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MoneyGram doubles the size of Tio's network

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MoneyGram doubles the size of Tio's network Powered By Docstoc
					 CORPORATE UPDATE                           February 28, 2011




                                                                                Pardeep S. Sangha, B.A. Sc., MBA
 TIO NETWORKS CORP.                                                             psangha@pifinancialcorp.com 604.718.7528
 (V-TNC) $0.55
                                                                                Sharon Wang, M.Sc. (Finance)
                                                                                swang@pifinancialcorp.com 604.664.2789
RATING: BUY                           TARGET: $0.95
(unchanged)                           (unchanged)
                                                                                Company Statistics
                                                                                Risk:                                                    SPECULATIVE
MoneyGram doubles the size of                                                   52-week High / Low:                                       0.7 / 0.45
                                                                                Shares Outstanding:                                      46.4 M (basic)
Tio’s network                                                                                                                            49.8 M (fd)
                                                                                Market Capitalization:                                   27.4 M (fd)
   EVENT: Tio Networks today announced a key partnership with Money-            30-Day Avg. Daily Volume:                                46,270
   Gram International, Inc. (MGI) which doubles the size of Tio’s bill pay-     Cash & Equivalents:                                      3.2 M
                                                                                Long Term Debt:                                          Nil
   ment network. Through this strategic alliance, Tio will be able to offer
                                                                                Insider Ownership:                                       19%
   expedited bill payment services at more than 35,000 MoneyGram agent
                                                                                CEO:                                                     Hamed Shahbazi
   locations across the United States including locations at Albertsons LLC,
   CVS/pharmacy, and Walmart stores.                                            Financial Summary
                                                                                (FYE Jul.31)
   Last week Tio Networks also announced strong preliminary results for                                                FY09             FY10      FY11e         FY12e
   Q2FY11 ending January 31, 2011 with transactional revenue of (CDN)           Revenue ($M)      21.5                                27.8           37.8            46.7
   $8.6M, an increase of 60% from Q2 of last year. Tio processed a record       EBITDA ($M)        0.8                                 0.6            2.3             4.5
   3.85 million transactions for Q2FY11 compared to 2.03 million transac-       Net Income ($M)  (2.2)                               (2.0)            0.3             2.7
   tions in the same quarter last year, an increase of 89% YoY.                 EPS             (0.05)                              (0.04)           0.01            0.06

   IMPACT: POSITIVE. The additional MoneyGram locations will bring the          Price/Sales                            1.3x          1.0x           0.7x             0.6x
   total number of locations on Tio’s network to approximately 58,000 loca-     EV/Sales                               1.1x          0.9x           0.6x             0.5x
   tions across North America. Although the MoneyGram locations are all         EV/EBITDA                             30.5x         40.7x          10.5x             5.4x
   active today, transactions will ramp up over several quarters. Nonethe-      Quarterly (FY11):                          Q1           Q2e          Q3e             Q4e
   less, the MoneyGram partnership gives us more comfort in our growth          Revenue ($M)                             8.6     8.7                10.0             10.5
   projections for FY11 and FY12.                                               EPS                                  ($0.00) ($0.00)               $0.01            $0.01

   FORECASTS: Our outlook continues to look positive for Tio Networks.                       1,600                                                                   $0.75

   We are forecasting 36% revenue growth for FY11 with revenue of                            1,400                                         200 day mvg               $0.70
                                                                                                                                           50 day mvg                $0.65
                                                                                             1,200
   $37.8M, $2.3M EBITDA, and $0.01 EPS. For FY12 we are forecasting                                                                                                  $0.60
                                                                                             1,000
   24% revenue growth to $46.7M, EBITDA of $4.5M, and $0.06 EPS.
                                                                                 Thousands




                                                                                                                                                                     $0.55
                                                                                              800
                                                                                                                                                                     $0.50
                                                                                              600
                                                                                                                                                                     $0.45
   VALUATION/RECOMMENDATION: We are maintaining our 12-month                                  400                                                                    $0.40
   target of $0.95, with a BUY recommendation and a SPECULATIVE risk                          200                                                                    $0.35

   rating. Our $0.95 price target represents an EV/Sales multiple of 0.9x                      -
                                                                                                   Feb-10   Apr-10    Jun-10   Aug-10    Oct-10   Dec-10   Feb-11
                                                                                                                                                                     $0.30

   and an EV/EBITDA multiple of 9.9x our FY12 estimates.

