UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

INFORMATION

Proxy Statement pursuantPursuant to Section 14(a) of the

Securities

Exchange Act of 1934

(Amendment No. 2)
Filed by the Registrant  x
Filed by a Party other than the Registrant  o
Check the appropriate box:
x           Preliminary Proxy Statement
o            Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o            Definitive Proxy Statement
o            Definitive Additional Materials
o            Soliciting Material Under Rule 14a -12

Filed by the Registrant ☒                                                   Filed by a Party other than the Registrant ☐

Checkthe appropriate box:

☐

Preliminary Proxy Statement

☐Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒Definitive Proxy Statement
☐Definitive Additional Materials
☐Soliciting Material Under Rule 14a-12

QUALSTAR CORPORATION

(Name of Registrant as Specified inIn Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment

Steven N. Bronson

David J. Wolenski

Sean M. Leder

Dale E Wallis

Alan Howe

Copy to:

James A. Prestiano, Esq.

The Law Offices of Filing Fee (Check the appropriate box):

James A. Prestiano, P.C.

631 Commack Road, Suite 2A

xCommack, NY 11725            No fee required

(631) 499-6000

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PRELIMINARY COPY – SUBJECT TO COMPLETION
3990-B Heritage Oak Court
Simi Valley, California 93063
SPECIAL MEETING OF SHAREHOLDERS
To be Held at 10:00 A.M. Local Time on

June 20, 2012

PROXY STATEMENT OF QUALSTAR CORPORATION
June    , 2012
3, 2014

Dear Fellow Qualstar Shareholder:


A special meeting

Shareholders of record as of Wednesday, June 4, 2014 are cordially invited to attend the shareholders2014 Annual Meeting of Shareholders of Qualstar Corporation, willa California corporation (“Qualstar,” the “Company,” or “we”), to be held on Friday, June 20, 201227, 2014, at 10:00 a.m., local time, at our headquartersthe corporate offices of Qualstar, located at 3990-B Heritage Oak Court, Simi Valley, California 93063.

The93063, beginning at 10:00 a.m. Pacific Time (including any adjournment, postponement, continuation or rescheduling thereof, the “2014 Annual Meeting”). At this meeting has been called atyou will be asked to vote on each of the requesttwo (2) proposals set forth in the attached Notice of BKF Capital Group, Inc.2014 Annual Meeting and Steven N. Bronson, its controlling shareholder, who, together, own a total of approximately 17% of Qualstar’s shares, in an effort by themProxy Statement, which contains detailed information about each proposal and other matters related to take over Qualstar for what we believe are their own short-term financial interests. They propose to accomplish their take-over of Qualstar by asking shareholders to vote:
·to remove all of the current members of Qualstar’s Board, including Lawrence Firestone, who was recently appointed as Qualstar’s CEO to implement new growth initiatives designed to return your Company to sustained profitability and, thereby, enhance the value of your investment in Qualstar; and
·
to elect as Qualstar’s directors, in addition to Bronson, four of his hand-picked nominees, none of whom, to our knowledge, has ever owned any Qualstar shares and at least two of whom have been employed by or were on the boards of companies that Bronson controls and, therefore, we believe, are not likely to put the interests of Qualstar’s shareholders ahead of Bronson’s interests.
Steven Bronson has stated that, if BKF succeeds in getting you to support its proposal to remove our current Board members and replace them with Bronson’s nominees, Bronson and his nominees will take action to distribute the majority of Qualstar’s cash (including proceeds from the sale of marketable securities) to shareholders. 2014 Annual Meeting.  

We believe that such a sizable distributionthe five (5) nominees proposed by your Board, with their breadth of cash would leave Qualstar withoutrelevant and diverse experience, represents the financial resources it needs:

Øto make investments in the development and marketing of new products and to take advantage of opportunities to make strategic acquisitions in order to grow our profitable power supply product business, as well as our tape library business, and
Ø
at the same time, maintain a strong balance sheet and the liquidity we believe we need to assure our existing customers and prospective new customers that Qualstar will be able to provide them with quality products and a high level of service and, thereby, increase our sales.
We believe that if we are to achieve sustainable profitability, it is imperative that we invest in the growthbest interests of our businessshareholders and at the same time maintain the financial strength to retain existing and attract new customers for our products.  However, it willshould be difficult to achieve both of these imperatives, if Bronson takes control of Qualstar and distributes a sizable amount of Qualstar’s cash.
Bronson also is proposing to divest Qualstar’s tape library business.  We believe that doing so would also be a mistake, because we expect market demand for tape libraries will continue for many years to come.  As a result, if Bronson is able to take over Qualstar and take action to divest our tape library business, we believe that will deprive Qualstar of a source of revenues that is important to our efforts to grow our business and achieve sustainable profitability in the future.
Bronson’s statements that Qualstar should distribute at least a majority of Qualstar’s cash, as well as divest our tape library business, leads us to believe that his primary purpose for launching his proxy contest is to realize a quick and opportunistic gain by distributing Qualstar’s cash and that he does not want to do the hard work or make the investments required to grow Qualstar’s business and create long-term value for Qualstar’s other shareholders.
By contrast, the goals ofelected. Accordingly, your Board of Directors and management, who own in the aggregate approximately 29% of Qualstar’s shares, are to return Qualstar to profitability and grow its business in order to enhance shareholder value for all of our shareholders, not only in the short-term, but also for the longer-term.  We believerecommends that these goals can be achieved if you voteAGAINST Bronson’s proposal FOR the following five (5) nominees: Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and thereby, enable Lawrence Firestone,Nick Yarymovych, using the Company’s new CEO,enclosed WHITE proxy card. Your VOTE is important to the future of Qualstar. We appreciate your support and our management teamlook forward to implement growth initiatives and build shareholder valueseeing you at the Company.  Moreover, we believe that Qualstar’s current directors bring a valuable blend of industry knowledge as well as strategic and operational expertise that will be important to Qualstar’s future success.
Your Board believes that the steps we are initiating and are committed to taking at Qualstar will protect and enhance shareholder value both now and in the future.  At the same time, we are receptive to new ideas and are willing to pursue new initiatives.  We believe, however, that an abrupt change in Qualstar’s Board or its strategic direction would only jeopardize Qualstar’s growth opportunities and put shareholder value at risk.
AS A RESULT, WE UNANIMOUSLY OPPOSE BRONSON’S EFFORTS TO TAKE OVER YOUR COMPANY.
Your vote is extremely important.  We urge you NOT to sign or return any gold proxy card that you may receive from Bronson and BKF.  Instead, whether2014 Annual Meeting. Whether or not you’ve returned a gold proxy card, we urge you plan to attend the 2014 Annual Meeting, please vote your shares AGAINST their proposal to remove Lawrence Firestone and the other directors and to replace them with Bronson’s nominees, by using the Internet, the phone, or by mail by returning theWHITE proxy card TODAY, to vote enclosed.

AGAINST BKF’s proposal to remove the current Board of Directors.  You may vote by telephone or over the internet by following the voting instructions on the WHITE proxy card, or by signing and dating the WHITE proxy card, marked AGAINST that proposal, and returning it in the postage prepaid return envelope provided. Only your latest-dated proxy counts.

If you have any questions or needrequire any assistance with voting your shares, please contact MacKenzie Partners, Inc., ourthe Company’s proxy solicitor AST Phoenix Advisors, 6201 15th Avenue, 3rd Floor, Brooklyn, New York 11219,(877) 283-0320.

It is important that your shares be represented.  Therefore, even if you presently plan to attend the 2014 Annual Meeting, please complete, sign and date and promptly return the enclosed proxy card in the envelope provided.  If you do attend the 2014 Annual Meeting and wish to vote in person, you may withdraw your proxy at (800) 322-2885 or (212) 929-5500 (call collect) orthat time.

I look forward to seeing you at proxy@mackenziepartners.com.

Thank you for your continuing support of Qualstarthe 2014 Annual Meeting.

Sincerely,

/s/ Steven N. Bronson

Steven N. Bronson

Chief Executive Officer and our efforts to increase shareholder value for all of our shareholders.

Sincerely,
William J. GervaisLawrence D. Firestone
Stanley W. CorkerCarl W. Gromada
Robert A. MeyerRobert E. Rich

President

 
 

QUALSTAR CORPORATION

3990-B Heritage Oak Court

Simi Valley, California 93063

SPECIAL

NOTICE OF THE 2014 ANNUAL MEETING OF SHAREHOLDERS

To be Heldheld on Friday, June 20, 201227, 2014 at 10:00 A.M. (PDT)

PROXY STATEMENT OF QUALSTAR CORPORATION
PLEASE SIGN, DATE AND MAIL THE ENCLOSED WHITE PROXY CARD TODAY
A special meeting

NOTICE IS HEREBY GIVEN that the 2014 Annual Meeting of Shareholders (including any adjournment, postponement, continuation or rescheduling thereof, the shareholders“2014 Annual Meeting”) of Qualstar Corporation (“Qualstar”Qualstar,” the “Company,” or the “Company”“we”) is towill be held on June 20, 2012 at 10:00 a.m., local time, at our headquartersthe corporate offices of Qualstar, located at 3990-B Heritage Oak Court, Simi Valley, California 93063.

The special meeting was requested by BKF Capital Group, Inc., which we refer to as BKF, and its controlling shareholder, Steven N. Bronson, to consider and vote93063, on Friday, June 27, 2014, at 10:00 a.m. Pacific Time, for the following proposals made by them:
purposes:

1.

To remove all current members of our Board of Directors;
  2.To approve a resolution to fix the authorized number of directors of Qualstar at five directors; and
  3.

To elect five persons nominated by BKFdirectors to fillserve one-year terms expiring at the 2015 Annual Meeting of Shareholders, or until their successors have been duly elected and qualified;

2.

To approve the appointment of SingerLewak LLP as the independent registered public accounting firm to audit our financial statements for the fiscal year ending June 30, 2014; and

3.

To transact any vacancies created on our Board ifother business as may properly come before the first proposal above is approved.2014 Annual Meeting and any adjournment thereof.

The

More information on all of these matters is included in the accompanying Proxy Statement. Shareholders of record date forat the special meeting is May 23, 2012 and, asclose of that date, the holders of 12,253,117 shares of our common stock werebusiness on Wednesday, June 4, 2014, are entitled to notice of, and to vote at, the special meeting.

2014 Annual Meeting and any adjournment or postponement thereof.  All shareholders are cordially invited to attend the 2014 Annual Meeting in person.

Your Board of Directors recommends that you vote FOR the Board’s five (5) nominees: Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and management team, including William J. Gervais, our outgoing President and CEO, who is retiring effective June 15, 2012, and Lawrence D. Firestone, our new President and CEO, who own, in total, approximately 29% of Qualstar’s shares, are unanimously opposed to the proposal of Bronson and BKF (proposal 1) to remove the current membersNick Yarymovych.

By Order of the Board of Directors

/s/ Steven N. Bronson

Steven N. Bronson, Chairman

Simi Valley, California

June 3, 2014

YOUR VOTE IS IMPORTANT.  THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE 2014 ANNUAL MEETING YOU SHOULD COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD, AND RETURN IT IN THE PREADDRESSED ENVELOPE PROVIDED.  NO POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.

IMPORTANT NOTICE regarding the availability of proxy materials for the 2014 Annual Meeting of Shareholders to be held on June 27, 2014:  This Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended June 30, 2013 are available on Qualstar’s website at www.qualstar.com.

QUALSTAR CORPORATION

3990-B Heritage Oak Court

Simi Valley, California 93063

PROXY STATEMENT

2014 ANNUAL MEETING OF SHAREHOLDERS

To be held on June 27, 2014 at 10:00 A.M. (PDT)

This Proxy Statement is being furnished to all shareholders of record as of Wednesday, June 4, 2014 by the Board of Directors (the “Board”) of Qualstar Corporation, a California corporation (“Qualstar,” the “Company,” or “we”), in connection with the solicitation of proxies for the 2014 Annual Meeting of Shareholders (including any adjournment, postponement, continuation or rescheduling thereof, the “2014 Annual Meeting”) to be held on Friday, June 27, 2014 at the corporate offices of Qualstar, located at 3990-B Heritage Oak Court, Simi Valley, California 93063, at 10:00 a.m. Pacific Time. This Proxy Statement contains important information about the business matters that will be voted on at the 2014 Annual Meeting.

GENERAL INFORMATION

Why am I receiving these materials?

We sent you this Proxy Statement because your Board is soliciting your proxy to vote at the 2014 Annual Meeting. This Proxy Statement summarizes the information you need to vote at the 2014 Annual Meeting. You do not need to attend the 2014 Annual Meeting to vote your shares of DirectorsQualstar’s common stock, no par value (the “Common Shares”). This Proxy Statement, the accompanying WHITE proxy card and management believe,our annual report on Form 10-K for the reasons described infiscal year ended June 30, 2013 are being made available to shareholders beginning on or about June 6, 2014. Please read this proxy statement, that proposal 1Proxy Statement, as it contains important information you need to know to vote at the 2014 Annual Meeting.

What proposals will be voted on at the 2014 Annual Meeting?

At the 2014 Annual Meeting, you will be asked to consider and vote upon the following matters:

●

Election of five directors to each serve until the 2015 Annual Meeting of Shareholders and until their respective successors shall have been duly elected and qualified (Proposal 1);

●

Approval of the appointment of SingerLewak LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2014 (Proposal 2); and

●

Any other matters, if any, as may properly be brought before the 2014 Annual Meeting and any postponement or adjournment of the 2014 Annual Meeting.

When and where will the 2014 Annual Meeting be held?

The 2014 Annual Meeting will be held on Friday, June 27, 2014, at 10:00 a.m. Pacific Time, at the corporate offices of Qualstar, located at 3990-B Heritage Oak Court, Simi Valley, California 93063.

Who is not inentitled to vote at the best interests of Qualstar’s shareholders.

Consequently, our2014 Annual Meeting?

Your Board of Directors is soliciting proxies AGAINSThas fixed the first Bronson/BKF proposalclose of business on Wednesday, June 4, 2014 as the record date for determining those shareholders entitled to notice of, and unanimously recommendsto vote on, all matters that youmay properly come before the 2014 Annual Meeting. As of the record date, Qualstar had 12,253,117 outstanding shares of common stock entitled to notice of, and to vote AGAINST that proposal.

at, the 2014 Annual Meeting. No other securities are entitled to vote at the 2014 Annual Meeting.  Only shareholders of record on the record date are entitled to notice of and to vote at the 2014 Annual Meeting and at any adjournment thereof. 

 
We

What are not taking a positionthe voting rights of shareholders?

Each shareholder of record is entitled to one vote for each share held as of the record date on proposal 2, because effective on Mr. Gervais’ retirement on June 15, 2012,all matters to come before the authorized number2014 Annual Meeting and at any adjournment thereof. Under our Articles of directors will be fixed by our Board at five directors; and we are not taking a position on proposal 3 because that proposal willIncorporation, shareholders do not have any effect if Qualstar’s shareholders join uscumulative voting rights in defeating proposal 1.

Your vote is extremely important.  You may attend the special meeting and voteelection of directors.

How many votes must be present to hold the 2014 Annual Meeting?

To conduct business at the 2014 Annual Meeting, a quorum must be present. The presence in person or by proxy of shareholders entitled to cast at least a majority of all votes entitled to be cast at the meeting shall constitute a quorum. We count proxies marked “withhold authority” as to any director nominee or “abstain” as to a particular proposal for purposes of determining the presence or absence of a quorum at the 2014 Annual Meeting for the transaction of business.

How do I vote my shares?

In addition to voting in person at the 2014 Annual Meeting or any postponement or adjournment thereof, you may vote by submittingmail, Internet or telephone.

Voting by Internet or Telephone.  If you are a registered shareholder (that is, if your stock is registered in your name), you may also vote by Internet or telephone by following the instructions included with your WHITE proxy card.  You are encouraged to vote electronically by Internet or telephone.  The procedures for each of these voting methods is set forth below.

Vote by Internet.  Use the Internet to vote your proxy 24 hours a day, 7 days a week.  Have your WHITE proxy card in hand when you log on.  You will be prompted to enter your Control Number(s) which is located on your proxy card and then follow the directions given to obtain your records and create a voting instructions form.

Vote by Telephone.  Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week. Have your WHITE proxy card in hand when you call. You will be prompted to enter your Control Number(s) which is located on your WHITE proxy card and then follow the directions given.

If you vote by Internet or telephone, you do not need to return your WHITE proxy card.

If your shares are held in “street name” (that is, if your stock is registered in the name of your broker, bank or other nominee), please check your proxy card or contact your broker, bank or other nominee to determine whether you will be able to vote by Internet or telephone.

If you need assistance in revoking your proxy or changing your vote, please call Qualstar’s proxy solicitor AST Phoenix Advisors, 6201 15th Avenue, 3rd Floor, Brooklyn, New York 11219,(877) 283-0320. 

Voting by Mail. To vote by mail, please sign, date and return to Qualstar as soon as possible the enclosed WHITE proxy card. An envelope with postage paid, if mailed in the United States, is provided for this purpose. Properly executed proxies that are received in time and not subsequently revoked will be voted as instructed on the proxies. If you vote by Internet or by telephone as described above, you need not also mail a proxy forto Qualstar.

Voting at the special meeting.  Whether2014 Annual Meeting. You may vote by ballot in person at the 2014 Annual Meeting.  If you want to vote by ballot, and you hold your shares in street name (that is, through a bank or notbroker), you must obtain a power of attorney or other proxy authority from that organization and bring it to the 2014 Annual Meeting. Follow the instructions from your bank, broker or other agent or nominee included with these proxy materials, or contact your bank, broker or other agent or nominee to request a power of attorney or other proxy authority. Even if you plan to attend the special meeting, we request2014 Annual Meeting, you are encouraged to submit a WHITE proxy card or vote by Internet or telephone to ensure that your vote is received and counted. If you vote in person at the 2014 Annual Meeting, you will revoke any prior proxy you may have submitted.


How does the Board of Directors recommend that I vote?

Your Board of Directors recommends that you submitvote as follows:

☐

“FOR” each of the following five (5) nominees to the Board: Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and Nick Yarymovych (Proposal 1);

☐

“FOR” approval of the appointment of SingerLewak LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2014 (Proposal 2).

What vote is required?

Directors are elected by a plurality of the votes cast for election of directors and only five directors may be elected at the 2014 Annual Meeting. The directors elected will be the five (5) nominees who receive the highest number of “ FOR ” votes cast at the 2014 Annual Meeting by shareholders present, in person, or by proxy, and entitled to vote. If a shareholder does not vote for the election of directors because the authority to vote is withheld, because a proxy TODAY,is not returned, because the broker holding the shares does not vote, or because of some other reason, the shares will not count in determining the total number of votes for each nominee. WHITE Proxies signed and returned unmarked will be voted FOR the Board’s five (5) nominees (Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and Nick Yarymovych). Please note that brokers may not vote on the election of directors in the absence of specific client instruction. Those who hold shares in a brokerage account are encouraged to provide voting “instructions to their broker. Votes that are not returned, withheld or broker non-votes will have no effect on the outcome of the election. If any nominee is unable to act as director because of an unexpected occurrence, the proxy holders may vote the proxies for another person or the Board of Directors may reduce the number of directors to be elected.

