EFTA00307193.pdf

WTAS VALUATION SERVICES GROUP AliphCom Common Equity Valuation as of June 20, 2011 CONFIDENTIAL EFTA00307193  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of June 2o, 2011 Table of Contents Transmittal Letter Definition of Value Scope of Engagement Conclusion Statement of Limiting Conditions Certification Background Exhibit A: Company Overview Exhibit B: Historical Financial Analysis Exhibit C: Industry Overview Exhibit D: Economic Overview Exhibit E: Valuation Methodologies Company Valuation (Step 1) Allocation of Company Value to Each Ownership Class (Step 2) Selected Approaches Total Company Valuation Exhibit F: Income Approach Revenue, Expenses, and Profitability Income Taxes Cash Flow Items Discount Rate Residual Value Conclusion Exhibit G: Discounted Cash Flow Analysis Exhibit H: Weighted Average Cost of Capital Exhibit I: Guideline Company Ratios Exhibit J: Market Approach: Public Company Market Multiple Method Overview Search Criteria Analysis Conclusion Exhibit K: Market Approach: Public Company Market Multiple Method Analysis CONFIDENTIAL I WTAS LLC EFTA00307194  ALIPHCOM - COMMON EQUITY VALUATION REPORT WTAS As of Julie 2o, 2011 Common Equity Valuation Exhibit L: Capitalization Rights Overview Exhibit M: Capitalization Table Exhibit N: Option Pricing Method Overview Analysis Black-Scholes Model Black-Scholes Model Assumptions Allocation of Value to Each Share Class Conclusion Exhibit 0: Option Pricing Method Analysis Exhibit P: Adjustment for Lack of Marketability William L Silber Study Management Planning, Inc. Study FMV Study Selected Marketability Discount Exhibit Q: Put Option Analysis Appendices Appendix 1: Guideline Company Tear Sheets Appendix 2: Studies Regarding Adjustments for Lack of Marketability Pre-IP0 Studies Restricted Stock Studies Appendix 3: Appraisers' Qualifications Appendix 4: Facts, Factual Assumptions, and Factual Representations Relied Upon in Our Valuation (Pursuant to Circular 230 Requirements) CONFIDENTIAL I WTAS LLC EFTA00307195 WTAS ALIPHCOM — COMMON EQUITY VALUATION REPORT As of June 20, 2011 August 3, 2011 Mr. Michael Tamaru Chief Financial Officer AliphCom 99 Rhode Island Street, 3 ni floor San Francisco, CA 94103 Dear Mr. Tamaru: We have completed our analysis of the fair market value of the common equity of AliphCom ("Aliph" or the "Company") on a per share basis (the "Subject Interest") as of June 20, 2011 (the "Valuation Date"). We understand that our valuation of the Subject Interest, as developed in this report, will be utilized for tax planning and financial reporting purposes in conjunction with regulations of Section 409A of the Internal Revenue Code ("IRC") as well as Financial Accounting Standards Board ("PASS") Accounting Standards Codification ("ASC") Topic 718 - Compensation'. We have not been engaged to make any purchase or sale recommendations associated with the Company and this report should not be utilized for any other purpose. Our valuation is dependent on numerous factors both internal and external to the Company as of the Valuation Date. However, a willing buyer, taking into account its own facts and circumstances, might have a different assessment of value. Thus, we make no representation, nor should it be implied that the Company would he sold at the indicated value. Such price would be dependent on market conditions and negotiations between buyer and seller. DEFINITION OF VALUE For tax reporting purposes and in conjunction with Section 409A of the IRC, the standard of value utilized in our analysis is fair market value, which is defined as: The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevantfacts. This definition of value is supported by pronouncements from the Internal Revenue Service (the "IRS") and has been further established in numerous court decisions dealing with fair market value issues. For financial reporting purposes, the standard of value to be utilized in our analysis is fair value as defined in the Glossary of FASB ASC Topic 718 as follows: The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. We also considered recent Financial Accounting Standards Board discussions and activity related to refining this definition and other current staff positions / decisions. For the purposes of this valuation analysis, it was assumed that no material difference existed between the estimated fair market value and the fair value of the Company's common equity on a per share basis. Throughout the course of this report and the related analysis, it can be assumed that the terms "fair market value" and "fair