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Galaxy Payroll Group Ltd. – IPO: ‘F-1/A’ on 4/10/24

On:  Wednesday, 4/10/24, at 3:59pm ET   ·   Accession #:  1213900-24-31865   ·   File #:  333-269043

Previous ‘F-1’:  ‘F-1/A’ on 10/31/23   ·   Latest ‘F-1’:  This Filing   ·   6 References:   To:  Galaxy Payroll Group Ltd. – Previous ‘F-1/A’ on 10/31/23 To:  Galaxy Payroll Group Ltd. – ‘F-1/A’ on 10/17/23 To:  Galaxy Payroll Group Ltd. – ‘F-1/A’ on 9/1/23 To:  Galaxy Payroll Group Ltd. – ‘F-1/A’ on 2/22/23 To:  Galaxy Payroll Group Ltd. – ‘F-1/A’ on 1/27/23 To:  Galaxy Payroll Group Ltd. – ‘F-1’ on 12/28/22 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/10/24  Galaxy Payroll Group Ltd.         F-1/A                  5:3.8M                                   EdgarAgents LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-1/A       Amendment No. 9 to Form F-1                         HTML   2.77M 
 2: EX-1.1      Form of Underwriting Agreement                      HTML    258K 
 3: EX-10.5     Service Agreement by and Between Immedis Limited    HTML    481K 
                and Galaxy Payroll Services Limited                              
 4: EX-23.1     Consent of Marcum Asia CPAs LLP                     HTML      6K 
 5: EX-23.2     Consent of Friedman LLP                             HTML      5K 

As filed with the U.S. Securities and Exchange Commission on April 10, 2024.

Registration No. 333-269043

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 9

to 

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Galaxy Payroll Group Limited

(Exact name of registrant as specified in its charter)

25th Floor, Ovest

77 Wing Lok Street

Sheung Wan, Hong Kong

Tel: +852 3105 2611

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Puglisi & Associates
850 Library Avenue, Suite 204
Newark, DE 19711

Tel: 302-738-6680

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a Copy to:

Approximate date of commencement of proposed sale to the public: Promptly after the effective date of this registration statement.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

EXPLANATORY NOTE

This registration statement on Form F-1 (the “Registration Statement”) contains two prospectuses, as set forth below.

The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:

The Registrant has included in this Registration Statement a set of alternate pages after the back-cover page of the Public Offering Prospectus (the “Alternate Pages”) to reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale offering by the Selling Shareholders.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED APRIL 10, 2024

2,000,000 Ordinary Shares Offered by Galaxy Payroll Group Limited

Galaxy Payroll Group Limited 

This is an initial public offering of Galaxy Payroll Group Limited’s ordinary shares. Hereinafter “the Company”, “we”, us”, or “Galaxy Payroll BVI” are all referring to Galaxy Payroll Group Limited. We are offering on a firm commitment basis our ordinary shares, par value $0.000625 per share (“Ordinary Shares”). Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price to be $4.00 per Ordinary Share. We have submitted the application to the Nasdaq to have our Ordinary Shares listed on the Nasdaq Capital Market under the symbol “GLXG”. The closing of this initial public offering is conditioned upon Nasdaq’s approval of our listing application. There can be no assurance that the offering will be closed and our Ordinary Shares will be trading on Nasdaq Capital Market. 

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 22 to read about factors you should consider before buying our Ordinary Shares.

We are a holding company incorporated in the British Virgin Islands, or BVI. As a holding company with no operations, we are not a Chinese operating company. Our operations are conducted by our Operating Entities, which are our indirect wholly-owned subsidiaries, Galaxy Payroll Services Limited (“Galaxy Payroll (HK)”), Galaxy GEO Services Limited (“Galaxy GEO Services”), Galaxy Corporate Management Consultancy (Shenzhen) Limited (“Galaxy HR (SZ)”), Galaxy Human Resources Limited (“Galaxy HR (TW)”), and Galaxy Recursos Humanos (Macau) Limitada (“Galaxy HR (Macau)”). 

The selling shareholders as defined under Principal Shareholders section of this prospectus is offering 2,240,000 Ordinary Shares to be sold in the offering pursuant to the resale prospectus. Neither we nor the underwriter will receive any proceeds from the sales of any of the Ordinary Shares being offered by the selling shareholders.

This is an offering of the Ordinary Shares of Galaxy Payroll Group Limited, the holding company incorporated in BVI, instead of shares of our Operating Entities. You may never directly hold any equity interest in our Operating Entities. 

Our Company faces various legal and operational risks and uncertainties relating to its operations in Hong Kong and in PRC. Our current corporate structure includes a wholly owned subsidiary doing business in PRC. We do not have any variable interest entity (the “VIE”) in PRC and we currently do not have any intention of establishing any VIEs in the future. If in the future there is any significant change to the current political arrangements between PRC and Hong Kong or PRC’s authority in Hong Kong, it could result in the PRC or Hong Kong regulatory authorities disallowing our current corporate structure, which in turn would likely result in a material adverse change in our operations, and cause our securities to decline significantly in value or become worthless. All of our operations are conducted by our Operating Entities in Hong Kong, PRC, Taiwan and Macau as subsidiaries of Galaxy Payroll BVI. 

Although we believe that the laws and regulations of the PRC do not currently have any material negative impact on our business, financial condition or results of operations, and our corporate structure is stable without any interference from current applicable laws in Hong Kong, PRC, Taiwan and Macau, we face risks and uncertainties associated with the complex and evolving PRC laws and regulations and as to whether and how the recent PRC government statements and regulatory developments, such as those relating to corporate structure, data and cyberspace security, and anti-monopoly concerns, would be applicable to a company like us, given our foreign investment personality, substantial operations in Hong Kong, and the Chinese government’s significant oversight authority over the conduct of business in Hong Kong. See “Risk Factors - Risks Relating to the PRC” and “Risk Factors - Risks Relating to Hong Kong, Taiwan and Macau” for more details.  

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and five supporting guidelines, which took effect on March 31, 2023. The Trial Administrative Measures stipulate the rules and requirements for overseas offering and listing conducted by PRC domestic companies, among which, a PRC domestic company that seeks to directly or indirectly offer and list securities in overseas markets, if both explicit conditions set forth under Article 15 (as listed under point (1) below) are satisfied with respect to an “indirect offering and listing”, shall fulfill the filing procedure with the CSRC. Article 15 of the Trial Administrative Measures provides that (1) any overseas offering and listing made by an issuer that meets both the following explicit criteria will be determined as an “indirect overseas offering and listing”: (a) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies, and (b) the main parts of the issuer’s business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China (point (1)(a) and (1)(b) collectively, the “Article 15 Explicit Conditions for Filing”); and (2) the determination as to whether or not an overseas offering and listing by PRC domestic companies is an “indirect overseas offering and listing”, shall be made on a “substance over form” basis (the “Discretional Clause”). As of the date of this prospectus, we do not believe that this offering constitutes an “indirect overseas offering and listing”, or that we are required to obtain the approval from or complete the filing with the CSRC pursuant to the Trial Administrative Measures for this offering because we do not meet both of the Article 15 Explicit Conditions for Filing at the same time as set out in the Trial Administrative Measures. No opinion was obtained from our PRC Legal Advisers regarding such matters because the CSRC has the sole discretion to determine whether this offering will be regarded as an “indirect overseas offering and listing” under the Discretional Clause and consequently whether the Company is required to obtain approval from or complete the filing with the CSRC pursuant to the Trial Administrative Measures. As the Trial Administrative Measures were recently published, there are substantial uncertainties as to its implementation and interpretation, and the CSRC may take a view that is contrary to our understanding of the Trial Administrative Measures under the principle of “substance over form” adopted thereby regarding the determination of an “indirect overseas offering and listing by PRC domestic companies”. See “Risk Factor - We believe we are not subject to the filing requirements under Trial Administrative Measures, which took effect on March 31, 2023, because (i) our PRC subsidiary accounted for far less than 50% of any of the Company’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year, and (ii) the Company’s main parts of business activities are not conducted in mainland China, nor is its main place of business located in mainland China, and the senior managers in charge of its business operation and management are not mostly Chinese citizens or domiciled in mainland China. However, We cannot assure you that the CSRC will have the same interpretation as us and if they request us to proceed with the filing nevertheless, we cannot give you an estimated time frame for completing such a filing which is beyond our control.” for more details.

Pursuant to the Holding Foreign Companies Accountable Act, or the HFCAA, the Public Company Accounting Oversight Board (the “PCAOB”) issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (i) mainland China of the PRC, and (ii) Hong Kong. In addition, the PCAOB’s report identified the specific registered public accounting firms which are subject to these determinations. Our former auditor, Friedman LLP, and our current auditor, Marcum Asia CPAs LLP (“Marcum Asia”), are both headquartered in New York, and have been inspected by the PCAOB on a regular basis. Neither of them is headquartered in mainland China or Hong Kong nor was identified in this report as a firm subject to the PCAOB’s determination. Notwithstanding the foregoing, in the event that, in the future, either PRC regulators take steps to impair the auditing firm’s access to the workpapers in PRC or Hong Kong, or the PCAOB is not able to fully conduct inspections of our auditor’s work papers in mainland China, or the PCAOB expands the scope of the Determination Report so that we are subject to the HFCAA, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets, trading of our securities on a national securities exchange or in the over-the counter may be prohibited under the HFCAA and an exchange may determine to delist our securities. On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act, as part of the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA and reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, thus, would reduce the time before an applicable issuer’s securities may be prohibited from trading or delisted. It can potentially cause delisting as well as depress the price of a foreign issuer’s securities if the issuer’s auditor is beyond the PCAOB’s complete inspection and investigation. On August 26, 2022, the PCAOB announced and signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China. The Protocol provides the PCAOB with: (1) sole discretion to select the firms, audit engagements and potential violations it inspects and investigates, without any involvement of Chinese authorities; (2) procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (3) direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates. On December 15, 2022, the PCAOB issued a new Determination Report which: (1) vacated the December 16, 2021 Determination Report; and (2) concluded that the PCAOB has been able to conduct inspections and investigations completely in the PRC in 2022. The December 15, 2022 Determination Report cautions, however, that foreign authorities might take positions at any time that would prevent the PCAOB from inspecting or investigating completely. As required by the HFCAA, if in the future the PCAOB determines it can no longer inspect or investigate completely because of a position taken by any foreign authority, including but is not limited to Hong Kong and mainland China authorities, the PCAOB will act expeditiously to consider whether it should issue a new determination. See “Risk Factors — Our auditor is headquartered in New York, and is subject to inspection by the PCAOB on a regular basis. To the extent that our independent registered public accounting firm’s audit documentation related to their audit reports for our company become located in China, the PCAOB may not be able to inspect such audit documentation and, as such, you may be deprived of the benefits of such inspection and our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act” for more information.

Funds may be transferred to Galaxy HR (SZ), Galaxy HR (TW) and Galaxy HR (Macau) through our subsidiaries in Hong Kong, Galaxy Payroll (China), Galaxy Payroll (TW) and Galaxy Payroll (HK) respectively, by additional capital contributions or shareholder’s loans. The funds were paid directly through Melkweg Cayman after reorganization since the bank account of Galaxy Payroll Group Limited had not been opened until November 15, 2022. Since then the dividends were paid through Galaxy Payroll BVI. The following are tables providing descriptions of how cash is transferred through our organization for the six months ended December 31, 2023, and for the fiscal years ended June 30, 2023 and 2022. See “Galaxy Payroll Group Limited - Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity - For the Six Months Ended December 31, 2023 and 2022”, “Galaxy Payroll Group Limited - Unaudited Condensed Consolidated Statements of Cash Flows - For the Six Months Ended December 31, 2023 and 2022”, “Galaxy Payroll Group Limited - Consolidated Statements of Changes in Shareholders’ Equity - For the Two Fiscal Years Ended June 30, 2023 and 2022” and “Galaxy Payroll Group Limited - Consolidated Statements of Cash Flows - For the Two Fiscal Years Ended June 30, 2023 and 2022” for more details.

Galaxy Payroll BVI’s ability to pay dividends to its shareholders and to service any debt it may incur may largely depend upon dividends paid by Galaxy Payroll (HK). Galaxy HR (SZ), as an indirect wholly-owned subsidiary of Galaxy Payroll BVI, is statutorily limited because it is required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. See Transfers of Cash to and from Our Subsidiaries on page 3-4 under Prospectus Summary for more details.

As advised by our Hong Kong Legal Advisers, according to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. In addition, there can be no assurance that in the future the PRC government will not intervene or impose restrictions on Galaxy Payroll (HK)’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, which could result in an inability or prohibition on making transfers or distributions to us and adversely affect our business. Therefore, to the extent funds and/or assets are in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds and/or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations by the PRC government. See Risk Factors Summary and “Risk Factor - Restrictions on currency exchange may limit our ability to receive and use our revenue effectively” for more details.

We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business and do not anticipate that any cash dividends will be paid or any assets will be transferred in the foreseeable future. Currently the Company does not have any contractual cash management policies that dictate how funds are transferred between our subsidiaries, holding company and investors. If we decide to distribute dividends to our investors, we may distribute dividends by way of cash or by other means that we consider appropriate. A decision to declare and pay any dividends would require the approval of our Board and will be at its discretion. In addition, any final dividend for a financial year will be subject to Shareholders’ approval and even if approved, cannot be regarded as an indication of future dividend policy or our payment of dividends in the future. See “Galaxy Payroll Group Limited Consolidated Statements of Changes in Shareholders’ Equity” and “Galaxy Payroll Group Limited Consolidated Statements of Cash Flows”.

We are an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 45 of this prospectus for more information.

This offering is being conducted on a firm commitment basis. The underwriter is obligated to take and pay for all of the Ordinary Shares if any such Ordinary Shares are taken. We have granted the underwriter an option for a period of 45 days after the effective date of this registration statement to purchase up to 15% of the total number of the Ordinary Shares to be offered by us pursuant to this offering (excluding Ordinary Shares subject to this option), solely for the purpose of covering over-allotments, at the public offering price less the underwriting discounts. If the underwriter exercises the option in full, and assuming an offering price of $4.00 per Ordinary Share, the total gross proceeds to us, before underwriting discounts and expenses, will be $9,200,000.

The underwriter expects to deliver the Ordinary Shares against payment as set forth under “Underwriting” on or about [●], 2024.

Recently, the Chinese government announced that it would step up supervision of Chinese firms listed offshore and/or foreign investments in China based issuers. Under the new measures, China will improve regulation of cross-border data flows and security, crack down on illegal activity in the securities market and punish fraudulent securities issuance, market manipulation and insider trading, China will also check sources of funding for securities investment and control leverage ratios. The Cyberspace Administration of China (“CAC”) has also opened a cybersecurity probe into several U.S.-listed tech giants focusing on anti-monopoly, financial technology regulation and more recently, with the passage of the Data Security Law, how companies collect, store, process and transfer data.

