UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

(Amendment No. 2)

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT

OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report _________________________

For the transition period from ___________ to ___________

Commission file number: 001-40848

GUARDFORCE AI CO., LIMITED

(Exact Name of Registrant as Specified in Its Charter)

Not Applicable

(Translation of Registrant’s Name Into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

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

Tel: +65 6702 1179

(Address of Principal Executive Offices)

Lei Wang, CEO

+65 6702 1179

olivia.wang@guardforceai.com

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

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange On Which Registered
Ordinary Shares, par value $0.003 per share |  | GFAI |  | The Nasdaq Stock Market LLC
Warrants, No par value |  | GFAIW |  | The Nasdaq Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report (December 31, 2021): There were 21,201,842 shares of the registrant’s ordinary shares outstanding, par value $0.003 per share.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non-Accelerated Filer ☒ | Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐ | International Financial Reporting ☒ | Other ☐
| Standards as issued by the International |
| Accounting Standards Board |

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Annual Report on Form 20-F

Year Ended December 31, 2021

TABLE OF CONTENTS

|  | Page
PART I |  |
ITEM 8. | FINANCIAL INFORMATION | 1
| A. Consolidated Statements and Other Financial Information | 1
| B. Significant Changes | 1
PART III |  |
ITEM 17. | FINANCIAL STATEMENTS | 2
ITEM 18. | FINANCIAL STATEMENTS | 2
ITEM 19. | EXHIBITS | 2

i

EXPLANATORY NOTE

This Amendment No. 2 to annual report on Form 20-F (the “Amendment No.2”) amends our annual report on Form 20-F for the year ended December 31, 2021, that was filed with the Securities and Exchange Commission (the “Commission”) on April 1, 2022 and amended on April 14, 2022 (the “Form 20-F”). In response to comments received from the staff of the Commission, our auditors have issued a new audit report to clarify (a) that the financial statements included were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and the standards of the Public Company Accounting Oversight Board (United States), (b) to correct a reference to Note 1 that should have referred to Note 2, (c) to correct an incorrect reference to negative cash flows from operating activities, and (d) to correct an incorrect reference to net loss for the year ended December 31, 2021.

As required by Rule 12b-15 under the Exchange Act of 1934, as amended, updated certifications of our principal executive officer and our principal financial officer are being filed as exhibits to this Amendment No. 2. Other than as described above, this Amendment No. 2 speaks as of the date of the initial filing of the Form 20-F and does not, and does not purport to, amend, update or restate the information in the Form 20-F or reflect any events that have occurred after the Form 20-F was originally filed on April 1, 2022.

ii

PART I

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Financial Statements

We have appended consolidated financial statements filed as part of this annual report. See Item 18 “Financial Statements.”

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

Dividend Policy

We have never declared or paid cash dividends on our ordinary shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends on our ordinary shares in the near future. We may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our ordinary shares. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. See also “Risk Factors—Risks Relating to Our Ordinary Shares and Warrants—We do not expect to declare or pay dividends in the foreseeable future.”

B. Significant Changes

Except as disclosed elsewhere in this annual report, no significant change has occurred since the date of our consolidated financial statements filed as part of this annual report.

1

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide our financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The full text of our audited consolidated financial statements begins on page F-1 of this annual report.

ITEM 19. EXHIBITS

Exhibit No. |  | Description
1.1 |  | Amended and Restated Memorandum and Articles of Association incorporating resolutions passed on August 20, 2021 (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K filed on August 25, 2021)
1.2 |  | Second Amended and Restated Articles of Association adopted at a general meeting held on June 23, 2022 (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K filed on June 24, 2022)
2.1 |  | Description of Rights of Ordinary Shares and Warrants Registered Pursuant to Section 12 of the Exchange Act as of December 31, 2021 (incorporated by reference to Exhibit 2.1 to the Annual Report on Form 20-F filed on April 1, 2022)
2.2 |  | Form of Purchaser Warrant (incorporated by reference to Exhibit 10.4 to the Report on Form 6-K furnished on January 21, 2022)
2.3 |  | Form of Warrant (incorporated by reference to Exhibit 4.3 to the Amendment No.3 to Form F-1 filed on September 20, 2021)
2.4 |  | Form of Warrant Agency Agreement between Guardforce AI Co., Limited and Vstock Transfer, LLC (incorporated by reference to Exhibit 4.2 to the Amendment No.3 to Form F-1 filed on September 20, 2021)
4.1 |  | Loan Agreement, dated August 25, 2018, by and between Guardforce Cash Solutions Security (Thailand) Company Limited and Profit Raider Investments Limited (incorporated by reference to Exhibit 2(b).1 to the Registration Statement on Form 20-F filed on May 18, 2020)
4.2 |  | Supplemental Agreement, dated April 29, 2019, to Loan Agreement by and between Guardforce Cash Solutions Security (Thailand) Company Limited and Profit Raider Investments Limited dated August 25, 2018 (incorporated by reference to Exhibit 2(b).2 to the Registration Statement on Form 20-F filed on May 18, 2020)
4.3 |  | Second Supplemental Agreement, dated March 11, 2020, to Loan Agreement by and between Guardforce Cash Solutions Security (Thailand) Company Limited and Profit Raider Investments Limited dated August 25, 2018 (incorporated by reference to Exhibit 2(b).3 to the Registration Statement on Form 20-F filed on May 18, 2020)
4.4 |  | Memorandum of Understanding, dated March 2, 2020, between Guardforce Security (Thailand) Co. Ltd. and Guardforce Cash Solutions Security (Thailand) Company Limited (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form 20-F filed on May 18, 2020)
4.5 |  | Lease Agreement, dated May 27, 2019, between Varin World Company Limited and Guardforce Cash Solutions Security (Thailand) Company Limited (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form 20-F filed on May 18, 2020)
4.6 |  | Third Supplemental Agreement, dated December 31, 2020, to Amended and Restated Loan Agreement by and between Guardforce Cash Solutions Security (Thailand) Company Limited and Profit Raider Investments Limited dated March 15, 2019, as supplemented (incorporated by reference to Exhibit 4.3 to the Annual Report on Form 20-F filed on April 29, 2021)
4.7 |  | Sale and Purchase Agreement, dated February 4, 2021, between Quantum Infosec Inc. and the Registrant (incorporated by reference to Exhibit 4.4 to the Annual Report on Form 20-F filed on April 29, 2021)
4.8 |  | Supplemental Agreement, dated February 4, 2021, between Quantum Infosec Inc. and the Registrant (incorporated by reference to Exhibit 4.5 to the Annual Report on Form 20-F filed on April 29, 2021)
4.9 |  | Form of Independent Director Agreement (incorporated by reference to Exhibit 10.9 to the Amendment No.1 to Form F-1 filed on August 13, 2021)

2

4.10 |  | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.10 to the Amendment No.1 to Form F-1 filed on August 13, 2021)
4.11 |  | Commissioned Development Agreement, dated February 8, 2022, between Guardforce AI Co., Limited and Shenzhen Kewei Robot Technology Co., Limited (incorporated by reference to Exhibit 99.1 to the Report on Form 6-K furnished on February 17, 2022)
4.12 |  | Guardforce AI Co., Limited 2022 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 to the Report on Form 6-K furnished on January 27, 2022)
4.13 |  | Form of Share Option Agreement (incorporated by reference to Exhibit 10.1 to the Report on Form 6-K furnished on January 27, 2022)
4.14 |  | Form of Restricted Share Award Agreement (incorporated by reference to Exhibit 10.2 to the Report on Form 6-K furnished on January 27, 2022)
4.15 |  | Form of Restricted Share Units Award Agreement (incorporated by reference to Exhibit 10.3 to the Report on Form 6-K furnished on January 27, 2022)
4.16 |  | Sale and Purchase Agreement, dated March 11, 2022, between Guardforce AI Co., Limited and Shenzhen Kewei Robot Technology Co., Limited (incorporated by reference to Exhibit 4.16 to the Annual Report on Form 20-F filed on April 1, 2022)
4.17 |  | Second Supplemental Agreement to Sale and Purchase Agreement, dated on March 17, 2022, by and among Quantum Infosec Inc., Guardforce AI Co., Limited and Handshake Networking Limited (incorporated by reference to Exhibit 4.17 to the Annual Report on Form 20-F filed on April 1, 2022)
8.1 |  | List of the registrant’s subsidiaries (incorporated by reference to Exhibit 8.1 to the Annual Report on Form 20-F filed on April 1, 2022)
11.1 |  | Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14.1 to the Amendment No.1 to Form F-1 filed on August 13, 2021)
12.1* |  | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
12.2* |  | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-1(a)
13.1** |  | Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2** |  | Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1 |  | Consent of Watson Farley & Williams (Thailand) Limited (incorporated by reference to Exhibit 15.1 to the Annual Report on Form 20-F filed on April 1, 2022)
15.2* |  | Consent of PKF Littlejohn LLP
15.3 |  | Consent of Wei, Wei & Co., LLP (incorporated by reference to Exhibit 15.3 to the Annual Report on Form 20-F filed on April 1, 2022)
101.INS |  | Inline XBRL Instance Document
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document.
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

| * | Filed with this Amendment No. 2 to annual report on Form 20-F/A

| ** | Furnished with this Amendment No. 2 to annual report on Form 20-F/A

3

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

| GUARDFORCE AI CO., LIMITED
| By: | /s/ Lei Wang
| Name: | Lei Wang
| Title: | Chief Executive Officer

Date: July 11, 2022

4

GUARDFORCE AI CO., LIMITED AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020

Contents |  | Page(s)
Report of Independent Registered Public Accounting Firm for the year ended December 31, 2021 |  | F-2
Report of Independent Registered Public Accounting Firm for the year ended December 31, 2020 and 2019 |  | F-4
Consolidated Balance Sheets |  | F-5
Consolidated Statements of Profit or Loss |  | F-6
Consolidated Statements of Comprehensive Loss |  | F-7
Consolidated Statements of Changes in Shareholders’ Equity |  | F-8
Consolidated Statements of Cash Flows |  | F-9
Notes to the Consolidated Financial Statements |  | F-10 - F-40

F-1

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of Guardforce AI Co., Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Guardforce AI Co., Limited (the "Company") as of December 31, 2021, the related consolidated statements of profit and loss, comprehensive loss, changes in equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with the International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

The Company is not required to have, nor are we engaged to perform, an audit of its internal controls over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s recurring losses from operations and short term loans due for repayment on December 31, 2022 raise substantial doubt about its ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2.

Critical Audit Matter

The critical audit matter communicated below is matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Going concern assessment

The Company has incurred a net loss for the financial year ended December 31, 2021 of USD$5,491,654, and has unrestricted cash and cash equivalent of USD$12,728,783 and current liabilities of USD$22,495,748 as at December 31, 2021. As part of the current liabilities, the Company has a short term loan of USD$13.5m together with interest owed of USD $1.6m from its related party Profit Raider Investment Limited. The principal loan amount and the interest owed are due for repayment on December 31, 2022. The Company determined the repayment of this loan, and other current liabilities, raised substantial doubt as to the Company’s ability to continue as a going concern one year from the issuance date of the consolidated financial statements. In making this determination, management prepared a going concern assessment through to March 2023 with significant assumptions which included expecting revenue and operating costs, other obligations and funding options.

The principal consideration for our determination that the evaluation of management’s going concern assessment was a critical audit matter are the significant judgment and subjectivity inherent in the Company’s assumptions made in the going concern assessment and the uncertainty of the Company’s ability to secure funding before December 31, 2022.

Our audit procedures related to the evaluation of management’s going concern assessment included the following, among others:

| ● | Assessed the overall reasonableness of the Company’s going concern assessment, including significant assumptions utilized by the Company.

| ● | Assessed the projected revenue and operating costs, liquidity of existing assets, the terms of the bank loans and related party loans and the finance facilities available.

| ● | Reviewed the written communication between the Company and Profit Raider Investment Limited to renew the short term loan.

| ● | Considered the impact on the Company’s working capital of the planned acquisitions in 2022.

| ● | Evaluated the adequacy of the Company’s financial statement disclosures.

/s/ PKF Littlejohn LLP

PKF Littlejohn LLP

London, United Kingdom

March, 31, 2022

PCAOB ID: 2814

We have served as the Company's auditor since October 19, 2021.

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Guardforce AI Co., Limited

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Guardforce AI Co., Limited and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of profit or loss, comprehensive income (loss), changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2020, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Wei, Wei & Co. LLP

Flushing, New York
April 29, 2021, except for Notes 2, 17, 18, 21 and 24 which are dated September 14, 2021

We have served as the Company’s auditor since 2019. In 2021, we became the predecessor auditor.

F-4

Guardforce AI Co., Limited and Subsidiaries

Consolidated Balance Sheets

(Expressed in U.S. Dollars)

|  |  |  | As of December 31, |
|  | Note |  | 2021 |  |  | 2020 |
Assets |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 4 |  | $ | 12,728,783 |  |  | $ | 8,414,044 |
Restricted cash |  | 4 |  |  | 1,600,000 |  |  |  | - |
Trade receivables |  | 6 |  |  | 4,939,568 |  |  |  | 5,468,911 |
Withholding taxes receivables |  | 7 |  |  | - |  |  |  | 690,487 |
Other current assets |  | 8 |  |  | 1,275,981 |  |  |  | 1,584,884 |
Inventories |  | 5 |  |  | 1,387,549 |  |  |  | 495,081 |
Amount due from related parties |  | 21 |  |  | 26,007 |  |  |  | 373,268 |
Total current assets |  |  |  |  | 21,957,888 |  |  |  | 17,026,675 |
Non-current assets: |  |  |  |  |  |  |  |  |  |
Restricted cash |  | 4 |  |  | 1,525,028 |  |  |  | 1,715,866 |
Property, plant and equipment |  | 9 |  |  | 9,897,301 |  |  |  | 7,884,354 |
Right-of-use assets |  | 10 |  |  | 2,364,993 |  |  |  | 4,190,351 |
Intangible assets, net |  | 11 |  |  | 164,316 |  |  |  | 223,408 |
Goodwill |  | 3 |  |  | 329,534 |  |  |  | - |
Withholding taxes receivable, net |  | 7 |  |  | 3,531,953 |  |  |  | 3,534,552 |
Deferred tax assets, net |  | 15 |  |  | 1,635,638 |  |  |  | 1,038,346 |
Other non-current assets |  | 8 |  |  | 345,586 |  |  |  | 361,275 |
Total non-current assets |  |  |  |  | 19,794,349 |  |  |  | 18,948,152 |
Total assets |  |  |  | $ | 41,752,237 |  |  | $ | 35,974,827 |
Liabilities and equity |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |
Trade and other payables |  | 12 |  | $ | 1,028,721 |  |  | $ | 1,540,411 |
Borrowings |  | 13 |  |  | 933,110 |  |  |  | 494,994 |
Borrowings from related parties |  | 21 |  |  | 13,506,184 |  |  |  | - |
Current portion of operating lease liabilities |  | 10 |  |  | 2,366,045 |  |  |  | 2,211,984 |
Current portion of finance lease liabilities, net |  | 14 |  |  | 619,301 |  |  |  | 632,105 |
Other current liabilities |  | 12 |  |  | 1,824,635 |  |  |  | 1,249,106 |
Income tax payables |  | 15 |  |  | - |  |  |  | 284,627 |
Amount due to related parties |  | 21 |  |  | 2,217,752 |  |  |  | 1,670,469 |
Total current liabilities |  |  |  |  | 22,495,748 |  |  |  | 8,083,696 |
Non-current liabilities: |  |  |  |  |  |  |  |  |  |
Borrowings |  | 13 |  |  | 859,120 |  |  |  | 993,869 |
Operating lease liabilities |  | 10 |  |  | - |  |  |  | 2,106,429 |
Borrowings from related parties |  | 21 |  |  | 5,332,803 |  |  |  | 19,085,812 |
Finance lease liabilities, net |  | 14 |  |  | 666,455 |  |  |  | 1,023,366 |
Other non-current liabilities |  |  |  |  | 54,000 |  |  |  | - |
Provision for employee benefits |  | 16 |  |  | 5,819,132 |  |  |  | 6,841,673 |
Total non-current liabilities |  |  |  |  | 12,731,510 |  |  |  | 30,051,149 |
Total liabilities |  |  |  |  | 35,227,258 |  |  |  | 38,134,845 |
Equity |  |  |  |  |  |  |  |  |  |
Ordinary shares – par value $0.003 authorized 300,000,000 shares, issued and outstanding 21,201,842 shares at December 31, 2021; par value $0.003 authorized 100,000,000 shares, issued and outstanding 17,356,090* shares at December 31, 2020 |  | 17 |  |  | 63,606 |  |  |  | 52,069 |
Subscription receivable |  |  |  |  | (50,000 | ) |  |  | (50,000 | )
Additional paid in capital |  |  |  |  | 15,379,595 |  |  |  | 2,082,795 |
Legal reserve |  | 20 |  |  | 223,500 |  |  |  | 223,500 |
Warrants reserve |  |  |  |  | 251,036 |  |  |  | - |
Retained earnings (Deficit) |  |  |  |  | (10,204,220 | ) |  |  | (4,722,294 | )
Accumulated other comprehensive income |  |  |  |  | 821,527 |  |  |  | 204,249 |
Capital & reserves attributable to equity holders of the Company |  |  |  |  | 6,485,044 |  |  |  | (2,209,681 | )
Non-controlling interests |  |  |  |  | 39,935 |  |  |  | 49,663 |
Total equity (deficit) |  |  |  |  | 6,524,979 |  |  |  | (2,160,018 | )
Total liabilities and equity (deficit) |  |  |  | $ | 41,752,237 |  |  | $ | 35,974,827 |

