NOTE

– SEGMENT INFORMATION

In its operation of the business, management reviews certain financial information, including segmented internal profit and loss statements prepared on a basis consistent with U.S. GAAP. Our

two

segments are Power Supplies and Data Storage. The

two

segments discussed in this analysis are presented in the way we internally manage and monitor performance for the

three

and

six

months ended

June 30, 2017

and

2016.

Allocations for internal resources were made to the business segments for the

three

and

six

months ended

June 30, 2017

and

2016.

The power supplies segment tracks certain assets separately, and all others are recorded in the storage segment for internal reporting presentations. The types of products and services provided by each segment are summarized below:

Power Supplies

— The Company designs and markets high-efficiency switching power supplies. We utilize contract manufacturers in Asia to produce the power supply products. These power supplies are used to convert AC line voltage to DC voltages, or DC voltages to other DC voltages for use in a wide variety of electronic equipment such as communications equipment, industrial machine tools, wireless systems, as well as medical and gaming devices. We sell our products globally through authorized resellers and directly to original equipment manufacturers (“OEMs”).

Storage

— The data storage industry is experiencing a tremendous increase in newly generated digital data due to Rich Media Content, Internet of Things, Data Mining and the Cloud. Tape based storage solution providers enable businesses to manage the massive growth of digital data assets in a cost-effective manner. For over

years, Qualstar engineered innovations and customer-oriented focus has led to products that solved our customer’s needs for simplicity, scalability, reliability and affordable solutions. Our tape based data storage product lines address long-term archive, backup and recovery of electronic data. These products consist of networked libraries that store and move high density tape cartridges and high speed tape drives that stream data to and from the tape cartridges. These optimized solutions allow the video centric markets such as media and entertainment, oil and gas, surveillance, digital security and medical imaging to achieve targeted data workflows.

Segment revenue, income (loss) before taxes and total assets were as follows (in thousands):

	Three Months Ended June 30 ,				Six Months Ended June 30 ,
	2017		2016		2017		2016
Revenue
Power Supplies	$	1,422	$	1,255	$	3,113	$	2,604
Storage:
Product		446		653		867		981
Service		399		462		726		935
Total storage	$	845	$	1,115	$	1,593	$	1,916
Revenue	$	2,267	$	2,370	$	4,706	$	4,520

	Three Months Ended June 30 ,					Six Months Ended June 30 ,
	2017		2016			2017		2016
Income (loss) before Taxes
Power Supplies	$	13	$	(333	)	$	40	$	(458	)
Storage		46		(3	)		77		(292	)
Income (loss) before taxes	$	59	$	(336	)	$	117	$	(750	)

	June 30, 2017		December 31 , 2016
Total Assets	(unaudited)
Cash and cash equivalents	$	4,457	$	3,691
Restricted cash		100		100
Other assets:
Power Supplies
Accounts receivable, net		875		1,158
Inventories, net		433		444
Property and equipment, net		32		35
Other assets		41		39
		1,381		1,676
Storage
Accounts receivable, net		495		425
Inventories, net		677		916
Property and equipment, net		168		251
Other assets		129		204
		1,469		1,796
Total Assets	$	7,407	$	7,263