value" are interchangeable. PASS ASC Topic 718 supersedes Statement of Financial Accounting Standards ("SPAS') No. 12311 CONFIDENTIAL I WTAS LLC 3 EFTA00307196 WTAS ALIPHCOM — COMMON EQUITY VALUATION REPORT As of June no, 2011 SCOPE OF ENGAGEMENT Where applicable, our valuation of the Subject Interest included an analysis of the Company's historical operating results, review of the industry in which the Company operates, research of comparable publicly traded companies, and a review of the Company's pro-forma forecast of future business operations. Consistent with Revenue Ruling 59-60 and standard practice, the following factors have also been analyzed and accorded due weight, where applicable: • The nature and history of the entity's business; • The general economic conditions and specific industry outlook; • The book value of the entity and its financial condition; • The earning capacity of the entity; • The entity's distribution history and capacity; • The existence of goodwill or other intangible value within the business; • Prior interest sales and the size of the interests being valued; and • The market price of companies engaged in the same or a similar line of business having their equity securities actively traded in a free and open market, either on an exchange or over-the- counter ("OTC"). We also considered differences between the Company's preferred and common shares with respect to liquidation preferences, conversion rights, voting rights, and other features. We also considered appropriate adjustments to recognize lack of marketability. Revenue Ruling 59-602 is the definitive source outlining the standard of value, approach, methods, and factors to be considered in valuing shares of the stock of a closely held entity similar to Palantir. Although initially presented for use in estate and gift tax calculations, Revenue Ruling 59-60 is regularly referenced and used in the valuation of closely held businesses for other tax reporting, and other purposes, and its principles are applicable in the valuation of most closely held businesses. In the course of our valuation analysis, we used financial and other information provided by management or obtained from private and public sources. We have accepted the financial data provided to us without verification as accurately reflecting the historical and projected financial position and operating results of the Company. 2 Revenue Ruling 54-6o, 2459-1 CB 237, modified by Revenue Ruling 65-193,1965-2 CB ro, and amplified by Revenue Ruling 77-287, 1977-2 CB 314, Revenue Ruling 8o-223, 248o-2 CB lot, and Revenue Ruling 83-120,1483-2 CIII7o. CONFIDENTIAL I VVTASLLC 4 EFTA00307197  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of Julie 2o, 2011 CONCLUSION Based on the information provided and the analysis conducted, and subject to the attached Statement of Limiting Conditions, it is our opinion that one common share of the Company as of the Valuation Date should be valued as follows: $0.77 (rounded) ZERO DOLLARS AND SEVENTY-SEVEN CENTS With regard to tax issues, pursuant to Internal Revenue Service requirements (Circular 230), please note that: • This opinion is limited to the tax issue addressed in the opinion (the valuation of the Subject Interest for tax reporting purposes). • Additional issues may exist that could affect the tax treatment of the subject transaction or matter. Our opinion does not consider or conclude on those additional issues. • With respect to any significant tax issues outside the limited scope of the opinion, the opinion was not written, and cannot be relied on by the taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. We appreciate this opportunity to perform this engagement and would be pleased to discuss our findings and the methodology used in the valuation. A copy of this report is retained in our files, together with the data from which it was prepared. Please do not hesitate to contact us if you have any questions or if we can be of further assistance concerning this engagement. Very truly yours, WTAS CONFIDENTIAL I WTAS LLC 5 EFTA00307198  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of June 20, 2011 Statement of Limiting Conditions The value conclusions related to the asset(s), propert(ies), business entit(ies), or business interest(s) (the "Subject Asset(s)") specified in our appraisal report / deliverable (hereafter referred to as the "Analysis") are governed by the following limiting conditions: t. No investigation of the legal description or matters, including title or encumbrances, will be made, and the owner's claim to the Subject Asset(s) is assumed to be valid and marketable. Further, unless otherwise specifically indicated, we have made the following assumptions: (i) the Subject Asset(s) is free and clear of any liens or encumbrances; (ii) the Subject Asset(s) meets full compliance with all applicable federal, state, and local zoning, as well as use, environmental, and similar laws and regulations; and (iii) all licenses, certificates, consents, or other legislative or administrative authority from any local, state, federal government, or private entity have been or can be obtained or renewed for any use on which the value conclusion is based in the Analysis. 