* | Giving retroactive effect to the reverse split on August 20, 2021.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Guardforce AI Co., Limited and Subsidiaries

Consolidated Statements of Profit and Loss

(Expressed in U.S. Dollars)

|  |  |  |  | For the years ended December 31, |
|  | Note |  |  | 2021 |  |  | 2020 |  |  | 2019 |
Revenue |  |  |  |  |  | $ | 35,153,190 |  |  | $ | 37,648,782 |  |  | $ | 38,571,080 |
Cost of sales |  |  |  |  |  |  | (31,084,833 | ) |  |  | (31,374,098 | ) |  |  | (33,928,496 | )
Gross profit |  |  |  |  |  |  | 4,068,357 |  |  |  | 6,274,684 |  |  |  | 4,642,584 |
Provision for and write off of withholding taxes receivable |  |  |  |  |  |  | (190,038 | ) |  |  | (1,722,762 | ) |  |  | - |
Selling, distribution and administrative expenses |  |  | 19 |  |  |  | (7,582,043 | ) |  |  | (6,674,472 | ) |  |  | (4,753,566 | )
Operating loss |  |  |  |  |  |  | (3,703,724 | ) |  |  | (2,122,550 | ) |  |  | (110,982 | )
Other income, net |  |  |  |  |  |  | 285,220 |  |  |  | 52,956 |  |  |  | 160,168 |
Foreign exchange (losses) gains, net |  |  |  |  |  |  | (1,821,175 | ) |  |  | 68,924 |  |  |  | 985,829 |
Finance costs |  |  |  |  |  |  | (984,843 | ) |  |  | (898,748 | ) |  |  | (886,465 | )
Loss (Profit) before income tax |  |  |  |  |  |  | (6,224,522 | ) |  |  | (2,899,418 | ) |  |  | 148,550 |
Provision for income tax benefit (expense) |  |  | 15 |  |  |  | 732,868 |  |  |  | (242,837 | ) |  |  | (88,473 | )
Net (loss) profit for the year |  |  |  |  |  |  | (5,491,654 | ) |  |  | (3,142,255 | ) |  |  | 60,077 |
Less: net loss (profit) attributable to non-controlling interests |  |  |  |  |  |  | 9,727 |  |  |  | 16,231 |  |  |  | (6,042 | )
Net (loss) profit attributable to equity holders of the Company |  |  |  |  |  | $ | (5,481,927 | ) |  | $ | (3,126,024 | ) |  | $ | 54,035 |
(Loss) Earnings per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted loss attributable to the equity holders of the Company |  |  |  |  |  | $ | (0.31 | ) |  | $ | (0.18 | ) |  | $ | 0.00 |
Weighted average number of shares used in computation: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted |  |  |  |  |  |  | 17,537,238 |  |  |  | 17,224,232 | * |  |  | 16,666,663 | *

| * | Giving retroactive effect to the reverse split on August 20, 2021.

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Guardforce AI Co., Limited and Subsidiaries

Consolidated Statements of Comprehensive Loss

(Expressed in U.S. Dollars)

|  |  |  |  | For the years ended December 31, |
|  | Note |  |  | 2021 |  |  | 2020 |  |  | 2019 |
Net (loss) profit for the year |  |  |  |  |  | $ | (5,491,654 | ) |  | $ | (3,142,255 | ) |  | $ | 60,077 |
Currency translation differences |  |  | 2.6 |  |  |  | (9,915 | ) |  |  | (60,558 | ) |  |  | 226,031 |
Remeasurements of defined benefit plan |  |  |  |  |  |  | 627,193 |  |  |  | (8,772 | ) |  |  | (131,713 |
Total comprehensive (loss) income for the year |  |  |  |  |  | $ | (4,874,376 | ) |  | $ | (3,211,585 | ) |  | $ | 154,395 |
Attributable to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity holders of the Company |  |  |  |  |  | $ | (4,870,410 | ) |  | $ | (3,181,717 | ) |  | $ | 152,954 |
Non-controlling interests |  |  |  |  |  |  | (3,966 | ) |  |  | (29,868 | ) |  |  | 1,441 |
|  |  |  |  |  | $ | (4,874,376 | ) |  | $ | (3,211,585 | ) |  | $ | 154,395 |

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Guardforce AI Co., Limited and Subsidiaries

Consolidated Statements of Changes in Equity

(Expressed in U.S. Dollars)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |  |
|  | Number of Shares |  |  | Amount ($0.001 par) |  |  | Subscription Receivable |  |  | Additional Paid-in Capital |  |  | Legal Reserve |  |  | Warrants Reserves |  |  | Other Comprehensive Income |  |  | Retained earnings (Deficit) |  |  | Non- controlling Interests |  |  | Total Equity |
Balance as at December 31, 2018 (see Note 17) |  |  | 16,666,663 | * |  | $ | 50,000 |  |  | $ | (50,000 | ) |  | $ | 2,360,204 |  |  | $ | 223,500 |  |  | $ | - |  |  | $ | 179,261 |  |  | $ | (1,650,305 | ) |  | $ | 59,852 |  |  | $ | 1,172,512 |
Currency translation adjustments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 226,031 |  |  |  | - |  |  |  | - |  |  |  | 226,031 |
Remeasurements of defined benefit plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (131,713 | ) |  |  | - |  |  |  | - |  |  |  | (131,713 | )
Net profit for the year |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 54,035 |  |  |  | 6,042 |  |  |  | 60,077 |
Balance as at December 31, 2019 (see Note 17) |  |  | 16,666,663 | * |  | $ | 50,000 |  |  | $ | (50,000 | ) |  | $ | 2,360,204 |  |  | $ | 223,500 |  |  | $ | - |  |  | $ | 273,579 |  |  | $ | (1,596,270 | ) |  | $ | 65,894 |  |  | $ | 1,326,907 |
Currency translation adjustments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (60,558 | ) |  |  | - |  |  |  | - |  |  |  | (60,558 | )
Capital distribution |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (376,276 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (376,276 | )
Stock-based compensation expenses |  |  | 689,427 | * |  |  | 2,069 |  |  |  | - |  |  |  | 98,867 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 100,936 |
Remeasurements of defined benefit plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (8,772 | ) |  |  | - |  |  |  | - |  |  |  | (8,772 | )
Net loss for the year ended December 31, 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,126,024 | ) |  |  | (16,231 | ) |  |  | (3,142,255 | )
Balance as at December 31, 2020 |  |  | 17,356,090 | * |  | $ | 52,069 |  |  | $ | (50,000 | ) |  | $ | 2,082,795 |  |  | $ | 223,500 |  |  | $ | - |  |  | $ | 204,249 |  |  | $ | (4,722,294 | ) |  | $ | 49,663 |  |  | $ | (2,160,018 | )
Currency translation adjustments |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (9,915 | ) |  |  | - |  |  |  | - |  |  |  | (9,915 | )
Stock-based compensation expenses |  |  | 187,594 |  |  |  | 563 |  |  |  | - |  |  |  | (563 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Remeasurements of defined benefit plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 627,193 |  |  |  | - |  |  |  | - |  |  |  | 627,193 |
Issuance of ordinary shares for acquisition of Handshake (see Note 17) |  |  | 43,700 |  |  |  | 131 |  |  |  | - |  |  |  | 327,632 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 327,763 |
Issuance of ordinary shares for acquisition of AI Singapore (see Note 3) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (12,719 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (12,719 | )
Issuance of ordinary shares through initial public offering (“IPO”) (see Note 17) |  |  | 3,614,458 |  |  |  | 10,843 |  |  |  | - |  |  |  | 12,977,028 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 12,987,871 |
Issuance of warrants through initial public offering (“IPO”) (see Note 17) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,422 |  |  |  | - |  |  |  | 251,036 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 256,458 |
Net loss for the year ended December 31, 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,481,926 | ) |  |  | (9,728 | ) |  |  | (5,491,654 | )
Balance as at December 31, 2021 |  |  | 21,201,842 |  |  | $ | 63,606 |  |  | $ | (50,000 | ) |  | $ | 15,379,595 |  |  | $ | 223,500 |  |  | $ | 251,036 |  |  | $ | 821,527 |  |  | $ | (10,204,220 | ) |  | $ | 39,935 |  |  | $ | 6,524,979 |

| * | Giving retroactive effect to the reverse split on August 20, 2021.

The accompanying notes are an integral part of these consolidated financial statements

F-8

Guardforce AI Co., Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Expressed in U.S. Dollars)

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Cash flows from operating activities |  |  |  |  |  |  |  |  |
Net (loss) profit |  | $ | (5,491,654 | ) |  | $ | (3,142,255 | ) |  | $ | 60,077 |
Adjustments for: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation |  |  | 4,981,259 |  |  |  | 4,979,274 |  |  |  | 5,246,912 |
Amortization of intangible assets |  |  | 51,383 |  |  |  | 54,745 |  |  |  | 43,129 |
Interest income |  |  | - |  |  |  | - |  |  |  | (8,728 | )
Stock-based compensation |  |  | - |  |  |  | 100,936 |  |  |  | - |
Finance costs |  |  | 909,093 |  |  |  | 650,492 |  |  |  | 515,846 |
Increase in deferred tax assets |  |  | (732,868 | ) |  |  | (30,135 | ) |  |  | 55,545 |
Recovery of doubtful accounts, net |  |  | - |  |  |  | (2,872 | ) |  |  | (19,554 | )
Increase in provision for withholding tax receivables |  |  | 190,038 |  |  |  | 1,012,543 |  |  |  | - |
Write off of withholding tax receivables |  |  | - |  |  |  | 710,219 |  |  |  | - |
Loss/(Gain) from fixed assets disposal |  |  | 4,438 |  |  |  | (431 | ) |  |  | (27,504 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
(Increase)/Decrease in trade and other receivables |  |  | (26,740 | ) |  |  | 389,320 |  |  |  | 858,205 |
(Increase)/Decrease in other current assets |  |  | 236,234 |  |  |  | 123,764 |  |  |  | 122,371 |
(Increase)/Decrease in inventories |  |  | (967,994 | ) |  |  | (484,745 | ) |  |  | - |
Decrease/(Increase) in amount due from related parties |  |  | 352,432 |  |  |  | (373,003 | ) |  |  | (12,930 | )
(Increase)/Decrease on other non-current assets |  |  | (58,431 | ) |  |  | 162,998 |  |  |  | (196,184 | )
(Decrease) in trade and other payables |  |  | (437,086 | ) |  |  | (561,769 | ) |  |  | (446,040 | )
(Increase)/Decrease in other current liabilities |  |  | 1,944,617 |  |  |  | (670,072 | ) |  |  | (177,789 | )
Increase in income tax payables |  |  | - |  |  |  | 272,972 |  |  |  | - |
(Decrease)/increase in amount due to related parties |  |  | (361,815 | ) |  |  | 529,489 |  |  |  | (381,737 | )
Decrease in withholding taxes receivable |  |  | 88,353 |  |  |  | 799,606 |  |  |  | (960,497 | )
Decrease in provision for employee benefits |  |  | 297,905 |  |  |  | 386,425 |  |  |  | 321,489 |
Net cash inflows from operating activities |  |  | 979,164 |  |  |  | 4,907,501 |  |  |  | 4,992,611 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |  |  |  |
Payment for property, plant and equipment |  |  | (5,235,480 | ) |  |  | (1,405,190 | ) |  |  | (433,513 | )
Proceeds from disposal of property, plant and equipment |  |  | - |  |  |  | - |  |  |  | 29,164 |
Payment for intangible assets |  |  | (13,235 | ) |  |  | (26,316 | ) |  |  | (47,163 | )
Cash acquired from acquisition of Handshake |  |  | 24,276 |  |  |  | - |  |  |  | - |
Net cash (outflows) from investing activities |  |  | (5,224,439 | ) |  |  | (1,431,506 | ) |  |  | (451,512 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from issues of shares |  |  | 13,244,329 |  |  |  | - |  |  |  | - |
Proceeds from borrowings |  |  | 1,563,444 |  |  |  | 7,363,163 |  |  |  | 3,122,656 |
Repayment of borrowings |  |  | (1,334,930 | ) |  |  | (5,371,766 | ) |  |  | (1,072,216 | )
Interest paid |  |  | (926,203 | ) |  |  | (248,047 | ) |  |  | (260,179 | )
Lease payments |  |  | (1,893,328 | ) |  |  | (2,876,314 | ) |  |  | (3,519,282 | )
Net cash inflows (outflows) from financing activities |  |  | 10,653,312 |  |  |  | (1,132,964 | ) |  |  | (1,729,021 | )
Effect of exchange rate changes on cash |  |  | (684,136 | ) |  |  | 99,158 |  |  |  | (585,922 | )
Net increase in cash and cash equivalents, and restricted cash |  |  | 5,723,901 |  |  |  | 2,442,189 |  |  |  | 2,226,156 |
Cash and cash equivalents, and restricted cash at beginning of year |  |  | 10,129,910 |  |  |  | 7,687,721 |  |  |  | 5,461,565 |
Cash and cash equivalents, and restricted cash at end of year |  | $ | 15,853,811 |  |  | $ | 10,129,910 |  |  | $ | 7,687,721 |
Non-cash investing and financing activities |  |  |  |  |  |  |  |  |  |  |  |
Leasehold improvements through finance leases |  | $ | - |  |  | $ | - |  |  | $ | 62,295 |

The accompanying notes are an integral part of these consolidated financial statements.

F-9

Guardforce AI Co., Limited and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020 and 2019

(Expressed in U.S. Dollars)

1. | NATURE OF OPERATIONS

Guardforce AI Co., Limited (“Guardforce”) is a company incorporated and domiciled in the Cayman Islands under the Cayman Islands Companies Act on April 20, 2018. The address of its registered office was 96 Vibhavadi Rangsit Road, Talad Bangkhen, Laksi, Bangkok 10210, Thailand, which has changed to 10 Anson Road, #28-01 International Plaza, Singapore 079903 since November 2021. Guardforce is controlled by Mr. Tu Jingyi (“Mr. Tu”) through Guardforce AI Technology Limited (“AI Technology”). The Company’s ordinary shares and warrants are listed under the symbol “GFAI” and “GFAIW”, respectively, on the Nasdaq Capital Market upon the completion of an initial public offering on September 28, 2021.

Guardforce AI Holding Limited (“AI Holdings”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on May 22, 2018. AI Holdings is a 100% owned subsidiary of Guardforce. AI Holdings is an investment holding company.

Guardforce AI Robots Limited (“AI Robots”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on May 22, 2018. AI Robots is a 100% owned subsidiary of Guardforce. AI Robots is an investment holding company.

Guardforce AI (Hong Kong) Co., Limited (“AI Hong Kong”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance (Chapter 622), on May 30, 2018. AI Hong Kong is a 100% owned subsidiary of Guardforce. Beginning March 2020, AI Hong Kong commenced robotic AI solution business of selling and leasing robots.

Southern Ambition Limited (“Southern Ambition”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on August 3, 2018. Southern Ambition is a 100% owned subsidiary of AI Robots. Southern Ambition is an investment holding company.

Horizon Dragon Limited (“Horizon Dragon”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on July 3, 2018. Horizon Dragon is a 100% owned subsidiary of AI Holdings. Horizon Dragon is an investment holding company.

