Diversion CF, Inc. (DiversionC) Prepared: 08:46, 2/20/2013 Industry Classification: NAICS Code: MMAS ( )

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1 Detailed Balance Sheet - Actual and % Audit Mthd Unqualif'd Unqualif'd Unqualif'd Accountant Dowe Cheat Dowe Cheat Dowe Cheat CURRENT ASSETS Cash Accts/Notes Rec-Trade 6, , , Bad Debt Reserve (-) Total Accts/Rec-Net 6, , , Inventory 8, , , TOTAL CURRENT ASSETS 14, , , NON-CURRENT ASSETS Machinery & Equipment Furniture & Fixtures , Leasehold Improvements Gross Fixed Assets 1, , , Accum Deprec & Impairment(-) , Total Fixed Assets - Net Accts/Notes Rec-Long Term Loans to Related Co - LTP Prepaids/Deferreds - LTP , Def Inc Tax Recover - LTP Non-Op Non-Cur Assets 1, , Intangibles - Other - - 2, TOTAL NON-CURRENT ASSETS 2, , , TOTAL ASSETS 17, , , CURRENT LIABILITIES ST Loans Payable-Bank 3, , , CP-Capital Lease Obligatns Accounts Payable-Trade 3, , , Other Accruals 1, , Income Taxes Payable Deferred Fed Inc Tax - CP Operating Current Liabs TOTAL CURRENT LIABILITIES 7, , , NON-CURRENT LIABILITIES Capital Lease Obligations Deferred Revenue TOTAL NON-CURRENT LIABILITIES , TOTAL LIABILITIES 7, , , NET WORTH Preferred Stock 18, , , Common Stock Paid In Capital 9, , , Retained Earnings (17,689) (100.3) (14,672) (49.9) (20,036) (136.0) TOTAL NET WORTH 9, , , TOTAL LIABILITIES & NET WORTH 17, , , Working Capital 7, , , Tang Net Worth-Actual 9, , , Notes: 1. Customer MRA ID: Page 1

2 Detailed Comprehensive Income Statement - Actual and % Audit Mthd Unqualif'd Unqualif'd Unqualif'd Accountant Dowe Cheat Dowe Cheat Dowe Cheat Sales/Revenues 51, , , Cost of Sales/Revenues 32, , , GROSS PROFIT 18, , , Selling Expense 3, , , General & Admin Expense , Advertising Expense , Lease/Rent Expense Depreciation Personnel Expense 8, , , TOTAL OPERATING EXPENSE 15, , , NET OPERATING PROFIT 3, , , Interest Expense (-) Interest Income Total Interest Inc(Exp) (153) (0.3) (216) (0.3) (219) (0.5) Other Income Gain(Loss) on Asset Sale (2) TOTAL OTHER INCOME(EXP) (151) (0.3) (207) (0.3) (152) (0.3) PROFIT BEFORE TAXES 3, , , Current Income Tax 1, , Income Tax Credit (+) TOTAL INCOME TAX EXPENSE 1, , NET PROFIT 2, , , EBIT 3, , , EBITDA 4, , , EBIDA 2, , , COMPREHENSIVE INCOME 2, , , Withdrawals - - (25,281) Adj to Retained Earnings 1 (1) 16,998 Page 2

3 Detailed Reconciliations Reconciliation of Retained Earnings BEGINNING RETAINED EARNINGS, AS PREVIOUSLY REPORTED (17,689) (14,672) Adj to Retained Earnings (1) 16,998 BEG RET. EARNINGS, RESTATED (17,690) 2,326 Net Profit 3,018 2,919 Withdrawals - (25,281) ENDING RETAINED EARNINGS (14,672) (20,036) Reconciliation of Net Worth BEGINNING NET WORTH 9,651 12,839 Net Profit 3,018 2,919 Div & Withdrawals-Cash - (25,281) Adjs to Ret Earnings (Above) (1) 16,998 Increase(Decrease) in: Preferred Stock 4,154 (7,924) Common Stock 1 (1) Paid In Capital (3,984) 7,615 ACTUAL ENDING NET WORTH 12,839 7,165 INCR(DECR) IN NET WORTH 3,188 (5,674) Reconciliation of Working Capital BEGINNING WORKING CAPITAL 7,022 8,045 Decrease(Increase) in Non-Current Assets: Total Fixed Assets-Net (416) 438 Accts/Notes Rec-Long Term Loans to Related Co - LTP 4 (31) Prepaids/Deferreds - LTP 6 (728) Def Inc Tax Recover - LTP (159) 122 Non-Op Non-Cur Assets Intangibles - Net (2,732) 2,732 Increase(Decrease) in Non-Current Liabilities: Capital Lease Obligations 780 (780) Other Non-Current Liabilities 143 (222) Increase(Decrease) in Net Worth 3,188 (5,674) ENDING WORKING CAPITAL 8,045 4,452 Page 3

