Costar Technologies : Consolidated Financial Statements and Independent Auditor’s Report for the Year Ended December 31, 2022

COSTAR TECHNOLOGIES, INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

INDEPENDENT AUDITOR'S REPORT

December 31, 2022

COSTAR TECHNOLOGIES, INC. AND SUBSIDIARIES

CONTENTS

Independent Auditor's 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	7-24

Independent Auditor's Report

Board of Directors

Costar Technologies, Inc.

Coppell, Texas

Opinion

We have audited the consolidated financial statements of Costar Technology Inc. and subsidiaries (the Company), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of operations, changes in stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements" section of our report. 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 audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Substantial Doubt About the Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, is operating under a forbearance agreement with their lender, and has stated that substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the conditions and events and management's plans regarding these matters are also described in Note 2. The consolidated 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.

Responsibilities of Management for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is required to

Board of Directors

Costar Technologies, Inc.

evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that these consolidated financial statements are available to be issued.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Dallas, Texas

May 9 2023

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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		6,016			6,544
of $201 and $205, respectively
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

See notes to consolidated financial statements.

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