Guardforce AI Group Co., Limited (“AI Thailand”) was incorporated in Thailand under the Civil and Commercial Code at the Registry of partnerships and Companies, Bangkok Metropolis, Thailand, on September 21, 2018 and has 100,000 ordinary plus preferred shares outstanding. 48,999 of the shares in AI Thailand are owned by Southern Ambition Limited, with one share being held by Horizon Dragon Limited, for an aggregate of 49,000 ordinary shares, or 49%, and 51,000 cumulative preferred shares are owned by two individuals of Thailand. The 49,000 ordinary shares with a value of approximately $16,000. The cumulative preferred shares are entitled to dividends of USD$0.03 per share when declared. The cumulative unpaid dividends of the preferred shares as of December 31, 2021 is approximately $1,700. Pursuant to article of associates of AI Thailand, the holder of an ordinary share may cast one vote per share at a general meeting of shareholders, the holder of preferred shares may cast one vote for every 20 preferred shares held at a general meeting of shareholders. Southern Ambition is entitled to cast more than 95% of the votes at a general meeting of shareholders. No dividends were declared during the years ended December 31, 2021, 2020 and 2019.

Guardforce Cash Solutions Security Thailand Co., Limited (“GF Cash (CIT)”) was incorporated in Thailand under the Civil and Commercial Code at the Registry of partnerships and Companies, Bangkok Metropolis, Thailand, on July 27, 1982 and has 3,857,144 outstanding shares. 3,799,544 ordinary shares and 21,599 preferred shares of the outstanding shares in GF Cash (CIT) (approximately 99.07% of the shares in GF Cash (CIT)) are owned by AI Thailand with one preferred share being held by Southern Ambition and 33,600 ordinary shares and 2,400 preferred shares (approximately 0.933% of the shares in GF Cash (CIT)) being held by Bangkok Bank Public Company Limited. Pursuant to the articles of association a shareholder may cast one vote per one share at a general meeting of shareholders. AI Thailand is entitled to cast 99.07% of the votes at a general meeting of shareholders. GF Cash (CIT)’s head office is located at No. 96 Vibhavadi-Rangsit Road, Talad Bang Khen Sub-District, Laksi District, Bangkok, Thailand. Beginning March 2020, GF Cash (CIT) commenced robotic AI solution business of selling and leasing of robots. No dividends were declared during the years ended December 31, 2021, 2020 and 2019.

97% of shares in GF Cash (CIT) are owned by AI Thailand and Southern Ambition, which were previously held by Guardforce TH Group Co., Ltd and Guardforce 3 Limited, with the same majority shareholder.

F-10

The reorganization of Guardforce and its subsidiaries (collectively referred to as the “Company) was completed on December 31, 2018. Pursuant to the reorganization, Guardforce became the holding company of the companies, which were under the common control of the controlling shareholder before and after the reorganization. Accordingly, the Company’s financial statements have been prepared on a consolidated basis by applying the predecessor value method as if the reorganization had been completed at the beginning of the earliest reporting period. The Company engages principally in providing cash management and handling services located in Thailand.

On March 25, 2021, the Company acquired 51% majority stake in information security consultants Handshake Networking Ltd (“Handshake”), a Hong Kong-based company specializing in penetration testing and forensics analysis in Hong Kong and the Asia Pacific region since 2004.

On November 1, 2021, the Company entered into a Transfer Agreement (the “Singapore Agreement”) to acquire 100% of the equity interests in Guardforce AI Singapore Pte. Ltd. (“AI Singapore”), a company incorporated in Singapore. Pursuant to the Agreement, AI Singapore became a wholly owned subsidiary of the Company. AI Singapore and Guardforce are ultimately controlled by Mr. Tu before and after the acquisition was completed. AI Singapore commenced robotic AI solution business of selling and leasing robots.

On November 18, 2021, the Company entered into a Transfer Agreement (the “Macau Agreement”) to acquire 100% of the equity interests in Macau GF Robotics Limited, a company incorporated in Macau (“Macau GF”). Pursuant to the Macau Agreement and upon the closing of the acquisition, Macau GF will become a wholly owned subsidiary of the Company. The acquisition was closed on February 9, 2022.

On November 18, 2021, the Company entered into another Transfer Agreement (the “Malaysia Agreement”) to acquire 100% of the equity interests in GF Robotics Malaysia Sdn. Bhd., a company incorporated in Malaysia (“Malaysia GF”). Pursuant to the Malaysia Agreement and upon the closing of the acquisition, Malaysia GF will become a wholly owned subsidiary of the Company. The acquisition was closed on January 20, 2022.

GFAI Robotics Group Co., Limited (“AI Robotics”) was incorporated in the British Virgin Islands under the BVI Business Companies Act, 2004, on December 6, 2021. AI Robotics is a 100% owned subsidiary of Guardforce. AI Robotics is an investment holding company.

F-11

The following diagram illustrates the Company’s legal entity ownership structure as of December 31, 2021:

Subsequent to December 31, 2021, the Company has included the following 100% owned subsidiaries of Guardforce through incorporations or business acquisitions:

GFAI Robot Service (Hong Kong) Limited (“AI HK”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance (Chapter 622), on January 18, 2022. AI HK is an investment holding company.

Guardforce AI Robot Service (Shenzhen) Co., Limited (“AI Shenzhen”) was incorporated in the People’s Republic of China (“PRC”) on February 23, 2022. AI Shenzhen is an investment holding company.

GFAI Robotics Services LLC (“AI US”) was incorporated in the State of Delaware on February 28, 2022. AI US commenced robotic AI solution business of selling and leasing robots.

GFAI Robot Service (Australia) Pty Ltd. (“AI Australia”) was incorporated in Australia on February 28, 2022. AI Australia commenced robotic AI solution business of selling and leasing robots.

On March 11, 2022, the Company entered into a Sale and Purchase Agreement (the “Kewei Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) to acquire 100% of the equity interests in Shenzhen Keweien Robot Service Co., Ltd. and Guangzhou Kewei Robot Technology Co., Ltd. from Shenzhen Kewei. Both acquirees are PRC-based companies. The acquisition serves an integral role in the growth of the Company’s robotic AI solution business as a service (RaaS) business initiative. The acquisition was closed on March 22, 2022. The acquisition purchase price of $10,000,000 were paid in a mix of cash (10%) and restricted ordinary shares of the Company (90%). On March 22, 2022, we issued 2,142,852 restricted Ordinary Shares to the sellers’ designated parties.

2. | SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies used in the preparation of these consolidated financial statements.

The financial statements were approved by the board of directors and authorized for issuance on March 28, 2022.

2.1 | Basis of presentation

The consolidated financial statements of Guardforce and subsidiaries have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All amounts are presented in United States dollars (“USD”) and have been rounded to the nearest USD.

On August 20, 2021, the shareholders of the Company approved a 1 for 3 reverse split of the Company’s authorized and issued ordinary shares whereby every three shares were consolidated into one share (the “Reverse Split”). In addition, the par value of each ordinary share increased from $0.001 to $0.003. The financial statements and all share and per share amounts have been retroactively restated to reflect the Reverse Split.

In addition, the accompanying financial statements are presented on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

F-12

As discussed on Note 21, the Company has a loan outstanding in the principal amount of $13.51 million due and payable in full on December 31, 2022, to Profit Raider Investment Limited, or Profit Raider. The Company will require an extension of the maturity date of this loan, and the Company cannot be sure whether or not Profit Raider will extend the maturity date of the loan, or if it does, under what terms. If Profit Raider does not extend the loan, the Company will (i) seek an alternative source of funding to replace the loan; and/or (ii) seek further negotiation with Profit Raider to convert the loan to shares; and/or (iii) seek support from the Company’s largest shareholder, Mr. Tu Jingyi, who owns 40.55% (as of the date of this report) of the Company’s ordinary shares, for repayment. There can be no assurance, however, that the Company would be able to find such alternative funding on terms acceptable to the Company, if at all. If the Company cannot obtain an extension of the maturity date of the loan and are not otherwise able to refinance the loan, the Company may default on the loan and such default would have a material adverse effect on the Company’s financial condition, cash flows and results of operations and could result in an action by Profit Raider against the Company to collect the amount due under the loan along with interest, fees and any other applicable chargers. The Company considers Profit Raider is one of the Company’s shareholders, who owns 5.285% (as of the date of this report) of the Company’s ordinary shares.

In assessing the going concern, management and the Board has considered:

| - | As discussed above, the risk of default on Profit Raider loan is assessed as low.

| - | Based on the budget and financial plans of the Company, management expects to see a positive trend in the Company’s future results. Management expects the business will be recovered in the future when the country begins to ease tough Covid pandemic control and lockdown measures.

| - | Improved cash flows including liquidity and borrowings from future fund-raising activities and the receipt of the $10.3 million private placement proceeds on January 20, 2022. The Company’s principal uses of cash have been, and management expects will continue to be, for working capital to support a reasonable increase in our scale of operations as well as for business expansion investments, as disclosed in Note 1, the Company acquired Shenzhen Keweien Robot Service Co., Ltd. and Guangzhou Kewei Robot Technology Co., Ltd. in March 2022.

| - | The Company has conditional and unconditional obligations as disclosed in Note 22, these commitments and contingencies are under normal course of business and are included in the budget. Regarding to the legal proceedings, as of the date of this report, the Company is a defendant in various labor related lawsuits in Thailand totaling approximately $0.8 million. Management believes these cases are without merit and is confident that the Appeals Court will make the decision according to the consideration of the Court of First Instance and order the dismissal of such lawsuits.

The Directors are satisfied that the Company has adequate financial resources to continue in operational existence for the foreseeable future, a period of at least 12 months from the date of this report. Accordingly, the going concern basis of accounting continues to be used in the preparation of the consolidated financial statements for the year ended December 31, 2021.

2.2 | Basis of consolidation

The consolidated statements of profit and loss and other comprehensive loss, statements of changes in equity and statements of cash flows of the Company for the relevant periods include the results and cash flows of all companies now comprising the Company from the earliest date presented or since the date when the subsidiaries and/or businesses first came under the common control of the controlling shareholders, wherever the period is shorter.

The consolidated balance sheets of the Company as at December 31, 2021 and 2020 have been prepared to present the assets and liabilities of the subsidiaries under the historical cost convention.

Equity interests in subsidiaries held by parties other than the controlling shareholders are presented as non-controlling interests in equity.

All intra-group and inter-company transactions and balances have been eliminated on consolidation.

2.3 | Segment reporting

IAS 14 Segment Reporting requires reporting of financial information by business or geographical area. It requires disclosures for ‘primary’ and ‘secondary’ segment reporting formats, with the primary format based on whether the entity’s risks and returns are affected predominantly by the products and services it produces or by the fact that it operates in different geographical areas.

F-13

The entity’s reportable segments are its business and geographical segments for which a majority of their revenue is earned from sales to external customers and for which:

| ● | revenue from sales to external customers and from transactions with other segments is 10% or more of the total revenue, external and internal, of all segments; or

| ● | segment result, whether profit or loss, is 10% or more the combined result of all segments in profit or the combined result of all segments in loss, whichever is greater in absolute amount; or

| ● | assets are 10% or more of the total assets of all segments.

Segments deemed too small for separate reporting may be combined with each other, if related, but they may not be combined with other significant segments for which information is reported internally. Alternatively, they may be separately reported. If neither combined nor separately reported, they must be included as an unallocated reconciling item.

The Company reports in one segment including (i) the provision of cash solutions (i.e., efficient cash management) and cash handling services to customers including cash transportation, cash processing and ATM services markets in Thailand, which represents 97.6% of our revenues; (ii) information security; and (iii) robotics AI solutions.

2.4 | Business combinations

The Company accounts for business combinations using the acquisition method when control is transferred to the Company, other than those between and among entities under common control. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on the bargain purchase is recognized in the statement of profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in the statement of profit or loss.

IFRS 3 Business combination does not include specific measurement guidance for transfers of businesses or subsidiaries between entities under common control. Accordingly, the Company has accounted for such transactions taking into consideration other guidance in the IFRS framework and pronouncements of other standard-setting bodies. The Company recorded assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements, and to have the consolidated balance sheet, consolidated statement of profit or loss, comprehensive income, changes in equity and cash flows reflect the results of combining entities for all periods presented for which the entities were under the transferor’s common control, irrespective of when the combination takes place.

2.5 | Non-controlling interest

The non-controlling interest represents the portion of the equity (net assets) in the subsidiary not directly or indirectly attributable to the Company. Non-controlling interests are presented as a separate component of equity on the consolidated balance sheet, consolidated statement of profit or loss, comprehensive income and changes in equity attributed to controlling and non-controlling interests.

2.6 | Critical accounting estimate and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Significant estimates during the years ended December 31, 2021, 2020 and 2019 include the provision for sales returns, provision for obsolete inventory, allowance for withholding tax receivables, allowance for doubtful accounts, useful life of fixed assets, impairment of goodwill, measurement of retirement benefit obligations, measurement of consideration and assets and liabilities acquired as business combinations, accounting for leases and valuation of deferred tax assets. The estimated amount for sales warranty on the sale of robots at December 31, 2021 and 2020 were $nil.

F-14

2.7 | Foreign currency translation

The presentational currency of the Company is the U.S. dollar (“USD”). The functional currency of Guardforce, AI Holdings, AI Robots, Horizon Dragon, Southern Ambition, AI Singapore, AI Robotics is the USD. The functional currency of AI Hong Kong and Handshake is Hong Kong dollar. The functional currency of AI Thailand and GF Cash (CIT) are Thai Baht (“Baht” or “THB”).

The currency exchange rates that impact our business are shown in the following table:

|  | Period End Rate |  |  | Average Rate |
|  | As of December 31, |  |  | For the Years Ended |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2021 |  |  | 2020 |  |  | 2019 |
Thai Baht |  |  | 0.0300 |  |  |  | 0.0333 |  |  |  | 0.0334 |  |  |  | 0.0313 |  |  |  | 0.0320 |  |  |  | 0.0324 |
Hong Kong Dollar |  |  | 0.1282 |  |  |  | 0.1282 |  |  |  | 0.1280 |  |  |  | 0.1282 |  |  |  | 0.1282 |  |  |  | 0.1280 |

2.8 | Financial risk management

2.8.1 | Financial risk factors

The Company’s activities expose it to a variety of financial risks: foreign exchange risk, interest rate risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.

| (i) | Credit risk

The Company trades only with parties that are expected to be creditworthy. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. The Company manages its operations to avoid any excessive concentration of counterparty risk about the Company takes all reasonable steps to seek assurance from the counterparties that they can fulfill their obligations. In addition, receivable balances are monitored on an ongoing basis with the result that the Company’s exposure to credit loss remains low.

The carrying values of the Company’s financial assets and contract assets represent its maximum credit exposure.

| (ii) | Foreign exchange risk

The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the THB and USD. Foreign exchange risk arises when future commercial transactions or recognized assets and liabilities are denominated in a currency that is not the respective functional currency of the Company’s subsidiaries. The functional currency of the Company and majority of its overseas subsidiaries is the USD whereas the functional currency of the subsidiaries which operate in Thailand is the THB. The Company currently does not hedge transactions undertaken in foreign currencies but manages its foreign exchange risk by performing regular reviews of the Company’s net foreign exchange exposures.

If the THB had strengthened/weakened by 1.68% against the USD (the average monthly variance during the 2-year period ended December 31, 2021 with all other variables held constant, the post-tax profit would have been approximately $228,000 higher/lower and $210,000 higher/lower, for the years ended December 31, 2021 and 2020, respectively, as a result of net foreign exchange gains/losses on translation of net monetary assets denominated in the THB/USD which is not the functional currency of the respective Company’s entities.

If the THB had strengthened/weakened by 1.56% against the USD (the average monthly variance during the 2-year period ended December 31, 2020 with all other variables held constant, the post-tax profit would have been approximately $210,000 higher/lower and $193,000 higher/lower, for the years ended December 31, 2020 and 2019, respectively, as a result of net foreign exchange gains/losses on translation of net monetary assets denominated in the THB/USD which is not the functional currency of the respective Company’s entities.

| (iii) | Interest rate risk

The Company’s exposure to changes in interest rates are mainly attributable to its borrowings and loans. At the reporting date, based on the composition of borrowings at December 31, 2021 (Note 13), if interest rates on borrowings had been 100 basis points higher/lower with all other variables held constant, the Company’s post-tax results for the year would have been approximately $14,000, $12,000 and $132,000 lower/higher for the years ended December 31, 2021, 2020 and 2019, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

| (iv) | Liquidity risk

Prudent liquidity management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities.

The Company’s primary cash requirements are for operating expenses and purchases of fixed assets. The Company mainly finances its working capital requirements from cash generated from funds raised from the IPO, operation, proceeds from bank borrowings and finance leases.

F-15

The Company’s policy is to regularly monitor current and expected liquidity requirements to ensure it maintains sufficient cash and cash equivalents and an adequate amount of committed credit facilities to meet its liquidity requirements in the short and long term.

At the reporting date, the contractual undiscounted cash flows of the Company’s current financial liabilities approximate their respective carrying amounts due to their short maturities.

The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, including interest if applicable.

