MARKET VALIDATION ANALYSIS A confidential comprehensive analysis of TRUE company market value. For owners and shareholders, an MVA is a critical value audit prior to entering the mergers & acquisitions marketplace.

MVA vs. BUSINESS APPRAISAL A is generally a financial evaluation driven by historical performance, using existing financial and organizational resources. An is a market-based valuation driven by potential future performance, with new (likely greater) financial and organizational resources coming from a premium strategic buyer. Avalon Advisors, Inc. Business Appraisal MVA

A is generally a financial evaluation driven by historical performance, using existing financial and organizational resources.

An is a market-based valuation driven by potential future performance, with new (likely greater) financial and organizational resources coming from a premium strategic buyer.

VALUATION DIFFERENCES “Seven offers ranged from financial evaluation  1.5 times cash flow to market valuation  7.6 times cash flow. The spread is quite pronounced.” Business Week Avalon Advisors, Inc.

“Seven offers ranged from financial evaluation  1.5 times cash flow to market valuation  7.6 times cash flow.

The spread is quite pronounced.”

Business Week

IRS R.R. 59-60 “No formula can be devised that will be generally applicable to the multitude of different valuation issues… Valuation… is, in essence, a prophecy as to the future.” Formulas can express value, but cannot determine value. Avalon Advisors, Inc.

“No formula can be devised that will be generally applicable to the multitude of different valuation issues… Valuation… is, in essence, a prophecy as to the future.”

Formulas can express value, but cannot determine value.

VALUATION ISSUES DRIVERS Growing Company Growth Industry/Market Experienced Management Team Experienced Workforce in Place Reliable Financial Reporting Broad and Transferable Customer Base Proprietary Products and Services Avalon Advisors, Inc.

DRIVERS

Growing Company

Growth Industry/Market

Experienced Management Team

Experienced Workforce in Place

Reliable Financial Reporting

Broad and Transferable Customer Base

Proprietary Products and Services

VALUATION ISSUES DETRACTORS Customer Concentration Product/Supplier Concentration Declining Industry/Market Management Exit Pending Litigation/Liabilities 100% Cash Purchase Terms Talking to Only One Buyer Avalon Advisors, Inc.

DETRACTORS

Customer Concentration

Product/Supplier Concentration

Declining Industry/Market

Management Exit

Pending Litigation/Liabilities

100% Cash Purchase Terms

Talking to Only One Buyer

FOCUS Economic & Industry Outlook US/International Economic Outlook Industry Dynamics/Trends Competitive Environment Porter’s Five Forces Existing Rivalries Barriers to Entry for New Competitors Potential for Substitute Products/Technologies Bargaining Power - Suppliers Bargaining Power - Customers Avalon Advisors, Inc.

US/International Economic Outlook

Industry Dynamics/Trends

Competitive Environment

Porter’s Five Forces

Existing Rivalries

Barriers to Entry for New Competitors

Potential for Substitute Products/Technologies

Bargaining Power - Suppliers

Bargaining Power - Customers

FOCUS M & A Environment Financial/Capital Markets Cross Border Trends “ The World is Flat” Identify Potential Strategic Buyers U.S. and International Research Operating Companies Private Investment Groups Avalon Advisors, Inc.

Financial/Capital Markets

Cross Border Trends

“ The World is Flat”

Identify Potential Strategic Buyers

U.S. and International Research

Operating Companies

Private Investment Groups

FOCUS Company Analysis FINANCIAL Recast Historical Statements Revenue Trends Analysis Pro Forma/Forecast Statements Financial Fitness Growth Rate Financial Strength Management Effectiveness Efficiency Ratios Avalon Advisors, Inc.

FINANCIAL

Recast Historical Statements

Revenue Trends Analysis

Pro Forma/Forecast Statements

Financial Fitness

Growth Rate

Financial Strength

Management Effectiveness

Efficiency Ratios

FOCUS Company Analysis [cont.] Products and Services Markets and Customers Sales and Marketing Strategy Suppliers Facilities Ownership/Succession Plan Operations Avalon Advisors, Inc.

Products and Services

Markets and Customers

Sales and Marketing Strategy

Suppliers

Facilities

Ownership/Succession Plan

Operations

FOCUS Company Analysis [cont.] SWOT Analysis Internal Strengths Internal Weaknesses External Opportunities External Threats Avalon Advisors, Inc.

SWOT Analysis

Internal Strengths

Internal Weaknesses

External Opportunities

External Threats

FOCUS Value Analysis Income Approach Discounted Future Earnings Capitalization of Earnings Market Approach Comparable Transaction Analysis Guideline Transactions (Public) Asset Approach Duplication Cost Analysis Intangible Asset Analysis Avalon Advisors, Inc.

Income Approach

Discounted Future Earnings

Capitalization of Earnings

Market Approach

Comparable Transaction Analysis

Guideline Transactions (Public)

Asset Approach

Duplication Cost Analysis

Intangible Asset Analysis

CONCLUSION Range of Values and Reconciliation Fair Market Value/Strategic Investment Value Making the Decision Personal Financial and Tax Planning Sale of Stock to the Public (IPO) Outright Sale of the Company Legal Issues Advisory Develop Appropriate Exit Strategy Avalon Advisors, Inc.

Range of Values and Reconciliation

Fair Market Value/Strategic Investment Value

Making the Decision

Personal Financial and Tax Planning

Sale of Stock to the Public (IPO)

Outright Sale of the Company

Legal Issues Advisory

Develop Appropriate Exit Strategy