Understanding Valuation for Equity Compensation and Avoiding the Perils of 409A

Stock Valuation Report Prepared for

Venture Co.

November 16, 2012

San Francisco Office 580 California Street, Suite 516

San Francisco, CA 94104 +1 (415) 283-3284

Boston Office

One Broadway, 14th Floor Cambridge, MA 02142

+1 (617) 684-5510

Salt Lake City Office 45 West 10000 South, Suite 209 Sandy,

UT 84070 +1 (801) 413-3930

South America Office

Rafael Nunez 3835 Of. 10 Cordoba - 5000

Cordoba, Argentina +54 (0351) 568-1850 Ext.888

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November 16, 2012

Mr. Joe Bigsby Chief Executive Officer Venture Co.

Dear Mr. Bigsby:

Venture Co. (“Venture Co.” or the “Company”) has retained Scalar Analytics, LLC (dba Scalar Analytics herein referred to as “Scalar” or “Scalar Analytics”) as an independent, qualified financial advisor to provide an estimation of the fair market value (the “Opinion”) of the Company’s Common Stock (the “Subject Security”), as of September 30, 2012 (the “Valuation Date”) (the “Engagement”). While Venture Co.'s management (“Management”) may use the results of this Opinion for financial reporting related to Accounting Standards Codification Topic 718 ("ASC 718") and tax reporting purposes related to Internal Revenue Code Section 409A (“IRC 409A”), Scalar does not assume any liability in furnishing this Opinion.

Purpose and Scope For purposes of performing our analysis, Venture Co.'s management provided us with financial data and other pertinent records and documents pertaining to the Company’s operations and assets. This information has been accepted as a proper representation of Venture Co.'s operations and condition. We did not, however, independently verify information provided to us, and maintain that the validity of the valuation depends on the completeness and accuracy of the information provided to Scalar.

These materials and their conclusions are intended to be used by the Board of Directors and Management of the Company for the exclusive purpose of compliance with IRC §409A – specifically, as the basis for establishing a strike price for the Company’s option grants – and as an input for ASC 718 compliance. We make no representation as to the accuracy of this Opinion if it is used for any other purpose without the written consent of Scalar Analytics. This Opinion should not be considered, in whole or in part, as investment advice by anyone.

Summary of Findings Based on our analysis, Scalar estimates that the value of the Subject Security on a non-marketable, minority basis is:

$0.484 per share

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Scalar has applied traditional valuation techniques and methods in determining the fair value of Venture Co.'s equity including market, income, and cost valuation approaches. Specifically we have valued the Company using the most current valuations of publicly traded comparable companies, comparable private acquisition and investment transactions, and the discounted cash flow valuation approach. We have also deployed commonly accepted allocation methods in determining the final value of the Company’s stock.

Our review also included factors external to the Company such as the state of the broader U.S. economy, the development of their target markets and the pace of adoption of their chosen technology platforms. Scalar Analytics has used valuation techniques and methods in accordance with recommendations by the American Institute of Certified Public Accountants (AICPA) in their Audit and Accounting Practice.

This report is subject to the terms and conditions of the Agreement as outlined in the engagement letter executed between Scalar Analytics, LLC and Venture Co.

Sincerely,

___________________________________________ Date: November 16, 2012

Scalar Analytics

Principal Appraiser Todd Miller, AVA

Contributing Appraisers Luis Coronel

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Table of Contents

Engagement Overview .................................................................................................................................. 1

Background ............................................................................................................................................... 1

Engagement Purpose and Scope ............................................................................................................... 1

Standard of Value ...................................................................................................................................... 1

Premise of Value ....................................................................................................................................... 2

Sources of Information .............................................................................................................................. 2

Analysis of Subject Entity and Related Nonfinancial Information ............................................................... 3

Company Description ................................................................................................................................ 3

Management .............................................................................................................................................. 3

Stage of Development ............................................................................................................................... 3

Risks .......................................................................................................................................................... 4

Industry Specific Risks .......................................................................................................................... 4

Company Specific Risks ........................................................................................................................ 4

Economic Risk ....................................................................................................................................... 4

Competitive Risk ................................................................................................................................... 5

Industry Overview ......................................................................................................................................... 5

Software as a Service ............................................................................................................................ 5

Economic Overview ...................................................................................................................................... 8

Financial Statement Analysis ...................................................................................................................... 11

Valuation Approaches and Methods Considered ........................................................................................ 11

Asset Approach ........................................................................................................................................ 11

Market Approach..................................................................................................................................... 11

Income Approach .................................................................................................................................... 12

Valuation Approaches and Methods Used .................................................................................................. 12

Asset Approach (Not Applicable) ............................................................................................................ 12

Cost Approach ......................................................................................................................................... 13

Market Approach..................................................................................................................................... 13

Recent Securities Transactions (Applicable) ....................................................................................... 13

Comparable Public Companies (Applicable) ....................................................................................... 14

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Comparable Transactions (Applicable) ............................................................................................... 14

Income Approach .................................................................................................................................... 15

Discounted Cash Flow (Applicable) .................................................................................................... 15

WACC Calculation ............................................................................................................................... 15

Weighted Average Value ............................................................................................................................. 16

Allocation Methods ..................................................................................................................................... 16

Option Pricing Method ............................................................................................................................ 17

Valuation Adjustments ................................................................................................................................ 18

Discount for Lack of Marketability (“DLOM”) ........................................................................................ 18

Put Option Analysis ............................................................................................................................. 19

Asian Put Option (Finnerty) ................................................................................................................ 19

Small Company Risk Premium ................................................................................................................ 20

Company Specific Risk Premium ............................................................................................................ 20

Valuation Analyst Representation ............................................................................................................... 22

Conclusion of Value .................................................................................................................................... 23

Purpose of Report .................................................................................................................................... 23

Assumptions and Limiting Conditions .................................................................................................... 23

Conclusion ............................................................................................................................................... 25

Valuation Analyst Qualifications ................................................................................................................ 26

Exhibits........................................................................................................................................................ 27

Exhibit A: Valuation Summary ........................................................................................................... 27

Exhibit B: Recent Securities Transaction Backsolve ........................................................................... 28

Exhibit C-1: Public Comparable Companies Analysis ......................................................................... 29



Exhibit D-1: Public Comparable Companies Descriptions .................................................................. 32



Exhibit E-1: Comparable Transactions Analysis.................................................................................. 35

Exhibit E-2: Comparable Transactions Analysis.................................................................................. 36

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Exhibit F-1: Comparable Transactions – Target Company Descriptions ............................................. 37




Exhibit G: Historical and Projected Income Statement ....................................................................... 41

Exhibit H: Historical and Projected Balance Sheet ............................................................................. 42

Exhibit I: Projected Cash Flow Statement ........................................................................................... 43

Exhibit J: Discounted Free Cash Flows ............................................................................................... 44

Exhibit K: WACC & Terminal Value Calculation ................................................................................ 45

Exhibit L: Capitalization Table Analysis ............................................................................................. 46

Exhibit M: Break Point Analysis .......................................................................................................... 47

Exhibit N: Option Pricing Method ...................................................................................................... 48

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Engagement Overview

BACKGROUND

Per the engagement letter executed between the parties, Scalar Analytics has completed an analysis of Venture Co. (“Venture Co.” or the “Company”) as of September 30, 2012 (“Valuation Date”), to determine the fair market value of the Company’s Common Stock (the “Subject Security”) on a non-marketable, minority interest basis.

ENGAGEMENT PURPOSE AND SCOPE

In October 2004 the IRS issued new regulations (Internal Revenue Code §409A) that suggest private companies should not issue stock options that are “in-the-money” or with an exercise price that is below “fair market value” as defined in IRS Revenue Ruling 59-60. To avoid an additional tax event and potential penalties, a formal valuation opinion is suggested every 12 months, or more often if there is a material change in either the business or the implied market value of the common stock.

Issued in December 2004 by the Financial Accounting Standards Board (FASB), ASC 718 (formerly SFAS 123R) addresses the accounting for stock-based compensation such as stock options. The statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and requires that such transactions be accounted for using the fair value method. A key driver for that calculation is the fair value of the common stock.

This report and its conclusions (the “Opinion”) are intended to be used by the Company for the exclusive purpose of compliance with IRC §409A and as an input for ASC 718 financial reporting purposes.

The American Institute for Certified Public Accountants (AICPA), in its Audit and Accounting Practice Aid Series, issued guidelines for the valuation of privately-held company equity securities issued as compensation. Scalar Analytics has followed these guidelines in its analysis and presentation of its conclusions.

STANDARD OF VALUE

Scalar Analytics determines fair market value using methodologies that rely on AICPA valuation standards and IRS requirements. Scalar Analytics derives the value of the Company’s equity from a valuation of the business as a whole and relies on the following definitions provided by regulatory entities:

IRS Revenue Ruling 59-60, Section 2.02: The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.


ASC 718: The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

ASC 820: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

PREMISE OF VALUE

For purposes of this engagement, Scalar Analytics has performed the valuation on the “Going Concern” premise of value, which is defined as follows:

Going Concern Value: The value of a business enterprise that is expected to continue to operate into the future. The intangible elements of Going Concern Value result from factors such as having a trained work

force, an operational plant, and the necessary licenses, systems and procedures in place.1

SOURCES OF INFORMATION

This Opinion is based on information provided and represented by management of the Company. Our review and analysis included, but was not necessarily limited to, the following:

Discussion with the Company’s management personnel concerning the Company’s assets, capital structure, and historical and forecasted operations

Analysis of historical and forecasted financial statements, and other financial and operational data concerning the Company

Review of corporate documents including but not limited to term sheets, articles of incorporation, purchase agreements, and a capitalization summary of common and preferred shares, options, and warrants

Analysis of the Company, its financial and operating history, the nature of its offerings, and its competitive position

Analysis of the industry in which the Company competes as well as the state of the development of the Company’s target markets and the pace of adoption of their chosen technology platforms and products

Research and analysis concerning comparable public companies and transactions involving comparable public and private companies

Analysis concerning the current economic conditions and outlook for the U.S. economy as well as applicable global economic conditions

Analysis and estimation of the fair market value of the common equity on a non-marketable, minority basis as of the Valuation Date

1 AICPA 2007, Statement on Standards for Valuation Services, pg. 45


Analysis of Subject Entity and Related Nonfinancial Information

COMPANY DESCRIPTION

Venture Co. is a Software-as-a-service company. Its software is deployed over the internet through common internet browsers. The Company licenses applications to customers as a service on demand, through a subscription, in a "pay-as-you-go" model, and at no charge for some products. All of the technology is hosted in the "cloud" and is accessed over the Internet as a service. Customers choose Venture Co. because the software is accessible from anywhere with an internet connection, requires no local server installation, and updates are seamless and instantaneous for all users. The Company’s customers operate in a variety of industries, including accounting, collaboration, customer relationship management, enterprise resource planning, invoicing, human resource management, content management, and service desk management.

MANAGEMENT

- Joe Bigsby, Founder and CEO Prior to Venture Co., Mr. Bigsby was the Chief Technology Officer at a Silicon Valley venture-backed company. Mr. Bigsby holds a B.S. and an M.S. from prestigious universities.

STAGE OF DEVELOPMENT

The AICPA Valuation Practice Aid defines six stages of enterprise development, defined as follows2

1. Enterprise has no product revenue to date and limited expense history, and typically an incomplete management team with an idea, plan, and possibly some initial product development. Typically, seed capital or first-round financing is provided during this stage by friends and family, angels, or venture capital firms focusing on early-stage enterprises, and the securities issued to those investors are occasionally in the form of common stock but are more commonly in the form of preferred stock.

:

2. Enterprise has no product revenue but substantive expense history, as product development is under way and business challenges are thought to be understood. Typically, a second or third round of financing occurs during this stage. Typical investors are venture capital firms, which may provide additional management or board of directors expertise. The typical securities issued to those investors are in the form of preferred stock.

3. Enterprise has made significant progress in product development; key development milestones have been met (for example, hiring of a management team); and development is near completion (for example, alpha and beta testing), but generally there is no product revenue. Typically, later rounds of financing occur during this stage. Typical investors are venture capital firms and strategic business Analytics. The typical securities issued to those investors are in the form of preferred stock.

2American Institute of Certified Public Accountants 2004, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, pp. 13–14.


