PR Newswire | Nov 15, 2021 11:30PM EST

Ended September 30, 2021

11/15 22:30 CST

Costar Technologies, Inc. Announces Financial Results For the Third Quarter Ended September 30, 2021($ in thousands except per share amounts) COPPELL, Texas, Nov. 15, 2021

COPPELL, Texas, Nov. 15, 2021 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the third quarter ended September 30, 2021.

Financial Results for the Quarter Ended September 30, 2021

* Revenues of $12,646, a 19.6% decrease compared to the third quarter of 2020.

* Operating expenses, excluding a third quarter 2020 impairment loss of $939, were down 18.0% to $4,152, compared to $5,062 in the third quarter of 2020.

* GAAP net income of $364 or $0.22 per diluted share, compared to GAAP net loss of $8,292, or ($5.17) per diluted share, in the third quarter of 2020.

* Adjusted earnings of ($237), or ($0.14) per diluted share, compared to $372, or $0.23 per diluted share, for the quarter ended September 30, 2020. Adjusted earnings, a non-GAAP measure, is defined below.

* Adjusted EBITDA of $74, compared to $974 for the quarter ended September 30, 2020. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company's Interim Chief Executive Officer, stated, "Increased customer order activity throughout the second and third quarters of 2021 contributed to one of our strongest backlogs entering the fourth quarter, which we began to realize in the month of October. The Costar transformation of providing compelling products, leveraging strengths across the organization, reducing debt, and driving profitability remains on track."

Sarah Ryder, the Company's Chief Financial Officer, went on to say, "Sustained cost and cash flow management drove decreases in operating expenses, allowing us to further reduce our debt position by $800 over the prior quarter. We addressed the difficult global supply chain environment in two primary ways: by limiting expenses and standardizing demand planning across our organization to provide better visibility of inventory. With product demand improving, as reflected in our quotation and bookings activity, we are actively managing supply chain challenges to fulfill existing orders and meet strengthening customer demand."

The Company's independent auditors completed their analysis of the Company's financial condition. The Independent Auditor's Review 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, impairment loss, revaluation of deferred tax asset, modification to inventory reserve policy, 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, impairment loss, modification to inventory reserve policy, 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 Nine Nine Ended Ended Months Months 9/30/21 Ended Ended 9/30/20 9/30/21 9/30/20

Adjusted Earnings (237) 372 (357) 1,036

Less:

Stock-Based Compensation (29) (27) (54) (112)

Intangible Amortization (254) (318) (882) (953)

Restructuring Costs (635)

Impairment Loss (939) (939)

Revaluation of Deferred Tax Asset (4,614) (4,614)

Modification to Inventory Reserve Policy (2,766) (2,766)

PPP Loan Forgiveness 3,060

Accrual of Employee Retention Credit 884 2,660

Net Income (Loss) 364 (8,292) 4,427 (8,983)

Quarter Quarter Nine Nine Ended Ended Months Months 9/30/21 9/30/20 Ended Ended 9/30/21 9/30/20

Adjusted EBITDA 74 974 729 2,124

Less:

Interest (240) (205) (740) (703)

Income Taxes (Benefit) 16 (4,896) (51) (4,653)

Depreciation (87) (115) (295) (346)

Intangible Amortization (254) (318) (882) (953)

Stock-Based Compensation (29) (27) (54) (112)

Restructuring Costs (635)

Impairment Loss (939) (939)

Modification to Inventory Reserve Policy (2,766) (2,766)

PPP Loan Forgiveness 3,060

Accrual of Employee Retention Credit 884 2,660

Net Income (Loss) 364 (8,292) 4,427 (8,983)

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)

September 30 2021 December 31, 2020

(Reviewed) (Audited)

ASSETS

Current assets

Cash and cash equivalents $ 5 $ 480

Accounts receivable, less allowance for doubtful accounts

of $217 and $175, respectively 6,581 8,579

Inventories 13,889 14,225

Prepaid expenses and other current assets 3,829 2,170

Total current assets 24,304 25,454

Non-current assets

Property and equipment, net 238 533

Deferred financing costs, net 20

Intangible assets, net 5,529 6,411

Goodwill 5,574 5,574

Right of use assets, net 1,461 2,185

Other non-current assets 109 149

(661)

Total non-current assets 12,911 14,872

Total assets $ 37,215 $ 40,326

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $ 6,204 $ 4,591

Accrued expenses and other current liabilities 3,819 5,141

Line of credit 9,502 13,024

Current maturities of long-term debt, net of unamortized

financing fees 3,003 3,592

Current maturities of lease liabilities 843 1,049

Total current liabilities 23,371 27,397

Long-Term liabilities

Payroll Protection Program loan 3,025

Deferred tax liability 116 116

Non-current maturities of lease liabilities 764 1,340

Total long-term liabilities 880 4,481

Total liabilities 24,251 31,878

Stockholders' Equity

Preferred stock

Common stock 3 3

Additional paid-in capital 157,775 157,686

Accumulated deficit (140,293) (144,720)

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

Total stockholders' equity 12,964 8,448

Total liabilities and stockholders' equity $ 37,215 $ 40,326

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

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

Net revenues $ 12,646 $ 15,727 $ 38,145 $ 47,395

Cost of revenues 8,789 12,917 25,479 32,449

Gross profit 3,857 2,810 12,666 14,946

Selling, general and administrative expenses 3,413 4,065 10,778 13,448

Engineering and development expense 739 997 2,357 3,552

Restructuring costs 635

Impairment loss 939 939

4,152 6,001 13,135 18,574

Loss from operations (295) (3,191) (469) (3,628)

Other income (expenses)

Interest expense (240) (205) (740) (703)

Other income, net 883 5,687 1

Total other income (expenses), net 643 (205) 4,947 (702)

Income (loss) before taxes 348 (3,396) 4,478 (4,330)

Income tax provision (benefit) (16) 4,896 51 4,653

Net income (loss) $ 364 $ (8,292) $ 4,427 $ (8,983)

Net income (loss) per share:

Basic $ 0.22 $ (5.17) $ 2.68 $ (5.63)

Diluted $ 0.22 $ (5.17) $ 2.68 $ (5.63)

5879 5879

Weighted average shares outstanding:

Basic 1,652 1,603 1,649 1,596

Diluted 1,655 1,603 1,652 1,596

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SOURCE Costar Technologies, Inc.