SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

ARB IOT Group Ltd. – IPO: ‘F-1’ on 9/30/22

On:  Friday, 9/30/22, at 5:27pm ET   ·   Accession #:  1213900-22-60785   ·   File #:  333-267697

Previous ‘F-1’:  None   ·   Next:  ‘F-1/A’ on 11/2/22   ·   Latest:  ‘F-1/A’ on 1/23/24   ·   7 References:   By:  ARB IOT Group Ltd. – Latest ‘F-1/A’ on 1/23/24 By:  ARB IOT Group Ltd. – ‘F-1’ on 10/31/23 By:  ARB IOT Group Ltd. – ‘20-F’ on 10/30/23 for 6/30/23 By:  ARB IOT Group Ltd. – ‘F-1/A’ on 3/27/23 By:  ARB IOT Group Ltd. – ‘F-1/A’ on 12/22/22 By:  ARB IOT Group Ltd. – ‘F-1/A’ on 12/5/22 By:  ARB IOT Group Ltd. – Next ‘F-1/A’ on 11/2/22 

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

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

 9/30/22  ARB IOT Group Ltd.                F-1                   28:4.8M                                   EdgarAgents LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-1         Registration Statement by a Foreign Issuer          HTML   1.91M 
 2: EX-3.1      Amended and Restated Memorandum of Association and  HTML    284K 
                Articles of Association of the Registrant                        
                (Currently in Effect)                                            
 3: EX-3.2      Form of Amended and Restated Articles of            HTML    349K 
                Association of the Registrant (To Be Effective                   
                Immediately Prior to the Completion of This                      
                Offering)                                                        
11: EX-10.10    Service Agreement Between Arb Big Data Sdn Bhd and  HTML     33K 
                Arb Axflix Sdn. Bhd., Dated 23 June 2021, for                    
                System Development Services                                      
12: EX-10.11    Service Agreement Between Arb Axflix Sdn Bhd and    HTML     30K 
                Arb Agro Technology Sdn Bhd (Formerly Known as                   
                Digital Agrophonic Sdn. Bhd)., Dated 28 May 2021,                
                for Implementation of System Development                         
13: EX-10.12    Service Agreement Between Arbiot Sdn Bhd and Arb    HTML     30K 
                Axflix Sdn. Bhd Dated 24 September 2021 for                      
                Implementation of Project Commissioning                          
14: EX-10.13    Service Agreement Between Arb Big Data Sdn Bhd and  HTML     30K 
                Arb Axflix Sdn. Bhd Dated 8 October 2021 for                     
                Implementation of System Development                             
15: EX-10.14    Service Agreement Between Arb Axflix Sdn Bhd and    HTML     30K 
                Arb Wms Technologies Sdn. Bhd (Formerly Known as                 
                Bluewave Wms Technologies Sdn Bhd) Dated 7 July                  
                2021 for Implementation of System Development                    
16: EX-10.15    Service Agreement Between Arb Innovation Sdn Bhd    HTML     32K 
                (Formerly Known as Aberys Innovation Sdn Bhd) and                
                Arb Axflix Sdn. Bhd Dated 20 July 2021 for                       
                Implementation of System Development                             
17: EX-10.16    Service Agreement Between Arb Axflix Sdn Bhd and    HTML     29K 
                Arb Intelligence Sdn. Bhd Dated 22 September 2021                
                for Implementation of System Development                         
18: EX-10.17    Service Agreement Between Arb System Sdn Bhd and    HTML     31K 
                Arb Distribution Sdn. Bhd Dated 2 July 2021 System               
                Development Services                                             
19: EX-10.18    Supply Agreement Between Arb Innovation Sdn Bhd     HTML    136K 
                (Formerly Known as Aberys Innovation Sdn Bhd)                    
                Dated 5 August 2021 and Ageson Industrial Sdn.                   
                Bhd.(Formerly Known as Ab5 Sdn Bhd), Dated 5                     
                August 2021 to Procure and Supply Ibs System                     
 4: EX-10.3     Tenancy Agreement Between Arb Intelligence Sdn.     HTML     93K 
                Bhd. and Vnh One Sdn. Bhd., Dated March 3, 2021                  
 5: EX-10.4     Management Services Agreement Among Arb Berhad,     HTML     24K 
                Arbiot Sdn. Bhd. and Arb Development Sdn. Bhd.,                  
                Dated September 15, 2020                                         
 6: EX-10.5     Service Agreement Between Arbiot Sdn Bhd and        HTML     40K 
                Baritech Sdn. Bhd., Dated 27 March 2019, for                     
                Project Commissioning Services                                   
 7: EX-10.6     Service Agreement Between Arbiot Sdn Bhd and        HTML     28K 
                Baritech Sdn. Bhd., Dated 30 April 2019, for                     
                Project Management and Business Application                      
                Services                                                         
 8: EX-10.7     Service Agreement Between Arbiot Sdn Bhd and        HTML     44K 
                Baritech Sdn. Bhd., Dated 25 May 2020, for Project               
                Commissioning Services                                           
 9: EX-10.8     Service Agreement Between Baritech Sdn Bhd and Arb  HTML     31K 
                Distribution Sdn. Bhd., Dated 1 October 2020, for                
                Project Management for Upgrade System Modules                    
10: EX-10.9     Service Agreement Between Arb Cloud Sdn Bhd and     HTML     29K 
                Arb Big Data Sdn. Bhd., Dated 23 June 2021, for                  
                System Development Services                                      
20: EX-21.1     List of Subsidiaries of the Registrant              HTML     17K 
21: EX-23.1     Consent of Bf Borgers CPA Pc                        HTML     12K 
22: EX-23.6     Consent of Smith Zander International               HTML     15K 
28: EX-FILING FEES  Filing Fee Table                                HTML     31K 
23: EX-99.1     Code of Ethics of the Registrant                    HTML     28K 
24: EX-99.3     Consent of Independent Director (Kevin) Khor Chin   HTML     13K 
                Meng                                                             
25: EX-99.4     Consent of Independent Director (Julia) Yuen Ya     HTML     13K 
                Ting                                                             
26: EX-99.5     Consent of Independent Director Khor Ben Jin        HTML     13K 
27: EX-99.6     Consent of (Addy) Ng Kok Wah                        HTML     13K 

