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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q



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|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2003



|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------------

For the transition period from _______ to _______

Commission file number 000-30083

QUALSTAR CORPORATION

|                                                       |  |                                                
|------------------------------------------------------ |  | -----------------------------------------------
|Incorporated under the laws of the State of California |  | (I.R.S. Employer Identification No.) 95-3927330

3990-B Heritage Oak Court
Simi Valley, CA 93063
(805) 583-7744

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes    [X]               No    [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes    [   ]               No    [X]

The total shares of common stock without par value outstanding at May 12, 2003
is 12,638,409.



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TABLE OF CONTENTS



|                                             |                                                                                               |                                                                     |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION              
|                                             | ITEM 1. Financial Statements                                                                 
|                                             |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                              
|                                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME                        
|                                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                    
|                                             |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
|                                             |                                                                                               | NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS       
|                                             | ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | ITEM 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                             | ITEM 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                 
|                                             | ITEM 1. Legal Proceedings                                                                    
|                                             | ITEM 4. Submission of Matters to a Vote of Security Holders                                  
|                                             | ITEM 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                  
|Certification of Principal Executive Officer
|Certification of Principal Financial Officer
|EXHIBIT INDEX                               
|EXHIBIT 99.1                                
|EXHIBIT 99.2                                



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Table of Contents

|                                                                                              |                                                                                                                |  |    |   | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |  | -- | - | 
|PART. I FINANCIAL INFORMATION                                                                 |                                                                                                                |  |    |  
|ITEM 1. Financial Statements                                                                  |                                                                                                                |  | 3  |  
|                                                                                              | Condensed consolidated balance sheets as of June 30, 2002 and March 31, 2003                                   |  |    | 3 | 
|                                                                                              | Condensed consolidated statements of income for the three months and nine months ended March 31, 2002 and
2003 |  |    | 4 | 
|                                                                                              | Condensed consolidated statements of cash flows for the nine months ended March 31, 2002 and 2003              |  |    | 5 | 
|                                                                                              | Condensed consolidated statement of changes in shareholders equity for the nine months ended March 31, 2003   |  |    | 6 | 
|                                                                                              | Notes to interim condensed consolidated financial statements                                                   |  |    | 7 | 
|ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                |  | 10 |  
|ITEM 3. Qualitative and Quantitative Disclosures About Market Risk                            |                                                                                                                |  | 12 |  
|ITEM 4. Controls and Procedures                                                               |                                                                                                                |  | 12 |  
|PART. II OTHER INFORMATION                                                                    |                                                                                                                |  |    |  
|ITEM 1. Legal Proceedings                                                                     |                                                                                                                |  | 13 |  
|ITEM 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                |  | 13 |  
|ITEM 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                |  | 13 |  
|Signatures                                                                                    |                                                                                                                |  | 14 |  
|Certification of Principal Executive Officer                                                  |                                                                                                                |  | 15 |  
|Certification of Principal Financial Officer                                                  |                                                                                                                |  | 16 |  

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PART I  FINANCIAL INFORMATION




ITEM 1. Financial Statements




QUALSTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2002 AND MARCH 31, 2003
(in thousands)

|                                     |                                                                                                                                                         |                            |        |          |        |           |        |             |        | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | -------- | ------ | --------- | ------ | ----------- | ------ | 
|                                     |                                                                                                                                                         |                            |        | JUNE 30, |        | MARCH 31,
|                                     |                                                                                                                                                         |                            |        | 2002     |        | 2003     
|                                     |                                                                                                                                                         |                            |        |          |        |          
|                                     |                                                                                                                                                         |                            |        |          |        |           |        | (Unaudited)
|ASSETS                              
|Current assets:                      |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     | Cash and cash equivalents                                                                                                                               |                            | $      | 16,363   |        |           | $      | 27,899      |       
|                                     | Marketable securities                                                                                                                                   |                            |        | 14,482   |        |           |        | 8,007       |       
|                                     | Receivables, net of allowances of $2,100 at June 30, 2002 and $1,943 at March 31, 2003                                                                  |                            |        | 6,695    |        |           |        | 3,571       |       
|                                     | Inventories                                                                                                                                             |                            |        | 9,652    |        |           |        | 7,160       |       
|                                     | Prepaid expenses and other current assets                                                                                                               |                            |        | 355      |        |           |        | 472         |       
|                                     | Prepaid income taxes                                                                                                                                    |                            |        | 148      |        |           |        | 416         |       
|                                     | Deferred income taxes                                                                                                                                   |                            |        | 1,501    |        |           |        | 1,501       |       
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     |                                                                                                                                                         | Total current assets       |        |          | 49,196 |           |        |             | 49,026 | 
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|Property and equipment, net          |                                                                                                                                                         |                            | 1,324  |          |        |           | 1,514  |            
|Other assets                         |                                                                                                                                                         |                            | 238    |          |        |           | 362    |            
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     |                                                                                                                                                         | $                          | 50,758 |          |        | $         | 50,902 |            
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|LIABILITIES AND SHAREHOLDERS EQUITY
|Current liabilities:                 |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     | Accounts payable                                                                                                                                        |                            | $      | 1,590    |        |           | $      | 844         |       
|                                     | Accrued payroll and related liabilities                                                                                                                 |                            |        | 308      |        |           |        | 549         |       
|                                     | Other accrued liabilities                                                                                                                               |                            |        | 693      |        |           |        | 720         |       
|                                     | Income taxes payable                                                                                                                                    |                            |        | 98       |        |           |        |            |       
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     |                                                                                                                                                         | Total current liabilities  |        |          | 2,689  |           |        |             | 2,113  | 
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|Deferred income taxes                |                                                                                                                                                         |                            | 96     |          |        |           | 96     |            
|Shareholders equity:                |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     | Preferred stock, no par value; 5,000 shares authorized; no shares issued                                                                                |                            |        |         |        |           |        |            |       
|                                     | Common stock, no par value; 50,000 shares authorized, 12,656 and 12,638 shares
issued and outstanding at June 30, 2002 and March 31, 2003, respectively |                            |        | 20,751   |        |           |        | 20,407      |       
|                                     | Deferred compensation                                                                                                                                   |                            |        | (631     | )      |           |        | (217        | )     
|                                     | Notes from directors                                                                                                                                    |                            |        | (387     | )      |           |        | (236        | )     
|                                     | Accumulated other comprehensive loss                                                                                                                    |                            |        | (31      | )      |           |        | (124        | )     
|                                     | Retained earnings                                                                                                                                       |                            |        | 28,271   |        |           |        | 28,863      |       
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     |                                                                                                                                                         | Total shareholders equity |        |          | 47,973 |           |        |             | 48,693 | 
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            
|                                     | Total liabilities and shareholders equity                                                                                                              |                            | $      | 50,758   |        |           | $      | 50,902      |       
|                                     |                                                                                                                                                         |                            |        |          |        |           |        |            

