Ostin Technology Group Reports Fiscal Year 2022 Results

NANJING,China,Feb. 16,2023 -- Ostin Technology Group Co.,Ltd. (the "Company") (Nasdaq: OST),a supplier of display modules and polarizers in China,today reported its financial results for the fiscal year ended September 30,2022.

Fiscal Year 2022 Summary

- Sales decreased by approximately $62.3 million,or 37%,to approximately $105.4 million for the fiscal year ended September 30,2022 from approximately $167.7 million for the fiscal year ended September 30,2021.

- Overall gross profit margin was 12% for fiscal year ended September 30,2022 as compared to 10% for fiscal year ended September 30,2021. The improvement in gross margin was largely due to the significantly higher gross margin of the Company's new research and development services.

- Net income was approximately $112,227 and $3.3 million in the fiscal years ended September 30,2022 and 2021,respectively.

- Cash and cash equivalents were $3.8 million as of September 30,2022,as compared to $0.7 million as of September 30,2021.

"During the fiscal year ended September 30,the Company's revenue was primarily impacted by the decrease in sales of display modules resulted from the decline of market demand for display modules and the continuous lockdown in mainland China from late 2021 to 2022. However,based on seasonality in the Company's business and cyclical nature of the Company's industry,we believe that the market demand will gradually recover in the second half of 2023 and give a steady boost to the Company's sales of display modules and polarizers in the next 12 to 18 months," said Mr. Tao Ling,Chairman and CEO of the Company.

"We have transitioned certain product lines from trial to mass production and will further improve the Company's research and development capabilities by leveraging accumulated experience and expertise in new product research and development,specifically catering to the Company's major end-brand clients. Looking ahead,the Company's focus remains on enhancing operating performance and executing the Company's profitable business strategy."

For the Fiscal Years Ended September 30

(in $ millions,except earnings per share; differences due to rounding)

2022

2021

% Change

Revenues

$

105.4

$

167.7

(37%)

Gross profit

12.6

17.4

(27%)

Gross margin

12%

10%

2 percentage points

Operating income

0.5

3.2

(86%)

Net income

0.1

3.3

(97%)

Earnings per share – Basic and Diluted

0.02

0.30

(93%)

Results of Operations

Revenues

Sales decreased by approximately $62.3 million,2021. The significant decrease in revenues was primarily due to the decrease in sales of display modules resulted from the decline of market demand for display modules and the continuous lockdown in mainland China from late 2021 to 2022.

(in $ millions,differences due to rounding)

September 30,

2022

September 30,

2021

Revenue Category

SalesAmount

(In USD)

As%of

Sales

SalesAmount

(In USD)

As%of

Sales

Sales of display modules

$

35.1

34

%

$

96.1

58

%

Sales of polarizers

62.7

59

%

62.6

37

%

Research and developments

5.7

5

%

-

-

%

Others

1.9

2

%

9.0

5

%

Total

105.4

100

%

167.7

100

%

- Sales of display modules decreased by approximately $61 million or 63%,to approximately $35.1 million for the fiscal year ended September 30,2022 from approximately $96.1 million for the fiscal year ended September 30,2021.

- To support mass production of polarizers,the Company invested significant capital and human resources to build and run Chengdu factory during the fiscal year ended September 30,2022 and discontinued low-margin display modules product lines. For fiscal years ended September 30,demand for polarizers remained stable and revenue generated from sales of polarizers was approximately $62.7 million and $62.6 million,respectively.

- For the fiscal year ended September 30,revenue generated from the Company's new research and development services was approximately $5.7 million,representing 5% of the Company's total revenues.

The following table shows the Company's revenues by geographic region for the fiscal years ended September 30,2022 and 2021. To mitigate impact of the exchange rate fluctuations and shipping disruptions caused by the epidemic,the Company switched focus from overseas to domestic markets. As a result,sales in Hong Kong and Taiwan saw a significant decrease during the fiscal year ended September 30,2022 as compared to the previous year.

(in $ millions,2022

September 30,2021

Country/Region

SalesAmount

As%of

Sales

Mainland China

$

96.4

91

%

$

133.9

80

%

Hong Kong and Taiwan

8.9

9

%

32.2

19

%

Others

-

-

%

1.6

1

%

Total

$

105.4

100

%

$

167.7

100

%

Cost of revenues

Cost of revenues decreased by approximately $57.6 million or 38%,to approximately $92.8 million for the fiscal year ended September 30,2022 from approximately $150.4 million for the fiscal year ended September 30,2021. The decrease in cost of revenues was generally in line with the decrease in revenues.

The following table presents cost of revenues by revenue categories for the fiscal years ended September 30,respectively.

