41 Nuts n' Seeds recognizes revenue when product is: O Ordered 0 Sold and invoiced o Delivered 0 Sold, delivered and invoiced 50 Including all existing and new proposed debt, what is Nuts n' Seeds Incorporated's 20W] debt service coverage ratio, assuming the operating line of credit was tested a 50% utilization? 1.69 1.51 1.96 1.?8 42 Based on the information provided in the company's financial statements, what is Nuts n' Seends Incorporated's 20W premises lease obligation? $81,000 $81,372 0 $81,762 $94,562 43 Based on the information provided in the company's financial statements, if Nuts n' Seeds Incorporated has an all-in rate of 5.75% on their operating line of credit, what is the bank's prime rate? 3.00% o 3.25% 3.50% 335% 44 What was Nuts n' Seeds' year over year revenue growth from X9 to YO? 12.19% 11.85% OoOO 11.96% 12.00%45 Working just off the balance sheet, and not including any new debt, what is Nuts n' Seeds' total liabilities to equity ratio in 20YO? 6.16X 0.67x OOOO 0.85X 6.89x46 Testing the operating line as fully drawn, plus all existing and new proposed term debt, what is Nuts n' Seeds Incorporated's 20Y0 Funded Debt to EBITDA ratio? 4.39 4.63 OOOO 5.40 4.9347 Testing the operating line as drawn at 75% usage, plus all existing and new proposed term debt, what is Nuts n' Seeds Incorporated's 2010 funded debt-to-EBITDA ratio? 3.39 3.93 OOOO 4.93 4.3948 Including the new proposed term loan, what is Nuts n' Seeds Incorporated's 20W) current ratio, if you tested the operating line as half drawn (50% usage)? 2.11 o 1.86 2.01 1 .22 49 Including the new proposed term loan, what is Nuts n' Seeds Incorporated's 20'\") total liabilities to equity ratio if you: 1] treated the shareholder loan as equity rather than as a liability, and 2) tested the operating line as fully drawn? 1.20 1.25 1.10 1.15 Notes to the Financial Statements Years Ended December 31, 20Y0 and 20X9 (Unaudited - See Notice to Reader) NATURE OF OPERATIONS Nuts n' Seeds Incorporated (the "Company") is a food processing company that produces and sells natural, organic packed food products. The company was incorporated under the laws of Anystate, USA and has been in existence for roughly 8 years. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Use of estimates The preparation of the financial statements requires management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include recognition of revenue, future warranty costs, the carrying amount of property and equipment, the carrying amount of other assets and the valuation allowances for accounts receivable. Actual results could differ from those estimates. (b) Financial instruments The Company's financial instruments consist of cash, accounts receivable, accounts payable, and accrued liabilities. The fair values of these financial instruments approximate their carrying values, due to their short maturities. (c) Property and equipment Property and equipment are recorded at cost less accumulated depreciation at the following rates: Food processing equipment Straight line depreciation method - 10 years Vehicles 30% declining balance Computers 50% declining balance Furniture and fixtures 20% declining balance One half year's depreciation is recorded in the first year of acquisition. (d) Income taxes The Company uses the taxes payable basis of accounting for income taxes. There is no significant difference between the effective income tax rate and the statutory rate. (e) Revenue recognition The Company recognizes revenue when product is sold, delivered and invoiced, and collection of any resulting receivable is reasonably assured.20YO 20X9 20YO 20X9 REVENUES $2,571,705 $2,296,165 Credit Line: 500,000 ASSETS CURRENT Spread: $275,879 $72,517 COST OF