                                                                                Corporate Information
                                                                                TIO Networks Corp. is an on-demand processor of
                                                                                fi nancial transactions. The Company provides bill
                                                                                payment, pre-paid debit card and money transfer serv-
                                                                                ices from its multi-channel network of over 58,000
                                                                                endpoint locations.




                                                                               A Disclosure fact sheet is available on Pages 7-8 of
                                                                               this report.
                                                                                                                                                                                                                                                                                                                                                                                                            Tio Networks Corp. (V-TNC) – February 28, 2011




Company Snapshot
    Quarterly Revenue and EBITDA                                                                                                                                                                                                                                                            Quarterly Transactional Revenue in US$ Currency
                                       10,000                                                                                                                                                                                                                                                                       9,000
                                                                                                                                                                                                                                                                                                                    8,000
                                          8,000
                                                                                                                                                                                                                                                                                                                    7,000
                                                                                                                                                                                                                                                                                                                    6,000
                                          6,000




                                                                                                                                                                                                                                                                                                       US $ '000)
    CDN $ ('000)




                                                                                                                                                                                                                                                                                                        Revenue
                                                                                                                                                                                                                                                                                                                    5,000
                                          4,000                                                                                                                                                                                                                                                                     4,000
                                                                                                                                                                                                                                                                                                                    3,000
                                          2,000
                                                                                                                                                                                                                                                                                                                    2,000

                                                 -                                                                                                                                                                                                                                                                  1,000
                                                                                                                                                                                                                                                                                                                            0




                                                                                                                                                                                                                                                                                                                                     Q1FY08

                                                                                                                                                                                                                                                                                                                                                    Q2FY08

                                                                                                                                                                                                                                                                                                                                                                          Q3FY08

                                                                                                                                                                                                                                                                                                                                                                                                 Q4FY08

                                                                                                                                                                                                                                                                                                                                                                                                                   Q1FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                        Q2FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                            Q3FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Q4FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Q1FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Q2FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Q3FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Q4FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          Q1FY11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Q2FY11
                                        (2,000)
                                                               Q1FY08

                                                                                  Q2FY08

                                                                                               Q3FY08


                                                                                                                 Q4FY08

                                                                                                                                    Q1FY09

                                                                                                                                                      Q2FY09

                                                                                                                                                                            Q3FY09

                                                                                                                                                                                         Q4FY09

                                                                                                                                                                                                     Q1FY10

                                                                                                                                                                                                                      Q2FY10


                                                                                                                                                                                                                                           Q3FY10

                                                                                                                                                                                                                                                                 Q4FY10

                                                                                                                                                                                                                                                                                Q1FY11
    Annual Revenue and Net Income                                                                                                                                                                                                                                                           Scalable business model with flat Operating Expenses
                                                 50,000                                                                                                                                                                                                                                                                 2,500


                                                 40,000                                                                                                                                                                                                                                                                 2,000




                                                                                                                                                                                                                                                                                               Operating Expenses
                                                 30,000




                                                                                                                                                                                                                                                                                                  CDN $ ('000)
                                                                                                                                                                                                                                                                                                                        1,500
                                       $('000)




                                                 20,000
                                                                                                                                                                                                                                                                                                                        1,000
                                                 10,000

                                                                                                                                                                                                                                                                                                                            500
                                                          0


                                                 (10,000)                                                                                                                                                                                                                                                                   -
                                                                                                                                                                                                                                                                                                                                           Q1FY08

                                                                                                                                                                                                                                                                                                                                                         Q2FY08

                                                                                                                                                                                                                                                                                                                                                                                   Q3FY08

                                                                                                                                                                                                                                                                                                                                                                                                          Q4FY08

                                                                                                                                                                                                                                                                                                                                                                                                                            Q1FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                 Q2FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Q3FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Q4FY09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Q1FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Q2FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               Q3FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Q4FY10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Q1FY11
                                                                                   FY08                                    FY09                                              FY10                               FY11e                                        FY12e

                                                                                                    Revenue                                                            Net Income




    Growth in Number of Transactions                                                                                                                                                                                                                                                        Locations Generating Income
                                                 5,000,000                                                                                                                                                                                                                                                        6,000
                                                 4,500,000
       # of Transactions per quarter




                                                                                                                                                                                                                                                                                                                  5,000
                                                 4,000,000
                                                                                                                                                                                                                                                                                            # Generating Income




