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证券 交易委员会

华盛顿， 特区20549

形式 20-F

（马克 一）

或

为 日终了的财政年度 6月30日, 2023

或

或

日期 需要该空壳公司报告的事件：_

委员会 文件号： 001-41333

洛克菲 有限

（确切的 章程中规定的注册人名称）

洛克菲 有限

246 丘吉尔大道

Subiaco WA 6008, 澳大利亚

+61 409 999 339

（地址 主要行政办公室）

加文 伯内特

洛克菲 有限

246 丘吉尔大道

Subiaco WA 6008, 澳大利亚

电话： +61 409 999 339

(Name, 公司联系人的电话、电子邮件和/或传真号码和地址）

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TABLE OF CONTENTS¹

BASIS OF PRESENTATION

Except as otherwise indicated, references in this Annual Report on Form 20-F (“Annual Report”) to “Locafy,” the “Company,” the “Group,” “we,” “us” and “our” refer to Locafy Limited, a company incorporated under the laws of Australia, and its directly owned subsidiary on a consolidated basis.

We express all amounts in this Annual Report in U.S. dollars, except where otherwise indicated. References to “$” and “US$” are to U.S. dollars and references to “A$” are to Australian dollars. Except as otherwise noted, conversions from Australian dollars into U.S. Dollars were made at the rate of A$1.0000 to US$0.6630, which was the daily exchange rate published by the Reserve Bank of Australia on June 30, 2023.

We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

On December 7, 2022, our shareholders approved, at a general meeting of shareholders, a 1-for-20 reverse share split (the “Reverse Share Split”) of our outstanding ordinary shares and warrants (the “IPO Warrants”) issued in connection with our initial public offering in the United States, effective as of 11:00 a.m. (Australia time). Except as otherwise indicated, all share and per share information in this Annual Report gives effect to the Reverse Share Split.

PRESENTATION OF FINANCIAL INFORMATION

We report under International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). None of the financial statements were prepared in accordance with generally accepted accounting principles in the United States. We present our financial statements in Australian dollars.

The consolidated financial statements and accompanying notes thereto presented in this Annual Report have been audited by Grant Thornton Audit Pty Ltd, our independent registered public accounting firm.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements are contained principally in the sections entitled “Risk Factors”, “Operating and Financial Review and Prospects”, “Business Overview” and “Business”. Forward-looking statements can often be identified by the use of terminology such as “subject to”, “believe,” “anticipate,” “plan,” “expect,” “intend,” “estimate,” “project,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and similar expressions, or by discussions of strategy. Forward-looking statements are any statements that look to future events and include, but are not limited to, statements regarding our business strategy; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth; our ability to attract new clients to purchase our solution; our strategy of expanding our business through strategic acquisitions and to integrate such acquisitions with our business and personnel; our ability to retain customer base and induce them to license additional products; our ability to accurately forecast future revenues and appropriately plan our expenses; market acceptance of our solutions; our expectations regarding implementation of remedial measures; our expectations regarding future revenues generated by our solutions; our ability to attract and retain qualified employees and key personnel; and the impact of the novel coronavirus (COVID-19) endemic and its ongoing effects on our business, results of operations, cash flows, financial condition and liquidity.

Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

The forward-looking statements contained in this Annual Report are based on current expectations, assumptions, and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments will be those that have been assumed or anticipated. These forward-looking statements are subject to a number of risks and uncertainties (some of which are beyond our control) that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors”. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. The forward-looking statements contained in this Annual Report represent our expectations as of the date of this Annual Report (or as the date they are otherwise stated to be made) and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

PART I

A. Directors and Senior Management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.

Not applicable.

A. [Reserved]

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

RISK FACTOR SUMMARY

Investing in our securities is speculative and involves substantial risk. You should carefully consider all of the information in this Annual Report prior to investing in our securities. There are numerous risk factors related to our business that are described under “Risk Factors” on page 8 and elsewhere in this Annual Report. These risks could materially and adversely impact our business, results of operations, financial condition and future prospects, which could cause the trading price of our ordinary shares to decline and could result in a loss of your investment. Among these important risks are the following:

As a result of these risks and other risks described under “Risk Factors,” there is no guarantee that we will experience growth or profitability in the future.

RISK FACTORS

You should consider carefully the following risk factors, as well as the other information in this Annual Report, including our financial statements and notes thereto. If any of the following risks were to actually occur, our business, financial conditions, results of operations and prospects could be materially adversely affected and the value of our securities could decline. The risks and uncertainties described below in this Annual Report for the year ended June 30, 2023, are not the only risks facing us. We may face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. See “Cautionary Note Regarding Forward-Looking Statements.”

Risks Relating to our Business and Industry

Our recent growth may not be indicative of our future growth, and we may not be able to sustain our revenue growth rate in the future. Our growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have experienced growth since the inception of our operations. Our revenue increased by 27.3% from year- end 2022 to year-end 2023. However, you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. We cannot assure you that we will be able manage our growth at the same rate as we did in the past, or avoid any decline in the future. To maintain our growth, we need to attract more customers, scale up our business and continue to improve our technology, among other things. Moreover, our current and planned staffing, systems, policies, procedures and controls may not be adequate to support our future operations. To effectively manage the expected growth of our operations and personnel, we will also be required to refine our operational, financial and management controls and reporting systems and procedures. If we fail to efficiently manage the expansion of our business, our costs and expenses may increase faster than we planned and we may not successfully attract a sufficient number of customers and end users in a cost-effective manner, respond timely to competitive challenges, or otherwise execute our business strategies. Our growth requires significant financial resources and will continue to place significant demands on our management. There is no guarantee that we will be able to effectively manage any future growth in an efficient, cost-effective and timely manner, or at all. Our past growth is not necessarily indicative of results that we may achieve in the future. If we fail to effectively manage the growth of our business and operations, our reputation, results of operations and overall business and prospects could be negatively impacted.

The market and technology space in which we participate are competitive, new, and rapidly changing, and if we do not compete effectively, introduce new features or products successfully, make enhancements to our existing products and services, or if our products and services do not perform as well as our competitors’, then our business, results of operations, and financial condition could be harmed.

Our market is subject to rapidly evolving products and technological change, and our future success depends on our technology. Products, services and technologies developed by others may render our products, services or technology obsolete or non-competitive. To attract new customers and end users and keep our existing ones engaged, we must introduce new products and services and upgrade our existing offerings to meet their evolving preferences. It is difficult to predict the preferences of a particular customer or a specific group of customers. Changes and upgrades to our existing products may not be well received by our customers and end users, and newly introduced products or services may not achieve success as expected. Moreover, the functionality, reliability or security of our technology or our ability to adequately maintain, develop, update or enhance our technology each depends on numerous factors, many of which are beyond our control, and any failure in respect of any of the foregoing may cause the level of usage and customer satisfaction to decline. This may result in reduced sales, loss of customers, damage to reputation, an inability to attract new clients and potential claims for breach of contract or other litigation.

Our future revenue and growth also depends on our ability to develop enhancements, new features and products, and services that utilize our technology. Enhancements, new features and products, and services that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our platform or other products and services or may not achieve the broad market acceptance necessary to generate significant revenue. The failure to successfully develop enhancements, services, features, products or other new solutions may materially adversely impact our future operations and financial performance, competitive position and business prospects.

Additionally, the market for generative artificial intelligence (“AI”), including “chatbots”, machine learning, and generative AI workloads is an intensely competitive and rapidly evolving market, and our future financial performance may depend on our ability to adapt to, and capture new spending, in this market. If more consumers utilize AI and AI-related technology to search for online content, or if we do not successfully integrate AI with our solutions and products or integrate AI with our solutions as rapidly or effectively as other competitors within our industry, search traffic volumes through traditional search engines may decline, and our solutions and products may not compete as effectively with AI or other available solutions, which may in turn have a negative impact on our business and financial condition.

We use third-party services and technologies in connection with our business, and any disruption to the provision of these services and technologies to us could result in negative publicity and a slowdown in the growth of our user base, which could materially and adversely affect our business, financial condition and results of operations.

Our business depends, in part, on services provided by, and relationships with, various third parties. For example, we rely on contracts with third-party suppliers such as Cloudflare, Inc. (“Cloudfare”), which provides cloud hosting services. If these contracts and services are terminated or suffer a disruption in the future and we are not able to replace or accommodate for those events in a timely and cost-effective manner, our operations and financial performance, competitive position and business prospects may be adversely impacted.

We are faced with uncertainties related to our research and development.

Our products and services are the subject of continuous research and development and must be continually and substantially developed in order to gain and maintain competitive and technological advantage, and in order to meaningfully improve the usability, scalability and accuracy of our products and services. There are no guarantees that we will be able to undertake such research and development successfully or cost effectively. Failure to successfully undertake such research and development, anticipate technical problems, or estimate research and development costs or timeframes accurately may adversely affect our results and viability.

We may be unable to execute our business plans or maintain high levels of service and customer satisfaction, which may adversely affect our business, operating results or financial condition.

To continue to grow our business, it is important that existing customers renew their subscriptions when existing contracts expire and that we expand our relationships with existing customers. Customers have no obligation to renew their subscriptions and may decide not to renew their subscriptions with a similar contract period, at the same prices and terms, or at all. In the past, some of our customers have elected not to continue to use our services. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality technical support, could adversely affect client retention, our reputation, our ability to sell our applications to existing and prospective clients, and, as a result, our business, operating results or financial condition. Our ability to retain customers and expand deployments with them may decline or fluctuate as a result of a number of factors, including customer satisfaction, functionality, reliability, customer support, prices, competitor prices, customer experience, new feature releases and overall performance of our technology.

Further, our solutions are inherently complex and may in the future contain, or develop, undetected defects or errors. Any defects in our platform could adversely affect our reputation, impair our ability to sell our applications in the future and result in significant costs to us. The costs incurred in correcting any platform defects may be substantial and could adversely affect our business, operating results or financial condition.

Our growth strategy is largely dependent upon increasing the number of customers that use our technology. As we seek to increase our sales, we may face upfront sales costs and longer sales cycles, higher customer acquisition costs, more complex customer requirements and volume discount requirements. We may also be required to enter into customized contractual arrangements with certain customers, particularly large enterprises, pursuant to which we are required to offer more favorable pricing terms in exchange for larger total contract values that accompany large deployments. As we continue to expand our sales efforts, we will need to continue to increase investment in sales and marketing. There is no assurance that such investments will succeed and contribute to additional customer acquisition, and in turn result in revenue growth.

There can be no assurance that we will successfully commercialize our technology or our products and services or that existing product markets will continue to grow or that new markets will develop. If we are unable to increase sales to customers, our business, financial condition, operations and overall financial performance may suffer.