As filed with the Securities and Exchange Commission on September 30, 2022 

Registration No. 333-   

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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

ARB IOT GROUP LIMITED

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s Name into English)
 

No. 17-03, Q Sentral, 2A, Jalan Stesen Sentral 2

Kuala Lumpur Sentral, 50470 Kuala Lumpur, Malaysia

+603-2276 1143

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

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

(800) 221-0102

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

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement the same offering. ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 2022

ARB IOT GROUP LIMITED

1,200,000 Ordinary Shares

This is the initial public offering of ARB IOT Group Limited, a Cayman Islands exempted company with limited liability whose principal place of business is in Malaysia. We are offering on a firm commitment basis 1,200,000 ordinary shares, par value $0.0001 per share, assuming an initial public offering price of $5.00 per ordinary share. We anticipate that the initial public offering price per ordinary share will be between $4.00 and $6.00.

Prior to this offering, there has been no public market for our ordinary shares. We have applied for listing our ordinary shares on the Nasdaq Capital Market under the symbol “ARBB.” No assurance can be given that our application will be approved.

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 11 of this prospectus for a discussion of information that should be considered in connection with an investment in our ordinary shares.

We are an “emerging growth company” and a “foreign private issuer,” each as defined under the U.S. federal securities laws, and, as such, are eligible for reduced public company reporting requirements for this and future filings.

