Research, Report & Profiling Services by IPOdesktop.com QED Connect, Inc. (QEDC.PK) Stock symbol: QEDC.PK…………………..………….………Float (est.4mm)..Ave. Volume 53,000

Stock price 10/29/07: $.93…….………….……….….……….Common shares (6/30/07: 44mm est)

52-week price range: $.16 - $2.20………………….….………Equity market capitalization: $41mm

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BUSINESS

The company’s goal is to provide enterprises, small to medium-sized businesses, schools and nonprofits with the ability to monitor and manage how employees are using computers, laptops, wireless devices and the Internet at any time, from any location in the world.

QED Connect provides organizations with web-hosted, Internet-based security software applications that are essential, affordable, easy to use, and completely maintained and operated by QED.v

Under QED’s Software-as-a-Service (SaaS) model, customers do not install any software on their end, nor do they pay for owning, upgrading or maintaining it. They obtain the benefits of packaged, commercially licensed software without the complexity and high cost.

100% INTERNET-BASED

Internet-based Software-as-a-Service (SaaS) is a rapidly growing market, projected to reach $10.9 billion in revenue by 2009.

Other Internet-only companies in the broad SaaS sector include: . - Salesforce.com (CRM) http://finance.yahoo.com/q?s=crm and . - Athenahealth, Inc. (ATHN) http://finance.yahoo.com/q?s=athn

Common characteristics include high gross margins, high subscription renewal rate and expanding top line revenue

PRODUCT SUMMARY

QED Connect's popular SaaS, Omni Manager, monitors, manages and reports on employee use of the Internet, e-mail, instant messaging, and other applications – anytime, anywhere in the world. It is an affordable way for organizations of any size or type to gain visibility, management and control of their entire network, employee activity and productivity.

. All computers, laptops and wireless devices can be monitored and managed at any time from any location in the world, solving the problems created by today's 'virtual' work environment of branch offices, remote workers and traveling employees. . Omni Manager offers all the essential security applications in one subscription-based service, including e-mail and Internet filtering and blocking, antivirus, instant messaging control, asset tracking, application usage monitoring, policy management and reporting. ROI is delivered in the form of improved employee productivity and cost and operational efficiencies.

RECENT DEVELOPMENTS

Multiple new contracts

. October 8, 2007: Two of Canada's prominent auto dealerships, Ottowa-based Otto's BMW Centre, the country's oldest BMW retailer, and the award-winning Otto's Subaru become the first Canadian companies to implement Omni Manager

. October 3, 2007: Contract with I/OMagic Corporation, a leading provider of digital entertainment and optical data storage products

. October 1, 2007: Contract with the North Central Arkansas Workforce Investment Area. The Workforce Investment Act (WIA) provides employment, training, and educational services to eligible individuals throughout the United States.

. September 26, 2007: Omni Manager has been nominated for the 2008 Global Product Excellence Awards. The awards are presented by the Info Security Products Guide, the world's leading publication on security-related products and technologies. The awards represent the best of the best in security technology

. September 18, 2007: Wallingford (CT) Public Schools has deployed the flagship service, Omni Manager, on over 250 computers

. September 12, 2007: Implemented Omni Manager hosted security services at the YWCA of Central Massachusetts, a nonprofit women's advocacy and resource center and local association of the YWCA of the USA. Omni Manager has been deployed to provide centralized security, management and control of IT assets across three different YWCA locations.

. September 10, 2007: Contract with the Living Classrooms Foundation to implement its flagship Omni Manager suite of hosted services. Omni Manager has been installed on PCs in the nonprofit organization's Carmelo Anthony Youth Development Center, a 22,000-square-foot facility partially funded by the NBA star to provide educational and social programs for community youth.

. September 6, 2007: Three-year contract with Connecticut-based Marrakech, Inc., a private nonprofit organization that provides residential, educational, and job placement services to people with disabilities.

Address: 2 Townsend West, Unit One, Nashua, NH 03063 Telephone: (603)881-3884, (FAX) (603) 881-3705 CEO: Tom Makmann, Chairman, CEO

Web Site: http://www.qedconnect.com/

State or other jurisdiction of incorporation or organization: NY Transfer Agent: Routh Stock Transfer, Investor contact: Sandy Moul, Tel: (949) 419-6177 info@qedconnect.com

MARKET GROWTH

Managed Services, also referred to as Software as a Service (SaaS), is expected to be one of the most dynamic growth sectors in the software support and security segments over the next five years. The combined markets for Managed Services, Internet security and outsourcing of e-mail filtering and anti-virus support is expected to grow from approximately $17B in 2005 to more than $25B in 2008.

