GRDAF Grounded Lithium Corporation (QB)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of, October 2023

 

Commission File Number 001-40848

 

GUARDFORCE AI CO., LIMITED

(Translation of registrant’s name into English)

 

10 Anson Road, #28-01 International Plaza

Singapore 079903

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ☒   Form 40-F ☐

 

 

 

Execution of Material Definitive Agreements

  

On September 28, 2023, Guardforce AI Co., Limited (“Guardforce” or the “Company”) entered into a loan conversion agreement (the “Loan Conversion Agreement”) with WK Venture Success Limited, a company incorporated in the British Virgin Islands with limited liability, which is the holder of certain indebtedness of the Company (“WK Venture”), and each of the entities listed on Schedule 2 (each a “Holder”, together with WK Venture, the “Holders”) to the Loan Conversion Agreement, pursuant to which the Holders will convert its outstanding loans to the Company in exchange for ordinary shares, par value $0.12 per share (the “Ordinary Shares”), of the Company (the “Loan Conversion”). As of the date of the Loan Conversion Agreement, a total of US$15,914,614.59 were owed to the Holders by the Company (which includes in the aggregate principal amount of US$13,421,792.82 and accrued unpaid interest of US$2,492,821.77). According to the Loan Conversion Agreement, the Holders will discharge the entire loan amount and accrued unpaid interest in exchange for receiving 2,947,150 Ordinary Shares (the “Conversion Shares”) of the Company, as allocated to each Holder as listed in Schedule 2 of the Loan Conversion Agreement, at a conversion price of US$5.40 per share (the “Conversion Price”).

 

Each of the Holders has agreed that the Conversion Shares and any certificates in respect of the Conversion Shares shall be notated with a restrictive legend and that the Holders shall not be entitled to have such restrictive legend removed until November 6, 2023; provided, however, that the Company will use its best efforts to remove any restrictive legends from any certificates representing the Conversion Shares or the book-entry account maintained by the transfer agent of the Company upon the request of any Holder after November 6, 2023, at the Company’s sole cost and expense. The Loan Conversion Agreement further stipulates that the Company shall not effect any conversion under the Loan Conversion to the extent that after giving effect to such conversion would cause any of the Holders to beneficially own, as determined pursuant to the Securities Act of 1933, a number of Ordinary Shares exceeding 9.99% of the number of Ordinary Shares outstanding on such date (including for such purpose the Ordinary Shares issuable upon such issuance).

 

In addition, as a condition to the execution of the Loan Conversion Agreement, each of the Holders executed and delivered to the Company a Voting Agreement and Irrevocable Proxy (the “Voting Agreement”), agreeing to appoint or procured that the person who is entitled to attend and vote such Holder’s Conversion Shares at a general meeting of the shareholders of the Company shall appoint, Ms. Lei Wang, the Executive Chairman of the Board of Directors and Chief Executive Officer of the Company, as his/her/its proxy(ies) (the “Proxy”), which shall be entitled to exercise the same powers on behalf of each of the Holders, to attend and vote instead of him/her/it, subject to the Company’s adopted second amended and restated memorandum and articles of association, as amended from time to time.

 

The foregoing descriptions of the Loan Conversion Agreement and the Voting Agreement are summaries of the material terms of such agreements. The descriptions do not purport to be complete and are qualified in their entirety by reference to the Loan Conversion Agreement and the Voting Agreement, which are attached hereto as Exhibits 10.1 and 10.2.

 

On September 12, 2023, the Company issued a press release announcing that the Company’s subsidiary, Guardforce Cash Solutions Security (Thailand) Company Limited, secured a two-year contract with a pre-existing client for its end-to-end cash management solutions. A copy of that press release is attached as Exhibit 99.1 hereto.

 

On October 2, 2023, the Company issued a press release announcing that the Company has entered into a loan conversion agreement which is expected to enhance the Company’s balance sheet by converting $13.4 million of debt and $2.5 million of accrued and unpaid interest in exchange for 2,947,150 restricted ordinary shares at $5.40 per share on September 28, 2023. A copy of that press release is attached as Exhibit 99.2 hereto.

 

This report on Form 6-K is incorporated by reference into (i) the prospectus contained in the Company’s registration statement on Form F-3 (SEC File No. 333-261881) declared effective by the Securities and Exchange Commission (the “Commission”) on January 5, 2022; (ii) the prospectus dated February 9, 2022 contained in the Company’s registration statement on Form F-3 (SEC File No. 333-262441) declared effective by the Commission on February 9, 2022; and (iii) the prospectus contained in the Company’s Post-Effective Amendment No. 1 to Form F-1 on Form F-3 (SEC File No. 333-258054) declared effective by the Commission on June 14, 2022.

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
10.1		Loan Conversion Agreement by and among Guardforce AI Co., Limited and each of the persons listed on Schedule 2 to this Loan Conversion Agreement dated September 28, 2023
10.2		Voting Agreement by and among Guardforce AI Co., Limited and each of the persons listed on the Schedule to this Voting Agreement dated September 28, 2023
99.1		Press Release titled “Guardforce AI Secures Two-Year Contract for its End-to-End Cash Management Solution Including Guardforce Digital Machine in Thailand” dated September 12, 2023
99.2		Press Release titled “Guardforce AI Reports Interim Financial Results for the First Half of 2023, and Provides Business Update” dated October 2, 2023

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: October 2, 2023	Guardforce AI Co., Limited
	By:	/s/ Lei Wang
		Lei Wang
		Chief Executive Officer

 

 

3

Exhibit 10.1

 

CONVERSION AGREEMENT

 

This Conversion Agreement (this “Agreement”) is made and entered into as of September 28, 2023 (the “Effective Date”), by and among Guardforce AI Co., Limited, an exempted company incorporated in the Cayman Islands (the “Company”), WK Venture Success Limited, a company incorporated in the British Virgin Islands with limited liability, who is the holder of certain indebtedness of the Company (“WK Venture”) and each of the persons listed on Schedule 2 to this Agreement (together with WK Venture, each, a “Holder” and collectively, the “Holders” and, the Holders together with the Company, the “Parties”).

 

Recitals

 

Whereas, on April 29, 2016, Guardforce Holdings (HK) Limited (“GFHK”) agreed to issue, and Profit Raider Investment Limited (“Profit Raider”) agreed to subscribe for, exchangeable bonds in the aggregate principal amount of US$15,000,000, due on April 29, 2018 (the “Bond”). As a result of certain internal loan restructuring of GFHK and its subsidiaries, Guardforce Cash Solutions Security (Thailand) Company Limited (“Guardforce Cash”), the Company’s 99.07% owned subsidiary, has become indebted to Profit Raider in respect of the Loan (as defined below) on and from April 29, 2018. On August 25, 2018, Guardforce Cash entered into an agreement with Profit Raider (the “Loan Agreement”) to record the terms and conditions regulating the loan in the principal amount of US$13,421,792.82 owed by Guardforce Cash to Profit Raider (the “Loan”). On April 29, 2019, Guardforce Cash entered into a supplemental agreement to the Loan Agreement with Profit Raider, to extend the due date of the Loan to December 31, 2019. The Company recorded a short-term borrowing in the Loan for the year ended December 31, 2019, bearing interest at 3.22% per annum prior to April 30, 2019, and 4% per annum from April 30, 2019 to December 31, 2019.

 

Whereas, on March 11, 2020, Guardforce Cash entered into the second supplemental agreement to the Loan Agreement with Profit Raider, to extend the due date of the Loan to December 31, 2020. On December 31, 2020, Guardforce Cash entered into the third supplemental agreement to the Loan Agreement with Profit Raider, to extend the due date of the Loan to December 31, 2022. On December 30, 2022, Guardforce Cash entered into the fourth supplemental agreement with WK Venture and other parties thereto to further extend the Loan to December 31, 2024. The Company recorded a long-term borrowing in the Loan for the year ended December 31, 2022, bearing interest at 4% per annum from April 30, 2019 to December 31, 2024.

 

Whereas, a deed of assignment and transfer dated September 29, 2022 (the “Assignment Deed”), was entered into between Profit Raider, WK Venture, and other parties named therein, pursuant to which the Loan, along with all present and future rights, claims, titles, interests, powers, benefits, obligations, and liabilities of Profit Raider pertaining to or in respect of the Loan, was assigned and transferred to WK Venture.

 

Whereas, as of July 31, 2023, the amount of accrued and unpaid interest of the Loan is US$2,492,821.77 (the “Unpaid Interest”), such that the total amount owed under the Loan is US$15,914,614.59 (the “Amount Owed”). Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Loan Agreement.

 

Whereas, the Parties desire to convert one hundred percent (100%) of the Amount Owed under the Loan into the ordinary shares, par value US$0.12 (the “Ordinary Shares”), of the Company, at a conversion price of US$5.40 per share (the “Conversion Price”) and subject to the terms and conditions set forth herein (such transaction, the “Loan Conversion”).