                                                 3,500,000                                                                                                                                                                                                                                                        4,000
                                                 3,000,000
                                                                                                                                                                                                                                                                                                                  3,000
                                                 2,500,000
                                                 2,000,000                                                                                                                                                                                                                                                        2,000
                                                 1,500,000
                                                 1,000,000                                                                                                                                                                                                                                                        1,000

                                                     500,000
                                                                                                                                                                                                                                                                                                                    -
                                                                                                                                                                                                                                                                                                                                      Q1FY09



                                                                                                                                                                                                                                                                                                                                                                 Q2FY09



                                                                                                                                                                                                                                                                                                                                                                                                     Q3FY09



                                                                                                                                                                                                                                                                                                                                                                                                                                     Q4FY09



                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Q1FY10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Q2FY10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Q3FY10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Q4FY10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Q1FY11
                                                           -
                                                                                 Q1FY08

                                                                                           Q2FY08

                                                                                                        Q3FY08

                                                                                                                           Q4FY08

                                                                                                                                             Q1FY09

                                                                                                                                                          Q2FY09

                                                                                                                                                                              Q3FY09

                                                                                                                                                                                        Q4FY09

                                                                                                                                                                                                  Q1FY10

                                                                                                                                                                                                                 Q2FY10

                                                                                                                                                                                                                                  Q3FY10

                                                                                                                                                                                                                                                    Q4FY10

                                                                                                                                                                                                                                                                      Q1FY11

                                                                                                                                                                                                                                                                                   Q2FY11




                                                                                                                                                                                                                                                                                                                                                                                                 Kiosk                                                               Express                                                              OEM



    Stable Cash Balance                                                                                                                                                                                                                                                                     Low Capex Spending
                                                 5,000
                                                                                                                                                                                                                                                                                                                    700
                                                 4,500
                                                                                                                                                                                                                                                                                                                    600
                                                 4,000

                                                 3,500                                                                                                                                                                                                                                                              500
                                                                                                                                                                                                                                                                                            CAPEX Spending
     CDN $ ('000)




                                                                                                                                                                                                                                                                                              CDN$ ('000)




                                                 3,000
                                                                                                                                                                                                                                                                                                                    400
       CASH




                                                 2,500

                                                 2,000                                                                                                                                                                                                                                                              300

                                                 1,500                                                                                                                                                                                                                                                              200
                                                 1,000
                                                                                                                                                                                                                                                                                                                    100
                                                     500

                                                      -                                                                                                                                                                                                                                                                 0
                                                                                                                                                                                                                                                                                                                                  Q4FY08


                                                                                                                                                                                                                                                                                                                                                        Q1FY09


                                                                                                                                                                                                                                                                                                                                                                                            Q2FY09


                                                                                                                                                                                                                                                                                                                                                                                                                     Q3FY09


                                                                                                                                                                                                                                                                                                                                                                                                                                                   Q4FY09


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Q1FY10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Q2FY10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Q3FY10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Q4FY10


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Q1FY11
                                                                        Q4FY08


                                                                                           Q1FY09


                                                                                                                  Q2FY09


                                                                                                                                             Q3FY09


                                                                                                                                                                   Q4FY09


                                                                                                                                                                                       Q1FY10


                                                                                                                                                                                                       Q2FY10


                                                                                                                                                                                                                               Q3FY10


                                                                                                                                                                                                                                                        Q4FY10


                                                                                                                                                                                                                                                                               Q1FY11




Source: Tio Networks Corp., PI Financial Corp.



2            |                              UPDATE                                                                                                                                                                                                                                                                              Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)
                                                                                                    Tio Networks Corp. (V-TNC) – February 28, 2011




                                        Discussion
                                        Tio Networks today announced a monumental partnership with MoneyGram International, Inc.
                                        (MGI) which doubles the footprint of Tio’s bill payment network. Through this strategic alliance
                                        with MoneyGram, Tio will be able to offer expedited bill payment services at more than 35,000
                                        MoneyGram agent locations across the United States including locations at Albertsons LLC, CVS/
                                        pharmacy, and Walmart stores. Initially Tio is offering bill payment services for AT&T Wireless, Cox
                                        Communications, Memphis Light Gas&Water and PG&E at these MoneyGram locations. Additional
                                        Tio billers will be added in the coming months to the MoneyGram network.

                                        MoneyGram is a leading global payment services company with 227,000 agent locations in more
                                        than 190 countries. In 2010, the company made revenues of $1.17 billion and Adjusted EBITDA of
                                        $254 million. MoneyGram’s primary business is money transfer as it is the second largest money
                                        transfer business in the world, but the Company also offers a range of additional financial services
                                        including bill payment services. MoneyGram has over 700 different biller partners and eventually
                                        many of these billers will also be available on Tio’s network.

