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Classified in: Science and technology, Business, Covid-19 virus
Subject: ERN

Costar Technologies, Inc. Announces Financial Results For the Second Quarter Ended June 30, 2020


COPPELL, Texas, Aug. 13, 2020 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the second quarter ended June 30, 2020 that have been reviewed by the independent accounting firm BKD, LLP.

Financial Results for the Quarter Ended June 30, 2020

Scott Switzer, the Company's Interim Chief Executive Officer, stated, "Challenges from the COVID-19 pandemic have impacted many businesses in the second quarter of 2020, and ours was no exception. The effects of business restrictions, temporary shutdowns and closures on our customers resulted in a decline in demand for our products. During the second quarter we launched a 'One Costar' initiative to unify our organization which resulted in significant cost savings, increased efficiencies, and improved employee collaboration across all our subsidiaries. As restrictions and closures ease, we are beginning to see increased quotation activity which we are confident will drive third quarter revenue wins. In addition, in the second quarter we released four new cameras that completes our family of mid-range products and will position us to enter new markets. Finally, in July we hired a Chief Revenue Officer to better leverage our sales team, improve our channel partner programs, and enhance our ability to meet the needs of our customers."   

Sarah Ryder, the Company's Chief Financial Officer, went on to say, "During this unprecedented time we successfully restructured the organization, improving efficiency and reducing operating expenses by 30%. These efforts helped offset softness in revenue during the quarter resulting from the COVID-19 pandemic. We continue to have constructive conversations with our bank, UMB, as we work to obtain a waiver and modify our covenants to facilitate future compliance. Strong financial performance in the first quarter, combined with material cost reductions achieved in the second quarter, have better positioned the Company to navigate throughout this uncertain economic environment." For more information regarding the Company's loan agreements, see Note 7 of the Company's financial statements.

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 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
Ended
6/30/20

Quarter
Ended
6/30/2019

Six Months
Ended
6/30/20

Six Months
Ended
6/30/19

Adjusted Earnings

508

972

664

(1,250)

Less:





    Stock-Based Compensation

(53)

(87)

(85)

(173)

    Intangible Amortization

(318)

(324)

(635)

(648)

    Restructuring Costs

(635)


(635)


Net Income (Loss)

(498)

561

(691)

(2,071)







Quarter
Ended
6/30/20

Quarter
Ended
6/30/2019

Six Months
Ended
6/30/20

Six Months
Ended
6/30/19

Adjusted EBITDA

650

1,593

1,150

(1,106)

Less:





    Interest

(207)

(348)

(498)

(656)

    Income Taxes (Benefit)

178

(157)

243

729

    Depreciation

(113)

(116)

(231)

(217)

    Intangible Amortization

(318)

(324)

(635)

(648)

    Stock-Based Compensation

(53)

(87)

(85)

(173)

    Restructuring Costs

(635)


(635)


Net Income (Loss)

(498)

561

(691)

(2,071)

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 35th 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.

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES









CONSOLIDATED BALANCE SHEETS

(AMOUNTS SHOWN IN THOUSANDS)





June 30, 2020


December 31, 2019




(Reviewed)


(Audited)

ASSETS









Current assets







   Cash and cash equivalents


$

1


$

1

   Accounts receivable, less allowance for doubtful accounts of $292 and $396 in 2020 and 2019, respectively



8,076



9,056

   Inventories, net of reserve for obsolescence of $1,167 and $1,264 in 2020 and 2019, respectively



20,285



20,196

   Prepaid expenses and other current assets



2,728



2,295


Total current assets



31,090



31,548









Non-current assets







   Property and equipment, net



742



910

   Deferred financing costs, net



39



59

   Deferred tax asset, net



4,514



4,514

   Trade names, net



2,017



2,198

   Distribution agreements, net



749



801

   Customer relationships, net



3,848



4,187

   Covenants not to compete, net



45



60

   Patents, net



154



169

   Technology, net



235



268

   Goodwill



6,513



6,513

   Right of use assets



2,664



3,131

   Other non-current assets



149



149


Total non-current assets



21,669



22,959










Total assets


$

52,759


$

54,507










LIABILITIES AND STOCKHOLDERS' EQUITY























Current liabilities







   Accounts payable


$

4,784


$

5,639

   Accrued expenses and other



6,803



5,879

   Line of credit



13,570



15,953

   Current maturities of long-term debt, net of unamortized financing fees



3,984



781

   Contingent purchase price



990



1,490

   Current maturities of notes payable, unrelated party



83



583

   Current maturities of lease liabilities



1,021



990


Total current liabilities



31,235



31,315









Long-Term liabilities







   Long-term debt, net of current maturities and unamortized financing fees






3,592

   Payroll Protection Program loan



3,025




   Non-current maturities of lease liabilities



1,871



2,389


Total long-term liabilities



4,896



5,981


Total liabilities



36,131



37,296









Stockholders' Equity







   Preferred stock







   Common stock



3



3

   Additional paid-in capital



157,586



157,478

   Accumulated deficit



(136,440)



(135,749)

Less common stock held in treasury, at cost



(4,521)



(4,521)


Total stockholders' equity



16,628



17,211










Total liabilities and stockholders' equity


$

52,759


$

54,507

 

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,




2020


2019


2020


2019




(Reviewed)


(Reviewed)


(Reviewed)


(Reviewed)















Net revenues


$

14,640


$

20,425


$

31,668


$

34,814

Cost of revenues



9,154



11,796



19,532



21,473















Gross profit



5,486



8,629



12,136



13,341















Selling, general and administrative expenses



4,198



6,024



9,383



12,537














Engineering and development expense



1,123



1,540



2,555



2,949















Restructuring costs



635






635








5,956



7,564



12,573



15,486















Income (loss) from operations



(470)



1,065



(437)



(2,145)















Other expenses














Interest expense



(207)



(348)



(498)



(656)


Other income (expense), net



1



1



1



1

Total other expenses, net



(206)



(347)



(497)



(655)















Income (loss) before taxes



(676)



718



(934)



(2,800)

Income tax provision (benefit)



(178)



157



(243)



(729)















Net income (loss)


$

(498)


$

561


$

(691)


$

(2,071)





























Net income (loss) per share:














Basic


$

(0.31)


$

0.36


$

(0.43)


$

(1.32)






























Diluted


$

(0.31)


$

0.35


$

(0.43)


$

(1.32)















Weighted average shares outstanding:














Basic



1,597



1,579



1,593



1,572






























Diluted



1,597



1,611



1,593



1,572

 

SOURCE Costar Technologies, Inc.


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