See the accompanying notes to these condensed consolidated financial statements.

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QUALSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2002 AND 2003
(in thousands, except per share amounts)
(UNAUDITED)

|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |        | 
|------------------------------------------ | -------------------------- | - | ------------------ | ------ | ----------------- | - | ----- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                           |                            |   | THREE MONTHS ENDED |        | NINE MONTHS ENDED
|                                           |                            |   | MARCH 31,          |        | MARCH 31,        
|                                           |                            |   |                    |        |                  
|                                           |                            |   | 2002               |        | 2003              |   | 2002  |        | 2003
|                                           |                            |   |                    |        |                   |   |       |        |     
|Net revenues                               |                            | $ | 8,603              |        |                   | $ | 8,189 |        |      | $ | 27,431 |        |  | $ | 25,389 |       
|Cost of goods sold                         |                            |   | 5,412              |        |                   |   | 5,085 |        |      |   | 17,112 |        |  |   | 15,959 |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|                                           | Gross profit               |   |                    | 3,191  |                   |   |       | 3,104  |      |   |        | 10,319 |  |   |        | 9,430  | 
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Operating expenses:                        |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|                                           | Research and development   |   |                    | 533    |                   |   |       | 1,138  |      |   |        | 1,523  |  |   |        | 2,905  | 
|                                           | Sales and marketing        |   |                    | 860    |                   |   |       | 921    |      |   |        | 2,168  |  |   |        | 2,826  | 
|                                           | General and administrative |   |                    | 946    |                   |   |       | 1,143  |      |   |        | 2,672  |  |   |        | 3,083  | 
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|                                           | Total operating expenses   |   |                    | 2,339  |                   |   |       | 3,202  |      |   |        | 6,363  |  |   |        | 8,814  | 
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Income (loss) from operations              |                            |   | 852                |        |                   |   | (98   | )      |      |   | 3,956  |        |  |   | 616    |       
|Interest income                            |                            |   | 256                |        |                   |   | 116   |        |      |   | 882    |        |  |   | 502    |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Income before provision for income taxes   |                            |   | 1,108              |        |                   |   | 18    |        |      |   | 4,838  |        |  |   | 1,118  |       
|Provision for income taxes                 |                            |   | 413                |        |                   |   | 7     |        |      |   | 1,768  |        |  |   | 526    |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Net income                                 |                            | $ | 695                |        |                   | $ | 11    |        |      | $ | 3,070  |        |  | $ | 592    |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Basic earnings per share                   |                            | $ | 0.06               |        |                   | $ | 0.00  |        |      | $ | 0.25   |        |  | $ | 0.05   |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Diluted earnings per share                 |                            | $ | 0.05               |        |                   | $ | 0.00  |        |      | $ | 0.24   |        |  | $ | 0.05   |       
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|Shares used to compute earnings per share: |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|                                           | Basic                      |   |                    | 12,513 |                   |   |       | 12,614 |      |   |        | 12,470 |  |   |        | 12,579 | 
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       
|                                           | Diluted                    |   |                    | 12,743 |                   |   |       | 12,641 |      |   |        | 12,665 |  |   |        | 12,667 | 
|                                           |                            |   |                    |        |                   |   |       |        |      |   |        |        |  |   |        |       

See the accompanying notes to these condensed consolidated financial statements.

