## <u>EMPIRE</u> 

VALUATION CONSULTANTS
MEMORANDUM

Date: November 24, 2014
To: John Murphy and Paul Goodwin
From: Jeff Schultz
Re: Phaidon Press Limited Financial Statement Questions

John/Paul,

While in the process of preparing our model, a handful of other questions came up. Would you be so kind as to provide responses?

Please feel free to email or call if you would like clarification on any item.

<table><tr><th>Question</th><th>Response</th></tr><tr><td>For fiscal year 2014, Restructuring Costs
of £1,656 (in 000s) was added back

Typically, we see Restructuring Costs as
an expense.

Please provide details surrounding
£1,656 of Restructuring Costs being
accounted for as income in fiscal year
_2014. </td><td></td></tr><tr><td>Trade Debtor balances have been as
follows: 
6/30/2012: £4,266 (66 days' receivable')
6/30/2013: £3,691 (66 days')
6/30/2014: £4,301 (74 days')

And are projected as follows:
6/30/2015: £6,400 (93 days')
6/30/2016: £6,541 (84 days')
6/30/2017: £6,641 (79 days')
Please provide details surrounding the
projected increase in year-end Trade
Debtor balances and days' receivable for
2015 and 2016</td><td></td></tr></table>

<table><tr><th></th><th>1365/(sales/receivable)</th><th></th><th></th><th></th><th></th></tr><tr><td>Page 1</td><td>of 2</td><td></td><td></td><td></td><td></td></tr><tr><td><u>777 Canal</u></td><td><u>View Blvd., Suite 200,</u></td><td><u>Rochester,</u></td><td><u>NY 14623</u></td><td><u>Tel: (585) 475-9260</u></td><td><u>empireval.com</u></td></tr><tr><td>New York</td><td></td><td>Cleveland</td><td></td><td>Rochester</td><td>West Hartford</td></tr></table>

## <u>EMPIRE</u>  (cont.)

<table><tr><th>Phaidon reported pre-tax losses as
follows: </th><th></th></tr><tr><td>2013: £1,950
2014: £1,294</td><td></td></tr><tr><td>And projects pre-tax losses as follows:</td><td></td></tr><tr><td>2015: £1,298</td><td></td></tr><tr><td>Does tax law permit a future tax credit for
losses in previous years? In the U.S.,
the credit is referred to as a Net
Operating Loss Carryforward.</td><td></td></tr><tr><td>If a tax credit is expected, please provide
details on how it is applied to the pre-tax
earnings projected for 2016 and 2017
(and years beyond).</td><td></td></tr><tr><td>If a tax credit is applicable, it would be
ideal to have an estimated tax credit for
each year until the credit is fully utilized.</td><td></td></tr></table>

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