Year ended December 31, 2021 |  | Within 1 year |  |  | 1 to 5 years |  |  | >5 years |  |  | Total |
Trade and other payables |  | $ | 1,028,721 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,028,721 |
Borrowings |  |  | 933,110 |  |  |  | 859,120 |  |  |  | - |  |  |  | 1,792,230 |
Borrowings from related parties |  |  | 13,506,184 |  |  |  | 5,332,803 |  |  |  | - |  |  |  | 18,838,987 |
Amount due to related parties |  |  | 2,217,752 |  |  |  | - |  |  |  |  |  |  |  | 2,217,752 |
Other liabilities |  |  | 1,824,635 |  |  |  | 54,000 |  |  |  | - |  |  |  | 1, 878,635 |
Lease liabilities |  |  | 2,366,045 |  |  |  | - |  |  |  | - |  |  |  | 2,366,045 |
Finance lease liabilities |  |  | 619,301 |  |  |  | 666,455 |  |  |  | - |  |  |  | 1,285,756 |
Provision for employee benefits |  |  | 563,243 |  |  |  | 1,856,583 |  |  |  | 32,165,128 |  |  |  | 34,584,954 |
|  | $ | 23,058,991 |  |  | $ | 8,768,961 |  |  | $ | 32,165,128 |  |  | $ | 63,993,080 |

Year ended December 31, 2020 |  | Within 1 year |  |  | 1 to 5 years |  |  | >5 years |  |  | Total |
Trade and other payables |  | $ | 1,540,411 |  |  | $ | - |  |  | $ | - |  |  | $ | 1,540,411 |
Borrowings from financial institutions |  |  | 494,994 |  |  |  | 993,869 |  |  |  | - |  |  |  | 1,488,863 |
Borrowings from related parties |  |  | - |  |  |  | 19,085,812 |  |  |  | - |  |  |  | 19,085,812 |
Amount due to related parties |  |  | 1,670,469 |  |  |  | - |  |  |  |  |  |  |  | 1,670,469 |
Other current liabilities |  |  | 1,249,106 |  |  |  | - |  |  |  | - |  |  |  | 1,249,106 |
Income tax payables |  |  | 284,627 |  |  |  | - |  |  |  | - |  |  |  | 284,627 |
Lease liabilities |  |  | 2,211,984 |  |  |  | 2,106,429 |  |  |  | - |  |  |  | 4,318,413 |
Finance lease liabilities |  |  | 701,796 |  |  |  | 1,074,047 |  |  |  | - |  |  |  | 1,775,843 |
Provision for employee benefits |  |  | 479,261 |  |  |  | 1,478,194 |  |  |  | 36,040,019 |  |  |  | 37,997,474 |
|  | $ | 8,632,648 |  |  | $ | 24,738,351 |  |  | $ | 36,040,019 |  |  | $ | 69,411,018 |

Net Debt Analysis

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Cash, cash equivalents, and restricted cash |  | $ | 15,853,811 |  |  | $ | 10,129,910 |
Borrowings – repayable within one year |  |  | (14,439,294 | ) |  |  | (494,994 | )
Borrowings – repayable within one year |  |  | (6,191,923 | ) |  |  | (20,079,681 | )
Net debt |  | $ | (4,777,406 | ) |  | $ | (10,444,765 | )

2.8.2 | Capital risk management

The Company’s objectives on managing capital are to safeguard the Company’s ability to continue as a going concern and support the sustainable growth of the Company in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to enhance shareholders’ value in the long term.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return of capital to shareholders, issue new shares or sell assets to reduce debt.

In the opinion of the directors of the Company, the Company’s capital risk is low.

2.8.3 | Impact of COVID-19

The Coronavirus Disease (COVID-19) outbreak and the measures taken to contain the spread of the pandemic have created a high level of uncertainty to global economic prospects and this has impacted the Company’s operations and its financial performance in year 2021. As COVID-19 continues to evolve with significant level of uncertainty, management of the Company is unable to reasonably estimate the full financial impact of COVID-19 on the Company’s financial results in year 2022. The Company is monitoring the situation closely and to mitigate the financial impact, it is conscientiously managing its cost by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align repayment obligations with receivable collections. Based on the Company’s most recent projections for year 2022 and with over $15 million in cash and cash equivalents and restricted cash, plus bolstered by receipt of the $10.3 million private placement proceeds on January 20, 2022 (Note 24), management of the Company believes that the Company will be able to continue to operate as a going concern in the foreseeable future for at least the next 12 months.

F-16

2.9 | Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurement for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

Accounting guidance also describes three main approaches to measuring the fair value of assets and liabilities: the (1) market approach, (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

Financial assets and liabilities of the Company mainly consist of cash and cash equivalents, restricted cash, trade and other receivables, amounts due from related parties, other current assets, trade payables, amounts due to related parties, accruals and other liabilities. As of December 31, 2021 and 2020, the carrying values of cash and cash equivalents, restricted cash, trade receivables, amounts due from related parties, prepayments and other current assets, trade payables, amounts due to related parties, accruals and other liabilities approximate their fair values due to the short-term maturity of these instruments.

2.10 | Share-based payment

The Company accounts for material share-based payments (primarily warrants) with the fair value of the issued warrants on the date of grant and recognition of compensation cost over the vesting period for award expected to vest. The fair value of warrants is determined using the Black Scholes valuation model.

2.11 | Cash and cash equivalents and restricted cash

Cash and cash equivalents include highly liquid investments with original maturities of three months or less.

Restricted cash amounting to $1.53 million represents cash pledged with a local bank in Thailand as collateral for bank guarantees issued by those banks in respect of project performance and for electricity usage. The restricted cash for projects that are expected to be completed within one year are classified as a current asset. Restricted cash amounting to $1.6 million represents the sum placed in a local bank in Hong Kong under the underwriting agreement for the IPO. The sum will be released by the Company upon the earliest of (i) the representative of the underwriting agreement receives and satisfies with the Company’s D&O policy; or (ii) twenty-four months from the IPO closing date.

2.12 | Trade receivables and other receivables

Trade and other receivables are recorded at net realizable value consisting of the carrying amount less an allowance for doubtful accounts as needed. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts and other receivables and accounts receivable from related parties. The Company determines the allowance for its trade receivable based on aging data, historical collection experience, customer specific facts and economic conditions. The Company writes-off trade receivable when amounts are deemed uncollectible. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts.

In determining the amount of the allowance for doubtful accounts, prior to January 1, 2020, the Company applied the following percentages: 5% to receivables from 61 to 90 days; 30% to receivables from 91 to 180 days and 60% to receivables from 181 to 365 days. Account balances older than one year were charged off against the allowance after all means of collection of been exhausted (both legally and commercially speaking) and the potential for recovery was considered remote. No allowance was established for the Company’s due from related parties and other receivables as the amounts were deemed fully collectible.

During the year ended December 31, 2020, the Company revised its allowance methodology to a specific provision basis in that an allowance for doubtful accounts is established and recorded based on management’s assessment of the credit history of its customers and current relationships with them. This revision in the allowance methodology did not have any material effect on the Company’s net accounts receivable as of December 31, 2019.

The Company did not have any write-offs during the years ended December 31, 2021, 2020 and 2019. The Company recognized a recovery of its bad debt expense of $nil, $2,872 and $19,554 during the years ended December 31, 2021, 2020 and 2019, respectively.

F-17

2.13 | Inventories

Inventories solely consist of robots and are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale. When inventory is sold, their carrying amount is charged to expense in the period in which the revenue is recognized. Write-downs for declines in net realizable value or for losses of inventories are recognized as an expense in the period the impairment or loss occurs. No allowance for slow moving or obsolete inventory was recorded for the years ended December 31, 2021 and 2020.

During the years ended December 31, 2021 and 2020, all inventories were purchased from a related party.

2.14 | Withholding taxes receivable

Withholding tax is a deduction from payments made to suppliers who provide services. The withholding tax rates can vary depending on the type of income and the tax status of the recipient. Based on tax rules currently in effect, the withholding tax rate is 3% for commercial contracts and 1% for governmental contracts in Thailand, which amounts are refundable. The Company generally files its request for a withholding tax refund by the end of May of the following year for withholding tax deducted in the previous year. Once the request for withholding tax refund is submitted to the Thai Revenue Department, the request will be subject to audit and review. Since it is difficult to predict the time required by the Thai Revenue Department to complete its audit and approve the relevant refund, except for known amount to be collected within the next 12 months, the Company has reflected its withholding tax receivable as a non-current asset in its statements of financial position for amounts due from the Revenue Department.

Withholding tax receivable is recorded net of related provision for amount that could be challenged by the taxing authority. Such provision represents the Company’s best estimate based on recent collection history.

2.15 | Loans to related party

The Company recognizes the contractual right to receive money on demand or on fixed or determinable dates as loans receivable. For those that the contractual maturity date is less than one year, the Company records as short-term loans receivable.

The Company recognizes interest income on an accrual basis using the straight-line method over the fixed or determinable dates.

2.16 | Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.

Depreciation is calculated using the straight-line method over the following estimated useful lives.

|  | Estimated useful life
Leasehold improvements |  | Lesser of useful life or remaining lease term
Tools and equipment |  | 5 years
Furniture, fixtures and office equipment |  | 5 years
Vehicles |  | 5,10 years
GDM machines |  | 5 years
Robots |  | 5 years

2.17 | Assets under construction

Assets under construction are stated at cost less impairment losses, if any. Cost comprises direct costs of construction as well as interest expense and exchange differences capitalized during the periods of construction and installation. Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for assets under construction until they are completed and ready for intended use.

F-18

2.18 | Intangible assets, net

Intangible assets represent computer software. The intangible assets are recorded at historic acquisition costs, and amortized on a straight-line basis over their estimated useful lives.

Costs associated with maintaining computer software programs are recognized as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company will be recognized as intangible assets when the criteria of intangible assets are met.

2.19 | Goodwill

Following initial recognition, goodwill is stated at costs less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

At the acquisition date, any goodwill acquired is allocated to the cash-generating units (CGU) which are expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill related. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognized. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of In these circumstances is measured on the basis of the relative values of the operation disposed of and the portion of the CGU retained.

No impairment loss on goodwill was recorded for the year ended December 31, 2021.

2.20 | Impairment of long-lived assets

At the end of each reporting period, the Company reviews the carrying amounts of its long-lived assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. The Company did not incur any impairment loss during the years ended December 31, 2021, 2020 and 2019.

2.21 | Trade and other payables

These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial tear which are unpaid. They are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.

2.22 | Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the amount initially recognized and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

2.23 | Revenue from contracts with customers

The Company generates its revenue primarily from three service lines: (1) Secure logistics; (2) Robotics AI resolutions; and (3) Information security.

Each service line primarily renders the following services:

| (1) | Secure logistics

(i) Cash-In-Transit - Non Dedicated Vehicle (CIT Non-DV); (ii) Cash-In-Transit - Dedicated Vehicle (CIT DV); (iii) ATM management; (iv) Cash Processing (CPC); (v) Cash Center Operations (CCT); (vi) Consolidate Cash Center (CCC); (vii) Cheque Center Service (CDC); (viii) Express Cash; (ix) Coin Processing Service; and (x) Cash Deposit Management Solutions

| (2) | Robotics AI solutions

(i) Sale of robots and (ii) Rental of robots

| (3) | Information security

(i) Penetration test; (ii) PCI ASV Scan and (iii) Rapid7 Sales

F-19

The Company recognizes revenue at a point in time as products are delivered and services are performed. Consultancy fees typically covers a period of time, the revenue is recognized on a rateable basis over the contract term.

| ● | Identify the contract or quotation with the agreed service price.

| ● | Evaluate the services engaged in the customer’s contract and identify the related performance obligations.

| ● | Consider the contract terms and commonly accepted practices in the business to determine the transaction price. The transaction price is the consideration that the Company expects to be entitled for delivering the services engaged with the customer. The consideration engaged in a customer’s contract is generally a fixed amount.

| ● | Allocate the transaction price, if necessary, to each performance obligation (to each good or service that is different) for an amount that represents the part of the benefit that the Company expects to receive in exchange for the right of delivering the services engaged with the customer.

| ● | Recognize revenue when the Company satisfied the performance obligation through the rendering of services engaged.

All of the conditions mentioned above are accomplished normally when the services are rendered to the customer and this moment is considered a point in time. The reported revenue reflects services delivered at the contract or agreed-upon price.

Contract liabilities consist of deferred revenue related to prepaid fees received from customers for future information security service over the term of the service agreement. The Company expects to recognize as revenue of $43,200 within the next 12 months and $54,000 after 12 months to 36 months.

Revenue is recognized when the related performance obligations are satisfied.

|  |  |  |  | Fixed Fees
Service Type |  |  | Performance Obligations |  | Per delivery / order |  | Per month
Cash-In-Transit (CIT) – Non Dedicated Vehicles (Non-DV) | (a) |  | Delivery from point A to point B per customer request. Service obligation was generally completed within same day. |  | √ |  |
Cash-In-Transit (CIT) – Dedicated Vehicles to Banks (DV) | (a) |  | Delivery from point A to point B per customer request. Service obligation was generally completed within same day. |  | √ |  |
ATM Management | (a) |  | Includes replenishment of ATM machines and first level maintenance services. Service obligation was generally completed within the same day. |  | √ |  |
Cash Processing (CPC) | (b) |  | Cash counting, sorting and vaulting services for customers in the retail industry. |  |  |  | √
Cash Center Operations (CCT) | (b) |  | Cash counting, sorting and depositing for local commercial banks on behalf of Bank of Thailand (BOT). |  |  |  | √
Consolidate Cash Center (CCC) | (b) |  | Cash counting, sorting and depositing for Bank of Thailand (BOT). |  |  |  | √
Cheque Center Service (CDC) | (b) |  | Handles cheque consolidation and distribution on behalf of local commercial bank. |  |  |  | √
Express Cash | (a) |  | Armored trucks (with onboard GDM) and crew teams are assigned to collect cash on behalf of local commercial banks. Service obligation was generally completed within the same day. |  | √ |  |
Coin Processing Service | (a) |  | Armored vehicles and crew teams are assigned to collect/deliver coins to/from customer sites. Service obligation was generally completed within the same day. |  | √ |  |
Cash Deposit Management Solutions | (b) |  | Cash deposit machine (Guardforce Digital Machine – GDM) are installed at the customers’ sites for the collection of cash. |  |  |  | √
Robotics AI Solutions - Sale of Robots | (a) |  | Delivery of robots and inspection completed at customer site. |  | √ |  |
Robotics AI Solutions - Rental of Robots | (b) |  | Robots are leased out for a fixed term |  |  |  | √
Penetration Test | (a) |  | Production of the test report |  | √ |  |
PCI ASV Scan | (a) |  | Submission of the scan result |  | √ |  |
Rapid7 Sales | (b) |  | Provision of information security service based on the sale and installation of Rapid7 software |  |  |  | √

F-20

The Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers. Except the sale of robots, customer’s billing is prepared on a monthly basis once service delivery reports have been confirmed and the invoice amount has been confirmed with the customers. Standard payment is 45 days but it may be 45 to 60 days depending on the individual customer contract.

| (a) | Revenue is recognized net of sales taxes and upon transfer of significant risks and rewards of ownership to customers. Revenue is not recognized to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

| (b) | Related service revenue or rental income is recognized on a straight-line basis over the term of the contracts.