ARB Berhad, through ARB Holdings Sdn. Bhd. and ARB IOT Limited, currently owns 100% of our outstanding ordinary shares. Upon the closing of this offering, we anticipate that ARB Berhad will own approximately 95.42% of our outstanding ordinary shares (or approximately 94.77% if the underwriters exercise the over-allotment option in full) and we will meet the definition of a “controlled company” under the corporate governance standards for Nasdaq listed companies. As a “controlled company,” we will be eligible to utilize certain exemptions from the corporate governance requirements of the Nasdaq Stock Market although we do not intend to avail ourselves of these exemptions.

We have granted the underwriter an option, exercisable for 45 days from the date of the closing of this offering, to purchase up to an additional 180,000 ordinary shares on the same terms as the other shares being purchased by the underwriter from us to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission 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.

The underwriter expects to deliver the ordinary shares to purchasers in this offering on or about [    ], 2022.

Maxim Group LLC

The date of this prospectus is [    ], 2022

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we, nor the underwriter has authorized anyone to provide you with different information. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus, or any free writing prospectus, as the case may be, or any sale of ordinary shares.

For investors outside the United States: Neither we, nor the underwriter has done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the ordinary shares and the distribution of this prospectus outside the United States.

COMMONLY USED DEFINED TERMS

Except as otherwise indicated by the context and for the purposes of this prospectus only, references in this prospectus to:

As all of our operations are conducted in Malaysia, all of our revenues are denominated in RM and our consolidated financial statements are presented in RM. This prospectus contains translations of RM amounts into USD at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from RM to USD in this prospectus were made at a rate of RM4.4055 to $1.00. We make no representation that any RM could have been, or could be, converted into USD, as the case may be, at any particular rate, at the rates stated below, or at all. The Malaysian government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RM into foreign exchange and through restrictions on foreign trade. On June 30, 2022, the exchange rate was RM4.4055 to $1.00.

The following table sets forth, for the periods indicated, information concerning exchange rates between the RM and the USD. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.

Numerical figures included in this registration statement have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

Our fiscal year end is June 30. References to a particular “fiscal year” are to our fiscal year ended June 30 of that calendar year. Our audited consolidated financial statements have been prepared in accordance with IFRS.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, you are cautioned not to give undue weight to this information.

We have proprietary rights to trademarks used in this prospectus that are important to our business. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are without the ®, ™ and other similar symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

This prospectus may contain additional trademarks, service marks and trade names of others. All trademarks, service marks and trade names appearing in this prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks, service marks or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other person.

RISK FACTORS

The ordinary shares being offered by us are highly speculative in nature, involve a high degree of risk and should be purchased only by persons who can afford to lose the entire amount invested. Before purchasing any of our shares, you should carefully consider the following factors relating to our business and prospects. You should pay particular attention to the fact that we conduct substantially all of our operations outside the US and are governed by legal and regulatory environments that in some respects differ significantly from the environment that may prevail in the U.S. If any of the following risks actually occurs, our business, financial condition or operating results will suffer, the trading price of our shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have a limited operating history and experience in the Malaysian IoT industry, which may make it difficult to evaluate our business and prospects and may not be indicative of our future growth or financial results.

We began operations in 2019, starting with offering smart home and building solutions, and since then, have rapidly expanded our product and service offerings to provide IoT solutions for agriculture, construction, consumer electronics, retail and other industries. Our business has grown rapidly as demonstrated by the increase in revenue from approximately RM50.3 million ($11.4 million) for the fiscal year ended June 30, 2021 to approximately RM443.0 million ($100.6 million) for the fiscal year ended June 30, 2022, an increase of RM392.7 million ($89.1 million), or 780.7%, and in profit from approximately RM18.9 million ($4.3 million) for the fiscal year ended June 30, 2021 to approximately RM73.3 million ($16.6 million) for the fiscal year ended June 30, 2022, an increase of 287.8%. However, due to our limited operating history and experience in the Malaysian IoT industry, our recent rapid growth may not be indicative of our future growth or financial results and makes an evaluation of our business and prospects difficult and highly speculative. There is no assurance that we will be able to maintain our historical growth rates in future periods. Our growth prospects should be considered in light of the risks and uncertainties that fast-growing companies with a limited operating history and experience in our industry may encounter, including, among others, risks and uncertainties regarding our ability to:

