Qualstar Recommends to Reject Attempt of BKF Capital Group

Qualstar Corporation has commenced the mailing of definitive proxy materials to its shareholders for Qualstar’s annual meeting of shareholders to be held on Friday, June 28, 2013.

Shareholders of record as of the close of business on May 20, 2013 will be entitled to attend and vote at the annual meeting.

The board of directors recommends that shareholders vote to elect Qualstar’s experienced and qualified director nominees – Allen H. Alley, Chester Baffa, Lawrence D. Firestone, Gerald J. Laber and Daniel C. Molhoek – by voting the white proxy card by telephone, Internet or mail.

Qualstar urges shareholders to vote only the white proxy card and discard any proxy card they may receive from BKF Capital Group, Inc. and its controlling shareholder, Steven N. Bronson and reject their latest attempt to obtain control of Qualstar without paying shareholders a control premium. After being rebuffed in their most recent opportunistic attempt to take control of Qualstar through a coercive partial tender offer at a price that would have deprived tendering shareholders of the ability to participate in, and benefit from, the future growth and value potential of Qualstar, BKF and Bronson have now launched a proxy contest to take control of Qualstar by having five of its own hand-picked nominees elected to the Qualstar’s board.

BKF’s interests in taking control of Qualstar may not be aligned with those of other shareholders. BKF is an entity that has two employees, including Bronson, and an intern, no operating business and no revenues from operations. As it admits in its filings with the SEC, BKF Capital is currently facing the risk of being deemed a regulated investment company subjected to related restrictions and, accordingly, needs to consummate an acquisition or merger or other business combination with a viable business entity such as Qualstar to avoid adverse regulatory consequences.

Qualstar believes that BKF has not fully disclosed its plans for Qualstar and is pursuing control of Qualstar for its own interests that are not aligned with those of other shareholders. Shareholders looking for further evidence as to whether BKF may have conflicting interests are encouraged to review the materials filed with the SEC this past January by BKF and Bronson in connection with their coercive partial tender offer, and the statement made by BKF that "[i]n establishing the purchase price,…, the purchaser [BKF] was motivated to establish the lowest price that might be acceptable to shareholders consistent with the purchaser’s [BKF’s] objectives."

Lawrence D. Firestone, Qualstar president and CEO, said: "As we continue to execute our strategic turnaround plan for Qualstar and position the company for financial success, Mr. Bronson and BKF are pursuing their proxy contest for control of Qualstar despite our numerous attempts to reach an amicable settlement and avoid the needless, costly and wasteful distraction. The previous failed attempts by Mr. Bronson and BKF to take control of Qualstar, without offering to pay our shareholders an appropriate control premium, have forced our board and management team to devote significant resources – including management time and shareholder money – to protect the interests of all shareholders, when these resources could have been better devoted to our ongoing efforts towards the growth of Qualstar. We remain committed to transforming and refocusing Qualstar on its growing core storage and power supply businesses and, accordingly, driving sustainable revenue, profitable growth and cash flow, and increasing returns for all shareholders."