Costar Technologies, Inc. Announces Financial Results for the First Quarter Ended March 31, 2015

(In thousands except per share amounts)

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May 18, 2015, 08:52 ET

COPPELL, Texas, May 18, 2015 /PRNewswire/ -- Costar Technologies, Inc. (the "Company") (OTC Markets Group: CSTI), announced its unaudited financial results for the quarter ended March 31, 2015 that has been reviewed by the independent accounting firm McGladrey LLP.

Highlights for the Quarter Ended March 31, 2015

GAAP net income of $29, or $0.02 per share based on 1,550 weighted average diluted shares outstanding. This compares to GAAP net income of $1,072, or $0.70 per share based on 1,532 weighted average diluted shares outstanding for the quarter ended March 31, 2014.
The Company posted positive net income for the quarter in spite of the anticipated decline of $4,200 in revenue from its largest customer, which included $3,300 due to the "catch-up" order in 2014 and $900 due to the implementation of tighter inventory management.
Revenue outside of the company's largest customer and CohuHD, grew at a rate of 22% versus the first quarter of 2014.

James Pritchett, President and Chief Executive Officer of the Company, stated, "We are pleased with the performance of our team and their ability to deliver a profitable quarter despite many obstacles. The first quarter is a historically soft quarter for both Costar and CohuHD, in addition, our largest customer reduced inventory and there was significant inclement weather in the Northeast." Mr. Pritchett added, "The CohuHD integration is progressing as planned as CohuHD finalizes its launch of the new RISE product line. We believe the Company is aligned to take advantage of specific vertical market opportunities in 2015 as we stay focused on our commitment to increase shareholder value through long term revenue and profitability growth."

Financial Results, First Quarter of 2015

The financial results for the first quarter of fiscal 2015 include the results of operations for CohuHD for the full quarter. In comparison, financial results for the first quarter of fiscal 2014 do not include CohuHD.

Revenue for the first quarter of 2015 totaled $8,099, as compared to revenue of $8,307 for the first quarter of the prior year, a decrease of approximately 3%. The Company's new subsidiary, CohuHD, generated approximately $3,353 in revenue during the period.

Gross profit for the first quarter of 2015 totaled $3,219. This compares to gross profit of $2,739 for the first quarter of 2014, an increase of 18%. The majority of the increase was due to the acquisition of CohuHD, but increased sales of the Company's higher margin network product was also a strong contributor.

Operating expenses for the first quarter of 2015 totaled $3,129. This compares to operating expenses of $1,655 for the first quarter of 2014, an increase of 89%. The majority of the increase was due to CohuHD.

Net income for the first quarter of 2015 was approximately $29, or $0.02 fully diluted earnings per share. This compares to net income for the first quarter of 2014 of $1,072, or $0.70 fully diluted earnings per share. CohuHD accounted for approximately $(46) of Company's net income in the 2015 quarter.

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 www.costartechnologies.com.

About Costar Technologies, Inc.

Costar Technologies, Inc. develops, designs 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".

Cautionary Statement Regarding Forward Looking Statements

This document contains forward-looking statements that involve risks and uncertainties, as well as assumptions, that if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements generally are identified by the words "expects," "anticipates," "believes," "intends," "estimates," "should," "would," "strategy," "plan" and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The risks, uncertainties and assumptions include developments in the marketplace for our products, competition, related products and services and general economic conditions, as well as other risks and uncertainties. Accordingly, we cannot give assurance that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company.

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS SHOWN IN THOUSANDS)

		March 31, 2015		December 31, 2014
		(Reviewed)		(Audited)

ASSETS

Current assets
Cash		$	620	$
Accounts receivable, less allowance for doubtful accounts of $70 and $75 in 2015 and 2014, respectively			5,070		7,086
Inventories, net of reserve for obsolescence of $379 in 2015 and 2014			7,714		7,629
Prepaid expenses			345		307
Deferred tax asset - current			392		408
	Total current assets		14,141		15,430

Non-current assets
Property and equipment, net			407		397
Deferred financing costs, net			82		97
Deferred tax asset, non-current			7,280		7,280
Trade names, net			2,405		2,464
Distribution agreement, net			826		844
Customer relationships, net			774		799
Covenant not to compete, net			17		18
Goodwill			2,063		2,063

	Total assets	$	27,995	$	29,392


LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities
Accounts payable		$	2,385	$	3,499
Accrued expenses and other			1,234		1,899
Line of credit			1,134		519
Short-term debt			600		600
Contingent purchase price					128
	Total current liabilities		5,353		6,645

Long-Term liabilities
Long-term debt			1,950		2,100
	Total long-term liabilities		1,950		2,100

	Total liabilities		7,303		8,745


Stockholders' Equity
Preferred stock
Common stock			3		3
Additional paid in capital			156,089		156,073
Accumulated deficit			(130,879)		(130,908)
Less common stock held in treasury, at cost			(4,521)		(4,521)
	Total stockholders' equity		20,692		20,647

	Total liabilities and stockholders' equity	$	27,995	$	29,392

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

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


			For the Three Months Ended March 31,
		2015		2014
		(Reviewed)		(Compiled)

Net revenues		$	8,099	$	8,307
Cost of revenues			4,880		5,568

Gross profit			3,219		2,739

Selling, general and administrative expenses			2,368		1,560
Engineering and development expense			761		56
Transaction and related expense					39
			3,129		1,655

Income from operations			90		1,084

Other income (expenses)
	Interest expense		(44)		(1)
	Other income and expense, net		1		2
Total other income (expenses), net			(43)		1

Income before taxes			47		1,085
Income tax provision			18		13

Net income		$	29	$	1,072


Net income per share:
	Basic	$	0.02	$	0.74


	Diluted	$	0.02	$	0.70


Weighted average shares outstanding
	Basic		1,466		1,458


	Diluted		1,550		1,532