QSGI Achieves Positive EBITDA for the Fourth Quarter of 2008

HIGHTSTOWN, N.J. and PALM BEACH, Fla., April 1 -- QSGI Inc. (BULLETIN BOARD: QSGI) , the most comprehensive provider of information technology services to help corporations better manage IT assets, data center maintenance expenses, and ensure best practices for data security and regulatory compliance, today reported financial results for the three months ended December 31, 2008.

Marc Sherman, Chairman and Chief Executive Officer of QSGI, commented, "Despite a challenging economic environment, we have been successful in executing company-building strategies while streamlining our operations. As a result, I am pleased to report we achieved positive earnings before interest, tax, depreciation and amortization (EBITDA) for the fourth quarter of 2008. At the same time, the difficult economic environment is driving demand for more affordable refurbished IT equipment. To address these changes in the marketplace, we implemented several initiatives that are working together to expand remarketing opportunities for refurbished computers through our Data Security & Compliance division . First, we obtained certification as a Microsoft(R) Authorized Refurbisher (MAR) of computer equipment in October 2008. As a result of this certification, QSGI is authorized to install Windows(R) XP Professional and Windows(R) XP Home Edition software on refurbished PCs to be resold with fully loaded operating systems. Second, we established a relationship with a leading on-line and catalog IT retailer for remarketing of refurbished computer equipment under the Microsoft MAR program. This relationship is off to a strong start, and we are focused on expanding this new sales channel in the coming months."

"Turning to the Data Center Maintenance division, we did experience some challenges in this division in the fourth quarter, resulting from budgetary constraints among some of our existing customers and increased pricing pressure. Offsetting this weakness, we have been actively pursuing new business in this division and believe that our value proposition and breadth of capabilities are appealing to companies seeking to save money in the current economic environment. Within our Data Center Hardware division, which supports the Data Center Maintenance division, we opened additional sourcing channels for computer parts and equipment. We had previously restructured operations in this division to eliminate inventory risk by serving as a broker for computer parts where we purchase and simultaneously sell enterprise class hardware directly from the OEM to the customer without holding parts in inventory. This strategy has enabled us to free up capital and direct resources to other key areas of the business."

"As part of a strategic decision to streamline the QSGI organization for greater efficiency, we have appointed Hank Laws to the position of Executive Vice President, Business Development, to oversee the Data Center Maintenance and Data Center Hardware divisions. Hank brings 20 years of technology sales and business development experience to his new role and is a strong addition to the team. Starting in the first quarter of 2009, QSGI will report results of operations for the Data Center Maintenance and Hardware divisions as a single business segment. The alignment of these businesses enables us to offer customers a more integrated solution at favorable price points. We are also working to closely integrate CCSI, which we acquired in July 2008. Through this acquisition, we have brought more key capabilities in-house, and are now able to provide our existing clients a broader offering including a Network Operating Center (NOC) and additional infrastructure support services."

Mr. Sherman concluded, "We are pleased to have achieved positive EBITDA on a company-wide basis during the fourth quarter, although the first quarter of 2009 has proven very challenging. As a result of increased sales through one of our channel partners, we faced customer concentration issues with our lender that limited our ability to remarket third-party equipment. Our lender has granted us a forbearance period until May 31, 2009, in addition to increasing our lending by approximately $1 million, and raising our concentration cap. This should allow us to resume growth and positive cash flow in future quarters and work us back into compliance with our lender. In addition, we have reduced over $2.5 million of operating expenses during the first quarter alone. This corporate restructuring and overhead reduction plan has had no effect on our ability to service clients and refurbish products. We feel we have taken the right steps to prepare QSGI for any market condition, and strongly believe these measures will prove out in future quarters."