2. WTAS LW ("WTAS") has relied upon information furnished by others, which is believed to be reliable. We have not independently verified the accuracy or completeness of the information. 3. During the course of our analysis, we were provided certain financial information, including estimates of cash flow, by management. We have not performed an examination, review, or compilation in accordance with standards prescribed by the American Institute of Certified Public Accountants and, therefore, do not express an opinion or offer any form of assurance on the cash flow data or their underlying assumptions. 4. The value conclusions are not intended to represent values for the Subject Asset(s) at any date other than the date of value specified in the Analysis. We assume no responsibility for changes in market conditions or physical factors that could affect the value of the Subject Asset(s) at a later date, or the inability of the owner to sell the Subject Asset(s) at the value specified in the Analysis. S. The Analysis has been prepared solely for the purpose stated, and should not be used for any other purpose or by any other person / party than to or for whom it is addressed and prepared. Our value conclusions are not intended to represent investment advice of any kind and do not constitute a recommendation as to the purchase price or sale of the Subject Asset(s). 6. Neither the Analysis nor any portion thereof (including, without limitations, any conclusions as to value, the identity of the appraiser, or the identity of WTAS) shall be disseminated to the public or third parties through advertising, public relations, news, sales, mail, direct transmittal, Securities and Exchange Commission disclosure documents, or any other media without the prior written consent and approval of WTAS. Possession of the Analysis, or a copy thereof, does not afford the holder the right to publication. The Analysis may not be used without the prior written consent of WTAS and Palantir. 7. Our engagement team is not required to give further consultation, testimony, or be in attendance in court with reference to the Subject Asset(s) in question or to update any report, recommendation, analysis, conclusion, or other document related to our services, unless additional arrangements are made. 8. Responsible ownership and competent property / asset management are assumed. CONFIDENTIAL I WTAS LLC 6 EFTA00307199  ALIPNCOM - COMMON EQUITY VALUATION REPORT WTAS As of Julie 20, 2011 Certification I certify, that to the best of my knowledge and belief: • The statements of fact contained in this report are true and correct. • The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and are my personal, impartial, and unbiased professional analyses, opinions, and conclusions. • WTAS and I have no present or prospective interest in the property that is the subject of this report, and have no personal interest with respect to the parties involved. • I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • The engagement of WTAS and myself in this assignment was not contingent upon developing or reporting predetermined results, nor was the compensation received for completing this engagement contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the dient, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of the appraisal. • The undersigned have performed services with respect to interests in the Company within the three- year period immediately preceding acceptance of the valuation engagement. Prior services were the valuation of one common share of the Company as of February 28, 2009, February 28, 2010, February 10, 2011, March 28, 2011, and June 30, 2007. • The procedures, opinions, and conclusions developed constitute an Appraisal Report, in conformance with the Business Valuation Standards of the American Society of Appraisers. No persons, other than the appraisers acknowledged below, provided significant business appraisal assistance to the person(s) signing this certification. 