The Company does not use variable interest entities in its corporate structure. We do not believe the Company’s current business to be within the targeted areas of concern by the Chinese government. However, because of the Company’s subsidiaries in Hong Kong and mainland China and their operations there, there is a risk that the Chinese government may in the future seek to affect operations of any company with any level of operations in Hong Kong or China through the exertion of increased control, oversight, intervention and influence of our Operating Entities’ operations, our ability to offer securities to investors, list our securities on a U.S. or other foreign exchange, conduct their business or accept foreign investment. Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition. If any or all of the foregoing were to occur, it could, in turn, result in a material change in the Company’s operations and/or the value of its Ordinary Shares and/or significantly limit or completely hinder its ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Prospectus dated April 10, 2024

TABLE OF CONTENTS

You should rely on the information contained in this prospectus or in any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus or in any related free writing prospectus. We are offering to sell, and seeking offers to buy the Ordinary Shares, only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares.

Neither we nor the underwriter have taken any action to permit a public offering of the Ordinary Shares outside the United States or to permit the possession or distribution of this prospectus or any filed free-writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the Ordinary Shares and the distribution of this prospectus or any filed free-writing prospectus outside the United States.

Until [●], 2024 (the 25^th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

RISK FACTORS

Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. The risks and uncertainties described below represent our known material risks to our business. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, you may lose all or part of your investment. You should not invest in this offering unless you can afford to lose your entire investment.

RISKS RELATING TO OUR BUSINESS

A significant portion of our revenue was generated from our five largest customers in the past two fiscal years ended June 30, 2023 and 2022 as well as for the six months ended December 31, 2023 and any significant decrease in the demand from such customers for our services may materially and adversely affect our financial conditions and operating results.

A significant portion of our revenue was derived from our five largest customers. For the years ended June 30, 2023 and 2022, our revenue generated from such customers amounted to approximately HK$22.5 million (US$2.9 million) and HK$28.0 million (US$3.6 million), representing approximately 71.4% and 59.7% of our revenue for the same periods, respectively. For the six months ended December 31, 2023, our revenue generated from such customers amounted to approximately HK$10.9 million (approximately US$1.4 million), representing approximately 72.5% of our revenue for the same periods.

There is no assurance that our major customers will continue to engage us for the provision of our payroll outsourcing services, employment services and consultancy and market research services and/or increase their demand for our services in the future. If there is any significant decrease in the number and scale of engagements awarded by such customers, our financial condition and operating results would be materially and adversely affected. Furthermore, in the event that our major customers experience any liquidity problems, the business, financial position and prospects of our Group may be materially and adversely affected. For details of our major customers, please refer to “Business — Customers” in this prospectus.

Our IT system may not perform as anticipated and is vulnerable to damage and interruption, which may lead to leakage of personal data of the employees of our end-users and our seconded employees.

The efficient operation of our business is dependent on our IT system, which is directly related to the stability and performance of our business operation.

We have in our possession a substantial amount of personal data related to the employees of our end users and our seconded employees. We are obliged to keep all the personal data in our possession in such manner required by the laws and regulations relating to personal data protection implemented in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries. If our IT system experiences any functional problems or there is any failure of our IT system due to power outages, hacker attacks, computer viruses, security breaches and errors in usage by our internal employees causing any breach of confidentiality by us or any failure to comply with the protection, collection, use and disclosure of personal data as prescribed under the relevant laws and regulations, resulting in personal data related to the employees of the end-users of our payroll outsourcing services or our seconded employees being leaked to or obtained by third parties, our reputation will be in jeopardy which could lead to loss of our major customers. The employees of the end-users of our payroll outsourcing services or our seconded employees may also take legal actions against us for damages and/or compensation for the loss that may have arisen or been incurred therefrom, in addition to the penalties prescribed under the relevant laws and regulations in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries we are subject to. For details of the regulatory framework and penalties in relation to personal data protection, please refer to “Regulations” in this prospectus.

The internal control procedures we have implemented to safeguard the security and confidentiality of our customer database may not effectively prevent leakage of personal data or unauthorized access to our customer database under all circumstances. If such incident happens, we may be subject to investigation, litigation, arbitration and other forms of legal proceedings and/or dispute for breach of personal data privacy laws and regulations in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries, and our management team will have to divert substantial time, effort and resources to handle the legal procedures. Details of our internal control measures are set out in “Business — Risk Management and Internal Control” in this prospectus. In the event that such breach has occurred, our business operation, financial results and reputation would be adversely affected.

The Major In-country Partner accounted for over 35%, 50% and 38% of our in-country partner costs throughout the year ended June 30, 2023 and 2022 as well as for the six months ended December 31, 2023, respectively. Any deterioration, termination of relationship or change of service offerings from The Major In-country Partner may adversely affect our business and results of operations.

We have entered into a human resources outsourcing service agreement with the Major In-country Partner for the provision of payroll outsourcing services and employment services by the Major In-country Partner to us in the mainland China. The Major In-country Partner accounted for over 35%, 50% and 38% of our in-country partner costs throughout the year ended June 30, 2023 and 2022 as well as for the six months ended December 31, 2023 respectively. In the event that our relationship with the Major In-country Partner deteriorates or terminates, or there is a significant change in scope of services provided by the Major In-country Partner, our business and results of operations may be adversely affected.

Our success depends on our key management personnel

Our success is largely attributable to the continued commitment and contribution of our executive directors and members of our senior management team. Their extensive knowledge and experience in the provision of payroll outsourcing services, employment services, and consultancy and market research services, as well as their established relationships with our customers and end-users have played a major role in our attainments. Mr. Lao, Mr. But and Mr. Yeung, each has over 15 years of experience in the payroll outsourcing service industry and employment service industry. Prior to founding our Group, they worked in a group of companies engaging in the provision of payroll outsourcing services and employment services. Other than our executive directors, our members of the senior management team, Ms. Lo Ho and Mr. Wu Chunlei, who possess extensive experience in the payroll outsourcing service industry and employment service industry for over 14 and 17 years, respectively, also play an important role in the daily operation of our Group including overseeing the daily operation of our Group and managing and training staff on delivery of services.

There is no assurance that we will be able to retain these key personnel, and the loss of any of them without suitable and timely replacements, or the inability to attract and retain qualified personnel may adversely affect our business, results of operations, financial positions and prospects.

In addition, we have to retain internal employees with the necessary level of competence, local experience and knowledge of payroll outsourcing services, employment services and consultancy and market research services so as to maintain and develop our business. In the future, we may encounter shortages of appropriately skilled personnel, which may hamper our ability to implement our strategies on the expansion of our operation, and materially and adversely affect our business and results of operations.

Our end-users may consider setting up their own human resources departments to manage their own payroll and employment functions when they expand to a larger scale at the respective regions.

One of the reasons for our end-users to outsource their payroll and/or employment functions to our Group was because of the costly and time-consuming nature of the work involved. However, when the size of their businesses grow in the respective regions, they may consider setting up their own human resources departments to manage the payroll and employment functions on their own due to economies of scale. If our end-users decide not to continue engaging our Group for payroll outsourcing services and/or employment services due to their expansion of businesses in the respective regions, our business and results of operations may be materially and adversely affected.

We may not be able to implement our business plans successfully

We plan to expand our business operation in the PRC and Hong Kong, with a focus on the PRC market. We may encounter difficulties in implementing such plan.

In particular, we may encounter difficulties in expanding our business operation in the PRC because the payroll outsourcing service industry and the employment service industry in the PRC are currently dominated by PRC enterprises, which used to be the only authorized entities to provide the services in the PRC. There is no assurance that we can grow our customer base in the PRC. Any inability to execute our development plans in the PRC market could adversely affect our business, growth, financial condition and results of operations.

Our continual development depends on our ability to successfully implement our business strategies and future plans, which in turn is subject to uncertainties and changing market conditions in the relevant jurisdictions. Our plans for development and business expansion are formulated based on assumptions on the occurrence of certain future events, which may or may not materialize. There is no guarantee that we will be able to successfully implement our business plans or any of our business strategies will yield the benefits or achieve the level of profitability as our anticipation. Furthermore, our Group may not be able to manage the growth of our business effectively in a controlled manner. Over-expansion may strain our limited managerial, operational and financial resources, which may have a material adverse impact on the stability of our operational and financial conditions.

The master service agreements we entered into with our channel customers do not provide any obligation on our channel customers to engage us for our payroll outsourcing services and/or our employment services and the significant reduction in number and/or scale of engagements from channel customers could have a material adverse effect on our business, financial condition and results of operations.

For the years ended June 30, 2023 and June 30, 2022, our revenue derived from our channel customers accounted for approximately 74.0% and 55.9% of our revenue, respectively. For the six months ended December 31, 2023, our revenue derived from our channel customers accounted for approximately 63.5% of our revenue. We entered into master service agreements with more than half of our channel customers for the provision of our payroll outsourcing services and employment services. Such agreements do not impose any guaranteed and/or minimum number of employees of our end-users for our payroll outsourcing services, or the minimum number of employees to be seconded by us. In the event, among others, that (i) our Group becomes the subject of a resolution or petition of winding- up; (ii) we are unable or are deemed unable or admit inability to pay our debts when they fall due; or (iii) any of our executive Directors is being charged or convicted of any criminal offence, the agreements may be terminated without the need of any notice. As such, our channel customers may terminate their master service agreements with immediate effect which will affect the number of end-users engaging us for our payroll outsourcing services and/or employment services, through our channel customers. We may consequently experience unexpected fluctuation of our revenue, and our business and results of operations may be materially and adversely affected.

The trend of our historical financial information may not be indicative of our financial performance in the future.

Our revenue decreased by approximately 32.8% to approximately HK$31.5 million (US$4.0 million) for the year ended June 30, 2023 from HK$46.9 million (US$6.0 million) for the year ended June 30, 2022. Our net income for the year decreased significantly by approximately 60% to approximately HK$9.0 million (approximately US$1.1 million) for the year ended June 30, 2023 from approximately HK$22.6 million (approximately US$2.9 million) for the year ended June 30, 2022, which was primarily attributable to the temporary cease of the new business, the consultancy and market research services, since July 2022. Our revenue decreased by approximately 3.7% from HK$15.6 million (US$2.0 million) for the six months ended December 31, 2022 to approximately HK$15.0 million (US$1.9 million) for the six months ended December 31, 2023. Our net income decreased significantly by approximately 38.0% from approximately HK$3.4 million (approximately US$0.4 million) for the six months ended December 31, 2022 to approximately HK$2.1 million (approximately US$0.3 million) for the six months ended December 31, 2023.   Such decrease was due to additional year-ended bonus paid to the operation and management team. The trend of our historical financial information may not be indicative of our financial performance in the future.

Our revenue may decline for an array of reasons, including failure to retain our existing customers and/or attract new customers, intensified market competition, slowdown in the growth of the overall payroll outsourcing service market and the employment service market and any unfavorable changes in government policies with respect to the payroll outsourcing service market and employment service market or the general economic conditions in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia or other Asian countries. Therefore, historical figures for our financial performance are reflective of our past performance only and may not necessarily be indicative of our financial performance in the future. We cannot assure you that there is a positive trend for our business prospects. We may not achieve comparable or higher level of financial performance in the future as we achieved during June 30, 2023 and 2022 as well as for the six months ended December 31, 2023.

Our revenue and profit sustainability depend on our ability to maintain our competitiveness through providing high quality services.

We have been conducting business in the payroll outsourcing service industry and the employment service industry for more than nine years. We recorded revenue of approximately, HK$31.5 million and HK$46.9 million (approximately US$4.0 million and US$6.0 million), respectively, and net income of approximately HK$9.0 million and HK$22.6 million (approximately US$1.1 million and US$2.9 million), respectively, for the years ended June 30, 2023 and June 30, 2022, respectively. We recorded revenue of approximately HK$15.0 million (approximately US$1.9 million), and net income of approximately HK$2.1 million (approximately US$0.3 million), for the six months ended December 31, 2023. The sustainability of our revenue and profit will depend on the ability to maintain our competitiveness in the payroll outsourcing service industry and employment service industry through providing high quality services.

The competition within the payroll outsourcing service industry and the employment service industry is intense. Our competitors and new market entrants may increase in the future resulting in intensified price competition, which could in turn adversely affect our bargaining power in terms of fees charged and consequently our results of operations and prospects. Our market position may be hampered by intensified competition in the form of better services and/or price reductions by our competitors. The failure of us to maintain our high quality services at competitive pricing could have a material adverse effect on our business, operating results and financial conditions.

We may be vicariously liable for the acts or omissions of our seconded employees and may be exposed to employment-related claims.

As of December 31, 2023, June 30, 2023 and June 30, 2022, we had 9, 7 and 4 seconded employees in Hong Kong, 69, 37 and 11 seconded employees in Taiwan and 2, 3 and 6 seconded employees in Macau employed by our Group directly, respectively. The seconded employees work for and are under the supervision of our end-users during the employment period but they remain as our employees pursuant to the employment contracts entered into between the seconded employees and us. As such, we may be vicariously liable for their acts or omissions while they carry out or purport to carry out the respective responsibilities entrusted to them by our end-users. Vicarious liability refers to the liability of a person for the tort committed by another person, for example, an employer would be liable for the acts and omissions of its employees even if the employer has not personally committed such acts and omissions. When providing employment services directly as our seconded employees’ employers of record, we may also be exposed to the following risks:

We may need to incur additional costs to settle or defend these claims or legal actions and our business, results of operations and financial conditions may be adversely affected. Our reputation may be substantially affected and the above events may also affect our relationship with our existing and potential channel customers and end-users.

Our historical dividend payments should not be taken as an indication of our future dividend policy or our payment of dividends in the future.

We may distribute dividends by way of cash or by other means that we consider appropriate. As a holding company, we mainly rely on receipt of funds from our Hong Kong subsidiary, Galaxy Payroll (HK) by way of dividends payments for our cash and financing requirements. As advised by our Hong Kong Legal Advisers, according to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. In addition, there can be no assurance that in the future the PRC government will not intervene or impose restrictions on Galaxy Payroll (HK)’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, which could result in an inability or prohibition on making transfers or distributions to us and adversely affect our business. A decision to declare and pay any dividends would require the approval of our Board and will be at its discretion. In addition, any final dividend for a financial year will be subject to Shareholders’ approval. During the six months ended December 31, 2023, our group declared dividends of approximately HK$9.4 million (US$1.2 million) and paid approximately HK$8.3 million (US$1.1 million). During the year ended June 30, 2023, our group declared dividends of approximately HK$13.8 million (US$1.8 million) and paid approximately HK$9.9 million (US$1.3 million). During the year ended June 30, 2022, our group declared dividends of approximately HK$14.4 million (US$1.8 million) and paid approximately HK$18.9 million (US$2.4 million). Any historical dividend payment should not be regarded as an indication of future dividend policy or our payment of dividends in the future.

