Omnicity Corp

Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

05/08/09

OMCY daily

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720 N. Range Line Road Carmel, IN. 46032 Phone: (317) 818-0023 Fax: (317) 818-0029 Email: ir@omnicitycorp.com Website: www.omnicitycorp.com

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Company Overview MARKET DATA Symbols OMCY Exchanges OTCBB Current Price $0.75 Price target $1.30 Rating Speculative Buy Outstanding Shares 34.52 Million Market Cap. $25.89 Million Avg Vol (3m): 17,068

Source: Yahoo Finance, Analyst Estimates

Omnicity Corp (OTCBB: OMCY) is the Midwest’s leading Broadband service provider. The Company provides affordable, high-speed fixed and wireless Internet access and advanced communications solutions to rural communities, businesses and residential users. At present, OMCY offers its services in unserved and underserved rural markets of the Midwest. It is already covering over half of the State of Indiana. OMCY’s vision is to be the first Broadband service provider to expand its network across rural America.

OMCY’s 5,500 subscribers include homes, businesses, government agencies and schools. Opportunities to expand its subscriber base are significant; approximately 85% of the line-of-sight households within the Company’s Broadband markets have limited access to high-speed Internet service. OMCY is partnering with Rural Electric Membership Cooperatives (REMCs) and Rural Telephone Companies (RTCs) to provide a comprehensive broadband solution. About 80% of the nation’s counties rely on the services of Rural Electric Membership Cooperatives, which represent the largest electric utility network in the United States with over 40 million member-owners. Over the next five years, OMCY plans to grow its customer base to 170,000 subscribers and increase EBITDA to a $57 million range. It is also likely that, as the subscriber base grows to exceed 25,000 subscribers, OMCY will emerge as an attractive acquisition candidate to a larger competitor interested in acquiring the Company’s revenues and profits, customer base and coverage area. OMCY plans to extend its services into 100 new rural markets over the next 18 months. The Company already covers over half of Indiana’s markets and plans to continue its Midwestern expansion in 2009. Nationwide expansion is targeted in 2010.

In March 2009, the Company announced the acquisition of NDWave, Indiana’s fastest-growing Wireless Internet Service Provider (WISP). The acquisition

Omnicity Corp (OTCBB: OMCY)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

added 1,450 customers to OMCY’s subscriber base in rural north central Indiana and brought coverage to another 34 rural Midwestern counties. Also in March, the Company acquired Cue Connex of Hartford City, Indiana. Through this acquisition, OMCY adds fiber and carrier-class wireless infrastructure to its municipal network as well as new, value-added municipal services such as automatic meter reading for water and utility companies and first responder networks for police, fire and EMS. On March 31, 2009, OMCY acquired Indiana’s fastest WISP, Forepoint Networks. This acquisition represented the third of several the Company plans to close before the end of May, 2009. The Forepoint acquisition adds another 1,000 subscribers and 23 towers to OMCY’s network. Some 20 of the 23 new towers are located in OMCY’s Tipmont REMC partner region.

In early April, OMCY acquired the business and network infrastructure of Peru, Indiana-based North Central Communications. This acquisition provides the Company with additional expertise in advanced meter reading technology, over 650 new customers, 25 new tower locations and an additional 1,800 square miles of coverage area. In addition, OMCY announced a partnership with Craigville Telephone Company that will bring additional fiber optic connections to OMCY’s carrier-grade wireless network and extend its network coverage in north eastern Indiana. In addition, the Company and its alliance partner, Agility Ventures, LLC, recently added another $1.0 million to an existing Master Lease facility. This capital infusion enables OMCY to expand its broadband network in rural markets and accelerate its acquisition strategy. The Company now has over 200 towers across half of the State of Indiana.

In March 2009, President Obama signed a $7.2 billion rural broadband stimulus program, which is intended to expand broadband Internet access in underserved and rural areas. The stimulus bill provides funding for grants, loans and loan guarantees, primarily for areas that lack broadband or are underserved. Prior to the bill being signed into law, OMCY executives traveled to Capitol Hill to meet with key members of the Indiana congressional delegation and make them aware of the Company’s mission of bringing broadband to rural America. They met with top policy aides for U.S. Senators Richard Lugar and Evan Bayh, and Congressmen Mike Pence and Dan Burton, to communicate their views on critical policy elements.

