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NEW CORPORATE PLAYER IN THE INDUSTRY AGAINST CYBER-TERRORISM [IMAGE] = IMMEDIATE BUY RECOMMENDATION Initiating Research Coverage Merilus Inc. = Symbol: MERH Shares Outstanding: 13.2 million Share Price: $1.90 Market Ca= pitalization: $25 million 52 Week Hi/Low: $8.50/$0.45 Estimated Public Floa= t: 2 million shares Developed over the last four years, Merilus has recent= ly started marketing the latest and most advanced computer security product= s targeted for small to medium businesses. This market has been, and is p= rojected to be, one of the fastest sectors in technology, largely unaffecte= d by the current weakness in the market. THE PROBLEM AND OPPORTUNITY A= Computer Security Institute and FBI survey showed 90% of large organizatio= ns detected breaches into their computing systems. 74% of these organizati= ons acknowledged financial losses. Price Waterhouse estimated this loss to= be about $40 billion last year. The estimated number of computer attacks = doubled last year according to the Emergency Response Team at Carnegie Mell= on University. International Data Corp. (IDC) predicts the compounded annu= al growth rates of digital security revenues will continue at over 88% per = year over the next 5 years. Merilus' products target small to medium bus= inesses, a particularly fast growing segment of the overall security market= , which has been underserved by the major security manufacturers. IDC esti= mates the small to medium business percentage of the total internet securit= y software market will increase from the current 43% to about 70% by 2004. = In terms of dollars, this means companies with fewer than 1000 employees co= uld spend about $7.4 billion on security in 2004. We strongly feel Merilus= is focusing on the right market, at the right time. MERILUS SOLUTIONS Me= rilus' computer software and hardware products represent major innovations,= which protect against computer information theft from hackers and others b= oth outside and within the business. Their recently introduced FireCards a= re the world's first network security system and firewall (controlling who = can access what type of data) that easily inserts into the standard PCI slo= t inside the computer. It is a computer within the computer allowing for re= mote updating of new innovations and security measures to ensure sensitive = data is protected as well as transmitted in a secure manner. Industry rev= iews have given the new products high ratings. Secure Computing Magazine g= ave the FireCard a five out of five star rating and The Tech Zone awarded a= 9.5 out of 10 score. NASA and Lockheed Martin are just a couple of the so= phisticated organizations that have started using Merilus products. Even t= hough Merilus and its products are relatively new to the market place we fe= el they will also have good acceptance because they are extremely price com= petitive. Management will strive to maintain its current 2:1 cost/feature = ratio, where products are either half the price of competitors for the same= functionality or twice the functionality for the same price. Manufacturin= g of the products is contracted out to keep capital and inventory costs dow= n and flexibility up. THE ROLLOUT Over the summer, after rigorous testing= in Compaq's labs, Merilus has become a member of the Compaq Solutions Alli= ance, allowing installation of products into Compaq computers. Merilus rece= ntly announced they have partnered with the three largest distributors in N= orth America: Ingram Micro, Tech Data and EMJ. Last week Merilus announced= its Reseller Program, which provides marketing and technical support as we= ll as substantial rebates to vendors selling Merilus' suite of computer sec= urity products. MANAGEMENT Dana Epp, President of Merilus started writing= commercial security monitoring software at the age of 14 and authored the = book Computer Security Concepts, Managing Business Threats in a Wired World= . Merilus has attracted a number of credible and notable Board members suc= h as John Connally, son of the former US Treasury Secretary, John Paul DeJo= ria, Chairman of John Paul Mitchell Systems. FINANCIALS and PROJECTIONS T= wo companies established in this industry are SonicWall (SNWL) and Watchgua= rd Technologies (WGRD). Over the last couple of years these two companies = have enjoyed approximately 100% annualized revenue growth. Analyst's conse= nsus (Thompson Financial) is that they will have sales growth next year of = about 50% and 40%, respectively. Merilus is in the process of raising $3 mi= llion in a Private Placement to power its marketing initiatives, increase i= nventory and to strengthen its balance sheet. Management and its financier= s expect to close this needed funding before year-end. Currently the Compan= y has minimal, but rapidly increasing revenues. Management is estimating= revenues of $8 million next year increasing to $34 million in 2003. In 20= 03 they estimate achieving net income of roughly $4 million. By 2003, we e= stimate the shares outstanding could increase to about 18 million. If thes= e numbers were met and a price to earnings ratio of 30 was applied, it coul= d suggest a possible $6 share price. Management's latest estimates are for= revenues increasing to $93 million in 2004. Merilus is little known in in= vestment circles however an Investor Awareness Program is expected to start= next week. For more information see www.merilus.com and call Steve Clare= , investor relations, at 866-623-3320. Ben Johnson, Analyst First Securit= ies Northwest, Inc. Member NASD and SIPC November 14, 2001 Mr. Johnson has = been a Registered Representative and Analyst for NASD member firms for over= 25 years. Investing in Merilus, which is not yet profitable, is speculat= ive and carries a high degree of risk. The material contained herein is so= lely for informational purposes only and is neither an offer nor solicitati= on to buy or sell any securities. The information is not guaranteed to be = accurate and is not a complete statement or summary of the available data o= n Merilus, and there may be errors and omissions. First Securities Northwes= t and Ben Johnson own, and may buy and sell shares of Merilus from time to = time. Forward looking-statements and comments contained herein within the m= eaning of provisions of the Securities Exchange Act of 1934, such as statem= ents regarding business and financing, business trends, future revenues and= profits, etc. contain no guarantee of future performance and that the actu= al results may differ materially. There can be no assurances that any expe= ctations will prove to be correct due to various risks and uncertainties. = First Securities' prior app! roval is needed for any distribution of this r= eport. Disclaimer: This is a paid advertisement from First Securitie= s Northwest Research. The material contained in this report is being furnis= hed solely for informational purposes. This is not a solicitation for the p= urchase or sale of securities. Readers are encouraged to conduct their own = research and due diligence, and/or obtain professional advice, prior to mak= ing any investment decision. The information contained herein is based on s= ources, which First Securities Northwest Research believes to be reliable, = but is not guaranteed to be accurate, and does not purport to be a complete= statement or summary of the available data. Any opinions expressed are sub= ject to change without notice. The statements and opinions contained herein= are not the statements and opinions of FreeRealTime.com, and FreeRealTime.= com disclaims any liability for or arising from such statements and opinion= s. This FRT Special Situation Alert has been sent to you courtesy of Free= RealTime.com. To be removed from the email distribution list for FRT Specia= l Situations & Alerts, simply click the link below. Click here to Unsubscr= ibe Advertisements and sponsorships are provided as a service to FreeReal= Time.com's users. FreeRealTime.com is not responsible for their content, se= rvices or products. * =3D estimated [IMAGE]=09
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