For the Fiscal Years Ended

(in $ millions,differences due to rounding)

September30,

2022

September30,

2021

Revenue Category

Sales of display modules

$

31.9

$

84.1

Sales of polarizers

57.3

56.9

Research and development

2.2

-

Others

1.4

9.4

Total

$

92.8

$

150.4

Gross Margin

Sales of display modules

9.2

%

12.5

%

Sales of polarizers

8.6

%

9.1

%

Research and development

61.7

%

-

%

Others

26.6

0.7

%

(3.6)

%

Total Gross Margin

12

%

10

%

Gross profit

The Company's gross profit decreased by approximately $4.8 million,or 27%,to approximately $12.6 million for the fiscal year ended September 30,2022 from approximately $17.4 million for the fiscal year ended September 30,2021. Overall gross profit margin was 12% for the fiscal year ended September 30,2022 as compared to 10% for the fiscal year ended September 30,2021. The improvement in gross margin was largely due to the significantly higher gross margin of the Company's new research and development services.

The decline in the gross profit margin of display modules and polarizers was primarily due to the substantial rise in logistics costs,electricity,and wages resulting from the prolonged lockdowns in mainland China from late 2021 to 2022. Additionally,the decrease in unit sales price and volume was due to declining market demand and heightened market competition.

Selling and marketing expenses

Selling and marketing expenses decreased by approximately $1.2 million,or 30%,to approximately $2.8 million for the fiscal year ended September 30,2022 as compared to approximately $4.0 million for the fiscal year ended September 30,2021. The decrease in selling and marketing expenses was mainly due to the decrease in revenue.

General and administrative expenses

General and administrative ("G&A") expenses increased by approximately $2.7 million,or 53%,to approximately $7.7 million for the fiscal year ended September 30,2022 as compared to approximately $5.0 million for the fiscal year ended September 30,2021. The increase in G&A expenses was due to the increase in professional fees after the Company's IPO and the increase in administrative expenses in complying with regulations imposed by local government to control COVID-19.

Research and development expenses

The Company's research and development expenses were approximately $2.5 million and $5.7 million for the fiscal years ended September 30,respectively. The COVID-19 pandemic caused delays in the delivery of research and development materials as well as lockdowns and quarantine measures for the Company's research and development staff in the PRC,leading to some suspended or slowed projects and therefore a decrease in research and development expenses.

Net income

As a result of the foregoing,we recorded a net income of approximately $112,respectively.

Cash and cash equivalents

Cash and cash equivalents were $3.8 million as of September 30,2021.

Recent Development

During the fiscal year ended September 30,the Company continued efforts to develop new products and have introduced a protection film to customers. The protection film is currently being tested by the Company's customers and is expected to be put into production at the beginning of 2023.

In an effort to increase the Company's profits as well as utilizing extensive resources and expertise in the display panel industry,the Company has diversified into the production and sales of display products for end users such as commercial display and consumer electronics,which generally have a higher profit margin than our display module products. The Company has independently developed new technologies that are used in proprietary products,such as the all-in-one intelligent conference system and Pintura® wireless photo transmission system,which are expected to officially launch sales in the United States in early 2023. Sales of Pintura wireless photo transmission system has started in China since October 2023. To boost the Company's marketing efforts for these products,the Company has increased sales force by hiring more sales representatives,providing end-user-focused sales training,and investing in electronics exhibitions and advertisements.

To further diversify the Company's source of revenue,the Company has leveraged strong research and development capabilities and accumulated expertise in the display module field and developed customized solutions for clients. During the fiscal year ended September 30,the Company began generating revenue from providing such research and development services to branded original design manufacturers.

About Ostin Technology Group Co.,Ltd.

Founded in 2010,the Company is a supplier of display modules and polarizers in China. The Company designs,develops and manufactures TFT-LCD display modules in a wide range of sizes and customized sizes which are mainly used in consumer electronics,outdoor LCD displays and automotive displays. The Company also manufactures polarizers used in the TFT-LCD display modules. In 2022,the Company expanded its business into the end-user market,offering display products of different sizes. The Company also is a provider of research and development services to branded original design manufacturers.

For more information,please visit http://www.austinelec.com/.

