BKF Capital Group, Inc. (OTCQB—BKFG) today released an open letter to the Board of Directors of Qualstar Corporation (NASDAQ—QBAK) in advance of a Special Meeting of Shareholders on June 20, 2012 to remove and replace the Qualstar Board. In the letter, BKF accuses the Board of once again distorting the truth about BKF and its principal, Steven Bronson, in an attempt to distract shareholders from the real issues of continually dismal performance, the problems of a business segment in decline that the Board has failed effectively to address and a purported turnaround strategy fraught with acquisition risk.
The full text of the letter follows.
June 15, 2012
To the Directors of Qualstar Corporation:“There you go again.” Yesterday you issued a press release with the eye-catching but utterly misleading title, “Qualstar Sets the Record Straight Regarding Steven Bronson’s Experience and BKF’s True Interests.” It is clear to us that, once again, your distortions and half-truths are simply an attempt to distract the attention of Qualstar shareholders from the real issues and problems that have plagued the Company on your watch. We address each of your errant claims below, but first focus on the real issues and problems from which the Board is apparently attempting to deflect shareholder attention. Setting the Real Record Straight BKF has called for the Special Meeting of Shareholders on Wednesday, June 20, 2012 to remove and replace the Qualstar Board, a program endorsed by Institutional Shareholder Services (ISS), the premier proxy advisory firm. BKF is urging Qualstar shareholders to promptly return their GOLD proxy cards to vote FOR the proposals of BKF to remove and replace the Board —
- Because, under the watch of the current Board, the Company has extended a continuous streak of unprofitability that began in 2004;
- Because, under the watch of the current Board, the Company’s net revenues have continued to decline, so that they were 42% less in 2011 than they were in 2004;
- Because, under the watch of the current Board, the Company’s stock price has continued to decline, so that is it over 60% lower than it was 10 years ago on a dividend adjusted basis;
- Because, under the watch of the current Board, the Company’s Tape Library business continues to lose money, dragging down the fortunes of the Company;
- Because the Board is touting an acquisition strategy when it has been incapable of profitably running its primary legacy business;
- Because pursuit of acquisitions as a cover for failed management of existing businesses is a tried and true prescription for financial disaster;
- Because the Board is refusing to make a distribution to its shareholders of excess cash, instead proposing to risk that cash on an unspecified and unproven program of acquisitions as part of a dangerous turnaround strategy;
- Because, with the departure of Mr. Gervais today, the current Board owns less than 1.3% of the outstanding shares;
- Because, at the recent annual meeting of shareholders, 3 of 5 directors failed to get a majority of the votes and a substantial number of shareholders withheld their votes from the other two;
- Because the current Board has just hired as the new CEO one of its own members with no experience as the CEO of a public company, and has guaranteed him payments in the first year of $455,000 not tied to performance; and
- Because for all of these reasons, we do not trust you when you say that at long last you are going to turn the fortunes of our Company around .