ubject: SPECIAL REPORT - INITIATING COVERAGE OF EZE
Bulletin # JUN99-01
ONCE YOU'VE READ THE HEADLINES, COME TO AGORA FOR THE NEWS
SPECIAL REPORT - INITIATING COVERAGE ON Ezenet Corp.
SYMBOL: EZE on Alberta Stock Exchange
Good morning to you all. The last time we initiated coverage on a new company with such a comprehensive report, we wrote about Sideware Systems (SYD.VSE) in February of 1998. The success of that story is as great as it was rare. Quite simply, despite our focus on large-cap companies, we have continued to search for another small-cap company that could meet and exceed all AGORA standards. The fact that it has taken AGORA 16 months to bring you another one is a testament to our focus on quality rather than quantity.
Please find enclosed our most recent research report with respect to EZENET CORPORATION (EZE.ASE). Pursuant to the company's latest audited financial statements and news releases, we now believe the time is right for AGORA readers to take a closer look at Ezenet, for the reasons we have outlined below. As usual, we have conveniently divided our reports into sub-headings that make our conclusions easy to read and follow. Before presenting our full report, we would like to present you with the following financial highlights, which will no doubt lead you to the same positive conclusions we have made with respect to Ezenet Corp.
FINANCIAL HIGHLIGHTS
· Has provided data outsourcing, software and high-speed Internet communications to business for 18 years and has achieved profitability in 20 consecutive years;
· Clients include Banks, Mutual Funds, Trust Companies and Mortgage Investment Managers. List of clients includes: Bank of Montreal, Toronto Dominion Bank, Dynamic Mutual Funds, Newcourt Financial, First Marathon Securities, AGF Trust, Midland Walwyn, I.O.F. and others;
· Financial performance for most recent year, ended December 1998. Revenues - $2.17 Million. (Increase over 1998 37%) Profits - $280,000 (Increase over 1998 484%)
· Financial performance for most recent quarter, ended March 31, 1999. Revenues - $640,000 (1999 annualized = $2.56 Million = Projected Growth of 17.97%). Profits - $157,000 (1999 annualized = $628,000 = Projected Growth of 124%); and
· The company has NO debt and a high six-figure cash balance.
We believe it was important to review these figures before presenting any further details because they insure the financial viability of this company. Quite simply, the actual figures and the year-over-year growth are rock solid. This is significant because too many new small-cap companies are long on exciting ideas but very short on financial stability. As such, the majority of new small-cap issues expose their shareholders to the risks associated with insufficient financing, including dilution, business interruption and inability to execute the business plan.
AGORA is proud to present its readers with a company that has proven the ability to generate significant revenues and profits as a private company over a 20-year basis. Combined with a solid customer base, which includes the biggest financial institutions in the country, AGORA is extremely confident the company will never expose its shareholders to risks associated with financing.
Once you have completed a review of our report, we urge you to take a closer look at this company yourselves and review all the information found at the Ezenet web site. For your convenience, we have taken the liberty of providing links within our report to any relevant information on the web. For those of you who prefer to review information in your own special way, we provide the following link directly to the company's home page:
ezenet.net
GENERAL INFORMATION
It is important to realize that Ezenet operations can be divided into two separate groups Data Processing Services and PC software development. 98% of all Ezenet revenues are generated by Data Processing Services, which generate revenues from the big financial institutions named above. The PC software development division creates software for individuals to use on their PC's and provides the opportunity for exponential future growth. In order to understand each operation better, we have broken them down as follows:
Data Processing Services The Core Business
There is an easy way to explain this business and a hard way. We'll take the easy way. Quite simply, every time you make a deposit at the bank, contribution to your mutual fund or payment on your car lease, that data has to be tracked, stored and secured on a complex system. This is how institutions insure that all of your financial statements are correct at any given time. The list is not limited to these functions and can be extended to GIC's, RRSP's, Mortgages, Loans and any other financial tool.
Rather than performing these complex functions themselves, banks, mutual fund companies and other financial institutions outsource the business and turn to Ezenet. In turn, Ezenet provides the equipment necessary both at the client's location and at a secure location, as well as, the necessary software to insure the integrity, accuracy and security of the information. In short, Ezenet undertakes a huge responsibility but is paid well to do it.