We are exposed to the credit risk of accounts receivable from customers.

We are exposed to credit risk in relation to our accounts receivable from customers. Our accounts receivable amounted to approximately HK$2.2 million and HK$9.0 million (US$0.3 million and US$1.1 million) as of June 30, 2023 and 2022, respectively. Our accounts receivable amounted to approximately HK$3.0 million (US$0.4 million) as of December 31, 2023. Our accounts receivable turnover days were approximately 66 days and 49 days for the years ended June 30, 2023 and 2022, respectively. Our accounts receivable turnover days were approximately 64 days for the six months ended December 31, 2023. Our business operations and cash flow are subject to the risk of delay in settlement from our customers. Our customers’ settlement date may be affected by their internal policies and we cannot assure you that our customers will settle in a timely manner. Our effort in strengthening our accounts receivable collection and management may not be effective and we cannot assure you that we will be able to fully recover the outstanding amounts due from our customers, if at all, or that our customers will settle the amounts in a timely manner.

Our businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of personal and business information, and collect, hold and transmit client funds, and a security or privacy breach may damage or disrupt our businesses, result in the disclosure of confidential information, damage our reputation, increase our costs, cause losses and materially adversely affect our results of operations.

In connection with our business, we collect, host, store, transfer, process, disclose, use, secure and retain and dispose of large amounts of personal and business information about our clients, employees of our clients, our vendors and our employees, contractors and temporary staff, including payroll information, health care information, personal and business financial data, identity card numbers and their foreign equivalents, bank account numbers, tax information and other sensitive personal and business information. We also collect significant amounts of funds from the accounts of our clients and transmit them to their employees, taxing authorities and others.

We are focused on ensuring that we safeguard and protect personal and business information and client funds, and we devote significant resources to maintain and regularly update our systems and processes. Nonetheless, the global environment continues to grow increasingly hostile as attacks on information technology systems continue to grow in frequency, complexity and sophistication, and we are regularly targeted by unauthorized parties using malicious tactics, code and viruses. Certain of these malicious parties may be state-sponsored and supported by significant financial and technological resources. Although this is a global problem, it may affect our businesses more than other businesses because malevolent parties (including our personnel) may focus on the amount and type of personal and business information that our businesses collect, host, store, transfer, process, disclose, use, secure and retain and dispose of, and the client funds that we collect and transmit.

We have programs and processes in place to prevent, detect and respond to data or cyber security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, are increasingly more complex and sophisticated and may be difficult to detect for long periods of time, we may be unable or fail to anticipate these techniques or implement adequate or timely preventive or responsive measures. Our ability to address cyber security incidents may also depend on the timing and nature of assistance that may be provided from relevant governmental or law enforcement agencies. Hardware, software, applications or services that we develop or procure from third parties, or are required by third parties such as foreign governments to install on our systems, may contain defects in design or manufacture or other problems that could (or, in respect of third-party software, may be designed to) compromise the confidentiality, integrity or availability of data or our systems. Unauthorized parties also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery, or other methods of deceiving these third parties or our personnel, including phishing and other social engineering techniques whereby attackers use end-user behaviors to distribute computer viruses and malware into our systems or otherwise compromise the confidentiality, integrity or availability of data on our systems. As these threats continue to evolve and increase, we continue to invest significant resources, and may be required to invest significant additional resources, to modify and enhance our information security and controls and to investigate and remediate any security vulnerabilities. In addition, while our operating environments are designed to safeguard and protect personal and business information, we may not have the ability to monitor the implementation or effectiveness of any safeguards by our clients, vendors or partners and, in any event, third parties may be able to circumvent those security measures. Information obtained by malevolent parties resulting from successful attacks against our clients, vendors, partners or other third parties may, in turn, be used to attack our information technology systems.

Any cyberattack, unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, theft of non-public or other sensitive information, or similar act by a malevolent party (including our personnel), or inadvertent acts or inactions by our vendors, partners or personnel, could result in the loss, disclosure or misuse of confidential personal or business information or the theft of client, and could have a materially adverse effect on our business or results of operations or that of our clients, result in liability, litigation, regulatory investigations and sanctions or a loss of confidence in our ability to serve clients, or cause current or potential clients to choose another service provider. As the global environment continues to grow increasingly hostile, the security of our operating environment is ever more important to our clients and potential clients. As a result, the breach or perceived breach of our security systems could result in a loss of confidence by our clients or potential clients and cause them to choose another service provider, which could have a materially adverse effect on our business.

Although we believe that we maintain a robust program of information security and controls and none of the data or cyber security incidents that we have encountered to date have materially impacted us, a data or cyber security incident could have a materially adverse effect on our business, results of operations, financial condition and reputation. While we maintain insurance coverage that, subject to policy terms and conditions and a significant self-insured retention, is designed to address losses or claims that may arise in connection with certain aspects of data and cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise in the continually evolving area of data and cyber risk.

Our systems, applications, solutions and services may be subject to disruptions that could have a materially adverse effect on our business and reputation.

Many of our businesses are highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We rely heavily on our payroll, financial, accounting, and other data processing systems. We need to properly manage our systems, applications and solutions, and any upgrades, enhancements and expansions we may undertake from time to time, in order to ensure they properly support our businesses. If any of these systems, applications or solutions fails to operate properly or becomes disabled even for a brief period of time, whether due to malevolent acts, errors, defects or any other factor(s), we could suffer financial loss, a disruption of our businesses, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a materially adverse effect on our results of operation or financial condition. We have disaster recovery, business continuity, and crisis management plans and procedures designed to protect our businesses against a multitude of events, including natural disasters, military or terrorist actions, power or communication failures, or similar events. Despite our preparations, our plans and procedures may not be successful in preventing or mitigating the loss of client data, service interruptions, disruptions to our operations, or damage to our important facilities.

A disruption of the data centers or cloud-computing services that we utilize could have a materially adverse effect on our business.

We host our applications and serve our clients with data centers that we operate, and with data centers that are operated, and cloud-computing services that are provided, by third-party vendors. If any of these data centers or cloud-computing services fails, becomes disabled or is disrupted, even for a limited period of time, our businesses could be disrupted and we could suffer financial loss, liability to clients, loss of clients, regulatory intervention or damage to our reputation, any of which could have a material adverse effect on our results of operation or financial condition. In addition, our third-party vendors may cease providing data center facilities or cloud-computing services, elect to not renew their agreements with us on commercially reasonable terms or at all, breach their agreements with us or fail to satisfy our expectations, which could disrupt our operations and require us to incur costs which could materially adversely affect our results of operation or financial condition.

Our lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud, which may affect the market for and price of our Ordinary Share.

To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to filing the registration statement of which this prospectus is a part, we were a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of June 30, 2023 and 2022, we and our independent registered public accounting firms identified material weaknesses in our internal control over financial reporting as well as other control deficiencies for the above mentioned periods. As defined in the standards established by the Public Company Accounting Oversight Board (“PCAOB”) of the United States, a “material weakness” is 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 our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to i) inadequate segregation of duties for certain key functions due to limited staff and resources; ii) a lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to formalize key controls over financial reporting and to prepare consolidated financial statements and related disclosures; iii) a lack of independent directors and an audit committee to establish formal risk assessment process and internal control framework; and iv) a lack of an effective control framework in place and critical information technology general controls (“ITGC”) have design deficiencies in areas including logical access, privileged access, IT operations and cybersecurity.

We intend to implement measures designed to improve our internal control over financial reporting to address the underlying causes of these material weaknesses, including i) hiring more qualified staff to fill up the key roles in the operations; ii) setting up a financial and system control framework with formal documentation of polices and controls in place; iii) appointing independent directors, establishing an audit committee and strengthening corporate governance; and iv) setting up an ITGC and system control framework with formal documentation of polices and controls in place.

We will be subject to the requirement that we maintain internal controls and that management perform periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Ordinary Shares, may be materially and adversely affected if we do not have effective internal controls. Before this offering, we were a private company with limited resources. As a result, we may not discover any problems in a timely manner and current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Ordinary Shares. The absence of internal controls over financial reporting may inhibit investors from purchasing our Ordinary Shares and may make it more difficult for us to raise funds in a debt or equity financing.

Additional material weaknesses or significant deficiencies may be identified in the future. If we identify such issues or if we are unable to produce accurate and timely financial statements, our stock price may decline and we may be unable to maintain compliance with the Nasdaq Listing Rules.  

If we fail to upgrade, enhance and expand our technology and services to meet client needs and preferences, the demand for our solutions and services may materially diminish.

Our businesses operate in industries that are subject to rapid technological advances and changing client needs and preferences. In order to remain competitive and responsive to client demands, we continually upgrade, enhance, and expand our technology, solutions and services. If we fail to respond successfully to technology challenges and client needs and preferences, the demand for our solutions and services may diminish. In addition, investment in product development often involves a long return on investment cycle. We have made and expect to continue to make significant investments in product development. We must continue to dedicate a significant amount of resources to our development efforts before knowing to what extent our investments will result in products the market will accept. In addition, our business could be adversely affected in periods surrounding our new product introductions if customers delay purchasing decisions to evaluate the new product offerings. Furthermore, we may not execute successfully on our product development strategy, including because of challenges with regard to product planning and timing and technical hurdles that we fail to overcome in a timely fashion.

RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE

We operate in a highly competitive market.

The payroll outsourcing service industry and the employment service industry in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries are fragmented and there are a large number of market players in the two industries. Some of our competitors may have advantages over our Group, such as (i) wider geographical coverage, services offerings, technology and security level, enabling them to enjoy higher economies of scale; (ii) better industry reputation and image; and (iii) higher capability in providing value-added services including consulting services and system maintenance and upgrade which are preferable to end-users.

There is no assurance that our competitors will not develop the expertise, experience and resources necessary to provide services that are better in quality and/or more competitive in pricing compared to our services. Failure to maintain or enhance our competitiveness within the industry or maintain our customer base may adversely affect our financial performance and profitability.

Failure to comply with, or changes in, laws and regulations applicable to our businesses could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

Our business is subject to a wide range of complex laws and regulations, including, but not limited to, the laws and regulations described in the “Regulations” section. Failure to comply with laws and regulations applicable to our operations or client solutions and services could cause us to incur substantial costs or could result in the suspension or revocation of licenses or registrations, the limitation, suspension or termination of services, the imposition of consent orders or civil and criminal penalties, including fines, and lawsuits, including class actions, that could damage our reputation and have a materially adverse effect on our results of operation or financial condition.

In addition, changes in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues and earnings and may require us to change the manner in which we conduct some aspects of our business. According to our Hong Kong Legal Advisers, we are not required to obtain any license from the relevant government authorities for the provision of payroll outsourcing services in Hong Kong. The Company relies on its own administrative staff to maintain its compliance status regarding Taiwan and Macau, therefore, based on management belief, we are not required to obtain any license from the relevant government authorities for the provision of payroll outsourcing services in Taiwan and Macau, respectively. In addition, according to our Hong Kong Legal Advisers, we had obtained all requisite licenses, permits and approvals for our business operations in Hong Kong including the business registration certificates and the employment agency license, and based on management belief, we are not required to obtain any license from the relevant government authorities for the provision of employment services in Taiwan. For acting as employers of record for our end-users in providing employment services in the PRC, we are required to obtain, and have obtained, the Labor Dispatch Operation Permit. Please refer to “Regulations” in this prospectus for the licensing requirements and regulatory frameworks for providing payroll outsourcing services and employment services in the PRC, Hong Kong, Taiwan and Macau, respectively.

If any of the government of the PRC, Hong Kong, Taiwan and/or Macau imposes any new or further licensing requirements, we may incur extra costs and human resources in complying with such requirements, laws and/or regulations and our business may be materially affected and we cannot guarantee that we will be able to obtain any additional licenses, if required. We cannot assure that there will not be any changes in the regulatory environment in respect of the payroll outsourcing service industry and/or the employment service industry in the PRC, Hong Kong, Taiwan and Macau which may be unfavorable to our Group.

Failure to comply with privacy, data protection and cyber security laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

The collection, storage, hosting, transfer, processing, disclosure, use, security and retention and destruction of personal information required to provide our services is subject to federal, state and foreign privacy, data protection and cyber security laws. These laws, which are not uniform, generally do one or more of the following: regulate the collection, storage, hosting, transfer (including in some cases, the transfer outside the country of collection), processing, disclosure, use, security and retention and destruction of personal information; require notice to individuals of privacy practices; give individuals certain access and correction rights with respect to their personal information; and regulate the use or disclosure of personal information for secondary purposes such as marketing. Under certain circumstances, some of these laws require us to provide notification to affected individuals, clients, data protection authorities and/or other regulators in the event of a data breach. In many cases, these laws apply not only to third-party transactions, but also to transfers of information among the Company and its subsidiaries.

We believe that providing insights from data, including artificial intelligence and machine learning, will become increasingly important to the value that our solutions and services deliver to our customers. However, the ability to provide data-driven insights may be constrained by current or future regulatory requirements or ethical considerations that could restrict or impose burdensome and costly requirements on our ability to leverage data in innovative ways.

Complying with privacy, data protection and cyber security laws and requirements may result in significant costs to our business and require us to amend certain of our business practices. Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. The future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in significant regulatory penalties and legal liability and damage our reputation. In addition, data security events and concerns about privacy abuses by other companies are changing consumer and social expectations for enhanced privacy and data protection. As a result, even the perception of noncompliance, whether or not valid, may damage our reputation.

If we fail to protect our intellectual property rights, it could materially adversely affect our business and our brand.

Our ability to compete and our success depend, in part, upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, and confidentiality or license agreements with our employees, customers, vendors, partners and others to protect our intellectual property rights. We may need to devote significant resources, including cybersecurity resources, to monitoring our intellectual property rights. In addition, the steps we take to protect our intellectual property rights may be inadequate or ineffective, or may not provide us with a significant competitive advantage. Our intellectual property could be wrongfully acquired as a result of a cyber-attack or other wrongful conduct by third parties or our personnel. Litigation brought to protect and enforce our intellectual property rights could be costly and time-consuming. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, which may be successful.

We may be sued by third parties for infringement of their proprietary rights, which could have a materially adverse effect on our business, financial condition or results of operations.

There is considerable intellectual property development activity in our industry. Third parties, including our competitors, may own or claim to own intellectual property relating to our products or services and may claim that we are infringing their intellectual property rights. We may be found to be infringing upon such rights, even if we are unaware of their intellectual property rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us or if we decide to settle, could require that we pay substantial damages or ongoing royalty payments, obtain licenses, modify applications, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers, vendors or partners in connection with any such claim or litigation. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming.