We will face additional risks as we offer new products and services, transact with a broader array of clients and counterparties, and expose ourselves to new geographical markets.

We are committed to providing new products and services in order to strengthen our market position in the industries that we operate in. We expect to expand our product and service offerings as permitted by relevant regulatory authorities, transact with new clients not in our traditional client base, and enter into new markets. If we are unable to achieve the expected results with respect to our offering of new products and services, our new client base, and in new geographical markets, our business, financial condition, and results of operations could be materially and adversely affected.

We may not be able to successfully identify, consummate or integrate acquisitions, and acquisitions may adversely affect our financial leverage.

Part of our business strategy may, from time to time, include pursuing synergistic acquisitions. We have expanded, and plan to continue to expand, our business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance our growth. In September 2022 and June 2023, we acquired technology assets from Jimmy Kelley Digital, a marketing firm headquartered in Austin, Texas. We may fund such acquisitions using cash on hand or accessing the capital markets. To the extent we finance such acquisitions with debt, the incurrence of such debt may result in a significant increase in our interest expense and financial leverage.

Further, the pursuit of acquisitions may pose certain risks to us. We may not be able to identify acquisition candidates that fit our criteria for growth and profitability. Even if we are able to identify such candidates, we may not be able to acquire them on terms or financing satisfactory to us. We will incur expenses and dedicate attention and resources associated with the review of acquisition opportunities, whether or not we consummate such acquisitions.

Additionally, even if we are able to acquire suitable targets on agreeable terms, we may not be able to successfully integrate their operations with ours. Achieving the anticipated benefits of any acquisition will depend in significant part upon whether we integrate such acquired businesses and personnel, as the case may be, in an efficient and effective manner. We may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of our acquisitions within the anticipated timing or at all. For example, elimination of duplicative costs may not be fully achieved or may take longer than anticipated. The benefits from any acquisition may be offset by the costs incurred in integrating the businesses and operations. We may also assume liabilities in connection with acquisitions to which we would not otherwise be exposed. An inability to realize any or all of the anticipated synergies or other benefits of an acquisition as well as any delays that may be encountered in the integration process, which may delay the timing of such synergies or other benefits, could have an adverse effect on our business, results of operations and financial condition.

Real or perceived errors, failures, vulnerabilities, or bugs in our technology could harm our business, results of operations, financial condition, and our reputation could be harmed.

We will need to ensure that our technology continues to be developed, updated and enhanced to add new features. The success of any enhancement or new feature depends on several factors, including our understanding of market demand, timely execution, successful introduction or integration and market acceptance. We may not successfully develop new content and features or enhance our technology to meet customer needs or demands. In addition, new content and features or enhancements may not achieve adequate acceptance in the market.

Errors, failures, vulnerabilities or bugs may occur in our technology, particularly when updates are deployed or new features or enhancements are rolled out. In addition, utilization of our technology in complicated, large-scale customer environments may expose errors, failures, vulnerabilities or bugs. Any such errors, failures, vulnerabilities or bugs may not be identified until after updates are deployed or new features or enhancements are rolled out. As a provider of technology solutions, our brand and reputation are particularly sensitive to such errors, failures, vulnerabilities or bugs given that our customers’ proprietary information will be available through the technology. Any unauthorized access to customers’ proprietary information by third parties or loss in customer data could expose us to significant liability.

Real or perceived errors, failures, vulnerabilities or bugs in our technology could result in negative publicity, loss of competitive position, loss of customer data, loss of or delay in market acceptance or claims for losses suffered or incurred by customers, all of which could adversely impact our business and our future operations and financial performance, competitive position and business prospects.

If there are interruptions or performance problems associated with the technology or infrastructure used to operate our technology, customers may experience service outages, other organizations may be reluctant to use our technology, and our reputation could be harmed.

Our technology is hosted through data centers provided by Cloudflare, a provider of cloud infrastructure services. Our operations therefore depend on the virtual cloud infrastructure hosted by Cloudflare as well as the information stored in these virtual data centers and which third-party Internet service providers transmit. Any incident affecting Cloudflare’s infrastructure could negatively affect the availability, functionality or reliability of our technology. A prolonged Cloudflare service disruption affecting our technology, or Cloudflare no longer being willing to offer its cloud infrastructure services, for example, could damage our reputation, expose us to liability, cause us to lose customers or otherwise adversely impact our business.

While our agreement with Cloudflare is ongoing for an indefinite term and may be terminated by us for any reason upon the delivery of adequate notice, or by either party if the other party is in material breach of the agreement and such agreement remains uncured for a period of 30 days, Cloudflare may also terminate our agreement at its sole discretion at any time, with or without notice for any reason or no reason at all. Cloudflare may also change or discontinue any of its virtual cloud infrastructure services from time to time, temporarily suspend our right to access or use any portion of the virtual cloud infrastructure, and may modify our agreement at any time upon requisite notice to us. While alternative cloud infrastructure services are available, we may incur significant costs and delays if we are required to transition to a new service provider, and alternative cloud infrastructure providers may provide services on terms less favorable to those offered by Cloudflare.

We face cybersecurity risks that could result in damage to our reputation and/or subject us to fines, payment of damages, lawsuits and restrictions on our use of data.

Our information systems and data, including those we maintain with our third-party service providers, may be subject to cybersecurity breaches in the future. Computer programmers and hackers may be able to penetrate our network security and misappropriate, copy or pirate our confidential information or that of third parties, create system disruptions or cause interruptions or shutdowns of our internal systems and services. Our technology may become subject to denial-of-service attacks, where a website is bombarded with information requests eventually causing the website to overload, resulting in a delay or disruption of service. Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. Certain of our employees have access to sensitive information about our clients’ employees. While we conduct background checks of our employees and limit access to systems and data, it is possible that one or more of these individuals may circumvent these controls, resulting in a security breach.

There is also a growing trend of advanced persistent threats being launched by organized and coordinated groups against corporate networks to breach security for malicious purposes.

The techniques used to obtain unauthorized, improper, or illegal access to our systems, our data or customers’ data, disable or degrade service, or sabotage systems are constantly evolving and have become increasingly complex and sophisticated, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched. Although we have developed systems and processes designed to protect our data and customer data and to prevent data loss and other security breaches and expect to continue to expend significant resources to bolster these protections, there can be no assurance that these security measures will provide absolute security. Any actual or perceived breach of our security could damage our reputation, cause existing clients to discontinue the use of our solution, prevent us from attracting new clients, or subject us to third-party lawsuits, regulatory fines or other actions or liabilities, any of which could adversely affect our business, operating results or financial condition.

Disruptions in the availability of our technology, through cyber-attacks or otherwise, could damage our computer or telecommunications systems, impact our ability to service our customers, adversely affect our operations and the results of operations, and have an adverse effect on our reputation. The costs to us to eliminate or alleviate security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and the efforts to address these problems could result in interruptions, delays, cessation of service and loss of existing or potential customers and may impede our sales, distribution and other critical functions. We may also be subject regulatory penalties and litigation by customers and other parties whose information has been compromised, all of which could have a material adverse effect on our business, results of operations and cash flows.

If we are unable to attract new users and organizations, our revenue growth and profitability will be harmed.

Our ability to broaden our customer base and achieve broader market acceptance of our technology will depend to a significant extent on the ability of our sales and marketing team to drive our sales pipeline and cultivate relationships to drive revenue growth.

We have invested in, and plan to continue, expanding our sales and marketing activities. Identifying, recruiting, and training sales personnel will require significant time, expense, and attention. We also plan to dedicate significant resources to sales and marketing programs. If we are unable to hire, develop, and retain talented sales or marketing personnel, if our new sales or marketing personnel are unable to achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to broaden our customer base and achieve broader market acceptance of our technology could be harmed. In addition, the investments we make in our sales and marketing team will occur in advance of experiencing benefits from such investments, making it difficult to determine in a timely manner if we are efficiently allocating resources in these areas.

If we fail to offer a high-quality customer experience, our business and reputation will suffer.

Our business model is based on recurring revenue arising from customers. A poor user experience may not necessarily be anticipated but may affect the growth of customer numbers and repeat purchases or ongoing contracts for the use of our software services. Factors that may contribute to poor customer experience include:

Poor user experiences may result in a decline in the level of usage of our products, the loss of customers, adverse publicity, litigation and regulatory investigations. If any of these occur, it may adversely impact our operations and financial performance, position and prospects.

Any inability to deal with and manage our development and growth could have a material adverse effect on our business, operations, financial performance and business prospects.

Achievement of our objectives will largely depend on the ability of the board of directors and management to successfully implement our development and growth strategy. However, there can be no assurance that our board of directors and management will successfully implement our development and growth strategy. Failure by our board of directors and management to properly implement and manage the strategic direction of the Company and our business would adversely affect our financial performance.

As we target rapid sales growth, this may bring challenges in recruiting sufficient qualified personnel to manage growth and maintain the desired quality of service and support. If any of the foregoing inabilities or challenges occurs, our business may be adversely impacted.

Failure to set optimal prices for our products could adversely impact our business, results of operations and financial condition.

We derive substantially all of our revenue from license subscription fees earned from customers using our technology as well as from advertising fees earned from customers publishing their content on our digital property network. We also offer tiered, volume-based discounts to our largest customers and in some cases, customers are contracted to some level of minimum revenue commitment. If competitors introduce new products or services at prices that are more competitive than ours for similar products and services, we may be unable to attract new customers or retain existing customers based on our historical pricing. Further, as we expand internationally, we also must determine the appropriate price to enable us to compete effectively internationally. As a result, in the future we may be required or choose to reduce our prices or change our pricing model, which could adversely affect our business, results of operations and financial condition.

We cannot guarantee that our future monetization strategies will be successfully implemented or generate sustainable revenues and profit.

We have developed a diversified revenue model and plan to explore additional opportunities to monetize our customer base and technology by, for example, promoting additional value-added services to end users to generate more subscription fees. If these efforts fail to achieve our anticipated results, we may not be able to increase or maintain our revenue growth. Specifically, in order to increase the number of our customers and end users and their levels of spending, we will need to address a number of challenges, including providing consistent quality products and services; continuing to innovate and stay ahead of our competitors; and improving the effectiveness and efficiency of our sales and marketing efforts. If we fail to address any of these challenges, we may not be successful in increasing the number of our customers and end users and their expenditures with us, which could have a material adverse impact on our business, financial condition and results of operations.

We have been reliant on government subsidies and research and development grants in the past and we cannot ensure that our existing capital will be sufficient to meet our capital requirements.

