Of HVAC Mainstreet Co., Inc.

123 W. Apple Avenue | ANY BIZ, FL 35555

Prepared by

7819 N. Dale Mabry Highway

STE 200

Tampa, FL 33614

1-800-311-0703

LETTER OF TRANSMITTAL

Report Date-

My Town Credit Union123 W. Apple AvenueTampa, FL 35555

Regarding: Valuation of

Dear ( ):

We have performed a , as that term is defined in the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants (AICPA), of

controlling interest in , herein known as the Subject Company or Company, as of the valuation date:

This valuation was performed solely to assist our client in the matter of ; Intended user(s) of the valuation: owners of the Company and agents. The resulting estimate of value should not be used for any other purpose or by any other party for any purpose. This valuation engagement was conducted in accordance with the SSVS. The estimate of value that results from a valuation engagement is expressed as a .

Any other restrictions or limitations, hypothetical conditions, references to specialist used, disclosure of subsequent events, applications of jurisdictional exception, or any other information the valuation analyst deemed useful to enable user(s) of the report to understand the work performed shall be detailed in the Introduction section of this report.

Based on our analysis, as described in this , the estimate of value of controlling interest in the Company as of the valuation date was (rounded):

$

This conclusion is subject to the Statement of Assumptions and Limiting Conditions section found in this report. We have no obligation to update this report or our conclusion of value for information that comes to our attention after the date of this report.

Franc Urso, CPA

Sr. Analyst

Ameri-Street Advisory, Inc.

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CONTENTS

LETTER OF TRANSMITTAL......................................................................................................................... - 2 -

INTRODUCTION.............................................................................................................................................. - 5 -

ASSETS & LIABILITIES ALLOCATION (USING THE INCOME APPROACH).....................................- 8 -

FINANCIAL STATEMENT/INFORMATION ANALYSIS.......................................................................... - 9 -

HISTORICAL INCOME & EXPENSES SUMMARY.............................................................................................- 9 -

SELLER’S DISCRETIONARY EARNINGS CALCULATION...............................................................................- 10 -

NORMALIZED, RECAST INCOME & EXPENSE GRAPHS...............................................................................- 11 -

Income Graph.........................................................................................................................................- 11 -

Gross Profit and SDE Margins Graph...................................................................................................- 12 -

Tax Return Front Page Expenses Graph..............................................................................................- 13 -

Tax Return Schedule A Graph...............................................................................................................- 14 -

Tax Return Schedule A Other COGS Graph.........................................................................................- 15 -

Tax Return Other deductions Graph.....................................................................................................- 16 -

Econimic & Common Sized Balance Sheets.........................................................................................- 17 -

RATIO ANALYIS.............................................................................................................................................- 19 -

BizMiner- Industry Financial Data.......................................................................................................- 19 -

BizMiner Subject Filter Criteria............................................................................................................- 20 -

Internal Liquidity Ratios........................................................................................................................- 21 -

Operating Efficiency Ratios...................................................................................................................- 23 -

Operating Profitability Ratios................................................................................................................- 24 -

Business Operating Risk Ratio (Stability)..............................................................................................- 25 -

Financial Leverage Analysis Ratios.......................................................................................................- 26 -

DETERMINING THE EXPECTED MULTIPLE & CAP RATE.................................................................- 27 -

THE COMPARABLES (COMPS)......................................................................................................................- 28 -

List of Comparables (Comps).................................................................................................................- 29 -

Graphic of Comparable Business & Subject Company........................................................................- 30 -

ENTERPRISE RISK FACTORS.........................................................................................................................- 31 -

Goodwill (Personal vs. Business) Risk Factors.....................................................................................- 32 -

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Sales Stability Risk Factors....................................................................................................................- 33 -

Other risk Factors...................................................................................................................................- 34 -

EFFECT OF RISK FACTORS ON COMPANY VALUE......................................................................................- 35 -

RECONCILIATION OF CONCLUSION OF VALUE (SANITY CHECK).................................................- 36 -

CAPITALIZED EARNINGS..............................................................................................................................- 37 -

NET MARGINS...............................................................................................................................................- 38 -

BEFORE-TAX-CASH FLOW...........................................................................................................................- 39 -

DEBT-SERVICE RATIOS.................................................................................................................................- 40 -

FIRM PROFILE............................................................................................................................................... - 41 -

OUR MISSION................................................................................................................................................- 41 -

ANALYST & PRINCIPAL PROFILES...............................................................................................................- 42 -

Francesco Urso, Principal......................................................................................................................- 42 -

Salvatore B. Urso, Principal...................................................................................................................- 43 -

William Burnham, Principal..................................................................................................................- 44 -

Christopher Henderson, Principal.........................................................................................................- 44 -

STATEMENT OF ASSUMPTIONS & LIMITING CONDITIONS............................................................- 45 -

INTERNATIONAL GLOSSARY OF BUSINESS VALUATION TERMS..................................................- 47 -

GLOSSARY OF ADDITIONAL TERMS....................................................................................................... - 54 -

BACKUP DATA.............................................................................................................................................. - 57 -

BALANCE SHEET AS OF DECEMBER 30, 2013.............................................................................................- 57 -

INCOME STATEMENT JAN 1, 2013 TO NOV 30, 2013..................................................................................- 58 -

ABBREVIATED TAX RETURN FOR 2012........................................................................................................- 59 -

ABBREVIATED TAX RETURN FOR 2011........................................................................................................- 60 -

ABBREVIATED TAX RETURN FOR 2010........................................................................................................- 61 -

PROJECTION SUMMMARY PROVIDED BY MANAGEMENT...........................................................................- 62 -

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INTRODUCTION

Type of Report: . As defined by SSVS.

The Subject Company description:

Discounts1. If applicable the following Discounts were applied. Note that if both discounts are applied, they are applied in a multiplicative manner, not additive.

Discount for Lack of Control 2 (DLOC) . This is sometimes referred to as Minority Interest Discount (MID). A discount was applied since the ownership interest being valued and owned by the client or user(s) is . If the analyst chose to apply this discount, it would have been applied to the Operating Assets prior the Discount for Lack of Marketability, DLOM (if applicable; see next section), i.e., additive.

1 Discounts only apply to the operating assets (tangible and intangible), not to the nonoperation assets and liabilities.

2 A control owner enjoys valuable prerogatives of ownership that a minority owner does not, including the ability to appoint management, determine management compensation & prerequisites, set policy and change the course of the business, acquire and liquidate assets, award contracts, make acquisitions, liquidate, dissolve, sell or recapitalize the company, etc.

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1. 100% Ownership2. Ownership sufficient to liquidate, merge, etc.3. 51% operating control

4. 50% -50% ownership (10% MID)5. Less than 50%, but the largest block of stock ownership (15% MID)6. Less than 50%, but with swing vote powers (20% MID)7. Less than 50%, but with cumulative voting powers (25% MID)8. Pure minority (30% MID)

Minority Interest

Control Interest

Discount for Lack of Marketability (DLOM) . In this case, applied when the Income Approach was considered. Based on the analyst’s experience in selling small, privately held companies, certain factors will limit the marketability of a company, e.g., location (small town vs. large city); niche companies requiring a non-common skill from the Buyer base. If the analyst chose to apply this discount, it would have been applied to the Operating Assets after the DLOC discount (if applicable), i.e., additive.

Restrictions and Limitations: .

Hypothetical Conditions: .

References to specialist used: .

Subsequent events: .

Sources of Information:

The source of the financial information was corporate tax returns ( – ), income statement ( to ), and balance sheet (as of ), which were all provided by the client or their advisors. See Backup Data section in this report.

The source of the non-financial information was

initial interview held on .

The analyst tour the facility.

Company attendees of initial interview:

David Smith, Vice President of Company

Standard of Value, Premise of Value, Approach, and Methods used:

In rendering a the analyst estimated on the premise of . The analyst considered four standard valuation approaches, namely- Income Approach,

Asset Approach, Cost Approach, and Market Approach.

Ultimately, the analyst determined that the yielded the highest value.

Furthermore, the method used within the chosen approach was the .

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The calculation of values

Equation (100% Controlling Interest & No Discounts)3

Value1=

$473,069 = $337,111 + $345,494 - ($209,536)

Our is that One Hundred Percent (100%) controlling interest prior to any discounts for control or lack of marketability is , where the Fair Market Value of the Operating Assets component would be , which is composed of (Tangible Assets) plus (Intangible Asset: Business or Enterprise Goodwill) plus (Intangible Asset: Personal or Professional Goodwill), all based on the valuation performed herein. Furthermore, the Non-Operating Assets are and Total Liabilities are .

, where the historical Weighted Seller’s Discretionary Earnings4 (wSDE) of was multiplied by the Sale-Price-to-Earnings Multiple (SP/SDE) of ; see the sections

below called Seller’s Discretionary Earnings (SDE) and Determining the Expected Multiple and CAP Rate.

The historical period considered was from through , where was annualized using of data.

Rationale for the Future Benefit Stream: Given that management expects revenues to increase by 10% in 2014, along with evidence from 2013 (11 month) comparison to 2012 (same period), the expectation is that the benefit stream shall be commensurate with or better than 2013. Thus most weight on historical performance is applied to 2013. Thus, the weights to the respective SDE values were applied as such in order to estimate the Future Benefit Stream: % on ; % on

; % on ; and % on .

The 100% controlling, non-discounted interest in the Operating Assets was derived by using the

3 See table in section called Assets & Liabilities Included (Operating & Non-Operating) for a summary of all operating and non-operating tangible assets and liabilities before minority interest discount is applied (if applicable).

4 Seller’s Discretionary Earnings (SDE) is used as the basis for the value of this company. It represents the net earnings before interest, income taxes, depreciation, amortization, owner perks, and elimination of all non-recurring income and expenses. It also assumes there is only one full-time working owner. Weighted SDE or wSDE takes into consideration multiple years’ performance.

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ASSETS & LIABILITIES ALLOCATION (USING THE INCOME APPROACH)

The Operating Assets includes only the Tangible and Intangible Operating Assets as listed below. The table below shows value for 100% ownership, i.e., before any discounts.

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FINANCIAL STATEMENT/INFORMATION ANALYSIS

HISTORICAL INCOME & EXPENSES SUMMARY

The following data was taken directly from . All small expenses where consolidated in the row called “Other Expenses <$3k.”

