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© 2010 SingerLewak. All rights reserved. APRIL 7, 2011- ORANGE COUNTY

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Page 1: CFO Essentials OC

© 2010 SingerLewak. All rights reserved.

APRIL 7, 2011- ORANGE COUNTY

Page 2: CFO Essentials OC

TM

Opening Remarks

Today’s Workshop Format

Introducing our Distinguished Panelists:

The CFO Essentials SingerLewak’s POV

Jim Pitrat, CPA - SingerLewak LLP

John Ahn – B. Riley

James A. Mercer III, Esq. – Sheppard Mullin

Gale Moore, CPA – SingerLewak LLP

AGENDA APRIL 7, 2011- ORANGE COUNTY

Page 3: CFO Essentials OC

Jim Pitrat, SingerLewak LLP

Jim Pitrat leads SingerLewak’s Assurance & Advisory practice where he oversees firm-wide assurance & advisory initiatives. Jim has experience with both

private and publicly traded companies and has also advised on cost management, internal controls, corporate restructurings, and mergers and acquisitions.

Jim has client service responsibilities in the business sectors of investor-backed private companies and public companies. Jim received his Bachelor of Science

degree in Business Administration from the University of Arizona in 1993 and his Master’s of Business Administration in 1997. Jim is a member of AICPA, the

Los Angeles Venture Association, the Software Council of Southern California and the Association for Capital Growth. Jim has been a guest instructor at

California Institute of Technology’s Entrepreneur Program, the University of Arizona Small Business Incubator Program, and USC’s EC2 Incubator Program. He

has also spoken on panels for Technology Council of Southern California and the California Society of CPAs. Jim has written for Los Angeles Business Journal,

American Venture Magazine, and Zone Magazine.

John Ahn, B. Riley

John Ahn is President of B. Riley and Head of Corporate Finance. Prior, he was a Managing Director in the Corporate Finance department. He is also a

Principal at Riley Investment Management, the asset management affiliate of B. Riley. He joined the firm in 2004. Mr. Ahn has wide range of experience in

capital raising, trading, and sales of distressed debt and equities. rior to joining B. Riley, Mr. Ahn was a loan trader at Security Pacific Bank in Los Angeles in

the Loan Syndications group. Mr. Ahn was also a Partner at Standard Capital Group in Los Angeles, an investment-banking firm that specialized in capital

raising for middle market companies. From 2003-2004, he was a Managing Director at Maxcor Financial Group in their high yield and distressed bond group.

In January 2004, Mr. Ahn joined BRC as a registered representative. He has served on the board of directors of MAIR Holdings and Regent Communications.

Mr. Ahn attended Williams College and earned his Bachelor of Arts degree in Economics.

OUR PANEL

Page 4: CFO Essentials OC

James A. Mercer III, Sheppard Mullin

Mr. Mercer is a partner in the Corporate Securities practice group in the firm's Del Mar Heights office. He chairs the firm’s Public Company practice and

serves as the Corporate Practice Group’s “China Desk” coordinating corporate work in the firm’s Shanghai office. Mr. Mercer practices in the area of

corporate law, with an emphasis in representing emerging growth companies in securities transactions and mergers and acquisitions.

Mr. Mercer assists clients in financing their business through seed capital, venture capital, IPOs, reverse mergers, PIPES, and secondary public offerings. He

regularly counsels publicly traded companies in matters of SEC compliance including the preparation and review of quarterly and annual reports, proxy

statements and solicitations, tender offers and going private transactions.

Gale Moore, SingerLewak LLP

Gale Moore is a partner in SingerLewak’s Orange County Assurance & Advisory practice. Gale has more than 20 years of experience specializing in public and

real estate-based companies, including Real Estate Investment Trust reporting and compliance. Her background includes assisting companies with capital

market transactions, IPOs, and participating on SOX readiness teams in reviewing control documentation, remediation plans, and testing approaches. She

was formerly a director with Deloitte & Touche LLP and has experience as a corporate controller, a position that gave her valuable insight into the internal

control process.