To date, a substantial but declining portion of our operations have been funded through government subsidies and research and development grants. Such subsidies and grants accounted for 8.9% and 14.5% of the sum of our revenue and other income (referred to herein as “total income”) for the years ended June 30, 2023 and June 30, 2022, respectively. We expect to generate revenues primarily through license subscription fees from our customer-base and through the acquisition of additional online directories and databases to grow the number of business profiles within our network and hence the opportunity to generate increased advertising revenues.

We believe that our existing capital and other sources of liquidity will be sufficient to meet our capital requirements, however, the adequacy of our available funds to meet our operating and capital requirements will depend on many factors, including our ability to achieve revenue growth and maintain favorable operating margins; the cost, progress and results of our future research and product development; the effect of competing technological and market developments; and costs incurred in enforcing and defending certain of the patents and other intellectual property rights upon which our technologies are based, to the extent such rights are challenged.

We cannot be certain that in the future alternative financing sources, including previously received government subsidies and research and development grants, will be available to us at such times or in the amounts we need or whether we can negotiate commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. If we are unable to obtain future financing through the methods we described above or through other means, our business may be materially impaired and we may be unable to complete our business objectives and may be required to cease operations, curtail one or more product development or commercialization programs, significantly reduce expenses, sell assets, seek a merger or joint venture partner, file for protection from creditors or liquidate all our assets. Additionally, though we have engaged qualified external consultants to assist us with the preparation of our grant applications, our government subsidies remain subject to review and potential audits, and we may be required to repay all or portion of the grant with penalties, as applicable, if we are deemed ineligible for such subsidies following such audits.

If we are not able to maintain and enhance our brand and increase market awareness of our company and products, our business, results of operations and financial condition may be adversely affected.

We believe that maintaining and enhancing the “Locafy” brand identity and increasing market awareness of our company and products, is critical to achieving widespread acceptance of our platform, to strengthen our relationships with our existing customers and to our ability to attract new customers. The successful promotion of our brand will depend largely on our continued marketing efforts, our ability to continue to offer high quality products, and our ability to successfully differentiate our products and platform from competing products and services. Our brand promotion activities may not be successful or yield increased revenue.

Negative publicity about us, our products or our platform could materially and adversely impact our ability to attract and retain customers, our business, results of operations and financial condition.

The promotion of our brand also requires us to make substantial expenditures, and we anticipate that these expenditures will increase as our market becomes more competitive and as we expand into new markets. To the extent that these activities increase revenue, this revenue may not be enough to offset the increased expenses we incurred. If we do not successfully maintain and enhance our brand, our business may not grow, our pricing power may be reduced relative to our competitors and we may lose customers, all of which would adversely affect our business, results of operations and financial condition.

Compliance with the rapidly evolving landscape of global data privacy and security laws may be challenging, and any failure or perceived failure to comply with such laws, or other concerns about our practices or policies with respect to the processing of personal data, could damage our reputation and deter current and potential customers and end users from using our platform and products and services or subject us to significant compliance costs or penalties, which could materially and adversely affect our business, financial condition and results of operations.

Failure to comply with the increasing number of data protection laws in the jurisdictions in which we operate, as well as concerns about our practices with regard to the collection, use, storage, retention, transfer, disclosure, and other processing of personal data, the security of personal data, or other privacy-related matters, such as cybersecurity breaches, misuse of personal data and data sharing without necessary safeguards, including concerns from our customers, employees and third parties with whom we conduct business, even if unfounded, could damage our reputation and operating results. As we seek to expand our business, we are, and may increasingly become, subject to various laws, regulations and standards, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory and legal frameworks regarding data privacy and security issues in many jurisdictions are constantly evolving and developing and can be subject to significant changes from time to time, including in ways that may result in conflicting requirements among various jurisdictions. Interpretation and implementation standards and enforcement practices are similarly in a state of flux and are likely to remain uncertain for the foreseeable future. As a result, we may not be able to comprehensively assess the scope and extent of our compliance responsibility at a global level and we may fail to fully comply with the applicable data privacy and security laws, regulations and standards. Moreover, these laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material and adverse impact on our business, financial condition and results of operations.

In certain jurisdictions in which we operate, stringent, extra-territorial data protection laws exist which increase our compliance burden and the risk of scrutiny. For example, the General Data Protection Regulation (EU) 2016/679 (“GDPR”), which applies to the collection, use, storage, retention, transfer, disclosure, and other processing of personal data obtained from individuals located in the European Union (“EU”) and in the United Kingdom (“UK”) or by businesses operating within the EU or the UK, became effective on May 25, 2018 and has resulted, and will continue to result, in significantly greater compliance burdens and costs for companies with customers, end users, or operations in the EU. The GDPR, which in post-Brexit UK is known as the “UK GDPR,” places stringent obligations and operational requirements on us as both a processor and controller of personal data and could make it more difficult or more costly for us to use and share personal data. Under the GDPR, data protection supervisory authorities are given various enforcement powers, including levying fines of up to 20 million Euros or up to 4% of an organization’s annual worldwide turnover, whichever is greater, for the preceding financial year, for non-compliance. Data subjects also have the right to be compensated for damages suffered as a result of a controller or processor’s non-compliance with the GDPR. While the GDPR provides a more harmonized approach to data protection regulation across the EU member states and the UK, it also gives EU member states and the UK certain areas of discretion and therefore laws and regulations in relation to certain data processing activities may differ on a member state by member state basis, which could further limit our ability to use and share personal data and could require localized changes to our operating model. In addition to the GDPR, the EU also has released a proposed Regulation on Privacy and Electronic Communications, or the ePrivacy Regulation, to replace the EU’s current Privacy and Electronic Communications Directive, or the ePrivacy Directive, to, among other things, better align EU member states and the rules governing online tracking technologies and electronic communications, such as unsolicited marketing and cookies, with the requirements of the GDPR. While the ePrivacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is currently going through the European legislative process, and commentators now expect it to be adopted after 2024. The current draft of the ePrivacy Regulation significantly increases fining powers to the same levels as GDPR and may require us to change our operational model and incur additional compliance expenses. Additional time and effort may need to be spent addressing the new requirements in the potential ePrivacy Regulation as compared to the GDPR.

Under the GDPR, restrictions are placed on transfers of personal data outside of the European Economic Area and the UK to countries which have not been deemed “adequate” by the European Commission (including the United States). As a global business, with customers and end users worldwide, we are susceptible to any changes in legal requirements affecting international data flows. On July 10, 2023, the European Commission adopted its adequacy decision for the new EU-US Data Privacy Framework following the invalidation of its predecessor, the EU-US Privacy Shield. This decision re-established a previously popular mechanism to legitimize cross-border transfers of personal data between the EU and the U.S. The new Data Privacy Framework was immediately challenged in the EU courts, just as Privacy Shield was, and it is unclear whether the new Framework will survive judicial review. While the invalidation of Privacy Shield did not invalidate the use of standard contractual clauses, a second mechanism for making lawful cross-border transfers, the decision has called the validity of standard contractual clauses into question under certain circumstances. In response, the European Data Protection Board and the UK Information Commissioner’s Office recently published new versions of the standard contractual clauses that purport to address the CJEU’s decision. Taken together, these recent legal developments have made the legality of transferring personal data from the EU to the U.S. or various other jurisdictions outside of the EU more uncertain. Due to this evolving regulatory guidance, we may need to invest in additional technical, legal and organization safeguards in the future to avoid disruptions to data flows within our business and to and from our customers and service providers. Furthermore, this uncertainty, and its eventual resolution, may increase our costs of compliance, impede our ability to transfer data and conduct our business, and harm our business or results of operations.

Outside of the EU and UK, many jurisdictions have adopted or are adopting new data privacy and security laws, which may result in additional expenses to us and increase the risk of non-compliance. For example, in the United States, various federal and state regulators, including governmental agencies like the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal data and data security. This patchwork of legislation and regulation may give rise to conflicts or differing views of personal privacy rights. For example, certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal data than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. One such comprehensive privacy law in the United States is the California Consumer Privacy Act (“CCPA”), which came into effect on January 1, 2020. Among other things, the CCPA requires companies that process information of California residents to make new detailed disclosures to consumers about such companies’ data collection, use and sharing practices, gives California residents expanded rights to access and delete their personal information, and to opt out of certain personal information sharing with (and sales of personal information to) third parties. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal data. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. The CCPA was amended in September 2018, November 2019 and September 2020, and it is possible that further amendments will be enacted, but even in its current form it remains unclear how various provisions of the CCPA will be interpreted and enforced. Additionally, a new privacy law, the California Privacy Rights Act (“CPRA”), which took take effect in most material respects on January 1, 2023, modifies the California Consumer Privacy Act significantly, including by expanding consumers’ rights with respect to certain sensitive personal information and creating a new state agency to oversee implementation and enforcement efforts, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. Other state privacy laws with similarities to the CCPA, such as the Colorado Privacy Act, the Utah Consumer Privacy Act, and the Virginia Consumer Data Privacy Act, will come into force in 2023. Connecticut, Iowa, Indiana, Tennessee, Oregon, Montana and Texas have each recently passed their own general consumer privacy laws, which will come into force in 2024 and 2025, and there have been ongoing discussions and proposals in the U.S. Congress with respect to new federal data privacy and security laws to which we would become subject if enacted. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may require us to modify our data processing practices and policies, divert resources from other initiatives and projects, and could restrict the way products and services involving data are offered, all of which may have a material and adverse impact on our business, financial condition and results of operations.

In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to time. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards. We expect that there will continue to be new proposed laws and regulations concerning data privacy and security, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws, regulations, standards and other obligations may require us to incur additional costs and restrict our business operations. For example, there is an increasing trend of jurisdictions requiring data localization, which may prohibit companies from storing data relating to resident individuals in data centers outside the relevant jurisdiction or, at a minimum, require a complete set of the data to be stored in data centers within the relevant jurisdiction. Because the interpretation and application of laws, regulations, standards and other obligations relating to data privacy and security are still uncertain, it is possible that these laws, regulations, standards and other obligations may be interpreted and applied in a manner that is inconsistent with our data processing practices and policies or the features of our products and services. If so, in addition to the possibility of fines, lawsuits, regulatory investigations, public censure, other claims and penalties, and significant costs for remediation and damage to our reputation, we could be materially and adversely affected if legislation or regulations are expanded to require changes in our data processing practices and policies or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively impact our business, financial condition and results of operations. Furthermore, the developing requirements relating to clear and prominent privacy notices (including in the context of obtaining informed and specific consents to the collection and processing of personal data, where applicable) may potentially deter end users from consenting to certain uses of their personal data. In general, negative publicity of us or our industry regarding actual or perceived violations of our end users’ privacy-related rights, including fines and enforcement actions against us or other similarly placed businesses, also may impair users’ trust in our privacy practices and make them reluctant to give their consent to share their data with us. Any inability to adequately address data privacy or security-related concerns, even if unfounded, or to comply with applicable laws, regulations, standards and other obligations relating to data privacy and security, could result in additional cost and liability to us, harm our reputation and brand, damage our relationships with consumers and have a material and adverse impact on our business, financial condition and results of operations.

