Equibles

6-K

Guardforce AI Co., Ltd. (GFAI)

6-K 2023-10-02 For: 2023-06-30
View Original
Added on April 08, 2026

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

WASHINGTON,

D.C. 20549

FORM

6-K

REPORT

OF FOREIGN PRIVATE ISSUER

PURSUANT

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

SECURITIES

EXCHANGE ACT OF 1934

For the month of, October 2023

Commission

File Number 001-40848

GUARDFORCE

AI CO., LIMITED

(Translation of registrant’s name into English)

10

Anson Road, #28-01 International Plaza

Singapore

079903

(Address of principal executive offices)

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

EXPLANATORY

NOTE

Guardforce AI Co., Limited (the “Company”) is furnishing this Form 6-K to provide the unaudited consolidated financial statements for the six months ended June 30, 2023 and 2022 and incorporate such financial statements into the Company’s registration statements referenced below.

This report on Form 6-K and the attached Exhibits 99.1, 99.2 and 99.3 are incorporated by reference into (i) the prospectus contained in the Company’s registration statement on Form F-3 (SEC File No. 333-261881) declared effective by the Securities and Exchange Commission on January 5, 2022, (ii) the prospectus dated February 9, 2022 contained in the Company’s registration statement on Form F-3 (SEC File No. 333-262441) declared effective by the Securities and Exchange Commission on February 9, 2022, and (iii) the prospectus dated June 14, 2022 contained in the Company’s post-effective Amendment No. 1 to the Form F-1 registration statement on Form F-3 (SEC File No. 333-258054) declared effective by the Securities and Exchange Commission on June 14, 2022.

1

FORWARD-LOOKING

INFORMATION

This Report on Form 6-K contains forward-looking statements and information relating to us that are based on the current beliefs, expectations, assumptions, estimates and projections of our management regarding our company and industry. When used in this report, the words “may”, “will”, “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. These statements reflect management’s current view of us concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: our negative operating profits may raise substantial doubt regarding our ability to continue as a going concern, our substantial customer concentration, with a limited number of customers accounting for a substantial portion of our recent revenues, our subsidiaries’ ability to distribute dividends to us may be subject to restrictions under the laws of their respective jurisdictions, the emergence of additional competing technologies, changes in domestic and foreign laws, regulations and taxes, political and social events in Thailand, the volatility of the securities markets, and other risks and uncertainties which are generally set forth under the heading, “Key information - Risk Factors” and elsewhere in our Annual Report on Form 20-F filed on May 1, 2023 (the “Annual Report”). Should any of these risks or uncertainties materialize, or should the underlying assumptions about our business and the commercial markets in which we operate prove incorrect, actual results may vary materially from those described as anticipated, estimated or expected in the Annual Report.

All forward-looking statements included herein attributable to us or other parties or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

2

SIGNATURES

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

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

3

EXHIBIT

INDEX

Exhibit Number Description
99.1 Unaudited Interim Consolidated Financial Statements as of June 30, 2023 and for the six months ended June 30, 2023 and 2022
99.2 Operating and Financial Review and Prospects in Connection with the Interim Consolidated Financial Statements for the six months ended June 30, 2023
99.3 Press Release titled “Guardforce AI Reports Interim Financial Results for the First Half of 2023, and Provides Business Update” dated October 2, 2023
101.INS Inline<br> XBRL Instance Document
101.SCH Inline<br> XBRL Taxonomy Extension Schema Document
101.CAL Inline<br> XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL<br> Taxonomy Extension Definition Linkbase Document
101.LAB Inline<br> XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline<br> XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover<br> Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its<br> XBRL tags are embedded within the Inline XBRL document

4

Exhibit99.1

GUARDFORCE AI CO., LIMITED AND SUBSIDIARIES

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 and 2022

Contents Page(s)
Unaudited Interim Condensed Consolidated Balance Sheets F-2
Unaudited Interim Condensed Consolidated Statement of Profit or Loss F-3
Unaudited Interim Condensed Consolidated Statement of Comprehensive Loss F-4
Unaudited Interim Condensed Consolidated Statement of Changes in Equity F-5
Unaudited Interim Condensed Consolidated Statement of Cash Flows F-6
Notes to the Unaudited Interim Condensed Consolidated Financial Statements F-7 – F-33

F-1

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated BalanceSheets

(Expressed in U.S. Dollars)

As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents 4 $ 24,738,377 $ 6,930,639
Restricted cash 4 17,059 -
Trade receivables 6 5,127,998 5,400,186
Other receivables 8 - 817,564
Other current assets 9 2,380,718 1,743,008
Withholding tax receivable, net 7 536,974 757,024
Inventories 5 1,636,245 5,105,770
Amounts due from related parties 22 7,716,503 14,508,873
Total current assets 42,153,874 35,263,064
Non-current assets:
Restricted cash 4 1,274,956 1,300,005
Property, plant and equipment 10 6,018,408 8,066,761
Right-of-use assets 11 3,323,870 4,171,409
Intangible assets, net 12 6,954,467 5,793,143
Goodwill 3 1,416,405 2,679,445
Withholding tax receivable, net 7 1,921,073 1,934,072
Deferred tax assets, net 17 634,619 1,511,753
Other non-current assets 9 397,030 447,322
Total non-current assets 21,940,828 25,903,910
Total assets $ 64,094,702 $ 61,166,974
Liabilities and Equity
Current liabilities:
Trade and other payables 13 $ 3,065,838 $ 2,633,995
Borrowings 14 3,509,709 3,181,616
Borrowing from a related party 22 1,666,846 3,148,500
Current portion of operating lease liabilities 11 1,645,233 1,774,192
Current portion of finance lease liabilities, net 16 200,383 398,136
Other current liabilities 13 2,837,287 2,477,369
Amounts due to related parties 22 3,703,038 3,868,691
Convertible note payables 15 606,786 1,730,267
Total current liabilities 17,235,120 19,212,766
Non-current liabilities:
Borrowings 14 13,727,574 13,899,818
Operating lease liabilities 11 1,686,803 2,340,075
Borrowings from related parties 22 1,437,303 1,455,649
Finance lease liabilities 16 229,747 233,550
Other non-current liabilities - 43,200
Provision for employee benefits 18 4,775,062 4,849,614
Total non-current liabilities 21,856,489 22,821,906
Total liabilities 39,091,609 42,034,672
Equity
Ordinary shares – par value 0.12 authorized 300,000,000 shares, issued and outstanding 6,883,223 shares at June 30, 2023; par value 0.12 authorized 7,500,000 shares, issued and outstanding 1,618,977 shares at December 31, 2022 826,022 194,313
Subscription receivable (50,000 ) (50,000 )
Additional paid in capital 65,150,407 46,231,302
Legal reserve 21 223,500 223,500
Warrants reserve 251,036 251,036
Accumulated deficit (42,588,233 ) (28,769,014 )
Accumulated other comprehensive income 1,281,904 1,112,494
Capital & reserves attributable to equity holders of the Company 25,094,636 19,193,631
Non-controlling interests (91,543 ) (61,329 )
Total equity 25,003,093 19,132,302
Total liabilities and equity $ 64,094,702 $ 61,166,974

All values are in US Dollars.

The accompanying notes are an integral partof these unaudited condensed consolidated financial statements.

F-2

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statementof Profit or Loss

(Expressed in U.S. Dollars)

Note For the six months ended<br> June 30,
2023 2022
(Unaudited) (Unaudited)
Revenue 2.13 $ 18,413,292 $ 16,942,522
Cost of sales 2.14 (15,939,067 ) (14,998,727 )
Gross profit 2,474,225 1,943,795
Stock based compensation - (252,095 )
Provision for and write off of withholding tax receivable (561,277 ) (263,340 )
Provision for expected credit loss on trade and other receivables (870,408 ) -
Provision for obsolete inventories (3,090,283 ) -
Impairment loss on fixed assets (1,591,766 ) -
Impairment of goodwill (1,263,040 ) -
Selling, distribution and administrative expenses 20 (6,981,660 ) (6,977,996 )
Operating loss (11,884,209 ) (5,549,636 )
Other income, net 77,765 46,859
Foreign exchange losses, net (583,661 ) (745,759 )
Finance costs (584,897 ) (410,861 )
Loss before income tax (12,975,002 ) (6,659,397 )
Provision for income tax (expense) benefit 17 (874,431 ) 320,183
Net loss for the period (13,849,433 ) (6,339,214 )
Less: net loss attributable to non-controlling interests 30,214 32,392
Net loss attributable to equity holders of the Company $ (13,819,219 ) $ (6,306,822 )
Loss per share
Basic and diluted loss attributable to the equity holders of the Company $ (4.35 ) $ (7.16 )
Weighted average number of shares used in computation:
Basic and diluted 3,174,282 880,618

The accompanying notes are an integral partof these unaudited interim condensed consolidated financial statements.

F-3

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statementof Comprehensive Loss

(Expressed in U.S. Dollars)

Note For the six months ended<br> June 30,
2023 2022
(Unaudited) (Unaudited)
Net (loss) for the period $ (13,849,433 ) $ (6,339,214 )
Currency translation differences 2.6 169,410 (197,909 )
Total comprehensive (loss) for the period $ (13,680,023 ) $ (6,537,123 )
Attributable to:
Equity holders of the Company $ (13,651,390 ) $ (6,502,884 )
Non-controlling interests (28,633 ) (34,239 )
$ (13,680,023 ) $ (6,537,123 )

The accompanying notes are an integral partof these unaudited interim condensed consolidated financial statements.

F-4

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statementof Changes in Equity (Deficit)

(Expressed in U.S. Dollars)

Accumulated
Number of Shares Amount (0.12<br>par) SubscriptionReceivable AdditionalPaid-inCapital LegalReserve Warrants Reserves OtherComprehensiveIncome Accumulated Deficit Non- controlling Interests TotalEquity
Balance as of December 31, 2021 529,766 $ (50,000 ) $ 15,379,595 $ 223,500 $ 251,036 $ 821,527 $ (10,204,220 ) $ 39,935 $ 6,524,979
Currency translation adjustments - - - - - (197,909 ) - - (197,909 )
Stock-based compensation expenses 7,000 - 251,255 - - - - - 252,095
Cancellation of shares (2 ) - - - - - - - -
Issuance of ordinary shares through private placements 416,483 - 18,225,749 - - - - - 18,275,727
Issuance of ordinary shares through exercise of warrants 27,377 - 1,420,404 - - - - - 1,423,689
Issuance of ordinary shares for acquisition of subsidiaries 148,071 - 4,562,111 - - - - - 4,579,880
Issuance of ordinary shares for deposit paid for acquisitions of subsidiaries 243,000 4,830,840 4,860,000
Net loss for the period - - - - - - (6,306,822 ) (32,392 ) (6,339,214 )
Balance as of June 30, 2022 (Unaudited) 1,371,695 $ (50,000 ) $ 44,669,954 $ 223,500 $ 251,036 $ 623,618 $ (16,511,042 ) $ 7,543 $ 29,379,247
Balance as of December 31, 2022 1,618,977 $ (50,000 ) $ 46,231,302 $ 223,500 $ 251,036 $ 1,112,494 $ (28,769,014 ) $ (61,329 ) $ 19,132,302
Currency translation adjustments - - - - - 169,410 - - 169,410
Cancellation of shares (Note 19) (245,339 ) ) - (4,880,223 ) - - - - - (4,909,664 )
Issuance of ordinary shares through CMPOs (Note 19) 4,946,184 - 20,273,844 - - - - - 20,867,386
Issuance of ordinary shares through exercise of warrants (Note 19) 128,901 - 491,224 - - - - - 506,692
Issuance of ordinary shares for acquisition of assets (Note 19) 262,500 - 1,816,500 - - - - - 1,848,000
Issuance of ordinary shares for a convertible note conversion (Note 19) 172,000 1,217,760 1,238,400
Net loss for the period - - - - - - (13,819,219 ) (30,214 ) (13,849,433 )
Balance as of June 30, 2023 (Unaudited) 6,883,223 $ (50,000 ) $ 65,150,407 $ 223,500 $ 251,036 $ 1,281,904 $ (42,588,233 ) $ (91,543 ) $ 25,003,093

All values are in US Dollars.