Investment Highlights Consolidator of rural broadband market OMCY provides fixed and wireless broadband Internet access to unserved and underserved rural communities in the Midwest. The Company’s vision is to be the first Broadband service provider to expand its network across rural America and to emerge as a lead consolidator of rural market Broadband. To achieve this vision, OMCY is acquiring and/or building operations in small to mid-size markets characterized by large numbers of households not effectively served by traditional hard-wire broadband service.

Huge market opportunity OMCY’s target markets have terrain and other conditions better suited to wireless transmissions and not attractive to traditional hard-wire operators. The Company estimates that at least 40 million rural and small market homes, businesses, government agencies and schools have inadequate high-speed Internet service and represent a large growth opportunity. Approximately 85% of the line-of-sight households within the Company’s target markets have limited access to high-speed Internet service.

Omnicity Omnicity Corp Corp (OTCBB: (OTCBB: OMCY) OMCY)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

Development of a nationwide wireless network to deliver low-cost broadband OMCY plans to develop a nationwide wireless network and deliver high-speed Internet access to rural subscribers more cost- effectively than traditional cable or fiber optic models. Traditional hard-wire systems are generally much more expensive to build than wireless networks. Reduced network development costs means lower infrastructure costs per subscriber for wireless operators as compared to comparably-sized traditional hardwire fiber-optic systems. Operating costs for wireless systems are also generally lower than comparable costs for hardwire systems. This is because of reduced network maintenance costs, capital costs and related depreciation. In addition, OMCY improves operating efficiencies by using centralized billing and management systems for its acquired businesses.

Competitive advantages over traditional hard-wire services OMCY believes it can deliver service to customers within three days of the initial service request. This is much faster than competitors, who require as much as two weeks for provisioning and installation. In addition, the Company’s technicians are installing the service directly in the customer’s home. Cable and DSL services require the customer to self-install routers and other equipment sent through the mail. OMCY’s services are also priced competitively with satellite services. In addition, compared to its primary competitors, OMCY provides, at no additional charge, SPAM and virus scanning of email, personal webhosting space and free technical service.

Aggressive acquisition strategy The Company’s business model has already proven successful in rural areas of Indiana. Going forward, OMCY plans to extend its geographic reach through strategic partnerships with Rural Electric Municipal Cooperatives (REMCs), rural telephone companies and local government agencies. Since October 2008, OMCY has entered into asset purchase agreements with four wireless operators: NDWave, Inc; Forepoint Networks Inc; Mooreland Wireless and North Central Communications, Inc. As a result of these acquisitions, the Company has now more than 5,500 subscribers and 200 tower locations covering half of the State of Indiana. In addition, through a recently announced partnership with Craigville Telco, the Company increases its network coverage in north eastern Indiana. OMCY plans to expand into 100 additional rural markets over the next 18 months.

External financing accelerates acquisition program OMCY and Agility Ventures, LLC recently closed an agreement that adds $1.0 million to the existing Master Lease facility, providing OMCY with funding to accelerate its acquisition program. Agility Ventures specializes in financing and consulting to companies in the wireless broadband market and is an excellent partner for OMCY because of its expertise, experience and established industry relationships.

Omnicity Corp (OTCBB: OMCY)

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report March May 11th, 4th, 2009

Positive cash flow and strong revenue growth outlook OMCY expects to, accelerate positive cash flow and earnings and achieve growth in annualized revenues to approximately $9 million by March 31, 2010. Over the next five years, the Company anticipates growing its customer base to 170,000 subscribers, improving operating margins and increasing EBITDA to a $57 million range.

These projections are based upon basic Broadband connections only and do not include the planned additions of Voice-over-Internet Protocol (“VOIP”) and Internet Protocol High-Def TV (“IPTV”). With the addition of these two services, the Company will be delivering a “triple play” much like its competitors are delivering in cities through hard-wire systems.

Business Model The Company develops and operates wireless broadband systems serving residential, commercial and government agency customers in rural Midwestern markets. It offers high-speed Internet solutions for rural communities not effectively served by wire and/or fiber optic networks. OMCY recently added 17 additional tower locations within its existing markets, acquired new tower locations through Forepoint and other acquisitions and plans to extend its services into 100 additional rural markets over the next 18 months. OMCY currently operates its network through 200 tower locations and cover over half of the State of Indiana.