 

 

Agreement

 

Now Therefore, in consideration of the mutual promises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Conversion.

 

(a) Conversion. Upon execution of this Agreement by the Company and each of the Holders and the satisfaction or waiver of each of the conditions set forth in Section 1(c) (the “Closing” and such date, the “Closing Date”), with no further action by any party, WK Venture hereby confirms, on behalf of itself and the other Holders, that one hundred percent (100%) of the Amount Owed under the Loan is hereby automatically converted into the number of Ordinary Shares of the Company set forth on Schedule 1 to this Agreement (the “Conversion Shares”). Any accrued and unpaid interest of the Loan from July 31, 2023 to the Effective Date shall be forgiven.

 

(b) Closing Deliverables.

 

(i) On the Closing Date, the Company will:

 

(1) deliver to each Holder a copy of this Agreement, duly executed by the Company;

 

(2) (A) procure the entry of each of the Holders in its shareholder list as the legal owner of the relevant number of Conversion Shares set forth opposite such Holder’s name on Schedule 2 to this Agreement and (B) provide electronic book entry statements in the names of each of the Holders for the applicable number of Conversion Shares; and

 

(3) deliver to each Holder a certificate signed by an authorized officer of the Company, dated as of the Closing Date, certifying that the conditions set forth in Section 1(c)(ii) have been satisfied.

 

(ii) On the Closing Date, each Holder will deliver to the Company a copy of this Agreement, in each case duly executed by such Holder.

 

(c) Closing Conditions.

 

(i) The obligations of the Company hereunder are subject to the following conditions being met:

 

(1) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) on the Closing Date of the respective representations and warranties of the Holders contained herein (unless as of a specific date therein in which case they shall be accurate as of such date);

 

(2) all obligations, covenants and agreements of each Holder that are required to be performed at or prior to the Closing Date shall have been performed in all material respects; and

 

(3) the delivery by each Holder of the items set forth in Section 1(b)(ii) of this Agreement.

 

 

(ii) The respective obligations of WK Venture and each of the Holders hereunder are subject to the following conditions being met:

 

(1) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein, in which case they shall be accurate as of such date);

 

(2) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed in all material respects;

 

(3) the Company shall have submitted to the Nasdaq Capital Market the Listing of Additional Shares Notification for the listing of the Conversion Shares on the Nasdaq Capital Market as set forth in Section 2(c), a copy of which shall have been provided to the Holders, and the Nasdaq Capital Market shall have raised no objection with respect thereto;

 

(4) no statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated hereby; and

 

(5) the delivery by the Company of the items set forth in Section 1(b)(i) of this Agreement.

 

2. Covenants.

 

(a) Restrictive Legends. Each of the Holders, understands and agrees that the Conversion Shares and any certificates in respect of the Conversion Shares shall be notated with the following legend or one similar to it:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF OTHER THAN IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM THE REGISTRATION STATEMENT REQUIREMENTS OF THE SECURITIES ACT, INCLUDING THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL (WHICH OPINION IS REASONABLY SATISFACTORY TO THE COMPANY) CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES TO THE EXTENT PERMITTED BY APPLICABLE FEDERAL AND STATE SECURITIES LAWS.”

 

Notwithstanding any other provisions of this Agreement, each of the Holders shall not be entitled to have the above legend removed, until November 6, 2023.

 

(b) Removal of Restrictive Legends.

 

(i) Subject to compliance with the requirements of Rule 144 under the US Securities Act of 1933, as amended (the “Securities Act”) or at any other time such legend is otherwise not required under applicable requirements and exemptions of the Securities Act, the Company will use its best efforts to remove any restrictive legends from any certificates representing the Conversion Shares or the book-entry account maintained by the transfer agent of the Company (the “Transfer Agent”) evidencing ownership of the Conversion Shares, as applicable, upon the request of any Holder and after November 6, 2023, at the Company’s sole cost and expense.

 

 

(ii) For the avoidance of doubt, (A) counsel to the Company shall provide all opinions with respect to the removal of restrictive legends (x) pursuant to and in compliance with Rule 144 or other available exemption from the registration statement requirements of the Securities Act, or (y) at such time as any registration statement covering the resale of the Conversion Shares is effective under the Securities Act, unless any registration exemption is available in compliance with the Securities Act (B) the Company shall provide confirmation to the Transfer Agent that all such opinions are acceptable and (C) the Company shall pay all costs associated with such opinions and counsel to the Company.

 

(iii) Notwithstanding anything in the Company’s Amended and Restated Memorandum and Articles of Association to the contrary, the Company hereby agrees that it shall not refuse to register the transfer of any of the Conversion Shares by any Holder; provided such transfer is made pursuant to either (A) a registration statement under the Securities Act, which registration statement shall have become effective, or (B) an exemption from the registration statement requirements of the Securities Act, including (x) the provisions of Regulation S promulgated under the Securities Act (“Regulation S”) or (y) Rule 144 promulgated under the Securities Act (“Rule 144”).

 

3. Representations and Warranties of the Company. The Company hereby represents and warrants to the Holders as of the date of this Agreement as set forth below:

 

(a) Incorporation, Good Standing and Qualification. The Company is an exempted company, duly incorporated, validly existing and in good standing under the laws of Cayman Islands. The Company is duly qualified to do business and is in good standing as a company in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business.

 

(b) Authorization; Binding Obligations. All corporate action on the part of the Company, its directors and shareholders necessary for the authorization of this Agreement, the performance of all obligations of the Company hereunder as of the Effective Date, and the authorization, allotment, issuance and delivery of the Conversion Shares pursuant hereto, has been duly and validly taken, and no further action is required by the Company, its directors or shareholders in connection herewith. This Agreement has been duly executed by the Company and, when executed and delivered by the other parties hereto, will be a valid and binding obligation of the Company enforceable in accordance with its terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) general principles of equity that restrict the availability of equitable remedies.

 

(c) No Conflicts. The execution, delivery and performance by the Company of this Agreement, the allotment, issuance and delivery of the Conversion Shares and the consummation by the Company of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of the Company’s or any subsidiary of the Company’s (“Subsidiary”) memorandum and articles of association, certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing the Company’s or any Subsidiary’s debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in (A) a material adverse effect on the legality, validity or enforceability of, or the Company’s ability to perform in any material respect its obligations under, this Agreement or (B) a Material Adverse Change (as defined below).

 

 

(d) No Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or any other person in connection with the execution, delivery and performance by the Company of this Agreement.

 

(e) Capitalization. As of the date hereof, the Company has an authorized share capital of US$36,000,000 divided into 300,000,000 Ordinary Shares of par value US$0.12 each, 6,883,223 Ordinary Shares of which are issued and outstanding. 687,633 (rounding down) Ordinary Shares will represent 9.99% of the Company’s issued and outstanding Ordinary Shares. All of the Company’s issued and outstanding Ordinary Shares are fully paid and non-assessable and were issued in compliance with all applicable laws. The issuance of the Conversion Shares pursuant to this Agreement will not obligate the Company to issue Ordinary Shares or other securities to any person (other than the Holders) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. No person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement.

 

(f) Issuance of the Conversion Shares. The Conversion Shares are duly authorized and, when issued and paid for in accordance with this Agreement by giving effect to the Loan Conversion, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens other than restrictions on transfer under applicable securities laws, the currently effective amended and restated memorandum and articles of association of the Company and the Voting Agreement mentioned in Section 6 of this Agreement.

 

(g) SEC Reports; Financial Statements. The Company has filed in a timely manner all reports, schedules, forms, statements and other documents required to be filed by the Company pursuant to the Securities Act and pursuant to Sections 13(a), 13(e), 14 and 15(d) of the US Exchange Act of 1934, as amended (the “Exchange Act”) during the preceding 12 months (except to the extent that Section 15(d) requires reports to be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act, which shall be governed by the next clause of this sentence); and the Company has filed in a timely manner all reports required to be filed pursuant to Sections 13(d) and 13(g) of the Exchange Act during the preceding 12 months (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the U.S. Securities and Exchange Commission (the “Commission”) with respect thereto as in effect at the time of filing. Such financial statements fairly present in all material respects the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the International Accounting Standards Board (“IFRS”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by IFRS); and the supporting schedules included or incorporated by reference in the SEC Reports present fairly in all material respects the information required to be stated therein. To the knowledge of the Company, PKF Littlejohn LLP and Wei, Wei & Co., LLP (the “Auditors”), whose reports are filed with the Commission and included or incorporated by reference in the SEC Reports, are each an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board.

 

 

(h) No Material Adverse Change. Since December 31, 2022, there has been no material adverse change in the financial position or results of operations of the Company or its Subsidiaries taken as a whole, nor to the Company’s knowledge, any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company or its Subsidiaries taken as a whole (a “Material Adverse Change”).