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Period & SourceFY13 P&L (11 mo. Annualized)

thru 11-30-2013

FY13 P&L (11 mo. Annualized) Annualized

FY12 Tax Return FY11 Tax Return FY10 Tax Return

Total Income $1,240,516 $1,353,290 $1,137,106 $1,064,961 $1,081,979DeductionsCOGS (less Direct Labor) $886,774 $967,390 $810,246 $742,848 $757,254Salaries and wages $152,901 $166,801 $127,812 $131,553 $164,820Rent $35,008 $38,191 $39,120 $68,500 $82,200

Insurance $20,414 $22,270 $15,441 $18,501 $22,120

Supplies $0 $0 $9,861 $0 $5,658Alarm Expense $305 $333 $957 $1,158 $1,381Management Fee $12,000 $13,091 $1,000 $0 $0Taxes & Licenses $1,473 $1,607 $12,036 $21,566 $27,933Interest $8,159 $8,901 $0 $123 $829Waste Disposal $0 $0 $2,091 $2,584 $2,583Office Expense $6,770 $7,385 $9,321 $18,544 $12,454Rep. & Maint. $4,581 $4,998 $1,415 $2,073 $4,637Utilities $1,778 $1,940 $3,186 $3,988 $4,240Administrative Expenses $9,120 $9,949 $0 $0 $0Misc. $0 $0 $800 $1,898 $3,202Moving Expense $0 $0 $4,209 $0 $0Legal & Prof. $2,000 $2,182 $6,974 $7,125 $6,347Bad Debt $0 $0 $0 $13,016 $0Employee Bene. programs $0 $0 $2,000 $0 $3,600Telephone $7,673 $8,371 $9,822 $7,699 $9,364Janitorial $0 $0 $4,848 $0 $0Net Depreciation $0 $0 $4,178 $4,557 $6,356Auto & Truck $15,784 $17,219 $14,765 $18,281 $14,013Other Expenses <$3k $1,750 $1,909 $1,777 $575 $1,043Total Deductions $1,166,492 $1,272,536 $1,081,859 $1,064,589 $1,130,034

Pre-Tax Profit $74,024 $80,754 $55,247 $372 ($48,055)

SELLER’S DISCRETIONARY EARNINGS CALCULATION

The income approach using the Seller’s Discretionary Earnings (SDE) is used to value this company. SDE represents the net earnings before interest, income taxes, depreciation and amortization. In addition, it includes all owner perks, discretionary expenses, and elimination of all non-recurring income and expenses. SDE is normalized to only one full-time working owner equivalent (FTE) who works 40 to 50 hours each week. Each of these expenses is “Added-Back” to the Pre-Tax Profit shown above in the Historical Income Summary section in order to calculate the Seller’s Discretionary Earnings, SDE. After all the “Add-backs” are applied, the results are the Recast, Normalized SDE, which are shown at the bottom of the following Table.

What’s more, all normalized income and expenses are shown in the graphs that follow in the Normalized, Recast, Income & Expenses Graphs section. The graphs provide a high-level, visual perspective of the Company’s historical income and expenses trends from year to year.

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Pre-Tax ProfitFY13 P&L (11 mo. Annualized) thru

11-30-2013FY12 Tax Return FY11 Tax Return FY10 Tax Return Explanation

Unadjusted Pretax Profit $74,024 $55,247 $372 ($48,055)

Add-Backs Net Gain (Loss) from form 4797

$0 $0 ($3,250) $0 Non-recurring

Salaries and wages $41,600 $42,400 $43,200 $49,402Treat Matthew Kratochvil as the full time equivalent (FTE) owner/operator. Thus we add-back 100% of his W2 Salary.

Bad Debt $0 $0 $13,016 $0 Non-recurring

Rent $0 $0 $29,380 $43,080 Recast to FMV. Seller owned the space prior to moving. Rent was high (NNN lease).

Taxes & Licenses $0 $0 $6,239 $8,428 Property Taxes; non-recurring

Interest $8,159 $0 $123 $829 Interest

Net Depreciation $0 $4,178 $4,557 $6,356 Depreciation

Auto & Truck $5,550 $6,000 $8,601 $1,800 Paid to non-working owner (Stanley)

Management Fee $12,000 $1,000 $0 $0 Paid to non-working owner (Stanley)

Moving Expense $0 $4,209 $0 $0 Non-recurring

Total Add-Backs $67,309 $57,787 $101,866 $109,895SDE through 11-30-2013 $141,334

Normalized SDE (Annual) $154,182 $113,034 $102,238 $61,840

NORMALIZED, RECAST INCOME & EXPENSE GRAPHS

INCOME GRAPH

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GROSS PROFIT AND SDE MARGINS GRAPH

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TAX RETURN FRONT PAGE EXPENSES GRAPH

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TAX RETURN SCHEDULE A GRAPH

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TAX RETURN SCHEDULE A OTHER COGS GRAPH

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TAX RETURN OTHER DEDUCTIONS GRAPH

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ECONIMIC & COMMON SIZED BALANCE SHEETS

4/30/2014 1/1/2014 1/1/2013 1/1/2012 1/1/2011 4/30/2014 1/1/2014 1/1/2013 1/1/2012 1/1/2011

AssetsCurrent Assets

Cash $40,904.19 $91,525.17 $178,062.89 $74,746.16 $5,746.18 2% 3.9% 7% 3% 0%

Accounts Receivables $579.41 $2,800.81 $27,640.39 $30,392.85 $26,590.62 0% 0.1% 1% 1% 1%

Inventory $29,558.60 $32,801.74 $28,889.17 $28,166.01 $22,745.94 1% 1.4% 1% 1% 1%

Marketable Securities $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Due from GSFS $281.80 $281.80 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Other Current Assets $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Other Current Assets $0.00 $0.00 $0.00 $0.00 $0.00 ` 0% 0.0% 0% 0% 0%

Other Current Assets $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Total Current Assets $71,324.00 $127,409.52 $234,592.45 $133,305.02 $55,082.74 3% 5.5% 9% 5% 2%

Fixed, Tangible AssetsLand $907,684.82 $907,684.82 $907,684.82 $907,684.82 $907,684.82 41% 39.1% 34% 34% 34%

Building, Improvements $1,235,364.00 $1,235,364.00 $1,680,550.28 $1,680,550.28 $1,680,550.30 56% 53.3% 62% 63% 63%

Fixtures, Furniture & Equipment $26,043.00 $26,043.00 $551,278.98 $535,647.00 $637,349.68 1% 1.1% 20% 20% 24%

Accumulated Depreciation ($57,916.13) ($69,076.13) ($959,532.00) ($869,128.00) ($889,320.45) -3% -3.0% -35% -32% -33%

Other Fixed Assets $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

2013 Ford Transit Van $24,208.69 $19,653.13 $0.00 $0.00 $0.00 1% 0.8% 0% 0% 0%

2013 Volkswagen Passat $0.00 $32,385.16 $0.00 $0.00 $0.00 0% 1.4% 0% 0% 0%

2011 Lincoln MKX $0.00 $34,077.22 $0.00 $0.00 $0.00 0% 1.5% 0% 0% 0%

Total Fixed Tangible Assets $2,135,384.38 $2,186,131.20 $2,179,982.08 $2,254,754.10 $2,336,264.35 97% 94.3% 81% 84% 87%

Other Assets $0.00 $0.00 0% 0%

Deposits $5,575.00 $5,575.00 $5,575.00 $5,575.00 $5,575.00 0% 0.2% 0% 0% 0%

Start-up Costs $0.00 $0.00 $260,028.57 $260,028.57 $260,028.57 0% 0.0% 10% 10% 10%

Investment in GSFS $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Franchise Costs $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Accumulated Amortization $0.00 $0.00 $0.00 $0.00 $0.00 0% 0.0% 0% 0% 0%

Loan Closing Costs- SBA $0.00 $0.00 $23,620.50 $23,620.50 $23,620.50 0% 0.0% 1% 1% 1%

Recalculation of Goodwill $0.00 $0.00 $0.00 $0.00 $0.00 0% 0% 0% 0% 0%

Other Assets $0.00 $0.00 $0.00 $0.00 $0.00 0% 0% 0% 0% 0%

Total Other Assets $5,575.00 $5,575.00 $289,224.07 $289,224.07 $289,224.07 0% 0% 11% 11% 11%

Total Assets $2,212,283 $2,319,116 $2,703,799 $2,677,283 $2,680,571 100% 100% 100% 100% 100%

Common Sized as % of Total AssetsEconomic Balance Sheet

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Liabilities & Shareholder EquityCurrent Liabilities

Accounts Payable $13,680.95 $16,132.17 $16,340.18 $7,197.45 $53,399.97 0.6% 1% 1% 0% 2%

Interest Bearing Current Liabilities $0.00 $25,901.05 $0.00 $0.00 $0.00 0.0% 1% 0% 0% 0%

Diferred Tax Liability $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Payroll Liabilities $16,750.00 $36,189.91 $151,725.07 $178,223.02 $219,997.07 0.8% 2% 6% 7% 8%

GSFS $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Loan from Sandy Queen $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Accrued Liabilities (Taxes, CC fees, other) $17,717.48 $23,587.16 $423,592.14 $78,511.38 $65,542.68 0.8% 1% 16% 3% 2%

Gift Certificates $2,640.10 $3,726.82 $13,976.60 $11,231.43 $11,639.95 0.1% 0% 1% 0% 0%

Misc.(Lease Payable Dishwasher, Donations on 4/ 30/ 14 BS) $2,233.18 $0.00 $2,032.74 $4,968.92 $0.00 0.1% 0% 0% 0% 0%

Total Current Liabilities $53,021.71 $105,537.11 $607,666.73 $280,132.20 $350,579.67 2.4% 5% 22% 10% 13%

Long Term Liabilities $0.00

Loan Payables to Little Bear, S. Queen, Peacey, Williamson $0.00 $0.00 $120,126.85 $120,126.85 $130,829.67 0.0% 0% 4% 4% 5%

PV of Capital Lease Obligations $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Loan on Volkswagen - Volk Credit $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Other Loans $2,112,837.80 $2,138,438.89 $0.00 $0.00 $0.00 95.5% 92% 0% 0% 0%

Note Payables: 5694104 and 5694101 $0.00 $0.00 $1,770,402.03 $1,898,586.03 $1,931,636.82 0.0% 0% 65% 71% 72%

Note Payable SBA $60,975.50 $65,857.50 $832,292.92 $858,512.92 $858,512.92 2.8% 3% 31% 32% 32%