The Company implements its Wireless Internet Service Provider (WISP) business model through three distinct growth strategies: Rural Electric Membership Cooperatives (REMCs) partnerships; strategic acquisitions; and through rural telephone companies and municipalities.

1. OMCY partners with REMCs, which are located in 80% of the nation’s counties and represent the largest electric utility network in the United States, with more than 40 million member-owners. REMCs serve more than 603,000 households and businesses in Indiana. OMCY has also formed an exclusive partnership with Service Concepts, a rural electric cooperative service organization owned by 29 Indiana REMCs and serving some 300 of the 830 REMCs across the U.S. OMCY intends to capitalize on its REMC relationships to reach rural homes, schools, hospitals and commercial businesses. In addition, the Company plans to leverage knowledge of new construction projects gained through its REMC relationships to market its services in advance of construction to builders and new homeowners.

2. The Company is acquiring WISPs in markets where it believes it can achieve positive cash flow and operating income quickly after consolidating the business operations of its targets. . Since October 2008, OMCY has entered into asset purchase agreements with four wireless operators: NDWave, Forepoint Networks, Mooreland Wireless and North Central Communications. On average, each acquisition brings the Company 650 new subscribers, $33,000 in incremental monthly revenues and $400,000 in new wireless assets and tower locations. These acquisitions have also added coverage of approximately 79,000 additional homes, some 35,000 of which are not currently served or are underserved by other Broadband providers.

3. OMCY partners with municipalities and other governmental entities to provide municipal broadband services such as meter reading and mobile broadband for emergency vehicles, police and fire. The Company’s 2009 acquisition of Cue Connex positions OMCY as a fourth utility (alongside heat, power and water) serving China America Omnicity Corp (OTCBB: Holdings OMCY) Inc. (OTCBB: CAAH)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

Indiana municipalities with broadband services.

Typical Wireless Internet Service Provider (WISP) model

Source: Company presentation

Deployment of Services OMCY deploys its network by installing next-generation collation equipment on cellular and commercial towers, municipally or privately-owned structures, and tall silos or rooftops. The Company uses standardsbased wireless equipment and license-exempt spectrum. At present, OMCY offers three levels of service to its residential customers and has secured the rights to 700MHz service in many of its markets, enabling OMCY to soon begin delivering VOIP services. The Company has also migrated to the next generation of 900MHz and 2.4GHz equipment, allowing for significant cost savings and performance enhancements.

In addition, a 3.65GHz nationwide license acquired with the NDWave purchase presents an unparalleled opportunity for OMCY to capture market territory and broadband customers by providing all of the advantages of WiMAX such as superior quality of service (QoS), enhanced service flow management, adaptive modulation and network scalability.

Corporate strategy The Company’s vision is to be the first Broadband service provider to expand its network across rural America to become a nationwide provider of high-speed wireless Internet services to rural and underserved communities. By leveraging its relationships with REMCs, rural telephone companies and local government agencies, OMCY may emerge as a lead consolidator in the rural Broadband market, focusing initially on Indiana and the Midwest, and eventually expanding nationwide.

OMCY is accelerating its expansion through ongoing acquisitions of smaller regional WISPs, continued organic growth and partnerships with REMCs, rural telephone companies and local government agencies. In addition to extending its reach geographically, OMCY plans to expand its service offerings and provide a “bundled” “triple Omnicity Corp (OTCBB: OMCY)

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report May 11th, 2009

play” broadband solution. The bundling of broadband services, including Internet, voice, and video, in partnership with rural electric and/or municipal services creates a unique opportunity for subscriber base growth and increased revenues per subscriber.

Overall, the Company’s corporate strategy encompasses: • Acquisition and operation of wireless Internet systems in markets in which the Company can achieve positive cash flow; • Use of a centralized billing and management system to improve operating efficiencies of the consolidated businesses; • Partnering with REMCs and local government agencies for marketing; • Partnering with regional and national Telephone companies for the delivery of voice services; • Partnering with local government agencies to provide essential services (mobile internet for EMT, fire, and police) and new utility applications (automated meter reading); • Negotiation of satellite services resale agreements; • Expansion of service offerings to include full “triple play” broadband: Internet, VOIP, and IPTV; • Use of low cost industry standard wireless equipment, allowing for very efficient use of capital and low operating cost per subscriber; • Migration to advanced wireless standards such as WiMAX. Marketing strategy The Company targets geographic areas where a relatively large percentage of households are not effectively serviced or passed by traditional hard-wire Internet providers.

