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Canopy Financial, Inc. Cash Flow Statement Worksheet Year Ending December 31, 2008 Beginning of Year End of Year Assets Difference Current Assets: : Cash A/R Other Total CA $ 7,139,482 $ 1,040,194 $ $ 264,000 $ 8,443,676 $ 6,921,934 $ 3,763,212 $ 2,450,500 $ 13,135,646 Equipment Accum Dep Net FA $ 4,213,610 $ (1,857,182) $ 2,356,428 $ 13,908,460 $ (3,264,085) $ 10,644,375 Other Assets $ 34,500 $ 118,421 Total Assets $ 10,834,604 $ 23,898,442 Liabilities and Equity Current Liabilities AP Deferred revenue Promissory note due to related pty ST debt Total CL $ 354,029 $ 3,001,938 $ $ 1,076,077 $ 4,432,044 $ 582,011 $ 1,229,987 $ 2,000,000 $ 2,119,238 $ 5,931,236 $ $ 4,432,044 $ $ 5,931,236 LT debt Total Liabilities Equity Common Stock APIC Retained earnings Total Equity $ $ 6,563,247 $ (160,687) $ 6,402,560 $ $ 14,555,247 $ 3,411,959 $ 17,967,206 Total Liab and Equity $ 10,834,604 $ $ 23,898,442 $ 3,572,646 CFFO Net income Adjustments: Depreciation/amortization A/R A/R Other current A/P A/P Def Revenue Other assets ST Debt Net CFFO 2,356,428 Investing: Additions to PPE Proceeds from PPE Purchase assets from RP Cap software Net Investing PPE rollforward Net BOY $ $ Proceeds sale Purch business PPE additions Cap software Depreciation Net EOY $ 10,644,375 Financing Issuance stock Proceeds debt RP Proceeds debt Net Financing Increase/decrease Cash BOY $ 7,139,482 Cash EOY Variance Actual EOY Cash $ 6,921,934 $ $ 6,921,934 (4) Commitments The Company leases three office facilities under noncancelable operating leases. Rental expenses under the operating leases were $634,890 and $500,830 for the years ended December 31, 2008 and 2007, respectively. Future minimum cash lease payments under noncancelable operating leases (with initial or remaining lease terns in excess of one year) as of December 31, 2008 are: Operating leases $ Year ending December 31: 2009 2010 2011 2012 2013 1,248,851 1,395,975 1,501,534 1,638,596 1,784,174 7,569,130 (5) Summary of CareGain Acquisition On October 9, 2008, the Company acquired the majority of the assets of the CareGain division from Fiserv, Inc. CareGain provided software to health plans and third party administrators related to the management of healthcare accounts owned by individual consumers. CareGain provided its customers with a nonexclusive, installable license of the software. The acquisition terms are: Acquisition terms Year ending December 31, 2008: Cash consideration paid at acquisition closing Promissory note payable to Fiserv, Inc. $ 2,000,000 2,000,000 4,000,000 The value of the promissory note at December 31, 2008 is $2,000,000. The Company pays quarterly interest installments on the value of the promissory note at a rate of 8% per annum. (3) Property and Equipment Property and equipment, stated at cost, at December 31, 2008 and 2007, consisted of the following: $ Furniture and fixtures Office equipment Computer equipment Computer software 2008 2,293,294 1,521,934 8,625,252 1,467,980 13,908,460 2007 1,039,485 645,865 2,012,476 515,784 4,213,610 Accumulated depreciation and amortization (3,264,085) (1,857,182) $ 10,644,375 2,356,428 Canopy Financial, Inc. Consolidated Statements of Cash Flows Years ended December 31, 2008 and 2007 2008 2007 $ 3,572,646 1,239,147 Cash flows from operating activities: Net income Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization Changes in operating assets and liabilities: Accounts receivable Accounts payable Other accrued expenses Net cash provided by operating activities 451,808 612,804 (1,684,775) (1,698,495) (540.622) 100,562 (1,467,299) (2,005,049) (388,520) (2,008,917) Cash flows from investing activities: Proceeds from sale of furniture and equipment Purchases of furniture and equipment Purchases of assets from related party Capitalization of internal use software development costs Net cash used in investing activities 15,455 (610,743) 11,365 (6,910,235) (2,000,000) (721.890) (9,620,760) (595,288) Cash flows from financing activities: Proceeds from issuance of stock Proceeds from debt financing Net cash provided by financing activities 8,000,000 1,302,650 9.302,650 5,000,000 1,050,284 6,050,284 Net increase (decrease) in cash and cash equivalents S (217,548) 3,446,079 Cash and cash equivalents at beginning of year S 7,139,482 3,693,403 Cash and cash equivalents at end of year $ 6,921.934 7,139.482 Canopy Financial, Inc. Consolidated Balance Sheets December 31, 2008 and 2007 2008 2007 Assets Current assets: Cash and cash equivalents Accounts receivable, net Other current assets Total current assets $ 6,921,934 3,763,212 2,450,500 13,135,646 7,139,482 1,040,194 264.000 8,443,676 Property and equipment, net Other assets Total assets 10,644,375 118,421 23,898,442 2,356,428 34,500 10,834,604 $ $ Liabilities and Stockholders’ Equity Current liabilities: Accounts payable Deferred revenue Promissory note due to related party Short term debt obligations Total current liabilities 354,029 3,001,938 582,011 1,229,987 2,000,000 2.119.238 5.931,236 1.076,077 4,432,044 Preferred stock: Series A Preferred Stock, $.001 par value. Authorized, 7,305,609; outstanding, 7,305,609 at December 31, 2008 and 2007 Series B Preferred Stock, S.001 par value. Authorized, 4,374,135; outstanding, 4,374,135 at December 31, 2008 and 2007 Series C Preferred Stock, $.001 par value. Authorized, 1,701,108 and 2,592,163 at December 31, 2008 and 2007, respectively; outstanding, 1,620,102 at December 31, 2008 and 2007 Series C-1 Preferred Stock, $.001 par value. Authorized, 2,401,977; outstanding, 2,401,977 at December 31, 2008 Common stock: Common Stock, $.001 par value. Authorized, 32,000,000 and 30,000,000 at December 31, 2008 and 2007, respectively; outstanding, 10,785,636 and 10,741,886 at December 31, 2008 and 2007, respectively Capital in excess of par value Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity 14,555,247 3,411,959 17,967,206 23,898.442 6,563.247 (160,687) 6,402,560 10.834,604 $ Canopy Financial, Inc. Consolidated Statements of Operations Years ended December 31, 2008 and 2007 $ 2008 19,467,300 61,420 19,528,720 2007 9,387,572 35,081 9,422,653 Revenue before reimbursements Reimbursements Total revenue Selling, general, and administrative expenses Depreciation and amortization expense Operating income Interest income, net Income before taxes Income taxes Net income 15,481,489 451,808 3,595,423 296,958 3.892.381 319,735 3,572,646 6,835,544 612,804 1,974,305 (286,540) 1,687,765 448,618 1,239,147 $

Adjust the cash flows as necessary for the year ended December 31, 2008 using the provided template and additional information. List any red flags.

 
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