4. Enterprise has met additional key development milestones (for example, first customer orders, first revenue shipments) and has some product revenue, but is still operating at a loss. Typically, mezzanine rounds of financing occur during this stage. Also, it is frequently in this stage that discussions would start with investment banks for an IPO.

5. Enterprise has product revenue and has recently achieved breakthrough measures of financial success such as operating profitability or breakeven or positive cash flows. A liquidity event of some sort, such as an IPO or a sale of the enterprise, could occur in this stage. The form of securities issued is typically all common stock, with any outstanding preferred converting to common upon an IPO (and perhaps also upon other liquidity events).

6. Enterprise has an established financial history of profitable operations or generation of positive cash flows. An IPO or sale of the enterprise could also occur during this stage.

According to these definitions, Venture Co. is considered to be in the fourth stage of development.

RISKS

The Company faces significant risks in achieving its long-term goals. The risks include but are not limited to:

Industry Specific Risks The industry in which the Company operates is highly competitive and at times rapidly changing. Constant technological advancements necessitate investments in sales and product development. Failure to maintain relationships with key customers and keep up with the “technological curve” could seriously impact the Company’s ability to meet future goals.

Company Specific Risks The Company’s product offerings are relatively new in an industry that is still quickly evolving. Its ability to continue to penetrate the market remains uncertain as potential clients may choose to adopt different products or platforms. In addition, industry standards or government regulations may impact the Company’s ability to meet market demands. Success will be a factor of investing in the development and implementation of sales campaigns, and subsequent adoption by its clients. Additionally, the Company could face financial pressure associated with obtaining capital given its operating history.

Economic Risk The Company’s performance is subject in part to worldwide economic conditions, including but not necessarily limited to the following macroeconomic factors:

- Consumer spending - Availability of safe, liquid investments that provide reasonable returns - Access to financing in credit and capital markets at reasonable rates - Government spending and sovereign debt levels in the U.S. and internationally


- Fluctuations in exchange rates relative to the U.S. dollar - Health and stability of major financial institutions

Recent uncertainty in global credit and equity markets have led to a tightening of business credit and liquidity, a contraction of consumer credit, business failures, higher unemployment, and declines in consumer confidence and spending in the United States and internationally. If global economic and financial market conditions deteriorate or remain weak for an extended period of time, the Company’s success may be adversely impacted.

Competitive Risk Venture Co. faces competition from larger, better capitalized companies that could directly compete with the Company’s products. These competitors may have superior product offerings, technologies, marketing capabilities, pricing, costs of production, or customer service. This, in addition to rapid changes in technology and consumer preferences, poses significant risks to the Company’s success. If Venture Co. does not adequately and timely anticipate and respond to competitors, the Company’s costs may increase or demand for their products may decline significantly.

Industry Overview

Software as a Service

Drivers A traditional rationale for outsourcing IT systems involves applying economies of scale to application operation, i.e., an outside service provider can offer better, cheaper, more reliable applications. SaaS-based application use has grown dramatically. A Gartner survey in July 2009 found that customers are "somewhat satisfied". Several important changes to the way people work have facilitated this rapid acceptance:

Availability of fast, low-cost broadband. Computers have become widespread—most information workers have at least basic computer

skills. Computing has become a commodity. In the past, corporate mainframes were jealously guarded

as strategic advantages. More recently, applications were viewed as strategic. Today, people know it’s the business processes and the data itself (customer records, workflows, pricing information) that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.

Insourcing IT systems requires expensive overhead including salaries, health care, liability, and physical building space.

Applications have tended to standardize. With notable industry-specific exceptions, most people spend most of their time using standardized applications. An expense-reporting page, an


applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.

Parametric applications are usable. In older applications, one could often only change a workflow by modifying the code. In more recent applications, particularly web-based ones, significantly new applications can be created from parameters and macros. This allows organizations to create different kinds of business logic on a common application platform. Many SaaS providers allow a wide range of customization within a basic set of functions.

A specialized software provider can target global markets. A company that made software for human resource management at boutique hotels might once have had a hard time finding enough of a market to sell its applications. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn means SaaS providers can often deliver products that meet specific market needs better than traditional "shrinkwrap" applications.

Web systems demonstrate reliability. Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.

Security is sufficiently well trusted and transparent. With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.

Enablement technology (tools, libraries, etc,) is available. According to IDC, organizations developing enablement technology that allow other vendors to quickly build SaaS applications will play an important role in driving the adoption of SaaS. Because of SaaS' relative infancy, many companies have either built enablement tools or platforms or are in the process of engineering enablement tools or platforms. A Saugatuck study shows the industry will most likely converge to three or four enablers that will act as SaaS Integration Platforms (SIPs).

Wide-area network bandwidth has grown drastically, following Moore's Law (more than 100% increase each 24 months), and is about to reach slow local networks bandwidths. Added to network quality improvement, this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.

SaaS has "democratized" software, allowing small and medium businesses to access functionality formerly the domain of large enterprises. Many analytical software tools have been released as SaaS applications on a monthly subscription basis.

SaaS facilitates data aggregation. Instead of collecting data from multiple data sources with different database schemas, all data for all customers is stored in a single database schema (i.e., multi-tenant). This simplifies running queries across customers, mining data, and looking for trends.


The rise of third-party SaaS data escrow services has reduced some security concerns by allowing application data to be held with an independent third party.

Sales Channels With products focused on the mid market, direct selling can become an expensive undertaking. SaaS companies seek alternatives by selling through value-added resellers (VARs), Managed Service Providers (MSPs), Master Managed Service Providers (MMSPs), and similar alliance Analytics. However, since SaaS is not only a different delivery mechanism, but a different business model and different technology, selling through channels has its own challenges.

Pricing Models SaaS applications provide the opportunity to implement pricing models that establish and maintain recurring revenue streams. Most SaaS vendors charge a monthly hosting or subscription fee. Opportunities also exist to charge per transaction, event, or other unit of value. These alternative pricing models exist because customers "lease" the software from the vendors and the vendors can view all transactional activity.

User satisfaction Gartner's 2008 survey of 333 enterprises in the US and UK found a low level of approval from customers, describing overall satisfaction levels as "lukewarm." Respondents who decided against SaaS cited high service cost, integration difficulty, and technical requirements. A recent report from Forrester, “The ROI of Software-As-A-Service,” examined a range of companies that chose SaaS solutions and found that SaaS does result in long-term value. Companies interviewed for the report cited several reasons for their ROI of SaaS:

Rapid deployment

Increased user adoption

Reduced support needs

Lower implementation and upgrade costs.

Representative SaaS Companies Performance


Economic Overview

Housing Rebounds, but Forward-Looking Indicators Cause Concern

Data released since the August Federal Open Market Committee (FOMC) meeting indicate that economic growth may have firmed, but at the same time, forward-looking indicators may portend stalling growth. Real gross domestic product (GDP) grew at a 1.7 percent annual rate in second quarter 2012. Contributors to recent growth have been improvements in housing and slight improvements in the labor market. Although manufacturing production also had picked up, more timely survey data had foreshadowed a decline for a few months. The August manufacturing data exhibited this drop. Inflationary pressures remain subdued.

Net Exports Drive Upward Revision of GDP Growth

Second-quarter real GDP growth was revised up to 1.7 percent from the advanced reading of 1.5 percent (Chart 1). The greatest contribution came from personal consumption expenditures (PCE), coming in at 1.2 percent, supported in part by progress in the housing market. Growth in business nonresidential fixed investment has slowed over the past four quarters, adding 0.4 percent, while an increase in residential investment was offset by a negative contribution from inventories. Net exports contributed 0.3 percent to GDP growth, an upward revision of 0.6 percent from the advanced reading. Government continues to be a drag on the economy, taking 0.2 percent off real GDP growth in the second quarter; yet, this drag has lessened. The upward revision of second-quarter GDP growth can be attributed primarily to the large, positive revision of the contribution of net exports; however, the largest contributor to overall growth, PCE, was largely driven by the noteworthy improvement in the housing market.


House Prices Showing Signs of an Uptake

Positive news continues to come out of the housing sector. House prices seem to have bottomed out, posting broad-based gains recently. Major house price indexes flattened at the beginning of 2012 and then increased over the summer, exhibiting year-over-year growth in the most recent readings (Chart 2).

Chart 3A displays the peak-to-trough house price decline for each state during the housing bust (note that North Dakota did not experience a house price decline). The five colors denote quintiles, with red states suffering the largest declines and green states being only mildly affected. The declines were concentrated on the coasts, especially in the Southwest and Florida. Many of the red states are now experiencing the greatest house price gains as their housing markets recover. Chart 3B shows the increase in house prices since prices bottomed out in each state through the June data release. Notably, house prices in Rhode Island and Delaware have yet to bottom out, and North Dakota’s large increase follows no decline in house prices. Increases in house prices will improve the balance sheets of households, leading to an increase in spending and a declining unemployment rate. A map of recent changes in the unemployment rate would reveal a correlation between the improvements in unemployment rates and recovery in house prices by state.

Slight Improvement in Nonfarm Payrolls

After a very weak second quarter (average monthly increase of 67,000 jobs) and a positive surprise from the July employment report (141,000 jobs), total nonfarm payrolls increased by only 96,000 jobs in August (Chart 4). In private services the biggest employment gains were in leisure and hospitality (34,000 jobs), professional and business services (28,000 jobs), and education and health services (22,000 jobs), which combined to account for three quarters of all gains in service-producing employment. The notable decline in August manufacturing employment in conjunction with recent survey data from the Institute for Supply Management (ISM) were leading indicators of the decline in manufacturing production observed in August.

Manufacturing Production Turning Down


After rising robustly in early 2012, manufacturing production slowed considerably (Chart 5) just as the contribution of business nonresidential fixed investment to real GDP growth continued to trend down.

The positive July reading temporarily alleviated concern about an immediate, more substantive slowdown; however, a number of red flags had already been raised. Weakness in both the August manufacturing employment data and the ISM manufacturing index were causes for concern; the ISM manufacturing index registered a sub-50 reading for three straight months, indicating below-trend growth. The large drop in manufacturing output that was feared materialized in the August report.

Prices Decelerating Slightly

Price pressures have been subdued in July and August. Core prices have been very stable, though there has been slight deceleration recently. Core PCE measures are below the FOMC’s 2 percent target, while the core consumer price index (CPI) inflation reading dipped below this target for the first time in nearly a year (Chart 6). Headline inflation has receded, but some increases in food prices will likely manifest in

slightly higher headline inflation in 2013. Import prices continue to fall on a year-over-year basis, possibly leading the deceleration in core inflation. Inflation expectations remain well-anchored.

Economic growth may have firmed from a modest starting pace below 2 percent. The trade balance improved substantially, contributing positively to the second-quarter GDP reading. The improvement in the housing market has also been a key driver of growth and looks to continue to

be so. The labor market is still operating with high levels of unemployment and underemployment. Nonfarm payrolls have picked up from the slow pace of the second quarter, though August’s employment numbers were disappointing following July’s report. The outlook for business investment has softened as ISM readings and manufacturing production have weakened. Inflationary pressures remain subdued amid disinflationary risks as core price indexes decelerate. Looking ahead, the central tendency forecast for U.S. real GDP growth for 2012 is between 1.7 and 2.0 percent; the forecast for 2013 improved to

between 2.5 and 3.0 percent, according to the FOMC’s survey of economic projections. 3

3 J.B. Cooke, National Economic Update: Housing Rebounds, but Forward-Looking Indicators Cause Concern, Federal Reserve Bank of Dallas, 9/17/2012, http://www.dallasfed.org/research/update-us/2012/1206.cfm


Financial Statement Analysis

Scalar Analytics obtained the following financial information from Venture Co. in connection with performing this analysis as of the Valuation Date:

Historical financial statements for the relevant time period Projected financial statements representing Management’s estimates regarding the Company’s

operations Identification and valuation of the company’s separate revenue streams Capitalization table and legal information related to the Company’s capital structure

See Exhibits G, H, and I for the Company historical and projected income statement, balance sheet, and cash flow statement. Based on the Company’s projections, the forecast included revenue and major expense categories along with selected balance sheet and cash flow information.

Valuation Approaches and Methods Considered

To determine the Company’s enterprise value, three traditional valuation methods were considered: the Asset Approach, the Market Approach, and the Income Approach.

ASSET APPROACH

The Asset Approach establishes value based on the cost of reproducing or replacing the property, less depreciation from physical deterioration and function and economic obsolescence, if present and measurable. This approach can be used to provide a reliable indication of value when applied to specific assets, such as land improvements, special-purpose buildings, special structures, systems, special machinery and equipment, and certain intangible assets.