The accompanying notes are an integralpart of these unaudited interim condensed consolidated financial statements

F-5

Guardforce AI Co., Limited and Subsidiaries

Unaudited Interim Condensed Consolidated Statementof Cash Flows

(Expressed in U.S. Dollars)

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

The accompanying notes are an integralpart of these unaudited interim condensed consolidated financial statements.

F-6

Guardforce AI Co., Limited and Subsidiaries

Notes to the Unaudited Interim Condensed ConsolidatedFinancial Statements

(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 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 two individuals owned in aggregate 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 June 30, 2023 and December 31, 2022 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 for the six months ended June 30, 2023 and 2022.

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. No dividends were declared for the six months ended June 30, 2023 and 2022. The Company engages principally in providing cash management and handling services located in Thailand.

F-7

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 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 (“AI Macau”). The consideration is approximately $3,205 (MOP25,000). AI Macau commenced robotic AI solution business of selling and leasing robots. The acquisition was closed on February 9, 2022. AI Macau is a 100% owned subsidiary of AI Robotics.

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 (“AI Malaysia”). The consideration is approximately $1 (RM1). AI Malaysia commenced robotic AI solution business of selling and leasing robots. The acquisition was closed on January 20, 2022. AI Malaysia is a 100% owned subsidiary of AI Robotics.

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.

GFAI Robot Service (Hong Kong) Limited (“AI Robot Service”) was incorporated in Hong Kong under the Hong Kong Companies’ Ordinance (Chapter 622), on January 18, 2022. AI Robot Service is an investment holding company. AI Robot Service is a 100% owned subsidiary of AI Robotics.

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. AI Shenzhen is a 100% owned subsidiary of AI Robot Service.

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. AI US is a 100% owned subsidiary of AI Robotics.

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. AI Australia is a 100% owned subsidiary of AI Robot Service.

GFAI Robot & Smart Machines Trading LLC (“AI Dubai”) was incorporated in the United Arab Emirates (UAE) on March 13, 2022. AI Dubai commenced robotic AI solution business of selling and leasing robots. AI Dubai is a 100% owned subsidiary of AI Robot Service.

GFAI Robotic and Innovation Solution (Thailand) Company Limited (“AI R&I”) was incorporated in Thailand on March 30, 2022. AI R&I commenced robotic AI solution business of selling and leasing robots. AI R&I is 98% owned by AI Thailand, 1% owned by Horizon Dragon and 1% owned by Southern Ambition.

GFAI Robot Service (UK) Limited (“AI UK”) was incorporated in the United Kingdom on April 29, 2022. AI UK commenced robotic AI solution business of selling and leasing robots. AI UK is a 100% owned subsidiary of AI Robot Service.

F-8

GFAI Robot Service Limited (“AI Canada”) was incorporated in Canada on May 6, 2022. AI Canada commenced robotic AI solution business of selling and leasing robots. AI Canada is a 100% owned subsidiary of AI Robot Service.

Guardforce AI Robot (Jian) Co., Limited (“AI Jian”) was incorporated in the People’s Republic of China (“PRC”) on May 16, 2022. AI Jian is an investment holding company. AI Jian is a 100% owned subsidiary of AI Robot Service.

GFAI Robot Service GK (“AI Japan”) was incorporated in Japan on May 24, 2022. AI Japan commenced robotic AI solution business of selling and leasing robots. AI Japan is a 100% owned subsidiary of AI Hong Kong.

GFAI Robot Service Co., Ltd. (“AI Korea”) was incorporated in South Korea on June 17, 2022. AI Korea commenced robotic AI solution business of selling and leasing robots. AI Korea is a 100% owned subsidiary of AI Hong Kong.

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. (“Shenzhen GFAI”) and Guangzhou Kewei Robot Technology Co., Ltd. (“Guangzhou GFAI”) 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 was paid in a mix of cash (10%) and restricted ordinary shares of the Company (90%). On March 14, 2022, the Company issued 53,571 (post-consolidation) restricted Ordinary Shares to the sellers’ designated parties.

On May 24, 2022, the Company entered into a Sale and Purchase Agreement (the “Yeantec Agreement”) with Shenzhen Yeantec Co., Limited (“Yeantec”) to acquire 100% of the equity interests in Beijing Wanjia Security System Co., Ltd. (“Beijing Wanjia”) from Yeantec. Beijing Wanjia is a PRC-based company with more than 25 years of experience in providing integrated security solution, focusing on fire alarm security systems, and a well-established customer base among retail businesses. The acquisition serves the growth of the Company’s other security business. The acquisition was closed on June 22, 2022. The acquisition purchase price of $8,400,000 was paid in a mix of cash (10%) and restricted ordinary shares of the Company (90%). On June 16, 2022, the Company issued 94,500 (post-consolidation) restricted Ordinary Shares to the sellers’ designated parties.

GFAI Robot Service (Vietnam) Co., Ltd (“AI Vietnam”) was incorporated in Vietnam on July 8, 2022. AI Vietnam is a dormant company and is a 100% owned subsidiary of AI Hong Kong. On March 22, 2023, the Company deregistered AI Vietnam.

On December 21, 2022, the Company entered into an asset purchase agreement (“Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) to purchase certain of Shenzhen Kewei’s robot-related business assets in China. The Company will acquire, and Yeantec will transfer to the Company, select robotic equipment assets and Kewei’s technology platform. The purchase price for these assets is $2,100,000, which will be fully paid in the form of 262,500 (post-consolidation) restricted ordinary shares of the Company based on a price of $8.0 (post-consolidation) per share. The Company issued 262,500 shares to Shenzhen Kewei on March 1, 2023.

F-9

The following diagram illustrates the Company’s legal entity ownership structure as of June 30, 2023:

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied for the six months ended June 30, 2023 and 2022 are consistent with those of the audited consolidated financial statements for the years ended December 31, 2022, 2021 and 2020, as described in those audited consolidated financial statements, except for the adoption of new and amended International Financial Reporting Standards (“IFRS”) effective for the year ending December 31, 2022 which are relevant to the preparation of the June 30, 2023 and 2022 interim condensed consolidated financial statements.

On September 25, 2023, the interim condensed consolidated financial statements were approved by the board of directors and authorized for issuance.

2.1 Basis of presentation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. These statements should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2022, 2021 and 2020, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The interim condensed consolidated financial statements have been prepared on a historical cost basis. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying unaudited condensed consolidated financial statements. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2023.

All amounts are presented in United States dollars (“USD”) and have been rounded to the nearest USD.

In addition, the accompanying condensed consolidated interim 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-10

The Company’s operating losses and net current liability position may raise substantial doubt on the Company’s ability to continue as a going concern.

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

- As of June 30, 2023, the current and non-current portion of loan outstanding with WK Venture Success Limited (“WK Venture”) were approximately $2.5 million and $13.6 million, respectively, which will be due on December 31, 2024 (Note 14). On September 28, 2023, WK Venture agreed to convert the principal and accrued interest of this loan in an aggregate amount of $15,914,615 at the conversion price of $5.40 into restricted ordinary shares of the Company. Thus, the loan with WK Venture has no impact on the Company’s liquidity and on the Company’s ability to meet its short-term financial obligations.
- As of June 30, 2023, the Company has a convertible note payable of $606,786 with Streeterville Capital,<br>LLC ( “CVP”), which will be due on October 24, 2023 (Note 15). Management believes this convertible note payable will be settled<br>before the maturity date, either CVP will convert the outstanding balance into restricted ordinary shares or the Company will repay the<br>amount owed in cash.
--- ---
- Based on the budget and financial plans of the Company, management is satisfied that the receipt of an<br>aggregate of approximately $21.0 million, after deducting underwriting discounts and other offering expenses from the two underwritten<br>public offering proceeds (Note 19) has provided the Company adequate financial resources to continue in operational existence for the<br>foreseeable future, a period of at least 12 months from the date of this report.
--- ---

On January 31, 2023, the Company completed a 1 for 40 share consolidation of its authorized and issued ordinary shares whereby every forty shares were consolidated into one share. In addition, the par value of each ordinary share increased from $0.003 to $0.12. Immediately following the completion of the share consolidation, the Company increased its authorized ordinary shares from 7,500,000 ordinary shares to 300,000,000 ordinary shares. The accompanying interim condensed consolidated financial statements for the six months ended June 30, 2022 have been retroactively adjusted to reflect the effect of the share consolidation.

2.2 Basis of consolidation

The consolidated statements of profit or 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 interim condensed consolidated balance sheet of the Company as of June 30, 2023 has 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

Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance. Transfers and sales between reportable segments, if any, are recorded at cost.

F-11

The Company reports financial and operating information in the following five segments (Note 23):

(i) Secured logistics;
(ii) Information security;
--- ---
(iii) Robotics AI solutions;
--- ---
(iv) General security solutions; and
--- ---
(v) Corporate and others
--- ---
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.

2.5 Critical accounting estimate and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and judgments 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.

In preparing the interim condensed consolidated financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2022.

2.6 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, AI Robots Service, AI Malaysia, AI Macau, AI US, AI Australia, AI Dubai, AI UK, AI Korea, AI Japan, AI Canada and AI Vietnam is the USD. The functional currency of AI Hong Kong and Handshake is the Hong Kong dollar (“HKD”). The functional currency of AI Thailand, GF Cash (CIT) and AI R&I is the Thai Baht (“Baht” or “THB”). The functional currency of AI Shenzhen, AI Jian, Shenzhen GFAI, Guangzhou GFAI and Beijing Wanjia is the Chinese Renminbi (“RMB”).

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

Period End Rate Average Rate
June 30, December 31, For the six months ended<br> June 30,
2023 2022 2023 2022
Thai Baht 0.0283 0.0289 0.0293 0.0295
Hong Kong Dollar 0.1282 0.1282 0.1282 0.1282
Chinese Renminbi 0.1379 0.1447 0.1444 0.1544
2.7 Financial risk management
2.7.1 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.

F-12

The interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the audited financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2022, 2021 and 2020.

2.7.2 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 public offerings, operations, proceeds from the exercise of warrants, bank borrowings and finance leases.

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.

2.7.3 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.

2.7.4 Impact of COVID-19

The COVID-19 pandemic developed rapidly in 2020. The resulting impact of the virus on the operations and measures taken by various governments to contain the virus have negatively affected the Company’s financial performance in the fiscal year 2022. The regulatory measures in response to the pandemic were relaxed and travel restrictions in most countries was lifted in late 2022, the Company might be recovered through the increase in economic activity in the fiscal year 2023. The Company is monitoring the situation closely and conscientiously managing its costs by adopting an operating cost reduction strategy and conserving liquidity by working with major creditors to align repayment obligations with receivable collections.

2.8 Inventories

Inventories consist of robots and security equipment which 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. The Company recorded an allowance for slow-moving or obsolete robot inventories of $3,090,283 and nil for the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2023 and 2022, all robot inventories were purchased from the related parties (Note 22), and all security equipment’s inventories were purchased from third parties.

F-13

2.9 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.

The Company recognizes the contractual right to receive money or products from related parties as amounts due from related parties. For those that the contractual maturity date is less than one year, the Company records as current assets.

2.10 Assets under construction

Assets under construction recorded in property, plant and equipment and intangible assets 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.

2. 10 Goodwill

Following initial recognition, goodwill is stated at cost 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. The Company recorded a goodwill impairment of 1,263,040 and nil for the six months ended June 30, 2023 and 2022, respectively.

2.11 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. For the six months ended June 30, 2023, an impairment loss on the robot assets of $1,591,766 was recognized when the carrying amount was greater than the value in use. Management estimated the value in use by estimating the expected cash flows from the cash-generating unit as well as a suitable discount rate in order to calculate the present value of those cash flows. The basis of impairment is determined based on the result of assessment. The Company did not incur any impairment loss for the six months ended June 30, 2022.

2.12 Offsetting Assets and Liabilities

During the six months ended June 30, 2023, the Company engaged in offsetting arrangements for certain financial assets and financial liabilities. These arrangements primarily involve the offsetting of related party receivables, related party payables and borrowings from a related party. The Company has established legally enforceable rights to offset financial assets and financial liabilities subject to offsetting arrangements. These rights may arise from agreements, netting arrangements, or a combination of legal and contractual rights.

