NBT Equities Research Report VCLD

NBT EQUITIES RESEARCH INITIAL REPORT
VERECLOUD ($VCLD) verecloud.com 5/23/2011
COPYRIGHT 2011 NBT EQUITIES RESEARCH and NBTEQUITIESRESEARCH.COM. This report may be published in part or in its entirety so long as Tobin Smith and NBT EQUITIES RESEARCH is referenced. NBT EQUITIES RESEARCH is a trademark of NBT EQUITY GROUP and NBT COMMUNICATIONS. All rights reserved.
Extended Coverage: Verecloud Inc. ($VCLD)
VERECLOUD INC. OTCBB: VCLD Website: verecloud.com Buy: Speculative Emerging Growth 2011 Target: .75 2012 Target: $2.20 Current Share Price: .30 Market Cap: 21.43 Shares Outstanding: 71.43 M Float: 6.9M Analyst: Tobin Smith, Chief Research Analyst NBT EQUITIES RESEARCH
INITIAL COVERAGE VERECLOUD INC. (OTBCC: VCLD)
We initiate coverage of Verecloud, Inc. as a speculative buy and pure play on the emerging growth sector of Cloud Computing and Services space now entitled Cloud Service Broker (CSB). NBT EQUITIES RESEARCH 2011
NBT Investment Thesis Cloud Service Brokerageaka the delivery of unified/integrated aggregations of third-party IT infrastructure-as-a-service and software applications-as-a-service is indeed the next big thing in Cloud Computing. Verecloud and its Nimbus CSB cloud service brokering platform have a considerable lead and advantage against the few actual competitors in the Cloud Service Brokerage (CSB) enabling technology space. By building a platform to telco/millions of simultaneous real time user grade, Verecloud is both positioned to become BOTH a leading
Cloud Service Broker to the Small-to-Mid Sized enterprise (SMBs) as well as the highest service level CSB platform for Tier 2 and Tier 3 sized Communications Services Providers (CSPs) and Managed Service Providers (MSPs) worldwide.
The Cloud Service Broker Opportunity For one, NBT is not sure that the title Cloud Service Broker is going to stickits a phrase loaded with pre-existing feelings for the word broker. But we ARE sure that both large and small-to-mid sized companies (broadly defined as business organizations with fewer than 500 employees) are going to spend in excess of $150 billion for cloud computing and services by 2014 from less than $50 billion in 2010 -- $94 billion for SMBs alone.
John Gage, one of the founders of Sun Computing, famously said 20 years ago The Network is the Computer. It took about 20 years, but he was right. Today we call the network the cloud Tobin Smith Founder & CEO NBT EQUITY GROUP
We are sure because the experts ALWAYS underestimate secular transformational shifts in ITthis will be no exception. NBT EQUITIES RESEARCH 2011 In our 30 years of following and researching information technology transformations, we have NEVER seen a faster morphing technology shift than the cloud computing shift. The relatively recent introduction of virtualization technology in computing data centers has surely been the gateway drug to the cloud because it changed the economics of shared data centers vs. siloed/standalone IT. But its been the explosion of X-as-a-Serviceie. EVERYthing IT now offered as an OPEX service vs. a CAPEX investmentthat moved cloud computing and services into hyper growth mode. And has truly sparked a no turning back revolution in IT.
Riding this amazing cumulative annual growth rate40% or moreis the holy grail of investing success in the IT sector for the next decade. World class business technology that used to require millions of dollars and months of installation and dozens of IT support staff now comes in a few days with an Amazon gift card. (Visit www.amazon.com and their focus on Amazon Cloud Drive by placing your mouse over the Amazon Cloud Drive, 5GB of free storage left hand side light blue navigational link) NBT Equities Research is covering the Cloud Computing and Services space from stem-tostern. We will have multiple companies in our Recommended Portfolio of emerging growth leaders. We are bringing out CloudInvestor.com and sponsoring the Cloud Computing Equities Alliance for public and private companies in the Cloud space. We do acknowledge that most investors, however, need a quick primer in the Cloud. The entire space has been constantly morphing every six months for the last 24 months. Most important: If you understand the Cloud 2011, you will understand why the recent shutdown (See article here: http://bit.ly/kn1CYf) of Amazons EC2 cloud infrastructure service in late April 2011 made the Cloud Service Broker value proposition now MORE valuable than ever.
Understanding the Cloud Computing and Service Continuum The definition of enterprise cloud computing is easy: its simply a standardized IT capability NBT EQUITIES RESEARCH 2011 delivered via the Internet as a pay-per-use service AND in a self-service way. Its everything traditional premise-based hardware and software is NOT. John Gage, one of the founders of Sun Computing, famously said 20 years ago The Network is the Computer. It took about 20 years, but he was right. But lets say that the network is the computer IF all the apps and services are pre-integrated or unified. Cloud services dont really increase efficiency unless they are pre-integrated. In old IT you spent a $1 on software and $3-$4 integrating into your business processes. Not very cloud-like or ANY magnitude of increased productivity and efficiencyi.e. NOT transformational.
The Big Pay Off of the Cloud In order for the cloud to deliver on its promises, various individual cloud services and applications must plug-and-play in and out. They need to be pre-integrated or unified with both other applications, computing services and communications services like VOIP and mobile communications. NOW we have lift-off! If you use Google or Yahoo mail and calendar, you are a pre-integrated or unified cloud services user. Said again, if not unified and pre-integrated with OTHER cloud based services and applications, the cloud is just another revenue stream for the systems integration conglomerateswho in a big way are Enemy #1 of Cloud Computing and Services world revolution. Telco and datacom reselling agents? Public Enemy #2. The key phrases to remember is unified and risk reduction. -Tobin Smith CEO & Founder NBT Equity Group
The Transformative Business Model Shift in the Cloud From a business perspective, Cloud Computing shifts IT consumption from the CAPEX modelwhere you buy and operate via physical hardware and softwareto the OPEX modelwhere you use and consume via the Internet. Cloud computing shifts the entire cost and delivery model of IT and in many cases the business model of the companies that employ this approach. NBT EQUITIES RESEARCH 2011
Substantial cost savings. Immensely faster implementation and provisioning. Significantly LESS IT staff support. Pre-integration and unified services integration with computing services and communications services that in most cases ELIMINATES the 3-5X systems integration hairball.
What is NOT to love about cloud computing? In short, cloud computing is the Next Big Thing in IT and is a secular shift for the next decade. Unified Cloud Services completely changes the way information and other digital services are delivered and consumed. Done correctly, it reduces IT risk and waste. The key phrases to remember are unified and risk reduction.
The Cloud Market 2014 $149 billion in total cloud spend worldwide by 2014 according to Gartner --from $59 billion in 2010. For Enterprise level companies Cloud Computing provides an entirely new business model that all sized enterprises can leverage to achieve a host of new opportunities. New applications for their users, better service to customers, substantially lower IT costs (i.e. coverting IT Capex to Opex) and faster time to market are just a few of NBT EQUITIES RESEARCH 2011
major brands in software today. The problem, the big guys cant innovate as fast as newcomers like Verecloud.
the benefits. But Fortune 2000 companies have significant issues with security and existing infrastructure investments that are keeping them primarily in the private cloudie. Caption: Cloud is not a trend, its a strategy being adapted and talked about by ALL a hybrid strategy where
they largely cloudify and virtualize their existing IT data centers and applications. The private cloud aint the cloudits a baby step. SMB operations are adopting the public cloud in a MUCH bigger and faster way than Fortune 2000 Enterprises. According to research provided by IDC, SMBs are expected to spend more than $90 Billion for cloud services in 2014. From $30 billion in 2009 For Communications Service Providers (CSPs)everyone from Tier 1 to regional Tier-3 playersand to Managed Services Providers (MSPs) and value added resellers (VARs) of both IT and telco servicesCloud Computing represents a game-changing opportunity as well. The Cloud is a significant revenue generator and margin enhancer by giving billions of clients from every global vertical the opportunity to work and play more efficiently and effectively. The problem with CSPs and the cloud? Tier-1 CSPs move VERY slow, have immense IT department conflicts and LONG development time frames. European CSPs have been WAY ahead of North American CSPs. Hosted email, communication, collaboration, mobility and security offerings comprise the vast majority of sellNBT EQUITIES RESEARCH 2011 thru volume from these CSPs (Jamcracker study Jan 2011). While selling generic Infrastructure as a Service (IaaS) is a natural fit for CSPs from a perception standpoint (especially since most of them already sell hosting), but its a doubleedged sword regarding margins because it will be difficult over the long term for many of them to stay price competitive against Amazon and others who have much greater buying power for commodity IaaS offerings. Without including a broader catalog of other services, CSPs will only replicate the current issues they face with margin erosion from core services like broadband.
We expect Nimbus CSB platform to be adopted by a significant number of primarily Telcos and Managed Service Providers who face a slow and painful margin erosion future simply selling PBX/Broadband and generic managed services to the SMB market. But the immediate and by far LARGEST opportunity at hand for Verecloud is to pioneer and lead the charge for Unified Cloud Computing and Services to the SMB market where the economics for Cloud Computing are overwhelming and unambiguous.
The Verecloud Solution for the SMB Market The challenge in the Cloud, once again, is how to manage it all. How can SMBs get preintegrated and unified cloud services and applicationsand who will plug-in new users and plug-out ex-users? Who is going to bill for all of this? Who is going to manage all these millions of cloud users? And WHOMin light of the Amazon EC2 disaster - is going to make 100% SURE That IF a data center goes down, another is automatically online picking up the slack? THIS is where the Cloud Service Broker comes into the picture. And where Verecloud and its Cloud Service Broker enabling platform Nimbus CSB comes to the rescue.
Verecloud CSB Verecloud is a channel for delivery of all of cloud services and appsaka all XaaS. Verecloud adds value by providing preintegrated cross-cloud identity, security and data integration, as well as a single point of fulfillment. Verecloud is generally agnostic when it comes to which XaaS offerings it resells. While certain services may achieve a leading status, NBT EQUITIES RESEARCH 2011
Common Ground (Source: 451 Group, with permission)
Verecloud believes that no service has a perpetual advantage, and even leading technologies are not right for every customer. Nimbus CSB is capable of consolidating virtually any The private cloud aint the cloudits a baby step. -Tobin Smith CEO & Founder NBT Equity Group combinations of services to create a customized technology suite within or across organizations. At the same time, Vereclouds legacy as a systems integrator means that it able to tailor the suite to meet the business needs of the individual organization. In short, public and private cloud computing requires governance. Governance in IT speak is managing in real time who gets what service from where and then how its managed--billed for and integrated together et al. Provisioning, orchestration, permissioning, and analytics are all part of the governance concept in a macro sense. Another way to describe and think of Nimbus CSB is as a real-time, cloud-based IT Management/Automation/Governance/Security/Data Storage Service do-it-yourself system. For a Cloud Service Broker to add value, they have to do it ALL in real time for the vendors and end users.
So Then What is a NBT EQUITIES RESEARCH 2011

