Edgecast Path

July 29, 2013

Michael Pachter Rohit Chopra (213) 688-4474 (212) 668-9871 [email protected] [email protected]

PRISM … Progress Report for Internet and Social Media

In This Issue: EdgeCast, Path

EdgeCast

 Content distribution network estimated to be fifth largest in the industry, with Twitter, Yahoo and Hulu for customers.  Doubling revenue each year, with approximately $100 million annual run rate.

 Rapidly growing industry and solid customer base should provide a tailwind for growth.

Path

 Alternative social network with no advertising, small networks and simple design.

 Saw accelerated user growth after adding direct messaging feature.

 Some signs indicate difficulty maintaining user growth and ensuring privacy.

THE INFORMATION HEREIN IS ONLY FOR ACCREDITED INVESTORS AS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT OF 1933 OR INSTITUTIONAL INVESTORS

WEDBUSHPRIVATE COMPANY STRATEGIES GROUP Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see page 10 of this report for analyst certification and important disclosure information.

EdgeCast

EdgeCast provides software and services in the developing market of content distribution networks (CDNs). CDNs are a crucial element in the efficient operation of Internet services, acting as channels for online content publishers and managing electronic storage and routing of delay-sensitive material to ensure speedy and reliable delivery of the content to end-users. For example, if a news publication in New York City creates a video, EdgeCast can host the video on multiple servers throughout the U.S., relieving the publisher’s server of distribution duty, keeping the content closer to viewers on the West Coast. This improves the availability of the video, and speeds loading when users request it.

Accelerating delivery by a fraction of a second or improving reliability by a percentage point may seem trivial, but such improvements are crucial to web-based companies. Google (GOOG) found that a half-second delay in search response equaled a 20% decrease in ad revenue; and Yahoo (YHOO) found that improving response time by 0.4 seconds yielded a 9% increase in traffic (via Techweb.com). The issue will become more critical as more content is consumed online, more data is stored in the cloud, and content files become larger from higher definition video and sound. Content distribution networks incorporate both hardware and software. Data centers and networks hold and distribute the content, while software manages the packaging and routing of the data. EdgeCast focuses on the software aspect, contracting with storage providers and telecommunications carriers to handle hardware. The firm claims its software allows its network to operate 25% faster than competing CDNs. It also offers analytic services and additional solutions for gaming platforms, e-commerce websites and software distribution.

EdgeCast was founded in 2006 in Santa Monica, CA by Alex Kazerani, James Segil and Phil Goldsmith. According to an interview with SoCalTech.com, Segil says the company focuses on clients with “mission-critical” web requirements; companies that are primarily Internet-driven. These customers include Twitter, Yahoo, Pinterest, LinkedIn (LNKD) and Hulu. Other large accounts include Mercedes-Benz, JetBlue (JBLU), Kellogg’s (K) and Sony (SNE). According to Segil, the founders’ experience in web hosting has allowed them to scale the business, while maintaining high performance. He also claims that customer service is superior, A simplified example of a content distribution network. allowing for faster ramp-up and greater flexibility for clients’ IT departments. EdgeCast has been attracting clients quickly, increasing customer count from 1,000 at year-end 2009 to over 6,000 currently. Employee headcount has expanded as well, from 100 in 2011 to 300 now.

Leadership Alex Kazerani co-founded EdgeCast and is now Chairman and CEO. He previously co-founded KnowledgBase and HostPro, both web and database hosting companies that he eventually sold. He is also a partner in several venture capital funds and a board member at Web.com (WWWW). President James Segil handles business development and often acts as the spokesman for the company. Prior to EdgeCast, he was President and COO at KnowledgeBase, then became Vice President of Business Development at Talisma Corporation when it acquired KnowledgeBase. Previously, he was the COO of Virtualis, and then became COO of Allegiance Telecom (ALGX) when it merged with Virtualis. Phil Goldsmith is the Chief Revenue Officer, and worked with Mr. Kazerani at Talisma, KnowledgeBase and HostPro. The CTO is Jay Sataka, who co-founded IP3 Networks. Mr. Sakata was also the network architect at HostPro and Internet service provider iWay Broadband.