Through its partnerships with REMCs, the Company gains access to advertising in REMC newsletters and bill stuffers provided by REMC marketing groups. OMCY and its REMC partners plan to co-brand the Company’s wireless Broadband services in newsletters, kiosks, billboards, service introduction inserts, print advertising and radio spots. REMCs have detailed information on their members which facilitates direct outreach to each member and more effective marketing than impersonal mass mailings.

The Company organizes direct mail campaigns in its targeted markets to drive leads, improve efficiency and reduce costs. A door hanger notifying the home owner that he/she qualifies for high-speed Broadband services has been developed. The door hanger contains contact information (including website address) for Omnicity that makes it easy for customers to learn about OMCY services. When a potential customer calls, each service level is known in advance: • If the customer qualifies for service, an order is taken and installation scheduled; • If the customer may qualify for service, a site survey is scheduled; • If the customer does not currently qualify for service, the address is noted for future expansion planning.

Overall, the Company’s marketing strategy aims to: Omnicity Corp (OTCBB: OMCY)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

• Pre-sell to the area through direct mail; • Attract an REMC partner in the area; • Reach out to the local hospital for partnering, as typically hospitals are the largest Internet user in the rural community, and often times the largest employer; • Offer marketing/agent agreements with local organizations that are vocal. Sometimes this is a church, school, PTA or scout troop; • Reach out to local businesses to offer services at a discount to their employees through the HR department; • Begin local advertising through billboards, post cards and press releases; • Reach out to local government agencies for a variety of services such as meter reading, emergency services and Web hosting; • Encourage referrals from existing customers and attract new customers via “word of mouth.”

Services The Company offers a variety of packages that allow customers to select the services which best meet their specific Internet requirements and budget. OMCY also offers specific services for municipalities, including: First Responder services. Broadband provides police, fire, emergency services, and city personnel with an integrated wireless system through which responders can receive information instantly via laptops in their vehicles.

Police can check tag numbers against stolen car databases, receive DMV information, and find outstanding warrants instantly. Fire departments can pull up blue prints before entering a burning building. Locations where hazardous chemicals are stored can be pinpointed and emergency personnel can obtain detailed directions that save time when responding to emergencies at rural addresses. Broadband first responder services have the advantage of being less restrictive and more affordable to operate than cellular first responder systems.

Automatic meter reading. OMCY offers turnkey solutions for utility company customers who need to replace or upgrade their existing system (whether it is water, electric, or gas) with a completely wireless system providing real-time data. The Company’s research indicates that the typical rural municipality loses, on average, 20% of potential water revenues because of water meters that are deteriorating and losing accuracy. A typical electric company may lose 2%-3% of revenues for the same reason. OMCY provides new meters with AMI technology or, when practical, retrofits many of the newer existing meters.

Remote video. Remote video is possible at a crisp, clear 30 frames per second. Video can be mounted in emergency vehicles and remotely viewed from other locations. Police officer safety is enhanced when in-car video cameras monitor traffic stops in real-time, as opposed to outdated VCR-based monitoring. Emergency vehicles may also be equipped with special systems that allow responders to remain connected to the network even when they are some distance from their vehicle.

Industry Outlook The communications industry is the nervous system of today’s economy and its revenue contribution was estimated at $1.2 trillion in 2006. In the past, the structure of the communication industry was based on the tight integration of critical communication functionality. Services were provided by a very limited set of players, with the core of the network supplying this tightly integrated set of features, and the edge (i.e. the users) consuming them. Today, packet-based Internet increasingly decouples the network through its design, service and delivery functionality.

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report May 11th, 2009

In 2007, the worldwide telecommunications market grew to $1.8 trillion and was expected to expand 7.6% in 2008 to $2.0 trillion. From a regional perspective, North America remains the largest telecommunications market. North American telecom revenues were forecast to reach $511.6 billion in 2008, a 4.5% increase from 2007.

Technologies such as Voice-over-Internet Protocol (VoIP) and broadband video are key drivers of telecommunications industry growth.

Internet usage The continued rollout of Broadband and next-generation, high-speed wireless networks stimulates mobile markets and creates a major driver of industry growth. The continual increase in the number of Internet users also expands the customer base for IP-based services.

