Slide 1: Presented by Lawrence Firestone, June 2013
PRESENTED BY: Lawrence Firestone June 2013
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements relating to expectations, plans or prospects for Qualstar Corporation that are based upon the current expectations and Belicks of Qualstar's management and are subject to certain risks and uncertainties that could cause
Slide 3: Important Shareholder Information
Important Shareholder Information In connection with its 2013 Annual Meeting of Shareholders, Qualstar has filed a definitive proxy statement and a WHITE proxy card with the SEC on June 4, 2013, and has mailed the definitive proxy statement and WHITE proxy card to its shareholders. WE URGE INVESTORS
Slide 4: Allen Alley, Chairman of the Board
Allen Alley, Chairman of the Board » QUALSTAR » N2POWER +
Slide 5: The Storage Crisis: A Vast Business Opportunity
= Individuals drive 75% of data generation = Enterprise responsible for 80% of storage/security = LESS than 1/3 of all stored data is secure The Storage Crisis: A Vast Business Opportunity Unstructured data Strained systems Disk drive failures Cost-prohibitive +» QUALSTAR + N2POWER +
Slide 6: Fast-Growing Markets; Trillions Invested
ie) Fast-Growing Markets; Trillions Invested Solid Performance Regular Archive Backup State Storage Storage Cost per Terabyte 0 aa : Capacity » QUALSTAR + N2POWER +
Slide 7: Industry Commentary
Industry Commentary Tiered storage solution using disks for short-term storage and tape for long-term archival could cut an enterprise storage system cost by 50% — Oracle Global installed enterprise tape storage capacity for data archival predicted to grow from >10MM TB in 2011 to 50MM TB by 2015 -1
Slide 8: Targeting Two High Growth Markets
Targeting Two High Growth Markets Network/ f ) Telephon Mid-Range popy F Storage es LED Instrument/ Lighting Appliance Enterprise Storage » QUALSTAR » N2POWER +
Slide 9: BKF Proxy Contest
im BKF Proxy Contest * BKF has made two prior attempts to take control of Qualstar without paying shareholders an appropriate control premium > Proxy contest in June 2012: Sought replacement of entire Qualstar Board at a special shareholder meeting > Unsolicited partial tender offer in January 2013:
Slide 10: BKF's Plans for Qualstar
BKF’s Plans for Qualstar « In 2012, BKF’s stated plan was to divest Qualstar’s storage business and distribute cash to shareholders ¢ Now, with Qualstar’s storage business thriving and the company positioned for profitability and growth, BKF claims it would take control to “implement operational str
Slide 11: Vote WHITE Card
cre VOTE WHITE CARD »Join management in transformation of Qualstar already underway » QUALSTAR » N2POWER +
Slide 12: Larry Firestone, CEO
Larry Firestone, CEO 12 » QUALSTAR » N2POWER +
Slide 13: Two Distinct Business Units
Two Distinct Business Units WUALSTAR. N2Power: A Qualstar® Company © Tape library backup/storage © Large portfolio of AC-DC and DC-DC power supplies © Data backup, archival storage and disaster protection e High density, high-efficiency « Highly scalable products « Reduced power, heat and cost 4 18
Slide 14: The Starting Point
im The Starting Point 14 * High quality, reliable storage and power conversion products ° Qualstar’s large size and structure driven by Y2K « Current market dynamics make model unsustainable VVVV VV High breakeven business model High fixed overhead and high inventories with low margins (27%) Non-sca
Slide 15: In June 2012, Initiated Strategic Plan
im In June 2012, Initiated Strategic Plan Margin Expansion Sales Growth New Product Introduction/Production Working Capital Management Inorganic Growth 45 QUALSTAR + N2POWER +
Slide 16: We set out to...