All these endeavors involve risks and will require significant allocation of management and employee resources. We cannot assure you that we will be able to effectively manage our growth or implement our business strategies effectively. If the market for our services does not develop as we expect or if we fail to address the needs of this dynamic market, our business, results of operations, and financial condition will be materially and adversely affected.

Our expansion into new products, services, technologies, market segments and geographic regions subjects us to additional risks.

In 2021, we ventured into a number of new market segments, products and services, including IoT Smart Agriculture, industrial building management, drone services and warehouse management. We have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. In response to new regulatory requirements or industry standards, or in connection with the introduction of new products, we may need to impose more rigorous risk management systems and policies, which may negatively affect the growth of our business. Any significant change to our business model may not achieve expected results and may materially and adversely affect our financial condition and results of operations. Failure to realize the benefits of amounts we invest in new technologies, products, or services could also result in the value of those investments being written down or written off.

We are subject to credit risks associated with a significant amount of accounts receivable, and if we are unable to collect accounts receivable from our customers, our results of operations and cash flows could be materially adversely affected.

Our normal trade credit terms range between 30 to 210 days. As of June 30, 2022 and 2021, we had approximately RM101.2 million ($23.0 million) and RM23.7 million ($5.4 million) in trade receivables. We provide a long credit period from 210 days to 365 days to some large customers to secure contracts from them. However, our customers sometimes still require additional time for payment, depending on their cash flow. Due to uncertainty of the timing of collection, we establish allowance for doubtful account based on individual account analysis and historical collection trends. We establish a provision for doubtful receivables when there is objective evidence that we may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as on past trends of collections. Considering customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against account receivable balance, with a corresponding charge recorded in the consolidated statements of operations and other comprehensive income. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. We did not have any bad debt write-off during the years ended June 30, 2022 and 2021. Approximately 8.9% and 98.6% of the trade receivables as of June 30, 2022 and 2021, respectively, have been collected as of the date of this prospectus.

Although we manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures, if there is an occurrence of circumstances that affect our customers’ ability to pay us such as deteriorating conditions in, bankruptcies, or financial difficulties of a customer or within their industries generally, our operating cash flow will be under tremendous pressure, and we could experience payment delays or default in payment to our suppliers or other creditors, which may result in material and adverse impact on our business, results of operations and financial condition.

We are a holding company, and we are accordingly dependent upon distributions from our subsidiaries to service our debt and pay dividends, if any, taxes and other expenses.

We are a Cayman Islands holding company and have no material assets other than ownership of equity interests in our subsidiaries. We have no independent means of generating revenue. We intend to cause our subsidiaries to make distributions to their shareholders in an amount sufficient to cover all applicable taxes payable and dividends, if any, declared by us. Our ability to service our debt, if any, depends on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans or other distributions, to pay amounts due on our obligations. Future financing arrangements may contain negative covenants that limit the ability of our subsidiaries to declare or pay dividends or make distributions. Our subsidiaries are separate and distinct legal entities; to the extent that we need funds, and our subsidiaries are restricted from declaring or paying such dividends or making such distributions under applicable law or regulations or are otherwise unable to provide such funds (for example, due to restrictions in future financing arrangements that limit the ability of our operating subsidiaries to distribute funds), our liquidity and financial condition could be materially harmed.

We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.

