A Pitt Meadows company that specializes in Wi-Fi and WiMAX broadband wireless technology is dismissing recent developments suggesting the company is in dire straits.
Tranzeo Wireless Technologies Inc. (TSX: TZT) is facing delisting from the Toronto Stock Exchange, and its auditors have expressed “substantial doubt” the company can continue as a going concern.
On July 25, the TSX announced it is reviewing Tranzeo’s common shares. The company has been given 120 days to regain compliance with listing requirements.
James Tocher, Tranzeo’s president and CEO, said the company’s auditors have been issuing the same warnings for the last three years and he expects his company will keep its TSX listing, even though its per-share stock has plunged from a high of $1.67 in March 2010 to a low of $0.15 July 11.
“It is our intention to satisfy the exchange on our listing and to remain listed on the [TSX],” Tocher told Business in Vancouver.
Tocher said he could not expand on how the company plans to meet the listing requirements, although Tranzeo said in a March 31 management discussion and analysis that generating profits through sales this year is critical to the company’s “continued existence.”
Paradigm Capital analyst Barry Richards said Tranzeo is in a tough market, but added that Tocher is resilient.
“It’s probably been frustrating for Tranzeo, because they have good technology,” Richards said. “I think it’s a fragmented market with a lot of players.
“It’s a new technology, and it’s on the outside looking in.”
There are plenty of manufacturers in the wireless broadband space, but Richards said Tranzeo managed to distinguish itself by concentrating on making quality, low-cost equipment.
“They designed something very cleverly that’s low-cost,” Richards said, “and they’re very good at manufacturing.”
Sometimes referred to as Wi-Fi on steroids, WiMAX is a form of broadband wireless Internet technology that obviates the need for cable. In rural regions where it’s too expensive or otherwise impractical to hard-wire communities, WiMAX can provide wireless broadband from service providers to the home or business without costly cable installations. In other words, you never have to wait around for the cable guy to show up.
Over the last few years, Tranzeo has been investing heavily in research and development, as well as acquisitions, and burning through cash reserves in the process.
In 2007, it bought the assets of Sensoria Corp., which made wireless mesh networks (used for wireless voice, video and data delivery) and in April 2010, Tranzeo bought Aperto Networks, a San Jose-based manufacturer of broadband wireless technology.
Those investments have helped put Tranzeo into a deficit, which, according to the company’s 2010 audited financial statements, doubled to $30.2 million in 2010 from $14.4 million in 2009. The company’s cash reserves were drawn down to $72,066 in 2010 from $1.8 million in 2009.
Worse, sales were down by about $1 million in 2011’s first quarter compared with the same period in 2010, although Tranzeo managed to offset that drop with a nearly commensurate decrease in sales costs.
Tocher said the company has spent the last two years working with large service providers in places like Indonesia and India, where Tranzeo’s products are used in to install high-speed wireless data networks.
“We’re going to be meeting some pretty big milestones on shipments over the next number of weeks into India,” Tocher said. “India is definitely a market that is moving very, very quickly for us.
“It took almost two years to break into the market. Now that we’ve gone through the qualification phases … we’re shipping to India once a week.”
As of March 31, the company’s cash position was $215,311.
If Tranzeo fails to meet its TSX listing requirements, Richards said it’s “probably not the end of the world for them.”
He pointed out that the company could always list on another exchange or go private, but Richards added that whatever happens, Tranzeo needs to increase sales.
“Really, in the end, they need orders.”
At press time, Tranzeo’s stock was valued at $0.19 per share.