RISKS RELATING TO OUR CORPORATE STRUCTURE

We rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.

We are a holding company incorporated in the British Virgin Islands with most of the business operations conducted by our Operating Entities in Hong Kong, Taiwan, Macau and the PRC, and we rely on dividends and other distributions on equity paid by our subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Subject to the BVI Act and our Amended and Restated Charter, our board of directors may, by resolutions of directors, authorize and declare a dividend to our shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they fall due. There is no further BVI statutory restriction on the amount of funds which may be distributed by us by dividend.

As advised by our Hong Kong Legal Advisers, according to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. Dividends cannot be paid out of share capital. See “Regulations — Regulations on Distributions” for more information. Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. See “Taxation —Hong Kong Taxation” for more details.  

According to the current PRC regulations, our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings, and our PRC subsidiary is only permitted to pay dividends to Galaxy Payroll (China) only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our subsidiary in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Although the statutory reserve can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of our PRC subsidiary, the reserve funds are not distributable as cash dividends except in the event of liquidation. Therefore, our PRC subsidiary’s ability to distribute dividends and amount to be distributed, if any may be greatly limited.

In addition, there can be no assurance that in the future the PRC government will not intervene or impose restrictions on our Hong Kong subsidiary, Galaxy Payroll (HK)’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, any limitation on the ability of Galaxy Payroll (HK) to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

PRC laws and regulations related to our current business operations are sometimes vague and uncertain and any changes in such laws and regulations and interpretations of which may impair our ability to operate profitably. 

Although Galaxy Payroll BVI has complete ownership of our Operating Entities and currently does not have or intends to have any contractual arrangement to establish a VIE structure with any entity or individual, the Group may still be subject to certain legal and operational risks associated with our Operating Entities being based in Hong Kong and PRC and having most of its operations to date in Hong Kong and PRC. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations related to our business and the enforcement and performance of our arrangements with customers in certain circumstances. The laws and regulations are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.

The uncertainties regarding the enforcement of laws and the fact that rules and regulations in mainland China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in our subsidiary in Hong Kong could result in a material change in our operations, financial performance and/or the value of our Ordinary Shares or impair our ability to raise money.

RISKS RELATING TO THE PRC, HONG KONG, TAIWAN AND MACAU

Substantial uncertainties and restrictions with respect to the political and economic policies of the PRC government and PRC laws and regulations could have a significant impact upon the business that we may be able to conduct in the PRC and accordingly on the results of our operations and financial condition.

Galaxy Payroll Group Limited is a holding company that, through our subsidiaries in Hong Kong, mainland China, Macau and Taiwan, provides payroll outsourcing and employment service. Because of the majority of our operations are in the PRC and Hong Kong, economic, political and legal developments in the PRC will significantly affect our business, financial condition, results of operations and prospects.

Our business operations may be adversely affected by the current and future political environment in the PRC. The Chinese government exerts substantial influence and control over the manner in which we must conduct our business activities. Our ability to operate in China may be adversely affected by changes in Chinese laws and regulations. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations. Only after 1979 did the Chinese government begin to promulgate a comprehensive system of laws that regulate economic affairs in general, deal with economic matters encourage foreign investment in China. Although the influence of the law has been increasing, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. Also, because these laws and regulations are relatively new, and because of the limited volume of published cases and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. In addition, there have been constant changes and amendments of laws and regulations over the past 30 years in order to keep up with the rapidly changing society and economy in China. Because government agencies and courts provide interpretations of laws and regulations and decide contractual disputes and issues, their inexperience in adjudicating new business and new polices or regulations in certain less developed areas causes uncertainty and may affect our business. Consequently, we cannot predict the future direction of Chinese legislative activities with respect to either businesses with foreign investment or the effectiveness on enforcement of laws and regulations in China. The uncertainties, including new laws and regulations and changes of existing laws, as well as judicial interpretation by inexperienced officials in the agencies and courts in certain areas, may cause possible problems to foreign investors. In addition, uncertainties regarding the enforcement of laws and the fact that rules and regulations in China can change quickly with little advance notice, along with the risk that the Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers could result in a material change in our operations, financial performance and/or the value of our common stock or impair our ability to raise money. Although the PRC government has been pursuing economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC through the allocation of resources, controlling payments of foreign currency, setting monetary policy and imposing policies that impact particular industries in different ways. We cannot assure you that the PRC government will continue to pursue policies favoring a market oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC. Any adverse changes in Chinese laws and regulations and the Chinese government’s significant oversight and discretion over the conduct of our business could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless and we may also incur material costs to ensure compliance, be subject to fines and no longer be permitted to continue our current business operations.

There remain some uncertainties as to whether we will be required to obtain approvals from Chinese authorities to list on the U.S. exchanges and offer securities in the future, and if required, we cannot assure you that we will be able to obtain such approval.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

However, the interpretation and application of the M&A Rules remain unclear, and this offering may ultimately require approval from the CSRC. If CSRC approval is required, it is uncertain whether it would be possible for us to obtain the approval and any failure to obtain or delay in obtaining CSRC approval for this offering would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies.

Our PRC Legal Advisers have advised us based on their understanding of the current PRC laws and regulations, that the aforesaid CSRC’s approval may not be required for the listing of our Ordinary Shares on the Nasdaq in the context of this offering, given that: (i) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours in this prospectus are subject to this regulation, (ii) our PRC subsidiary was incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition of equity interests or assets of a PRC domestic company owned by PRC companies or individuals as defined under the M&A Rules.

However, our PRC Legal Advisers have further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and their opinions summarized above are subject to any new laws, regulations and rules or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to obtain or delay in obtaining CSRC approval for this offering. These sanctions may include fines and penalties on our operations in China, limitations on our operating privileges in China, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our subsidiary in China, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our Ordinary Shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the Ordinary Shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the Ordinary Shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur. In addition, if the CSRC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver.

We are also aware that recently, the PRC government initiated a series of regulatory actions and released statements to regulate business operations in certain areas in mainland China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas using variable interest entity structure, adopting new measures to extend the scope of cybersecurity reviews, and expanding the efforts in anti-monopoly enforcement.

On December 28, 2021, the Cyberspace Administration of China, or the “CAC”, and other PRC authorities promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. The Cybersecurity Review Measures further restates and expands the applicable scope of the cybersecurity review in effect. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services and network platform operators engaging in data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators holding personal information of over one million users must apply to the Cybersecurity Review Office for a cybersecurity review before a foreign listing. Based on a set of Q&As published on the official website of the State Cipher Code Administration in connection with the issuance of the Cybersecurity Review Measures, an official of the said administration indicated that a network platform operator should apply for a cybersecurity review prior to the submission of its listing application with non-PRC securities regulators. Given the recency of the issuance of the Cybersecurity Review Measures, there is a general lack of guidance and substantial uncertainties exist with respect to their interpretation and implementation.

In November 2021, the CAC released the Measures of Regulations on the Network Data Security Administration (Draft for Comments), or the Draft Regulations on Network Data Security. The Draft Regulations on Network Data Security define “data processors” as individuals or organizations that can make autonomous decisions regarding the purpose and the manner of their data processing activities such as data collection, storage, utilization, transmission, publication and deletion. In accordance with the Draft Regulations on Network Data Security, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process the personal information of more than one million users; (ii) merger, reorganization or division of internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests affects or may affect national security; (iii) listing in Hong Kong which affects or may affect national security; or (iv) any data processing activity that affects or may affect national security. However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Regulations on Network Data Security requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or authorize a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this prospectus, the Draft Regulations on Network Data Security has not been formally adopted, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial uncertainty.

To the knowledge of the management, as of the date of this prospectus, (i) the Company does not hold personal information of over one million users, (ii) we process data for the sole purpose of human resource services which does not involve data processing activities that affect or may affect national security, and (iii) the Company has not been informed by any PRC governmental authority of any requirement that it file for a cybersecurity review; therefore, based on the foregoing and as advised by our PRC Legal Advisers, the Company believes it is not required to pass cybersecurity review of CAC. Further, as advised by our PRC Legal Advisers, as of the date of this prospectus, our PRC subsidiary has obtained all requisite PRC licenses, permits and approvals necessary for its operation of business, including the business license, Labor Dispatch Operation Permit and the record-filing receipt from the competent human resource authority for its human resource services business, and our PRC subsidiary was not denied such licenses, permits or approvals by the PRC authorities; in addition, as advised by our PRC Legal Advisers, other than under the Trial Administrative Measures discussed above under this section, we and our PRC subsidiary are not required under applicable laws and regulations in effect to obtain any permissions or approvals from the PRC authorities to offer the securities being registered to foreign investors, and therefore, nor have we or our PRC subsidiary received or were denied such permissions or approvals by the PRC authorities.

However, if there is significant change to current political arrangements between mainland China and Hong Kong, or the applicable laws, regulations, or interpretations change, and that the Company or our PRC subsidiary is required to obtain such approvals in the future, and that the Company does not receive or maintain the approvals or is denied permissions from the PRC authorities, or inadvertently concludes that such approvals are not required, we could incur material costs to ensure compliance, be subject to fines and no longer be permitted to continue our current business operations. We may not be able to list our Ordinary Shares on U.S. exchange, or continue to offer securities to investors, which would materially affect the interest of the investors and cause significantly depreciation of our price of Ordinary Shares.

We believe we are not subject to the filing requirements under Trial Administrative Measures, which took effect on March 31, 2023, because (i) our PRC subsidiary accounted for far less than 50% of any of the Company’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year, and (ii) the Company’s main parts of business activities are not conducted in mainland China, nor is its main place of business located in mainland China, and the senior managers in charge of its business operation and management are not mostly Chinese citizens or domiciled in mainland China. However, We cannot assure you that the CSRC will have the same interpretation as us and they request us to proceed with the filing nevertheless, we cannot give you an estimated time frame for completing such a filing which is beyond our control.

On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued the Opinions on Strictly and Lawfully Cracking Down Illegal Securities Activities to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws.

On December 24, 2021, the China Securities Regulatory Commission, or the “CSRC”, published the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comment) (the “Administration Provisions”), and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comment) (the “Measures”) for public comments. The Administration Provisions and Measures for overseas listings lay out specific requirements for filing documents and include unified regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation. Domestic companies seeking to list abroad must carry out relevant security screening procedures if their businesses involve such supervision. Companies endangering national security are among those off-limits for overseas listings.

On February 17, 2023, the CSRC promulgated the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Administrative Measures”) and five supporting guidelines, which took effect on March 31, 2023. Compared to the Measures, the Trial Administrative Measures clarified and emphasized several aspects, including: (i) comprehensive determination of the “indirect overseas offering and listing by PRC domestic companies” in compliance with the principle of “substance over form” and particularly, as stipulated under Article 15 Explicit Conditions for Filing, an issuer will be required to go through the filing procedures under the Trial Administrative Measures if the following criteria are met at the same time: a) 50% or more of the issuer’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by PRC domestic companies, and b) the main parts of the issuer’s business activities are conducted in mainland China, or its main places of business are located in mainland China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in mainland China; (ii) exemptions from immediate filing requirements for issuers that a) have already been listed or registered but not yet listed in foreign securities markets, including U.S. markets, prior to the effective date of the Trial Administrative Measures, and b) are not required to re-perform the regulatory procedures with the relevant overseas regulatory authority or the overseas stock exchange, c) whose such overseas securities offering or listing shall be completed before September 30, 2023. However, such issuers shall carry out filing procedures as required if they conduct refinancing or are involved in other circumstances that require filing with the CSRC; (iii) a negative list of types of issuers banned from listing overseas, such as issuers under investigation for bribery and corruption; (iv) regulation of issuers in specific industries; (v) issuers’ compliance with national security measures and the personal data protection laws; and (vi) certain other matters such as: an issuer must file with the CSRC within three business days after it submits an application for initial public offering to competent overseas regulators; and subsequent reports shall be filed with the CSRC on material events, including change of control or voluntary or forced delisting of the issuer(s) who have completed overseas offerings and listings.

The Trial Administrative Measures provide the CSRC with power to warn, fine, and issue injunctions against both PRC domestic companies, their controlling shareholders, and their advisors in listing or offering securities (collectively, the “Subject Entities”), as well as individuals directly responsible for these Subject Entities (the “Subject Individuals”). Pursuant to Article 27, for failure to comply with the Trial Administrative Measures Negative List or the Trial Administrative Measures Filing Obligations, or materially false or misleading statements in the filing and reporting required by the Trial Administrative Measures: (1) PRC domestic companies, and their controlling shareholders if the controlling shareholders induced the PRC domestic companies’ failure to comply, severally, may face warnings, injunctions to comply, and fines between RMB 1 million and 10 million (approximately $145,647 and $1,456,473); the Subject Individuals in these entities may severally, face warnings and fines between RMB 0.5 million and 5 million (approximately $72,824 and $728,237). (2) Advisors in listing or offering securities that failed to dutifully advise the PRC domestic companies and their controlling shareholders in complying with the Trial Administrative Measures and caused such failures to comply can face warnings and fines between RMB 0.5 million and 5 million (approximately $72,824 and $728,237); the Subject Individuals in these advisor entities may, severally, face warnings and fines between RMB 0.2 million and 2 million (approximately $29,129 and $291,295). For those with severe violations, based on Article 31, the CSRC may impose a ban on entering into the securities market upon the relevant responsible persons. Any such violation that constitutes a crime shall be investigated for criminal liability according to law.