Loan from Sandy Queen $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Other Long Term Liabilities $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Total Long-Term Liabilities $2,173,813.30 $2,204,296.39 $2,722,821.80 $2,877,225.80 $2,920,979.41 98.3% 95% 101% 107% 109%

Shareholders' EquityCommon Stock $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Preferred Stock $0.00 $0.00 $0.00 $0.00 $0.00 0.0% 0% 0% 0% 0%

Paid-in Capital ($754,531.05) ($744,331.05) ($556,324.62) ($556,324.62) ($502,257.89) -34.1% -32% -21% -21% -19%

Retained Earnings $739,979.42 $753,613.27 ($70,365.31) $76,249.81 ($88,730.05) 33.4% 32% -3% 3% -3%

Total Shareholders' Equity ($14,551.63) $9,282.22 ($626,689.93) ($480,074.81) ($590,987.94) -0.7% 0% -23% -18% -22%

Total Liabilities & Shareholders' Equity $2,212,283 $2,319,116 $2,703,799 $2,677,283 $2,680,571 100.0% 100% 100% 100% 100%

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RATIO ANALYIS

BIZMINER- INDUSTRY FINANCIAL DATA

Our Ratio Analysis Industry Data is sourced from BizMiner (Brandow Company, Inc.). BizMiner produces granular industry statistical reports for business valuation professionals, accountants, the IRS, and other organizations. Raw data used by BizMiner is sourced from an array of the nation’s business databases, reporting agencies, and government statistical sources, including the IRS, Bureau of Labor Statistics, and the Economic Census of available sectors. According to BizMiner, it accesses over half a billion sourced data points from eighteen million business operations for each of its twice annual updates. Data is sourced from:

IRS SOI Corporation Income Tax Returns IRS SOI Corporation Tax Book IRS SOI 1040 Schedule C Income Tax Returns IRS SOI Statistics of Income- Individual Tax Statistics US Economic Census of Manufactures US Census Economy Overview US Census Annual Survey of Manufactures US Census Annual Retail Trade Survey US Census Annual Wholesale Trade Survey US Census Quarterly Financial Reports US Census County Business Patterns Bureau of Labor Statistics Monthly Employment Reports Bureau of Labor Statistics Monthly Unemployment Reports US Census Wholesale Trade Report US Census Quarterly (New Housing) Sales by Price and Financing US Census Total Construction Spending US Census Retail Trade Report US Census Quarterly Services Survey Commercial Real Estate Survey Credit Reporting Agencies Business Directories

Sales volume figures are for firms identifying this as their primary classification. For example, a report for retail furniture stores analyzes sales of stores whose predominant revenue stream is furniture sales; that data would not include furniture sold at a general department store. Firms in more detailed industry segments may opt to identify a higher level parent classification as their primary line of business, effectively reducing sales applied to the detailed segment.

It is sometimes difficult to ascertain precise sales data for the smallest firms in the databases. When precise numbers are not available, reports that offer a sales range may be utilized. When there is a very small number of firms in a category (most often startups, which are by nature often micro-firms) the sales is recorded at 150,000 (reflecting a 100,000-175,000 range).

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BIZMINER SUBJECT FILTER CRITERIA

This data in this report was filtered using the following criteria:

1. Release date:

2. Segment:

3. Industry:

4. Sales Class:

5. No. Firms:

Raw data shown in Appendix of this report.

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INTERNAL LIQUIDITY RATIOS

4/30/2014 1/1/2014 1/1/2013 1/1/2012 1/1/2011Industry Median

Internal Liquidity RatiosCurrent Ratio 1.3 1.2 0.4 0.5 0.2 1.8

Quick Ratio 0.8 0.9 0.3 0.4 0.1 1.2

Cash Ratio 0.8 0.9 0.3 0.3 0.0

Receivables Turnover 1516 182 100 83 86

Avg. # Days to Collect AR 0 Days 2 Days 4 Days 4 Days 4 Days 4 Days

Inventory Turnover #DIV/0! 24 25 26 27

Avg. # Days to Turn Inv. #DIV/0! 15 Days 15 Days 14 Days 13 Days 13 Days

Payables Turnover 46 45 61 22 11

Avg. # Days to Pay AP 8 Days 8 Days 6 Days 17 Days 32 Days 18 Days

Working Capital Turnover 128 -16 -11 -11 -8

Avg. # Days to Turn Working Captial 3 Days -23 Days -33 Days -34 Days -47 Days 15 Days

Cash Conversion Cycle #DIV/0! 9 Days 12 Days 2 Days -15 Days -1 Days

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# ݏ � ݑ$ݎ ݎ� �ݎ ݒݒݒݒݒݒݒݒݒݒݒݒݒݕݐݒ$ # ݏ ���ܥ �ܣ െ�# ݏ �"ܣ �"ܣ

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23 | P a g e

24 | P a g e

1/1/2

011

6/1/2

011

11/1/2

011

4/1/2

012

9/1/2

012

2/1/2

013

7/1/2

013

12/1/2

0130

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Short-Term Liquidity

Current RatioQuick RatioCash Ratio

1/1/2

011

5/1/2

011

9/1/2

011

1/1/2

012

5/1/2

012

9/1/2

012

1/1/2

013

5/1/2

013

9/1/2

013

1/1/2

014-60

-50

-40

-30

-20

-10

0

10

20

30

40

Short-Term Liquidity: AR, Inv, AP

Avg. # Days to Collect AR

Avg. # Days to Turn Inv.

Avg. # Days to Pay AP

Avg. # Days to Turn Working Captial

Cash Conversion Cycle

OPERATING EFFICIENCY RATIOS

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1/1/2

011

4/1/2

011

7/1/2

011

10/1/2

011

1/1/2

012

4/1/2

012

7/1/2

012

10/1/2

012

1/1/2

013

4/1/2

013

7/1/2

013

10/1/2

013

1/1/2

014

4/1/2

0140%

20%

40%

60%

80%

100%

120%

140%

Op Eff: Management's use of Assets

Net Fixed Asset Turnover

Net Total Assets Turnover

OPERATING PROFITABILITY RATIOS

26 | P a g e

BUSINESS OPERATING RISK RATIO (STABILITY)

27 | P a g e

FINANCIAL LEVERAGE ANALYSIS RATIOS

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1/1/2

011

4/1/2

011

7/1/2

011

10/1/2

011

1/1/2

012

4/1/2

012

7/1/2

012

10/1/2

012

1/1/2

013

4/1/2

013

7/1/2

013

10/1/2

013

1/1/2

014

4/1/2

014

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Financial Leverage: OCF Ratio

OCF Ratio

1/1/2

011

3/1/2

011

5/1/2

011

7/1/2

011

9/1/2

011

11/1/2

011

1/1/2

012

3/1/2

012

5/1/2

012

7/1/2

012

9/1/2

012

11/1/2

012

1/1/2

013

3/1/2

013

5/1/2

013

7/1/2

013

9/1/2

013

11/1/2

013

1/1/2

014

3/1/2

014

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

Business Operating Risk: Degree of Operating Leverage

DETERMINING THE EXPECTED MULTIPLE & CAP RATE

To assess the risk for a business buyer we calculate an expected return on investment that we call Expected CAP Rate. It is reflective of the return on investment a business Buyer would expect to achieve if we capitalize the Company's SDE; it is a figure of merit to measure Risk for an investor. The Expected Cap Rate depends on A) the type of company we are valuing and B) the risks within the subject Company we are valuing.

Our "build-up" method to calculate the Expected CAP Rate starts by first choosing a Range of SP/SDE Multiples taken from sales transactions of “similar” companies (“Comps”) to the Subject Company. For example, if we are valuing a medical practice, then we will use Comps of medical practices that sold in the past ten years. This is done by using transactional data from actual, similar sold businesses (Comps) from BizComps database (Note: CAP Rate is the inverse of SP/SDE multiples). Thus, the "Range" (floor and ceiling) is set by the Comps shown below in List of Comparables (Comps) section.

In our case we chose our comps using the criteria listed below in “The Comparables (Comps)” Section.

For our valuation of the Company, we found records where the lowest SP/SDE Multiple was (highest CAP Rate %) and Highest SP/SDE Multiple was (Lowest CAP Rate %).

29 | P a g e

THE COMPARABLES (COMPS)

General

The comparables used were assimilated from database. A detailed list of the comparables is shown below in the List of Comparables (Comps) section; the statistics of the transactions are compiled below on this page. A statistic of interest is the SP/SDE ratio; this represents the Sale Price-to-SDE of the companies sold, and is referred to as “The Multiple.” The criteria of the comparables are as follows:

a. The filter criteria were: i. Companies with the following characteristics:

1. Durable Products Wholesalers2. Sold in Florida in past 12 years3. Rent greater than $0.

ii. All outliers were removed until the mean and median of the SP/SDE (Sale Price to SDE) ratio were approximately equal.

b. Summary of Stats:i. records. Actual businesses sold.

ii. SP/SDE Mean of & Median of ; implies all outliers have been removed.

iii. R2 value of ; implies relationship between SDE and Sale Price. See the following “Sales Price to SDE” graph in “Graphic of Comparables Business & Subject Company” section.

Notes:

1. Mean and Median are almost equal by removing all “unusual transactions,” i.e., outliers.

2. The comps treat inventory, real estate, A/R, A/P as non-performing assets. Thus “Sale Price” or “SP” does not include these items.