With regard to our commercial arrangements, we and our counterparties, including business partners and external service providers, might be subject to contractual obligations regarding the processing of personal data. While we believe our and our counterparties’ conduct under these agreements is in material compliance with all applicable laws, regulations, standards, certifications and orders relating to data privacy or security, we or our counterparties may fail, or be alleged to have failed, to be in full compliance. In the event that our acts or omissions result in alleged or actual failure to comply with applicable laws, regulations, standards, certifications and orders relating to data privacy or security, we may incur liability. While we endeavor to include indemnification provisions or other protections in such agreements to mitigate liability and losses stemming from our counterparties’ acts or omissions, we may not always be able to negotiate for such protections and, even where we can, there is no guarantee that our counterparties will honor such provisions or that such protections will cover the full scope of our liabilities and losses.

While we strive to comply with our internal data privacy guidelines as well as all applicable data privacy and security laws and regulations, and contractual obligations in respect of personal data, there is no assurance that we are able to comply with these laws, regulations and contractual obligations in all respects. Any failure or perceived failure by us, external service providers or business partners to comply may result in proceedings or actions against us, including fines and penalties or enforcement orders (including orders to cease processing activities) being levied on us by government agencies or proceedings or actions against us by our business partners, customers or end-users, including class action privacy litigation in certain jurisdictions, and could damage our reputation and discourage current and future users from using our products and services, which could materially and adversely affect our business, financial condition and results of operations. In addition, compliance with applicable laws on data privacy requires substantial expenditure and resources, including to continually evaluate our policies and processes and adapt to new requirements that are or become applicable to us on a jurisdiction-by-jurisdiction basis, which would impose significant burdens and costs on our operations or may require us to alter our business practices. Concerns about the security of personal data also could lead to a decline in general Internet usage, which could result in a decrease in demand for our products and services and have a material and adverse effect on our business, financial condition and results of operations. Furthermore, if the local government authorities in our target markets require real-name registration for users of our platform, the growth of our customer and end-user bases may slow down and our business, financial condition and results of operations may be adversely affected.

We rely on key personnel and employees with the technical know-how to lead and operate our businesses.

We depend on the expertise, experience and efforts of our executive officers and other key employees. A failure to attract and retain executive, business development, technical and other key personnel could reduce our revenues and operational effectiveness. There is a continuing demand for relevant qualified personnel, and we believe that our future growth and success will depend upon our ability to attract, train and retain such personnel.

Competition for personnel in our industry is intense, and there is a limited number of persons with knowledge of, and experience in, this industry. There can be no assurance that we will maintain sufficiently qualified personnel or hire additional qualified personnel on a timely basis, or that we will be able to retain our key management personnel. An inability to attract or maintain a sufficient number of requisite personnel, particularly those with the requisite technical expertise, could have a material adverse effect on our performance or on our ability to capitalize on market opportunities or meet our stated objectives.

If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights.

We use intellectual property and technology developed in the course of our business. A substantial part of our commercial success will depend on our ability to establish and protect our intellectual property to maintain our software source code.

A component of the underlying technology on which our technology is built is patented in the United States (Patent Number US 9286274). However, the granting of a patent does not guarantee validity since it may be revoked on the grounds of invalidity at any time during its life and, at any point, an alleged infringer may assert that the patent is invalid. The granting of the patent also does not guarantee that the patentee has freedom to operate the invention claimed in the patent because, for example, the working of a patented invention may be prevented by the existence of another patent. In addition, there are limitations associated with patent protection and, generally speaking, a patent issued in one jurisdiction will not prevent unauthorized exploitation of the invention in other jurisdictions.

Further to the above, the commercial value of our intellectual property assets is dependent on any relevant legal protections. These legal mechanisms, however, do not guarantee that the intellectual property will be protected or that our competitive position will be maintained. No assurance can be given that employees or third parties will not, knowingly or unknowingly, breach confidentiality agreements, infringe or misappropriate our intellectual property or commercially sensitive information or that competitors will not be able to produce non-infringing competitive products. Competition in retaining and sustaining protection of technologies and the complex nature of technologies can lead to expensive and lengthy disputes for which there can be no guaranteed outcome. There can be no assurance that any intellectual property which we (or entities we deal with) may have an interest in now or in the future will afford us commercially significant protection of technologies or that any of the projects that may arise from technologies will have commercial applications.

In addition, there can be no assurance that we will implement adequate measures to protect our intellectual property. Failure in the measures implemented to protect our intellectual property may result in an erosion of any potential competitive position. Additionally, securing rights to (or developing) technologies complementing our existing intellectual property will also play an important part in our commercial success. There is no guarantee that such rights can be secured or such technologies can be developed.

Our results of operations may be harmed if we are subject to a protracted infringement claim, a claim that results in a significant damage award, a third-party infringement claim, or a claim that results in an injunction.

There is a risk that the validity, ownership or authorized use of intellectual property relevant to us and our technology may be successfully challenged by third parties or that third parties may assert intellectual property infringement, unfair competition or like claims against us under copyright, trade secret, patent or other laws. If a third party accuses us of infringing on its intellectual property rights or if a third party commences litigation against us for the infringement of intellectual property rights, we may incur significant costs in defending such action, whether or not it ultimately prevails. Typically, intellectual property litigation is expensive and may result in the inability to use the intellectual property in question. While we are not aware of any claims of this nature in relation to any of the intellectual property rights in which we have or will acquire an interest, such claims, if made, may harm, directly or indirectly, our business and operations. Costs that we incur in defending third-party infringement actions may also include diversion of management’s and technical personnel’s time and attention from normal commercial operations.

In addition, parties making claims against us may be able to obtain injunctive or other equitable relief that could prevent us from further using our technology and intellectual property or commercializing our products. In the event of a successful claim of infringement against us, we may be required to pay damages and other costs and obtain one or more licenses from the prevailing third party. If we are not able to obtain these licenses at a reasonable cost, if at all, it could encounter delays in commercializing our products or product introductions and loss of substantial resources while we attempt to develop alternative products. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from commercializing available products and could cause us to incur substantial expense.

Any of these events could adversely impact our business and our future operations and financial performance, position and prospects.

There is substantial doubt about our ability to continue as a going concern.  

Our independent registered public accounting firm has issued an opinion on our consolidated financial statements included in this Annual Report that states that there is substantial doubt in respect of the assumption that we will continue as a going concern. We have incurred substantial operating losses and have used cash in our operating activities for the past few years. As of and for the year ended June 30, 2023, we had a net loss of A$3,891,586 and net cash used in operating activities of A$2,260,971. Our consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern. We also cannot be certain that additional financing, if needed, will be available on acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to continue our operations. There remains substantial doubt about our ability to continue as a going concern for the next twelve months from the date the consolidated financial statements were issued.

To date, we have experienced negative cash flow from development of our technology, as well as from the costs associated with building a sales force to market our product and services. Our ability to achieve or, if achieved, sustain profitability is based on numerous factors, many of which are beyond our control, including the market acceptance of our products, competitive product development and our market penetration and margins. If such factors become significant, we may never be able to generate sufficient revenue to achieve or, if achieved, sustain profitability.

Because of the numerous risks and uncertainties associated with further development and commercialization of our technology and any future tests, we are unable to predict the extent of any future losses or the exact timing of when we will become profitable, if ever. We may never become profitable, and you may never receive a return on an investment in our securities. An investor in our securities must carefully consider the substantial challenges, risks and uncertainties inherent in the development in our industry. We may never develop our technology and our business may fail.

We may need additional capital, and financing may not be available on terms acceptable to us, or at all.

Our independent registered public accounting firm has issued an opinion on our consolidated financial statements included in this Annual Report that states that there is substantial doubt in respect of the assumption that we will continue as a going concern, there is a risk that we may need additional cash resources in the future to fund our growth plans or if we experience adverse changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for new investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. The issuance and sale of additional equity would result in further dilution to our shareholders. One or more new debt financings could subject us to any or all of the following risks:

The occurrence of any of these risks could adversely affect our operations or financial condition.

The market for our solutions among may be limited if prospective clients demand customized features and functions that we do not offer.

Prospective clients may require customized features and functions unique to their business processes that we do not offer. In order to ensure we meet these requirements, we may devote a significant amount of support and service resources to these prospective clients, increasing the cost and time required to complete sales with no guarantee that these prospective clients will adopt our solution. Further, we may not be successful in implementing any customized features or functions. If prospective clients require customized features or functions that we do not offer, or that would be difficult for them to deploy themselves, the market for our solution will be more limited and our business could be adversely affected.

Because our long-term success depends, in part, on our ability to expand the sales of our products to clients located outside of Australia, our business could be subject to risks associated with international operations.

Our operations are conducted primarily in Australia. An element of our growth strategy is to expand our operations and client base. If we decide to expand our operations into other international markets, it will require significant resources and management attention and may subject us to various regulatory, economic and political risks. Because of our lack of experience with international operations, we cannot ensure that our international expansion efforts will be successful, and the impact of such expansion efforts may adversely affect our business, operating results or financial condition.

The COVID-19 endemic and its continuing effects have significantly impacted the global economy and markets and may continue to do so, which could adversely affect our business, financial condition and the trading price of our securities.

In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency. COVID-19 is expected to remain a serious endemic threat for an indefinite future period and may continue to adversely affect the global economy, including as related but not limited to, supply chain issues and supply shortages, volatile market conditions and rising global inflation, which in turn could adversely affect our ability to obtain future debt or equity financing or affect the trading price of our securities, among others. It is difficult to determine the extent of the economic and market impacts from COVID-19 and its continuing effects, and the many ways in which they may negatively affect our business, the trading price of our securities or on our future results of operations and financial condition.

As a company primarily based outside of the United States, our business is subject to economic, political, regulatory and other risks associated with international operations.

As a company with substantial operations in Australia, our business is subject to risks associated with conducting business outside the United States. Many of our suppliers are located outside the United States. Accordingly, our future results could be harmed by a variety of factors, including:

Risks Related to Our Securities

The market price of our securities may be volatile, which could result in substantial losses.

Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our securities to wide price fluctuations regardless of our operating performance. Some of the factors that may cause the market price of our securities to fluctuate include:

In addition, stock markets have historically experienced substantial price and volume fluctuations. Broad market and industry factors may harm the market price of our securities. Hence, the market price of our securities could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the market price of our securities regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs, our management’s attention and resources could be diverted and it could harm our business, operating results and financial condition.