F-14

2.13 Revenue from contracts with customers

The Company generates its revenue primarily from four service lines: (1) Secure logistics; (2) Robotics AI resolutions; (3) Information security; and (4) General security solutions.

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
--- ---
(4) General security solutions
--- ---
(i) Installation of fire alarm security systems; (ii) Sale of security equipment
--- ---

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 ratable basis over the contract term. The Company applies the following five-step model in order to determine the amount:

● To identify the contract or quotation with the agreed service price.
● To evaluate the services engaged in the customer’s contract and identify the related performance obligations.
--- ---
● To 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.
--- ---
● To 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.
--- ---
● To recognize revenue when the Company satisfies 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 revenue of $428,839 within the next 12 months and $nil after 12 months to 36 months.

Revenue is recognized when the related performance obligation is satisfied.

F-15

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

For the six months ended June<br> 30,
2023 Percentage of <br> Total 2022 Percentage of <br> Total
Service Type Revenue Revenue
(Unaudited) (Unaudited)
Cash-In-Transit – Non-Dedicated Vehicles (CIT Non-DV) 32.5 % 31.8 %
Cash-In-Transit – Dedicated Vehicle to Banks (CIT DV) 10.7 % 12.6 %
ATM Management 21.2 % 27.9 %
Cash Processing (CPC) 8.8 % 8.3 %
Cash Center Operations (CCT) 5.2 % 7.1 %
Consolidate Cash Center (CCC) 2.1 % 1.3 %
Cheque Center Service (CDC) - % 0.05 %
Others ** 0.02 % 0.05 %
Cash Deposit Management Solutions (GDM) 6.1 % 5.1 %
Robotics AI solutions 2.4 % 4.2 %
Information security 2.2 % 1.6 %
General security solutions 8.8 % - %
Total 100.0 % 100.0 %

All values are in US Dollars.

** Others<br>include primarily revenue from express cash and coin processing services.

During the six months ended June 30, 2022, revenues amounting to $16,808,399 were generated from third parties; and $134,123 were generated from a related party (Note 22).

During the six months ended June 30, 2023 all revenues were generated from third parties.

2.14 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.

2.15 New and amended accounting standards

All new standards and amendments that are effective for annual reporting period commencing January 1, 2023 have been applied by the Company for the six months ended June 30, 2023. The adoption of these new and amended standards did not have material impact on the interim condensed 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, 2023, and they have not been early adopted by the Company in preparing these interim condensed consolidated financial statements. None of these new standards and amendments to standards is expected to have a significant effect on the interim condensed consolidated financial statements of the Company.

F-16

3. BUSINESS COMBINATIONS

In 2021 and 2022, the Company acquired a total of five subsidiaries, these acquisitions have been accounted for in accordance with IFRS 3 guidelines under acquisition accounting, whereby the Company recognized the assets and liabilities transferred at their carrying amounts with carry-over basis.

A Purchase Price Allocation exercise has been undertaken to establish the constituent parts of the acquired companies’ balance sheet at fair value on acquisition. As is customary in these circumstances, this will remain under review and subject to change during the twelve-month hindsight period. The interim condensed consolidated financial statements condensed the information and disclosures of all the acquired subsidiaries required in the audited financial statements, and should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2022, 2021 and 2020.

The following represents the purchase price allocation at the dates of the acquisitions:

Handshake<br><br> on March 25,<br> 2021 AI Macau<br><br> on February 9,<br> 2022 AI <br><br>Malaysia<br><br> on January 20,<br> 2022 Beijing<br><br> Wanjia on<br><br> June 22,<br> 2022 Shenzhen<br><br> GFAI and<br><br> Guangzhou<br><br> GFAI on<br><br> March 22,<br> 2022
Cash and cash equivalents $ 24,276 $ 21,038 $ 12,500 $ 38,342 $ 2,187
Other current assets 32,250 4,162 - 2,219,318 2,393,558
Property, plant and equipment - - - 20,488 2,055,610
Intangible assets - - - 1,593,398 1,592,783
Other non-current assets - - - 203,765 23,566
Current liabilities (58,297 ) (92,350 ) (13,184 ) (1,681,573 ) (4,320,434 )
Goodwill 329,534 70,355 685 411,862 1,867,009
Total purchase price $ 327,763 $ 3,205 $ 1 $ 2,805,600 $ 3,614,279

During the six months ended June 30, 2023, the Company recorded impairment losses on Handshake of $329,534 and on Shenzhen GFAI and Guangzhou GFAI of $933,506.

4. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
As of<br> June 30,<br> 2023 As of<br> December 31, <br> 2022
--- --- --- --- ---
(Unaudited)
Cash on hand $ 465,853 $ 471,408
Cash in bank 24,272,524 6,459,231
Subtotal 24,783,377 6,930,639
Restricted cash – current (a) 17,059 -
Restricted cash – non-current (b) 1,274,956 1,300,005
Cash, cash equivalents, and restricted cash $ 26,030,392 $ 8,230,644
(a) During the six months ended June 30, 2023, with regards to various labor-related lawsuits in the PRC,<br>the PRC Court issued an order to freeze one of the Company’s bank accounts which restricted or prohibited the transfer and use of<br>deposited funds by the Company. The sum will be released when the Company has paid to satisfy the claims.
--- ---
(b) The non-current restricted cash represents cash pledged with a local bank in Thailand as collateral for<br>bank guarantees issued by those banks in respect of the Company’s Cash-In-Transit projects.
--- ---

F-17

5. INVENTORIES
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- --- --- ---
(Unaudited)
Robots in warehouse $ 4,976,219 $ 5,553,859
Robots in transit 46,950 -
Security equipment 415,036 494,793
Impairment provision for inventories (3,801,960 ) (942,882 )
Inventories $ 1,636,245 $ 5,105,770

The Company recorded an allowance for slow-moving or obsolete robot inventories of $3,090,283 and nil for the six months ended June 30, 2023 and 2022, respectively.

6. TRADE RECEIVABLES, NET
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- --- ---
(Unaudited)
Trade receivable $ 5,160,600 $ 5,392,720
(Impairment provision) recovery of doubtful accounts (32,602 ) 7,466
Trade receivable, net $ 5,127,998 $ 5,400,186

The Company recorded an allowance for doubtful accounts of $45,932 and $nil for the six months ended June 30, 2023 and 2022, respectively.

7. WITHHOLDING TAX RECEIVABLE
2023 2022
(Unaudited) (Unaudited)
Balance at January 1, $ 2,691,096 $ 3,531,953
Addition 401,941 381,966
Collection - (1,045,061 )
Write off/ Allowance for uncollectible (561,277 ) (263,340 )
Exchange difference (73,713 ) (153,902 )
Balance at June 30, $ 2,458,047 $ 2,451,616
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- ---
(Unaudited)
Current portion $ 536,974 $ 757,024
Non-current portion 1,921,073 1,934,072
Withholding tax receivable $ 2,458,047 $ 2,691,096

On July 12, 2023, the Company received a withholding tax refund of THB18,959,514 (approximately $0.5 million) in connection with the Company’s 2018 withholding tax refund applications of THB29,188,153 (approximately $0.8 million). The Company wrote off approximately $0.3 million, representing the difference between the receivable recorded and the amount of refund subsequently received from the Thai Revenue Department.

F-18

During the six months ended June 30, 2022, the Company received a withholding tax refund of THB35,312,291 (approximately $1.0 million) in connection with the Company’s 2016 to 2017 withholding tax refund applications (totaled THB56,107,574 or approximately $1.6 million). The Company wrote off approximately $0.6 million, representing the difference between the receivable recorded and the amount of refund received from the Thai Revenue Department.

Out of prudence, based on amount refunded and written off for the receivable related to years 2013 to 2018, the Company recorded an allowance of approximately $0.3 million and $0.1 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, an allowance balance of $1.2 million and $0.9 million, respectively were maintained against its withholding tax receivable.

8. OTHER RECEIVABLES
As of<br> June 30,<br> 2023 As of<br> December 31, <br> 2022
--- --- --- --- --- ---
(Unaudited)
Cash advance to a third-party vendor $ 778,724 $ 817,564
Impairment provision for other receivables (778,724 ) -
$ - $ 817,564

The Company recorded an allowance for doubtful accounts of $815,887 and $nil for the six months ended June 30, 2023 and 2022, respectively.

9. OTHER CURRENT AND OTHER NON-CURRENT ASSETS
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- ---
(Unaudited)
Input VAT and other taxes receivable $ 314,855 $ 293,429
Prepayments – office and warehouse rental 1,240,967 780,279
Prepayments - insurance 375,985 106,167
Prepayments - others 166,165 91,926
Uniforms 14,781 24,699
Tools and supplies 152,035 155,642
Deferred costs 90,555 219,782
Cash advances to employees 25,375 71,084
Other current assets $ 2,380,718 $ 1,743,008
Deposits $ 397,030 $ 437,602
Deferred costs - 9,720
Other non-current assets $ 397,030 $ 447,322

The Company recorded an allowance for doubtful accounts of $8,589 and $nil for the six months ended June 30, 2023 and 2022, respectively.

F-19

10. PROPERTY, PLANT and EQUIPMENT
Leasehold<br> improvements Machinery<br> and<br> equipment Office<br> decoration<br> and<br> equipment Vehicles Assets<br> under<br> construction GDM<br> machines Robots Total
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Cost
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
Acquisitions through business combinations - - 205,070 141,619 - - 2,571,013 2,917,702
Additions 26,342 18,698 18,603 80,350 - 318,905 2,178,914 2,641,812
Disposals (101,834 ) (7,437 ) (15,463 ) (344,818 ) (211,659 ) (15,892 ) (12,273 ) (709,376 )
Exchange differences (173,963 ) (281,325 ) (298,630 ) (880,949 ) (4,472 ) (107,391 ) (392,122 ) (2,138,852 )
At June 30, 2022 (Unaudited) 2,990,228 4,838,437 5,322,024 15,230,070 32,555 1,909,548 9,714,602 40,037,464
At December 31, 2022 $ 3,146,864 $ 4,868,015 $ 5,354,351 $ 15,518,987 $ 33,222 $ 1,948,698 $ 7,194,815 $ 38,064,952
Additions - 1,750 6,964 - - 624,126 273,779 906,619
Disposals (104,773 ) (105,939 ) (48,955 ) (47,155 ) - - (56,389 ) (363,211 )
Impairment of fixed assets - - - - - - (1,591,766 ) (1,591,766 )
Exchange differences (60,518 ) (95,521 ) (106,807 ) (353,552 ) (652 ) (38,238 ) (141,241 ) (796,529 )
At June 30, 2023 (Unaudited) 2,981,573 4,668,305 5,205,553 15,118,280 32,570 2,534,586 5,679,198 36,220,065
Accumulated Depreciation
At December 31, 2021 $ 2,693,472 $ 4,906,277 $ 4,799,149 $ 13,447,168 $ - $ 891,378 $ 691,433 $ 27,428,877
Acquisitions through business combinations - - 184,364 136,723 - - 520,516 841,603
Depreciation charged for the period 51,903 57,623 96,235 416,775 - 188,620 762,874 1,574,030
Disposals (99,439 ) (7,396 ) (15,432 ) (330,993 ) - (5,303 ) (461 ) (459,024 )
Exchange differences (146,005 ) (271,901 ) (268,318 ) (742,974 ) - (56,970 ) (81,330 ) (1,567,498 )
As June 30, 2022 (Unaudited) 2,499,931 4,684,603 4,795,998 12,926,699 - 1,017,725 1,893,032 27,817,988
At December 31, 2022 $ 2,577,341 $ 4,748,031 $ 4,889,742 $ 13,493,656 $ - $ 1,230,247 $ 3,059,174 $ 29,998,191
Depreciation charged for the period 48,922 34,180 87,164 263,962 - 202,983 516,626 1,153,837
Disposals (108,213 ) (109,514 ) (44,542 ) (48,748 ) - (14,847 ) (325,864 )
Exchange differences (48,443 ) (90,705 ) (101,287 ) (275,519 ) - (30,774 ) (77,779 ) (624,507 )
As June 30, 2023 (Unaudited) 2,469,607 4,581,992 4,831,077 13,433,351 - 1,402,456 3,483,174 30,201,657
Net book value
At June 30, 2022 (Unaudited) $ 490,298 $ 153,834 $ 526,026 $ 2,303,371 $ 32,555 $ 891,822 $ 7,821,570 $ 12,219,476
At June 30, 2023 (Unaudited) $ 511,966 $ 86,313 $ 374,476 $ 1,684,929 $ 32,570 $ 1,132,130 $ 2,196,024 $ 6,018,408

F-20

Depreciation expense related to property, plant and equipment was $1,057,117 and $1,460,187, respectively for the six months ended June 30, 2023 and 2022.