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QUALSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 2002 AND 2003
(in thousands)
(UNAUDITED)

|                                                     |                                                                                   |                                              |                                               |        |      |        |        |       |     |       |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------- | ------ | ---- | ------ | ------ | ----- | --- | ----- | -
|                                                     |                                                                                   |                                              |                                               |        | 2002 |        | 2003  
|                                                     |                                                                                   |                                              |                                               |        |      |        |       
|OPERATING ACTIVITIES:                                |                                                                                   |                                              |                                               |        |      |        |        |      
|                                                     | Net income                                                                        |                                              | $                                             | 3,070  |      |        | $      | 592   |    
|                                                     | Adjustments to reconcile net income to net cash provided by operating activities: |                                              |                                               |        |      |        |        |       |    
|                                                     |                                                                                   | Depreciation and amortization                |                                               |        | 205  |        |        |       | 278 |      
|                                                     |                                                                                   | Amortization of deferred compensation        |                                               |        | 322  |        |        |       | 237 |      
|                                                     |                                                                                   | Provision for bad debts and returns          |                                               |        | 70   |        |        |       | (25 | )    
|                                                     |                                                                                   | Accrued interest on directors notes         |                                               |        | (23  | )      |        |       | (15 | )    
|                                                     |                                                                                   | Changes in operating assets and liabilities: |                                               |        |      |        |        |       |     |      
|                                                     |                                                                                   |                                              | Accounts receivable                           |        |      | (753   | )      |       |     | 3,149 |  
|                                                     |                                                                                   |                                              | Inventories                                   |        |      | 498    |        |       |     | 2,540 |  
|                                                     |                                                                                   |                                              | Prepaid expenses and other assets             |        |      | (18    | )      |       |     | (41   | )
|                                                     |                                                                                   |                                              | Prepaid income taxes and income taxes payable |        |      | 895    |        |       |     | (366  | )
|                                                     |                                                                                   |                                              | Accounts payable                              |        |      | (1,298 | )      |       |     | (746  | )
|                                                     |                                                                                   |                                              | Accrued liabilities                           |        |      | (30    | )      |       |     | 268   |  
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Net cash provided by operating activities            |                                                                                   |                                              | 2,938                                         |        |      |        | 5,871  |      
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|INVESTING ACTIVITIES:                                |                                                                                   |                                              |                                               |        |      |        |        |      
|                                                     | Purchases of equipment and leasehold improvements                                 |                                              |                                               | (226   | )    |        |        | (428  | )  
|                                                     | Sales (purchases) of marketable securities, net                                   |                                              |                                               | (5,394 | )    |        |        | 6,382 |    
|                                                     | Purchase of assets of N2Power, Inc.                                               |                                              |                                               |       |      |        |        | (288  | )  
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Net cash provided by (used in) investing activities  |                                                                                   |                                              | (5,620                                        | )      |      |        | 5,666  |      
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|FINANCING ACTIVITIES:                                |                                                                                   |                                              |                                               |        |      |        |        |      
|                                                     | Proceeds from exercise of stock options                                           |                                              |                                               | 26     |      |        |        | 145   |    
|                                                     | Repurchase of common stock                                                        |                                              |                                               |       |      |        |        | (312  | )  
|                                                     | Principal and interest payments on directors notes                               |                                              |                                               | 152    |      |        |        | 166   |    
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Net cash provided by (used in) financing activities  |                                                                                   |                                              | 178                                           |        |      |        | (1     | )    
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                              | (2,504                                        | )      |      |        | 11,536 |      
|Cash and cash equivalents at beginning of period     |                                                                                   |                                              | 20,809                                        |        |      |        | 16,363 |      
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Cash and cash equivalents at end of period           |                                                                                   | $                                            | 18,305                                        |        |      | $      | 27,899 |      
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      
|Supplemental cash flow disclosure:                   |                                                                                   |                                              |                                               |        |      |        |        |      
|                                                     | Income taxes paid                                                                 |                                              | $                                             | 873    |      |        | $      | 340   |    
|                                                     |                                                                                   |                                              |                                               |        |      |        |        |      

See the accompanying notes to these condensed consolidated financial statements.

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QUALSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
NINE MONTHS ENDED MARCH 31, 2003
(in thousands)
(UNAUDITED)

