Amendment: SEC Form 20-F/A filed by Locafy Limited

3.1 General information

The financial statements cover Locafy Limited as a consolidated entity consisting of Locafy Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Locafy Limited’s functional and presentation currency.

A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorized for issue, in accordance with a resolution of directors, on November 12, 2024.

3.2 Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).

Historical cost convention

The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments.

Going concern basis

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The Consolidated Entity and Company have incurred a net loss after tax of $2,988,469 and experienced net cash outflows from operating activities of $1,112,902 for the year ended 30 June 2024.

As at 30 June 2024, the Consolidated Entity and Company had cash assets of $275,875 and reported current liabilities exceed its current assets by $1,033,667. During July 2024, the Company sold 70,708 ordinary shares for total gross proceeds of US$554,428. Following this capital raise, on a proforma basis as of 1 July 2024, the Consolidated Entity and Company has cash assets of $1,097,689 and current liabilities exceed current assets by $211,853.

The Consolidated Entity and Company’s ability to continue as going concerns and to pay their debts as and when they fall due is dependent on generating additional revenues from its operations, managing all costs in line with management’s forecasts and, if necessary, raising further capital. Management have prepared a cash flow forecast on this basis which indicates that the Consolidated Entity will have sufficient cash flows to meet minimum operating overheads and committed expenditure requirements for the 12 month period from the date of signing the financial report if they are successful in meeting those forecasts.

The Directors believe the Consolidated Entity and Company will continue as a going concern, after consideration of the following factors:

The financial report has therefore been prepared on the going concern basis. Should the Consolidated Entity and the Company be unable to achieve successful outcomes in relation to each of the matters referred to above, there is substantial doubt whether the Consolidated Entity and the Company will be able to continue as a going concern and, therefore, whether they will realise their assets and discharge their liabilities in the normal course of business.

The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts, nor to the amounts and classification of liabilities that might be necessary should the Consolidated Entity and the Company not continue as a going concern.

3.3 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the group are eliminated in full on consolidation.

3.4 Segment Reporting

The Company has two operating segments: publishing and SEO agency. In identifying these operating segments, management generally follows the Company’s service lines representing its main products and services (see Note 7). Each of these operating segments are managed separately as each requires different technologies, marketing approach and other resources.

3.5 Revenue

Overview

Revenue arises mainly from the sale of digital marketing solutions and associated services. To determine whether to recognise the revenue, the Company follows a 5-step process:

The Company often enters into transactions involving a range of the Company’s products and services, for example for the delivery of software and related after-sales support.

In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties.

Revenue is recognised either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers.

The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position (see Note 20). Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

Consideration received can be variable in nature, based upon customer usage in excess of contractually agreed units. The variable consideration is included in the transaction price at the company’s best estimate, using either an expected value or most likely outcome, whichever provides the best estimate and is included in revenue to the extent that it is highly probable that there will be no significant reversal of the cumulative amount of revenue when any price uncertainty is resolved.

Revenue from operating segments

The Company operates two segments: Publishing and SEO Agency, with the key differentiation being website ownership. Under the Publishing segment are products and services that the Company offers that are related to digital properties (i.e. mastheads) that it owns e.g. business data published on Hotfrog, advertising placed on AussieWeb, articles published on scoop.com.au. In contrast, under the SEO Agency segment are products and services that are applied to digital properties that are owned and operated by third parties

Revenue from products and services

Subscriptions

Revenues from the sale of product licences are recognised during the period in which the subscription is made available to our customers for use. The SaaS and related support revenue (if any) is recognised over time, being the subscription period, as the customer simultaneously receives and consumes the benefit of accessing product licences.

Access to the product licence is not considered distinct from other performance obligations, as access to any product licence alone does not allow the customer to obtain substantially all the benefits of the access, and is therefore accounted for as a single performance obligation.

Advertising

We own and operate a network of more than 60 million web pages. The vast majority of these web pages are related to business directories; however, we are focused on increasing the number of article web pages as the content for these types of web pages a generally more “rich” and therefore more engaging for readers. In situations where a web page is published for free (i.e. non-sponsored content) we may choose to monetize those pages through advertising placements. Advertising revenue is generally derived on a Pay-Per-Impression or similar basis and recognised during the period in which the advertisements are published.

Services

Where the Company provides services which involve developing a customer-specific website design or solution, in such cases, revenue is recognised during the period in which the professional services were delivered or upon the achievement of agreed performance obligations.

3.6 Foreign currencies

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (A$), which is the functional currency of the Company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

3.7 Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments.

3.8 Employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

3.9 Share-based payments arrangements

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or service received, except where that fair value cannot be estimated reliably, in which case they are measured at their fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Performance rights

Share-based compensation benefits are provided to employees via the Company’s Incentive Performance Rights Plan (Plan). The objective of the Plan is to assist in the recruitment, reward, retention and motivation of eligible persons of the Group. The fair value of performance rights granted under the Plan are recognized as a share-based payment expense with a corresponding increase in equity.

The fair value is measured at grant date and recognized over the period of service during which the employees become unconditionally entitled to the performance rights. The fair value of the performance rights at grant date excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). These non-market vesting conditions are included in assumptions about the number of performance rights that are expected to vest.

At each statement of financial position date, the entity revises its estimate of the number of performance rights that are expected to vest. The share-based payment expense recognized each period considers the most recent estimate. The impact of the revision to original estimates, if any, is recognized in the statement of profit or loss and other comprehensive income with a corresponding adjustment to equity.