The number of Internet users already exceeds one billion worldwide. As of June 30, 2008, there were 1.46 billion Internet users worldwide, according to Internet World Stats.

Internet Usage Population, Mn ( 2008 Est. ) Europe North America World’s total

800.4 337.2 6,676.1

% Pop. of World 11.9 % 5.0 % 100.0 %

Internet Users, Latest Data, Mn

Penetration (% Population)

384.6 248.2 1,463.6

48.1 % 73.6 % 21.9 %

% Usage User of Growth World ( 2000-2008 ) 26.3 % 17.0 % 100.0 %

266.0 % 129.6 % 305.5

Source: www.internetworldstats.com/stats.htm

Broadband usage Broadband is often called high-speed Internet because of its high rate of data transmission. The number of broadband connections is increasing rapidly as many users require higher speeds for peer-to-peer (P2P) files sharing systems, downloading music and games, video on demand and VoIP calls.

Point Topic predicts the total number of broadband lines in the 40 largest broadband countries will grow from 393 million at year-end 2008 to 635 million by 2013. Broadband in less developed markets is forecast to grow from 16 million to 48 million lines over the same period. The number of broadband lines globally is projected to increase 10.8% annually to 683 million lines by 2013. This is down from 27.7% annual growth between 2004 and 2008, but still a significant expansion rate. One major reason for the slowdown in growth is that most of the richer countries are approaching saturation with broadband; new customers are becoming harder to find and sign up. At the same time, poorer countries such as China and India have gone through the initial rapid growth phase and are now growing steadily rather than exponentially1.

According to Gartner Group, consumer broadband connections penetrated 18% of households worldwide in 2007, and by 2012, broadband will be found in 25% of households. Five countries exceeded 60% broadband penetration in 2007 and this number is expected to grow to 17 countries by 2012.2 The dominant fixed broadband technology is DSL, which controls 66% of the market3.

1. http://www.itu.int/ITU-D/ict/newslog/680+Million+Broadband+Lines+In+2013.aspx 2. http://biz.yahoo.com/bw/080724/20080724005341.html?.v=1 3. www.budde.com.au/buddereports/4566/Regional_-_Broadband_Market_-_Asia_Pacific_-_2008.aspx?r=51

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

Looking five years ahead, China is forecast to emerge as the largest broadband country, with 153 million broadband lines versus 117 million lines in the U.S. In fact, China is expected to surpass the U.S. in 2009. India and Brazil are also expected to enter the top 10, with Russia positioned as number 11.

WISP industry overview In the United States today, several thousand WISPs operate in the licensed and unlicensed spectrum. These operators are predominately using unlicensed 900MHz and 2.4GHz for the transmission of services. WISPs mainly serve rural and smaller markets where cable and digital subscriber lines are not available, or provide dialup speeds only. Worldwide interoperability for microwave access or WiMAX, which is a telecommunications technology that enables wireless transmission of data using a variety of transmission modes, is expected to become a mainstream technology in the near future, and facilitate mobile data transmission on a large commercial scale, thus increasing the utility of such networks in rural environments.

Most WISPs in the United States are small companies with less than 2,000 subscribers. OMCY estimates that less than 3% of WISPs have more than 2,000 subscribers. Of these, most are focused on residential customers and have located their transmission facilities on a variety of vertical assets, including tall buildings, schools, grain elevators and towers. The Company believes many of these smaller WISPs may be attractive acquisition candidates and ripe for consolidation since they lack the necessary resources for further developing their existing networks and subscriber bases. OMCY estimates the rural and small town market includes some 40 million homes, businesses, government agencies and schools nationwide.

The installed base of mobile devices (mobile phones, iPhones, Blackberries, Palms, etc.) is large and growing. The proliferation of wireless broadband and the evolution of handset technologies enhance the mobile experience and increase the relevance and opportunities for mobile commerce and advertising. Wireless subscriber penetration in the U.S. already exceeds 90%.

USA Telecoms, Wireless, Broadband and Forecasts predicts wireless revenues will continue to enjoy strong growth in 2009, following growth of nearly 50% in 2008, underpinned by robust wireless data revenue growth. In early 2009, wireless data revenues are expected to account for approximately 25% of total wireless service revenues, up from 18% in 2007. Significantly, the majority of wireless data revenues are now being generated by non-messaging applications and services such as music downloads, mobile TV, video blogs and Internet-accessed entertainment services4.

