An Ottawa firm that says its technology can significantly boost the performance of Wi-Fi networks is looking to sell $800,000 worth of new shares as it tries to reignite its R&D efforts in the face of plummeting revenues and millions of dollars in losses.
Edgewater Wireless, which trades on the TSX Venture Exchange, says it plans to issue nearly seven million units comprised of a common share and a future purchase warrant. The non-brokered private placement is being led by management and directors of the company.
The units will be priced at 11 and a half cents each – nearly 40 per cent less than Edgewater’s current trading price. Buyers will have the option of acquiring one additional share for each unit purchased at a price of 23 cents apiece within two years of the closing date.
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The company says it plans to divide the additional funds among engineering and product development ($360,000), sales, marketing and business development ($240,000) and working capital ($240,000).
Edgewater’s latest funding bid comes as the company fights to gain market traction amid supply-chain disruptions and a severe cash-flow shortage. In a statement last week, CEO Andrew Skafel said the firm’s management and directors “are committed to our current strategic direction.”
Speeding up data flows
The company is developing what it calls “spectrum-splicing” Wi-Fi technology designed to help large venues – think stadiums or even a big-box grocery store – deliver internet connectivity to many users.
In a nutshell, Edgewater’s solution takes a traditional one-channel Wi-Fi connection that essentially funnels all traffic through one line and turns it into a “multi-lane highway,” thereby speeding up the flow of data over wireless networks.
Although the company managed to land a Fortune 50 customer in U.S. grocery chain Kroger a few years ago and achieved official vendor status with Mediacom, one of the largest cable companies south of the border, it has been unable to build on those wins.
After topping more than $400,000 in fiscal 2019, Edgewater’s revenues have been in a free fall since.
In the quarter ending Oct. 31, 2020, the most recent period for which the company has filed reports, Edgewater said it brought in no revenue at all, while posting a net loss of nearly $190,000. The company has not generated six-figure quarterly revenues since early in 2019 and has racked up total net losses of nearly $4 million over the past eight quarters.
Last fall, the Ontario Securities Commission ordered a trading freeze on Edgewater shares after the company failed to file various quarterly and year-end financial statements on time. Edgewater said “resource constraints” caused the delays.
The firm blamed some of its financial woes on problems with the output levels in its semiconductor chips, saying in late 2019 it hoped to seek new investment to rectify the issue. In its most recent financial filings, Edgewater management said its bleak revenue picture “reflects lack of silicon supply,” – an issue it’s cited for several years – and said production of new solutions was delayed due to a shortage of capital.
“We no longer have an existing inventory of key components and have not invested further in production and optimization,” the company said.
In addition, Edgewater says the COVID-19 pandemic has disrupted its fundraising efforts while hampering its efforts to test and deploy its solutions in venues such as stadiums and do proof-of-concepts for residential customers.
“We cannot estimate the long-term impact of COVID-19 on our business, financial position, operating results and cash flows,” management said in its most recent analysis, adding it expects the pandemic to continue affecting its results well into 2021.
In the past few months, Edgewater has shaken up its C-suite and advisory teams as it tries to beef up its liquidity.
Former chief financial officer Robert Harper resigned in December and was replaced by accountant Chris Olney, while two board members also stepped down. Meanwhile, the firm received a $100,000 loan from shareholders in November, and the following month Skafel agreed to loan the company $100,000 to help cover operating costs.
Despite its current struggles, the firm still says it believes its products have massive market potential.
Edgewater said earlier this month it completed a proof-of-concept for a major Tier 1 service provider in 750,000 homes with a total of more than six million connected devices.
The company said tests showed the speed and quality of Wi-Fi traffic improved significantly when its solution was used, adding that houses with the most devices experienced the biggest gains.
Skafel said last week the trial “demonstrates the magnitude of the opportunity for spectrum slicing and Edgewater.”
Edgewater’s shares were down two cents to 18 cents in late-afternoon trading on the TSX-V.