Guardforce AI(GFAI) - 2024 Q2 - Quarterly Report

Financial Performance - Total revenue for the six months ended June 30, 2024, was $17,566,844, a decrease of 2.43% compared to $18,005,603 for the same period in 2023[6] - Gross profit increased to $3,239,750, up 50.05% from $2,158,796 in the prior year[6] - Operating loss from continuing operations improved to $(2,081,862), significantly better than $(11,901,828) in the same period last year[6] - Net loss attributable to equity holders of the Company was $(1,847,594), compared to $(13,819,219) in the previous year, reflecting a substantial reduction in losses[6] - Total comprehensive loss for the period was $(2,614,125), compared to $(13,680,023) in the prior year, indicating improved financial performance[9] - For the six months ended June 30, 2024, the net loss from continuing operations was $1,877,146, compared to a net loss of $13,860,995 for the same period in 2023[15] - The company reported a net loss of $1,838,427 for the six months ended June 30, 2024, significantly improved from a net loss of $13,849,433 in the prior year[15] - The company reported a basic and diluted loss per share of $(0.18) for the six months ended June 30, 2024, compared to $(4.35) in the same period last year[6] Assets and Liabilities - Total assets decreased to $36,183,978 as of June 30, 2024, down 21.1% from $45,814,948 at the end of 2023[4] - Total liabilities decreased to $12,568,730, a reduction of 39.2% from $20,662,173 at December 31, 2023[4] - Cash and cash equivalents decreased to $13,979,217, down 30.5% from $20,235,227 at the end of 2023[3] - The total cash and cash equivalents, and restricted cash decreased to $15,501,772 as of June 30, 2024, from $26,030,392 as of June 30, 2023[15] - The total balance as of June 30, 2024, was $10,237,282, with an accumulated deficit of $(60,188,269)[13] Expenses and Cost Management - The company has made significant progress in reducing operating expenses, with selling, distribution, and administrative expenses decreasing to $(4,967,290) from $(6,683,850) year-over-year[6] - The company’s staff expenses for the six months ended June 30, 2024, were $3,141,756, a decrease of 12.78% from $3,602,127 in 2023[130] - Total selling, distribution, and administrative expenses for the six months ended June 30, 2024, were $4,967,290, a decrease of 25.66% compared to $6,683,850 in 2023[130] - The company recorded a valuation allowance of $22,949 for deferred tax assets not expected to be realized for the six months ended June 30, 2024, compared to $874,431 in 2023[117] Acquisitions and Investments - The Company acquired a 51% majority stake in Handshake Networking Ltd on March 25, 2021, and separated from it on February 6, 2024[25] - The Company acquired 100% of Guardforce AI Singapore Pte. Ltd. on November 1, 2021, which commenced AI&Robotics solution business[26] - The acquisition of Macau GF Robotics Limited was closed on February 9, 2022, for approximately $3,205 (MOP25,000)[28] - The acquisition of GF Robotics Malaysia Sdn. Bhd. was closed on January 20, 2022, for approximately $1 (RM1)[29] - The acquisition of Shenzhen Kewei Robot Technology Co., Ltd. was closed on March 22, 2022, for $10,000,000, paid in a mix of cash (10%) and restricted ordinary shares (90%)[40] - The acquisition of Beijing Wanjia Security System Co., Ltd. was closed on June 22, 2022, for $8,400,000, also paid in a mix of cash (10%) and restricted ordinary shares (90%)[41] - The Company will acquire robot-related business assets from Shenzhen Kewei for $2,100,000, fully paid in restricted ordinary shares[44] - InnoAI was acquired for RMB1 on May 13, 2024, and is dedicated to AI project research and development[46] Cash Flow and Liquidity - Cash flows from operating activities resulted in a net cash used of $1,808,989 for the six months ended June 30, 2024, compared to $1,046,862 in the same period of 2023[15] - The Company reported a net cash provided by investing activities of $134,703 for the six months ended June 30, 2024, contrasting with a net cash used of $1,046,308 in 2023[15] - The Company’s liquidity management strategy includes maintaining sufficient cash and cash equivalents, with cash generated from public offerings and operations being the primary source of working capital[63] Inventory and Receivables - The Company reported an allowance for slow-moving or obsolete robots' inventories of $nil for the six months ended June 30, 2024, compared to $3,090,283 for the same period in 2023[68] - The company reported inventories of $381,155 as of June 30, 2024, down from $506,403 as of December 31, 2023, reflecting a decrease of approximately 24.7%[89] - Trade receivables, net, were $5,316,983 as of June 30, 2024, compared to $5,630,805 as of December 31, 2023, indicating a decrease of about 5.6%[91] - The withholding tax receivable balance decreased to $1,871,427 as of June 30, 2024, from $2,224,846 as of December 31, 2023, a decline of approximately 16%[92] - The company recorded an allowance for doubtful accounts of $184,180 for the six months ended June 30, 2024, compared to $45,932 for the same period in 2023, representing a significant increase in provisions[91] Depreciation and Amortization - Depreciation and amortization of fixed and intangible assets for the six months ended June 30, 2024, was $1,556,922, down from $2,619,001 in 2023[15] - The company reported depreciation expense related to property, plant, and equipment of $526,206 for the six months ended June 30, 2024, compared to $1,057,117 for the same period in 2023, indicating a reduction in depreciation[97] - Amortization expense related to intangible assets was $214,632 for the six months ended June 30, 2024, compared to $535,568 for the same period in 2023[103] Related Party Transactions - The company engaged in related party transactions totaling $432,118 for services/products received in the first half of 2024, compared to $211,066 in 2023, representing an increase of approximately 104.5%[138] - As of June 30, 2024, the company had amounts due from related parties totaling $13,086, a significant decrease from $2,172,638 as of December 31, 2023[133] - The company recorded interest expense of $4,575 for borrowings from related parties for the six months ended June 30, 2024, down from $39,949 in 2023[137] Compliance and Regulations - The legal reserve requirement of $223,500 was met as of June 30, 2024, in compliance with Thailand's regulations[131] Shareholder Activities - The company completed a public offering on May 5, 2023, issuing 1,720,430 ordinary shares for gross proceeds of approximately $9.2 million at a price of $4.65 per share[124] - The company issued a total of 288,000 restricted ordinary shares to officers and employees for their service performed in 2023, with a fair value of $924,955[128] - The company issued 1,628,368 ordinary shares through an "At the Market Offering" for aggregate gross proceeds of $2,593,842 from July 1, 2024, to the date of the financial statement release[129]