                                        MoneyGram locations are active today. According to Tio’s management, the IT integration between
                                        the two networks has been completed and tested. The MoneyGram locations are just starting to
                                        transact with Tio’s billers. As of Q1FY11 ending October 31, 2010, Tio Networks reported having
                                        25,560 locations of which 9,650 locations transacted during that quarter. The additional MoneyGram
                                        locations will bring the total number of locations on Tio’s network to approximately 58,000 locations
                                        across North America.

                                        Tio Networks achieves 67% year over year transactional revenue growth for Q2FY11. Last week Tio
                                        Networks also announced preliminary results for Q2FY11 ending January 31, 2011 with transactional
                                        revenue of (CDN) $8.6M, an increase of 60% from Q2 of last year. When measured in US dollars,
                                        Tio’s transactional revenue grew by 67% from USD$5.1M in Q2FY10 to USD$8.6M in Q2FY11. We
                                        view transactional revenue in US dollars as a better measure of growth as most of Tio’s revenues
                                        are generated in US dollars while the Company reports its financial results in Canadian dollars. The
                                        Company’s transactional revenue growth was driven by the growth in the Company’s network and
                                        the addition of highly transacting Express terminals earlier in the year.

                                        Tio Networks sets new record for number of transactions in the quarter. Tio processed a record
                                        3.85 million transactions for Q2FY11 compared to 2.03 million transactions in the same quarter last
                                        year, an increase of 89% YoY.


                                        Outlook: Positive
                                        Although the MoneyGram locations are all active today, transactions will ramp up over several
                                        quarters. It takes time to market the availability of Tio’s billers (such at AT&T Wireless or PG&E) at
                                        these MoneyGram locations. In many instances, Tio Networks or the billers have to actively market
                                        to consumers to let them know they can now pay their utility, cable or wireless bill at one of the many
                                        MoneyGram locations. We have made small changes to our estimates in which we were already
                                        predicted ramping up to over 50,000 locations by the end of FY11. Furthermore, we do not have any
                                        metrics at this point related to the number of expected transactions per location at the MoneyGram
                                        locations. The number of transactions per location will also increase as Tio introduces more billers
                                        to the MoneyGram locations.

                                        We believe Tio will achieve 36% revenue growth and positive net income in FY11. Our estimates
                                        for FY11 are revenues of $37.8M, EBITDA of $2.3M and $0.01 positive EPS. The Company’s growth
                                        is being driven by the expansion of its network and the addition of new billers. We are conserva-
                                        tively forecasting 24% revenue growth in FY12 because at this time we do not know how many
                                        transactions will be generated at the new MoneyGram locations. Our FY12 forecast is for revenues
                                        of $46.7M, EBITDA of $4.5M, and $0.06 EPS.




Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)                                                                    UPDATE     |   3
                                                                            Tio Networks Corp. (V-TNC) – February 28, 2011




                 Tio Networks has a stable balance sheet and a scalable business model which is now generating
                 positive cash flows. At the end of Q1FY11, Tio had cash of $3.2M, with no long term debt. Although
                 the Company’s cash position is relatively low, we do not believe the Company needs to raise ad-
                 ditional capital for operating purposes. The Company may choose to raise capital to strengthen its
                 balance sheet and fund strategic initiatives such as acquisitions.


                 Valuation and Recommendation
                 Tio Networks is undervalued. Tio Networks is currently valued at an EV/Sales multiple of 0.6x and
                 an EV/EBITDA multiple of 10.5x our FY11 estimates. We believe Tio’s share price has not performed
                 over the past 6 months because of investors’ concerns over the Company’s profitability. We believe
                 the profitability in FY12 will raise investor confidence in the Company, potentially leading to share
                 price appreciation.

                 We are maintaining our BUY recommendation for Tio Networks (V-TNC), and our 12-month target
                 price of $0.95. We continue to have a SPECULATIVE risk rating on the Company. Our $0.95 price
                 target represents an EV/Sales multiple of 0.9x and an EV/EBITDA multiple of 9.9x our FY12 esti-
                 mates. We like Tio Networks because the Company continues to grow its network footprint and
                 has been executing on its growth strategy with strong revenue growth and EBITDA improvement.
                 We believe Tio Networks is increasingly becoming a potential target for acquisition, given that the
                 Company now has a substantially large network and is generating positive cashflows.