Online activity The average active U.S. Web surfer went online 58 times during the month of June in 2008, according to Nielsen Online5. While online, the average Web user accessed 107 domains and viewed about 2,373 pages. Other statistics for U.S. Internet usage for June 2008 were: • • • •

Duration of web page viewed, 0:00:53; PC time per person, 65:58:; Active digital media universe, 164 million; Current digital media universe (estimate), 223.1 million.

4. http://www.reuters.com/article/pressRelease/idUS219853+05-Feb-2009+BW20090205 5. www.internetretailer.com/dailyNews.asp?id=27105

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report May 11th, 2009

According to the Online Publisher Organization (OPA) Internet Activity Index, in the last four year the bulk of consumer online activity has shifted away from communications in favor of content. Internet users are spending nearly half their online time viewing, up 37% from just four years ago and nearly as much time as is spent on communications and commerce combined. The increase in content’s share has been fairly steady in the last several years, growing 13% annually from 2005 to 2007. More content and programs are moving to IP platforms as an alternate or sole means of distribution.

Summary of OPA Internet Activity Index 50%

47%

45%

47%

40% 35% 30%

33% 34%

25% 20%

16%

15% 10%

3%

5% 0%

2003

15%

5%

2007

Content

Search

Commerce

Communications

Source: www.marketingcharts.com/interactive/users-online-time-spent-mostly-on-content-not-communications-commerce-1256/

OPA attributes this shift to several factors, including an increase in the volume of content online, the transition of traditionally offline media activities to the Web, and continued broadband adoption. This latter factor has contributed to an increase in overall time spent online (as opposed to share of time spent) across all four categories: content, search, commerce, and communications.

Financial Outlook and Valuation OMCY plans to become the premier consolidator of rural market Broadband service in the United States by delivering high- speed Internet access to rural subscribers.

Since its inception in 2003, the Company has grown to become the Midwest’s largest fixed and wireless Internet Service Provider (WISP). Management plans to accelerate the Company’s growth through acquisitions of smaller regional WISPs and continue organic growth in 2009. OMCY is aggressively acquiring WISPs in rural and small markets where management believes the Company can quickly achieve positive cash flow and operating income.

The Company has already entered into asset purchase agreements with NDWave, Forepoint Networks, Mooreland Wireless and North Central Communications. Each acquisition gives the Company on average 650 new subscribers, $33,000 in incremental monthly revenues and $400,000 in new assets and tower infrastructures.

These acquisitions also add coverage of approximately 79,000 additional homes. As a result of these acquisitions, the Company has already increased its subscriber base to more than 5,500 customers.

Through acquisitions and organic growth, OMCY expects to achieve positive cash flow and earnings and record annualized revenues of $9 million by March 31, 2010. Over the next five years, the Company targets growth in its customer base to 170,000 subscribers, increasing margins and growing revenues to nearly $87 million and EBITDA to around $57 million.

Omnicity Corp (OTCBB: OMCY)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

Revenue and EBITDA Growth Targets ($ millions)

Source: Management Projectionss

The Company will likely require significant external financing to implement its acquisition strategy. In March 2009, OMCY expanded its Master Lease financing facility with Agility Ventures, providing $1.0 million in additional capital for the acquisition program.

Going forward, the Company plans to use a combination of both debt and equity financing to fund its growth and future acquisitions. At March 31, 2009 OMCY had 33,087,007 shares issued and outstanding. Future equity financing will likely increase the share count and dilute the ownership of existing shareholders.

Comparative analysis We based our valuation on comparative analysis, selecting companies that provide wireless and mobile Internet access services as OMCY’s valuation peers.

Peer comparison Company name 23-Mar-09

Ticker Symbol

Price $

Market Cap. $ Mn

EarthLink Inc. BT Group plc Level 3 Communications Inc. Qwest Communications International BCE, Inc. Clearwire Corporation Median

ELNK BT LVLT Q BCE CLWR

7.26 12.40 1.04 3.55 21.54 5.58

787 9,600 1,700 6,070 16,920 4,040

Omnicity Corp

OMCY

0.75

25.8

P/E

P/S

TTM

2010E

4.0 5.0 n/m 9.0 26 n/m 11.0

11.0 6.5 n/m 12.0 10.0 n/m 9.8

TTM 0.9 0.3 0.4 0.5 1.0 2.2 0.9

2010E 1.2 0.3 0.3 0.5 1.0 0.9 0.7

Source: Yahoo Finance

Omnicity Corp (OTCBB: OMCY)

