UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 2)
(Mark One)
OF 1934
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report _________________________
For the transition period from ___________ to ___________
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
Not Applicable
(Translation of Registrant’s Name Into English)
(Jurisdiction of Incorporation or Organization)
Tel: +65 6702 1179
(Address of Principal Executive Offices)
+
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange On Which Registered | ||
| Ordinary Shares, par value $0.003 per share | The | |||
| Warrants, No par value | GFAIW | The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of
each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31,
2021): There were
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Emerging growth company |
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | ☒ | Other ☐ |
| Standards as issued by the International | ||
| Accounting Standards Board |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
Annual Report on Form 20-F
Year Ended December 31, 2021
TABLE OF CONTENTS
| Page | ||
| PART I | ||
| ITEM 8. | FINANCIAL INFORMATION | 1 |
| A. Consolidated Statements and Other Financial Information | 1 | |
| B. Significant Changes | 1 | |
| PART III | ||
| ITEM 17. | FINANCIAL STATEMENTS | 2 |
| ITEM 18. | FINANCIAL STATEMENTS | 2 |
| ITEM 19. | EXHIBITS | 2 |
i
EXPLANATORY NOTE
This Amendment No. 2 to annual report on Form 20-F (the “Amendment No.2”) amends our annual report on Form 20-F for the year ended December 31, 2021, that was filed with the Securities and Exchange Commission (the “Commission”) on April 1, 2022 and amended on April 14, 2022 (the “Form 20-F”). In response to comments received from the staff of the Commission, our auditors have issued a new audit report to clarify (a) that the financial statements included were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and the standards of the Public Company Accounting Oversight Board (United States), (b) to correct a reference to Note 1 that should have referred to Note 2, (c) to correct an incorrect reference to negative cash flows from operating activities, and (d) to correct an incorrect reference to net loss for the year ended December 31, 2021.
As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Amendment No. 2. Other than as described above, this Amendment No. 2 speaks as of the date of the initial filing of the Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events that have occurred after the Form 20-F was originally filed on April 1, 2022.
ii
PART I
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Financial Statements
We have appended consolidated financial statements filed as part of this annual report. See Item 18 “Financial Statements.”
Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Dividend Policy
We have never declared or paid cash dividends on our ordinary shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our ordinary shares in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our ordinary shares. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also “Risk Factors—Risks Relating to Our Ordinary Shares and Warrants—We do not expect to declare or pay dividends in the foreseeable future.”
B. Significant Changes
Except as disclosed elsewhere in this annual report, no significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.
1
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide our financial statements pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The full text of our audited consolidated financial statements begins on page F-1 of this annual report.
ITEM 19. EXHIBITS
2
| * | Filed with this Amendment No. 2 to annual report on Form 20-F/A |
| ** | Furnished with this Amendment No. 2 to annual report on Form 20-F/A |
3
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| GUARDFORCE AI CO., LIMITED | ||
| By: | /s/ Lei Wang | |
| Name: | Lei Wang | |
| Title: | Chief Executive Officer | |
Date: July 11, 2022
4
GUARDFORCE AI CO., LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Guardforce AI Co., Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Guardforce AI Co., Limited (the "Company") as of December 31, 2021, the related consolidated statements of profit and loss, comprehensive loss, changes in equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
The Company is not required to have, nor are we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s recurring losses from operations and short term loans due for repayment on December 31, 2022 raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2.
Critical Audit Matter
The critical audit matter communicated below is matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Going concern assessment
The Company has incurred a net loss for the financial year ended December 31, 2021 of USD$5,491,654, and has unrestricted cash and cash equivalent of USD$12,728,783 and current liabilities of USD$22,495,748 as at December 31, 2021. As part of the current liabilities, the Company has a short term loan of USD$13.5m together with interest owed of USD $1.6m from its related party Profit Raider Investment Limited. The principal loan amount and the interest owed are due for repayment on December 31, 2022. The Company determined the repayment of this loan, and other current liabilities, raised substantial doubt as to the Company’s ability to continue as a going concern one year from the issuance date of the consolidated financial statements. In making this determination, management prepared a going concern assessment through to March 2023 with significant assumptions which included expecting revenue and operating costs, other obligations and funding options.
The principal consideration for our determination that the evaluation of management’s going concern assessment was a critical audit matter are the significant judgment and subjectivity inherent in the Company’s assumptions made in the going concern assessment and the uncertainty of the Company’s ability to secure funding before December 31, 2022.
Our audit procedures related to the evaluation of management’s going concern assessment included the following, among others:
| ● | Assessed the overall reasonableness of the Company’s going concern assessment, including significant assumptions utilized by the Company. |
| ● | Assessed the projected revenue and operating costs, liquidity of existing assets, the terms of the bank loans and related party loans and the finance facilities available. |
| ● | Reviewed the written communication between the Company and Profit Raider Investment Limited to renew the short term loan. |
| ● | Considered the impact on the Company’s working capital of the planned acquisitions in 2022. |
| ● | Evaluated the adequacy of the Company’s financial statement disclosures. |
/s/
PKF Littlejohn LLP
March, 31, 2022
PCAOB ID:
We have served as the Company's auditor since October 19, 2021.
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Guardforce AI Co., Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Guardforce AI Co., Limited and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of profit or loss, comprehensive income (loss), changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2020, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Wei, Wei & Co. LLP
Flushing, New York
April 29, 2021, except for Notes 2, 17, 18, 21 and 24 which are dated September 14, 2021
We have served as the Company’s auditor since 2019. In 2021, we became the predecessor auditor.
F-4
Guardforce AI Co., Limited and Subsidiaries
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
| As of December 31, | ||||||||||
| Note | 2021 | 2020 | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | 4 | $ | $ | |||||||
| Restricted cash | 4 | |||||||||
| Trade receivables | 6 | |||||||||
| Withholding taxes receivables | 7 | |||||||||
| Other current assets | 8 | |||||||||
| Inventories | 5 | |||||||||
| Amount due from related parties | 21 | |||||||||
| Total current assets | ||||||||||
| Non-current assets: | ||||||||||
| Restricted cash | 4 | |||||||||
| Property, plant and equipment | 9 | |||||||||
| Right-of-use assets | 10 | |||||||||
| Intangible assets, net | 11 | |||||||||
| Goodwill | 3 | |||||||||
| Withholding taxes receivable, net | 7 | |||||||||
| Deferred tax assets, net | 15 | |||||||||
| Other non-current assets | 8 | |||||||||
| Total non-current assets | ||||||||||
| Total assets | $ | $ | ||||||||
| Liabilities and equity | ||||||||||
| Current liabilities: | ||||||||||
| Trade and other payables | 12 | $ | $ | |||||||
| Borrowings | 13 | |||||||||
| Borrowings from related parties | 21 | |||||||||
| Current portion of operating lease liabilities | 10 | |||||||||
| Current portion of finance lease liabilities, net | 14 | |||||||||
| Other current liabilities | 12 | |||||||||
| Income tax payables | 15 | |||||||||
| Amount due to related parties | 21 | |||||||||
| Total current liabilities | ||||||||||
| Non-current liabilities: | ||||||||||
| Borrowings | 13 | |||||||||
| Operating lease liabilities | 10 | |||||||||
| Borrowings from related parties | 21 | |||||||||
| Finance lease liabilities, net | 14 | |||||||||
| Other non-current liabilities | ||||||||||
| Provision for employee benefits | 16 | |||||||||
| Total non-current liabilities | ||||||||||
| Total liabilities | ||||||||||
| Equity | ||||||||||
| Ordinary shares – par value $ | 17 | |||||||||
| Subscription receivable | ( | ) | ( | ) | ||||||
| Additional paid in capital | ||||||||||
| Legal reserve | 20 | |||||||||
| Warrants reserve | ||||||||||
| Retained earnings (Deficit) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||
| Capital & reserves attributable to equity holders of the Company | ( | ) | ||||||||
| Non-controlling interests | ||||||||||
| Total equity (deficit) | ( | ) | ||||||||
| Total liabilities and equity (deficit) | $ | $ | ||||||||
| * | Giving retroactive effect to the reverse split on August 20, 2021. |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Guardforce AI Co., Limited and Subsidiaries
Consolidated Statements of Profit and Loss
(Expressed in U.S. Dollars)
| For the years ended December 31, | ||||||||||||||||
| Note | 2021 | 2020 | 2019 | |||||||||||||
| Revenue | $ | $ | $ | |||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||||||
| Gross profit | ||||||||||||||||
| Provision for and write off of withholding taxes receivable | ( | ) | ( | ) | - | |||||||||||
| Selling, distribution and administrative expenses | 19 | ( | ) | ( | ) | ( | ) | |||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income, net | ||||||||||||||||
| Foreign exchange (losses) gains, net | ( | ) | ||||||||||||||
| Finance costs | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss (Profit) before income tax | ( | ) | ( | ) | ||||||||||||
| Provision for income tax benefit (expense) | 15 | ( | ) | ( | ) | |||||||||||