4 Detailed UCA Cash Flow Sales/Revenues 66,366 45,964 Chg in Accts/Notes Rec-Trade (1,225) 3,709 Chg in Bad Debt Reserve (-) Chg in Deferred Revenue 143 (222) Cash Collected From Sales 65,499 49,784 Cost of Sales/Revenues (41,407) (29,591) Chg in Inventory (8,067) 7,627 Chg in Accounts Payable-Trade 2,500 (3,697) Cash Paid To Suppliers (46,974) (25,661) CASH FROM TRADING ACTIVITIES 18,525 24,123 Selling Expense (2,610) (3,520) General & Admin Expense (3,444) (746) Advertising Expense (1,591) (589) Personnel Expense (11,035) (7,190) Lease/Rent Expense (832) (612) Chg in Prepaids/Deferreds - LTP 6 (728) Chg in Other Accruals 262 (875) Cash Paid for Operating Costs (19,244) (14,260) CASH AFTER OPERATIONS (719) 9,863 Other Income 9 67 Interest Income 5 1 Chg in Operating Current Liabs (86) 106 Current Income Tax (1,928) (717) Income Tax Credit (+) Chg in Def Inc Tax Recover - LTP (159) 122 Chg in Income Taxes Payable (220) 50 Chg in Deferred Fed Inc Tax - CP 227 (331) Other Income(Exp) & Taxes Paid (2,152) (402) NET CASH AFTER OPERATIONS (2,871) 9,461 Interest Expense (-) (221) (220) Withdrawals - (25,281) Cash Paid for Dividends & Interest (221) (25,501) NET CASH INCOME (3,092) (16,040) CP-Capital Lease Obligatns - (390) Current Portion Long Term Debt - (390) CASH AFTER DEBT AMORT. (3,092) (16,430) Chg in Machinery & Equipment (83) 99 Chg in Furniture & Fixtures (476) 580 Chg in Leasehold Improvements (151) 266 Chg in Accum Deprec & Impairment(-) 294 (507) Depreciation (294) (228) Chg in Net Fixed Assets (710) 210 Chg in Accts/Notes Rec-Long Term Chg in Loans to Related Co - LTP 4 (31) Chg in Non-Op Non-Cur Assets Chg in Investments Chg in Intangibles - Other (2,732) 2,732 Chg in Net Intangibles (2,732) 2,732 Cash Paid for Plant and Investments (3,229) 3,461 FINANCING SURPLUS (REQMNTS) (6,321) (12,969) Page 4

5 Detailed UCA Cash Flow Chg in ST Loans Payable-Bank 4,587 (2,861) Chg in Long Term Debt 1,170 (780) Adj to Retained Earnings (1) 16,998 Chg in Preferred Stock 4,154 (7,924) Chg in Common Stock 1 (1) Chg in Paid In Capital (3,984) 7,615 Total External Financing 5,927 13,047 CASH AFTER FINANCING (394) 78 Add: Cash ENDING CASH & EQUIVALENTS - 78 Page 5