Revenue SDE Sale Price Sale Price / SDE FF&E Inventory

Low $323 $74 $150 1.31 $10 $10

High $2,433 $1,047 $1,990 2.76 $187 $400Mean $1,249 $298 $643 2.12 $55 $140

Median N/A N/A N/A 2.03 N/A N/AStandard Deviation $773 $286 $599 0.42 $53 $143

Count 11 11 11 11 11 11

Comps Selected

30 | P a g e

LIST OF COMPARABLES (COMPS)

ID SIC NAICS Business Description Revenue SDE Inventory FF&E Rent/ RevenueFranchise RoyaltyEmployeesAsking Price Price Price / Revenue Price / SDE Down Pmt Terms Days on Mkt Sale Date Location01204 2675 322222 Whsle-Printer's Lamination 462 176 18 187 6% 7 418 408 0.88 2.32 100% SBA 197 4/30/2002 Tampa Bay, FL02350 5031 444190 Whsle-Doors/Windows 900 151 40 10 6% No 5 320 279 0.31 1.85 40% 7 Yrs @ 8% 102 8/24/2005 Florida02383 5045 421440 Whsle/Retail-Batteries 1004 108 50 30 5% No 4 310 283 0.28 2.62 89% 5 Yrs @ 8.5% 3/31/2009 Florida02448 5047 424210 Whsle-Medical Products 1857 507 400 120 5% No 14 1,400 1,400 0.75 2.76 100% 4 12/26/2004 Florida02449 5047 424210 Whsle-Medical Products 366 113 50 25 5% No 1 325 235 0.64 2.08 55% 5 Yrs @ 6% 210 12/3/2004 Florida02485 5065 421690 Whsle-Cell Phones 323 74 50 20 3% No 3 FT / 1 PT 175 150 0.46 2.03 50% 3 Yrs @ 7% 125 4/22/2005 Florida02510 5074 423720 Whsle-Plumbing Products 1817 174 210 55 4% No 5 365 305 0.17 1.75 52% 5 Yrs @ 7% 156 4/30/2003 Florida02590 5087 421850 Whsle-Cleaning Products 856 153 174 55 3% 7 227 200 0.23 1.31 100% 855 8/23/2002 Northwest Florida02943 5211 423310 Whsle-Windows/Doors 2433 1047 10 52 1% No 14 1,990 1,990 0.82 1.90 50% 10 Yrs @ 8% 131 6/26/2006 Florida11855 55131 422310 Whsle-Fabrics 2379 424 397 17 5% No 2 1,000 1,000 0.42 2.36 100% 739 4/28/2010 Florida03871 5699 448190 Whsle-Uniforms 1344 353 140 30 5% No 6 FT / 1 PT 860 825 0.61 2.34 85% 360 1/29/2009 Florida

31 | P a g e

Sale PriceSDE “Multiple”

GRAPHIC OF COMPARABLE BUSINESS & SUBJECT COMPANY

The following is a graphic representation of our opinion of the subject Company’s Operating Assets value relative to the comparable businesses as it relates to Sale Price vs. Seller’s Discretionary Earnings, SDE. It represents the Company values without any of the non-performing assets such as real estate, A/R, Inventory, etc.

32 | P a g e

Subject Company Operating Assets

(100%)

ENTERPRISE RISK FACTORS

Once we have the “Range” of CAP Rates chosen, then to continue our calculation of the Expected CAP Rate, which is within that "Range," we analyze the Subject Company's "Risk Factors" to determine where within our "Range" our Expected Cap Rate should fall; for instance, If the subject Company exhibits low risk characteristics due to there being very little owner personal goodwill and no significant customer concentration, then the Expected CAP Rate will be lower since the risk is lower. What’s more, the Expected CAP Rate will approach the low side of the "Range."

Based on our professional judgment and experience in selling businesses and performing business valuations, we have determined that following major risk factors influence the value of a business enterprise. These Enterprise Factors are shown in the table below and explained in detail in the next section called Risk Factors Details.

In order to quantify the Subject Company’s risk, a weight was assigned to each Enterprise Factor based on importance (rank) for that type of company, while a risk assessment score (1 to 4) was simultaneously applied to each Enterprise Factor in order to calculate the “weight” or “effect” on Expected CAP Rate. See section table below and section called Effect of Risk Factors on Company Value.

Note that a score of “1” implies most risk and “4” implies least risk, while “2.5” is nominal. What’s more, a rank score of “7” implies that for this particular type of company (Subject) this Enterprise Factor is the least important (e.g., for a restaurant, location could be ranked 2 or 3 in importance vs. a manufacturing business, which could have a rank of 6 or 7).

The combination of Rank and Risk Assessment are used to quantify where within our Comps’ Range our “Expected Multiple” or “Expected CAP Rate” for the Subject Company shall lie.

33 | P a g e

Risk Assessment

(1-worse; 4- best)

1 Business Dependency on Seller 2.8 47

2 Sales & Earnings Stability 2.7 20

6 Performing Assets & Build out 2.5 11

7 Location & Facilities 2.5 9

5 Company History Assessment 3.0 6

3 Sales and/or Earnings Trend 4.0 4

4 Barrier of Entry to Market 3.0 3

Expected Multiple 2.2

Expected CAP RATE 46%

Rank (importance) Enterprise Risk Factor Weight

The following sections describe in detail our assessment of the Subject Company’s characteristics relative to each of the Risk Factors.

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GOODWILL (PERSONAL VS. BUSINESS) RISK FACTORS

35 | P a g e

The Comps' The Comps'

Lowest SP/SDE Highest SP/SDE

Comparables "Range" from BIZCOMPS 1.3 1.4 1.5 1.5 1.6 1.7 1.7 1.8 1.9 2.0 2.0 2.1 2.2 2.3 2.3 2.4 2.5 2.5 2.6 2.7 2.8 1 1.2 1.3 1.5 1.6 1.8 1.9 2.1 2.2 2.4 2.5 2.7 2.8 3.0 3.1 3.3 3.4 3.6 3.7 3.9 4

Expected Multiple (SP/SDE) after Appling Risk Scores= 2.2 46%

Note: 1,2's are negs while 3,4's are positives; 2.5 is no change off center

Weights (1-7) Risk Factors

Risk Score (1-4)

1 Enterprise vs. Personal Goodwill 2.8Owner's Involvement and Presence/Management Structure4- Absentee (<10 hrs./week), manager(s), multiple employees

3- Part-time (< 30 hrs./week), manager(s), multiple employees

2.5- Full-time (>40hrs/week), manager(s), multiple employees

2- Full-time (>40hrs/week), no manager(s), multiple employees

1- Full-time (>40 hrs/week), no managers, no employees

2.5

Owner or Key Employee(s) Interaction w/ customers4- Owner does not interact with any current customers directly or indirectly

3- Owner interacts with some current customers, but none large (i.e., >10% revenue)

2- Owner interacts with some the large current customers (i.e., >30% revenue)

1- Owner interacts with large customers (i.e., >50%)

2.5

Owner or Key Employee(s) Involvement in critical roles? 4- No sales, No bidding, or No operations; No management of any kind

3- No sales, No bidding, No operations. Does have oversight of managers in these areas

2- Does outside sales, bidding, but no cold calls

1- Key salesman and does cold calls

2.5

Would a Covenant Not to Compete (CNTC) be necessary by the owner or key employee(s) if the business were sold? Yes- Assign 1

No- Assign 2.5

1.0

Would the owner and key employee(s) be willing to sign a CNTC? Yes- Assign 4

No- Assign 1

4.0

Business trade name (D/B/A) bear the name of the owner? Yes- Assign 1

No- Assign 44.0

Advertising or Outside/Inside Sales Expenditures 4- Greater than 15% or $50K, or have established sales force or distributors

3- Greater than 10% or $20K

2- Greater than 3% or $10K

1- Spends less than 3% or $5K and no sales force 3.0

47

Nominal vs. Comps

Comps' Highest CAP Rate is 77% Comps' Lowest CAP Rate is 36%

Factors Notes

Three Owners: Bobbye Stanley (50% owner; absentee). Bobbye's husband James Stanley is the Treasurer, but not a shareholder. Walter Maurer (25% owner; roles: GM, purchasing, interfacing with customers, tech support, pulls orders for customers; he is very experienced in the field). Matthew Kratochvil (25% owner; roles: sales manager, customer interface, tech support). To normalize the SDE to 1 FTE owner/operator, we shall addback only Matt's W2 income (treat him as the FTE owner/operator).

Employees: 2 FT and 1-2 PT employees. 1 FT clerk, 1 FT driver, & 1 PT clerk and 1 PT driver employees.

Key employees include 1) Toni; Roles: Office manager ; works 40 per wk; length employment: since inception of the company; pay: $20/hr.2) Gib; Roles: warehouse clerk, driver and customer interface; he can handle the business while the owners are out (short time).

Since there are 2 key owners, both interacting with all the customers, both with key roles we shall assign a 2.5.

Most of the business comes in for the following reasons: 1) Service Level. Walt and Matt are very knowledgeable, with years of trade experience. They also focus on being responsive to client needs through technical support and inventory availability. 2) They are strategically located between Fort Meyers and Naples (too small for the large competitors), so they enjoy a less competitive market. For this reason a 3.0 shall be awarded.

Since there are 2 key owners, both interacting with all the customers, we shall assign a 2.5.

Assess. Weight

130.9

Rank Weight

Nominal CAP Rate is 49%

Expected CAP Rate= Since Risk Level is

46

SALES STABILITY RISK FACTORS

36 | P a g e

2 Sales & Earnings Stability 2.7Number of unique, unrelated customers annually? 4- Thousands

3- Hundreds

2- Tens

1- Less than 19

3.0

Note: Pick Comps first; then make all "common denominators" equal to 2.5

Customer/Supplier/Sales Person Concentration 4- Virtually no concentration

3- Some Concentration

2- Moderate Concentration

1- High Concentration2.0

How much of the revenue is recurring? 4- At least 50%

3- At least 25%

2- less than 10%

1- None

2.5

How many years have sales or earnings been within +/- 15%? 4- Four Years

3- Three Years

2- Two Years

1- Not in past 4 years

3.0

The Company's dividend or growth capacity (per IRS RR 59-60) 4- Company has had the capacity for 4 of the past 4 years AND Trending UP

3- Company has had the capacity for 3 of the past 4 years AND Trending UP

2- Company has had the capacity for 2 of the past 4 years OR downward trend

1- Company has not had the capacity in the past 4 years OR Significant downward trend

3.0

Market Stability 4- Very stable & expect no long-term slowdown

3- Very stable now, but not sure in long-term

2- Unsure based on current economic indications

1- Unsure based on current economy

2.5

Company sells wholesale HVAC equipment primarily to contractors (~80% of sales) and individual (~20%). The company also sells HVAC-R (refrigeration parts), but not as significant as the HVAC systems. The contractor customers primarily serve the Residential condos (~70% of the 80% sales) and commercial building market (~30% of the 80% sales). Company has 100's of customers.

The largest customer represents ~30% of sales; long-time customer (~8yrs).

Second largest customer is ~10% of sales.

There are 2 customers that are ~5% each.

Since we are using same comps a 2.5 shall be awarded.

53.320

This is the amount of funds (net income) remaining to meet all demands in support of future growth (e.g., working capital, capital expenditures). The measure known as "net cash flow to equity" is often considered a proxy for "dividend paying capacity" in regards to RR 59-60 as it represents the cash flow available to equity holders, i.e., potential dividends.

Economy seems to be rebounding.

There are large changes, but all in a positive direction, and probably due to the rebounding economy.