Market

The market for content delivery networks is heavily concentrated—In April 2012 it was estimated that 85% of the market is controlled by the top three firms: Akamai (AKAM), Limelight Networks (LLNW) and Level 3 Communications (LVLT) (according to RCR Wireless). The value of the global CDN market was estimated by BCC Research to be $3.6 billion in 2012, with $1.9 billion coming from North America and $1.1 billion from the Asia-Pacific region. The global market is projected to grow rapidly (13.9% annually) to $6.9 billion by 2017. Asia-Pacific is expected to grow faster than North America, with 14% CAGR vs. 13.65% for North American (see chart below).

CDN Market

2012 1.1 1.9 0.6

2017 2.1 3.6 1.2

0 1 2 3 4 5 6 7 8 Billions of Dollars

Asia-Pacific North America Other

Source: BCC Research, Wedbush

Much of this growth is expected to come from delivery of video, which is expected to increase in volume by more than 30% over the five-year period to 2017, fueled by consumers’ growing appetite for in-home streaming and mobile video. As this growth has become apparent, other companies have begun to enter the market, including large firms that offer similar products and services. Amazon has extended its cloud storage capabilities to content distribution, and Microsoft now offers CDN services under its Azure brand. Rackspace and Google have also entered the space. Dell entered the market in April of 2012 by partnering with EdgeCast, with the former providing hardware and EdgeCast contributing software.

EdgeCast is believed to be the fourth largest company in the space, behind the three largest services and CDNetworks, a South Korean company traded publicly on the Korean stock exchange. Publicly traded Akamai, which had sales of $1.47 billion over the past four quarters, is the pioneer of the industry. It was founded in 1998 by a group including an MIT professor and graduate student; the two developed algorithms to dynamically route online content and relieve Internet congestion. Over the past five years, Akamai’s revenue has almost doubled, and it now employs 3,000 people. Limelight Networks was founded in 2001; it is also publicly traded, but unlike Akamai, it is not profitable. It earned $181 million over the previous four quarters (up 47% over five years) and has approximately 500 employees. Level 3 is a multi-billion dollar corporation that provides multiple networking products and services. Although it does not typically break out revenue from content distribution, the company disclosed in April 2012 that it expected global CDN sales to be approximately $600 million for fiscal year 2012 (via RCR Wireless).

Financials

EdgeCast has disclosed approximate growth rates through press releases over the last several years. (Dollars in Millions) Akamai Limelight EdgeCast According to these announcements, the company roughly Revenue $1,470 $181 $100 doubled revenue in 2011, and doubled again in 2012. It also claimed that 2012 was its third consecutive year of Employees 3,000 500 300 profitability. In a July 2013 interview with The Wall Street Rev/Emp $0.49 $0.36 $0.33 Journal, EdgeCast President Segil disclosed the company’s revenue was at a $100 million annual run rate. According to an article from Seeking Alpha, the company Est. Sales NTM $1,664 $194 $140 $200 can expect a run rate of $140 million for 2014, suggesting Enterprise Value $ 7,499 $120 $1,912 $6,830 a growth rate of 40%. The table at right shows how these numbers stack up against publicly traded, competition. EV/Sales NTM 4.51 0.62 13.66 34.15 Because Limelight is not profitable, the most appropriate Growth Rate 13.2% 7.2% 40.0% 100% pure-play comparison is Akamai. The company currently carries an enterprise value of $7.5 billion with sales EV/S NTM/G 34.1 8.6 estimated to reach $1.66 billion over the next 12 months Source: Thomson Reuters, Company data, Wedbush (NTM), implying a growth rate of 13.2%. Taking the EV/sales NTM ratio and dividing by the growth rate, we calculate that Akamai carries a growth adjusted EV/sales NTM ratio of 34.1. Applying that ratio to a range of revenue and growth rates, we project an enterprise value between $1.9 and $6.83 billion.

