Locafy Restates FY24 Financials, Cites Control Weaknesses

TL;DR

**Locafy's restatement and control failures are a major red flag; avoid until they prove they can count.**

AI Summary

Locafy Ltd (LCFYW) filed an amended 20-F/A for the fiscal year ended June 30, 2024, restating its previously issued audited Consolidated Financial Statements due to errors. The restatement primarily addresses a misstatement related to employee service Tranche 1 performance rights, where the accumulative balance recorded should have been reversed through profit or loss in accordance with IFRS 2 'Share-based Payments' as performance conditions were not met by June 30, 2024. This correction impacts the share-based payment expense and the share-based payment reserve. The company also identified additional material weaknesses in its internal control over financial reporting as of June 30, 2024, specifically citing inadequate review of non-routine and judgmental transactions, inadequate controls over share-based payment accounting, and inadequate controls over the financial statement closing process. Investors are advised to rely only on the financial information in this Comprehensive Form 20-F. The company had 1,382,185 ordinary shares outstanding as of June 30, 2024, and reports under IFRS, with all amounts expressed in U.S. dollars.

Why It Matters

This restatement signals significant internal control deficiencies at Locafy, particularly concerning complex accounting areas like share-based payments. For investors, this raises red flags about the reliability of past financial reporting and future earnings visibility, potentially eroding confidence and impacting LCFYW's stock price. Employees might face increased scrutiny and pressure as the company works to remediate these issues. Competitively, this could put Locafy at a disadvantage, as rivals with stronger financial governance may gain investor trust. The broader market will watch closely to see if Locafy can swiftly implement robust controls and restore credibility, as such restatements often lead to prolonged investor skepticism.

Risk Assessment

Risk Level: high — The filing explicitly states that previously issued financial statements 'should no longer be relied upon' due to errors, necessitating a restatement. Furthermore, management identified 'additional material weaknesses' in internal control over financial reporting as of June 30, 2024, including 'inadequate controls over share-based payment accounting' and 'inadequate controls over financial statement closing process.' These are fundamental control failures that indicate a high risk of future misstatements and potential investor litigation.

Analyst Insight

Investors should exercise extreme caution and consider divesting from LCFYW until the company demonstrates a sustained period of accurate financial reporting and effective internal controls. New investors should avoid initiating a position. Monitor subsequent filings for evidence of remediation of the identified material weaknesses and consistent, reliable financial disclosures.

Financial Highlights

debt To Equity

N/A

revenue

$N/A

operating Margin

N/A%

total Assets

$N/A

total Debt

$N/A

net Income

$N/A

eps

$N/A

gross Margin

N/A%

cash Position

$N/A

revenue Growth

+N/A%

Key Numbers

• 1,382,185 — Ordinary shares outstanding (As of June 30, 2024, after a 1-for-20 reverse share split)
• A$1.0000 to US$0.6624 — Exchange rate (Used for conversions from AUD to USD on June 28, 2024)
• 2024 — Fiscal year end (The period for which financial statements were restated)
• 2025-08-20T00:00:00Z — Date of 6-K filing (When restatement was previously disclosed)

Key Players & Entities

• Locafy Ltd (company) — Registrant filing 20-F/A
• SEC (regulator) — Securities and Exchange Commission
• Gavin Burnett (person) — Company Contact Person
• Nasdaq Capital Market (regulator) — Exchange where LCFY and LCFYW are registered
• Grant Thornton Audit Pty Ltd (company) — Independent registered public accounting firm
• IASB (regulator) — International Accounting Standards Board
• Reserve Bank of Australia (regulator) — Source for exchange rates
• Audit Committee (company) — Board of Directors committee consulted on restatement

