GFAI

Business Context and Reporting Period

This Form 6-K filing by Guardforce AI Co., Ltd. covers the month of March 2022, specifically dated March 21, 2022. The filing announces the entry into a non-binding Letter of Intent (LOI) to expand its Robotics as a Service (RaaS) and security service roadmap through the acquisition of subsidiaries from the Kewei Group in China.

Key Financial Metrics

The filing does not provide standard financial performance metrics such as revenue, profit, cash flow, margins, debt, or liquidity for the reporting period. The only financial figures disclosed relate to the proposed acquisition:

• Estimated Valuation: U.S. $30 million (based on projected average revenues from 2022 to 2026 for the initial eight companies).
• Payment Structure: 10% cash and 90% restricted shares.
• Cash Deposit Required: U.S. $3,000,000.
• Share Price for Consideration: U.S. $2.00 per share.

Material Changes

The primary material change is the strategic move to acquire up to 36 subsidiaries of the Kewei Group (Shenzhen Kewei Robot Technology Co., Limited and Shenzhen Yeantec Co., Limited). The acquisition is structured in two phases:

1. Phase One: Immediate acquisition of eight companies.
2. Phase Two: Right of first refusal to purchase the remaining 28 companies within 24 months, contingent on operational plans.

The company expects to sign definitive agreements for Phase One before the end of May 2022.

Outlook, Risks, and Contingencies

Management views this transaction as a continuation of its expansion strategy. However, the transaction is subject to several contingencies and risks:

• Due Diligence: The acquisition is contingent upon the satisfactory completion of due diligence.
• Definitive Agreements: Finalization depends on entering into binding agreements.
• Third-Party Consents: Required approvals from third parties are necessary.
• Non-Binding Nature: The current LOI is non-binding.
• Phase Two Uncertainty: The purchase of the additional 28 companies is not guaranteed and depends on future operational plans.

Investor Verification Checklist

• Verify the completion of due diligence and the signing of definitive agreements for Phase One by the end of May 2022.
• Confirm the actual valuation and purchase price once definitive agreements are executed, as the current $30 million figure is an estimate based on projected revenues.
• Monitor the company's cash position to ensure the $3,000,000 deposit can be paid within 10 days of the LOI signing.
• Assess the impact of issuing restricted shares (90% of consideration) on existing shareholder dilution.
• Track the operational integration of the eight initial subsidiaries to determine if the right of first refusal for the remaining 28 companies will be exercised.