 

(i) Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the SEC Reports and would have, or would reasonably be expected to result in, a Material Adverse Change.

 

(j) Compliance with Laws. Each of the Company and each Subsidiary: (i) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the business of the Company as currently conducted (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (ii) has not received any warning letter, untitled letter or other correspondence or notice from any governmental or regulatory agency, authority, body, entity or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”) alleging or asserting noncompliance with any Applicable Laws or any consents, authorizations, approvals, licenses, certificates, clearances, permits or orders or supplements and amendments thereto (collectively, “Authorizations”) of or from any Governmental Entities that the Company needs as of the date hereof to conduct its business purpose as described in the SEC Reports; (iii) possesses all Authorizations and such Authorizations are valid and in full force and effect and are not in violation of any term of any such Authorizations, except where the invalidity of such Authorizations or the failure of such Authorizations to be in full force and effect would not result in a Material Adverse Change; (iv) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any activity conducted by the Company is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; and (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission), except where the failure to be so in compliance would not, individually or in the aggregate, result in a Material Adverse Change.

 

(k) Listing and Maintenance Requirements. The Ordinary Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Ordinary Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as may be disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from the Nasdaq Capital Market to the effect that the Company is not in compliance with the listing or maintenance requirements of the Nasdaq Capital Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

 

(l) Foreign Corrupt Practices Act. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of, and with authority from, the Company and its Subsidiaries, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have had a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.

 

(m) Compliance with OFAC. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of, and with authority from, the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(n)  Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, ‘the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

 

(o) Solvency. As of the date hereof, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid.

 

(p) Private Placement. None of the Company nor any person acting on behalf of the Company has taken or will take any action which would subject the offer, issuance or sale of the Conversion Shares in accordance with this Agreement to registration under the provisions of Section 5 of the Securities Act. Assuming the accuracy of the Holders’ representations and warranties set forth in Section 4, no registration under the Securities Act is required for the offer and sale of the Conversion Shares by the Company to the Holders as contemplated hereby. The issuance and sale of the Conversion Shares hereunder does not contravene the rules and regulations of the Nasdaq Capital Market.

 

 

(q) No General Solicitation; Directed Selling Efforts. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Conversion Shares by any form of general solicitation or general advertising. Neither the Company nor any person acting on its behalf has engaged in any “directed selling efforts” (under and as defined in Regulation S) to U.S. persons with respect to the Conversion Shares.

 

(r) Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the issuance and sale of the Conversion Shares hereunder to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.

 

(s) No Investment Company Status. The Company is not and, after giving effect to the transactions contemplated by this Agreement, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.

 

4. Representations and Warranties of the Holders. Each Holder, severally and not jointly, hereby represents and warrants to the Company in respect of that Holder itself as follows (provided that such representations and warranties do not lessen or obviate the representations and warranties of the Company set forth in this Agreement):

 

(a) Requisite Power and Authority. Such Holder has all necessary power and authority to execute and deliver this Agreement and to carry out its provisions. All action on such Holder’s part required for the lawful execution and delivery of this Agreement has been taken. Upon its execution and delivery, this Agreement will be a valid and binding obligation of such Holder, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (ii) as limited by general principles of equity that restrict the availability of equitable remedies.

 

(b) Reliance on Exemptions. Such Holder understands that the Conversion Shares are being offered in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Holder set forth herein in order to determine the availability of such exemptions and the eligibility of any Holder to receive the Conversion Shares. All of the written information which such Holder has provided to the Company in respect of itself is true, correct and complete as of the date this Agreement is signed.

 

(c) Transfer Restrictions and Terms and Conditions. At the time of issuance of the Conversion Shares, there does not exist a registration statement under the Securities Act for the Conversion Shares, which registration statement shall have become effective and is current with respect to the Conversion Shares. Such Holder acknowledges that the Conversion Shares to be issued to that Holder must be held indefinitely unless subsequently registered and qualified under the Securities Act, or unless an exemption from registration and qualification is otherwise available.

 

 

(d) Restricted Securities. Such Holder, acknowledges that the shareholder list and book entry account representing or evidencing the Conversion Shares shall contain a customary restrictive legend restricting the offer, sale or transfer of any Conversion Shares except in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act, or pursuant to an available exemption from registration under the Securities Act. Such Holder (i) is purchasing the Conversion Shares for Holder’s own account and not with a view to the resale or distribution thereof; (ii) at no time was presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and issue of the Conversion Shares; (iii) is not required to be registered as a broker-dealer under Section 15 of the Exchange Act, and is not affiliated with any broker-dealer registered under Section 15 of the Exchange Act; and (iv) agrees that any subsequent offer for sale or sale of any such Conversion Shares shall be made pursuant to either (1) a registration statement under the Securities Act, which registration statement shall have become effective and shall be current with respect to the Conversion Shares being offered and sold, or (2) an exemption from the registration statement requirements of the Securities Act, including the provisions of Regulation S promulgated under the Act (“Regulation S”) or Rule 144.

 

(e) Foreign Holders. Such Holder hereby represents that it is located outside of the United States and such Holder, at the time of the sale of the Conversion Shares, will be outside the United States. Such Holder has not engaged in or directed any unsolicited offers to purchase the Ordinary Shares of the Company in the United States, and is neither a U.S. Person nor a Distributor (as defined in Rule 902(k) and 902(d), respectively, of Regulation S). Such Holder is familiar with and understands the terms and conditions and requirements contained in Regulation S, specifically, without limitation, the Holder understands that the statutory basis for the exemption claimed for the sale of the Conversion Shares would not be present if the sale, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the Securities Act. Such Holder further represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Conversion Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the receipt of the Conversion Shares, (ii) any foreign exchange restrictions applicable to such receipt, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Conversion Shares. The Holder’s subscription for and continued beneficial ownership of the Conversion Shares will not violate any applicable securities or other laws of the Holder’s jurisdiction.

 

(f) Independence of Parties. Such Holder hereby represents that it is an independent entity from each of the other Holders and is not an agent, representative, partner, or employee of any other Holder and is not under common control with any other Holder. For the purpose of this provision, under common control means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise); provided, however, that in any event any person which beneficially owns, directly or indirectly, 10% or more (in number of votes) of the securities having ordinary voting power for the election of directors of a corporation shall be conclusively presumed to control such corporation.

 

5. Restrictions On Disposition

 

(a) Restrictions on Disposition. Each Holder will not make any disposition of all or any portion of its Conversion Shares unless:

 

(i) there is then in effect a registration statement under the Securities Act, covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

(ii) such Holder has notified the Company of the proposed disposition and such disposition will not require registration of such securities under the Securities Act.

 

 

Notwithstanding the foregoing provisions of this Section 5(a), no such registration statement will be required: (i) for any transfer of any Conversion Shares in compliance with the Securities and Exchange Commission’s Rule 144 or Rule 144A or pursuant to another available exemption from registration, or (ii) for any transfer of any Conversion Shares by a Holder that is a partnership, limited liability company, corporation or venture capital fund to (A) a partner of such partnership, member of such limited liability company or shareholder of such corporation, (B) an affiliate of such partnership, limited liability company or corporation (including, any affiliated investment fund of such Holder), (C) a retired partner of such partnership or a retired member of such limited liability company, or (D) the estate of any such partner, member, or shareholder, or (iii) for the transfer without additional consideration or at no greater than cost by gift, will, or intestate succession by any Holder to the Holder’s spouse or lineal descendants or ancestors or any trust for any of the foregoing; provided that, in the case of clauses (ii) and (iii), the transferee agrees in writing to be subject to the terms and conditions of this Agreement to the same extent as if the transferee were an original Holder under this Agreement.

 

(b) Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not effect any conversion of the Amount Owed under the Loan to the extent that after giving effect to such conversion would cause any of the Holders to beneficially own a number of Ordinary Shares exceeding 9.99% of the number of Ordinary Shares outstanding on such date (including for such purpose the Ordinary Shares issuable upon such issuance) (the “Maximum Percentage”). For purposes of this section, beneficial ownership of Ordinary Shares will be determined pursuant to the Securities Act.

 

6. Voting Agreement and Irrevocable Proxy. Each of the Holders shall appoint, or procure that the person who is entitled to attend and vote such Holder’s Conversion Shares at a general meeting of the shareholders of the Company shall appoint, Ms. Lei Wang, who is the Executive Chairman of the Board of Directors and Chief Executive Officer of the Company as his/her/its proxy(ies) (the “Proxy”) to attend and vote instead of him/her/it, subject to the Company’s adopted Memorandum and Articles as amended from time to time. A proxy needs not to be a shareholder of the Company. The Proxy shall be entitled to exercise the same powers on behalf of each of the Holders which they represent as the Holders could exercise. As a condition to the execution of this Agreement, each of the Holders is executing and delivering to the Company a Voting Agreement and Irrevocable Proxy in substantially the form attached hereto as Exhibit A (the “Voting Agreement”).