The requirements of being a U.S. public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

Our ordinary shares and warrants are listed on Nasdaq. As a U.S. public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, we are subject to other reporting and corporate governance requirements, including certain requirements of Nasdaq and certain provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), which imposes significant compliance obligations upon us. We are also required to ensure that we have the ability to prepare financial statements that are fully compliant with all applicable reporting requirements on a timely basis. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual reports with respect to our business and operating results. Sarbanes-Oxley, as well as rules subsequently implemented by the Securities and Exchange Commission (the “SEC”) and Nasdaq, have imposed increased regulation and disclosure and require enhanced corporate governance practices of public companies. Our efforts to comply with evolving corporate governance laws, regulations and standards are likely to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. These changes will require a significant commitment of additional resources. We may need to hire more employees in the future to comply with these requirements, which will increase our costs and expenses.

We may not be successful in implementing these requirements and implementing them could materially adversely affect our business. In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a timely and accurate basis could be impaired. If we do not implement such requirements in a timely manner or with adequate compliance, we might be subject to sanctions or investigations by regulatory authorities, such as the SEC or Nasdaq. Any such action could harm our reputation and the confidence of investors, customers and other third parties with whom we do business and could materially adversely affect our business and cause the trading price of our ordinary shares to fall.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Being a U.S. public company and adhering to these new rules and regulations makes it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our Audit and Risk Committee, and qualified executive officers.

We are a “foreign private issuer” and may have disclosure obligations that are different from those of U.S. domestic reporting companies. As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which could limit the information publicly available to our shareholders.

As a “foreign private issuer,” we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we are not required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders are exempt from the insider reporting and short-swing profit recovery requirements in Section 16 of the Exchange Act. Accordingly, our shareholders may not know on as timely a basis when our officers, directors and principal shareholders purchase or sell their ordinary shares, as the reporting deadlines under the corresponding Australian insider reporting requirements are not applicable. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. As a result of such varied reporting obligations, shareholders should not expect to receive the same information at the same time as information provided by U.S. domestic companies.

In addition, as a foreign private issuer, we have the option to follow certain Australian corporate governance practices rather than those of the United States, except to the extent that such laws would be contrary to U.S. securities laws, provided that we disclose the requirements we are not following and describe the Australian practices we follow instead. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all domestic U.S. corporate governance requirements.

We may lose our “foreign private issuer” status in the future, which could result in additional costs and expenses to us.

We are a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. We may in the future lose foreign private issuer status if a majority of our ordinary shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status, such as if: (i) a majority of our directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer would be significantly more than the costs incurred as an Australian foreign private issuer. If we are not a foreign private issuer, we would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we may lose the ability to rely upon exemptions from corporate governance requirements that are available to foreign private issuers.

We are an “emerging growth company,” and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act. For as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” until the fifth anniversary of the fiscal year end date following the completion of our initial public offering in March 2022, however, our status would change more quickly if we have more than $1.235 billion in annual revenue, if the market value of our ordinary shares held by non-affiliates equals or exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three-year period before the end of that period.

Investors could find our ordinary shares less attractive if we choose to rely on these exemptions. If some investors find our ordinary shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ordinary shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ordinary shares.

Prior to our initial public offering in March 2022, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the years ended June 30, 2023 and 2022, we identified material weaknesses in our internal control over financial reporting. As a result of lacking an effective accounting review process, material adjustments were made to the financial statements for the last two fiscal years in order to be in conformity with International Financial Reporting Standards. We also identified a significant deficiency relating to insufficient written policies and procedures for accounting and financial reporting which led to inadequate financial statement closing process. To remediate our material weaknesses, we expect to incur substantially more additional costs for addressing our material weaknesses and deficiencies. Our remedial measures will include: (a) hiring qualified internal control personnel, including financial and IT personnel, to manage the implementation of internal control policies, procedures and improvement of the internal audit function, system user access, security management and data protection, as applicable; (b) developing and implementing written policies and procedures for accounting and financial reporting that meet the standards applied to public companies listed in the United States; and (c) conducting internal control training to management, key operations personnel and the accounting department, so that management and relevant personnel understand the requirements and elements of internal control over financial reporting mandated by the U.S. securities laws. We have commenced the implementation of several aforementioned remedial measures, which we expect to complete by June 30, 2024. Our ongoing remedial measures include the formal documentation of key Company controls, processes and accounting transactions. The implementation of any or all of these measures, however, still may not fully address the material weaknesses in our internal control over financial reporting. Additionally, as most of our documentation will be prepared internally, we do not expect there to be significant material costs to implement our remedial measures. Our failure to correct the material weaknesses or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

Any future failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis, which could result in our inability to satisfy our reporting obligations or result in material misstatements in our financial statements. If our financial statements are not accurate, investors may not have a complete understanding of our operations or may lose confidence in our reported financial information, which could result in a material adverse effect on our business or have a negative effect on the trading price of our ordinary shares.

For as long as we are an “emerging growth company”, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an “emerging growth company” until the fifth anniversary of the fiscal year end date following the completion of our initial public offering in March 2022. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

If we identify material weaknesses in our internal control over financial reporting, or if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our ordinary shares could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Substantial future sales of our ordinary shares, or the perception that these sales could occur, may cause the price of our ordinary shares to drop significantly, even if our business is performing well.

A large volume of sales of our ordinary shares, or securities convertible into or exercisable or exchangeable for our ordinary shares, into the public market, including shares of our ordinary shares issued upon exercise of options or warrants, could decrease the prevailing market price of our ordinary shares and could impair our ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of our ordinary shares or warrants does not occur, the mere perception of the possibility of these sales could depress the market price of our ordinary shares or warrants and have a negative effect on our ability to raise capital in the future.

We do not anticipate paying cash dividends and, accordingly, shareholders must rely on share appreciation for any return on their investment.

We have never paid any dividends on our ordinary shares. We currently intend to retain our future earnings, if any, to fund the development and growth of our businesses and do not anticipate that we will declare or pay any cash dividends on our ordinary shares in the foreseeable future. As a result, capital appreciation, if any, of our ordinary shares will be your sole source of gain on your investment for the foreseeable future. Investors seeking cash dividends should not invest in our ordinary shares.

Our failure to meet the continued listing requirements Nasdaq could result in a delisting of our securities.

On March 21, 2023, we received a letter from the Listing Qualifications Department of Nasdaq indicating that we did not meet the minimum of $2.5 million in shareholders’ equity required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(b)(1) or the alternative compliance standards relating to the market value of listed securities or net income from continuing operations (the “Minimum Stockholders’ Equity Requirement”). The letter also indicated that we will be provided with a period of 45 calendar days to submit a plan to regain compliance, and if such plan is accepted by Nasdaq, we may be granted up to 180 calendar days from March 21, 2023 in which to regain compliance. On June 21, 2023, we received a letter from the Listing Qualifications Staff of Nasdaq indicating that, based upon our continued non-compliance with the Minimum Stockholders’ Equity Requirement, as of June 30, 2023, our securities would be subject to delisting unless we timely request a hearing before the Nasdaq Hearings Panel (the “Panel”). Further, as of June 21, 2023, we did not meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. On August 17, 2023, we presented our appeal to the Panel and on August 24, 2023, the Panel informed us that we had been granted an exception to Nasdaq Listing Rule 5550(b)(1) until October 31, 2023 by demonstrating compliance with the Minimum Stockholders’ Equity Requirement through the filing of this Form 20-F.

We have in the past, and may in the future, be unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our ordinary shares on Nasdaq. For instance, on June 30, 2022, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon the closing bid price of our ordinary shares for the 30 consecutive business day period, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2). Effective as of December 7, 2022, we effected the Reverse Share Split of our ordinary shares and IPO Warrants. On December 22, 2022 we received notice from Nasdaq indicating that the Company had regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2), and the matter was closed.

If we fail to satisfy the continued listing requirements of Nasdaq, such as minimum stockholders’ equity requirements or minimum bid price requirements, Nasdaq may take steps to delist our ordinary shares. Such a delisting would have a negative effect on the price of our ordinary shares, impair the ability to sell or purchase our ordinary shares when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from Nasdaq could also have other negative results, including the potential loss of institutional investor interest and fewer business development opportunities, as well as a limited amount of news and analyst coverage of us. Delisting could also result in a determination that our ordinary shares are a “penny stock,” which would require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary market for our ordinary shares. In the event of a delisting, we would attempt to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our ordinary shares from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

We are governed by the corporate laws of Australia, which in some cases have a different effect on shareholders than the corporate laws of the United States and may have the effect of delaying or preventing a change in control.

We are governed by the Australian Corporations Act 2001 (Cth) (the “Corporations Act”) and other relevant laws, which may affect the rights of shareholders differently from those of a company governed by the laws of a U.S. jurisdiction, and may, together with our Constitution (“Constitution”), have the effect of delaying, deferring or discouraging another party from acquiring control of the Company by means of a tender offer, a proxy contest or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance.

Our Constitution and Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders.

As an Australian company, we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Constitution, as well as the Corporations Act, sets forth various rights and obligations that apply to us as an Australian company and which may not apply to a U.S. corporation. These requirements may operate differently than those of many U.S. companies. You should carefully review the summary of these matters set forth under “Item 10. Additional Information—B. Memorandum and Articles of Association” as well as our Constitution, which is included as an exhibit to this Annual Report, prior to investing in our securities.

U.S. civil liabilities may not be enforceable against us, our directors, our officers or certain experts named in this Annual Report.

We are governed by the Corporations Act and our principal place of business is in Australia. All of our directors and officers, reside outside of the United States, and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us and such directors, officers and experts or to enforce judgments obtained against us or such persons, in U.S. courts, in any action, including actions predicated upon the civil liability provisions of U.S. federal securities laws or any other laws of the United States. Additionally, rights predicated solely upon civil liability provisions of U.S. federal securities laws or any other laws of the United States may not be enforceable in original actions, or actions to enforce judgments obtained in U.S. courts, brought in Australian courts, including courts in the State of Western Australia. In addition, as a company incorporated in Australia, the provisions of the Corporations Act regulate the circumstances in which shareholder derivative actions may be commenced which may be different, and in many ways less permissive, than for companies incorporated in the United States.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.

The trading market for our ordinary shares will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure you that analysts will cover us or provide favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion of our ordinary shares, our share price would likely decline. If one or more of these analysts cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

U.S. holders of our securities may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

While we do not believe we are a passive foreign investment company (“PFIC”), the determination as to whether we are a PFIC for any taxable year is based on the application of complex U.S. federal income tax rules that are subject to differing interpretations. If we are a PFIC for any taxable year during which a U.S. Holder (as defined under “Item 10. Additional Information–E. Taxation–Material U.S. Federal Income Tax Considerations”) holds our ordinary shares and warrants, it would likely result in adverse U.S. federal income tax consequences for such U.S. Holder. U.S. Holders should carefully read “Item 10. Additional Information–E. Taxation–Material U.S. Federal Income Tax Considerations for United States Holders” for more information and consult their own tax advisors regarding the likelihood and consequences if we are treated as a PFIC for U.S. federal income tax purposes.