| Net (loss) profit for the year | ( | ) | ( | ) | ||||||||||||
| Less: net loss (profit) attributable to non-controlling interests | ( | ) | ||||||||||||||
| Net (loss) profit attributable to equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | |||||||||
| (Loss) Earnings per share | ||||||||||||||||
| Basic and diluted loss attributable to the equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Weighted average number of shares used in computation: | ||||||||||||||||
| Basic and diluted | * | * | ||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Guardforce AI Co., Limited and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Expressed in U.S. Dollars)
| For the years ended December 31, | ||||||||||||||||
| Note | 2021 | 2020 | 2019 | |||||||||||||
| Net (loss) profit for the year | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Currency translation differences | 2.6 | ( | ) | ( | ) | |||||||||||
| Remeasurements of defined benefit plan | ( | ) | ( | |||||||||||||
| Total comprehensive (loss) income for the year | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Attributable to: | ||||||||||||||||
| Equity holders of the Company | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Guardforce AI Co., Limited and Subsidiaries
Consolidated Statements of Changes in Equity
(Expressed in U.S. Dollars)
| Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Amount ($0.001 par) | Subscription Receivable | Additional Paid-in Capital | Legal Reserve | Warrants Reserves | Other Comprehensive Income | Retained earnings (Deficit) | Non- controlling Interests | Total Equity | |||||||||||||||||||||||||||||||
| Balance as at December 31, 2018 (see Note 17) | * | $ | $ | ( | ) | $ | $ | $ | - | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Remeasurements of defined benefit plan | - | - | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||
| Net profit for the year | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Balance as at December 31, 2019 (see Note 17) | * | $ | $ | ( | ) | $ | $ | $ | - | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||
| Capital distribution | - | - | - | ( | ) | - | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation expenses | * | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Remeasurements of defined benefit plan | - | - | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2020 | - | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance as at December 31, 2020 | * | $ | $ | ( | ) | $ | $ | $ | - | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
| Currency translation adjustments | - | - | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation expenses | - | ( | ) | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Remeasurements of defined benefit plan | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for acquisition of Handshake (see Note 17) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for acquisition of AI Singapore (see Note 3) | - | - | - | ( | ) | - | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||
| Issuance of ordinary shares through initial public offering (“IPO”) (see Note 17) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of warrants through initial public offering (“IPO”) (see Note 17) | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2021 | - | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance as at December 31, 2021 | $ | $ | ( | ) | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements
F-8
Guardforce AI Co., Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net (loss) profit | $ | ( | ) | $ | ( | ) | $ | |||||
| Adjustments for: | ||||||||||||
| Depreciation | ||||||||||||
| Amortization of intangible assets | ||||||||||||
| Interest income | ( | ) | ||||||||||
| Stock-based compensation | ||||||||||||
| Finance costs | ||||||||||||
| Increase in deferred tax assets | ( | ) | ( | ) | ||||||||
| Recovery of doubtful accounts, net | ( | ) | ( | ) | ||||||||
| Increase in provision for withholding tax receivables | ||||||||||||
| Write off of withholding tax receivables | ||||||||||||
| Loss/(Gain) from fixed assets disposal | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| (Increase)/Decrease in trade and other receivables | ( | ) | ||||||||||
| (Increase)/Decrease in other current assets | ||||||||||||
| (Increase)/Decrease in inventories | ( | ) | ( | ) | ||||||||
| Decrease/(Increase) in amount due from related parties | ( | ) | ( | ) | ||||||||
| (Increase)/Decrease on other non-current assets | ( | ) | ( | ) | ||||||||
| (Decrease) in trade and other payables | ( | ) | ( | ) | ( | ) | ||||||
| (Increase)/Decrease in other current liabilities | ( | ) | ( | ) | ||||||||
| Increase in income tax payables | ||||||||||||
| (Decrease)/increase in amount due to related parties | ( | ) | ( | ) | ||||||||
| Decrease in withholding taxes receivable | ( | ) | ||||||||||
| Decrease in provision for employee benefits | ||||||||||||
| Net cash inflows from operating activities | ||||||||||||
| Cash flows from investing activities | ||||||||||||
| Payment for property, plant and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Proceeds from disposal of property, plant and equipment | ||||||||||||
| Payment for intangible assets | ( | ) | ( | ) | ( | ) | ||||||
| Cash acquired from acquisition of Handshake | ||||||||||||
| Net cash (outflows) from investing activities | ( | ) | ( | ) | ( | ) | ||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from issues of shares | ||||||||||||
| Proceeds from borrowings | ||||||||||||
| Repayment of borrowings | ( | ) | ( | ) | ( | ) | ||||||
| Interest paid | ( | ) | ( | ) | ( | ) | ||||||
| Lease payments | ( | ) | ( | ) | ( | ) | ||||||
| Net cash inflows (outflows) from financing activities | ( | ) | ( | ) | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||||||
| Net increase in cash and cash equivalents, and restricted cash | ||||||||||||
| Cash and cash equivalents, and restricted cash at beginning of year | ||||||||||||
| Cash and cash equivalents, and restricted cash at end of year | $ | $ | $ | |||||||||
| Non-cash investing and financing activities | ||||||||||||
| Leasehold improvements through finance leases | $ | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Guardforce AI Co., Limited and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in U.S. Dollars)
| 1. | NATURE OF OPERATIONS |
Guardforce AI Co., Limited (“Guardforce”) is a company incorporated and domiciled in the Cayman Islands under the Cayman Islands Companies Act on April 20, 2018. The address of its registered office was 96 Vibhavadi Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210, Thailand, which has changed to 10 Anson Road, #28-01 International Plaza, Singapore 079903 since November 2021. Guardforce is controlled by Mr. Tu Jingyi (“Mr. Tu”) through Guardforce AI Technology Limited (“AI Technology”). The Company’s ordinary shares and warrants are listed under the symbol “GFAI” and “GFAIW”, respectively, on the Nasdaq Capital Market upon the completion of an initial public offering on September 28, 2021.
Guardforce AI Holding Limited (“AI
Holdings”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on May 22, 2018. AI Holdings
is a
Guardforce AI Robots Limited (“AI
Robots”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on May 22, 2018. AI Robots is
a
Guardforce AI (Hong Kong) Co., Limited
(“AI Hong Kong”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance (Chapter 622), on May 30, 2018.
AI Hong Kong is a
Southern Ambition Limited (“Southern
Ambition”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on August 3, 2018. Southern
Ambition is a
Horizon Dragon Limited (“Horizon
Dragon”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on July 3, 2018. Horizon Dragon
is a
Guardforce AI Group Co., Limited (“AI
Thailand”) was incorporated in Thailand under the Civil and Commercial Code at the Registry of partnerships and Companies, Bangkok
Metropolis, Thailand,
Guardforce Cash Solutions Security Thailand
Co., Limited (“GF Cash (CIT)”) was incorporated in Thailand under the Civil and Commercial Code at the Registry of partnerships
and Companies, Bangkok Metropolis, Thailand, on July 27, 1982 and has 3,857,144 outstanding shares.
F-10
The reorganization of Guardforce and its subsidiaries (collectively referred to as the “Company) was completed on December 31, 2018. Pursuant to the reorganization, Guardforce became the holding company of the companies, which were under the common control of the controlling shareholder before and after the reorganization. Accordingly, the Company’s financial statements have been prepared on a consolidated basis by applying the predecessor value method as if the reorganization had been completed at the beginning of the earliest reporting period. The Company engages principally in providing cash management and handling services located in Thailand.
On March 25, 2021, the Company acquired
On November 1, 2021, the Company entered
into a Transfer Agreement (the “Singapore Agreement”) to acquire
On November 18, 2021, the Company entered
into a Transfer Agreement (the “Macau Agreement”) to acquire
On November 18, 2021, the Company entered
into another Transfer Agreement (the “Malaysia Agreement”) to acquire
GFAI Robotics Group Co., Limited (“AI
Robotics”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on December 6, 2021. AI Robotics
is a
F-11
The following diagram illustrates the Company’s legal entity ownership structure as of December 31, 2021:
Subsequent to December 31, 2021, the
Company has included the following
GFAI Robot Service (Hong Kong) Limited (“AI HK”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance (Chapter 622), on January 18, 2022. AI HK is an investment holding company.
Guardforce AI Robot Service (Shenzhen) Co., Limited (“AI Shenzhen”) was incorporated in the People’s Republic of China (“PRC”) on February 23, 2022. AI Shenzhen is an investment holding company.
GFAI Robotics Services LLC (“AI US”) was incorporated in the State of Delaware on February 28, 2022. AI US commenced robotic AI solution business of selling and leasing robots.
GFAI Robot Service (Australia) Pty Ltd. (“AI Australia”) was incorporated in Australia on February 28, 2022. AI Australia commenced robotic AI solution business of selling and leasing robots.
On March 11, 2022, the Company entered
into a Sale and Purchase Agreement (the “Kewei Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen
Kewei”) to acquire
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.
The financial statements were approved by the board of directors and authorized for issuance on March 28, 2022.
| 2.1 | Basis of presentation |
The consolidated financial statements of Guardforce and subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All amounts are presented in United States dollars (“USD”) and have been rounded to the nearest USD.
