PR Newswire | Aug 12, 2021 09:15PM EDT

Ended June 30, 2021

08/12 20:15 CDT

Costar Technologies, Inc. Announces Financial Results For the Second Quarter Ended June 30, 2021($ in thousands except per share amounts) COPPELL, Texas, Aug. 12, 2021

COPPELL, Texas, Aug. 12, 2021 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the second quarter ended June 30, 2021.

Financial Results for the Quarter Ended June 30, 2021

* Revenues of $14,717, a 0.5% increase compared to the second quarter of 2020. * Operating expenses, excluding second quarter 2020 restructuring costs of $635, were down 13.3% to $4,615, compared to $5,321 in the second quarter of 2020. * GAAP net income of $4,862, or $2.94 per diluted share, compared to GAAP net loss of $498, or ($0.31) per diluted share, in the second quarter of 2020. * Adjusted earnings of $371, or $0.22 per diluted share, compared to $508, or $0.32 per diluted share, for the quarter ended June 30, 2020. Adjusted earnings, a non-GAAP measure, is defined below. * Adjusted EBITDA of $783, compared to $650 for the quarter ended June 30, 2020. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company's Interim Chief Executive Officer stated, "The second quarter of 2021 presented a recovering but difficult global business environment. Our revenues rebounded from the first quarter of 2021 and the continued reduction in our operating expenses drove improved profitability. We launched our NDAA compliant cameras with enhanced artificial intelligence and pedestrian detection, expanding our target market and meeting customer needs. The Costar team has continued to show great resilience in a challenging situation. The strength of the team and the progress of our business transformation confirms the direction for the years ahead."

Sarah Ryder, the Company's Chief Financial Officer went on to say, "Our second quarter revenues were consistent with the prior year despite increases in sales quotation activity and order volumes. The global chip shortage and shipping and logistics issues experienced in the second quarter caused delays, pushing several orders to the third and fourth quarters of 2021. We enter the third quarter with a strong sales backlog as we continue to manage supply chain and logistics challenges. Our overall debt position decreased from $19,600 to $13,300 due to improved cash management and full forgiveness of our Payroll Protection Program loan in June 2021. In addition the Company is eligible to receive an Employee Retention Credit for the first three quarters of 2021. This credit results in a significant decrease in our payroll tax obligation, estimated to be approximately $2,550 over the three quarters."

The Company's independent auditors completed their analysis of the Company's financial condition. The Independent Auditor's Report, including financial statements and applicable footnote disclosures, is available on our website at www.costartechnologies.com.

Non-GAAP Financial Measures

The Company defines adjusted earnings, a non-GAAP measure, as net income (loss) excluding stock-based compensation, amortization of acquisition-related intangible assets, restructuring costs, PPP loan forgiveness and accrual of Employee Retention Credit. The Company defines adjusted EBITDA, a non-GAAP measure, as earnings before interest, taxes, depreciation, amortization, stock-based compensation, restructuring costs, PPP loan forgiveness and accrual of Employee Retention Credit. The following tables reconcile the non-GAAP financial measures disclosed in this release to GAAP net income (loss):

Quarter Quarter Six Months Six Months Ended Ended Ended Ended 6/30/21 6/30/20 6/30/21 6/30/20

Adjusted Earnings 371 508 (110) 664

Less:

Stock-Based Compensation (31) (53) (35) (85)

Intangible Amortization (314) (318) (628) (635)

Restructuring Costs (635) (635)

PPP Loan Forgiveness 3,060 3,060

Accrual of Employee Retention Credit 1,776 1,776

Net Income (Loss) 4,862 (498) 4,063 (691)

Quarter Quarter Six Months Six Months Ended Ended Ended Ended 6/30/21 6/30/20 6/30/21 6/30/20

Adjusted EBITDA 783 650 665 1,150

Less:

Interest (255) (207) (500) (498)

Income Taxes (Benefit) (57) 178 (67) 243

Depreciation (100) (113) (208) (231)

Intangible Amortization (314) (318) (628) (635)

Stock-Based Compensation (31) (53) (35) (85)

Restructuring Costs (635) (635)

PPP Loan Forgiveness 3,060 3,060

Accrual of Employee Retention Credit 1,776 1,776

Net Income (Loss) 4,862 (498) 4,063 (691)

These reconciliations of GAAP to non-GAAP measures should be considered together with the Company's financial statements. These non-GAAP measures are not meant as a substitute for GAAP but are included solely for informational and comparative purposes. The Company's management believes that this information can assist investors in evaluating the Company's operational trends, financial performance, and cash generating capacity. Management believes these non-GAAP measures allow investors to evaluate the Company's financial performance using some of the same measures as management. However, the non-GAAP financial measures should not be regarded as a replacement for (or superior to) corresponding, similarly captioned, GAAP measures.

