Security firm Jawz gets that sinking feeling

It appears that troubled Canadian firm Jawz Inc. may have taken its final bite out of the network security business.

The first of two recent press releases, dated Nov. 30, announced that effective that date, all board members and officers of Jawz Inc. were resigning because “the company was unable to negotiate reasonable terms for director and officer liability insurance.” It further stated that this failure was due to “the current economic climate” and an “unresolved litigation being maintained in California.”

The second statement announced that the company’s banker, Toronto-based Thompson Kernaghan and Co., had issued a demand for payment of its principal amount of US$3.77 million and noted Thomson Kernaghan’s “intention to enforce security.”

After receiving a fair amount of buzz for its security solutions, in late July 2001 Jawz was sued in California by the Los Angeles-based Bristol Asset Management, a major Jawz shareholder. Bristol claimed that Jawz broke an agreement to provide warrants for one million shares of Jawz stock, which Jawz failed to deliver. As a result, Bristol is seeking US$14 million from Jawz, plus additional damages for fraud, breach of fiduciary duty and unfair business practices.

Jawz, in return, claimed that Bristol has a history of suing companies that perform below expectation. It is this bitter fight – complete with duelling press releases and countersuits – that the Jawz statement cited as a factor in the board’s mass resignation.

In late August, after the company’s legal troubles hit the news, Jawz Canada Inc. – the Toronto-based company also operated its own Canadian division – was placed in receivership by Thomson Kernaghan, a move that at the time analysts predicted might slow, but probably not halt the company’s overall slide.

At press time, Jawz Inc. had not returned calls from Network World Canada, and its Web site was operating only intermittently.