Total revenue for the fourth quarter of 2008 increased 19% to $11.2 million, as compared with $9.4 million for the same period in 2007. The increase in revenue reflects an increase in services revenue to $5.6 million from $1.9 million for the same period last year, partially offset by a decline in product revenue to $5.6 million from $7.5 million for the same period last year. The increase in services revenue was primarily due to the acquisition of CCSI in July 2008. Gross profit for the company was $3.2 million, compared to gross profit of $1.9 million in the fourth quarter of 2007. The increase in gross profit reflects the acquisition of CCSI. Selling, general and administrative expenses were $2.7 million versus $3.0 million for the same period last year reflecting additional expense reductions. Net loss available to common stockholders for the fourth quarter of 2008 was $549,223 or $0.02 per share, compared to a net loss of $9.0 million or $0.29 per share, for the same period in 2007. Net loss for the fourth quarter of 2007 included a $7.2 million charge for goodwill and asset impairment as the company took a total write down all of its goodwill and intangible assets related to the Data Center Hardware division.

About QSGI

QSGI provides a full suite of information technology services to help corporations and governmental agencies better reduce data center maintenance expenses, manage hardware assets, build best practices for data security and assure regulatory compliance. With a focus on the entire range of IT platforms - from mainframes, midrange servers and PC, to network infrastructure and enterprise storage hardware, the services offered by QSGI are specifically designed to reduce total cost of ownership for IT assets and maximize the clients' return on their IT investment. For enterprise class hardware in the data center, QSGI offers hardware maintenance services, hardware environment planning and consultation, refurbished whole systems, parts, features, upgrades and add-ons. Additionally, for desktop IT assets, servers and SAN products, QSGI offers a range of end-of-life services that include: automated asset auditing, Department of Defense (DOD) level data destruction, documentation for regulatory compliance, hardware refurbishment with worldwide remarketing or proper IT asset recycling. Additionally, through its acquisition of Contemporary Computer Services, Inc. (CCSI), an enterprise class IT services provider with an extensive list of corporate, educational, and government customers, QSGI also performs network design, implementation, and monthly maintenance services on corporations' networking infrastructure as well as 24/7 IT monitoring and diagnostics through its North American Network Operating Center (NOC).

Statements about QSGI's future expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are 'forward-looking statements' within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Litigation Reform Act of 1995. QSGI intends that such forward-looking statements involve risks and uncertainties and are subject to change at any time, and QSGI's actual results could differ materially from expected results. QSGI undertakes no obligation to update forward-looking statements to reflect subsequently occurring events or circumstances.

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                         CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                                          December 31,
                                                       2008          2007
                               Assets
  Current Assets
    Cash and cash equivalents                        $274,150      $127,723
    Accounts receivable, net of reserve of
     $1,075,471 and $955,599 in 2008 and 2007,
     respectively                                   4,689,376     3,853,362
    Inventories                                     5,144,010     6,578,031
    Prepaid expenses and other assets                 242,659       163,553
      Total Current Assets                         10,350,195    10,722,669

  Property And Equipment, Net                         727,454       286,766

  Goodwill                                          7,934,627     1,489,621

  Intangibles, Net                                  6,017,968       470,348

  Other Assets                                        285,198       448,066

      Total Assets                                $25,315,442   $13,417,470


           Liabilities And Stockholders' Equity (Deficit)

                                                  December 31,  December 31,
                                                       2008          2007

  Current Liabilities
    Revolving line of credit                       $5,351,130    $3,754,061
    Accounts payable                                4,128,170     1,109,940
    Accrued expenses                                1,048,652       654,461
    Accrued payroll                                   164,311        88,818
    Deferred revenue                                  385,805       439,865
    Other current liabilities                         288,360       311,610
       Total Current Liabilities                   11,366,428     6,358,755

  Long-Term Deferred Revenue                           19,000       142,772

  Notes Payable - Principal Stockholder            10,000,000             -

  Deferred Income Taxes                                27,300        27,300

       Total Liabilities                           21,412,728     6,528,827

  Redeemable Convertible                            4,257,910     4,238,685
  Preferred Stock Commitments And Contingencies
   (Notes 2, 8 And 14)

  Stockholders' Equity (Deficit)
    Preferred shares: authorized 5,000,000 in
     2008 and 2007, $0.01 par value, none issued            -             -
    Common shares: authorized 95,000,000 in
     2008 and 2007, $0.01 par value; 48,547,716
     shares in issued and outstanding in 2008, of
     which 10,000,000 shares were contingent
     acquisition shares held escrow, and
     31,172,716 shares issued and outstanding
     in 2007                                          385,477       311,727
   Additional paid-in capital                      16,723,724    14,134,298
   Accumulated deficit                            (17,464,397)  (11,796,067)
       Total Stockholders' Equity (Deficit)          (355,196)    2,649,958