 

7. Waiver of Rights. The Holders who entitled to attend and vote at a general meeting of the shareholders of the Company hereby irrevocably waive their rights under the Company’s adopted Memorandum and Articles as amended from time to time to nominate a Director for election to the Company’s Board of Directors.

 

8. Miscellaneous.

 

(a) Governing Law; Venue. This Agreement shall be governed by and construed under the laws of the State of New York in all respects without giving effect to conflict of law principles thereof. The parties agree that any action brought by either party under or in relation to this Agreement, including without limitation to interpret or enforce any provision of this Agreement, shall be brought in, and each party agrees to and does hereby submit to the jurisdiction and venue of, any state or federal court located in the state of New York.

 

(b) Amendments and Waivers. No provisions of this Agreement shall be modified, waived or terminated, except by an instrument in writing signed by each party hereto.

 

(c) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

 

(d) Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

 

(e) Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

(f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(g) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein.

 

(h) Further Assurances. Each party hereto agrees to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other actions as may be reasonably necessary to consummate the transactions contemplated by this Agreement.

 

(i) Attorneys’ Fees. In the event that any suit or action is instituted under or in relation to this Agreement, including without limitation to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

(j) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder under this Agreement and the Voting Agreement (the “Transaction Documents”) are several and not joint with the obligations of any other Holder, and no Holder shall be responsible in any way for the performance or non-performance of the obligations of any other Holder under any Transaction Document. Nothing contained herein or in the Voting Agreement, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or in the Voting Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any action or proceeding for such purpose. The Company has elected to provide all Holders with the same terms for the convenience of the Company and not because it was required or requested to do so by any of the Holder. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among the Holders.

 

(Signature Page Follows)

 

 

In Witness Whereof, the Parties have executed this Conversion Agreement as of the Effective Date.

 

	Company:
	Guardforce AI Co., Limited
	a Cayman Islands exempted company
	By:	/s/ Lei Wang
	Name:	Lei Wang
	Title:	Executive Chairman of the Board of Directors and Chief Executive Officer
	Address:
	10 Anson Road
	#28-01 International Plaza
	Singapore 079903

 

	HOLDER:
	WK Venture Success Limited
	a British Virgin Islands company
	By:	/s/ Yang Jinping
	Name:	Yang Jinping
	Title:	Director
	Address:
	Vistra Corporate Services Centre,
	Wickhams Cay II, Road Town, Tortola,
	VG1110, British Virgin Islands

 

	HOLDER:
	Yuan Chun Holding Co., Limited
	a British Virgin Islands company
	By:	/s/ Wang Tao
	Name:	Wang Tao
	Title:	Director
	Address:
	Coastal Building, Wickham’s Cay II,
	P.O. Box 2221, Road Town, Tortola,
	VG1110, British Virgin Islands

 

[Signature Page to Conversion Agreement]

 

 

	HOLDER:
	Sunton Development Company Limited
	a Hong Kong company
	By:	/s/ Yang Neng
	Name:	Yang Neng
	Title:	Director
	Address:
	Suite 702, 7/F., Fu Fai Commercial Centre,
	27 Hillier Street, Sheung Wan, Hong Kong

 

	HOLDER:
	Yescom Development Company Limited
	a Hong Kong company
	By:	/s/ Wang Wei
	Name	Wang Wei
	Title:	Director
	Address:
	Suite 702, 7/F., Fu Fai Commercial Centre,
	27 Hillier Street, Sheung Wan, Hong Kong

 

	HOLDER:
	Hash Digital Investment Limited
	a Hong Kong company
	By:	/s/ Su Zhengyang
	Name:	Xu Zhengyang
	Title:	Director
	Address:
	22/F., Queen’s Road Centre,
	152 Queen’s Road Central,
	Sheung Wan, Hong Kong

 

[Signature Page to Conversion Agreement]

 

 

Schedule 1

Loan

 

Holder Name and Address

100% of Principal Amount

100% of Unpaid Interest

100% of Amount Owed1

Loan Issue Date

Conversion Price

Number of Conversion Shares

Type of Security

WK Venture Success Limited   Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands

US$

13,421,792.82

US$

2,492,821.77

US$

15,914,614.59

August 25, 2018

US$ 5.40 per share

2,947,150 (Fractional shares disposed)

Restricted Ordinary Shares

 

1	Interest calculated through July 31, 2023.

 

 

Schedule 2

Holders

 

Holder Name and Address		Number of Conversion Shares				Percentage of the Company’s Issued and Outstanding Ordinary Shares Prior to Issuance of Conversion Shares				Percentage of the Company’s Issued and Outstanding Ordinary Shares Post Issuance of Conversion Shares				Type of Security
WK Venture Success Limited Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands			871,250				12.66	%			8.86	%		Restricted Ordinary Shares
Yuan Chun Holding Co., Limited Coastal Building, Wickham’s Cay II, P.O. Box 2221, Road Town, Tortola, VG1110, British Virgin Islands			642,000				9.33	%			6.53	%		Restricted Ordinary Shares
Sunton Development Company Limited Suite 702, 7/F., Fu Fai Commercial Centre, 27 Hillier Street, Sheung Wan, Hong Kong			485,000				7.05	%			4.93	%		Restricted Ordinary Shares
Yescom Development Company Limited Suite 702, 7/F., Fu Fai Commercial Centre, 27 Hillier Street, Sheung Wan, Hong Kong			483,900				7.03	%			4.92	%		Restricted Ordinary Shares
Hash Digital Investment Limited 22/F., Queen’s Road Centre, 152 Queen’s Road Central, Sheung Wan, Hong Kong			465,000				6.76	%			4.73	%		Restricted Ordinary Shares
Total			2,947,150				42.82	%			29.98	%

 

 

Exhibit A

 

Voting Agreement and Irrevocable Proxy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.2

 

VOTING AGREEMENT AND IRREVOCABLE PROXY

 

This VOTING AGREEMENT AND IRREVOCABLE PROXY (this “Agreement”) is made and entered into as of September 28, 2023 (the “Effective Date”), by and among Guardforce AI Co., Limited, an exempted company incorporated in the Cayman Islands (the “Company”), WK Venture Success Limited, a company incorporated in the British Virgin Islands with limited liability, who is the holder of certain indebtedness of the Company (“WK Venture” ) and each of the persons listed on the Schedule to this Agreement (together with WK Venture, each, a “Holder” and collectively, the “Holders” and, the Holders together with the Company, the “Parties”).

 

RECITALS

 

WHEREAS, concurrently with the execution of this Agreement, the Company and the Holders are entering into a Conversion Agreement (the “Conversion Agreement”) providing for conversion of WK Venture’s outstanding loans to the Company and accrued and unpaid interests into ordinary shares, with a par value of US$0.12 per share (the “Ordinary Shares”), of the Company (the “Loan Conversion”). Pursuant to the Conversion Agreement, WK Venture will convert the principal amount of US$13,421,792.82 and accrued and unpaid interests of US$2,492,821.77 into 2,947,150 Ordinary Shares of the Company (the “Conversion Shares”) at the conversion price of US$5.40 per Ordinary Share. In connection with that Conversion Agreement, the Holders desire to appoint the designated director, Ms. Lei Wang (who is the Executive Chairman of the Board of Directors and the Chief Executive Officer of the Company), as each of the Holders’ proxy in respect of the Conversion Shares, to attend and vote at each annual general meeting of the shareholders of the Company and at any other meetings of the shareholders of the Company called, subject to the Company’s adopted Second Amended and Restated Articles of Association of the Company as amended from time to time and in accordance with the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the promises and the covenants and agreements set forth in the Conversion Agreement and in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1. Restrictions on Shares.

 

(a) Except pursuant to the terms of this Agreement, the Holders shall not, directly or indirectly, grant any proxies or powers of attorney with respect to the exercise of voting rights attached to any of the Conversion Shares, deposit any of the Shares into a voting trust, or enter into a voting agreement or similar arrangement or commitment with respect to any of the Conversion Shares or make any public announcement that is in any manner inconsistent with the irrevocable appointment contained in Section 2 (Agreement to Vote Shares) hereof.

 

(b) Except as otherwise provided herein, each Holder shall not, in its capacity as a legal or beneficial shareholder of the Company, directly or indirectly, take any action that would make any representation or warranty contained herein untrue or incorrect or be reasonably expected to have the effect of impairing the ability of Holders to perform its obligations under this Agreement.