07 01 40%,„ r Petra Loer, CFA, ASA WTAS Tax ID Number: 26-1437743 Contributing Appraiser: Shirley Zhang CONFIDENTIAL I WTAS LLC 7 EFTA00307200  EXHIBIT A Company Overview ALIPHCOM — COMMON EQUITY VALUATION As of June 20.2011 8 EFTA00307201  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of Julie 20, 2011 Exhibit A: Company Overview Founded in 1998 and headquartered in San Francisco, California, Aliph originated as a leading developer of design-driven, noise-eliminating bluetooth headsets. Since inception, Aliph has refined its noise suppression technology3 for commercial applications. In December 2006, the Company introduced its award-winning Jawbone Bluetooth headset with Noise Shield nationwide. Since its launch, the Jawbone Bluetooth headset has become one of the best-selling Bluetooth headsets in the U.S. and is also sold in the U.K. The Company subsequently launched its low- and mid-price-range product series, the Jawbone Prime and Jawbone ICON series, in 2009 and early 2010, respectively, which featured headsets with innovative and sleek designs. Since its release, the Jawbone ICON series has received outstanding reviews and experienced strong sales volume through online and third-party retailers. As of the Valuation Date, Aliph has expanded its product lines from headsets to wireless speakers and speakerphones (the JAWBOX series), as well as new software applications and services. For instance, the Company introduced MyTalk in 2010, a web portal that allows users to download applications and software for enhanced setting control and connectivity with their devices. The Company also introduced a free mobile phone service called "THOUGHTS", which allows users to record and send instant voice messages to individual or group contacts (vs. traditional methods of texting and emailing). Furthermore, the Company expects to release its Armstrong activity band in July 2011, which will primarily target physically active urban adults. The Company's products received various accolades and awards, with the most recent being the winner of the 2010 Industrial Designer's Society of America ("IDSA") Design of the Decade. Going forward, management is forecasting significant growth from recently launched new products and services, expanding existing market segments, and developing new products. Based on discussions with management, the applicable target market for the Company's Armstrong activity band is significantly larger than previously anticipated. As such, management expects to achieve a larger sales volume of activity bands, which is reflected in the revised forecast for the current Valuation Date. Similarly, management also expects the stereo headphone line to achieve a higher sales volume from the Company's recently launched Jambox, which is expected to be sold globally going forward. Management expects bluetooth sales to remain flat and sales of its enterprise products to decline going forward. Overall, due to competitive pricing pressure, management is forecasting similar pricing points, and expects to achieve a similar long-term profitability margin as previously forecasted. In June 2011, Aliph secured its latest round of Series 5 preferred financing with JP Morgan Digital Growth Fund, LP. However, according to management, there were a couple of investors who were considering making additional Series 5 investments in the Company. As a result of the uncertainty related to these potential investments, we did not consider them in our analysis as of the Valuation Date. Based on discussions with management, the Series 5 preferred round of financing was not considered arms length, as the financing was not marketed to solicit other competing offers. In addition, the potential investors did not perform extensive financial due diligence of the Company, and the investors were personal friends of the Chief Executive Officer. As such, we did not rely upon the Series 5 preferred round of financing as an indication of value in arriving at our concluded value for the Company's common shares at the Valuation Date. Since inception, the Company has had seven rounds of preferred share financing, through which the Company had raised aggregate proceeds of approximately $118.5 million. Its primary investors at the Valuation Date included JP Morgan Digital Growth Fund, LP; Sequoia Capital; the Mayfield Fund; Khosla Ventures; Andreessen Horowitz Fund II, LP; and AH Capital Management, LW. As a result of the economic recession and investments the Company has made in development thus far, the Company incurred operating losses before interest expense and tax of approximately $17.6 million on revenues of approximately $86.8 million for the fiscal year ended December 31, 2010. However, going forward, the Company is forecasted to break even in the 2012 time frame, and revenues are projected to experience significant growth in the near term as the Company expects to see an increase in sales volume from its entry into new geographic markets and expansion in the new activity band market. 