Guardforce AI(GFAI) - 2024 Q4 - Annual Report

PART I ITEM 1. Identity of Directors, Senior Management and Advisers This item is not applicable for annual reports on Form 20-F - This item is not applicable for annual reports on Form 20-F[23] ITEM 2. Offer Statistics and Expected Timetable This item is not applicable for annual reports on Form 20-F - This item is not applicable for annual reports on Form 20-F[24] ITEM 3. Key Information This section outlines critical information including capitalization, offer reasons, and comprehensive risk factors covering business, corporate structure, international operations, and securities A. Reserved This section is not applicable - This section is not applicable[25] B. Capitalization and Indebtedness This section is not applicable - This section is not applicable[26] C. Reasons for the Offer and Use of Proceeds This section is not applicable - This section is not applicable[27] D. Risk Factors This section details various risks including operational, corporate, international, and those related to the company's ordinary shares and warrants - Investment in the company's securities involves a high degree of risk, particularly due to significant operations in Thailand and a legal/regulatory environment that differs from the U.S[28] - The company's negative operating profits raise substantial doubt about its ability to continue as a going concern, necessitating additional financing[29][35] - The company operates in highly competitive industries, including secured logistics and AI&Robotics, facing pricing pressures and rapid technological obsolescence in 2024[36][37][39][42][43] - A significant portion of the company's revenue is concentrated among a limited number of customers, with the top four customers accounting for approximately 59.0% of total revenues in 2024, posing risks from demand fluctuations or contract terminations[47][48][49] - The company reports financial results under IFRS, which differs from U.S. GAAP, potentially making comparisons difficult for investors[50] - Operations in Thailand are subject to risks from evolving security legislation, unexpected increases in minimum wages, and rising fuel costs, which could negatively impact profitability[51][52][53] - The company's success depends on retaining its leadership team and attracting/retaining qualified personnel, especially skilled AI researchers and developers[54] - There is a risk of losing the 'Guardforce' trademark license in Thailand, which could materially affect the business and brand recognition[55][56] - The decreasing use of cash could negatively impact the traditional secured logistics business, despite efforts to diversify into cash management and non-cash security solutions[60] - The fast-changing AI and robotics technologies may lead to significant provisions and impairments on robot assets and cloud platforms due to obsolescence or incompatibility[61][62] - The AI industry faces challenges related to laws, regulations, ethical, and societal considerations, with non-compliance potentially leading to financial loss or reputational damage[63] - Implementation of AI&Robotics solutions requires significant capital expenditures, with no assurance of recouping these investments[64] - The divestiture of Handshake and potential failure to integrate other acquisitions (Shenzhen GFAI, Guangzhou GFAI, Beijing Wanjia, InnoAI) could affect business growth and result in goodwill loss[65][66] - Compromise of information security on the company's platform could materially and adversely affect business, operations, and reputation, leading to litigation and penalties[67] - Transfer pricing decisions may result in uncertain tax exposures, and challenges by taxing authorities could negatively affect financial condition[68] - Geopolitical instability, including ongoing military conflicts in Ukraine and the Middle East, could materially adversely affect the global economy, capital markets, and the company's business[69][162] - The company's tiered shareholding structure in Thailand, designed to comply with foreign investment restrictions, may be challenged by authorities, potentially leading to license revocation, penalties, or forced restructuring[70][71][72][74][75] - A severe or prolonged downturn in the global economy or the markets where the company primarily operates (Thailand) could materially and adversely affect revenues and results of operations[76] - The company is vulnerable to foreign currency exchange risk, particularly between the Thai Baht (THB) and U.S. dollar (USD), which can impact recognized amounts from conversions[77][78] - The ability of subsidiaries to distribute dividends to the parent company may be restricted by laws and regulations in their respective jurisdictions, particularly in Thailand[79] - Doing business in China exposes the company to risks from changing economic, political, and social conditions, government policies, and evolving legal and regulatory systems (e.g., data security, cybersecurity, personal information protection)[81][83][84][86][87][91][97][98] - Uncertainty exists regarding the requirement for approvals from PRC authorities (CSRC, CAC) for U.S. listings and future securities offerings, which could lead to sanctions or adverse impacts on business and share price[99][100][101][102] - PRC regulations on loans and direct investments by offshore holding companies may restrict the company's ability to inject capital into its PRC subsidiaries or fund their operations[103] - The company's reliance on dividends from PRC subsidiaries for cash needs is subject to limitations on dividend payments, including requirements for accumulated profits and reserve allocations[104] - Classification as a 'Resident Enterprise' in China could result in unfavorable tax consequences, including a 25% enterprise income tax on worldwide income and potential withholding tax on dividends to non-PRC shareholders[105][106] - Shareholders may be subject to PRC income tax on any gain realized from the transfer of the company's ordinary shares[107] - PRC M&A Rules and regulations on overseas listings could make it more difficult and time-consuming to pursue growth through acquisitions or mergers in 2024[108][109][110] - PRC regulations (SAFE Circular 37) on offshore special purpose companies by PRC residents may subject beneficial owners or subsidiaries to liability, limit capital injection, or restrict profit distribution[111][112][113][114] - Fluctuations in Renminbi exchange rates against the U.S. dollar could materially adversely impact results of operations and investment value, with limited hedging options available[115][116][117] - The price of ordinary shares and warrants may fluctuate significantly, and failure to maintain a minimum bid price of $1.00 could lead to delisting from Nasdaq[118][120][123] - Future issuances of securities (ordinary shares, warrants) could dilute existing shareholders' interests and adversely affect market price[124][125][126][127][128][129][130][131](index=1