 

 

(c) Any shares or other securities of the Company that Holders purchases or with respect to which Holders otherwise acquires legal or beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) after the date of this Agreement and prior to the Expiration Time, including by reason of any share split, share dividend, share consolidation, reclassification, recapitalization or other similar transaction (collectively, the “New Shares”) shall be subject to the terms and conditions of this Agreement to the same extent as if they constituted Conversion Shares. As used herein, the term “Expiration Time” shall mean the earlier to occur of (A) such date and time designated by the Company in a written notice to the Holders, or (B) the written agreement of the parties hereto to terminate this Agreement.

 

(d) Should any Holder(s) choose to transfer or sell their Conversion Shares privately (“Private Transfer”), such action shall be permissible under the terms set forth in this Agreement. Notwithstanding any Private Transfer of shares by the Holder(s), the granting, allocation, or attribution of voting rights to Ms. Lei Wang and appointment her as the proxy shall remain unchanged and unaffected by such Private Transfer. The Holder(s) undertaking a Private Transfer shall (i) provide timely notice to the Company and the relevant parties involved of any such transaction to ensure clarity on the continuation of voting rights as specified; and (ii) have the buyer of the Conversion Shares appoint Ms. Lei Wang as their proxy.

 

(e) The restriction contained in paragraph (d) above does not apply to and the term “Private Transfer” shall exclude any sale, transfer or trading of any of the Conversion Shares and the New Shares conducted by a Holder (i) on a stock market or securities exchange on which the Ordinary Shares are traded or quoted; or (ii) over the counter trade conducted through the medium of a stock broker, securities dealer or financial services intermediary.

 

2. Agreement to Vote Shares. Prior to the Expiration Time, each Holder unconditionally and irrevocably appoints Ms. Lei Wang, who is the Chairperson of the board of directors and the Chief Executive Officer of the Company, as each Holder’s proxy to attend and vote at each annual general meeting of the shareholders of the Company and at any other meetings of the shareholders of the Company called, and at every adjournment or postponement thereof, and on every action or approval by written consent or resolution of the shareholders of the Company.

 

3. Irrevocable Proxy. Concurrently with the execution and delivery of this Agreement, each Holder shall deliver to the Company a duly executed proxy in the form attached hereto as Annex A (the “Proxy”), which proxy is coupled with an interest sufficient in law to support an irrevocable proxy, and, until the Expiration Time, shall be irrevocable to the fullest extent permitted by law, with respect to each and every meeting of shareholders of the Company or action or approval by written resolution or consent of shareholders of the Company covering the total number of Conversion Shares and New Shares in respect of which each of the Holders is entitled to vote at any such meeting or in connection with any such written consent. Upon the execution of this Agreement by the Holders, (i) each of the Holders hereby revokes any and all prior proxies (other than the Proxy) given by each of the Holders and (ii) each of the Holders shall not grant any subsequent proxies, or enter into any agreement or understanding with any person to vote or give instructions with respect to the Conversion Shares and New Shares in any manner inconsistent with the terms of Section 2, until after the Expiration Time.

 

 

4. Representations, Warranties and Covenants of Holders. Each of the Holders hereby in respect of itself only represents, warrants and covenants to the Company as follows:

 

(a) Upon due delivery by the Company of legal title to and ownership in the Conversion Shares to such Holder in accordance with terms of the Conversion Agreement, such Holder is the legal or beneficial owner of, or exercises voting power over, that number of Ordinary Shares of the Company set forth on the Schedule hereto. No person not a signatory to this Agreement has a beneficial interest in or a right to acquire or vote any of the Conversion Shares (other than, if such Holder is a partnership or a limited liability company, the rights and interest of persons and entities that own partnership interests or units in such Holder under the partnership agreement or operating agreement governing such Holder and applicable partnership law or limited liability company law, or if such Holder is a married individual and resides in a state with community property laws, the community property interest of his or her spouse to the extent applicable under such community property laws). The Conversion Shares are and will be at all times up until the Expiration Time be legally or beneficially owned by such Holder free and clear of any security interests, liens, claims, pledges, options, rights of first refusal, co-sale rights, agreements, limitations on such Holder’s voting rights, charges and other encumbrances of any nature that would adversely affect Ms. Lei Wang’s exercise or fulfillment of the rights and obligations of such Holders under this Agreement or of the parties to this Agreement. Each of the Holders’ registered office is set forth on the signature page hereto.

 

(b) If such Holder is a corporation, limited partnership or limited liability company, such Holder is an entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or constituted.

 

(c) Such Holder has all requisite power, capacity and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Holder and the consummation by such Holder of the transactions contemplated hereby have been duly authorized by all necessary action, if any, on the part of such Holder (or its board of directors or similar governing body, as applicable), and no other actions or proceedings on the part of such Holder are necessary to authorize the execution and delivery by such Holder of this Agreement and the consummation by such Holder of the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Holder and, assuming the due authorization, constitutes a valid and binding obligation of such Holder, enforceable against such Holder in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally and to general principles of equity.

 

(d) The execution and delivery of this Agreement does not, and the performance by such Holder of its agreements and obligations hereunder will not, conflict with, result in a breach or violation of or default under (with or without notice or lapse of time or both), or require notice to or the consent of any person under, any provisions of the organizational documents of such Holder (if applicable), or any agreement, commitment, law, rule, regulation, judgment, order or decree to which such Holder is a party or by which such Holder is, or any of its assets are, bound, except for such conflicts, breaches, violations or defaults that would not, individually or in the aggregate, prevent or delay such Holder from performing his, her or its obligations under this Agreement.

 

 

(e) Each of the Holders agree that it will not in its capacity as a shareholder of the Company bring, commence, institute, maintain, prosecute or voluntary aid any action, claim, suit or cause of action, in law or in equity, in any court or before any governmental entity, which (i) challenges the validity or seeks to enjoin the operation of any provision of this Agreement or (ii) refute the due execution and delivery by it of this Agreement.

 

5. Restrictions on Disposals

 

The parties hereby agree that no person (other than an existing Holder) shall acquire any interest in any Conversion Shares or New Shares (and the Company shall not be obliged to register any transfer of any Conversion Shares or New Shares or any interest therein by any Holder) by way of a Private Transfer unless such person has (i) entered into a deed of adherence in a form reasonably acceptable to the Company agreeing to be bound by this Agreement and (ii) provided to the Company a duly executed Proxy covering the total number of Conversion Shares and New Shares in respect of which such person is to acquire an interest.

 

6. Compliance with US securities laws and regulations

 

The Company hereby undertakes to and covenants with each of the Holders that the Company will, at the Company’s own costs and expenses, for the purpose of this Agreement, cause and procure its US legal advisers to secure due compliance by the Holders of any and all disclosure, filing and reporting obligations under the securities laws, rules and regulations of the United States that may arise from the assumption and performance by the Holders of their respective obligations incurred under this Agreement.

 

7. Miscellaneous.

 

(a) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given on (i) the date of delivery, if delivered personally or by commercial delivery service, or (ii) on the date of confirmation of receipt (or the next Business Day, if the date of confirmation of receipt is not a Business Day), if sent via facsimile (with confirmation of receipt), to the parties hereto at the following address (or at such other address for a party as shall be specified by like notice):

 

(i)

if to the Company, to:

Guardforce AI Co., Limited

10 Anson Road, #28-01 International Plaza, Singapore 079903

Attn: Lei Wang

Email: olivia.wang@guardforceai.com

with a copy (which shall not constitute notice) to:

 

Bevilacqua PLLC

 

1050 Connecticut Avenue, NW, Suite 500

Washington, DC 20036

Attn: Louis A. Bevilacqua, Esq.

Email: lou@bevilacquapllc.com 

 

 

(ii)

if to the Holders, to the address set forth for each of the Holders on the signature page hereof.

 

(b) Interpretation. When a reference is made in this Agreement to sections or exhibits, such reference shall be to a section of or an exhibit to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The phrases “the date of this Agreement”, “the date hereof”, and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date first above written. Unless the context of this Agreement otherwise requires: (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; and (iii) the terms “hereof,” “herein,” “hereunder” and derivative or similar words refer to this entire Agreement.

 

(c) Specific Performance; Injunctive Relief. The parties hereto acknowledge that the Company will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants or agreements of Shareholder set forth herein or in the Proxy. Therefore, it is agreed that, in addition to any other remedies that may be available to the Company upon any such violation of this Agreement or the Proxy, the Company shall have the right to enforce such covenants and agreements and the Proxy by specific performance, injunctive relief or by any other means available to the Company at law or in equity and each of the Holders hereby waives any and all defenses that could exist in its favor in connection with such enforcement and waives any requirement for the security or posting of any bond in connection with such enforcement.

 

(d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties hereto; it being understood that all parties need not sign the same counterpart. Delivery of an executed counterpart of a signature page to this Agreement by telecopy or by electronic delivery in Adobe Portable Document Format or other electronic format based on common standards will be effective as delivery of a manually executed counterpart of this Agreement.