MARKET APPROACH

The Market Approach is based on the assumption that the value of an asset (including a company) is equal to the value of a substitute asset with the same characteristics. Therefore, the value of an asset can be inferred by finding similar assets that have been sold in recent transactions.

One methodology under the Market Approach is the Recent Securities Transaction approach. This approach considers the Company’s implied equity value based on recent transactions of the subject company’s securities. The applicability of this methodology depends on the circumstances surrounding the transaction; specifically, whether or not it meets the criteria outlined in the definition of Fair Market Value.

The Comparable Public Company Method compares the subject company with select publicly-traded companies. Valuation multiples are calculated from selected companies to provide an indication of how much a current investor in the marketplace would be willing to pay for a company with characteristics


similar (e.g. similar business, size and other operating characteristics) to the subject company. These valuation multiples are evaluated and adjusted based on the strengths and weaknesses of the subject company relative to the selected guideline companies. Finally, the multiples are applied to the subject company’s operating data to arrive at an indication of fair value. The Comparable Company Method is most appropriate when public companies that are reasonably similar to the subject company can be found.

Another methodology of the Market Approach is the Comparable Transaction Method. This method relies on data of mergers and acquisitions that have occurred in the subject company’s industry or related industries. As in the Comparable Company Method, valuation multiples are developed and applied to the subject company’s operating data to estimate fair value. Again, the Comparable Transaction Method can be used if there are recent transactions involving companies similar to the subject company. Both the Comparable Companies Method and the Comparable Transactions Method were considered in this analysis.

Lastly, the Market Approach also includes the use of industry-specific multiples. Companies in certain industries are often valued in terms of customers, users, recurring monthly revenue, and a number of other attributes. Where reliable data is available, it may be appropriate to conduct a valuation by applying these industry-specific multiples to the appropriate attributes of the subject company.

INCOME APPROACH

The income approach seeks to measure the future benefits that can be quantified in monetary terms. This method typically involves two general steps. The first is making a projection of the total cash flows expected to accrue to an investor in the asset. Examples include cash flow realizable from an interest in a business, rental savings from a favorable contract, or a royalty savings from ownership of a patent. The second step involves discounting these cash flows to present value at an appropriate discount rate that considers the degree of risk associated with the realization of the projected monetary benefits.

The discounted cash flow method (“DCF”) is a form of the income approach often used in the valuation of entire businesses, major segments of a business or intangible property. The value of the invested capital is the sum of the present value of projected debt-free net income throughout the discrete and terminal periods.

Valuation Approaches and Methods Used

ASSET APPROACH (NOT APPLICABLE)

Generally the asset approach is considered applicable to start-ups in stages 1 and 2 (as defined previously). The following circumstances typically apply to these companies:


There is limited (or no) basis for using the income or market approaches; i.e., there are no comparable market transactions, and the enterprise has virtually no financial history from which to derive forecasts of future results.

The enterprise has been issued patents (or patents are pending), but has not yet developed a product. A relatively small amount of cash has been invested.

Since none of the aforementioned scenarios apply to Venture Co., the Asset Approach was not used in determining the ultimate conclusion of value.

COST APPROACH Invested Capital (Not Applicable) This approach may establish value based on the cost of reproducing or replacing the property, less depreciation from physical deterioration and function and economic obsolescence, if present and measurable. This approach can be used to provide a reliable indication of value when applied to specific assets, such as land improvements, special-purpose buildings, special structures, systems, special machinery and equipment, and certain intangible assets.

In an analogous logic, in the early stages of a company development, when revenue generation and related operations are still not significant or inexistent, capital invested can also serve as an indication of value. The assumption and logic implies that to build a similar company in the same stage of development, the capital needed to do so would be at least equal to the amount invested in the company, which is assumed serves to fund costs incurred to date to build, research and/or develop the company offerings, and achieve the current structure of the subject company.

In the case of the Company, we considered the capital invested to date as representative of this measure. Consequently, a value of $22,182,037 was referenced, but not relied upon, in the calculation of the Market Value of Invested Capital (MVIC) outlined later in this report.

MARKET APPROACH

Recent Securities Transactions (Applicable) Per AICPA valuation guidelines, recent securities transactions should be considered as a relevant input for computing the company’s valuation. When the company sold preferred stock to investors, there was an implied valuation of the company upon which the securities were priced.

To calculate the total equity value implied from the recent equity sale, Scalar Analytics uses the Backsolve method, which utilizes the Option Pricing Method framework to calculate an implied value based on the recent transaction. The Backsolve is superior to a simple pre- or post-money calculation because it takes into account the economic rights of the recently issued security in relation to the rights of other equity holders. Debt is then added to the resulting value to calculate the Market Value of Invested Capital (“MVIC”).


Using this approach, the Company’s MVIC, on a marketable basis, was estimated at $42.93 million (see Exhibit B: Recent Securities Transaction Backsolve).

Comparable Public Companies (Applicable) In the search for appropriate comparable companies, public companies were screened based on business model, product offerings, industry of operation and the portion of revenues provided through relevant business segments. Based on these criteria, the following five companies were selected as appropriate comparable companies (See Exhibit D for public company descriptions):

- salesforce.com, inc - Concur Technologies, Inc. - Kenexa Corp. - LogMeIn, Inc. - Constant Contact, Inc.

Using historical and projected financial data for each company, trading multiples were calculated for each comparable company. We determined the enterprise value to last twelve months’ (LTM) revenue, LTM EBITDA, next twelve months’ (NTM) revenue, and NTM EBITDA trading multiples to be most applicable. Applying the relevant multiples to the Company’s respective financial metrics resulted in the following range of value:

Averaging the relevant data points and adding the cash balance yielded an implied MVIC of $49.98 million (see Exhibit C for detailed analysis).

Comparable Transactions (Applicable) Using information available from the Scalar Analytics, CapIQ, and Bloomberg databases, a list of comparable transactions was compiled to incorporate the Comparable Transactions Approach. Transactions were screened by identifying acquired companies that operate in Venture Co.'s industry, and companies that have similar business models. The list was refined by separating it into a single list

Implied Enterprise Value

Implied Equity Value (Backsolve) $41,182,012

Plus: Debt $1,750,000

Market Value of Invested Capital $42,932,012

In thousands of dollars (000) LTM Revenue LTM EBITDA NTM Revenue NTM EBITDA

Venture Co. $6,812.0 ($6,337.8) $14,380.7 ($3,166.6)

Mean Multiple 5.0x 22.1x 4.0x 19.2x

Implied Enterprise Value $33,809.2 N/A $57,270.2 N/A

Average Enterprise Value $45,539.7

Plus Cash $4,441.9

Market Value of Invested Capital $49,981.6


containing target companies that most directly compete with Venture Co. and removing target companies with noticeable differences in business model (see Exhibit F for target company descriptions). Based on available financial information regarding these transactions and the multiples of implied enterprise value over LTM and NTM operating metrics, we calculated the following range of value:

Averaging the relevant data points and adding the cash balance yielded an implied MVIC of $55.09 million (see Exhibit E for comparable transaction analysis).

INCOME APPROACH

Discounted Cash Flow (Applicable) Venture Co.'smanagement provided historical financial statements and projections (found in Exhibit G, H, and I), which we used to perform a discounted cash flow analysis. This method involved modeling the firm’s operations over the specified time period, and then adding the present value of the discrete period free cash flows to the discounted value of the free cash flows in the terminal year.

The estimated average market value of the company in the terminal year was calculated using the exit multiple method. This method uses projected revenue and EBITDA in the terminal year, and then applies the appropriate multiplies (from comparable transactions) to each metric. The resulting values are averaged to determine the terminal value. The terminal value is then discounted to the present by the calculated discount rate (WACC for unlevered free cash flows or cost of equity for levered free cash flows). Based on the discounted cash flow analysis, we calculated an MVIC of $44.60 million. Details of this analysis can be found in the DCF Valuation Summary contained in Exhibits J & K.

WACC Calculation The weighted average cost of capital (“WACC”) is the rate of return that reflects the risk of an investment. The higher the risk, the higher the return expected by investors. The WACC is developed using the capital asset pricing model (“CAPM”), the long term weight of equity and debt in the financial


Venture Co. $6,812.0 ($6,337.8) $14,380.7 ($3,166.6)




Plus Cash $4,441.9


WACC 51.2%

NPV of FCFs ($2,282.0)

PV of Terminal Value $46,888.5

Enterprise Value $44,606.5

Plus: Non-Operating Cash $0.0



structure of companies in the industry, and the estimated cost of debt. CAPM was utilized to develop the Company’s cost of equity. The CAPM formula is defined as follows:

Re = Rf + β*(Rm) + SP + CP

Where:

Re = Return on equity Rf = Risk-free rate β = Beta (unlevered) Rm= Market risk premium SP = Size premium CP = Company specific risk premium

We used the following inputs for the CAPM:

Rf =2.42% β = 0.96 Rm = 5.02% SP = 6.00% CP = 39.0%

The Company’s cost of equity was estimated at 52.2%.Using cost of debt and debt/equity information from publicly traded comparables, the WACC for Venture Co. was calculated at 51.21%. For additional details on the WACC calculation, see Exhibit K.

Weighted Average Value

After considering all valuation methods under each approach, the relevant valuation inputs were weighted appropriately to arrive at a weighted average equity value as follows:

Allocation Methods

The AICPA guidelines allow for three methods of allocating enterprise value to differing security holders in the capitalization schedule: the Current Value Method (“CVM”), the Probability Weighted Expected Return Method (“PWERM”), and the Option Pricing Method (“OPM”). Each of these allocation methods were considered in estimating the fair market value of the Company’s common stock. The Option

Fair Market Value of Venture Co. as of September 30, 2012 Market Value of Method Weighted

In actual dollars Invested Capital Weighting Value

Adj. Book Value of Assets (Cost) $5,914,647 0.0% $0

Invested Capital (Cost) $22,182,037 0.0% $0

Recent Securities Transaction Backsolve (Market) $42,932,012 25.0% $10,733,003

Public Comps Valuation (Market) $49,981,604 25.0% $12,495,401

Acquisition Comps Valuation (Market) $55,094,153 25.0% $13,773,538

Discounted Cash Flow Valuation (Income) $44,606,522 25.0% $11,151,631

Weighted Market Value of Invested Capital $48,153,573

Less Debt ($1,750,000)

Weighted Equity Value $46,403,573


Pricing Method was considered appropriate given the Company’s anticipated exit date and uncertainty regarding future returns.

OPTION PRICING METHOD

Scalar Analytics estimated the fair value of Venture Co.'s common equity using the OPM (see Exhibit M: Break Point Analysis and Exhibit N: Option Pricing Method). The OPM treats common stock and preferred stock as call options on the value of the enterprise, with exercise prices based on the liquidation preferences of preferred stockholders. Under this method, the common stock has value only if the funds available for distribution to shareholders exceed the value of the liquidation preferences at the time of a liquidity event (for example, merger, or sale), assuming the enterprise has funds available to make a liquidation preference meaningful and collectible by the shareholders.

The common stock is modeled as a call option that gives its owner the right but not the obligation to buy the underlying enterprise value at a predetermined or exercise price. In the model, the exercise price is based on a comparison with the enterprise value rather than, as in the case of a “regular” call option, a comparison with a per-share stock price. Thus, common stock is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred stock is liquidated. The OPM has commonly used the Black-Scholes model to price the call option.

The OPM considers the various terms of the stockholder agreements, including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations, upon liquidation of the enterprise. In addition, the method implicitly considers the effect of liquidation preferences as of the

future liquidation date, not as of the valuation date. 4

4Valuation of Privately-Held-Company Equity Securities Issued as Compensation, American Institute of Certified Public Accountants, 2004, pg. 61.

$0

$50

$100

$150

$200

$250

$300

Ret

urns

(mil

lion

s)

Enterprise Value (millions)

Returns By Share Class (Breakpoints)

LT Debt

Series C

Series B

Series A

Common

Allocated

A Warrants

Common Warrants

Unallocated$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

Ente

rpri

se V

alue

(mil

lions

)

Enterprise Value (millions)

Returns By Share Class (Linear)

Unallocated

Common Warrants

A Warrants

Allocated

Common

Series A

Series B

Series C

LT Debt


Based on the average of the five year volatility calculations from the public comparable companies, a volatility number of 54% was selected for the option pricing calculation. Based on the breakpoints and capital structure as detailed in Exhibit L& M, the fair market value of common stock is estimated at $0.484 per share on a non-marketable basis.