Insiders have substantial control over us which could delay or prevent a change in corporate control or result in the entrenchment of management or the board of directors.

Our directors, executive officers and principal shareholders, together with their affiliates and related persons, will beneficially own, in the aggregate, approximately 22.4% of our outstanding ordinary shares. As a result, these shareholders, if acting together, may have the ability to determine the outcome of matters submitted to our shareholders for approval, including the election and removal of directors and any merger, or sale of all or substantially all of our assets. In addition, these persons, acting together, may have the ability to control our management and affairs. Accordingly, this concentration of ownership may harm the market price of our ordinary shares by:

A. History and Development of the Company

We were incorporated on April 23, 2009 in Australia under the name Gumiyo Australia Pty Ltd. On January 14, 2021, we changed our name to Locafy Limited. Our principal executive offices are located at 246 Churchill Avenue, Subiaco, Western Australia 6008, Australia and our telephone number is +61 409 999 339. On March 25, 2022, we completed our initial public offering in the United States. Our ordinary shares and warrants are listed on Nasdaq under the symbols “LCFY” and “LCFYW”, respectively. Our website address is www.locafy.com. The information contained on, or that can be accessed through, our website is not a part of this Annual Report. We have included our website address in this Annual Report solely as an inactive textual reference.

The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. As a foreign private issuer, we are exempt from the rules under the Exchange Act that prescribe the furnishing and content of proxy statements to shareholders.

B. Business Overview

Overview

We are an Australian company currently focused on commercializing our Software as a Service (“SaaS”) online Search Engine Optimization (“SEO”) technology (“Technology”). Our Technology publishes search engine optimized web pages using a combination of data integrations and generative AI (“Content”) and our “Entity Based” SEO technology and know-how (“Site Structure”). Once the Content and Site Structure is integrated with our Technology, the production of search engine optimized web pages is largely automated, which enables us to scale production. Based on our testing and those active in production, these web pages are highly likely to appear prominently in search engine results pages (“SERP”) for search keywords relevant to those web pages, more rapidly than alternative solutions.

“Local search” is one of the strongest emerging trends in SEO, with consumers increasingly searching for products and services in close proximity to their immediate location. According to Safari Digital, approximately 46% of all Google searches include “local intent”. Our Technology provides users with a cost-effective solution to increase their online visibility and thereby increase the likelihood that consumers searching online for local products and services will find the end customer’s business. Our “first generation” local search product, Proximity Network, enabled our end users to gain search relevance for a specific keyword and location. For this product, our Technology creates a separate landing page for each keyword and location combination and automates the interlinking of those pages, creating a network of pages, which effectively operates as a niche micro-directory for a customer. Our ongoing research and development to improve our Technology resulted in the June 2023 release of our Local Pages product (“Local Pages”), a more advanced local search product that utilizes our local “Site Structure”. This product does not require a consumer to enter a location in their search query as the pages are designed to rank locally, for a broader range of keywords relevant to the business, based on where the consumer is physically searching from. We believe that Local Pages also generally perform better in SERP results as compared to Proximity Networks for a wider range of keywords.

In August 2022, we acquired technology assets from Jimmy Kelley Digital, which enabled us to extend our product offering beyond local search solutions to now include “national search” and “brand search” solutions.

National search solutions allow us to access a wider market opportunity by enabling end users to reach a broader audience for “national” search terms. Our research and development into ranking factors for “national” search terms has led to pioneering “Entity-Based” SEO. Based on our research, an “Entity” is the highest order keyword or reference point attributed by search engines that they use to help establish the context of a website. This form of SEO focuses on search optimization of the Entity, which by default encompasses a collection of associated keywords. The effect is to gain leverage across multiple keywords through the optimization of a singular Entity, which from our testing, dramatically enhances the search relevancy of a web page. We are now incorporating this breakthrough technology across our entire product range. Our National SEO solutions combine Content with national search optimized Site Structures.

Brand search solutions are primarily focused on improving search prominence for products sold via online marketplaces, in particular, on Amazon. On October 4, 2022 we launched our Brand Boost product which is an e-commerce SEO marketing tool. Our Brand SEO solutions combine Content with brand optimized Site Structures.

Fundamental to each of our search solutions are the landing pages created through our Technology; each of which are configured for a specific use case. Our landing pages contain features that would otherwise require significant manual effort to achieve or the application of additional and more expensive solutions. For instance, in order to achieve superior SERP rankings we optimize our landing pages to enable search engines to detect and understand the relevant page content based on a specific “Entity”. We also automatically incorporate other contributing factors affecting SERP rankings include page speed, accessibility security, and unique quality content, for which we are able to leverage generative artificial intelligence (“AI”).

We also operate a Publishing division, which includes ownership of Hotfrog, a global online business directory, and three additional Australian-focused directories, AussieWeb.com.au (“AussieWeb”), PinkPages.com.au (“PinkPages”) and SuperPages.com.au (“SuperPages”). Combined, these directory assets contain more than 46 million business listings and an email database of approximately 245,000 subscribers.

We believe these large customer databases represent significant untapped commercial potential as we continue our research and development into how to produce individual landing pages from the directory databases on a large-scale. In June 2023, we commenced in-market trials with two of our existing partners to programmatically generate Local Pages using business listing content drawn from our business directory database and supplemented with other content sources, including the end user’s Google Business Profile and generative AI content.

Our Industry

For the approximate 334 million businesses worldwide that may be seeking to get found online for the products and services they offer, there are two main alternatives. The first is to pay for digital advertising and the alternative is to buy SEO services to enhance their own online presence. Both markets are substantial, with annual spend on digital advertising anticipated to be over $600 billion in 2023.

Before the advent of search engines such as Google, Yahoo! and Bing, one method for finding information online was through web directories. A web directory is a searchable catalog of links to external websites. The links are typically organized according to categories, for example “professional services > bookkeeping.” A person searching for information can also browse by category or type a query in a search box. Many of these early web directories were built by companies that owned print directories, and they tended to employ the same commercial strategies online as they did in print. That business model has been superseded by search engine tactics that favor results for the most relevant service in the nearest proximity to the search user. Search engines now effectively operate in competition to traditional directory business models.

Search engines are programs that create a catalog of information by, amongst other things, scanning the Internet to assess the structure of websites and the content within websites. Internet users utilize search engines through the use of keyword(s) search terms. Search engines like Google have developed a series of algorithms to determine what content is best served for a particular keyword search. While search engines do not publish specific details about how their search algorithms operate, SEO is the method used to increase the likelihood of obtaining a high ranking (ideally first page) for relevant keyword searches.

The goal for many content publishers (i.e., business owners) is for their own website or other online presence solutions to appear in the first SERP for related keyword searches. For example, a plumber may want to feature in searches where the keywords are “hot water systems” or “leaking tap.” Accordingly, a website’s keyword ranking is very important because the higher a website ranks in the SERP, the more likely Internet users will view the website, which is likely to then generate more calls, map views, requests for directions or form fills. This means the business can be expected to acquire more sales leads, which could generate more revenue.

An alternative and common internet marketing strategy involves paying an advertising fee to a search engine to appear in specific keyword search results. Google Ads (formerly Adwords) is an example of such a program. The major disadvantages to a business of implementing such a strategy are cost, complexity and a behavioral phenomenon coined “banner blindness,” which describes the phenomenon of users having learned to ignore content that resembles ads, is located in close proximity to ads, or that appears in locations traditionally dedicated to ads.

Studies have shown that 94% of people skip over paid search adverts. Given the challenges with paid advertising, we believe content publishers prefer solutions like those offered by Locafy that are based on SEO principles which promote organic search results.

Our Strategy

Historically, we have applied our Technology on websites owned by end users as well as on landing pages that we own. However, the reliance on end users to assist with implementations is neither efficient nor scalable and should customers cancel, they would still retain the benefit of the SEO improvements already made by our Technology. We intend to increasingly apply our Technology on our own online properties as a priority and utilize our landing pages as the foundation for all of our SEO solutions. By utilizing our proprietary landing pages, we are able to realize a number of benefits, including:

Our Products and Services

We provide an integrated suite of solutions with the objective of helping to maximize the online marketing presence for business owners. The products we offer can be broadly categorized as: Publishing and SEO solutions. Further, within SEO solutions we have products that are applicable to Local, National and Brand related searches.

Publishing

We own and operate several online directories. An important component of an online presence for a business owner is to publish a business profile on various online directories, also referred to as “citation management.” Business owners or digital agencies on behalf of business owners publish business profiles (providing search relevancy) on many business directories in markets in which the business operates (providing search prominence in their proximity). While many smaller business owners do this manually, there are service providers that manage large volumes of business profiles through technology platforms. It is more efficient for these citation management services to be managed via an API that can synchronize with and publish to third-party directories, such as those we own.

We have several commercial agreements with citation management companies that pay a fee to connect to our directories via API to publish citations for their clients. The attraction for citation management companies is that our directory network attracts high volumes of Internet traffic and clicks as a result of consumers searching for local products and services. We intend to continue to seek out additional commercial citation management opportunities and to add to our publishing network through the production of additional niche directories or acquisition of relevant directories, databases and complementary technologies.

We also intend to continue our directory network upgrades to further develop the automated production of web products from the data published to the directories. In June 2023, we commenced in-market trials with two of our existing partners to programmatically generate Local Pages using content drawn from our business directory listing data and supplemented with other data sources, including the end user’s Google Business Profile and AI-generated content. We intend to extend our commercial agreements with these and other partners for Local Pages subscriptions.

Local SEO solutions

Our SEO solutions are designed to gain online marketing prominence for specific keywords within specific locations either for businesses with a physical address or businesses that operate in a specific service area.

Proximity Pages and Proximity Networks

The primary purpose of our Proximity Pages is to create a prominent and relevant online presence in a business’s immediate proximity in order to deliver more sales leads at a lower cost of acquisition than alternative methods. Typical calls to action include chat-bots, click-to-call, click-to-book, request directions and request-a-quote (via basic form fill). A Proximity Network is a collection of interlinked Proximity Pages. The power of each Proximity Page when combined with the interlinking of related pages within a single solution provides additional SEO benefits that generally result in improved page ranking for the desired keywords. The Proximity Pages and Proximity Networks complement a customer’s existing online marketing presence and do not require any adjustment to their existing website.