We have entered into a number of transactions with ARB Berhad, our indirect controlling shareholder, and its affiliated companies. In addition, we have entered into transactions with a subsidiary of Ageson Berhad, a Malaysia public listed company where Dato’ Sri Liew Kok Leong is Executive Director. See “Related Party Transactions” beginning on page 88. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

We may in the future enter into additional transactions with entities controlled by ARB Berhad or in which any of our directors, officers or principal shareholders (including ARB Berhad), or any members of their immediate family, have a direct or indirect material interest. Such transactions present potential for conflicts of interest, as the interests of these entities and their shareholders may not align with the interests of the Company and our unaffiliated shareholders with respect to the negotiation of, and certain other matters related to, our purchases from and other transactions with such entities. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these transactions, such as for events of default.

Our Board of Directors intends to authorize the Audit Committee upon its formation to review and approve all material related party transactions. We rely on the laws of the Cayman Islands, which provide that the directors owe a duty of care and a duty of loyalty to our company. Under Cayman Islands law, our directors have a duty to act honestly, in good faith, and view our best interests. Our directors also have a duty to exercise the care, diligence, and skills that a reasonably prudent person would exercise in comparable circumstances. See “Description of Share Capital—Differences in Corporate Law” beginning on page 93 for additional information on our directors’ fiduciary duties under Cayman Islands law. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties. These transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in litigation or enforcement actions by the SEC or other agencies. 

There is no assurance that our hydroponics IoT project will operate as intended.

During the year ended June 30, 2022, we completed construction and deployment of our initial hydroponics IoT project on approximately 30 acres of land in Cameron Highlands, Pahang, Malaysia. However, as the project was recently completed and has not been in operation for long, it is subject to certain risks, including that it may not be able to achieve or maintain the intended benefits, such as high production yields, lower crop losses and reduced operation costs.

If our customers fail to pay us in accordance with the terms of their agreements, we may have to bring actions to compel payment.

We typically enter into multiple year arrangements with our customers. If customers fail to pay us under the terms of our agreements, we may be adversely affected both from the inability to collect amounts due and the cost of enforcing the terms of our contracts, including litigation. The risk of such negative effects increases with the term length of our customer arrangements. Furthermore, some of our customers may seek bankruptcy protection or other similar relief, including as a result of the impacts and disruptions caused by the COVID-19 pandemic, and fail to pay amounts due to us, or pay those amounts more slowly, either of which could adversely affect our business, results of operations and financial condition.

Our product supply and service agreements generally give our customers flexibility to terminate engagements without cause by giving notice in advance, and as such, subjects our revenue to uncertainty to some degree.

Our product supply and service agreements, such as our drones agreements, typically allow our clients to terminate our master agreements and work orders with or without cause, and, in the case of termination without cause, subject to 30 days’ prior notice.

Our clients may terminate or reduce their use of our services for a number of reasons, including that they are not satisfied with our services or our ability to meet their needs and expectations. Even if we successfully deliver on contracted services and maintain close relationships with our clients, factors beyond our control could cause the loss of or reduction in business or revenue from our existing clients. These factors include without limitation:

The ability of our clients to terminate their engagement with us at will makes our future sales amounts uncertain. We may not be able to replace any client that chooses to terminate or not renew its contract with us, which could materially adversely affect our revenue and thus our results of operations. Furthermore, terminations in engagements may make it difficult to plan our project resource requirements.

If a significant number of clients cease using or reduce their usage of our services, we may be required to spend significantly more on sales and marketing than we currently plan to spend in order to maintain or increase revenue from clients or lay off our IT professionals. Such changes could adversely affect our business, results of operations and financial condition.

We depend on a limited number of customers for a large portion of our revenues.

