2.

Reporting Period.  Unless otherwise noted herein, the MOR generally reflects the Debtors’ books and records and financial activity occurring during the applicable reporting period.  Except as otherwise noted, no adjustments have been made for activity occurring after the close of the reporting period.

3.

Consolidated Entity Accounts Payable and Disbursement Systems.  As described in the Cash Management Motion,² the Debtors utilize an integrated, centralized cash management system, in the ordinary course of business, to collect, concentrate, and disburse funds generated by their operations (the “Cash Management System”).  The Debtors maintain a consolidated accounts payable and disbursements system to pay operating and administrative expenses through various disbursement accounts.  In the ordinary course of business, the Debtors maintain business relationships among each other, which result in intercompany receivables and payables (the “Intercompany Claims”) arising from intercompany transactions (the “Intercompany  Transactions”).  As set forth more fully in the Debtors’ Cash Management Motion, the primary Intercompany Transactions giving rise to Intercompany Claims are cash receipts activities, disbursement activities, inventory purchases, and expense allocations.  Historically, Intercompany Claims are not settled by actual transfers of cash among the Debtors.  Instead, the Debtors track all Intercompany Transactions in their accounting system, which concurrently are recorded on the applicable Debtors’ balance sheets.  The Debtors have attempted to identify disbursements on an individual Debtor basis.  However, because the Debtors generally track and report their financial information on a consolidated basis some errors may exist and adjustments in future reporting may be necessary.

4.

Accuracy.  The financial information disclosed herein was not prepared in accordance with federal or state securities laws or other applicable non-bankruptcy law or in lieu of complying with any periodic reporting requirements thereunder.  Persons and entities trading in or otherwise purchasing, selling, or transferring the claims against or equity interests in the Debtors should evaluate this financial information in light of the purposes for which it was prepared.  The Debtors are not liable for and undertake no responsibility to indicate variations from securities laws or for any evaluations of the Debtors based on this financial information or any other information.

5.

Debtor in Possession Financing.  On June 13, 2016, the Bankruptcy Court entered theFinal Order Pursuant to 11 U.S.C. §§ 105, 361, 362, 363 and 364 and Rules 2002, 4001, and 9014 of the Federal Rules of Bankruptcy Procedure (I) Authorizing Incurrence by the Debtors of Postpetition Secured Indebtedness, (II) Granting Liens, and (III) Authorizing Use of Cash Collateral by the Debtors and Providing for Adequate Protection, and (IV) Modifying the Automatic Stay [ECF No. 298] (the “DIP Order”), which approved and authorized the Debtors to access up to $160,000,000 in postpetition financing and to provide the Debtors’ prepetition secured parties adequate protection on the terms and conditions set  forth in the DIP Order. Please see the DIP Order for additional detail.  Descriptions of the Debtors’ prepetition debt structure and the collateral relating to the bank debt are contained in the Declaration of  David J. Dick Pursuant to Rule 1007-2 of the Local Bankruptcy Rules for the Southern District  of New York [ECF No. 4].  Reference to the applicable loan agreements and related documents is necessary for a complete description of the collateral and the nature, extent, and priority of liens.

6.

Payment of Prepetition Claims Pursuant to First Day Orders.  Within the first two days of the Debtors’ chapter 11 cases, the Bankruptcy Court entered orders (the “First-Day Orders”) authorizing, but not directing, the Debtors to, among other things, pay certain prepetition (a) service fees and charges assessed by the Debtors’ banks and debit and credit card companies; (b) claims of warehousemen and miscellaneous lien  claimants; (c)  certain  insurance obligations; (d)  obligations  to “critical  vendors”; (e)  customer programs obligations; (f) employee wages, salaries, and related items, including employee benefit programs and independent contractor obligations; and (g) taxes and assessments. To the extent any payments  were made on account of such claims following the commencement of these chapter 11 cases pursuant to the authority granted to the Debtors by the Bankruptcy Court under the First Day Orders, such payments have been included in the MOR unless otherwise noted.

7.

Liabilities Subject to Compromise.  The bar date for asserting general unsecured claims for all entities other than governmental units was July 25, 2016 at 5:00 p.m. (Eastern), and October 31, 2016 at 5:00 p.m. (Eastern) for governmental units.  The bar date for asserting administrative claims was December 13, 2016 at 5:00 p.m. (Eastern).  Any amount classified as liabilities subject  to compromise are estimates and are subject to future change and adjustment.

8.

Reservation of Rights.  The Debtors reserve all rights to amend or supplement the MOR in all respects, as may be necessary or appropriate.  Nothing contained in this MOR shall constitute a waiver of any of the Debtors’ rights or an admission with respect to their chapter 11 cases.