Creditors, shareholders and potential buyers of security provider Jawz Canada Inc. have been clogging the phone lines of the company’s appointed manager since the subsidiary was put into receivership Monday.

“We fielded, between shareholders and creditors and other people, about 800 phone calls yesterday,” said Joseph R. Zamuda, Jawz Canada’s receiver at Alternative Recoveries Inc. “As soon as the news was out, the phone calls started.”

Zamuda said among the callers were “about a half-dozen” potential buyers. Robert Kubbernus, chairman & CEO of parent company Jawz Inc., confirmed that a deal is “on the table” for the Canadian subsidiary’s Ottawa office.

On Monday, Alternative Recoveries issued a press release stating Jawz Canada had been put into receivership by its banker, Thompson Kernaghan of Toronto. Toronto-based Jawz Inc. is publicly traded on the Nasdaq: OTC Bulletin Board. Jawz Canada is not a public entity.

“We were relying on the banker for a certain amount of money every month, and we were notified on Friday that they weren’t going to make the next payment,” Kubbernus said. “The company has a certain asset base. Once liabilities surpass that. . . .”

Kubbernus offered a number of reasons why Thomas Kernaghan decided to cut off funding.

“Slowing economy, lack of sales, a quarterly report that was not stellar,” Kubbernus said of Jawz Canada. “But a company that I thought was turning around.”

IDC Canada analyst Dan McLean said the news of the subsidiary’s demise was somewhat surprising.

“They looked as though they were offering something interesting and unique,” McLean said. “They looked to be at the right place at the right time,” as security was getting a lot of hype.

Still, McLean said despite the buzz, security is still a tough concept to sell to CEOs.

“The problem with security is that it’s an IT concern and not a business concern,” he said, explaining that it is difficult for companies like Jawz to convince business leaders why they need comprehensive security.

And even IT managers, who recognize the dangerous potential of a security breach, often figure the odds of an attack are too remote to justify taking a bite of limited IT budgets, McLean said.

“I think the belief with a lot of them is that (a breach) is not very likely,” he said. “So they allocate dollars to immediate pain points.”

Both McLean and Kubbernus said the problems faced by Jawz Canada are commonplace in the security business. Kubbernus said Jawz is taking an especially cautious approach to its business in light of the economy.

“There’s something to be said for sitting on the sidelines because the parent company is sitting on the sidelines” waiting for the economy to improve, he said

However, Jawz might not have that much time. In its report last week to the Securities and Exchange Commission, Jawz said it was unable to meet its financial obligations and was meeting with creditors and potential investors in the hopes of alleviating its cash-flow problems.

Jawz said it had an accumulated deficit of $76,013,912 and working capital deficiency of $7,766,225 as of March 31.

The report also said the company’s auditors, Ernst & Young, have expressed doubt about Jawz’s ability to continue operations.

Losing the Canadian subsidiary is a large blow to Jawz’s fortunes as 86 per cent of the company’s revenues for the six months ending June 30 came from Canada.

Jawz Canada is no longer taking on new business, but will continue projects in progress before the receivership announcement. About 60 employees are affected by the change in operations, Kubbernus said.

Zamuda said he has gotten control of the subsidiary’s assets and a clearer picture of Jawz Canada’s finances should be revealed in a couple of days.

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