OUR PANEL

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OUR PANEL

Page 6: CFO Essentials OC

JIM PITRAT, SINGERLEWAK

RISKS

Page 7: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

Page 8: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

KEY SURVEY RESULTS FORMULATING OUR “ESSENTIAL RISKS” WE

REVIEW 2 KEY SURVEYS ALONG WITH REVIEWING OUR CLIENT CONCERNS

March 2011-Duke University / CFO Magazine 2011-Business

Outlook Survey

FEI CEO’s Top Challenges Survey

Page 9: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

CFOs: OUTLOOK ROSIER -SOME SECTORS HIRING, BUT INFLATION A WORRY

• OPTIMISM AMONG CFO’S IS - HIGHEST SINCE 2007

• CFOs EXPECT EARNINGS GROWTH IN 2011

Earnings growth expected to jump 18% --compared to 9% in Asia

and 10% in Europe

Capital expenditures expected to jump 12% in 2011

R&D expenditures expected to grow by 4%

Over half the companies in the survey expect to build more

cash on their balance sheets

Page 10: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

CFOs: OUTLOOK ROSIER - SOME SECTORS HIRING, BUT INFLATION A WORRY (cont’d)

• CFOs EXPECT ONLY MODEST EMPLOYMENT GROWTH (1.2%)

Some industries identify need for skilled workers (engineering, product development, finance and accounting and sales)

• CFOs ARE CONCERNED ABOUT INFLATION

• A 4% inflation would cut earnings growth in half • High concern about fuel and commodities

• 39% OF CFOs FIND BORROWING CONDITIONS HAVE IMPROVED

• However for companies <100MM, still say credit is tight

• 39% OF COMPANIES EXPECT TO ACQUIRE ANOTHER COMPANY IN 2011

Page 11: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

CEOs 2011 TOP CHALLENGES FOR FINANCIAL EXECUTIVES

ECONOMIC RECOVERY AND THE US FISCAL OUTLOOK

HEALTH CARE LAW

FINANCIAL REGULATORY REFORM

GLOBAL CONVERGENCE OF US GAAP AND IFRS

PRIVATE COMPANY ACCOUNTING SYSTEM REFORM

UNCERTAIN TAX POSITIONS

BUSINESS TAXATION

PENDING INTERNATIONAL BUSINESS ISSUES

CLIMATE CHANGE

Page 12: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

SL’s “CFO ESSENTIAL RISKS” FOR 2011

We have identified the following 5 ESSENTIAL RISKS FOR CFOs in the Mid-Market

RISK DESCRIPTION RISK

CLASS

EXAMPLE STRATEGIC IMPERATIVE “AT RISK” AND RISK DESCRIPTIONS

#1 Maintaining Compliance

with Increased Regulation

Compliance • Being out of compliance with new SEC rules

• Impact related to potential new EPA regs

• Impact related to changing Health Care

• Impact related to Dodd-Frank

• Other Regulations

#2 Access to Credit and

Financing

Financial • Risk of being unable to Finance Growth under strategic imperatives

• Risk of being unable to Finance Acquisitions

• Risk of being unable to meet needs if economy slips or business slips

#3 Managing Growth and

Operating in a “Lean”

Environment

Operating • Engineering issues and quality problems

• Over-hiring in a risky environment

• Inventory shortages or cost issues related to inflationary pressures

• Over-purchasing of inventory or over-producing due to inflationary concerns

and price volatility

• Margin Pressures and impact on profitability

• Suppliers taking on inventory risk for customers

Page 13: CFO Essentials OC

RISKS JIM PITRAT, SINGERLEWAK

SL’s CFO ESSENTIAL RISKS FOR 2011 (cont’d)

