August 11, 1999 RECOMMENDATION: BUY
JAWS Technologies, Inc. (OTC BB: JAWZ)
Building a Leader in Information Security Solutions; Unique Data Encryption Product ?Statistically Unbreakable?; Compelling Valuation; Initiating With A BUY Recommendation
MARKET DATA:
Exchange Symbol JAWZ (OTC BB)
Price of Common Stock (8/10/99) $1.56
30-Day Average Trading Volume 134,900
Shares Outstanding 13.6 million
52-Week High/Low $4.25/$0.13
Website???????????www.jawstech.com NETD CORPORATE INFORMATION
Address 1013 17th Avenue SW
Calgary, Alberta, Canada T2T OA7
Telephone (403) 508-5056
Chairman & CEO Robert Kubbernus
CFO Riaz Mamdani
COO Tej Minhas
SUMMARY INVESTMENT CONSIDERATIONS
JAWS Technologies, Inc. (JAWZ) is an emerging leader in the provision of information security solutions for businesses and individuals. In addition to comprehensive information security audit and consulting services for businesses, JAWZ is currently marketing the JAWS 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 four times stronger than the industry standard for ?strong encryption? and is ?statistically unbreakable.? The Company 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. We believe that the Company?s products are superior to anything commercially available in terms of strength and ease-of-use, and that JAWZ is positioned to become the industry leader in the data security and encryption field. We are initiating coverage of JAWZ with a BUY rating, and recommend purchase by investors tolerant of the risks associated with small-cap and micro-cap equity investments.
I. Very Large, Fragmented Market ? Field not dominated by any one player
 We view the market for information security software and services as virtually the entire universe of computer users. In 1998, over 41 million computers were sold in the US alone. We believe that the trend in the computer industry toward information sharing and open computing should result in increased opportunities for information security breaches and demonstrate the need for strong data protection applications.
 A 1998 FBI/Computer Security Institute study found that 64% of companies polled reported system security breaches ? a 16% increase over 1997. Financial losses from these breaches were valued at over $136 million. The study also found that computer security staff levels rose 49% last year and should increase 15% this year.
 Although no one product or company controls the market for data security and encryption software, two competitors, RSA and PGP, currently lead the market. We believe that JAWZ?s data encryption software is stronger by several orders of magnitude as well as being easier to use, and thus in a position to gain dominance in the marketplace.
II. Strongest Encryption Software Commercially Available ? Fast, Easy to Use, One-Click Encryption
 The industry standard for ?strong? encryption is 128-bit encryption (i.e. the standard encryption strength for secure Internet transmissions using Netscape Navigator). Competing products PGP and RSA use 1,024-bit encryption, while JAWZ?s software uses 4,096-bit encryption. JAWZ?s email-encryption software integrates easily into most commonly used email software, including Microsoft Outlook and Outlook Express, Eudora Light and Pro, Netscape Messenger, Pegasus and Calypso.
 We found the product to be fast and easy to use. By clicking one button on the computer screen, a user can encrypt a one-megabyte file (the size of a digital image or a book-length text file) in 1.15 seconds.
III. Valuation Section ? Approaching Milestones
 The market capitalization of JAWZ is approximately $20 million. We do not believe that this adequately reflects the commercial potential of its products, or the opportunities presented by a market growing as rapidly as the data protection market.
 A number of additional new products are scheduled for release in the near future. JAWZ is also actively seeking acquisitions of products, technologies and security integration and consulting companies.
We are initiating coverage of JAWZ with a BUY recommendation with this abbreviated research report. We plan to publish a full-length report, with a detailed analysis of JAWZ, its products and the competitive environment (including a detailed financial model), in the near future.
RISK CONSIDERATIONS
This section of the document is provided to remind potential investors to undertake a prudent level of due diligence prior to making an investment in the securities of JAWS Technologies, Inc. For a complete description of risks and uncertainties to JAWZ?s business, see the ?Risk Factors? section in JAWZ?s SEC filings, which can be accessed directly from the SEC Edgar filings at www.SEC.gov on the Internet. Other potential risks include:
 Market risk: Investors should consider technical risks common to many small-cap stock investments, including liquidity levels, small float, risk of dilution, dependence upon key personnel, dependence upon single products or technologies, and the strength of competitors that may be larger, better capitalized and hold dominant market positions.
 Business risk: JAWZ has limited experience in the development, marketing, and the distribution of its data protection technology. Many of its products are in the early stages of commercialization. Additionally, JAWZ intends to distribute its products and services through other companies. There can be no assurance that these distribution agreements will be completed, or that the market will accept any products currently marketed or under development.
 Competitive risk: The market for data protection and encryption products can be characterized as intense. Many companies are currently developing, or evaluating, technologies that could compete directly with the Company?s technologies. Many of these potentially competitive companies could be larger, better positioned and financially stronger than JAWZ.
FOR ADDITIONAL INFORMATION
Contact SmallCaps Online LLC ? 212-554-4158
SOURCES FOR ADDITIONAL INFORMATION
The following are website addresses offering related information, and links to other sources of information.
www.jawstech.com JAWS Technologies? corporate web site.
www.SmallCapsOnline.com SmallCaps Online?s site for company information and research
www.sec.gov US Securities and Exchange Commission, with links to EDGAR filings
The information in this report has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation by SmallCapsOnline LLC for the purchase or sale of any securities. SmallCaps Online LLC or its affiliates has performed investment banking, consulting or other services for Jaws Technologies and may solicit investment banking, consulting or other business from, any company mentioned in this report. SmallCaps Online LLC or its affiliates or persons associated with SmallCaps Online LLC or its affiliates may at anytime be long or short any of the securities referred to herein and may make purchases or sales thereof while this report is in circulation or posted on the SmallCaps Online LLC website at www.SmallCapsOnline.com. This material or any portion thereof, may not be reproduced without prior permission from SmallCaps Online LLC. SmallCaps Online LLC is not responsible for the contents of this document that is intended for electronic transmission and could be thus subjected to tampering or alteration. Copyright ¸ 1999 by SmallCaps Online LLC. All rights reserved. |