Examples of Cloud Services Brokerages, Gartner Group Research, January 2011
Cloud Service Broker? A ground breaking Gartner Group report from late 2010 forecasts that cloud service brokerages will exist to fill the governance gap between the service consumer and the service provider.
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Gartner Research believes that cloud service brokers (CSBs) are one of the most necessary and attainable opportunities for service providers, distributors and enterprise IT organizations. In the CSB model they broker relationships between a service consumer and multiple cloud services and computing providers. In the POST Amazon EC2 world they will ALSO need to be the last safety net for service security. "The future of cloud computing will be permeated with the notion of brokers negotiating relationships between providers of cloud services and the service customers. (Source: Gartner: "Cloud Consumers Need Brokerages to Unlock the Potential of Cloud Services") The CSB model provides an architectural, business and IT operations model for enabling, delivering and managing different cloud services within a federated and consistent provisioning, billing, security, administration and support framework. In other words, a cloud broker provides a value-adding IT management/Automation/Governance/Security/Data Storage Service do-it-yourself system platform for the consumption of business cloud computing and services.
The Gartner Report That Started the Cloud Service Brokerage Industry Gartner predicts Cloud Service Brokerage will become THE largest revenue opportunity in the CloudNBT agrees. Hundreds of $billions in cloud services and application use will be NBT EQUITIES RESEARCH 2011 delivered via Cloud vendors and users via the CSB model. In other words, as cloud computing evolves, combinations of cloud services will be too complex and untrustworthy for end consumers to handle their integration, according to Gartner, Inc. The Amazon EC2 debacle confirmed this thesis. With the evolution of cloud computing, one inescapable reality continues to surface and that is, as with service-oriented architecture before it, the fact that cloud computing promotes the idea of continuous proliferation of services, said Daryl Plummer, managing vice president and chief Gartner Fellow. Unfortunately, using services created by others and ensuring that theyll work not only separately, but also together are complicated tasks, rife with data integration
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issues, integrity problems and the need for relationship management. Hence the role of brokers to add value to services and to deliver new services built and delivered on top of old services. The future of cloud computing will be permeated with the notion of brokers negotiating relationships between providers of cloud services and the service customers, said L. Frank Kenney, research director at Gartner. In this context, a broker might be software, appliances, platforms or suites of technologies that enhance the base services available through the cloud. Enhancement will include managing access to these services, providing greater security or even creating completely new services. Although cloud service brokers may be delivered through technology, there is still a need for brokerage businesses to exist to take advantage of the brokers. A brokerage is a service whereas a broker may simply be B2B technology, and Gartner believes that cloud service brokerages (CSBs) are one of the most necessary and attainable opportunities for cloud service providers. CSBs will broker relationships between a service consumer and a service provider. Gartner divides CSB businesses into three main categories: 1. Cloud Service Intermediation An intermediation broker provides a service that directly enhances a given service delivered to one or more service consumers, essentially adding value on top of a given service to enhance some specific capability. CSBs will offer intermediation for multiple services of any kind such as NBT EQUITIES RESEARCH 2011 identity management or access management. Individual cloud service consumers will acquire these intermediation services through some consumer-focused service providers, such as AT&T, Verizon, Telestra or Virgin Media. Intermediation brokers could also supervise pricing and billing.
Intermediation brokerages and the broker products that support them will exist in three places. First they may reside in the cloud at the service providers location, allowing the provider to deliver a level of governance beyond the original service. Second, the broker may reside at the consumers location and may allow local management or administration of service levels. Finally, the service broker may exist in the cloud as a service and in this situations, a true
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brokerage service business exists independent of the original service provider or the consumer.
2. Aggregation Its unlikely that consumer organizations or individuals will be able to provide the data integration, process integrity or intermediation needed to bring multiple services together. An aggregation brokerage service combines multiple services into one or more new services. It will ensure that data is modeled across all component services and integrated as well as ensuring the movement and security of data between the service consumer and multiple providers. These aggregation brokers will exist primarily in the cloud as service providers in their own right, forming a layer of service provisions that approximates the application layer in traditional computing. In aggregation-style brokerages, the services brokered are generally fixed and wont change frequently.
3. Cloud Service Arbitrage Cloud service arbitrage is similar to cloud service aggregation. The difference between them is that the services being aggregated arent fixed. Indeed the goal of arbitrage is to provide flexibility and opportunistic choices for the service aggregator e.g., providing multiple e-mail services through one service provider or providing a credit-scoring service that checks multiple scoring agencies and selects the best score.
What sits between you and the cloud will become a critical success factor in cloud computing as cloud services multiply and expand faster than the ability of cloud consumers to manage or govern them in use, said Mr. Plummer. The growth of service brokerage businesses will increase the ability of cloud consumers to use services in a trustworthy manner. Cloud service providers must begin to partner with cloud brokerages to ensure that they can deliver the services they promote. So whats a cloud broker? Essentially its a value added player whose value is they significantly REDUCE the RISK of public-based cloud computing and insure ALL services and apps play together. For 10 employees or 10,000in real time. NBT EQUITIES RESEARCH 2011
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In essence, the CSB sits on top of all other cloud-based service and application providers. The broker doesnt have to provide cloud services per se, but does need to in real time manage, automate and secure: a) pre-integrated plug-and-play b) Manage the applications c) Provision the services d) Automate bill and facilitate transactions e) Deliver pre-determined service levels f) Provide security
g) Facilitate back-up IT failure systems (think Amazons EC2 downtime in late April 2011
NBT assumes that cloud brokers would also become the service level agreement (SLA) insurance provider as well to their clients as well. A few key points about why a cloud broker makes sense:

Intermediaries exist in consumption relationships with technology. Many industries use brokerages every day in financial services, travel and other verticals NBT EQUITIES RESEARCH 2011 FDIC and FINRA provide insurance for broker held fundswhy not insurance against data center outages? Brokers act on behalf of the consumer, in this case the IT buyer.
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The Cloud Services Delivery Stack
What are cloud services? As we have previously stated, cloud services are software, computing and technology processes provided via the Internet. These services are commonly delivered on-demand to NBT EQUITIES RESEARCH 2011 computers and other devices, such as smartphones or tablet computers, which are webbrowser enabled. Cloud services are typically classified into broad categories commonly referred to as X-as-aService (XaaS): 1. Infrastructure-as-a-Service (IaaS) - Provides consumers and businesses with virtual servers and storage capabilities on an as-needed basis, eliminating large up-front costs. This is commonly referred to as cloud computing. IaaS is quite mature, having been offered for many years in the form of dedicated or virtualized hosting. Todays services have evolved into highly configurable options that can be rapidly provisioned
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and activated across numerous network connectivity choices. Softlayer are examples of IaaS providers.
Rackspace and
2. Platform-as-a-Service (PaaS) - Provides the ability to create applications over the Internet using a turnkey software development stack. PaaS often includes IaaS
capabilities and common software development components such as application server, web server, and database server. IaaS is a cost effective way for developers to create their own customized solutions without the burden of dedicated IT operations or database management teams. Hardware, operating system and database
administration are simply consumed as needed from a central source. Amazon EC2, Microsoft Azure, and Heroku are examples of PaaS.
3. Software-as-a-Service (SaaS) - Provides software applications for consumers and businesses on-demand. The software is accessed via the Internet through any
computing device having a web browser. This enables consumers to use the software only as needed and at a reduced cost, versus the traditional model of licensing equipment with software rights. More importantly, SMBs can obtain the same powerful software as larger enterprises since they pay per user rather than for a costly enterprise-wide license. Salesforce.com, Microsoft Exchange and Sharepoint and
Quickbooks Online are examples of SaaS.
4. Business-Processes-as-a-Service (BPaaS) Provides a pre-integrated package of services in order to create a cohesive technology process delivered from a hosted platform. This is sometimes referred to as a managed service. An example is a unified communications VoIP service integrated with conferencing, collaboration and email. NBT EQUITIES RESEARCH 2011
Verecloud CSB: A New Leader in Integration Platform as a Service Vereclouds Nimbus CSB loosely falls into a new category of Cloud computingIntegration platform as a service. Integration platform as a service (iPasS) is simply a suite of cloud services aimed at addressing a wide range of cloud computing, B2B applications, B2C
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applications, Business Process as a Service and on-premises integration and governance scenarios. Take all your cloud IT infrastructure and SaaS. NOE integrate PBX as a Service, VOIP as a Service, Video conferencing as a Service and you start to have a cloud-enabled unified data and communications integration platform. All thats left is to consolidate all the billing issues into one bill. Self-manage the provisioning of various cloud-based services to all employees and clients Analyze which services are working well and which ones are notand suggest alternatives. Finally take ALL those services, add a Service Level Agreement (i.e. acceptable levels of down time for the platform) and NOW you have what NBT, Gartner and others are calling a Cloud Service Broker. A super managed service provider might be another term for a cloud service broker. Bottom-line: Verecloud CSB is technically an Integration as a service (iPaaS) enabling technology.
Cloud Computing Architecture To understand cloud computing and where it is going, lets go back to the architecture in its three foundational layers: 1. The system infrastructure service layer (IaaS or infrastructure as a service) providing the core computing, networking and storage services 2. Application infrastructure service layer (usually called PaaS) with its database management system (DBMS), application servers, application security, messaging, business process management (BPM), managed file transfer (MFT), B2B integration, data and application integration, SOA governance and other middle tier application services
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3. The application service layer (known as SaaS) delivering user application functionalities like ERP, CRM, human capital management (HCM), collaboration web conferencing/email and vertical market applications and vertical job functionalities
The iPaaS Suite The iPaaS suite is meant to provide users with an integrated integration and governance platform for making independently designed applications and service ALL seamlessly work together. According to the Gartner report on iPaaS, iPaaS offerings combine cloud services for protocol bridging, messaging, transformation, routing, service virtualization, adapters, orchestration, community management, MFT, registry/repository, development tools et al. Gartner defines iPaaS as a suite of cloud services enabling development, execution, and governance of integration flow connecting any combination of on premises and cloud-based processes, services, applications and data within individual or across multiple organizations.
So What does iPass Have to Do with A Cloud Service Brokerage (CSB)? CSBs will combine iPaaS-based integration services with other cloud services and unified IP communication applications-as-a-Service (VOIP, PBX, Conference etc.) to provide users with end-to-end solutions to specific business problems and business processes that involve the NBT EQUITIES RESEARCH 2011
Caption: Cloud is not a trend; its a disruptive technology that is here to stay. Like a letter of the alphabet on a keyboard, cloud is a mainstay in business.
consumption of services from MULTIPLE cloud services. This is where Verecloud CSB iPaaS platform shines.
The Verecloud Solution At its core Nimbus CSB is a proprietary integration platform (the IPaaS). The
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IPaaS is carrier-grade and provides the quality of service requirements demanded by customers mission critical systems. The IPaaS is the foundation for, and differentiator which enables Verecloud to aggregate and provide carrier-grade cloud services. With the IPaaS, the brokering of services is a value added proposition. The value that Verecloud brings to the table is:

