20-F/A: Locafy Limited Files Amended Annual Report After Accounting Firm Error

Locafy Limited has filed an amendment to its annual report on Form 20-F to correct an error in the report of its independent registered public accounting firm.

Summary

• Locafy Limited has amended its annual report on Form 20-F due to an error in the original filing.
• The amendment solely addresses the incorrect report from the company's independent auditor, Grant Thornton.
• The financial statements included in the report are for the fiscal year ended June 30, 2024.
• The company experienced a net loss of $2,988,469 and net cash outflows from operating activities of $1,112,902 during the year ended June 30, 2024.
• As of June 30, 2024, the company had 1,382,185 ordinary shares outstanding.
• The company's current liabilities exceed its current assets by $1,033,667 as of June 30, 2024.
• Following a capital raise in July 2024, the company's cash assets were $1,097,689 and current liabilities exceeded current assets by $211,853 on a proforma basis as of July 1, 2024.
• The company's ability to continue as a going concern is dependent on generating additional revenues, managing costs, and potentially raising further capital.
• The company has an At The Market Offering with H.C. Wainwright & Co., LLC, allowing it to raise up to US$ 1,549,173.
• The company operates in two segments: Publishing and SEO Agency.

Sentiment

Score: 4

Explanation: The document highlights significant financial losses and concerns about the company's ability to continue as a going concern, which is a negative signal. However, the company is actively raising capital and has a growing sales pipeline, which provides some positive outlook. The overall sentiment is cautiously negative.

Positives

• The company has the ability to raise funds through equity issues, currently up to US$ 1,549,173, pursuant to an At The Market Offering.
• The company's sales pipeline continues to grow, and it is confident of achieving further sales growth.
• The company has developed online marketing technology delivered via a Software-as-a-Service (SaaS) model.
• The company's technology incorporates Entity Based SEO technology, which leads to web pages appearing more prominently in search engine results.
• The company operates a Publishing division, which includes ownership of the global directory, Hotfrog, and three additional Australian directories.

Negatives

• The company incurred a net loss of $2,988,469 for the year ended June 30, 2024.
• The company experienced net cash outflows from operating activities of $1,112,902 during the same period.
• The company's current liabilities exceed its current assets by $1,033,667 as of June 30, 2024.
• The company's ability to continue as a going concern is dependent on generating additional revenues, managing costs, and potentially raising further capital.
• The company's auditor has raised substantial doubt about the company's ability to continue as a going concern.

Risks

• The company's ability to continue as a going concern is dependent on generating additional revenues, managing costs, and potentially raising further capital.
• The company's current liabilities exceed its current assets, raising concerns about its short-term financial stability.
• The company's auditor has raised substantial doubt about the company's ability to continue as a going concern.
• The company is exposed to market risk through its use of financial instruments, specifically currency risk and interest rate risk.
• The company is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables.

Future Outlook

The company's ability to continue as a going concern is dependent on generating additional revenues from its operations, managing all costs in line with management's forecasts and, if necessary, raising further capital. Management have prepared a cash flow forecast on this basis which indicates that the Consolidated Entity will have sufficient cash flows to meet minimum operating overheads and committed expenditure requirements for the 12 month period from the date of signing the financial report if they are successful in meeting those forecasts.

Management Comments

• Management believes the Consolidated Entity and Company will continue as a going concern, after consideration of regular review of management accounts and cash flow forecast, close management of operating costs and corporate overheads, sales pipeline growth, and the ability to raise funds through equity issues.
• Management is confident of achieving further sales growth across a number of existing and new reseller customers and different product offerings.

Industry Context

The company operates in the online marketing technology sector, providing solutions for search engine optimization (SEO) and digital publishing. The company's focus on Entity Based SEO and automated content publishing aligns with current trends in digital marketing. The acquisition of scoop.com.au indicates a strategy to expand its online property portfolio and content reach.

Comparison to Industry Standards

• The company's financial performance, with a net loss of $2,988,469, is not uncommon for early-stage technology companies focused on growth and development.
• The company's reliance on external funding through equity raises is typical for companies in the SaaS and digital marketing space.
• The company's focus on developing proprietary technology, such as Entity Based SEO, is a common strategy for companies seeking a competitive advantage in the digital marketing industry.
• The company's expansion into publishing through the acquisition of scoop.com.au is a strategy used by other digital marketing companies to diversify revenue streams and increase brand visibility.
• The company's use of an At The Market Offering to raise capital is a common practice for publicly listed companies, particularly those with a need for ongoing funding.

Related Party Transactions

• In 2024, a director assigned their employment agreement to a company controlled by that director.

Stakeholder Impact

• Shareholders face the risk of further dilution due to potential capital raises.
• Employees may be concerned about the company's financial stability and future prospects.
• Customers may be impacted by the company's ability to continue providing services.
• Suppliers and creditors may be concerned about the company's ability to meet its financial obligations.

Next Steps

• The company needs to focus on generating additional revenues from its operations.
• The company needs to manage all costs in line with management's forecasts.
• The company may need to raise further capital to ensure its ability to continue as a going concern.
• The company will continue to commercialize its developed technologies and acquire complementary assets.

Key Dates

Keywords

Locafy Limited, Annual Report, Form 20-F, Financial Statements, Going Concern, SEO, SaaS, Publishing, Auditor, Grant Thornton, Share Capital, Operating Loss, Net Loss, Cash Flow, Equity, Debt, Revenue, Expenses, At The Market Offering, H.C. Wainwright & Co.