Costar Technologies, Inc. Announces Financial Results For the Third Quarter Ended September 30, 2019

COPPELL, Texas, Nov. 14, 2019 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the third quarter ended September 30, 2019 that have been reviewed by the independent accounting firm BKD, LLP.

Financial Results for the Quarter Ended September 30, 2019

    --  Revenues of $17,774, a 6.3% decrease compared to the third quarter of
        2018. The Arecont Vision (AVC) acquisition closed in the prior year
        quarter and results are included beginning July 14, 2018.
    --  Operating expenses were down 6.4% to $6,283, compared to $6,711 in the
        third quarter of 2018. The third quarter of 2018 included $243 in
        expenses related to the AVC acquisition.
    --  GAAP net income of $840, or $0.51 per diluted share, compared to a GAAP
        net income of $56, or $0.04 per diluted share, in the third quarter of
    --  Adjusted earnings of $1,287, or $0.79 per diluted share, compared to
        $1,099, or $0.69 per diluted share for the quarter ended September 30,
        2018. Adjusted earnings, a non-GAAP measure, is defined below.
    --  Adjusted EBITDA of $2,010, compared to $1,560 for the quarter ended
        September 30, 2018. Adjusted EBITDA, a non-GAAP measure, is defined

Scott Switzer, Chief Operating Officer and Chief Financial Officer, stated, "This quarter marks our second consecutive profitable quarter since the acquisition of Arecont Vision. The third quarter is historically our strongest quarter, and 2019 was no exception. Except for CohuHD and Arecont Vision, our divisions were up 11% over the third quarter of 2018. We have experienced softness in CohuHD's transportation market segment, which generated $4M in revenue during the third quarter of 2019, a decline of over $0.6M from the third quarter of 2018 due to weather delays and tariffs affecting state budgets."

President and Chief Executive Officer, James Pritchett stated, "We have made significant advances at Arecont Vision Costar in a relatively short period of time. The effects of the bankruptcy still impact the division's revenues, but the cost reduction actions taken early in 2019 are having a positive result. Arecont Vision's third quarter was the division's second positive quarter as revenues stabilized. We recently won two major long-term contacts with financial institutions, both domestic and international, that will begin shipping in the fourth quarter. We continue to invest in developing artificial intelligence for our cameras for retail, financial and Smart City applications. I am confident the changes we have made, and are continuing to make, will position us for long-term growth and profitability for our shareholders."

The Company's outside 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

Non-GAAP Financial Measures

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

                                                    Quarter       Quarter
                                              Ended         Ended
                                                    9/30/19       9/30/18

                 Adjusted Earnings                    1,287          1,099


          Stock-Based Compensation                    (124)          (66)

         Intangible Amortization                     (323)         (324)

          Transaction and Related Expenses                          (243)

          Loan Forgiveness Required Under AVC
           Purchase Agreement                                       (410)

                 Net Income (Loss)                      840             56

                                                    Quarter       Quarter
                                              Ended         Ended
                                                    9/30/19       9/30/18

              Adjusted EBITDA                      2,010          1,560


         Interest                                    (350)         (329)

         Income Taxes                                (255)          (24)

         Depreciation                                (118)         (108)

         Intangible Amortization                     (323)         (324)

          Stock-Based Compensation                    (124)          (66)

          Transaction and Related Expenses                          (243)

          Loan Forgiveness Required Under AVC
           Purchase Agreement                                       (410)

                 Net Income (Loss)                      840             56

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 35(th) largest company in a&s magazine's Security 50 for 2019. 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.