Funding EdgeCast received $4 million in Series A capital in its first funding round in June of 2007. Investors included Mark Amin and Jon Feltheimer. Six months later, the company received an additional $6 million from Steamboat Ventures in a Series B round. In April 2010, Menlo Ventures contributed $10 million in Series C funding; and in July of this year, EdgeCast received $54 million from existing

investors Menlo Ventures and Steamboat, as well as Performance Equity Management. Total venture capital now stands at $74 million. Company President Segil has indicated that an initial public offering is on the table, but gave no timeline (via SoCalTech.com).

Path

While Facebook (FB) can be equated to a town newspaper, Path refers to itself as a family dinner table. The social network was developed to be a more intimate and private experience compared to rivals in the space. Launched in 2010, the San Francisco-based service was originally designed as a mobile application used to share pictures with a limited number of friends and family. Users were limited to 50 connections in order to restrict networks to established relationships with family and close friends. The app was a reaction to the growing trend of “oversharing” that tends to take place on Facebook and Twitter when networks grow from friends to acquaintances. Path believed that in the larger social networks, users become inundated with posts and updates that bear little meaning because the bonds between users are weak. The application underwent a change in November of 2011 with the release of version 2.0. The interface took on an appearance similar to Facebook’s Timeline, but simpler, cleaner and more visually appealing. The connection limit was raised to 150, and users were given more ways to distribute information. To avoid creating a feeling of intrusion, the firm elected not to use advertising as a revenue source, instead selling camera filters within the app for $.99. The redesign was appreciated (according to GigaOm), and total customers reached 1 million (according to TechCrunch).

In February 2012, Path was accused of uploading user address books without permission. The company would eventually pay an $800,000 fine to the FTC for the transgression. Path continued to add features in 2012, including content search and the ability to import posts and pictures from Facebook, Instagram and Foursquare; in March 2013, the company released version 3.0, which included direct messaging and virtual goods. This was the firm’s first serious attempt to monetize the app, offering stickers (stylized emoticons) in packs of 10 or 12 with a price tag of $1.99 per pack. According to Morin, the company took in more revenue from this stream in the first 24 hours of availability than the company had earned in its previous existence (via TechCrunch). User base had grown to 6 million, and the company’s new CFO was helping to develop a possible revenue stream from premium subscriptions. Path’s user interface

Popularity User growth began to accelerate, reaching 10 million by the end of April of this year, but Path was once again criticized for its treatment of users’ contacts. New customers began to notice that, upon registration, their family and friends began receiving unsolicited text messages from the company. In response, Facebook restricted Path’s API, disallowing the service to access user contacts, although Path users could still post to Facebook from their Path app (via TechCrunch). Path management claimed that the “spamming” was unintentional, and could be disabled during the registration process. The company’s user base continued to grow rapidly, with CEO Morin claiming in April that the firm was adding 1 million users per week (via the Wall Street Journal); by May 6, 2013, Path total users stood at 12 million. 14,000,000 3.5% User growth since that time has been unclear; the company has not released 12,000,000 3.0% further data. Using app usage figures 10,000,000 2.5% from mobile app researchers Onavo and Appmtr.com, we estimated Path’s 8,000,000 2.0% user numbers for the months of June 6,000,000 1.5% and July (see chart at right). Appmtr.com measures the active users 4,000,000 1.0% of various apps within the Facebook 2,000,000 0.5% platform, while Onavo gives user information for U.S. iPhone apps. 0 0.0% Because Path includes the ability to post to Facebook (as well as login using Facebook credentials), and because Path’s apps are mobile only, these data sets provide relevant Total Users MAU FB iOS % Users proxies in order to estimate the user base. Both services show an increase Source: Onavo, Appmtr.com, Company data, Wedbush in Path usage in March and May of 5

2013, consistent with the expansion disclosed by Path management. However, Onavo indicates a drop-off in monthly users in June (its latest available data), while Appmtr shows a similar loss in June and an additional loss in July. By finding the numerical relationship between previously disclosed user numbers and the corresponding usage data from these sources, we can apply the relationship to usage for June and July and extrapolate an approximate user count. Our calculations suggest a user base of approximately 11.2 million monthly average users in June and 8 million for July.