Local Pages

Local Pages campaigns employ our local search optimized Site Structures, which focuses on optimizing the landing pages we publish for a relevant primary keyword (“Entity”). The term “Entity” describes the effect of having keywords naturally associated with a primary keyword to form a “cluster” of related search terms. Once that optimization takes effect, amongst other advantages, the Local Pages will typically rank for the cluster of keywords relevant to that Entity without needing to specifically optimize all of the associated keywords on the landing pages.

Map Pack Booster

Our Map Pack Booster (previously marketed as “Proximity Booster”) involves optimizing a client’s Google Business Profile (“GBP”) by linking it to our Proximity Network or Local Pages products. By linking one of our Local SEO products to the GBP, we ensure there is a consistent and relevant optimized web presence promoting the keywords contained in the GBP. Through this process, we believe we can achieve faster and higher-ranking results within Google’s “Local Pack” for competitive keywords. We believe it is a distinct commercial advantage for a business to appear in the top 3 of a “Local Pack” given its positioning and prominence in Google search results, emphasized by the fact that around 32% of local organic traffic is generated from the Top 3 map pack results.

National SEO solutions

Keystone

Our breakthrough Keystone product enables our landing pages to rapidly achieve search prominence on a national scale. The Keystone solution promotes the “Entity” associated with the business but does not associate that with a specific location. For this solution, we utilize our national search optimized Site Structure, which enables the landing page to rank highly in generic national SERP results.

Brand SEO solutions

Brand Boost

Our Brand Boost product has the potential to rapidly increase online product sales in e-commerce marketplaces. In this use-case we utilize our landing pages to optimize for search rankings within online marketplaces (e.g., Amazon) for products associated with a brand. Historically, clients have typically reported increased sales between 20% to 60% following this technology being implemented. Our brand search optimized Site Structure is utilized for this solution.

Our Competitive Strengths

Typical providers of SEO solutions could be broadly classified into three categories: enterprise level organizations, digital media agencies and SEO freelancers. We believe we have both a technological and commercial competitive advantage over each of these alternative service providers. Indeed, many of these types of SEO solution providers become our customers because our Technology automates a lot of otherwise manual work and we achieve superior results compared to what they would otherwise be able to achieve.

Technology Advantages

Site Structure and Know-How

The advantages of our Technology have been gained through years of meticulous research, development and live testing. This has resulted in the development of proprietary know-how on the optimal website structure to implement to meet a broad range of SEO objectives. In addition to the SEO site structure, our landing pages incorporate known search ranking factors relating to speed, accessibility, security and unique quality content. This know-how has been embedded within our Technology platform which facilitates ease-of-application, repetition and scale.

Time to effect

Our current generation landing pages are particularly effective in rapidly achieving high-ranking search results, especially when compared to traditional SEO techniques such as “back-linking” and “content-first focus”. These traditional methods often take months to take effect (if at all), whereas our technology has the ability to generate a Page 1 search result within 30 days of implementation and oftentimes much faster than that. We achieve these results due to our proprietary Site Structure.

Commercial Advantages

Scale

Throughout our operational processes, we aim to have minimal human intervention as necessary. Our Platform’s customer “self-serve” capability allows our partners and customers to purchase and implement our SEO products, which for those customers connected to our Platform via API, can be largely pre-populated with existing content. Our Technology enables very high volumes of websites to be developed through automation which accordingly allows us to operate at scale.

Large-enterprise media groups typically service tens of thousands of customers using either third party SEO technology or their own technology solutions. Digital agencies typically service dozens to hundreds of clients while SEO freelancers typically service a handful of customers. The amount of manual work required to deploy alternative SEO solutions for any of these competitors is a limiting factor in their ability to scale.

Set up time

We automate many SEO tasks that would otherwise take considerable time, cost and manual effort to undertake. The typical set up time for our solutions is minutes as compared to potentially weeks or months for alternative comparative solutions. This is due, in part, to the fact we do not need to interact with the client’s existing website, which would typically require substantial changes to its foundations in order to obtain an equivalent SERP ranking performance. By default, our landing pages already incorporate key proprietary SEO technologies, which makes implementations more efficient and effective. We can also add Content to the site in a largely automated manner.

Set up Costs

Given that our SEO solutions can be largely automated, we have the option to waive or charge a minimal set up fee, whereas digital agencies and SEO freelancers would generally charge a few thousand dollars through to tens of thousands of dollars in set up fees as they are providing a labor-intensive service.

Additionally, because our SEO solutions have the ability to demonstrate SERP ranking performance in a short period of time (i.e., typically within 30 days from implementation), customers can quickly see results as compared to other service providers who typically set expectations with customers of achieving results within 6 to 12 months from implementation.

Revenue Model and Commercial Overview

Revenue Model

Our revenue model is focused on securing long-term, recurring revenue contracts both within our Subscription and Publishing revenue lines. Our Subscription revenues are derived via both direct-to-end user and channel sales. The delivery of these contracts may incorporate professional services, however, these services tend to be limited in scope as most implementations are highly automated. In the case of Publishing revenues, we primarily earn income through the bulk-publishing of business profiles online and through advertising generated by online user traffic.

Direct clients are typically charged our recommended retail price (“RRP”) and can also qualify for volume discounts. Resellers are typically charged wholesale prices which are a discount to RRP.

Subscription Fee Revenues

We charge recurring subscription fees for our products across our Local, National and Brand range of SEO solutions.

Local SEO

Our Local SEO products currently comprise of Proximity Networks, Local Pages and Map Pack Boosters.

Proximity Networks are used to enhance search rankings for a target keyword within a defined geographical location. We generate a landing page for each keyword and location combination being targeted. The size of the network will therefore depend on the volume of keywords and locations with the volume being the multiple of those two factors. For example, a client that selects five (5) keywords and 50 locations will have a 250 page Proximity Network. We typically charge a monthly subscription fee based on the volume of pages within each Proximity Network.

Local Pages are typically charged as a monthly subscription fee for each campaign.

Map Pack Booster can be implemented as a standalone solution or sold in conjunction with either Proximity Network or Local Pages. The solution effectively amplifies a customer’s GBP to gain search prominence in Google’s Map Pack. We typically charge an additional monthly subscription fee for each application of Map Pack Booster.

National SEO

Keystone, our National SEO product, is currently charged as a flat monthly subscription fee for each campaign. However, because the value of each Keystone keyword can be significantly different due to its search popularity, we continue to evaluate the commercial viability of adopting a “market-based” or “value-based” pricing model. In certain cases, we may charge professional fees to implement Keystone.

Brand SEO

Brand Boost, our Brand SEO product, is currently charged as a flat monthly subscription fee for each campaign. However, because Brand Boost seeks to drive search traffic to e-commerce websites and marketplaces, we continue to evaluate the commercial viability of adopting a “value-based” pricing model where we are able to share in any increase in end-user sales revenue. In certain cases, we may charge professional fees to implement Brand Boost.

Advertising Revenues

We generate advertising revenue from our online Publishing assets, including the global directory network Hotfrog and a number of Australian-focused directories including AussieWeb, PinkPages and SuperPages.

From each directory, additional advertising revenue is generated, for instance, from Google Ads (formerly Adsense), which is variable and based on a number of factors, including site traffic. In some cases, business owners also pay a premium advertising rate to appear higher within a specific directory’s search results pages.

We also generate revenue through bulk listing contracts. We enter into commercial contracts with owners or managers of online business databases, including citation management companies that seek to advertise their client’s business profile on our Publishing Network of online directories. This can range from a few thousand listings up to several million listings. The fees we charge are typically relative to the volume of business listings being published, with contracts being either fixed-price for an agreed term or variable based on the volume of profiles being published.

Service Fee Revenues

We may enter into commercial contracts with clients to produce various online publishing solutions in exchange for service fees. These solutions typically relate to bespoke applications of our existing products. Under these contracts, we may also charge ongoing service fees to maintain and support the solution in a managed services arrangement.

Commercial Overview

To support our revenue model, our commercial drivers are to partner with more Publishers and Resellers. We also maintain a direct-to-end user customer base.

Publishers

We have existing commercial agreements with diversified media organizations who wish to increase their online audience reach. Our technology improves the online search prominence of their publications, which the media organizations themselves are able to monetize on their online publishing “mastheads”. On June 22, 2023 we announced the signing of an agreement with a prominent U.S.-based diversified media company to sell our Keystone technology to its portfolio of clients that advertise on their media assets. While no revenues were generated in the year ended June 30, 2023 as a result of this agreement, we expect significant revenues to be recognized in the year ending June 30, 2024 and future periods.

We also partner with data aggregation companies who provide citation management services whereby their business users are able to centrally manage their advertised business profile across multiple online directories, search engines, applications and maps. Data aggregation companies connect to our Publishing API, to facilitate automated bulk publishing to one or more of our owned directories. We currently collectively publish on our Hotfrog directory property more than 8 million business profiles originated from data aggregation companies.

During the year ended June 30, 2023, revenues from our data aggregation partners grew 34.1% to A$871,502 (2022: A$649,937) due to the net new increase in the number of partners connected to our Publishing API. Advertising revenues across our network of directory properties remained steady at A$313,882 (2022: A$314,513).

As a result of enhancements made to our Publishing API in June 2023, we have extended the functionality for our data aggregation partners to re-purpose the business profile data they provide to us to additionally produce our Local SEO products for resale. We are currently undergoing live trials of this solution with two long standing clients, both of whom are data aggregation companies.

We are also optimistic about the potential of applying Proximity Networks towards our own online directory properties. Our strategy is to increase both the number of pages as well as the search prominence of those pages with an expectation of increased search impressions, leading to increased advertising revenues.

Resellers

An important component of our business model includes creating a sales network by leveraging resellers who supply our products and services to their end-user client base. Our resellers typically manage many business profiles, ranging from a few dozen for smaller agencies, to several thousand for mid-sized agencies, to hundreds-of-thousands or even millions for Publishers. By initially engaging with these types of channel partners, we reduce upfront sales and marketing costs and gain access to large client bases where there is a strong existing client relationship with a trusted service provider.

Our resellers obtain pricing which is typically at a discount to suggested retail pricing. We invoice the reseller and support them through our customer success team. Our resellers are responsible for invoicing their end user clients and maintaining those relationships. Under this model, we believe we can achieve revenue growth without a proportionate increase in costs since our solutions are generally digital in nature and highly scalable with minimal marginal production cost.

In some markets, we engage master resellers, which are resellers that that have the rights to appoint resellers within their own network. In these cases, the master reseller appoints customers both directly and via their reseller network.