For the six months ended June 30, 2023 and 2022, the Company recorded an impairment loss on robot assets of $1,591,766 and $nil, respectively.

As of June 30, 2023 and 2022, net book value of robot assets of approximately $695,000 and $1,145,000, respectively were leased out to third parties and the robot assets were held and used by the lessee.

11. RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

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

2023 2022
(Unaudited) (Unaudited)
Balance at January 1, $ 4,171,409 $ 2,364,993
New leases 271,004 804,500
New leases acquired through business combinations - 167,597
Depreciation expense (1,042,981 ) (1,095,227 )
Exchange difference (75,562 ) (108,566 )
Balance at June 30, $ 3,323,870 $ 2,133,297

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 the six months ended June 30, 2023 was 3.52%. The weighted average incremental borrowing rate applied to new leases during the six months ended June 30, 2022 varies from 3.49% to 5% in different regions.

For the six months ended June 30, 2023 and 2022, interest expense of $58,602 and $41,211 arising from lease liabilities was included in finance costs, respectively. Depreciation expense related to right-of-use assets was $1,026,316 and $1,064,623, respectively for the six months ended June 30, 2023 and 2022.

F-21

12. INTANGIBLE ASSETS
Assets under construction
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Computer<br> software Right-of-use<br> Platform Customer<br> base Technical<br> know-how Security<br> Surveillance<br> system Cash<br> Management<br> Systems Intelligent<br> Cloud<br> Platform Intelligent<br> Cloud<br> Platforms Total
Cost
At December 31, 2021 $ 907,304 $ - $ - $ - $ - $ - $ - $ - $ 907,304
Acquisitions through business combinations - 733,311 1,120,688 514,968 1,102,647 - - - 3,471,614
Additions 1,761 - - - 81,119 3,000,000 3,082,880
Exchange differences (49,955 ) - - - - (3,525 ) - (53,480 )
At June 30, 2022 (Unaudited) 859,110 733,311 1,120,688 514,968 1,102,647 77,594 3,000,000 - 7,408,318
At December 31, 2022 $ 887,745 $ 673,029 $ 1,042,110 $ 499,344 $ 1,360,898 $ 194,495 $ 3,000,000 $ - $ 7,657,621
Additions - - - - 195,087 - - 1,597,754 1,792,841
Transfer - - - - - - (2,821,882 ) 2,821,882 -
Exchange differences (17,419 ) (31,974 ) (49,509 ) (23,723 ) (306,604 ) (3,816 ) - - (433,045 )
At June 30, 2023 (Unaudited) 870,326 641,055 992,601 475,621 1,249,381 190,679 178,118 4,419,636 9,017,417
Accumulated amortization
At December 31, 2021 $ 742,988 $ - $ - $ - $ - $ - $ - $ - $ 742,988
Acquisitions through business combinations - - - - 285,433 - - - 285,433
Amortization charged for the period 25,290 17,951 129,327 - - - - - 172,568
Exchange differences (41,944 ) - - - - - - (41,944 )
As June 30, 2022 (Unaudited) 726,334 17,951 129,327 - 285,433 - - - 1,159,045
At December 31, 2022 $ 767,168 $ 50,477 $ 405,868 $ 28,405 $ 612,560 $ - $ - $ - $ 1,864,478
Amortization charged for the period 26,139 33,582 201,013 28,346 63,817 - - 182,671 535,568
Exchange differences (15,908 ) (3,927 ) (28,438 ) (2,641 ) (286,182 ) - - - (337,096 )
As June 30, 2023 (Unaudited) 777,399 80,132 578,443 54,110 390,195 - - 182,671 2,062,950
Net book value
At June 30, 2022 (Unaudited) $ 132,776 $ 715,360 $ 991,361 $ 514,968 $ 817,214 $ 77,594 $ 3,000,000 $ - $ 6,249,273
At June 30, 2023 (Unaudited) $ 92,927 $ 560,923 $ 414,158 $ 421,511 $ 859,186 $ 190,679 $ 178,118 $ 4,236,965 $ 6,954,467

Amortization expense related to intangible assets was $535,568 and $172,568, respectively for the six months ended June 30, 2023 and 2022.

F-22

13. TRADE AND OTHER PAYABLES AND OTHER CURRENT LIABILITIES
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- ---
(Unaudited)
Trade payables – third parties $ 2,596,576 $ 2,060,856
Accrued salaries and bonus 454,218 515,758
Accrued customer claims, cash loss and shortage ** 15,044 57,381
Trade and other payables $ 3,065,838 $ 2,633,995
Output VAT $ 74,171 $ 118,125
Accrued expenses 389,318 522,059
Payroll payable 1,776,907 979,027
Other payables 168,052 289,494
Deferred revenue 428,839 568,664
Other current liabilities $ 2,837,287 $ 2,477,369
** Includes a provision for penalty for failure to meet performance indicators as stipulated in certain customer contracts for approximately $7,108 and $11,800 as of June 30, 2023 and 2022, respectively.
14. BORROWINGS
--- ---
As ofJune 30,2023 As ofDecember 31,2022
--- --- --- --- ---
(Unaudited)
Current portion of long-term bank borrowings $ 1,039,988 $ 947,559
Current portion of long-term third-party borrowing 2,469,721 2,234,057
Long-term bank borrowings 138,212 432,179
Long-term third-party borrowing 13,589,362 13,467,639
Total borrowings $ 17,237,283 $ 17,081,434

The Company maintains two borrowings with one financial institution. The borrowings are used for working capital purposes to support its business operations in Thailand. Those borrowings carry interest at the rates of 4.72% and 4.69% per annum. The borrowings mature on July 29, 2023 and April 7, 2025. For the six months ended June 30, 2023 and 2022, the interest expense was $33,394 and $33,745, respectively.

As of June 30, 2023, the Company has unused bank overdraft availability of approximately $283,000 (THB10 million) and no unused trust receipts availability.

The Company obtained a loan in the principal amount of $13.42 million from WK Venture Success Limited (“WK Venture”), a third party on April 25, 2018. The Loan bears interest at 4% and is due on December 31, 2024. In accordance with the terms of the Agreements, the Company is required to pay the full principal amount of the Loan, along with accrued interest, on December 31, 2024 and the Company is not required to make monthly payments on this obligation. For the six months ended June 30, 2023 and 2022, interest expense was $411,270 and $400,920, respectively. The accrued interest portion of this loan is classified as short-term borrowing and the principal portion of this loan is classified as long-term borrowing. On September 28, 2023, WK Venture agreed to convert the principal and accrued interest of this loan in an aggregate amount of $15,914,615 at the conversion price of $5.40 into restricted ordinary shares of the Company.

15. CONVERTIBLE NOTE PAYABLE

On October 25, 2022, the Company entered into a securities purchase agreement with Streeterville Capital, LLC ( “CVP”), pursuant to which the Company issued CVP an unsecured convertible promissory note on October 25, 2022 in the original principal amount of $1,707,500.00 (the “Note”), convertible into the Company’s ordinary shares.

The Note bears simple interest at a rate of 8% per annum. All outstanding principal and accrued interest on the Note will become due and payable on the maturity date, which is twelve months after the purchase price of the Note is delivered by Investor to the Company. Subject to the occurrence of any triggering events as defined in the Note, the Investor shall have the right to increase the balance of the Note by 5% or 10%. The Company may pay all or any portion of the amount owed earlier than it is due; provided that in the event the Company elects to prepay all or any portion of the outstanding balance, the Company shall pay to the Investor 120% of the portion of the outstanding balance the Company elects to prepay. Early payments of less than all principal, fees and interest outstanding will not, unless agreed to by Investor in writing, relieve the Company of the Company’s remaining obligations hereunder.

F-23

On April 17, 2023, CVP delivered to the Company a conversion notice informing the Company that CVP had elected to convert a portion of the Note balance $1,238,400 at the conversion price of $7.20 into restricted ordinary shares of the Company. In connection with this conversion, the Company issued 172,000 restricted ordinary shares to CVP on April 19, 2023. As of April 17, 2023, the date of conversion notice, $534,744 remained outstanding under the Note. For the six months ended June 30, 2023, the interest expense was $65,644.

16. FINANCE LEASE LIABILITIES
As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
--- --- --- --- ---
(Unaudited)
Current portion $ 200,383 $ 398,136
Non-current portion 229,747 233,550
Finance lease liabilities $ 430,130 $ 631,686

For the six months ended June 30, 2023 and 2022, interest expense was $15,987 and $30,942, respectively.

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

As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited)
Within 1 year $ 212,173 $ 423,514
After 1 year but within 5 years 248,490 253,448
Less: Finance charges (30,533 ) (45,276 )
Present value of finance lease liabilities, net $ 430,130 $ 631,686

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

As of <br> June 30,<br> 2023 As of<br> December 31, <br> 2022
(Unaudited)
Cost $ 1,540,416 $ 1,571,075
Less: Accumulated depreciation (618,097 ) (564,844 )
Net book value $ 922,319 $ 1,006,231
17. TAXATION
--- ---

Value added tax (“VAT”)

GF Cash (CIT) and AI R&I are subsidiaries operating in Thailand, which are subject to a statutory VAT of 7% for services in Thailand. Shenzhen GFAI, Guangzhou GFAI and Beijing Wanjia are subsidiaries operating in the PRC, which are subject to a statutory VAT of 13% for goods delivered and rental provided, 6% for services provided and 9% for construction projects in the PRC. 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 balance sheets 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.

F-24

Income tax

Current income tax is provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income tax is accounted for using an asset and liability method. Under this method, deferred income tax is recognized for the tax consequences of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred tax of a change in tax rates is recognized in the consolidated statements of profit or loss in the period of change. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income tax levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. During the six months ended June 30, 2023 and 2022, the Company made a valuation allowance of $874,431 and $nil on the portion of deferred tax assets not expected to be realized.

18. PROVISION FOR EMPLOYEE BENEFITS

Prior to March 30, 2022, the Company had only one retired benefit plan (“Plan A”), on March 30, 2022, the Company established an additional retired benefit plan (“Plan B”). Both plans are based on the requirements 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. The plan asset is unfunded and the Company will pay benefits when needed.

Provision for <br><br>employee benefits
2023 2022
(Unaudited) (Unaudited)
Defined benefit obligations at January 1, $ 4,849,614 $ 5,819,132
Estimate for the six months period* (74,552 ) (348,418 )
Defined benefit obligations at June 30, $ 4,775,062 $ 5,470,714
* The estimate represents the difference between the Company’s estimated defined benefit obligations based on employees’ past service and expected future salary at the beginning of the fiscal year and the end of the six months period.
19. SHAREHOLDERS’ EQUITY
--- ---

On January 31, 2023, the Company completed a 1 for 40 share consolidation of its authorized and issued ordinary shares whereby every forty shares were consolidated into one share. In addition, the par value of each ordinary share increased from $0.003 to $0.12. Immediately following the completion of the share consolidation, the Company increased its authorized ordinary shares from 7,500,000 ordinary shares to 300,000,000 ordinary shares.

On February 17, 2023, a total of 2,339 fractional shares were canceled as a result of the share consolidation.

In connection with the restricted ordinary shares issued on June 16, 2022 as a deposit to acquire 100% of the equity interests in seven Kewei Group companies, such acquisition was terminated on September 13, 2022 (Note 22) and on February 13, a total of 243,000 shares were returned and cancelled.