Disaggregation information of revenue by service type which was recognition based on the nature of performance obligation disclosed above is as follows:

|  | For the year ended December 31, |
Service Type |  | 2021 |  |  | Percentage of Total Revenue |  |  | 2020 |  |  | Percentage of Total Revenue |  |  | 2019 |  |  | Percentage of Total Revenue |
Cash-In-Transit – Non-Dedicated Vehicles (CIT Non-DV) |  | $ | 11,205,580 |  |  |  | 31.9 | % |  | $ | 12,045,914 |  |  |  | 32.0 | % |  | $ | 12,052,738 |  |  |  | 31.2 | %
Cash-In-Transit - Dedicated Vehicle to Banks (CIT DV) |  |  | 4,556,538 |  |  |  | 13.0 | % |  |  | 4,822,354 |  |  |  | 12.8 | % |  |  | 4,958,139 |  |  |  | 12.9 | %
ATM Management |  |  | 10,809,497 |  |  |  | 30.7 | % |  |  | 12,542,613 |  |  |  | 33.3 | % |  |  | 14,024,291 |  |  |  | 36.4 | %
Cash Processing (CPC) |  |  | 3,034,360 |  |  |  | 8.6 | % |  |  | 2,842,209 |  |  |  | 7.5 | % |  |  | 2,283,835 |  |  |  | 5.9 | %
Cash Center Operations (CCT) |  |  | 2,802,171 |  |  |  | 8.0 | % |  |  | 3,256,423 |  |  |  | 8.6 | % |  |  | 3,661,135 |  |  |  | 9.5 | %
Consolidate Cash Center (CCC) |  |  | 182,263 |  |  |  | 0.5 | % |  |  | - |  |  |  | - | % |  |  | - |  |  |  | - | %
Cheque Center Service (CDC) |  |  | 59,923 |  |  |  | 0.2 | % |  |  | 61,197 |  |  |  | 0.2 | % |  |  | 394,290 |  |  |  | 1.0 | %
Others ** |  |  | 5,270 |  |  |  | 0.0 | % |  |  | 399,977 |  |  |  | 1.1 | % |  |  | 38,570 |  |  |  | 0.1 | %
Cash Deposit Management Solutions (GDM) |  |  | 1,644,611 |  |  |  | 4.7 | % |  |  | 1,457,307 |  |  |  | 3.9 | % |  |  | 1,158,082 |  |  |  | 3.0 | %
Robotic AI solutions |  |  | 368,659 |  |  |  | 1.0 | % |  |  | 220,788 |  |  |  | 0.6 | % |  |  | - |  |  |  | - | %
Information security |  |  | 484,318 |  |  |  | 1.4 | % |  |  | - |  |  |  | - | % |  |  | - |  |  |  | - | %
Total |  | $ | 35,153,190 |  |  |  | 100 | % |  | $ | 37,648,782 |  |  |  | 100 | % |  | $ | 38,571,080 |  |  |  | 100 | %

| ** | Others includes revenues from express cash, coin processing services and international shipment.

During the years ended December 31, 2021, 2020 and 2019, revenue amounting to $35,041,563, 37,433,467 and $38,571,080 were generated from third parties, respectively; and $111,627, $215,315 and $nil were generated from a related party (see Note 21), respectively.

F-21

2.24 | Cost of sales

Cost of sales consists primarily of internal labor costs and related benefits, and other overhead costs that are directly attributable to services provided.

2.25 | Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax. Income tax expense is charged to the consolidated statements of profit or loss as they incur.

Current income taxes are recorded in the results of the year they are incurred.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, including tax loss carry forwards and certain tax credits, to the extent that it is probable that future taxable profits, reversal of existing taxable temporary differences will be available against which those deductible temporary differences can be utilized after considering future tax planning strategies. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit and reversal of existing taxable temporary differences will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits and reversal of existing taxable temporary differences will allow the deferred tax asset to be recovered.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Net deferred income taxes are classified as a non-current asset or liability, regardless of when the temporary differences are expected to reverse.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

2.26 | Provisions

Provisions are recognized for liabilities of uncertain timing or amount when the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be estimated reliably. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

F-22

As of the date of filing, the Company is a defendant in various labor related lawsuits totaling approximately $773,858. Management believes these cases are without merit and is confident that the Appeals Court will make the decision according to the consideration of the Court of First Instance and order the dismissal of such lawsuits. Therefore, no provision has been made for these liabilities in the financial statements.

2.27 | Employee benefits

The Company provides for retirement benefits payable for employees of its subsidiaries in Thailand under the Thai Labor Law; and follows IFRS 19 in accounting for the related obligation. Depending upon the individual employee’s salary and years of service, the related obligation is calculated by an independent actuary using the projected unit credit method. The present value of the obligation is determined by discounting with the interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related liabilities. The sensitivity analysis is determined by i) discount rate; ii) salary increase rate; iii) turnover rate; and iv) life expectancy.

All re-measurements effects of the Company’s retirement benefit obligation such as actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized directly in other comprehensive income.

As of December 31, 2021, 2020 and 2019, actuarial gain of $627,193, actuarial loss of $8,772 and actuarial loss of $131,713, net of tax has been recognized in other comprehensive income, respectively.

2.28 | Leases

From January 1, 2019, in accordance with IFRS 16, leases with terms greater than 12 months are recognized as a right-of-use asset (“ROU”) and a corresponding lease liability at the date in which the leased asset is available for use by the Company. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed payments.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases of the Company, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Company uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

| ● | The amount of the initial measurement of the lease liability

| ● | any lease payments made at or before the commencement date less any lease incentives received

Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The lease terms of buildings and others are generally less than ten years and less than five years, respectively.

Payments associated with leases with a lease term of 12 months or less on the Company’s equipment and vehicles and all leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss.

2.29 | Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.

F-23

2.30 | Earnings per share (“EPS”)

Basic EPS is calculated by dividing the net profit (loss) attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by using the weighted average number of ordinary shares outstanding adjusted to include the potentially dilutive effect of outstanding share-based awards and convertible debt instruments, unless their inclusion in the calculation is anti-dilutive.

2.31 | New and amended accounting standards

All new standards and amendments that are effective for annual reporting period commencing January 1, 2021 have been applied by the Company for the year ended December 31, 2021. The adoption of these new and amended standards did not have material impact on the consolidated financial statements of the Company. A number of new standards and amendments to standards have not come into effect for the year beginning January 1, 2021, and they have not been early adopted by the Company in preparing these consolidated financial statements. None of these new standards and amendments to standards is expected to have a significant effect on the consolidated financial statements of the Company.

3. | BUSINESS COMBINATION

| (i) | On February 4, 2021, the Company announced the acquisition of a majority stake in information security consultants Handshake Networking Ltd. (“Handshake”), a Hong Kong-based company specializing in penetration testing. A total of 43,700 shares were issued and valued at $7.50 per share in consideration of 51% of Handshake. The acquisition was closed on March 25, 2021.

Accordingly, the acquisition has been accounted for in accordance with IFRS 3 guidelines under acquisition accounting, whereby the Company recognized the assets and liabilities of Handshake transferred at their carrying amounts with carry-over basis.

The following represents the purchase price allocation at the date of the acquisition:

|  | March 25, 2021 |
Cash and cash equivalents |  | $ | 24,276 |
Other current assets |  |  | 32,250 |
Current liabilities |  |  | (58,297 | )
Goodwill |  |  | 329,534 |
Total purchase price |  | $ | 327,763 |

The revenue included in the Consolidated Statement of Profit and Loss since March 25, 2021 contributed by Handshake Networking Ltd was $484,318. Handshake Networking Limited also contributed net income of $39,787 over the same period.

Had Handshake Networking Limited been consolidated from January 1, 2021, the Consolidated Statement of Profit and Loss would show revenue of $35,228,807 and net loss of $5,603,766.

| (ii) | On November 1, 2021, the Company entered into a Transfer Agreement (the “Agreement”) to acquire 100% of the equity interests in Guardforce AI Singapore Pte. Ltd., a company incorporated in Singapore (“AI Singapore”). AI Singapore and Guardforce are ultimately controlled by Mr. Tu Jingyi before and after the acquisition was completed.

The Company recorded assets and liabilities recognized as a result of transactions between entities under common control at the carrying value on the transferor’s financial statements to reflect the results for the full year 2021, irrespective of transaction date.

The following represents their assets and liabilities:

|  | December 31, 2021 |
Cash and cash equivalents |  | $ | 28,148 |
Other current assets |  |  | 11,973 |
Current liabilities |  |  | (68,882 | )
Loss for the year |  |  | 16,041 |
Additional paid in capital |  | $ | 12,720 |

F-24

4. | CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Cash on hand |  | $ | 349,846 |  |  | $ | 392,803 |
Cash in bank |  |  | 12,378,937 |  |  |  | 8,021,241 |
Subtotal |  |  | 12,728,783 |  |  |  | 8,414,044 |
Restricted cash |  |  | 3,125,028 |  |  |  | 1,715,866 |
Cash, cash equivalents, and restricted cash |  | $ | 15,853,811 |  |  | $ | 10,129,910 |

5. | INVENTORIES

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Robots at warehouse |  | $ | 1,387,160 |  |  | $ | 252,411 |
Robots in transit |  |  | 389 |  |  |  | 242,670 |
|  | $ | 1,387,549 |  |  | $ | 495,081 |

No allowance for slow moving or obsolete inventory was recorded for the years ended December 31, 2021 and 2020.

6. | TRADE RECEIVABLES, NET

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Trade receivables |  | $ | 4,939,568 |  |  | $ | 5,468,911 |
Allowance for doubtful accounts |  |  | - |  |  |  | - |
Trade receivables, net |  | $ | 4,939,568 |  |  | $ | 5,468,911 |

The following tables details the Company’s trade receivables as of:

December 31, 2021

|  | Trade receivables - as of December 31, 2021 |
|  | Current |  |  | <30 |  |  | 31-60 |  |  | 61-90 |  |  | 91 and over |  |  | Total |
Trade receivables |  | $ | 4,449,831 |  |  | $ | 361,327 |  |  | $ | 85,385 |  |  | $ | 20,487 |  |  | $ | 22,538 |  |  | $ | 4,939,568 |

December 31, 2020

|  | Trade receivables - as of December 31, 2020 |
|  | Current |  |  | <30 |  |  | 31-60 |  |  | 61-90 |  |  | 91 and over |  |  | Total |
Trade receivables |  | $ | 5,073,178 |  |  | $ | 250,408 |  |  | $ | 103,581 |  |  | $ | 14,891 |  |  | $ | 26,853 |  |  | $ | 5,468,911 |

The allowance for doubtful accounts are as below:

Balance at December 31, 2019 |  | $ | (2,999 | )
Recovery of doubtful accounts |  |  | 2,872 |
Write off |  |  | - |
Exchange difference |  |  | 127 |
Balance at December 31, 2020 and 2021 |  | $ | - |

F-25

7. | WITHHOLDING TAXES RECEIVABLES, NET

|  | 2021 |  |  | 2020 |
Balance at January 1, |  | $ | 4,225,039 |  |  | $ | 6,865,971 |
Addition |  |  | 826,634 |  |  |  | 728,165 |
Collection |  |  | (648,025 | ) |  |  | (1,527,771 | )
Write off |  |  | - |  |  |  | (710,219 | )
Allowance for uncollectible |  |  | (190,038 | ) |  |  | (1,055,775 | )
Exchange difference |  |  | (681,657 | ) |  |  | (75,332 | )
Balance at December 31, |  | $ | 3,531,953 |  |  | $ | 4,225,039 |

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Current portion |  | $ | - |  |  | $ | 690,487 |
Non-current portion |  |  | 3,531,953 |  |  |  | 3,534,552 |
Withholding taxes receivables, net |  | $ | 3,531,953 |  |  | $ | 4,225,039 |

During 2020, the Company received a withholding taxes refund for THB 47,812,370 (approximately $1.5 million) in connection with the Company’s 2013 to 2015 withholding taxes refund applications (totaled THB 89,268,913 or approximately $2.9 million): the balance of the refund amounted to THB 20,724,273 (approximately $0.7 million) was received in January 2021. During the year ended December 31, 2020, the Company wrote off approximately $0.7 million, representing the difference between the receivable recorded and amount of known refund from the Thai Revenue Department. The Company did not have any write offs during the year ended December 31, 2021.

Out of prudence, based on amount written off for the receivable related to year 2013 to 2015, the Company recorded an allowance of approximately $1.1 million against its withholding taxes receivable for year 2016 through 2020 during the year ended December 31, 2020, and an allowance of approximately $0.2 million against its withholding taxes receivable for the year ended December 31, 2021.

8. | OTHER CURRENT AND OTHER NON-CURRENT ASSETS

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Input VAT receivable |  | $ | 125,981 |  |  | $ | 134,746 |
Prepayments - office rental |  |  | 807,172 |  |  |  | 952,616 |
Prepayments - insurance |  |  | 110,408 |  |  |  | 292,095 |
Prepayments - others |  |  | 92,234 |  |  |  | 51,920 |
Uniforms |  |  | 19,963 |  |  |  | 17,954 |
Tools and supplies |  |  | 81,343 |  |  |  | 135,553 |
Deferred costs |  |  | 38,880 |  |  |  | - |
Other current assets |  | $ | 1,275,981 |  |  | $ | 1,584,884 |
Deposits |  | $ | 296,986 |  |  | $ | 361,275 |
Deferred costs |  |  | 48,600 |  |  |  | - |
Other non-current assets |  | $ | 345,586 |  |  | $ | 361,275 |

F-26

9. | PROPERTY, PLANT AND EQUIPMENT

|  | Leasehold improvements |  |  | Machinery and equipment |  |  | Office furbishing and equipment |  |  | Vehicles |  |  | Assets under construction |  |  | GDM machines |  |  | Robots |  |  | Total |
Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2019 |  | $ | 3,616,762 |  |  | $ | 7,128,146 |  |  | $ | 7,062,322 |  |  | $ | 17,905,064 |  |  | $ | 327,937 |  |  | $ | - |  |  | $ | - |  |  | $ | 36,040,231 |
Additions |  |  | 38,876 |  |  |  | 62,626 |  |  |  | 136,497 |  |  |  | 25,237 |  |  |  | - |  |  |  | 285,510 |  |  |  | 860,026 |  |  |  | 1,408,772 |
Disposals |  |  | (2,365 | ) |  |  | (1,363,245 | ) |  |  | (26,512 | ) |  |  | (16,570 | ) |  |  | (2,774 | ) |  |  | - |  |  |  | - |  |  |  | (1,411,466 | )
Transfers in (out) |  |  | - |  |  |  | (44,953 | ) |  |  | (1,164,305 | ) |  |  | - |  |  |  | (311,237 | ) |  |  | 1,520,495 |  |  |  | - |  |  |  | - |
Exchange differences |  |  | (4,166 | ) |  |  | (68,734 | ) |  |  | (56,194 | ) |  |  | (27,969 | ) |  |  | (13,926 | ) |  |  | 77,111 |  |  |  | 24,924 |  |  |  | (68,954 | )
At December 31, 2020 |  | $ | 3,649,107 |  |  | $ | 5,713,840 |  |  | $ | 5,951,808 |  |  | $ | 17,885,762 |  |  | $ | - |  |  | $ | 1,883,116 |  |  | $ | 884,950 |  |  | $ | 35,968,583 |
Additions |  |  | 35,194 |  |  |  | 66,707 |  |  |  | 82,307 |  |  |  | 400,506 |  |  |  | 259,590 |  |  |  | 27,546 |  |  |  | 4,913,655 |  |  |  | 5,785,505 |
Disposals |  |  | (78,156 | ) |  |  | (96,666 | ) |  |  | (18,519 | ) |  |  | (240,660 | ) |  |  |  |  |  |  | (5,777 | ) |  |  | (58,160 | ) |  |  | (497,938 | )
Exchange differences |  |  | (366,462 | ) |  |  | (575,380 | ) |  |  | (603,152 | ) |  |  | (1,811,740 | ) |  |  | (10,904 | ) |  |  | (190,959 | ) |  |  | (371,375 | ) |  |  | (3,929,972 | )
At December 31, 2021 |  | $ | 3,239,683 |  |  | $ | 5,108,501 |  |  | $ | 5,412,444 |  |  | $ | 16,233,868 |  |  | $ | 248,686 |  |  | $ | 1,713,926 |  |  | $ | 5,369,070 |  |  | $ | 37,326,178 |
Accumulated Depreciation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2019 |  | $ | 2,735,649 |  |  | $ | 6,385,994 |  |  | $ | 5,234,288 |  |  | $ | 12,554,324 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 26,910,255 |
Depreciation charged for the year |  |  | 186,209 |  |  |  | 430,228 |  |  |  | 219,724 |  |  |  | 1,426,001 |  |  |  | - |  |  |  | 288,495 |  |  |  | 24,646 |  |  |  | 2,573,303 |
Disposal |  |  | (2,365 | ) |  |  | (1,363,070 | ) |  |  | (26,152 | ) |  |  | (16,568 | ) |  |  | - |  |  |  |  |  |  |  | - |  |  |  | (1,408,155 | )
Transfers in (out) |  |  | - |  |  |  | (11,747 | ) |  |  | (290,802 | ) |  |  | - |  |  |  | - |  |  |  | 302,549 |  |  |  | - |  |  |  | - |
Exchange differences |  |  | 3,520 |  |  |  | (50,439 | ) |  |  | (12,436 | ) |  |  | 40,307 |  |  |  | - |  |  |  | 25,236 |  |  |  | 638 |  |  |  | 6,826 |
At December 31, 2020 |  | $ | 2,923,013 |  |  | $ | 5,390,966 |  |  | $ | 5,124,622 |  |  | $ | 14,004,064 |  |  | $ | - |  |  | $ | 616,280 |  |  | $ | 25,284 |  |  | $ | 28,084,229 |
Depreciation charged for the year |  |  | 143,026 |  |  |  | 158,628 |  |  |  | 218,525 |  |  |  | 1,134,600 |  |  |  | - |  |  |  | 354,203 |  |  |  | 692,555 |  |  |  | 2,701,537 |
Disposal |  |  | (74,708 | ) |  |  | (96,660 | ) |  |  | (18,472 | ) |  |  | (240,659 | ) |  |  | - |  |  |  | (2,120 | ) |  |  | (3,183 | ) |  |  | (435,802 | )
Exchange differences |  |  | (297,859 | ) |  |  | (546,657 | ) |  |  | (525,526 | ) |  |  | (1,450,837 | ) |  |  | - |  |  |  | (76,985 | ) |  |  | (23,223 | ) |  |  | (2,921,087 | )
At December 31, 2021 |  | $ | 2,693,472 |  |  | $ | 4,906,277 |  |  | $ | 4,799,149 |  |  | $ | 13,447,168 |  |  | $ | - |  |  | $ | 891,378 |  |  | $ | 691,433 |  |  | $ | 27,428,877 |
Net book value |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At December 31, 2020 |  | $ | 726,094 |  |  | $ | 322,874 |  |  | $ | 827,186 |  |  | $ | 3,881,698 |  |  | $ | - |  |  | $ | 1,266,836 |  |  | $ | 859,666 |  |  | $ | 7,884,354 |
At December 31, 2021 |  | $ | 546,211 |  |  | $ | 202,224 |  |  | $ | 613,295 |  |  | $ | 2,786,700 |  |  | $ | 248,686 |  |  | $ | 822,548 |  |  | $ | 4,677,637 |  |  | $ | 9,897,301 |

There was no impairment of property, plant and equipment recorded for the years ended December 31, 2021, 2020 and 2019. No property, plant and equipment were pledged as security for bank borrowings.