Governance--security and policy compliance of cloud service consumption Value-chain management--managing the provisioning and fulfillment for both users and service providers Service enrichment--billing aggregation, simplified service switching, context and analytics Centralized functionality of service, archiving and auditing
Without the IPaaS, a cloud service broker is merely a middleman. But with the IPaaS a cloud service broker becomes a new kind of managed service provider adding value for both users and cloud service vendors.
Why Nimbus CSB is Unique The Nimbus platform brings the capabilities of different best-of-breed cloud vendors together in one system - application and service management, eCommerce and marketplace and NBT EQUITIES RESEARCH 2011 integration platform as a service. These are the key elements of cloud enablement and management. This groundbreaking technology allows businesses to access, order and manage multiple cloud services through a single portal, receive a single bill. Other iPaaS platforms are are not nearly at the telco grade level of sophistication and scalability of Nimbus.
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The iPaaS Competition Integration-as-a-service in a pure B2B market is well established with many vendors such as GXS, IBM-Sterling, E2open, Crossgate and Liason Technologies et al. These are enterprisetargeted solutions that arent viable for SMBs. Vendors like Boomi were bought by Dell (last year) and Cast Iron (bought by IBM). The next level is the e-commerce B2B integration on premiseagain E2open, Hubspan and Liaison Technology dominate here. The open source run at iPaaS are coming from Cordys, iWay Software, Mulesoft and Tibco with its Silver PaaS offering. There are a plethora of startups focusing on cloud services integration market like Appresso, Interia, Jitterbit, and Vigelence, to name a few. Boomi was purchased by Dell to expand its cloud services offerings.
Current iPaaS Barriers The factors slowing down adoption of iPaaS (according to Gartner) include 1. Excessive market fragmentation 2. The number of start-up companies with unproven technologies and/or incomplete offerings 3. Providers shifting business models and pricing options 4. Security privacy and SLA capacity (now with the Amazon EC2 issues)
The Verecloud iPaaS Competitive Strategy Vereclouds strategy is to use its bombproof telco-grade platform to offer its OWN cloud services as well as to sell their CSB product to other CSB organizations primarily in the telco carrier and managed service provider world.
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Actually delivering a set of integrated and plug and play system of IaaS, SaaS, BPaaS and wrap them all up with unified communications to the SMB world proves their advantage is delivering a Telco grade 99.99% reliable iPaaS platform. In other words, building their own cloud service broker on a truly scalable platform that can serve at 99.99 service level to millions of SMBs is really the only way to prove the Verecloud CBS platform.
The Value Proposition

The Nimbus CSB exploits the disruptive technology of the cloud. The XaaS suppliers are looking for ways to expand their marketing reach and channels and would especially like to penetrate the SMB base. The Verecloud brand has the potential to become the industry standard since there are first-to-market opportunities at hand. Innovative Technology Through its relationship with Belatrix in Argentina, Verecloud is building a robust and proprietary technology suite of products which began release in February, 2011 (Nimbus1.0) and will continue through September, 2011. The Nimbus CSB is also a carrier grade technology by virtue of the companys use of Gigaspaces technology, which is a highly scalable, high-transaction technology platform. The Nimbus CSB is built on very scalable architecture. The Nimbus CSB is built on a combination of cutting-edge technologies, including Vereclouds proprietary, third-party licensed technology and open source code. There are no unforeseen technology hurdles to overcome to build the Nimbus CSB. The Nimbus CSB will harness global innovation of application developers. NBT EQUITIES RESEARCH 2011
Rapid Prototyping In addition, in todays world the way to build any type of Internet delivered service is rapid prototyping aka getting it out there and using actual customer feedback to improve the service.
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By going direct to SMBs vs. waiting for telco and MSP clients to trial and then deploy the Verecloud CSB platform, Verecloud gets to market significantly faster and with a much improved product AHEAD of its competition. What is the commercial potential of cloud services? According to a Gartner report dated June 2, 2010 (Report No. G00200833):
Cloud computing and cloud services (in combination) was the number one search term on gartner.com and the number one inquiry asked of Gartner in 2009 The world-wide market for cloud services was $59 billion in 2009 By 2014, the world-wide market will grow to nearly $150 billion (with SMBs comprising $94 billion of that amount), an annual growth rate of 17%
The reason for the strong rate of adoption for cloud services is threefold. First, speed and low latency capabilities of internet connections have grown markedly in the last 5 years. This has paved the way for richer software services and large amounts of data to be easily delivered. All this capacity really comes from the wide adoption of storage and server virtualization technologies. Second, businesses and customers now operate in a world of multiple computing devices. A PC is no longer the dominant connection to the internet and for running software applications. The consumption of services has grown greatly through the use of laptops, tablet computers, and smartphones accessing the internet through both fixed and wireless means. Finally, recent advancements in IT operating software have made it economically viable for cloud services providers to offer, provision, and bill for services on a per user or even under a usage basis. As a result, there is now an extensive ecosystem of services that businesses can provision through the Cloud. New, richer services become available almost daily. Simply: The more virtualization, the more cloud stuff. The more cloud stuff, the more SMB businesses are spending in the Cloud. NBT EQUITIES RESEARCH 2011
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Number of SMBs (millions)