4   |   UPDATE                                             Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)
                                                                                                                       Tio Networks Corp. (V-TNC) – February 28, 2011




 Income Statement (000's)                    FY08      FY09      FY10     FY11e     FY12e               Fiscal 2010                                 Fiscal 2011
 (Year end 31-July)                                                                              Q1          Q2          Q3        Q4        Q1         Q2e          Q3e       Q4e
                                            Actual    Actual    Actual       Est.      Est.   Actual      Actual      Actual    Actual    Actual        Est.         Est.      Est.

 Revenue                                    14,276    21,471    27,771    37,804    46,697    5,158        5,512      8,352     8,750     8,591        8,715      10,006    10,491
    Direct Costs                             9,254    15,090    21,444    28,988    34,836    3,759        4,107      6,704     6,874     6,750        6,697       7,615     7,926
 Gross Profit                                5,022     6,381     6,327     8,486    11,420    1,399        1,404      1,648     1,876     1,841        1,909       2,281     2,455

 Operating Expenses
    G&A                                      4,300     4,020     4,192     4,382     4,760    1,058        1,015         946    1,173     1,074        1,091       1,100     1,117
    R&D                                      1,251       775       750       843     1,014      180          180         180      210       197          200         216       230
    S&M                                      1,797     1,149     1,142     1,045     1,296      290          279         310      263       240          259         263       283
 Total Operating Expenses                    7,348     5,944     6,085     6,270     7,070    1,529        1,474       1,436    1,645     1,511        1,549       1,580     1,629

 Operating Income                           (2,326)     438       243      2,216     4,350     (130)         (70)       212       231       330         360         701       826

 Other expenses                              3,897     2,590     2,159     1,934     1,660      539          557         573      491       532          492        467       442
 Net Income before taxes                    (6,223)   (2,152)   (1,917)      282     2,690     (669)        (627)       (361)    (260)     (203)        (132)       234       383

 Provision for (recovery of) income taxes       29        13        37        0          0        5            6           8       19        11            0          0         0
 Net income                                 (6,251)   (2,165)   (1,954)     282      2,690     (674)        (633)       (369)    (278)     (214)        (132)       234       383

 EPS (fd)                                   ($0.15)   ($0.05)   ($0.04)    $0.01     $0.06    ($0.01)     ($0.01)     ($0.01)   ($0.01)   ($0.00)     ($0.00)      $0.01     $0.01

 EBITDA                                     (2,635)     792       594      2,290     4,470       35          74         202       284       345         379         721       845

 As Percentage of Revenue

 Revenue                                    100.0%    100.0%    100.0%    100.0%    100.0%    100.0%      100.0%      100.0%    100.0%    100.0%      100.0%      100.0%    100.0%
    Direct Costs                             64.8%     70.3%     77.2%     76.7%     74.6%     72.9%       74.5%       80.3%     78.6%     78.6%       76.8%       76.1%     75.6%
 Gross Margin                                35.2%     29.7%     22.8%     22.4%     24.5%     27.1%       25.5%       19.7%     21.4%     21.4%       21.9%       22.8%     23.4%

 Operating Expenses
    G&A                                      30.1%     18.7%     15.1%     11.6%     10.2%    20.5%        18.4%      11.3%     13.4%     12.5%        12.5%       11.0%     10.6%
    R&D                                       8.8%      3.6%      2.7%      2.2%      2.2%     3.5%         3.3%       2.2%      2.4%      2.3%         2.3%        2.2%      2.2%
    S&M                                      12.6%      5.4%      4.1%      2.8%      2.8%     5.6%         5.1%       3.7%      3.0%      2.8%         3.0%        2.6%      2.7%
 Operating Margin                            51.5%     27.7%     21.9%     16.6%     15.1%    29.6%        26.7%      17.2%     18.8%     17.6%        17.8%       15.8%     15.5%

 Net Income Margin                            NEG       NEG       NEG       0.7%      5.8%      NEG         NEG         NEG       NEG       NEG         NEG         2.3%      3.7%