FAQ

Risk Factors

• Restatement of Financial Statements [high — financial]: The company has concluded that certain previously issued financial statements should not be relied upon and has restated them. This process was time-consuming and expensive, potentially exposing the company to additional risks.
• Shareholder Litigation Risk [medium — legal]: The restatement of prior financial statements may lead to future shareholder litigation, which could result in significant legal costs and reputational damage.
• Internal Control Weaknesses [high — operational]: The company identified material weaknesses in its internal control over financial reporting, including inadequate review of non-routine transactions, controls over share-based payment accounting, and the financial statement closing process. Failure to maintain effective controls could lead to inaccurate reporting or fraud.
• Uncertainty of Future Growth [medium — financial]: Prior growth may not be indicative of future growth, and the company may not be able to sustain its revenue growth rate. This makes it difficult to evaluate future prospects and increases the risk of failure.
• Competitive and Rapidly Changing Market [medium — market]: The market and technology space is competitive, new, and rapidly changing. Failure to compete effectively, introduce new features, or enhance existing products could harm the business.
• Reliance on Third-Party Services [medium — operational]: The company uses third-party services and technologies. Any disruption to these services could result in negative publicity and a slowdown in user base growth, adversely affecting the business.
• Growth Management Challenges [medium — operational]: Failure to manage growth effectively could prevent the execution of the business plan or the maintenance of high service levels and customer satisfaction.
• Technology Errors and Vulnerabilities [medium — operational]: Real or perceived errors, failures, vulnerabilities, or bugs in the company's technology could harm its business, results of operations, financial condition, and reputation.

Industry Context

Locafy operates in the digital presence and marketing technology sector, which is characterized by rapid technological advancements and intense competition. Companies in this space focus on providing solutions for businesses to manage their online visibility, customer engagement, and digital advertising. Key trends include the increasing demand for AI-driven personalization, data analytics for marketing effectiveness, and integrated platforms that offer a comprehensive suite of digital tools.

Regulatory Implications

The restatement of financial statements and identification of material weaknesses in internal controls pose significant regulatory risks. Investors and regulators will scrutinize Locafy's compliance with financial reporting standards (IFRS) and internal control requirements. Failure to remediate these issues could lead to further SEC scrutiny, potential fines, or delisting from exchanges.

What Investors Should Do

1. Review the restated financial statements thoroughly.
2. Assess the company's remediation plan for internal control weaknesses.
3. Monitor future financial reports for improvements in accuracy and control.
4. Consider the impact of past accounting errors on valuation.

Key Dates

• 2024-06-30: Fiscal Year End — Date as of which financial statements were restated due to accounting errors, including share-based payment misstatements and internal control weaknesses.
• 2025-08-20: 6-K Filing — Date when the restatement was previously disclosed, signaling the company's acknowledgment of financial reporting issues.

Glossary

20-F/A

An amended annual report filed by foreign private issuers with the U.S. Securities and Exchange Commission (SEC). It contains updated or restated financial information. (This filing contains the restated financial statements and disclosures about the reasons for the restatement and identified internal control weaknesses.)

IFRS

International Financial Reporting Standards. A set of accounting standards developed by the International Accounting Standards Board (IASB). (Locafy Ltd reports under IFRS, meaning its financial statements are prepared according to these global accounting principles.)

Share-based Payments

Transactions in which a company provides equity instruments (like stock options or restricted stock) or incurs liabilities to pay for goods or services based on the price of its equity instruments. (A primary driver for the restatement was a misstatement related to employee service Tranche 1 performance rights under IFRS 2, indicating issues with accounting for equity compensation.)

Material Weaknesses

A deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. (The company identified multiple material weaknesses, highlighting significant deficiencies in its financial reporting processes and controls.)

Reverse Share Split

A corporate action where a company reduces the number of its outstanding shares by consolidating existing shares into fewer, proportionally more valuable shares. (The company underwent a 1-for-20 reverse share split, which impacted the number of ordinary shares outstanding as of June 30, 2024.)

Year-Over-Year Comparison

This amended 20-F/A primarily serves to correct previously issued financial statements due to accounting errors, specifically concerning share-based payments. It also discloses new material weaknesses in internal controls over financial reporting as of June 30, 2024. Therefore, a direct comparison of key metrics like revenue growth or margins to a prior period's filing is not the focus; instead, the emphasis is on the accuracy of the reported financial data and the effectiveness of the company's internal controls.