6 Detailed Ratios LIQUIDITY Working Capital 7,022 8,045 4,452 Quick Ratio Current Ratio Net Sales/Working Capital LEVERAGE Net Worth-Actual 9,651 12,839 7,165 Tang Net Worth-Actual 9,651 10,107 7,165 Eff Tang Net Worth-Actual 9,651 10,107 7,165 Debt/Worth Debt/Tang Worth Debt Less Sub Debt-Liability/Eff Tg Wth Borrowed Funds/Eff Tg Worth LT Debt/Net Fixed Assets Total Liabilities/Total Assets Debt to Book Capital COVERAGE Interest Coverage Net Income+Depr+Amort-Divs/CPLTD N/A 8.49 N/A Net Income+Depr+Amort-Divs/CPLTD pp N/A (56.75) Input Cash Flow Coverage UCA Cash Flow Coverage (4.70) 0.37 UCA Cash Flow/CPLTD pp (12.99) 0.37 EBITDA/Interest Exp+CPLTD EBITDA/Interest Exp+CPLTD pp EBITDA 4,041 5,461 3,784 EBIDA 2,731 3,533 3,367 Fixed Charge Coverage (FFO + Interest) / Interest Expense N/A Debt Coverage Ratio N/A (0.34) 1.84 Funded Debt/EBITDA PROFITABILITY (%) Return on Assets Return on Equity Gross Margin Gross Margin (plus Depr) % Operating Expense % Operating Expense (excl Depr) % Operating Profit Margin Operating Profit Margin (plus Depr) % Net Margin Dividend Payout Rate Effective Tax Rate EBITA Margin % Page 6

7 Detailed Ratios ACTIVITY Gross Accounts Receivable Days Net Accounts Receivable Days Inventory Days on Hand Inventory Days on Hand (excl Depr) Accounts Payable Days Accounts Payable Days (excl Depr) Net Sales/Total Assets Net Sales/Net Worth Net Sales/Net Fixed Assets Profit Before Taxes/Total Assets (%) CAPEX / Depreciation Expense N/A 2.41 (0.92) Cash to Net Sales Log 10 (Net Sales) GROWTH (%) Total Assets Growth (49.89) Total Liabilities Growth (54.31) Net Worth Growth (44.19) Net Sales Growth (30.74) Operating Profit Growth (32.31) Net Profit Growth (3.28) Sustainable Growth (75.73) CASH FLOW RCF / Adjusted Debt 0.28 (2.50) RCF / Net Adjusted Debt 0.28 (2.52) (RCF - CAPEX) / Adjusted Debt 0.22 (2.48) FCF / Adjusted Debt (0.27) (1.74) FCF / Net Adjusted Debt (0.27) (1.75) FFO / Adjusted Debt N/A FFO / Net Adjusted Debt N/A CAPEX / CFO N/A (0.23) (0.02) CFO / Profit Before Extraordinary Items N/A (1.02) 3.17 Page 7

8 Cash Flow Management CASH FLOW DRIVERS CASH FLOW DRIVERS Net Sales Growth (30.74) Gross Margin (plus Depr) % Operating Expense (excl Depr) % Accounts Receivable Days Inventory Days on Hand (excl Depr) Accounts Payable Days (excl Depr) OTHER FACTORS Other Operating Assets ,310 Accrued Expenses Days Other Current Liabilities CASH MARGIN MANAGEMENT SUMMARY GROSS PROFIT: BEGINNING GROSS PROFIT 18,931 24,959 Gross Profit Management 639 (913) Gross Profit Growth 5,389 (7,673) ENDING GROSS PROFIT (PLUS DEPR) 24,959 16,373 OPERATING EXPENSES: BEGINNING OPERATING EXPENSE (14,905) (19,512) Operating Expense Management (364) 857 Operating Expense Growth (4,243) 5,998 ENDING OPER EXP (LESS DEPR) (19,512) (12,657) CASH OPERATING PROFIT 5,447 3,716 TRADING ACCOUNT MANAGEMENT SUMMARY CASH IMPACT OF MANAGEMENT: Accounts Receivable 917 1,627 Inventory (5,924) 3,018 Accounts Payable 1,689 (2,111) Total Management - Trading Acct (3,318) 2,534 Other Operating Assets 173 (907) Accruals (55) (423) Other Current Liabilities - - Total Management - Other Factors 119 (1,330) TOTAL CASH IMPACT OF MGMT (3,199) 1,205 CASH IMPACT OF GROWTH: Accounts Receivable (1,784) 2,193 Inventory (2,143) 4,609 Accounts Payable 811 (1,586) Total Growth - Trading Accounts (3,116) 5,216 Other Operating Assets (167) 179 Accruals 317 (452) Other Current Liabilities - - Total Growth - Other Factors 149 (273) TOTAL CASH IMPACT OF SALES GROWTH (2,967) 4,942 TOTAL TRADING ACCOUNT AND OTHER FACTOR CHG (6,166) 6,147 CASH AFTER OPERATIONS (719) 9,863 Page 8