 Y-o-Y Growth

 Revenue                                      6.0%     50.4%     29.3%     36.1%     23.5%      7.0%        0.1%       46.4%     60.9%     66.6%       58.1%       19.8%     19.9%
 COS                                         17.2%     63.1%     42.1%     35.2%     20.2%     12.7%        8.7%       62.2%     78.8%     79.6%       63.0%       13.6%     15.3%
 Gross Profit                                -9.8%     27.1%     -0.8%     34.1%     34.6%     -5.9%      -18.7%        4.7%     17.8%     31.6%       35.9%       38.4%     30.9%
 G&A                                         15.8%     -6.5%      4.3%      4.5%      8.6%     22.2%       -4.4%      -13.8%     18.0%      1.5%        7.5%       16.3%     -4.8%
 R&D                                         24.6%    -38.1%     -3.1%     12.3%     20.3%    -14.6%       -4.3%        3.7%      3.9%      9.3%       10.9%       20.3%      9.4%
 S&M                                         10.1%    -36.1%     -0.6%     -8.5%     24.1%      5.1%        3.3%        2.2%    -12.2%    -17.4%       -7.4%      -15.0%      7.7%
 Operating Earnings                           NMF       NMF     -44.6%    813.9%     96.3%      NMF         NMF         NMF     135.5%      NMF         NMF       231.1%    257.6%
 Net Income                                   NMF       NMF       NMF       NMF     852.5%      NMF         NMF         NMF       NMF       NMF         NMF         NMF       NMF


 Sequential Quarterly Growth

 Revenue                                                                                       -5.1%        6.9%       51.5%      4.8%     -1.8%        1.4%       14.8%      4.8%
 COS                                                                                           -2.2%        9.3%       63.2%      2.5%     -1.8%       -0.8%       13.7%      4.1%
 Gross Profit                                                                                 -12.2%        0.4%       17.4%     13.8%     -1.9%        3.7%       19.5%      7.6%
 G&A                                                                                            6.5%       -4.1%       -6.7%     23.9%     -8.4%        1.5%        0.9%      1.5%
 R&D                                                                                          -10.7%       -0.2%       -0.1%     16.8%     -6.1%        1.2%        8.4%      6.2%
 S&M                                                                                           -2.9%       -3.8%       11.0%    -15.3%     -8.7%        7.9%        1.8%      7.4%
 Operating Earnings                                                                             NMF         NMF         NMF       9.0%     42.8%        9.2%       94.9%     17.7%
 Net Income                                                                                     NMF         NMF         NMF       NMF       NMF         NMF         NMF      63.7%




Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)                                                                                                     UPDATE           |   5
                                                                                                                             Tio Networks Corp. (V-TNC) – February 28, 2011




    Balance Sheet (000's)                                      FY08       FY09       FY10              Q1FY11
    (year end 31-Jul)                                          Actual     Actual     Actual             Actual

    ASSETS
      Current
         Cash and equivalents                                  3,395      3,161      2,259               2,683
         Restricted Cash                                           0          1        540                 535
         Accounts receivable                                     451        277        403                 277
         Accounts receivable from US Bank                      1,655      3,074      5,861               5,127
         Prepaid expenses and deposits                           161        173        200                 158
         Inventory                                               436        313        318                 326
      SUBTOTAL - CURRENT ASSETS                                6,099      7,430      9,610               9,113

          Fixed assets (property plant and equipment)          5,885      4,050      2,750               2,338
          Deferred financing costs                                 0          0          0                   0
          Deposits and other assets                              333        246        169                 124

          TOTAL ASSETS                                        12,316     11,726     12,530              11,576

    LIABILITIES AND SHAREHOLDER EQUITY
    Current Liabilities
           Accounts payable and accrued liabilities            1,843      1,737      1,581               1,450
           Payable to deployment partners                      1,850      3,284      6,039               5,384
           Capital lease obligations                             266        305         52                  34
           Current portion of asset retirement oblig.             30         30        113                 112
           Current portion of leasehold inducement                39         39         39                  39
           Current portion of long term debt                       0          0          0                   0
           Customer deposits and deferred revenue                237        279        311                 380
    SUBTOTAL - CURRENT LIABILITIES                             4,265      5,717      8,134               7,399

    Long Term Liabilities
          Capital lease obligations                              314         36         27                 18
          Convertible promisory note                               0          0          0                  0
          Long term debt                                           0          0          0                  0
          Deferred revenue                                       195        175        131                131

    SUBTOTAL - LONG TERM LIABILITIES                             698        382        401                378

    Shareholders' Equity
          Share capital                                        27,458     27,553     27,624             27,624
          Warrants                                                259        259          0                  0
          Equity portion of convertible promisory note              0          0          0                  0
          Contributes Surplus                                   2,536      2,879      3,387              3,407
          Deficit                                             (22,899)   (25,064)   (27,018)           (27,232)
    SUBTOTAL - SHAREHOLDERS' EQUITY                             7,354      5,627      3,993              3,799