We consider our major customers in each period to be those customers that accounted for more than 10% of overall revenues in such period. For the year ended June 30, 2022, one major customer, Ageson Industrial Sdn. Bhd. (formerly known as AB5 Sdn. Bhd.), accounted for 59.5% of the revenues from the IoT System Development line of business and 34.8% of the total revenues. Ageson Industrial Sdn. Bhd. is a related party. See “Related Party Transactions—Transactions with Related Parties.” For the year ended June 30, 2022, another major customer, who is an unrelated third party, accounted for 30.9% of the revenues from the IoT System Development line of business and 18.1% of the total revenues. For the year ended June 30, 2021, one (1) major customer, who is an unrelated third party, accounted for 95.1% of the revenues from the IoT Smart Home & Building line of business and 56.2% of the total revenues. For the year ended June 30, 2021, another major customer, ARB Cloud Sdn. Bhd., accounted for 100% of the revenues from the IoT System Development line of business and 11.9% of the total revenues. ARB Cloud Sdn. Bhd. is a related party. See “Related Party Transactions—Transactions with Related Parties.” The loss of, or a substantial decrease in the volume of, revenues by any of our top customers could harm our revenues and profitability. In addition, an adverse change in the terms of our dealings with, or in the financial wherewithal or viability of, one or more of our significant customers could harm our business, financial condition and results of operations.

We expect that a significant portion of our revenues will continue to be derived from a small number of customers and that the percentage of revenues represented by these customers may increase. As a result, changes in the strategies of our largest customers may reduce our revenues. Further, the impact of COVID-19 may result in a change in demand for our services and products as a result of customers modifying their sales, pricing, or spending practices in response to the global pandemic. The loss of such sales could have an adverse effect on our business, financial condition and results of operations.

All of our projects have agreed milestones and specific completion dates. If we fail to meet these contractual commitments, we could be subject to financial penalties or claims for liquidated damages, which could adversely affect our business, operating results, financial condition and prospects.

All of our projects have agreed milestones and specific completion dates. There is a risk that we may encounter delays in completing our projects or meeting agreed milestones. Failure to complete our projects on time or meet agreed milestones may subject us to financial penalties and claims arising for liquidated damages by our customers. Any extended service delays could adversely affect our reputation, ability to attract new customers and retain existing customers, revenue, and operating results.

We depend on third-party providers and suppliers for components of our IoT hydroponics, smart home and building and industrial building management systems and projects, third-party software licenses for our products and services, and third-party providers to transmit signals to our monitoring facilities and provide other services to our customers. Any failure or interruption in products or services provided by these third parties could harm our ability to operate our business.

We source a variety of hardware and software from third party suppliers for our IoT hydroponics, smart home and building, industrial building management systems and projects. As a result, our ability to implement IoT solutions for customers depends on third parties providing us with timely and reliable products and services at acceptable prices. In developing and operating our projects, we rely on products supplied by third parties meeting our design and other specifications and on components manufactured and delivered from third parties, and on certain services performed by third parties. We also rely on contractors to perform substantially all of the construction and installation work related to our projects, and we may need to engage subcontractors with whom we have no experience. Any delays, malfunctions, inefficiencies or interruptions in these products or services could adversely affect the quality and performance of our projects and require considerable expense to maintain and repair our projects, which could harm our brand, reputation or growth. In addition, if we are unable to avail ourselves of warranties and other contractual protections with providers of products and services, we may incur additional costs related to the affected products and services, which could adversely affect our business, operating results, or financial condition.