OTHER RISK FACTORS

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6 Performing Assets (FF&E)

FF&E Current Value vs. Comps' or Condition of FF&E 2.54- > 75% of asking price and/or Excellent Condition

3- > 75% of asking price and/or Very good Condition

2- < 25% of asking price and/or Poor Condition

1- < 25% of Asking Price and/or in Very Poor Condition or nearing obsolescence

Weights (1-7)

7 Location & Facilities

1- Poor

2- Bad

2.5- Not Bad

3- Good

4- Excellent

2.5

Weights (1-7)

5 Company History Assessment

1- Company is less than 2 years old

2- Recent Start-up Company/Not Well Established (less than 4 years)

2.5- Established Company/Good Customer Base (4-9 years)

3- Well Established Company/Good Customer Base (10-15 years)

4- Long Record of Successful Business/Strong Customer Base(16+ years)

Weights (1-7)

3 Gross Revenues and SDE Historical Trends4- Gross and SDE Avg % Δ > 20%

3- Gross and SDE Avg % Δ > 10%

2- Either Gross or SDE Avg % Δ Declining >10%

1- Either Gross or SDE Avg % Δ Declining >20%

Weights (1-7)

4 Barrier of Entry to Market1- Extremely easy to enter; low capital investment, no special training, or no special licenses

2- Easy to enter; moderate capital investment AND no special training or no special licenses

2.5- Moderate entry; moderate capital investment AND special training or licenses

3- Difficult to enter; high capital investment OR special training or special licenses

4- Extremely difficult to enter; high capital investment AND special training or special license

Sum of weighted factors

Medium Business Factor (Weighted)

FF&E is current value ~$30k. Note: mean $55k. Mainly consists of computer system with new server; 16' Box Truck (2001, well maintained, hydraulic lift gate); Ford F350 Box Truck (12'; old Ryder Truck); Forklift

Recently moved into a new space across the street from previous space. New rent terms are much more favorable. Note the recast historical rent adjustments.

Historical avg. % Gross has increased ~9% and Avg % SDE has increased ~35%.

Given the expertise, location, reputation, and required inventory capital, there would be a moderately high barrier for a competitor.

4

6

3

27

290.82.908

7.5

11

3.0

4.0

100

18

44

9

3.0

Company est. in 2002.

10

EFFECT OF RISK FACTORS ON COMPANY VALUE

The Graph below shows graphically the most influential risk factors contributing to the subject Company’s Expected CAP Rate or Multiple. Note: Since the “Multiple” is the inverse of the CAP RATE either could be used to assess risk.

38 | P a g e

RECONCILIATION OF CONCLUSION OF VALUE (SANITY CHECK)

To best reconcile our against reality, we shall consider some of the typical calculations that may be performed by hypothetical Buyers and Lenders in an actual business acquisition.

The two most common scenarios for a business acquisition are the following:

1. An unleveraged acquisition; this is where a Buyer buys the business without financing.

2. A leveraged acquisition; this is where a Buyer would secure financing from a third party lender or through the Seller via a Seller-Held Note.

Thus in order to reconcile our business valuation against these two real-life circumstances, the following “pressure points” are analyzed, namely- Historical Capitalized Earnings, Historical Net Margins, Before-Tax Cash Flow using historical SDE, and Debt Service Ratios a lender would consider. In addition, Personal Goodwill and Customer Concentration also could become very influential.

Regardless of the valuation, it is these “pressure points” that directly impact a Buyer and Lender’s final decision.

For the Subject Company, the most significant pressure points appear to be:

1. CAP RATE in 2010.2. Margins from 2009 through 2012.3. Cash Flow in 2010.4. Debt Service Ratio for 2010 thru 2012.

See more details below.

39 | P a g e

CAPITALIZED EARNINGS

With any investment of any kind, investors will base their decisions whether to invest, and how much to invest, on the risk level and their personal involvement necessary to manage that investment. For instance, if an investor has $1 Million to invest, but she does not want work and wants to assume minimal risk, then a CD or Bond may be the best investment, but the ROI will be very low, probably 2% or 3%. If, however, the investor would like a better return on her $1 Million as she is willing to assume a more risk and be more involved (but not 40 to 50 hours per week), she may consider buying investment property, where she could expect 6% to 12% ROI, i.e., CAP Rate. Finally, if the investor expects an even higher ROI, she may consider buying a business, where the risk is much higher, as would be her required involvement in the management of the “investment.” This is where the “Expected CAP Rate” comes in; it is the ROI that is “expected” for the high level of risk and involvement inherent to businesses. What’s more, since the risk is so much higher than a CD, bond, or investment property, the “Expected CAP Rate” is much higher, e.g., 20% to 200%, depending on the type of company and internal risks within the Company.

Below we compare the historical Subject Company’s performance against our Expected CAP Rate.

Notes:

1. the 2010 CAP Rate drops below our Comps’ range, i.e., 20% compared to 36%.

2. Given the company’s projections and trend this pressure point is highly mitigated.

40 | P a g e

Capitalized Earnings>

CAP Rate Range chosen for this valuation is from 38% (lowest Risk) to 77% (highest Risk)

Expected CAP Rate is 45.9% since Risk Level is Nominal vs. Comps

Weighted Subject Co. CAP Rate= 46% Using wSDE

Current year Subject Co. CAP Rate= 47%FY13 P&L (11 mo. Annualized)

Worse case Subject Co. CAP Rate= 20% FY10 Tax Return

Best case CAP Rate= 47%FY13 P&L (11 mo. Annualized)

For that period, the subject Co. CAP Rate is above the Expected CAP Rate of 46%

For that period, the subject Co. CAP Rate is below the Expected CAP Rate of 46%

For that period, the subject Co. CAP Rate is outside the Comps' range of 36%

"Expected CAP Rate" is the return on investment a Buyer would expect to achieve if we capitalize the Company's SDE; it is a figure of merit to measure Risk for an investor. It depends on A) the type of company and B) the risk within the subject Company.

20%

46% 47%

0%

10%

20%

30%

40%

50%

60%

Historical CAP Rates vs. Expected CAP Rate

46%•Expected CAP Rate for the Subject Company

8% •Nominal for Real Estate

3%•Nominal for CD or Bond

NET MARGINS

In general, notwithstanding our Subject Company, a Net Owner Benefit Margin (i.e., SDE/Rev) less than 10% is a concern; 10% to 15% we consider marginal; and greater than 15% we consider healthy. The reason is that a business that operates with small margins has greater risk of having cash flow problems in the event of unforeseen circumstances such as costs increases, overhead increases, etc.

However, to properly assess margin risk for our Subject Company, we compare our Subject Company to our Comps’ margins.

Notes:

1.

41 | P a g e

Historical Margin Analysis

> Net Owner Benefit margin SDE/ Rev <10% is a concern; 10% to 15% marginal; 15%+ healthy (see BizComps Stats to compare)

current year Net Profit Margin= 12%FY13 P&L (11 mo. Annualized)

worse case Net Profit Margin= 6% FY10 Tax Return

Best case Net Profit Margin= 12%FY13 P&L (11 mo. Annualized)

Mean SDE/ REV of Comps= 24%

6%

12%

0%

5%

10%

15%

20%

25%

30%

Net Margin Range

BEFORE-TAX-CASH FLOW

Assuming a leveraged acquisition, the Before-Tax Cash Flow (BTCF) becomes a pressure point that a Buyer must consider. Typically BTCF becomes more relevant in an acquisition where a large amount of non-performing assets are also sold with the company or necessary to operate the Company. The most common case is when a large amount of Inventory or operating capital is necessary.

Below are Typical Terms that one may expect for this acquisition of this Company. The Sale Price is comprised of the Operating Assets plus Inventory.

Notes:

1. At the Subject Company’s Operating Assets value of At the Subject Company’s Operating Assets value of $337,111 plus inventory at $220,642 the 2010 BTCF is significantly different from the subsequent years.

2. If the Company continues on its growth path, and 2010 becomes less relevant, the valuation becomes more attractive to prospective Buyers. This is the expectation by management and appears true based on the Company trends.

42 | P a g e

Recommended Sale Price = $557,752

Down Payment = $167,326 30%

Debt ServiceFirst Mortgage with Bank $390,427 70% Percent Bank will finance

Interest Rate 5% Assume SBA loan

No. Years 7 SBA loans typically amortized over 7 yrs if no RE; 10 to 15 yrs with Real Estate if blendedMonthly Pmt $5,518

Seller Promissory Note $0 0% Required Percentage Financed by ownerInterest Rate 5%No. Years 10Monthly Pmt $0

Total Monthly PMT $5,518Total Annual PMTs $66,219

Operating Assets (100% with controlling interest) + Inventory Buyer dwn pmt

Before Tax Cash Flow (BTCF)

> Owner Benefit while servicing the debt.

wSDE Less Annual Debt Service= $88,442

current year SDE Less Annual Debt Service=$93,346 FY13 P&L (11 mo. Annualized)

worse case SDE Less Annual Debt Service= $1,371 FY10 Tax Return

best case SDE Less Annual Debt Service= $93,346 FY13 P&L (11 mo. Annualized)

Using wSDE

$1

$88 $93

$0$10$20$30$40$50$60$70$80$90

$100

Thou

sand

s

BTCF Range

DEBT-SERVICE RATIOS

Debt-Service Ratio is another pressure point. It is very common that the Small Business Administration (SBA) is used as a lending source for main-street business acquisitions. Therefore, to assess a lender’s risk, we shall assume a Buyer will be seeking financing from the SBA under the terms delineated above in the Before-Tax Cash Flow section.

The equation for Debt Service Ratio is as follows. In general, the ratio must be greater than about 1.5 for three consecutive years in order to be considered for approval. Of course, this calculation is only a part of the decision process, and the exact criteria may vary from lender to lender.

SDE is Seller’s Discretionary Earnings of the Subject Company. BPCF is the Buyer’s personal cash flow. In other words, the creditor considers the Buyer’s

personal debt, aside from the acquisition of the Company, into its assessment. Ann. Debt is the annual debt service to acquire the Company under the terms listed above.

Notes:

1. We used $50,000 as the Buyer’s Personal Cash Flow.

2. This is only a hypothetical example under an asset sale scenario. The bank will calculate a more accurate debt service ratio for the Buyer.

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Buyer's Personal Cash Flow (BPCF)= ($50,000) without the business income

Debt Service= 1.7 FY13 P&L (11 mo. Annualized) Debt Service= 1.0 FY12 Tax ReturnDebt Service= 0.9 FY11 Tax ReturnDebt Service= 0.3 FY10 Tax Return

* To properly calculate, make sure all questionable Add-Backs are removed.