As of the date of this prospectus, we do not believe that this offering constitutes an “indirect overseas offering and listing”, or that we are required to obtain the approval from or complete the filing with the CSRC pursuant to the Trial Administrative Measures for this offering, because we do not meet both of the Article 15 Explicit Conditions for Filing at the same time as set out in the Trial Administrative Measures to determine whether an overseas offering shall be deemed as an indirect overseas offering and listing by PRC domestic companies, specifically, a) the Company’s PRC subsidiary accounted for far less than 50% of any of the Company’s operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year, and b) the Company’s main parts of business activities are not conducted in mainland China, nor is its main place of business located in mainland China, and the senior managers in charge of its business operation and management are not mostly Chinese citizens or domiciled in mainland China; and that the majority of the Company’s operations are not in mainland China. No opinion was obtained from our PRC Legal Advisers regarding such matters because the CSRC has the sole discretions to determine whether this offering will be regarded as an “indirect overseas offering and listing” under the Discretional Clause and whether the Company is required to obtain approval from or complete the filing with the CSRC pursuant to the Trial Administrative Measures for this offering. As the Trial Administrative Measures were recently issued, there remains uncertainty as to how it will be interpreted or implemented. Authorities in mainland China may have different interpretation under the principle of “substance over form” adopted by the Trial Administrative Measures regarding the determination of an “indirect overseas offering and listing by PRC domestic companies”, over which the CSRC may have substantial discretions. Given the foregoing, in regard to whether we fall within the scope of filing, we submitted an application for communication with the CSRC on May 29, 2023 to request a reply from the CSRC, and as of the date of this prospectus, we have not yet received any reply from the CSRC on such matter nor been informed that we should complete the filing requirements pursuant to the Trial Administrative Measures for this offering. The Company plans to complete this offering without going through a filing procedure with CSRC unless the Company is informed by the CSRC that it should do the filing. If we are required by the CSRC to submit and complete the filing procedures of this offering and listing, we cannot assure you this offering and listing could be completed within our expected time frame, or even at all. Any failure by us to comply with such filing requirements under the Trial Administrative Measures may result in an order to rectify, warnings and fines against us and could materially hinder our ability to complete this offering, offer or to continue to offer our securities. Lastly, any actions by the Chinese government to exert more oversight and control over transaction that are conducted overseas could significantly limit or completely hinder our ability to complete our offering and cause the value of such securities to significantly decline or be worthless.

Adverse regulatory developments in China may subject us to additional regulatory review, and additional disclosure requirements and regulatory scrutiny to be adopted by the SEC in response to risks related to recent regulatory developments in China may impose additional compliance requirements for companies like us with China-based operations, all of which could increase our compliance costs, subject us to additional disclosure requirements.

The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore, may lead to additional regulatory review in China over our financing and capital raising activities in the United States. In addition, we may be subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect of restricting the scope of our operations in China, or causing the suspension or termination of our business operations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.

On July 30, 2021, in response to the recent regulatory developments in China and actions adopted by the PRC government, the Chairman of the SEC issued a statement asking the SEC staff to seek additional disclosures from offshore issuers associated with China-based operating companies before their registration statements will be declared effective. On August 1, 2021, the China Securities Regulatory Commission stated in a statement that it had taken note of the new disclosure requirements announced by the SEC regarding the listings of Chinese companies and the recent regulatory development in China, and that both countries should strengthen communications on regulating China-related issuers. We cannot guarantee that we will not be subject to tightened regulatory review and we could be exposed to government interference in China.

Compliance with China’s new Data Security Law, Cybersecurity Review Measures, Personal Information Protection Law, regulations and guidelines relating to the multi-level protection scheme and any other future laws and regulations may entail significant expenses and could materially affect our business.

Recently, the Cyberspace Administration of China has taken action against several Chinese internet companies in connection with their initial public offerings on U.S. securities exchanges, for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law, the Cyber Security Law and the Cybersecurity Review Measures, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.” On December 28, 2021, the Cyberspace Administration of China and other PRC authorities promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. The Cybersecurity Review Measures further restates and expands the applicable scope of the cybersecurity review in effect. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services and network platform operators engaging in data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators holding personal information of over one million users must apply to the Cybersecurity Review Office for a cybersecurity review before a foreign listing.

As of the date of this Prospectus, we do not believe we currently are among the network platform operators holding personal information of over one million users, as mentioned above. Uncertainties still exist, however, due to the possibility that laws, regulations, or policies in the PRC could change rapidly in the future. Any future action by the PRC government expanding the categories of industries and companies whose foreign securities offerings are subject to review by the Cyberspace Administration of China could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and could cause the value of such securities to significantly decline or be worthless.

Also, on August 20, 2021, the National People’s Congress passed the Personal Information Protection Law, which took effect on November 1, 2021. The law creates a comprehensive set of data privacy and protection requirements that apply to the processing of personal information and expands data protection compliance obligations to cover the processing of personal information of persons by organizations and individuals in China, and the processing of personal information of persons in China outside of China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, persons in China. The law also proposes that critical information infrastructure operators and personal information processing entities who process personal information meeting a volume threshold to-be-set by Chinese cyberspace regulators are also required to store in China personal information generated or collected in China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. Lastly, the Personal Information Protection Law stipulates significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year.

Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement. Compliance with the Cyber Security Law and the Data Security Law could significantly increase the cost to us of providing our service offerings, require significant changes to our operations or even prevent us from providing certain service offerings in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, offerings or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law and/or related implementing regulations. Any failure on our part to comply with such law or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital, including engaging in follow-on offerings of our securities in the U.S. market.

We believe that we are currently compliant with the regulations or policies that have been issued by the CAC to date. As of the date of this prospectus, we have not been involved in any investigations on cybersecurity or data security initiated by related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. However, as uncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations and financial condition.

It may be difficult for U.S. regulators, such as the Department of Justice, the SEC, and other authorities, to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with regulatory authorities in the Unities States—including the SEC and the Department of Justice—may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC territory. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase the difficulties you face in protecting your interests.

Our auditor is headquartered in New York, and is subject to inspection by the PCAOB on a regular basis and is not subject to the determinations announced by the PCAOB on December 16, 2021. If the PCAOB determines that it cannot inspect or fully investigate our auditors for two consecutive years, you may be deprived of the benefits of such inspection and our common stock could be delisted from the stock exchange pursuant to the Holding Foreign Companies Accountable Act.

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States.

Pursuant to the Holding Foreign Companies Accountable Act, the PCAOB issued a Determination Report on December 16, 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in: (1) mainland China of the PRC because of a position taken by one or more authorities in mainland China; and (2) Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in Hong Kong.

As auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, our auditor is required by the laws of the United States to undergo regular inspections by the PCAOB.  Inspections of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. We are required by the HFCAA to have an auditor that is subject to the inspection by the PCAOB. While our present auditor is located in the United States and the PCAOB is able to conduct inspections on such auditor and is not among the auditor firms listed on the Determination Report issued by the PCAOB, to the extent this status changes in the future or if the PCAOB is unable to inspect or investigate completely our auditor because of a position taken by an authority in a foreign jurisdiction, trading in our Ordinary Shares could be prohibited under the HFCAA, and as a result our Ordinary Shares could be delisted from Nasdaq.

On May 13, 2021, the PCAOB proposed a new rule for implementing the HFCAA. Among other things, the proposed rule provides a framework for the PCAOB to use when determining, under the HFCAA, whether it is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction. The proposed rule would also establish the manner of the PCAOB’s determinations; the factors the PCAOB will evaluate and the documents and information it will consider when assessing whether a determination is warranted; the form, public availability, effective date, and duration of such determinations; and the process by which the board of the PCAOB can modify or vacate its determinations. The proposed rule was adopted by the PCAOB on September 22, 2021 and approved by the SEC on November 5, 2021.

On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act, as part of the Consolidated Appropriations Act, 2023, was signed into law, which amended the HFCAA and reduced the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two, thus, would reduce the time before an applicable issuer’s securities may be prohibited from trading or delisted. It can potentially cause delisting as well as depress the price of a foreign issuer’s securities if the issuer’s auditor is beyond the PCAOB’s complete inspection and investigation.

The SEC is assessing how to implement other requirements of the HFCAA, including the listing and trading prohibition requirements described above. The SEC may propose additional rules or guidance that could impact us if our auditor is not subject to the PCAOB inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfill its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCAA. However, some of the recommendations were more stringent than the HFCAA. For example, if a company was not subject to the PCAOB inspection, the report recommended that the transition period before a company would be delisted would end on January 1, 2022.

On December 2, 2021, the SEC issued amendments to finalize the interim final rules previously adopted in March 2021, and established procedures to identify issuers and prohibit the trading of the securities of certain registrants as required by the HFCAA.

On August 26, 2022, the PCAOB announced and signed a Statement of Protocol (the “Protocol”) with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China. The Protocol provides the PCAOB with: (1) sole discretion to select the firms, audit engagements and potential violations it inspects and investigates, without any involvement of Chinese authorities; (2) procedures for PCAOB inspectors and investigators to view complete audit work papers with all information included and for the PCAOB to retain information as needed; (3) direct access to interview and take testimony from all personnel associated with the audits the PCAOB inspects or investigates.

On December 15, 2022, the PCAOB issued a new Determination Report which: (1) vacated the December 16, 2021 Determination Report; and (2) concluded that the PCAOB has been able to conduct inspections and investigations completely in the PRC in 2022. The December 15, 2022 Determination Report cautions, however, that foreign authorities might take positions at any time that would prevent the PCAOB from inspecting and investigating completely. As required by the HFCAA, if in the future the PCAOB determines it can longer inspect or investigate completely because of a position taken by any foreign authority, including but is not limited to Hong Kong and mainland China authorities  , the PCAOB will act expeditiously to consider whether it should issue a new determination.

While the HFCAA is not currently applicable to the Company because the Company’s current auditors are subject to PCAOB review, if this changes in the future for any reason, the Company may be subject to the HFCAA. The implications of this regulation if the Company were to become subject to it are uncertain. Such uncertainty could cause the market price of our Ordinary Shares to be materially and adversely affected, and our securities could be delisted or prohibited from being traded on Nasdaq earlier than would be required by the HFCAA. If our Ordinary Shares are unable to be listed on another securities exchange by then, such a delisting would substantially impair your ability to sell or purchase the Ordinary Shares when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative impact on the price of the Ordinary Shares.

The fluctuation of the Renminbi may have a material adverse effect on your investment.

The change in value of the Renminbi against the U.S. dollar and other currencies is affected by various factors such as changes in China’s political and economic conditions and China’s foreign exchange controls. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar. Under such policy, the Renminbi was permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Later on, the People’s Bank of China has decided to further implement the reform of the RMB exchange regime and to enhance the flexibility of RMB exchange rates. Such changes in policy have resulted in a significant appreciation of the Renminbi against the U.S. dollar since 2005. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in a further and more significant adjustment of the Renminbi against the U.S. dollar. Any significant appreciation or revaluation of the Renminbi may have a material adverse effect on the value of, and any dividends payable on, our Ordinary Shares in foreign currency terms. More specifically, if we decide to convert our Renminbi into U.S. dollars, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. To the extent that we need to convert U.S. dollars we receive from our contemplated initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. In addition, appreciation or depreciation in the exchange rate of the Renminbi to the U.S. dollar could materially and adversely affect the price of shares of our Ordinary Shares in U.S. dollars without giving effect to any underlying change in our business or results of operations.

Our results of operations are subject to fluctuations in the exchange rate between the U.S. dollar and the Hong Kong dollar.

Exchange rate fluctuations between the U.S. dollar and the Hong Kong dollar, as well as inflation in Hong Kong may negatively affect our earnings. A portion of our revenues and expenses are denominated in U.S. dollars. However, a significant portion of the expenses associated with our subsidiaries’ Hong Kong operations, including facilities-related expenses, are incurred in Hong Kong dollars, and personnel-related expenses are expected to be incurred in Hong Kong dollars. Consequently, inflation in Hong Kong will have the effect of increasing the dollar cost of our operations in Hong Kong, unless it is offset on a timely basis by a devaluation of the Hong Kong dollar, as applicable, relative to the U.S. dollar. We cannot predict any future trends in the rate of inflation in Hong Kong or the rate of devaluation of the Hong Kong dollar, as applicable, against the U.S. dollar. In addition, we are exposed to the risk of fluctuation in the value of the Hong Kong dollar vis-a-vis the U.S. dollar. While the Hong Kong government has continued to pursue a fixed exchange rate policy, with the Hong Kong dollar pegged at approximately HK$7.80 to $1.00, we cannot assure you that such policy will be maintained. Any significant appreciation of the Hong Kong dollar against the U.S. dollar would cause an increase in our Hong Kong dollar expenses, as applicable, as recorded in our U.S. dollar denominated financial reports, even though the expenses denominated in Hong Kong dollars, as applicable, will remain unchanged. In addition, exchange rate fluctuations in currency exchange rates in countries or areas other than Hong Kong where we operate and do business may also negatively affect our earnings.

Restrictions on currency exchange may limit our ability to receive and use our revenue effectively.

Some of our revenue is denominated in Renminbi. As a result, restrictions on currency exchange may limit our ability to use revenue generated in Renminbi to fund any business activities we may have outside China in the future or to make dividend payments to our shareholders in U.S. dollars. Under current PRC laws and regulations, Renminbi is freely convertible for current account items, such as trade and service-related foreign exchange transactions and dividend distributions. However, Renminbi is not freely convertible for direct investment or loans or investments in securities outside China, unless such use is approved by SAFE. For example, foreign exchange transactions under our subsidiary’s capital account, including principal payments in respect of foreign currency-denominated obligations, remain subject to significant foreign exchange controls and the approval requirement of SAFE. These limitations could affect our ability to convert Renminbi into foreign currency for capital expenditures. To the extent cash and/or assets in the business is in the PRC/Hong Kong or a PRC/Hong Kong entity, the funds and/or assets may not be available to fund operations or for other use outside of the PRC/Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of us or our subsidiaries by the PRC government to transfer cash and/or assets. And the Chinese government is further strengthening the control of foreign exchange, we will not be able to change the Chinese government’s decision in our own power.

Risks relating to the economic, political, legal and social conditions in Hong Kong, Taiwan and Macau.

During the two fiscal years ended June 30, 2023 and 2022, we also operate our business in Hong Kong, Taiwan and Macau. Any adverse changes in the economic, political, legal and social conditions of Hong Kong, Taiwan and Macau may lead to an adverse impact on the demand for our services and may result in deteriorating financial performance of our Group.

Furthermore, we cannot assure you that there will not be any political movements or large scale political unrest in Hong Kong, Taiwan or Macau, which may in turn adversely impact the market or lead to disruption of the general economic, political and social conditions in Hong Kong, Taiwan or Macau. If such unrest or movement persists for a substantial period of time, it may lead to such disruption, and our overall business, results of operations and financial condition may be adversely affected.

Hong Kong and Macau became the special administrative regions of the PRC when the sovereignties of both regions were returned to the PRC, whereas Taiwan has a unique political status with conflict on its sovereignty with the PRC. We cannot assure you that the economic, political and legal developments in Hong Kong, Macau and Taiwan will not be adversely affected as a result of the exercise of sovereignties by the PRC over Hong Kong and Macau and the conflict between Taiwan and the PRC. If there is any material adverse change in the general economic, political and legal developments in Hong Kong, Macau or Taiwan, our operations and financial position may be adversely affected.

Risks of acts of God, acts of war and terrorism, natural disasters, riots, epidemics and other disasters.

The economy, infrastructure and livelihood of the people of the PRC, Hong Kong, Taiwan and Macau or such other jurisdictions may be materially and adversely affected by acts of God, acts of war and terrorism, natural disasters, riots, epidemics and other disasters which are beyond our control. Our business, financial condition and results of operations may be adversely affected if these events occur.

