QSGI Reports 54% Increase in Gross Profit on 27% Year-over-Year Increase in First Quarter Revenue; 107% Increase in Data Security & Compliance Division Revenue

Business Wire, May 4, 2006

HIGHTSTOWN, N.J. -- QSGI INC. (NYSE Arca: QGI) today reported financial results for the first quarter ended March 31, 2006.

First Quarter 2006 Financial Highlights (year-over-year):

Total revenue increased 26.9% to $9.3 million

--Data Security & Compliance division revenue increased 107.3% to $4.8 million

--Data Center Maintenance division revenue increased 35.1% to $1.0 million

Gross margin expanded 410 basis points to 23.3%

--Data Security & Compliance gross margin more than doubled to 17.3%

--Data Center Maintenance gross margin increased 210 basis points to 67.1%

Net loss was $497,000 or $0.02 per share, which included a pre-tax charge of $448,000 to increase the allowance for doubtful accounts from a single customer against whom QSGI is pursuing recourse. This had the effect of increasing net loss by $0.01 per share

Marc Sherman, chairman and chief executive officer of QSGI, commented, "Data Security had a very strong quarter. Revenues increased 107 percent and gross margins more than doubled. This quarter's strong performance and margin improvement reflects our strategy to increase the mix of corporate customers utilizing our full suite of data security services, versus our traditional wholesale remarketing business. Within our Data Center Maintenance division, gross margins surpassed 67 percent, due to resources we added that are now generating economies of scale as we add new mainframe services contracts within close geographic proximity. Although our Data Center Hardware division contracted slightly, reflecting the uneven nature of the sales cycle, we are confident that on an annualized basis, the division will maintain its historical rate of growth and profitability. Overall, we added 8 new Data Security & Compliance customers and 7 new Data Center Maintenance customers, which will continue to ramp-up and further expand our margins throughout fiscal 2006."

New client and channel partners signed during the quarter:

--8 new Data Security & Compliance clients

--7 additional contracts from new or existing Data Center Maintenance clients which account for incremental annual revenue of more than $730,000

Total revenue for the first quarter of 2006 increased to $9.3 million, compared to $7.3 million for the same period in 2005, reflecting a 107.3% increase in revenue from the company's Data Security and Compliance division, and a 35.1% increase in revenue from the company's Data Center Maintenance division, partially offset by a 13.2% decline in the company's Data Center Hardware division.

Net loss for the first quarter of 2006 was $497,000 or $0.02 per share, compared to net loss of $606,000 or $0.02 per share, for the same period in 2005. Operating loss for the first quarter of fiscal 2006 includes a pre-tax charge of $448,000 to increase the allowance for doubtful accounts, as the company is reserving for a single customer's receivables that may not be collectible, and against whom QSGI is pursuing recourse. This had the effect of increasing net loss by $0.01 per share.

Conference Call

The company will host a conference call on Thursday, May 4th, at 8:30 a.m. Eastern time, to discuss its results for the 2006 fiscal first quarter. To participate in the call, please dial (706) 679-7685. A live Webcast of the call will also be available on the company's Web site, www.QSGI.com. To listen to the live call online, please visit the site at least 10 minutes early to register, download and install any necessary audio software. The Webcast will be archived on the site, and a telephone replay of the call will be available for seven days beginning at 11:30 a.m. Eastern time, May 4th, at 706-645-9291, using conference ID #8348962.

About QSGI

QSGI is the only data security and regulatory compliance provider offering a full suite of end-of-life and other life-cycle services for a Fortune 1000 corporation's and government client's entire information technology (IT) platform. QSGI offsets its clients' expenses through its value-added remarketing program. Prior to resale, the company utilizes its proprietary Department of Defense (DOD) level certified data sweep to eliminate otherwise recoverable data. QSGI reduces its clients' potential liability by ensuring regulatory and environmental compliance for IT products. QSGI also maintains and provides services on enterprise-class hardware, including mainframes, midrange servers, tape storage products and disk storage products. Given the sensitive nature of the company's client relationships, it does not provide the names of its clients.

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.