On August 20, 2021, the shareholders
of the Company approved a 1 for 3 reverse split of the Company’s authorized and issued ordinary shares whereby every three shares
were consolidated into one share (the “Reverse Split”). In addition, the par value of each ordinary share increased from $
In addition, the accompanying financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
F-12
As discussed on Note 21, the Company has a loan outstanding in the principal amount of $13.51 million due and payable in full on December 31, 2022, to Profit Raider Investment Limited, or Profit Raider. The Company will require an extension of the maturity date of this loan, and the Company cannot be sure whether or not Profit Raider will extend the maturity date of the loan, or if it does, under what terms. If Profit Raider does not extend the loan, the Company will (i) seek an alternative source of funding to replace the loan; and/or (ii) seek further negotiation with Profit Raider to convert the loan to shares; and/or (iii) seek support from the Company’s largest shareholder, Mr. Tu Jingyi, who owns 40.55% (as of the date of this report) of the Company’s ordinary shares, for repayment. There can be no assurance, however, that the Company would be able to find such alternative funding on terms acceptable to the Company, if at all. If the Company cannot obtain an extension of the maturity date of the loan and are not otherwise able to refinance the loan, the Company may default on the loan and such default would have a material adverse effect on the Company’s financial condition, cash flows and results of operations and could result in an action by Profit Raider against the Company to collect the amount due under the loan along with interest, fees and any other applicable chargers. The Company considers Profit Raider is one of the Company’s shareholders, who owns 5.285% (as of the date of this report) of the Company’s ordinary shares.
In assessing the going concern, management and the Board has considered:
| - | As discussed above, the risk of default on Profit Raider loan is assessed as low. |
| - | Based on the budget and financial plans of the Company, management expects to see a positive trend in the Company’s future results. Management expects the business will be recovered in the future when the country begins to ease tough Covid pandemic control and lockdown measures. |
| - | Improved cash flows including liquidity and borrowings from future fund-raising activities and the receipt of the $10.3 million private placement proceeds on January 20, 2022. The Company’s principal uses of cash have been, and management expects will continue to be, for working capital to support a reasonable increase in our scale of operations as well as for business expansion investments, as disclosed in Note 1, the Company acquired Shenzhen Keweien Robot Service Co., Ltd. and Guangzhou Kewei Robot Technology Co., Ltd. in March 2022. |
| - | The Company has conditional and unconditional obligations as disclosed in Note 22, these commitments and contingencies are under normal course of business and are included in the budget. Regarding to the legal proceedings, as of the date of this report, the Company is a defendant in various labor related lawsuits in Thailand totaling approximately $ |
The Directors are satisfied that the Company has adequate financial resources to continue in operational existence for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, the going concern basis of accounting continues to be used in the preparation of the consolidated financial statements for the year ended December 31, 2021.
| 2.2 | Basis of consolidation |
The consolidated statements of profit and loss and other comprehensive loss, statements of changes in equity and statements of cash flows of the Company for the relevant periods include the results and cash flows of all companies now comprising the Company from the earliest date presented or since the date when the subsidiaries and/or businesses first came under the common control of the controlling shareholders, wherever the period is shorter.
The consolidated balance sheets of the Company as at December 31, 2021 and 2020 have been prepared to present the assets and liabilities of the subsidiaries under the historical cost convention.
Equity interests in subsidiaries held by parties other than the controlling shareholders are presented as non-controlling interests in equity.
All intra-group and inter-company transactions and balances have been eliminated on consolidation.
| 2.3 | Segment reporting |
IAS 14 Segment Reporting requires reporting of financial information by business or geographical area. It requires disclosures for ‘primary’ and ‘secondary’ segment reporting formats, with the primary format based on whether the entity’s risks and returns are affected predominantly by the products and services it produces or by the fact that it operates in different geographical areas.
F-13
The entity’s reportable segments are its business and geographical segments for which a majority of their revenue is earned from sales to external customers and for which:
| ● | revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or |
| ● | segment result, whether profit or loss, is 10% or more the combined result of all segments in profit or the combined result of all segments in loss, whichever is greater in absolute amount; or |
| ● | assets are 10% or more of the total assets of all segments. |
Segments deemed too small for separate reporting may be combined with each other, if related, but they may not be combined with other significant segments for which information is reported internally. Alternatively, they may be separately reported. If neither combined nor separately reported, they must be included as an unallocated reconciling item.
The Company reports in one segment including (i) the provision of cash solutions (i.e., efficient cash management) and cash handling services to customers including cash transportation, cash processing and ATM services markets in Thailand, which represents 97.6% of our revenues; (ii) information security; and (iii) robotics AI solutions.
| 2.4 | Business combinations |
The Company accounts for business combinations using the acquisition method when control is transferred to the Company, other than those between and among entities under common control. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on the bargain purchase is recognized in the statement of profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in the statement of profit or loss.
IFRS 3 Business combination does not include specific measurement guidance for transfers of businesses or subsidiaries between entities under common control. Accordingly, the Company has accounted for such transactions taking into consideration other guidance in the IFRS framework and pronouncements of other standard-setting bodies. The Company recorded assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements, and to have the consolidated balance sheet, consolidated statement of profit or loss, comprehensive income, changes in equity and cash flows reflect the results of combining entities for all periods presented for which the entities were under the transferor’s common control, irrespective of when the combination takes place.
| 2.5 | Non-controlling interest |
The non-controlling interest represents the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheet, consolidated statement of profit or loss, comprehensive income and changes in equity attributed to controlling and non-controlling interests.
| 2.6 | Critical accounting estimate and judgements |
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates during the years ended December 31, 2021, 2020 and 2019 include the provision for sales returns, provision for obsolete inventory, allowance for withholding tax receivables, allowance for doubtful accounts, useful life of fixed assets, impairment of goodwill, measurement of retirement benefit obligations, measurement of consideration and assets and liabilities acquired as business combinations, accounting for leases and valuation of deferred tax assets. The estimated amount for sales warranty on the sale of robots at December 31, 2021 and 2020 were $.
F-14
| 2.7 | Foreign currency translation |
The presentational currency of the Company is the U.S. dollar (“USD”). The functional currency of Guardforce, AI Holdings, AI Robots, Horizon Dragon, Southern Ambition, AI Singapore, AI Robotics is the USD. The functional currency of AI Hong Kong and Handshake is Hong Kong dollar. The functional currency of AI Thailand and GF Cash (CIT) are Thai Baht (“Baht” or “THB”).
The currency exchange rates that impact our business are shown in the following table:
| Period End Rate | Average Rate | |||||||||||||||||||||||
| As of December 31, | For the Years Ended | |||||||||||||||||||||||
| 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | |||||||||||||||||||
| Thai Baht | ||||||||||||||||||||||||
| Hong Kong Dollar | ||||||||||||||||||||||||
| 2.8 | Financial risk management |
| 2.8.1 | Financial risk factors |
The Company’s activities expose it to a variety of financial risks: foreign exchange risk, interest rate risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.
| (i) | Credit risk |
The Company trades only with parties that are expected to be creditworthy. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Company manages its operations to avoid any excessive concentration of counterparty risk about the Company takes all reasonable steps to seek assurance from the counterparties that they can fulfill their obligations. In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to credit loss remains low.
The carrying values of the Company’s financial assets and contract assets represent its maximum credit exposure.
| (ii) | Foreign exchange risk |
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the THB and USD. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the respective functional currency of the Company’s subsidiaries. The functional currency of the Company and majority of its overseas subsidiaries is the USD whereas the functional currency of the subsidiaries which operate in Thailand is the THB. The Company currently does not hedge transactions undertaken in foreign currencies but manages its foreign exchange risk by performing regular reviews of the Company’s net foreign exchange exposures.
If the THB had strengthened/weakened
by 1.68% against the USD (the average monthly variance during the 2-year period ended December 31, 2021 with all other variables held
constant, the post-tax profit would have been approximately $
If the THB had strengthened/weakened
by 1.56% against the USD (the average monthly variance during the 2-year period ended December 31, 2020 with all other variables held
constant, the post-tax profit would have been approximately $
| (iii) | Interest rate risk |
The Company’s exposure to changes
in interest rates are mainly attributable to its borrowings and loans. At the reporting date, based on the composition of borrowings at
December 31, 2021 (Note 13), if interest rates on borrowings had been
| (iv) | Liquidity risk |
Prudent liquidity management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities.
The Company’s primary cash requirements are for operating expenses and purchases of fixed assets. The Company mainly finances its working capital requirements from cash generated from funds raised from the IPO, operation, proceeds from bank borrowings and finance leases.
F-15
The Company’s policy is to regularly monitor current and expected liquidity requirements to ensure it maintains sufficient cash and cash equivalents and an adequate amount of committed credit facilities to meet its liquidity requirements in the short and long term.
At the reporting date, the contractual undiscounted cash flows of the Company’s current financial liabilities approximate their respective carrying amounts due to their short maturities.