Employees
1.2 1.2 0.7 1.1 2.9 0.9
0 1- 4 5-9 10 - 19 20 - 500 500+
Verecloud CSB Target MarketSmall to Medium Businesses There are more than 8 million SMBs in the United States ranging in size from single employee business to up to 500 employees. Vereclouds target is those with fewer than 500 employees:
According to Verecloud research the number of SMBs and recent research indicate a large and fertile market for cloud services in general. The factors underlying this conclusion include:

Surveys of SMB IT managers indicate broad, increasing adoption of cloud services The three most common objections/concerns of this group regarding adoption of Cloud services (security, complexity and up-front costs) are solved by Nimbus CSB SMB represent a largely underserved market for IT integration Vereclouds pre-integration approach and joint marketing with network operators or large professional communities means customer acquisition costs are economically attractive
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Cloud adoption has accelerated even faster than the most aggressive forecasts. According to the recently released State of SMB IT technology survey from the Spiceworks Voice of IT Market Research Program:

Overall IT budgets are seeing their largest growth in more than 18 months Twice as many small and medium business (SMB) IT professionals are using cloud solutions today compared to the second half of 2010 Twenty-six percent of IT budgets are earmarked for hosted and cloud services, up from 19% this time last year, a 37% increase Software (34%) and hosted IT/cloud services (26%) make up 60% of total IT budgets
Vereclouds Nimbus CSB platform addresses this challenge by integrating, monitoring and managing all of the organizations cloud services and related spending. Nimbus CSB seamlessly connects small and medium businesses to cloud service suppliers. Verecloud will distribute and bill for cloud services and allow SMBs to manage their cloud services through one portal and pay for these services from a single bill. NBT EQUITIES RESEARCH 2011
Verecloud Mission Vereclouds mission is to become the industry leader in cloud service brokerage by creating a value chain with the following benefits:
SMBs can more efficiently and with LESS IT risk operate their businesses by expanding and aggregating their cloud services through one portal Cloud service suppliers can expand their reach and strengthen their product offerings through Nimbus CSBs powerful integration and billing capabilities
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Nimbus CSB bridges the current gap between (i) small and medium businesses that want expanded and integrated services via the Cloud, (ii) communications service providers (CSPs) and managed service suppliers (MSPs) who need innovative, high-margin services to drive growth, and (iii) innovative clouding computing solution suppliers who want access to the large distribution channels that have developed.
With its powerful Nimbus CSB platform as the foundation, Verecloud will distribute, manage and bill for cloud services to SMBs. Verecloud will reach these SMBs through targeted distribution channels including value added resellers (VARs), managed service providers and communication service providers, such as wireline and wireless telecommunications and cable companies.
The Verecloud Team Individually, VCLD brings an average of 15+ years of deep expertise in telecommunications, technology and software. The company began as a IT professional services provider specializing in telco OSS/BSS integrations for clients like Qwest, Sprint and the new 4G wholesale service provider LightSquared whom continues to be a primary client as Verecloud transitions to the CSB model.

The CEO is a great leader has cast a strong vision. The senior management team also brings strong leadership, innovation and vision to the table. The core employee base has worked together in for many years. The corporate culture is nimble and fast to adapt to change. Dr. Hossein Eslambolchi is officially on the Board of Directors. Phil Tonge is officially on the Board of Directors. Tobin Smith is engaged. The company has assembled a very impressive group of Trusted Advisors throughout the United States. Denver, Colorado is a great location to recruit added technology talent to the team. NBT EQUITIES RESEARCH 2011
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The Overall Vision Long Term: NBT believes that Verecloud will develop a $500 million business by providing value to small and medium businesses (SMBs) around the globe by helping these businesses find, buy and manage the cloud enabled applications that reduce their costs and improve their productivity.
Agreement with Spiceworks An initial version of Nimbus CSB, consisting of the first two tools will be made available to Spiceworks 1.4 million members. The two tools, which will initially be provided to users for free, are:
The Verecloud Expense Manager (VEM) which monitors, tracks, and manages the cost of each cloud service consumed by an organization. NBT EQUITIES RESEARCH 2011 A plug-in to the Spiceworks IT network management application.
Spiceworks users represent 850,000 SMBs, and consist entirely of active, hands-on IT professionals. Applications already available to Spiceworks users are IT management tools covering network monitoring, PC inventory, IT reporting, and help desk. IT managers can manage their entire on-site infrastructure with these tools. Off-site technology can be effectively managed for the first time, now that the VEM and the plug-in are available. Nimbus CSB provides IT managers with tools for managing the growing, wide-variety of cloud services used by their organizations alongside their existing IT infrastructure.
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Verecloud believes that the relationship with Spiceworks represents a highly efficient means of targeting SMB IT professionals. Providing basic Nimbus CSB functionality for free serves as a gateway to acquiring IT managers as paying customers later. It is expected that the IT professionals using the tools will see the value of using Verecloud to acquire and manage their portfolio of cloud services. As those professionals increasingly subscribe to cloud services, Nimbus CSB will be viewed by the Spiceworks community as the cloud services acquisition and management tool.
Large and increasing adoption of cloud services by Spiceworks members A survey of the Spiceworks community shows broad and increasing adoption of cloud services. In first quarter 2010, 14% of its membership was using cloud services. By first quarter 2011, the rate has doubled to 28%, and is expected to be 42% by year-end 2011. A 42% cloud adoption rate by the end of 2011, translates to more than 350,000 potential business users that Verecloud will be reaching directly through Spiceworks.
Verecloud solves the most common objections In 2010, the most common objection cited by Spiceworks IT professionals was that cloud services are an unproven new technology. In the 2011 survey this objection was not among the top three objections or concerns. Today, IT managers are most concerned about (i) security, (ii) complexity and (iii) initial up-front cost. Nimbus CSB, with its IPaaS foundation, solves these problems completely. By targeting the Spiceworks community, Verecloud offers the exact capabilities that IT professionals have identified as their top needs. NBT EQUITIES RESEARCH 2011
Spiceworks represents a low-cost customer acquisition strategy in an underserved market Spiceworks was founded in 2006, and already has more than 1.4 million members and is growing at a rate of more than 2,000 users each day. Verecloud gains this level of exposure immediately, simply by providing the cloud management tools as part of the Spiceworks toolkit. Spiceworks has segregated its membership by size of business and annual IT spend/budget. The table below demonstrates that the commercial opportunity to capture a part of the yearly IT expenditures is significant:
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Services catalog The list of XaaS providers available is lengthy and growing every day. It is virtually impossible for IT managers to remain fully informed about what is available and to judge what is best for their organizations needs. The process of qualifying vendors based on good business practice and criteria is virtually impossible for the small to medium sized business. Verecloud has undertaken an extensive, continual review of Cloud vendors, covering all categories of XaaS. It has qualified vendors based on cost, functionality, dependability, and capability to provide enterprise-class technology. Verecloud has also qualified vendors to ensure that each provides standards-based application process interfaces. In this way Verecloud can guarantee that customers enjoy a fully integrated user experience with their customized cloud service technology suite. As a channel for cloud vendors, Verecloud expects to ultimately have a large and ever-growing catalog of services. Verecloud plans to have annitial catalog representing a suite of popular small business technologies from covering variety of vendors. Examples of the types of vendors Verecloud may engage include:

a customer relationship management cloud service an exchange email, SharePoint, and back-up cloud service A cloud desktop backup company A cloud server service provisioning and virtualization, storage, and hosting NBT EQUITIES RESEARCH 2011
The Cloud services brokerage business model The table below is a sample cloud services technology suite, highlighting the related monthly price paid by the customer and the associated cost to Verecloud paid to the cloud service vendor. It was developed with input from a Fortune 500 telecom provider while Verecloud was assisting in the development of their cloud services business strategy.
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The revenue model is a pass through modelVerecloud aggregates customers and services, and passes a portion of the monthly subscription revenue to the service vendor. The cost to Verecloud reflects the current, standard pricing charged by vendors. It is anticipated that over time, as the Vereclouds customer base grows, it will be able to negotiate more favorable sourcing agreements with individual service vendors. Revenue assumptions per customer/user With Nimbus CSB, businesses can consume the above services in a customized manner. Each organization will build the technology suite that suits their needs. It may even be customized for individual employee users. With the mix-and-match approach, revenue from each customer will vary. For the sake of preparing a valid business case, we have conservatively estimated revenue per customer and the underlying take rates.
A la Carte menu pricing We estimate that Verecloud once they are offering a full suite of services in the catalog, the revenue from each business will average approximately $100.00 per month per employee spread across the entire employee base of both users and non-users. NBTs revenue projections also assume that is achieved over time, the take rate is assumed to be lower in the earliest time frame in the model.
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Revenue assumptions by NBT Equities Research are per business customer. SMBs are broadly defined as having fewer than 500 employees. For the purpose of estimating revenue, the average number of employees within each size segment is assumed as follows:
This table reflects the high degree of conservatism we at NBT have used to create underlying Vereclouds financial projections. The assumption of the amount spent by each Spiceworks member company on cloud services is a small fraction of their overall spending on the IT function. As the Service Catalog Grows, the Business Model Scales Quickly With a diverse catalog of cloud services growing over time, NBT estimates that Verecloud s monthly spend per SMB on services through the Nimbus CSB platform to be approximately $3,500 (assuming an average of 35 employees per SMB). Today, these SMBs are already spending an average of $500 per month on cloud services. As a result, NBTs assumptions reflect a modest offering of services that could grow as new cloud offerings are available. Tier-1 to Tier 3 Communication Service Providers: Nimbus CSB OEM Strategy NBT does expect to see VCLD make serious headway into white labeling its Nimbus CSB platform to the Telecom market place worldwide. The sales cycle is very slow and as we have previously discussed, a BIG part of VCLDs reason to bring out Nimbus CSB services directly to the SMB market is to go around the notoriously slow CSP adoption to change. NONE of the NBT projections included in this report forecast revenues from OEM or white-label business. NBT EQUITIES RESEARCH 2011
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But the Verecloud Platform is built to run MILLIONS of transactions and users simultaneously in real time at 99.999% service level performance. Competitive CSB platforms are built on relatively light weight .Net or other platforms built for 10,000 or 20,000 users. The Nimbus CSB platform IS the only was CSPs behind the cloud adoption curve can get in the game in MONTHS, not years. CSPs NEED to Get Into the CDB Game In fact for years, cloud marketplace providers have been monetizing the CSP networks and are creating a strong bond to customers, marginalizing the role of the CSP. As a cloud service brokerage, the CSP will be back in control of the network and the cloud services offered to enterprises, and able to monetize their customer relationships.
With the advent of network convergence and Voice Over Internet Protocol (VoIP), the lines between telecommunications products have blurred. The promise of cloud services product silos will be replaced by an end-to-end functional architecture that establishes the CSP as a cloud services brokerage who can deliver any service from anywhere to anyone. CSPs that put the resources and energy behind this transformation will become the trusted intermediary in cloud services, and can leverage customer intimacy as their sustainable competitive advantage.
The CSB Solution for CSPs Clearly the solution to the cloud service broker opportunity is for CSPs is the Nimbus CSB platform. With Vereclouds extensive experience as telecommunication systems integrators and architects of OSS solutions, VCLD has designed an ecosystem solution that is complete and cost effective. To facilitate interoperability with existing environments, Nimbus CSB is designed using open source software, standards frameworks and technologies. NBT EQUITIES RESEARCH 2011
Nimbus CSB addresses all of the concerns of a communications service provider that is looking for a way to extend their relationship with business customers, and participate in the $94 billion SMB cloud services market.
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With Verecloud a partner CSBs get:

A path to revenue growth with a strong ROI A lower cost way to manage and operate a cloud service brokerage ecosystem A platform that is adaptable to changing business models and the deployment of new cloud service offerings in weeks, not months or years An environment that can be operationally ready in months not years A solution that is not a rip-and-replace for existing OSS functions, but adapts to your infrastructure An inexpensive proposition for an enterprise, carrier-grade service delivery platform that is scalable, with low latency and guaranteed transaction processing An end to paying the continuous systems integration tax for configuration of a canned solution every time you introduce a new product or enter new markets
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Appendix A: NBT Equities Research Verecloud Valuation