For Proposal 2 (appointment of SingerLewak LLP), approval will require both: (i) the affirmative vote of a majority of the shares present in person or represented by proxy and voting on the proposal, and (ii) the affirmative vote of a majority of the quorum. For purposes of Proposals 2, abstentions and broker non-votes will not affect the outcome under clause (i), which recognizes only actual votes for or against the proposal. Abstentions and broker non-votes may affect the outcome under clause (ii) because abstentions and broker non-votes are counted for purposes of determining the quorum and have the effect of a vote against the proposal.

AGAINSTIf I give a proxy, how will my shares be voted?

WHITE proxy cards received by us before the 2014 Annual Meeting that are properly executed and dated will be voted at the 2014 Annual Meeting in accordance with the instructions indicated on the proxy.

If you properly execute and date your WHITE proxy card but do not include voting instructions, your WHITE proxy card will be voted FOR the election of each of the following five (5) director nominees: Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and Nick Yarymovych,and FOR Proposal 2, and in accordance with the best judgment of the named proxies on any other matters that may come before the meeting. Unsigned proxies will not be voted.

If you vote using the website or the telephone number noted on the WHITE proxy card, you do not need to return ANY proxy card.

If the 2014 Annual Meeting is postponed or adjourned, a shareholder’s proxy will remain valid and may be voted at the postponed or adjourned meeting. A shareholder still will be able to revoke the shareholder’s proxy until it is voted.

What if other matters are voted on at the 2014 Annual Meeting?

With respect to any other matter that properly comes before the 2014 Annual Meeting, the proxy holders will vote the proxies in their discretion in accordance with their best judgment and in the manner they believe to be in the best interest of Qualstar. For example, if you do not give instructions on your WHITE proxy card or by Internet or telephone, and a nominee for Director listed on the WHITE proxy card withdraws before the election (which is not now anticipated), your shares will be voted by the proxy holders for any substitute nominee as may be nominated by the Board of Directors. The holders of the proxy shall be Steven N. Bronson and James A. Prestiano.

On the date we filed this Proxy Statement with the Securities and Exchange Commission, the Board did not know of any other matter to be brought before the 2014 Annual Meeting.


How will my shares be voted if I mark “Abstain” on my proxy card?

We will count a properly executed WHITE proxy card marked “Abstain” as present for purposes of determining whether a quorum is present, but the shares represented by that WHITE proxy card will not be voted at the 2013 Annual Meeting for the proposals so marked.

Will my shares be voted if I do not provide instructions to my broker or nominee?

When a matter to be voted on at a shareholders meeting is the subject of a contested solicitation, under NASDAQ rules, brokers no longer have discretion to vote shares that they hold in their name on behalf of a third party. Therefore, if you hold your shares in the name of your broker (sometimes called “street name” or “nominee name”) and you do not provide your broker with specific instructions regarding how to vote on any proposal to be voted on at the 2014 Annual Meeting, your broker will not be permitted to vote your shares on that proposal. This is called a “broker non-vote.” For example, if you provide your broker instructions on Proposal No. 1 but not on Proposal No. 2, the first proposal describedbroker will vote on Proposal No. 1 as you direct but will not vote your shares on Proposal No. 2

Please remember to give your broker specific instructions when returning your WHITE proxy card. If you previously returned a proxy card without specific instructions regarding how your shares are to be voted, please complete and return the enclosed WHITE proxy card to your broker with specific voting instructions.

Can I revoke my proxy or change my vote?

An executed proxy may be revoked at any time before its exercise by delivering to the Corporate Secretary of Qualstar a written notice of revocation or a duly executed proxy bearing a later date. Prior to the date of the 2014 Annual Meeting, any notice of revocation or subsequent proxy must be delivered to our Corporate Secretary at 3990-B Heritage Oak Court, Simi Valley, California 93063, the principal executive office of Qualstar.  On the date of the 2014 Annual Meeting, such notice or subsequent proxy should be delivered in thisperson at the 2014 Annual Meeting prior to the time of the vote.  Accordingly, the execution of the enclosed proxy statement,will not affect a shareholder’s right to vote in person should such shareholder find it convenient to attend the 2014 Annual Meeting and desire to vote in person, so long as the shareholder has revoked his or her proxy prior to its exercise in accordance with these instructions. If you have instructed a broker to vote your shares, you must follow your broker’s directions in order to change those instructions.

What does it mean if I receive more than one WHITE proxy card?

If you hold your shares in more than one account, you will receive a WHITE proxy card for each account.  To ensure that all of your shares are voted, please vote using each WHITE proxy card you receive or, if you vote by Internet or telephone, you will need to enter each of your Control Numbers. Remember, you may vote by telephone or over the internetInternet or by signing, dating and returning the enclosed WHITE proxy card in the postage-prepaidpostage-paid envelope provided.   Instructions for voting

Who will solicit proxies on behalf of the Board?

Proxies may be solicited on behalf of the Board, without additional compensation, by Qualstar’s directors, officers and regular employees. Such persons are listed in Appendix I to this Proxy Statement. Additionally, the Board has retained AST Phoenix Advisors, 6201 15th Avenue, 3rd Floor, Brooklyn, New York 11219,(877) 283-0320, a proxy solicitation firm, who may solicit proxies on the Board’s behalf.

The original solicitation of proxies by mail may be supplemented by telephone, telegram, facsimile, electronic mail, and personal solicitation by our directors, officers or over the internet can be found on the enclosed WHITE proxy card.

WE URGE YOU NOT TO SIGN OR RETURN ANY GOLD PROXY CARD
THAT MAY BE SENT TO YOU BY BRONSON OR BKF.
If you attend the special meeting and wish to change your proxy vote, you may do so automatically by voting in person at the special meeting.other regular employees (who will receive no additional compensation for such solicitation activities). You may also revokebe solicited by advertisements in periodicals, press releases issued by us and postings on our corporate website. Unless expressly indicated otherwise, information contained on our corporate website is not part of this Proxy Statement.


Who will bear the cost of the solicitation of proxies?

The entire cost of soliciting proxies, including the costs of preparing, assembling, printing and mailing this Proxy Statement, the proxy card and any previously returned proxyadditional soliciting materials furnished to shareholders, will be borne by sending another later-dated proxyQualstar. Copies of solicitation material will be furnished to banks, brokerage houses, dealers, banks, voting trustees, their respective nominees and other agents holding shares in their names, which are beneficially owned by others, so that they may forward this solicitation material, together with our Annual Report on Form 10-K for the special meeting.  If you have previously returned a gold proxy card sentfiscal year ended June 30, 2013, to you by BKF,beneficial owners. In addition, if asked, we urge youwill reimburse these persons for their reasonable expenses in forwarding these materials to sign, datethe beneficial owners.

What is Qualstar’s Internet address?

Qualstar’s Internet address is http://www.Qualstar.com. You can access this Proxy Statement and return the enclosed WHITE proxy card marked “AGAINST” the first proposal above seeking to remove all current members of our Board of Directors.  Only your latest-dated proxy counts.

We appreciate your continued support.
FOR THE BOARD OF DIRECTORS
Nidhi H. Andalon
Secretary
IMPORTANT NOTICE Regarding the Availability of Proxy MaterialsQualstar’s Annual Report on Form 10-K for the Special Meetingfiscal year ended June 30, 2013 at this Internet address. Qualstar’s filings with the Securities and Exchange Commission (the “SEC”) are available free of Shareholders to be heldcharge via a link from this address. Unless expressly indicated otherwise, information contained on June 20, 2012:  Thisour website is not part of this Proxy Statement. In addition, none of the information on the other websites listed in this Proxy Statement is part of this Proxy Statement. These website addresses are intended to be inactive textual references only.

Who can answer my questions?

The Companies proxy solicitor AST Phoenix Advisors is available to answer any questions concerning this Proxy Statement, toll free at(877) 283-0320. 

How can I obtain additional copies of these materials or copies of other documents?

Complete copies of this proxy statement and our Annual Report on Form 10-K for the fiscal year ended June 30, 2013 are also available on Qualstar’sour website at http://www.Qualstar.com .  

www.qualstar.com

YOUR VOTE IS IMPORTANT,Your vote at this year’s meeting is especially important, no matter how many or how few shares of common stock you own. We urge you to votePlease sign and date the enclosed WHITE proxy card, today,AGAINST BKF’s proposal to remove our current Board members.  You can vote by telephone, over the internet or by marking your WHITE proxy card AGAINST the first proposal and then dating, signing and returning that WHITE proxy cardreturn it in the enclosed postage prepaid return envelope. Instructions for votingpostage-paid envelope promptly or vote by telephoneInternet or over the internet can be found on your WHITE proxy card.telephone.

Since only your latest dated proxy card will count, we urge you NOT to return any gold proxy card you receive from or on behalf of BKF or Bronson.  
 

ELECTION OF DIRECTORS

Even if you(Proposal 1)

In accordance with Qualstar’s bylaws, the number of directors constituting the Board is fixed as of the commencement of voting at the 2014 Annual Meeting at five.  All five directors are to be elected at the 2014 Annual Meeting and will hold office until the next Annual Meeting of Shareholders and until their respective successors are elected and have already returned a gold proxy card, you can revoke that earlier vote simplybeen qualified.

The following five individuals - Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and Nick Yarymovych - have been designated by votingthe enclosed WHITE proxy card AGAINSTBoard as the proposalnominees for election as directors. Messrs. Bronson, Wolenski, Leder and Wallis currently serve as directors of Qualstar and were all elected to remove Qualstar’s current directors.  Also, please be surethe Board at the 2013 Annual Meeting of Shareholders. Each of these nominees was recommended to the Board by the Nominating and Governance Committee and was approved by the Board. The recommendation of the Board is based on its carefully considered judgment that the latest dated proxy card you return isexperience, record and qualifications of each of its nominees make them the WHITE proxy card.

If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., our proxy solicitor, at (800) 322-2885 or (212) 929-5500 (call collect) or at proxy@mackenziepartners.com.
This proxy statement is dated June   , 2012best candidates to serve on the Board. We believe that these five nominees, with their breadth of relevant and is first being mailed to shareholders on or about June   , 2012.
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REASONS OUR BOARD OF DIRECTORS OPPOSES THE PROPOSAL OF BRONSON AND BKF
TO REMOVE AND REPLACE THE MEMBERS OF OUR BOARD
Our Board of Directors believes that replacing our Board members with Steven Bronson and his other nominees is not indiverse experience, represent the best interests of our shareholders and that the five nominees recommended by the Board should be elected.

The nominees of the Board have consented to serving as nominees for a number of reasons.

