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______________________________________________________________________ SPIZZIRRILAW.COM In accordance with Treasury Regulations which became applicable to all tax practitioners as of June 20, 2005, please note that the advice given herein (including any attachments) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of either avoiding tax penalties, or promoting, marketing, or recommending to another party any transaction or matter addressed herein.

GENERAL OVERVIEW OF THE IRC § 382 STUDY Under IRC § 382 of the Internal Revenue Code of 1986, as amended, a company's ability to use certain tax attributes, including Net Operating Loss carry forwards (tax losses) from prior years to offset current income may be limited if the company had a 50% change in ownership as defined by law. The IRC § 382 limitation generally applies to public and private corporations that have tax attribute carryovers about to be utilized or are releasing the valuation allowance against deferred tax assets under FAS 109. IRC § 382 imposes parallel restrictions on the carryover of capital losses and certain credits. A 382 Study involves a detailed review of numerous legal documents including:

1. Stock Ledger. Information about your company’s stock transactions should be in this ledger.

2. Schedules 13D and 13G. These documents are filed with the SEC by persons who report beneficial ownership of more than five percent of a class of stock of a public company. Schedules 13D and 13G disclose the name of the shareholder and the class and number of shares owned, and many other details that are relevant for purposes of determining whether the filer is a 5-percent shareholder.

3. Proxy Statements. Proxy statements should be read in conjunction with Schedules 13D and 13G. In addition to disclosing the identity of your company’s 5-percent shareholders immediately before a significant event or transaction that required shareholder approval, they typically refer back to the relevant Schedules 13D and 13G for ownership information.

4. Forms 3, 4, and 5. These documents are filed with the SEC by the management of a public company and contain information about management’s acquisitions and dispositions of your company’s stock, including option exercises.

5. Financial Statements. Your company’s financial statements contain an abundance of relevant information. For example, the balance sheet will indicate both the class and number of shares of outstanding stock on a quarterly and yearend basis. In addition, the

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SPIZZIRRILAW.COM In accordance with Treasury Regulations which became applicable to all tax practitioners as of June 20, 2005, please note that the advice given herein (including any attachments) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of either avoiding tax penalties, or promoting, marketing, or recommending to another party any transaction or matter addressed herein.

notes to the financial statements will describe your company’s equity transactions in detail. All of this information will help you identify your company’s testing dates.

6. Prior Section 382 Documents. Your company’s prior Section 382 studies, including documentation regarding any prior ownership changes, if any, should be reviewed.

7. Transaction Documents. Not surprisingly, you will also need to review stock purchase agreements, term sheets, and the like for all current and pending equity transactions. For example, if your company had a public offering during the last quarter, you’ll need to review the offering documents and any other relevant information to determine the number of shares issued, the offering price, and most importantly, the 5-percent shareholders who received shares of stock. The purpose of an IRC § 382 study is to determine whether an ownership change described, as that term is described by IRC § 382, has occurred. Following an ownership change of a loss corporation, the net operating loss carryovers and net unrealized built‐in losses of the corporation may become subject to an annual limitation imposed by IRC § 382. This limitation is generally computed by multiplying the value of the loss corporation immediately before the ownership change by the applicable Federal long‐term tax‐exempt rate in effect during the month of the ownership change. When a loss corporation has successive ownership changes, it is necessary to calculate two (or more) IRC § 382 Limitations. In general, the lesser limitation will apply. IRC § 382 requires that a loss corporation file an Information Statement with its federal income tax return in the year when the ownership change occurred. The Information Statement must identify the date on which the ownership change occurred. IRC § 382 also requires a loss corporation in which an owner shift or equity structure shift occurs to file an Information Statement even if it does not have an ownership change resulting in the imposition of a limitation described by IRC § 382. The Information Statement must also indicate that an ownership change did not occur and disclose any testing dates that occurred during the taxable year. A loss corporation is required to maintain records that are necessary to determine the following items: (1) the identity of its 5‐percent shareholders, (2) the percentage of stock owned by each 5‐percent shareholder, and (3) whether the Section 382 limitation is applicable. A complex set of statutes, regulations and cases surround the application of IRC § 382 to each specific taxpayer. Further analysis and additional information is required in order to determine the IRC § 382 limitation on specific tax attributes for each taxpayer. Please contact Spizzirri Law Offices if you would like to discuss the application of IRC § 382 to your Company.