The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, including interest if applicable.
| Year ended December 31, 2021 | Within 1 year | 1 to 5 years | >5 years | Total | ||||||||||||
| Trade and other payables | $ | $ | $ | $ | ||||||||||||
| Borrowings | ||||||||||||||||
| Borrowings from related parties | ||||||||||||||||
| Amount due to related parties | ||||||||||||||||
| Other liabilities | ||||||||||||||||
| Lease liabilities | ||||||||||||||||
| Finance lease liabilities | ||||||||||||||||
| Provision for employee benefits | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Year ended December 31, 2020 | Within 1 year | 1 to 5 years | >5 years | Total | ||||||||||||
| Trade and other payables | $ | $ | $ | $ | ||||||||||||
| Borrowings from financial institutions | ||||||||||||||||
| Borrowings from related parties | ||||||||||||||||
| Amount due to related parties | ||||||||||||||||
| Other current liabilities | ||||||||||||||||
| Income tax payables | ||||||||||||||||
| Lease liabilities | ||||||||||||||||
| Finance lease liabilities | ||||||||||||||||
| Provision for employee benefits | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Net Debt Analysis
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash, cash equivalents, and restricted cash | $ | $ | ||||||
| Borrowings – repayable within one year | ( | ) | ( | ) | ||||
| Borrowings – repayable within one year | ( | ) | ( | ) | ||||
| Net debt | $ | ( | ) | $ | ( | ) | ||
| 2.8.2 | Capital risk management |
The Company’s objectives on managing capital are to safeguard the Company’s ability to continue as a going concern and support the sustainable growth of the Company in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long term.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return of capital to shareholders, issue new shares or sell assets to reduce debt.
In the opinion of the directors of the Company, the Company’s capital risk is low.
| 2.8.3 | Impact of COVID-19 |
The Coronavirus Disease (COVID-19) outbreak and the measures taken to contain the spread of the pandemic have created a high level of uncertainty to global economic prospects and this has impacted the Company’s operations and its financial performance in year 2021. As COVID-19 continues to evolve with significant level of uncertainty, management of the Company is unable to reasonably estimate the full financial impact of COVID-19 on the Company’s financial results in year 2022. The Company is monitoring the situation closely and to mitigate the financial impact, it is conscientiously managing its cost by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align repayment obligations with receivable collections. Based on the Company’s most recent projections for year 2022 and with over $15 million in cash and cash equivalents and restricted cash, plus bolstered by receipt of the $10.3 million private placement proceeds on January 20, 2022 (Note 24), management of the Company believes that the Company will be able to continue to operate as a going concern in the foreseeable future for at least the next 12 months.
F-16
| 2.9 | Fair value measurements |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurement for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity.
Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: the (1) market approach, (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
Financial assets and liabilities of the Company mainly consist of cash and cash equivalents, restricted cash, trade and other receivables, amounts due from related parties, other current assets, trade payables, amounts due to related parties, accruals and other liabilities. As of December 31, 2021 and 2020, the carrying values of cash and cash equivalents, restricted cash, trade receivables, amounts due from related parties, prepayments and other current assets, trade payables, amounts due to related parties, accruals and other liabilities approximate their fair values due to the short-term maturity of these instruments.
| 2.10 | Share-based payment |
The Company accounts for material share-based payments (primarily warrants) with the fair value of the issued warrants on the date of grant and recognition of compensation cost over the vesting period for award expected to vest. The fair value of warrants is determined using the Black Scholes valuation model.
| 2.11 | Cash and cash equivalents and restricted cash |
Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
Restricted cash amounting to $
| 2.12 | Trade receivables and other receivables |
Trade and other receivables are recorded at net realizable value consisting of the carrying amount less an allowance for doubtful accounts as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts and other receivables and accounts receivable from related parties. The Company determines the allowance for its trade receivable based on aging data, historical collection experience, customer specific facts and economic conditions. The Company writes-off trade receivable when amounts are deemed uncollectible. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts.
In determining the amount of the allowance for doubtful accounts, prior to January 1, 2020, the Company applied the following percentages: 5% to receivables from 61 to 90 days; 30% to receivables from 91 to 180 days and 60% to receivables from 181 to 365 days. Account balances older than one year were charged off against the allowance after all means of collection of been exhausted (both legally and commercially speaking) and the potential for recovery was considered remote. No allowance was established for the Company’s due from related parties and other receivables as the amounts were deemed fully collectible.
During the year ended December 31, 2020, the Company revised its allowance methodology to a specific provision basis in that an allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history of its customers and current relationships with them. This revision in the allowance methodology did not have any material effect on the Company’s net accounts receivable as of December 31, 2019.
The Company did not have any write-offs
during the years ended December 31, 2021, 2020 and 2019. The Company recognized a recovery of its bad debt expense of $, $
F-17
| 2.13 | Inventories |
Inventories solely consist of robots and are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. When inventory is sold, their carrying amount is charged to expense in the period in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized as an expense in the period the impairment or loss occurs. No allowance for slow moving or obsolete inventory was recorded for the years ended December 31, 2021 and 2020.
During the years ended December 31, 2021 and 2020, all inventories were purchased from a related party.
| 2.14 | Withholding taxes receivable |
Withholding tax is a deduction from
payments made to suppliers who provide services. The withholding tax rates can vary depending on the type of income and the tax status
of the recipient. Based on tax rules currently in effect, the withholding tax rate is
Withholding tax receivable is recorded net of related provision for amount that could be challenged by the taxing authority. Such provision represents the Company’s best estimate based on recent collection history.
| 2.15 | Loans to related party |
The Company recognizes the contractual right to receive money on demand or on fixed or determinable dates as loans receivable. For those that the contractual maturity date is less than one year, the Company records as short-term loans receivable.
The Company recognizes interest income on an accrual basis using the straight-line method over the fixed or determinable dates.
| 2.16 | Property, plant and equipment |
Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.
Depreciation is calculated using the straight-line method over the following estimated useful lives.
| Estimated useful life | ||
| Leasehold improvements | ||
| Tools and equipment | ||
| Furniture, fixtures and office equipment | ||
| Vehicles | ||
| GDM machines | ||
| Robots |
| 2.17 | Assets under construction |
Assets under construction are stated at cost less impairment losses, if any. Cost comprises direct costs of construction as well as interest expense and exchange differences capitalized during the periods of construction and installation. Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for assets under construction until they are completed and ready for intended use.
F-18
| 2.18 | Intangible assets, net |
Intangible assets represent computer software. The intangible assets are recorded at historic acquisition costs, and amortized on a straight-line basis over their estimated useful lives.
Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company will be recognized as intangible assets when the criteria of intangible assets are met.
| 2.19 | Goodwill |
Following initial recognition, goodwill is stated at costs less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill related. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognized. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of In these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained.
No impairment loss on goodwill was recorded for the year ended December 31, 2021.
| 2.20 | Impairment of long-lived assets |
At the end of each reporting period, the Company reviews the carrying amounts of its long-lived assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. The Company did not incur any impairment loss during the years ended December 31, 2021, 2020 and 2019.
| 2.21 | Trade and other payables |
These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial tear which are unpaid. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.
| 2.22 | Interest-bearing borrowings |
Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.
| 2.23 | Revenue from contracts with customers |
The Company generates its revenue primarily from three service lines: (1) Secure logistics; (2) Robotics AI resolutions; and (3) Information security.
Each service line primarily renders the following services:
| (1) | Secure logistics |
(i) Cash-In-Transit - Non Dedicated Vehicle (CIT Non-DV); (ii) Cash-In-Transit - Dedicated Vehicle (CIT DV); (iii) ATM management; (iv) Cash Processing (CPC); (v) Cash Center Operations (CCT); (vi) Consolidate Cash Center (CCC); (vii) Cheque Center Service (CDC); (viii) Express Cash; (ix) Coin Processing Service; and (x) Cash Deposit Management Solutions
| (2) | Robotics AI solutions |
(i) Sale of robots and (ii) Rental of robots
| (3) | Information security |
(i) Penetration test; (ii) PCI ASV Scan and (iii) Rapid7 Sales
F-19
The Company recognizes revenue at a point in time as products are delivered and services are performed. Consultancy fees typically covers a period of time, the revenue is recognized on a rateable basis over the contract term.
| ● | Identify the contract or quotation with the agreed service price. |
| ● | Evaluate the services engaged in the customer’s contract and identify the related performance obligations. |
| ● | Consider the contract terms and commonly accepted practices in the business to determine the transaction price. The transaction price is the consideration that the Company expects to be entitled for delivering the services engaged with the customer. The consideration engaged in a customer’s contract is generally a fixed amount. |
| ● | Allocate the transaction price, if necessary, to each performance obligation (to each good or service that is different) for an amount that represents the part of the benefit that the Company expects to receive in exchange for the right of delivering the services engaged with the customer. |
| ● | Recognize revenue when the Company satisfied the performance obligation through the rendering of services engaged. |
All of the conditions mentioned above are accomplished normally when the services are rendered to the customer and this moment is considered a point in time. The reported revenue reflects services delivered at the contract or agreed-upon price.
Contract liabilities consist of deferred revenue related to prepaid fees received from customers for future information security service over the term of the service agreement. The Company expects to recognize as revenue of $43,200 within the next 12 months and $54,000 after 12 months to 36 months.
