Swarmio Applies for Creditor Protection

Swarmio Media Holdings Inc sought creditor protection in the Ontario Superior Court of Justice last week.

The Court agreed to some of its initial requests (it stayed proceedings until July 1, appointed a monitor, agreed to a debtor-in-possession or DIP loan) and scheduled a “comeback” hearing for June 30, at which point Swarmio says it will request the Court approve a sale and investment solicitation process that will allow it to emerge from creditor protection as “a going concern,” albeit one with a new owner.

According to documents filed with the court, the unnamed company behind the $135,000 DIP loan  has confirmed its intention to bid in the sale process. This company already has ties to Swarmio—one of its principals is a former Swarmio director and principal of one of Swarmio’s “most significant business partners.”

The reason we’re discussing Swarmio, which started life as Ubique Networks, is because it has an office in Sydney and, for a brief moment in March 2020, when it was on the receiving end of a $250,000 loan from ACOA and a $338,369 grant from the National Research Council, it was  a “Cape Breton” technology company.

The truth, as always, is somewhat more complicated.


Go public

The last time I reported on Swarmio, in 2020, it was poised to go public—listing on the on the Calgary-based TSX Venture Exchange (TSX.V) by means of a reverse takeover (RTO) of a company called Cairo Resources, a so-called Capital Pool Company created for no purpose other than to be acquired by a company seeking to go public without the fuss of an initial public offering (IPO).

Swarmio co-founder and CEO Vijai Karthigesu assured me the deal was scheduled to go through in May 2020, although he added that he was “hoping the coronovirus doesn’t bring the entire market down!”  As it turned out, the deal fell through in April 2020 because, according to Entrevestor, “COVID-19 was driving down stock markets.”

Photographs of five men who are officers and/or board members of Swarmio Media Holdings Inc

But Swarmio nevertheless managed to go public by creating a new holding company—British Columbia-registered Swarmio Media Holdings Inc—selling $9 million worth of shares in a 2021 private placement and listing on the Canadian Stock Exchange (CSE) by means of a reverse takeover of the holding company.

Swarmio is now structured as three companies:

Swarmio Media Holdings Inc (the parent company) is the holding company established for the reverse takeover. It’s registered in British Columbia company with an office in Vancouver and holds 100% of the equity of Swarmio Inc. According to the Swarmio website, its board of directors includes:

Swarmio co-founder and CEO Vijai Karthigesu (board chair)

Swarmio co-founder and CTO Sorin Stoian

Swarmio EVP of global sales Tesh Kapadia

Swarmio CFO Jonathan Visva

Last40Ventures general partner (and former Innovacorp VP) Andrew Ray

Founder and CEO of WestBridge Telecom (“one of Swarmio’s strategic telco distribution partners”) Elie Jeitani (who resigned from the board in June 2023)

Swarmio Inc, a wholly-owned subsidiary of Swarmio Media Holdings Inc, is the operating entity of the Swarmio Group and a federal corporation under the Canada Business Corporations Act with a registered office in Sydney. Swarmio Inc employs the majority of the company’s employees and owns the majority of the company’s assets, including intellectual property. Employees are located in Ontario and Nova Scotia (Halifax and Sydney). Its directors are Karthigesu, Stoian and Ray.

Swarmio Media Inc is a federal corporation registered on 5 May 2020. Its head office is in Nova Scotia (I’ve seen it listed as both Halifax and Sydney). Swarmio Media is the signatory to a majority of the company’s material contracts with its key suppliers and partners. The company lists one director: Vijai Karthigesu

Although the “registered offices” for two of these companies are in Nova Scotia and Swarmio has benefited greatly from ACOA largesse on the understanding that it is an Atlantic Canadian venture, top Swarmio management never relocated from Ontario.



Back in 2020, I calculated that, since its founding in 2014, Swarmio has been on the receiving end of a significant amount of government funding in various forms. Its chief benefactor was Innovacorp, the provincial venture capital fund, which invested $3.5 million between 2015-2016 and 2020-2021, getting in its last $320,000 investment before it was unceremoniously shuttered by Premier Tim Houston in 2022. (Houston merged Innovacorp with Nova Scotia Business Inc. and Invest Nova Scotia Fund to create a new Crown corporation—Invest Nova Scotia—managed and controlled by his economic development minister.)

In fact, as Swarmio was preparing to go public in 2021, Private Capital Journal reported that upon closing of the acquisition:

Vijai Karthigesu and Innovacorp will be the only shareholders beneficially controlling over 10% of outstanding shares with ownership of 9,619,400 common shares and 10,334,708 common shares respectively.

Those shares, I should add, have tanked—falling from $0.56 when Swarmio first listed to a fraction of $0.01 when it applied for creditor protection.

Since 2020, when I last did the math, Swarmio has benefited from additional government money (including that last Innovacorp injection), so I’ve updated my table to reflect the new total: $8.2 million. (The documents filed with the Ontario Court reference two loan agreements worth a total of $250,000—$38,100 still outstanding—with Business Development of Canada which I haven’t included because I wasn’t sure of the dates).

