Costar Technologies : Announces Financial Results for the Second Quarter Ended September 30, 2021

	Corporate Headquarters
	101 Wrangler Drive, Ste 201
	Coppell, TX 75019
	Phone: [phone]
	www.costartechnologies.com
FOR IMMEDIATE RELEASE	CONTACT: Sarah Ryder
November 15, 2021	Chief Financial Officer
	Costar Technologies, Inc.
	[phone]

Costar Technologies, Inc. Announces Financial Results

For the Third Quarter Ended September 30, 2021

($ in thousands except per share amounts)

Coppell, Texas - November 15, 2021 - 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."

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

www.costartechnologies.com

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,

1. 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):

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.

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

www.costartechnologies.com

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.

* * * * *

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

www.costartechnologies.com

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (AMOUNTS SHOWN IN THOUSANDS)

		September 30 2021			December 31, 2020
ASSETS		(Reviewed)				(Audited)
Current assets		5	$	480
Cash and cash equivalents	$
Accounts receivable, less allowance for doubtful accounts		6,581				8,579
of $217 and $175, respectively
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
Total non-current assets		12,911				14,872
Total assets	$	37,215		$	40,326
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities		6,204	$	4,591
Accounts payable	$
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		116				3,025
Deferred tax liability					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		3				3
Common stock
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

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

www.costartechnologies.com

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)
Weighted average shares outstanding:
Basic		1,652			1,603			1,649			1,596
Diluted		1,655			1,603			1,652			1,596