F-25

In connection with an asset purchase agreement entered between the Company and Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) on December 21, 2022 to purchase certain of Shenzhen Kewei’s robot-related business assets in China (Note 1), on March 1, 2023, a total of 262,500 restricted ordinary shares were issued to the shareholders of Shenzhen Kewei.

In connection with the conversion of the convertible note with Streeterville Capital, LLC (“CVP”) (Note 15), the Company issued 172,000 restricted ordinary shares to CVP on April 19, 2023.

A total of 128,901 warrants were exercised during the six months ended June 30, 2023. No warrants were exercised subsequently from July 1, 2023 to the date of this filing. As of June 30, 2023, we have an aggregate of 2,013,759 warrants issued and outstanding. On March 8, 2023, the Company issued a Notice regarding Adjustment of Exercise Price (for Public Warrants) after share consolidation to the Company’s public warrant holders. As a result of the share consolidation, the exercise price under the public warrant was proportionately increased from $0.16 to $6.40, the exercise price under the private warrant was proportionately increased from $0.18 to $7.20. If any holder exercises one warrant, one-40th (1/40) ordinary share will be received in cash (by Cash in Lieu), holders must exercise at least 40 warrants to receive 1 ordinary share.

On May 5, 2023, the Company completed an underwritten public offering (“CMPO 1”) to issue 1,720,430 ordinary shares and an additional 258,064 ordinary shares for the exercise of an over-allotment option at the time of the closing at a public offering price of $4.65 per share for aggregate gross proceeds of approximately $9.2 million. On May 12, 2023, the Company completed another underwritten public offering (“CMPO 2”) to issue 2,580,600 ordinary shares and an additional 387,090 ordinary shares for the exercise of an over-allotment option at the time of the closing at a public offering price of $4.65 per share for aggregate gross proceeds of approximately $13.8 million.

20. SELLING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
For the six months ended<br> June 30,
--- --- --- --- ---
2023 2022
(Unaudited) (Unaudited)
Staff expense $ 3,602,127 $ 2,988,331
Rental expense 345,026 77,999
Depreciation and amortization expense 1,251,359 1,176,705
Utilities expense 53,015 30,021
Travelling and entertainment expense 135,186 216,633
Marketing expense 150,203 228,054
Professional fees 774,553 1,262,085
Repairs and maintenance 35,298 26,835
Employee benefits 29,316 228,506
Research and development expense 95,322 68,946
Other expenses** 510,255 673,881
$ 6,981,660 $ 6,977,996
** Other<br>expenses mainly comprised of office expenses, stamp duties, training costs, transportation costs for robots, etc.
--- ---
21. LEGAL RESERVE
--- ---

Thailand

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 June 30, 2023 and December 31, 2022.

F-26

The PRC

Pursuant to the laws applicable to the PRC’s Foreign Investment Enterprises, the Company must make appropriations from after-tax profit to non-distributable reserve funds. Subject to certain cumulative limits, the general reserve requires annual appropriations of 10% of after-tax profits as determined under the PRC laws and regulations at each year-end until the balance reaches 50% of the PRC entity registered capital; the other reserve appropriations are at the Company’s discretion. These reserves can only be used for specific purposes of enterprise expansion and are not distributable as cash dividends. For the six months ended June 30, 2023, the Company did not accrue any legal reserve.

22. RELATED PARTY TRANSACTIONS

The principal related party balances as of June 30, 2023 and December 31, 2022 are as follows:

Amounts due from related parties:

As of<br> June 30,<br> 2023 As of<br> December 31, <br> 2022
(Unaudited)
Guardforce TH Group Company Limited (c) $ 1,749 $ 894
Guardforce AI Technology Limited (c) 423 423
Guardforce AI Service Limited (c) 423 423
Shenzhen Intelligent Guardforce Robot Technology Co., Limited (a) 5,544,156 7,312,883
Shareholders’ of Shenzhen Kewei Robot Technology Co., Limited and its subsidiaries (b) 2,160,000 7,020,000
Nanjing Zhongzhi Yonghao Robot Co., Ltd. (c) - 7,297
Nanchang Zongkun Intelligent Technology Co., Ltd. (c) - 7,310
Sichuan Qiantu Guardforce Robot Technology Co., Ltd. (c) - 3,777
Shanghai Nanshao Fire Engineering and Equipment Co., Ltd. (c) - 144,737
CSF Mingda Technology Co., Ltd (c) 9,752 11,129
$ 7,716,503 $ 14,508,873
(a) Amounts due from Shenzhen Intelligent Guardforce Robot Technology Co., Limited (“CIOT”) comprised of $4,481,346 representing prepayments for the purchase of robots from a related party and $1,062,809 receivables in connection with the robots returned to a related party.<br> <br><br> <br>On May 25, 2023, following the repayment plan provided by Tu Jingyi (“Mr. Tu”) to the Company on March 1, 2023 in connection with the settlement of the outstanding balance of the receivables due from the related parties under Mr. Tu’s control, the Company entered into an agreement with Mr. Tu, Shenzhen Intelligent Guardforce Robot Technology Co., Limited (“CIOT”), Shenzhen Kewei Robot Technology Co., Limited and its subsidiaries (“Shenzhen Kewei”) and Guardforce Holdings (HK) Limited (“GF Holdings”) to legally enforce the right to set-off certain recognized related party receivable and payable amounts on a net basis (“Netting Arrangement”). Mr. Tu agreed to waive the Company’s repayment of the borrowings from Guardforce Holdings (HK) Limited in an aggregate amount of $1,500,000 to offset the same amount of related party receivables with CIOT. As of the date of this filing, the Company is negotiating with Mr. Tu on the settlement of the second installment of $1,500,000 which is due on September 30, 2023 in accordance with the repayment plan.
(b) On May 24, 2022, the Company entered into a securities purchase agreement with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) to acquire 100% of the equity interests in seven Kewei Group companies from Shenzhen Kewei. The acquisition purchase price of $21,600,000 in a mix of cash (10%) and restricted ordinary shares of the Company (90%) were fully paid during the year ended December 31, 2022. Based on the market share price at the issuance date, the equity portion of the deposit paid for business acquisitions was valued at $4,860,000.

F-27

On September 13, 2022, the Company terminated the securities purchase agreement, the cash paid to Shenzhen Kewei was agreed to be refunded and the shares issued to Shenzhen Kewei was agreed to be returned. On February 13, 2023, 243,000 restricted ordinary shares amounting to $4,860,000 were returned to and canceled by the Company.

On March 31, 2023, shareholders’ of Shenzhen Kewei repaid RMB2,000,000 (approximately $291,000) to the Company. On May 25, 2023, an amount of $1,500,000 due was offset with the borrowings from Guardforce Holdings (HK) Limited under the Netting Arrangement.

(c) Amounts due from these related parties represent business advances for operational purposes.

Amounts due to related parties:

As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited)
Tu Jingyi (a) $ 220,808 $ 210,028
Guardforce Holdings (HK) Limited (b) 423,184 394,016
Guardforce Security (Thailand) Company Limited (c) 68,897 77,413
Shenzhen Kewei Robot Technology Co., Limited and its subsidiaries (d) 2,569,448 2,403,555
Shenzhen Zhongzhi Yonghao Robot Co., Ltd. 376,391 394,151
Shenzhen Qianban Technology Co., Ltd. (d) - 99,733
Guardforce Security Service (Shanghai) Co., Ltd. (e) 34,465 267,764
Shenzhen Guardforce Qiyun Technology Co., Ltd. (e) - 189
Shanghai Yongan Security Alarm System Co., Ltd. (e) 9,650 21,842
Guardforce Aviation Security Company Limited (c) 195 -
$ 3,703,038 $ 3,868,691
(a) Amounts due to Tu Jingyi represented interest accrued on the respective loans.
(b) Amounts due to Guardforce Holdings (HK) Limited comprised of $195,398 advances made and $227,786 accrued interests on the loans.
(c) Amounts due to Guardforce Security (Thailand) Company Limited and Guardforce Aviation Security Company Limited represent accounts payable for services provided by a related party.
(d) Amounts due to Shenzhen Kewei Robot Technology Co., Limited and its subsidiaries comprised of $2,590,621 representing trade payables for the purchase of robots from a related party and $22,173 expense paid on behalf by a related party.
(e) Amounts due to related parties represent business advances for operational purposes.

F-28

Short-term borrowings from related parties:

As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited)
Guardforce Holdings (HK) Limited (a) $ 1,666,846 $ 3,148,500

Long-term borrowings from related parties:

As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited)
Guardforce Holdings (HK) Limited (b) $ - $ 18,346
Tu Jingyi (c) 1,437,303 1,437,303
$ 1,437,303 $ 1,455,649
(a) On April 17, 2020, the Company borrowed $2,735,000 from Guardforce Holdings (HK) Limited. As of December 31, 2022, the outstanding balance of this loan was $2,735,000. The loan is unsecured and bears an interest rate at 2%. The loan was due on April 16, 2023 and was verbally agreed to extend with the same terms and conditions until this loan is scheduled to be settled in late 2023. For the six months ended June 30, 2023 and 2022, interest expense on this loan was $25,570 and $27,350, respectively. This loan is classified as short-term borrowing from a related party. On May 25, 2023, the principal amount of this loan of $1,068,154 was settled under the Netting Arrangement.<br> <br><br> <br>On September 9, 2020, the Company borrowed $413,500 from Guardforce Holdings (HK) Limited. The loan is unsecured and it bears interest at 2%. The loan is due on September 8, 2023. For the six months ended June 30, 2023 and 2022, interest expense on this loan was $3,446 and $4,135, respectively. On May 25, 2023, the principal amount of this loan of $413,500 was settled under the Netting Arrangement.
(b) On December 31, 2019, the Company borrowed $1,499,998 from Guardforce Holdings (HK) Limited. As of December 31, 2022, the outstanding balance of this loan was $18,346. The loan is unsecured and it bears an interest rate of 2%. The loan is due on June 30,2025. For the six months ended June 30, 2023 and 2022, interest expense on this loan was $153 and $770, respectively. On May 25, 2023, the principal amount of this loan of $18,346 was settled under the Netting Arrangement.
(c) On September 1, 2018, the Company entered into an agreement with Tu Jingyi whereby Tu Jingyi loaned $1,437,303 (RMB10 million) to the Company. The loan is unsecured with an interest rate at 1.5%. The loan is due on June 30, 2025. For the six months ended June 30, 2023 and 2022, interest expense on this loan was $10,780 and $nil, respectively. This loan is classified as long-term borrowing from a related party.