9 Executive Financial Statement - Actual and % Audit Mthd Unqualif'd Unqualif'd Unqualif'd Accountant Dowe Cheat Dowe Cheat Dowe Cheat ASSETS Cash & Near Cash Accts/Notes Rec (Net) 6, , , Inventory 8, , , TOTAL CURRENT ASSETS 14, , , Net Fixed Assets LT Receivables & Investments Other Non-Current Assets 2, , , Intangibles - Net - - 2, TOTAL NON-CURRENT ASSETS 2, , , TOTAL ASSETS 17, , , LIABILITIES/NET WORTH S/T Loans Payable 3, , , Current Portion - LTD Accounts Payable 3, , , Accrued Liabilities 1, , Taxes Payable Other Current Liabilities TOTAL CURRENT LIABILITIES 7, , , Long Term Debt Other Non-Current Liabilities TOTAL NON-CURRENT LIABILITIES , TOTAL LIABILITIES 7, , , TOTAL NET WORTH 9, , , TOTAL LIABILITIES & NET WORTH 17, , , INCOME STATEMENT Net Sales/Revenues 51, , , Cost of Sales/Revenues 32, , , GROSS PROFIT 18, , , Net Operating Expenses 14, , , Depr & Amort NET OPERATING PROFIT 3, , , Interest Income(Expense) (153) (0.3) (216) (0.3) (219) (0.5) Other Income(Expense) PROFIT BEFORE TAXES 3, , , Income Taxes 1, , PROFIT BEFORE EXTRAORDINARY ITEMS 2, , , NET PROFIT 2, , , COMPREHENSIVE INCOME 2, , , Cash Dividends & Withdrawals - - (25,281) Adj to Retained Earnings 1 (1) 16,998 Page 9

10 Consultant Ratios PROFITABILITY Profit Before Taxes/Sales (%) Profit Before Taxes/TNW (%) Operating Expenses/Sales (%) Operating Leverage (%) BORROWING AND CAPITAL SPENDING Capital Expenditures 710 (210) Avg Cap Expenditures Expected Capital Expenditures 450 (69) Avg Expected Cap Expenditures $ Change Short Term Debt 4,587 (2,861) $ Change Long Term Debt 780 (780) CONSULTANT ALERTS Def Tax + Tax Payable/Tax Exp (%) Average Tax Rate (%) Other Cur Assets/Tot Cur Assets (%) Other Cur Liabs/Tot Cur Liabs (%) Other Non Cur Assets/Tot Assets (%) Accum Deprec/Gross Fixed Assets (%) Other Income/Net Income Aft Tax (%) Investments/Total Assets (%) Other Cash Income Adjustments (72) 174 % Growth Accrued Liabs (67.99) % Growth Pref Stock (35.70) % Growth Common Stock (25.00) % Growth Other Equity (42.87) Page 10