Revenue is recognized when the related performance obligations are satisfied.
| Fixed Fees | |||||||
| Service Type | Performance Obligations | Per delivery / order | Per month | ||||
| Cash-In-Transit (CIT) – Non Dedicated Vehicles (Non-DV) | (a) | Delivery from point A to point B per customer request. Service obligation was generally completed within same day. | √ | ||||
| Cash-In-Transit (CIT) – Dedicated Vehicles to Banks (DV) | (a) | Delivery from point A to point B per customer request. Service obligation was generally completed within same day. | √ | ||||
| ATM Management | (a) | Includes replenishment of ATM machines and first level maintenance services. Service obligation was generally completed within the same day. | √ | ||||
| Cash Processing (CPC) | (b) | Cash counting, sorting and vaulting services for customers in the retail industry. | √ | ||||
| Cash Center Operations (CCT) | (b) | Cash counting, sorting and depositing for local commercial banks on behalf of Bank of Thailand (BOT). | √ | ||||
| Consolidate Cash Center (CCC) | (b) | Cash counting, sorting and depositing for Bank of Thailand (BOT). | √ | ||||
| Cheque Center Service (CDC) | (b) | Handles cheque consolidation and distribution on behalf of local commercial bank. | √ | ||||
| Express Cash | (a) | Armored trucks (with onboard GDM) and crew teams are assigned to collect cash on behalf of local commercial banks. Service obligation was generally completed within the same day. | √ | ||||
| Coin Processing Service | (a) | Armored vehicles and crew teams are assigned to collect/deliver coins to/from customer sites. Service obligation was generally completed within the same day. | √ | ||||
| Cash Deposit Management Solutions | (b) | Cash deposit machine (Guardforce Digital Machine – GDM) are installed at the customers’ sites for the collection of cash. | √ | ||||
| Robotics AI Solutions - Sale of Robots | (a) | Delivery of robots and inspection completed at customer site. | √ | ||||
| Robotics AI Solutions - Rental of Robots | (b) | Robots are leased out for a fixed term | √ | ||||
| Penetration Test | (a) | Production of the test report | √ | ||||
| PCI ASV Scan | (a) | Submission of the scan result | √ | ||||
| Rapid7 Sales | (b) | Provision of information security service based on the sale and installation of Rapid7 software | √ | ||||
F-20
The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Except the sale of robots, customer’s billing is prepared on a monthly basis once service delivery reports have been confirmed and the invoice amount has been confirmed with the customers. Standard payment is 45 days but it may be 45 to 60 days depending on the individual customer contract.
| (a) | Revenue is recognized net of sales taxes and upon transfer of significant risks and rewards of ownership to customers. Revenue is not recognized to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. |
| (b) | Related service revenue or rental income is recognized on a straight-line basis over the term of the contracts. |
Disaggregation information of revenue by service type which was recognition based on the nature of performance obligation disclosed above is as follows:
| For the year ended December 31, | ||||||||||||||||||||||||
| Service Type | 2021 | Percentage of Total Revenue | 2020 | Percentage of Total Revenue | 2019 | Percentage of Total Revenue | ||||||||||||||||||
| Cash-In-Transit – Non-Dedicated Vehicles (CIT Non-DV) | $ | % | $ | % | $ | % | ||||||||||||||||||
| Cash-In-Transit - Dedicated Vehicle to Banks (CIT DV) | % | % | % | |||||||||||||||||||||
| ATM Management | % | % | % | |||||||||||||||||||||
| Cash Processing (CPC) | % | % | % | |||||||||||||||||||||
| Cash Center Operations (CCT) | % | % | % | |||||||||||||||||||||
| Consolidate Cash Center (CCC) | % | - | % | - | - | % | ||||||||||||||||||
| Cheque Center Service (CDC) | % | % | % | |||||||||||||||||||||
| Others ** | % | % | % | |||||||||||||||||||||
| Cash Deposit Management Solutions (GDM) | % | % | % | |||||||||||||||||||||
| Robotic AI solutions | % | % | - | - | % | |||||||||||||||||||
| Information security | % | - | % | - | - | % | ||||||||||||||||||
| Total | $ | % | $ | % | $ | % | ||||||||||||||||||
| ** |
During the years ended December 31,
2021, 2020 and 2019, revenue amounting to $
F-21
| 2.24 | Cost of sales |
Cost of sales consists primarily of internal labor costs and related benefits, and other overhead costs that are directly attributable to services provided.
| 2.25 | Income tax |
Income tax expense represents the sum of the tax currently payable and deferred tax. Income tax expense is charged to the consolidated statements of profit or loss as they incur.
Current income taxes are recorded in the results of the year they are incurred.
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, including tax loss carry forwards and certain tax credits, to the extent that it is probable that future taxable profits, reversal of existing taxable temporary differences will be available against which those deductible temporary differences can be utilized after considering future tax planning strategies. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit and reversal of existing taxable temporary differences will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits and reversal of existing taxable temporary differences will allow the deferred tax asset to be recovered.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Net deferred income taxes are classified as a non-current asset or liability, regardless of when the temporary differences are expected to reverse.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
| 2.26 | Provisions |
Provisions are recognized for liabilities of uncertain timing or amount when the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be estimated reliably. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.
Where it is probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
F-22
As of the date of filing, the Company
is a defendant in various labor related lawsuits totaling approximately $
| 2.27 | Employee benefits |
The Company provides for retirement benefits payable for employees of its subsidiaries in Thailand under the Thai Labor Law; and follows IFRS 19 in accounting for the related obligation. Depending upon the individual employee’s salary and years of service, the related obligation is calculated by an independent actuary using the projected unit credit method. The present value of the obligation is determined by discounting with the interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related liabilities. The sensitivity analysis is determined by i) discount rate; ii) salary increase rate; iii) turnover rate; and iv) life expectancy.
All re-measurements effects of the Company’s retirement benefit obligation such as actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized directly in other comprehensive income.
As of December 31, 2021, 2020 and 2019,
actuarial gain of $
| 2.28 | Leases |
From January 1, 2019, in accordance with IFRS 16, leases with terms greater than 12 months are recognized as a right-of-use asset (“ROU”) and a corresponding lease liability at the date in which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Company uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
| ● | The amount of the initial measurement of the lease liability |
| ● | any lease payments made at or before the commencement date less any lease incentives received |
Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The lease terms of buildings and others are generally less than ten years and less than five years, respectively.
Payments associated with leases with a lease term of 12 months or less on the Company’s equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss.
| 2.29 | Related parties |
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
F-23
| 2.30 | Earnings per share (“EPS”) |
Basic EPS is calculated by dividing the net profit (loss) attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by using the weighted average number of ordinary shares outstanding adjusted to include the potentially dilutive effect of outstanding share-based awards and convertible debt instruments, unless their inclusion in the calculation is anti-dilutive.
| 2.31 | New and amended accounting standards |
All new standards and amendments that are effective for annual reporting period commencing January 1, 2021 have been applied by the Company for the year ended December 31, 2021. The adoption of these new and amended standards did not have material impact on the consolidated financial statements of the Company. A number of new standards and amendments to standards have not come into effect for the year beginning January 1, 2021, and they have not been early adopted by the Company in preparing these consolidated financial statements. None of these new standards and amendments to standards is expected to have a significant effect on the consolidated financial statements of the Company.
| 3. | BUSINESS COMBINATION |
| (i) | On February 4, 2021, the Company announced the acquisition of a majority stake in information security consultants Handshake Networking Ltd. (“Handshake”), a Hong Kong-based company specializing in penetration testing. A total of |
Accordingly, the acquisition has been accounted for in accordance with IFRS 3 guidelines under acquisition accounting, whereby the Company recognized the assets and liabilities of Handshake transferred at their carrying amounts with carry-over basis.
The following represents the purchase price allocation at the date of the acquisition:
| March 25, 2021 | ||||
| Cash and cash equivalents | $ | |||
| Other current assets | ||||
| Current liabilities | ( | ) | ||
| Goodwill | ||||
| Total purchase price | $ | |||
The revenue included in the Consolidated
Statement of Profit and Loss since March 25, 2021 contributed by Handshake Networking Ltd was $
Had Handshake Networking Limited been
consolidated from January 1, 2021, the Consolidated Statement of Profit and Loss would show revenue of $
| (ii) | On November 1, 2021, the Company entered into a Transfer Agreement (the “Agreement”) to acquire |
The Company recorded assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements to reflect the results for the full year 2021, irrespective of transaction date.