In addition to the data processing services, Ezenet also generates revenue from the maintenance and service of the network linking the client to Ezenet. Due to the complexity and sensitivity of the information, Ezenet typically enjoys exclusivity in these contracts and generates significant revenues. Here is just a short list of Ezenet's well-known clients:
· AGF Group of Funds
· Bank of Montreal
· First Marathon Mortgage Corp
· First Marathon Inc
· IOF Foresters
· Manulife Financial
· Midland Walwyn
The combination of these two core functions generates 98% of Ezenet's $2,000,000+ in annual revenues. More importantly, the complexity and sensitivity of this service means Ezenet is unlikely to lose a client once they have been obtained. Unlike most corporate functions, data processing is very difficult to change between suppliers and will only occur if a supplier such as Ezenet essentially fails to perform its function. Given the fact Ezenet has performed these services for two decades, it is safe to assume Ezenet has established a solid reputation for essential data processing services within the financial community and can expect continued growth from their core operations.
An example of this growth can be found in EZE's recent press release announcing a multi-year contract to provide data processing and system design services to a new on-line auto leasing alliance between The Bank of Montreal (BMO) and Newcourt (Newcourt) Credit Group. BMO and Newcourt believe they will be able to capture a significant portion of the annual $15 Billion Canadian auto leasing industry and EZE will provide all data processing services for the alliance. This contract will not only have a positive impact on EZE's bottom line, it is also indicative of Ezenet's ability to capture contracts with Canada's largest financial institutions.
With respect to the effect of this contract on company financials, it is important to realize this agreement commenced on April 1, while the last reported quarter was for the period ending March 31. As such, Ezenet can expect to see even bigger growth than first quarter numbers have actually projected for 1999.
For your convenience, we have provided a link to the full press release below:
stockhouse.com
In summary, shareholders will be able to count on a steady, secure and growing revenue/income source from Ezenet core operations, thus eliminating any exposure to finance risk and maintaining the company's ability to finance growth internally.
PC SOFTWARE DEVELOPMENT GROWTH FROM AWARD WINNING SOFTWARE
Due to the success of its core business, Ezenet has the luxury of developing further products and financing them with existing profits. Without question, Its most successful product to date is "INSTAbase Web Ready", a software program that allows users to create databases of their own design and to publish the database on the Web.
If you do not have any experience in databases and this sounds a little bit confusing, you will find it easier to understand that INSTAbase has been reviewed and recommended by highly reputable computer magazines, including, "Business Week", "PC Magazine" and "PC World", which selected it as one of the best software products of the year. This is the kind of language that any investor understands and values. Here are just some specific quotes and awards from those publications:
· PC World Online Top 10 database tools. March 19, 1999
· PC World Online Editor's Pick. February 1999.
· Business Week First rate software for small biz. March, 1998
· Tucows Must Have! Beautiful piece of programming!
· PC World Magazine “Instabase is more accessible and approachable than its famous-name competition.” April, 1998
· ZD Net Editor's Pick. September 6, 1998
· Pittsburgh Tribune “People who have never used a database before…might just love it and the price is right”. September 28, 1998
· Toronto Star “While clearly aimed at newbies…It is chock full of features”. June 4, 1998
Impressively, we don't have the room to list all of the top reviews and awards but the list is proof positive that INSTAbase is a great piece of software and should enjoy great success. This, in turn, translates into great potential revenues and income for EZE. For your convenience, we have included the direct link so that you can review all the accolades and awards at:
instabase.com
Just click on “reviews” for the complete list. While you are there, we urge you to look around the effectively designed site and learn more about INSTAbase.
The success of the product has now led to distribution deals being signed with large software distributors in both the United Kingdom (Guildsoft Ltd.) and Germany (Softline AG) over the last two months. To further fuel the current demand in Germany, a German help file has been created as well as a German patch which changes the online databases which are created by INSTAbase, into the German language. For your convenience, we have provided the following link to these press releases:
stockhouse.com
With respect to North American distribution, INSTAbase has signed a retail deal with Business Depot (Canada) in which INSTAbase will be bundled with the launch of Microsoft Office 2000, as well as, sold independently. In conjunction with their retail effort, EZE has hired the former Word Perfect Sales Manager to head US Sales and we expect to see further retail deals signed in the future.
