Costar Technologies : Consolidated Financial Statements and Independent Accountant’s Review Report for the Quarter Ended September 30, 2022

COSTAR TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT ACCOUNTANT'S REVIEW REPORT

September 30, 2022

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONTENTS

Independent Accountant's Review Report	1 - 2
Consolidated Financial Statements
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Changes in Stockholders' Equity	5
Consolidated Statements of Cash Flows	6
Notes to Consolidated Financial Statements	7-22

Independent Accountant's Review Report

Board of Directors

Costar Technologies, Inc.

Coppell, Texas

Results of Review of Interim Financial Information

We have reviewed the consolidated financial statements of Costar Technologies, Inc. and its subsidiaries (collectively, the Company), which comprise the balance sheet as of September 30, 2022, and the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2022 and 2021, and cash flows for the nine-month periods ended September 30, 2022 and 2021, and the related notes (collectively referred to as the interim financial information).

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Basis for Review Results

We conducted our review in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of interim financial information is substantially less in scope than an audit conducted in accordance with GAAS, the objective of which is an expression of an opinion regarding the financial information as a whole, and accordingly, we do not express such an opinion. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

Responsibilities of Management for the Interim Financial Information

Management is responsible for the preparation and fair presentation of the financial information in accordance with U.S. GAAP and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

Board of Directors

Costar Technologies, Inc.

Page 2

Report on Consolidated Balance Sheet as of December 31, 2021

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balances sheet as of December 31, 2021, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated March 31, 2022. In our opinion, the accompanying consolidated balance sheet of the Company as of December 31, 2021, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Emphasis of Matter

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2, the Company entered into a Forbearance Agreement with its bank in June 2022 which extended the forbearance period through February 2023. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our conclusion is not modified with respect to this matter.

Dallas, Texas

November 14, 2022

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (AMOUNTS SHOWN IN THOUSANDS)

		September 30, 2022		December 31, 2021
ASSETS		(Reviewed)			(Audited)
Current assets
Cash and cash equivalents	$	1	$	4
Accounts receivable, less allowance for doubtful accounts		9,629			6,544
of $287 and $205, respectively
Inventories		17,517			15,069
Prepaid expenses and other current assets		2,774			3,562
Total current assets		29,921			25,179
Non-current assets
Property and equipment, net		65			164
Intangible assets, net		4,546			5,274
Goodwill		5,574			5,574
Right of use assets, net		899			1,214
Other non-current assets		117			114
Total non-current assets		11,201			12,340
Total assets
$	41,122	$	37,519
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	6,264	$	6,935
Accrued expenses and other current liabilities		3,543			3,894
Line of credit		15,000			9,337
Current maturities of long-term debt, net of unamortized
financing fees		2,216			2,807
Current maturities of lease liabilities		513			732
Total current liabilities		27,536			23,705
Long-Term liabilities
Deferred tax liability		179			179
Non-current maturities of lease liabilities		464			608
Total long-term liabilities		643			787
Total liabilities		28,179			24,492
Stockholders' Equity
Preferred stock
Common stock		3			3
Additional paid-in capital		158,004			157,899
Accumulated deficit		(140,543)			(140,354)
Less common stock held in treasury, at cost		(4,521)			(4,521)
Total stockholders' equity		12,943			13,027
Total liabilities and stockholders' equity	$	41,122		$	37,519

See notes to consolidated financial statements.

3