|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   |        |     |  
|-------------------------------------------------------------- | ------------------------------------------ |  | --------------- | - | ------------ | - | -------- | - | ------ |  | ------------- | - | --------- | - | ------ | - | -------- | - | ----- | - |  | - | ---- | - |  | - | ----------- | --- | - | - | ------ | --- |  | - | ------ | --- | -
|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   | ACCUMULATED |     |   |   |        |     |  |   |       
|                                                               |                                            |  | PREFERRED STOCK |   | COMMON STOCK |   |          |   |        |  | NOTES         |   | OTHER     |   |        |   |          |   |       |   | 
|                                                               |                                            |  |                 |   |              |   | DEFERRED |   | FROM   |  | COMPREHENSIVE |   | RETAINED  |   |        |   |         
|                                                               |                                            |  | SHARES          |   | AMOUNT       |   | SHARES   |   | AMOUNT |  | COMPENSATION  |   | DIRECTORS |   | LOSS   |   | EARNINGS |   | TOTAL
|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |      
|Balance at July 1, 2002                                        |                                            |  |                |   |              | $ |         |   |        |  | 12,656        |   |           | $ | 20,751 |   |          | $ | (631  | ) |  | $ | (387 | ) |  | $ | (31         | )   |   | $ | 28,271 |     |  | $ | 47,973 |    
|Amortization of deferred
compensation                          |                                            |  |                |   |              |   |         |   |        |  |              |   |           |   |       |   |          |   | 237   |   |  |   |     |   |  |   |            |     |   |   |       |     |  |   | 237    |    
|Forfeiture of stock options                                    |                                            |  |                |   |              |   |         |   |        |  |              |   |           |   | (177   | ) |          |   | 177   |   |  |   |     |   |  |   |            |     |   |   |       |     |  |   |       |    
|Exercise of stock options                                      |                                            |  |                |   |              |   |         |   |        |  | 52            |   |           |   | 145    |   |          |   |      |   |  |   |     |   |  |   |            |     |   |   |       |     |  |   | 145    |    
|Repurchase of common stock                                     |                                            |  |                 |   |              |   |          |   |        |  | (70           | ) |           |   | (312   | ) |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   | (312   | )  
|Accrued interest on
directors notes                           |                                            |  |                |   |              |   |         |   |        |  |              |   |           |   |       |   |          |   |      |   |  |   | (15  | ) |  |   |            |     |   |   |       |     |  |   | (15    | )  
|Receipt of principal and
interest payments on
directors notes |                                            |  |                |   |              |   |         |   |        |  |              |   |           |   |       |   |          |   |      |   |  |   | 166  |   |  |   |            |     |   |   |       |     |  |   | 166    |    
|Comprehensive income:                                          |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   |        |    
|                                                               | Change in unrealized
losses on investments |  |                 |  |              |   |          |  |        |  |               |  |           |   |        |  |          |   |       |  |  |   |      |  |  |   |             | (93 | ) |   |        |     |  |   |        | (93 | )
|                                                               | Net income                                 |  |                 |  |              |   |          |  |        |  |               |  |           |   |        |  |          |   |       |  |  |   |      |  |  |   |             |    |   |   |        | 592 |  |   |        | 592 |  
|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   |        |    
|Comprehensive income                                           |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   | 499    |    
|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   |        |    
|Balance at March 31, 2003                                      |                                            |  |                |   |              | $ |         |   |        |  | 12,638        |   |           | $ | 20,407 |   |          | $ | (217  | ) |  | $ | (236 | ) |  | $ | (124        | )   |   | $ | 28,863 |     |  | $ | 48,693 |    
|                                                               |                                            |  |                 |   |              |   |          |   |        |  |               |   |           |   |        |   |          |   |       |   |  |   |      |   |  |   |             |     |   |   |        |     |  |   |        |    

See the accompanying notes to these condensed consolidated financial statements.

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QUALSTAR CORPORATION
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(in thousands, except per share amounts)
(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements are
unaudited, except for the balance sheet at June 30, 2002 which is derived from
our audited financial statements, and should be read in conjunction with the
consolidated financial statements and related notes included in Qualstar
Corporations (Qualstar, us, we, or our) Annual Report on Form 10-K
filed with the Securities and Exchange Commission (SEC) on September 30, 2002.
In the opinion of management, these unaudited condensed consolidated financial
statements include all adjustments, consisting primarily of normal recurring
items, which are necessary for the fair presentation of Qualstars consolidated
financial position as of March 31, 2003, consolidated results of operations for
the three months and nine months ended March 31, 2002 and 2003, and
consolidated cash flows for the nine months ended March 31, 2003. Operating
results for the three month and nine month periods ended March 31, 2003 are not
necessarily indicative of results to be expected for a full year.

NOTE 2. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net
income per share for the three months and nine months ended March 31, 2002 and
2003:

|                             |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |        | 
|---------------------------- | ------------------------------------------------------------------------------------------------------- | - | ------------ | ------ | ----------------- | - | ---- | ------ | ---- | - | ---- | ------ |  | - | ---- | ------ | 
|                             |                                                                                                         |   | THREE MONTHS |        | NINE MONTHS ENDED
|                             |                                                                                                         |   | MARCH 31,    |        | MARCH 31,        
|                             |                                                                                                         |   |              |        |                  
|                             |                                                                                                         |   | 2002         |        | 2003              |   | 2002 |        | 2003
|                             |                                                                                                         |   |              |        |                   |   |      |        |     
|Numerator:                   |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       
|                             | Net income                                                                                              |   | $            | 695    |                   |   | $    | 11     |      |   | $    | 3,070  |  |   | $    | 592    | 
|Denominator:                 |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       
|                             | Denominator
for basic net income per share  weighted average shares                                    |   |              | 12,513 |                   |   |      | 12,614 |      |   |      | 12,470 |  |   |      | 12,579 | 
|                             | Dilutive potential common shares from employee stock options
and restricted stock                       |   |              | 230    |                   |   |      | 27     |      |   |      | 195    |  |   |      | 88     | 
|                             |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       
|                             | Denominator
for diluted net income per share  adjusted weighted
average shares and assumed conversions |   |              | 12,743 |                   |   |      | 12,641 |      |   |      | 12,665 |  |   |      | 12,667 | 
|                             |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       
|Basic net income per share   |                                                                                                         | $ | 0.06         |        |                   | $ | 0.00 |        |      | $ | 0.25 |        |  | $ | 0.05 |       
|                             |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       
|Diluted net income per share |                                                                                                         | $ | 0.05         |        |                   | $ | 0.00 |        |      | $ | 0.24 |        |  | $ | 0.05 |       
|                             |                                                                                                         |   |              |        |                   |   |      |        |      |   |      |        |  |   |      |       

Shares issuable under stock options of 68,000 and 467,000 at March 31, 2002 and
2003, respectively, have been excluded from the computation of diluted earnings
per share because the effect would be antidilutive.