. The global market for managed security services is expected to be $2.9B in 2006 growing to $3.7B in 2008. . The Yankee Group reports that the Internet Security market was $13B in 2005 while E-mail filtering expenditures are projected to grow from $1.1B in 2005 to $2.8B in 2008. Outsourcing of E-mail filtering and Anti Virus was $550M in 2005 and is estimated to be over $1B in 2008. In addition, businesses with fewer than 1,000 employees are a ripe market for the growing Web enabled services industry. Interactive collaboration and e-commerce will produce growth rates of up to 45 percent each year for the rest of the decade.

TARGET MARKET

> QED’s target market is companies with up to 500 employees (5,750,201 in the US alone) that typically lack technical IT staff, and are primarily serviced by third parties. Most of these companies do not have the time or technical resources to follow rapidly changing technology and compliance regulations. . Third party service and support is normal for these companies. Network Monitoring, Internet Security, and productivity tools have been priced out of their budget and from a technology context are just "blue sky" services. . They need and want a supplier who understands the SMB space to provide reliable managed services that solve their Network and Internet Security issues at an SMB (small business) price point.

The education sector is starting to also feel the effects from the proliferation of technology as both students and faculty members now have easy access to the Internet. The Children’s Internet Protection Act (CIPA) is a federal law requiring k-12 schools that receive funding support for Internet access or internal connections to have Internet filtering measures in place on school and library computers.

QED’s flagship offering, Omni Manager, crosses all vertical market boundaries to solve security pain points that exist in every organization, from K-12 schools to small businesses to corporate giants. It is engineered to address a wide range of market needs with a comprehensive product offering that exceeds existing internet security solutions.

Target Market Growth Drivers

. Many smaller firms lack the expertise and network capabilities to take advantage of advanced services and are turning to online applications as a quick, low-cost way to remain competitive. The more access to the Internet these companies require, the more exposed their networks are to outside threats.

. For the organization with less than 100 employees, the necessity for managed services is virtually required. Typically organizations with less than 100 employees do not have even one full time IT person.

. Frequently, they will have a handful of part time employees filling in sporadically, accompanied by the occasional visit by the local IT provider to fix problems, resolve network issues and help out with strategic upgrades. . And although a larger industry had been created out of this dynamic, the time has come for those IT providers to evolve and mature.

OVERALL MARKET GROWTH DRIVERS

> Over the past several years, companies of all sizes have experienced the tremendous value and efficiencies that advances in IT bring to their businesses . Remote work forces, sophisticated applications, storage and archiving of information, improved communications, e-business and many other critical services have been enabled by IT. . More specifically, today’s IT environment is built around a mobile computing architecture where most companies now have more laptop computers than desktops.

> PricewaterhouseCooper’s third annual "Global State of Information Security" study, conducted in 2005 in conjunction with CIO and CSO magazines, found that while companies are increasing their security budgets, they still lack sufficient resources to implement completely effective security policies and systems. The survey also found: . Security spending is going up as a percentage of overall IT budgets. . Organizations are initiating a variety of people-oriented security programs to combat security threats including employee training, Internet monitoring, and centralized security information management systems. . They are also implementing process-oriented programs such as business continuity/disaster recovery plans, security audits (34%), risk assessments, and network/system monitoring and analysis. . They are also investing in security technologies including firewalls and spyware/adware/spam detection tools. . In addition to the e-mail and security buying intentions uncovered by the PricewaterhouseCoopers’ survey, Datamonitor is also forecasting a significant increase in spending for email filtering solutions to combat spam and other security threats. . The research firm expects the worldwide e-mail filtering market (including appliances, software and service based revenues) to equal $2.87 Billion in 2008, . Representing a CAGR (compound annual growth rate) of 26 percent.

> THINK Strategies research shows that enterprises are becoming more receptive to managed e-mail and security services for the following reasons: . The sheer volume and magnitude of today’s email security threats are too great for enterprises to combat. . The sophistication of the e-mail security threats is beyond the skills of IT professionals. . The competitive pressures and budgetary constraints facing enterprises – large and small –preclude them from making sufficient investment in email security systems and staff.

> When it comes to e-mail alone, consider the facts: . 171 Billion messages per day in 2006 growing 331 Billion in 2009 . 1.4 billion e-mail boxes in 2006 growing to 2.2 Billion in 2009 . 90% of professionals are expected to carry mobile devices that will be capable of receiving e-mail by 2008 . 28 Billion Spam e-mails sent daily . 2.5 Billion Porn related Spam sent daily . 15-20% of all enterprise e-mail received daily is Spam . 1,000 employee enterprise receives 2.1 Million Spam e-mails annually . An average of 34 Spam e-mails are received per corporate user per day . 95% of phishing attacks use spoofed e-mail addresses . 90% of viruses are distributed by e-mail . 76% of virus attacks result in lost productivity

> It’s about prevention

. The primary goal is to catch technical problems before they hinder performance or, even worse, lead to network downtime.