Forward-Looking Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans,objectives,goals,strategies,future events or performance,and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may,"will,"intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters,it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including,but not limited to,the following: the Company's goals and strategies; the Company's forecast on market trend; the Company's future business development; the demand for and market acceptance for new products; changes in technology; risks and uncertainties regarding lingering effects of the Covid-19 pandemic on the Company's businesses,including disruptions to the Company's supply chain; the Company's ability to attract and retain skilled professionals; client concentration; and general economic conditions affecting the Company's industry and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC. For these reasons,among others,investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the SEC,which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

For more information,please contact:

Ostin Technology Group Co.,Ltd.

ir@austinelec.com

Investor Relations:

Janice Wang

Wealth Financial Services LLC

Phone: +86 13811768599

+1 628 283 9214

Email: services@wealthfsllc.com

OSTIN TECHNOLOGY GROUP CO.,LTD.

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30,2022 AND 2021

(IN U.S. DOLLARS,EXCEPT FOR NUMBER OF SHARES DATA)

September30,

2021

ASSETS

Current Assets

Cash and cash equivalents

$

3,655,947

$

684,335

Restricted cash

150,973

-

Accounts receivable,net of allowance for doubtful accounts

of $31,997 and $94,166,respectively

6,270,505

25,551,527

Notes receivable

-

101,361

Inventories,net

15,432,712

18,686,680

Advances to suppliers,net

6,097,833

7,300,770

Tax receivables

92,749

443,173

Prepaid expenses and other receivables

207,584

1,426,790

Total Current Assets

31,908,303

54,194,636

Property,plant and equipment,net

19,415,829

19,368,333

Land use rights,net

1,284,591

1,497,579

Intangible assets,net

2,968,745

127,129

Deferred tax assets,net

566,404

673,179

Long-term investment

210,867

-

Right-of-use lease assets

5,571

105,625

Other long-term receivables

823,116

-

TOTAL ASSETS

$

57,183,426

$

75,966,481

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

Accounts payable

$

6,279,484

$

17,618,986

Accrued expenses and other current liabilities

1,950,122

2,632,370

Advances from customers

1,175

4,506,016

Due to related parties

477,964

3,197,070

Short-term borrowings

21,292,963

32,417,418

Operating lease liabilities – current

89,917

193,161

Total Current Liabilities

31,505,625

60,565,021

Operating lease liabilities – non-current

-

5,583

Long-term liability

-

194,022

Other long-term payables

52,590

-

TOTAL LIABILITIES

31,558,215

60,764,626

COMMITMENTS AND CONTINGENCIES

-

-

SHAREHOLDERS' EQUITY

Common stock,$0.0001 par value,500,000,000 shares

authorized,14,006,250 and 10,250,000 shares issued and

outstanding as of September 30,2022 and 2021

1,401

1,013

Additional paid-in capital

23,256,219

10,856,169

Statutory surplus reserves

1,496,314

1,033,653

Retained earnings

2,484,385

2,748,068

Accumulated other comprehensive loss

(1,902,108)

(316,017

)

Total Equity Attributable to Ostin Technology Group Co.,Ltd.

25,336,211

14,322,886

Equity attributable to non-controlling interests

289,000

878,969

Total Shareholders' Equity

25,625,211

15,201,855

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

57,481

OSTIN TECHNOLOGY GROUP CO.,LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE FISCAL YEARS ENDED SEPTEMBER 30,2021 AND 2020

(IN U.S. DOLLARS,EXCEPT SHARES DATA)

For the fiscal years ended September 30,

2022

2021

2020

Sales

$

105,416,746

$

167,744,801

$

140,073,917

Cost of sales

(92,804,431)

(150,385,723

)

(128,489,255

)

Gross profit

12,612,315

17,359,078

11,584,662

Operating expenses:

Selling and marketing expenses

(2,793,197)

(3,965,790

)

(2,172,393

)

General and administrative expenses

(7,649,241)

(4,990,951

)

(3,123,219

)

Research and development costs

(2,515,239)

(5,712,792

)

(2,828,718

)

Gain from disposal of property,plant and equipment

795,783

527,818

-

Total operating expenses

(12,161,894)

(14,141,715

)

(8,124,330

)

Operating income

450,421

3,217,363

3,460,332

Other income (expenses):

Interest income (expense),net

(1,290,811)

(1,112,045

)

(688,401

)

Other income (expenses),559

1,133,103

(67,370

)

Total other expenses,net

(11,252)

21,058

(755,771

)

Income before income taxes

439,169

3,238,421

2,704,561

Income tax provision

(326,942)

57,086

126,725

Net income

112,227

3,295,507

2,831,286

Net income (loss) attributable to non-controlling

interests

(86,751)

196,564

117,175

Net income attributable to Ostin Technology Group

Co.,Ltd.

198,978

3,098,943

2,714,111

Net income

112,286

Other comprehensive income (loss):

Foreign currency translation adjustment

(1,716,150)

272,591

415,403

Comprehensive (loss) income

(1,603,923)

3,568,098

3,246,689

Comprehensive (loss) income attributable to non-

controlling interests

(216,810)

219,497

126,444

Comprehensive (loss) income attributable to Ostin

Technology Group Co.,Ltd.