NOTE 3. MARKETABLE SECURITIES

Marketable securities consist primarily of high-quality corporate, federal
and state government securities. These securities are classified in one of
three categories: trading, available-for-sale, or held-to-maturity. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held-to-maturity securities are those securities which the
Company has the ability and intent to hold until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for-sale. All of the Companys marketable securities were classified
as available-for-sale at June 30, 2002 and March 31, 2003.

Available-for-sale securities are recorded at market value. Unrealized
holding gains and losses, net of the related income tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of shareholders equity until realized. Dividend and
interest income are recognized when earned. Realized gains and losses for
securities classified as available-for-sale are included in earnings when the
underlying securities are sold and are derived using the specific
identification method for determining the cost of securities sold.

7



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##### Table of Contents



NOTE 4. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Inventory is comprised as follows:

|               |  |               |       |                |  |   |       | 
|-------------- |  | ------------- | ----- | -------------- |  | - | ----- | 
|               |  | JUNE 30, 2002 |       | MARCH 31, 2003
|               |  |               |       |               
|Raw materials  |  | $             | 7,980 |                |  | $ | 6,463 | 
|Finished goods |  |               | 1,672 |                |  |   | 697   | 
|               |  |               |       |                |  |   |       | 
|               |  | $             | 9,652 |                |  | $ | 7,160 | 
|               |  |               |       |                |  |   |       | 

NOTE 5. COMPREHENSIVE INCOME

For the nine months ended March 31, 2002 and 2003, comprehensive income
amounted to approximately $2.8 million and $0.5 million, respectively. The
difference between net income and comprehensive income relates to the changes
in the unrealized losses or gains the Company recorded for its
available-for-sale securities.

NOTE 6. STOCK BASED COMPENSATION

Employee stock options are accounted for under Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, as amended and
interpreted, which requires recognition of expense when the option price is
less than the fair value of the stock at the date of grant. The Company
generally awards options for a fixed number of shares at an option price equal
to the fair value of the stock at the date of grant. The Company has adopted
the disclosure only provisions of the Financial Accounting Standards Boards
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation (SFAS 123).

If the Company recognized employee stock option related compensation
expense in accordance with SFAS 123 and used the minimum value method for
grants prior to the Companys initial public offering and the Black-Scholes
method model afterward for determining the weighted average fair value of
options granted, the Companys net income and earnings per share would have
been reduced to the pro forma amounts indicated below:

|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|---------------------------------------------------------------------- |  | ------------ | ---- | ----------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ---- | -
|                                                                       |  | THREE MONTHS |      | NINE MONTHS ENDED
|                                                                       |  | MARCH 31,    |      | MARCH 31,        
|                                                                       |  |              |      |                  
|                                                                       |  | 2002         |      | 2003              |  | 2002 |       | 2003
|                                                                       |  |              |      |                   |  |      |       |     
|Net income as reported                                                 |  | $            | 695  |                   |  | $    | 11    |      |  | $ | 3,070 |   |  | $ | 592  |  
|Stock-based employee compensation cost included in reported net income |  |              | 150  |                   |  |      | 65    |      |  |   | 322   |   |  |   | 237  |  
|Pro forma stock-based employee compensation cost under SFAS 123        |  |              | (165 | )                 |  |      | (162  | )    |  |   | (495  | ) |  |   | (486 | )
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Pro forma net income (loss)                                            |  | $            | 680  |                   |  | $    | (86   | )    |  | $ | 2,897 |   |  | $ | 343  |  
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Earnings (loss) per share:                                             |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Basic  as reported                                                    |  | $            | 0.06 |                   |  | $    | 0.00  |      |  | $ | 0.25  |   |  | $ | 0.05 |  
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Basic  pro forma                                                      |  | $            | 0.05 |                   |  | $    | (0.01 | )    |  | $ | 0.23  |   |  | $ | 0.03 |  
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Diluted  as reported                                                  |  | $            | 0.05 |                   |  | $    | 0.00  |      |  | $ | 0.24  |   |  | $ | 0.05 |  
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  
|Diluted  pro forma                                                    |  | $            | 0.05 |                   |  | $    | (0.01 | )    |  | $ | 0.23  |   |  | $ | 0.03 |  
|                                                                       |  |              |      |                   |  |      |       |      |  |   |       |   |  |   |      |  

All shares issuable under stock options at
March 31, 2003 have been excluded
from the proforma diluted earnings per share computation for the three month
period ended March 31, 2003 because the effect would be antidilutive.

8



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NOTE 7. BUSINESS ACQUISITIONS

On July 11, 2002, the Company acquired the assets and intellectual
properties of N2Power, Incorporated (N2Power), a privately held company which
designs and produces small and efficient open-frame switching power supplies.
The consideration for this acquisition was $250,000 plus acquisition expenses
of $38,000. The purchase price was primarily allocated to a patent which will
be amortized over 5 years. The accompanying consolidated financial statements
include the operations of N2Power from the date of acquisition.

NOTE 8. STOCK REPURCHASE

On February 12, 2003, the Company announced that the Board of Directors
authorized a stock repurchase program of up to 500,000 shares of the Companys
common stock. The stock repurchase will be funded by available working
capital. There is no time limit for the completion of the stock repurchase
program and it may be discontinued at any time. As of March 31, 2003, the
Company had repurchased 69,667 shares of its common stock at a total cost of
approximately $312,000, or an average price of approximately $4.47 per share.