Valuation Adjustments

DISCOUNT FOR LACK OF MARKETABILITY (“DLOM”)

A number of restricted stock and pre-IPO studies have been referenced in valuation court cases over the years when discussing the appropriate discount for lack of marketability. Included below is a summary of the historical restricted stock studies:

Restricted Stock Study Years Covered Average Discount

Institutional Investor Study 1966 – 1969 25.8%

Gelman 1980 – 1970 33.0%

Trout 1968 – 1972 33.5%

Moroney Not Specified 35.6%

Maher 1969 – 1973 35.4%

Standard Research Consultants 1978 – 1982 45.0%

Willamette Management Associates 1981 – 1984 31.2%

Silber 1981 – 1988 33.8%

Management Planning 1980 – 1996 27.1%

These studies are limited in that many were restricted to a small sample of transactions and most provide

little or no detail regarding how the marketability discount varies around the average.5 More recently, FMV Opinions, Inc. (“FMV”) conducted a study of 230 transactions from 1980 through April 1997. The

overall average discount for all 230 transactions was 20.1% with a standard deviation of 17.2%.6 The discounts were shown to vary significantly from -10% to 70% discounts. The practice of using benchmark averages is inappropriate and has been frowned upon by tax courts. According to the results of this study, “Smaller, less profitable entities, and those with higher degree of balance sheet risk, will

tend to have higher discounts.”7

FMV divided the transaction sample into quintiles and computed the median total assets, market-to-book ratio, and price per share as shown below:

5Robak& Hall, “Bringing Sanity to Marketability Discounts: A New Data Source”, page 2. 6Id., page 6. 7Id., page 8.


Quintile 1 2 3 4 5

Percentage Discount 2.9% 12.6% 21.1% 31.2% 43.7%

Market-to-Book Ratio 3.97 5.05 4.88 8.12 7.92

Total Assets ($000s) 43,585 31,404 16,305 10,725 5,994

Price per Share $10.19 $8.50 $6.00 $3.42 $3.75

The FMV study also found that, “Highly profitable firms tend to have lower discounts than the average.” The top decile, arranged by profitability, has a median discount of 11.0 percent.

Guidance from the Securities and Exchange Commission (“SEC”) and the AICPA suggests that a more quantitative approach should be used to estimate an appropriate DLOM. Scalar references two approaches: the Put Option Analysis, and the Asian Put Option or Finnerty model.

Put Option Analysis The logic of the put option approach rests on the notion that the holder of a non-marketable security can effectively purchase liquidity by purchasing the option to sell. Hence, the non-marketable value of a security is its fair market value, less the value of the option to sell. The put option calculation relies on the Black-Scholes option pricing model, which utilizes volatility from publicly traded comparable companies, an appropriate risk-free rate, and an estimated time to maturity (or liquidity).

Asian Put Option (Finnerty)

John D. Finnerty conducted an option-pricing study8

8 John D. Finnerty, “The Impact of Transfer Restrictions on Stock Prices.” Analysis Group/Economics, October 2002.

that “tests the relative importance of transfer restrictions on the one hand and information and equity ownership concentration effects on the other in explaining private placement discounts.” The model assumes that investors do not have perfect market timing ability. Instead, the DLOM is modeled as the value of an average strike put option. In addition to analyzing stock-options, Finnerty analyzed 101 private placements of restricted stock that occurred between January 1, 1997, and February 3, 1997. The Finnerty private placement study concluded price discounts of 20.13 percent and 18.41 percent for the day prior to the day prior to the private placement and for 10 days prior to the private placement, respectively.

Put Option Analysis

Basic put option approach for estimating the DLOM. Current Equity Value (Price) [s] 100%

Exercise [k] 100%

Riskfree Rate [r] 0.31%

Maturity (in years) [t] 3.0

Calculations Volatility [σ] 54.50%

(LN(s/k)+(r+(σ^2)/2)*t)/(σ*SQRT(t)) d1 0.482

d1 - σ*SQRT(t) d2 (0.462)

(k*EXP(-s*t))*NORMSDIST(-d2)-s*NORMSDIST(-d1) Discount for Lack of Marketability 35.7%


The usefulness of the Finnerty model may be limited by two main factors. First, an important assumption of the model is a liquidity event. The reality for an owner of private company stock is that he or she may never experience a liquidity event. This assumption would warrant a price discount greater than what is indicated by the option pricing studies. Second, an owner of private company stock does not have the ability to hedge his or her investment in the options market. Stock options on small, thinly traded companies rarely exist, and the market for private company stock or options on that stock simply does not exist.

If the implied DLOM from a particular option pricing model is 30 percent (when the strategy is actually available to investors), then the implied DLOM for shares of private company stock would be expected to

be higher (when the strategy does not actually exist).9

SMALL COMPANY RISK PREMIUM

Since most of the comparable public companies are large or mid cap stocks, we apply an additional risk premium to the cost of equity calculated from the CAPM. This adjustment reflects the additional premium investors require for small cap public stocks. The discount ranges from between 0% – 6% depending on the size (in revenue) of the company.

COMPANY SPECIFIC RISK PREMIUM

The CAPM relies on assumptions about the long-term, publicly traded stock markets. To capture the risk investors require for investing in smaller, less profitable, and less mature companies, an additional company specific risk premium is applied to the cost of equity. The company specific risk premium reflects the additional risk associated with the Company revenue relative to market, profitability, and its assets base.

9 Travis R. Lance, “The Use of Theoretical Models to Estimate the Discount for Lack of Marketability.” Willamette Management Associates, 2007.

Asian Put Option (Finnerty)

The Asian Put Option was developed by John Finnerty. See "Measuring the Impact of Length of Holding Period Restriction, ( T ), In Years [1] [2] 2.0

Marketability Restrictions on Stock Prices" by John Finnerty, PricewaterhouseCoopers Volatility per year ( s ) [3] 54.50%

(1997) for additional information Risk-free rate (semi-annual bond-equivalent yield) 0.23%

Risk-Free Rate, continuously compounded ( r ) [4] 0.23%

Notes Dividend Yield (q) expressed as a % of stock price 0.0%

[1] Based on the time period until liquidity will be attained.

[2] The Finnerty model caps the length of the holding period at 2 years. Intermediate calculations

[3] Based on the Company's projected volatility. (s^2)T 0.5940

[4] Based on bond math: converts risk-free rate from discrete to continuous compounding. v [5] 0.4228

[5] v = SQRT{(s^2)T + ln[2*(exp((s^2)T) - (s^2)T - 1)] - 2 ln[exp((s^2)T) - 1]}. A = [(r-q)/v]*sqrt(T) + 1/2 v * sqrt(T) 0.3066

[6] d = e(r-q)TN(A) - N(B) B = [(r-q)/v]*sqrt(T) - 1/2 v * sqrt(T) (0.2912)

Discount for Lack of Marketability, d, as a % of stock price [6] 23.8%

Selected Discount for Lack of Marketability 35.7%


Scalar Partners - Company Specific Discount Scale

Revenues (in 000s) $50,000.0 $30,000.0 $20,000.0 $10,000.0 $5,000.0

Profitability 5.0% 0.0% (5.0%) (10.0%) (15.0%)

Total Assets (in 000s) $50,000.0 $30,000.0 $20,000.0 $10,000.0 $5,000.0

Discount Penalties if Less Than…

Revenues 3.0% 3.0% 3.0% 3.0% 3.0%

Net Income 3.0% 3.0% 3.0% 3.0% 3.0%

Total Assets 3.0% 3.0% 3.0% 3.0% 3.0%

Company Specific Adjustments

Revenues (in 000s) $6,812.0 3.0% 3.0% 3.0% 3.0% 0.0%

Profitability (101.3%) 3.0% 3.0% 3.0% 3.0% 3.0%

Total Assets (in 000s) $5,914.6 3.0% 3.0% 3.0% 3.0% 0.0%

2012 Company Specific Discount to Cost of Equity 39.0%


Valuation Analyst Representation

The undersigned hereby certify that to the best of our knowledge and belief:

Compensation for Scalar Analytics is not contingent on any action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The reported analysis, opinions, and conclusions are limited only by the reported terms and conditions, and represent the unbiased professional analyses, opinions, and conclusions of Scalar Analytics. The analyses, opinions and conclusions were developed, and this report has been prepared, in accordance with the American Institute of Certified Public Accountants Statement on Standards for Valuation Services.

___________________________________________ Date: November 16, 2012

Scalar Analytics

Principal Appraiser Todd Miller, AVA

Contributing Appraisers Luis Coronel


Conclusion of Value

PURPOSE OF REPORT

Scalar Analytics has performed a valuation engagement, as that term is defined in the Statement on Standards for Valuation Services (SSVS) of the American Institute of Certified Public Accountants, of Venture Co. as of September 30, 2012. This valuation was performed solely for the purpose stated in this report. The resulting estimate of value should not be used for any other purpose or by any other party for any purpose. This valuation engagement was conducted in accordance with the SSVS. The estimate of value that results from a valuation engagement is expressed as a conclusion of value.

ASSUMPTIONS AND LIMITING CONDITIONS

Scope of Analysis The appraisal of any financial instrument or business is a matter of informed judgment. The accompanying appraisal has been prepared on the basis of information and assumptions set forth in the report, its appendices, our underlying work papers, and the limiting conditions and assumptions set forth.

Use of Report This report and the conclusion of value arrived at herein are for the exclusive use of our client for the sole and specific purposes as noted herein. They may not be used for any other purpose or by any other party for any purpose. Furthermore the report and conclusion of value are not intended by the author and should not be construed by the reader to be investment advice in any manner whatsoever. The conclusion of value represents the considered opinion of Scalar Analytics, based on information furnished to them by Venture Co. and other sources.

Distribution Neither all nor any part of the contents of this report (especially the conclusion of value, the identity of any valuation specialist, or the firm with which such valuation specialists are connected or any reference to any of their professional designations) should be disseminated to the public through advertising media, public relations, news media, sales media, mail, direct transmittal, or any other means of communication without the prior written consent and approval of Scalar Analytics.

Going Concern Assumption, No Undisclosed Contingencies Scalar Analytics’ analysis: (a) is based on the past and present financial condition of the Company and its assets as of the Valuation Date; (b) assumes that as of the Valuation Date the Company and its assets will continue to operate as configured as a going concern; (c) assumes that the current level of management expertise and effectiveness would continue to be maintained and that the character and integrity of the enterprise through any sale, reorganization, exchange, or diminution of the owners’ participation would not be materially or significantly changed; and (d) assumes that the Company had no undisclosed real or contingent assets or liabilities, no unusual obligations or substantial commitments, other than in the


ordinary course of business, nor had any litigation pending or threatened that would have a material effect on our analysis.

Lack of Verification of Information Provided Financial statements and other related information provided by the Company or its representatives, in the course of this engagement, have been accepted without any verification as fully and correctly reflecting the enterprise’s business conditions and operating results for the respective periods, except as specifically noted herein. Scalar Analytics has not audited, reviewed, or compiled the financial information provided to us and, accordingly, we express no audit opinion or any other form of assurance on this information. Public information and industry and statistical information have been obtained from sources we believe to be reliable. However, we make no representation as to the accuracy or completeness of such information and have performed no procedures to corroborate the information.

Reliance on Forecasted Data Concerning forecasted financial and operational data, Scalar Analytics does not express an opinion or any other form of assurance as to the reasonableness of the underlying assumptions. If prospective financial information approved by management has been used in our work, we have not examined or compiled the prospective financial information and therefore, do not express an audit opinion or any other form of assurance on the prospective financial information or the related assumptions. Events and circumstances frequently do not occur as expected, and there will usually be differences between prospective financial information and actual results, and those differences may be material.

Subsequent Events The terms of Scalar Analytics’ engagement are such that Scalar Analytics has no obligation to update this report or to revise the valuation because of events and transactions occurring subsequent to the date of the valuation unless Scalar Analytics is engaged to provide valuations in the future.

