Quarterly Report for the Nine Months Ended September 30, 2021 and 2020

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Qualstar Corporation and Subsidiaries

Quarterly Report for the Periods Ended

September 30, 2021 and 2020

Qualstar Corporation

1 Jenner, Suite 200

Irvine, CA 92618

Phone: [phone]

www.qualstar.com

QUALSTAR CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
	Page
	No.
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Condensed Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Condensed Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Condensed Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . .	19

Item 1. Financial Statements

QUALSTAR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)

(unaudited)

	September 30,	December 31,
		2021		2020
Assets
Current assets:
Cash and cash equivalents	$	4,107	$	4,157
Restricted cash		100		100
Accounts receivable, net		1,081		1,379
Inventories		1,943		1,910
Prepaid expenses and other current assets		240		164
Total current assets		7,471		7,710
Property and equipment, net		118		103
Right-of-use assets		327		428
Deferred tax assets		30		30
Other assets		24		35
Total assets	$	7,970	$	8,306
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	685	$	666
Accrued payroll and related liabilities		140		214
Deferred service revenue		531		600
Lease liabilities, current		115		254
PPP loan		263		258
Other accrued liabilities		229		183
Total current liabilities		1,963		2,175
Long-term liabilities:
Lease liabilities, long term		234		198
Deferred service revenue, long-term		307		274
Other long-term liabilities		28		42
Total long-term liabilities		569		514
Total liabilities		2,532		2,689
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized; no shares
issued		-		-
Common stock, no par value; 50,000,000 shares authorized; shares
issued and outstanding 1,891,555 at September 30, 2021, and
1,950,025 at December 31, 2020		18,807		18,980
Accumulated deficit		(13,369)		(13,363)
Total shareholders' equity		5,438		5,617
Total liabilities and shareholders' equity	$	7,970	$	8,306

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QUALSTAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

			Three Months Ended			Nine Months Ended
			September 30,			September 30,
			2021		2020			2021		2020
Net revenues		$	2,095	$	1,855		$	6,721	$	5,817
Cost of goods sold			1,439		1,076			4,537		3,603
Gross profit			656		779			2,184		2,214
Operating expenses:
Engineering			114		163			375		342
Sales and marketing			342		393			1,106		1,007
General and administrative			346		412			708		1,120
Total operating expenses			802		968			2,189		2,469
Income (loss) from operations			(146)		(189)			(5)		(255)
Other income (expense), net			(2)		-			(1)		9
Income (loss) before income taxes			(148)		(189)			(6)		(246)
Provision for income taxes			-		-			-		-
Net income (loss)		$	(148)	$	(189)		$	(6)	$	(246)
Earnings (loss) per share:
Basic	$	(0.08)	$	(0.10)	$	0.00	$	(0.13)
Diluted
$	(0.08)	$	(0.10)	$	0.00	$	(0.13)
Weighted average common shares outstanding:
Basic			1,943		1,925			1,949		1,925
Diluted			1,943		1,925			1,949		1,925

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QUALSTAR CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

(unaudited)

	Common Stock		Accumulated
Three Months Ended September 30, 2021	Shares		Amount		Deficit		Total
Balances at June 30, 2021	1,953	$	18,990	$	(13,221)	$	5,769
Share repurchases	(61)		(183)		-		(183)
Share-based compensation	-		-		-		-
Net income (loss)	-		-		(148)		(148)
Balances at September 30, 2021	1,892	$	18,807	$	(13,369)	$	5,438

	Common Stock		Accumulated
Nine Months Ended September 30, 2021	Shares		Amount		Deficit		Total
Balances at December 31, 2020	1,950	$	18,980	$	(13,363)	$	5,617
Share repurchases	(61)		(183)		-		(183)
Share-based compensation	3		10		-		10
Net income (loss)	-		-		(6)		(6)
Balances at September 30, 2021	1,892	$	18,807	$	(13,369)	$	5,438

		Common Stock		Accumulated
Three Months Ended September 30, 2020		Shares		Amount		Deficit		Total
Balances at June 30, 2020		1,925	$	18,848	$	(12,162)	$	6,686
Share-based compensation	-		-		-		-
Net income (loss)	-		-		(189)		(189)
Balances at September 30, 2020	1,925	$	18,848	$	(12,351)	$	6,497

		Common Stock		Accumulated
Nine Months Ended September 30, 2020		Shares		Amount		Deficit		Total
Balances at December 31, 2019		1,925	$	18,848	$	(12,105)	$	6,743
Share-based compensation	-		-		-		-
Net income (loss)	-		-		(246)		(246)
Balances at September 30, 2020	1,925	$	18,848	$	(12,351)	$	6,497

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