Costar Technologies : 3rd Quarter 2021 Financial Results

COSTAR TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR'S REVIEW REPORT

September 30, 2021

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONTENTS

Independent Auditor'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 Auditor's Review Report

Board of Directors

Costar Technologies, Inc.

Coppell, Texas

We have reviewed the consolidated financial statements of Costar Technologies, Inc. and its subsidiaries (collectively, the Company), which comprise the consolidated balance sheet as of September 30, 2021, and the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2021 and 2020 and the consolidated statements of changes in stockholders' equity and cash flows for the nine-month periods ended September 30, 2021 and 2020.

Management's Responsibility

Management is responsible for the preparation and fair presentation of the financial information in accordance with accounting principles generally accepted in the United States of America; this responsibility includes the design, implementation, and maintenance of internal control sufficient to provide a reasonable basis for the preparation, and fair presentation of interim financial information in accordance with the applicable financial reporting framework.

Auditor's Responsibility

Our responsibility is to conduct our review in accordance with auditing standards generally accepted in the United States of America 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. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an opinion.

Conclusion

Based on our review, we are not aware of any material modifications that should be made to the financial information referred to above for it to be in accordance with accounting principles generally accepted in the United States of America.

Board of Directors

Costar Technologies, Inc.

Page 2

Report on Consolidated Balance Sheet as of December 31, 2020

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of December 31, 2020, 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 29, 2021. In our opinion, the accompanying consolidated balance sheet of the Company as of December 31, 2020, 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 July 2021, which extended the forbearance period through February 2022. 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 opinion is not modified with respect to this matter.

Dallas, Texas

November 15, 2021

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (AMOUNTS SHOWN IN THOUSANDS)

	September 30 2021		December 31, 2020
ASSETS		(Reviewed)			(Audited)
Current assets
Cash and cash equivalents	$	5	$	480
Accounts receivable, less allowance for doubtful accounts		6,581			8,579
of $217 and $175, respectively
Inventories		13,889			14,225
Prepaid expenses and other current assets		3,829			2,170
Total current assets		24,304			25,454
Non-current assets
Property and equipment, net		238			533
Deferred financing costs, net					20
Intangible assets, net		5,529			6,411
Goodwill		5,574			5,574
Right of use assets, net		1,461			2,185
Other non-current assets		109			149
Total non-current assets		12,911			14,872
Total assets
$	37,215	$	40,326
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	6,204	$	4,591
Accrued expenses and other current liabilities		3,819			5,141
Line of credit		9,502			13,024
Current maturities of long-term debt, net of unamortized
financing fees		3,003			3,592
Current maturities of lease liabilities		843			1,049
Total current liabilities		23,371			27,397
Long-Term liabilities
Payroll Protection Program loan					3,025
Deferred tax liability		116			116
Non-current maturities of lease liabilities		764			1,340
Total long-term liabilities		880			4,481
Total liabilities		24,251			31,878
Stockholders' Equity
Preferred stock
Common stock		3			3
Additional paid-in capital		157,775			157,686
Accumulated deficit		(140,293)			(144,720)
Less common stock held in treasury, at cost		(4,521)			(4,521)
Total stockholders' equity		12,964			8,448
Total liabilities and stockholders' equity	$	37,215		$	40,326

See notes to consolidated financial statements.

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