For example, epidemics threaten people’s lives and may adversely affect their livelihood as well as their living and consumption patterns. The occurrence of an epidemic is beyond our control, and we cannot assure you that the outbreak of coronavirus (including COVID-19), severe acute respiratory syndrome, the H5N1 strain of avian influenza, the H1N1 strain of swine flu, the Zika virus or any other epidemics or pandemics will not happen. Any epidemic or pandemic occurring, such as the most recent outbreak of COVID-19, in the PRC, Hong Kong, Taiwan and Macau, or even in areas outside of the PRC, Hong Kong, Taiwan and Macau, may severely affect and restrict the level of economic activity as the government may impose regulatory administrative measures quarantining affected areas or other measures to control the outbreak of the disease, which in turn may adversely affect our business, financial condition and results of operations. Acts of war and terrorism may cause damage or disruption to us or our employees, facilities, markets, suppliers or customers, any of which may adversely impact our revenue, cost, financial condition and results of operations or the trading price of our Shares. Potential war or terrorist attacks may also cause uncertainty and cause our business to suffer in ways that we cannot currently predict.

High customer concentration exposes us to all of the risks faced by our major customers and may subject us to significant fluctuations or declines in revenues.

Our customers include both enterprises and individuals. A limited number of our major customers, however, have contributed a significant portion of our revenues in the past. As of December 31, 2023, our top four customers accounted for 27.5%, 25.1%, 19.2% and 16.5%, respectively, of the Group’s total accounts receivable. As of June 30, 2023, our top three customers accounted for 39.5%, 26.7% and 18.2%, respectively, of the Group’s total accounts receivable. As of June 30, 2022, our top four customers accounted for 38.2%, 14.6%, 11.1% and 11.1%, respectively, of the Group’s total accounts receivable. For the six months ended December 31, 2023, three major customers accounted for 24.6%, 20.9% and 12.6% of the Group’s total revenues. For the year ended June 30, 2023, our top three major customers accounted for 36.4%, 14.7% and 13.4%, respectively, of the Group’s total revenues. For the year ended June 30, 2022, our top two major customers accounted for 28.2% and 10.6%, respectively, of the Group’s total revenues Although we continually seek to diversify our customer base, we cannot assure you that the proportion of the revenue contribution from these customers to our total revenues will decrease in the near future. Dependence on a limited number of major customers will expose us to the risks of substantial losses and extend the turnover days if any of them reduces or even ceases business collaborations with us.

We need to maintain stable relationship with our limited number of suppliers, otherwise our business may be adversely affected.

A limited number of our major vendors, however, have contributed a significant portion of our supplies in the past. As of June 30, 2023 and 2022, our top vendor accounted for 100% of the Group’s total account payable. For the years ended June 30, 2023 and 2022, our top vendor accounted for 37.9% and 54.3% of the Group’s total in-country partner costs, respectively. As of December 31, 2023, our top vendor accounted for 100% of the Group’s total account payable. For the six months ended December 31, 2023, two major vendors accounted for 37.6% and 19.4%, respectively, of the Group’s total in-country partner costs. We will actively expand our suppliers base, but for now we still depend on a limited number of major vendors and will expose us to the risks of substantial losses and extend the turnover days if any of them reduces or even ceases business collaborations with us.

There is uncertainty regarding whether we will be deemed as a PRC resident enterprise. If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within China is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the managing body that actually, comprehensively manage and control the production and operation, staff, accounting, property and other aspects of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued the Notice of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the Standards of De Facto Management Body, or SAT Notice 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although SAT Notice 82 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or non-PRC entities, the criteria set forth in SAT Notice 82 may reflect SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Notice 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the places where senior management and senior management departments that are responsible for daily production, operation and management of the enterprise perform their duties are mainly located within the territory of China; (ii) financial decisions (such as money borrowing, lending, financing and financial risk management) and personnel decisions (such as appointment, dismissal and salary and wages) are decided or need to be decided by organizations or persons located within the territory of China; (iii) main property, accounting books, corporate seal, the board of directors and files of the minutes of shareholders’ meetings of the enterprise are located or preserved within the territory of China; and (iv) one half (or more) of the directors or senior management staff having the right to vote habitually reside within the territory of China.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes, as the standards in the preceding paragraph are not applicable to us since we are not an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of our Ordinary Shares, if such income is treated as sourced from within China.

Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders and any gain realized on the transfer of our Ordinary Shares by such shareholders may be subject to PRC tax at a rate of 20% (and such PRC tax may be withheld at source in the case of dividends). Any PRC income tax liability may be reduced under applicable tax treaties. However, it is unclear whether in practice our non-PRC shareholders would be able to obtain the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our Ordinary Shares.

RISKS RELATING TO INFORMATION CONTAINED IN THIS PROSPECTUS

Forward-looking statements contained in this prospectus are subject to risks and uncertainties.

This prospectus contains certain statements and information that are “forward-looking” and uses forward-looking terminologies such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “may”, “ought to”, “should” or “will” or similar terms. Those statements include, the discussion of our growth strategy and expectations concerning our future operation, liquidity and capital resources. Investors of our Ordinary Shares are cautioned that reliance on any forward-looking statements involves risks and uncertainties and that any or all of those assumptions could prove to be inaccurate and as a result, the forward-looking statements based on those assumptions could also be incorrect. The uncertainties in this regard include, but are not limited to, those identified in this section, many of which are not within our control. In light of these and other uncertainties, the inclusion of forward-looking statements in this prospectus should not be regarded as representations by our Company that our plans or objectives will be achieved and investors should not place undue reliance on such forward-looking statements. Please refer to “Forward-looking statements” in this prospectus for further details.

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR ORDINARY SHARES

Prior to this offering, we had no public market for our Ordinary Shares and you may not be able to resell our Ordinary Shares at or above the price you paid, or at all.

Prior to this offering, there was no public market for our Ordinary Shares. We cannot assure you that an active public market for our Ordinary Shares will develop or that the market price of our Ordinary Shares will not decline below the public offering price. The public offering price of our Ordinary Shares may not be indicative of prices that will prevail in the trading market following the offering.

If we are unable to comply with certain conditions, our Ordinary Shares may not trade on the NASDAQ Capital Market.

If we are unable to meet initial listing requirements for listing of our securities on NASDAQ, our shares may not trade on the NASDAQ Capital Market. In addition, we have relied on an exemption to the blue sky registration requirements afforded to “covered securities.” Securities listed on the NASDAQ Capital Market are “covered securities.” If we are unable to meet the final conditions for listing, then we will not be able to rely on the covered securities exemption to blue sky registration requirements and we would need to register the offering in each state in which we planned to sell Ordinary Shares. Consequently, we will not complete this offering until we have met the final conditions.

If our financial condition deteriorates, we may not meet continued listing standards on the NASDAQ Capital Market.

We have submitted the application for listing of our securities on the NASDAQ Capital Market. However, there can be no assurance that the offering will be closed and our Ordinary Shares will be trading on the NASDAQ Capital Market. The NASDAQ Capital Market requires companies to fulfil specific requirements in order for their shares to continue to be listed. If our Ordinary Shares are listed on the NASDAQ Capital Market but are delisted from the NASDAQ Capital Market at some later date, our shareholders could find it difficult to sell our Ordinary Shares. In addition, if our Ordinary Shares are delisted from the NASDAQ Capital Market at some later date, we may apply to have our Ordinary Shares quoted on the Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the NASDAQ Capital Market. In addition, if our Ordinary Shares are not so listed or are delisted at some later date, our Ordinary Shares may be subject to the “penny stock” regulations. These rules impose additional sales practice requirements on broker-dealers who sell low-priced securities to persons other than established customers and institutional accredited investors and require the delivery of a disclosure schedule explaining the nature and risks of the penny stock market. As a result, the ability or willingness of broker-dealers to sell or make a market in our Ordinary Shares might decline. If our Ordinary Shares are not so listed or are delisted from the NASDAQ Capital Market at some later date or become subject to the penny stock regulations, it is likely that the price of our Ordinary Shares would decline and that our shareholders would find it difficult to sell their Ordinary Shares. In addition, we have relied on an exemption to the blue sky registration requirements afforded to “covered securities.” Securities listed on the NASDAQ Capital Market are “covered securities.” If we are unable to meet the final conditions for listing, then we will not be able to rely on the “covered securities” exemption to blue sky registration requirements and we would need to register the offering in each state in which we planned to sell Ordinary Shares. Consequently, we will not complete this offering until we have met the final conditions.

The trading price of our ordinary shares following this offering may be subject to rapid and substantial price volatility that may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares. 

The trading price of our ordinary shares following this offering may be subject to rapid and substantial price volatility that may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares. Our ordinary shares may trade at prices higher or lower than the offering price. There have been recent instances of extreme share price run-ups followed by rapid price declines following initial public offerings, with share price volatility seemingly unrelated to company performance, particularly among companies with relatively smaller public floats, and we expect that such instances may continue and/or increase in the future. We anticipate our ordinary shares will initially be held by a relatively limited number of shareholders and thus, are likely to be more sporadically and thinly traded than that of larger, more established companies. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price of our ordinary shares could, for example, decline precipitously in the event that a large number of our shares are sold on the market without commensurate demand as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the shares of a larger, more established company that has a relatively large public float.

We cannot predict the extent to which a trading market will develop or how liquid the market might become. The initial public offering price may not be indicative of prices that will prevail in the trading market. The trading price of our ordinary shares following this offering is therefore likely to be highly volatile and could be subject to wide fluctuation in price in response to various factors, and many of the factors are beyond our control. Such volatility, including any stock run-ups, may be unrelated or disproportionate to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares. Accordingly, you could lose all or part of your investment.

If a limited number of participants in this offering purchase a significant percentage of the offering, the effective public float may be smaller than anticipated and the price of our Ordinary Shares may be volatile.

As a company conducting a relatively small public offering, we are subject to the risk that a small number of investors will purchase a high percentage of the offering. If this were to happen, investors could find our Ordinary Shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their Ordinary Shares.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you with the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be 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. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

Ordinary Shares eligible for future sale may adversely affect the market price of our Ordinary Shares, as the future sale of a substantial amount of outstanding Ordinary Shares in the public marketplace could reduce the price of our Ordinary Shares.

The market price of our Ordinary Shares could decline as a result of sales of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our Ordinary Shares. An aggregate of 16,000,000 Ordinary Shares are outstanding before the consummation of this offering and 18,000,000 Ordinary Shares will be outstanding immediately after this offering, assuming no exercise of the underwriter’s over-allotment option. All of the Ordinary Shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining Ordinary Shares will be “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act.

You will experience immediate and substantial dilution.

The initial public offering price of our Ordinary Shares is expected to be substantially higher than the pro forma net tangible book value per share of our Ordinary Shares. Assuming the completion of the offering, if you purchase Ordinary Shares in this offering, you will incur immediate dilution of approximately $[●] per share in the pro forma net tangible book value per share from the price per share that you pay for the Ordinary Shares. Accordingly, if you purchase Ordinary Shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”

We have not finally determined the uses of the proceeds from this offering, and we may use the proceeds in ways with which you may not agree.

While we have identified the priorities to which we expect to put the proceeds of this offering, our management will have considerable discretion in the application of the net proceeds received by us. Specifically, we intend to use the net proceeds from this offering for research and development and additional hiring, sales and marketing, working capital, and general corporate purposes. We have reserved the right to re-allocate funds currently allocated to that purpose to our general working capital. If that were to happen, then our management would have discretion over even more of the net proceeds to be received by our company in this offering. You will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve profitability or increase our stock price. The net proceeds from this offering may be placed in investments that do not produce profit or increase value. See “Use of Proceeds.”

Our officers, directors and principal shareholders own a significant percentage of our Ordinary Shares and will be able to exert significant control over matters subject to shareholder approval.

Assuming the completion of this offering, our officers, directors, and 5% or greater shareholders will, in the aggregate, beneficially own approximately [●]% of our outstanding Ordinary Shares. Specifically, Mr. Lao, Mr. But and Mr. Yeung, our executive officers, in the aggregate, will beneficially own [●]% following this offering, which, in turn, will allow such shareholders to exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. As a result, our officers, directors, and 5% or greater shareholders will possess substantial ability to impact our management and affairs and the outcome of matters submitted to shareholders for approval.  This concentration of ownership and voting power may also discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of our company and might reduce the price of our Ordinary Shares. These actions may be taken even if they are opposed by our other shareholders, including those who purchase Ordinary Shares in this offering. See “Principal Shareholders.”

Resales of our Ordinary Shares in the public market by the Selling Shareholders may cause the market price of our Ordinary Shares to decline.

Resales of 2,240,000 Ordinary Shares by our selling shareholders from time to time, after the closing of this offering, could compete with the initial public offering of the Ordinary Shares and have the effect of depressing the market price for our Ordinary Shares.

We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a newly public company, and our management will be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business.

As a newly public company, we will incur significant legal, accounting, and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission, or the SEC, and NASDAQ. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our Ordinary Shares, fines, sanctions and other regulatory action and potentially civil litigation.

There may not be an active trading market for our Ordinary Shares, which may cause shares of our Ordinary Shares to trade at a discount from the initial offering price and make it difficult to sell the Ordinary Shares you purchase.

Prior to this offering, there has not been a public trading market for our Ordinary Shares. It is possible that after this offering an active trading market will not develop or continue or, if developed, that any market will be sustained which would make it difficult for you to sell your Ordinary Shares at an attractive price or at all. The initial public offering price per share will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which Ordinary Shares will trade in the public market after this offering. The market price of our stock may decline below the initial offering price and you may not be able to sell your Ordinary Shares at or above the price you paid in this offering, or at all.

The market price of Ordinary Shares may be volatile, which could cause the value of your investment to decline.

Even if a trading market develops, the market price of our Ordinary Shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could reduce the market price of our Ordinary Shares in spite of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in response the market price of our Ordinary Shares could decrease significantly. You may be unable to resell your Ordinary Shares of at or above the initial public offering price. In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, or at all.

Future sales, or the perception of future sales, by us or our existing shareholders in the public market following this offering could cause the market price for our Ordinary Shares to decline.

The sale of substantial amounts of Ordinary Shares in the public market, or the perception that such sales could occur could harm the prevailing market price of our Ordinary Shares. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of 18,000,000 Ordinary Shares outstanding. Of the outstanding Ordinary Shares, the [●] Ordinary Shares sold or issued in this offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended, or Securities Act, except that any Ordinary Shares held by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described in “Shares Eligible for Future Sale.” All remaining Ordinary Shares, which are currently held by our existing shareholders, may be sold in the public market in the future subject to the lock-up agreements and the restrictions contained in Rule 144 under the Securities Act. If any existing shareholders sell a substantial amount of Ordinary Shares, the prevailing market price for our Ordinary Shares could be adversely affected. Our executive officers, directors and certain of our existing shareholders will sign lock-up agreements with the underwriters that will, subject to certain customary exceptions, restrict the sale of our Ordinary Shares and certain other securities held by them for 90 days following the date of this prospectus. The underwriters may, in their sole discretion and at any time without notice, release all or any portion of the Ordinary Shares subject to any such lock-up agreements. As restrictions on resale end, the market price of our Ordinary Shares could drop significantly if the holders of our restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our Ordinary Shares or other securities.