Bronson has stated that, if he succeedselection to the Board, to being named in getting you to support BKF’s proposal to remove our current Board members and replace them with Bronson and his four nominees, Bronson and his other nominees will take action to distribute the majority of Qualstar’s cash (including the proceeds from the sale of marketable securities) to shareholders, as well as to divest Qualstar’s tape library business.
Bronson Proposal to Distribute Qualstar’s Cash.  Although, on first reading, the idea of distributing most of Qualstar’s cash may sound attractive, we believe, for the reasons that follow, that such a large cash distribution would disadvantage our long standing shareholders and weaken Qualstar, putting Qualstar’s future success and the value of our shareholders’ investment at risk:
·We believe Bronson’s purpose in seeking to remove the current board members and replace them with Bronson and his four other nominees is to enable Bronson to distribute a substantial amount of our cash so that BKF will be able to realize a quick and opportunistic return on its investment in Qualstar’s shares, even if that reduces shareholder value over the longer term.
·
Such a large cash distribution, we believe, would leave Qualstar without sufficient financial resources that it needs to grow its business and remain competitive in what is still a difficult and uncertain economy.  Moreover, the goal of Qualstar’s directors is and always has been to increase shareholder value for the long term.  To accomplish that goal, we believe Qualstar needs to retain its cash resources in order:
oTo invest in new products and extend our product lines;
oTo capture market share from our competitors by investing in and implementing new marketing programs and, if necessary, through price competition;
oTo hire additional management personnel to support the growth of our business;
oTo fund opportunistic strategic acquisitions of complementary businesses; and
oTo provide for unanticipated contingencies that could occur in the future.
Moreover, in our experience, particularly during periods of economic difficulties and uncertainties, customers prefer to purchase products from financially strong and liquid manufacturers, like Qualstar, in order to protect themselves against supply chain interruptions.  As a result, we think it is important for Qualstar to maintain a strong balance sheet and substantial liquidity to provide our customers with confidence that we will continue to have the financial strength and resources to continue to improve and expand our product offerings, to provide the high level of service that our customers have come to expect from us,this Proxy Statement and to be able to weather difficult economic conditions.
Therefore, we believe that Bronson’s proposal to distribute a majority of Qualstar’s cash in a single lump sum, would leave Qualstar vulnerable to adverse market and economic conditions, make it more difficult for Qualstar to grow its business and remain competitive and, for those reasons, would reduce shareholder value.
Bronson’s unwillingness to acknowledge that his proposals could well have these kinds of consequences for Qualstar and its shareholders leads us to believe that his primary purpose for launching his proxy contest is to realize a quick and opportunistic gain by distributing Qualstar’s cash and that he does not want to do the hard work or make the investments required to grow Qualstar’s business and create long-term value for Qualstar’s other shareholders.
Bronson’s Proposal to Divest Qualstar’s Tape Library Business.  We believe that it would also be a mistake,serving as Bronson and BKF propose, to divest our tape library business.  We expect market demand for tape libraries will continue for many years to come.  The following are a few of the actions we have taken and intend to take to increase our sales of tape libraries:
·During the past year we have released two new models of our mid-size RLS rack mountable tape libraries, the RLS 8350 and the RLS 8500 Series.  These two new models offer increased storage capacity and enhanced features compared to our legacy RLS 8000 Series, which will be phased out.  Our new RLS models have been favorably received by our customers and we expect sales of these new tape libraries to increase our overall sales of tape libraries.
·We have also developed and will soon release a new feature that will allow our new RLS 8350 and RLS 8500 Series tape libraries to share tape cartridges between vertically stacked libraries.  This feature, not available on any of our previous libraries, will allow customers to start with one library and subsequently expand useable tape cartridge capacity as their data storage needs grow.  We believe that this new feature will stimulate sales of our new RLS 8350 and RLS 8500 Series tape libraries.
·We continue to invest in our XLS enterprise class of tape libraries to develop new models and product enhancements.
·Our previous director of North American sales resigned in February 2011 and that position has remained open since then.  Once Mr. Firestone joins us as our new CEO on June 1, 2012, one of his first tasks will be to hire a new director of North American sales, with a proven track record, to manage and strengthen our sales organization.
·Our Board, under the leadership of Mr. Firestone, intends to conduct a thorough review of all aspects of both our tape library and power supply businesses and implement appropriate additional measures to increase sales while controlling costs.
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Our power supply business has increased sales from $1.3 million in the fiscal year ended June 30, 2005 to $8.5 million in the fiscal year ended June 30, 2011, and has been profitable in each fiscal year since 2008.  We intend to continue to improve and refresh our existing products, develop new power supply products and invest additional financial resources to expand and grow our power supply business.
Our Board also intends to seek out and consider opportunities to grow Qualstar’s business not only by expanding our current product lines, but also through strategic acquisitions of other businesses or product lines that will be complementary to our existing businesses and enable us to leverage our existing expertise and resources, in order to grow our sales and improve the profitability of our operations.  Although we have no agreements or understandings with respect to any acquisitions, we believe it is important to conserve Qualstar’s cash resources so that we will be in a position to pursue acquisition and new business opportunities when they become available, as well as to grow our existing businesses.
For the foregoing reasons, our Board of Directors and management unanimously recommend that our shareholders vote AGAINST Bronson’s and BKF’s proposal to remove the current members of our Board and replace them with Bronson and his other nominees, none of whom, it appears, has had experience managing data storage or power supply businesses similar to Qualstar’s.
Information Regarding Qualstar’s Tape Library Business
Qualstar’s revenue from its tape library business declined from $12.3 million in the fiscal year ended June 30, 2009 to $9.9 million in the fiscal year ended June 30, 2011, by approximately 10.1% per year.  During this period, our tape library business incurred a loss before taxes of $2.6 million in fiscal 2009; however, Qualstar succeeded in reducing the loss before taxes by nearly 38% to $1.6 million in fiscal 2011.
During this three-year period, Qualstar’s tape library product lines were undergoing transition on several different fronts simultaneously.  The 17 year old TLS family of tape libraries reached end-of-life manufacturing and sales cycles, the 12 year old RLS rack mountable product line was being replaced by our newer RLS 8350 and 8500 Series of products, and our enterprise class XLS family of tape libraries was downsizing as a result of the availability from our suppliers of the new LTO-5 format of tape drives, which have twice the data capacity compared to the previous LTO-4 format tape drives.
We believe the prospects for the tape library market are favorable, driven by the new data retention requirements resulting from new laws and regulations and by the growing needs of both businesses and government agencies, both in the United States and other countries, to keep larger and larger volumes of business and other information for longer and longer periods of time.  Just within the United States, for example, legislation such as HIPAA and the Dodd-Frank Act of 2010, and E-Discovery requirements in federal and state courts, plus proposed legislation such as the Protecting Children from Internet Pornographers Act of 2011, are or will be imposing additional data retention burdens on private businesses and government agencies.  Since the total cost of ownership of a tape library system is significantly lower than the total cost of ownership of a hard disc drive system with similar data capacity, we believe that many organizations will choose tape libraries for storing such data.  Moreover, with the addition of our new tape library products, we will be more competitive, in relation to other tape library manufacturers, which we believe will enable us to capture a greater share of the tape library market and, thereby, increase our sales.
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
The following questions and answers are intended to address briefly some commonly asked questions regarding the matters being considered at the special meeting of shareholders.  We urge you to read the remainder of this proxy statement carefully because the information in this section does not provide all information that might be important to you.  Please refer to the more detailed information contained elsewhere in this proxy statement, the appendices to this proxy statement and any documents referred to in this proxy statement, which you should read carefully.  In this proxy statement, the terms “Qualstar,” the “Company,” “we,” “our,” “ours,” and “us” refer to Qualstar Corporation.
Q:Why am I receiving this proxy statement?
A:The special meeting described in this proxy statement was requested by Bronson and BKF to consider and vote upon proposals which, if approved at the special meeting, would give Steven Bronson and BKF control of Qualstar.
As discussed elsewhere in this proxy statement, we believe that Bronson is seeking to take control of Qualstar  to enable him to realize a quick and opportunistic gain for himself, rather than seeking to create permanent shareholder value for Qualstar’s other shareholders.
Q:How does Qualstar’s Board of Directors recommend that I vote?
A:The members of the Board of Directors and management, including William J. Gervais and Lawrence D. Firestone, the outgoing and incoming CEOs of the Company, unanimously recommend that shareholders vote AGAINST Bronson’s and BKF’s first proposal to remove Qualstar’s current directors.
The Board of Directors is not taking any position and is not soliciting proxies with respect to either the second proposal or the third proposal made by Bronson and BKF.  The second proposal, which seeks to reduce the size of the Board from six to five directors, is no longer relevant because our Board will reduce the authorized number of directors to five directors effective upon Mr. Gervais’ retirement on June 15, 2012. We are not taking a position on proposal 3 because Bronson’s nominees can only be elected at the special meeting to fill vacancies on the Board and, if Qualstar’s shareholders join us in defeating proposal 1, there will be no Board vacancies to fill.  If you return the WHITE proxy card and do not attend the special meeting in person you will not be able to vote with respect to the third proposal.
Q:When and where is the special meeting?
A:The special meeting is scheduled to be held at 10:00 a.m., local time, on June 20, 2012 at our headquarters located at 3990-B Heritage Oak Court, Simi Valley, California 93063. Directions to this location are available at http://www.qualstar.com/146028.html.
Q:Who can vote at the special meeting?
A:Shareholders of record as of May 23, 2012, the record date, are entitled to receive notice of and to vote at the special meeting.
Q:What is the required quorum for the special meeting?
A:The holders of a majority of our outstanding shares of common stock as of the record date must be present in person or by proxy at the special meeting in order to conduct business at the meeting.  This is called a quorum.  On May 23, 2012, the record date, 12,253,117 shares of our common stock were outstanding.
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Q:What are the methods by which I can vote my shares at the special meeting?
A:You may attend the special meeting and vote your shares in person; but whether or not you intend to attend the special meeting, we urge that you vote the WHITE proxy card TODAY by any of the following methods:
·By telephone or over the internet, by following the instructions that are on the WHITE proxy card; or
·
By marking your vote AGAINST proposal 1 on the proxy card, or leaving the proxy card blank and then signing, dating and returning the WHITE proxy card in the postage prepaid return envelope that is enclosed with this proxy statement.
If you vote by one of these methods, your shares will be voted in accordance with the specific voting instructions on the WHITE proxy card.  Any WHITE proxy cards that we receive which are signed by shareholders but which lack specific instructions will be voted AGAINST proposal 1.
We strongly urge you NOT to sign or return any gold proxy card sent to you by Bronson or BKF.
Q.What do I need to do if I choose to attend and vote my shares, in person, at the special meeting?
A.If you chose to attend and vote in person at the special meeting, please bring the enclosed WHITE proxy card or proof of identification to the meeting.  However, if your shares are held for you in a brokerage account or at a bank or in the name of a nominee holder, to vote in person at the special meeting you must request a legal proxy from your broker, bank or nominee holder and bring that proxy with you in order to vote in person at the special meeting.
Q:If my shares are held for me in a brokerage account or by a bank or other nominee holder, how can I vote my shares?
A.
If your shares are held for you in a brokerage account or by a bank or other nominee holder, your shares are held in “street name”.  In that case you will receive a voting instruction card, which will be similar to the enclosed proxy and will be WHITE in color.  In order to assure that your votes will count at the special meeting, as soon as you receive that voting instruction card, please complete that card by indicating your vote AGAINST proposal 1 and then signing, dating and returning it in the postage prepaid return envelope enclosed with your voting instruction card.
The voting instruction card will also contain instructions on how you can vote your shares by telephone or over the internet. If you vote by one of these methods, you do not need to return your voting instruction card.
If you plan to attend and want to vote your shares at the special meeting, however, you will need to bring a legal proxy to the meeting.  You can obtain a legal proxy by calling your broker, bank  or nominee holder to request such a proxy.
If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., our proxy solicitor, at (800) 322-2885 or (212) 929-5500 (call collect) or at proxy@mackenziepartners.com.
Q.How many votes do I have?
A.Each shareholder is entitled to cast a number of votes at the special meeting equal to the number of shares that the shareholder owned on May 23, 2012, the record date for the special meeting.
Q:What vote is required to approve proposal 1?
A:
The affirmative vote of the holders of a majority of the outstanding shares entitled to vote at the special meeting is required to approve proposal 1.  The Board of Directors and management unanimously recommend that shareholders vote AGAINST proposal 1.
Q:What vote is required to approve proposals 2 and 3?
A:
Proposal 2 requires the affirmative vote of the holders of a majority of the shares represented at the special meeting and entitled to vote, assuming a quorum is present.  Proposal 3 requires, with respect to each nominee, the affirmative vote of the holders of a majority of the shares represented at the special meeting and entitled to vote, assuming a quorum is present.  We are not taking a position on proposal 2, because effective upon Mr. Gervais’ retirement on June 15, 2012, the authorized number of directors will be fixed by our Board at five directors.  We are not taking a position on proposal 3 nor are we soliciting proxies with respect to proposal 3, because Bronson’s nominees cannot be elected to the Board if Qualstar’s shareholders join us in defeating proposal 1.  If you return the WHITE proxy card and do not attend the special meeting in person you will not have the right to vote with respect to the third proposal.
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Q:How will abstentions and “broker non-votes” be treated?
A:
Abstentions and shares represented by proxies that reflect “broker non-votes” (shares of stock held of record by a broker as to which no voting direction or discretionary authority exists) will be counted for purposes of determining the presence of a quorum at the special meeting.  Abstentions will have the effect of a vote against proposal 1, proposal 2 and proposal 3.   Broker non-votes will have the effect of a vote against proposal 1 and no effect on proposal 2 or proposal 3.
Q:What should I do if I receive more than one set of voting materials?
A:If your shares are registered differently and are held in more than one account, then you will receive more than one proxy statement and proxy card.  Please be sure to vote all of your accounts so that all of your shares are represented at the special meeting.
Q:What should I do with any gold proxy card I may receive from BKF?
A:The Board recommends that you discard any gold proxy card sent to you by Bronson or BKF.  Instead, the Board recommends that you use the WHITE proxy card to vote by telephone, by internet or by signing, dating and returning the WHITE proxy card in the envelope provided TODAY.  If you have already returned a gold proxy card, you can effectively revoke it by voting the enclosed WHITE proxy card.  Only your latest-dated proxy will be counted at the special meeting.
Q:Can I change my vote after I return my proxy?
A:
You may revoke any proxy and change your vote at any time before the shareholder vote takes place at the special meeting.  You may do this prior to the time of voting by delivering a written notice to Qualstar revoking your proxy, submitting a new proxy by telephone or internet, or submitting a subsequently signed and dated proxy card.  You may also revoke your proxy by attending the special meeting and voting in person.  Attending the special meeting will not revoke your proxy unless you specifically request it.  If you have previously signed a gold proxy card sent to you by BKF, you may revoke any vote you may have cast in favor of proposal 1 by following the instructions for changing your vote, as described above.
Written notices of revocation and other communications about revoking your proxy should be addressed to: Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, California 93063; Attention: Corporate Secretary
However, if you hold your shares through a broker, bank or other nominee, you should follow the instructions of your broker, bank or nominee regarding revocation of proxies.  If your broker, bank or nominee allows you to vote by telephone or over the internet, you may be able to change your vote by voting again by telephone or over the internet.
Q:Who should I contact if I have questions?
A:If you have any questions or need assistance voting your shares, please contact MacKenzie Partners, Inc., our proxy solicitor, at (800) 322-2885 or (212) 929-5500 (call collect) or at proxy@mackenziepartners.com.
SHARES OWNED BY OUR DIRECTORS AND EXECUTIVE OFFICERS
As of May 23, 2012, the record date for the special meeting, our directors and executive officers beneficially owned, in the aggregate, approximately 3,663,555 shares of our common stock (including 144,000 shares issuable upon exercise of options exercisable within 60 days of May 23, 2012), or approximately 29.6% of the outstanding shares of our common stock determined in accordance with the beneficial ownership rules of the SEC.  Our directors and executive officers have informed us that they intend to vote all of their outstanding shares of common stock “AGAINST” proposal 1.
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PURPOSE OF SOLICITATION
Background on the Calling of the Special Meeting
On January 3, 2011, BKF filed a Schedule 13D with the SEC disclosing that it had accumulated beneficial ownership of 12.7% of our outstanding shares.  BKF reported that it had acquired 1,500,000 of such shares through a privately negotiated transaction, on December 17, 2010, at a purchase price of $1.55 per share, or an aggregate purchase price of $2,325,000.
Qualstar received a letter from BKF, dated February 15, 2012, asking the Board of Directors (1) to divest Qualstar's Tape Library business; (2) to distribute cash to Qualstar’s shareholders; and (3) to focus Qualstar's resources on its Power Supply business.
Our Board of Directors subsequently reviewed the letter from BKF and concluded that the BKF proposals should be carefully considered in the context of creating long-term shareholder value.  Qualstar sent a letter, dated February 24, 2012, to BKF communicating the Board’s conclusion.
On February 28, 2012, BKF issued a press release requesting Qualstar’s shareholders to withhold their votes for Qualstar’s Board of Directors at the Annual Meeting of Shareholders to be held on March 21, 2012.
On March 21, 2012, Qualstar held its 2012 Annual Meeting of Shareholders, at which the current members of the Board of Directors wereif elected by the Qualstar shareholders to serve a one-year term expiring at the Annual Meeting of Shareholders to be held in 2013 or until their successors are elected and qualified.
On April 30, 2012, BKF delivered a letter to Qualstar exercising its right under our bylaws, as a holder of 10% or more of our outstanding shares, to call a special meeting of shareholders, to be held on June 20, 2012, in order to consider the proposals listed in this proxy statement.
Subsequent to the receipt of BKF’s April 30, 2012 letter requesting a special meeting, representatives of Qualstar had conversations with representatives of BKF concerning the special meeting, including a meeting on or about May 3, 2012  between William J. Gervais, Qualstar’s CEO and owner of 27% of Qualstar’s outstanding shares, and Greg Heller, Senior Vice President of BKF.  At that meeting, Mr. Heller asked Mr. Gervais to vote his shares in favor of BKF’s proposals, and stated that BKF wanted Mr. Gervais to be on Qualstar’s Board, presumably as one of BKF’s nominees.  Mr. Heller also said that he and Steven Bronson believed that Qualstar should make a cash distribution to its shareholders in an amount equal to approximately 80% or more of Qualstar’s cash and marketable securities which, as of March 31, 2012, totaled approximately $21.6 million.  Mr. Gervais and Mr. Heller also had a phone conversation on or about May 9, 2012, during which they discussed a possible two-week delay in the date of the special meeting provided that the parties signed a standstill agreement.  The parties did not reach any agreement on these matters.
On May 18, 2012, in response to BKF’s request for a special meeting, our Board of Directors announced the time and place of the meeting and set the record date for May 23, 2012.
On or about May 22, 2012, Greg Heller placed a call to Mr. Gervais in which Mr. Heller stated that he and Mr. Bronson would like to meet with Mr. Gervais regarding the proxy contest.  Mr. Gervais declined the invitation to meet.
Further information regarding the calling of the special meeting can be found with our SEC filings, the location of which is described under “Where You Can Find Additional Information,” below.
BKF’s Proposals
The purpose of the special meeting will be to consider and vote on the following proposals made by BKF:
(1)to remove all current members of our Board of Directors;
(2)to approve a resolution to fix the authorized number of directors of Qualstar at five directors; and
(3)to elect five persons nominated by BKF to fill any vacancies created on our Board if the first proposal above is approved.
Our Board of Directors and management unanimously recommend that shareholders vote AGAINST the first proposal above.  We are not taking any position nor are we soliciting proxies with respect to the second proposal, which seeks to reduce the size of the Board from six to five directors, since our Board will reduce the authorized number of directors to five effective upon Mr. Gervais’ retirement on June 15, 2012.  The text of the proposed resolution is set forth in Appendix II to this proxy statement.  We are also not taking any position on the third proposal above and we are not soliciting proxies with respect to this proposal because this proposal will have no effect if BKF’s first proposal listed above is not approved.
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Interests of Our Directors
Cash Compensation

In considering the recommendation of our Board of Directors with respect to the BKF proposals, you should be aware that our non-employee directors receive the following annual compensation in their capacity as members of our Board of Directors, and will therefore no longer be eligible to receive this compensation if they are removed from the Board:
·$2,000 per quarter plus $1,000 for each Board meeting attended;
·$1,000 per quarter for Audit Committee members plus an attendance fee of $500 per meeting if the Audit Committee meeting is held in conjunction with a meeting of the full Board, and $1,000 per meeting if held on a day when the full Board does not meet;
·$500 for members of the Compensation Committee who attend meetings of that committee that are held on a day when the full Board does not meet; and
·$250 per meeting for telephonic meetings of the full Board or of a committee on which a director is a member.
Our Board of Directors was aware of these interests and considered them, among other matters, in reaching its decision to unanimously recommend that our shareholders vote AGAINST BKF’s proposal 1.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock as of May 23, 2012 for:
·each person (or group of affiliated persons) who we know beneficially owns more than 5% of our common stock;
·each of our directors;
·each of our executive officers named in the Fiscal 2011 Summary Compensation Table included in Qualstar’s Proxy Statement for its Annual Meeting of Shareholders held on March 21, 2012; and
·all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares.  Except as indicated by footnote, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned, subject to community property laws where applicable.  The percentage of shares beneficially owned is based on 12,253,117 shares of common stock outstanding as of May 23, 2012.  Shares of common stock subject to options currently exercisable or exercisable within 60 days of May 23, 2012, are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person.  The address for those individuals for which an address is not otherwise indicated is: c/o Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, California 93063.
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Common
Options
Exercisable
Within 60
Beneficial Ownership
NameShares OwnedDays (1)Number Percent
William J. Gervais
3,313,364—3,313,36427.0%
BKF Capital Group, Inc.
Steven N. Bronson (2)
225 N.E. Mizner Blvd., Suite 400
Boca Raton, FL 33432
  2,123,056   —   2,123,056   17.3%
Porter Orlin LLC (3)
665 Fifth Avenue, 34th Floor, New York, NY  10103
  912,901   —   912,901   7.5%
Dimensional Fund Advisors LP (4)
6300 Bee Cave Road, Austin, TX 78746
  933,389   —   933,389   7.6%
Stanley W. Corker
  18,940   24,000   42,940   * 
Carl Gromada
  7,571   24,000   31,571   * 
Lawrence D. Firestone
  —   —   —   * 
Robert A. Meyer
  —   24,000   24,000   * 
Robert E. Rich
  131,400   24,000   155,400   1.3%
Nidhi H. Andalon
  —   16,000   16,000   * 
Randy Johnson
  —   12,000   12,000   * 
Robert K. Covey
  48,280   20,000   68,280   * 
All directors and officers as a group (9 persons)  3,519,555   144,000   3,663,555   29.6%
*Less than 1.0%
(1)Represents shares that may be acquired upon exercise of stock options which are either currently vested or will vest within 60 days of May 23, 2012.
(2)Based on information contained in reports filed with the Securities and Exchange Commission, BKF Capital Group, Inc. beneficially owns 2,065,356 shares of Qualstar common stock as of May 9, 2012.  Steven N. Bronson, as the Chairman and President of BKF Capital Group, Inc., may be deemed to beneficially own the shares of Qualstar held by BKF Capital Group, Inc.  Mr. Bronson, as the sole owner of BA Value Investors, LLC, is the beneficial owner of 57,700 shares of Qualstar.
(3)Based on information contained in reports filed with the Securities and Exchange Commission, Porter Orlin LLC, an investment adviser, beneficially owns 912,901 shares as of December 31, 2011.
(4)Based on information contained in reports filed with the Securities and Exchange Commission, Dimensional Fund Advisors LP, an investment adviser, beneficially owns 933,389 shares as of December 31, 2011.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Board of Directors.  Qualstar will bear the entire cost of the Board’s solicitation of proxies in connection with the special meeting, including the costs associated with the preparation, assembly, printing and mailing of this proxy statement, the WHITE proxy card and any additional soliciting material furnished by Qualstar to shareholders.
Qualstar will also reimburse brokerage firms and other persons representing beneficial owners of shares for their expense in forwarding Qualstar’s solicitation materials to such beneficial owners.
Qualstar has retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a fee not to exceed $50,000, plus reasonable out-of-pocket expenses.  MacKenzie Partners, Inc. may solicit proxies by mail, advertisement, telephone, via the internet or in person; however, neither MacKenzie Partners nor Qualstar plans to solicit proxies via internet chat rooms.  MacKenzie Partners, Inc. expects to employ approximately 25 people to solicit proxies from Qualstar’s shareholders. In addition, directors, officers and other employees of Qualstar may solicit proxies in connection with the special meeting, none of whom will receive additional compensation for doing so.
Qualstar’s total expenses related to the solicitation of proxies in connection with the special meeting are expected to be at least $250,000, of which approximately $25,000 has been spent to date.  Appendix I sets forth certain information relating to Qualstar’s directors and certain officers who will be soliciting proxies in connection with the special meeting.
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Appraisal Rights
Holders of shares of our common stock do not have appraisal rights under California law in connection with this solicitation of proxies.
CERTAIN INFORMATION ABOUT THE COMPANY AND ITS DIRECTORS AND
EXECUTIVE OFFICERS
Certain information pertaining to Qualstar and its directors and executive officers including information pertaining to corporate governance and executive compensation is set forth in Appendix III to this proxy statement.
SHAREHOLDER PROPOSALS
Proposals to be Included in Our Proxy Statement
A shareholder who wishes to have a proposal considered for inclusion in our proxy statement for action at the next Annual Meeting of Shareholders must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934.  The proposal must be in writing and be received by the Secretary of Qualstar at our principal place of business no later than October 19, 2012.
Advance Notice Procedures
If a shareholder desires to have a proposal acted upon at the next Annual Meeting of Shareholders that is not included in our proxy statement in accordance with SEC Rule 14a-8, or if a shareholder desires to nominate someone for election to our Board of Directors, the shareholder must follow the procedures outlined in our bylaws.  Our bylaws provide that in order for a shareholder proposal to be considered at an annual meeting of shareholders, written notice of the proposal must be received by the Secretary of Qualstar generally not less than 60 days nor more than 90 days prior to the anniversary of the preceding year’s annual meeting of shareholders.  The notice must contain information required by our bylaws, including a description of the proposal and any material interest of the shareholder relating to such proposal.
In order to nominate someone for election to our Board of Directors at an annual meeting of shareholders, written notice of the proposed nomination must be received by the Secretary of Qualstar not less than 60 days nor more than 90 days prior to the anniversary of the preceding year’s annual meeting of shareholders.  The notice must contain information required by our bylaws regarding the shareholder and the nominee, as well as information required to be included in a proxy statement by SEC rules and regulations.
Accordingly, in order for a shareholder proposal or nomination to be considered at the next Annual Meeting of Shareholders, a written notice of the proposal or the nomination, which includes the information required by our bylaws, must be received by the Secretary of Qualstar between December 21, 2012 and January 20, 2013.
A copy of the full text of the bylaw provisions containing the advance notice procedures described above may be obtained upon written request to the Secretary of Qualstar at our principal place of business.
OTHER MATTERS
As of the date of this Proxy Statement, Qualstar has no reason to believe that any nominee will be unable or unwilling to serve if elected as a director. However, if for any reason a nominee becomes unable to serve or for good cause will not serve if elected, the Board upon the recommendation of its Nominating and Governance Committee may designate substitute nominees, in which event the shares represented by proxies returned to us will be voted for such substitute nominees. If any substitute nominees are so designated, we will file an amended proxy statement we know of no matters that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the amended proxy statement and to serve as directors if elected, and includes certain biographical and other information about such nominees required by the applicable rules promulgated by the SEC.

The accompanying WHITE proxy card will not be presentedvoted for consideration at the special meetingmore than five candidates or for anyone other than as described in this proxy statement.  If, however, other matters are properly brought before the special meeting,Board’s nominees or designated substitutes. Unless otherwise instructed, the persons named as proxiesin the accompanying proxy will vote in accordance with their judgment on such other matters unless otherwise indicated on the proxy.

WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterlyto elect Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis and current reports, proxy statements and other information with the SEC.  You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C., 20549.  Please call the SEC at 1-800-SEC-0330 for further information on the SEC’s public reference room.  Our SEC filings are also availableNick Yarymovych to the public atBoard, unless, by marking the SEC’s website at http://www.sec.gov.
Any person, including any beneficial owner,appropriate space on the WHITE proxy card, the shareholder instructs that he, she or it withholds authority from the proxy holder to whom this proxy statement is delivered may request copies of reports, proxy statements or other information concerning us, without charge, by written request, directed to Corporate Secretary, c/o Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, California 93063 or by telephone at 805-583-7744 extension 114.  If you would like to request documents, please do so by June 15, 2012 in order to receive them before the special meeting.
10
THIS PROXY STATEMENT IS DATED JUNE [__], 2012.  YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ABOVE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors
Simi Valley, California
June [__], 2012
11 

Appendix I
INFORMATION CONCERNING PERSONS WHO MAY BE DEEMED
PARTICIPANTS IN THE COMPANY’S SOLICITATION OF PROXIES
The following table sets forth the name, principal business address and the present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which their employment is carried on, of the directors and executive officers of Qualstar who, under SEC rules, may be deemed “participants” in our solicitation of proxies from Qualstar shareholders in connection with the special meeting.  Unless otherwise indicated, the principal business address for the participants is 3990-B Heritage Oak Court, Simi Valley, California 93063.  The table also includes the number of shares of our common stock beneficially owned by each participant, which includes shares that may be acquired by the exercise of stock options within 60 days of May 23, 2012.  None of the participants is the record owner of any shares of our common stock that such person does not own beneficially.
Name and Address
Positions with Qualstar/Occupation
Shares Owned Beneficially
William J. Gervais(1)
President, Chief Executive Officer and Director of Qualstar3,313,364
Stanley W. Corker
Qualstar Director
Director of Technology Research and Partner, Emerald Asset Management
3175 Oregon Pike
Leola, Pennsylvania 17540
42,940
Lawrence D. Firestone(2)
Qualstar Director
Chief Financial Officer of Xiotech Corporation
—
Carl W. GromadaQualstar Director31,571
Robert A. MeyerQualstar Director24,000
Robert E. Rich
Director of Qualstar
Shareholder of Stradling Yocca Carlson & Rauth, a Professional Corporation.
660 Newport Center Drive Suite 1600
Newport Beach, CA 92660
155,400
Nidhi H. AndalonVice President and Chief Financial Officer of Qualstar16,000
Robert K. CoveyVice President, Marketing of Qualstar68,280
Randy JohnsonVice President and General Manager, N2Power12,000

(1)On March 21, 2012, Mr. William J. Gervais, a co-founder and the Chief Executive Officer, President and a member of the Board of Directors advised the Board that he was retiring, after having served as the Company’s President and CEO since 1984, and therefore tendered his resignation as a director and officer of the Company effective as of June 15, 2012.  Following his retirement, Mr. Gervais will continue to be available to the Company as needed and in connection therewith, has entered into a Consulting Agreement with the Company.  The Consulting Agreement is for a term of two years and provides that during the first year of that agreement, Mr. Gervais will be paid $1,000 for each day of consulting, up to a maximum of 50 days a quarter, and in the second year, $1,000 for each day of consulting, up to a maximum of 25 days a quarter.
(2)Lawrence D. Firestone has been appointed to the position of Chief Executive Officer and President of the Company, to succeed Mr. William J. Gervais, commencing on June 1, 2012.  Mr. Firestone’s employment agreement, entered into on May 8, 2012, provides that Mr. Firestone will be employed by the Company for an initial term commencing on June 1, 2012 through June 30, 2013.  Mr. Firestone’s employment agreement provides that he will receive (i) a base annual salary of $300,000 during the initial one year term and $350,000 per year beginning July 1, 2013, unless his employment agreement is not renewed; (ii) an incentive bonus that will be tied to achieving financial and other objectives established by the Board, with a potential target bonus of 100% of his base salary subject to certain adjustments; and (iii) stock options to purchase up to 300,000 shares of the Company’s common stock.  Mr. Firestone also will receive a signing bonus of $75,000 which will be applied towards and to that extent reduce, any incentive bonus he earns.  If Mr. Firestone is terminated by the Company without cause or if he resigns for good reason, he will receive his accrued compensation and, subject to certain conditions, a lump sum amount equal to his then current base salary for 18 months.  If Mr. Firestone is terminated by the Company without cause or if he resigns for good reason within 12 months following a change of control of the Company, he will receive severance compensation and benefits which include, subject to certain conditions (1) a lump sum payment of an amount equal to 18 month’s of his then current annual base salary; (2) payment of COBRA premiums for 18 months; (3) a lump sum payment equal to 100% of his target incentive bonus for the then current year of employment, prorated as of his termination date, plus an additional 12 months target incentive bonus; and (4) accelerated vesting of all his then unvested stock options.  Such severance compensation will be subject to reduction to the extent necessary to comply with the severance compensation limitations of Section 280(g) of the Internal Revenue Code.  If BKF’s proposals are approved, the removal of the current members of the Board of Directors and the election of five persons to fill the resulting vacancies on the Board of Directors will constitute a “change of control” under Mr. Firestone’s employment agreement.

I-1
Information Regarding Transactions in the Company’s Securities by Participants
The following table sets forth information concerning all purchases and sales of shares of Qualstar common stock by the participants listed above during the past two years (May 23, 2010 through May 23, 2012).  None of the purchase price or market value of the shares is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding the shares.
Name Date Number of Shares Footnote
        
William J. Gervais 5/26/10 2,505  2
  6/11/2010 1,500  2
  6/14/2010 700  2
  11/16/2010 1,000  2
  11/17/2010 1,000  2
  11/18/2010 12,700  2
  11/19/2010 1,000  2
  11/22/2010 1,200  2
  11/23/2010 2,500  2
  11/24/2010 9,550  2
  2/17/2011 3,500  2
  5/16/2011 3,393  2
  5/17/2011 1,100  2
  5/19/2011 700  2
  5/20/2011 1,736  2
  5/23/2011 3,050  2
  5/24/2011 8,100  2
  5/25/2011 6,000  2
  5/26/2011 167  2
  5/27/2011 4,000  2
  5/31/2011 4,325  2
  6/01/2011 5,800  2
  6/02/2011 1,477  2
  6/07/2011 4,816  2
  6/08/2011 5,000  2
  6/09/2011 5,000  2
  6/10/2011 5,000  2
  6/13/2011 5,000  2
  6/14/2011 3,600  2
  9/14/2011 15,000  2
  9/15/2011 800  2
  9/15/2011 700  2
  11/22/2011 6,000  2
  12/09/2011 63,000  2
  2/16/2012 6,000  2
Stanley W. Corker N/A N/A  N/A
Lawrence D. Firestone N/A N/A  N/A
Carl W. Gromada 5/25/2011 13,000  1
  5/26/2011 27,600  1
  5/27/2011 100  1
Robert A. Meyer N/A N/A  N/A
Robert E. Rich N/A N/A  N/A
Nidhi H. Andalon N/A N/A  N/A
Robert K. Covey N/A N/A  N/A
Randy Johnson N/A N/A  N/A
(1)           Open market sale.
(2)           Open market purchase.vote.
I-2
Miscellaneous Information Concerning Participants
Except as described in this Appendix I, to the best of our knowledge, no associate of any person listed in the first table above beneficially owns any shares of common stock or other securities of Qualstar.  Except as described in this Appendix I, to the best of our knowledge, there have been no transactions since the beginning of our last fiscal year, and there are no currently proposed transactions, in which we or any of our subsidiaries was or is to be a party, in which the amount exceeds $120,000, and in which any of the persons listed in the first table above or any of his or her associates had or will have a direct or indirect material interest.
To the best of our knowledge, except as described in this Appendix I, no person listed in the first table above, or any of his or her associates, has entered into any agreement or understanding with any person respecting any future employment by us or our affiliates or any future transactions to which we or any of our affiliates will or may be a party, except for customary terms of employment for the positions listed in the table.  Except as described in this Appendix I, for employee equity awards or for proxies given in connection with our 2012 annual meeting of shareholders, to the best of our knowledge, there are no contracts, arrangements or understandings by any of the persons listed in the first table above within the past year with any person with respect to any securities of Qualstar, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies.
Except as described in this Appendix I, to the best of our knowledge, none of the persons listed in the first table above beneficially owns any securities of any subsidiary of Qualstar.
Except as described in this Appendix I and except as described under “Interests of Our Directors” in the Qualstar proxy statement, to the best of our knowledge, no person listed in the first table above has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the special meeting.
To the best of our knowledge, there are no material proceedings to which any director, officer or affiliate of Qualstar, or any owner of record or beneficially of more than five percent of Qualstar’s common stock, or any associate of any such director, officer, affiliate of Qualstar, or security holder is a party adverse to Qualstar or any of its subsidiaries or has a material interest adverse to Qualstar or any of its subsidiaries.
 I-3

Appendix II
BKF Resolution
Proposal No. 2
“RESOLVED: That the exact number of authorized directors shall be five (5) until changed in accordance with the provisions of the Company’s amended and restated bylaws.”
Appendix III
CERTAIN INFORMATION ABOUT THE COMPANY AND ITS DIRECTORS AND
OFFICERS
DIRECTORS

The following table provides information regarding the directors of Qualstar,Qualstar’s nominees, their ages, the year in which each first became a director of Qualstar, their principal occupations or employment during the past five years, directorships held with other public companies at any time during the past five years, and other biographical data.  FollowingIncluded in the biography of each directornominee is a brief description of the particular experience, qualifications, attributes or skills that led the Board to conclude that the directornominee should serve as a director of Qualstar.

Name and Age

Business Experience During Last

Name and Age

Five Years and Other Directorships

William J. Gervais   (69)
William J. Gervais is a founder

Steven N. Bronson (48)

Steven N. Bronson was appointed CEO on July 3, 2013. He and his investment company, BKF Capital Group Inc. (BKF) own 23.4% of Qualstar stock. Mr. Bronson has been our PresidentChairman and a director since our inception in 1984, and was elected Chief Executive Officer of BKF since October 2008. In July 2010 he became Chairman and Chief Executive Officer of Interlink Electronics, Inc., a global leader in January 2000.the design of patented Force-Sensing Resistor™ (FSR™) technology and a pioneer in printed electronics. Since 1996, Mr. Bronson has served as the Chairman and Chief Executive Officer of Bronson & Co., LLC, an investment banking firm that advises private and public, emerging growth and middle market companies. In addition, Mr. Bronson served as Chairman and Chief Executive Officer of Mikron Infrared Instruments, Inc., from August 1998 to May 1999, which he successfully restructured and which was later sold.

David J. Wolenski   (52)

David J. Wolenski is Vice President of Electro-Mechanical Products, Inc. ("EMP"), a privately-held company engaged in the manufacture of precision-machined components and thermal management systems for the Semiconductor, Laser, and Medical Device industries.  He has been a director on EMP's board since August 2000, and has served as an officer of the Company since November 2002.  From 1984 until January1996 to 2000, Mr. GervaisWolenski was Chief Executive Officer of OZO Automation, Inc. (OTCBB:OZOA), a publicly-traded company that produced robotic workstations for the electronics industry.  As Chief Executive Officer he also served as our Chief Financial Officer.  From 1981 until 1984, Mr. Gervais was Presidentmanaged the sale of Northridge Design Associates, Inc., an engineering consulting firm.  Mr. Gervais was a co-founder,OZO's assets to JOT Automationof Olunsalo, Finland, and served as Engineering ManagerPresident of their Depaneling subsidiary from 1976 until 1981, of Micropolis2000 to 2001.  From 1983 to 1996, Mr. Wolenski held various positions with Johns Manville Corporation, a former manufacturer of hard disk drives.worldwide leader in fiberglass insulations and engineered products, which included managerial assignments in manufacturing, business development, and quality assurance.  His past board affiliations have included OZO Automation, Inc. where he was a director from 1996-1999, and Bio-Medical Automation, Inc., where he was a director from 1999-2000.  Mr. Gervais earnedWolenski holds a B.S.BS degree in Mechanical Engineering from California State Polytechnicthe University in 1967.  Among other qualifications, Mr. Gervais brings toof Colorado at Boulder (1983), and an MBA from the Board executive leadership skills and over 35 years experience in the data storage industry, including 27 years as the principal executive officerUniversity of Qualstar.   On March 21, 2012, Mr. Gervais advised the Board that he was retiring,  and therefore tendered his resignation as a director and officer of the Company effective as of June 15, 2012.  Following his retirement, Mr. Gervais will continue to be available to the Company as needed.Colorado at Denver (1990).

 

Lawrence D. Firestone   (53)

Sean Leder   (43)

Lawrence D. Firestone was appointed a director of Qualstar on May 13, 2011 to fill the vacancy on the Board created when the Board adopted a resolution expanding the number of directors from six to seven. Mr. Firestone has been appointed to the position of

Sean Leder is currently serving as Chief Executive Officer of Leder Holdings, LLC, Chief Executive Officer of The Leder Group and President of the Company, to succeed Mr. William J. Gervais, commencing on June 1, 2012.Leder Realty & Management, Inc. He currently is the Chief Financial Officer of Xiotech Corporation, a leading supplier of performance driven enterprise storage, a position he has held since February 2011.  From August 2006 to August 2010, Mr. Firestone was Executive Vicethe posts of CEO of The Leder Group and President and Chief Financial Officer of Advanced Energy Industries, Inc. (AEIS), a leading provider of power conversion devicesLeder Realty & Management for the semi-conductorpast nineteen years. Mr. Leder started his career on Wall Street where, at Chase Manhattan Bank, he worked in mergers and solar inverter markets.  From 1999 until August 2006,acquisitions. Later, as a Merrill Lynch investment banker, he worked on the real estate investment banking team, raising money for and advising real estate investment trusts. Mr. Firestone served asLeder received his B.A. in Political Science from Brandeis University in 1993.

Dale E. Wallis  (64)

Dale E. Wallis has over 40 years of business and entrepreneurial experience. In the Seniorlast 15 years, Mr. Wallis has been Vice President, and Chief Financial Officer and secretary and treasurer at Applied FilmsTreasurer of The Aerospace Corporation, (AFCO), a leading supplier$900 million revenue defense contractor that manages much of thin film deposition equipment.the US Government’s satellite communications programs.  Prior to joining Applied Films,Aerospace, Mr. FirestoneWallis was Chief Financial Officer for a privately held company and in senior financial management for an international publicly held company.  Earlier in his career Mr. Wallis was a Senior Manager with Ernst & Young and an auditor with KPMG.   Mr. Wallis currently is on the board for Financial Executives International, a professional organization of over 12,000 CFOs in the US, Canada, Japan and the UK.  Mr. Wallis has recently served as an adjunct professor of accounting at major universities.  

Nick Yarymovych (49)

Nick Yarymovych is currently serving as the SVP, Global Consulting and Operations with NTT Centerstance and brings deep expertise in helping companies build cloud solutions and optimize their customer relationships. Throughout his professional consulting career, he has launched new business units and led and supported numerous business turnarounds, process reengineering, and systems integration projects.

In 2001 Mr. Yarymovych founded Ventus Solutions, one of the first Salesforce.com Premier Partner consulting firms. Since its beginning, Ventus had successfully deployed several hundred implementations and helped pioneer high impact approaches to implementing cloud based solutions. As President and CEO, he grew the business organically and profitably while establishing an expert team that was consistently rated highest in Salesforce.com customer satisfaction, tied with NTT Centerstance. In 2011, Ventus merged with NTT Centerstance. Previously, Mr. Yarymovych served as Vice President and Chief Operating Officer of Avalanche Industries, a contract manufacturere-Business Solutions with QuickStart Technologies where he led the company's e-business consulting services division. While at QuickStart, he launched the Customer Relationship Management (CRM) practice, which was named by IDC as one of custom cables and harnesses, from 1996the top emerging CRM integrators of 1999. Prior to 1999.QuickStart, Mr. FirestoneYarymovych served as a director of Amtech Systems, Inc. from 2005 to 2007Client Partner with Cambridge Technology Partners in their Strategy and as a director of Hyperspace Communications, Inc. from 2004 to 2005.  Mr. Firestone received a BSBA degree in Accounting from Slippery Rock State College in 1981.  Among other qualifications, Mr. Firestone brings to the BoardManagement Consulting Group. While at Cambridge, Nick established an expertise in financesolving large customer-facing problems and accounting including experience as chief financial officer of public companies, executive management experience,driving operational turnarounds in various industries using structured business process reengineering (BPR) methodologies.

Mr. Yarymovych earned his M.B.A. from Pepperdine University and prior experience as a director of two public companies.

Stanley W. Corker   (60)
Stanley W. Corker has served as a director of Qualstar since January 2006.  Since 1996, Mr. Corker has been the Director of Technology Research and a partner of Emerald Asset Management, a diversified investment management firm.  Prior to joining Emerald Asset Management, Mr. Corker obtained over 20 years experiencehis B.S. in the computer storage industry from key roles in engineering and marketing at several manufacturers of tape drives, and as an industry analyst with International Data Corporation (IDC).  Mr. Corker received a B.S. degree in Computer ScienceAerospace Engineering from the University of Essex, England in 1972, where he later conducted five years of postgraduate research in computer networking systems.  Among other qualifications, Mr. Corker brings to the Board engineering and marketing experience in the data storage industry, as well as expertise in financial analysis.
Southern California.

Carl W. Gromada   (70)
Carl W. Gromada has served as a director of Qualstar since March 2005.  From 2000 to the present, Mr. Gromada has been a consultant and a private investor. From 1996 to 2000, Mr. Gromada served as Chief Executive Officer, and a member of the board of directors of Computer Resources Unlimited, Inc., a company involved in the design, manufacture and sale of a broad line of products for the computer storage industry.  Mr. Gromada received a B.S. degree in Business Administration from Temple University in 1965.  Among other qualifications, Mr. Gromada brings to the Board public accounting and internal audit experience, executive leadership experience, as well as experience with mergers and acquisitions.
Robert A. Meyer   (67)
Robert A. Meyer has served as a director of Qualstar since March 2006.  Mr. Meyer is currently retired.  From 1994 until June 2005, Mr. Meyer was employed in various management positions by United States Filter Corporation, a company engaged in the water treatment industry serving industrial, commercial and residential customers.  His positions at United States Filter Corporation included Director of Finance, Business Development from 2000 to 2002, and Vice President of Internal Audit from 2003 until he retired in June 2005.  Mr. Meyer received a B.S. degree in Accounting from C.W. Post College in 1972, and he is a Certified Public Accountant.  Among other qualifications, Mr. Meyer brings to the Board expertise in finance and accounting, and executive management experience.

Our Board of Directors recommends a vote FOR the election of each of the Board’s nominees (Steven N. Bronson, David J. Wolenski, Sean M. Leder, Dale E. Wallis, and Nick Yarymovych) in accordance with the instructions on the enclosed WHITE proxy card or, if you do not receive a proxy card, the voting instruction form provided by your bank or broker.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL FIVE OF THE BOARD’S DIRECTOR NOMINEES.

