Qualstar Corp (QBAK) SEC Filing 10-K Annual report for the fiscal year ending Saturday, December 31, 2016

Exhibit 99.1

QUALSTAR REPORTS RESULTS FOR THE FOURTH QUARTER AND FULL YEAR ENDING DECEMBER 31, 2016

Qualstar reports its second consecutive quarter of positive cash flow - well positioned for future profitability.

Simi Valley, Calif., March 16, 2017

Quarter Ended December 31, 2016 Financial Results

Revenues for the quarter ended December 31, 2016 were $2.2 million, compared with $2.6 million for the quarter ended December 31, 2015, a decrease of $0.4 million or 15.4%. Loss from operations for the quarter ended December 31, 2016 was consistent with the quarter ended December 31, 2015 at $0.4 million. Net loss per basic and diluted share for the quarter ended December 31, 2016 was $(0.20) and $(0.21) for the quarter ended December 31, 2015.

Data Storage segment revenues were $0.8 million for the quarter ended December 31, 2016, compared with $1.3 million for the same period last year, a decrease of $0.5 million or 38.5%, primarily due to pricing competition in the industry. Power supply segment revenues were $1.4 million for the quarter, compared with $1.3 million in the quarter ended December 31, 2015, an increase of $0.1 million, or 7.7%, due to timing of orders shipped to manufacturers.

Gross margin was 18.2% of revenues or $0.4 million for the quarter ended December 31, 2016, a significant decrease from the gross margin of 42.3% of revenues or $1.1 million for the quarter ended December 31, 2015. Gross margin for the quarter ended December 31, 2016 included a $0.5 million charge for slow moving and obsolete inventory. Without this provision, gross margin was 40.9% of revenues or $0.9 million. Operating expenses for the three months ended December 31, 2016 were $0.8 million or 36.4% of revenues, compared with $1.5 million, or 57.7% of revenues for the three months ended December 31, 2015.

Year Ended December 31, 2016 Financial Results

Qualstar reported revenues of $9.4 million for the year ended December 31, 2016, a decrease of 14.5% compared with $11.0 million for the year ended December 31, 2015. Net loss from operations for the year ended December 31, 2016 was $1.2 million or $(0.59) per basic and diluted share. This compares with a net loss for the year ended December 31, 2015 of $2.6 million, or $(1.29) per basic and diluted share.

Gross margin was 27.7% of revenues or $2.6 million for the year ended December 31, 2016, a slight decrease from the gross margin of 28.2% of revenues or $3.1 million for the year ended December 31, 2015. Gross margin for the year ended December 31, 2016 included a $1.0 million charge for slow moving and obsolete inventory. Without this provision, gross margin was 38.3% of revenues or $3.6 million. Operating expenses for the year ended December 31, 2016 were $3.8 million or 40.4% of revenues, compared with $5.7 million, or 51.8% of revenues for the year ended December 31, 2015.

Steven N. Bronson, Chief Executive Officer and President of Qualstar said, “We recognize that competition in the data storage industry has created pressure on maintaining our market share. However, investments we have made in our cost structure are beginning to emerge as we were able to keep our expenses in line with the decline in sales.”

Cash, cash equivalents and restricted cash was $3.8 million at December 31, 2016, a decrease of $0.2 million from December 31, 2015. The decrease in cash is attributed to operating activities.

“Cash flow continues to improve, as we see the benefits from our previous cost cutting measures”, stated Mr. Bronson. “Despite the market headwinds that continue to be quite challenging, I am very pleased with our progress and remain energized about Qualstar’s future,” Mr. Bronson continued. “Over the past year, we have taken a variety of actions to strengthen our core business and we continue to explore strategic options.”