Costar Technologies : Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2022

	Corporate Headquarters
	101 Wrangler Drive, Ste 201
	Coppell, TX 75019
	Phone: [phone]
	www.costartechnologies.com
FOR IMMEDIATE RELEASE	CONTACT: Sarah Ryder
May 9, 2023	Chief Financial Officer
	Costar Technologies, Inc.
	[phone]

Costar Technologies, Inc. Announces Financial Results For the Fourth Quarter and Year Ended December 31, 2022($ in thousands except per share amounts)

Coppell, Texas - May 9, 2023 - Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI) announced today its financial results for the fourth quarter and year ended December 31, 2022.

Financial Results for the Quarter Ended December 31, 2022

• Revenues of $12,637, a 14.5% decrease compared to the fourth quarter of 2021.
• Operating expenses, excluding a fourth quarter 2022 impairment loss of $2,063, were down 18.6% to $3,636, compared to $4,465 in the fourth quarter of 2021.
• GAAP net loss of ($2,188) or ($1.33) per diluted share, compared to GAAP net loss of ($61), or ($0.04) per diluted share, in the fourth quarter of 2021.
• Adjusted earnings of $108, or $0.07 per diluted share, compared to $286, or $0.17 per diluted share, for the quarter ended December 31, 2021. Adjusted earnings, a non-GAAP measure, is defined below.
• Adjusted EBITDA of $424, compared to $665 for the quarter ended December 31, 2021. Adjusted EBITDA, a non-GAAP measure, is defined below.

Financial Results for the Year Ended December 31, 2022

• Revenues of $54,184, a 2.4% increase compared to the prior year.
• Operating expenses, excluding a fourth quarter 2022 impairment loss of $2,063, were down 6.2% to $16,508, compared to $17,600 in the prior year.
• GAAP net loss of $2,377 or ($1.44) per diluted share, compared to GAAP net income of $4,366, or $2.64 per diluted share, in the prior year.
• Adjusted earnings of $749, or $0.45 per diluted share, compared to ($70), or ($0.04) per diluted share, for the year ended December 31, 2021. Adjusted earnings, a non-GAAP measure, is defined below.

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

www.costartechnologies.com

• Adjusted EBITDA of $1,995, compared to $1,395 for the year ended December 31, 2021. Adjusted EBITDA, a non-GAAP measure, is defined below.

Scott Switzer, the Company's Interim Chief Executive Officer, stated, "Year-over-year adjusted EBITDA improved 43% driven by modest revenue growth and continued discipline managing expenses. We were able to partially fulfill the backlog in the fourth quarter and still closed out the year with a healthy $4.5 million backlog. As the majority of our end users are in retail, uncertainty due to inflation and rising interest rates created a softening in demand late in the year, with some retailors fearing a potential future economic slowdown. We are confident in our team and our strategy and excited about the opportunities ahead."

Sarah Ryder, the Company's Chief Financial Officer, went on to say, "We have made significant headway lowering our costs to improve future results, reducing operating expenses by 6% in 2022 during an elevated inflationary period. The reduction was due in part to the closure of our Duarte and Glendale offices in 2022. The company continues to evaluate what further actions are required to drive profitability, and made the decision not to renew the lease for its San Diego facility which terminates this month. Centralizing manufacturing operations in our Coppell, Texas facility provides future operational expense savings and cost synergies. Our focus remains on reducing leverage and maximizing shareholder value."

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.

Corporate Headquarters

101 Wrangler Drive, Ste 201

Coppell, TX 75019

Phone: [phone]

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 Employee Retention Credits. 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 Employee Retention Credits. 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.

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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)

		December 31, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	1	$	4
Accounts receivable, less allowance for doubtful accounts
of $201 and $205, respectively		6,016			6,544
Inventories		15,110			15,069
Prepaid expenses and other current assets		3,132			3,562
Total current assets		24,259			25,179
Non-current assets
Property and equipment, net		52			164
Intangible assets, net		4,303			5,274
Goodwill		3,511			5,574
Right of use assets, net		1,110			1,214
Other non-current assets		21			114
Total non-current assets		8,997			12,340
Total assets	$	33,256	$	37,519
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	4,460	$	6,935
Accrued expenses and other current liabilities		2,852			3,894
Line of credit		11,907			9,337
Current maturities of long-term debt, net of unamortized
financing fees		2,021			2,807
Current maturities of lease liabilities		511			732
Total current liabilities		21,751			23,705
Long-Term liabilities
Deferred tax liability		93			179
Non-current maturities of lease liabilities		667			608
Total long-term liabilities		760			787
Total liabilities		22,511			24,492
Stockholders' Equity
Preferred stock
Common stock		3			3
Additional paid-in capital		157,994			157,899
Accumulated deficit		(142,731)			(140,354)
Less common stock held in treasury, at cost		(4,521)			(4,521)
Total stockholders' equity		10,745			13,027
Total liabilities and stockholders' equity	$	33,256	$	37,519