A recent Gallup poll showed the average employee spends over 75 minutes per day dealing with non-business activity on office computers, such as spam, viruses and personal Internet surfing. That means a company with 500 employees stands to lose multi-millions annually in productivity.

. At the very least constant monitoring is required, and that is where technology becomes useful in one of the most meaningful ways imaginable. Remote monitoring and network management tools ensure constant vigilance and empower solution providers to make themselves positively indispensable to their customers.

PRODUCT STRATEGY

QED Connect, Inc. is an innovative Software-as-a-Service (SaaS) provider for the information security market designed especially to address today’s business environment and provide visibility, management and control to management and administrators right at their desktop.

The Omni Manager secures laptops/desktops and enforces policies in real time, regardless of whenever or wherever they connect to the organization’s network. The key features are:

. An ‘online’ web based service delivering comprehensive protection and policy enforcement to all laptops and desktops , regardless of their location or on or offline status

Ability to create, apply and enforce policy in real time regardless of network or location

Central control of all your desktops/laptops via a single online control center, accessible from any Internet connected computer

Easily deployed and simple to use, manage and administer

Comprehensive ‘real time’ web based reporting and auditing on ever user and hardwired or wireless machine on the network

No manual updating. All Anti Virus signatures and new versions of the service are updated directly, seamlessly and automatically

Plug and play - no hardware or equipment required; operates in conjunction with existing network infrastructure.

Control employee productivity losses caused by use of non-work related web sites and applications

Increase in organizational security and policy compliance

Reduction in IT administration and management time

Reduced operating and maintenance costs due to hosted platform

The e-mail filter acts as a ‘threat counteragent’, sitting between the Internet and the organization. Using an advanced combination of Anti Virus and overlaying filtering techniques and technologies, it eliminates email borne viruses, spam and threats before they reach the organization’s email systems. It is a fully scaleable platform ensures that smaller SME customers derive the same benefits as large enterprises.

Advances in security technologies combined with reduced bandwidth costs allow managed service providers to offer continuous IT network and Internet monitoring, to businesses with limited or no IT staff.

. QED’s product suite also reports all hardware and software changes by device, even remote based laptops, so change control and asset management can be implemented.

MARKETING & SALES PLAN

QED’s target customer base are the SMBs and DEOs with 100+ PC’s as well as regional school districts and nonprofit groups with 500 PC’s and above. QED utilizes an in-house telemarketing group and dedicated sales/support teams to focus on the various vertical markets. The primary method of marketing QED’s products and services is direct to the end user.

The secondary strategy is to work with regional Internet Service Providers (ISP), Managed Service Providers (MSP) and specialty VAR’s to offer QED services.

The initial focus is in the Northeast and selected areas across North America.

Since the products and services are web-enabled, the sales team can provide an online demo for the customer with the option of either doing a 30 day evaluation or of purchasing immediately. QED believes that the targeted customers will purchase solutions over the phone due to the functionality, low price point and the users’ limited time for IT related issues.

The sales efforts expand regionally and by adding additional vertical markets.

The company plans to be up to 30 tele-sales representatives by first quarter in 2008 to support the revenue plan.

Marketing will be web based to give the QED web site a high profile during web searches for Internet Security and email filtering related key words;.

Advertising on educational sites such as eschoolnews.com can generate 90,000 clicks through per month from the IT sector of education.

COMPETITION

Internet Security

Internet security and performance has become a significant part of today’s business environment, especially as the move to mobile computing and availability of Internet service continues to grow. Issues range from virus attacks and control of corporate assets to misuse of company information and employee productivity losses. The open operating environment of the Internet with its ease of access offers the opportunity for the user to be online at will. Firewalls and other approaches to managing this activity are limited and have little to no effect on the mobile computer. Most security products offer virus scanning with only the higher end, enterprise class solutions that provideadditional functionality such as policy management. Asset management is usually a separate package that must be installed and then monitored by an IT staff. Symantec is the leader in offering products for virus scanning but requires the individual or designated IT staff, to monitor the system. Newer players in this market like Surf Control, Trend Micro, F-Secure and Message Labs offer limited functionality; virus scanning and email filtering.

QED offers the next generation of internet security product – Software-as-a-Service. A comprehensive Internet security service which begins protection from the moment an Internet connection is detected. The service secures laptops/desktops and enforces policies in real time, regardless of whenever or wherever they connect to the web. Combining core functionality of Anti Virus, Web Filtering & Blocking, and Usage & Application Management with comprehensive reporting, QED enables the central application and enforcement of policies across geographic boundaries and time zones.