  Total Liabilities and Stockholders'
   Equity (Deficit)                               $25,315,442   $13,417,470



                     CONSOLIDATED STATEMENTS OF OPERATIONS
             For The Twelve Months Ended December 31, 2008 and 2007
                                   (Unaudited)

                                                       For The Years
                                                     Ended December 31,
                                                    2008           2007

  Product Revenue                              $19,768,862    $30,126,257
  Service Revenue                               14,382,038      7,094,853
       Total Revenue                            34,150,900     37,221,110

  Cost Of Products Sold                         19,079,155     25,525,836
  Cost Of Services Sold                          7,591,768      2,516,833
       Cost Of Sales                            26,670,923     28,042,669

  Gross Profit                                   7,479,977      9,178,441

  Selling, General And Administrative Expenses  10,983,302      9,905,064

  Goodwill And Asset Impairment                          -      7,206,698

  Depreciation And Amortization                    727,581        702,310

  Interest Expense, Net of interest income       1,432,065        396,417

  Loss Before Provision For Income Taxes        (5,662,971)    (9,032,048)

  Provision For Income Taxes                         5,359        243,804

  Net Loss                                      (5,668,330)    (9,275,852)

  Accretion To Redemption Value Of Preferred
   Stock                                            19,225         18,108

  Preferred Stock Dividend                         258,708        258,000

  Net Loss Available To Common Stockholders    $(5,946,263)   $(9,551,960)

  Net Loss Per Common Share - Basic and Diluted     $(0.17)        $(0.31)

  Weighted Average Number Of Common Shares
   Outstanding - Basic and Diluted              34,340,066     31,172,716


                  CONSOLIDATED STATEMENTS OF CASH FLOWS
         For The Twelve Months Ended December 31, 2008 and 2007
                               (Unaudited)

                                                     For The Years
                                                   Ended December 31,
                                                  2008           2007
  Cash Flows From Operating Activities
    Net loss                                 $(5,668,330)   $(9,275,852)
    Adjustments to reconcile net loss
     to net cash provided by (used in)
     operating activities
       Goodwill and asset impairment                   -      7,206,698
       Depreciation and amortization             727,581        702,130
       Stock option compensation expense         149,481         19,430
       Amortization of Original Issue
        Discount                                 258,083              -
       Deferred income taxes                     (56,247)       174,336
       Allowance for doubtful accounts           418,885        713,500
       Inventory allowance                       848,000        176,000
       Changes in assets and liabilities;
        net of acquisition
       Accounts receivable                      (321,878)     2,977,775
       Inventories                             1,075,146     (1,771,321)
       Prepaid expenses and other current
        assets                                  (100,912)        23,389
       Other assets                              435,622        (50,417)
       Accounts payable, accrued expenses
        and other liabilities                    660,000       (660,840)
  Net Cash Provided By (Used In)
   Operating Activities                       (1,574,569)       234,828

  Cash Flows From Investing Activities
    Advances for notes receivable                      -        (96,250)
    Collections of notes receivable                    -         53,200
    Cost of Acquisition                         (192,563)             -
    Cash from business acquired                  255,714              -
    Purchases of property and equipment         (107,701)      (211,713)
    Proceeds from sale of equipment                    -         62,301
  Net Cash Used In Investing Activities          (44,550)      (192,462)

  Cash Flows From Financing Activities
    Net amounts paid under previous
     revolving line of credit                 (3,776,929)             -
    Payments for financing costs                 (25,614)      (127,827)
    Preferred stock dividends                   (258,708)      (258,000)
    Net amounts borrowed under current
     revolving line of credit                  5,826,797       (161,764)
  Net Cash Provided By (Used In)
   Financing Activities                        1,765,546       (547,591)

  Net Increase (Decrease) In Cash
   And Cash Equivalents                          146,427       (505,225)

  Cash And Cash Equivalents -
   Beginning Of Year                             127,723        632,948

  Cash And Cash Equivalents - End Of Year       $274,150       $127,723