We have identified the following 5 ESSENTIAL RISKS FOR CFOs in the Mid-Market

RISK DESCRIPTION RISK CLASS EXAMPLE STRATEGIC IMPERATIVE “AT RISK” AND RISK DESCRIPTIONS

#4 Attracting and Managing

Talent

Operating • Unable to meet strategic needs, take advantage of the marketplace or or

manage strategic plan

• Unable to meet production requirements

• Unable to meet sales requirements due to sales staff shortages

• Unable to maintain top-quality talent in cost-sensitive environment

#5 Keeping Up with Accounting

Standards and Adapting to

IFRS Convergence

Compliance

and financial

• Complexity causing financial reporting miscues

• Out of compliance with financial reporting requirements

Page 14: CFO Essentials OC

JOHN AHN, B. RILEY

CASH FLOW

Page 15: CFO Essentials OC

MIDDLE MARKET OVERVIEW

After a period of severe financial market volatility and contracted

liquidity in the global credit markets and U.S. banking system, credit and investment capital have started to flow back into the middle market for refinancings, acquisitions and growth capital

Reasonably priced capital exists for properly positioned companies

2011 Middle Market Equity is expected to experience continuous growth due to:

Recent clarity on tax rates

The Federal Reserve’s second quarter effort to push investors

back into the equity markets

The prospects of a more business friendly federal government

CASH FLOW JOHN AHN, B. RILEY

Page 16: CFO Essentials OC

MIDDLE MARKET EQUITY - PUBLIC

Overall U.S. IPO market continued its recovery in 2010, led

by General Motors $16 billion deal

154 IPOs with total proceeds of $38.7 billion in 2010

Q1 2011 has shown a 30.4% increase in number of deals filed and a 253.5% increase in total proceeds compared to Q1 2010

Registered Direct Offerings are the fastest growing financing structure in the U.S. Capital Markets

Positioned as a genuine capital raising alternative from both public offerings and PIPEs

In 2010, RDOs raised over $10 billion in capital, an effective

increase of over 58% from 2009 (C4 Captial)

CASH FLOW JOHN AHN, B. RILEY

Page 17: CFO Essentials OC

INITIAL PUBLIC OFFERING

(INSTITUTIONAL QUALITY)

An initial public offering (IPO) occurs when a company issues

common stock to the public for the first time

IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded

JOHN AHN, B. RILEY

CASH FLOW

Page 18: CFO Essentials OC

INITIAL PUBLIC OFFERING

(INSTITUTIONAL QUALITY) (cont’d)

Factors influencing IPO valuations:

Interim and expected future financial performance (quarterly earnings and estimates)

Industry public market comparables

Disclosures that may impact future financial results

Strength of management

Use of proceeds

Public float and trading volume

Research coverage

Investor profile:

Institutional funds and retail investors

JOHN AHN, B. RILEY

CASH FLOW

Page 19: CFO Essentials OC

IPO CONSIDERATIONS

• ADVANTAGES:

Source of capital to fund working capital and acquisition requirements

Path for liquidity for existing shareholders

Valuation comparable to or higher than an outright corporate sale

Creates additional credibility for business and future financing

Enables the acquisition of lower cost senior financing

Employees may participate in an employee stock option plan

JOHN AHN, B. RILEY

CASH FLOW

Page 20: CFO Essentials OC

IPO CONSIDERATIONS (cont’d)

• DISADVANTAGES:

Company operating under public scrutiny and accountability

Strategic, operating and financial information available to competitors

Significant demand on management’s time and resources

Reduced flexibility and decision making based on corporate governance

requirements

High costs associated with filings and SOX requirements

JOHN AHN, B. RILEY

CASH FLOW

Page 21: CFO Essentials OC

IPO STATISTICAL DATA

0

40

80

120

160

200

240

2004 2005 2006 2007 2008 2009 2010

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

Number of Deals Total Proceeds (Billions)

2004 2005 2006 2007 2008* 2009 2010* Q1 2011

Total Return 35% 19% 26% 13% -33% 16% 25% 7%

First Day Return 11% 11% 11% 13% 3% 7% 10% 3%

Aftermarket Return 21% 6% 12% 1% -36% 8% 15% 12%

% of IPOs with NEGATIVE First Day Returns 19% 21% 21% 25% 58% 32% 33% 22%

% Priced Above Range 18% 20% 21% 23% 7% 17% 13% 29%

% Priced Within Range 45% 52% 49% 55% 65% 56% 47% 39%

% Priced Below Range 36% 29% 30% 22% 28% 27% 40% 32%

Notes: Excluding SPACs

* Excluding Visa, 2008 proceeds and average deal size would have been $10.1 billion and $241 million, respectively