There are multiple reasons why this estimated drop-off may have occurred. First, Facebook’s restriction of the “Find Friends” feature may have caused the fall in usage of Path’s Facebook app; however, the fall did not occur until June, a month after Facebook’s restriction (beginning of May). Also, this would not explain the drop in iPhone usage shown by Onavo. Another possible explanation was set forth by Sam Biddle and Nitasha Tiku of ValleyWag. They report that Path initiated a large advertising campaign on Facebook at the beginning of April, and that this drove the acceleration of customer growth. They point to a chart (also supplied by Onavo) that shows a spike in Path’s share of voice (portion of ads appearing on a page) on Facebook that corresponds to an increase in iPhone app popularity (see chart below).

Source: Onavo, ValleyWag

Path has not disclosed user engagement figures since March of this year, when Morin disclosed that about half of their users were active monthly, with approximately 12.5% active daily. In May, the CEO told AllThingsD that engagement was higher than ever. Recently, Path struck a deal with Sprint to include a one-touch app download on certain popular Android phones. A similar deal was struck with Sony to include Path pre-loaded onto Xperia phones sold in the Asia-Pacific region. The firm has also expanded its reach to wearable computing by integrating with Nike (NKE) Fuel, and developing a Path app for Google Glass.

Leadership CEO and co-founder Dave Morin was an early developer of Facebook, working on the company’s platform that allowed developers to connect third applications (like Path) to the social network. He left the firm in 2010 after four years in order to create Path. Prior to Facebook, Mr. Morin spent two years at Apple (AAPL) in product and marketing. He currently sits on the board of Eventbrite, and is an investor in several other technology companies. Shawn Fanning, who designed and co-founded the music sharing service Napster in 1998, co-founded Path after leaving Electronic Arts (EA). Co-founder Dustin Mierau is also the Chief Designer; Mierau created a Mac client for Napster, later selling the software to the company. CFO Kim Jabal came to Path in February of 2013, with the task of enhancing the company’s monetization strategy. She spent a year as Vice President of Finance at consumer electronics company Lytro, after spending eight years at Google. There she held positions in investor relations and online sales, eventually becoming the director of engineering finance.

Market

As CEO Morin explained in an interview at TechCrunch Disrupt SF, Path competes against email, texting and instant messaging more than it competes against social networks like Facebook and Twitter. Path limits a user’s network to 150 of their closest friends and family, which would be the people that one communicates with via private messages. The firm’s revenue model agrees with this idea: Path doesn’t compete for Facebook and Twitter’s ad dollars; it competes for dollars spent on messaging features. This places Path against texting and direct messaging applications such as WhatsApp and Viber, as well as newcomers like Snapchat. Path’s global influence puts it in competition with Asian messaging apps such as Line and Tencent’s QQ.