SALES 1,697,325 Prime: 3.00% Cash 1.554.917 Sales tax receivable 15,127 15,959 Total Rate: Inventory 790,535 796,513 GROSS MARGIN 874,380 741,248 Accounts receivable 387,517 362,885 Existing Term Loan: EXPENSES Amortization (months): 1,469,058 1,247,874 Advertising and promotion 23,541 17,185 Rate Bank charges 11,648 9.886 Rate Monthly EQUIPMENT (Note 3) 803.658 692.554 Business taxes, licenses and memberships 13,297 9,147 Monthly Payment Courier and postage 10,271 6.238 Total Annual Payments: Total Assets $2,272,716 $1,940,428 Depreciation 115,727 94,722 Insurance 3,941 3,516 New Term Loan: 500,000 Interest 68,495 29.638 Amortization (months): 84 LIABILITIES Office and administration 6,132 5,286 Rate 5.50% CURRENT Repairs and maintenance 12,861 9,214 Rate Monthly: Accounts payable and accrued liabilities $325,514 5324,554 Rent and occupancy 81,372 81, 178 Monthly Payment: Bank line of credit 500,000 441,589 Salaries and wages 365,182 315,950 Total Annual Payments: Current portion of long-term debt 33,333 Software and computers 6,137 4,288 Salaries payable 15,430 13,955 Telephone 1,507 958 Warehouse 64,968 56 255 874,278 780,098 785,079 643,461 DUE TO SHAREHOLDERS 914,412 914,412 LONG-TERM DEBT 166,667 NET INCOME BEFORE INCOME TAXES 89,301 97,787 1,955,357 1,694,510 INCOME TAXES 17,860 18,761 SHAREHOLDERS' EQUITY NET INCOME $71,441 $79,026 Share capital (Note 4) 100 100 Retained earnings 317,259 245,818 EBITDA: Total Equity 317,359 245,918 Credit Line Interest: Existing Annual Term Loan Blended Payments: Total Liabilities and Shareholders' Equity $2,272,716 $1,940,428 New Annual Term Loan Blended Payments: Debt Service Coverage Ratio: Total Liabilities: Total Funded Debt Total Equity: Funded Debt to EBITDA Total Liabilities to Equity: Current Assets: Current Liabilities: Current Ratio:Years Ended December 31, 20Y0 and 20X9 (Unaudited - See Notice to Reader) 3. PROPERTY AND EQUIPMENT Net Book Value Accumulated Cost Depreciation 20YO 20X9 Food processing equipment 716,655 179,691 536,964 556,709 Vehicles 136,205 40,305 95,900 102.304 Computers 29,239 28,355 884 8,473 Furniture and fixtures 37,286 20,195 17,091 25,068 919,384 268,546 803,658 592.554 4. BANK LOANS 20YO 20X9 General operating line of credit: Bank Prime plus 2.75% $500.000 $441,589 Reducing term loan for equipment: 5.1% fixed rate; blended monthly payments of $3,230 200.000 The company is exposed to interest rate risk to the extent that prime rates fluctuate. Security is as follows: General charge over all assets and undertakings of the company 5. SHARE CAPITAL 20YO 20X9 Authorized: Unlimited voting common shares without par value Issued: 100 common shares $100 $100 6. DUE TO SHAREHOLDERS 20YO 20X9 Amounts due to shareholders are nom-interest bearing with no specific repayment terms $914,412 $914,412 7. COMMITMENTS The company has lease commitments as follows: Premises Equipment 20Y1 $81,762 $12,800 20Y2 $81,000 $12,800 Page 7 NUTS N' SEEDS INCORPORATED 20Y3 $81,000 $12,800 20Y4 $81,000 $ 9,200NUTS N' SEEDS INCORPORATED Balance Sheet December 31, 20Y0 and 20X9 (Unaudited - See Notice to Reader) 20YO 20X9 ASSETS CURRENT Cash $ 275,879 $ 72,517 Sales tax receivable 15,127 15,959 Inventory 790,535 796,513 Accounts receivable 387,517 362,885 1,469,058 1,247,874 EQUIPMENT (Note 3) 803.658 692.554 $ 2,272,716 $ 1,940,428 LIABILITIES CURRENT Accounts payable and accrued liabilities $ 325,514 $ 324,554 Bank line of credit 500,000 441,589 Current portion of long-term debt 33,333 Salaries payable 15,430 13,955 874,278 780,098 DUE TO SHAREHOLDERS 914,412 914,412 LONG-TERM DEBT 166,667 1,955,357 1,694,510 SHAREHOLDERS' EQUITY Share capital (Note 4) 100 100 Retained earnings 317.259 245.818 317,359 245,918 $ 2.272.716 $ 1,940.428