NOTE 9. LEGAL PROCEEDINGS

On January 10, 2003, Raytheon Company (Raytheon) filed a complaint in
the United States District Court for the Eastern District of Texas alleging
that Qualstar and seven other named defendants infringe a patent owned by
Raytheon entitled Mass Data Storage Library. Raytheon filed an amended
complaint on or about February 6, 2003, which includes an allegation that
Qualstars tape libraries infringe Raytheons patent. The complaint seeks an
injunction against all defendants and an unspecified amount of damages.
Qualstar responded to the complaint on March 7, 2003 and denied Raytheons
allegations of infringement. A scheduling conference is set for May 20, 2003
to determine future scheduling matters and the trial date. Qualstar and its
legal counsel continue to analyze Raytheons patent and available defenses to
the claims of infringement. Based on our analysis, we believe that Raytheons
claims against Qualstar are without merit and we intend to vigorously defend
against this complaint.

9



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##### Table of Contents






ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements inherently
are subject to risks and uncertainties, some of which we cannot predict or
quantify. Our actual results may differ materially from the results projected
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in our Annual Report on Form
10-K for the fiscal year ended June 30, 2002 in ITEM 1 Business, including
the section therein entitled Risk Factors, and in ITEM 7- Managements
Discussion and Analysis of Financial Condition and Results of Operations. You
generally can identify forward-looking statements by the use of forward-looking
terminology such as believes, may, expects, intends, estimates,
anticipates, plans, seeks, or continues, or the negative thereof or
variations thereon or similar terminology. We disclaim any obligation to
update or revise these forward-looking statements to reflect the occurrence of
events or circumstances in the future.

RESULTS OF OPERATIONS

Three months ended March 31, 2003 Compared to three months ended March 31,
2002.

NET REVENUES. Revenues are recognized upon shipment of the product to the
customer, less estimated returns, for which provision is made at the time of
sale.

Net revenues for the three months ended March 31, 2003 were $8.2 million,
compared with net revenues of $8.6 million for the three months ended March 31,
2002, a decrease of $0.4 million. The decrease can be attributed to fewer
libraries sold as well as reduced tape media revenue. Partially
offsetting this
decrease were increases in tape drive and service contract revenue. The
selling prices of our tape libraries have remained relatively stable during the
quarter ended March 31, 2003 compared to the prior year quarter. The selling
prices of tape media have decreased somewhat since the third quarter of fiscal
2002, whereas the selling prices of tape drives have had an overall increase.
The decrease in selling prices of tape media is primarily due to decreases in
our cost to purchase media, which we pass through to our customers. The
increase in selling prices of tape drives is primarily due to the introduction
of new releases of existing tape drive technology, such as SDLT 320, which were
not yet available during the third quarter of fiscal 2002. We do not
anticipate significant changes in the selling prices of our tape libraries
during the fourth quarter of fiscal 2003.

GROSS PROFIT. Gross profit was $3.1 million or 37.9% of net revenues for
the three months ended March 31, 2003 compared to $3.2 million or 37.1% for the
three months ended March 31, 2002, representing a decrease of 2.7%. Our gross
margin is partially a function of the mix of products sold. Generally, larger
tape libraries and newer tape drive technologies have higher gross margins than
do smaller tape libraries and older tape drive technologies. Historically,
tape libraries and drives have higher gross profit margins as a percentage of
sales than do tape media. Furthermore, changes in service revenues, which are
reported net of cost, can impact the Companys overall gross margin. The
increase in our gross profit margin as a percentage of net revenues is
primarily due to product mix.

RESEARCH AND DEVELOPMENT. Research and development expenses consist of
engineering salaries, benefits, purchased parts and supplies used in
development activities. Research and development expenses for the three months
ended March 31, 2003 were $1.1 million or 13.9% of revenues as compared to $0.5
million or 6.2% of revenues for the three months ended March 31, 2002. Our
higher research and development spending reflects our establishment of an
Advanced Development Group in Boulder, Colorado. This Group has been
established to broaden our overall product line with new and innovative tape
libraries. We expect research and development expenses to remain steady or
slightly increase during the next quarter.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
employee salaries and benefits, sales commissions, trade show costs,
advertising, technical support and travel related expenses. Sales and
marketing expenses remained consistent at $0.9 million for the three months
ended March 31, 2003 and 2002. Sales and marketing expenses as a percentage of
net revenues were 11.2% for the three months ended March 31, 2003 as compared
with 10.0% for the three months ended March 31, 2002. The increase in sales
and marketing expenses as a percentage of revenues is primarily due to an
overall decrease in revenue of 4.8%. We anticipate sales and marketing
expenses will remain stable or increase slightly for the fourth quarter of
fiscal year 2003.

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GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
employee salaries and benefits, deferred compensation related to equity
incentives, provisions for doubtful accounts and returns and professional
service fees. General and administrative expenses for the three months ended
March 31, 2003 were $1.1 million, or 14.0% of net revenues, compared with $0.9
million, or 11.0% of net revenues, for the three months ended March 31, 2002.
The increase in general and administrative expenses is due to increased
insurance costs, professional service fees, employee benefit costs, and legal
fees. We anticipate that general and administrative expenses will remain
stable or slightly increase in the fourth quarter of fiscal 2003.