Key Financial Figures

• $1.0000 — U.S. Dollars were made at the rate of A$1.0000 to US$0.6624, which was the daily excha
• $0 — were made at the rate of A$1.0000 to US$0.6624, which was the daily exchange rate

Filing Documents

• form20-fa.htm (20-F/A) — 2904KB
• ex12-1.htm (EX-12.1) — 17KB
• ex12-2.htm (EX-12.2) — 18KB
• ex13-1.htm (EX-13.1) — 8KB
• ex13-2.htm (EX-13.2) — 8KB
• ex15-1.htm (EX-15.1) — 5KB
• form20-f_003.jpg (GRAPHIC) — 8KB
• form20-f_002.jpg (GRAPHIC) — 25KB
• 0001641172-25-025206.txt ( ) — 11719KB
• lcfy-20240630.xsd (EX-101.SCH) — 110KB
• lcfy-20240630_cal.xml (EX-101.CAL) — 94KB
• lcfy-20240630_def.xml (EX-101.DEF) — 323KB
• lcfy-20240630_lab.xml (EX-101.LAB) — 598KB
• lcfy-20240630_pre.xml (EX-101.PRE) — 464KB
• form20-fa_htm.xml (XML) — 2529KB

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 71 ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 71 PART II ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 72 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 72 ITEM 15.

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 72 ITEM 16. [RESERVED] 73 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 73 ITEM 16B. CODE OF ETHICS 73 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 74 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 74 ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 74 ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT 75 ITEM 16G. CORPORATE GOVERNANCE 75 ITEM 16H. MINE SAFETY DISCLOSURE 75 ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 75 ITEM 16J. INSIDER TRADING POLICIES 75 ITEM 16K. CYBERSECURITY 75 PART III ITEM 17.

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 77 ITEM 18.

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS 77 ITEM 19. EXHIBITS 77

SIGNATURES

SIGNATURES 79 2 EXPLANATORY NOTE We are filing this comprehensive Annual Report on Form 20-F for the fiscal year ended June 30, 2024 ("Comprehensive Form 20-F"). In filing this Comprehensive Form 20-F, we are restating our previously issued audited Consolidated Financial Statements as of and for the fiscal year ended June 30, 2024 (the "Prior Financial Statements"). Restatement Background As previously disclosed in our Report on Form 6-K filed with the Securities and Exchange Commission (the "SEC") on August 20, 2025 , in connection with the preparation of our consolidated financial statements for the half year ended December 31, 2024, we, in consultation with the Audit Committee of our Board of Directors, concluded that the Prior Financial Statements should no longer be relied upon due to errors in such consolidated financial statements and should be restated to correct the misstatements therein. During the preparation of the consolidated financial statements for the half year ended December 31, 2024, a misstatement relating to employee service related Tranche 1 performance rights was identified. As at June 30, 2024, the performance conditions relating to the Tranche 1 rights had not been met. At June 30, 2024, the accumulative balance recorded in relation to the employee service rights should have been reversed through the profit or loss in accordance with IFRS 2 "Share-based Payments". A restatement relating to the share-based payment expense and the share-based payment reserve to accurately reflect the impact has been recognised in the accompanying restated consolidated financial statements. Restatement Overview Other sections impacted by the restatement of the Prior Financial Statements are: Part I, Item 3D. Risk Factors Part I, Item 5. Operating and Financial Review and Prospects Part I, Item 8. Financial Information Part II, Item 15. Controls and Procedures We have not filed, and do not intend to file, amendments to the previously f

Risk Factors

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 9 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: We have concluded that certain of our previously issued financial statements should not be relied upon and have restated certain of our previously issued consolidated financial statements which was time consuming and expensive and could expose us to additional risks that could have a negative effect on us. The restatement of the Prior Financial Statements may lead to future shareholder litigation. 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. Our prior 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. 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 bu

View Full Filing

View this 20-F/A filing on SEC EDGAR