The company’s main source of revenue comes from virtual goods, which users can purchase in the app’s “Shop.” The primary product is electronic “stickers,” which customers can place in messages. Stickers are large, stylized versions of emoticons (e.g., smileys or hearts) used to quickly convey attitudes or emotions. The graphics – also called “emoji” – have become increasingly popular throughout the world after gaining a foothold in Japan. The difficulty of typing Japanese words on smartphones, combined with the prevalence of anime in Japanese culture, enhanced the popularity of using cartoon-like images to quickly convey a message. The trend grew throughout Asia and has since spread to rest of the world. Facebook introduced stickers to the web version of its messaging service in July of this year. South Korean Internet company Naver, owner of the messaging app Line, is often attributed to introducing stickers to Japan, and earned $17 million in revenue from the products in the first quarter of 2013 (according to The Next Web). Stickers usually come in “packs” of 10 to 12. Path charges $1.99 for each pack, and introduces new offerings on a monthly basis. The company’s stickers tend to be higher-quality than most: they often incorporate branded characters, or are designed by professional artists. While most competitors use virtual goods as their main revenue source, WhatsApp charges users $.99 per year after their first year of use; Snapchat and Viber do not yet have monetization strategies in place.

Path has proven to be popular in Asian countries, especially in Indonesia, where Path.com ranks number 332 in website popularity (according to Alex.com); this is due to the particularly abusive use of Facebook in Indonesia, where the social network is used to aggressively sell products. Path also saw growth in Latin America during the recent expansion in users. This global presence is a positive for Path; Internet use in general, and mobile connection in particular, is expected to grow in developing markets in the coming years.

Financials

Path has not released any revenue data, and does not disclose how many of its users have been monetized. Naver was able to translate approximately 150 million total Line users into $17 million in one quarter, for an annualized run-rate of $68 million, or $0.45 per user each year. Applying this rate to Path’s 12 million users yields annual revenue of $5.44 million, or $3.63 million if Path’s user base has shrunk to 8 million. Neither Path nor Line currently discloses engagement rates or average spending per user, so this comparison is indirect.

Funding Path was seeded with $2.5 million from a long list of angel investors, including Index Ventures, Founders Fund, Dustin Moskovitz and Ashton Kutcher. Shortly after launch, in February of 2011, the company received an additional $8.5 million in a round led by Kleiner Perkins Caufield & Byers and existing investor Index Ventures. According to an article by TechCrunch, around the time of this funding, Path management turned down a buy-out offer from Google of over $100 million. The founders instead accepted the Series A funding which valued the company at approximately $25 million. The next round of funding came in April of 2012 when Kleiner Perkins and Index Ventures again contributed, with support from Redpoint Ventures, Greylock Partners, Richard Branson and others. The $30 million investment valued the company at approximately $250 million (according to an article by AllThingsD). Reports suggest that Path is currently in the process of securing additional funds. Although previous reports suggested management was seeking up to $100 million at $1 billion valuation, a more recent article indicates the company is looking to raise approximately $50 million at a total firm value of $500 million (TechCrunch).

Last Week’s News  Dropbox has acquired application developer Endorse for an undisclosed sum. Endorse recently shut down its service, which offered cash rewards to users for brand loyalty. The Endorse team includes a number of talented developers, including Steve Carpenter, founder of Cake Financial [sold to Etrade (ETFC) in 2010]. However, according to TechCrunch, the acquisition is not solely for gaining talent.

 ModCloth (EBAY), an indie-fashion retail website, announced that it is releasing an iPhone app, and also disclosed some financial numbers. The company, which has about $48 million in venture funding, claims 2012 revenue of $100 million, with a current growth rate of 40% per year. By comparison, Fab.com had approximately $120 million in sales last year, and was valued at $1 billion in its most recent funding round. (According to TechCrunch)

 Flipboard announced a version of their popular mobile app for full web browsers. Originally designed only for mobile devices, the service gives users the ability to easily create visually appealing e-magazines by aggregating news and social network feeds. The addition of a web version will allow the firm to further integrate full-page ads. Flipboard currently has approximately 75 million registered users, with 25 million of those coming on since March of this year. (According to TechCrunch)

 Leap Motion has officially released its touchless motion controller. The device allows users to control a PC or Mac using hand gestures through a small device loaded with optical sensors. Pre-orders are shipping now, and device-specific apps are now available in Leap’s app store (called Airspace), including Google Earth (GOOG), the New York Times (NYT) and Autotrader.com. Reviews of the controller have been mixed, citing that the device is fast and accurate, but needs innovative applications in order for it to add value (according to TechCrunch). The Leap Motion Controller is approximately the size of a large USB memory stick, and sells for $80.