                                                                                                                   September 30, 2019                     December 31, 2018



               Current assets

       Cash and cash equivalents                                                                                                         $
              1                                       $

       Accounts receivable, less allowance for doubtful accounts

          of $570 and $859 in 2019 and 2018, respectively                                                                                       9,250                                                9,333

       Inventories, net of reserve for obsolescence

          of $1,026and $1,101 in 2019 and 2018, respectively                                                                                   20,525                                               20,618

       Prepaid expenses and other current assets                                                                                                2,573                                                1,531

     Total current assets                                                           32,349                                               31,671

               Non-current assets

       Property and equipment, net                                                                                                                991                                                  915

       Deferred financing costs, net                                                                                                               69                                                   99

       Deferred tax asset, net                                                                                                                  3,766                                                3,766

       Trade names, net                                                                                                                         2,289                                                2,561

       Distribution agreements, net                                                                                                               827                                                  905

       Customer relationships, net                                                                                                              4,361                                                4,884

       Covenants not to compete, net                                                                                                               68                                                   92

       Patents, net                                                                                                                               177                                                  200

       Technology, net                                                                                                                            285                                                  335

       Goodwill                                                                                                                                 6,513                                                6,513

       Other non-current assets                                                                                                                   149                                                  109

     Total non-current assets                                                       19,495                                               20,379

     Total assets                                                       $
              51,844                                    $


               Current liabilities

       Accounts payable                                                                                                              $
              4,885                                     $

       Accrued expenses and other                                                                                                               7,026                                                7,075

       Line of credit                                                                                                                          14,772                                               11,738

       Current maturities of long-term debt, net of unamortized

          financing fees                                                                                                                          779                                                  773

       Current portion of contingent purchase price                                                                                               992                                                1,048

       Current maturities of notes payable, unrelated party                                                                                       833

       Current maturities of notes payable, related party                                                                                         206                                                  805

     Total current liabilities                                                      29,493                                               27,225

               Long-Term liabilities

       Long-term debt, net of current maturities and

          unamortized financing fees                                                                                                            3,788                                                4,373

       Contingent purchase price, net of current portion                                                                                                                 992

     Total long-term liabilities                                                     3,788                                                5,365

     Total liabilities                                                              33,281                                               32,590

               Stockholders' Equity

       Preferred stock

       Common stock                                                                                                                                 3                                                    3

       Additional paid-in capital                                                                                                             157,363                                              157,029

       Accumulated deficit                                                                                                                  (134,282)                                           (133,051)

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

     Total stockholders' equity                                                     18,563                                               19,460

     Total liabilities and stockholders' equity                         $
              51,844                                    $



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

                                                                                             2019                    2018                                                  2019          2018

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

       Net revenues                                                                               $
          17,774                                               $
         18,960                  $
              52,588                 $

       Cost of revenues                                                                                   10,054                                                      11,426                              31,527                          25,400

                     Gross profit                                                                           7,720                                                       7,534                              21,061                          16,464

        Selling, general and administrative
         expenses                                                                                          4,821                                                       5,264                              17,358                          12,327

        Engineering and development expense                                                                1,462                                                       1,204                               4,411                           2,746

        Transaction and related expense                                                                          243                                                                                            307

                                                                                                             6,283                                                       6,711                              21,769                          15,380

                     Income (loss) from operations                                                         1,437                                                         823                               (708)                          1,084

       Other expenses

                                                                        Interest expense                       (350)                                                      (329)                            (1,006)                          (521)

                                                                        Other income
                                                                         net                      8                                                        (414)                            9                               (414)

        Total other expenses, net                                                                           (342)                                                      (743)                              (997)                          (935)

        Income (loss) before taxes                                                                          1,095                                                          80                             (1,705)                            149

        Income tax provision (benefit)                                                                       255                                                          24                               (474)                             81

                     Net income (loss)                                                                $
          840                                                  $
          56                 $
              (1,231)                    $

                     Net income (loss) per share:


              Basic                           $
          0.53                                                $
          0.04                  $
              (0.78)                  $

              Diluted                         $
          0.51                                                $
          0.04                  $
              (0.78)                  $

                     Weighted average shares outstanding:


              Basic                                  1,597                                                       1,546                               1,576                           1,546

              Diluted                                1,633                                                       1,600                               1,576                           1,600

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SOURCE Costar Technologies, Inc.