11 RiskCalc for Private Firm (United States) - Version 3.1 Industry Classification: NAICS Code: MKMV.RiskAnalyst.Reports.DefaultRisk ( ) EDF credit measures calculated with Credit Cycle Adjustments Current Date 12/ / /2012 2/ /31/ Audit Mthd Unqualif'd Unqualif'd Unqualif'd Accountant Dowe Cheat Dowe Cheat Dowe Cheat Source Currency: USD United States Dollars Dollars Target Currency: USD United States Exchange Rate: Exchange Rate Date: 12/31/ /31/ /31/ /31/ Yr Bond Default Rate Mapping Ba1.edf Ba2.edf Ba1.edf Ba1.edf 1 Yr Percentile Yr Custom Rating NA NA NA NA 5 Yr Bond Default Rate Mapping Ba1.edf Ba3.edf Ba1.edf Ba1.edf 5 Yr Percentile Yr Custom Rating NA NA NA NA Cumulative EDF Credit Measures (%): 1 Year Year Year Year Year Forward EDF Credit Measures (%): 1 Year Year Year Year Year Annualized EDF Credit Measures (%): 1 Year Year Year Year Year Yr. Relative Contributions: Return On Assets (ROA) Sales Growth N/A Cash to Assets Change in AR Turnover N/A Change in Return On Assets (ROA) N/A Inventory to Sales Cash Flow to Interest Expense Retained Earnings to Current Liabilities Current Liabilities to Sales Leverage Size Yr. Relative Contributions: Return On Assets (ROA) Sales Growth N/A Cash to Assets Change in AR Turnover N/A Change in Return On Assets (ROA) N/A Inventory to Sales Cash Flow to Interest Expense Retained Earnings to Current Liabilities Current Liabilities to Sales Page 11

12 RiskCalc for Private Firm (United States) - Version 3.1 Industry Classification: NAICS Code: MKMV.RiskAnalyst.Reports.DefaultRisk ( ) Current Date 12/ / /2012 2/ /31/ Audit Mthd Unqualif'd Unqualif'd Unqualif'd Accountant Dowe Cheat Dowe Cheat Dowe Cheat Leverage Size Yr. Relative Sensitivities: Return On Assets (ROA) Sales Growth Cash to Assets Change in AR Turnover Change in Return On Assets (ROA) Inventory to Sales Cash Flow to Interest Expense Retained Earnings to Current Liabilities Current Liabilities to Sales Leverage Size Yr. Relative Sensitivities: Return On Assets (ROA) Sales Growth Cash to Assets Change in AR Turnover Change in Return On Assets (ROA) Inventory to Sales Cash Flow to Interest Expense Retained Earnings to Current Liabilities Current Liabilities to Sales Leverage Size Percentiles: Return On Assets (ROA) Sales Growth N/A Cash to Assets Change in AR Turnover N/A Change in Return On Assets (ROA) N/A Inventory to Sales Cash Flow to Interest Expense N/A Retained Earnings to Current Liabilities Current Liabilities to Sales Leverage Size Ratios or Levels: Return On Assets (ROA) Sales Growth N/A Cash to Assets Change in AR Turnover N/A Change in Return On Assets (ROA) N/A Inventory to Sales Cash Flow to Interest Expense N/A , , Retained Earnings to Current Liabilities Current Liabilities to Sales Leverage Size 1,425, ,295, ,125, ,125, When defining percentiles, be aware that observations in the sample population are sorted in order of increasing ratio value. This means that the item's impact on risk relative to its location within a certain percentile depends upon the relationship between the ratio and risk. An item that is in a high percentile for profitability has a positive impact by lowering the probability of default, since more profitable companies have lower risk of default. Conversely, an item in a high percentile in a leverage ratio has a negative impact, since a highly leveraged company has a higher risk of default. EDF Notes for statement: 12/31/2010 Inventory Previous Year: EDF is based on sector averages for corresponding ratio. Page 12

13 RiskCalc for Private Firm (United States) - Version 3.1 Industry Classification: NAICS Code: MKMV.RiskAnalyst.Reports.DefaultRisk ( ) Accounts Receivable Previous Year: EDF is based on sector averages for corresponding ratio. Total Assets Previous Year: EDF is based on sector averages for corresponding ratio. Accounts Payable Previous Year: EDF is based on sector averages for corresponding ratio. Sales Previous Year: EDF is based on sector averages for corresponding ratio. Net Income Previous Year: EDF is based on sector averages for corresponding ratio. NAICS: :Trade EDF Notes for statement: 12/31/2011 NAICS: :Trade EDF Notes for statement: 12/31/2012 NAICS: :Trade Page 13