Legal Matters Scalar Analytics assumes no responsibility for legal matters including interpretations of either the law or contracts. Scalar Analytics has made no investigation of legal title and has assumed that all owners’ claims to property are valid. Scalar Analytics has given no consideration to liens or encumbrances except as specifically stated in financial statements provided to us. Scalar Analytics has assumed that all required licenses, permits, etc. are in full force and effect. Scalar Analytics assumes that all applicable federal, state, local zoning, environmental and similar laws and regulations have and continue to be complied with by the Company. Scalar Analytics assumes no responsibility for the acceptability of the valuation approaches used in our report as legal evidence in any particular court or jurisdiction. The suitability of Scalar Analytics’ report and opinion for any legal forum is a matter for the Company and the Company’s legal advisor to determine.

Testimony Future services regarding the subject matter of this report, including, but not limited to testimony or


attendance in court, shall not be required of Scalar Analytics unless previous arrangements have been made in writing.

CONCLUSION

Based on our analysis, as described in this valuation report, the calculated value of Venture Co.'s common stock on a non-marketable basis as of September 30, 2012 is $0.484 per share. This conclusion is subject to the assumptions and limiting conditions as outlined in this report and to the Valuation Analyst’s Representation.


Valuation Analyst Qualifications

Todd Miller, AVA– Associate Todd Miller is an Associate at Scalar Analytics and is responsible for managing the firm's valuation and transaction advisory engagements. Todd has performed dozens of valuations for private and venture-backed companies in all stages of development. He has interacted with the transaction advisory teams of numerous Big Four and regional accounting firms across the country in performing valuations, passing the scrutiny of strict legal and audit standards. Todd has also helped perform solvency opinions, ESOP valuations, and advised on $100M+ mergers. Prior to joining Scalar Analytics, Todd was an associate with Horizon Analytics, a secondary private equity advisory firm. Additionally, Todd worked as an analyst for Granada Advisors providing consulting and financial modeling services to small and mid-market companies in the Rocky Mountain region. Todd also worked as an intern with Peterson Ventures performing industry analysis where he developed a strategic growth plan for one of their portfolio companies. Todd graduated from Brigham Young University’s Marriott School of Management with a degree in finance. He is also an Accredited Valuation Analyst and a member of the National Association of Certificed Valuators and Analysts.

Luis Coronel– Vice President

Luis is a Vice President at Scalar Analytics and is responsible for managing the firm's valuation and transaction advisory engagements. Prior to joining Scalar Analytics, Luis was an analyst at vSpring Capital, a Salt Lake City-based venture capital firm with over $400 million under management. Previously, Luis held several managerial and financial positions with firms in Argentina including corporate HR manager for Productora Alimentaria S.A., general manager for La California, a real estate development company, and as a financial analyst for Edward's International Services S.A. Luis is a National Public Accountant (CPN) in Argentina and graduated with an MBA from Brigham Young University with an emphasis in finance.


Exhibits

Exhibit A: Valuation Summary

Fair Market Value of Venture Co. as of September 30, 2012 Market Value of Method Weighted

In actual dollars Invested Capital Weighting Value

Adj. Book Value of Assets (Cost) $5,914,647 0.0% $0

Invested Capital (Cost) $22,182,037 0.0% $0

Recent Securities Transaction Backsolve (Market) $42,932,012 25.0% $10,733,003

Public Comps Valuation (Market) $49,981,604 25.0% $12,495,401

Acquisition Comps Valuation (Market) $55,094,153 25.0% $13,773,538

Discounted Cash Flow Valuation (Income) $44,606,522 25.0% $11,151,631

Weighted Market Value of Invested Capital $48,153,573

Less Debt ($1,750,000)

Weighted Equity Value $46,403,573

Equity Allocation Method Option Pricing Method

Value per Common Share (marketable, minority basis) $0.753

Discount for Lack of Marketability 35.7%

Value per Common Share (non-marketable, minority basis) $0.484


Exhibit B: Recent Securities Transaction Backsolve

Option Value Analysis Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7 Option 8 Option 9 Option 10

Definition: Before this breakpoint… Series C

liquidation

preference

Series B & A

liquidation

preference

Common

participates

Allocated

options exercise

Series A

converts to

common

Common

Warrants

exercise

Unallocated

options

participate in

value

Series B

converts to

common

Series C reaches

3.0x

participation

cap

Series C

converts into

Common stock

Break Points $0 $20,771,210 $22,182,037 $25,812,886 $27,793,293 $28,582,104 $39,428,548 $56,429,660 $301,546,405 $421,162,792 Infinity

Current Equity Value (Price) $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012 $41,182,012

Exercise $0 $20,771,210 $22,182,037 $25,812,886 $27,793,293 $28,582,104 $39,428,548 $56,429,660 $301,546,405 $421,162,792 Infinity

Riskfree Rate 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31%

Maturity (in years) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0

Volatility 54% 54% 54% 54% 54% 54% 54% 54% 54% 54% 54%

d1 28.815 1.207 1.137 0.977 0.898 0.869 0.528 0.148 (1.627) (1.981) 0.000

d2 27.871 0.263 0.193 0.033 (0.046) (0.075) (0.416) (0.796) (2.571) (2.925) 0.000

Call Option Value: $41,182,012 $24,074,139 $23,249,329 $21,291,816 $20,316,134 $19,944,203 $15,646,424 $11,102,887 $620,840 $261,072 $0

Incremental Option Value $17,107,873 $824,810 $1,957,513 $975,682 $371,932 $4,297,779 $4,543,537 $10,482,047 $359,768 $261,072

Option Value of Security Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7 Option 8 Option 9 Option 10

Series C $17,107,873 $0 $447,939 $185,744 $61,154 $708,116 $689,152 $1,532,604 $0 $38,627

Series B $0 $644,422 $0 $0 $0 $0 $0 $328,365 $13,052 $8,070

Series A $0 $180,388 $0 $0 $36,680 $204,534 $199,056 $448,685 $18,045 $11,157

Common $0 $0 $1,509,575 $625,966 $206,090 $2,386,386 $2,322,478 $5,235,016 $210,538 $130,175

Allocated $0 $0 $0 $163,972 $53,986 $625,115 $608,374 $1,371,316 $55,150 $34,100

A Warrants $0 $0 $0 $0 $14,022 $78,187 $76,093 $171,519 $6,898 $4,265

Common Warrants $0 $0 $0 $0 $0 $295,441 $265,177 $597,726 $24,039 $14,863

Unallocated $0 $0 $0 $0 $0 $0 $383,207 $796,816 $32,046 $19,814

Total $17,107,873 $824,810 $1,957,513 $975,682 $371,932 $4,297,779 $4,543,537 $10,482,047 $359,768 $261,072

Total Option Value Option Value Total Shares Share Value Discount* Non-Marketable

Series C $20,771,208 5,934,632 $3.500 0.0% $3.500

Series B $993,910 1,239,906 $0.802 0.0% $0.802

Series A $1,098,545 1,714,171 $0.641 0.0% $0.641

Common $12,626,224 20,000,000 $0.631 35.7% $0.406

Allocated $2,912,013 5,239,012 $0.556 35.7% $0.358

A Warrants $350,984 655,276 $0.536 35.7% $0.345

Common Warrants $1,197,245 2,283,567 $0.524 35.7% $0.337

Unallocated $1,231,883 3,044,179 $0.405 35.7% $0.260

Total $41,182,012 40,110,742 Discount for Lack of Marketability*

Implied Enterprise Value

Implied Equity Value (Backsolve) $41,182,012

Plus: Debt $1,750,000

Market Value of Invested Capital $42,932,012


Exhibit C-1: Public Comparable Companies Analysis

Operating and Market Data Ticker Stock Market Enterprise LTM LTM NTM NTM

(dollars in millions) Symbol Price Value Value Revenues EBITDA Revenue EBITDA

Comparable Public Companies 09/30/12

salesforce.com, inc NYSE:CRM $152.69 $21,223.9 $20,674.6 $2,643.3 $116.2 $3,426.1 $150.7

Concur Technologies, Inc. NasdaqGS:CNQR $73.73 $4,054.0 $3,822.1 $439.8 $50.7 $551.0 $63.5

Kenexa Corp. NYSE:KNXA $45.83 $1,265.0 $1,208.4 $318.0 $26.7 $397.7 $33.3

LogMeIn, Inc. NasdaqGS:LOGM $22.43 $555.1 $356.6 $134.2 $14.6 $156.8 $17.1

Constant Contact, Inc. NasdaqGS:CTCT $17.40 $530.6 $449.5 $243.4 $22.6 $276.2 $25.7



Multiples and Margins Enterprise Value Gross EBITDA LTM Revenue LTM EBITDA

Weight LTM Rev LTM EBITDA NTM Rev NTM EBITDA Margin Margin Growth Growth

5

Comparable Public Companies NTM Discount (19.8%) (22.1%)

20% salesforce.com, inc 7.8x N/A 6.0x N/A 78.1% 4.4% 36.5% 1.0%

20% Concur Technologies, Inc. 8.7x N/A 6.9x N/A 71.9% 11.5% 25.8% 10.4%

20% Kenexa Corp. 3.8x N/A 3.0x N/A 60.0% 8.4% 32.1% 80.8%

20% LogMeIn, Inc. 2.7x 24.4x 2.3x 20.9x 89.9% 10.9% 13.7% (17.5%)

20% Constant Contact, Inc. 1.8x 19.9x 1.6x 17.5x 71.0% 9.3% 19.1% 21.9%

Median 3.8x 22.1x 3.0x 19.2x 71.9% 9.3% 25.8% 10.4%

Mean 5.0x 22.1x 4.0x 19.2x 74.2% 8.9% 25.4% 19.4%

75th Percentile 7.8x 23.3x 6.0x 20.1x 78.1% 10.9% 32.1% 21.9%

25th Percentile 2.7x 21.0x 2.3x 18.3x 71.0% 8.4% 19.1% 1.0%

Weighted 5.0x 8.9x 4.0x 7.7x


Venture Co. $6,812.0 ($6,337.8) $14,380.7 ($3,166.6)




Plus Cash $4,441.9




Beta and Volatility Levered Debt / Effective Unlevered Volatility Calculation

Beta Equity Tax Rate Beta 1 Year 2 Year 5 Year

Comparable Public Companies

salesforce.com, inc 1.40 N/A 40.0% N/A 41.7% 42.6% 47.8%

Concur Technologies, Inc. 1.35 6.2% 40.0% 1.30 37.9% 38.6% 46.5%

Kenexa Corp. 2.72 N/A 40.0% N/A 63.6% 57.0% 69.1%

LogMeIn, Inc. 0.45 0.0% 62.0% 0.45 51.2% 46.6% N/A

Constant Contact, Inc. 1.10 0.0% 40.0% 1.10 49.9% 49.6% N/A

Median 1.35 1.10 49.91% 46.56% 47.84%

Mean 1.40 0.95 48.86% 46.87% 54.50%

Beta Application to Venture Co.

Unlevered Target Debt / Effective Relevered

Beta Equity Tax Rate Beta

Median 1.10 0.0% 40.0% 1.10

Mean 0.95 2.1% 40.0% 0.96


Exhibit D-1: Public Comparable Companies Descriptions

Public Comparable Company Descriptions

Name Description

salesforce.com, inc salesforce.com, inc provides cloud computing and social enterprise solutions to various businesses and industries worldwide. The company delivers customer relationship management

applications through Internet or cloud. Its cloud computing services enable customers to connect, engage, sell, service, and collaborate with customers. The company markets sales force

automation features of its application services and customer service and support automation features under the Service Cloud brand name. It also provides Chatter applications for the

enterprise to connect and share information securely and in real-time; Radian6 application that offers customers a tool for social media monitoring and marketing; and Data.com, which

provides companies with a database of business contacts, company profiles, and social insights. In addition, the company offers The Force.com, a cloud computing platform, which

enables customers and developers to build complementary applications; Heroku Platform, a application development platform for application developers to build and deploy social and

mobile applications; Database.com, an enterprise cloud database for developers to architect and build new mobile and social applications in the cloud; and The AppExchange, an online

directory that allows customers to browse, sample, share, and install applications developed on its Force.com platform. Further, it provides professional services comprising consulting,

deployment, and training services. The company markets its services primarily through its direct sales, and referral and indirect sales. salesforce.com, inc was founded in 1999 and is

based in San Francisco, California.