 
Robert E. Rich   (61)Robert E. Rich has served as a director of Qualstar since January 2000.  Mr. Rich has been engaged in the private practice of law since 1975 and has been a shareholder of Stradling Yocca Carlson & Rauth, legal counsel to Qualstar, since 1984.  Mr. Rich received a B.A. degree in Economics from the University of California, Los Angeles in 1972 and his J.D. degree from the University of California, Los Angeles in 1975.  Among other qualifications, Mr. Rich brings to the Board expertise in corporate governance, corporate and securities laws, and mergers and acquisitions.

CORPORATE GOVERNANCE

Director Independence

Our Board has determined that all of our directors satisfy the current “independent director” standards established by rules of The NasdaqNASDAQ Stock Market, Inc. (“Nasdaq”NASDAQ”), except for (i) Mr. Gervais, who is Chief Executive Officer and President of Qualstar who announced his retirement and therefore tendered his resignation as a director and officer of the Company effective as of June 15, 2012; (ii) Mr. Firestone, who has been appointed to the position of Chief Executive Officer and President of Qualstar to succeed Mr. William J. Gervais, commencing on June 1, 2012; and (iii) Richard A. Nelson, who was Vice President Engineering and Secretary of Qualstar until January 28, 2011, when he retired as an officer and employee of the Company.  Mr. Nelson did not stand for reelection to the Board at the 2012 Annual Meeting.. Each director serving on the Audit Committee of our Board also meets the more stringent independence requirements established by Securities and Exchange Commission rules applicable to audit committees.  Mr. Robert E. Rich, a member of our Board of Directors since January 2000, is a shareholder in the law firm of Stradling Yocca Carlson & Rauth, which has provided legal services to Qualstar since 1984. Our Board has determined that no director has a relationship that would interfere with the exercise of independent judgment in carrying out his responsibilities as a director. There are no family relationships among any of the directors or executive officers of the Company.

Board of Directors and Committee Meetings

During the fiscal year ended June 30, 2011,2013, our Board of Directors met four19 times and the committees of our Board held a total of six17 meetings.  Each incumbent director attended at least 75%100% of the aggregate of all meetings of the Board of Directors and the committees of the Board, if any, on which he served during fiscal 2011.

2013.

The independent directors meet in executive session on a regular basis without any management directors or employees present.

Although we have no formal policy requiring director attendance at

In accordance with our Corporate Governance Guidelines, which our previous Board adopted on April 26, 2013, directors are expected to attend annual meetings of shareholders, we scheduleshareholders.  A copy of our Corporate Governance Guidelines is available in the annual meeting for a date that is convenient for all directors to attend.  All directors who were electedinvestors section of the Company’s website at the 2011 annual meeting of shareholders attended that meeting.

www.Qualstar.com.

Committees of the Board

Our Board has three standing committees:  the Audit Committee, the Compensation Committee and the Nominating and Governance Committee.

The Audit Committee

The Audit Committee is comprised solely of non-employee directors who satisfy current NasdaqNASDAQ standards with respect to independence, financial expertise and experience. TheDuring the fiscal year ended June 30, 2013, the members of the Audit Committee is currently comprised of Messrs.were: Carl W. Gromada, Stanley W. Corker Gromada and Robert A. Meyer, with Mr. Gromada serving as the Chairman. OurOn February 11, 2013, Allen H. Alley replaced Mr. Corker on the Audit Committee. At that time the Board of Directors has determined that Mr. Gromada and Mr. Meyer meetmet the Securities and Exchange Commission’sCommission definition of “audit committee financial expert.”

The Audit Committee has a written charter that specifies its responsibilities, which include oversight of the financial reporting process and system of internal accounting controls of the Company,Qualstar, and appointment and oversight of the independent public accountants engaged to audit the Company’sQualstar’s financial statements.  A copy of our Audit Committee Charter is available in the investors section of the Company’sQualstar’s website at www.Qualstar.com.

The Audit Committee held four9 meetings during fiscal 2011.2013.  To ensure independence, the Audit Committee also meets separately with our independent public accountants andapart from meeting with members of management.

The Company held its 2013 Annual Meeting of Shareholders on June 28, 2013, the last business day of fiscal year 2013. At the Annual Meeting the shareholders of the Company elected a new Board of Directors that took office on the afternoon of June 28, 2013. At its initial meeting, on June 28, 2013, the new Board of Directors appointed the current members of the Audit Committee, which are Dale E. Wallis, David J. Wolenski and Alan B. Howe, with Mr. Wallis serving as Chairman. Our Board of Directors has determined that Mr. Wallis and Mr. Wolenski meet the Securities and Exchange Commission’s definition of “audit committee financial expert.”

The Compensation Committee

The Compensation Committee is comprised solely of independent directors.  Thenon-employee directors who satisfy current NASDAQ standards with respect to independence. During the fiscal year ended June 30, 2013, the members of the Compensation Committee is currently comprised of Messrs.were: Stanley W. Corker, Carl W. Gromada and Robert A. Meyer, with Mr. Corker serving as the Chairman. On February 11, 2013, Daniel C. Molhoek replaced Mr. Gromada on the Compensation Committee.

The Compensation Committee reviews and recommends the salaries and bonuses of our executive officers, establishes compensation and incentive plans for our executive officers, and determines other fringe benefits.  The Compensation Committee didalso evaluates the Company’s compensation plans and practices in order to determine that they do not meet during fiscal 2011.create excessive or unnecessary risks for the Company.  The Compensation Committee currently does not have a charter.

held 7 meetings during fiscal 2013.

 

Processes and Procedures of theThe Compensation Committee.  During fiscal 2011, our chief executive officer, William J. Gervais, played an important role in formulating the compensation program for our executive officers.  Mr. Gervais co-founded Qualstar in 1984, is the largest individual shareholder, and has served full time as the Company’sCommittee meets with Qualstar’s Chief Executive Officer and President.other senior executives in order to obtain recommendations with respect to Qualstar’s compensation programs and practices for executives and other employees. Management discusses with the Compensation Committee the practices that have been put in place to identify and mitigate, as necessary, potential risks.  The Compensation Committee considered Mr. Gervaistakes management’s recommendations into consideration, but is not bound by management’s recommendations with respect to be one of the most important employees of Qualstar, and highly valued his insight and views on compensation matters.  Mr. Gervais made recommendations to the Compensation Committee regarding base salary, cash bonuses, and awards of equity-based long-term compensation of the executive officers, including his own compensation.  The Compensation Committee took Mr. Gervais’ recommendations into account in determining the Committee’s own recommendations regarding cash compensation, which were then presentedannually reviews and recommends for approval to the full Board for approval.

all elements of compensation of Qualstar’s Chief Executive Officer, and reviews, counsels, and makes recommendations regarding the compensation elements of other senior executives. The Compensation Committee also approves equity awards to all employees of Qualstar.  A copy of our Compensation Committee Charter is available in the investors section of the Company’s website atwww.Qualstar.com.

The Company held its Annual Meeting of Shareholders on June 28, 2013, the last business day of fiscal year 2013. At the Annual Meeting the shareholders of the Company elected a new Board of Directors that took office on the afternoon of June 28, 2013. At its initial meeting, the new Board of Directors appointed the current members of the Compensation Committee, which are David J. Wolenski and Sean M. Leder, with Mr. Wolenski serving as Chairman. Accordingly, the current Compensation Committee had no input or oversight of the Company’s compensation of executive officers during fiscal year 2013.

The Nominating and Governance Committee

TheNominating and Governance Committee is comprised solely of independent directors and currently includesduring fiscal 2013 was comprised of Messrs. Corker, Gromada, Meyer and Rich, with Mr. Meyer serving as Chairman.  The Nominating Committee held 6 meetings during fiscal 2013.

The role of the Nominating and Governance Committee, as set forth in its charter, is to develop and recommend to the Board corporate governance guidelines applicable to Qualstar, assist the Board by identifying, evaluating and recommending candidates for election to the Board, and recommendrecommending Board members to serve on each committee of the Board.  A copy of our Nominating and Governance Committee Charter is available in the investors section of the Company’sQualstar’s website at www.Qualstar.com.  The Nominating Committee held two meetings during the fiscal year ended June 30, 2011.

The guidelines and procedures for identifying and evaluating nominees for election to the Board are set forth in the charter of the Nominating Committee Charter.and Governance Committee.  In general, persons considered for nomination to the Board must have demonstrated outstanding achievement, integrity and judgment and such other skills and experience as will enhance the Board’s ability to serve the long-term interests of the CompanyQualstar and our shareholders, and must be willing and able to devote the necessary time for Board service.  To comply with regulatory requirements, a majority of Board members must qualify as independent directors under NasdaqNASDAQ rules, and at least one Board member must qualify as an “audit committee financial expert” under rules promulgated by the SEC.  In order to qualify for nomination or renomination for election to the Board, a candidate must also comply with all applicable provisions of the SecuritiesQualstar’s bylaws as amended and Exchange Commission.  The Committee does not have any policy regarding diversity in identifying nominees for director.

restated.

The Nominating and Governance Committee considers potential candidates recommended by current directors, company officers, employees and others, and will consider candidates recommended by shareholders to be consideredfor consideration as director nominees.  Our charter makes no distinction between whether a director nominee is recommended by a shareholder or by management andmanagement.  Although we have not received any recommendations for director nominees from shareholders, we expect that the Nominating Committee applieswould apply the same process and criteria in evaluating a shareholder recommendation as it would for a management recommendation.  A shareholder wishing to recommend a candidate for nomination to the Board should send a letter to our Corporate Secretary at 3990-B Heritage Oak Court, Simi Valley, California 93063.  The mailing envelope must contain a clear notation that the enclosed letter is a “Director Nominee Recommendation.”  The letter must identify the author as a shareholder and provide a brief summary of the candidate’s qualifications.  At a minimum, candidates recommended for election to the Board must meet the independence standards established by NasdaqNASDAQ and the criteria set forth above.

The Company held its Annual Meeting of Shareholders on June 28, 2013, the last business day of fiscal year 2013. At the Annual Meeting the shareholders of the Company elected a new Board of Directors that took office on the afternoon of June 28, 2013. At its initial meeting, the new Board of Directors dissolved the Nominating and Governance Committee. On February 18, 2014, the new Board of Directors authorized and approved the formation of the Nominating and Governance committee and the new Board of Directors appointed the current members of the Nominating and Governance Committee, which are Messrs. Wolenski and Leder.

Board Leadership Structure and the Role of the Board in the Oversight of Risk Management

William J. Gervais co-founded Qualstar in 1984 and has served as our President since inception and also as our Chief Executive Officer since 2000.  During fiscal 2011, we did not have a Chairman of the Board, although Mr. Gervais effectively functioned in that capacity at Board meetings.  He is the largest individual shareholder of the Company and, in the view of the Board of Directors, he is the single most important employee.  Qualstar is a small company and our Board currently consists of only six directors and, after Mr. Gervais’ retirement, will consist of only five directors, four of whom are independent.  For these reasons, our Board believed that it was not necessary to have a Chairman or a lead director.

Our Board is involved in overseeing the management of risks that face our company.  Historically, potential risks have been considered by the full boardBoard as they became apparent, such as in connection with potential acquisitions, as new business opportunities are evaluated, or with day-to-day operational issues.  Our Audit Committee focuses on risks related to financial information systems and financial reporting, regularly reports to the full Board regarding its activities and any specific risks that merit attention by the full Board.

Compensation Policies and Practices as they Relate to Risk Management
The  Our Compensation Committee has reviewedoversight responsibility regarding risks related to the Company’s compensation policies and practices as they relate to risk management for all employees, including executive officers. The compensation policies and practices reviewed by the Compensation Committee included: 1) annual base salaries; 2) cash bonuses; and 3) equity-based compensation under the Company’s 2008 Stock Incentive Plan.   Following such review, the Compensation Committee determined that risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company. In coming to this conclusion, the Compensation Committee considered, among others things, the fact that a bonus plan was not established for 2011 or 2012 (except with respect to Randy Johnson as described below).
practices.

 

Shareholder Communications with the Board

Shareholders wishing to communicate with the Board of Directors or with an individual Board member concerning the CompanyQualstar may do so by writing to the Board or to the particular Board member, and mailing the correspondence to:  Attention: Corporate Secretary, Qualstar Corporation, 3990-B Heritage Oak Court, Simi Valley, California 93063.  The envelope should indicate that it contains a shareholder communication.

All correspondence received is opened and screened for security purposes and is then entered into a log for tracking purposes. Qualstar’s Corporate Secretary reviews such shareholder communicationscorrespondence and provides the Board at each of its meetings with a summary of all such correspondence and a copy of any correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or the standing committees of the Board or that otherwise requires their attention. The Corporate Secretary will not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. Correspondence relating to accounting, internal controls or auditing matters will be forwardedhandled in accordance with procedures established by the Audit Committee with respect to the director or directors to whom the communications are addressed.

such matters.

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics that applies to our chief executive officer, chief financial officer, controller and persons performing similar functions.  A copy of the Code of Business Conduct and Ethics is available in the investors section of the Company’sQualstar’s website at www.Qualstar.com, and a copy also may be obtained at no charge by written request to the attention of the Corporate Secretary at 3990-B Heritage Oak Court, Simi Valley, California 93063.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires Qualstar’s directors and executive officers, and persons who own more than ten percent of Qualstar’s common stock, to file with the Securities and Exchange CommissionSEC initial reports of ownership and reports of changes in ownership of our common stock.  Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish Qualstar with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of Section 16(a) reports furnished to us and written representations that no other reports were required during the fiscal year ended June 30, 2011,2013, our officers, directors and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements exceptrequirements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to the beneficial ownership of our common stock as follows:  Lawrence D. Firestone was appointedof June 2, 2014 for:

●

each person (or group of affiliated persons) who we know beneficially owns more than 5% of our common stock;

●

each of our directors and nominees for election to the Board;

●

each of the named executive officers; and

●

all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to our Boardshares.  Except as indicated by footnote, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned, subject to community property laws where applicable.  The percentage of Directorsshares beneficially owned is based on May 13, 2011.  He filed an Initial Statement of Beneficial Ownership of Securities on Form 3 (which reported that he did not own any12,253,117 shares of common stock outstanding as of June 2, 2014.  Shares of common stock subject to options currently exercisable or exercisable within 60 days of June 2, 2014, are deemed outstanding for computing the percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person.  The address for those individuals for which an address is not otherwise indicated is: c/o Qualstar stock) on August 2, 2011, approximately three months after it was due.

Corporation, 3990-B Heritage Oak Court, Simi Valley, California 93063.

 

  

Common

  

Options

Exercisable

Within

  

Beneficial Ownership

 

Name

 

Shares Owned

  

60 Days (1)

  

Number

  

Percent

 
                 

Steven N. Bronson (2)

  2,872,820   —   2,872,820   23.4

%

                 

Dimensional Fund Advisors LP (3)

     6300 Bee Cave Road

     Austin, TX 78746

  929,028   —   929,028   7.6

%

                 

William J. Gervais (4)

  2,483,864   —   2,483,864   20.3

%

                 

Lloyd Miller, III (5)

     222 Lakeview Avenue, Suite 160-365

     West Palm Beach, FL 33401

  1,587,534   —   1,587,534   13

%

                 

Alan B. Howe (6)

  3,500   —   3,500   *

 

                 

Sean M. Leder (7)

  12,000   —   12,000   * 
                 

Randy D. Johnson

  —   17,000   17,000   * 
                 

All directors and officers as a group

(4 persons)

  2,888,320   17,000   2,905,320   23.7

%

* Less than 1.0%

(1)

Represents shares that may be acquired upon exercise of stock options which are either currently vested or will vest within 60 days of June 2, 2014.

(2)

Based on information contained in a Form 4 filed with the Securities and Exchange Commission (SEC) on June 3, 2014, BKF Capital Group, Inc. beneficially owns 2,815,120 shares of Qualstar common stock. Steven N. Bronson, as the Chairman, President and controlling shareholder of BKF Capital Group, Inc., may be deemed to beneficially own the shares of Qualstar held by BKF Capital Group, Inc. Mr. Bronson, is the owner of an additional 57,700 shares of Qualstar. Steven N. Bronson was appointed Qualstar’s CEO and President on July 3, 2013.

(3)

Based on information contained in a Schedule 13G filed with the SEC, Dimensional Fund Advisors LP, an investment adviser, beneficially owns 929,028 shares as of December 31, 2013.

(4)

Based on information contained in a Form 4 filed with the SEC on February 19, 2014, William J. Gervais beneficially owns 2,483,864 shares.

(5)

Based on information contained in a Form 4 filed with the SEC on May 14, 2014, Lloyd Miller, III, an investment advisor, beneficially owns 1,587,534 shares.

(6)

Based on Information contained in a Form 4 filed with the SEC on March 17, 2014, Alan B. Howe beneficially owns 3,500 shares.

(7)

Based on information contained in a Form 4 filed with the SEC on May 19, 2014, Sean M. Leder beneficially owns 12,000 shares.


COMPENSATION DISCUSSION AND ANALYSIS

This section contains a discussion of the material elements of compensation awarded to, earned by, or paid to our principal executive officer, our principal financial officer, and our other executive officers who were serving as executive officers of Qualstar at June 30, 2011.2013.  These individuals are identified in the Summary Compensation Table and other compensation tables that follow this section, and are referred to throughout this Proxy Statementreport as our “named executive officers.”

Our Board of Directors has a standing Compensation Committee, which is comprised solely of nonemployee directors who satisfy current NASDAQ standards with respect to independence.

During the fiscal year ended June 30, 2013, the members of the Compensation Committee were: Stanley W. Corker, Carl W. Gromada and Robert A. Meyer, with Mr. Corker serving as the Chairman. On February 11, 2013, Daniel C. Molhoek replaced Mr. Gromada on the Compensation Committee.

The Company held its Annual Meeting of Shareholders on June 28, 2013, the last business day of fiscal year 2013. At the Annual Meeting the shareholders of the Company elected a new Board of Directors that took office on the afternoon of June 28, 2013. At its initial meeting, the new Board of Directors appointed the current members of the Compensation Committee, which are David J. Wolenski and Sean M. Leder, with Mr. Wolenski serving as Chairman. Accordingly, the current Compensation Committee had no input or oversight of the Company’s compensation of executive officers during fiscal year 2013.

The Compensation Discussion and Analysis below is a discussion of the material elements of compensation awarded to, earned by, or paid to our principal executive officer, our principal financial officer, and our other executive officers who were serving as executive officers of Qualstar at June 30, 2013, by the prior Compensation Committee and prior Board of Directors.

Executive Summary and Overview of Fiscal 2013 Compensation

Our Company’s long-term success depends on our ability to fulfill the expectations of our customers in a competitive environment and deliver value to shareholders. To achieve these goals, it is critical that we are able to attract, motivate, and retain highly talented individuals at all levels of the organization that are committed to Qualstar’s values and objectives.

Qualstar strives to provide compensation that is (a) linked to shareholder value creation, (b) reflective of the overall performance of Qualstar and each individual executive, and (c) considerate of the competitive market levels of compensation needed to recruit, retain and motivate top executive talent, while remaining consistent with the other objectives.

Compensation ProgramPhilosophy and Objectives

Our

Qualstar’s executive compensation program is intendedbased on the same objectives that guide Qualstar in establishing all of its compensation programs:

●

Compensation fosters the long-term focus required for Qualstar’s success. In general, the compensation of Company executives includes longer-term incentives because they are in a greater position to influence longer-term results.

