Montrose Global Assets Inc. Inspections Inspections Appraisals Appraisals Types of Appraisals -USPAP Appraisals -Which Kind of USPAP appraisal do you need? Types of Appraised Values - Which value do you need? Loan Balance vs. Liquidation Loan Balance vs. Liquidation

Inspections Sarbane-Oxley Compliance Sarbane-Oxley Compliance GAAP GAAP FASB 13 FASB 13

You Need an Inspection if You Want to: Confirm that your collateral is on site, or Confirm that your collateral is on site, or Confirm that your collateral is in good condition, or Confirm that your collateral is in good condition, or To Send a Message That: To Send a Message That: You are out there, and You are out there, and You are watching them. You are watching them. Order an Inspection! Order an Inspection!

Steps to Make an Equipment Inspection Happen: 1-Inform the Customer: 1-Inform the Customer: It is time for a routine inspectionIt is time for a routine inspection Your equipment inspector will be calling to arrange a mutually convenient timeYour equipment inspector will be calling to arrange a mutually convenient time Ask the customer who the inspector should callAsk the customer who the inspector should call Tell him/her the inspector will require a brief tourTell him/her the inspector will require a brief tour Assure the customer that the inspection will not be disruptiveAssure the customer that the inspection will not be disruptive

2- Inform Montrose 2- Inform Montrose You want the inspectionYou want the inspection The customer is expecting our callThe customer is expecting our call Discuss fee and timing with Montrose Global Assets Inc.Discuss fee and timing with Montrose Global Assets Inc.

3- Provide Montrose With : 3- Provide Montrose With : An equipment ListAn equipment List Make, model, S/N of each piece of equipment, counts and descriptions. Make, model, S/N of each piece of equipment, counts and descriptions. Exact Location (address) of equipmentExact Location (address) of equipment Contact #’sContact #’s The reason for inspectionThe reason for inspection A description of anything extra you want us to look for:A description of anything extra you want us to look for: Senior people still on staff? Senior people still on staff? Employee moral? Employee moral? Activity? Activity?

4 Provide Montrose with the Inspectors answer to: 4 Provide Montrose with the Inspectors answer to: “Why are you here?” Or“Why are you here?” Or “Who are You?”“Who are You?”

Inspection vs. Appraisals

Appraisals Sarbane-Oxley Compliance Sarbane-Oxley Compliance GAAP GAAP FASB 13 FASB 13

You need an appraisal if you want to: Know the dollar amount that could be recovered by selling the assets Know the dollar amount that could be recovered by selling the assets The sale strategy best suited to these assets The sale strategy best suited to these assets Valuation Valuation Residual Value Residual Value Forced Liquidation Value Forced Liquidation Value Orderly Liquidation Value Orderly Liquidation Value Then Order an Appraisal! Then Order an Appraisal!

What is an Appraisal? An appraisal is a formal estimate of an asset value under various liquidating conditions. An appraisal is a formal estimate of an asset value under various liquidating conditions. It must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), promulgated by the Appraisal Standards Board. It must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), promulgated by the Appraisal Standards Board.

Types of USPAP Appraisals: (by scope of appraisal) A Complete Appraisal A Complete Appraisal All assets of the business are appraised- tangible and intangibleAll assets of the business are appraised- tangible and intangible A Limited Appraisal A Limited Appraisal Only certain assets are appraised- the M&E, the Real Estate, the Inventory, or the Tangible assetsOnly certain assets are appraised- the M&E, the Real Estate, the Inventory, or the Tangible assets

By Details Reported in Appraisal A- Self Contained Appraisal Report A- Self Contained Appraisal Report Describes in detail the methods, analysis, logic, etc. B- Summary Appraisal Report B- Summary Appraisal Report Summarizes the methods, analysis, logic, etc. C- Restricted Appraisal Report C- Restricted Appraisal Report States the methods, analysis, logic, etc. – Also warns that there is not enough information for a third party to understand the report

Desktop Appraisal Performed without an inspection by appraiser or his/her designated inspector Performed without an inspection by appraiser or his/her designated inspector Considered less reliable than if inspected first Considered less reliable than if inspected first Appraisal must state that the assets were not inspected Appraisal must state that the assets were not inspected

Benefits of an Appraisal over an inspection Characterization of Operations Characterization of Operations dead, picking up, etc. Insights About the Company, Customers and Key Employees Insights About the Company, Customers and Key Employees

Types of Appraised Values Fair Market Value Fair Market Value Useful if business is being sold Orderly Liquidation Orderly Liquidation What could be recovered in 3 or 4 months Forced Liquidation Value Forced Liquidation Value What could be recovered from an auction sale, Sale Period- Up to two months

Benefit of an Appraisal Report The appraiser can provide insight through The appraiser can provide insight through Direct ObservationDirect Observation ConversationsConversations Your Eyes and EarsYour Eyes and Ears

Direct Observation Maintenance Maintenance Dismantled Equipment Dismantled Equipment Idle Equipment Idle Equipment Equipment in Storage Equipment in Storage

Conversations with: Senior personnel about: Senior personnel about: CompetitorsCompetitors Major CustomersMajor Customers SalesSales The IndustryThe Industry Workers about: Workers about: Recent LayoffsRecent Layoffs General toneGeneral tone

Mechanics of Having Montrose Conduct an Inspection or Perform an Appraisal

Steps to Make an Equipment Appraisal Happen: 1-Inform the Customer: 1-Inform the Customer: It is time for a “routine” appraisalIt is time for a “routine” appraisal The appraiser will call to schedule his visitThe appraiser will call to schedule his visit He/she will ask aboutHe/she will ask about Maintenance policies. Usage, Upgrades, Repairs etc. Maintenance policies. Usage, Upgrades, Repairs etc. Therefore he must speak to a person knowledgeable of the equipment Therefore he must speak to a person knowledgeable of the equipment The appraiser will require a tourThe appraiser will require a tour The appraiser will take digital photographs of the equipment AND the serial numbers.The appraiser will take digital photographs of the equipment AND the serial numbers. The appraiser will not be disruptiveThe appraiser will not be disruptive

2- Inform Montrose: 2- Inform Montrose: You want an appraisalYou want an appraisal The customer is expecting our callThe customer is expecting our call Discuss a fee with Montrose Global Assets IncDiscuss a fee with Montrose Global Assets Inc Alert Montrose so that we can plan ahead to minimize travel costs:Alert Montrose so that we can plan ahead to minimize travel costs: Inform us ASAP with the equipment info you have so that we can start the research before we go. The minimum information required is the make, model, serial number and description of the equipment. If original cost, year of acquisition, accessories and installation cost are available, that would be valuable. Inform us ASAP with the equipment info you have so that we can start the research before we go. The minimum information required is the make, model, serial number and description of the equipment. If original cost, year of acquisition, accessories and installation cost are available, that would be valuable.

Comparison of Outstanding Loan Balance Fifteen year schedule with straight line depreciation Fifteen year schedule with straight line depreciation Change in OLV of standard, popular machinery Change in OLV of standard, popular machinery Initial drop in value, then gradual decline with age and condition, then levels off Change in OLV of custom, special purpose machinery Change in OLV of custom, special purpose machinery Severe initial drop in value, then relatively stable until condition changes or new process appears Change in OLV of certain high tech machinery Change in OLV of certain high tech machinery Severe initial drop in value, then relatively stable until new technology appears

Comparison of Outstanding Loan Balance to Liquidation Value