9 Spokes fights ASX suspension over going concern assumption

9 Spokes fights ASX suspension over going concern assumption

Auditor declines to express an opinion on whether the company was a going concern

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Auckland-based data insights software developer 9 Spokes has responded to a query from the Australian Stock Exchange (ASX) after its shares were suspended from quotation in late June.

The suspension came after 9 Spokes' auditor, PwC, declined to express an opinion on whether the company remained a going concern.

The auditor noted: "We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements".

The group incurred a net loss of $4.9 million and had a net operating cash outflow of $2.6 million for the year ended 31 March, 2020, while it had available cash totaling $4.7 million. 

"The group forecasts that it has sufficient funds available to continue operations for a five month period from the date these consolidated financial statements are authorised," auditor PwC noted. 

"The group will need to secure either new revenue opportunities or raise additional capital to continue operations beyond this period."

However, due to the level of uncertainty over forecasting 9 Spokes' future cash flows, its ability to secure new revenue opportunities and the absence of "formal and advanced" capital raising activity, PwC said it was unable to obtain sufficient evidence to enable it to form an opinion on whether the use of the going concern assumption was appropriate.

In its response to the ASX, dated July 2 but posted on July 7, 9 Spokes general counsel and company secretary Melisa Beight highlighted revenue from long-term contracts that were not fulfilled during 2020 but which are expected to deliver increased revenue in 2021.

Contracts for licence fees not yet fulfilled at the end of 2019 was $4 million, but at the end of 2020 that increased to $11.7 million.

9 Spokes also expressed confidence in its ability to negotiate new contracts with its banking partners and financial institutions, negotiations which it said were already under way.

Finally, 9 Spokes expressed confidence in its ability to raise new capital.

Beight said 9 Spokes considered its financial condition sufficient to warrant both its continued listing and filing of its financial report as a going concern.

"9 Spokes continues to develop business and channel opportunities, while exercising effective cost management," Beight wrote. 

"9 Spokes believes that this, together with its continued research and development in relation to its platform will assist to achieving 9 Spokes' aim of ultimately being cash flow positive."

9 Spokes was still noted as "suspended" on the ASX today.

Among the disclosures, 9 Spokes noted it had to refund, by the end of July, $243,000 it received from the government's COVID-19 wage subsidy.

9 Spokes raised $25 million ahead of listing in 2016. In October last year it won a significant contract with Bank of America as part of Microsoft's co-sell programme.

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