    TOTAL LIABILITIES + SHAREHOLDER EQUITY                    12,316     11,726     12,529              11,576



    Valuation - Current Price                                   FY08       FY09       FY10     FY11e     FY12e
    Current Price                               $   0.55
    Current Market Cap (000's) F.D.             $ 27,368
    Current Enterprise Value (000's)            $ 24,151
    P/Sales                                                       1.9        1.3        1.0      0.7        0.6
    EV/Sales                                                      1.7        1.1        0.9      0.6        0.5
    EV/EBITDA                                                    N.M.       30.5       40.7     10.5        5.4
    P/E                                                          N.M.       N.M.       N.M.     90.7        9.5

    Valuation - Target Price                                    FY08       FY09       FY10     FY11e     FY12e
    Target Price                                $   0.95
    Target Market Cap (000's)                   $ 47,273
    Target Enterprise Value (000's)             $ 44,055
    P/Sales                                                       3.3        2.2        1.7      1.3       1.0
    EV/Sales                                                      3.1        2.1        1.6      1.2       0.9
    EV/EBITDA                                                    N.M.       N.M.       N.M.     19.2       9.9
    P/E                                                          N.M.       N.M.       N.M.     N.M.      16.5


    % potential share price appreciation                73%




6     |    UPDATE                                                                                           Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)
                                                                                                                     Tio Networks Corp. (V-TNC) – February 28, 2011




Disclosure Fact Sheet
  Ratings                                                                             Price Volatility / Risk
BUY : recommendation: stock is expected to appreciate from its current                SPECULATIVE : The Company has no established operating revenue, and/or
price level at least 10-20% in the next 12 months.                                    balance sheet or cash flow concerns exist. Typically low public float or lack
NEUTRAL : recommendation: stock is expected to trade in a narrow range                of liquidity exists. Rated for risk tolerant investors only.
from its current price level in the next 12 months.                                   ABOVE AVERAGE : Revenue and earnings predictability may not be estab-
SELL : recommendation: stock is expected to decline from its current price            lished. Balance sheet or cash flow concerns may exist. Stock may exhibit
level at least 10-20% in the next 12 months.                                          low liquidity.
U/R : Under Review                                                                    AVERAGE : Average revenue and earnings predictability has been estab-
N/R : No Rating                                                                       lished; no significant cash flow/balance sheet concerns are foreseeable
Analyst recommendations and targets are based on the stock’s expected                 over the next 12 months. Reasonable liquidity exists. Price Volatility/Risk
return over a 12-month period or may be based on the company achiev-                  analysis while broad based includes the risks associated with a company’s
ing specific fundamental results. Under certain circumstances, and at the              balance sheet, variability of revenue or earnings, industry or sector risks,
discretion of the analyst, a recommendation may be applied for a shorter              and liquidity risk.
time period. The basis for the variability in the expected percentage change
for a recommendation, relates to the differences in the risk ratings applied
to individual stocks. For instance stocks that are rated Speculative must
be expected to appreciate at the high end of the range of 10-20% over a
12-month period.

  Analyst Certification

I, Pardeep S. Sangha, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject securities or issuers.
I also certify that no part of my compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in
this report. I am the research analyst primarily responsible for preparing this report.

  Research Disclosures

                                                                                                                                                       Applicability
1) PI Financial Corp. and its affiliates’ holdings in the subject company’s securities, in aggregate exceeds 1% of each company’s
   issued and outstanding securities.                                                                                                                     1) No
2) The analyst(s) responsible for the report or recommendation on the subject company, a member of the research analyst’s
   household, and associate of the research analyst, or any individual directly involved in the preparation of this report, have a
   financial interest in, or exercises investment discretion or control over, securities issued by the following companies.                                2) No
3) PI Financial Corp. and/or its affiliates have received compensation for investment banking services for the subject company
   over the preceding 12-month period.                                                                                                                    3) No
4) PI Financial Corp. and/or its affiliates expect to receive or intend to seek compensation for investment banking services
   from all companies under research coverage within the next 3 months.                                                                                   4) No
5) PI Financial Corp. and/or its affiliates have managed or co-managed a public offering of securities for the subject company in the past 12 months.      5) No
6) The following director(s), officer(s) or employee(s) of PI Financial Corp. is a director of the subject company in which PI provides
   research coverage.                                                                                                                                      6) No
7) A member of the research analyst’s household serves as an officer, director or advisory board member of the subject company.                             7) No
8) PI Financial Corp. and/or its affiliates makes a market in the securities of the subject company.                                                       8) No
9) Company has partially funded previous analyst visits to its projects.                                                                                   9) No
10) Additional disclosure:                                                                                                                                10) No

