Stockprowler’s pick this week is…

JAWZ, Inc. (NasdaqNM: JAWZ)

• Corporate Web Site: http://www.jawstech.com
• Shares Outstanding: 27.6 million
• Public Float: 16 million
• Insider Ownership: 42%
• Institutional Ownership: less than 1%
• Market Capitalization: $48.4 million
• Closing Price Friday: $1.75

     It wasn’t that long ago that information was safe and secure, tucked away on a disc in your PC. Then along came the Internet and the idea of global connectivity. The notion of being able to access data anywhere, stored on any computer anywhere in the world, instantly, is awe-inspiring. But universal connectivity comes with a price… information/data theft. A recent FBI / Computer Security Institute study found that 64% of the companies it surveyed reported system security breaches. The challenge to maintain the integrity of the Internet, to keep information and communications secure, is of paramount importance as we begin this new millennium.

     This week’s pick, Toronto based JAWZ, Inc., is an emerging leader in providing information security solutions for both business and individual PC users. JAWZ is currently marketing its L5 Data Encryption software program, the strongest data encryption software package commercially available today, and XMail, an email encryption product. The company’s encryption programs are efficient, easy-to-use, and utilize an encryption algorithm that is stronger than the industry standard for "strong encryption" by several orders of magnitude and is "statistically unbreakable." The two most dominant data encryption programs currently on the market are Pretty Good Privacy (PGP) from Network Associates, and SecurPC from RSA Data Security (RSA). PGP is one of the most widely distributed programs for encrypting data and email and it uses up to 2,048 bit encryption. RSA utilizes a different algorithm to generate a key that is anywhere from 128 to 4,096 bits, depending on configuration. JAWZ’s L5 software uses a proprietary 4,096 bit encryption algorithm and the company is now completing work on a 16,384 bit encryption algorithm. Every one-bit increase in bit length represents a doubling of strength of the encryption algorithm, making JAWZ’s software vastly stronger than PGP, and as strong as RSA’s strongest configuration. 

JAWZ is selling its L5 Encryption product and enabling free downloads of its XMail program over the Internet while developing relationships with Value Added Resellers (VARs) and outside-software developers. JAWZ is also negotiating with microchip manufacturers to embed its security software directly into microchips, thereby allowing JAWZ to participate as an OEM manufacturer. Additionally, the company’s ability to function as an Original Equipment Manufacturer gives it the ability to embed its technology in microchips, wireless communication devices, smart cards and so forth. External software developers can install the L5 encryption software and use it as an additional selling feature to enhance their own products. Stockprowler expects the commercial potential for JAWZ data security and encryption products to be enormous.  According to recent studies, approximately 3.4 trillion email messages were delivered in the US in 1998. Corporate e-mail users numbered 66 million in the US in 1998 and this number is expected to increase to 130 million by the end of 2000. Analysts forecast that the worldwide market for information security products will reach $17 billion by 2003.

     On October 31, 2000, JAWZ, Inc. announced that it has been selected by Verizon Communications (NYSE: VZ) to provide a comprehensive array of information security services to Verizon’s large business customers. “Through this agreement, we will ensure that our customers receive the most comprehensive and cost-effective risk assessment, vulnerability analysis and information security solutions available,” said Rocco Youmans, director, network security services, Verizon Enterprise Solutions Group. “The end-goal for Verizon and JAWZ is to support a secure environment for e-business transactions.” Verizon Communications was formed by the merger of Bell Atlantic and GTE, and is one of the world's leading providers of communications services. Verizon provides services to more than 40 percent of the US population. A Fortune 10 company with more than 260,000 employees and more than $60 billion in 1999 revenues, Verizon's global presence extends to 40 countries in the Americas, Europe, Asia and the Pacific. It is the opinion of Stockprowler.com that the Verizon deal with JAWZ represents an impressive endorsement of JAWZ’s proprietary technology. The magnitude of the deal will raise JAWZ’s profile and establish the company as a global player in information security. JAWZ expects to achieve revenue of about US $22 million in the first year and US $40 million in the second year from the deal with Verizon. The agreement comes on the heels of a security contract with CU-Connection Ltd. last week which provides on-line access to shared cash networks for credit unions in Canada. CU-Connection provides access to Automated Teller Machines and Point-of-Sale networks for 62 financial institutions, with combined assets of $5-Billion. JAWZ will implement a secure electronic payment transaction processing system… a deal that is valued at US $12-million over five years.

     On August 8, JAWZ, Inc. announced second quarter 2000 revenues of US $2.2 million, a 241% increase over first quarter 2000 revenues of $651,892. In addition, JAWZ achieved listing on the Nasdaq National Markets during the second quarter, and on June 9, 2000, JAWZ was awarded “most outstanding security product “ at Internet World 2000 in Sydney, Australia. The recent Verizon and CU-Connect deals validate JAWZ’s technology and business model.  Furthermore, as bandwidth and international connectivity proliferate, the “always on” connectivity will pose a whole new set of security challenges for corporations and will likely trigger an explosive growth phase for information security vendors such as JAWZ. It is the opinion of Stockprowler.com that at present trading levels JAWZ offers an incredible investment opportunity. JAWZ closed Friday at 1 3/4 on profit taking after surging as high as 2 9/16 earlier in the week.