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report May 11th, 2009

The peer group companies currently trade at forward Price/Earnings multiples averaging around 9.8 times earnings. We believe OMCY warrants a comparable valuation because of its niche focus on rural markets, rapidly growing subscriber base and cost savings opportunities. We also think the Company will emerge as an attractive acquisition target for a larger competitor interested in acquiring OMCY’s revenues, subscriber base and coverage area. We value OMCY at a 8.0 times forward multiple to projected EBITDA, which we are using as a proxy for earnings, and obtain a $1.30 price target, based on our assumption that equity sales will increase shares outstanding to 40 million in 2010.

We are initiating coverage of OMCY with a Speculative Buy Rating and a $1.30 price target. However, we strongly advise prospective investors to consider the risk factors mentioned below since the Company faces many challenges in achieving its subscriber base and EBITDA growth goals.

Risks Limited operating history OMCY has only recently emerged as a consolidator in the WISP segment and has an extremely limited operating history, which makes it difficult to evaluate the Company’s strategy and business prospects. The risks and difficulties faced by the Company include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having a shorter period for measuring the effectiveness of OMCY’s business strategies as compared to companies with longer operating histories.

Lack of revenues and negative operating cash flows Since its inception, the Company has reported modest revenues, net losses and negative operating cash flows.

While management targets robust revenue and EBITDA growth, there is no assurance that the Company can achieve these targets.

Need for additional financing The Company will require substantial additional capital to pursue its acquisition strategy and commence a promotional campaign to drive subscriber growth. Accumulated losses and limited tangible assets may make it difficult for OMCY to secure additional financing on acceptable terms. We estimate that the Company will need to raise approximately $1.0 million in equity or debt capital to operate its business for one year.

Competitive pressure The market for wireless and mobile internet access services is dominated by large wireless telecommunications carriers such as AT&T Wireless, Sprint and Verizon Wireless, and includes well-funded start-ups such as ClearWire. Other competitors specialize in “hotspot” services such as Boingo and wandering Wi-Fi. Competitive pricing pressures and the superior resources available to more established players may make it difficult for OMCY to compete and slow the Company’s expansion.

Omnicity Corp (OTCBB: OMCY)

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

Management Team Mr. Beltzhoover develops and oversees the implementation and achievement of business objectives, proDick Beltzhoover vides leadership, strategic direction and vision to OMCY. He was the first investor in OMCY and brings President & Chief Executive more than 35 years’ business and corporate venturing experience to the Company. Mr. Belthoover formerly Officer, Director served as COO and as a board member to National Vulcanized Fibre. He also founded and served as presi-

dent of Insul Reps, a business which represents manufacturers in the electronic and electro-mechanical markets. Mr. Beltzhoover grew sales to $40 million and directed Insul Reps expansion. He was also instrumental in securing funding for and helping build Indy Connection into an $8 million in annual sales business which was ultimately sold to Carey Limousine for $12 million. Other businesses he founded include Midwest Rail, Prestige Magazine, Hunt Graphics, and Digital Arts, all of which were sold to private companies. Mr. Beltzhoover holds a Bachelor of Science degree in Mechanical Engineering from Penn State University.

Greg Jarman Chief Operating Officer, Director

Mr. Jarman serves as COO and manages OMCY’s day-to-day operations while providing leadership, strategic direction and vision. Mr. Jarman most recently served as president of RushDSL, a rural broadband services provider. He also served as chief technology Officer of Q-media, a network services and managed services provider, and chief technology officer and a board member of Netisun LLC, where he directed Netisun’s technical services group and managed network infrastructure. Mr. Jarman was a founder and executive of Indiana Communications & Systems, a rural business ISP and managed service providers acquired by Netisun LLC. He has 25 years of technical experience and has consulted with Northrop, The Associated Group, United Student Aid Funds, Cinergy, Sperry, Unisys, and EDS. Mr. Jarman received his AS in Computer Information Services from Indiana Central University.