 

(e) Entire Agreement; Nonassignability; Parties in Interest; Death or Incapacity. This Agreement and the documents and instruments and other agreements specifically referred to herein or delivered pursuant hereto (including, without limitation, the Proxy) (i) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) are not intended to confer, and shall not be construed as conferring, upon any person other than the parties hereto any rights or remedies hereunder. Neither this Agreement nor any of the rights, interests, or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise, by the Holders without the prior written consent of the Company, and any such assignment or delegation that is not consented to shall be null and void. This Agreement, together with any rights, interests or obligations of the Company hereunder, may be assigned or delegated in whole or in part by the Company to any direct or indirect wholly owned subsidiary of the Company without the consent of or any action by the Company upon notice by the Company to the Holders as herein provided. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns (including, without limitation, any person to whom any Conversion Shares or New Shares are sold, transferred or assigned). All authority conferred herein shall survive the death or incapacity of each of the Holders and in the event of each of the Holders’ death or incapacity, any obligation of each of the Holders hereunder shall be binding upon the heirs, personal representatives, successors and assigns of each of the Holders.

 

 

(f)  Severability. In the event that any provision of this Agreement, or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement shall continue in full force and effect and the application of such provision to other persons or circumstances shall be interpreted so as reasonably to effect the intent of the parties hereto. The parties hereto further agree to use their commercially reasonable efforts to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that shall achieve, to the extent possible, the purposes of such void or unenforceable provision.

 

(g) The obligations of each Holder to the Company under this Agreement are several only. No Holder is responsible to the Company for the obligations of any other Holders under this Agreement.

 

(g) Remedies Cumulative. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy shall not preclude the exercise of any other remedy.

 

(h) Governing Law. The terms and conditions of this Agreement and the rights of the parties hereunder shall be governed by and construed in all respects in accordance with the laws of the Cayman Islands. The parties to this Agreement hereby irrevocably agree that the courts of the Cayman Islands shall have exclusive jurisdiction in respect of any dispute, suit, action, arbitration or proceedings (“Proceedings”) which may arise out of or in connection with this Agreement and waive any objection to Proceedings in the courts of the Cayman Islands on the ground of venue or on the basis that the Proceedings have been brought in an inconvenient forum.

 

(i) Termination. This Agreement shall terminate and shall have no further force or effect from and after the Expiration Time, and thereafter there shall be no liability or obligation on the part of the Holders, provided, that no such termination shall relieve any party from liability for any willful breach of this Agreement prior to such termination.

 

(j) Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against which the waiver is to be effective. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any right hereunder.

 

(k) Rules of Construction. The Parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

 

(l) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Voting Agreement and Irrevocable Proxy as of the Effective Date.

 

	Company:
	Guardforce AI Co., Limited
	a Cayman Islands exempted company
	By:	/s/ Lei Wang
	Name:	Lei Wang
	Title:	Executive Chairman of the Board of Directors and Chief Executive Officer
	Address:
	10 Anson Road
	#28-01 International Plaza
	Singapore 079903
	HOLDER:
	WK Venture Success Limited
	a British Virgin Islands company
	By:	/s/ Yang Jinping
	Name:	Yang Jinping
	Title:	Director
	Address:
	Vistra Corporate Services Centre,
	Wickhams Cay II, Road Town, Tortola,
	VG1110, British Virgin Islands

 

	HOLDER:
	Yuan Chun Holding Co., Limited
	a British Virgin Islands company
	By:	/s/ Wang Tao
	Name:	Wang Tao
	Title:	Director

 

	Address:
	Coastal Building, Wickham’s Cay II,
	P.O. Box 2221, Road Town, Tortola,
	VG1110, British Virgin Islands

 

Signature Page to Voting Agreement and irrevocable proxy

 

 

	HOLDER:
	Sunton Development Company Limited
	a Hong Kong company
	By:	/s/ Yang Neng
	Name:	Yang Neng
	Title:	Director
	Address:
	Suite 702, 7/F., Fu Fai Commercial Centre,
	27 Hillier Street, Sheung Wan, Hong Kong
	HOLDER:
	Yescom Development Company Limited
	a Hong Kong company
	By:	/s/ Wang Wei
	Name:	Wang Wei
	Title:	Director
	Address:
	Suite 702, 7/F., Fu Fai Commercial Centre,
	27 Hillier Street, Sheung Wan, Hong Kong
	HOLDER:
	Hash Digital Investment Limited
	a Hong Kong company
	By:	/s/ Xu Zhengyang
	Name:	Xu Zhengyang
	Title:	Director
	Address:
	22/F., Queen's Road Centre,
	152 Queen's Road Central,
	Sheung Wan, Hong Kong

 

Signature Page to Voting Agreement and irrevocable proxy

 

 

Schedule Above Referred To

 

List of Holders

 

Holder Name		Number of Conversion Shares
WK Venture Success Limited			871,250
Yuan Chun Holding Co., Limited			642,000
Sunton Development Company Limited			485,000
Yescom Development Company Limited			483,900
Hash Digital Investment Limited			465,000
Total			2,947,150

 

 

Annex A

 

IRREVOCABLE PROXY

 

We, [*name] of [*address] (the "Shareholder") being the holder of [*number] ordinary shares of Guardforce AI Co., Limited, a Cayman Islands exempted company (the "Company"), hereby appoint Ms. Lei Wang, the Executive Chairman of the Board of Directors and the Chief Executive Officer of the Company (the "Proxy Holder") the true and lawful attorney and proxy of the Shareholder for and in the Shareholder's name, place and stead to attend all meetings of the shareholders of the Company and to vote at a meeting any and all shares in the Company at the time standing in the Shareholder's name and to exercise all consensual rights in respect of such shares (including without limitation giving or withholding written consents of shareholders and calling special general meetings of shareholders) upon and during the continuance of the voting agreement made between, among others, the Company and the Shareholder dated September 28, 2023 (the “Voting Agreement”).

 

The Shareholder hereby affirms that this proxy is given pursuant to Clause 3 of the Voting Agreement. THIS PROXY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE.

 

The Shareholder hereby ratifies and confirms and undertakes to ratify and confirm all that the Proxy Holder may lawfully do or cause to be done by virtue hereof.

 

If at any time this proxy shall or for any reason be ineffective or unenforceable or fail to provide the Proxy Holder with the rights or the control over the Shareholder's shares of the Company purported to be provided herein, the Shareholder shall execute a replacement instrument which provides the Proxy Holder with substantially the same control over the Shareholder's shares of the Company as contemplated herein.

 

This proxy shall terminate and cease to have effect on and from (i) the Expiration Time or (ii) the time when the Shareholder ceases to own any voting shares in the Company’s issued capital.

 

This irrevocable proxy shall be governed by the laws of the Cayman Islands and the Shareholder irrevocably submits to the jurisdiction of the courts of the Cayman Islands in relation to the matters contained herein.

 

IN WITNESS WHEREOF this Deed is duly executed and delivered the day and year first before written.

 

SIGNED as a DEED by		)
[*Name of Authorised Signatory]		)
authorised signatory for		)
[*Name]
In the presence of:
Name:
	[*Name of Witness]

 

 

 

Exhibit 99.1

 

 

 

Guardforce AI Secures Two-Year Contract for its End-to-End Cash Management
Solution Including Guardforce Digital Machine in Thailand

 

NEW YORK, NY / September 12, 2023 / Guardforce AI Co., Limited (“Guardforce AI” or the “Company”) (NASDAQ: GFAI, GFAIW), an integrated security provider specializing in secured logistics, Artificial Intelligence (AI) and Robot-as-a-Service (“RaaS”), today announced that its subsidiary, Guardforce Cash Solutions Security (Thailand) Company Limited (“GFCS”), has secured a two-year contract with a pre-existing client (“Client”) for its end-to-end cash management solutions, further strengthening the Company’s leading position in Thailand.

 

The end-to-end cash management solution in this contract renewal includes Guardforce Digital Machine (“GDM”), Cash-in-Transit (“CIT”), Cash Processing Centre, and Change Fund services across four locations in Bangkok, Thailand.

 

GDM, which is the newly added service in this contract, enhances the Client’s safety through a security system that protects from potential fraud or theft. GDM also minimizes work processes and enhances efficiency by eliminating the need for staff to count cash by hand, thereby decreasing cash counting errors. The Client can also generate revenue reports at any time, from anywhere.

 

Kee Yun (Tommy) Kwan, Chief Operating Officer of Guardforce AI, stated, “We’re grateful to our client for this contract award. We have been working with them for many years and are excited to expand the scope of our services. We’re the only company in Thailand that provides complete end-to-end cash management solutions. Besides strengthening our position in the market, the relationships we maintain with our clients provide us a solid foundation to expand into other business sectors such as robotics.” 

 

About Guardforce AI Co., Ltd.

