ERF Wireless intends to raise up to $7.5 million in private placement of stock

By Sheri Kasprzak

New York, Oct. 17 - ERF Wireless Inc. is in talks with an investment bank for a $7.5 million private placement.

The full details of the confidential private placement have not yet been released, but ERF said in its most recent form 10-QSB filed with the Securities and Exchange Commission that it has engaged an investment bank "with offices in 35 states" to bring the offering.

"The company has also held discussions with certain investment banking firms regarding expanding the confidential private placement to $10 million and has exchanged a term sheet with one such firm, although we can provide no assurance that we will be successful in reaching an acceptable arrangement for such services," said the report.

Separately, ERF entered into a term sheet for a $3.75 million convertible note offering. The term sheet for the two-year notes provides that the financing will be conducted in three tranches. In the first tranche, ERF will raise $1.3 million. No other details on that private placement were available.

"We anticipate that we will be successful at closing the transaction, although we can provide no assurance that we will be able to reach an acceptable arrangement for such closing," the report said in reference to the notes.

For the quarter ended June 30, the company sustained a net loss of $491,000, compared to a net loss of $89,000 for the same quarter of 2004.

"We do not have any significant credit facilities available with financing institutions or other third parties, and as such we must rely upon best-efforts third-party funding from individual accredited investors," said the earnings report. "Though we recently completed the subscription agreement for [$750,000 in] series A convertible preferred stock ... and anticipate that we will be successful at raising additional capital through private placements on a best-efforts basis, we can provide no assurance that we will be successful in any future best-efforts financing efforts.

"If we are unable to either obtain financing from external sources or generate internal liquidity from anticipated future operations, we may need to curtail acquisition plans and operations."

ERF most recently tapped the PIPE market in September with a $1.5 million convertible note deal. Under the terms of that offering, the company sold 6% notes to Global Capital Fund, LP; GCA Strategic Investment Fund Ltd.; HIPL Family Trust and DP Securities Inc.

The two-year notes were convertible into common shares at the lesser of $3.50 each or 85% of the average of the three lowest volume-weighted average prices for the 10 trading days before notice of conversion.

Based in League City, Texas, ERF is a wireless broadband services provider.

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