PROVISION FOR INCOME TAXES. The provision for income taxes was $7,000 or
38.9% of pre-tax income, for the three months ended March 31, 2003, compared to
$413,000 or 37.3% of pretax income, for the three months ended March 31, 2002.

Nine months ended March 31, 2003 Compared to nine months ended March 31, 2002.

NET REVENUES. Net revenues for the nine months ended March 31, 2003 were
$25.4 million, compared with net revenues of $27.4 million for the nine months
ended March 31, 2002. The primary reason for this decrease is that we sold
fewer libraries during the current fiscal year compared with the same period
for the prior fiscal year. Sales of tape media, which we purchase from the
manufacturers and resell, also declined. The selling prices of our tape
libraries have remained relatively stable during the nine month period ended
March 31, 2003 compared to the same period a year ago. The selling prices of
tape media have decreased slightly since the end of fiscal 2002 whereas the
selling prices of tape drives have had an overall increase. The decrease in
selling prices of tape media is primarily due to decreases in our cost to
purchase media, which we pass through to our customers. The increase in
selling prices of tape drives is primarily due to the introduction of new
releases of existing tape drive technology, such as SDLT 320, which were not
yet available during the first three quarter of fiscal 2002.

GROSS PROFIT. Gross profit was $9.4 million or 37.1% of net revenues for
the nine months ended March 31, 2003 compared to $10.3 million or 37.6% for the
nine months ended March 31, 2002, representing a decrease of 8.6%. Our gross
margin is partially a function of the mix of products sold. Generally, larger
tape libraries and newer tape drive technologies have higher gross margins than
do smaller tape libraries and older tape drive technologies. Furthermore, tape
libraries and drives have higher gross profit margins as a percentage of sales
than do tape media. The minor decrease in our gross profit margin as a
percentage of net revenues is primarily due to product mix.

RESEARCH AND DEVELOPMENT. Research and development expenses consist of
engineering salaries, benefits, purchased parts and supplies used in
development activities. Research and development expenses for the nine months
ended March 31, 2003 were $2.9 million or 11.4% of revenues as compared to $1.5
million and 5.6% of revenues for the nine months ended March 31, 2002. Our
higher research and development spending reflects our establishment of an
Advanced Development Group in Boulder, Colorado. This Group has been
established to broaden our overall product line with new and innovative tape
libraries.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
employee salaries and benefits, sales commissions, trade show costs,
advertising, technical support and travel related expenses. Sales and
marketing expenses for the nine months ended March 31, 2003 were $2.8 million,
an increase of $0.7 million compared to the nine months ended March 31, 2002.
Sales and marketing expenses as a percentage of net revenues were 11.1% for the
nine months ended March 31, 2003 as compared with 7.9% for the nine months
ended March 31, 2002. The increase in sales and marketing expenses is
attributable primarily to an overall reduction of marketing development funds
and rebates from our key suppliers and an increased level of advertising to
help launch our new RLS product line. Expenditures on salaries, commissions,
and trade shows have remained stable.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
employee salaries and benefits, deferred compensation related to equity
incentives, provisions for doubtful accounts and returns and professional
service fees. General and administrative expenses for the nine months ended
March 31, 2003 were $3.1 million, or 12.1% of net revenues, compared with $2.7
million, or 9.7% of net revenues, for the nine months ended March 31, 2002.
The increase in general and administrative expenses is due to increased
insurance costs, professional service fees, employee benefit costs and legal
expenses.

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PROVISION FOR INCOME TAXES. The provision for income taxes was $0.5
million or 47.0% of pre-tax income, for the nine months ended March 31, 2003,
compared to $1.8 million, or 36.5% of pre-tax income, for the nine months ended
March 31, 2002. The increase in the provision for income taxes as a percentage
of pre-tax income is primarily due to an additional provision in the current
year, net of certain items, related to prior fiscal years. This amount was not
material to those years and had a greater impact on the current years
effective tax rate due to the low pre-tax book income amount.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have funded our capital requirements with cash flows from
operations. Cash flows provided by operating activities were $5.9 million and
$2.9 million for the first nine months of fiscal 2003 and 2002, respectively.
For the nine months ended March 31, 2003, operating cash was primarily provided
by collection of accounts receivables and reductions in inventory levels. For
the nine months ended March 31, 2002, operating cash was primarily provided by
net income.

Cash provided by investing activities was $5.7 million during the first
nine months of fiscal year 2003. The primary reason for the increase in cash
from investing activities was the sale of marketable securities, offset
partially by purchases of fixed assets and the assets of N2Power, Inc. During
the first nine months of fiscal year 2002, the Company used $5.6 million of
cash in investing activities. This use was attributable to the purchase of
marketable securities and fixed assets.

There was no significant cash used or provided by financing activities
during the nine month periods ending March 31, 2003, and March 31, 2002,
respectively.

On February 12, 2003, we announced that our Board of Directors authorized
a program to repurchase up to 500,000 shares of our common stock in open market
transactions, block purchases or private transactions. The stock repurchase
will be funded by available working capital and is not expected to negatively
impact our liquidity. There is no time limit for the completion of the stock
repurchase program and it may be discontinued at any time. As of March 31,
2003, the Company had repurchased 69,667 of its common stock through this
buyback program for a total expenditure of approximately $312,000.