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10. | RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILTIES

The carrying amounts of right-of-use assets are as below:

|  | 2021 |  |  | 2020 |
Balance at January 1, |  | $ | 4,190,351 |  |  | $ | 6,173,590 |
New leases |  |  | 824,734 |  |  |  | 532,978 |
Depreciation expense |  |  | (2,279,722 | ) |  |  | (2,506,446 | )
Exchange difference |  |  | (370,370 | ) |  |  | (9,771 | )
Balance at December 31, |  | $ | 2,364,993 |  |  | $ | 4,190,351 |

Lease liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate. The weighted average incremental borrowing rate applied to new leases during year 2021, 2020 and 2019 was 3.49%, 3.25% and 4.08%, respectively.

During the years ended December 31, 2021, 2020 and 2019, interest expense of $109,848, $146,723 and $100,650 arising from lease liabilities was included in finance costs, respectively. Depreciation expense related to right-of-use assets was $2,279,722, $2,506,446 and $2,583,318, respectively during the years ended December 31, 2021, 2020 and 2019.

11. | INTANGIBLE ASSETS, NET

|  | Computer |
|  | software |
Cost |  |  |
At December 31, 2019 |  | $ | 969,286 |
Additions |  |  | 26,316 |
Disposals |  |  | (141 | )
Exchange difference |  |  | (416 | )
At December 31, 2020 |  |  | 995,045 |
Additions |  |  | 13,235 |
Exchange difference |  |  | (100,976 | )
At December 31, 2021 |  |  | 907,304 |
Accumulated amortization |  |  |  |
At December 31, 2019 |  |  | 715,834 |
Amortization charged for the year |  |  | 54,745 |
Disposals |  |  | (141 | )
Exchange difference |  |  | 1,199 |
At December 31, 2020 |  |  | 771,637 |
Amortization charged for the year |  |  | 51,383 |
Exchange difference |  |  | (80,032 | )
At December 31, 2021 |  |  | 742,988 |
Net book value |  |  |  |
At December 31, 2020 |  | $ | 223,408 |
At December 31, 2021 |  | $ | 164,316 |

12. | TRADE AND OTHER PAYABLES AND OTHER CURRENT LIABILITIES

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Trade payable – third parties |  | $ | 675,227 |  |  | $ | 1,366,482 |
Accrued salaries and bonus |  |  | 262,396 |  |  |  | 140,321 |
Other payables, accrued customer claims, cash loss and shortage** |  |  | 91,098 |  |  |  | 33,608 |
Trade and other payables |  | $ | 1,028,721 |  |  | $ | 1,540,411 |
Output VAT |  | $ | 95,348 |  |  | $ | 114,877 |
Accrued Expenses |  |  | 572,157 |  |  |  | 375,815 |
Payroll Payable |  |  | 936,080 |  |  |  | 560,051 |
Other Payables |  |  | 177,850 |  |  |  | 198,363 |
Deferred revenue |  |  | 43,200 |  |  |  | - |
Other current liabilities |  | $ | 1,824,635 |  |  | $ | 1,249,106 |

| ** | Includes a provision for penalty for failure to meet certain performance indicators as stipulated in certain customer contracts for approximately $5,900 and $14,600 respectively.

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13. | BORROWINGS

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Current portion of long-term borrowings |  | $ | 933,110 |  |  | $ | 494,994 |
Long-term borrowings |  |  | 859,120 |  |  |  | 993,869 |
Borrowings from financial institutions |  | $ | 1,792,230 |  |  | $ | 1,488,863 |

The Company maintains borrowings with one financial institution. The borrowings are used for working capital purposes to support its business operations in Thailand. For the year ended December 31, 2021, the Company borrowed four bank loans carrying interests at the rates of 4.47, 2%, 2%, and 4.22%, respectively. For the year ended December 31, 2020, the Company borrowed five bank loans carrying interests at the rates of MLR minus 1%, MLR minus 1%, MLR minus 1%, 2%, and 2%, respectively. Borrowings are due to mature and repayable on June 30, 2023, May 31, 2022, April 7, 2025 and February 16, 2022. For the years ended December 31, 2021, 2020 and 2019, interest expense was $78,353 and $82,779 and $81,191, respectively.

As of December 31, 2021, the Company has unused bank overdraft availability of approximately $300,000.

As of December 31, 2020, the Company has unused bank overdraft availability of approximately $330,000 and unused trust receipts availability of approximately $1,700,000.

| 14. | FINANCE LEASE LIABILITIES

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Current portion |  | $ | 619,301 |  |  | $ | 632,105 |
Non-current portion |  |  | 666,455 |  |  |  | 1,023,366 |
Finance lease liabilities |  | $ | 1,285,756 |  |  | $ | 1,655,471 |

For the years ended December 31, 2021, 2020 and 2019, interest expense was $84,794, $98,405 and $135,708, respectively.

The minimum lease payments under finance lease agreements are as follows:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Within 1 year |  | $ | 673,105 |  |  | $ | 701,796 |
After 1 year but within 5 years |  |  | 713,092 |  |  |  | 1,074,047 |
Less: Finance charges |  |  | (100,441 | ) |  |  | (120,372 | )
Present value of finance lease liabilities, net |  | $ | 1,285,756 |  |  | $ | 1,655,471 |

Finance lease assets comprise primarily vehicles and office equipment as follow:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Cost |  | $ | 2,819,697 |  |  | $ | 3,172,647 |
Less: Accumulated depreciation |  |  | (927,408 | ) |  |  | (937,442 | )
Net book value |  | $ | 1,892,290 |  |  | $ | 2,235,205 |

15. | TAXATION

Value added tax (“VAT”)

The Company is subject to a statutory VAT of 7% for services in Thailand. The output VAT is charged to customers who receive services from the Company and the input VAT is paid when the Company purchases goods and services from its vendors. The input VAT can be offset against the output VAT. The VAT payable is presented on the statements of financial position when input VAT is less than the output VAT. A recoverable balance is presented on the balance sheets when input VAT is larger than the output VAT.

Income taxes

Cayman Islands

The Company is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.

F-29

British Virgin Islands

The Company’s subsidiary incorporated in the BVI is not subject to taxation.

Singapore

The Company’s subsidiary incorporated in Singapore is subject to a corporate income tax rate of 17% on Singapore taxable income.

Hong Kong

The Company’s subsidiary incorporated in Hong Kong is subject to a corporate income tax rate of 16.5% on Hong Kong taxable income.

Thailand

The Company’s subsidiary incorporated in Thailand is subject to a corporate income tax rate of 20%.

Pre-tax loss, by jurisdiction, for the years ended December 31, 2021, 2020 and 2019 is as follows:

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Cayman Islands |  | $ | (1,733,786 | ) |  | $ | (1,711,094 | ) |  | $ | (714,196 | )
BVI |  |  | (12,769 | ) |  |  | (12,345 | ) |  |  | (6,945 | )
Hong Kong |  |  | (588,315 | ) |  |  | (63,483 | ) |  |  | (39,828 | )
Singapore |  |  | (16,041 | ) |  |  | - |  |  |  | - |
Thailand |  |  | (3,873,611 | ) |  |  | (1,112,496 | ) |  |  | 909,519 |
|  | $ | (6,224,522 | ) |  | $ | (2,899,418 | ) |  | $ | 148,550 |

The components of the income tax provision are:

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current income tax expense |  | $ | - |  |  | $ | 261,586 |  |  | $ | - |
Deferred income tax (benefit) expense |  |  | (732,868 | ) |  |  | (18,749 | ) |  |  | 88,473 |
Total income tax (benefit) expense |  | $ | (732,868 | ) |  | $ | 242,837 |  |  | $ | 88,473 |

Reconciliation between the statutory tax rate to income before income taxes and the actual provision for income taxes is as follows:

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
(Loss) Profit before income tax expense* |  | $ | (4,068,887 | ) |  | $ | 864,207 |  |  | $ | 909,519 |
Thailand income tax statutory rate |  |  | 20 | % |  |  | 20 | % |  |  | 20 | %
Income tax at statutory tax rate |  |  | (813,777 | ) |  |  | 172,841 |  |  |  | 181,904 |
Permanent differences |  |  | 80,910 |  |  |  | 69,996 |  |  |  | (93,431 | )
Income tax (benefit) expense |  | $ | (732,868 | ) |  | $ | 242,837 |  |  | $ | 88,473 |

| * | This amount represents profit before income tax after adjustments for non-deductible and non-taxable expense items from the Thailand operating entity.

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Deferred tax assets and liabilities are comprised of the following:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Provision for employee benefits |  | $ | 1,163,826 |  |  | $ | 1,368,335 |
Net operating loss carried forward |  |  | 728,331 |  |  |  | 1,105 |
Deferred tax assets |  |  | 1,892,157 |  |  |  | 1,369,440 |
Less: |  |  |  |  |  |  |  |
Deferred tax liabilities - finance leases |  |  | (256,519 | ) |  |  | (331,094 | )
Deferred tax assets, net |  | $ | 1,635,638 |  |  | $ | 1,038,346 |

16. | PROVISION FOR EMPLOYEE BENEFITS

The Company has a defined benefit plan based on the requirement of the Thailand Labor Protection Act B.E.2541 (1988) to provide retirement benefits to employees based on pensionable remuneration and length of service which are considered as unfunded. There were no plan assets set up and the Company will pay benefits when needed.

According to IFRS 19 (Revised 2017), the use of Projected Unit Credit (PUC) Cost Method is required in order to determine the actuarial liability based on past service and expected future salary. Thus, the actuarially acceptable assumptions on salary scale are needed. Actuarial assumptions on other components of the benefit formulas are also required to measure the obligation such as demographic assumptions and financial assumptions. All of these assumptions are important because they are directly related to a possibility of actuarial gains and losses. Moreover, the obligations are measured on a discounted basis because they may be settled many years after the employees render the related service.

The following assumptions have been adopted for this actuarial valuation:

Demographic Assumptions:

| 1. | Mortality Table (Annual Death Rate): Male and Female Thai Mortality Ordinary Tables of 2017 (TMO 2017) which is the latest mortality table from the Office of Insurance Commission in Thailand.

| 2. | Annual Disability Rate: 5% of the Male and Female TMO 2017.

| 3. | Annual Voluntary Resignation: Age related rates as follows.

Age Group (Years) |  | Annual Voluntarily Resignation Rate of Direct Cost Staff |  |  | Annual Voluntarily Resignation Rate of Indirect Cost Staff |
Below 31 |  |  | 31 | % |  |  | 16 | %
31-40 |  |  | 16 | % |  |  | 8 | %
41-50 |  |  | 14 | % |  |  | 6 | %
Above 50 |  |  | 0 | % |  |  | 0 | %

| 4. | Annual Forced Resignation: Age related rates as follows.

Age Group (Years) |  | Annual Forced Resignation Rate |
Below 31 |  |  | 0 | %
31-40 |  |  | 0 | %
41-50 |  |  | 0 | %
Above 50 |  |  | 0 | %

F-31

Financial Assumptions:

| 1. | Discount Rate: Single weighted average discount rate is 1.92% per year based on the zero coupon yield rate of government bonds in Thailand from the Thai Bond Market Association (Thai BMA) as of December 31, 2021. Duration (or single weighted average remaining time to retire) is 12 years.

| 2. | Salary Increase Rate: 3.00% per year. The projected salary is calculated at the time of retirement or forced resignation.

| 3. | Taxes payable by the plan: The contributions are not a tax-deductible expense according to the Revenue Department in Thailand so there are no taxes payable by the plan

Movement in the present value of the defined benefit obligation:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Defined benefit obligations at January 1, |  | $ | 6,841,673 |  |  | $ | 6,439,795 |
Benefits paid during the year |  |  | (462,306 | ) |  |  | (517,531 | )
Current service costs |  |  | 649,242 |  |  |  | 770,934 |
Interest |  |  | 102,196 |  |  |  | 96,019 |
Past service cost and gain (loss) on settlement |  |  | - |  |  |  | 36,939 |
Actuarial loss |  |  | (627,193 | ) |  |  | 8,772 |
Exchange differences |  |  | (676,257 | ) |  |  | 6,745 |
Defined benefit obligations at December 31, |  | $ | 5,827,355 |  |  | $ | 6,841,673 |

The following table presents the sensitivity analysis for each significant actuarial assumption with a variation of 1.0% in the assumptions as of the end of the reporting period:

For the year ended December 31, 2021

Assumption |  | % Change (+) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |  |  | % Change (-) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |
Discount Rate |  |  | 1 |  |  | $ | 5,406,718 |  |  | $ | (412,414 | ) |  |  | -7.09 |  |  |  | -1 |  |  | $ | 6,291,799 |  |  | $ | 472,667 |  |  |  | 8.12 |
Salary Increase Rate |  |  | 1 |  |  |  | 6,141,412 |  |  |  | 322,280 |  |  |  | 5.54 |  |  |  | -1 |  |  |  | 5,534,865 |  |  |  | (284,267 | ) |  |  | -4.89 |
Turnover Rate |  |  | 1 |  |  |  | 5,596,605 |  |  |  | (222,526 | ) |  |  | -3.82 |  |  |  | -1 |  |  |  | 5,905,978 |  |  |  | 86,846 |  |  |  | 1.49 |
Life Expectancy |  |  | +1 Year |  |  |  | 5,832,121 |  |  |  | 12,989 |  |  |  | 0.22 |  |  |  | -1 Year |  |  |  | 5,806,228 |  |  |  | (12,904 | ) |  |  | -0.22 |

For the year ended December 31, 2020

Assumption |  | % Change (+) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |  |  | % Change (-) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |
Discount Rate |  |  | 1 |  |  | $ | 6,246,875 |  |  | $ | (594,798 | ) |  |  | -8.69 |  |  |  | -1 |  |  | $ | 7,540,239 |  |  | $ | 698,566 |  |  |  | 10.21 |
Salary Increase Rate |  |  | 1 |  |  |  | 7,303,544 |  |  |  | 461,871 |  |  |  | 6.75 |  |  |  | -1 |  |  |  | 6,442,685 |  |  |  | (398,988 | ) |  |  | -5.83 |
Turnover Rate |  |  | 1 |  |  |  | 6,515,632 |  |  |  | (326,041 | ) |  |  | -4.77 |  |  |  | -1 |  |  |  | 6,990,881 |  |  |  | 149,208 |  |  |  | 2,18 |
Life Expectancy |  |  | +1 Year |  |  |  | 6,860,711 |  |  |  | 19,038 |  |  |  | 0.28 |  |  |  | -1 Year |  |  |  | 6,822,778 |  |  |  | (18,895 | ) |  |  | -0.28 |

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For the year ended December 31, 2019

Assumption |  | % Change (+) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |  |  | % Change (-) in Assumption |  |  | Liability |  |  | Amount Change in Liability |  |  | % Change in Liability |
Discount Rate |  |  | 1 |  |  | $ | 5,877,653 |  |  | $ | (562,142 | ) |  |  | -8.73 |  |  |  | -1 |  |  | $ | 7,098,037 |  |  | $ | 658,242 |  |  |  | 10.22 |
Salary Increase Rate |  |  | 1 |  |  |  | 6,832,393 |  |  |  | 392,599 |  |  |  | 6.10 |  |  |  | -1 |  |  |  | 6,098,352 |  |  |  | (341,443 | ) |  |  | -5.3 |
Turnover Rate |  |  | 1 |  |  |  | 6,131,013 |  |  |  | (308,782 | ) |  |  | -4.79 |  |  |  | -1 |  |  |  | 6,576,958 |  |  |  | 137,163 |  |  |  | 2.13 |
Life Expectancy |  |  | +1 Year |  |  |  | 6,458,065 |  |  |  | 18,207 |  |  |  | 0.28 |  |  |  | -1 Year |  |  |  | 6,421,657 |  |  |  | (18,137 | ) |  |  | -0.28 |

Maturity profile of the defined benefit obligation as of December 31, are as follow:

Year |  | Defined Benefit Obligation |
2022 |  | $ | 563,243 |
2023 |  |  | 275,116 |
2024 |  |  | 266,120 |
2025 |  |  | 426,322 |
2026 |  |  | 339,031 |
2027 |  |  | 549,994 |
2028 |  |  | 359,377 |
2029 |  |  | 319,184 |
2030 |  |  | 477,371 |
2031 |  |  | 759,926 |
2032-2045 |  |  | 14,194,589 |
>2045 |  |  | 16,054,681 |

17. | SHAREHOLDERS’ EQUITY

On August 20, 2021, the shareholders of the Company approved a 1 for 3 reverse split of the Company’s authorized and issued ordinary shares whereby every three shares were consolidated into one share (the “Reverse Split”). In addition, the par value of each ordinary share increased from $0.001 to $0.003. The financial statements and all share and per share amounts have been retroactively restated to reflect the Reverse Split. On August 20, 2021, in addition to the Reverse Split, the shareholders of the Company also approved:

| ● | a proposal to resolve fractional entitlements to the Company’s issued ordinary shares resulting from the Reserve Split – under the proposal, fractional shares will be disregarded and will not be issued to the shareholders of the Company but all such fractional shares shall be redeemed in cash for the fair value of such fractional share, with fair value being defined as the closing price of the ordinary shares on a post-reverse split basis on the applicable trading market on the first trading date of the Company’s ordinary shares following the effectiveness of the Reverse Split; and

| ● | an increase in the Company’s authorized ordinary shares from 100,000,000 to 300,000,000.