 

Guardforce AI Co., Ltd. (NASDAQ: GFAI, GFAIW) is a global security solutions provider, building on its legacy secured logistic business, while expanding to integrated AI and Robot-as-a-Service (RaaS) business. With more than 40 years of professional experience and a strong customer foundation, Guardforce AI is developing RaaS solutions that improve operational efficiency, quickly establishing its presence in the Asia Pacific region, while expanding globally. For more information, visit www.guardforceai.com Twitter: @Guardforceai

 

Safe Harbor Statement

 

This press release contains statements that do not relate to historical facts but are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, continue, could, estimate, expect, indicate, intend, may, plan, possible, predict, project, pursue, will, would and other similar terms and phrases, as well as the use of the future tense. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on current beliefs, expectations and assumptions regarding the future of the business of the Company, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control, including the risks described in our registration statements and reports under the heading “Risk Factors” as filed with the Securities and Exchange Commission. Actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements in this press release speak only as of the date hereof. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether because of new information, future events or otherwise.

 

Investor Relations:

 

David Waldman or Natalya Rudman

Crescendo Communications, LLC

Email: gfai@crescendo-ir.com

Tel: 212-671-1020

 

Guardforce AI Corporate Communications

 

Hu Yu

Email: yu.hu@guardforceai.com 

Exhibit 99.2

 

 

Guardforce AI Reports Interim Financial Results for the First Half of 2023, and Provides Business Update

 

Announces agreement to convert $15.91 million of debt and accrued interest into ordinary shares at $5.40 per share; expected to significantly enhance the balance sheet

 

NEW YORK, NY / October 2, 2023 / Guardforce AI Co., Limited (“Guardforce AI” or the “Company”) (NASDAQ: GFAI, GFAIW), an integrated security provider specializing in secured logistics, Artificial Intelligence (AI) and Robot-as-a-Service (“RaaS”), today provided a business update and announced interim financial results for the six months ended June 30, 2023 ("1H 2023").

 

Additionally, the Company announced that it has entered into an agreement expected to enhance its balance sheet by converting $13.4 million of debt and $2.5 million of accrued and unpaid interest in exchange for 2,947,150 restricted ordinary shares at $5.40 per share on September 28, 2023. The conversion price represents an approximately 29% premium to the closing price of the prior day.

 

Lei (Olivia) Wang, Chairwoman and Chief Executive Officer of Guardforce AI, stated, “We are pleased to report that revenue increased 8.7% to $18.4 million for the first half of 2023. Although we saw a decrease in our robotics AI solutions revenue due to the lasting effects of the Covid-19 pandemic in the first half of 2023, we remain extremely confident in the outlook for our robotics AI solutions. As we receive ongoing feedback from our clients, we are customizing our robots by implementing AI and value-added applications. We have approximately 1,800 robots in use by our clients in the market, and we have a better understanding of our clients’ demands and requirements. By integrating open-source AI models into our next-level solutions, we are confident that the implementation of AI increases the service efficiency and lowers the cost for our clients.

 

“During the first half of the year, we secured two long-term contracts with pre-existing clients for our secured logistics and cash handling services in Thailand. This past month, we secured a two-year contract with a pre-existing client for our end-to-end cash management solutions in Thailand. Furthermore, following our business strategy of diversifying our client base, in the past 6 months, half of our top 15 clients have shifted from banks to retail and chain stores, which are our main target clients in the AI and robotics sector.

 

 

“In the robotics AI business sector, we see a continued demand for robots that have the latest AI technology. We now have a clearer go-to-market strategy and business model for the robotics and AI implementations. Towards that end, we recently partnered with leading security provider, Concorde Security Pte Ltd ("Concorde"), to co-launch a new robotic security solution in Singapore. By combining Concorde’s security solutions with our robotic AI automation, we're further enhancing our security offerings to our clients. In the hospitality industry, we have partnered with Blue Pin (HK) and launched the Smart AI Hotel solution, which allows customers to use our concierge robots to make bookings online, check-in, and check-out. We were also awarded an advertising contract for our innovative Artificial Intelligence of Things (AIoT) Robot Advertising (RA) in Macau. Our AIoT RA model enables advertisers to publish advertisements on Guardforce AI's robots and make more informed marketing decisions with data feedback from the Guardforce AI Intelligent Cloud Platform (GFAI ICP). We will continue to enhance and develop our robotic solutions with innovative AI technology for the hospitality and security industries and look forward to partnering with other companies within these markets to further accelerate growth.

 

“Lastly, we strengthened our balance sheet by raising net proceeds of approximately $23 million gross proceeds in the first half of 2023. We plan to further enhance our balance sheet by converting $13.4 million of debt and $2.5 million of accrued interest in exchange for ordinary shares at a conversion price of $5.40 per share, which is more than a 29% premium to the previous closing price of our stock on September 28, 2023. The lender has been our long-term strategic partner and has been supportive of our business development. Given that the conversion price is at a premium to market, we believe this transaction is in the best long-term interests of the Company and our shareholders. We also believe this transaction illustrates the lender’s confidence in our business outlook. Overall, we are now in a much stronger financial position, significantly improving our balance sheet, and having built a highly scalable business model that we believe will drive significant value for shareholders.”

 

Financial Overview

 

Net revenue increased by $1.47 million or 8.7%, to $18.4 million for 1H 2023, compared to $16.9 million for 1H 2022. This increase was primarily due to our Cash-In-Transit business, demand for our Guardforce Digital Machine and revenue increase from Beijing Wanjia Security System Co., Ltd which we acquired in June 2022. Gross profit increased to $2.5 million for 1H 2023 compared to $1.9 million for the same period last year, and gross margin increased from 11.5% for the six months ended June 30, 2022, to 13.4% for the six months ended June 30, 2023, primarily due to cost control initiatives and higher profit margin from our robotics AI solution business.

 

For the 1H 2023, total selling, distribution, and administrative (SG&A) expenses increased slightly by 0.05% to $6.98 million compared to $6.97 million for the six months ended June 30, 2022. Our business model includes free trials to collect product feedback for new feature development, and advertising models require a certain amount of robot deployments in place. As a result, the Company recognized an impairment loss on robots’ assets in accordance with IFRS accounting principles. Operating loss was $11.9 million for 1H 2023, compared to $5.5 million for 1H 2022, which included an approximate $4.7 million provision and impairment of inventory and fixed assets, as well as a $1.3 million of impairment on goodwill. Adjusted net loss (non-IFRS) was $2.40 million compared with $3.04 million in 2022. As of June 30, 2023, and December 31, 2022, the Company had approximately $26.0 million and $8.2 million of cash and cash equivalents and restricted cash, respectively.

 

 

About Guardforce AI Co., Ltd.

 

Guardforce AI Co., Ltd. (NASDAQ: GFAI, GFAIW) is a global security solutions provider, building on its legacy secured logistic business, while expanding to integrated AI and Robot-as-a-Service (RaaS) business. With more than 40 years of professional experience and a strong customer foundation, Guardforce AI is developing RaaS solutions that improve operational efficiency, quickly establishing its presence in the Asia Pacific region, while expanding globally. For more information, visit Twitter: @Guardforceai

 

Safe Harbor Statement

 

This press release contains statements that do not relate to historical facts but are "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, continue, could, estimate, expect, indicate, intend, may, plan, possible, predict, project, pursue, will, would and other similar terms and phrases, as well as the use of the future tense. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on current beliefs, expectations and assumptions regarding the future of the business of the Company, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control, including the risks described in our registration statements and reports under the heading "Risk Factors" as filed with the Securities and Exchange Commission. Actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements in this press release speak only as of the date hereof. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether because of new information, future events or otherwise.