We believe our existing cash and cash equivalents, plus anticipated cash
flows from operating activities, will be sufficient to fund our working capital
and capital expenditure needs for at least the next 12 months. We may utilize
cash to invest in businesses, products or technologies we believe are
strategic. We regularly evaluate other companies and technologies for possible
investment by us. In addition, we have made and expect to make investments in
companies with whom we have identified potential synergies. However, we have
no present commitments or agreements with respect to any material acquisition
of other businesses or technologies.




ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Since all sales are currently made in U.S. dollars, a strengthening of the US
dollar could make our products less competitive in foreign markets. Our
interest income is sensitive to changes in the general level of US interest
rates, particularly since the majority of our investments are in short-term
instruments. We have no outstanding debt nor do we utilize derivative
financial instruments. Therefore, no quantitative tabular disclosures are
required.




ITEM 4. Controls and Procedures

The Companys principal executive officer and its principal financial
officer have concluded that the Companys disclosure controls and procedures
are adequate and effective for the purposes set forth in Exchange Act Rule
13a-14(c). This conclusion was based on an evaluation of the Companys
disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c))
as of a date within 90 days prior to the filing of this Quarterly Report on
Form 10-Q.

There were no significant changes in the Companys internal controls or in
other factors since the date of this evaluation that could significantly affect
the Companys internal controls.

12



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##### Table of Contents






PART II  OTHER INFORMATION




ITEM 1. Legal Proceedings

On January 10, 2003, Raytheon Company (Raytheon) filed a complaint in
the United States District Court for the Eastern District of Texas alleging
that Qualstar and seven other named defendants infringe a patent owned by
Raytheon entitled Mass Data Storage Library. Raytheon filed an amended
complaint on or about February 6, 2003, which includes an allegation that
Qualstars tape libraries infringe Raytheons patent. The complaint seeks an
injunction against all defendants and an unspecified amount of damages.
Qualstar responded to the complaint on March 7, 2003 and denied Raytheons
allegations of infringement. A scheduling conference is set for May 20, 2003
to determine future scheduling matters and the trial date. Qualstar and its
legal counsel continue to analyze Raytheons patent and available defenses to
the claims of infringement. Based on our analysis, we believe that Raytheons
claims against Qualstar are without merit and we intend to vigorously defend
against this complaint.




ITEM 4. Submission of Matters to a Vote of Security Holders

The following matters were voted upon at the Annual Meeting of
Stockholders of the Company held on February 6, 2003:



| | 1. |  | The following persons were elected as directors to serve a one year
term expiring at the Annual Meeting of Stockholders to be held in 2004
or until their successors are elected and qualified:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  |                      |           |                    |  |  |        | 
|------------------ |  | -------------------- | --------- | ------------------ |  |  | ------ | 
|                   |  | Number of Votes Cast
|                   |  |                     
|Name               |  | For                  |           | Authority Withheld
|                   |  |                      |           |                   
|                   |  |                      |          |                    |  |  |       | 
|William J. Gervais |  |                      | 9,129,123 |                    |  |  | 67,600 | 
|Richard A. Nelson  |  |                      | 9,129,123 |                    |  |  | 67,600 | 
|Bruce E. Gladstone |  |                      | 9,129,123 |                    |  |  | 67,600 | 
|Robert E. Rich     |  |                      | 9,129,123 |                    |  |  | 67,600 | 
|Trude C. Taylor    |  |                      | 9,129,123 |                    |  |  | 67,600 | 
|Robert T. Webber   |  |                      | 9,129,123 |                    |  |  | 67,600 | 




ITEM 6. Exhibits and Reports on Form 8-K.



| | (a) |  | Exhibits:
| | --- |  | ---------



| | 99.1 |  | Certification by Principal Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ---- |  | -------------------------------------------------------------------------------------------------------
|
| | 99.2 |  | Certification by Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.



| | (b) |  | No Reports on Form 8-K were filed during the fiscal quarter ended
March 31, 2003.
| | --- |  | ---------------------------------------------------------------------------------

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



|                      | QUALSTAR CORPORATION                                                          
|--------------------- | ------------------------------------------------------------------------------
|                     
|Dated:   May 14, 2003 | /s/   WILLIAM J. GERVAISWilliam J. Gervais, President,
Chief Executive Officer



|Dated:   May 14, 2003 | /s/   FREDERIC T. BOYERFrederic T. Boyer
Principal Financial Officer
|--------------------- | --------------------------------------------------------------------

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Certification of Principal Executive Officer

I, William J. Gervais, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Qualstar
Corporation;                                                                                                                                                                                                                                                   
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the
registrant and we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | C) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 14, 2003



| | /s/   WILLIAM J. GERVAISWilliam J. Gervais
Principal Executive Officer
| | ----------------------------------------------------------------------

15



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##### Table of Contents






Certification of Principal Financial Officer

I, Frederic T. Boyer, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Qualstar
Corporation;                                                                                                                                                                                                                                                   
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;                   
|
| | 4. |  | The registrants other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Rules 13a-14 and 15d-14 of the Exchange Act) for the
registrant and we have:                                                                                               



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;                                                                                                                        



| | 5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors:
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



| | 6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 14, 2003



| | /s/   FREDERIC T. BOYERFrederic T. Boyer
Principal Financial Officer
| | --------------------------------------------------------------------

16



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##### Table of Contents






EXHIBIT INDEX

|            |  |                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                            
|            |  |                                                                                                        
|99.1        |  | Certification by Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|99.2        |  | Certification by Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.