3 Originally used for military applications, with its participation in a Defense Advanced Research Projects Agency (DARPA) program. CONFIDENTIAL I WTAS LLC 9 EFTA00307202  EXHIBIT B Historical Financial Analysis ALIPHCOM - COMMON EQUITY VALUATION As of June 20, 2011 10 EFTA00307203  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of JUlle 20, 2011 Exhibit B: Historical Financial Analysis Aliph's revenues rebounded in 2010 following the decline in 2009 as a result of the lackluster demand due to the economic recession. As of the Valuation Date, management expects its products to continue gaining traction in their primary markets. See the historical financial statement analysis below. Selected Historical Income Statement Data (in $0005) Year-to- Date Mar 2006 2007 2008 2009 2010 2011 Revenue $1,201 $55,708 $145,455 $70,434 $86,781 $28,477 Operating income (loss) (1,928) 4,608 6,821 (13,007) (17,636) (9,990) Net income (loss) (2,148) 3,300 2,791 (13,089) (17,663) (9,991) CONFIDENTIAL I WTAS LLC I I EFTA00307204  EXHIBIT C Industry Overview ALIPHCOM — COMMON EQUITY VALUATION As of June 20, 2011 12 EFTA00307205  ALIPHCOM— COMMON EQUITY VALUATION REPORT WTAS As of June no, 2011 Exhibit C: Industry Overview. The wireless communications equipment industry consists of two general sectors: the wireless handsets / headsets sector and the wireless infrastructure (network equipment) sector. The wireless handset sector consists of both analog and digital handsets, and is estimated to be the world's largest consumer electronic market. According to Datamonitor, the global wireless handset market reached total revenues of approximately $95.8 billion in 2009, representing a compound annual growth rate ("CAGR") of approximately 8.5% for the period spanning 2005 through 2009. Over the four-year period spanning from 2005 through 2009, more consumers dropped landline phones completely and instead relied on their wireless handsets for phone service, such that the volume of mobile handsets that were in use increased at a four-year CAGR of 10.7% from 2005 to 2009, and reached an approximate one billion units in 2009. Going forward, the performance of the wireless handset market is forecasted to continue to accelerate, with an anticipated CAGR of 10.1% for the five-year period spanning from 2009 to 2014, reaching a total market value of approximately $1,55.3 billion by the end of 2014. See below for additional details. Table 17: Global mobile phones market value forecast: $ billion, 2009-14 Year $ billion billion % Growth 2009 95.8 68.9 (3.7%) 2010 103.2 74.2 7.7% 2011 113.2 81.4 9.7% 2012 124.8 89.7 10.3% 2013 138.9 99.9 11.3% 2014 155.3 111.7 11.8% CAGR: 2009-14 10.1% Source: Datamonitor DATAMONITOR • Sources: Standard & Poor's Industry Surveys (n, the Datamonitor Group, and information provided by management. CONFIDENTIAL I WTAS LLC 13 EFTA00307206  ALIPHCOM - COMMON EQUITY VALUATION REPORT WTAS As of June 20, 2011 Figure 10: Global mobile phones market value forecast: $ billion. 2009-14 S Dinar Growls 180 14 160 • • 11 •— 11 140 .10 17n • •8 g 100 •6 .4 80 as 2 j 00 0 40 -2 20 2010 2011 2312 • 2013 2014 -4 Year Source: Datamonitor DATAMONITOR According to MI, the wireless infrastructure market is continuing to experience growth due to the expansion of fourth generation (4G) digital networks. The usage of these high-speed networks has been fueled by the growing demand for smartphones, such as Apple's 4G iPhone and Google Inc.'s Android- based G2. The rise in demand for smartphones has been largely driven by the significant growth in social networking, as these devices provide access to popular social networking websites such as Facebook, Twitter, and MySpace. In upcoming years, the demand for these devices will depend on product differentiation, as consumers require more customized, intelligent, and powerful applications. Geographically, the world's mature economies continue to play an important role in the wireless handset market; however, the number of new mobile subscribers in these developed countries is