NBT financial projections. We have built our valuation model by assuming the numbers and then applied a terminal value growth rate from 2015.
CONTENT OUTLINE NBTs Financial Projections for Verecloud 2011-2015 Free Cash Flow Valuation 2011-2015 Assumptions Valuation Presentation Present Values of FCF Terminal Value calculation (EBITDA multiple) Analysis on Terminal Growth Rates Valuation per Share
FREE CASH FLOW VALUATION Assumptions CAPEX was added in the FCF model Depreciation was added in the FCF model Change of working capital were updated based on NBT assumptions. Debt was updated in the FCF Analysis. Model is discounted back to March 31st, 2011 Number of outstanding shares are assumed to be 110m
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NBTs VCLD Valuation Presentation Valuation per Share
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NBTs VCLD Valuation Presentation Present and Terminal Value calculations
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NBTs VCLD Free Cash Flow Valuation 2011-2015
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Appendix B: Competitive Solutions (Information from their company websites)
Jamcracker The Jamcracker Platform is used by hundreds of service providers, cloud providers and enterprises around the world to enable, deliver and manage private and public cloud services. Companies such as Telstra, Telus, Eircom, AB&T, Cisco, BroadSoft, Nokia Siemens Networks, DHL and many others are unifying cloud services with Jamcracker.
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Jamcracker is the most visible Unified Cloud Service Delivery provider The JSDN Service Provider solution aggregates order management, security and policy management, user and service administration, billing and settlement, usage reporting and auditing, and license management across all internally hosted and external third party Cloud services. Internal services may include Infrastructure as a Service (IaaS) as well as a service providers existing core offerings such as broadband, VoIP, and other network services. External services may include Software as a Service (SaaS) or Platform as a Service (PaaS) or other third-party provided business processes such as IT helpdesk and managed services for small businesses. Unifying the delivery architecture allows services to be enabled, managed, and delivered in a consistent manner to a Networked Services Providers business customers, whether sold
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directly or through distribution channels. The unified services grid includes services integration toolkits and capabilities that allow service providers to aggregate life-cycle services management and enable single sign-on access, user and service administration, reporting, billing, and helpdesk ticketing capabilities across their customer base. The Services Integration Module provides connectivity between the services grid and legacy order management systems, billing systems, network monitoring tools, helpdesks, and internal and external directories and databases. The JSDN provides a unified cloud services delivery platform that consolidates services and user management for a wide array of cloud services, with key features including: Unified provisioning, administration, billing, settlement, support, security and catalogue services. Service integration adapters which connect the JSDN to third party-provided hosted solutions, offered by ISVs with whom Jamcracker has established Master Distribution Agreements. Jamcracker can also on-board core services and others that are hosted within service providers own data centers. Ecosystem partners can be both a supplier and a distributor of services. For example, carriers can publish their own core services to the JSDN, enabling them to create bestof-breed cloud services bundles that comprise internal and externally-provided solutions. Pre-integrated, distribution-ready services available through the JSDN include infrastructure, security, data backup, messaging, collaboration, mobility and business productivity solutions from Microsoft, Cisco, McAfee, Blackberry, IBM, Google and dozens of other best-of-breed cloud service providers.
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Salesforce/Quickbooks JV Quickbooks and SaaS pioneer Saleforce.com are going to provide an integrated walled garden service to the SMB markets beginning in the summer. According to CEO McCawley: Intuit and Salesforce are going to combine forces to build a walled-garden of integration between the two applications. Our value proposition is that we will be providing the Switzerland of integrations. The point here is that if you are already using Idea2 for CRM but want to use Quickbooks for financials or are using Salesforce.com for CRM but want to use Intacct for financials you are not out in the cold. I believe that these walled-gardens will be effective in the short-term but will give way to brokerages that provide more flexibility and enable migration to more specialized applications. Our platform provides the capability to manage these types of integrations today. However, I do not think we will sell integrations (iPaaS) as a product (outside of the Professional Services engagements) until the end of 2011. I think there is too much education that needs to happen before SMBs are ready to take on the purchase and management of integrations between cloud services. Once we can afford to take on the education, though, integrations become very sticky and worth a ton of revenue with high margins.
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AppDirect Info from their website: About Us Our Business Application Network allows businesses to easily find the perfect software solution for their needs through our application marketplaces. Businesses can now benefit from one bill for all their applications and one portal to manage and use them. This allows greater integration, ease of use and security for application management.
The Story We founded AppDirect in the summer of 2009 with a simple mission: improve the web-based enterprise experience. Our mission and enthusiasm attracted a leading team with over 55 years of collective on-demand e-commerce and software experience from HP, Oracle, Google, VMware, and Salesforce. In our first year, AppDirect grew into one of the largest independent software distribution channels through channel partners that share our vision and passion for web-based products.
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Web-based software is better. Web-based technology overcomes the barriers to entry that software companies face in the traditional packaged software market. This makes the software industry more competitive and businesses can now benefit from a greater range of products and services. It liberalizes software by allowing small businesses to access and afford enterprise grade solutions. We make web-based software even better. AppDirect promotes the ease of use, security and reach of web-based applications. Despite the growth in web-based applications over the past few years it remains difficult to find solutions and integrate them for unified management and use. We address this problem with our Application Marketplace, which makes it much easier for businesses to find and compare solutions. We also allow businesses to manage and use web-based software applications in a unified environment through our Business Application Manager. How it works