* *Excluding General Motors, 2010 proceeds and average deal size would have been $22.9 billion and $150 million, respectively

United States Historical IPO Return Statistics

Nu

mb

er o

f d

eal

s To

tal Pro

ceed

s ($B

illion

s) JOHN AHN, B. RILEY

CASH FLOW

ANNUAL U.S. IPO BREAKDOWN

Page 22: CFO Essentials OC

REGISTERED DIRECT OFFERINGS

• A registered direct offering is the sale of registered securities to a

selected number of pre-identified accredited and institutional investors

• Securities are marketed by a placement agent on a “best efforts” basis

• No Underwriting = No firm commitment to buy the securities

• RDOs were historically issued by smaller public companies and those without investment-grade credit where conventional public offerings (PIPEs) and similar private transaction weren’t viable options

JOHN AHN, B. RILEY

CASH FLOW

Page 23: CFO Essentials OC

REGISTERED DIRECT OFFERINGS (cont’d)

• Other public companies have begun to prefer an RDO over other

capital-raising methods because of the following advantages:

• Confidential, targeted marketing process

• Better pricing

• Overall reduced risk

• Combines many of the best features of underwritten follow-ons and PIPEs

• Provides issuers with the truncated marketing process of a PIPE, but with the ability to hit a narrow market window

• Unlike a PIPE, the securities sold in an RDO become

immediately registered and tradable

JOHN AHN, B. RILEY

CASH FLOW

Page 24: CFO Essentials OC

REGISTERED DIRECT DESCRIPTIVE SUMMARY

• Most common type of security sold in an RDO is common stock

• Issuers may sell other types of securities, convertible notes, warrants or debt

• Buyers typically range from an issuer’s existing investors to institutional investors that have a relationship with the placement agent

• The majority of RDO’s are made on an effective Form S-3 or Shelf Registration Statement

• Permits the registration of securities prior to the planning of any specific offering

JOHN AHN, B. RILEY

CASH FLOW

Page 25: CFO Essentials OC

REGISTERED DIRECT DESCRIPTIVE SUMMARY (cont’d)

• Form S-3 eligibility and technical considerations:

• Sufficient capacity under the shelf to conduct the offering

• The shelf must cover the type of security the issuer plans to issue through the RDO

• Issuers with less than $150MM in market capitalization are subject to FINRA approval

• Issuers with a market cap under $75MM must limit its offerings to less than one-third of its public float over any 12-month period

JOHN AHN, B. RILEY

CASH FLOW

Page 26: CFO Essentials OC

REGISTERED DIRECT CONSIDERATIONS

• ADVANTAGES:

• Marketed to a targeted group of investors like a private placement or PIPE

• Issuers that want to test the market can do so without attracting unwanted publicity

• Not subject to “liquidity discounts” that coincide with a PIPE offering

• Avoids the risk of market fluctuation due to speculative trading

• The securities are immediately transferable because they are already registered

JOHN AHN, B. RILEY

CASH FLOW

Page 27: CFO Essentials OC

REGISTERED DIRECT CONSIDERATIONS (cont’d)

• DISADVANTAGES:

• Marketing process is significantly shorter than a secondary option

• Not as widely distributed as any other public offering

• Increased scrutiny under the rules of the company’s securities exchange

• Offering does not include an over-allotment option

CASH FLOW JOHN AHN, B. RILEY

Page 28: CFO Essentials OC

REGISTERED DIRECT – CAPITAL RAISE COMPARISON

TYPE OF

OFFERING REGISTERED

ROAD SHOW

IMMEDIATE LIQUIDITY

FOR INVESTOR

CONFIDENTIAL MARKETING

USE OF EXISTING PUBLIC DOCS

LOW TRANSACTION

COSTS

LOW DISCOUNT

TO TRADING PRICE

HIGHER DILUTIVE EFFECT

EXTENDED PROCEEDS

PERIOD

TRADITIONAL UNDERWRITTEN OFFERING

X X X POSSIBLY X

ATM OFFERINGS

X (S-3 ELIGIBLE)