On March 25, 2021, a total of 43,700 shares were issued to acquire a majority stake in Handshake.

On September 28, 2021, the Company completed an initial public offering to issue 3,614,458 units, each unit consisting of one of our ordinary shares, par value $0.003 per share, and a warrant to purchase one ordinary share at $4.15 per unit for aggregate gross proceeds of approximately $15 million. Each ordinary share is being sold together with one warrant to purchase one ordinary share. Each whole share exercisable pursuant to the warrants will have an exercise price per share at $5.1875, equal to 125% of the initial public offering price. The warrants will be immediately exercisable and will expire on the fifth anniversary of the original issuance date.

The fair value of the warrants, determined using the Black-Scholes valuation model, was $0.46 per warrant. The significant inputs into the model were share price as shown above, the exercise price as shown above, volatility of 17.06%, expected warrant life of 5 years, and an annual risk-free interest rate of 2.5%. The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of Nasdaq-100 companies between 2015 – 2019.

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As of December 31, 2019, 16,666,663 ordinary shares were issued at par value of $0.003, equivalent to share capital of $50,000. On February 5, 2020, the shareholders of the Company authorized an increase in the authorized shares of the Company from 16,666,663 ordinary shares to 100,000,000 ordinary shares. In March 2020, the Company issued 689,427 ordinary shares (see Note 18) at par value. Total ordinary shares issued as of December 31, 2020 was 17,356,090, equivalent to share capital of approximately $52,069. As of December 31, 2021 and 2020, subscription receivable for these shares was $50,000. There is no definitive due date to pay up the receivables. During 2020, the Company recorded a capital distribution to the controlling shareholder for approximately $380,000, representing the amount of a related party receivable/loan written off.

18. | STOCK-BASED COMPENSATION

On December 16, 2019, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with VCAB Eight Corporation, a Texas corporation (“VCAB”), pursuant to which, subject to certain preconditions being satisfied, it was agreed that VCAB would merge with and into the Company. The main objective of the Merger was to increase the Company’s shareholder base to, among other things, assist the Company in satisfying the listing standards of a national security exchange in the United States. The Merger was completed effective on March 10, 2020, and the separate existence of VCAB ceased on that date. As consideration for the Merger, the Company agreed to issue an aggregate of 877,021 shares of capital stock (“Plan Shares’) to VCAB’s claim holders. As of December 31, 2020, the Company has issued, 689,427 of the Plan Shares to approximately 670 designated and Bankruptcy Court approved claim holders. During 2021, the Company issued 187,594 of the Plan Shares to additional claim holders upon their approval by the Bankruptcy Court. Following the completion of this process, the Company has approximately 1,300 holders of its outstanding ordinary shares. The Company recorded the fair value of the shares in connection to the 877,025 shares issued in the merger transaction of $18,826 as stock-based compensation expense.

On January 8, 2020, Guardforce AI Service Ltd. entered into agreements with and transferred 833,333 shares each, totaling 1,666,666 of the Company’s ordinary shares, to, Mr. Terence Wing Khai Yap, the Company’s Chairman and Ms. Lei Wang, the Company’s Chief Executive officer. The shares, deemed as issuances by the Company, were transferred to Mr. Yap and Ms. Wang as compensation for serving in their roles as the Company’s Chairman and Chief Executive Officer, respectively. The Company accounted for these transfers as stock-based compensation expenses; the aggregate charge was $46,341, representing the fair value of the shares being transferred.

On March 13, 2020, the Company’s Board of Directors approved the transfer of 1,666,666 ordinary shares of Guardforce AI Co. Limited from Guardforce AI Technology to Profit Raider Investments Limited (“Profit Raider”) to fulfil a short-term borrowing transaction (see Note 21). This transfer is deemed an issuance by the Company and the Company recorded a charge of stock-based compensation expense of $35,769.

19. | ADMINISTRATIVE EXPENSES

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Staff expense |  | $ | 3,471,146 |  |  | $ | 2,759,505 |  |  | $ | 2,201,515 |
Rental expense* |  |  | 24,551 |  |  |  | 702,664 |  |  |  | 547,513 |
Depreciation and amortization expense |  |  | 1,261,988 |  |  |  | 167,380 |  |  |  | 153,316 |
Utilities expense |  |  | 93,736 |  |  |  | 120,236 |  |  |  | 131,810 |
Travelling and entertainment expense |  |  | 148,063 |  |  |  | 138,707 |  |  |  | 108,021 |
Professional fees |  |  | 1,183,499 |  |  |  | 932,891 |  |  |  | 391,273 |
Repairs and maintenance |  |  | 71,990 |  |  |  | 70,443 |  |  |  | 104,813 |
Employee benefits |  |  | 153,454 |  |  |  | 548,628 |  |  |  | 358,287 |
Other service fees |  |  | 240,328 |  |  |  | 273,333 |  |  |  | 282,322 |
Other expenses** |  |  | 933,288 |  |  |  | 960,685 |  |  |  | 474,696 |
|  | $ | 7,582,043 |  |  | $ | 6,674,472 |  |  | $ | 4,753,566 |

| * | During the year ended December 31, 2020 and 2019, depreciation expense of $700,741 and $547,513 relating to the right of use assets was recorded as rental expense, respectively.

| ** | Other expenses mainly comprised of office expenses, stamp duties, training costs, etc.

20. | LEGAL RESERVE

Under the provisions of the Civil and Commercial Code, GF Cash (CIT) is required to set aside as a legal reserve at least 5% of the profits arising from the business of the Company at each dividend distribution until the reserve is at least 10% of the registered share capital. The legal reserve is non-distributable. The Company reserve has met the legal reserve requirement of $223,500 as of December 31, 2021 and 2020.

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21. | RELATED PARTY TRANSACTIONS

The table below sets forth the major related parties and their relationships with the Company as of December 31, 2021:

Name of related parties |  | Relationship with the Company
Tu Jingyi (“Mr. Tu”) |  | Controlling shareholder
Long Top Limited |  | Mr. Tu’s father is the majority shareholder
Guardforce TH Group Company Limited |  | Mr. Tu’s father is the majority shareholder
Guardforce Security (Thailand) Company Limited |  | Mr. Tu’s father is the majority shareholder of its ultimate holding company
Bangkok Bank Public Company Limited |  | Minority shareholder
Shenzhen Junwei Investment Development Company Limited |  | Minority shareholder
Guardforce Aviation Security Company Limited |  | Mr. Tu’s father is the majority shareholder of its ultimate holding company
Guardforce 3 Limited |  | Mr. Tu’s father is the majority shareholder
Guardforce Group Limited |  | Controlled by Mr. Tu’s father
Guardforce AI Technology Limited |  | Holding Company
Guardforce AI Service Limited |  | Holding Company
Profit Raider Investment Limited (“Profit Raider”) |  | 10% shareholder effective March 2020
Shenzhen Douguaer Investment Partnership |  | Ultimately controlled by Mr. Tu
Guardforce Holdings (HK) Limited |  | Controlled by Mr. Tu’s father
Guardforce Limited |  | Mr. Tu’s father is the majority shareholder of its ultimate holding company
Shenzhen Intelligent Guardforce Robot Technology Co., Limited |  | Controlled by Mr. Tu
Perfekt Technology & System Co., Ltd. |  | Mr. Tu’s father is the majority shareholder of its ultimate holding company
GF Robotics Malaysia Sdn. Bhd |  | Controlled by Mr. Tu’s brother
Macau GF Robotics Limited |  | Controlled by Mr. Tu’s brother
Quantum Infosec Inc (“Quantum”) |  | Minority shareholder of Handshake
Richard Stagg |  | Director of Handshake
GF Technovation Company Limited |  | Mr. Tu’s father is the majority shareholder of its ultimate holding company

The principal related party balances and transactions as of and for the years ended December 31, 2021, 2020 and 2019 are as follows:

Amounts due from related parties:

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Guardforce TH Group Company Limited |  |  | 6,335 |  |  |  | 6,026 |
Guardforce AI Technology Limited |  |  | 626 |  |  |  | - |
Guardforce AI Service Limited |  |  | 626 |  |  |  | - |
Bangkok Bank Public Company Limited |  |  | - |  |  |  | 443 |
Guardforce Limited |  |  | - |  |  |  | 20,647 |
Shenzhen Intelligent Guardforce Robot Technology Co., Limited |  |  | - |  |  |  | 346,152 |
GF Robotics Malaysia Sdn. Bhd |  |  | 11,973 |  |  |  | - |
Macau GF Robotics Limited |  |  | 5,058 |  |  |  | - |
Quantum Infosec Inc |  |  | 1,389 |  |  |  | - |
|  | $ | 26,007 |  |  | $ | 373,268 |

Amounts due from related parties as of December 31, 2021 represent business advances for operational purposes.

Amounts due to related parties:

|  |  |  |  | As of December 31, |
|  |  |  |  | 2021 |  |  | 2020 |
Tu Jingyi |  |  | (a) |  |  |  | 109,607 |  |  |  | 88,047 |
Shenzhen Junwei Investment Development Company Limited |  |  |  |  |  |  | - |  |  |  | 225,085 |
Guardforce Holdings (HK) Limited |  |  | (b) |  |  |  | 163,590 |  |  |  | 156,782 |
Profit Raider Investment Limited |  |  | (a) |  |  |  | 1,626,726 |  |  |  | 1,136,664 |
Guardforce Aviation Security Company Limited |  |  |  |  |  |  | - |  |  |  | 1,224 |
Guardforce Security (Thailand) Company Limited |  |  |  |  |  |  | - |  |  |  | 62,667 |
Shenzhen Intelligent Guardforce Robot Technology Co., Limited |  |  | (c) |  |  |  | 301,853 |  |  |  | - |
Richard Stagg |  |  | (d) |  |  |  | 15,976 |  |  |  | - |
|  |  |  |  |  | $ | 2,217,752 |  |  | $ | 1,670,469 |

| (a) | Amounts due to Mr. Tu Jingyi and Profit Raider Investment Limited represented interest accrued on the respective loans.

F-35

| (b) | Amounts due to Guardforce Holdings (HK) Limited comprised of $28,896 advances made and $134,694 accrued interests on the loans.

| (c) | Amounts due to Shenzhen Intelligent Guardforce Robot Technology Co., Limited represent accounts payable for the purchase of robots from a related party.

| (d) | Amounts due to Richard Stagg represent advance from a related party with no fixed term of repayment. The interest rate was 8% per annum for the year ended December 31, 2021, which had been reduced to 3% per annum beginning January 1, 2022.

Short-term borrowings from related parties:

|  |  |  | As of December 31, |
|  |  |  | 2021 |  |  | 2020 |
Profit Raider Investment Limited |  | (a) |  | $ | 13,506,184 |  |  | $ | - |

Long-term borrowings from related parties:

|  |  |  | As of December 31, |
|  |  |  | 2021 |  |  | 2020 |
Guardforce Holdings (HK) Limited |  | (b) |  | $ | 3,895,500 |  |  | $ | 4,140,500 |
Tu Jingyi |  | (c) |  |  | 1,437,303 |  |  |  | 1,437,303 |
Profit Raider Investment Limited |  | (a) |  |  | - |  |  |  | 13,508,009 |
|  |  |  | $ | 5,332,803 |  |  | $ | 19,085,812 |

| (a) | On April 29, 2018, Guardforce TH Group Company Limited entered into an agreement with Profit Raider Investment Limited to transfer the loan between Guardforce TH and the Company to Profit Raider. As a result, the Company recorded a short-term borrowing from a third party in the amount of $13.42 million bearing interest at 4% from April 30, 2019 to December 31, 2019 and 3.22% prior to April 30, 2019. The Company assumed an additional liability of approximately $576,000 which has been treated as an additional expense paid in 2018. The holding companies have guaranteed the short-term borrowings from Profit Raider which amount is due on December 31, 2020. On March 13, 2020, the Company’s Board of Directors approved the transfer of 1,666,666 ordinary shares of Guardforce AI Co. Limited from Guardforce AI Technology to Profit Raider. As a result of this share transfer, Profit Raider is deemed an affiliate of the Company and therefore this borrowing is presented as a related party loan since March 2020 and the loan was extended to December 31, 2022 with the same terms and conditions with an interest rate at 4%. For the year ended December 31, 2021, 2020 and 2019, interest expense was $612,387, $579,039 and $293,827, respectively. As of the date of this report, the Company has been negotiating with Profit Raider on the further extension of loan which will be due on December 31, 2022.

| (b) | On December 31, 2019, the Company entered into an agreement with Guardforce Holdings (HK) Limited whereby Guardforce Holdings (HK) Limited loaned $1,499,998 to the Company. The loan is unsecured and it bears an interest rate of 3%. The loan was initially due on December 31, 2020. During the year ended December 31, 2021 and 2020, the Company repaid $245,000 and $507,998 to partially settle the principal, respectively. The loan was extended to December 22, 2022 bearing interest rate at 2%. For the years ended December 31, 2021 and 2020, interest expense on this loan was $14,940 and $19,840, respectively.

On April 17, 2020, the Company borrowed $2,735,000. The loan is unsecured and bears an interest rate at 2%. The loan is due on April 16, 2023. For the year ended December 31, 2021 and 2020, interest expense on this loan was $54,700 and $34,187, respectively.

On September 9, 2020, the Company borrowed $413,500. The loan is unsecured and it bears interest at 2%. The loan is due on September 8, 2023. For the year ended December 31, 2021 and 2020, interest expense on this loan was $8,270 and $2,757, respectively.

| (c) | On September 1, 2018, the Company entered into an agreement with Mr. Tu Jingyi whereby Mr. Tu Jingyi borrowed $1,437,303 (RMB10 million) to the Company. The loan is unsecured with an interest rate at 3%. The loan was expired on August 31, 2019, which was extended to August 31, 2020. On September 1, 2020, the Company further extended the loan to August 31, 2022 with an interest rate at 1.5%. For the years ended December 31, 2021, 2020 and 2019, interest expense on this loan was $21,560, $35,933 and $38,000, respectively.