 

EndPoint Protection

X

Asset Mgt

X

X

Copyright Theft

X

Spyware

X

X

Employee Internet use

X

X

X

I/M Monitoring

X

X

X

Porn Content

X

X

X

X

X

X

Email Filtering

X

X

X

X

X

X

X

Anti Virus

X

X

X

X

X

X

X

QED Connect

McAfee

Symantec

SurfControl

T TrendMicro

F-Secure

MessageLab

POTENTIAL QED GROWTH & DRIVERS

. QED Connect, Inc.’s business model encompasses both direct sales and channel sales support. This provides the ability to grow rapidly with a minimum of financial and physical resources.

. The experienced management group has worked as a team over most of the last decade and has the experience to control a high growth environment.

. The business model assumes a monthly recurring revenue basis for both domestic and international customers. Contracts are annually, renewable on the anniversary date

. It is reasonable to assume that management will also make strategic acquisition to further broaden OED’s product line. > Valuation assumptions: . Top line revenue & growth: it appears based on the number of new contracts signed in September and through the first 10 days of October, that QED can generate significant top line revenue growth, and we can assume most of the revenue is recurring because it is subscription-based

. Gross margins: because QED is 100% Internet-based, we can assume that gross margins will be in the 75-85% range, which means that significant top line revenue growth can propel the company towards breakeven, at least, on an operating basis. Valuation

. QED appears to have a unique, fully featured (functional) set of software applications targeted to the small business market and the public/private education system.

. If it can indeed carve out a leadership role in its defined markets, then it is possible it can earn a relatively high valuation, perhaps on the order of …Salesforce.com (CRM), which has a market cap at $55 of $6.41 billion. For the quarter ended July 31, 2007 CRM generated revenue of $176 million and generated after-tax income of $3.7 million. Based on annualizing the quarterly results, CRM’s price-to-sales ratio is 9 and the P/E ratio is 433

…and AethenaHealth (ATHN), which has a market cap of $1.2 billion. For the six months ended June 30, 2007 ATHN generated sales of $46mm and a loss of $6.1mm. Based on annualizing ATHN’s six month revenue results, ATHN’s price-to-sales ratio is 13, which is the same order of magnitude as CRM’s Potential Market Capitalization . We believe there is a good chance that QED will have quarterly revenue in the range of $2mm for the quarter ending June 30, 2008 with 3rd quarter revenues of $3mm based on strong educational sales. . If that run rate becomes visible to investors, then it is reasonable to assume the price-to-sales ratio will be in the same range as CRM and ATHN, which is between 9 and 13 . To be conservative, if a price-to-sales ratio is assumed to be 10.5 (near the low end of the CRM/ATHN range) then potential, intermediate-term market capitalization is 10.5 times the potential June quarter run rate of $8mm run rate, or $84mm. . Assuming 44 million shares outstanding, then the potential price per share, given the above assumptions, may be in the range of $1.90

MANAGEMENT

QED benefits from a cohesive management team who has worked together for more than a decade. Collectively, these top executives have 60-plus years of hardware and software experience in the data storage and data integrity industries.

Thomas Makmann, Chairman & CEO

A 30-year technology industry veteran with start-up and early stage companies. Mr. Makmann has also held numerous senior management positions, including: President and CEO of Network Storage Solutions, Inc., President & COO of nStor Technologies Inc. (AMEX: NSO), VP and GM of Archive Corporation, and VP-Mobile Storage Products for Maxtor Corporation. Mr. Makmann holds a Bachelors of Science degree in Mechanical Engineering.

Roger Kirkland, Co-Founder, VP of Sales & Marketing

Has more than 25 years of executive-level sales and marketing experience, with such firms as VP of International Sales at Network Storage Solutions, Inc., Director of Sales and Marketing for Hardware Planning Services, and VP of Sales and Marketing for Rexon Corp. Throughout his career, Mr. Kirkland is credited with establishing distribution channels for U.S. companies seeking a global presence for the first time. Mr. Kirkland’s area of expertise includes Europe, Asia, South Africa, Japan and the Middle East.

Thomas Gruber, Acting CFO

. Has more than 30 years of financial and general management experience ranging from start-ups to Fortune 500 companies. Since January 2006, Mr. Gruber has been a partner in Sunny Creek Partners, Inc., a private equity investment group specializing in small-to mid-sized companies. Mr. Gruber’s former positions with public companies include President and CFO of nStor Technolgoies Inc. (AMEX: NSO), CFO of Western Digital (NYSE: WDC), and CFO of Wireless Xcessories (Nasdaq: WIRX). Mr. Gruber holds a Bachelor’s of Business Administration degree from Ohio University and a Master of Business Administration degree from Pepperdine University.

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