X X X X X

PIPEs NOT

INITIALLY X X X POSSIBLY X

RDOs X

(S-3 ELIGIBLE) X X X X X X

RIGHTS OFFERING

X X X X

EQUITY LINE FACILITIES

X X X X X X

1 2

3

4

(1) Some PIPE offerings require registration shortly after the private placement (2) Typically liquid within 3-12 months after the private placement (3) Discounts are typically 4-8% below market (4) The ability to raise capital at higher prices in the future can reduce the amount of dilation

JOHN AHN, B. RILEY

CASH FLOW

Page 29: CFO Essentials OC

REGISTERED DIRECT CASE STUDY –

“KRATOS DEFENSE & SECURITIES SOLUTIONS”

Kratos provides mission critical engineering, IT services and war

fighter solutions for the U.S. Federal Government, Defense

Department and state and local agencies

Principal services include C4ISR, weapon systems sustainment, military weapon

range operations and technical services

Market Capitalization of $103 million at time of RDO

August 3rd - Kratos and B. Riley held discussions about capital raising initiatives

B. Riley explained the benefits of RDOs

Kratos confirmed use of proceeds to repay acquisition related debt

August 10th - Kratos hired B. Riley as Placement Agent

All hands due diligence kick off meeting was held

CASH FLOW JOHN AHN, B. RILEY

Page 30: CFO Essentials OC

REGISTERED DIRECT CASE STUDY

“KRATOS DEFENSE & SECURITIES SOLUTIONS”

August 13th – Kratos filed an S-3

B. Riley continued its due diligence

August 19th - SEC advised that it would not review the S-3

August 21st - The S-3 was declared effective

B. Riley began contacting select investors, obtained NDAs and disclosed

intention to issue shares

Management presentations arranged via conference calls and in person

meetings

August 27th - After the financial markets closed, B. Riley

continued to contact investors and during the next few hours

subscribed the offering

CASH FLOW JOHN AHN, B. RILEY

Page 31: CFO Essentials OC

HOW TO POSITION YOUR COMPANY FOR A CAPITAL RAISE:

DEMONSTRATE SOLID FINANCIAL PERFORMANCE

• Historical and Projected Financials

Consistent financial results

Top-line revenue growth

Recurring revenue

Strong operating margins

Increasing profitability

Low seasonality

Upward trend in historical performance

Importance of trailing/last twelve months (TTM/LTM)

• Operating Cash Flow

Focus on hitting projected revenue and earnings numbers

Review customer profitability

Understand differences between EBITDA and cash flow

JOHN AHN, B. RILEY

CASH FLOW

Page 32: CFO Essentials OC

HOW TO POSITION YOUR COMPANY FOR A CAPITAL RAISE: (cont’d)

“HAVE A CLEAN STORY”

• Audited Financial Statements

Have your financial statements audited with a reputable firm to add credibility

• Income Statement Adjustments

Includes one-time/non-recurring charges, private company expenses and other

“addbacks”

• Customer and Supplier Diversification

Investors will pay less for companies dominated by one or two customers

• Legal Documentation

Make sure licenses and regulatory filings are current & identify

any required consent

JOHN AHN, B. RILEY

CASH FLOW

Page 33: CFO Essentials OC

HOW TO POSITION YOUR COMPANY FOR A CAPITAL RAISE: (cont’d)

“HAVE A CLEAN STORY”

• Form of Incorporation

Consult with professionals to understand company or transaction specific tax

implications

• Operational Processes and Systems

Are the company’s processes well documented, efficient and transferable?

