Doubts have been raised about New Zealand software firm 9 Spokes' ability to continue as a going concern, despite the ASX-listed company receiving government assistance through Callaghan Innovation.
9 Spokes, which is chaired by former Telecom chief executive Paul Reynolds, reported its first-half financial results on Friday showing a net loss of $4.95 million for the six months to September 30, better than the $10.56m loss the same period a year ago. Revenue more than doubled to $4.9m.
However, accumulated losses have now surpassed the company's share capital and stood at $48.9m at balance date.
9 Spokes, which provides online, software as a service for small and medium businesses, is attempting to raise capital but discussions with potential investors have not yet concluded within an expected timeframe.
The company has entered into a short-term funding facility to provide working capital in the meantime and as at September 31 had drawn down $500,000 of a $2.5m facility that carries a 6 per cent interest rate rising to 12 per cent on January 1.
The company remains actively engaged in discussion with potential investors and hopes to provide an update on progress soon.
Independent auditor PwC issued a "disclaimer of conclusion" on the financial statements, highlighting material uncertainties casting doubt on its ability to continue as a going concern.
It noted 9 Spokes had available cash of $1.6m, of which $400,000 was restricted as security for a building lease. The auditor drew attention to the conditions of the short-term funding facility, ability to obtain sufficient additional funding within the next three months and secure sustainable revenue as material uncertainties.
"As a result … we were therefore not able to obtain sufficient appropriate evidence to enable us to express a conclusion as to whether the going concern assumption is appropriate," PwC said.
9 Spokes said its reduced loss for the half year reflected both an increase in revenue and lower costs. Overall expenses reduced by 22 per cent to $2.9m.
Net cash ouflows from operating activities totalled $6.5m for the six months, compared to $9.7m for the same period a year ago.
The company also revealed it has received a New Zealand Government Callaghan Growth grant to assist with research and development.
The grant subsidises the company 20 per cent of its eligible R&D expenditure, up to $5m per year. During the first half, 9 Spokes received $492,000 from Callaghan on that basis.
A Callaghan spokeswoman said the agency had no comment to make on 9 Spokes. The government is phasing out the agency's Growth Grant programme in favour of an R&D tax break.
9 Spokes shares last traded at A2.3 cents on the ASX, having fallen from a high of 20 cents in March 2017.