As the rights of shareholders under BVI law differ from those under U.S. law, you may have fewer protections as a shareholder.

Our corporate affairs will be governed by our Memorandum and Articles of Association, the BVI Business Companies Act (Revised Edition 2020) as amended (the “BVI Act”), and the common law of the BVI. The rights of shareholders to take legal action against our directors, actions by minority shareholders, and the fiduciary responsibilities of our directors under BVI law are governed by the BVI Act and the common law of the BVI. The common law of the BVI is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England and the wider Commonwealth, which has persuasive, but not binding, authority on a court in the BVI. The rights of our shareholders and the fiduciary responsibilities of our directors under BVI law are largely codified in the BVI Act but are potentially not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the BVI has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of all of the above, holders of our Ordinary Shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S. company.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.

We conduct substantially all of our operations in PRC and Hong Kong and substantially all of our assets are located in PRC and Hong Kong. In addition, three executive officers, namely Mr. Lao, Mr. But and Mr. Yeung, and two of our management personnel, namely Ms. Lo and Mr. Wong, live in Hong Kong and their nationalities are Hong Kong. One of our senior managements, namely Mr. Wu, lives in United Kingdom, but his nationality is Hong Kong. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside PRC or Hong Kong. In addition, as advised by Han Kun Law Offices and Han Kun Law Offices LLP, our PRC Legal Advisers and Hong Kong Legal Advisers, PRC or Hong Kong does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States and many other countries and regions.  Therefore, although the enforcement of a foreign judgment may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court since the judgment may be regarded as creating a debt between the parties to it, direct recognition and enforcement in PRC or Hong Kong of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult, time-consuming, costly or even impossible. See Enforceability Of Civil Liabilities for more information.

BVI companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.

Shareholders of BVI companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of a BVI company could, however, bring a derivative action in the BVI courts, and there is a clear statutory right to commence such derivative claims under Section 184C of the BVI Act. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a BVI company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The BVI courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law; and to impose liabilities against us, in original actions brought in the BVI, based on certain liability provisions of U.S. securities laws that are penal in nature. There is no statutory recognition in the BVI of judgments obtained in the United States, although the courts of the BVI will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. The BVI Act offers some limited protection of minority shareholders. The principal protection under statutory law is that shareholders may apply to the BVI court for an order directing the company or its director(s) to comply with, or restraining the company or a director from engaging in conduct that contravenes, the BVI Act or the company’s Memorandum and Articles of Association. Under the BVI Act, the minority shareholders have a statutory right to bring a derivative action in the name of and on behalf of the company in circumstances where a company has a cause of action against its directors. This remedy is available at the discretion of the BVI court. A shareholder may also bring an action against the company for breach of duty owed to him as a member. A shareholder who considers that the affairs of the company have been, are being or likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the BVI court for an order to remedy the situation.

There are common law rights for the protection of shareholders that may be invoked, largely dependent on English company law. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the Board of Directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to BVI law and the constituent documents of the company. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s Memorandum and Articles of Association, then the courts may grant relief. Generally, the areas in which the courts will intervene are the following: (1) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (2) acts that constitute fraud on the minority where the wrongdoers control the company; (3) acts that infringe or are about to infringe on the personal rights of the shareholders, such as the right to vote; and (4) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders. This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

The laws of the BVI may provide less protection for minority shareholders than those under U.S. law, so minority shareholders may have less recourse than they would under U.S. law if the shareholders are dissatisfied with the conduct of our affairs.

Under the laws of the BVI, the rights of minority shareholders are protected by provisions of the BVI Act dealing with shareholder remedies and other remedies available under common law (in tort or contractual remedies). The principal protection under statutory law is that shareholders may bring an action to enforce the constitutional documents of the company (i.e. the Memorandum and Articles of Association) as shareholders are entitled to have the affairs of the company conducted in accordance with the BVI Act and the Memorandum and Articles of Association of the company. A shareholder may also bring an action under statute if he feels that the affairs of the company have been or will be carried out in a manner that is unfairly prejudicial or discriminating or oppressive to him. The BVI Act also provides for certain other protections for minority shareholders, including in respect of investigation of the company and inspection of the company books and records. There are also common law rights for the protection of shareholders that may be invoked, largely dependent on English common law, since the common law of the BVI for business companies is limited.

As a company incorporated in the British Virgin Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the NASDAQ Stock Market corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the NASDAQ Stock Market corporate governance listing standards.

As a BVI business company to be listed on the NASDAQ Capital Market, we are subject to the NASDAQ Stock Market corporate governance listing standards. However, the NASDAQ Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the British Virgin Islands, which is our home country, may differ significantly from the NASDAQ Stock Market corporate governance listing standards. For instance, we are not required to:

Currently, we do not intend to rely on home country practice with respect to our corporate governance after we complete with this offering. However, if we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing standards applicable to U.S. domestic issuers.

We may not be able to pay any dividends on our Ordinary Shares in the future due to BVI law.

Under BVI law, we may only pay dividends to our shareholders if the value of our assets exceeds our liabilities and we are able to pay our debts as they become due. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends, if any, will be at the discretion of our Board of Directors, and will depend upon our results of operations, cash flows, financial condition, payment to us of cash dividends by our subsidiaries, capital needs, future prospects and other factors that our directors may deem appropriate.

We may be or may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax consequences to U.S. investors.

Based on the past and projected composition of our income and assets, and the valuation of our assets, including goodwill, we do not believe we were a passive foreign investment company (a “PFIC”) for our most recent taxable year, and we do not expect to become a PFIC in the current taxable year or the foreseeable future, although there can be no assurance in this regard.

In general, we will be a PFIC for any taxable year in which:

The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. Because we have calculated the value of our goodwill by taking into account the expected market value of our Ordinary Shares, a decrease in the price of our Ordinary Shares may also result in our becoming a PFIC.

If we are a PFIC for any taxable year during which you hold our Ordinary Shares, our PFIC status could result in adverse U.S. federal income tax consequences to you if you are a U.S. Holder, as defined under “Tax Matters — United States Federal Income Taxation.” For example, if we are or become a PFIC, you may become subject to increased tax liabilities in respect of our Ordinary Shares under U.S. federal income tax laws and regulations, and will become subject to burdensome reporting requirements. See “Tax Matters — United States Federal Income Taxation — Passive Foreign Investment Company.” There can be no assurance that we will not be a PFIC for the current or any future taxable year.

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our Ordinary Shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (1) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) we will be exempt from any rules that may be adopted by the PCAOB requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (3) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (4) we will not be required to hold nonbinding advisory votes on executive compensation or shareholder approval of any golden parachute payments not previously approved. We currently intend to take advantage of the reduced disclosure requirements regarding executive compensation. If we remain an “emerging growth company” after fiscal 2018, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Wall Street Reform and Customer Protection Act, or the Dodd-Frank Act, and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, meaning that the company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including (1) if we become a large accelerated filer, (2) if our gross revenue exceeds $1.07 billion in any fiscal year or (3) if we issue more than $1.0 billion in non-convertible notes in any three year period. The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our Ordinary Shares less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our Ordinary Shares less attractive as a result, there may be a less active trading market for our Ordinary Shares and our stock price may decline and/or become more volatile.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

We describe certain material risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

ENFORCEABILITY OF CIVIL LIABILITIES

We are incorporated under the laws of the BVI with limited liability. We are incorporated in the BVI because of certain benefits associated with being a BVI company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of exchange control or currency restrictions and the availability of professional and support services. However, the BVI has a less developed body of securities laws as compared to the United States and provides protections for investors to a significantly lesser extent. In addition, BVI companies may not have standing to sue before the federal courts of the United States.

Substantially all of our assets are located outside the United States. In addition, three executive Directors, namely Mr. Lao, Mr. But and Mr. Yeung, and two of our senior managements, namely Ms. Lo and Mr. Wong, live in Hong Kong. One of our senior managements, namely Mr. Wu, lives in United Kingdom, and all or a substantial portion of such persons’ 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 or such persons or to enforce against them or against us, judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof.

We have appointed Puglisi & Associates as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any State of the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

We have been advised by our Hong Kong Legal Advisers, that there is uncertainty as to whether the judgment of United States courts will be directly enforced in Hong Kong, as the United States and Hong Kong do not have a treaty or other arrangements providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters. However, a foreign judgment may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court since the judgment may be regarded as creating a debt between the parties to it, provided that the foreign judgment, among other things, is a final judgment conclusive upon the merits of the claim and is for a liquidated amount in a civil matter and not in respect of taxes, fines, penalties, or similar charges. Such a judgment may not, in any event, be so enforced in Hong Kong if (a) it was obtained by fraud; (b) the proceedings in which the judgment was obtained were opposed to natural justice; (c) its enforcement or recognition would be contrary to the public policy of Hong Kong; (d) the court of the United States was not jurisdictionally competent; or (e) the judgment was in conflict with a prior Hong Kong judgment.

We have been advised by Han Kun Law Offices, our counsel as to PRC law, that the United States and PRC do not have a treaty providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not automatically be enforceable in PRC, but will have to follow the procedure under the PRC Civil Procedures Law. 

We have been advised by Forbes Hare, our counsel as to BVI law, that the United States and the BVI do not have a treaty providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically be enforceable in the BVI.

USE OF PROCEEDS

Based upon an assumed initial public offering price of $4 per Ordinary Share and assuming the underwriter exercises its over-allotment option in full, we estimate that we will receive net proceeds from this offering, after deducting the estimated underwriting discounts, non-accountable expense allowance, and the estimated offering expenses payable by us, of approximately $6,609,240. We will not receive any of the proceeds from the sale of the Ordinary Shares being offered by the Selling Shareholders.

We plan to use the net proceeds we receive from this offering for the following purposes:

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering.

If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

Brand promotion and marketing

After going public, we aim to further promote our company branding, profile and professional capability in order to achieve strong reputation and reliable image. We believe enhancing the trust level from our existing/ potential client is the key success factor for our industry in long run.

Recruitment of talented personnel

Human resources is crucial for our industry, and recruitment of talented personnel continues to be one of our on-going top priority during day-to-day operation. Thus, we plan to recruit additional experienced staff with solid business and HR background which can fit for our multiple line of business.

Expansion of new offices and servicing scope

In order to grow our business, we are considering expanding our business in China and later other targeted markets (including Macau, Taiwan and the U.S.). Through setting up of physical location over there, we aim not only to capture new business opportunity, but also to attract more local talented personnel to join us. We plan to allocate 20% of the net proceeds of the Offering to prepare for setting up new branches and offices in these countries including but not limited to research of market, location and regulation, assessment of labor and other costs, and preparation of establishment. We will decide an expansion plan based on our study and assessment, market condition, our cash position and projection of our business. We may, however, need additional capital to set up those new branches and offices based on our expansion plan. We cannot assure you that our operation will provide us with sufficient fund to carry out the expansion or we will be able to raise additional fund for such purpose. We may adjust expansion from time to time based on various factors mentioned herein.

Enhancement of IT systems

We aim to enhance our IT system in order to develop ERP and accounting systems and enhance the security level of our IT systems. We believe developing ERP and accounting system and enhancing our IT system security can increase the confidence and reliability from our customers and provide a greater working environment for operation.

General working capital

We aim to reserve a portion of net proceeds for general working capital needs and use as daily operation. This can serve as a buffer to deal with the fluctuating economic environment and at the same time provide a stable finance backup for daily operational use.

DIVIDEND POLICY

Our board of directors has discretion on whether to distribute dividends. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. In either case, all dividends are subject to certain restrictions under BVI law, namely that the company may only pay dividends if the value of our assets exceeds our liabilities and we are able to pay our debts as they become due. Even if we decide to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

We do not have any present plan to pay any cash dividends on our Ordinary Shares in the foreseeable future after this offering. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a BVI business company with limited liability incorporated in the BVI. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. If we pay any dividends on our Ordinary Shares, As a holding company, we will be dependent on receipt of funds from the subsidiaries. Cash dividends on our Ordinary Shares, if any, will be paid in U.S. dollars.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2023:

You should read this capitalization table in conjunction with “Use of Proceeds,” “Summary Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the related notes appearing elsewhere in this prospectus.

A $1.00 increase in the assumed initial public offering price of $4.00 per Ordinary Share would increase each of additional paid-in capital, total shareholders’ equity and total capitalization by $1,840,000, while a $1.00 decrease in the assumed initial public offering price of $4.00 per Ordinary Share would decrease each of additional paid-in capital, total shareholders’ equity and total capitalization by $1,840,000, assuming the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts, non-accountable expense allowance and estimated expenses payable by us.

DILUTION

If you invest in our Ordinary Shares, your interest will be diluted for each Ordinary Share you purchase to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.

Our net negative tangible book value as of December 31, 2023 was -$405,472, or -$0.03 per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting the net tangible book value per Ordinary Share (as adjusted for the offering) from the initial public offering price per Ordinary Share and after deducting the underwriting discounts, non-accountable expense allowance, and the estimated offering expenses payable by us.

After giving effect to our sale of 2,000,000 Ordinary Shares offered in this offering based on the assumed initial public offering price of $4 per Ordinary Share, after deduction of the underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us, our pro forma as adjusted net negative tangible book value as of December 31, 2023 was -$405,472 or -$0.03 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of $0.37 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of $3.66 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only.

The following table illustrates such dilution:

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2023, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, the total consideration paid and the average price per Ordinary Share before deducting the underwriting discounts, non-accountable expense allowance, and the estimated offering expenses payable by us.

The pro forma as adjusted information as discussed above is illustrative only. Our net income book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our Ordinary Shares and other terms of this offering determined at the pricing.

CORPORATE HISTORY AND STRUCTURE

Our Corporate History

Galaxy Payroll Group Limited (the “Company”) was incorporated in the British Virgin Islands on August 26, 2021 under the BVI Business Companies Act (Revised Edition 2020) as amended as a BVI business company with members’ limited liability in preparing for the Listing, and is the holding company of our Group. Our Company was incorporated as part of the Reorganization, the details of which are set out in “Reorganization” below in this section.