• Potential Liabilities

Consider settling any outstanding disputes with customers, suppliers and

employees

JOHN AHN, B. RILEY

CASH FLOW

Page 34: CFO Essentials OC

HOW TO POSITION YOUR COMPANY FOR A CAPITAL RAISE: (cont’d)

BECOME EDUCATED ON THE CAPITAL MARKETS

• Understand traditional & non-traditional valuation methodologies & metrics

• Analyze the company’s strategic alternatives, such as organic growth,

growth through merger or acquisition, minority or majority recapitalization,

strategic sale, IPO or status quo

• Shareholder Value Seek shareholder liquidity events while the Company is still growing Maximize profitability levels Avoid excessive revenue at the expense of profitability Focus on cost controls Avoid entry into unrelated business lines Create a competitive sales process Don’t shop your deal multiple times Minimize any perceived risks

• Select the right transaction advisors (attorney/investment bankers)

JOHN AHN, B. RILEY

CASH FLOW

Page 35: CFO Essentials OC

JAMIE MERCER, SHEPPARD MULLIN

M&A

Page 36: CFO Essentials OC

TRENDS IN MERGERS AND

ACQUISITIONS

JAMIE MERCER, SHEPPARD MULLIN

M&A

Page 37: CFO Essentials OC

RECENT ABA DEAL POINT STUDY STUDY

75 transactions completed in 2009

All transactions over $100 million

All U.S. Public company targets

DEAL TERMS

51% all cash

24% all stock

25% mixed consideration

JAMIE MERCER, SHEPPARD MULLIN

M&A

Page 38: CFO Essentials OC

NO UNDISCLOSED LIABILITIES

JAMIE MERCER, SHEPPARD MULLIN

Includes Rep 99%

(94% of deals in 2008)

“All Liabilities” (Buyer Favorable 65%)

(57% of deals in 2008)

“GAAP Liabilities” (Target Favorable)

35% (43% of deals in 2008)

(Subset: includes rep)

M&A

Page 39: CFO Essentials OC

10B-5 FULL DISCLOSURE

JAMIE MERCER, SHEPPARD MULLIN

Includes “Knowledge

Qualifier” 25%

“No Knowledge” Qualifier

75% (100% in deals in 2008)

Includes Rep 5%

(2% of deals in 2008)

No Rep 95%

(98% of deals in 2008)

(Subset: includes rep)

M&A

Page 40: CFO Essentials OC

AVAILABILITY OF FINANCING

JAMIE MERCER, SHEPPARD MULLIN

No Condition 67%

(88% of deals in 2008)

Includes Condition 33%

(12% of deals in 2008)

M&A

Page 41: CFO Essentials OC

MATERIAL ADVERSE EFFECT (MAE)

JAMIE MERCER, SHEPPARD MULLIN

Includes “Walk Right” 100%*

(97% of deals in 2008)

M&A

Page 42: CFO Essentials OC

MAE CARVEOUT - PROJECTIONS

JAMIE MERCER, SHEPPARD MULLIN

No Carveout 7%

Includes Carveout 93%

(25% of deals in 2008)

(75% of deals in 2008)

M&A

Page 43: CFO Essentials OC

MAE CARVEOUT – CHANGE IN LAW

JAMIE MERCER, SHEPPARD MULLIN

No Carveout 9%

Includes Carveout 91%

(14% of deals in 2008)

(86% of deals in 2008)

M&A

Page 44: CFO Essentials OC

MAE CARVEOUT - ACCOUNTING

JAMIE MERCER, SHEPPARD MULLIN

No Carveout 8%

Includes Carveout 92%

(17% of deals in 2008)

(83% of deals in 2008)

M&A

Page 45: CFO Essentials OC

CHOICE OF LAW

JAMIE MERCER, SHEPPARD MULLIN

State of Incorporation 24%

(39% of deals in 2008)

Delaware 71%

(36% of deals in 2008)

Delaware 100%

(95% of deals in 2008)

Other 5%

(25% of deals in 2008)

Target not incorporated in Delaware Target incorporated in Delaware

M&A

Page 46: CFO Essentials OC

SHAREHOLDER SUITS NUMBER OF STRIKE SUITS INCREASING Allege breach of fiduciary duty by target board

Number of suits tripled since 2007 (105 to 337)

FORUM SELECTION IN BYLAWS Vice Chancellor Laster’s comment In re Revlon (2010)