Debt Service or Coverage Ratio > 1.5*

> 1.5Ann. DebtSDE + BPCF

FIRM PROFILE

OUR MISSION

Ameri-Street Advisory SM (ASA) was founded to serve a specific market. Our mission is to provide affordable, comprehensive, AICPA compliant business valuations for small, privately held, American main-street businesses.

The fact is that most companies that provide business valuations:

Are too expensive. Most valuation costs exceed $5,000.

ASA’s fees are a fraction of the cost. We can make our services affordable by using our proprietary, internally developed tools and by maintaining control of our overhead expenses.

Do not have practical experience in selling companies; thus do not have the true wherewithal and experience to assess “Fair Market Value” as it relates to main-street businesses.

ASA was founded by experienced M&A and business intermediaries with extensive practical experience in actually selling and operating companies. When calculating fair market value, our analysts utilize their practical experiences in order to more accurately assess risk and hence properly capitalize the business earnings.

Only use templates and generic reports which are not completely applicable to small companies.

ASA’s deliverable is 100% in compliance with the American Institute of Certified Public Accounts (AICPA) Statement on Standards for Valuation Services (SSVS).

Because ASA was founded by business intermediaries with real-life experiences and strong financial backgrounds, we have the ability to accurately quantify real-life business characteristics in order to properly assess risk and hence value.

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ANALYST & PRINCIPAL PROFILES

FRANCESCO URSO, PRINCIPAL

Franc is a certified public accountant in Florida with over 20 years of experience in business consulting and operations and buying and selling businesses. Franc began his business career when he co-founded a real estate investment group that purchased, managed and sold commercial real estate and retail property. Franc has a Master’s Degree from the University of Florida in Accounting and a Bachelor’s Degree in Accounting and Engineering from the University of South

Florida.

After graduating from University of Florida, Franc joined the Tampa office of Price Waterhouse where he serviced clients in the manufacturing, real estate, retail and financial services industries. His clients included both large and small companies like Thrucomm, Lykes Brothers, Walter Industries, World Access, Nobility Homes, Sun Hydraulics, Pinnacle Towers, Prudential Florida Realty, Bay Transportation, Lehigh Acres, Celotex, Health Plan Services, Harvard Industries and Disney. His primary responsibilities included auditing his client's books and records and performing due diligence for acquisitions. Franc was also involved in the IPO of Sun Hydraulics.

Franc became Controller for Thrucomm, Inc., an early-stage high-growth telecommunications company, located in St. Petersburg, Florida. While at Thrucomm, Franc was successful in raising $6.5 million in bridge financing and $5 million in leasing financing; completed a private placement of $15 million in Senior Preferred Stock; and raised $70 million in capital from private equities market. Franc was also responsible for day-to-day activities of the accounting department and completing special projects for the executive team.

Franc then joined Gulf Atlantic Capital, an investment banking firm, located in Tampa, Florida, where he helped clients sell their middle market companies. While at Gulf Atlantic, Franc was integral in selling the following businesses:

$45 million wallboard manufacturer, located in Birmingham, Alabama

$6 million apparel machinery manufacturer, located in Atlanta, Georgia

$100 million auto parts distributor, located in Dallas, Texas and Tampa, Florida

$50 million 50-chain restaurant franchisee, located in Scottsdale, Arizona

$15 million specialty wire manufacturer, located in New York, New York

$80 million go-cart manufacturer, located in Ft. Wayne, Indiana

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SALVATORE B. URSO, PRINCIPAL

Salvatore Urso founded Ameri-Street Advisory (ASA) in 2010. ASA is a spin-off of Florida Business Acquisitions, a business brokerage firm in Tampa, FL established in 2006. See FloridaBizAcq.com.

He, along with his brother Francesco Urso, CPA, developed a proprietary methodology that incorporates key, standard valuation techniques and

fundamental concepts that are commonly used by valuation experts and M&A firms to sell and value companies. The system incorporates mathematical calculations that are used to quantify real-life characteristics into the “build-up” of the risk model and Fair Market Value of main-street businesses.

Over the past eight years, Mr. Urso has personally interviewed over 600 business owners, performed over 300 business valuations, and sold over 40 companies; he has over 20 years of experience in business, sales, and marketing, which has rendered him very adept and effective at selling and valuating companies.

While obtaining practical experience in the sale of businesses, local attorneys and business owners began employing Mr. Urso to provide business valuations for various uses- namely, bankruptcy, divorce, partner disputes, business mergers and acquisitions. CPAs, lenders, and attorneys often refer their clients to Mr. Urso and his firm. Recently, Mr. Urso has been called upon to testify as an expert witness in divorce and bankruptcy cases.

Aside from Ameri-Street Advisory and Florida Business Acquisitions, Mr. Urso co-founded two family businesses and is a managing member in the Tampa based Comfort Keepers home health agency. He has personally started, bought, managed and sold investment properties and businesses for two decades. His fundamental recipe is to combine integrity, honesty, experience and attention to detail, so all sides experience a win-win business transaction.

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WILLIAM BURNHAM, PRINCIPAL

Bill Burnham is a lifelong resident of the Tampa Bay area. He is a graduate of the University of South Florida where he majored in Accounting. He obtained his MBA from The Florida Institute of Technology in 1983. Bill has 25 years of experience working with Fortune 500 companies, nearly twenty of those years in management positions. During that time he managed over 200 employees and spent time in accounting, finance, manufacturing, production control and

strategic planning. He managed government contract budgets in excess of 50 million dollars and operating budgets of more than 25 million dollars. He prepared analysis for potential acquisitions, proposals for government contracts and conducted companywide training programs on several different topics. Bill’s experience includes successfully integrating the manufacturing operations of acquired companies into existing operations on two separate occasions. He also led the implementation of a new MRP system which was completed six months ahead of schedule. Complementing his large company background, Bill also has many years of experience as a small business owner. In his own business Bill tripled his sales, achieved twenty percent profit margins and retained ninety eight percent of his customers in his first four years in business. Bill combines this diverse background of experience with a passion for small businesses and an overarching commitment to honesty to make him uniquely qualified as an associate with Ameri-Street Advisory.

CHRISTOPHER HENDERSON, PRINCIPAL

Chris graduated from the University of Georgia with an MS in artificial intelligence and a BS in computer science. He has lived in the Orlando area since 1997. He has more than fifteen years of business experience including large-scale project management, budgeting, financial analysis, staffing, business acquisition, customer relationship management, and technical oversight. He has also owned and managed personal real estate investments for over 15 years.

After working for years in a large corporate environment with companies such as Lockheed Martin, TRW, Northrop Grumman, Boeing, and SAIC, he founded his own company, which was consistently one of the top performers of its type nationally. Organized from the outset for eventual sale, this business sold within weeks for full asking price.

While selling his own company, Chris became fascinated by the workings of the business brokerage industry and realized it would be a good fit for his analytical, organizational, and communication skills. He was recruited to join the firm not only for these professional skills, but also because of his integrity and personal attributes.

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STATEMENT OF ASSUMPTIONS & LIMITING CONDITIONS

1. The conclusion of value arrived at herein is valid only for the stated purpose as of the date of the valuation.

2. Financial statements and other related information provided by the Subject Company or its representatives, in the course of this engagement, have been accepted without any verification as fully and correctly reflecting the enterprise’s business conditions and operating results for the respective periods, except as specifically noted herein. our Firm has not audited, reviewed, or compiled the financial information provided to us and, accordingly; we express no audit opinion or any other form of assurance on this information.

3. Public information and industry and statistical information have been obtained from sources we believe to be reliable. However, we make no representation as to the accuracy or completeness of such information and have performed no procedures to corroborate the information.

4. We do not provide assurance on the achievability of the results forecasted by the Subject Company because events and circumstances frequently do not occur as expected; differences between actual and expected results may be material; and achievement of the forecasted results is dependent on actions, plans, and assumptions of management.

5. The conclusion of value arrived at herein is based on the assumption that the current level of management expertise and effectiveness would continue to be maintained, and that the character and integrity of the enterprise through any sale, reorganization, exchange, or diminution of the owners’ participation would not be materially- or significantly changed.

6. This report and the conclusion of value arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein- They may not be used for any other purpose or by any other party for any purpose. Furthermore the report and conclusion of value are not intended by the author and should not be construed by the reader to be investment advice in any manner whatsoever. The conclusion of value represents the considered opinion of our Firm, based on information furnished to them by the Subject Company and other sources.

7. Neither all nor any part of the contents of thi5 report especially the conclusion of value: the identity of any valuation specialist(s), or the firm with which such valuation specialists are connected or any reference to any of their professional designations) should be disseminated to the public through advertising, media, public relations, news media, sales media, mail, direct transmittal, or any other means of communication without the prior written consent and approval of our Firm.

8. Future services regarding the subject matter of this report, including, but not limited to testimony or attendance in court, shall not be required of our Firm unless previous arrangements have been made in writing.

9. Our Firm is not an environmental consultant or auditor, and it takes no responsibility for any actual or potential environmental liabilities. Any person entitled to rely on this report, wishing to know whether such liabilities exist, or the scope and their effect on the value of the property, is encouraged to obtain a professional environmental assessment. Our Firm does not conduct or provide environmental assessments and has not performed one for the subject property.

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10. Our Firm has not determined independently whether the Subject Company is subject to any present or future liability relating to environmental matters (including, but not limited to CERCLA/Superfund liability) nor the scope of any such liabilities. our Firm’s valuation takes no such liabilities into account, except as they have been reported to our Firm by the Subject Company or by an environmental consultant working for the Subject Company, and then only to the extent that the liability was reported to us in an actual or estimated dollar amount. Such matters, if any, are noted in the report. To the extent such information has been reported to us, our Firm has relied on it without verification and offers no warranty or representation as to its accuracy or completeness.

11. Our Firm has not made a specific compliance survey or analysis of the subject property to determine whether it is subject to, or in compliance with, the American Disabilities Act of 1990, and this valuation does not consider the effect if any, of noncompliance.

12. The conclusion of value (or the calculated value) in this report deviates from the Statement on Standards for Valuation Services as a result of published governmental, judicial, or accounting authority.

13. No change of any item in this appraisal report shall be made by anyone other than our Firm, and we shall have no responsibility for any such unauthorized change.

14. Unless otherwise stated, no effort has been made to determine the possible effect, if any, on the subject business due to future Federal, state, or local legislation, including any environmental or ecological matters or interpretations thereof.