The following represents their assets and liabilities:
| December 31, 2021 | ||||
| Cash and cash equivalents | $ | |||
| Other current assets | ||||
| Current liabilities | ( | ) | ||
| Loss for the year | ||||
| Additional paid in capital | $ | |||
F-24
| 4. | CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash on hand | $ | $ | ||||||
| Cash in bank | ||||||||
| Subtotal | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | ||||||
| 5. | INVENTORIES |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Robots at warehouse | $ | $ | ||||||
| Robots in transit | ||||||||
| $ | $ | |||||||
No allowance for slow moving or obsolete inventory was recorded for the years ended December 31, 2021 and 2020.
| 6. | TRADE RECEIVABLES, NET |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Trade receivables | $ | $ | ||||||
| Allowance for doubtful accounts | ||||||||
| Trade receivables, net | $ | $ | ||||||
The following tables details the Company’s trade receivables as of:
December 31, 2021
| Trade receivables - as of December 31, 2021 | ||||||||||||||||||||||||
| Current | <30 | 31-60 | 61-90 | 91 and over | Total | |||||||||||||||||||
| Trade receivables | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
December 31, 2020
| Trade receivables - as of December 31, 2020 | ||||||||||||||||||||||||
| Current | <30 | 31-60 | 61-90 | 91 and over | Total | |||||||||||||||||||
| Trade receivables | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The allowance for doubtful accounts are as below:
| Balance at December 31, 2019 | $ | ( | ) | |
| Recovery of doubtful accounts | ||||
| Write off | ||||
| Exchange difference | ||||
| Balance at December 31, 2020 and 2021 | $ |
F-25
| 7. | WITHHOLDING TAXES RECEIVABLES, NET |
| 2021 | 2020 | |||||||
| Balance at January 1, | $ | $ | ||||||
| Addition | ||||||||
| Collection | ( | ) | ( | ) | ||||
| Write off | ( | ) | ||||||
| Allowance for uncollectible | ( | ) | ( | ) | ||||
| Exchange difference | ( | ) | ( | ) | ||||
| Balance at December 31, | $ | $ | ||||||
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Current portion | $ | $ | ||||||
| Non-current portion | ||||||||
| Withholding taxes receivables, net | $ | $ | ||||||
During 2020,
Out of prudence, based on amount written
off for the receivable related to year 2013 to 2015, the Company recorded an allowance of approximately $
| 8. | OTHER CURRENT AND OTHER NON-CURRENT ASSETS |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Input VAT receivable | $ | $ | ||||||
| Prepayments - office rental | ||||||||
| Prepayments - insurance | ||||||||
| Prepayments - others | ||||||||
| Uniforms | ||||||||
| Tools and supplies | ||||||||
| Deferred costs | ||||||||
| Other current assets | $ | $ | ||||||
| Deposits | $ | $ | ||||||
| Deferred costs | ||||||||
| Other non-current assets | $ | $ | ||||||
F-26
| 9. | PROPERTY, PLANT AND EQUIPMENT |
| Leasehold improvements | Machinery and equipment | Office furbishing and equipment | Vehicles | Assets under construction | GDM machines | Robots | Total | |||||||||||||||||||||||||
| Cost | ||||||||||||||||||||||||||||||||
| At December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Transfers in (out) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Exchange differences | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| At December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Additions | ||||||||||||||||||||||||||||||||
| Disposals | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Exchange differences | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| At December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Accumulated Depreciation | ||||||||||||||||||||||||||||||||
| At December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Depreciation charged for the year | ||||||||||||||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Transfers in (out) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Exchange differences | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| At December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Depreciation charged for the year | ||||||||||||||||||||||||||||||||
| Disposal | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Exchange differences | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| At December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net book value | ||||||||||||||||||||||||||||||||
| At December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| At December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
There was no impairment of property, plant and equipment recorded for the years ended December 31, 2021, 2020 and 2019. No property, plant and equipment were pledged as security for bank borrowings.
F-27
| 10. | RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILTIES |
The carrying amounts of right-of-use assets are as below:
| 2021 | 2020 | |||||||
| Balance at January 1, | $ | $ | ||||||
| New leases | ||||||||
| Depreciation expense | ( | ) | ( | ) | ||||
| Exchange difference | ( | ) | ( | ) | ||||
| Balance at December 31, | $ | $ | ||||||
Lease liabilities were measured at
the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate. The weighted average
incremental borrowing rate applied to new leases during year 2021, 2020 and 2019 was
During the years ended December 31,
2021, 2020 and 2019, interest expense of $
| 11. | INTANGIBLE ASSETS, NET |
| Computer | ||||
| software | ||||
| Cost | ||||
| At December 31, 2019 | $ | |||
| Additions | ||||
| Disposals | ( | ) | ||
| Exchange difference | ( | ) | ||
| At December 31, 2020 | ||||
| Additions | ||||
| Exchange difference | ( | ) | ||
| At December 31, 2021 | ||||
| Accumulated amortization | ||||
| At December 31, 2019 | ||||
| Amortization charged for the year | ||||
| Disposals | ( | ) | ||
| Exchange difference | ||||
| At December 31, 2020 | ||||
| Amortization charged for the year | ||||
| Exchange difference | ( | ) | ||
| At December 31, 2021 | ||||
| Net book value | ||||
| At December 31, 2020 | $ | |||
| At December 31, 2021 | $ | |||
| 12. | TRADE AND OTHER PAYABLES AND OTHER CURRENT LIABILITIES |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Trade payable – third parties | $ | $ | ||||||
| Accrued salaries and bonus | ||||||||
| Other payables, accrued customer claims, cash loss and shortage** | ||||||||
| Trade and other payables | $ | $ | ||||||
| Output VAT | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Payroll Payable | ||||||||
| Other Payables | ||||||||
| Deferred revenue | ||||||||
| Other current liabilities | $ | $ | ||||||
| ** | Includes a provision for penalty for failure to meet certain performance indicators as stipulated in certain customer contracts for approximately $ |
F-28
| 13. | BORROWINGS |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Current portion of long-term borrowings | $ | $ | ||||||
| Long-term borrowings | ||||||||
| Borrowings from financial institutions | $ | $ | ||||||
The Company maintains borrowings with
one financial institution. The borrowings are used for working capital purposes to support its business operations in Thailand.
As of December 31, 2021, the Company
has unused bank overdraft availability of approximately $
As of December 31, 2020, the Company
has unused bank overdraft availability of approximately $
| 14. | FINANCE LEASE LIABILITIES |
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Current portion | $ | $ | ||||||
| Non-current portion | ||||||||
| Finance lease liabilities | $ | $ | ||||||
For the years ended December 31, 2021,
2020 and 2019, interest expense was $
The minimum lease payments under finance lease agreements are as follows:
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Within 1 year | $ | $ | ||||||
| After 1 year but within 5 years | ||||||||
| Less: Finance charges | ( | ) | ( | ) | ||||
| Present value of finance lease liabilities, net | $ | $ | ||||||
Finance lease assets comprise primarily vehicles and office equipment as follow:
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cost | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
| 15. | TAXATION |
Value added tax (“VAT”)
The Company is subject to a statutory
VAT of
Income taxes
Cayman Islands
The Company is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.
F-29
British Virgin Islands
The Company’s subsidiary incorporated in the BVI is not subject to taxation.
Singapore
The Company’s subsidiary incorporated
in Singapore is subject to a corporate income tax rate of
Hong Kong
The Company’s subsidiary incorporated
in Hong Kong is subject to a corporate income tax rate of
Thailand
The Company’s subsidiary incorporated
in Thailand is subject to a corporate income tax rate of
Pre-tax loss, by jurisdiction, for the years ended December 31, 2021, 2020 and 2019 is as follows:
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Cayman Islands | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| BVI | ( | ) | ( | ) | ( | ) | ||||||
| Hong Kong | ( | ) | ( | ) | ( | ) | ||||||
| Singapore | ( | ) | ||||||||||
| Thailand | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ||||||
The components of the income tax provision are:
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Current income tax expense | $ | $ | $ | |||||||||
| Deferred income tax (benefit) expense | ( | ) | ( | ) | ||||||||
| Total income tax (benefit) expense | $ | ( | ) | $ | $ | |||||||
Reconciliation between the statutory tax rate to income before income taxes and the actual provision for income taxes is as follows:
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (Loss) Profit before income tax expense* | $ | ( | ) | $ | $ | |||||||
| Thailand income tax statutory rate | % | % | % | |||||||||
| Income tax at statutory tax rate | ( | ) | ||||||||||
| Permanent differences | ( | ) | ||||||||||
| Income tax (benefit) expense | $ | ( | ) | $ | $ | |||||||
| * | This amount represents profit before income tax after adjustments for non-deductible and non-taxable expense items from the Thailand operating entity. |
F-30
Deferred tax assets and liabilities are comprised of the following:
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Provision for employee benefits | $ | $ | ||||||
| Net operating loss carried forward | ||||||||
| Deferred tax assets | ||||||||
| Less: | ||||||||
| Deferred tax liabilities - finance leases | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| 16. | PROVISION FOR EMPLOYEE BENEFITS |
The Company has a defined benefit plan based on the requirement of the Thailand Labor Protection Act B.E.2541 (1988) to provide retirement benefits to employees based on pensionable remuneration and length of service which are considered as unfunded. There were no plan assets set up and the Company will pay benefits when needed.
According to IFRS 19 (Revised 2017), the use of Projected Unit Credit (PUC) Cost Method is required in order to determine the actuarial liability based on past service and expected future salary. Thus, the actuarially acceptable assumptions on salary scale are needed. Actuarial assumptions on other components of the benefit formulas are also required to measure the obligation such as demographic assumptions and financial assumptions. All of these assumptions are important because they are directly related to a possibility of actuarial gains and losses. Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service.