The principal related party transactions for the six months ended June 30, 2023 and 2022 are as follows:

Related party transactions:

For the six months ended<br> June 30,
Nature 2023 2022
(Unaudited) (Unaudited)
Service/ Products received from related parties:
Guardforce Security (Thailand) Company Limited (a) $ 68,897 $ 67,864
Guardforce Aviation Security Company Limited (b) 600 -
Shenzhen Intelligent Guardforce Robot Technology Co., Limited – Purchases (c) - 7,008,322
Shenzhen Kewei Robot Technology Co., Ltd. – Purchases (c) 141,569 844,255
Shenzhen Kewei Robot Technology Co., Limited – ICP (d) - 3,000,000
$ 211,066 $ 10,920,441
Service/ Products delivered to related parties:
GF Technovation Company Limited – Sales (e) $ - $ 134,123

Nature of transactions:

(a) Guardforce Security (Thailand) Company Limited provided security guard services to the Company;

F-29

(b) Guardforce Aviation Security Company Limited provided escort services to the Company;
(c) The Company purchased robots from Shenzhen Intelligent Guardforce Robot Technology Co., Limited and Shenzhen Kewei Robot Technology Co., Ltd. During the six months ended June 30, 2023, the Company purchased 207 robots amounting to $229,162 through an asset purchase agreement (Note 1) and $50,927 through placing standard purchase orders. In addition, 124 robots amounting to $138,520 were returned by the Company.
(d) On February 8, 2022, the Company entered into a Commissioned Development Agreement with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) for the development of a robotics management platform named GFAI Intelligent Cloud Platform V2.0 (“ICP”). The contract amount was $3,000,000 which was paid as a one-time lump sum payment after the execution of the agreement.
(e) The Company sold robots and spare parts to GF Technovation Company Limited.
23. CONSOLIDATED SEGMENT DATA
--- ---

Selected information by segment is presented in the following tables for the six months ended June 30, 2023 and 2022:

For the six months ended<br> June 30,
Revenues^(1)^ 2023 2022
(Unaudited) (Unaudited)
Secured logistics $ 15,943,156 $ 15,960,547
Information security 407,689 262,934
Robotics AI solutions 440,229 719,041
General security solutions 1,622,218 -
$ 18,413,292 $ 16,942,522
(1) Revenue<br>excludes intercompany sales.
--- ---
For the six months ended<br> June 30,
--- --- --- --- --- --- ---
Operating loss 2023 2022
(Unaudited) (Unaudited)
Secured logistics $ (1,101,369 ) $ (962,310 )
Information security (311,916 ) (19,041 )
Robotics AI solutions (8,320,982 ) (1,977,324 )
General security solutions (542,569 ) -
Corporate and others ^(2)^ (1,607,373 ) (2,590,961 )
Operating loss (11,884,209 ) (5,549,636 )
Total other income from five segments 77,765 46,859
Foreign exchange losses, net:
- Secured logistics (598,053 ) (751,622 )
- Information security 432 44
- Robotics AI solutions 13,150 5,973
- Corporate and others 810 (154 )
Finance costs:
- Secured logistics (423,440 ) (405,365 )
- Information security (6,589 ) (1,648 )
- Corporate and others (154,868 ) (3,848 )
Loss before income tax (12,975,002 ) (6,659,397 )
Provision for income tax (expense) benefit (874,431 ) 320,183
Net loss for the period (13,849,433 ) (6,339,214 )
Less: Loss attributable to the non-controlling interest 30,214 32,392
Net loss attributable to equity holders of the Company $ (13,819,219 ) $ (6,306,822 )
(2) Includes<br>non-cash compensation, legal and professional fees and consultancy fees for the Company.
--- ---

For the six months ended June 30, 2023 and 2022, non-cash compensation of $nil and $252,095, respectively was solely attributable the Corporate and others segment.

F-30

Depreciation and amortization by segment for six months ended June 30, 2023 and 2022 are as follows:

For the six months ended<br> June 30,
Depreciation and amortization: 2023 2022
(Unaudited) (Unaudited)
Secured logistics $ 1,570,069 $ 1,887,059
Robotics AI solutions 741,548 810,319
General security solutions 124,713 -
$ 2,436,330 $ 2,697,378

Total assets by segment as of June 30, 2023 and December 31, 2022 are as follows:

Total assets As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited) (Audited)
Secured logistics $ 22,854,857 $ 25,315,845
Information security 199,259 615,517
Robotics AI solutions 17,330,745 23,577,547
General security solutions 2,296,882 4,260,811
Corporate and others 21,412,959 7,397,254
$ 64,094,702 $ 61,166,974

Total non-current assets by geographical segment as of December 31, 2022 and 2021 are as follows:

Total non-current assets As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited) (Audited)
The PRC (including Hong Kong and Macau) $ 11,762,228 $ 11,234,176
Thailand 9,774,623 14,223,714
Other countries 403,977 446,020
$ 21,940,828 $ 25,903,910

F-31

Total liabilities by segment as of June 30, 2023 and December 31, 2022 are as follows:

Total liabilities As of<br> June 30,<br> 2023 As of<br> December 31,<br> 2022
(Unaudited) (Audited)
Secured logistics $ 12,850,116 $ 28,789,053
Information security 143,919 238,229
Robotics AI solutions 4,477,486 4,580,740
General security solutions 1,425,037 1,661,469
Corporate and others 20,195,051 6,765,181
$ 39,091,609 $ 42,034,672
24. COMMITMENTS AND CONTINGENCIES
--- ---

Executives/directors agreements

The Company has several employment agreements with executives and directors with the latest expiring in August 2025. 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 June 30, 2023, are as follows:

Amount
Twelve months ending June 30:
2024 $ 875,472
2025 740,000
2026 118,333
Total minimum payment required $ 1,733,805

Contracted expenditure commitments

The Company’s contracted expenditures commitments as of June 30, 2023 but not provided in the interim condensed consolidated financial statements are as follows:

Payments Due by Period
Less than 1-3 4-5 More<br> than
Contractual Obligations Nature Total 1 year years years 5 years
Service fee commitments (a) $ 56,644 $ 56,644 $ - $ - $ -
Operating lease commitments (b) 3,589,243 1,924,149 1,645,840 19,254 -
Purchase commitments (c) 3,106,786 3,106,786 - - -
$ 6,752,673 $ 5,087,579 $ 1,645,840 $ 19,254 $ -
(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, which expired in August 2023. In August, 2023, the Company renewed the service agreement with Stander for 2 years.
(b) From time to time, the Company entered into various short-term lease agreements to rent warehouses and offices. In addition, the Company has various low value items with various lease terms that the Company is committed to pay in the future.
(c) AI Hong Kong entered into various purchase agreements with Shenzhen Intelligent Guardforce Robot Technology Co., Limited and Shenzhen Kewei Robot Technology Co., Ltd. to establish mutual contractual obligations for future purchases of robots. These agreements do not contain the scheduled delivery dates. As of the date of filing, the Company does not intend to execute these agreements until the robot inventories on hand are being sold.

F-32

Bank guarantees

As of June 30, 2023, the Company had commitments with banks for bank guarantees in favor of government agencies and others of approximately $3,700,000.

Litigation

As of the date of filing, the Company is a defendant in various labor-related lawsuits totaling approximately $400,593. Management believes sufficient provision has been made for these liabilities in this interim condensed consolidated financial statements.

25. SUBSEQUENT EVENTS

Numerous subsequent events disclosures are being made elsewhere in this interim condensed consolidated financial statements. Subsequent events have been reviewed through the date of filing and required no adjustments or disclosures.

F-33

Exhibit 99.2

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

IN CONNECTION WITH THE INTERIM CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS FOR THE

SIX MONTHS ENDED JUNE 30, 2023

In this report, as used herein, and unless the context suggests otherwise, the terms “GFAI,” “Company,” “we,” “us” or “ours” refer to the combined business of Guardforce AI Co., Limited, its subsidiaries and other consolidated entities. References to “dollar” and “$” are to U.S. dollars, the lawful currency of the United States. References to “THB” are to the legal currency of Thailand. References to “RMB” are to the legal currency of the People’s Republic of China. References to “SEC” are to the Securities and Exchange Commission.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this Report on Form 6-K and with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 20-F for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission on May 1, 2023 (the “2022 Form 20- F”). This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those identified elsewhere in this report on Form 6-K, and those listed in the 2022 Form 20-F under “Item 3. Key Information-D. Risk Factors” or in other parts of the 2022 Form 20-F.

Overview

Our businesses are categorized into four main units:

[i] Secure Logistics Business;

[ii] Information Security Business;

[iii] Robotics AI Solution Business; and

[iv] General security Business.

Secure Logistics Business

We conduct business mainly through Guardforce Cash Solutions Security Thailand Co., Limited, or GF Cash (CIT), our subsidiary, which provides secured logistics solutions in Thailand. This includes the following services:

(i) Cash-In-Transit – Non-Dedicated Vehicle (Non-DV):

CIT (Non-DV) includes the secure transportation of cash and other valuables between commercial banks and the Bank of Thailand, Thailand’s central bank. CIT (Non-DV) also includes the transportation of coins between the commercial banks, the Thai Royal Mints and the Bank of Thailand. As such, the main customers for this service are the local commercial banks. Charges to the customers are dependent on the value of the consignment; condition of the cash being collected (for example, seal bag collection, piece count collection, bulk count collection, or loose cash collection); and the volume of the transaction. Vehicles used for the delivery of this service are not dedicated to the specific customers.

(ii) Cash-In-Transit – Dedicated Vehicle (DV):

CIT (DV) includes the secure transportation of cash and other valuables between commercial banks. As part of this service, dedicated vehicles are assigned specifically to the contracted customer for their dedicated use between the contracted designated bank branches. As this is a dedicated vehicle service, customers will submit direct schedules to our CIT teams for the daily operational arrangements and planning. Charges to the customers are on a per vehicle per month basis.

(iii) ATM Management Services:

ATM management includes cash replenishment services and first and second line of maintenance services for the ATM machines. First line of maintenance services (FLM) includes rectification of issues related to jammed notes, dispenser failures and transaction record print-out issues. Second line of maintenance services (SLM) includes all other issues that cannot be rectified under the FLM. SLM includes, for example, complete machine failure, and damage to hardware and software.

(iv) Cash Processing (CPC):

Cash processing (CPC) services include counting, sorting, counterfeit detection and vaulting services. We provide these services to commercial banks in Thailand.

(v) Cash Center Operations (CCT):

Cash Center Operations (CCT) is an outsourced cash center management service. We operate the cash center on behalf of the customer, which includes note counting, sorting, storage, inventory management and secured transportation of the notes and coins to the various commercial banks in Thailand.

(vi) Cheque Center Service (CDC):

Cheque Center Service (CDC) includes secured cheque pickup and delivery service.

(vii) Express Cash:

The express cash service is an expansion of our Guardforce Digital Machine, or GDM, solution. We work with commercial banks to have a mobile GDM installed in our CIT vehicles to collect cash from retail customers at the retailers’ sites. The cash is immediately processed inside the CIT vehicle and the cash counting results are immediately transmitted to GF Cash (CIT) headquarters and to a commercial bank. The bank will then credit the counted amount to its customers’ bank accounts. We launched the Express Cash service in 2019.

(viii) Coin Processing Service:

The Coin Processing Service includes the secure collection of coins from retail businesses and banks. The coins are stored and then delivered to the Royal Thai Mint, a sub-division of the Thai Treasury Department, Ministry of Finance. We deploy manpower to work at the Royal Thai Mint as cashier services. Additionally, we use our existing vehicle fleet to deliver coins from the Royal Thai Mint to bank branches, and vice versa.

(ix) Cash Deposit Management Solutions:

Cash Deposit Management Solutions are currently delivered by our Guardforce Digital Machine solution. Our GDM product is deployed at customer sites to provide secured retail cash deposit services. Customers use our GDM product to deposit daily cash receipts. We then collect the daily receipts from our GDM in accordance with agreed schedules. All cash receipts are then securely collected and delivered to our cash processing center for further handling and processing.

Information Security Business

We acquired a majority stake in Handshake Networking (Handshake) on March 25, 2021, in furtherance of our strategy to diversify into information security as part of our portfolio of services. The purpose of this acquisition was to provide us with the experience, expertise, and creditability to capitalize on the growing information security market.

The services offered under our Information Security business include:

● External<br>and Internal Penetration Testing;
● Wireless<br>Network Testing;
--- --- 
2
● Web<br>Application Testing;
● Hospitality<br>Services Testing;
--- ---
● Consulting<br>Services, Training;
--- ---
● PCI<br>Services; and
--- ---
● Forensic<br>Services.
--- ---

Robotics AI Solution Business

Our Robotics Solutions business was established in 2020 as part of our revenue diversification efforts. We do not manufacture the robots, but we operate on a Robots as a Service (RaaS) business model and purchase the robots from equipment manufacturers. We integrate various value add applications into the robots for leasing to generate recurring revenue. As part of our market penetration strategy, we have adopted a mass adoption strategy by providing the robots on a trial basis with an option to purchase or rent.

On March 22, 2022, we acquired 100% of the equity interests in Shenzhen GFAI Robot Technology Co., Limited (“Shenzhen GFAI”) and Guangzhou GFAI Technology Co., Limited (“Guangzhou GFAI”). Shenzhen GFAI and Guangzhou GFAI are based in both Shenzhen and Guangzhou, ranking among the top 10 largest Chinese cities and among the 30 largest cities globally. Shenzhen GFAI and Guangzhou GFAI focus on the hospitality, healthcare, property management, and government sectors. Revenues are derived from AI robotic services which automate repetitive tasks, making them less labor intensive. This acquisition is expected to serve an integral role in the growth of our RaaS business initiative in the Greater Bay Area, which is one of the fastest-growing economic regions in the PRC. During the six months ended June 30, 2023, revenues contributed by Shenzhen GFAI and Guangzhou GFAI was $307,677.