15. If prospective financial information approved by management has been used in our work, we have not examined or compiled the prospective financial information and therefore, do not express an audit opinion or any other form of assurance on the prospective financial information or the related assumptions. Events and circumstances frequently do not occur as expected and there will usually be differences between prospective financial information and actual results, and those differences may be material.

16. We have conducted interviews with the current management of the Subject Company concerning the past, present, and prospective operating results of the company.

17. Except as noted, we have relied on the representations of the owners, management, and other third parties concerning the value and useful condition of all equipment, real estate, investments used in the business, and any other assets or liabilities, except as specifically stated to the contrary in this report. We have not attempted to confirm whether or not all assets of the business are free and clear of liens and encumbrances or that the entity has good title to all assets.

 

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INTERNATIONAL GLOSSARY OF BUSINESS VALUATION TERMS

To enhance and sustain the quality of business valuations for the benefit of the profession and its clientele, the below identified societies and organizations have adopted the definitions for the terms included in this glossary5.

Adjusted Book Value Method—a method within the asset approach whereby all assets and liabilities (including off-balance sheet: intangible: and contingent) are adjusted to their fair market values. (NOTE: In Canada on a going concern basis)

Adjusted Net Asset Method- see Adjusted Book Value Method.

Appraisal- see Valuation.

Appraisal Approach- see Valuation Approach.

Appraisal Date- see Valuation Date.

Appraisal Method- see Valuation Method.

Appraisal Procedure- see Valuation Procedure.

Arbitrage Pricing Theory- a multivariate model for estimating the cost of equity capital, which incorporates several systematic risk factors.

Asset (Asset-Based) Approach—a general way of determining a value indication of a business: business ownership interest: or security using one or more methods based on the value of the assets net of liabilities.

Beta- a measure of systematic risk of a stock; the tendency of a stock’s price to correlate with changes in a specific index.

Blockage Discount—an amount or percentage deducted from the current market price of a publicly traded stock to reflect the decrease in the per share value of a block of stock that is of a size that could not be sold in a reasonable period of time given normal trading volume.

Book Value-see Net Book Value.

Business- see Business Enterprise.

Business Enterprise—a commercial, industrial, service, or investment entity (or a combination thereof) pursuing an economic activity.

Business Risk—the degree of uncertainty of realizing expected future returns of the business resulting from factors other than financial leverage. See Financial Risk.

Business Valuation—the act or process of determining the value of a business enterprise or ownership interest therein.

Capital Asset Pricing Model (CÅPM)—a model in which the cost of capital for any stock or portfolio of stocks equals a risk-free rate plus a risk premium that is proportionate to the systematic risk of the stock or portfolio.5 Reproduced verbatim from the International Glossary of Business Valuation Terms (the Glossary)

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Capitalization—a conversion of a single period of economic benefits into value.

Capitalization Factor—any multiple or divisor used to convert anticipated economic benefits of a single period into value.

Capitalization of Earnings Method—a method within the income approach whereby economic benefits for a representative single period are converted to value through division by a capitalization rate.

Capitalization Rate—any divisor usually expressed as a percentage) used to convert anticipated economic benefits of a single period into value.

Capital Structure—the composition of the invested capital of a business enterprise; the mix of debt and equity financing.

Cash Flow—cash that is generated over a period of time by an asset, group of assets, or business enterprise. It may be used in a general sense to encompass various levels of specifically defined cash flows. When the term is used, it should be supplemented by a qualifier (for example, “discretionary” or “operating”) and a specific definition in the given valuation context.

Common Size Statements—financial statements in which each line is expressed as a percentage of the total. On the balance sheet: each line item is shown as a percentage of total assets, and on the income statement, each item is expressed as a percentage of sales.

Control—the power to direct the management and policies of a business enterprise.

Control Premium—an amount or a percentage by which the prorata value of a controlling interest exceeds the pro rata value of a non-controlling interest in a business enterprise to reflect the power of control.

Cost Approach—a general v of determining a value indication of an individual asset by quantifying the amount of money required to replace the future service capability of that asset.

Cost of Capital—the expected rate of return that the market requires in order to attract funds to a particular investment.

Debt-Free—ire discourage the use of this term. See Invested Capital.

Discount for Lack of Control—an amount or percentage deducted from the pro rata share of value of 100% of an equity interest in a business to reflect the absence of some or all of the powers of control.

Discount for Lack of Marketability—an amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability.

Discount for Lack of Voting Rights—an amount or percentage deducted from the per share value of a minority interest voting share to reflect the absence of voting rights.

Discount Rate—a rate of return used to convert a future monetary sum into present value.

Discounted Cash Flow Method—a method within the income approach whereby the present value of future expected net cash flows is calculated using a discount rate.

Discounted Future Earnings Method—a method within the income approach whereby the present value of future expected economic benefits is calculated using a discount rate.

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Economic Benefits—inflows such as revenues, net income, net cash flows. etc.

Economic Life—the period of time over which property may generate economic benefits.

Effective Date—see Valuation Date.

Enterprise—see Business Enterprise.

Equity—the owner’s interest in property after deduction of all liabilities.

Equity Net Cash Flows—those cash flows available to pay out to equity holders (in the form of dividends) after funding operations of the business enterprise, making necessary capital investments, and increasing or decreasing debt financing.

Equity Risk Premium—a rate of return added to a risk-free rate to reflect the additional risk of equity instruments over risk free instruments (a component of the cost of equity capital or equity discount rate).

Excess Earnings—that amount of anticipated economic benefits that exceeds an appropriate rate of return on the value of a selected asset base (often net tangible assets) used to generate those anticipated economic benefits.

Excess Earnings Method—a specific way of determining a value indication of a business, business ownership interest, or security determined as the sum of a) the value of the assets derived by capitalizing excess earnings and b) the value of the selected asset base. Also frequently used to value intangible assets. See Excess Earnings.

Fair Market Value—the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arms-length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts. (NOTE: In Canada, the term “price” should be replaced with the term “highest price”.)

Fairness Opinion—an opinion as to whether or not the consideration in a transaction is fair from a financial point of view.

Financial Risk—the degree of uncertainty of realizing expected future returns of the business resulting from financial leverage. See Business Risk.

Forced Liquidation Value—liquidation value, at which the asset or assets are sold as quickly as possible, such as at an auction.

Free Cash Flow—we discourage the use of this term. See Net Cash Flow.

Going Concern—an ongoing operating business enterprise.

Going Concern Value—the value of a business enterprise that is expected to continue to operate into the future. The intangible elements of Going Concern Value result from factors such as having a trained work force, an operational plant, and the necessary licenses, systems, and procedures in place.

Goodwill—that intangible asset arising as a result of name, reputation, customer loyalty, location, products, and similar factors not separately identified.

Goodwill Value—the value attributable to goodwill.

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Guideline Public Company Method- a method within the market approach whereby market multiples are derived from market prices of stocks of companies that are engaged in the same or similar lines of business and that are actively traded on a free and open market.

Income (Income-Based) Approach—a general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more methods that convert anticipated economic benefits into a present single amount.

Intangible Assets—nonphysical assets such as franchises, trademarks, patents, copyrights, goodwill, equities, mineral rights, securities, and contracts (as distinguished from physical assets) that grant rights and privileges and have value for the Internal Rate of Return—a discount rate at which the present value of the future cash flows of the investment equals the cost of the investment.

Intrinsic Value—the value that an investor considers, on the basis of an evaluation or available facts, to be the “true” or “real” value that will become the market value when other investors reach the same conclusion. When the term applies to options, it is the difference between the exercise price and strike price of an option and the market value of the underlying security.

Invested Capital—the sum 0f equity and debt in a business enterprise. Debt is typically (a) all interest-bearing debt or (b) long-term, interest-bearing debt. When the term is used, it should be supplemented by a specific definition in the given valuation context.

Invested Capital Net Cash Flows—those cash flows available to pay out to equity holders (in the form of dividends) and debt investors (in the form of principal and interest) after funding operations of the business enterprise and making necessary capital investments.

Investment Risk—the degree of uncertainty as to the realization of expected returns.

Investment Value—the value to a particular investor based on individual investment requirements and expectations. (NOTE: in Canada the term used is “Value to the Owner”)

Key Person Discount—an amount or percentage deducted from the value of an ownership interest to reflect the reduction in value resulting from the actual or potential loss of a key person in a business enterprise

Levered Beta—the beta reflecting a capital structure that includes debt.

Limited Appraisal—the act or process of determining the value of a business, business ownership interest security or intangible asset with limitations in analyses, procedures, or scope.

Liquidity—the ability to quickly convert property to cash or pay a liability.

Liquidation Value—the net amount that would be realized if the business is terminated and the assets are sold piecemeal. Liquidation can be either “orderly” or “forced.”

Majority Control—the degree of control provided by a majority position.

Majority Interest—an ownership interest greater than 50% of the voting interest in a business enterprise.

Market (Market-Based) Approach—a general way of determining a value indication of a business, business ownership interest, security, or intangible asset by using one or more

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methods that compare the subject to similar businesses, business ownership interests, securities, or intangible assets that have been sold.

Market Capitalization of Equity—the share price of a publicly traded stock multiplied by the number of shares outstanding.

Market Capitalization of Invested Capital—the market capitalization of equity plus the market value of the debt component of invested capital.

Market Multiple—the market value of a company’s stock or invested capital divided by a company measure (such as economic benefits, number of customers).

Marketability—the ability to quickly convert property to cash at minimal cost.

Marketability Discount—see Discount for Lack of Marketability.

Merger and Acquisition Method—a method within the market approach whereby pricing multiples are derived from transactions of significant interests in companies engaged in the same or similar lines of business.

Mid-Year Discounting—a convention used in the Discounted Future Earnings Method that reflects economic benefits being generated at midyear approximating the effect of economic benefits being generated evenly throughout the year.

Minority Discount—a discount for lack of control applicable to a minority interest.

Minority Interest—an ownership interest less than 50% of the voting interest in a business enterprise.

Multiple—the inverse of the capitalization rate Net Book Value—with respect to a business enterprise, the difference between total assets (net of accumulated depreciation, depletion, and amortization) and total liabilities as they appear on the balance sheet (synonymous with Shareholder’s Equity. With respect to a specific asset, the capitalized cost less accumulated amortization or depreciation as it appears on the books of account of the business enterprise.

Net Cash Flows—when the term is used, it should be supplemented by a qualifier. See Equity Net Cash Flows and Invested Capital Net Cash Flows.