In addition, Ezenet also advises an infomercial test-marketing program is to begin broadcasting in fifteen (15) US markets by the end of June, as well as, in Toronto with the addition of a radio advertising program. If the test marketing proves successful, Ezenet will expand infomercial marketing to major North American markets including Los Angeles, New York and Chicago.
With respect to wholesale distribution, the company has also signed an agreement with software distributor Mirasil.
As a result of these marketing initiatives, Ezenet is projecting INSTAbase sales of approximately $1,000,000 in 1999, which alone would translate into an additional 50% increase from EZE 1998 revenues.
FINANCIAL PERFORMANCE
Unlike the majority of new small-cap issues, Ezenet has been a revenue generating and profit-earning corporation for the 20 years it operated prior to going public. A review of the most recent data reveals impressive figures and growth.
On an annual basis, Ezenet achieved revenues of $2,127, 540 for the year ended 1998 and achieved growth of 37% over 1997 revenues of $1,552,834. Profits for 1998 were $278,544. This is an especially refreshing change over new small-caps which rarely report profits in their early years if ever. This profit figure also represents a big jump (484%) over 1997 profits of $47,663.
On a quarterly basis, Ezenet recently released its 1999 first quarter results and they strongly indicate that Ezenet is well on its way to continued growth. Specifically, Ezenet reported 1st quarter revenues of $640,247 and profits of $157,791.
If we extrapolate these figures over the 1999 year, we project 1999 revenues of $2,560,988 and 1999 profits of $631,164, which represent growth of 17.97% and 124% respectively. Given the impressive nature of these figures, we are even more impressed with the fact they do not take into account any of the revenues to be generated by the Bank of Montreal/Newcourt contract. That contract commenced on April 1 and will be reflected in the 2nd quarter report for the period
April 1-June 30.
Nor do they take into account any additional anticipated revenues from INSTAbase. Despite being in its early stages, we believe the company will benefit from sales of INSTAbase as the marketing program begins to gain momentum in the second half of 1999. Currently, the company is anticipating sales of approximately $1,000,000 from INSTAbase.
An indication of EZE's financial strength can be found in the fact the complete INSTAbase marketing program is being funded internally. This is completely atypical of any new small-cap issue, which almost always requires private placement financing - and dilution - to fund such large marketing initiatives.
In summary, Ezenet financials are impressive from a revenue, profit and growth perspective and we rank it among the very best in new small-cap issues. The financial health of this company provides shareholders with stability, security and the ability to finance most projects internally, thus reducing the risk of undue dilution and all risks associated with small-cap companies. Such financial health also gives the company greater leverage if financing for larger projects is ever necessary.
STOCK INFORMATION
Ezenet trades on the Alberta Stock Exchange under the symbol EZE. The company has issued and outstanding shares of 7.4 Million common shares and 3.0 Million preferred shares. EZE commenced trading on October 19, 1998 and opened at a price of .21. EZE hit a 52-week high of 3.20 in May. As of this first week in June, EZE is trading in the 2.80-3.00 range.
Fundamentals of EZE make it a definite acquisition target for The AGORA Portfolio. We are very impressed by both the fundamental and financial strength of this small-cap company, a combination that is rarely found in new public companies. We are also secured by the fact EZE generates the majority of its revenues from core operations that were long established and profitable before this company ever went public. The company's client list and technical expertise leads us to believe that core revenues and profits will only continue to grow.
>From an acquisition point of view, EZE traded from 1.50 to 3.00 in just under one month and, true to our philosophy, will need to show some staying power at current highs before acquisition by The AGORA Portfolio. As such, we will be watching the trading action and volume in EZE very closely over the next 30 days for any natural pullback. If that does not occur and EZE begins to enjoy success from INSTAbase sales, The AGORA Portfolio will then begin acquiring core positions in this company.
Regards,
AGORA
agoracorp.com
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AGORA INTERNET RELATIONS CORP. receives a monthly monetary fee from Valu-net Corporation and Mirandor Explorations Inc. for the purposes of communicating with Internet shareholders - both current and prospective - to increase awareness of and interest in our clients. AGORA INTERNET RELATIONS CORP activities are aimed purely at keeping their clients' shareholders and prospective shareholders informed about their company. These activities consist of providing investors with previously disclosed factual information concerning the company, comments from company principals, copies of material that has been filed with regulatory authorities, comments prepared by registered brokers or investment dealers and material published in newspapers, magazines or journals.
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