(1,387,113)

3,348,601

3,120,245

Earnings per ordinary share

Basic and diluted

$

0.02

$

0.30

$

0.27

Weighted average number of ordinary shares outstanding

Basic and diluted

11,773,202

10,125,000

10,000

OSTIN TECHNOLOGY GROUP CO.,LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE FISCAL YEARS ENDED SEPTEMBER 30,2021 AND 2020

(IN U.S. DOLLARS)

For the years ended

September 30,

2022

2021

2020

Cash Flows from Operating Activities:

Net income (loss)

$

112,227

$

3,507

$

2,286

Adjustments to reconcile net income to net cash (used

in) provided by operating activities:

Depreciation expense

2,309,263

1,841,250

1,080,675

Amortization expense of land use rights

78,926

85,842

18,447

Amortization expense of intangible assets

214,703

199,913

327,636

Amortization expense of right-of-use assets

53,627

114,387

-

Bad debt (recovery) expense for accounts receivable

(60,982

)

94,166

233,824

Bad debt expense for advances to suppliers

228,251

311,811

-

Inventory provision

21,962

780,366

288,411

Deferred tax assets,net

106,775

208,832

(299,996

)

Gain from disposal of property,plant and equipment

(795,783

)

(527,818

)

-

Imputed interest for short-term borrowings from third parties

-

370,847

228,291

Changes in operating assets and liabilities:

Accounts receivable

18,373,339

(15,163,687

)

(6,710,021

)

Notes receivable

99,663

2,129,820

(1,887,698

)

Inventories

1,599,407

(559,724

)

(5,752,729

)

Advances to suppliers

330,995

1,378,929

(2,130,279

)

Prepaid expenses and other receivables

1,177,551

(854,448

)

50,864

Other long-term receivables

(893,493)

-

-

Accounts payable

(10,507,396

)

(6,781,879

)

11,538,662

Accrued expenses and other current liabilities

(194,934)

(3,614,350

)

5,192,485

Advances from customers

(2,894,344

)

(1,542,196

)

2,945,080

Income tax payable

335,069

590,588

(230,257

)

Operating lease liabilities

(53,629

)

(22,415

)

-

Other long-term payables

57,086

-

-

Net cash (used in) provided by operating activities

9,698,283

(17,664,259

)

7,724,681

Cash Flows from Investing Activities:

Purchases of property,plant and equipment

(5,122,095

)

(6,211,335

)

(3,701,172

)

Disposal of property,plant and equipment

1,045

1,024,990

-

Purchases of intangible assets

(3,060,601

)

(11,568

)

(1,475,783

)

Long-term investment

(210,867

)

-

-

Net cash used in investing activities

(6,878,518

)

(5,913

)

(5,176,956

)

Cash Flows from Financing Activities:

Proceeds received from stock issuance

12,409,022

-

98,494

Repayment of notes payable

-

-

(1,070,573

)

Proceeds from (Repayments to) long-term liability

(873,401

)

93,928

-

Proceeds from short-term bank borrowings

15,706,830

17,850,026

9,335,389

Repayments on short-term bank borrowings

(16,243,972

)

(12,569,361

)

(8,007,879

)

Proceeds from short-term borrowings from third party individuals

1,972

16,872,476

5,838,187

Repayments on short-term borrowings from third party individuals

(9,652,990

)

(5,890,252

)

(6,254,364

)

Proceeds from related parties

2,746,749

9,092,860

3,004,804

Repayments to related parties

(5,371,422

)

(6,885,557

)

(2,733,592

)

Net cash provided by financing activities

11,788

18,564,120

210,464

Effect of changes in currency exchange rates

291,032

(379,135

)

133,202

Net (decrease) increase in cash and cash equivalents

3,585

(4,677,187

)

2,891,392

Cash,cash equivalents and restricted cash at the beginning of year

684,335

5,361,522

2,470,130

Cash and cash equivalents and restricted cash at the end of year

$

3,806,920

$

684,335

$

5,522

Reconciliation of cash,cash equivalents and restricted

cash to the Consolidated Balance Sheets

Cash and cash equivalents

$

3,335

$

5,343,434

Restricted cash

150,973

-

18,088

Total cash,cash equivalents and restricted cash

$

3,522

Supplemental disclosures of cash flows information:

Cash paid for income taxes

$

241,697

$

374,951

$

268,724

Cash paid for interest

$

1,010,897

$

751,658

$

527,027

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