On December 21, 2022, we entered into an asset purchase agreement (“Agreement”) with Shenzhen Kewei Robot Technology Co., Limited (“Shenzhen Kewei”) to purchase select robotic equipment assets and Kewei’s technology platform. With this acquisition, we will have a solid foundation for future RaaS capability and have access to the entire China market through the sales channels and agents built by Kewei since 2019, and will serve clients across various industries, such as restaurants, hotels, and office buildings, including Fortune 500 customers. The revenue streams will include robotic rental, advertising, and technical services across most of the major metropolitan cities in China.

General Security Business

On June 22, 2022, we acquired 100% of the equity interests in Beijing Wanjia Security System Co. Ltd (“Beijing Wanjia”) in the PRC. Beijing Wanjia is an integrated alarm security solution provider with over 25 years’ experience and a well-established customer base among retail businesses. The acquisition of a well-established integrated security solution provider in Beijing is truly transformative as it not only strengthens our foothold in Asia, but also expands our integrated security capabilities. During the six months ended June 30, 2023, revenues contributed by Beijing Wanjia was $1,622,218.

The business environment in which we operate can change quickly. We must quickly adapt to changes in the competitive landscape and local market conditions. To be successful, we must be able to balance, on a market-by market basis, the effects of changing demand on the utilization of our resources. We operate on a centralized basis but allow enough flexibility so local field management can adjust operations to the particular circumstances of their markets.

We measure financial performance on a long-term basis. We create value by focusing on yielding solid returns on capital, growing our revenues and earnings, and generating cash flows sufficient to fund our growth.

3

Results of Operations

The following table sets forth a summary of our unaudited interim condensed consolidated results of operations and the amounts as a percentage of total revenues for the periods indicated. This information should be read together with our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.

For the six months ended June 30,
2023 2022
% of<br> Revenue % of<br> Revenue
Revenue 100.0 % 100.0 %
Cost of sales ) (86.6 )% ) (88.5 )%
Gross profit 13.4 % 11.5 %
Stock based compensation - % ) (1.5 )%
Provision for and write off of withholding taxes receivable ) (3.0 )% ) (1.6 )%
Provision for expected credit loss on trade and other receivables ) (4.7 )% - %
Provision for obsolete inventories ) (16.8 )% - %
Impairment loss on fixed assets ) (8.6 )% - %
Impairment on goodwill ) (6.9 )% - %
Selling, distribution and administrative expenses ) (37.9 )% ) (41.1 )%
Operating loss ) (64.5 )% ) (32.8 )%
Other income, net 0.4 % 0.3 %
Foreign exchange losses, net ) (3.1 )% ) (4.4 )%
Finance costs ) (3.2 )% ) (2.4 )%
Loss before income tax ) (70.4 )% ) (39.3 )%
Provision for income tax (expense) benefit ) (4.7 )% 1.9 %
Net loss for the period ) (75.1 )% ) (37.4 )%
Net loss attributable to:
Equity holders of the Company ) )
Non-controlling interests
) )

All values are in US Dollars.

Comparison of six months ended June 30,2023, and 2022

Revenue

For the six months ended June 30, 2023, our revenue was $18,413,292, an increase of $1,470,770, or 8.7%, compared to $16,942,522 for the six months ended June 30, 2022. This increase was mainly driven by the following factors:

(i) There<br>was $610,613, or 11.4%, increase from our Cash-In-Transit business with our retail customers due to the increased frequency of services<br>when Thailand begins to ease tough Covid pandemic control and lockdown measures in 2023. However, there was a decrease in our Cash-In-Transit<br>and ATM business with our bank customers by $1,009,042, or 14.7%, due to the decreasing use of cash which results in a reduced need for<br>cash in the marketplace and a decline in the need for physical bank branches and ATM services.
(ii) We<br>experienced continuous increase on the demand for our Guarcforce Digital Machine or GDM products. For the six months ended June 30, 2023,<br>the revenue contribution from our GDM product increased by $256,665, or 29.5%.
--- ---
(iii) We<br>acquired Beijing Wanjia Security System Co., Ltd. on June 22, 2022, which contributed $1,622,218, or 8.8%, to our total revenue for the<br>six months ended June 30, 2023.
--- ---
(iv) There<br>was decrease in our robotics AI solutions revenue due to the lasting effects after Covid-19. Revenue decreased by$278,352, or 38.7%,<br>compared to the same period of 2022. The impact of the COVID-19 pandemic on our business has been significant and we were unable to fully<br>recover in the first half of year 2023. There was a decline in consumer demand on our robots during the six months ended June 30, 2023,<br>we will evolve our robots with changing consumer preferences by investing in the R&D projects.
--- --- 
4

Cost of sales

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

For the six months ended June 30, 2023, our cost of revenue was $15,939,067, an increase of $940,340, or 6.3%, compared to $14,998,727 for the six months ended June 30, 2022. This increase was in line with the increase in revenue. Cost of revenue as a percentage of our revenues slightly decreased from 88.5% for the six months ended June 30, 2022, to 86.6% for the six months ended June 30, 2023. Despite the increase in fuel consumption costs in the past comparable period by approximately 8.3% from THB31.11 ($0.92) average per liter for the six months ended June 30, 2022 to THB33.70 ($0.99) average per liter for the six months ended June 30, 2023, we continue our effective cost savings measures to control our direct labor and overhead cost which offset the impact on the increase fuel price.

Gross profit.

As a percentage of revenue, our gross profit margin increased from 11.5% for the six months ended June 30, 2022 to 13.4% for the six months ended June 30, 2023, primarily due to the cost control and we have a higher profit margin from our robotics AI solution business. During the six months ended June 30, 2023, the gross profit margin for our secured logistics business and robotics AI solution business was 9.3% and 22.1%, respectively.

Provision for and write off of withholdingtax receivable.

During the six months ended June 30, 2023, we recorded a provision for, and write-off of, withholding tax receivable of $261,793 and $299,484, respectively. On July 12, 2023, we received a withholding tax refund of THB18,959,514 (approximately $0.5 million) in connection with the Company’s 2018 withholding tax refund applications of THB29,188,153 (approximately $0.8 million). The Company wrote-off the difference between the receivable recorded and the amount of refund subsequently received from the Thai Revenue Department. Out of prudence, at each reporting period, we estimate and record the provision for withholding tax receivable based on the amount historically refunded and written off.

Provision for expected credit loss on tradeand other receivables.

During the six months ended June 30, 2023, we made a provision for expected credit loss on trade and other receivables amounting to $870,408. During the COVID-19 pandemic, we temporarily provided flexible credit terms to certain customers to foster long-term business relationships, however, some of our customers are still facing financial hardship since the end of the COVID-19 pandemic, leading to their inability to repay our outstanding receivables. As of June 30, 2023, we estimated the potential credit losses through a comprehensive assessment of credit risk, probability of default and scenario analysis and recorded a provision to reflect the true value of our receivables on the financial statements.

Provision for obsolete inventory.

During the six months ended June 30, 2023, we made a provision for our robot inventory amounting to $3,090,283. This provision represents an estimate of the amount of inventory that may not be sold at its original cost due to obsolescence, damage, or a decline in market value. Our inventory provision is determined based on an analysis of historical sales trends, current market conditions, existing sales pipeline, and the age and condition of our inventory. During the first half-year of 2023, although our business is gradually recovering from the COVID-19 pandemic, which was less severe than 2022, we experienced a continuous decrease in demand and reduction of selling price for our robots compared to our budget, resulting in excess inventory levels. This led to the recognition of a provision for inventory was needed as we adjusted our estimates for potential losses on slow-moving or obsolete inventory.

We have implemented measures to improve our inventory forecasting and management, including the use of our GFAI ICP which provides advanced analytics and planning. Going forward, our newly acquired Kewei’s technology platform will provide more in-depth analytics and planning on our China market, and we will continue monitoring our inventory levels and adjust our inventory provision as necessary. We believe that our proactive approach to inventory management will enable us to maintain a healthy balance between inventory levels and sales performance, while mitigating the impact of losses on our financial results. Overall, we believe that our inventory provision reflects our commitment to responsible inventory management and our focus on delivering long-term value to our shareholders.

5

Impairment loss on fixed assets.

During the six months ended June 30, 2023, we recognized an impairment loss of $1,591,766 on our robot fixed assets. This impairment loss was primarily driven by our free trial business model that shows an inadequate estimated future cash flow associated with these assets. This impairment loss reflects the reduction in the value of the impaired assets and negatively impacts our financial performance.

Despite this impairment loss, we remain committed to investing in our robot assets to support our growth and expansion plans. We continue to evaluate our fixed assets on a regular basis to ensure that they remain relevant and meet our operational needs. Going forward, we will continue to monitor our fixed assets for indications of potential impairment and will adjust our estimates as necessary. We are committed to investing in our assets in a prudent and responsible manner while balancing the need for growth and innovation with the need to maintain a strong balance sheet. Overall, we believe that our recognition of the impairment loss reflects our commitment to transparent and responsible financial reporting, and our focus on delivering long-term value to our shareholders.

Impairment on goodwill.

During the six months ended June 30, 2023, we recognized impairment losses on Handshake Networking Limited, Shenzhen GFAI Robot Technology Co., Limited and Guangzhou GFAI Technology Co., Limited in an aggregate amount of $1,263,040. Despite the passing of the COVID-19 pandemic, our businesses have not returned to normal and our markets have not regained confidence as we expected, we identified indicators of potential impairment including declining sales trends, increased competition, and changes in the operating environment in first half-year of 2023, thus we performed impairment testing and the amount of the impairment losses recognized reflects the excess of the carrying value of goodwill over its estimated recoverable amount.

These impairment losses recognized during the six months ended June 30, 2023 serve as a prudent measure to ensure the accuracy and transparency of our financial reporting. Going forward, we will continue to closely monitor the performance of our reporting units and evaluate any indicators of impairment. Despite the challenges on our business operations that we are still facing, we remain committed to the sustained success of the Company.

Selling, distribution and administrative expenses.

The Company’s total selling, distribution and administrative expenses are comprised of the following:

● Selling<br>and distribution expenses are mainly comprised of compensation and benefits for our sales and marketing personnel, travel and entertainment<br>expenses, exhibitions, advertising and marketing promotion expenses, depreciation of motor vehicles, rental expenses, utility expenses<br>and transportation charges.
● Administrative<br>expenses are mainly comprised of compensation and related expenses for our management and administrative personnel, depreciation of leasehold<br>improvements, robots and motor vehicles and rental expenses of our offices in different countries.
--- ---

Our three most significant selling, distribution and administrative expenses for the six months ended June 30, 2023 were staff expense, depreciation and amortization expense and professional fees of $3,602,127, $1,251,359 and $774,553, respectively. Professional fees mainly represent (i) the corporate legal fees in connection with the acquisition of the assets from Shenzhen Kewei Robot Technology Co., Limited, two underwritten public offerings (“CMPOs”) completed in May 2023, provision of legal advice, (ii) the audit fees and audit-related fees.

For the six months ended June 30, 2023, our total selling, distribution, and administrative expenses were $6,981,660, a slight increase of $3,664, or 0.05%, compared to $6,977,996 for the six months ended June 30, 2022. We have successfully maintained our operating expenses at a consistent level with the previous same period of 2022, which resulted from our successful cost reduction strategies including streamlining processes and allocating resources effectively to optimize our operational efficiency.

6

Although we maintain our cost reduction measures, we expect our administrative expenses will increase over time as we continue to expand our business. Our selling expenses are expected to increase as we continue to expand our business and promote our Guardforce brand. Our administrative expenses are expected to increase, reflecting the hiring of additional personnel and other costs related to the anticipated growth of our business, as well as the higher costs of operating as a public company.

Other income.

For the six months ended June 30, 2023, other income was $77,765 as compared to $46,859 for the six months ended June 30, 2022. Other income is comprised mainly of miscellaneous income, interest income and gain (loss) from disposal of fixed assets.