About Costar Technologies, Inc.

Costar Technologies, Inc. develops, designs, manufactures, and distributes a range of security solution products including surveillance cameras, lenses, digital video recorders and high-speed domes. The Company also develops, designs, and distributes industrial vision products to observe repetitive production and assembly lines, thereby increasing efficiency by detecting faults in the production process. Headquartered in Coppell, Texas, the Company's shares currently trade on the OTC Markets Group under the ticker symbol "CSTI". Costar was ranked as the 40th largest company in a&s magazine's Security 50 for 2020. Security 50 is an annual ranking by the magazine of the world's largest security manufacturers in the areas of video surveillance, access control and intruder alarms, based on sales revenue.

Cautionary Statement Regarding Forward Looking Statements

This press release contains forward-looking statements, including statements regarding the Company's ability to grow revenue and earnings, that are subject to substantial risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, including but not limited to risks related to the ability to diversify business across vertical markets, secure new customer wins, and launch new products. You can often identify forward-looking statements by words such as "believe," "may," "estimate," "continue," "anticipate," "intend," "plan," "expect," "predict," "potential," or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations, but they involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of the risks and uncertainties.

You should not place undue reliance on any forward-looking statements. The Company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking information, except to the extent required by applicable laws.

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS SHOWN IN THOUSANDS)

June 30 December 31, 2021 2020

(Reviewed) (Audited)

ASSETS

Current assets

Cash and cash equivalents $ 2 $ 480

Accounts receivable, less allowance for doubtfulaccounts

of $225 and $175, respectively 7,677 8,579

Inventories 12,762 14,225

Prepaid expenses and other current assets 3,952 2,170

Total current assets 24,393 25,454

Non-current assets

Property and equipment, net 325 533

Deferred financing costs, net 20

Intangible assets, net 5,783 6,411

Goodwill 5,574 5,574

Right of use assets, net 1,705 2,185

Other non-current assets 109 149

(661)

Total non-current assets 13,496 14,872

Total assets $ 37,889 $ 40,326

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $ 5,149 $ 4,591

Accrued expenses and other current liabilities 4,873 5,141

Line of credit 10,110 13,024

Current maturities of long-term debt, net ofunamortized

financing fees 3,199 3,592

Current maturities of lease liabilities 955 1,049

Total current liabilities 24,286 27,397

Long-Term liabilities

Payroll Protection Program loan 3,025

Deferred tax liability 116 116

Non-current maturities of lease liabilities 916 1,340

Total long-term liabilities 1,032 4,481

Total liabilities 25,318 31,878

Stockholders' Equity

Preferred stock

Common stock 3 3

Additional paid-in capital 157,746 157,686

Accumulated deficit (140,657) (144,720)

Less common stock held in treasury, at cost (4,521) (4,521)

Total stockholders' equity 12,571 8,448

Total liabilities and $ 37,889 $ 40,326 stockholders' equity

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS SHOWN IN THOUSANDS, EXCEPT NET INCOME PER SHARE)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Reviewed) (Reviewed) (Reviewed) (Reviewed)

Net revenues $ 14,717 $ 14,640 $ 25,499 $ 31,668

Cost of revenues 9,728 9,154 16,690 19,532

Gross profit 4,989 5,486 8,809 12,136

Selling, general and administrative 3,764 4,198 7,365 9,383expenses

Engineering and development expense 851 1,123 1,618 2,555

Restructuring costs 635 635

4,615 5,956 8,983 12,573

Income (loss) from operations 374 (470) (174) (437)

Other expenses

Interest expense (255) (207) (500) (498)

Other income, net 4,800 1 4,804 1

Total other income (expenses), net 4,545 (206) 4,304 (497)

Income (loss) before taxes 4,919 (676) 4,130 (934)

Income tax provision (benefit) 57 (178) 67 (243)

Net income (loss) $ 4,862 $ (498) $ 4,063 $ (691)

Net income (loss) per share:

Basic $ 2.94 $ (0.31) $ 2.47 $ (0.43)

Diluted $ 2.94 $ (0.31) $ 2.46 $ (0.43)

Weighted average shares outstanding:

Basic 1,652 1,597 1,648 1,593

Diluted 1,655 1,597 1,650 1,593

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SOURCE Costar Technologies, Inc.