Consolidates cases in one jurisdiction

Takes advantage of Delaware case law and judges

GALAVIZ V. BERG (JAN. 2011) Oracle’s forum selection clause struck down

Adopted by directors only

Adopted after the events that gave rise to claim

JAMIE MERCER, SHEPPARD MULLIN

M&A

Page 47: CFO Essentials OC

REGULATORY REPORTING JAMIE MERCER, SHEPPARD MULLIN

Page 48: CFO Essentials OC

SEC REGULATORY

DEVELOPMENTS FOR 2011

JAMIE MERCER, SHEPPARD MULLIN

REGULATORY REPORTING

Page 49: CFO Essentials OC

2011 SEC FOCUS AREAS MANAGEMENT’S DISCUSSION AND ANALYSIS

Overview

Financial Metrics

Liquidity and Capital Resources

EXECUTIVE COMPENSATION

Compensation Clawbacks

Say on Pay

PROXY STATEMENT

Proxy Access Rules

JAMIE MERCER, SHEPPARD MULLIN

REGULATORY REPORTING

Page 50: CFO Essentials OC

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 51: CFO Essentials OC

FINANCIAL ACCOUNTING AND

REPORTING UPDATE EFFECTIVE IN 2011 STILL HOT IN 2011 PROMISED IN 2011

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 52: CFO Essentials OC

EFFECTIVE IN 2011 GOODWILL IMPAIRMENT TEST

Guidance related to step 2 analysis

Public years beginning after 12/15/10

Private years beginning after 12/15/11

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 53: CFO Essentials OC

EFFECTIVE IN 2011 PUBLIC COMPANY BUSINESS COMBINATIONS

Supplementary Pro Forma Information

FINANCIAL AUDIT GALE MOORE, SINGERLEWAK

Page 54: CFO Essentials OC

EFFECTIVE IN 2011 FAIR VALUE MEASUREMENTS

Clarification on level 3 disclosures

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 55: CFO Essentials OC

EFFECTIVE IN 2011 CERTAIN REVENUE ARRANGEMENTS THAT INCLUDE SOFTWARE ELEMENTS MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 56: CFO Essentials OC

STILL HOT IN 2011 REVENUE RECOGNITION

Multiple element arrangements (VSOE, TPE, ESP)

Disclosure related to judgments

Compliance with ASU 2009-13

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 57: CFO Essentials OC

STILL HOT IN 2011 GOODWILL IMPAIRMENT

Disclosures (key assumptions)

Skepticism directed at impairment analysis

MD & A Discussion

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 58: CFO Essentials OC

STILL HOT IN 2011 FAIR VALUE MEASUREMENTS

Method and assumptions questioned

Disclosures

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 59: CFO Essentials OC

STILL HOT IN 2011 CONTINGENCY DISCLOSURES

Discussion not robust (reasonably possible range)

Same disclosure for multiple years

Settlement in same period of initial disclosure

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 60: CFO Essentials OC

STILL HOT IN 2011 BUSINESS COMBINATIONS

Contingencies

Minority interest

Acquired business audited financial statements

Pro-forma Disclosures

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 61: CFO Essentials OC

PROMISED IN 2011 JOINT PROJECTS

Financial instruments

Balance sheet offsetting

Revenue Recognition

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 62: CFO Essentials OC

PROMISED IN 2011

Leases

Fair Value Measurement

Statement of Comprehensive Income

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 63: CFO Essentials OC

PROMISED IN 2011

IASB – Insurance contracts

FASB Consolidation

IASB Consolidation

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 64: CFO Essentials OC

PROMISED IN 2011

Consolidation – Investment companies

Investment Properties

IASB – Postemployment benefits

GALE MOORE, SINGERLEWAK

FINANCIAL AUDIT

Page 65: CFO Essentials OC

PROMISED IN 2011

Discontinued operations

***Loss Contingencies

FINANCIAL AUDIT GALE MOORE, SINGERLEWAK

Page 66: CFO Essentials OC

www.SheppardMullin.com 858.720.7469

www.brileyco.com 310.966.1444

www.SingerLewak.com 877.754.4557

CONTACT US

JIM PITRAT JAMIE MERCER

GALE MOORE

JOHN AHN