During the year ended June 30, 2023, revenues from our reseller sales channel grew 15.5% to A$2,229,913 (2022: A$1,929,836). The growth was comparatively modest as our strategy was to simply maintain existing reseller customers while we completed the development of our newer range of products incorporating our Entity-based technologies. Selling the Entity-based technologies to new resellers would avoid confusion and reduce support and maintenance costs for both ourselves and our resellers.

Direct-to-End Users

Historically, we have built (organically and via acquisitions) a direct-to-end user customer base. While our current strategic focus is to grow our Publisher and Reseller channels, our Direct channel still remains significant. During the year ended June 30, 2023, revenues in this segment increased 47.6% to A$1,961,396 (2022: A$1,328,403). The growth is mainly attributed to an increase in customers and subscriptions in Australia and North America.

Growth Strategy

Our main objectives are to rapidly expand our reseller channel network, primarily in the North American and Australian markets, and through automation, expand their uptake. We also intend to accelerate our data acquisition activities and data synchronization projects to maximize the addressable market within our ecosystem to which we can apply our Technology.

Our growth strategy is to:

In addition, we will:

We intend to seek additional staffing and resources as needed to assist in implementing these key objectives, secure new commercial contracts and service our existing client base, particularly in engineering, marketing and design to help grow the business and facilitate this commercialization strategy.

We plan to generate increased revenues through existing partnerships and also through securing new commercial partnerships. We also plan to explore new acquisitions and business initiatives, which expand both our client base and the capabilities of our technology and solutions in both existing and new markets.

We plan to target clients who own or manage large online databases and are seeking to reduce their operating costs, increase their organic traffic and increase revenues from advertising and lead generation solutions. Accordingly, the type of commercial partners that we are targeting include online directory publishers, data management companies, digital agencies, large media companies and domain registrars.

We plan to continue our ongoing maintenance, development and enhancement of our technology to ensure it meets consumer demand and remains compliant with new and emerging technologies and data protection laws.

Competition

We compete against various companies to attract and engage users, some of which are larger and have greater brand name recognition, longer operating histories, larger marketing budgets and established customer relationships, access to larger customer bases and significantly greater resources for the development of their solutions. In addition, we may face potential competition from participants in adjacent markets that may enter our markets by leveraging related technologies and partnering with or acquiring other companies or providing alternative approaches to provide similar results.

Furthermore, rival product offerings by existing and new competitors as well as technology developments by competitors may have an adverse impact on our business operations, financial performance and prospects as well as on the value and market price of our ordinary shares. This risk may influence our customer acquisition cost and customer lifetime value.

Given the recent advent of AI and chatbots, it is too early to properly assess its impact on how consumers search for online content and the effect this will have on us and our technology.

Intellectual Property

Our ability to establish and protect our core technology and intellectual property, including our software source code and copyright, is critical to our success. We rely on a combination of patents, trade secrets, including know-how, and contractual rights to establish and protect our proprietary rights in our technology. A component of the underlying technology on which our technology is built is patented in the United States (Patent Number US 9286274), which will remain in effect until January 27, 2035. In addition, we enter into confidentiality and non-disclosure agreements with our employees and business partners. The agreements we enter into with our employees also provide that all software, inventions, developments, works of authorship and trade secrets created by them during the course of their employment are our property.

See “Item 3. Key Information—D. Risk Factors—Risks Relating to our Business and Industry—If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate reduced revenue, and incur costly litigation to protect our rights.”

C. Organizational Structure

We commenced activities in April 2009. The chart below illustrates our organizational structure, including the dates and jurisdictions of incorporation. As of the date hereof, Moboom USA Inc. has ceased operations and remained dormant during the year. We intend to formally close the company at an appropriate time.

D. Property, Plants and Equipment

We are headquartered in Perth, Australia where we lease and occupy for office space approximately 603 square meters (approximately 6,490 square feet) as of the date of this Annual Report. The current lease term expires in November 2026, and we believe that our existing facilities are generally adequate to meet our current of future needs, but we expect to seek additional space as needed to accommodate future growth.

None.

Overview

We are an Australian company currently focused on commercializing our Software as a Service (SaaS) online Search Engine Optimization (SEO) technology (“Technology”). Our Technology publishes search engine optimized web pages using a combination of data integrations and generative AI (“Content”) and our “Entity Based” SEO technology and know-how (“Site Structure”). Once the Content and Site Structure is integrated with our Technology, the production of search engine optimized web pages is largely automated which enables the Company to scale production. Based on our testing and those in production, these web pages are highly likely to appear prominently in search engine results pages (“SERP”) for search keywords relevant to those web pages, more rapidly than alternative solutions.

Fundamental to each of our search solutions are the landing pages created through our Technology; each of which are configured for a specific use case. Our landing pages contain features that would otherwise require significant manual effort to achieve or the application of additional and more expensive solutions. For instance, in order to achieve superior SERP rankings we optimize our landing pages to enable search engines to detect and understand the relevant page content based on a specific “Entity”. We also automatically incorporate other contributing factors affecting SERP rankings include page speed, accessibility security, and unique quality content, for which we are able to leverage generative artificial intelligence (“AI”).

We also operate a Publishing division, which includes ownership of Hotfrog, a global online business directory, and three additional Australian-focused directories, AussieWeb.com.au (“AussieWeb”), PinkPages.com.au (“PinkPages”) and SuperPages.com.au (“SuperPages”). Combined, these directory assets contain more than 46 million business listings and an email database of approximately 245,000 subscribers.

A. Operating Results

Revenue. We derive substantially all of our revenue from license subscription fees earned from customers using our technology as well as from data and advertising fees earned from customers publishing their content on our digital property network.

Operating Expenses. The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, bonuses and commissions. We also incur other non-personnel costs related to our general overhead expenses. We plan to continue investing in sales and marketing by increasing our sales and marketing headcount, expanding our sales channels and building our brand awareness. We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future as we expand our sales and marketing efforts, although these expenses may fluctuate as a percentage of our total revenue from period to period depending on the timing of these expenses and, over the longer term, we expect them to decline as a percentage of revenue as we scale our business. Following the completion of our initial public offering in March 2022, we have incurred additional expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and increased expenses for insurance, investor relations and professional services.

Comparison of the Years Ended June 30, 2023 and 2022

The following table sets forth information concerning our operating results for the years ended June 30, 2023 and 2022:

Revenue

Subscription revenues grew 26.8% to A$4,020,241 (2022: A$3,169,094). The increase in subscription revenues was modest compared to previous years as we did not aggressively pursue new business while we incorporated technologies acquired from Jimmy Kelley Digital into our developed Technology. As this was a significant upgrade that would have key technologies “baked-in” to improve page performance, reduce input errors and require lower maintenance, our preference was to wait for these new products to be available for commercial release in June 2023.

The intellectual property acquired from Jimmy Kelley Digital also provided us with a platform to access a new customer segment comprising SEO specialists who understand the benefits from the Company’s implementation of Entity-Based SEO. Approximately A$700,000 was derived from this segment during the relevant period post-acquisition, comprising both direct and channel partner customers.

Advertising revenues have remained steady at A$315,524 (2022: A$316,713). Given our technical focus on Platform upgrades, we reduced R&D efforts related to the creation and publication of our proposed “decentralised” directories. That said, the Platform upgrade itself will serve as the foundation for further work to grow our directory network and associated advertising revenues.

Data revenues increased by 34.1% to A$871,502 (2022: A$649,937). The growth in Data revenues was due to the net new increase in the number of partners connected to our Publishing API during the year. While not having a significant financial impact during the year ended June 30, 2023, our recent Platform technology upgrade included enhancements to our Publishing API so that both are now in the same Locafy technology ecosystem. As a result, data partners will have the ability to programmatically create additional online assets for resale to their end user customers and potentially lead to increased demand for our subscription revenue products.

Other Income

Other income decreased by 23.4% to A$993,493 (2022: A$1,298,499) primarily due to the year ended June 30, 2022 including R&D tax incentive grants for both the years ended June 30, 2022 and 2021, and a significantly lower foreign exchange gain during the year ended June 30, 2023, partially offset with a gain from the extinguishment of a liability.

Operating Expenses

During the year ended June 30, 2023, total operating expenses increased 3.0% primarily due to an increase in employment related expenses and an increase in amortization expenses, partially offset through lower consultancy expenses.

Technology expense. Technology expense includes the software and hosting services required to operate and maintain our platform, software that we use in the management of our broader operations, and third-party solutions that we may offer for resale. The decrease in technology expense for the year ended June 30, 2023 compared to the year ended June 30, 2022 is primarily attributed to a A$194,387 reduction in expenses related to third party “signals” software required in the delivery of our solutions, resulting from the conclusion of minimum purchasing commitments and partially offset by the A$120,813 increase in costs associated with the development and maintenance of new technologies acquired from Jimmy Kelley Digital.

Employee benefits expense. The most significant components of operating expenses are personnel costs, relating to our engagement of employees and contractors, together with associated expenses including recruitment, payroll taxes and insurances. Employee benefits expenses increased 19.4% to A$5,267,246 for the year ended June 30, 2023 (2022: A$4,411,926). The increase in expenses was mainly due to an increase in headcount during the first half of the year ended June 30, 2023. Through the acquisition of Jimmy Kelley Digital, we shifted our development efforts and streamlined all areas of the organization, in particular in sales and operations, leading to a significant reduction in employee and contractor expenses during the second half of the year ended June 30, 2023. At June 30, 2023, we had 34 employees globally (2022: 50). The year ended June 30, 2023 included A$460,603 in non-cash share-based payment expenses, which was primarily related to the issue of performance rights from prior years.

Occupancy expense. The increase in occupancy expenses for the year ended June 30, 2023 compared to the year ended June 30, 2022 was primarily due to a contractual increase in lease costs for our Perth office, the adoption of leased premises in connection with the acquisition of assets from Jimmy Kelley Digital, partially offset by the termination of short-term office premises.

Advertising expense. Advertising expenses decreased in the year ended June 30, 2023 as compared to the year ended June 30, 2022 primarily due to a reduction in trade show attendance and associated costs, together with the reduction in the engagement of marketing consultants.

Consultancy expense. Consultancy expense for the year ended June 30, 2023 was A$874,638 (2022: A$1,691,544) with the decrease primarily due to the costs associated with our initial public offering during the year ended June 30, 2022. However, the year ended June 30, 2023 included additional costs related to audit, compliance and investor relations.

Depreciation and amortization expense. The increase in depreciation and amortization expense to A$1,355,170 for the year ended June 30, 2023 (2022: A$852,361) was as a result of our acquisition of technology and other assets and our capitalization of development costs.

Other expenses. The movement in other expenses primarily related to a reduction in foreign exchange costs.

Impairment of financial assets. 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.

Comparison of the Years Ended June 30, 2022 and 2021

The following table sets forth information concerning our operating results for the years ended June 30, 2022 and 2021: