Guardforce AI Co., Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed March 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and reported in U.S. dollars.
Business context
Guardforce provides secure logistics services, principally cash-in-transit, ATM management and cash processing in Thailand. It is expanding into robotics-as-a-service and information security. Secure logistics generated 97.6% of 2021 revenue. At year-end, robotics and information security contributed approximately 1.0% and 1.4%, respectively. The company acquired 51% of Hong Kong information-security firm Handshake in 2021.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $35.15 million | $37.65 million |
| Gross profit / margin | $4.07 million / 11.6% | $6.27 million / 16.7% |
| Operating loss | $3.70 million | $2.12 million |
| Net loss | $5.49 million | $3.14 million |
| Operating cash flow | $0.98 million inflow | $4.91 million inflow |
| Investing cash flow | $5.22 million outflow | $1.43 million outflow |
| Cash and restricted cash | $15.85 million | $10.13 million |
| Current assets / current liabilities | $21.96 million / $22.50 million | $17.03 million / $8.08 million |
| Total liabilities / equity | $35.23 million / $6.52 million | $38.13 million / $(2.16) million |
Year-end cash included $12.73 million unrestricted cash and $3.13 million restricted cash. Bank borrowings were $1.79 million; related-party borrowings were $13.51 million current and $5.33 million non-current. Operating and finance lease liabilities were separately reported. Operating cash flow fell sharply while property and equipment purchases were $5.24 million. The company reported a $1.82 million foreign-exchange loss, largely associated with currency exposure and the related-party loan.
Changes versus prior year
- Revenue declined 6.6%, primarily due to COVID-related customer closures and reduced CIT and ATM service activity, as well as fewer activities following bank-customer mergers.
- Gross margin contracted 5.1 percentage points. Management cited higher fuel costs, overtime and rental expense reclassification; average fuel cost per liter rose about 25.7% year over year.
- Operating expenses increased 13.6% to $7.58 million, including higher headquarters, listing, professional and public-company costs.
- Net loss widened by $2.35 million. Newer activities grew from a small base: robotics revenue was $0.37 million and Handshake contributed $0.48 million.
- Cash and restricted cash increased, supported principally by the October 2021 IPO; financing cash flow was $10.65 million inflow, while investing cash flow rose with capital spending.
Outlook, risks and unusual items
- Going concern and liquidity: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern, citing recurring losses and the $13.51 million Profit Raider related-party loan, plus accrued interest, due December 31, 2022. Management said it was seeking an extension or alternative funding and expected available liquidity to support at least 12 months. Repayment or refinancing was not assured.
- Subsequent financing: On January 20, 2022, the company raised approximately $10.3 million in a private placement of shares and warrants. This financing occurred after year-end and does not eliminate the repayment and execution risks.
- Growth plans: Management targeted 44% of 2022 revenue from non-CIT offerings and described plans to expand robotics, information security and geographic reach. More than 1,400 robots had been deployed by February 2022, but most were still on free trial; 2021 robotics revenue remained small. The target is forward-looking, not reported performance.
- Customer concentration: The top five customers represented 71.9% of 2021 revenue; the largest customer contributed 27.3%. Customer loss, contract renewal terms or pricing pressure could materially affect results.
- Related parties and acquisitions: Robotics purchases from a related party were $5.70 million in 2021. The company completed acquisitions of Shenzhen GFAI and Guangzhou GFAI in March 2022 for $10 million, paid 10% in cash and 90% in restricted shares. A separate proposed acquisition of up to eight Kewei Group companies was subject to due diligence and definitive agreements; the stated $3 million cash deposit and projected-revenue valuation make execution and related-party terms important to monitor.
- Other risks: COVID-19, competition, declining cash usage, fuel and wage inflation, currency fluctuations, Thai foreign-ownership restrictions, evolving PRC data-security rules, and the ability to integrate acquisitions. Nasdaq had notified the company of a minimum-bid-price deficiency, with a September 6, 2022 deadline to regain compliance.
- Contingencies: The company disclosed labor-related lawsuits totaling approximately $0.77 million and made no provision, stating management believed the claims lacked merit. It also had approximately $5.7 million of bank guarantees. No material off-balance-sheet arrangements were reported.
- Audit and controls: The auditor issued an unmodified IFRS opinion but identified going-concern uncertainty as a critical audit matter. Management stated disclosure controls and internal control over financial reporting were effective after remediation of prior-year deficiencies; the auditor did not attest to internal-control effectiveness.
Most important facts to verify
- Reconcile the auditor’s critical-audit-matter reference to a FY2021 net loss of $7.25 million with the audited statements and MD&A, which report $5.49 million.
- Confirm the precise amount and maturity terms of the Profit Raider loan, accrued interest, and any executed extension, refinancing or repayment plan.
- Review post-year-end cash, restricted cash, private-placement proceeds and cash needs against the acquisition, robotics-platform and other growth commitments.
- Track conversion of robot trials into paid deployments, revenue mix against the 44% non-CIT target, and actual profitability of Handshake and acquired businesses.
- Assess customer renewals and concentration, related-party transactions and acquisition terms, litigation developments, and Nasdaq listing compliance.