We rely on third-party software for key automation features in certain of our offerings and on the interoperation of that software with our own, such as our mobile applications and related platform. We could experience service disruptions if customer usage patterns for such offerings exceed, or are otherwise outside of, design parameters for the system and the ability for us or our third-party provider to make corrections. Such interruptions in the provision of services could result in our inability to meet customer demand, damage our reputation and customer relationships, and materially and adversely affect our business. We also rely on certain software technology that we license from third parties and use in our products and services to perform key functions and provide critical functionality. For example, we license the software platform for our monitoring operations from third parties. Because a number of our products and services incorporate technology developed and maintained by third parties, we are, to a certain extent, dependent upon such third parties’ ability to update, maintain, or enhance their current products and services; to ensure that their products are free of defects or security vulnerabilities; to develop new products and services on a timely and cost-effective basis; and to respond to emerging industry standards, customer preferences, and other technological changes. Further, these third-party technology licenses may not always be available to us on commercially reasonable terms, or at all. If our agreements with third-party vendors are not renewed or the third-party software becomes obsolete, is incompatible with future versions of our products or services, or otherwise fails to address our needs, we cannot provide assurance that we would be able to replace the functionality provided by the third-party software with technology from alternative providers. Furthermore, even if we obtain licenses to alternative software products or services that provide the functionality we need, we may be required to replace hardware installed at our monitoring centers and at our customers’ sites, including security system control panels and peripherals, in order to execute our integration of or migration to alternative software products. Any of these factors could materially adversely affect our business, financial condition, results of operations, and cash flows.

We will rely on various third-party telecommunications providers (if any) and signal processing centers (if any) to transmit and communicate signals to our monitoring facility in a timely and consistent manner. These telecommunications providers and signal processing centers could deprioritize or fail to transmit or communicate these signals to the monitoring facility for many reasons, including disruptions from fire, natural disasters, pandemics, weather and the effects of climate change (such as flooding, wildfires, and increased storm severity), transmission interruption, malicious acts, provider preference, government action, or terrorism. The failure of one or more of these telecommunications providers or signal processing centers to transmit and communicate signals to the monitoring facility in a timely manner could affect our ability to provide alarm monitoring, automation, and interactive services to our customers. We also rely on third-party technology companies to provide automation and interactive services to our customers. These technology companies could fail to provide these services consistently, or at all, which could result in our inability to meet customer demand and damage our reputation. There can be no assurance that third-party telecommunications providers, signal processing centers, and other technology companies will continue to transmit and communicate signals to the monitoring facility or provide automation and interactive services to customers without disruption. Any such failure or disruption, particularly one of a prolonged duration, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

We source software and hardware from various local suppliers and any disruption in global supply chain may affect our business, operating results, and financial condition.

We source hardware and software from local suppliers. While we are not dependent on any single supplier, any serious and prolonged global shortage of hardware and software required to implement our projects may lead to delay in delivery to customers which may affect our reputation, our business relationship with our customers, or expose us to late delivery penalties. This in turn could potentially result in loss of business opportunities or loss of revenue that may adversely affect our profitability and growth.

Our success in the IoT gadgets distribution business depends on our relationships with third party gadget suppliers and their continued performance.

We currently source IoT gadgets primarily from a third party supplier on an order-by-order basis and sell them through a large number of resellers, distributors and retailers. We provide sales services to these resellers, distributors and retailers to support their distribution to end users. If the products of the third party supplier have real or perceived quality or safety issues, we may experience negative effects to our reputation as a result of our procurement of products from them. In addition, such supplier may develop relationships with our competitors and such relationships may result in them terminating collaboration with us. If we fail to effectively manage our relationships with, or lose such supplier, we may not be able to substitute them with suitable alternative business partners in a timely manner on commercially acceptable terms or at all, which may negatively impact our revenues, financial condition, operations and prospects.

Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.

Our agreements with customers and other third parties generally include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, or other liabilities relating to or arising from our software, services or other contractual obligations. Large indemnity payments could harm our business, results of operations, and financial condition. Although we normally contractually limit our liability with respect to such indemnity obligations, those limitations may not be fully enforceable in all situations, and we may still incur substantial liability under those agreements. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business and results of operations.

Our ability to manage over 2,800 resellers, distributors and retailers for the distribution of IoT gadgets is subject to a number of risks.

Currently, we have a total of approximately 2,800 resellers, distributors and retailers for the distribution of mobile gadget accessories. This business line is primarily based on individual purchase orders placed by these resellers, distributors and retailers. If they fail to successfully market and sell gadget products to end users, or fail to obtain sufficient capital or effectively manage their business operations, consumer relationships, labor relationships or credit risks, it could adversely affect our revenues, as a result of reduced sales of gadget products to them.

