AN award-winning Scottish theatre company's future is "hanging by a thread" following the decision by Creative Scotland to deny it long-term funding.

Dogstar Theatre Company, based in Inverness, applied for but did not get three-year funding from the national arts funding body, which unveiled its shake-up of arts funding two weeks ago.

Its director said the decision could mean the "end of the road" for the company.

Dogstar successes include the multi-award-winning The Tailor of ­Inverness, which has toured internationally.

It is also planning plays with leading Scottish writer Jackie Kay and a stage version of James Robertson's acclaimed novel The Testament of Gideon Mack.

Mr Robertson said that the funding decision was "incomprehensible".

Dogstar's co-director Hamish MacDonald said that without stable finances it is difficult to see how the company can continue.

Over the past three years the company has received more than £200,000 in funding from Creative Scotland, which says that cash is ­available through the new Open Project Funding pot.

The company, led by artistic directors Matthew Zajac and Hamish MacDonald, held a board meeting on Wednesday. In a statement, it said: "After years of demonstrating our ability to create, produce and tour high quality contemporary theatre to international audiences, as well as those across Scotland, it is difficult to understand what exactly Creative Scotland are looking for."

Mr MacDonald said: "We don't see what more we can do to receive the regular support we need."

The Tailor of Inverness toured areas including Eastern Europe and Australia, and Mr MacDonald said the company has been asked to stage the play in April as part of the Brits Off Broadway festival.

A Creative Scotland spokeswoman said: "It is not appropriate to discuss the details of applications with anyone other than the organisations themselves."