●

Compensation reflects the level of job responsibility, individual performance, and Company performance. As employees progress to higher levels in the organization, an increasing proportion of their pay should be linked to Company performance and shareholder returns because those employees are more able to affect Qualstar’s results.

●

Compensation reflects the value of the job in the marketplace. To attract and retain a highly skilled work force, we must remain competitive with the pay of other premier employers who compete with us for talent.

●

While compensation programs and individual pay levels will always reflect differences in job responsibilities, geographies and marketplace considerations, the overall structure of the compensation and benefit programs should be broadly similar and equitable across the organization.


Overview of Executive Compensation Program

The Compensation Committee

The Compensation Committee has responsibility for establishing, implementing and monitoring adherence to fulfill three primary objectives:  first,Qualstar’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that attract, retain and retain qualifiedmotivate high-caliber employees, foster teamwork, and maximize the long-term success of Qualstar by appropriately rewarding our employees for their achievements. The Compensation Committee evaluates risks and rewards associated with Qualstar’s overall compensation philosophy and structure.

Role of Executive Officers in Compensation Decisions

The Compensation Committee meets with Qualstar’s Chief Executive Officer and other senior executives requiredin order to obtain recommendations with respect to Qualstar’s compensation programs and practices for executives and other employees. Management discusses with the Compensation Committee the practices that have been put in place to identify and mitigate, as necessary, potential risks. The Chief Executive Officer annually reviews the performance of each executive officer, other than himself. The Chief Executive Officer’s performance is reviewed annually by the Compensation Committee.

With support from market compensation data, performance reviews and other information, management makes recommendations to the Compensation Committee on the base salaries, bonus targets and equity compensation for the success of our business; second,executive officers and other employees. The Compensation Committee takes management’s recommendations into consideration, but is not bound by management’s recommendations with respect to reward these executives for financial and operating performance; and third, to align their interests with those of our shareholders to create long-term shareholder value.  The principal elements of the compensation program for our named executives include base salary, cash bonus, and long-term incentives in the form of stock options.

Executive Officer Compensation Elements
Base Salaries
Our Board of Directors, upon the recommendationexecutive compensation.

While management attends certain meetings of the Compensation Committee, establishes base salaries for ourthe Compensation Committee also holds executive officers.sessions not attended by any members of management or by non-independent directors. The Compensation Committee considersmakes all compensation decisions in respect of the executive officers and approves recommendations regarding equity awards to all employees of the Company.

Executive Officer Compensation Elements

For fiscal year 2013, the principal components of compensation for named executive officers were: (1) Base Salary, (2) Performance-Based Incentive Compensation, (3) Long-Term Equity Incentive Compensation, (4) Personal Benefits, and (5) Other Compensation. In determining the amount and relative allocation among each component of compensation for each named executive officer, the Compensation Committee considered, among other factors, the Company’s and each executive officer’s experience level and historical performance, compensation paid by companies comparable in size to Qualstar, the experience level and past performancedata obtained from management’s recruitment activities, historical rates of the individual executives, as well as theexecutive compensation, Company revenues and profitability, and alignment with the Company’s overall compensation philosophy.

Base Salary

Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of Qualstar.  Ourfulfilling the Company’s key objectives. Base salaries are also set with the goal isof rewarding executive officers on a day-to-day basis for their time and services while encouraging them to provide base salaries that are fairstrive for performance-based and competitive, but not excessive.

long-term incentives.

 

The table below shows the base salary established by the Compensation Committee for each of our named executive officers for fiscal years 20112013 and 2012,2014, and the percentage change compared to the prior fiscal year. Salary adjustments typically do not coincide with the beginning of the fiscal year, so the amounts shown below may not be exactly the same asdiffer from those shown in the Fiscal 20112013 Summary Compensation Table.

Name and Principal Position
 
Fiscal 2011
Base Salary
  
Percent Change versus Fiscal 2010
Base Salary
  
Fiscal 2012
Base Salary
  
Percent Change versus Fiscal 2011
Base Salary
 
William J. Gervais
Chief Executive Officer and President
 $177,500(1) 12.7% $177,500  ─ 
Nidhi H. Andalon
Vice President and Chief Financial Officer
 $150,000  ─  $160,000(2) 6.7%
Randy Johnson
Vice President and General Manager, N2Power
 $180,000  ─  $180,000  ─ 
Robert K. Covey
Vice President of Marketing
 $165,600  ─  $170,600(3) 3.0%

Name and Principal Position 

 

Fiscal 2013

Base Salary

 

Percent Change versus

Fiscal 2012

Base Salary

 

Fiscal 2014

Base Salary

 

Percent Change versus

Fiscal 2013

Base Salary

         

Steven N. Bronson

Chief Executive Officer and President

 

─

 

─

 

$200,000(1)

 

─

         

Lawrence D. Firestone

      Former Chief Executive Officer and President

 $300,000(2) 

─

 

─

 

─

         

Philip G. Varley

      Former Chief Financial Officer

 

$185,000(3)

 

─

 

$185,000

 

─

         

Nidhi H. Andalon

       Former Chief Financial Officer and Vice President

 $160,000(4) 6% ─ ─
         

Randy D. Johnson

Vice President and General Manager, N2Power

 

$200,000

 

─

 

$200,000

 

─

         

Robert K. Covey

Former Vice President of Marketing

 

$170,600(5)

 

─

 

─

 

─

         

Louann Negrete

Chief Financial Officer

 ─ ─ $135,000(6) ─
         

Daniel Jan

Executive Vice President

 

─

 

─

 

 

$200,000(7)

 

 

─

 

__________

(1)

(1)

Mr. Bronson was appointed our Chief Executive Officer and President on July 3, 2013.

(2)

As

Mr. Firestone’s employment was terminated July 9, 2013.

(3)

Mr. Varley resigned as Chief Financial Officer on December 3, 2013.

(4)

Ms. Andalon ended her employment as Chief Financial Officer and Vice President on March 15, 2013.

(5)

Mr. Covey ended his employment as Vice President of Marketing on August 16, 2013.

(6)

Ms. Negrete was appointed Chief Financial Officer on December 1, 2013. In addition to her base salary, Ms. Negrete is also entitled to a cost-saving measure, guaranteed bonus of $10,000.

(7)

Mr. Gervais voluntarily reducedJan was appointed Executive Vice President on April 1, 2014. In addition to his base salary, by $20,000 in August 2008Mr. Jan received a restricted stock grant of 100,000 restricted shares of the Company that vest as follows: 33,333 shares on April 1, 2017, 33,333 shares on April 1, 2018 and by an additional 10% in July 2009.  The $20,000 reduction in33,334 shares on April 1, 2019. Mr. Gervais' base salary was reinstated in May 2011.Jan is also eligible to receive a bonus of up to $60,000.

 
(2)Ms. Andalon’s base salary was increased to $160,000 effective November 2, 2011.

(3)As a cost-savings measure, Mr. Covey’s base salary was reduced by 10%, from $184,000 to $165,600, in July 2009.  Mr. Covey’s base salary was partially reinstated, by $5,000, in July 2011.
Cash Bonuses
Historically, each year

Performance-Based Incentive Compensation

In accordance with the Boardterms of Directors, upon the recommendationhis employment agreement, Mr. Firestone was awarded a bonus of the Compensation Committee, has established a cash bonus plan for executive officers based on Qualstar achieving stated levels of consolidated revenue and pre-tax profits$154,500 for the fiscal year excludingended June 30, 2013. This was reduced by the effectsamount of acquisitions, if any, made during the fiscal year.  However, in recent years Qualstar has not achieved the levelshis previously paid bonus of revenues or pre-tax profits required$75,000, and his commuting expenses of $34,500.

Mr. Varley’s employment as Chief Financial Officer ended on December 3, 2013. He was eligible to earn the minimum bonus amounts under prior bonus plans.  Consequently, the Board of Directors did not establish a bonus plan for executive officers for fiscal 2011, and has not established a bonus plan for executive officers for fiscal 2012, with the exception of Randy Johnson.  Mr. Johnson was first appointed an executive officer by our Board on March 25, 2010.  His incentive compensation plan, which was established before Mr. Johnson became an executive officer and has not been modified, provides that he can earn a cash bonus based on the level of pre-tax profits achieved by our N2Power business unit for the fiscal year.  Mr. Johnson’s potential bonus ranges from 0%up to 25% of his base pay if N2Power is unprofitable, up to a maximum amount equal to 15%compensation at the discretion of his base pay if N2Power achieves pre-tax profits equal to more than 19% of N2Power sales.the Board. For the fiscal year ended June 30, 2011,2013. Mr. JohnsonVarley earned a bonus of $14,400, which is$10,000, equal to 8%5.4% of his base pay.

Our

Mr. Johnson was paid a bonus of $10,000 for the fiscal year ended June 30, 2013.

Mr. Covey was paid a bonus of $10,000 for the fiscal year ended June 30, 2013.

The payment of the above performance-based incentive compensation was authorized by the prior Compensation Committee and the prior Board of Directors. The current Compensation Committee and the current Board of Directors reserves the right to pay discretionary cash bonuses, if deemed appropriate.

Equity-Based Compensation
We use stock option grants as a form of long-term compensation.  For the past several years, however, our stock generally has not been actively traded and the price per share has declined or stayed within a relatively narrow range.  Consequently, stock options have not provided significant compensation in recent years.  We did not grantauthorize or approve the granting or payment of any stock optionsof the above performance-based incentive compensation.

In connection with the appointment of Steven N. Bronson as our Chief Executive Officer and President on July 3, 2013, the current Compensation Committee determined that Mr. Bronson would be eligible for an incentive bonus during fiscal year 2014 based on the achievement of certain goals and objectives established by the Board of Directors. Goals and objectives initially established for Mr. Bronson relate to our executive officers in fiscal 2011.

revitalization of the Company’s operations and achievement of financial performance targets, with a potential target incentive bonus of 50% of his base salary.

Long-Term Equity Incentive Compensation

Our 2008 Stock Incentive Plan authorizes usthe Company to grant stock options to purchase, in the aggregate, up to 500,000 shares of our common stock. This plan was adopted by our Board of Directors in November 2008 and approved by our shareholders in March 2009, and replaces our 1998 Stock Incentive Plan, which expired in 2008.2009. Under both plans,the plan, the exercise price of stock options must be no less than the closing price of our common stock on the date of grant. It is our policy to grant stock options only at duly held meetings of our Board of Directors, with an exercise price equal to the closing price of our common stock on the date of the Board meeting.

Compensation of our Named Executive Officers
The amount of each component of compensation established for the named

Stock options are granted to executive officers is based on a numberas long-term incentives in order to align executives’ performance with the interests of factors.  These factors include company performance,the Company’s stockholders and also to encourage retention. In 2013, the Compensation Committee determined an equity incentive compensation target for each executive officer after consideration of individual performance compensation paid by companies comparable in size to Qualstar, the recommendations of our Chief Executive Officer, William J. Gervais, and a reviewaccomplishments, future Company performance, performance goals, and other elements of the prior compensation historyexecutives’ compensation. Stock options awarded to executive officers during fiscal year 2013 are set forth in the table below entitled “Grants of each executive officer.  Some of these factors are discussed above.  Other factors applicablePlan-Based Awards in Fiscal Year 2013.”

Personal Benefits

As employees, the executives were eligible to each named executive officer are discussed below.

William J. Gervais co-founded Qualstarparticipate in 1984. The Compensation Committee considers Mr. Gervaishealth and welfare benefits, as offered to be largely responsible for the successour general workforce, designed to attract and retain a skilled workforce in a competitive marketplace. These benefits help ensure that the Company has achieved,a healthy and focused workforce through reliable and competitive health and other personal benefits. These benefits were considered in relation to the total compensation package, but did not materially impact decisions regarding other elements of executive officer compensation.

Other Compensation

The Company was party to an employment agreement with Mr. Firestone that provided that Mr. Firestone would be employed by the Company for an initial term beginning on June 1, 2012 (the “Start Date”) through June 30, 2013, which term would be automatically renewed for one year unless the Company provided written notice of our most important employees.  However,non-renewal by March 31, 2013. Mr. Gervais historically has requested thatFirestone’s employment agreement specified his base salary at the rate of $300,000 per year during the initial term, which would be maintained atincreased to $350,000 per year beginning July 1, 2013 unless the Company provided written notice of non-renewal of Mr. Firestone’s employment agreement by March 31, 2013, as well as a level the Compensation Committee considers to be relatively low.  The reasons for this include his belief that in the long term his individual equity ownershippotential target incentive bonus of Qualstar potentially will provide greater financial returns than current compensation.  As a cost savings measure, Mr. Gervais voluntarily reduced100% of his base salary as described above under the caption entitled “Performance-Based Incentive Compensation.” In accordance with other terms of Mr. Firestone’s employment agreement, the Company paid to him during fiscal year 2013 a signing bonus of $75,000 and reimbursed $34,500 in commuting and temporary housing expenses.


Mr. Firestone’s employment agreement further provided that if he was terminated by $20,000the Company without cause or if he resigned for good reason, he would receive his accrued compensation and, subject to certain conditions, a lump sum payment of an amount equal to his then current base salary for 18 months. The employment agreement also provided that if Mr. Firestone was terminated by the Company without cause or if he resigned for good reason within 12 months of a change in August 2008control, he would receive his accrued compensation and byseverance benefits which include, subject to certain conditions, (1) a lump sum payment of an amount equal to his then current base salary for 18 months; (2) payment of COBRA premiums for 18 months; (3) a lump sum payment equal to 100% of his target incentive bonus for his then current term, prorated as of his termination date, plus an additional 10%12 months target incentive bonus; and (4) accelerated vesting of all his then unvested stock options. “Cause” includes, among other acts, any act of fraud, embezzlement or dishonesty which materially adversely affects the business of the Company or any successor entity, any unauthorized use or disclosure of confidential information or trade secrets of the Company, any material act or omission involving malfeasance or gross negligence in July 2009. In lightthe performance of the executive’s duties and any material deviation from any of the Company’s improved financial performance during fiscal 2011, the $20,000or a successor entity’s policies. “Good reason” includes, among other acts, a demotion or material reduction in responsibility level, a decrease in level of his compensation by more than ten percent (10%), and a relocation of more than 30 miles from the executive’s current work place.

A “change of control” is defined in Mr. Gervais' base salary was reinstated in May 2011.  Mr. Gervais also has never requested nor acceptedFirestone’s employment agreement as an acquisition by any person of beneficial ownership of 50% or more of the Company’s voting stock, option awards.

Nidhi H. Andalon has been our Chief Financial Officer since January 2009 and was appointed Vice Presidentcertain mergers or other business combinations involving the Company, the sale of all or substantially all of the Company’s assets, the approval by ourthe Company’s stockholders of a liquidation or dissolution of the Company, or if, during any period of 12 consecutive months, a majority of the Board of Directors on March 25, 2010. Ms. Andalon joined Qualstar’s finance department in January 2003 asis replaced by individuals who were not approved by a senior accountant, and was promoted to Assistant Controller in June 2004 and to Controller in October 2005.  In recognitionvote of her performance as Chief Financial Officer during her first six months in that position, our Board approved an increase in her base salary toat least a rate of $150,000 per year, effective asmajority of the startdirectors then still in office who were directors at the beginning of the period. A copy of the employment agreement with Mr. Firestone is filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal 2010.  Ms. Andalon’s base salary in fiscal 2011 remained unchanged fromyear ended June 30, 2012.

On July 3, 2013, the prior year.

Randy Johnson has served as the General Manager of our N2Power business unit since 2002, and was appointed Vice-President and General Manager, N2Power by our Board of Directors on March 25, 2010.authorized the termination of Mr. Johnson has primary responsibilityFirestone’s employment agreement for all aspects of our power supply business, including sales.cause. On July 9, 2013, Mr. Johnson’s base salary of $180,000 per year and his incentive compensation planFirestone was informed that he was terminated for fiscal 2011, as described above, remained unchanged fromcause. On July 11, 2013, the prior year.
Robert K. Covey has been our Vice President of Marketing since 1994.  AsCompany filed a cost savings measure, Mr. Covey’s compensation was reduced by 10%, or $18,400, as of July 2009.  In lightlawsuit in the Superior Court of the Company’s improved financial performance during fiscal 2011, $5,000State of California, County of Los Angeles, and assigned case number BC514889, against Mr. Firestone alleging, among other things, that Mr. Firestone breached his duties owned to the Company.On September 18, 2013, Qualstar filed an amended complaint against former CEO Lawrence D. Firestone and others for breach of fiduciary duty, breach of duty of loyalty, breach of duty of care, and the commission of corporate waste that is currently pending in the Superior Court of the reductionState of California, County of Los Angeles.  The lawsuit is entitled:Qualstar Corporation v. Lawrence D. Firestone, Stanley Corker, Carl W. Gromada, Robert A. Meyer, Robert Rich, Daniel Molhoek, Allen Alley, Gerald Laber, Steven Wagner and Does 1 through 10, inclusive, and assigned Case No. BC 514889. Qualstar is seeking to enjoin the payment of Lawrence D. Firestone’s severance package and the recovery of monetary damages to be proven at trial. On April 17, 2014, Defendant Lawrence D. Firestone filed a cross-complaint against Qualstar for wrongful termination of employment in Mr. Covey’s base salary was reinstated in July 2011.
The Rolebreach of Shareholder Say-on-Pay Vote
Atcontract, employer’s breach of the Company's annual meetingimplied covenant of shareholders heldgood faith and fair dealing, breach of contract, and conversion. Also on March 24, 2011, our shareholders hadApril 17, 2014, Qualstar voluntarily withdrew its claims against Defendant Gerald Laber, without prejudice. On April 18, 2014, the opportunity to cast an advisory vote (a “say-on-pay” proposal) on the compensation of our executive officers as disclosed in our proxy statement for that meeting.  Shareholders approved the say-on-pay proposalCourt denied motions filed by the affirmative voteremaining Defendants that had been seeking the dismissal of 94.1%all causes of the shares cast on that proposal. The Compensation Committee believes this affirms shareholders' support of the Company's approach to executive compensation,action against all Defendants.

Tax and did not change its approach in fiscal 2011. The Compensation Committee will continue to consider the outcome of the Company's say-on-pay votes when making future compensation decisions for our named executive officers.

At last year’s annual meeting, our shareholders also had the opportunity to cast an advisory vote (a “say-on-frequency” proposal) on how often the Company should include a say-on-pay proposal in its proxy statements for future annual meetings.  Shareholders had the choice of voting to have the say-on-pay vote every year, every two years or every three years.  The frequency receiving the highest number of votes was every three years.  In accordance with this vote, our Board decided to hold the say-on-pay advisory vote every three years, with the next say-on-pay advisory vote to be held at Qualstar’s 2014 annual meeting of shareholders.

Tax Considerations
Accounting Implications

Under Section 162(m) of the Internal Revenue Code, we generally receive a federal income tax deduction for compensation paid to any of our named executive officers only to the extent total compensation does not exceed $1.0 million during any fiscal year or if it is “performance-based” under Section 162(m). The total compensation earned by ourDuring fiscal year 2013, none of the executive officers has always been less than $1.0 million and, consequently,of the limitations imposed by Section 162(m) have not been a factor.

