Harshman = Phillips & Company, LLP

1. =20 The Standard:=20 Fair Market Value =96 Fair=20 Market Value is defined as = =93The price=20 at which the property would change hands between a willing buyer and a = willing=20 seller, neither being under a compulsion to buy or sell and both having=20 reasonable knowledge of relevant facts.=94

2. =20 The Premise:=20 Typically, on a going concern basis, that is, the business will continue = to=20 operate.

3. =20 The Confusion: Many types of value include Fair = Market Value, Fair Value, Insider Value, = Negotiated=20 Value, Enterprise Value, Strategic Value, Synergistic Value, Investment = Value,=20 Pre-Money Value, Post-Money Value, Buy/Sell Value, Liquidating Value = among=20 others. Each have = different=20 meanings and, however slightly or extremely similar or different from = one=20 another, could produce and convey significantly different results when = applied=20 to a business valuation appraisal and analysis = process.

4. =20 The Numbers:=20 A good place to start, and = finish, then=20 start again.

=B7 =20 Financial Statements =96 Summary level spreadsheets and full = disclosure=20 reports, typically 5yrs or more if available (Audited, Reviewed,=20 Compiled).

=B7 =20 Tax Returns =96=20 complete returns for the business and all related companies, = entities/affiliates=20 connected to the business.

=B7 =20 Budgets, Forecasts and = Projections =96 Summary level spreadsheets and Acc/Sys = generated=20 budget to actual reports, typically prior two years, current year, and = future=20 two to three years or more if available.

=B7 =20 Company History =96=20 Typically includes resumes and past experiences of owners, founders, key = employees, growth in size, employees, capital investments, territories,=20 services, products, significant acquisitions, mergers, etc. including = history of=20 other key financial and non-financial drivers and indicators, etc.

5. =20 The People:=20 Organizational Chart, job descriptions, compensation packages and = agreements=20 (compensation, benefits, deferred comp, bonus, options, etc.), labor=20 requirements, unions, Tour of facilities and interviews,=20 etc.

6. =20 The Customers: Customer aging & sales summary = spreadsheets and=20 detail reports, typically for 5yrs or more if available, for pricing, = volume,=20 stability of services, products, customers, referral sources, ability to = look=20 through your customers to your customers=92 customers, suppliers, = employees and=20 management and development of acceptable management plans for mitigating = customer concentration risks, etc. =20

7. =20 The Management:=20 Management, depth, succession = plans, and=20 ownership structures, shareholder agreements, buy/sell, terms of past=20 transactions, etc.

8. =20 The Suppliers: Ability to look through your vendors, = subcontractors and=20 service providers including technology and Acc/Sys requirements for = potential=20 risks, and development of acceptable management plans for mitigating = supplier=20 concentration risks, business interruption, disaster recovery and = business=20 reputation protection, etc.

9. =20 The Future:=20 Long-term commitments, agreements, debt, leases, insurance (people, = equipment,=20 facilities, P&C, etc.), POs, contracts, warranties and guarantees,=20 etc.

10. = The=20 Advisors: Legal matters, = industry=20 advisories, Litigation, environmental concerns, illegal acts, = violations,=20 corporate docs (minutes, by-laws, articles, good standing with states = qualified=20 to do business, extraordinary and unusual items, discontinued = operations,=20 judgements, etc.

11. = The=20 Competition: Competitors = for=20 existing customers and future customers (and in today=92s environment, = for=20 existing and future employees), your industry organizations, trade = associations,=20 publications, referral contacts, etc.

12. = The=20 Systems: Facilities, = equipment,=20 technology, capacity, work environment, location, asset appraisals,=20 non-essential assets such as investments, excess working capital, Tour = of=20 facilities and interviews, etc.

13. = The=20 Drivers: What makes the = business=20 work? What are your key = drivers and=20 indicators (financial and non-financial) for Financial performance? = Operating=20 performance? Future prospects? Growth (sales, margin, etc.)? Liquidity? = Other=20 business, industry and economic Risk Factors? = Etc.?