F-36

Related party transactions:

|  |  |  | For the years ended December 31, |
|  | Nature |  | 2021 |  |  | 2020 |  |  | 2019 |
Service/ Products received from related parties: |  |  |  |  |  |  |  |  |  |  |
Guardforce Security (Thailand) Company Limited |  | (a) |  | $ | 763,256 |  |  | $ | 714,625 |  |  | $ | 415,604 |
Guardforce Aviation Security Company Limited |  | (b) |  |  | 5,739 |  |  |  | 13,190 |  |  |  | 4,219 |
Perfekt Technology & System Co., Ltd. |  | (c) |  |  | 6,850 |  |  |  | 35,842 |  |  |  | - |
Shenzhen Intelligent Guardforce Robot Technology Co., Limited – Purchases |  | (d) |  |  | 5,702,103 |  |  |  | 1,584,873 |  |  |  | - |
Profit Raider Investment Limited |  |  |  |  | - |  |  |  | 150,000 |  |  |  | - |
|  |  |  | $ | 6,477,948 |  |  | $ | 2,498,530 |  |  | $ | 419,823 |
Service/ Products delivered to related parties: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Bangkok Bank Public Company Limited |  |  |  | $ | - |  |  | $ | 9,726 |  |  | $ | - |
Shenzhen Intelligent Guardforce Robot Technology Co., Limited – Commission |  |  |  |  | - |  |  |  | 158,487 |  |  |  | - |
Guardforce Limited |  | (e) |  |  | 12,846 |  |  |  | 205,589 |  |  |  | - |
GF Technovation Company Limited |  | (e) |  |  | 98,781 |  |  |  | - |  |  |  | - |
|  |  |  | $ | 111,627 |  |  | $ | 373,802 |  |  | $ | - |

Nature of transactions:

| (a) | Guardforce Security (Thailand) Co., Ltd. provided security guard services to the Company;
| (b) | Guardforce Aviation Security Co., Ltd. provided escort services to the Company;
| (c) | Perfekt Technology & System Co., Ltd. provided security equipment to the Company;
| (d) | The Company purchased robots from Shenzhen Intelligent Guardforce Robot Technology Co., Limited;
| (e) | Guardforce Limited and GF Technovation Company Limited are fellow subsidiaries. GF Technovation Company Limited was incorporated in 2021 for running robotics related business. The Company sold robots to GF Technovation Company Limited in place of Guardforce Limited beginning March 2021.

As disclosed on Note 1, the Company entered into a Sale and Purchase Agreement (the “Kewei Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) to acquire 100% of the equity interests in Shenzhen Keweien Robot Service Co., Ltd. and Guangzhou Kewei Robot Technology Co., Ltd. from Shenzhen Kewei. Shenzhen Kewei. This is a related party transaction since the Shenzhen Kewei and the two acquirees are controlled by Mr. Tu Jingyi.

22. | COMMITMENTS AND CONTINGENCIES

Executives/directors agreements

The Company has several employment agreements with executives and directors with the latest expiring in 2024. All agreements provide for automatic renewal options with varying terms of one year or three years unless terminated by either party. Future payments for employment agreements as of December 31, are as follows:

|  | Amount |
Years ending December 31: |  |  |
2022 |  | $ | 1,235,937 |
2023 |  |  | 479,584 |
2024 |  |  | 112,903 |
Total minimum payment required |  | $ | 1,828,424 |

Contracted expenditure commitments

The Company’s contracted expenditures commitments as of December 31, 2021 but not provided in the consolidated financial statements are as follows:

|  |  |  | Payments Due by Period |
|  |  |  |  |  |  | Less than |  |  |  |  |  |  |  |  | More than |
Contractual Obligations |  | Nature |  | Total |  |  | 1 year |  |  | 1-3 years |  |  | 4-5 years |  |  | 5 years |
Service fee commitments |  | (a) |  | $ | 599,107 |  |  | $ | 359,464 |  |  | $ | 239,643 |  |  | $ | - |  |  | $ | - |
Operating lease commitments |  | (b) |  |  | 1,399,168 |  |  |  | 936,783 |  |  |  | 414,607 |  |  |  | 37,596 |  |  |  | 10,182 |
|  |  |  | $ | 1,998,275 |  |  | $ | 1,296,247 |  |  | $ | 654,250 |  |  | $ | 37,596 |  |  | $ | 10,182 |

F-37

| (a) | The Company has engaged Stander Information Company Limited (“Stander”) to provide technical services relating to the cash management systems for the Company’s secure logistics business. The service agreement with Stander comprised of a monthly fixed service fee and certain other fees as specified in the agreement. In 2022, the Company plans to acquire their own cash management system to replace Stander’s services, the acquisition cost of the system is approximately $1.1 million (THB36.7 million).

| (b) | From time to time, the Company has leased various low value items with various lease terms that the Company is committed to pay in the future.

Bank guarantees

As of December 31, 2021, the Company had commitments with banks for bank guarantees in favor of government agencies and others of approximately $5,700,000.

Litigation

As of the date of filing, the Company is a defendant in various labor related lawsuits totaling approximately $773,858. Management believes these cases are without merit and is confident that the Appeals Court will make the decision according to the consideration of the Court of First Instance and order the dismissal of such lawsuits. Therefore, no provision has been made for these liabilities in the financial statements.

23. | CONCENTRATIONS

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenue for the years ended December 31, 2021, 2020 and 2019.

|  | For the years ended December 31, |
|  | 2021 |  |  | % of revenue |  |  | 2020 |  |  | % of revenue |  |  | 2019 |  |  | % of revenue |
Company A |  | $ | 9,611,739 |  |  |  | 27.3 | % |  | $ | 10,237,481 |  |  |  | 27.3 | % |  | $ | 10,314,869 |  |  |  | 26.7 | %
Company B |  |  | 6,636,377 |  |  |  | 18.9 | % |  |  | 7,284,968 |  |  |  | 19.5 | % |  |  | 7,032,721 |  |  |  | 18.2 | %
Company C |  |  | 3,559,424 |  |  |  | 10.1 | % |  |  | 3,296,691 |  |  |  | 8.8 | % |  |  | 4,143,091 |  |  |  | 10.7 | %
Company D |  |  | 4,140,975 |  |  |  | 11.8 | % |  |  | 4,007,021 |  |  |  | 10.7 | % |  |  | 2,831,833 |  |  |  | 7.3 | %
|  | $ | 23,948,515 |  |  |  | 68.1 | % |  | $ | 24,826,161 |  |  |  | 66.3 | % |  | $ | 24,322,514 |  |  |  | 62.9 | %

Details of the customers which accounted for 10% or more of trade receivable are as follows:

|  | As of December 31, |
|  | 2021 |  |  | % account receivable |  |  | 2020 |  |  | % account receivable |
Company A |  | $ | 737,264 |  |  |  | 14.9 | % |  | $ | 803,031 |  |  |  | 14.7 | %
Company B |  |  | 718,128 |  |  |  | 14.5 | % |  |  | 708,165 |  |  |  | 12.9 | %
Company C |  |  | 690,906 |  |  |  | 14.0 | % |  |  | 584,928 |  |  |  | 10.7 | %
Company D |  |  | 949,496 |  |  |  | 19.2 | % |  |  | 1,215,095 |  |  |  | 22.2 | %
|  | $ | 3,095,794 |  |  |  | 62.7 | % |  | $ | 3,311,219 |  |  |  | 60.5 | %

24. | SUBSEQUENT EVENTS

Subsequent events have been reviewed through the date the consolidated financial statements were issued and required no adjustments or disclosures other than the following:

The Company incorporated and acquired various companies to commence robotic AI solution business of selling and leasing robots (Note 1).

On January 20, 2022, the Company completed a private placement with several investors, wherein a total of 7,919,997 ordinary shares of the Company, par value $0.003 per share were issued at a purchase price of $1.30 per share, with each investor also receiving a warrant to purchase up to a number of ordinary Shares equal to 150% of the number of ordinary Shares purchased by such investor in the offering, at an exercise price of $1.30 per share, for a total purchase price of approximately $10.3 million.

F-38

25. | CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

The Company performed a test of its restricted net assets of the consolidated subsidiaries in accordance with the Securities and Exchange Commission’s Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial information of the parent company.

The subsidiaries did not pay any dividends to the Company for the periods presented. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiaries under the equity method of accounting. Such investment is presented on the separate condensed statement of financial position of the Company as “Investment in subsidiaries”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with IFRS have been condensed or omitted.

The parent Company did not have significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2021 and 2020.

STATEMENTS OF FINANCIAL POSITION - PARENT COMPANY ONLY

|  | As of December 31, |
|  | 2021 |  |  | 2020 |
|  | (Unaudited) |  |  | (Unaudited) |
Assets |  |  |  |  |  |
Cash and cash equivalents |  | $ | 5,129,248 |  |  | $ | 1,030,340 |
Other receivables |  |  | 5,833 |  |  |  | - |
Goodwill |  |  | 329,534 |  |  |  | - |
Investment in subsidiaries |  |  | 5,731,576 |  |  |  | 1,823,463 |
Total assets |  | $ | 11,196,191 |  |  | $ | 2,853,803 |
Liabilities and equity |  |  |  |  |  |  |  |
Trade and other payables |  | $ | 135,295 |  |  | $ | 116,084 |
Long-term borrowings from related company |  |  | 4,575,852 |  |  |  | 4,947,400 |
Total liabilities |  |  | 4,711,147 |  |  |  | 5,063,484 |
Equity |  |  |  |  |  |  |  |
Ordinary Shares –Authorized 300,000,000 shares, par value $0.003 (2020: Authorized 100,000,000 shares*) |  |  | 63,606 |  |  |  | 52,069 |
Subscription receivable |  |  | (50,000 | ) |  |  | (50,000 | )
Additional paid in capital |  |  | 15,603,631 |  |  |  | 2,082,795 |
Legal reserve |  |  | 223,500 |  |  |  | 223,500 |
Accumulated deficit |  |  | (10,204,220 | ) |  |  | (4,722,294 | )
Accumulated other comprehensive income |  |  | 821,527 |  |  |  | 204,249 |
Capital & reserves |  |  | 6.485,044 |  |  |  | (2,209,681 | )
Total liabilities and equity |  | $ | 11,196,191 |  |  | $ | 2,853,803 |

| * | Giving retroactive effect to the reverse split on August 20, 2021.

F-39

STATEMENTS OF PROFIT AND LOSS AND COMPREHENSIVE LOSS - PARENT COMPANY ONLY

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |
Revenue |  | $ | - |  |  | $ | - |  |  | $ | - |
Cost of sales |  |  | - |  |  |  | - |  |  |  | - |
Gross margin |  |  | - |  |  |  | - |  |  |  | - |
Administrative expenses |  |  | (1,861,520 | ) |  |  | (1,519,150 | ) |  |  | (656,176 | )
Loss from operations |  |  | (1,861,520 | ) |  |  | (1,519,150 | ) |  |  | (656,176 | )
Other income, net |  |  | 227,205 |  |  |  | 9 |  |  |  | - |
Finance cost |  |  | (99,470 | ) |  |  | (92,717 | ) |  |  | (53,214 | )
Equity (loss) income of subsidiaries |  |  | (3,748,142 | ) |  |  | (1,515,166 | ) |  |  | 763,425 |
Net (loss) profit for the year |  |  | (3,620,407 | ) |  |  | (3,126,024 | ) |  |  | 54,035 |
Total comprehensive (loss) income for the year |  | $ | (5,481,927 | ) |  | $ | (3,126,024 | ) |  | $ | 54,035 |

STATEMENTS OF CASH FLOWS – PARENT COMPANY ONLY

|  | For the years ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |
Operating activities |  |  |  |  |  |  |  |  |
Net loss |  | $ | (5,481,927 | ) |  | $ | (3,126,024 | ) |  | $ | 54,035 |
Adjustments to reconcile net income to net cash provided by operating activities |  |  |  |  |  |  |  |  |  |  |  |
Stock-based compensation |  |  | - |  |  |  | 100,936 |  |  |  | - |
Equity loss from equity investments |  |  | 3,748,142 |  |  |  | 1,514,166 |  |  |  | (763,425 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Other receivables, net |  |  | (5,833 | ) |  |  | 57,400 |  |  |  | 332,599 |
Other payables |  |  | (7,405,803 | ) |  |  | 975,618 |  |  |  | 1,422,550 |
Net cash used in operating activities |  |  | (9,145,421 | ) |  |  | (477,904 | ) |  |  | 1,045,759 |
Financing activities |  |  |  |  |  |  |  |  |  |  |  |
IPO proceeds |  |  | 13,244,329 |  |  |  | - |  |  |  | - |
Net cash provided by financing activities |  |  | 13,244,329 |  |  |  | - |  |  |  | - |
Net increase (decrease) in cash and cash equivalents, and restricted cash |  |  | 4,098,908 |  |  |  | (477,904 | ) |  |  | 1,045,759 |
Cash and cash equivalents at beginning of year |  |  | 1,030,340 |  |  |  | 1,508,244 |  |  |  | 462,485 |
Cash and cash equivalents at end of year |  | $ | 5,129,248 |  |  | $ | 1,030,340 |  |  | $ | 1,508,244 |

F-40

Guardforce AI Co., Ltd. International Financial Reporting Standards 1878635 Includes a provision for penalty for failure to meet certain performance indicators as stipulated in certain customer contracts for approximately $5,900 and $14,600 respectively. This amount represents profit before income tax after adjustments for non-deductible and non-taxable expense items from the Thailand operating entity. 2.18 During the year ended December 31, 2020 and 2019, depreciation expense of $700,741 and $547,513 relating to the right of use assets was recorded as rental expense, respectively. Other expenses mainly comprised of office expenses, stamp duties, training costs, etc. Amounts due to Mr. Tu Jingyi and Profit Raider Investment Limited represented interest accrued on the respective loans. Amounts due to Richard Stagg represent advance from a related party with no fixed term of repayment. The interest rate was 8% per annum for the year ended December 31, 2021, which had been reduced to 3% per annum beginning January 1, 2022. Amounts due to Shenzhen Intelligent Guardforce Robot Technology Co., Limited represent accounts payable for the purchase of robots from a related party. Amounts due to Guardforce Holdings (HK) Limited comprised of $28,896 advances made and $134,694 accrued interests on the loans. On April 29, 2018, Guardforce TH Group Company Limited entered into an agreement with Profit Raider Investment Limited to transfer the loan between Guardforce TH and the Company to Profit Raider. As a result, the Company recorded a short-term borrowing from a third party in the amount of $13.42 million bearing interest at 4% from April 30, 2019 to December 31, 2019 and 3.22% prior to April 30, 2019. The Company assumed an additional liability of approximately $576,000 which has been treated as an additional expense paid in 2018. The holding companies have guaranteed the short-term borrowings from Profit Raider which amount is due on December 31, 2020. On March 13, 2020, the Company’s Board of Directors approved the transfer of 1,666,666 ordinary shares of Guardforce AI Co. Limited from Guardforce AI Technology to Profit Raider. As a result of this share transfer, Profit Raider is deemed an affiliate of the Company and therefore this borrowing is presented as a related party loan since March 2020 and the loan was extended to December 31, 2022 with the same terms and conditions with an interest rate at 4%. For the year ended December 31, 2021, 2020 and 2019, interest expense was $612,387, $579,039 and $293,827, respectively. As of the date of this report, the Company has been negotiating with Profit Raider on the further extension of loan which will be due on December 31, 2022. On December 31, 2019, the Company entered into an agreement with Guardforce Holdings (HK) Limited whereby Guardforce Holdings (HK) Limited loaned $1,499,998 to the Company. The loan is unsecured and it bears an interest rate of 3%. The loan was initially due on December 31, 2020. During the year ended December 31, 2021 and 2020, the Company repaid $245,000 and $507,998 to partially settle the principal, respectively. The loan was extended to December 22, 2022 bearing interest rate at 2%. For the years ended December 31, 2021 and 2020, interest expense on this loan was $14,940 and $19,840, respectively. On April 17, 2020, the Company borrowed $2,735,000. The loan is unsecured and bears an interest rate at 2%. The loan is due on April 16, 2023. For the year ended December 31, 2021 and 2020, interest expense on this loan was $54,700 and $34,187, respectively. On September 9, 2020, the Company borrowed $413,500. The loan is unsecured and it bears interest at 2%. The loan is due on September 8, 2023. For the year ended December 31, 2021 and 2020, interest expense on this loan was $8,270 and $2,757, respectively. Guardforce Limited and GF Technovation Company Limited are fellow subsidiaries. GF Technovation Company Limited was incorporated in 2021 for running robotics related business. The Company sold robots to GF Technovation Company Limited in place of Guardforce Limited beginning March 2021. Perfekt Technology & System Co., Ltd. provided security equipment to the Company; Guardforce Aviation Security Co., Ltd. provided escort services to the Company; The Company purchased robots from Shenzhen Intelligent Guardforce Robot Technology Co., Limited; Guardforce Security (Thailand) Co., Ltd. provided security guard services to the Company; (a) The Company has engaged Stander Information Company Limited (“Stander”) to provide technical services relating to the cash management systems for the Company’s secure logistics business. The service agreement with Stander comprised of a monthly fixed service fee and certain other fees as specified in the agreement. 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