The following assumptions have been adopted for this actuarial valuation:
Demographic Assumptions:
| 1. | Mortality Table (Annual Death Rate): Male and Female Thai Mortality Ordinary Tables of 2017 (TMO 2017) which is the latest mortality table from the Office of Insurance Commission in Thailand. |
| 2. | Annual Disability Rate: |
| 3. | Annual Voluntary Resignation: Age related rates as follows. |
| Age Group (Years) | Annual Voluntarily Resignation Rate of Direct Cost Staff | Annual Voluntarily Resignation Rate of Indirect Cost Staff | ||||||
| Below 31 | | % | | % | ||||
| 31-40 | % | % | ||||||
| 41-50 | % | % | ||||||
| Above 50 | % | % | ||||||
| 4. | Annual Forced Resignation: Age related rates as follows. |
| Age Group (Years) | Annual Forced Resignation Rate |
|||
| Below 31 | |
% | ||
| 31-40 | % | |||
| 41-50 | % | |||
| Above 50 | % | |||
F-31
Financial Assumptions:
| 1. | Discount Rate: Single weighted average discount rate is |
| 2. | Salary Increase Rate: |
| 3. | Taxes payable by the plan: The contributions are not a tax-deductible expense according to the Revenue Department in Thailand so there are no taxes payable by the plan |
Movement in the present value of the defined benefit obligation:
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Defined benefit obligations at January 1, | $ | $ | ||||||
| Benefits paid during the year | ( | ) | ( | ) | ||||
| Current service costs | ||||||||
| Interest | ||||||||
| Past service cost and gain (loss) on settlement | ||||||||
| Actuarial loss | ( | ) | ||||||
| Exchange differences | ( | ) | ||||||
| Defined benefit obligations at December 31, | $ | $ | ||||||
The following table presents the sensitivity
analysis for each significant actuarial assumption with a variation of
For the year ended December 31, 2021
| Assumption | % Change (+) in Assumption | Liability | Amount Change in Liability | % Change in Liability | % Change (-) in Assumption | Liability | Amount Change in Liability | % Change in Liability | ||||||||||||||||||||||||
| Discount Rate | 1 | $ | $ | ( | ) | - | -1 | $ | $ | |||||||||||||||||||||||
| Salary Increase Rate | 1 | -1 | ( | ) | - | |||||||||||||||||||||||||||
| Turnover Rate | 1 | ( | ) | - | -1 | |||||||||||||||||||||||||||
| Life Expectancy | +1 Year | -1 Year | ( | ) | - | |||||||||||||||||||||||||||
For the year ended December 31, 2020
| Assumption | % Change (+) in Assumption | Liability | Amount Change in Liability | % Change in Liability | % Change (-) in Assumption | Liability | Amount Change in Liability | % Change in Liability | ||||||||||||||||||||||||
| Discount Rate | 1 | $ | $ | ( | ) | - | -1 | $ | $ | |||||||||||||||||||||||
| Salary Increase Rate | 1 | -1 | ( | ) | - | |||||||||||||||||||||||||||
| Turnover Rate | 1 | ( | ) | - | -1 | |||||||||||||||||||||||||||
| Life Expectancy | +1 Year | -1 Year | ( | ) | - | |||||||||||||||||||||||||||
F-32
For the year ended December 31, 2019
| Assumption | % Change (+) in Assumption | Liability | Amount Change in Liability | % Change in Liability | % Change (-) in Assumption | Liability | Amount Change in Liability | % Change in Liability | ||||||||||||||||||||||||
| Discount Rate | 1 | $ | $ | ( | ) | - | -1 | $ | $ | |||||||||||||||||||||||
| Salary Increase Rate | 1 | -1 | ( | ) | - | |||||||||||||||||||||||||||
| Turnover Rate | 1 | ( | ) | - | -1 | |||||||||||||||||||||||||||
| Life Expectancy | +1 Year | -1 Year | ( | ) | - | |||||||||||||||||||||||||||
Maturity profile of the defined benefit obligation as of December 31, are as follow:
| Year | Defined Benefit Obligation | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| 2032-2045 | ||||
| >2045 | ||||
| 17. | SHAREHOLDERS’ EQUITY |
On August 20, 2021, the shareholders
of the Company approved a 1 for 3 reverse split of the Company’s authorized and issued ordinary shares whereby every three shares
were consolidated into one share (the “Reverse Split”). In addition, the par value of each ordinary share increased from $
| ● | a proposal to resolve fractional entitlements to the Company’s issued ordinary shares resulting from the Reserve Split – under the proposal, fractional shares will be disregarded and will not be issued to the shareholders of the Company but all such fractional shares shall be redeemed in cash for the fair value of such fractional share, with fair value being defined as the closing price of the ordinary shares on a post-reverse split basis on the applicable trading market on the first trading date of the Company’s ordinary shares following the effectiveness of the Reverse Split; and |
| ● | an increase in the Company’s authorized ordinary shares from |
On March 25, 2021, a total of
On September 28, 2021, the Company completed
an initial public offering to issue
The fair value of the warrants, determined
using the Black-Scholes valuation model, was $
F-33
As of December 31, 2019,
| 18. | STOCK-BASED COMPENSATION |
On December 16, 2019, the Company entered
into an agreement and plan of merger (the “Merger Agreement”) with VCAB Eight Corporation, a Texas corporation (“VCAB”),
pursuant to which, subject to certain preconditions being satisfied, it was agreed that VCAB would merge with and into the Company. The
main objective of the Merger was to increase the Company’s shareholder base to, among other things, assist the Company in satisfying
the listing standards of a national security exchange in the United States. The Merger was completed effective on March 10, 2020, and
the separate existence of VCAB ceased on that date. As consideration for the Merger, the Company agreed to issue an aggregate of
On January 8, 2020, Guardforce AI Service
Ltd. entered into agreements with and transferred
On March 13, 2020, the Company’s
Board of Directors approved the transfer of
| 19. | ADMINISTRATIVE EXPENSES |
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Staff expense | $ | $ | $ | |||||||||
| Rental expense* | ||||||||||||
| Depreciation and amortization expense | ||||||||||||
| Utilities expense | ||||||||||||
| Travelling and entertainment expense | ||||||||||||
| Professional fees | ||||||||||||
| Repairs and maintenance | ||||||||||||
| Employee benefits | ||||||||||||
| Other service fees | ||||||||||||
| Other expenses** | ||||||||||||
| $ | $ | $ | ||||||||||
| * | During the year ended December 31, 2020 and 2019, depreciation expense of $ |
| ** | Other expenses mainly comprised of office expenses, stamp duties, training costs, etc. |
| 20. | LEGAL RESERVE |
Under the provisions of the Civil and
Commercial Code, GF Cash (CIT) is required to set aside as a legal reserve at least
F-34
| 21. | RELATED PARTY TRANSACTIONS |
The table below sets forth the major related parties and their relationships with the Company as of December 31, 2021:
| Name of related parties | Relationship with the Company | |
| Tu Jingyi (“Mr. Tu”) | Controlling shareholder | |
| Long Top Limited | Mr. Tu’s father is the majority shareholder | |
| Guardforce TH Group Company Limited | Mr. Tu’s father is the majority shareholder | |
| Guardforce Security (Thailand) Company Limited | Mr. Tu’s father is the majority shareholder of its ultimate holding company | |
| Bangkok Bank Public Company Limited | Minority shareholder | |
| Shenzhen Junwei Investment Development Company Limited | Minority shareholder | |
| Guardforce Aviation Security Company Limited | Mr. Tu’s father is the majority shareholder of its ultimate holding company | |
| Guardforce 3 Limited | Mr. Tu’s father is the majority shareholder | |
| Guardforce Group Limited | Controlled by Mr. Tu’s father | |
| Guardforce AI Technology Limited | Holding Company | |
| Guardforce AI Service Limited | Holding Company | |
| Profit Raider Investment Limited (“Profit Raider”) | ||
| Shenzhen Douguaer Investment Partnership | Ultimately controlled by Mr. Tu | |
| Guardforce Holdings (HK) Limited | Controlled by Mr. Tu’s father | |
| Guardforce Limited | Mr. Tu’s father is the majority shareholder of its ultimate holding company | |
| Shenzhen Intelligent Guardforce Robot Technology Co., Limited | Controlled by Mr. Tu | |
| Perfekt Technology & System Co., Ltd. | Mr. Tu’s father is the majority shareholder of its ultimate holding company | |
| GF Robotics Malaysia Sdn. Bhd | Controlled by Mr. Tu’s brother | |
| Macau GF Robotics Limited | Controlled by Mr. Tu’s brother | |
| Quantum Infosec Inc (“Quantum”) | Minority shareholder of Handshake | |
| Richard Stagg | Director of Handshake | |
| GF Technovation Company Limited | Mr. Tu’s father is the majority shareholder of its ultimate holding company |
The principal related party balances and transactions as of and for the years ended December 31, 2021, 2020 and 2019 are as follows:
Amounts due from related parties:
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| Guardforce TH Group Company Limited | ||||||||
| Guardforce AI Technology Limited | ||||||||
| Guardforce AI Service Limited | ||||||||
| Bangkok Bank Public Company Limited | ||||||||
| Guardforce Limited | ||||||||
| Shenzhen Intelligent Guardforce Robot Technology Co., Limited | ||||||||
| GF Robotics Malaysia Sdn. Bhd | ||||||||
| Macau GF Robotics Limited | ||||||||
| Quantum Infosec Inc | ||||||||
| $ | $ | |||||||
Amounts due from related parties as of December 31, 2021 represent business advances for operational purposes.