rapidly declining as penetration rates have reached relatively saturated levels. As a result, the focus of market growth has turned to emerging markets in regions within the Asia-Pacific, where low penetration rates and pent-up demand for network connectivity bode well for new subscriber acquisitions. According to Datamonitor, as of 2009, the Asia-Pacific region had the majority share (or approximately 55.2%) of the total wireless handsets sold globally. See the chart on the following page for details. CONFIDENTIAL I WTAS LLC 14 EFTA00307207  ALIPHCOM - COMMON EQUITY VALUATION REPORT WTAS As of June 2o, 2011 Figure 3: Global mobile phones market segmentation II: % share. by value, 2009 ••,rnericas 180% Europe 269% Source: Datamonitor DATAMONITOR The number of unified communications CLIC") users is expected to increase from approximately 2.1 million in 2010 to approximately so million in 2015. Based on information provided by management, the increase will be driven by both enterprise and personal usage. Overall, the growth in headphone sales is expected to be primarily driven by an increase in smartphone usage. Participants operating in the wireless handset / headset industry include large public companies such as Motorola Mobility, Ines, Palm, Inc.6, Nokia Corp., Plantronics Inc., Research in Motion Ltd., Netgear Inc., and Logitech International SA, as well as a number of smaller companies such as AliphCom and BlueAnt Wireless. The continuing recovery of the worldwide economy is expected to continue to drive consumer demand for wireless products, which represents a significant market opportunity for companies in that space. s Effective January 4, 2011, Motorola Mobility, Inc., and Motorola Solutions, Inc. spun-off into two separate publicly traded companies. Motorola Mobility, Inc. primarily provides products and services to consumer and entertainment sectors. Motorola Solutions, Inc. primarily provides products and services to enterprise and government sectors. 6 As of July 1, 2010, Palm, Inc. was acquired by Hewlett-Packard Company. CONFIDENTIAL I VVTASLLC 15 EFTA00307208  EXHIBIT D Economic Overview ALIPHCOM — COMMON EQUITY VALUATION As of June 20, 2011 16 EFTA00307209  ALIPHCOM - COMMON EQUITY VALUATION REPORT WTAS As of June 20, 2011 Exhibit D: Economic Overview 7 A fundamental consideration in the valuation of any business is the performance of the economy in which that business operates or from which it derives its benefits (i.e., revenues and profits). In the case of the Company, it is important to consider the performance and outlook of the economy in which it operates. Current economic concerns include global political upheaval, uncertainty related to European sovereign debt, quantitative easing, government stimulus programs, and a continually weak housing market Despite widespread agreement that the U.S. economy began to grow in late-2009, weak labor, retail, and housing markets in 2010 have caused the economic recovery to be slow. Furthermore, high household indebtedness is expected to continue to lead to weak demand in the retail markets. Please see below for further details. GROSS DOMESTIC PRODUCT According to the Economist Intelligence Unit CEIU"), the economic gross domestic product ("GDP") in the U.S. is expected to grow 2.9% in 2011 as the recovery continues and consumer confidence improves. The government has approved a $300 billion economic stimulus package, which was expected to continue to support economic growth in 2011. Quarterly Real GDP Growth 1.5% 1.0% 0.5% MI C..0% * . .0% P.. IP A/ / / / e,ert lie le / •P re n0 , -1.0% 1.5% -2-0% ECONOMIC INDICATORS The projected growth in GDP is also supported by a modest expansion in production, consumer spending, and manufacturing. The continually increasing economic indicators represent an increase in inventories and economic activity. Please see below for further information. Consolidated - Annual Change (2/10 - 2/11) Industrial Production 5.81% Business Manufacturing 7.53% Consumer . endin 3.77% 7 Sources: Capital IQ, Federal Reserve Board, the Bureau of Economic Analysis, the Bureau of Labor Statistics, the University of Michigan Consumer Sentiment Report, Institute for Supply Management, the Livingston Survey, the EIU, and Standard & Poor's Industry Surveys. CONFIDENTIAL I WTAS LLC 17 EFTA00307210  ALIPHCOM - COMMON EQUITY VALUATION REPORT WTAS As of Julie so, 2011 HOUSING MARKET Since 2008, the subprime debt crisis has placed downward pressure on economic growth as significant losses from subprime loans have reduced the willingness of banks to loan