Finance costs.

For the six months ended June 30, 2023, finance costs were $584,897 as compared to $410,861 for the six months ended June 30, 2022. Finance costs are comprised of finance charges for leases, interest expense on interest-bearing bank borrowings and a third-party borrowing, an interest-bearing convertible note and two related-party borrowings utilized for working capital purposes.

Provision for income tax (expense) benefit.

For the six months ended June 30, 2023, our income tax expense was $874,431 as compared to income tax benefit of $320,183 for the six months ended June 30, 2022. We are subject to various rates of income tax under different jurisdictions. During the six months ended June 30, 2023, we recognized an income tax expense related to the valuation allowance on our deferred tax assets arising from our secured logistics business. Due to the historical losses and economic conditions, management determines to establish an allowance of $874,431 on the deferred tax assets after assessing the probability of realizing the benefits of the deferred tax assets in future periods.

Net loss.

For the six months ended June 30, 2023, our net loss was $13,849,433, an increase of $7,510,219, as compared to net loss $6,339,214 for the six months ended June 30, 2022. This was mainly due to provisions and impairments made during the first half-year of 2023.

Although we incurred a significant net loss for the six months ended June 30, 2023, we expect to see a positive trend in our future results.

Net loss attributable to non-controlling Interests.

For the six months ended June 30, 2023, and 2022, net loss attributable to non-controlling interests were $30,214 and $32,392, respectively.

Net loss attributable to equity holders ofthe Company.

For the six months ended June 30, 2023, and 2022, our net loss attributable to equity holders of the Company were $13,819,219 and $6,306,822, respectively.

Inflation.

Our operating results for the six months ended June 30, 2023, were negatively affected by the recent inflationary cost pressures. The higher fuel price, transportation costs, and higher wage rates impact the profitability of our business. We will develop operational strategies to mitigate the inflation which involve a combination of cost-cutting measures and adjustments to pricing.

Foreign Currency Fluctuations.

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

7

Critical Accounting Policies.

IFRS 15 Revenue from Contracts with Customers supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services or goods to a customer. IFRS 15 requires entities to exercise judgment, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with our customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after January 1, 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment: and hedge accounting.

Non-IFRS Financial Measures

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

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

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

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

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

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

For the six months ended <br> June 30,
2023 2022
Net loss – IFRS $ (13,849,433 ) $ (6,339,214 )
Finance costs 584,897 410,861
Provision for income tax expense (benefit) 874,431 (320,183 )
Depreciation and amortization expense 2,619,001 2,697,378
EBITDA (9,771,104 ) (3,551,158 )
Stock based compensation - 252,095
Provision for and write off of withholding taxes receivable 561,277 263,340
Provision for expected credit loss on trade and other receivables 869,519 -
Provision for obsolete inventories 3,090,282 -
Impairment loss on fixed assets 1,591,766 -
Impairment of goodwill 1,263,040 -
Adjusted net loss (Non-IFRS) $ (2,395,220 ) $ (3,035,723 )
Non-IFRS loss per share
Loss per share attributable to equity holders of the Company
Basic and diluted $ (0.75 ) $ (3.45 )
Weighted average number of shares used in computation:
Basic and diluted 3,174,282 880,618 
8

Liquidity and Capital Resources

Our principal sources of liquidity and capital resources have been, and are expected to continue to be, cash flow from operations and bank borrowings. Our principal uses of cash have been, and we expect 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 of June 30, 2023 and 2022, we had cash and cash equivalents and restricted cash of approximately $26.0 million and $9.5 million, respectively.

The following table summarizes the key cash flow components from our unaudited interim condensed consolidated statements of cash flows for the periods indicated.

For the six months ended <br> June 30,
2023 2022
Net cash used in operating activities $ (1,046,862 ) $ (13,827,792 )
Net cash used in investing activities (1,046,308 ) (9,341,708 )
Net cash generated from financing activities 19,876,078 17,375,453
Effect of exchange rate changes on cash 16,840 (519,523 )
Net decrease in cash and cash equivalents, and restricted cash 17,799,748 (6,313,570 )
Cash and cash equivalents, and restricted cash at January 1, 8,230,644 15,853,811
Cash and cash equivalents, and restricted cash at June 30, $ 26,030,392 $ 9,540,241

Operating Activities.

Net cash used in operating activities was $1,046,862 for the six months ended June 30, 2023. The difference between our net loss of $13,849,433 and net cash used in operating activities was mainly due to (i) depreciation and amortization of $2,619,001, comprised of depreciation of fixed assets, depreciation of right-of-use assets and amortization of intangible assets mainly acquired through the business combinations; (ii) interest expense of $584,897 for the bank loans and loans from related parties and finance costs related to the finance lease and operating lease liabilities; (iii) provision for and write off of withholding tax receivable of $561,277; (iv) provision for expected credit loss on trade and other receivable of $869,519; (v) impairment of robotics related assets including inventories and fixed assets in aggregate of $4,682,048; (vi) impairment of goodwill of $1,263,040; and (vi) the cash generated from operating activities of $2,180,824, which was generally due to the increase in trade and other payables and other current liabilities of $1,285,317, which mainly represents the trade payables to third parties and payroll payable; the decrease in amounts due with related parties of $639,807 due to the repayment of related party receivables by returning the shares we issued in connection with the deposit paid for acquisitions that was subsequently terminated; the decrease in deferred tax assets of $874,431 due to a valuation allowance made on the portion that is more likely than not that it will not be realized. The cash generated was being offset with the cash used in operating activities by the increase in other assets of $719,254 representing the prepayments made for office and warehouse rental during the six months ended June 30, 2023.

Investing Activities.

Net cash used in from investing activities was $1,046,308 for the six months ended June 30, 2023, which was due to the purchase of property, plant, and equipment of $829,231 and the purchase of intangible assets of $217,077.

9

Financing Activities.

Net cash generated from financing activities was $19,876,078 for the six months ended June 30, 2023, which was mainly attributable to the two underwritten public offerings (“CMPOs”) completed in May 2023. On May 5, 2023, we completed an underwritten public offering to issue 1,720,430 ordinary shares and an additional 258,064 ordinary shares for the exercise of an over-allotment option at the time of the closing at a public offering price of $4.65 per share for aggregate gross proceeds of approximately $9.2 million. On May 12, 2023, we completed another underwritten public offering to issue 2,580,600 ordinary shares and an additional 387,090 ordinary shares for the exercise of an over-allotment option at the time of the closing at a public offering price of $4.65 per share for aggregate gross proceeds of approximately $13.8 million.

In addition, we obtained proceeds from bank borrowings of $1,756,738 and from the exercise of warrants of $506,693. The cash generated was being offset with (i) $49,664 cash paid for the cancellation of fractional shares as a result of the share consolidation which was effective on January 31, 2023; (ii) repayment of borrowings of $1,937,096; and (iii) lease payments and interest paid of $1,267,979.

Research and Development, Patents and Licenses,Etc.

There is no intellectual property owned by us at this moment.

We have outlined our research and development plans to foster innovation and drive technology advancements within our robotics AI solutions business. We plan to collaborate with third-party business partners and develop our internal R&D team’s capabilities. We have budgeted approximately $1.8 million for research and development expenditures for 18 months from the second half of the fiscal year of 2023 through the end of the fiscal year 2024.

Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demand, commitments, or events that are reasonably likely to have a material effect on our net revenues and income from operations, profitability, liquidity, capital resources, or would cause reported financial information not to be indicative of future operation results or financial condition.

Off-Balance Sheet Arrangements

We do not have off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial position, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material.

Tabular Disclosure of Contractual Obligations

Executives/directors agreements

The Company has several employment agreements with executives and directors with the latest expiring in August 2025. 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 June 30, 2023, are as follows:

Amount
Twelve months ending June 30:
2024 $ 875,472
2025 740,000
2026 118,333
Total minimum payment required $ 1,733,805 
10

Contracted expenditure commitments

The Company’s contracted expenditures commitments as of June 30, 2023 but not provided in the interim condensed consolidated financial statements are as follows:

Payments Due by Period
Less than 1-3 4-5 More<br> than
Contractual Obligations Nature Total 1 year years years 5 years
Service fee commitments (a) $ 56,644 $ 56,644 $ - $ - $ -
Operating lease commitments (b) 3,589,243 1,924,149 1,645,840 19,254 -
Purchase commitments (c) 3,106,786 3,106,786 - - -
$ 6,752,673 $ 5,087,579 $ 1,645,840 $ 19,254 $ -
(a) The<br>Company has engaged Stander Information Company Limited (“Stander”) to provide technical services relating to the cash management<br>systems for the Company’s secure logistics business. The service agreement with Stander comprised of a monthly fixed service fee<br>and certain other fees as specified in the agreement, which was expire in August 2023. In August, 2023, the Company renewed the service<br>agreement with Stander for 2 years.
--- ---
(b) From<br>time to time, the Company entered into various short-term lease agreements to rent warehouses and offices. In addition, the Company has<br>various low value items with various lease terms that the Company is committed to pay in the future.
--- ---
(c) AI<br>Hong Kong entered into various purchase agreements with Shenzhen Intelligent Guardforce Robot Technology Co., Limited and Shenzhen Kewei<br>Robot Technology Co., Ltd. to establish mutual contractual obligations for future purchases of robots. These agreements do not contain<br>the scheduled delivery dates. As of the date of filing, the Company is not intent to execute these agreements until the inventories on<br>hand are being sold.
--- ---

11

Exhibit 99.3

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

Announcesagreement to convert $15.91 million of debt and accrued interest into ordinary shares at $5.40 per share; expected to significantly enhancethe balance sheet

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

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

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

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

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

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

FinancialOverview

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

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

2

AboutGuardforce AI Co., Ltd.

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

SafeHarbor Statement

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

InvestorRelations:

David Waldman or Natalya Rudman

Crescendo Communications, LLC

Email: gfai@crescendo-ir.com

Tel: 212-671-1020

GuardforceAI Corporate Communications

Hu Yu

Email: yu.hu@guardforceai.com

(tables follow)

3

GuardforceAI Co., Limited and Subsidiaries

UnauditedInterim Condensed Consolidated Statement of Profit or Loss

(Expressedin U.S. Dollars)

For the six months ended<br> June 30,
2023 2022
(Unaudited) (Unaudited)
Revenue $ 18,413,292 $ 16,942,522
Cost of sales (15,939,067 ) (14,998,727 )
Gross profit 2,474,225 1,943,795
Stock based compensation - (252,095 )
Provision for and write off of withholding tax receivable (561,277 ) (263,340 )
Provision for expected credit loss on trade and other receivables (870,408 ) -
Provision for obsolete inventories (3,090,283 ) -
Impairment loss on fixed assets (1,591,766 ) -
Impairment of goodwill (1,263,040 ) -
Selling, distribution and administrative expenses (6,981,660 ) (6,977,996 )
Operating loss (11,884,209 ) (5,549,636 )
Other income, net 77,765 46,859
Foreign exchange losses, net (583,661 ) (745,759 )
Finance costs (584,897 ) (410,861 )
Loss before income tax (12,975,002 ) (6,659,397 )
Provision for income tax (expense) benefit (874,431 ) 320,183
Net loss for the period (13,849,433 ) (6,339,214 )
Less: net loss attributable to non-controlling interests 30,214 32,392
Net loss attributable to equity holders of the Company $ (13,819,219 ) $ (6,306,822 )
Loss per share
Basic and diluted loss attributable to the equity holders of the Company $ (4.35 ) $ (7.16 )
Weighted average number of shares used in computation:
Basic and diluted 3,174,282 880,618 
4

GuardforceAI Co., Limited and Subsidiaries

UnauditedInterim Condensed Consolidated Balance Sheets

(Expressedin U.S. Dollars)

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

All values are in US Dollars.

5

GuardforceAI Co., Limited and Subsidiaries

UnauditedInterim Condensed Consolidated Statement of Cash Flows

(Expressedin U.S. Dollars)

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

Non-IFRSFinancial Measures

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

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

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

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

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

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

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

7

Report a Problem

Category
Description
Email (optional, for follow-up)