16 We set out to... Reconfigure Qualstar for the Next Stage of Growth Implement 5 point Strategic Plan * Right-size the organization ¢ Eliminate unprofitable parts of business * Implement scalable manufacturing * Establish a variable cost of goods model * Implement an engineering structure to produc
Slide 17: Strong Management Additions
Strong Management Additions Turnaround Experience Management Relevant Experience New Lawrence Firestone Turnaround specialist with 30+yrs of operations and financial ee management experience in global public and private companies. CFO of v Xiotech, CFO Advanced Energy, SVP, CFO Applied Films alreWen
Slide 18: New, Independent Board
Board Member Allen Alley* Chet Baffa** Lawrence Firestone Gerald “Bud” Laber* Daniel Molhoek* * Appointed in last 12 months ** Newly nominated New, Independent Board Extensive Experience Across Disciplines Relevant Experience CO and Chairman of Pixelworks; public and private board veteran; venture c
Slide 19: Board Focused on Governance & Shareholder Value
18 Board Focused on Governance & Shareholder Value Independent » CEO is only management member on the Board >» Independent chairman > Only outside directors on key committees Leadership and Involvement >» Decades of combined board service on multiple public and private companies » Active Board with
Slide 20: Margin Expansion — US Outsourced Manufacturing
Margin Expansion — US Outsourced Manufacturing e US Outsourced manufacturing of library products » Improving margins ¢ Lower material and fixed costs © 20% Workforce reduction { majority of manufacturing staff hired by CTS } >» Working capital management « Reduced footprint — eliminated need for 45,
Slide 21: High Growth Sales Opportunities
im High Growth Sales Opportunities Strengthened sales leadership and energized sales teams Sales channel expansion > N2Power — Key account focus on distributors » Storage — Expand reseller distribution channel Development of alternate sales channels > Alliances allowing Qualstar to sell through a la
Slide 22: Driving Sales through Increased Partnerships
Driving Sales through Increased Partnerships Added 40 resellers in storage over the last 12 months Joined Tier One Technology Alliance Program » Part of best of breed technology solutions » Outsourced manufacturing was key to securing agreement: * |SO-9000 EMS production © Scalability of production
Slide 23: Positioned to Focus on New Storage Products
Positioned to Focus on New Storage Products ¢ Outsourced manufacturing frees up resources for product development ¢ Product refresh complete * i heheheh ] » XLS and RLS product lines an. » 34} +7 } ° Initiated new product pipeline » Better define, target and convert ‘ te g44a7? opportunities | » Dev
Slide 24: N2Power Product Introductions
N2Power Product Introductions Additional standard products Customer-specific products New vertical markets Increase footprint in existing (LED, industrial, medical) customer base 28 » QUALSTAR » N2POWER +
Slide 25: P&L Review
P&L Review* Years Ended June 30, nN Power supplies $1437 $1,229 $1,544 $9,420 Library 1969 2126 1,908 7,661 Net revenues 3,406 A 17,081 Gross margin 40.0% 43.5% 36.6% 2 Total operating expenses 2635 2,465 1,937 7,201. Operating loss (1,309) (2,004) (673) (2,538) Loss per share: ($0.11) ($0.08) ($0.0
Slide 26: Impact of Charges to FY 2013 P&L
im Impact of Charges to FY 2013 P&L * §600K employee separation * $1.4M write off of excess space » §300K contract labor to » §600K write-off/scrap of Inventory empty/reconfigure operations » $160K recruiting fees » +5500K Deferred revenue not recognized in FQ3 2013 » §$70OK Tender offer and proxy c
Slide 27: Balance Sheet Highlights
a Balance Sheet Highlights {in thousands) Cash and investments $16,745 $20,885 Accounts receivable 3,425 2,995 Inventories 585 75, Total current assets 23,531 28,824 Total current liabilities 5314 3,745 Total shareholders’ equity 18,191 25,053 » QUALSTAR + N2POWER +
Slide 28: Inorganic Growth Opportunities
Inorganic Growth Opportunities Expand Product Suite * Complementary lines in storage and power Expand Sales Channels * Channel partners ¢ Integrators * Resellers Expand Target Markets * Geographic diversification * Power —LED lighting, telecom switches, LCDs * Storage — Enterprise, OEM, Archive appl
Slide 29: FY 2014 Strategic Focus — Driving Growth
im FY 2014 Strategic Focus — Driving Growth Sales growth » Standard channel expansion > Alternate channel expansion —Tier 1 reseller, OEM product Product expansion >» Develop new library products for FY 2015 launch >» Develop new N2Power products for FY2015/2016 launch Operations » Complete outsourc
Slide 30: Targeting Shareholder Value
BR Targeting Shareholder Value (5 in Millions) "Mid-Term Target. Long-Term Target (6 of revenues) Revenues ~$25M ~$50M Gross Margin 42% 45% Engineering 13% 10% Sales & Marketing 12% 8% G&A 11% 7% Operating Expenses 36% 25% Operating Margin 6% 20% 30 +» QUALSTAR + N2POWER +
Slide 31: QBAK — A Compelling Investment Case
QBAK — A Compelling Investment Case Driving Optimal Business Model Cohesive, Disciplined Management Team Expanding Margins & Improving Working Capital Optimizing Infrastructure to Drive New Products Strong Growth Potential in Storage & Power Markets Organic and Inorganic Growth Initiatives Focused o
Slide 32: Qualstar...Poised for Success
Qualstar...Poised for Success Superior products Restructured company Re-energized team Growing markets Cohesive, experienced management & Board Effective strategy in place, delivering results “| bh SRS Increasing investor interest 2 » QUALSTAR » N2POWER +
Slide 33: Thank You
Thank You