funds to other financial institutions and consumers. Despite the stabilization of prices in the housing markets since 2008, many states hit hardest by the subprime crisis have yet to recover, resulting in a surplus inventory of homes available in the housing market. This has resulted in significant declines in new home construction and construction-related industries, which has also slowed economic growth. Home sales began to recover in late 2009; however, inventories remained high in 2010, which has kept home prices low. Furthermore, new housing starts have remained weak as excess housing inventory has been slow to sell. New Home Starts (000's) Iwo 21100 15 00 1000 5 00 ° FfitIMITI§Iffiiiii ifillIkiiI/Ifill ›- -.a -Eiia.mI$.;g.a. -4.,-a,..-a.a 2 . a.. -4a -a ..?.. . -A01-= -E- LABOR / CONSUMER STATISTICS According to EIU, the unemployment rate is expected to decrease to an average of 8.o% for fiscal year 2011. Reports from the Bureau of Labor Statistics indicate that the Consumer Price Index for All Urban Consumers increased 2.2% from February 2010 to February 2011. According to HU, consumer confidence has 'mproved in the first quarter of 2010 as consumer confidence reached its highest level since February 2008. In general, labor markets and consumer sentiment have improved but remain weak, which has resulted in slow economic recovery. Unemployment Rate (%) 12.0% 10.0% IL 6.0% 40% 2.0% ...% EltlittiiiiiiiiiifIttfifikglIiiiiffillui -••-•?. :: 2 pep reo -a -c•- p.r, 2 c.cee- onWr- 7 I1 -6 .fl e) e- 'fl?ss.7.-?.. .4 2 CONFIDENTIAL I WTAS LLC IS EFTA00307211 WTAS ALIPNCOM - COMMON EQUITY VALUATION REPORT As of June 20, 2011 INTEREST RATES According to the December 2010 Livingston Survey, the interest rate on three-month Treasury bills is expected to increase from 0.2% in December 2010 to 0.4% by December 2011, before further increasing to 1.6% by December 2012. In addition, ten-year Treasury bond interest rates are expected to increase from 2.8% in December 2010 to 3.3% by December 2011. Current estimates for the ten-year Treasury bond interest rates anticipate an increase to 4.0% by December 2012. The U.S. Federal Reserve has kept long- term and short-term interest rates low in an effort to incentivize economic growth and prevent deflation. Please refer to the chart below. to Year (Weekly) Interest Rates 9.0% 8.0% 7.o% 6.o% 5.o% 4.o% 3.0% 2.0% 1.0% 0.0% ce ebsore4",".le.....\,;,,,tie.s\b\ ...t.,, # le1 55it, 1 43 ...0 e s ....\t",r.0.,,t§:.# ..N.t:„.,0 ...\tr.#..0 , cfe# 49cP....tx ..t„.. FINANCIAL MARKETS For the 12 months ended June 20, 2011, U.S. equity markets demonstrated strong gains. Please see below for annual market returns. 6/20/2010 6/20/2011 Return Dow Jones Industrial 10,450.64 12,080.38 15.6% Nasdaq 2,309.80 2,629.66 13.8% 5 00 1,117 .51 1,278.36 14.4% CONCLUSION The future performance of the Company is correlated with both the overall growth and performance of the economy. As noted above, the economy in which the Company operates is in the midst of an economic recovery. If the economic environment continues to improve, the Company will be well-prepared for further growth. However, if the economy dips back into a recession, the future outlook for the Company could be materially affected. CONFIDENTIAL I WTAS LLC 19 EFTA00307212  EXHIBIT E Valuation Methodologies ALIPHCOM — COMMON EQUITY VALUATION As of June 20, 2011 20 EFTA00307213  ALIPHCOM — COMMON EQUITY VALUATION REPORT WTAS As of Julie 2o, 2011 Exhibit E: Valuation Methodologies COMPANY VALUATION (STEP 1) There is no universal formula to determine an appropriate value for an illiquid, non-controlling interest in a closely held company. Determination of value is a matter of judgment, which takes into consideration economic and market conditions, as well as investment opportunities that would be considered as alternatives to the interest being valued. The methods commonly used to value a closely held business include the following: Income Approach. This approach focuses on the income-producing capability of a business. The income approach estimates value based on the expectation of future cash flows that a company will generate — such as cash earnings, cost savings, tax deductions, and the proceeds from disposition. These cash flows are discounted to the present using a rate of return that incorporates the risk-free rate for the use of funds, the expected rate of inflation, and risks associated with the particular investment. The selected discount rate is generally based on rates of return available from alternative investments of similar type, quali