Snakk to tap investors for $2 million

See also: ‘We need to become profitable in 12 months’ — Snakk CEO

Snakk Media [NZX: SNK] plans to tap investors for $2 million and shift over to the fledgling NXT market from the NZAX.

The capital raising is expected within the next month, with the offer available to all New Zealand-based investors and priority to be given to existing shareholders.

Details of the capital raising, which will fund staff recruitment, expansion into new markets and investment in technology partnerships, are still being finalised.

"Over the past nine months, the operational performance across key areas of the business has significantly improved," chief executive Mark Ryan says. "Our cashflow is better than expected, our gross margins have continued to rise, and our cash usage has significantly decreased. All of this puts us in a better position to achieve our goals with less funding."

The offer comes after Snakk's 2015 annual report was tagged by auditor Staples Rodway, which cited a "material uncertainty" over the company's ability to meet revenue targets and reach a financing agreement, while keeping an unqualified opinion on the accounts. Snakk later issued a statement saying it had sufficient cash reserves to fund its growth.

The company also plans to migrate to NZX's NXT market for small-to-medium sized firms, joining G3 Group, the mail operations and document management company, and the sole listing on the fledgling market.

The NZX's new platform comes with a less onerous disclosure regime requiring regular operating metrics rather than the continuous disclosure on the main board. NXT will ultimately replace the decade-old secondary board, the NZ Alternative Index (NZAX), which has languished from a lack of investor interest.

Snakk shares last traded at 4.9c and have declined 31% this year. It joined the NZAX in a compliance listing in 2013 at 6.5c.

Earlier this month, Snakk said sales rose to $2.3 million in the three months ended June 30, from $1.9 million in the same period a year earlier.

On a year-on-year basis the rate of cash usage fell 83%, with $146,000 spent in the first quarter, the lowest for the company in a three-month period, it says.

Gross margin rose 70%, it says, without providing a specific figure.

(BusinessDesk)