Our history can be traced back to April 2013 when Mr. Lao, Mr. But and Mr. Yeung, being our Founder Shareholders and executive officers, and an independent third party (the “Former Shareholder”), through Galaxy (Seychelles), founded our Group by acquiring Galaxy Payroll (HK) and Galaxy GEO Services, our first two operating subsidiaries in Hong Kong. Each of Mr. Lao, Mr. But, Mr. Yeung and the Former Shareholder held 25% shareholding in Galaxy (Seychelles) until the Former Shareholder disposed of the shares he held in Galaxy (Seychelles) in April 2015. The Former Shareholder is a member of the senior management of a subsidiary of the Major In-country Partner. Our Group principally engages in payroll outsourcing and employment services.

Upon the acquisition of Galaxy Payroll (HK) in 2013, we commenced our business in Hong Kong and entered into contracts for the provision of payroll outsourcing and employment services with our customers. Our customers included (i) channels which are global human resources service providers engaged by companies/organizations to handle payroll and employment related matters for their branch offices in different regions; and (ii) end-users that outsource their payroll or employment functions to us directly. The end-users of our services included mainly multinational companies/organizations engaging in a wide variety of industries. For payroll outsourcing services, a majority of our end-users during the two fiscal years ended June 30, 2023 and 2022 as well as for the six months ended December 31, 2023 engaged in the retail and trading, industrial, IT, financial and professional services industries. For employment services, a majority of our end-users during the two fiscal years ended June 30, 2023 and 2022 as well as for the six months ended December 31, 2023 engaged in the IT, retail and trading, industrial, professional institution and education and healthcare industries. In the same year, we extended our payroll outsourcing and employment services to the PRC. Starting from July 2021, the Company has offered consultancy and market research services, a majority of our end-users during the year ended June 30, 2022 engaged in the IT, industrial, media, advertising and entertainment, professional services. The Company temporarily ceased the consultancy and market research services since July 2022.

Subsequently, in April 2015, Cornerstone Enterprise, an investment holding company, which was held by Mr. Lao, Mr. But and Mr. Yeung in equal shares, acquired the share held by the Former Shareholder in Galaxy (Seychelles), the former holding company of our Group, and the Former Shareholder ceased to be a shareholder of our Group. To the best knowledge of our Directors, the Former Shareholder disposed of his shares in Galaxy (Seychelles) to focus on his career in the PRC. Since then, our Group has been under the ownership of Mr. Lao, Mr. But and Mr. Yeung. For further information about the background and experience of Mr. Lao, Mr. But and Mr. Yeung, please refer to “Directors and Senior Management” in this prospectus.

Leveraging on our industry experience and at the request of our customers, we further expanded our business to Macau and Taiwan in 2015 and 2016, respectively. With the expansion of our business, we established Galaxy HR (SZ) in 2018 to further develop the PRC market. In 2019, Galaxy HR (SZ) obtained the Labor Dispatch Operation Permit which enables us to act as employer of record for our end-users in providing employment services in the PRC.

Our Key Business Milestones

The following events are the key business and corporate development milestones of our Group:

Our Corporate Developments

We set out below the corporate history, the principal business and the changes in shareholding of members of our Group:

Our Company

Galaxy Payroll Group Limited was incorporated in the British Virgin Islands on August 26, 2021 as a BVI business company. The initial authorized share capital of our Company is 50,000 Ordinary Shares, par value US$1.00 per share. On December 19, 2022, the Company filed Amended and Restated Charter with the Registrar to increase our authorized shares from 50,000 Ordinary Shares, par value of US$1 per share, to unlimited number of Ordinary Shares, par value of US$0.000625 per share and effectuated a forward split of all issued and outstanding shares at a ratio of 1,600:1.

Our Company is an investment holding company and currently does not engage in any business activity. 

Melkweg Holdings Limited

Melkweg Holdings Limited was incorporated in the Cayman Islands on October 31, 2019 as an exempted company with members’ limited liability. The initial authorized share capital of Melkweg Holdings Limited is HK$380,000 (US$48,932) divided into 38,000,000 Shares of HK$0.01 (US$0.001) each. Upon incorporation of Melkweg Holdings Limited, on October 31, 2019, it allotted and issued one fully paid share to an initial subscriber, an independent third party, at par value, and was subsequently transferred to JEAN Oceania on October 31, 2019.

On January 17, 2020, Melkweg Holdings Limited allotted and issued 1,000 shares to Pine Mountain, 1,000 shares to Agapao Investment, and 999 shares to JEAN Oceania, respectively, at par value, all credited as fully paid. Upon allotment and issue of the said shares, Melkweg Holdings Limited was held as to approximately 33.33% by Pine Mountain, 33.33% by Agapao Investment and 33.33% by JEAN Oceania, respectively.

Melkweg BVI

Melkweg BVI was incorporated in the BVI on November 5, 2019 as a company limited by shares. Upon its incorporation, Melkweg BVI was authorized to issue up to a maximum of 50,000 Ordinary Shares.

On the same day, Melkweg BVI allotted and issued one share, one share and one share to Pine Mountain, Agapao Investment and JEAN Oceania at US$1 each respectively. The shares allotted and issued were credited as fully paid.

Melkweg BVI is an investment holding company and currently does not engage in any business activity. As part of the Reorganization, Melkweg BVI becomes a wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy Payroll (HK)

Galaxy Payroll (HK) was incorporated in Hong Kong on February 21, 2013 as a private company limited by shares. Upon its incorporation, Galaxy Payroll (HK) allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held as to 9,999 shares by Mr. Lao and one share by Mr. But. On April 5, 2013, Mr. Lao and Mr. But transferred their respective shares in Galaxy Payroll (HK) to Galaxy (Seychelles), the former holding company of our Group, at a consideration of HK$9,999 (US$1,288) and HK$1 (US$0.13), respectively. The consideration was determined with reference to the nominal value of the shares. Upon completion of the said transfers, the entire issued share capital of Galaxy Payroll (HK) was owned by Galaxy (Seychelles).

Galaxy Payroll (HK) principally engages in the provision of payroll outsourcing services, employment services and consultancy and market research services in Hong Kong. As part of the Reorganization, Galaxy Payroll (HK) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy Payroll (TW)

Galaxy Payroll (TW) was incorporated in Hong Kong on December 31, 2018 as a private company limited by shares. Upon its incorporation, Galaxy Payroll (TW) allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held by Galaxy (Seychelles).

Galaxy Payroll (TW) is an investment holding company and currently does not engage in any business activity. As part of the Reorganization, Galaxy Payroll (TW) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy GEO Services

Galaxy GEO Services was incorporated in Hong Kong on February 5, 2013 as a private company limited by shares. Upon its incorporation, Galaxy GEO Services allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held by the Former Shareholder. On April 5, 2013, the Former Shareholder transferred the 10,000 shares in Galaxy GEO Services to Galaxy (Seychelles), the former holding company of our Group, at a consideration of HK$10,000 (US$1,288). The consideration was determined with reference to the nominal value of the shares. Upon completion of the said transfer, the entire issued share capital of Galaxy Payroll (HK) was owned by Galaxy (Seychelles).

Galaxy GEO Services principally engages in the provision of employment services in Hong Kong through acting as employers of record of the seconded employees of our end-users. As part of the Reorganization, Galaxy GEO Services becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy Payroll (China)

Galaxy Payroll (China) was incorporated in Hong Kong on October 24, 2017 as a private company limited by shares. Upon its incorporation, Galaxy Payroll (China) allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held by Galaxy (Seychelles).

Galaxy Payroll (China) is an investment holding company and currently does not engage in any business activity. As part of the Reorganization, Galaxy Payroll (China) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy HR (Macau)

Galaxy HR (Macau) was incorporated in Macau on July 26, 2016 as a limited liability company and subsequently commenced its business. Upon its incorporation, Galaxy HR (Macau) had a registered capital of MOP50,000 fully paid and held by Galaxy Payroll (HK) as to MOP49,000 and Mr. Lao as to MOP1,000.

Galaxy HR (Macau) principally engages in the provision of payroll outsourcing services in Macau. As part of the Reorganization, Galaxy HR (Macau) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy HR (TW)

Galaxy HR (TW) was incorporated in Taiwan on March 21, 2018 as a limited liability company and subsequently commenced its business. Galaxy HR (TW) was incorporated upon the instructions of Mr. Lao, Mr. But and Mr. Yeung with a paid-in capital of NT$5,380,000 which was paid by Mr. Lao Wai Man, brother of Mr. Lao, our executive Director and Founder Shareholder, and was held on behalf of Mr. Lao, Mr. But and Mr. Yeung jointly at its incorporation. On May 17, 2019, Mr. Lao Wai Man transferred the entire paid-in capital of Galaxy HR (TW) to Galaxy Payroll (TW) upon the instructions of Mr. Lao, Mr. But and Mr. Yeung at a consideration of NT$5,380,000, which was determined with reference to the paid-in capital of Galaxy HR (TW).

Galaxy HR (TW) principally engages in the provision of payroll outsourcing services and employment services in Taiwan. As part of the Reorganization, Galaxy HR (TW) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Galaxy HR (SZ)

Galaxy HR (SZ) was incorporated in the PRC on March 7, 2018 as a limited liability company and subsequently commenced its business. Upon its incorporation, Galaxy HR (SZ) had a registered share capital of RMB2,000,000 and was wholly-owned by Galaxy Payroll (China).

Galaxy HR (SZ) principally engages in the provision of payroll outsourcing and employment services in the PRC. As part of the Reorganization, Galaxy HR (SZ) becomes an indirect wholly-owned subsidiary of our Company. Please refer to “Reorganization” below in this section for further details.

Reorganization

We reorganized our corporate structure in preparation for, and in connection with the Listing. Following completion of the Reorganization, our Company became the holding company of our Group. The steps of Reorganization are set out below.

1. Incorporation of our Company

Galaxy Payroll Group Limited was incorporated in the British Virgin Islands on August 26, 2021 as a BVI business company. The initial authorized share capital of our Company is 50,000 Ordinary Shares, par value US$1.00 per share. On December 19, 2022, the Company filed Amended and Restated Charter with the Registrar to increase our authorized shares from 50,000 Ordinary Shares, par value of US$1 per share, to unlimited number of Ordinary Shares, par value of US$0.000625 per share and effectuated a forward split of all issued and outstanding shares at a ratio of 1,600:1.

2. Incorporation of Melkweg Holdings Limited

Melkweg Holdings Limited was incorporated in the Cayman Islands on October 31, 2019 as an exempted company with members’ limited liability. The initial authorized share capital of Melkweg Holdings Limited is HK$380,000 (US$48,932) divided into 38,000,000 Shares of HK$0.01 (US$0.001) each. Upon incorporation of Melkweg Holdings Limited, on October 31, 2019, it allotted and issued one fully paid share to an initial subscriber, an independent third party, at par value, and was subsequently transferred to JEAN Oceania on October 31, 2019.

3. Incorporation of Melkweg BVI

Melkweg BVI was incorporated in BVI as a company limited by shares on November 5, 2019. Upon its incorporation, Melkweg BVI was authorized to issue up to a maximum of 50,000 Ordinary Shares. Upon incorporation of Melkweg BVI, on November 5, 2019, Melkweg BVI allotted and issued one share, one share and one share to Pine Mountain, Agapao Investment and JEAN Oceania at US$1.00 each respectively. The shares allotted and issued were credited as fully paid.

4. The subsidiaries of Melkweg BVI

A. Galaxy Payroll (HK) and Galaxy HR (Macau)

Galaxy HR (Macau) is owned as to 98.0% by Galaxy Payroll (HK). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (HK) from Galaxy (Seychelles) at a consideration of HK$8,478,836 (US$1,091,817). The consideration was determined with reference to the net asset value of Galaxy Payroll (HK) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

B. Galaxy Payroll (TW) and Galaxy HR (TW)

Galaxy HR (TW) is a direct wholly-owned subsidiary of Galaxy Payroll (TW). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (TW) from Galaxy (Seychelles) at a consideration of HK$10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy Payroll (TW) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

C. Galaxy GEO Services

On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy GEO Services from Galaxy (Seychelles) at a consideration of HK$10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy GEO Services as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

D. Galaxy Payroll (China) and Galaxy HR (SZ)

Galaxy HR (SZ) is a direct wholly-owned subsidiary of Galaxy Payroll (China). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (China) from Galaxy (Seychelles) at a consideration of HK$10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy Payroll (China) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

Upon the completion of the aforesaid share transfers, Galaxy Payroll (HK), Galaxy Payroll (TW), Galaxy GEO Services and Galaxy Payroll (China) became the direct wholly- owned subsidiaries of Melkweg BVI, Galaxy HR (TW) and Galaxy HR (SZ) became the indirect wholly-owned subsidiaries of Melkweg BVI and Galaxy HR (Macau) was held as to 98% by Melkweg BVI through Galaxy Payroll (HK).

5. Share transfer of Galaxy HR (Macau)

Upon incorporation of Galaxy HR (Macau), Mr. Lao held one quota of MOP1,000 in Galaxy HR (Macau), representing 2.0% of the equity interest in Galaxy HR (Macau). On December 13, 2019, Mr. Lao transferred his one quota in Galaxy HR (Macau) to Galaxy GEO Services at a consideration of MOP1,000.

The above transfer was legally completed and settled on December 13, 2019. Upon completion of the said transfer, Galaxy HR (Macau) was held as to 98.0% by Galaxy Payroll (HK) and 2.0% by Galaxy GEO Services and thereby became an indirect wholly-owned subsidiary of our Company.

6. Share swap

On January 17, 2020, Pine Mountain, Agapao Investment and JEAN Oceania transferred their respective interest, that was 4,001 shares, 4,001 shares and 4,001 shares in Melkweg BVI, representing the entire issued shares of Melkweg BVI to our Company at a total consideration of US$12,003.00. The consideration was determined with reference to the par value of the shares transferred. The consideration for the acquisition was satisfied by:

The above transfers were legally completed and settled on January 17, 2020. Upon completion of the said transfers, Melkweg BVI becomes a direct wholly-owned subsidiary of our Company, and Galaxy Payroll (HK), Galaxy Payroll (TW), Galaxy GEO Services, Galaxy Payroll (China), Galaxy HR (TW), Galaxy HR (SZ) and Galaxy HR (Macau) become the indirect wholly-owned subsidiaries of our Company.

7. Share exchange by and between the Company and Melkweg Holdings Limited

On August 26, 2021, the Company and Melkweg Holdings Limited entered into a share exchange agreement, pursuant to which the Company issued to three shareholders and their designees of Melkweg Holdings Limited a total of 10,000 (before the Forward Share Split) Ordinary Shares in exchange for all of the outstanding equity shares of Melkweg Holdings Limited. As a result of the share exchange, Melkweg Holdings Limited become a wholly owned subsidiary of the Company. The restructuring of the Company was then completed.