 DataStax has raised $45 million in a Series D round of funding, bringing total venture capital for the Big Data analysis firm to almost $109 million. The new cash will be used to further penetrate global markets, as well as continue development of the company’s solutions, which are based on Apache Cassandra NoSQL. According to CEO Billy Bosworth, the funding is part of a build-up to an IPO, although no timeframe for such an event was given. DataStax’s customers include eBay (EBAY), Constant Contact (CTCT), Adobe (ADBE) and Netflix (NFLX). (According to TechCrunch)

 Reputation.com, the online reputation management firm, has acquired password management start-up MySocialCloud. The buy-out will help Reputation.com to build out a “data vault” service to help users protect and control their personal information. Half of MySocialCloud’s 10-person team will stay on with Reputation.com, which is making its third acquisition this year, and its second in two months. MySocialCloud had previously been backed by Richard Branson, among others. (According to TechCrunch)

 Foursquare (FB) has opened up its targeted ad platform to small business. The service considers a user’s current location, as well as their past activity, to decide which ads to present to the individual at the time of check-in. Foursquare has attracted large retailers over the past few months by demonstrating that 78% of users who search for things on Foursquare make a purchase at a resulting vendor. That pay-off will now be available to small and medium sized businesses. (According to VentureBeat)

 Twitter (FB) will expand its TV ad-targeting service (called Amplify), as part of its effort to reach $1 billion in revenue by the end of this year (according to an article by Bloomberg). Because Twitter is very popular during large TV events, the social network has capitalized by offering television advertisers the chance to promote Twitter messages to people watching the events. Testing showed that these targeted viewers were 58% more likely to purchase from the advertised brands.

About The Wedbush Private Company Strategies Group

The Private Company Strategies Group of Wedbush Securities is a leader in providing research and trading to the rapidly growing industry of privately traded securities, with an emphasis on companies in the social media space. We assist companies in raising growth capital through traditional private placements and provide liquidity options for existing and former employees through tailored selling programs. We also work with venture capital, private equity and hedge fund investors to help them adjust their holdings in some of the most dynamic companies. We endeavor to understand the underlying industries of the private companies we trade, in order to help our clients make informed decisions about their investments. We provide discreet customized solutions for our institutional and accredited private clients through a team of professionals located in New York, Los Angeles and San Francisco.

Contact Wedbush Securities Private Company Strategies Group:

Michael Pachter Kevin Cohen Managing Director, Equity Research Director of Trading, Private Company Strategies Group Head of Research, Private Company Strategies Group (213) 688-8089 | [email protected] (213) 688-4474 | [email protected] Twitter: @michaelpachter

Sheri Kaiserman Mark Benson Head of Equities Director of Research (213) 688-4483 | [email protected] (213) 688-4435 | [email protected]

@WedbushPCoS Wedbush PSG

http://linkd.in/RxlmjN https://twitter.com/WedbushPCoS

About Wedbush Securities Founded in 1955, Wedbush Securities is a leading investment firm that provides brokerage, clearing, investment banking, equity research, public finance, fixed income sales and trading, and asset management to individual, institutional and issuing clients. Wedbush currently ranks as a top liquidity provider for the NASDAQ, and was ranked as the #1 stock picker for 2010, 2011, and again for the 1st half of 2012 by Barron’s. Headquartered in Los Angeles, with over 100 offices nationwide, Wedbush focuses on relentless service, client financial safety, continuity, and advanced technology. (www.wedbush.com)

Covered Companies Mentioned in this Report (priced intra-day July 29, 2013)

COMPANY TICKER RATING PRICE PRICE TARGET Facebook FB Outperform $34.90 $39.00 Nike NKE Neutral $62.61 $58.00 Google GOOG Neutral $889.94 $860.00 Electronic Arts EA Outperform $25.60 $30.00 LinkedIn LNKD Neutral $205.99 $195.00 Netflix NFLX Underperform $247.34 $80.00 eBay EBAY Outperform $52.03 $64.00

Important Disclosures

The information contained herein is intended for accredited investors as defined in Rule 501 of Regulation D under the Securities Act of 1933 or institutional investors.