Don Prest Chief Financial Officer, Director

Mr. Prest leads the SEC financial reporting process for OMCY and the implementation of the overall financing plan. Mr. Prest has been a U.S. and Canadian public company assurance partner for 17 years at a large regional PCAOB registered accounting firm in Canada, where his career began 26 years ago. Mr. Prest has been an assurance partner to over 150 U.S. public companies. He retired from this position at year-end 2008 to focus on OMCY. Mr. Prest was a partner of FBP Capital Corp for six years where he leveraged his international tax and assurance practice and contacts to assist FBP’s clients in becoming public companies. He also served as chief financial officer for Power Air Corporation for three years. Power Air is a public fuel cell company. Mr. Prest began his career in 1983 after graduating from BCIT with a degree in Financial Management. Mr. Prest received his Canadian CA designation in 1991 and his U.S. CPA designation in 1997.

Bob Evans Vice President of Acquisitions

Mr. Evans graduated Magna Cum Laude from Indiana University School of Law in 1986 after majoring in Accounting at the Indiana University School of Business, from which he graduated in 1983. Mr. Evans worked for the Indianapolis law firms of Bingham Summers Welsh & Spilman and Kroger Gardis & Regas where his practice was focused primarily in the areas of mergers and acquisitions and securities regulation.

He has extensive experience in asset acquisitions and SEC compliance work. Mr. Evans also has significant experience in leadership and operations management, working for small to medium-sized businesses as well as heading the field operations for the 2000 census in Chula Vista, California.

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Analyst: Analyst:Lisa Victor Springer, Sula, Ph.D. CFA Initial Report May 11th, 2009

David Bradford Vice President Corporate Development, Director

Mr. Bradford assists senior officers of OMCY in the design and development of OMCY’s long-term strategic plan. His responsibilities include advising management on acquisitions, operations, and financial matters, and ensuring their most effective synthesis to the maximization of OMCY’s strategic and operating plans.

He works as a consultant to OMCY through International Corporate Resources Group, an international investment banking services firm, where he serves as senior analyst. Mr. Bradford has devoted the majority of his senior management career to the telecommunications industry. From 1977 through 1987 he held executive positions at the Chicago Tribune’s broadcast and cable television divisions. His positions included vice president and general manager for Tribune Cable Communications, vice president of operations for WGN Electronic Systems Company, and director of strategic planning for Tribune Cable and subsidiaries.

After leaving the Tribune companies Mr. Bradford served as president of Empire Communications and Bradford Communications, both rural cable television multi-system operators. Mr. Bradford subsequently served as president of National Telsat, a rural wireless television and data provider. He also currently serves on the board of directors of KX2 Performance Group, Inc., a North Carolina-based NASCAR motorsports marketing firm. Mr. Bradford brings thirty years of successful subscriber-based telecommunications operating experience to the OMCY team as well as participation and oversight of numerous debt and equity financings, acquisitions, and restructurings.

David Weddell Vice President, Sales and Marketing

Mr. Weddell manages business relationships with Rural Electric Membership Cooperative groups (REMCs) and large clients. His business career spans 28 years. In 1996, he worked with GTE Wireless Data based in Tampa, Florida and led the team that brought mobility to the credit card industry. In 2003, he became North American sales director for Supernova Systems, Inc., an Indiana-based WISP. Mr. Weddell was responsible for implementing the Virtual WISP program for Supernova Systems and created partnerships with Verizon Wireless, Lightyear Network Solutions, Sprint, DISH Network, DIRECTV and Wild Blue Satellite Internet.

In 2007 Mr. Weddell founded and became president of Cue Connex, LLC. Mr. Weddell earned a Bachelor of Science degree from Indiana State University.

William Herdrich Director

Mr. Herdrich is a Rushville, Indiana native and has been involved in finance in the oil and gas industry for forty years. He has a deep understanding of Midwest rural markets, having been a retailer and wholesaler in the petroleum industry and actively participating in numerous leadership roles on regional and national boards. Mr. Herdrich has assisted in the creation of several firms including businesses in finance, environmental services and real estate development.

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Analyst: Lisa Springer, CFA Initial Report May 11th, 2009

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Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www. finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Lisa Springer, CFA, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Lisa Springer, MBA, CFA - Senior Analyst Lisa serves Beacon Research Partners as a research analyst. She brings to the company over 15 years experience in equity research and investment marketing. Prior to joining Beacon, Lisa worked as an equity analyst for an independent research provider. She has also held positions as investor relations officer for a NYSE-listed company and director of financial analysis for a large consulting firm. Lisa earned an MBA from the University of Chicago and is a Chartered Financial Analyst (CFA).

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