Check the appropriate box: | |
o | Preliminary Proxy Statement |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
o | Definitive Proxy Statement |
x | Definitive Additional Materials |
o | Soliciting Material Pursuant to §240.14a-12 |
x
|
No fee required
|
|
o
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
|
|
(1)
|
Title of each class of securities to which transaction applies:
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
|
(3)
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
|
(5)
|
Total fee paid:
|
|
o
|
Fee paid previously with preliminary materials.
|
|
o
|
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
|
|
(1)
|
Amount Previously Paid:
|
|
·
|
Four of the five existing directors (not including co-founder William Gervais who is retiring) have been in office since at least 2006, with one serving since 2005 and another serving since 2000;
|
·
|
The Company has not been profitable since 2004;
|
·
|
The Company’s net revenues were 42% less in 2011 than they were in 2004;
|
·
|
The Company’s stock price has declined by over 66% in the last 10 years on a dividend adjusted basis;
|
·
|
After the departure of the Company’s co-founder next month, the current Board will in total own less than 1.3% of the outstanding shares;
|
·
|
The current Board has just hired as the new CEO one of its own members with no experience as the CEO of a public company, and has guaranteed him payments in the first year of $455,000 not tied to performance.
|
According to the Company’s own performance graph in its Annual 10-K Report for fiscal 2011 (at left), the Company’s stock performance has lagged both the market and its self-determined peer group over the last five years. The Company has experienced net losses since 2004, losing on a cumulative basis during the period of fiscal 2004 through fiscal 2011 a total of $12.63 million (with an additional $1.4 million in the first nine months of fiscal 2012). Net revenues are down over 42% in the same period, from $31.5 million in fiscal 2004 to $18.3 million in fiscal 2011. And the trend continues, with net revenue for the first nine months of 2012 down by almost 6% from the comparable prior year period. |
·
|
On May 9th, the Company announced the appointment of Lawrence Firestone as CEO to succeed Mr. Gervais, who will be retiring on June 15th. Not only does Mr. Firestone have no experience as the CEO of a public issuer. Not only did the Board appoint him after BKF demanded a meeting at which shareholders will decide whether they want Mr. Firestone as a director of their company, let alone as their CEO. Not only did the Board commit to making non-performance based payments to Mr. Firestone in the first year of his employment of over $455,000, almost triple the annual compensation of the current CEO. The Board agreed to pay Mr. Firestone 18 months’ severance and other benefits if the Board is replaced and Mr. Firestone is terminated within 12 months, after we announced our contest to remove the current Board!
|
·
|
In its May 9th press release on the appointment of Mr. Firestone, the Company quoted Mr. Firestone as seeking growth through acquisitions (in addition to internal growth), a disturbing remark considering that the current Board has yet to figure out how to profitably operate the Company’s existing business.
|
·
|
On May 10th, the Company released its third quarter and nine month results for fiscal 2012. Net loss for the quarter increased by 7.6% to $553,000 from $514,000 in the 2011 third quarter, and net loss for the nine months increased by 128% to $1,467,000 from $643,000 in the corresponding period a year earlier.
|
·
|
On May 18th, in its press release announcing the June 20th Special Meeting at which shareholders will vote on BKF’s proposal to replace the Board, the Company again quotes Mr. Firestone, this time saying that the current Board plans “to implement new initiatives to increase sales and return Qualstar to sustained profitability” and accusing BKF of “seeking to take control of Qualstar in order to secure a quick, opportunistic gain, instead of seeking to return Qualstar to profitability in order to enhance shareholder value for all of our shareholders.” Aside from the gratuitous and unfounded accusation regarding the intentions of BKF, you have to ask yourself, Why should shareholders place any confidence in the current Board to now return the Company to profitability? Where was this Board for the past six years when the Company was floundering in red ink?
|
·
|
The Company filed preliminary proxy material in response to our contest on June 1st. In those materials—
|
·
|
the Company says, “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,” to which we ask, Where was this Board until now?
|
·
|
the Company again speaks of pursuing acquisitions, even though the current Board has not managed to run a profitable business in the past six years;
|
·
|
the Company says, “the goals of 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,” while neglecting to mention that with the departure of Mr. Gervais, the equity ownership of the current Board and management will drop to 1.3% (not counting options);
|
·
|
the Company says, “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 [and] to provide the high level of service that our customers have come to expect from us,” as if a well-managed company needs 70% of its assets in cash and marketable securities in order to instill confidence in its customers!
|
What should you be doing now?
|
BKF Capital Group, Inc. | |||
|
|
||
Greg S. Heller
Senior Vice President
|