  General Disclosure

The affiliates of PI Financial Corp. are PI Financial (US) Corp., PI Financial Services Corp., and PI Capital Corp.
Analysts are compensated through a combined base salary and bonus payout system. The bonus payout is amongst other factors determined by rev-
enues generated directly or indirectly from various departments including Investment Banking. Evaluation is largely on an activity-based system that
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prior express written permission of PI Financial Corp.
PI Financial Corp.’s policies and procedures regarding dissemination of research, and stock rating and target changes can be reviewed on our corporate
website at www.pifinancialcorp.com (Research: Research and Conflict Disclosure)


Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)                                                                                           UPDATE       |   7
                                                                                                               Tio Networks Corp. (V-TNC) – February 28, 2011




The attached summarizes PI’s analysts review of the material operations of the attached company(s).

Analyst                      Company                              Type of Review                    Operations / Project                    Date
Pardeep S. Sangha            Tio Networks Corp.                   Management Update                 Vancouver BC                            02/11


    Disclosure to US Residents
PI Financial (US) Corp. is a U.S. registered broker-dealer and subsidiary of PI Financial Corp. PI Financial (US) Corp. accepts responsibility for the contents
of this research report, subject to the terms and limitations as set out above. U.S. residents seeking to effect a transaction in any security discussed
herein should contact PI Financial (US) Corp. directly.

Recommendations                                           Number of Recommendations                                                 Percentage

BUY                                                                    44                                                             89.80%
NEUTRAL                                                                  4                                                             8.16%
SELL                                                                     1                                                             2.04%
U/R                                                                      0                                                             0.00%
N/R                                                                      0                                                             0.00%

TOTAL                                                                  49



    Stock Rating and Target Changes
For reports that cover more than six subject companies, the reader is referred to our corporate web site for information regarding stock ratings and
target changes. www.pifinancialcorp.com (Research: Research and Conflict Disclosure)




                                                                                    Tio Networks Corp. (Initiated Coverage Sep 11/07)
      $1.00
                                                                                    Date            Rating Change        Target Change             Share Price
      $0.90
                                                                                    May 17/10       Buy                  $0.85 to $0.95            $0.55
      $0.80
                                                                                    Jul 21/09       Buy                  $0.65 to $0.85            $0.46
      $0.70                                                                         Mar 20/09       Buy                  $0.45 to $0.65            $0.45
      $0.60                                                                         Nov 17/08       Buy                  $1.10 to $0.45            $0.195
                                                                                    Sep 19/08       Buy                  $1.50 to $1.10            $0.55
      $0.50
      $0.40
      $0.30
      $0.20
      $0.10
      $0.00
        Fe 8




        Fe 9




        Fe 0
        M 8




        M 9




        M 0




              11
        No 8




        No 9




        No 0
               8




               9




        Au 0
              0




              0

              0




              0

              1




              1
              0




              0




              1
            -0




            -0




            -1
           v-




           v-




           v-
           b-




           b-




           b-




           b-
          g-




          g-




          g-
         ay




         ay




         ay
        Fe



        Au




        Au




8   |   UPDATE                                                                              Pardeep S. Sangha, B.A. Sc., MBA | Sharon Wang, M.Sc. (Finance)
Capital Markets Group

Bert Quattrociocchi, BA, CFA
Executive Vice President, Head of Capital Markets
604.664.2925


Research Analysts                                                      Institutional Sales                                            Investment Banking
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Sheila Broughton, MBA, CFA                                             Jim Danis, B.Sc. (Hons.)                                       Blake Corbet, BA
604.664.2695                                                           604.718.7551                                                   604.664.2967
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                                                                                                                                                             .
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403.543.2823                                                           604.664.2963
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                                                                       416.883.9045
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604.718.7541                                                           604.718.7532                                                   Calgary
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Technology                                                                                                                            403.543.2918
Pardeep S. Sangha, B.A.Sc., MBA
                                                                       Institutional Trading
604.718.7528
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Research Associates                                                    Joe Tibble
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403.543.2822
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604.664.2789


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