Concur Technologies, Inc. Concur Technologies, Inc. provides integrated travel and expense management solutions for companies of various industries, sizes, and geographies. It offers the Concur Connect platform,

a cloud computing software solution primarily on a subscription basis, which enables customers, partners, suppliers, and third-party developers to connect. The company provides various

solutions to streamline the travel procurement, itinerary management, expense management, and invoice management processes. Its solutions include online travel procurement solutions,

which automate corporate travel booking and processing; itinerary management solutions that enable individual business travelers and their organizations to manage and share travel

itinerary information; and automated expense management solutions, which simplify the expense reporting process. The company also offers other value-added and extended services that

leverage its integrated cloud offerings, including expense reimbursement; expense report auditing services to streamline the process of managing and substantiating expense receipts;

business intelligence that enable customers to use captured data to analyze trends, influence budget decisions, improve forecasting, and monitor for fraudulent activity; and invoice

management solutions to automate, simplify, and reduce the costs associated with the process of entering, approving, and managing the payment of vendor invoices. In addition, it

provides consulting; and various extended services, such as site administration, audit and compliance services, advanced analytics, and customized integration in connection with its

integrated travel and expense management solutions. Concur markets and sells its solutions worldwide through direct sales organizations; and indirect distribution channels, such as

strategic resellers and referral partners, as well as through its Website. The company was founded in 1993 and is headquartered in Redmond, Washington.




Name Description

Kenexa Corp. Kenexa Corporation, together with its subsidiaries, provides software-as-a-service solutions that enable organizations to recruit, retain, and develop employees. The company offers talent

acquisition solutions, such as recruitment technology systems that locates and tracks talented candidates; onboarding solutions, which provide form management for legal documents,

workflow, and electronic signatures; employee assessments that help organizations to select and retain top performers; and skills tests, which enable organizations to identify and select

talented candidates. Its talent acquisition solutions also include Kenexa Interview Builder system that provides an online structured interview reference library of approximately 3,000

questions; employment branding solutions; and recruitment process outsourcing (RPO) solutions, which offer global recruitment services. The company also provides talent retention

solutions comprising performance management solutions that integrate performance management, compensation management, career development, goal alignment, and succession

planning; employee surveys; learning management solutions, which enable organizations to deliver and track employee learning; leadership solutions, including leadership audit,

leadership assessments, and leadership development solutions; CompAnalyst suite of compensation management solutions; and consumer solutions that provide compensation-focused

tools and content. It serves financial services and banking, manufacturing, government, life sciences, biotechnology and pharmaceuticals, retail, healthcare, hospitality, call centers, and

education industries. Kenexa Corporation operates primarily in the United States, the United Kingdom, Germany, the Netherlands, Canada, China, and other European countries. The

company was formerly known as TalentPoint, Inc. and changed its name to Kenexa Corporation in November 2000. Kenexa Corporation was founded in 1987 and is headquartered in

Wayne, Pennsylvania.

LogMeIn, Inc. LogMeIn, Inc. develops and markets a suite of remote access, remote support, and collaboration solutions in the United States, the United Kingdom, and internationally. The company

provides remote user access services, including LogMeIn Free, a free remote access service, which provides secure access to a remote computer or other Internet-enabled device; LogMeIn

Pro, a remote access service; LogMeIn Hamachi, a hosted virtual private network service; LogMeIn Ignition that delivers one click access to remote computers that subscribe to LogMeIn

Free or LogMeIn Pro; Pachube, a hosted service for building and running Internet of things applications; and LogMeIn for iPad/iPhone, a mobile application for iOS devices. It also offers

customer care, remote support, and device management services comprising LogMeIn Rescue, a Web-based remote support and customer care service to support remote tablets,

smartphones and computers, and applications, as well as assist computer users via the Internet; LogMeIn Rescue+Mobile, an add-on of LogMeIn Rescue’s Web-based remote support

service to remotely access and support smartphones and tablet computers; BoldChat, a Web-based live chat and click-to-call service; LogMeIn Central, a Web-based management console;

and LogMeIn Backup, a service that subscribers install on two or more computers to create a backup network. In addition, the company provides remote collaboration services, such as

join.me and join.me pro, which are browser-based online meetings and screen sharing services. It serves small and medium-sized businesses, information technology service providers,

mobile carriers, customer service centers, original equipment manufacturers, and consumers. The company was formerly known as 3am Labs, Inc. and changed its name to LogMeIn, Inc.

in March 2006. LogMeIn, Inc. was founded in 2003 and is based in Woburn, Massachusetts.




Name Description

Constant Contact, Inc. Constant Contact, Inc. provides on-demand email marketing, social media marketing, event marketing, and online survey products primarily in the United States. It offers email

marketing products, which allow customers to create, send, and track professional and affordable permission-based email marketing campaigns; and social media marketing products that

allow customers to manage and optimize their presence across multiple social media networks. The company also provides event marketing products, which enable its customers to

promote and manage events, communicate with invitees and registrants, capture and track registrations, and collect online payments; and online survey products that enable its customers

to create and send surveys, and analyze the responses. In addition, it offers customer support services to customers and trailers through phone, chat, email, and social media. Further, the

company provides ancillary services, such as custom services to customers who like its email campaigns, event promotions, or surveys prepared for them; and online training programs to

educate participants on email marketing and social media marketing best practices, as well as a workshop programs. It markets its products directly for small organizations, including

retailers, restaurants, law and accounting firms, consultants, non-profits, religious organizations, and alumni associations. The company was formerly known as Roving Software

Incorporated and changed its name to Constant Contact, Inc. in 2006. Constant Contact, Inc. was founded in 1995 and is headquartered in Waltham, Massachusetts.


Exhibit E-1: Comparable Transactions Analysis

Multiples Analysis (dollars in millions) Implied LTM LTM LTM Revenue LTM EBITDA

Weight Date Target Name Acquirer Name EV Revenue EBITDA Mutliple Multiple

8

Comparable Precedent Transactions Used? Used?

13% 10/18/11 IQTR141453382 IQ25022195 eResearchTechnology, Inc. Keynote Systems Inc. $89.8 $20.0 ($1.3) 4.5x 1 N/A 1

13% 05/26/10 IQTR98125456 IQ111358 SkillSoft plc (nka:SSI Investments II Limited) Advent International Corporation $1,127.3 $315.0 $116.0 3.6x 1 9.7x 1

13% 04/05/12 IQTR168060609 IQ683161 Taleo Corp. Warburg Pincus LLC $1,805.5 $315.4 $29.6 5.7x 1 60.9x 1

13% 02/14/12 IQTR144260754 IQ93713 DemandTec, Inc. International Business Machines Corporation $426.9 $89.1 ($7.8) 4.8x 1 N/A 1

13% 02/15/12 IQTR143976841 IQ34879 SuccessFactors, Inc. SAP America, Inc. $3,516.0 $291.8 ($27.2) 12.0x 1 N/A 1

13% 07/15/11 IQTR130828541 IQ34067 Savvis, Inc. CenturyLink, Inc. $2,962.7 $973.4 $229.2 3.0x 1 12.9x 1

13% 04/01/11 IQTR129212824 IQ1994418 Allegient Systems, Inc. Bottomline Technologies (de), Inc. $49.8 $14.4 $3.0 3.4x 1 16.7x 1

13% 01/25/12 IQTR142032139 IQ94412 Rightnow Technologies Inc. Oracle Corporation $1,521.4 $216.2 $23.9 7.0x 1 63.8x 1

Median 4.6x 16.7x

Mean 5.5x 32.8x

75th Percentile 6.1x 60.9x

25th Percentile 3.5x 12.9x

Weighted 5.5x 20.5x


Venture Co. $6,812.0 ($6,337.8) $14,380.7 ($3,166.6)




Plus Cash $4,441.9



Exhibit E-2: Comparable Transactions Analysis

Growth & Margin Analysis LTM Revenue LTM EBITDA Gross EBITDA Net 1 Week

Target Name Growth Growth Margin Margin Margin Premium

Comparable Precedent Transactions

eResearchTechnology, Inc. N/A N/A 55.7% (6.4%) (19.7%) N/A

SkillSoft plc (nka:SSI Investments II Limited) (2.4%) 0.9% 90.8% 35.8% 20.7% 17.6%

Taleo Corp. 32.9% (2.6%) 67.2% 9.4% (5.5%) 24.1%

DemandTec, Inc. 11.8% N/A 63.9% (8.8%) (21.7%) 72.5%

SuccessFactors, Inc. 59.3% N/A 66.1% (12.7%) (11.0%) 77.3%

Savvis, Inc. 16.6% 29.8% 47.5% 23.7% (4.6%) 9.5%

Allegient Systems, Inc. 18.2% 36.3% 64.8% 20.7% 12.1% N/A

Rightnow Technologies Inc. 23.0% 43.3% 69.9% 11.0% 12.3% 10.5%

Median 18.2% 29.8% 65.4% 10.2% (5.0%) 20.9%

Mean 22.8% 21.5% 65.7% 9.1% (2.2%) 35.3%

75th Percentile 28.0% 36.3% 67.9% 21.4% 12.2% #¡NUM!

25th Percentile 14.2% 0.9% 61.8% (7.0%) (13.2%) 12.3%


Exhibit F-1: Comparable Transactions – Target Company Descriptions

Comparable Transaction Target Company Descriptions

Name Description

eResearchTechnology, Inc. Keynote DeviceAnywhere Inc. provides a platform for the planning, testing, and monitoring of mobile applications. It offers testing, monitoring, and measurement products

and services for various enterprises, such as online portals, e-commerce sites, B2B sites, mobile operators, and mobile infrastructure providers. The company provides mALM,

a mobile application lifecycle management product; Test Center Enterprise Interactive that offers cloud-based testing for internal and external-facing mobile applications and

Websites, including support, training, and services; and Test Center Enterprise Automation that automates the testing of mobile applications. It also offers Test Center

Enterprise Monitoring, which provides performance monitoring for mobile applications and Websites to detect potential problems; Test Center Developer, a device lab for

mobile applications developer; Device Planner that helps users to identify the productive mobile platforms and devices for their applications or Website; and Test Planner,

which helps optimize test plans for mobile applications. Its customers include information technology, engineering, and quality assurance departments from organizations

around the world in finance, healthcare, retail, e-commerce, and media/entertainment. The company has strategic partnerships with Hewlett-Packard Company and

International Business Machines. Keynote DeviceAnywhere Inc. was formerly known as Mobile Complete, Inc. The company was founded in 2003 and is based in San Mateo,

California. As of October 18, 2011, Keynote DeviceAnywhere Inc. operates as a subsidiary of Keynote Systems Inc.

SkillSoft plc (nka:SSI Investments II

Limited)

SSI Investments II Limited, through its subsidiaries, engages in the provision of on-demand e-learning and performance support solutions for enterprises, government,

education, and small and medium-sized businesses worldwide. Its products include SkillChoice multi-modal learning solutions that offer various resources to support formal

training and informal performance support needs; SkillPort for managing e-learning programs; SkillSoft Dialogue, a virtual classroom platform for live and on-demand

learning sessions; KnowledgeCenters learning portals that allow learners instant access to content; business impact series, which include the audio-driven dramatizations of

workplace business problems and solutions; and challenge series titles that provide interactive case studies. The company’s products also consist SkillSoft leadership

advantage, a pre-packaged learning portal; business skills courseware collection comprising courseware titles; IT Skills courseware collection that include software

development, operating systems and server technologies, Internet and network technologies, IT security, enterprise database systems, and Web design courseware titles;

desktop skills courseware collection; and legal compliance, federal government compliance, and environmental safety and health courseware collection. In addition, it

operates leadership development channel that offers a collection of live and on-demand video learning presentations. Further, the company provides online mentoring,

books24x7 library access, and executive content services. It sells its products through a direct field sales force and resellers. The company was formerly known as SSI

Investments II Limited and changed its name on May 26, 2010. SSI Investments II Limited was founded in 1989 and is headquartered in Nashua, New Hampshire.