Net Present Value—the value, as of a specified date, of future cash inflows less all cash outflows (including the cost of investment) calculated using an appropriate discount rate.

Net Tangible Asset Value—the value of the business enterprise’s tangible assets (excluding excess assets and non-operating assets) minus the value of its liabilities.

Non-operating Assets—assets not necessary to ongoing operations of the business enterprise. (NOTE: in Canada, the term used is “Redundant Assets”)

Normalized Earnings—economic benefits adjusted for nonrecurring, noneconomic, or other unusual items to eliminate anomalies and/or facilitate comparisons.

Normalized Financial Statements—financial statements adjusted for non-operating assets and liabilities and/or for nonrecurring, noneconomic: or other unusual items to eliminate anomalies and/or facilitate comparisons.

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Orderly Liquidation Value—liquidation value at which the asset or assets are sold over a reasonable period of time to maximize proceeds received.

Premise of Value—an assumption regarding the most likely set of transactional circumstances that may be applicable to the subject valuation; for example, going concern, liquidation.

Present Value—the value, as of a specified date, of future economic benefits and/or proceeds from sale, calculated using an appropriate discount rate.

Portfolio Discount—an amount or percentage deducted from the value of a business enterprise to reflect the fact that it owns dissimilar operations or assets that do not fit well together.

Price/Earnings 1%Iultiple—the price of a share of stock divided by its earnings per share.

Rate of Return—an amount of income loss) and/or change in value realized or anticipated on an investment, expressed as a percentage of that investment.

Redundant Assets—see Non-operating Assets.

Report Date—the date conclusions are transmitted to the client.

Replacement Cost New—the current cost of a similar new property having the nearest equivalent utility to the property being valued.

Reproduction Cost New—the current cost of an identical new property.

Required Rate of Return—the minimum rate of return acceptable by investors before they will commit money to an investment at a given level of risk.

Residual Value—the value as of the end of the discrete projection period in a discounted future earnings model.

Return on Equity—the amount, expressed as a percentage, earned on a company’s common equity for a given period.

Return on Investment—See Return on Invested Capital and Return on Equity.

Return on Invested Capital—the amount, expressed as a percentage, earned on a company’s total capital for a given period.

Risk-Free Rate—the rate of return available in the market on an investment free of default risk.

Risk Premium—a rate of return added to a risk-free rate to reflect risk.

Rule of Thumb—a mathematical formula developed from the relationship between price and certain variables based on experience, observation, hearsay; or a combination of these; usually industry specific.

Special Interest Purchasers—acquirers who believe they can enjoy post-acquisition economies of scale, synergies, or strategic advantages by combining the acquired business interest with their own.

Standard of Value—the identification of the type of value being utilized in a specific engagement; for example, fair market value, fair value, investment value.

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Sustaining Capital Reinvestment—the periodic capital outlay required to maintain operations at existing levels, net of the tax shield available from such outlays.

Systematic Risk—the risk that is common to all risky securities and cannot be eliminated through diversification. The measure of systematic risk in stocks is the beta coefficient.

Tangible Assets—physical assets (such as cash, accounts receivable, inventory, property, plant and equipment, etc.).

Terminal Value—See Residual Values.

Transaction Method—See Merger and Acquisition Method.

Unlevered Beta—the beta reflecting a capital structure without debt.

Unsystematic Risk—the risk specific to an individual security that can be avoided through diversification.

Valuation—the act or process of determining the value of a business, business ownership interest, security or intangible asset.

Valuation Approach—a general way of determining a value indication of a business, business ownership interest, security, or intangible asset using one or more valuation methods.

Valuation Date-the specific point in time as of which the valuator’s opinion of value applies (also referred to as “Effective Date” or “Appraisal Date”).

Valuation Method—within approaches, a specific way to determine value.

Valuation Procedure—the act, manner, and technique of performing the steps of an appraisal method.

Valuation Ratio—a fraction in which a value or price serves as the numerator and financial, operating, or physical data serve as the denominator.

Value to the Owner—see Investment Value.

Voting Control—de jure control of a business enterprise.

Weighted Average Cost of Capital (WÆCC)—the cost of capital (discount rate) determined by the weighted average, at market value, of the cost of all financing sources in the business enterprise’s capital structure.

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GLOSSARY OF ADDITIONAL TERMS

Assumptions and Limiting Conditions. Parameters and boundaries under which a valuation is performed, as agreed upon by the valuation analyst and the client or as acknowledged or understood by the valuation analyst and the client as being due to existing circumstances. An example is the acceptance, without further verification by the valuation analyst from the client of the client’s financial statements and related information.

Business Ownership Interest. A designated share in the ownership of a business (business enterprise).

Calculated Value. An estimate as to the value of a business, business ownership interest, security, or intangible asset, arrived at by applying valuation procedures agreed upon with the client and using professional judgment as to the value or range of values based on those procedures.

Calculation Engagement. An engagement to estimate value wherein the valuation analyst and the client agree on the specific valuation approaches and valuation methods that the valuation analyst will use and the extent of valuation procedures the valuation analyst will perform to estimate the value of a subject interest. A calculation engagement generally does not include all of the valuation procedures required for a valuation engagement. If a valuation engagement had been performed, the results might have been different. The valuation analyst expresses the results of the calculation engagement as a calculated value, which may be either a single amount or a range.

Capital or Contribution- Asset Charge. A fair return on an entity’s contributory assets, which are tangible and intangible assets used in the production of income or cash flow associated with an intangible asset being valued. In this context, income or cash flow refers to an applicable measure of income or cash flow; such as net income, or operating cash flow- before taxes and capital expenditures. A capital charge may be expressed as a percentage return on an economic rent associated with, or a profit split related to, the contributory assets.

Capitalization of Benefits Method. A method within the income approach whereby expected future benefits (for example, earnings or  cash flow) for a representative single period are converted to value through division by a capitalization rate.

Comparable Profits Method. A method of determining the value of intangible assets by comparing the profits of the subject entity with those of similar uncontrolled companies that have the same or similar complement of intangible assets as the subject company.

Comparable Uncontrolled Transaction Method. A method of determining the value of intangible assets by comparing the subject transaction to similar transactions in the market place made between independent (uncontrolled) parties.

Conclusion of Value. An estimate of the value of a business, business ownership interest, security, or intangible asset, arrived at by applying the valuation procedures appropriate for a valuation engagement and using professional judgment as to the value or range of values based on those procedures.

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Control Adjustment. A valuation adjustment to financial statements to reflect the effect of a controlling interest in a business. An example would be an adjustment to owners’ compensation that is in excess of market compensation.

Engagement to Estimate Value. An engagement, or any part of an engagement (for example, a tax, litigation, or acquisition-related engagement), that involves determining the value of a business, business ownership interest, security, or intangible asset. Also known as valuation service.

Excess Operating Assets. Operating assets in excess of those needed for the normal operation of a business.

Fair Value. In valuation applications, there are two commonly used definitions for fair value:

(1) For financial reporting purposes only; the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Source: Financial Accounting Standards Board Accounting Standards Codification glossary.

 (2) For state legal matters only, some states have laws that use the term fair cake in shareholder and partner matters. For state legal matters only; therefore: the term may be defined by statute or case law in the particular jurisdiction.

Guideline Company Transactions Method. A method within the market approach whereby market multiples are derived from the sales of entire companies engaged in the same or similar lines of business.

Hypothetical Condition. That which is or may be contrary to what exists, but is supposed for the purpose of analysis.

Incremental Income. Additional income or cash flow attributable to an entity’s ownership or operation of an intangible asset being valued: as determined by a comparison of the entity’s income or cash flow with the intangible asset to the entity’s income or cash flow without the intangible asset. In this context, income or cash flow refers to an applicable measure of income or cash flow; such as license royalty income or operating cash flow before taxes and capital expenditures.

Normalization. See Normalized Earnings in Appendix “International Glossary of Business Valuation Terms.”

Pre-adjustment Value. The value arrived at prior to the application: if appropriate, of valuation discounts or premiums.

Profit Split Income. With respect to the valuation of an intangible asset of an entity, a percentage allocation of the entity’s income or cash flow whereby (1) a split (or percentage) is allocated to the subject intangible and (2) the remainder is allocated to all of the entity’s tangible and other intangible assets. In this context, income or cash flow refers to an applicable measure of income or cash flow, such as net income or operating cash flow before taxes and capital expenditures.

Relief from Royalty Method. A valuation method used to value certain intangible assets (for example, trademarks and trade names based on the premise that the only value that a purchaser of the assets receives is the exemption from paying a royalty for its use. Application

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of this method usually involves estimating the fair market value of an intangible asset by quantifying the present value of  the stream of market-derived royalty payments that the owner of the intangible asset is exempted from or “relieved” from paving.

Residual Income. For an entity that owns or operates an intangible asset being valued, the portion of the entity’s income or cash flow remaining after subtracting a capital charge on all of the entity’s tangible and other intangible assets. Income or cash flows can refer to any appropriate measure of income or cash flaw, such as net income or operating cash flow before taxes and capital expenditures.

Security. A certificate evidencing ownership or the rights to owner ship in a business enterprise that (1) is represented by an instrument or by a book record or contractual agreement, (2) is of a type commonly dealt in on securities exchanges or markets or, when represented by an instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for investment, and (3) either one of a class or series or, by its terms, is divisible into a class or series of shares, participations, interests, rights, or interest-bearing obligations.

Subject Interest. A business, business ownership interest, security or intangible asset that is the subject of a valuation engagement

Subsequent Event. An event that occurs subsequent to the valuation date.

Valuation Analyst. A member of our Firm who performs an engagement to estimate value that culminates in the expression of a conclusion of value or a calculated value.

Valuation Assumptions. Statements or inputs utilized in the performance of an engagement to estimate value that serve as a basis for the application of particular valuation methods.

Valuation Engagement. An engagement to estimate value in which a valuation analyst determines an estimate of the value of a subject interest by performing appropriate valuation procedures, as outlined in the AICPA Statement on Standards for Valuation Services, and is free to apply the valuation approaches and methods he or she deems appropriate in the circumstances. The valuation analyst expresses the results of the valuation engagement as a conclusion of value, which may be either a single amount or a range.

Valuation Service. See Engagement to Estimate Value.

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BACKUP DATA

BALANCE SHEET AS OF

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INCOME STATEMENT ABBREVIATED TAX RETURN FOR 2011

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ABBREVIATED TAX RETURN FOR 2010

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PROJECTION SUMMMARY PROVIDED BY MANAGEMENT

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