DateAmountType of FundingOrganizationProgram Purpose
23 October 2015$500,000Conditionally Repayable ContributionACOABusiness Development ProgramDevelop a gaming experience with no "lag" time
8 July 2015$498,000ContributionNational Research Council CanadaN/ATo support a firm in the Computer systems design and related services (except video game design and development) (NAICS: 541514) with a research and development project
18 July 2016$499,657ContributionNational Research Council CanadaN/ATo support a firm in the Computer systems design and related services (except video game design and development) (NAICS: 541514) with a research and development project
18 January 2017$468,750Conditionally Repayable ContributionACOABusiness Development ProgramCommercialize recently developed "lagless" gaming technology
31 March 2017$50,000Non-Repayable ContributionACOABDP - Productivity and Business SkillsHire a chief revenue officer
18 April 2018$500,000Conditionally Repayable ContributionACOABusiness Development ProgramExecute go to market strategy
29 October 2018$50,000Non-Repayable ContributionACOA BDP - Productivity and Business SkillsHire a financial controller to streamline financial planning
15 October 2019$250,000Unconditionally Repayable ContributionACOAREGI - Business Scale-up and ProductivityCommercialize Swarmio eSports Platform in South Asia
17 February 2020$338,369ContributionNational Research Council of CanadaIndustrial Research Assistance Program (IRAP)Edge Computing Environment for Infrastructure Service Providers
1 June 2020$100,000Unconditionally Repayable ContributionACOAREGI - Business Scale-up and ProductivityProvide assistance to mitigate impacts of Covid-19
17 May 2021$30,000ContributionNational Research Council CanadaIndustrial Research Assistance Program – Contributions to FirmsEdge Computing Environment for Infrastructure Service Providers
21 June 2021$30,000ContributionNational Research Council CanadaIndustrial Research Assistance Program – Youth Employment ProgramSwarmio is involved in the development eSports platform. This project for the youth involves data analytics, Power BI dashboard presentations of KPIs, and creation of user flows and story maps and stream statistics management.
9 August 2021$502,609ContributionNational Research Council CanadaIndustrial Research Assistance Program – Contributions to FirmsThe Unified Payments Platform (Swarmio Pay) project is designed to make the process of integrating new payment processors from multiple global networks more streamlined and efficient.
18 August 2021$50,000Non-Repayable ContributionACOAREGI - Productivity and Business SkillsHire a Vice President, Product Strategy
31 July 2022$301,000ContributionNational Research Council CanadaIndustrial Research Assistance Program – Contributions to FirmsGraphQL Integration and Caching
19 August 2022$500,000Unconditionally Repayable ContributionACOAREGI - Business Scale-up and ProductivityTo commercialize Swarmio eSports platform in the Philippines
1 January 2023$103,353ContributionNational Research Council CanadaIndustrial Research Assistance Program – Contributions to FirmsAmended GraphQL Integration and Caching
2015-2016$500,000Early stage VC investmentInnovacorp
2016-2017$200,000Early stage VC investmentInnovacorp
2017-2018$300,000Early stage VC investmentInnovacorp
2018-2019$2,000,000Early stage VC investmentInnovacorp
2019-2020$180,000Early stage VC investmentInnovacorp


Failed attempts

Life is not easy for tech startups, I get that, and having watched BlackBerry the other night (highly recommend) I find myself reading the description of Swarmio’s post-listing struggles with something like sympathy—certainly for its employees. Swarmio has missed payroll and the company’s 22 full-time Canadian employees are owed approximately $1,099,097. (The filings don’t mention anything owed the company’s approximately 50 independent consultants, most of whom are located outside Canada.)

Everything, it seems, took longer “than expected” post-listing from the sales cycle, to the contract negotiations with telcoms, to the implementation and integration of Swarmio’s technology into the telecoms’ existing platforms.

The court filings say Swarmio pursued “a number of strategic alternatives” during this two-year period, including a failed equity financing, a failed attempt to sell the business to a third party, a failed attempt to sell the business to one of its telecoms partners and a failed attempt to generate revenue through a new business line.

After almost a decade of operation, the company “still does not generate material revenue from its operations, and it has exhausted the liquidity raised from its initial public offering and rounds of secured and unsecured debt, and equity financing during 2022.” As of 31 December 2022, the company had assets with a book value of approximately $1.2 million and debts approaching $11 million:

…the Swarmio Group…is unable to pay its obligations as they generally become due. They are in default of their secured debt obligations. They have missed payroll. They owe source deductions. They have received demand letters from various trade creditors. And they do not have liquidity to pay suppliers and employees without interim financing.


Value for money?

Swarmio has three main products, Swarmio Matrix, Swarmio Hive and Swarmio Pay.

I can’t explain the technology behind them but I can explain the goals: Swarmio aims, first, “to enhance” the gaming experience of gamers by reducing network lag time or latency (Matrix); second, to help telecoms “penetrate the gaming market and monetize the use of gaming platforms by their own customers” (Hive); and third, to help game publishers and distributors “reach and monetize the gamers in regions where the credit card penetration is very low.”

I’m not a gamer, but I have been learning lately about the monetization of the genre—how it’s no longer enough to simply sell a consumer an expensive game, better you should give them the game then sell to them constantly as they play, charging them for extra content or the chance to advance in an endless series of “micro-transactions” that can involve real money or in-game currency (purchased with real money).

It’s a slightly different flavor of the model that let’s you buy a desktop printer for next to nothing then soaks you for ink and toner and it’s become so prevalent, it’s making companies that simply sell you a thing that is then yours to use seem passé. (Best is when you can both sell the product for big bucks and continue selling over its lifetime, think: John Deere’s practice of selling tractors but refusing to allow owners to repair them.)

But I digress, the point is, had the federal and provincial governments gone to the public in 2015 and said, “Should we spend $8.2 million of your money to improve the gaming experience for gamers and facilitate its monetization by telecoms and game developers OR should we build some affordable housing?” I like to think the public would have opted for the housing.

Almost 10 years later, we would have had some affordable housing. Instead, we’re left (presumably) as owners of 9,619,400 common shares of a company on the verge of bankruptcy.