14. = The=20 Growth: What is your next = dollar=20 worth in terms of Revenues (net)? Margin? Profits? Invested Capital? = Cash Flow?=20 Liquidity? Etc.?

15. = The=20 Equation: Predicted earnings capacity, = predicted=20 growth in these earnings and predicted risks associated with these = earnings=20 being translated into ROI, Liquidity, Cash flow, Reward,=20 Etc.

16. = The=20 Answer: What=92s your = business worth?=20 It depends.

A. =20 The Value:=20 How do we value a business? = As the=20 Answer indicates, it depends.

B. =20 The Analyst:=20 Our role as an independent appraiser is = to=20 determine the fair market value based on the facts and circumstances = made=20 available. We also act as = advisors=20 to determine the values for the many different types of value outside = the=20 context of fair market value for the benefit of our=20 clients.

C. =20 The Process:=20 AFB =96 Anticipated Future=20 Benefits

=B7 =20 Establish=20 earnings (normal) =96 = Quality of and=20 Predictability of=85

=B7 =20 Establish=20 risks (many, including = markets,=20 business, customers, suppliers, labor, employee, management, sales, = marketing,=20 finance, cycles, trends, economies, growth, etc., among others) =96 = Quality of and=20 Predictability of=85

=B7 =20 Discounts/Premiums (getting to the =93cash=94) - Quality of and = Predictability=20 of=85

=B7 =20 Sanity=20 checks (or lack thereof) = =96=20 reasonable rate of return, before and after =93fair market value=94 = transaction=20 occurs (these won=92t equal due to different valuation criteria for = before and=20 after), financial economics of transaction (is it affordable?), = substitution=20 considerations.

D. =20 The Analysis: = Consider the obvious, and the not = so=20 obvious, then reconsider

=B7 =20 Approaches -=20 Asset approaches, market approaches, income approaches and excess = earnings=20 approach.

=B7 =20 Databases=20 - Consider market comparable = data,=20 guideline public companies, buy/sell transactions, company specific=20 transactions, databases for comparable ratios such as P/E, risks, = leverage,=20 financial.

=B7 =20 Analysis - Consider F/S, TRs for ratios, trends and = industry=20 comparisons.

=B7 =20 Intangibles -=20 Tours, interviews, build valuation case for quality and predictability = of=20 revenues, margins, profits, risks, growth and liquidity. =

=B7 =20 Valuation =96=20 Select methods and determine = the quality=20 and predictability of the AFB = =96 Anticipated Future Benefits.=20

E. =20 The=20 Communication: Reporting requirements, = consultations,=20 litigation, etc.

Business valuation reports = - NACVA, USPAP, AICPA, IRS, DOL = and=20 others have business valuation standards, consulting standards and = report=20 writing standards. We = adhere to=20 the standards of NACVA and the AICPA with consideration = given to=20 USPAP, IRS, DOL and other guidelines. Professional fees range = for=20 reporting engagements =96 generally $15,000 to $20,000, with certain = engagements=20 in excess of $25,000. Every situation is unique, with = many=20 valuation issues, variables, unknowns and valuation metrics so please = call to=20 discuss your issues.

Letter of consultation = -=20 Letter of consultation does not adhere to the report writing=20 standards. We do adhere = to all=20 other standards of NACVA = and the=20 AICPA with consideration = given to=20 USPAP, IRS, DOL and = other=20 guidelines.

Litigation support, special = consultations=20 and negotiations - Litigation support, special consultations = and=20 negotiations do not adhere to the report writing standards. We do adhere to all other = standards of=20 NACVA and the AICPA with consideration = given to USPAP, IRS, DOL and other=20 guidelines. = Professional fees can=20 range from $5,000 to $10,000 or higher for these types of = engagements. Again, every situation is = unique, call to=20 discuss your issues. =

Notes:

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