Company had non-performance-based compensation in excess of $1,000,000.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the foregoing Compensation Discussion and Analysis and has discussed its contents with Qualstar’s management and the Board of Directors. Based on the review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this report.

Submitted by the members of the Compensation Committee

Stanley W. Corker (Chairman)

Carl W. Gromada
Robert A. Meyer

David J. Wolenski (Chairman)

Sean M. Leder

 

RISKS RELATED TO COMPENSATION POLICIES AND PRACTICES

We believe that our compensation programs have been appropriately designed to attract and retain talent and properly incentivize our employees. To the extent our compensation programs provide for incentive-based compensation, these programs are designed to pay for performance and, thus, encourage only appropriate risk-taking. These programs are also subject to funding caps and oversight of the Compensation Committee and various functional departments of the Company to ensure that our employees, including our executive officers, are not encouraged to take excessive or unnecessary risks in managing our business. As a result, we believe that our compensation programs are not likely to create excessive risks that would have a materially adverse effect on the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our Board of Directors has a standing Compensation Committee. The members of this committee duringDuring the fiscal year ended June 30, 2011 and presently are2013, the members of the Compensation Committee were: Stanley W. Corker, Carl W. Gromada and Robert A. Meyer.  No executive officerMeyer, with Mr. Corker serving as the Chairman. On February 11, 2013, Daniel C. Molhoek replaced Mr. Gromada on the Compensation Committee. The Company held its Annual Meeting of Qualstar serves as a memberShareholders on June 28, 2013, the last business day of fiscal year 2013. At the Annual Meeting the shareholders of the boardCompany elected a new Board of directorsDirectors that took office on the afternoon of June 28, 2013. At its initial meeting the new Board of Directors appointed new members to the Compensation Committee. The current members of the Compensation Committee are David J. Wolenski and Sean M. Leder, with Mr. Wolenski serving as Chairman. Accordingly, the current Compensation Committee had no input or oversight of the Company’s compensation committee of any entity that has one or more executive officers serving on our Board of Directors.during fiscal year 2013. No member of the Compensation Committee is, or ever has been,was during fiscal year 2013, an employee or officer of Qualstar.

During the fiscal year ended June 30, 2013, none of our executive officers:

-

served as a member of the compensation committee (or other board committee performing equivalent functions or, in theabsence of any such committee, the entire the board of directors) of another entity, one of whose executive officersserved as a member of our board of directors;

-

served as a director of another entity, one of whose executive officers served as a member of our board of directors; or

-

served as a member of the compensation committee (or other board committee performing equivalent functions or, in theabsence of any such committee, the entire the board of directors) of another entity, one of whose executive officersserved as a member of our board of directors.

 

EXECUTIVE COMPENSATION

Summary Compensation Table

The following tables show information about the compensation earned by our principal executive officer, our principal financial officer, and our other executive officers who were serving as executive officers at June 30, 2011.2013. These officers are referred to in this Proxy Statementreport as the “named executive officers.”

Fiscal Year 20112013 Summary Compensation Table

Name and Principal Position
 
Year
 
Salary (1)
($)
  
Bonus (1)
($)
  
Grant Date Fair Value of Option Awards (2)
($)
  
All Other Compensation (3)
($)
  
Total
($)
 
William J. Gervais
 2011 $161,346  $—  $—  $2,851  $164,197 
Chief Executive Officer and President
 2010  158,170   —   —   3,102   161,272 
  2009  178,838   —   —   2,254   181,092 
                       
Nidhi H. Andalon (4)
 2011  150,010   —   —   573   150,583 
Vice President and Chief Financial Officer
 2010  150,010   —   —   919   150,929 
  2009  130,276   —   —   1,275   131,551 
                       
Randy Johnson (5)
 2011  180,003   14,400   —   573   194,976 
Vice President and General Manager, N2Power
 2010  180,003   3,600   —   573   184,176 
                       
Robert K. Covey
 2011  173,550   —   —   2,254   175,804 
Vice President of Marketing
 2010  166,297   —   —   2,501   168,798 
  2009  183,467   —   —   5,123   188,590 

Name and Principal Position

 

Year

 

Salary (1)
($)

  

Bonus (1)
($)

  

Grant Date

Fair Value of

Option

Awards (2)
($)

  

All Other

Compensation (3)
($)

  

Total
($)

 
                       

Lawrence D. Firestone (6) 

 

2013

 $300,019  $45,000  $42,000  $2,279  $389,298 

Former Chief Executive
Officer and President

 

2012

  18,463   75,000   70,120   —   163,583 

 

 

                      

Philip G. Varley (5)

 

2013

  37,712   10,000   10,884   405   59,001 
Former Chief Financial                      
Officer                      
                       

Nidhi H. Andalon (4)

 2013  115,010   —   —   1,104   116,114 

Former Vice President and
Chief Financial Officer

 

2012

  158,013   —   11,600   532   170,145 

 

 

2011

  150,010   —   —   573   150,583 
                       
                       

Randy Johnson

 

2013

  210,428   10,000   —   1,705   222,133 

Vice President and General
Manager, N2Power

 

2012

  179,450   10,800   11,600   2,286   204,136 
 
 

2011

  186,788   14,400   —   2,129   203.317 
                       
                       

Robert K. Covey (7)

Former Vice President of

Marketing

 

2013

  179,480   10,000   —   1,535   191,015 
  

2012

  01179,480   —   11,600   2,213   193,293 
  

2011

  173,550   —   —   2,254   175,804 

(1)

The amounts shown in these columns reflect salary and bonuses earned by the named executive officers for each of the fiscal years indicated.

(2)

The amounts shown in this column represent the fair value of stock options at the date of grant.  No options were granted to any of our named executive officers during the last three fiscal years.  For information regarding the calculation of the grant date fair value of stock options, refer to note 9 of the Qualstar financial statements included in Item 8 of our annual report on Form 10-K for the fiscal year ended June 30, 2011, as filed with the Securities and Exchange Commission.

(3)

The amounts shown above under “All Other Compensation” represent matching contributions under our 401(k) plan, and premiums for disability and life insurance.

(4)

Ms. AndalonAndalon’s employment as Chief Financial Officer and Vice President terminated on March 15, 2013.

(5)

Mr. Varley was appointed our Chief Financial Officer on April 10, 2013, effective January 19, 2009as of his commencement date of April 10, 2013, and was granted 20,000 stock options at an exercise price of $1.82 on April 26, 2013. Mr. Varley’s employment as Chief Financial Officer terminated on December 3, 2013.

(6)

Mr. Firestone’s employment was terminated July 9, 2013.

(7)

Mr. Covey’s employment as Vice President effective March 25, 2010.of Marketing terminated on August 16, 2013.

(5)Mr. Johnson was appointed our Vice-President and General Manager, N2Power effective March 25, 2010.

 

On July 3, 2013, the Board of Directors appointed Steven N. Bronson to serve as the Chief Executive Officer and President of Qualstar, with an annual salary of $200,000 per year. On March 6, 2014, Qualstar entered into an employment agreement with Mr. Bronson.

On December 1, 2013, the Board of Directors appointed Louann Negrete as the Chief Financial Officer of Qualstar, with an annual salary of $135,00 per year with a guaranteed bonus of $10,000.

Grants of Plan-Based Awards

The following table sets forth information regarding grants of awards to each named executive officer during the year ended June 30, 20112013 under our equity incentive plan.

Grants of Plan-Based Awards in Fiscal Year 2011

2013

Name

 

Grant Date

 

All Other

Option Awards:

Number of

Securities

Underlying

Options (1)
(#)

  

Exercise or Base

Price of Option

Awards ($ / Sh)

  

Grant Date Fair
Value of Option

Awards (2)
($)

 
            
            

Lawrence D. Firestone (3)

 

1/2/2013

 100,000  $1.44  $42,000 

Philip G. Varley

 

4/26/2013

 20,000  $1.82  $10,884 

Name

(1)

Grant Date
All Other Option Awards: Number of Securities Underlying Options (1)
(#)
Exercise or Base Price of Option Awards ($ / Sh)
Grant Date Fair
Value of Option Awards (2)
($)
William J. Gervais————
Nidhi H. Andalon————
Randy Johnson————
Robert K. Covey————
(1)No options were granted to any of our named executive officers during fiscal year 2011.  

Stock options granted to the named executive officers typically vest over four years at the rate of 25% of the number of shares as of each anniversary of the date of grant, provided that the executive is still employed by Qualstar on the vesting date.

(2)

(2)

The amounts shown in this column represent the full grant date fair value of stock options granted, computed in accordance with FASB Accounting Standards Codification Topic 718, and does not necessarily correspond to the actual value that will be realized by the named executive officers.  For information regarding

(3)

Under the calculationterms of the grant date fair valueemployment agreement dated May 8, 2012 between the Company and Mr. Firestone 100,000 of the stock options referawarded to note 9Mr. Firestone on January 2, 2013 vest at the rate of the Qualstar financial statements included in Item 8 of our annual report25,000 per quarter beginning on Form 10-K for the fiscal year ended June 30, 2011, as filed with the Securities and Exchange Commission.March 31, 2013.

 

Outstanding Equity Awards

The following table provides information regarding outstanding equity awards held by each named executive officer as of June 30, 2011,2013, including the number of unexercised vested and unvested stock options. The vesting schedule for each grant is shown following this table.

Outstanding Equity Awards at 20112013 Fiscal Year End

  
Option Awards
 
  
Number of Securities
Underlying Unexercised
Options (#)
  
Option
Exercise
Price
  
Option
Expiration
 
Name
 
Exercisable
  
Unexercisable (1)
  
($)
  
Date
 
William J. Gervais  —   —   —   — 
Nidhi H. Andalon  16,000   —  $3.02  06/14/2016 
Randy Johnson  9,000   3,000  $3.10  03/25/2018 
Robert K. Covey  20,000   —  $5.94  01/03/2012 

  

Option Awards

  

Number of Securities

Underlying Unexercised

Options (#)

 

Option

Exercise

Price

  

Option

Expiration

Name

 

Exercisable

  

Unexercisable

 ($)  Date

Lawrence D. Firestone

  6,000   18,000 (1)  $1.83 

07/28/2021

Lawrence D. Firestone

  75,000   25,000 (2)  $1.94 

05/31/2022

Lawrence D. Firestone

  50,000   50,000 (3)  $1.44 

01/02/2023

Philip G. Varley

  —   20,000 (1)  $1.82 

04/25/2023

Randy Johnson

  12,000   —  $3.10 

03/25/2018

Randy Johnson

  5,000   15,000 (1)  $1.89 

06/18/2022

Robert K. Covey

  5,000   15,000 (1)  $1.89 

06/18/2022

William J. Lurie

  5,000   15,000 (1)  $1.89 

06/18/2022

______________

(1)

(1)

Stock options granted to the named executive officers vest over four years at the rate of 25% of the options as of each anniversary of the date of grant, provided that the executive is still employed by Qualstar on the vesting date. The amounts shown in this column represent the remaining unvested portion of each option grant.

(2)

Under the terms of the employment agreement dated May 8, 2012 between the Company and Mr. Firestone, 75,000 of the stock options awarded to Mr. Firestone on June 1, 2012 vest on June 30, 2013, 18,750 on September 30, 2013 and the remaining 6,250 on December 31, 2013.

(3)

Under the terms of the employment agreement dated May 8, 2013 between the Company and Mr. Firestone, 100,000 of the stock options awarded to Mr. Firestone on January 2, 2013 vest at the rate of 25,000 per quarter beginning on March 31, 2013.

Option Exercises

The table below sets forth information for each named

No executive officer regarding the exercise ofexercised any stock options during the fiscal year ended June 30, 2011, including the aggregate value realized upon exercise before payment of any applicable withholding taxes.

2013. 

 
Option Exercises in Fiscal Year 2011
Option Awards
Name
Number of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise (1)
($)
William J. Gervais——
Nidhi H. Andalon——
Randy Johnson——
Robert K. Covey——

(1)The value realized on exercise of option awards represents the market price per share of common stock on the date of exercise, less the stock option exercise price per share, multiplied by the number of stock options exercised.

Director Compensation

Each of our non-employee directors receives cash fees and equity-based awards as compensation for histheir service on the Board of Directors and the committees of the Board on which he isthey are a member. The table below sets forth cash compensation earned by each non-employee director, and the grant date fair value of share-based compensation granted to each non-employee director, during the fiscal year ended June 30, 2011.  Mr. Gervais did not receive any compensation for his service on the Board.  All compensation earned by Mr. Gervais as an employee is reported in the Summary Compensation Table above and has been excluded from the table below.

2013.

Fiscal Year 20112013 Director Compensation Table

Name
 
Fees Earned or Paid in Cash (1)
($)
  
Grant Date Fair Value of Option
Awards (2)(3)
($)
  
Total
($)
 
Stanley W. Corker $18,000   —  $18,000 
Lawrence D. Firestone (4)  1,865   —   1,865 
Carl W. Gromada  18,000   —   18,000 
Robert A. Meyer  18,000   —   18,000 
Richard A. Nelson (5)  2,250   —   2,250 
Robert E. Rich  11,250   —   11,250 

Name

 

Fees Earned or

Paid in Cash (2)
($)

  

Grant Date Fair

Value of Option

Awards (3)(4)
($)

  

Total
($)

 

Allen H. Alley(1)

 $18,750  $12,000  $30,750 

Stanley W. Corker(1)

  30,500   —   30,500 

Lawrence D. Firestone(1)(6)

  —   —   — 

Carl W. Gromada(1)

  29,750   —   29,750 

Gerald J. Laber(1)

  5,750   13,889   19,649 

Robert A. Meyer(1)

  30,500   —   30,500 

Daniel C. Molhoek(1)

  20,000   12,000   32,000 

Robert E. Rich (5)

  3,500   —   3,500 

(1)Each of these Board members ceased to serve at the conclusion of the Annual Shareholders Meeting held on June 28, 2013.
 (1)

(2)

The amounts shown in this column represent the amount of cash compensation earned in fiscal year 20112013 for service on the Board of Directors and any committees of the Board, on which the director was a member in fiscal 2011.2013.

(3)

(2)No stock options were granted to our directors during fiscal 2011. 

Stock options granted to our directors typically vest over four years at the rate of 25% of the shares as of each anniversary of the date of grant.

(4)

(3)

As of June 30, 2011,2013, each of our non-employee directors named in the above table (except Mr. Nelson and Mr.Lawrence D. Firestone) held unexercised stock options for 24,000 shares of our common stock.

 (4)
(5)Mr. Rich resigned from the Board effective September 24, 2012.

(6)

Mr. Firestone was appointedCEO of the Company and consequently received no additional compensation for his services as a director and as a member of the Audit Committee on May 13, 2011.  Mr. Firestone resigned from the Audit Committee in May 2012 in connection with his appointment to the position of President and Chief Executive Officer of the Company.Board Member.

(5)Mr. Nelson served as an officer and employee of Qualstar until his retirement on January 28, 2011.  Prior to his retirement, Mr. Nelson did not receive any fees for his service, as such, as a director of the Company.  Mr. Nelson did not stand for reelection to the Board at the 2012 Annual Meeting.
Each

During the fiscal year ended on June 30, 2013, each of our non-employee directors receives $2,000 per quarter plusreceived $1,000 for each Board meeting attended in person as compensation for his service on the Board, and is reimbursed for expenses incurred in connection with attendance at meetings of the Board and any committees on which he serves. Directors who serve on the Audit Committee of our Board receive an additional fee of $1,000 per quarter plus an attendance fee of $500 per meeting if the Audit Committee meeting is held in conjunction with a meeting of the full Board, and $1,000 per meeting if held on a day when the full Board does not meet. Directors who serve on the Compensation Committee of our Board receive an additional fee of $500 for attending meetings of that committee that are held on a day when the full Board does not meet. An attendance fee of $250 per meeting is paid for telephonic meetings of the full Board or of a committee on which a director is a member. No fees arewere paid for service on the Board to directors who are employees of Qualstar.

Directors are eligible to receive stock options under our 2008 Stock Incentive Plan. However, no stock options were granted to our non-employee directors duringDuring the fiscal year ended June 30, 2011.

2013, Allen Alley, Daniel Molhoek and Gerald Laber were each granted options to purchase 24,000 shares of Qualstar common stock.

Potential Benefits Upon Termination or Following a Change in Control

Stock options granted under our 2008 Stock Incentive Plan and our 1998 Stock Incentive Plan provide that upon certain circumstances in the event of or following a change in control of Qualstar, the unvested portion of such stock options will accelerate and become immediately vested in full. In general, a change in control is deemed to occur if we were to sell substantially all of our assets or if Qualstar were to merge into, consolidate with or enter into a reorganization with another entity in a transaction in which Qualstar is not the surviving corporation.

 

If a change in control occurs and the acquiring entity does not assume and continue the employee’s rights under the unvested stock options, then all unvested stock options will accelerate and vest in full upon the occurrence of the change in control. If the acquiring entity does assume the employee’s rights under the unvested stock options, but the employee’s employment subsequently is terminated without cause, or if the employee resigns for good reason after the change in control, then all unvested stock options held by the employee would accelerate and vest in full as of the date of termination.

The reasons for which an employee may voluntarily resign and trigger acceleration of vesting include a change in the employee’s position which materially reduces his or her duties and responsibilities or the level of management to which the employee reports, a reduction in the employee’s level of compensation and benefits by more than 15 percent, or a relocation of employee’s principal place of employment by more than 30 miles without his or her consent.

The following table below sets forth information regarding the estimated amounts that each named executive officer would have realized in the event that a change in control of Qualstar had occurred, and all of his unvested stock options had accelerated and become immediately vested in full and, in the case of Mr. Firestone, his employment was terminated without cause or he resigned for good reason, as of June 30, 2011.


2013:

Estimated Benefits at 20112013 Fiscal Year End in the Event of a Change in Control

(2)

Name

 

Option Awards (1)

  

Severance

  

Target Bonus

  

COBRA

 

Lawrence D. Firestone

  0   $450,000   $600,000   $31,170 

____________________          

Name

(1)

Option Awards (1)
William J. Gervais—
Nidhi H. Andalon—
Randy Johnson—
Robert K. Covey—
(1)

The amounts in this column represent the aggregate gain each named executive officer would have realized if all unvested stock options that were held by him or her on June 30, 20112013 accelerated and became immediately vested in full on that date. The amount of gain was calculated based on the difference between the exercise price of each unvested option and the closing price of our common stock on that date, which was $1.81$1.40 per share.

(2)

In the case of Mr. Firestone, the amounts below reflect the benefits he would have been owed in the event that his employment was terminated without cause or he resigned for good reason, as of June 30, 2013. Under the terms of the employment agreement between the Company and Mr. Firestone, “cause” includes, among other acts, any act of fraud, embezzlement or dishonesty which materially adversely affects the business of the Company or any successor entity, any unauthorized use or disclosure of confidential information or trade secrets of the Company, any material act or omission involving malfeasance or gross negligence in the performance of the executive’s duties and any material deviation from any of the Company’s or a successor entity’s policies. “Good reason” includes, among other acts, a demotion or material reduction in responsibility level, a decrease in level of his compensation by more than ten percent (10%), and a relocation of more than 30 miles from the executive’s current work place.