Name Description

Taleo Corp. Taleo Corporation provides on-demand talent management software solutions. The company’s products include Taleo Enterprise that supports medium and large enterprises

in talent management processes comprising sourcing, recruiting, onboarding, performance management, goals management, development planning, succession planning,

compensation, and learning; and Taleo Business Edition, which supports smaller and more centralized organizations, stand-alone departments and divisions of larger

organizations, and staffing companies in recruiting, onboarding, performance management, compensation, and learning. It also operates the Taleo Knowledge Exchange, an

online customer forum and social network that enables its customers to share and discuss talent management topics, product ideas, and best practices; the Taleo Solution

Exchange, an online partner application and solution marketplace, which enables its customers to explore, evaluate, demo, and compare products and services from the Taleo

partner ecosystem; and the Taleo Talent Exchange, a crowd-sourced talent marketplace to source active and passive candidates, share candidates, and enable job seekers to

find the right positions and apply for open positions using their universal profile. In addition, the company provides professional services, such as implementation, solution

optimization and expansion, technical, and training services. It serves organizations in the business services, consumer goods, energy, financial services, healthcare,

manufacturing, technology, transportation, government, and retail sectors. The company offers its software applications primarily on a subscription basis through its direct

sales force and strategic partners in the United States, Canada, Europe, and Australia. The company was formerly known as Recruitsoft, Inc. and changed its name to Taleo

Corporation in March 2004. Taleo Corporation was incorporated in 1999 and is headquartered in Dublin, California. As of April 5, 2012, Taleo Corp. operates as a subsidiary

of Oracle Corporation.

DemandTec, Inc. DemandTec, Inc. provides collaborative optimization network of software services connecting retailers and consumer products (CP) companies. Its solutions include

DemandTec Lifecycle Price Optimization, which enables retailers to price items at various stages in their lifecycle consisting of new items, regular items, promoted items, and

clearance items; DemandTec End-to-End Promotion Management that enables retailers to manage the processes related to retail promotions, such as collaborative promotion

planning, CP vendor deal management, in-store promotion execution, and post-event analysis; and DemandTec Assortment & Space, which enables retailers to create

localized assortments by store, cluster, or section, based on shopper demographics, the competitive environment, and a science-based quantitative understanding. The

company provides DemandTec Shopper Insights and DemandTec Targeted Marketing, which are a collection of services that enable retailers and their CP trading partners to

understand key shopper insights, define shopper segments, and plan shopper merchandising and marketing programs for various consumer segments; DemandTec Marketing

Plan Optimization, which enables CP executive and brand managers to develop strategic marketing investment allocation decisions and optimize marketing mix decisions;

and DemandTec Total Trade Optimization that enables CP companies to optimize and manage the spectrum of trade funds decisions. It also offers consulting and analytical

services. The company sells its applications by means of a software-as-a-service, as well as through its direct sales organization in cooperation with entities, such as systems

integration firms, strategy consultants, and syndicated data providers. It sells its products primarily in North America, Europe, and South America. The company was founded

in 1999 and is based in San Mateo, California. As of February 14, 2012, DemandTec, Inc. operates as a subsidiary of International Business Machines Corp.




Name Description

SuccessFactors, Inc. SuccessFactors, Inc. provides cloud-based business execution software solutions for organizations to bridge the gap between business strategy and results worldwide. The

company’s application suite includes modules and capabilities comprising Performance Management to deliver content that enables managers to provide feedback to reports;

Goal Management to support the process of creating, monitoring, and assessing employee goals; 360-Degree Review to support the collection of feedback from an employee’s

peers, reports, and superiors; Calibration & Team Rater to identify top and lower performers; Learning that combines formal, social, and extended learning with content

management, reporting, and analytics; Succession & Development to provide visibility into an organization’s talent pool; Career & Development Planning to align learning

activities with an employee’s competency gaps; and Compensation to facilitate the processes of merit pay adjustments, bonus allocations, calibrations, and distribution of

stock-based awards. Its application suite also comprises Analytics and Reporting to provide visibility into key performance and talent data in the organization; Recruiting

Management to identify, screen, select, hire, and on-board job applicants; Employee Central, a HR information system; Jam Social Learning and Collaboration Platform to

enhance employee creativity, spontaneity, and teamwork; Proprietary and Third-Party Content for competencies, goals, job descriptions, skills, surveys, and wage data; and

Recruiting Marketing product. In addition, it offers implementation and strategic consulting services. SuccessFactors has a strategic partnership with Korn/Ferry

International. The company was formerly known as Success Acquisition Corporation and changed its name to SuccessFactors, Inc. in April 2007. The company was founded

in 2001 and is headquartered in San Mateo, California. As of February 15, 2012, SuccessFactors, Inc. operates as a subsidiary of SAP America, Inc.

Savvis, Inc. Savvis, Inc. an information technology (IT) services company, provides cloud, managed hosting, managed security, colocation, professional, and network services to

businesses and government agencies worldwide. The company offers hosting services comprising colocation services for clients seeking data center space and power for their

server and networking equipment needs; and managed hosting services for clients’ IT infrastructure and network needs. Its managed hosting services include cloud services;

assistance and consultation in security for network and hosting environments, virtualization, Web-based applications, business recovery, software-as-a-service, program

management, and infrastructure and migration; dedicated hosting services; utility computing and storage services; and managed security services for the monitoring and

management of security appliances, software, and network-based controls. The company also offers managed network services, including managed VPN services that include

hardware, management systems, and operations to transport an enterprise’s voice, video, and data applications; hosting area network services that provide high-speed

Internet connectivity for hosting and cloud clients; and bandwidth services to enterprises and wholesale carrier clients, which comprise tier-1 Internet services in North

America, Europe, and Asia that are managed, unmanaged, or integrated with its VPN. It serves its clients in various industries, including financial services, media and

entertainment, software, and government sectors through direct sales force, indirect sales channels, and marketing programs. It was formerly known as SAVVIS

Communications Corporation and changed its name to Savvis, Inc. in May 2005. The company was founded in 1995 and is based in Town & Country, Missouri. As of July

15, 2011, Savvis, Inc. operates as a subsidiary of CenturyLink, Inc.




Name Description

Allegient Systems, Inc. Allegient Systems, Inc. provides software and services that assist legal departments to manage bill payment and expense management, as well as make informed decisions. It

provides outsourced bill reviews, software-based reviews and analysis, and company data captured from the bill review processes for insurance and law companies. The

company’s products include the Expense and Performance Management Suite, which provides standard reports and introductory business intelligence tools that support the

day-to-day tactical analysis of legal expense management; and Performance Management Consulting, which generates and displays strategic management information based

on the data drawn from data collection. Allegient Systems, Inc. was formerly known as Law Audit Services, Inc. The company was founded in 1988 and is headquartered in

Wilton, Connecticut with additional sales offices in Chicago, Illinois; and Toronto, Canada. As of April 1, 2011, Allegient Systems, Inc. operates as a subsidiary of Bottomline

Technologies Inc.

Rightnow Technologies Inc. Rightnow Technologies, Inc. provides cloud-based customer experience software products and services. The company primarily offers RightNow CX, a customer experience

suite for consumer-centric organizations to enable interactions across Web, social, and contact center touch points. Its RightNow CX suite includes RightNow Web Experience,

which integrates into an existing Web infrastructure to provide an online customer experience providing customer access to Web self-service; RightNow Social Experience

that enables organizations to listen and respond to conversations with their consumers on the social Web and to build branded communities to cultivate their own

conversations; and RightNow Contact Center Experience, which enables organizations to deliver consistent customer experiences across multi-channel interactions. The

company’s RightNow CX suite also comprises RightNow Engage, which provides horizontal service, sales, and marketing business processes that support, span, and inter-

connect the Web, social, and contact center experiences; RightNow CX Cloud Platform that provides a platform for scalability, performance, flexibility, and security;

RightNow Mission Critical Operations, a cloud delivery platform; and RightNow CX Commitment, which describes the way to deliver a customer experience. It also provides

professional services, including project management and consulting services. Rightnow Technologies, Inc. serves various industries, such as technology, public sector,

retail/consumer packaged goods, entertainment, financial services, telecommunication, and travel and hospitality industries. The company sells its products and services

through its direct sales organization, as well as through partner channels, system integrators, and resellers in North America, Europe, and the Asia Pacific. Rightnow

Technologies, Inc. was founded in 1995 and is headquartered in Bozeman, Montana.


Exhibit G: Historical and Projected Income Statement

In thousands of dollars (000) Historicals ending Dec 31, LTM Projections ending Dec 31,

2010 2011 9/30/12 2012 2013 2014 2015 2016

Total Revenue $795.0 $3,925.0 $6,812.0 $8,893.0 $16,230.0 $36,028.0 $45,000.0 $65,000.0

Total Cost of Sales $119.3 $549.5 $1,021.8 $1,334.0 2,434.5 5,404.2 6,750.0 9,750.0

Gross Profit 675.8 3,375.5 5,790.2 7,559.1 13,795.5 30,623.8 38,250.0 55,250.0

Operating Expenses 3,217.0 7,277.0 12,128.0 14,560.0 15,670.0 30,100.0 36,000.0 49,600.0

EBITDA ($2,541.3) ($3,901.5) ($6,337.8) ($7,001.0) ($1,874.5) $523.8 $2,250.0 $5,650.0

D&A 35.0 57.0 88.0 102.0 209.6 285.8 336.6 387.4

EBIT (2,576.3) (3,958.5) (6,425.8) (7,102.9) (2,084.1) 238.0 1,913.5 5,262.7

Interest Expense / (Income) 61.0 15.0 228.0 236.7 68.9 (547.0) (1,169.8) (1,925.1)

Other Expense / (income) (57.0) (14.0) 246.0 246.0 0.0 0.0 0.0 0.0

Pretax Income (2,580.3) (3,959.5) (6,899.8) (7,585.6) (2,152.9) 785.0 3,083.3 7,187.8

Income Taxes / (Benefit) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Income ($2,580.3) ($3,959.5) ($6,899.8) ($7,585.6) ($2,152.9) $785.0 $3,083.3 $7,187.8

Performance Metrics

Revenue Growth Rate #¡DIV/0! 393.7% NA 126.6% 82.5% 122.0% 24.9% 44.4%

COGS Margin 15.0% 14.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%

Gross Margin 85.0% 86.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0%

Operating Expenses 404.7% 185.4% 178.0% 163.7% 96.5% 83.5% 80.0% 76.3%

EBITDA Margin (319.7%) (99.4%) (93.0%) (78.7%) (11.5%) 1.5% 5.0% 8.7%


Exhibit H: Historical and Projected Balance Sheet

In thousands of dollars (000) Historicals ending Dec 31, As of Projections ending Dec 31,

2010 2011 9/30/12 2012 2013 2014 2015 2016

Cash and equivalents $3.0 $15.9 $4,441.9 $15,750.5 $12,581.0 $12,666.7 $15,381.3 $21,700.7

Accounts Receivable $596.8 2,119.0 951.8 1,242.5 2,267.7 5,033.9 6,287.5 9,081.9

Other Current Assets $5.2 102.8 91.1 119.0 217.1 482.0 602.1 869.6

Total Current Assets 605.0 2,237.7 5,484.8 17,112.0 15,065.8 18,182.6 22,270.8 31,652.2

PP&E 68.9 214.3 376.2 194.2 102.3 51.6 (20.7) (64.5)

Other Assets 59.6 49.5 53.6 53.6 94.7 94.7 94.7 94.7

Total LT Assets 128.5 263.8 429.8 247.8 196.9 146.3 74.0 30.2

Total Assets $733.5 $2,501.6 $5,914.6 $17,359.7 $15,262.7 $18,328.8 $22,344.8 $31,682.4

Accounts Payable 48.8 262.7 409.4 491.5 528.9 1,016.0 1,215.2 1,674.2

Accrued Liabilities 78.2 95.0 40.3 48.3 52.0 99.9 119.5 164.7

Short-Term Debt 0.0 1,730.8 1,500.0 1,414.5 553.5 553.5 553.5 553.5

Other Current Liabilities 754.6 1,282.9 1,467.5 1,761.8 1,896.1 3,642.2 4,356.1 6,001.8

Total Current Liab. 881.5 3,371.4 3,417.2 3,716.1 3,030.6 5,311.7 6,244.3 8,394.2

Long-Term Debt 0.0 39.6 250.0 256.6 1,006.6 1,006.6 1,006.6 1,006.6

Other LT Liabilities 0.0 0.0 17.6 8.5 0.0 0.0 0.0 0.0

Total LT Liabilities 0.0 39.6 267.6 265.2 1,006.6 1,006.6 1,006.6 1,006.6

Total Liabilities 881.5 3,411.0 3,684.8 3,981.3 4,037.2 6,318.3 7,251.0 9,400.8

Total Equity (148.0) (909.4) 2,229.9 13,378.4 11,225.5 12,010.5 15,093.8 22,281.6

Total Liab. and Equity $733.5 $2,501.6 $5,914.6 $17,359.7 $15,262.7 $18,328.8 $22,344.8 $31,682.4