Wedbush Securities Wedbush does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The analysts receive compensation that is based upon various factors including WS’ total revenues, a portion of which are generated by WS’ investment banking activities.

Analyst Certification I, Michael Pachter, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not, directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained in this report.

Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ213.pdf

Investment Rating System: Outperform: Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months. Neutral: Expect the total return of the stock to perform in-line with the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months. Underperform: Expect the total return of the stock to underperform relative to the median total return of the analyst’s (or the analyst’s team) coverage universe over the next 6-12 months.

The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the other stocks in the analyst’s coverage universe (or the analyst’s team coverage).*

Rating Distribution Investment Banking Relationships (as of June 30, 2013) (as of June 30, 2013) Outperform:54% Outperform:15% Neutral: 41% Neutral: 1% Underperform: 5% Underperform: 0%

The Distribution of Ratings is required by FINRA rules; however, WS’ stock ratings of Outperform, Neutral, and Underperform most closely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS’ stock ratings are on a relative basis.

Wedbush Equity Research Disclosures as of July 29, 2013

Company Disclosure Facebook 1 Nike 1 Google 1 Electronic Arts 1 LinkedIn 1 Netflix 1 eBay 1

Research Disclosure Legend 1. WS makes a market in the securities of the subject company. 2. WS managed a public offering of securities within the last 12 months. 3. WS co-managed a public offering of securities within the last 12 months. 4. WS has received compensation for investment banking services within the last 12 months. 5. WS provided investment banking services within the last 12 months. 6. WS is acting as financial advisor. 7. WS expects to receive compensation for investment banking services within the next 3 months. 8. WS provided non-investment banking securities-related services within the past 12 months. 9. WS has received compensation for products and services other than investment banking services within the past 12 months. 10. The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the common stocks. 11. WS or one of its affiliates beneficially own 1% or more of the common equity securities. 12. The analyst maintains Contingent Value Rights that enables him/her to receive payments of cash upon the company’s meeting certain clinical and regulatory milestones.

Private securities may involve a high degree of risk and are intended for sophisticated investors who are capable of understanding and assuming the risks involved.

Private securities may have a high level of volatility. High volatility investments may experience sudden and large drop in their value causing losses that may equal your original investment.

Private securities are illiquid and may not be readily realizable and it may be difficult to sell or realize those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed.

Investors should obtain advice from their own financial advisor and only make investment decisions on the basis of the investor’s own objectives, experience, risk tolerance, and resources.

The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a representation by this corporation, nor is any recommendation made herein based on any privileged information.

This information is not intended to be or should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned herein.

This firm, Wedbush Securities, its affiliates, officers, employees, members of their families, or any one or more of them, and its discretionary and advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales thereof in the open market or otherwise.

The information and expressions of opinion contained herein are subject to change without further notice.

The herein mentioned securities may be sold to or bought from customers on a principal basis by this firm.

Any reference to past performance is not a guarantee of future results.

Supporting documentation will be furnished upon request for any claims, comparisons, recommendation, statistics or other technical data. Additional information with respect to the information contained herein may be obtained upon request.

Applicable disclosure information is also available upon request by contacting the Business Conduct Department at (213) 688-8090. You may also submit a written request to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017.

RESEARCH DEPT. • (213) 688-4505 • www.wedbush.com EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076 CORPORATE HEADQUARTERS (213) 688-8000