Transactions with Related Persons

There are no relationships or transactions involving any

Mr. Robert E. Rich, who served as a member of our directors or executive officersBoard of Directors from January 2000 until September 24, 2012, is a shareholder in the law firm of Stradling Yocca Carlson & Rauth, which has provided legal services to Qualstar since 1984. During the fiscal year ended June 30, 2013 Qualstar paid $338,000 to this law firm for which disclosure is required undergeneral business purposes and $316,000 for legal services provided in connection with the rulesproxy contest related to the special meeting of the Securities and Exchange Commission.

shareholders held on June 27, 2012.

In accordance with the charter of the Audit Committee of our Board of Directors, the Audit Committee is responsible for reviewing any proposed transaction with any related person which involves a potential conflict of interest or for which approval is required under applicable Securities and Exchange Commission and NasdaqNASDAQ rules. Currently, this review and approval requirement applies to any transaction to which Qualstar will be a party, in which the amount involved exceeds $120,000, and in which any of the following persons will have a direct or indirect material interest: (a) any of our directors or executive officers, (b) any nominee for election as a director, (c) any security holder who is known to us to own of record or beneficially more than five percent of our common stock, or (d) any member of the immediate family of any of the persons described in the foregoing clauses (a) through (c).

In the event that management becomes aware of any related person transaction, management will present information regarding the proposed transaction to the Audit Committee for review. Approval of a transaction with a related person requires the affirmative vote of a majority of the members of the Audit Committee or of a majority of the members of the full Board of Directors. If the related person transaction involves a member or members of the Board, approval requires a majority vote of the directors who do not have a financial interest in the transaction.

 

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

This report is submitted by the current Audit Committee members who served on the committee during the fiscal year ended June 30, 2011.  Messrs. Gromada, Corker, Meyer and Firestone composed the Audit Committee until May 2012, at which time Mr. Firestone resigned from the Audit Commmittee in connection with his appointment to the position of Chief Executive Officer and President of Qualstar.

2013.

The Audit Committee of the Board of Directors is composed solely of non-employee directors who satisfy the current NasdaqNASDAQ requirements with respect to independence, financial expertise and experience.  The Audit Committee operates pursuant to a written charter adopted by the Board of Directors, a copy of which is available in the investors section of the Company’sQualstar’s website at  www.Qualstar.com.

www.Qualstar.com .

The Board of Directors has the ultimate authority for effective corporate governance, including oversight of the management of Qualstar.  The Audit Committee’s purpose is to assist the Board of Directors in fulfilling its responsibilities by overseeing the accounting and financial reporting processes of Qualstar, the audit of Qualstar’s consolidated financial statements, the qualifications and performance of the independent registered public accounting firm engaged as Qualstar’s independent auditor, and Qualstar’s internal control over financial reporting.

The Committee relies on the expertise and knowledge of management and the independent auditor in carrying out its oversight responsibilities.  Management is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial reporting principles, internal control over financial reporting, and disclosure controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations.  Management is responsible for objectively reviewing and evaluating the adequacy, effectiveness and quality of our system of internal control.  Qualstar’s independent auditor is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

The Audit Committee fulfilled its duties and responsibilities during fiscal 20112013 and with respect to the financial statements for the fiscal year ended June 30, 2011,2013, as outlined in the Committee’s charter.  Among other actions, the Committee:

reviewed and discussed our quarterly consolidated financial statements and related periodic reports filed with the SEC, with management and the independent auditor,

• 

reviewed with management and the independent auditor the audit scope and plans,

• 

inquired about the adequacy of Qualstar’s internal controls,

reviewed with management and the independent auditor the audit scope and plans,
inquired about the adequacy of the Company’s internal controls,

inquired about significant risks, reviewed our policies for risk assessment and risk management and assessed the steps management is taking to control these risks, and

met in periodic executive sessions with the independent auditor.

• 

met in periodic executive sessions with the independent auditor.

The Audit Committee has reviewed and discussed with management and SingerLewak LLP, the Company’sQualstar’s independent auditor for fiscal 2011,2013, the audited financial statements and related footnotes and independent auditor’s report on those financial statements for the fiscal year ended June 30, 2011.2013.  Management represented to the Audit Committee that our financial statements were prepared in accordance with generally accepted accounting principles.  The Audit Committee discussed with management and the independent auditor the quality of our accounting principles, the reasonableness of significant estimates and judgments and the disclosures in our financial statements, including the disclosures relating to critical accounting policies.

The Audit Committee recognizes the importance of maintaining the independence of Qualstar’s independent auditor, both in fact and appearance.  Consistent with its charter, the Audit Committee has evaluated SingerLewak LLP’s qualifications, performance and independence.  The Audit Committee has received from the independent auditors the written disclosures and the letter required by applicable requirements of the Public Company Oversight Board regarding the independent accountant’s communications concerning independence, and has discussed with them their independence from the CompanyQualstar and its management and has considered whether the independent auditors’ provision of non-audit services is compatible with maintaining their independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board approved, that the audited financial statements be included in the Company’sQualstar’s Annual Report on SEC Form 10-K for the fiscal year ended June 30, 2011,2013, for filing with the Securities and Exchange Commission.

Current Members of the Audit Committee

           Carl W. Gromada (Chairman)
           Stanley W. Corker
           Robert A. Meyer
since July 3, 2013

Dale E. Wallis, David J. Wolenski and Alan B. Howe, with Mr. Wallis serving as Chairman.

 

Preliminary Copy - Subject

APPROVAL OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Proposal 2)

Proxies solicited by the Board of Directors will, unless otherwise directed, be voted to Completion

approve the appointment by the Audit Committee of SingerLewak LLP as the independent registered public accounting firm to audit Qualstar’s financial statements for the fiscal year ending June 30, 2014.  We have engaged SingerLewak LLP in this capacity each year commencing with fiscal year 2009.  If the shareholders do not approve this appointment, the Audit Committee will consider other independent registered public accounting firms.

Representatives of SingerLewak LLP will be present at the 2014 Annual Meeting to respond to appropriate questions and will be given an opportunity to make a statement if they so desire.

Fees Paid to Independent Registered Public Accounting Firm.  The aggregate fees billed by SingerLewak LLP, our independent registered public accounting firm for fiscal years 2013 and 2012 for professional services rendered to Qualstar during the fiscal years ended June 30, 2013 and June 30, 2012, respectively, were comprised of the following:

  

Fiscal

2013

  

Fiscal

2012

 

Audit Fees

 $149,000  $115,500 

Audit-related fees

  —   — 

Tax fees

  15,000   5,000 

All other fees

  —   — 

Total fees

 $164,000  $120,500 

Audit fees include fees for professional services rendered in connection with the audit of our consolidated financial statements for each year and reviews of our unaudited consolidated quarterly financial statements, as well as fees related to consents and reports in connection with regulatory filings for those fiscal years.

SingerLewak, LLP was our principal accountant for tax compliance, tax advice and tax planning during fiscal years 2013 and 2012.  Tax fees related primarily to tax compliance review and advisory services.

Audit Committee Pre-Approval Policies and Procedures.  Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent accountants in accordance with applicable Securities and Exchange Commission rules. The Audit Committee adopted a written pre-approval policy on June 25, 2003, and all services performed by SingerLewak LLP have been pre-approved in accordance with the Audit Committee’s pre-approval policy. The Audit Committee generally pre-approves particular services or categories of services on a case-by-case basis. The independent registered public accountants and management periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accountants in accordance with these pre-approvals, and the fees for the services performed to date.

 

PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2015 ANNUAL MEETING

Proposals to be Included in Our Proxy Statement

A shareholder who wishes to have a proposal considered for inclusion in our proxy statement for action at the 2015 Annual Meeting of Shareholders must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934.  The proposal must be in writing and be received by the Corporate Secretary of Qualstar at our principal place of business no later than February 3, 2015.

Advance Notice Procedures

If a shareholder desires to have a proposal acted upon at the 2015 Annual Meeting of Shareholders that is not to be included in our proxy statement in accordance with SEC Rule 14a-8, or if a shareholder desires to nominate someone for election to our Board of Directors, the shareholder must follow the procedures outlined in our amended and restated bylaws. Our bylaws provide that in order for a shareholder proposal to be considered at an annual meeting of shareholders, written notice of the proposal must be received by the Corporate Secretary of Qualstar at the principal executive offices of Qualstar not less than 60 days nor more than 90 days prior to the anniversary of the preceding year’s annual meeting of shareholders. The notice must contain information required by our bylaws, including, but not limited to, a description of the proposal and any material interest of the shareholder relating to such proposal.

In order to nominate someone for election to our Board of Directors at an annual meeting of shareholders, written notice of the proposed nomination must be received by the Corporate Secretary of Qualstar not less than 60 days nor more than 90 days prior to the anniversary of the preceding year’s annual meeting of shareholders. The notice must contain information required by our bylaws regarding the shareholder and the nominee, as well as information required to be included in a proxy statement by SEC rules and regulations.

Shareholders are also advised to review Qualstar’s amended and restated bylaws, which contain additional requirements about advance notice of shareholder proposals and director nominations, including the information that must accompany any such shareholder notice.

Accordingly, in order for a shareholder proposal (other than a proposal made pursuant to SEC Rule 14a-8) or nomination to be considered at the 2015 Annual Meeting of Shareholders, a written notice of the proposal or the nomination, which includes the information required by our bylaws, must be received by the Corporate Secretary of Qualstar at the principal executive offices of Qualstar between March 22, 2015 and April 21, 2015.

A copy of the full text of the bylaw provisions containing the advance notice procedures described above may be obtained upon written request to the Corporate Secretary of Qualstar at our principal place of business.

IMPORTANT

Your vote at this year’s 2014 Annual Meeting is especially important, no matter how many or how few shares you own. Please sign and date the enclosed WHITE proxy card and return it in the enclosed postage-paid envelope promptly.

Only your latest dated, signed proxy card will be counted.  Any proxy may be revoked at any time prior to its exercise at the 2014 Annual Meeting as described in this Proxy Statement.

 

Appendix I

INFORMATION CONCERNING PERSONS WHO ARE PARTICIPANTS IN

QUALSTAR’S SOLICITATION OF PROXIES FOR THE 2014 ANNUAL MEETING OF SHAREHOLDERS

Unless otherwise noted, capitalized terms used but not defined in this Appendix I shall have the meanings ascribed to them in the Proxy Statement to which this Appendix I is attached. Under applicable SEC rules and regulations, members of our Board of Directors, our Board’s director nominees, and executive officers of Qualstar are deemed to be “participants” with respect to Qualstar’s solicitation of proxies from shareholders in connection with the 2014 Annual Meeting of Shareholders.

Directors and Nominees

The following table sets forth the names and business addresses of our current directors and director nominees who are all deemed to be “participants” in our solicitation under applicable SEC rules and regulations. The principal occupation or employment of each director or nominee who may be deemed to be a participant is set forth in the section of the Proxy Statement entitled “Proposal No. 1: Election of Directors.”

Name

Business Address

Steven N. Bronson

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

David J. Wolenski

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

Sean M. Leder

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

Dale E. Wallis

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

Alan Howe

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

Nick Yarymovych

Qualstar Corporation

3990-B Heritage Oak Court

Simi Valley, California 93063

Officers and Employees

The following table sets forth the names of our executive officers (other than Mr. Bronson who is listed above) who are deemed to be “participants” in our solicitation under applicable SEC rules and regulations. The principal occupation of each person listed below refers to such person’s position with Qualstar, and the business address of Qualstar is 3990-B Heritage Oak Court, Simi Valley, California 93063.

Name

Principal Occupation

Louann Negrete

Randy D. Johnson

Chief Financial Officer

Vice President and General Manager of

N2Power division

Daniel Jan

Executive Vice President

 

Information Regarding Ownership of Qualstar’s Securities by Participants

Except as described in this Appendix I or otherwise in this Proxy Statement, none of the persons listed above in “Directors and Nominees” and “Officers and Employees” owns any debt or equity security issued by Qualstar of record that he or she does not also own beneficially. The number of shares of Qualstar’s common stock beneficially owned by certain of the persons listed above in “Directors and Nominees” and “Officers and Employees,” as of June 2, 2014, is set forth in the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.”

Information Regarding Transactions Involving Qualstar’s Securities by Participants

The following table reflects all transactions within the last two fiscal years.

 Name

Date

Transaction Description

Number of Shares

Acquired

(Disposed)

Steven N. Bronson(1)

May 21, 2012

Purchase of Shares

  2,297,119

Steven N. Bronson(2)

November 21, 2013

Purchase of Shares

 13,551

Steven N. Bronson(2)

November 22, 2013

Purchase of Shares

60,320

Steven N. Bronson(2)

November 25, 2013

Purchase of Shares

3,200

Steven N. Bronson(2)

November 26, 2013

Purchase of Shares

10,059

Steven N. Bronson(2)

November 27, 2013

Purchase of Shares

44,874

Steven N. Bronson(2)

December 2, 2013

Purchase of Shares

10,400

Steven N. Bronson(2)

December 4, 2013

Purchase of Shares

24,226

Steven N. Bronson(2)

December 9, 2013

Purchase of Shares

4,600

Steven N. Bronson(2)

December 10, 2013

Purchase of Shares

126

Steven N. Bronson(2)

December 13, 2013

Purchase of Shares

300

Steven N. Bronson(2)

December 16, 2013

Purchase of Shares

11,000

Steven N. Bronson(2)

December 17, 2013

Purchase of Shares

7,440

Steven N. Bronson(2)

December 18, 2013

Purchase of Shares

38,092

Steven N. Bronson(2)

December 19, 2013

Purchase of Shares

4,936

Steven N. Bronson(2)

December 20, 2013

Purchase of Shares

16,554

Steven N. Bronson(2)

December 23, 2013

Purchase of Shares

11,711

Steven N. Bronson(2)

December 24, 2013

Purchase of Shares

8,092

Steven N. Bronson(2)

December 26, 2013

Purchase of Shares

150

Steven N. Bronson(2)

December 27, 2013

Purchase of Shares

10,000

Steven N. Bronson(2)

December 31, 2013

Purchase of Shares

75,698

Steven N. Bronson(2)

January 3, 2014

Purchase of Shares

5,100

Steven N. Bronson(2)

January 6, 2014

Purchase of Shares

20,000

Steven N. Bronson(2)

January 7, 2014

Purchase of Shares

17,030

Steven N. Bronson(2)

January 8, 2014

Purchase of Shares

100

Steven N. Bronson(2)

February 21, 2014

Purchase of Shares

171,742

Steven N. Bronson(2)

February 25, 2014

Purchase of Shares

2,700

Steven N. Bronson(2)

May 30, 2014

Purchase of Shares

3,700

David J. Wolenski

None

None

N/A

Sean M. Leder

May 16, 2014

Purchase of shares

2,500

May 19, 2014

Purchase of shares

9,500

Dale E. Wallis

None

None

N/A

Alan Howe

March 14, 2014

Purchase of Shares

3,500

Louann Negrete

None

N/A

Randy D. Johnson

Grant of options to purchase

17,000 shares

N/A

Daniel Jan

None

N/A

(1)     These shares of Qualstar were beneficially owned by Mr. Bronson as of May 21, 2012. BKF Capital Group, Inc. (BKF Capital) is the owner of 2,815,120 shares. Steven N. Bronson, as the Chairman, CEO and majority shareholder of BKF Capital, may be deemed to be the beneficial owner of the shares of Qualstar held by BKF Capital. Mr. Bronson individually owns 57,700 shares of Qualstar that were acquired prior to May 21, 2012.

(2)      These shares of Qualstar were purchased by BKF Capital in open market transactions.

 

Miscellaneous Information Regarding Participants

Except as described in this Appendix I or this Proxy Statement, neither any participant nor any of their respective associates or immediate family members was a party to any transaction or series of transactions since July 1, 2010, or is to be a party to any currently proposed transaction or series of proposed transactions, in which (i) Qualstar was or is to be a participant, (ii) the amount involved exceeds $120,000, and (iii) any participant, associate or immediate family member had or will have a direct or indirect material interest. Furthermore, except as described in this Appendix I or elsewhere in this Proxy Statement, (a) no participant or any of their respective associates directly or indirectly beneficially owns any securities of Qualstar or any securities of any parent or subsidiary of Qualstar and (b) no participant owns any securities of Qualstar of record that such participant does not own beneficially.

Except as described in this Appendix I or this Proxy Statement:

●

No participant or any of their respective associates has any arrangements or understandings with any person with respect to any future employment by Qualstar or any of its affiliates or any future transaction to which Qualstar or any of its affiliates will or may be a party;

●

No participant is, or was within the past year, a party to any contract, arrangement or understanding with any person with respect to any securities of Qualstar, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies;

●

No participant has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 2013 Annual Meeting other than, with respect to each of the Board’s nominees, such nominee’s interest in election to the Board of Directors; and

●

There are no material proceedings in which any director or executive officer of Qualstar is a party adverse to Qualstar or any of its subsidiaries, or has a material interest adverse to Qualstar or any of its subsidiaries.

Except as described in this Appendix I or this Proxy Statement, and excluding any director or executive officer of Qualstar acting solely in that capacity, no person who is a party to an arrangement or understanding pursuant to which a nominee for election as director is proposed to be elected has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 2014 Annual Meeting.


PROXY

QUALSTAR CORPORATION

3990-B Heritage Oak Court

Simi Valley, California 93063

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF QUALSTAR CORPORATION.

The undersigned hereby appoints Steven N. Bronson and James A. Prestiano, and each of them individually, the attorney, agent and proxy of the undersigned, with full power of substitution in each of them, to represent and vote all the shares of Qualstar Corporation which the undersigned is entitled to vote at the 2014 Annual Meeting of Shareholders to be held at Qualstar’s corporate headquarters, located at 3990-B Heritage Oak Court, Simi Valley, California 93063, on Friday, June 27, 2014 at 10:00 a.m., Pacific Time, and at any and all adjournments or postponements thereof, as follows:

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED: “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AND AS THE PROXY HOLDERS MAY DETERMINE IN THEIR DISCRETION WITH REGARD TO ANY OTHER MATTER PROPERLY BROUGHT BEFORE THE 2014 ANNUAL MEETING.

1.     Election of Directors:

For

Withhold

For

Withhold

For

Withhold

  01-Steven N. Bronson

☐

☐

02-David J. Wolenski

☐

☐

03- Sean M. Leder

☐

☐

  04- Dale E. Wallis

☐

☐

05-Nick Yarymovych

☐

☐

For

Against

Abstain

2.    To approve the appointment of SingerLewak LLP as Qualstar’s independent registered public accounting firm for the fiscal year ending June 30, 2014.

☐

☐

☐

IMPORTANT—PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY

(continued from reverse side)


This Proxy confers discretionary authority to vote on any other matters as may properly come before the meeting.   The undersigned hereby revokes any other proxy heretofore executed by the undersigned for the meeting and acknowledges receipt of the Notice of 2014 Annual Meeting of Shareholders and Proxy Statement, datedJune 3, 2014 .

Dated:

Signature

Signature if held jointly

Please date this Proxy and sign it exactly as your name or names appear hereon.  When shares are held by more than one person, all should sign.  When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such.  If shares are held by a corporation or partnership, please sign in full corporate or partnership name by an authorized officer.

Please mark, sign, date and return this Proxy promptly using the enclosed envelope.  If your address is incorrectly shown, please print changes.