Exhibit I: Projected Cash Flow Statement

In thousands of dollars (000) Projections ending Dec 31,

2012 2013 2014 2015 2016

Net Income From Continuing Operations (7,585.6) (2,152.9) 785.0 3,083.3 7,187.8

Depreciation & Amortization 102.0 209.6 285.8 336.6 387.4

Stock-Based Compensation Expense 0.0 0.0 0.0 0.0 0.0

Change in Working Capital 1,521.4 (947.8) (750.0) (441.0) (912.1)

Cash Flow from Operations (5,962.2) (2,891.2) 320.8 2,978.9 6,663.0

Capital Expenditures (81.8) (117.7) (235.1) (264.3) (343.5)

Other Assets (4.1) (41.1) 0.0 0.0 0.0

Additions to Intangibles 0.0 0.0 0.0 0.0 0.0

Cash Flow from Investments (85.9) (158.7) (235.1) (264.3) (343.5)

Cash Flow Available for Financing Activities ($6,048.1) ($3,049.9) $85.7 $2,714.6 $6,319.4

Issuance / (Repurchase) of Equity 21,873.5 0.0 0.0 0.0 0.0

Issuance / (Repurchase) of Debt (90.8) (119.5) 0.0 0.0 0.0

Cash Flow from Financing Activities 21,782.7 (119.5) 0.0 0.0 0.0

Net Change in Cash $15,734.6 ($3,169.5) $85.7 $2,714.6 $6,319.4

Beginning Cash Balance $15.9 $15,750.5 $12,581.0 $12,666.7 $15,381.3

Ending Cash Balance $15,750.5 $12,581.0 $12,666.7 $15,381.3 $21,700.7


Exhibit J: Discounted Free Cash Flows

Free Cash Flow Summary Projections ending Dec 31,

In thousands of dollars (000) 2011 2012 2013 2014 2015 2016

Revenue $3,925.0 $8,893.0 $16,230.0 $36,028.0 $45,000.0 $65,000.0

Growth Rate 126.6% 82.5% 122.0% 24.9% 44.4%

EBITDA ($3,901.5) ($7,001.0) ($1,874.5) $523.8 $2,250.0 $5,650.0

Margin (99.4%) (78.7%) (11.5%) 1.5% 5.0% 8.7%

Depreciation & Amortization 57.0 102.0 209.6 285.8 336.6 387.4

Margin 1.5% 1.1% 1.3% 0.8% 0.7% 0.6%

Capex & Additions to Intangibles 81.8 117.7 235.1 264.3 343.5

Margin 0.9% 0.7% 0.7% 0.6% 0.5%

EBITDA ($7,001.0) ($1,874.5) $523.8 $2,250.0 $5,650.0

Less: Depreciation & Amortization (102.0) (209.6) (285.8) (336.6) (387.4)

EBIT (7,102.9) (2,084.1) 238.0 1,913.5 5,262.7

Less: Cash Taxes 0.0 0.0 0.0 0.0 0.0

Plus: Depreciation & Amortization 102.0 209.6 285.8 336.6 387.4

Less: Capex (81.8) (117.7) (235.1) (264.3) (343.5)

Change in Working Capital 1,521.4 (947.8) (750.0) (441.0) (912.1)

Unlevered Free Cash Flows ($5,561.3) ($2,940.0) ($461.3) $1,544.8 $4,394.3

Cash Flows Remaining through EOY ($1,401.8) ($2,940.0) ($461.3) $1,544.8 $4,394.3

Discount Periods (mid-year convention) 0.13 0.75 1.75 2.75 3.75

Present Value of FCFs ($1,330.6) ($2,154.2) ($223.5) $495.0 $931.3

Total Present Value of Free Cash Flows ($2,282.0)

WACC 51.2%

NPV of FCFs ($2,282.0)


Enterprise Value $44,606.5

Plus: Non-Operating Cash $0.0



Exhibit K: WACC & Terminal Value Calculation

Cost of Equity Comments

Relevered Beta 0.96

x Market risk premium 5.0% S&P 500 returns relative to T-bonds from 1945 to 2009

+ Risk free rate 2.4% Yield on 20 year Treasury bonds

+ Size discount 6.0% Duff & Phelps size discount

+ Company specific discount 39.0% Company specific risk premium

= Cost of Equity 52.2%

Weighted Average Cost of Capital Required Rates of Return for Venture-Backed Private Companies*

Cost of equity 52.2% Stage of development Plummer Scherlis, et al.

x Equity/Total Cap 97.9% Start-up 50 - 70% 50 - 70%

Weighted average cost of equity 51.1% First stage or "early development" 40 - 60% 40 - 60%

Second stage or "expansion" 35 - 50% 30 - 50%

Average cost of debt 5.5% Bridge/IPO 25 - 35% 20 - 35%

x (1 - tax rate) 60.0% * AICPA Practice Aid

x Debt/Total Cap 2.1%

Weighted average cost of debt 0.1%

Weighted average cost of capital 51.2%

Terminal Value (Exit Multiple Method) Revenue EBITDA

2016 Metrics $65,000.0 $5,650.0

Estimated Exit Multiple 5.5x 32.8x

$358,824.4 $185,308.7

Estimated Exit Value $272,066.5

Discount Rate 51.2%



Exhibit L: Capitalization Table Analysis

z Series C Series B Series A A Warrants Common Common Allocated Unallocated Total

Investment Date 9/30/2011 3/1/2011 10/8/2010 ENTER DATA ENTER DATA ENTER DATA ENTER DATA ENTER DATA Total

Invested Capital $20,771,210 $1,102,276 $308,551 - - - - - $22,182,037

Price per share $3.500 $0.889 $0.180 - - - - - Total

Shares Issued 5,934,632 1,239,906 1,714,171 655,276 20,000,000 2,283,567 5,239,012 3,044,179 Total

Strike Price - - - $0.180 - $0.200 $0.140 $0.490 Total

Conversion Rate 1.0x 1.0x 1.0x 1.0x - - - - Total

Shares (as converted) 5,934,632 1,239,906 1,714,171 655,276 20,000,000 2,283,567 5,239,012 3,044,179 40,110,742

Ownership % 14.8% 3.1% 4.3% 1.6% 49.9% 5.7% 13.1% 7.6% 100.0%

Liquidation Preference (x) 1.0x 1.0x 1.0x 1.0x - - - - Total

Total Liquidation Preference $20,771,210 $1,102,276 $308,551 $117,950 $0 $0 $0 $0 $22,299,987

Participating Preferred? Y N N N - - - - Total

Part. Cap Imposed? Y - - - - - - - Total

Participation Cap (x) 3.0x - - - - - - - TotalPost-Money Valuation $140,387,597

Pre-Money Valuation $119,616,387


Exhibit M: Break Point Analysis

Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7 Option 8 Option 9 Option 10

Definition: Before this

breakpoint…

Series C

liquidation

preference

Series B & A

liquidation

preference

Common

participates

Allocated options

exercise

Series A converts

to common

Common

Warrants

exercise

Unallocated

options

participate in

value

Series B converts

to common

Series C reaches

3.0x

participation cap

Series C converts

into Common

stock

Price per Common Share $0.000 $0.000 $0.140 $0.180 $0.200 $0.490 $0.889 $7.000 $10.500 Infinity

Series C $20,771,210 $20,771,210 $21,602,059 $21,979,075 $22,108,773 $23,895,869 $26,474,555 $62,313,631 $62,313,631 Pro Rata

Series B $0 $1,102,276 $1,102,276 $1,102,276 $1,102,276 $1,102,276 $1,102,276 $8,780,916 $13,120,586 Pro Rata

Series A $0 $308,551 $308,551 $308,551 $386,344 $902,532 $1,647,365 $12,139,622 $18,139,218 Pro Rata

Common $0 $0 $2,800,000 $4,070,565 $4,507,652 $10,530,252 $19,220,552 $141,638,438 $211,638,438 Pro Rata

Allocated $0 $0 $0 $332,825 $447,321 $2,024,944 $4,301,373 $36,368,812 $54,705,354 Pro Rata

A Warrants $0 $0 $0 $0 $29,738 $227,061 $511,788 $4,522,662 $6,816,128 Pro Rata

Common Warrants $0 $0 $0 $0 $0 $745,614 $1,737,858 $15,715,332 $23,707,817 Pro Rata

Unallocated $0 $0 $0 $0 $0 $0 $1,433,892 $20,066,992 $30,721,619 Pro Rata

Option Proceeds $0 $0 $0 $733,462 $851,411 $1,308,125 $2,799,773 $2,799,773 $2,799,773 $2,799,773

Breakpoints $20,771,210 $22,182,037 $25,812,886 $27,793,293 $28,582,104 $39,428,548 $56,429,660 $301,546,405 $421,162,792 Infinity


Exhibit N: Option Pricing Method

Option Value Analysis Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7 Option 8 Option 9 Option 10

Definition: Before this breakpoint… Series C

liquidation

preference

Series B & A

liquidation preference

Common

participates

Allocated options

exercise

Series A converts to

common

Common

Warrants

exercise

Unallocated

options

participate in

value

Series B converts

to common

Series C reaches

3.0x

participation cap

Series C converts

into Common

stock

Break Points $0 $20,771,210 $22,182,037 $25,812,886 $27,793,293 $28,582,104 $39,428,548 $56,429,660 $301,546,405 $421,162,792 Infinity

Current Equity Value (Price) $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573 $46,403,573

Exercise $0 $20,771,210 $22,182,037 $25,812,886 $27,793,293 $28,582,104 $39,428,548 $56,429,660 $301,546,405 $421,162,792 Infinity

Riskfree Rate 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31% 0.31%

Maturity (in years) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0

Volatility 54% 54% 54% 54% 54% 54% 54% 54% 54% 54% 54%

d1 28.942 1.333 1.264 1.103 1.025 0.995 0.654 0.275 (1.501) (1.855) 0.000

d2 27.998 0.389 0.320 0.159 0.081 0.051 (0.290) (0.669) (2.445) (2.799) 0.000

Call Option Value: $46,403,573 $28,763,403 $27,871,048 $25,735,075 $24,660,647 $24,249,313 $19,421,999 $14,152,891 $929,712 $405,738 $0

Incremental Option Value $17,640,170 $892,355 $2,135,972 $1,074,429 $411,334 $4,827,313 $5,269,108 $13,223,179 $523,975 $405,738

Option Value of Security Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Option 7 Option 8 Option 9 Option 10

Series C $17,640,170 $0 $488,775 $204,543 $67,632 $795,364 $799,205 $1,933,391 $0 $60,031

Series B $0 $697,195 $0 $0 $0 $0 $0 $414,235 $19,010 $12,542

Series A $0 $195,160 $0 $0 $40,566 $229,734 $230,844 $566,020 $26,281 $17,340

Common $0 $0 $1,647,197 $689,319 $227,924 $2,680,416 $2,693,361 $6,604,011 $306,632 $202,309

Allocated $0 $0 $0 $180,567 $59,705 $702,136 $705,527 $1,729,925 $80,322 $52,995

A Warrants $0 $0 $0 $0 $15,507 $87,821 $88,245 $216,372 $10,046 $6,628

Common Warrants $0 $0 $0 $0 $0 $331,842 $307,524 $754,035 $35,011 $23,099

Unallocated $0 $0 $0 $0 $0 $0 $444,402 $1,005,190 $46,672 $30,793

Total $17,640,170 $892,355 $2,135,972 $1,074,429 $411,334 $4,827,313 $5,269,108 $13,223,179 $523,975 $405,738

Total Option Value Option Value Total Shares

Share Value

(Marketable)

Marketability

Discount

Share Value (Non-

Marketable)

Series C $21,989,112 5,934,632 $3.705 0.0% $3.705

Series B $1,142,982 1,239,906 $0.922 0.0% $0.922

Series A $1,305,945 1,714,171 $0.762 0.0% $0.762

Common $15,051,167 20,000,000 $0.753 35.7% $0.484

Allocated $3,511,178 5,239,012 $0.670 35.7% $0.431

A Warrants $424,620 655,276 $0.648 35.7% $0.417

Common Warrants $1,451,511 2,283,567 $0.636 35.7% $0.409

Unallocated $1,527,057 3,044,179 $0.502 35.7% $0.323

Total $46,403,573 40,110,742

Understanding Valuation for Equity Compensation and Avoiding the Perils of 409A

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