Subscriptions & Billing Provisioning & Access Users & Roles Federation & Integration Support
Subscriptions & Billing We automate order-fulfillment. Businesses can subscribe to applications and manage all their subscriptions in a single, simple, and secure portal. For each application, businesses can upgrade subscriptions, purchase additional seats, update payment information, and track their billing and usage history. This easy self-service experience erases the need for manual orderfulfillment overhead. NBT EQUITIES RESEARCH 2011 We also allow businesses to easily manage their orders, invoices, and payments. Behind the scene, we take care of all transaction processing and deposit top line revenue to a channels designated merchant account. We also take care of the reconciliation process with all vendors. Our on demand billing engine allows distribution channels to start selling applications from day one.
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Provisioning & Access We automatically provision users to applications at check out. Users can instantly gain access to the features, services and seats associated with their selected application pricing plan. We service applications on demand. Client administrators can also easily assign applications to their employees thereby simplifying the on-boarding process. With one click administrators can give or revoke user access to applications. In this way, administrators can add a user to an application or remove a user without needing to go to every vendor site. NBT EQUITIES RESEARCH 2011
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Users & Roles We allow client administrators to easily invite and manage users. Administrators can also assign roles that reflect an organizational structure and control access to sensitive data.
All applications on The Business Application Network benefit from a highly secure level of integration. Our integration with each app relies on leading industry protocols and provides for a seamless customer experience. Customers benefit from single-sign on access to all applications on the network. This prevents the risk and complexity of managing multiple passwords. Users can now benefit from an extra layer of authentication and security around their applications, while enjoying the convenience of one password.
Federation & Integration
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British Telecom
Hubspan Seattle-based Hubspan, the company behind the industrys "first secure and reliable singleinstance, multi-tenant integration platform delivered as a managed service," has gained widespread traction worldwide with its flagship WebSpan cloud-based solution, a Software-asa-Service integration platform leverages the SaaS model "to reduce the cost and complexity of integrating processes within and between enterprises."
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Engine Yard As a company dedicated to "furthering innovation in Ruby, Rails and cloud computing," Engine Yard offers Rails-focused "24/7 operations support on top of great infrastructure" to companies in search of a smooth path from 100 users to 100,000 users. In July 2008 the company closed $15 million of Series B financing led by New Enterprise Associates (NEA), which included participation from Amazon.com. It has two PaaS products, xCloud and AppCloud, both based exclusively on open source technology.
Cloudworks The goal of Cloudworks is to allow small and mid-market companies to outsource all of their computers, software, and data. Completely web-based, it works like Salesforce or Hotmail - a company's employees can log in through a web browser to access their desktop, server, software, files, email...everything.
Vordel
Fast, Safe, Connectivity for SOA & Cloud Services
Vordel provides a high-performance secure framework enabling customers to govern the deployment of their SOA and Cloud Services. Vordel's products offer enterprises the ability to reduce the costs associated with large-scale integration projects; flexibly manage an ever changing policy environment and ensure compliance with the strictest levels of protection required for the deployment of services across multiple domains. Vordel Cloud Service Broker (CSB) connects organizations to the Cloud. It manages the connections, including API Keys that are vital for authentication to Cloud services, as well as providing security and increasing performance. CSB applies critical governance controls for service access, usage and availability. It aggregates multi-domain services across their enterprise, partners and 3rd party cloud services such as Amazon EC2, Salesforce and Google Apps. By bringing services together, Vordel Cloud Service Broker enables
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organizations to consistently define and manage policy across these services and report on them. Despite the clear agility and cost saving benefits, there are factors which are holding back Cloud usage. These include a deficit of trust: organizations simply do not trust third-parties to protect their sensitive data. CSB securely links on-site applications with off-site cloud services from multiple providers in a hybrid cloud environment enabling enterprises to overcome the trust deficit and avoid over reliance on any single provider. Additionally, there is the simple fact that Cloud services involve a connection out over the Internet, a connection which may be subject to delays and outages, thus increasing concern about the reliability of the services and the Service provider themselves. Vordel Cloud Service Broker allows users to cache frequently accessed and transmitted data to mitigate against the threat of cloud network outages and provide a level of redundancy protection. NBT EQUITIES RESEARCH 2011
Governed: Create, Monitor and Enforce Policies Key to any SOA implementation is the ability to regulate, monitor and enforce policies. These policies govern who can access the services (identity), how the services should response (performance) and how records are kept (audit trail for compliance).
Appirio
Cloud computing solution provider Appirio, which in February 2009 closed out a $10 million Series C funding round, said the VC community has been eyeing cloud startups for a while, but the increase in investment activity shows that cloud computing is now on nearly every CIO
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wish list. "VCs have been pouring money into cloud computing startups for years," Appirio CEO Chris Barbin said. "Now that cloud technologies are on the priority list of almost every enterprise CIO and even mandated to federal agencies, it's not surprising to see an uptick in investment. The interesting thing will now be to see which cloud investments start to pay off -- is it infrastructure, platform, apps or even emerging categories such as cloud brokerages?" Just where cloud investments will pay off most is still up in the air. Burns suggests that it will be on the cloud computing infrastructure and service provider sides; while Skytap's Rosa suggested that cloud management and cloud automation, where Skytap plays, will be a big winner for investors. Collina Ventures' Hill pegged cloud infrastructure and cloud security as the big draws moving forward, but added that investors will be attracted to companies that that have found a "focused niche," whether that niche is technological, vertical or geographical. Regardless of which segment most prospers the market and the opportunity for investors and cloud computing vendors will continue to snowball, Hill said. "It's going to accelerate," he said. "What's going to happen is we're going to see some companies continue to have success and need more capital and the stakes are going to get higher. There has been a lot of hype and now's the time to deliver value." Neovise's Burns agreed. "Long story short: It doesn't feel to me like we hit that peak yet with funding and acquisitions," Burns said. "The VCs are out there looking at it and saying 'there are a lot of people moving this way.' They see this huge market that's nowhere near done growing and look for places to invest." NBT EQUITIES RESEARCH 2011
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DISCLAIMER This report may be a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. NBT Equities Research is a wholly-owned subsidiary of NBT Equity Group Inc. The information and opinions in this report were prepared by NBT Equities Research, LLC. The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. We make no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report constitute the current judgment of the author as of the date of the report and are subject to change without notice. We have no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn. This report is provided for informational purposes only. Neither NBT Equities Research nor its officers, directors, partners, employees, consultants nor anyone involved in the publication of this special report is a registered investment adviser or broker/dealer and none of the foregoing make any recommendation that the purchase of securities of any company profiled in this special report is suitable or advisable for any person or that an investment in such securities will be profitable. Past performance of profiled securities is not indicative of future results. Companies profiled in this special report may lack an active trading market for their securities and investing in such securities is highly speculative and carries a high degree of risk. Anyone investing in these companies should be able and prepared to bear a loss of his or her entire investment. The information on this special report is not designed to be used as the basis for an investment decision. You should confirm to your own satisfaction the veracity of any information prior to entering into any investment. The decision to buy or sell any security that may be featured by NBT Equities Research is done purely at the readers own risk. Under no circumstances will its owners, officers, or employees be held liable for any losses incurred by the use of information contained in this special report. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The recipients of our reports must make their own independent decisions regarding any securities mentioned in our reports. NBT Equities Research, LLC has received compensation from the company or companies mentioned in this report or agents acting on their behalf. This report may be reproduced, distributed or published by any person for any purpose without the prior written consent of NBT Equities Research. Please cite source when quoting.

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NBT EQUITIES RESEARCH INITIAL REPORT

VERECLOUD ($VCLD) verecloud.com 5/23/2011

Extended Coverage: Verecloud Inc. ($VCLD)

INITIAL COVERAGE VERECLOUD INC. (OTBCC: VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Common Ground (Source: 451 Group, with permission)

Extended Coverage: Verecloud Inc. ($VCLD)

So Then What is a NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

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The Cloud Services Delivery Stack

Extended Coverage: Verecloud Inc. ($VCLD)

Quickbooks Online are examples of SaaS.

Extended Coverage: Verecloud Inc. ($VCLD)

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

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NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

The Value Proposition

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

Number of SMBs (millions)

0 1- 4 5-9 10 - 19 20 - 500 500+

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

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NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

Extended Coverage: Verecloud Inc. ($VCLD)

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With Verecloud a partner CSBs get:

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

Appendix A: NBT Equities Research Verecloud Valuation

Extended Coverage: Verecloud Inc. ($VCLD)

NBTs VCLD Valuation Presentation Valuation per Share

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

NBTs VCLD Valuation Presentation Present and Terminal Value calculations

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

NBTs VCLD Free Cash Flow Valuation 2011-2015

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

Appendix B: Competitive Solutions (Information from their company websites)

NBT EQUITIES RESEARCH 2011

Extended Coverage: Verecloud Inc. ($VCLD)

NBT EQUITIES RESEARCH 2011