20-F/A: Locafy Limited Amends 20-F Filing to Address SEC Comments on Liquidity and Debt

Locafy Limited has amended its Form 20-F filing to address SEC comments regarding liquidity, going concern, and debt obligations related to convertible notes.

Summary

• Locafy Limited has filed an amendment to its Form 20-F for the fiscal year ended June 30, 2023, to address comments received from the SEC.
• The amendment supplements disclosures in Item 5 (Operating and Financial Review and Prospects) regarding liquidity and capital resources, specifically concerning the company's going concern status and outstanding debt obligations related to convertible notes.
• It also supplements disclosures in Item 3D (Risk Factors) related to the company's outstanding debt obligations pursuant to certain of its outstanding convertible notes.
• The company had 1,276,248 ordinary shares outstanding as of June 30, 2023.
• The company's revenue increased by 27.3% from year-end 2022 to year-end 2023.
• The company experienced a net loss of A$3,891,586 and net cash used in operating activities of A$2,260,971 for the year ended June 30, 2023.
• The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
• As of June 30, 2023, the outstanding balance of the ASX Convertible Notes totaled A$301,600.
• The company is working to pay off its outstanding obligations under the ASX Convertible Notes.
• The company may offer and sell ordinary shares through H.C. Wainwright & Co., LLC, as sales agent, under an at-the-market offering agreement.
• As of June 30, 2023, the company had sold 245,010 ordinary shares under the Sales Agreement at a weighted average exercise price of $9.14 per share, which resulted in net proceeds of approximately $2,168,910 to the company, after deducting sales commissions and expenses payable by the company.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue increased, the company is still operating at a loss and faces significant challenges, including doubts about its ability to continue as a going concern. The need for additional capital raises further underscores the financial strain.

Positives

• Revenue increased by 27.3% from year-end 2022 to year-end 2023.
• Subscription revenues grew 26.8% to A$4,020,241.
• Data revenues increased by 34.1% to A$871,502.
• The company is actively working to pay off its outstanding obligations under the ASX Convertible Notes.
• The company has an at-the-market offering agreement with H.C. Wainwright & Co., LLC, and has sold 245,010 ordinary shares under the Sales Agreement at a weighted average exercise price of $9.14 per share, which resulted in net proceeds of approximately $2,168,910 to the company, after deducting sales commissions and expenses payable by the company.
• There was an increased focus on debtor collections during the year ended June 30, 2023, incorporating among other things, a greater involvement from account managers (e.g., linking commissions to collections), referrals to external debt collections agencies and the increased collection of customer credit card and direct debit details.

Negatives

• The company reported a net loss of A$3,891,586 for the year ended June 30, 2023.
• Net cash used in operating activities was A$2,260,971 for the year ended June 30, 2023.
• Auditors have expressed substantial doubt about the company's ability to continue as a going concern.
• The company has outstanding ASX Convertible Notes with a balance of A$301,600 as of June 30, 2023.
• The company may need additional capital, and financing may not be available on terms acceptable to us, or at all.

Risks

• The company's recent growth may not be indicative of future growth.
• The market is competitive and rapidly changing.
• The company relies on third-party services and technologies.
• Failure to manage growth effectively could impact business.
• The company faces cybersecurity risks.
• The COVID-19 endemic and its continuing effects could adversely affect the business.
• The company's business is subject to economic, political, regulatory, and other risks associated with international operations.
• The company may lose its foreign private issuer status, which could result in additional costs and expenses.
• The company may fail to maintain an effective system of internal control over financial reporting.
• Substantial future sales of ordinary shares could cause the price to drop significantly.
• The company does not anticipate paying cash dividends.
• Failure to meet continued listing requirements of Nasdaq could result in delisting.
• U.S. civil liabilities may not be enforceable against the company, its directors, or officers.
• The market price of the company's securities may be volatile, which could result in substantial losses.
• The company's outstanding obligations under the ASX Convertible Notes may adversely affect our cash flow and our ability to operate our business.

Future Outlook

The company expects to finance its future cash needs through public or private equity offerings, debt financings, government subsidies and research and development grants, and business development transactions.

Industry Context

The document mentions the competitive and rapidly evolving market for AI, including chatbots, machine learning, and generative AI workloads, and the company's need to adapt to and capture new spending in this market.

Stakeholder Impact

• Shareholders face the risk of potential dilution from future equity offerings.
• Employees face uncertainty due to the company's going concern status and potential need for cost reductions.
• Customers may be concerned about the company's long-term viability and ability to provide ongoing services.
• Creditors face the risk of potential default on outstanding debt obligations.

Next Steps

• The company plans to progressively pay down the outstanding balance of the ASX Convertible Notes as its financial capacity allows.
• The company will continue to monitor and address the material weaknesses in its internal control over financial reporting.
• The company will continue to execute its at-the-market offering agreement with H.C. Wainwright & Co., LLC.

Key Dates

Keywords

Locafy Limited, Form 20-F, Amendment, Financial Results, Liquidity, Going Concern, Convertible Notes, SEC Comments, Risk Factors, Revenue, Net Loss, ASX Convertible Notes, Share Offering, H.C. Wainwright, Auditor Opinion