 

Investor Relations:

David Waldman or Natalya Rudman

Crescendo Communications, LLC

Email: gfai@crescendo-ir.com

Tel: 212-671-1020

 

Guardforce AI Corporate Communications

Hu Yu

Email: yu.hu@guardforceai.com 

 

 

(tables follow)

 

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statement of Profit or Loss

(Expressed in U.S. Dollars)

 

		For the six months ended June 30,
		2023				2022
		(Unaudited)				(Unaudited)
Revenue		$	18,413,292			$	16,942,522
Cost of sales			(15,939,067	)			(14,998,727	)
Gross profit			2,474,225				1,943,795
Stock based compensation			-				(252,095	)
Provision for and write off of withholding tax receivable			(561,277	)			(263,340	)
Provision for expected credit loss on trade and other receivables			(870,408	)			-
Provision for obsolete inventories			(3,090,283	)			-
Impairment loss on fixed assets			(1,591,766	)			-
Impairment of goodwill			(1,263,040	)			-
Selling, distribution and administrative expenses			(6,981,660	)			(6,977,996	)
Operating loss			(11,884,209	)			(5,549,636	)
Other income, net			77,765				46,859
Foreign exchange losses, net			(583,661	)			(745,759	)
Finance costs			(584,897	)			(410,861	)
Loss before income tax			(12,975,002	)			(6,659,397	)
Provision for income tax (expense) benefit			(874,431	)			320,183
Net loss for the period			(13,849,433	)			(6,339,214	)
Less: net loss attributable to non-controlling interests			30,214				32,392
Net loss attributable to equity holders of the Company		$	(13,819,219	)		$	(6,306,822	)
Loss per share
Basic and diluted loss attributable to the equity holders of the Company		$	(4.35	)		$	(7.16	)
Weighted average number of shares used in computation:
Basic and diluted			3,174,282				880,618

 

 

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Balance Sheets

(Expressed in U.S. Dollars)

 

		As of June 30, 2023				As of December 31, 2022
			(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	24,738,377			$	6,930,639
Restricted cash			17,059				-
Trade receivables			5,127,998				5,400,186
Other receivables			-				817,564
Other current assets			2,380,718				1,743,008
Withholding tax receivable, net			536,974				757,024
Inventories			1,636,245				5,105,770
Amounts due from related parties			7,716,503				14,508,873
Total current assets			42,153,874				35,263,064
Non-current assets:
Restricted cash			1,274,956				1,300,005
Property, plant and equipment			6,018,408				8,066,761
Right-of-use assets			3,323,870				4,171,409
Intangible assets, net			6,954,467				5,793,143
Goodwill			1,416,405				2,679,445
Withholding tax receivable, net			1,921,073				1,934,072
Deferred tax assets, net			634,619				1,511,753
Other non-current assets			397,030				447,322
Total non-current assets			21,940,828				25,903,910
Total assets		$	64,094,702			$	61,166,974
Liabilities and Equity
Current liabilities:
Trade and other payables		$	3,065,838			$	2,633,995
Borrowings			3,509,709				3,181,616
Borrowing from a related party			1,666,846				3,148,500
Current portion of operating lease liabilities			1,645,233				1,774,192
Current portion of finance lease liabilities, net			200,383				398,136
Other current liabilities			2,837,287				2,477,369
Amounts due to related parties			3,703,038				3,868,691
Convertible note payables			606,786				1,730,267
Total current liabilities			17,235,120				19,212,766
Non-current liabilities:
Borrowings			13,727,574				13,899,818
Operating lease liabilities			1,686,803				2,340,075
Borrowings from related parties			1,437,303				1,455,649
Finance lease liabilities			229,747				233,550
Other non-current liabilities			-				43,200
Provision for employee benefits			4,775,062				4,849,614
Total non-current liabilities			21,856,489				22,821,906
Total liabilities			39,091,609				42,034,672
Equity
Ordinary shares – par value $0.12 authorized 300,000,000 shares, issued and outstanding 6,883,223 shares at June 30, 2023; par value $0.12 authorized 7,500,000 shares, issued and outstanding 1,618,977 shares at December 31, 2022			826,022				194,313
Subscription receivable			(50,000	)			(50,000	)
Additional paid in capital			65,150,407				46,231,302
Legal reserve			223,500				223,500
Warrants reserve			251,036				251,036
Accumulated deficit			(42,588,233	)			(28,769,014	)
Accumulated other comprehensive income			1,281,904				1,112,494
Capital & reserves attributable to equity holders of the Company			25,094,636				19,193,631
Non-controlling interests			(91,543	)			(61,329	)
Total equity			25,003,093				19,132,302
Total liabilities and equity		$	64,094,702			$	61,166,974

 

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statement of Cash Flows

(Expressed in U.S. Dollars)

 

		For the six months ended June 30,
		2023				2022
		(Unaudited)				(Unaudited)
Cash flows from operating activities
Net loss		$	(13,849,433	)		$	(6,339,214	)
Adjustments for:
Depreciation and Amortization of fixed and intangible assets			2,619,001				2,697,378
Stock-based compensation			-				252,095
Provision for and write off of withholding tax receivable			561,277				263,340
Provision for expected credit loss on trade and other receivables			869,519				-
Provision for obsolete inventories			3,090,282				-
Impairment loss on fixed assets			1,591,766				-
Impairment on goodwill			1,263,040				-
Finance costs			584,897				506,818
Loss from fixed assets disposal			41,965				24,530
Changes in operating assets and liabilities:
Decrease (Increase) in trade and other receivables			157,279				(205,716	)
Increase in other assets			(719,595	)			(968,103	)
Decrease (Increase) in inventories			296,824				(5,521,429	)
Decrease (Increase) in amounts due from/to related parties			639,807				(6,111,443	)
Decrease (Increase) in deferred tax assets			874,431				(325,083	)
Increase in Trade and other payables and other current liabilities			1,285,317				1,265,752
(Decrease) Increase in withholding tax receivable			(374,013	)			663,095
Increase (Decrease) in provision for employee benefits			20,774				(29,812	)
Net cash used in operating activities			(1,046,862	)			(13,827,792	)
Cash flows from investing activities
Acquisition of property, plant and equipment			(829,231	)			(2,309,334	)
Proceeds from sale of property, plant and equipment			-				4,120
Acquisition of intangible assets			(217,077	)			(3,082,880	)
Acquisition of subsidiaries, net of cash acquired			-				(1,793,614	)
Deposits paid for business acquisitions			-				(2,160,000	)
Net cash used in investing activities			(1,046,308	)			(9,341,708	)
Cash flows from financing activities
Proceeds from issue of shares			20,867,386				18,275,728
Proceeds from exercise of warrants			506,693				1,423,690
Cash paid for the cancellation of fractional shares			(49,664	)			-
Proceeds from borrowings			1,756,738				-
Repayment of borrowings			(1,937,096	)			(840,762	)
Payment of lease liabilities			(1,267,979	)			(1,483,203	)
Net cash generated from financing activities			19,876,078				17,375,453
Net decrease in cash and cash equivalents, and restricted cash			17,782,908				(5,794,047	)
Effect of movements in exchange rates on cash			16,840				(519,523	)
Cash and cash equivalents, and restricted cash at January 1,			8,230,644				15,853,811
Cash and cash equivalents, and restricted cash at June 30,		$	26,030,392			$	9,540,241
Non-cash investing and financing activities
Equity portion of purchase consideration paid for acquisition of subsidiaries			-				4,579,879
Equity portion of purchase consideration paid for acquisition of assets (Note 20)			1,848,000				-

 

 

Non-IFRS Financial Measures

 

To supplement our unaudited interim condensed consolidated financial statements, which are prepared and presented in accordance with IFRS, we use the non-IFRS adjusted EBITDA as financial measures for our consolidated results.

 

We believe that adjusted EBITDA helps identify underlying trends in our business that could otherwise be distorted by the effect of certain income or expenses that we include in loss from operations and net loss. We believe that these non-IFRS measures provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We present the non-IFRS financial measures in order to provide more information and greater transparency to investors about our operating results.

 

EBITDA represents net loss before (i) finance costs, provision for income tax benefit, depreciation of fixed assets and amortization of intangible assets, which we do not believe are reflective of our core operating performance during the periods presented.

 

Non-IFRS adjusted net loss represents net loss before (i) finance costs, income tax benefit and depreciation of fixed assets and amortization of intangible assets, (ii) certain non-cash expenses, consisting of stock-based compensation expense and allowance for, write off of withholding tax receivables, (iii) impairment of assets including trade and other receivables, inventories, fixed assets and goodwill.

 

Non-IFRS loss per share represents non-IFRS net (loss) income attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the periods. Non-IFRS diluted (loss) earnings per share represents non-IFRS net (loss) income attributable to ordinary shareholders divided by the weighted average number of shares outstanding during the periods on a diluted basis.

 

The table below is a reconciliation of our net loss to EBITDA and non-IFRS net loss for the periods indicated:

 

		For the six months ended June 30,
		2023				2022
Net loss – IFRS		$	(13,849,433	)		$	(6,339,214	)
Finance costs			584,897				410,861
Provision for income tax expense (benefit)			874,431				(320,183	)
Depreciation and amortization expense			2,619,001				2,697,378
EBITDA			(9,771,104	)			(3,551,158	)
Stock based compensation			-				252,095
Provision for and write off of withholding taxes receivable			561,277				263,340
Provision for expected credit loss on trade and other receivables			869,519				-
Provision for obsolete inventories			3,090,282				-
Impairment loss on fixed assets			1,591,766				-
Impairment of goodwill			1,263,040				-
Adjusted net loss (Non-IFRS)		$	(2,395,220	)		$	(3,035,723	)
Non-IFRS loss per share
Loss per share attributable to equity holders of the Company
Basic and diluted		$	(0.75	)		$	(3.45	)
Weighted average number of shares used in computation:
Basic and diluted			3,174,282				880,618

 

 

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