Qualstar Update

Qualstar letter to shareholders from CEO, Steven Bronson:

April 13, 2020

Dear Fellow Qualstar Shareholders,

We recently announced on Thursday, April 9, 2020, that our Board of Directors determined to delist our shares from trading on the Nasdaq Stock Market and cease to file periodic reports with the SEC. Our Board concluded that the benefits to the Company and its Stockholders of continuing our listing on the Nasdaq and SEC reporting did not justify the costs. This decision was not taken lightly, and we weighed all the factors in determining the best course of action.

We have determined that our expected cost savings will be approximately $300,000 per year. The majority of these savings will be derived from reducing and eliminating costs, including Nasdaq listing fees, professional fees including legal and audit, and a reduction of board fees.

Based on our closing stock price of $2.46 as of Thursday, April 9, 2020, our stock is trading at a slight premium to our cash per share and a substantial discount to our book value of $3.50 per share, both measured as of December 31, 2019. Also, our current market capitalization is less than one times our 2019 fiscal year revenue. We feel that the cost savings will allow us to reallocate funds to other growth initiatives such as product and sales expansion.

A Few of Our Accomplishments:

• Since becoming the CEO & President in July 2013, I successfully executed a turnaround. Taking the company from a loss of over $10 million for the fiscal year ended June 30, 2013, to an average profit of $700,000 per year for the three years ended December 31, 2019. This was accomplished without diluting existing shareholders by raising new capital.
• We introduced a new Tape Data Storage product line that allows us to be competitive and relevant in today's landscape.
• For the year ended 2019, our Data Storage revenue was $4.194 million up from $3.11 million in 2018, an increase of 34%.
• We also secured a substantial development project that generated almost $5 million in revenues over two and a half years that we terminated in the first quarter of 2020.

In summary, as CEO and the largest single shareholder of Qualstar I'm confident in our direction and I believe we are well positioned for long term success. I am grateful to our customers and employees and I look forward to continuing to execute on our growth strategy.

Be well, and stay safe!

Respectfully,

Steven N. Bronson
Chief Executive Officer

View source version on businesswire.com: https://www.businesswire.com/news/home/20200413005149/en/