Amounts due to related parties:
| As of December 31, | ||||||||||||
| 2021 | 2020 | |||||||||||
| Tu Jingyi | (a) | |||||||||||
| Shenzhen Junwei Investment Development Company Limited | ||||||||||||
| Guardforce Holdings (HK) Limited | (b) | |||||||||||
| Profit Raider Investment Limited | (a) | |||||||||||
| Guardforce Aviation Security Company Limited | ||||||||||||
| Guardforce Security (Thailand) Company Limited | ||||||||||||
| Shenzhen Intelligent Guardforce Robot Technology Co., Limited | (c) | |||||||||||
| Richard Stagg | (d) | |||||||||||
| $ | $ | |||||||||||
| (a) | Amounts due to Mr. Tu Jingyi and Profit Raider Investment Limited represented interest accrued on the respective loans. |
F-35
| (b) | Amounts due to Guardforce Holdings (HK) Limited comprised of $ |
| (c) | Amounts due to Shenzhen Intelligent Guardforce Robot Technology Co., Limited represent accounts payable for the purchase of robots from a related party. |
| (d) | Amounts due to Richard Stagg represent advance from a related party with no fixed term of repayment. The interest rate was |
Short-term borrowings from related parties:
| As of December 31, | ||||||||||
| 2021 | 2020 | |||||||||
| Profit Raider Investment Limited | (a) | $ | $ | |||||||
Long-term borrowings from related parties:
| As of December 31, | ||||||||||
| 2021 | 2020 | |||||||||
| Guardforce Holdings (HK) Limited | (b) | $ | $ | |||||||
| Tu Jingyi | (c) | |||||||||
| Profit Raider Investment Limited | (a) | |||||||||
| $ | $ | |||||||||
| (a) | On April 29, 2018, Guardforce |
| (b) | On December 31, 2019, |
On April 17, 2020,
On September 9, 2020, the Company borrowed
$413,500.
| (c) | On September 1, 2018, |
F-36
Related party transactions:
| For the years ended December 31, | ||||||||||||||
| Nature | 2021 | 2020 | 2019 | |||||||||||
| Service/ Products received from related parties: | ||||||||||||||
| Guardforce Security (Thailand) Company Limited | (a) | $ | $ | $ | ||||||||||
| Guardforce Aviation Security Company Limited | (b) | |||||||||||||
| Perfekt Technology & System Co., Ltd. | (c) | - | ||||||||||||
| Shenzhen Intelligent Guardforce Robot Technology Co., Limited – Purchases | (d) | - | ||||||||||||
| Profit Raider Investment Limited | - | |||||||||||||
| $ | $ | $ | ||||||||||||
| Service/ Products delivered to related parties: | ||||||||||||||
| Bangkok Bank Public Company Limited | $ | $ | $ | - | ||||||||||
| Shenzhen Intelligent Guardforce Robot Technology Co., Limited – Commission | - | |||||||||||||
| Guardforce Limited | (e) | - | ||||||||||||
| GF Technovation Company Limited | (e) | - | ||||||||||||
| $ | $ | $ | - | |||||||||||
Nature of transactions:
| (a) | Guardforce Security (Thailand) Co., Ltd. provided security guard services to the Company; | |
| (b) | Guardforce Aviation Security Co., Ltd. provided escort services to the Company; | |
| (c) | Perfekt Technology & System Co., Ltd. provided security equipment to the Company; | |
| (d) | The Company purchased robots from Shenzhen Intelligent Guardforce Robot Technology Co., Limited; | |
| (e) | Guardforce Limited and GF Technovation Company Limited are fellow subsidiaries. GF Technovation Company Limited was incorporated in 2021 for running robotics related business. The Company sold robots to GF Technovation Company Limited in place of Guardforce Limited beginning March 2021. |
As disclosed on Note 1, the Company
entered into a Sale and Purchase Agreement (the “Kewei Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen
Kewei”) to acquire
| 22. | COMMITMENTS AND CONTINGENCIES |
Executives/directors agreements
| Amount | ||||
| Years ending December 31: | ||||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total minimum payment required | $ | |||
Contracted expenditure commitments
The Company’s contracted expenditures commitments as of December 31, 2021 but not provided in the consolidated financial statements are as follows:
| Payments Due by Period | ||||||||||||||||||||||
| Less than | More than | |||||||||||||||||||||
| Contractual Obligations | Nature | Total | 1 year | 1-3 years | 4-5 years | 5 years | ||||||||||||||||
| Service fee commitments | (a) | $ | $ | $ | $ | $ | ||||||||||||||||
| Operating lease commitments | (b) | |||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||
F-37
| (a) | The Company has engaged Stander Information Company Limited (“Stander”) to provide technical services relating to the cash management systems for the Company’s secure logistics business. The service agreement with Stander comprised of a monthly fixed service fee and certain other fees as specified in the agreement. |
| (b) | From time to time, the Company has leased various low value items with various lease terms that the Company is committed to pay in the future. |
Bank guarantees
As of December 31, 2021, the Company
had commitments with banks for bank guarantees in favor of government agencies and others of approximately $
Litigation
As of the date of filing, the Company
is a defendant in various labor related lawsuits totaling approximately $
| 23. | CONCENTRATIONS |
The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenue for the years ended December 31, 2021, 2020 and 2019.
| For the years ended December 31, | ||||||||||||||||||||||||
| 2021 | % of revenue | 2020 | % of revenue | 2019 | % of revenue | |||||||||||||||||||
| Company A | $ | % | $ | % | $ | % | ||||||||||||||||||
| Company B | % | % | % | |||||||||||||||||||||
| Company C | % | % | % | |||||||||||||||||||||
| Company D | % | % | % | |||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||
Details of the customers which accounted for 10% or more of trade receivable are as follows:
| As of December 31, | ||||||||||||||||
| 2021 | % account receivable | 2020 | % account receivable | |||||||||||||
| Company A | $ | % | $ | % | ||||||||||||
| Company B | % | % | ||||||||||||||
| Company C | % | % | ||||||||||||||
| Company D | % | % | ||||||||||||||
| $ | % | $ | % | |||||||||||||
| 24. | SUBSEQUENT EVENTS |
Subsequent events have been reviewed through the date the consolidated financial statements were issued and required no adjustments or disclosures other than the following:
The Company incorporated and acquired various companies to commence robotic AI solution business of selling and leasing robots (Note 1).
On January 20, 2022, the Company completed
a private placement with several investors, wherein a total of
F-38
| 25. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY |
The Company performed a test of its restricted net assets of the consolidated subsidiaries in accordance with the Securities and Exchange Commission’s Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial information of the parent company.
The subsidiaries did not pay any dividends to the Company for the periods presented. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investment is presented on the separate condensed statement of financial position of the Company as “Investment in subsidiaries”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with IFRS have been condensed or omitted.
The parent Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2021 and 2020.
STATEMENTS OF FINANCIAL POSITION - PARENT COMPANY ONLY
| As of December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Other receivables | ||||||||
| Goodwill | ||||||||
| Investment in subsidiaries | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and equity | ||||||||
| Trade and other payables | $ | $ | ||||||
| Long-term borrowings from related company | ||||||||
| Total liabilities | ||||||||
| Equity | ||||||||
| Ordinary Shares –Authorized | ||||||||
| Subscription receivable | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Legal reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Capital & reserves | ( | ) | ||||||
| Total liabilities and equity | $ | $ | ||||||
| * | Giving retroactive effect to the reverse split on August 20, 2021. |
F-39
STATEMENTS OF PROFIT AND LOSS AND COMPREHENSIVE LOSS - PARENT COMPANY ONLY
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Revenue | $ | $ | $ | - | ||||||||
| Cost of sales | - | |||||||||||
| Gross margin | - | |||||||||||
| Administrative expenses | ( | ) | ( | ) | ( | ) | ||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Other income, net | - | |||||||||||
| Finance cost | ( | ) | ( | ) | ( | ) | ||||||
| Equity (loss) income of subsidiaries | ( | ) | ( | ) | ||||||||
| Net (loss) profit for the year | ( | ) | ( | ) | ||||||||
| Total comprehensive (loss) income for the year | $ | ( | ) | $ | ( | ) | $ | |||||
STATEMENTS OF CASH FLOWS – PARENT COMPANY ONLY
| For the years ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Operating activities | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | |||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Stock-based compensation | - | |||||||||||
| Equity loss from equity investments | ( | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Other receivables, net | ( | ) | ||||||||||
| Other payables | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| Financing activities | ||||||||||||
| IPO proceeds | - | |||||||||||
| Net cash provided by financing activities | - | |||||||||||
| Net increase (decrease) in cash and cash equivalents, and restricted cash | ( | ) | ||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||
| Cash and cash equivalents at end of year | $ | $ | $ | |||||||||
F-40