A major safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.

Construction sites are inherently dangerous, and provision of services to the construction, homebuilding and land development industries poses certain inherent health and safety risks. Due to health and safety regulatory requirements and the projects we work on, health and safety performance is critical to the success of our solutions in these fields.

Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result. Such a failure could generate significant negative publicity and have a corresponding impact on our reputation and our relationships with relevant regulatory agencies, governmental authorities and local communities, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We have engaged in and plan to conduct additional strategic transactions, which could divert our management’s attention, result in additional dilution to our shareholders, disrupt our operations and adversely affect our operating results. We may not be able to successfully integrate acquired businesses and technologies or achieve the anticipated benefits of such acquisitions.

In pursuing our business strategy, we have in the past acquired and plan to seek to acquire or invest in businesses, products, technologies, or talent that we believe could complement or expand our business, augment our service and solution offerings, enhance our technical capabilities or otherwise offer growth opportunities. We intend to use 60% of net proceeds from this offering in such strategic acquisitions. We may compete with others for the same opportunities. The pursuit of any of these strategic transactions may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable transactions, whether or not they are consummated.

Any strategic transaction may result in unforeseen operating difficulties and expenditures. If we acquire additional businesses or enter into other strategic transactions, we may not be able to integrate the acquired personnel, operations, and technologies successfully, or effectively manage the combined business following the strategic transactions. In addition, we have limited experience in consummating strategic transactions. We also may not achieve the anticipated benefits from the strategic transactions due to a number of factors, including:

In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.

Strategic transactions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results, increase our financial risk, restrict our ability to take certain actions and cause the market price of our ordinary shares to decline. In addition, if a strategic transaction fails to meet our expectations, our operating results, business, and financial position may suffer.

We may be required to record impairment charges against the carrying value of our goodwill and other intangible assets in the future.

As of June 30, 2022 and 2021, we had recorded goodwill and intangible assets with a net book value of RM139.1 million ($31.6 million) and RM68.7 million ($15.6 million), respectively. Besides amortizing intangible assets over 5 to 10 years, we are required to test for impairment at least annually and whenever evidence of impairment exists. During the year ended June 30, 2022 and 2021, amortization of intangible assets of approximately RM15.4 million ($3.5 million) and RM1.5 million ($0.3 million) were recorded in our statements of profit or loss, respectively. Other than that, we have not recorded any impairment charges against the carrying value of our goodwill and intangible assets in the past. The carrying value of our goodwill and intangible asset values are measured using a variety of factors, including values of comparable companies, overall stock market and economic data and our own projections of future financial performance. We may be required in the future to record impairment charges that could have a material adverse effect on our reported results.

We will likely need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.

In order to execute our business plans, we expect that we will need to significantly increase the number of our employees and the scope of our operations. We currently rely on some of the employees of our ultimate controlling shareholder to administer and supervise some of our operations. See “Related Party Transactions—Arrangement Between ARB Berhad and Our Company.” Our future financial performance and our ability to deliver solutions and services that meet customers’ expectations and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To manage our anticipated future growth, we will need to continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. In addition, the expansion of our systems and infrastructure may require us to commit financial, operational and managerial resources before our revenues increase and without assurances that our revenues will increase. Moreover, continued growth could strain our ability to maintain reliable service levels for our customers. If we fail to achieve the necessary level of efficiency as we grow, our growth rate may decline and investors’ perceptions of our business and our prospects may be adversely affected, and the market price of our securities could decline.

Our lack of insurance could expose us to significant costs and business disruption.

The IoT industry in Malaysia is an emerging sector. We currently do not have any product liability or disruption insurance to cover our operations in Malaysia, which, based on public information available to us relating to Malaysia-based IoT companies, is consistent with customary industry practice in Malaysia. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. If we suffer any losses, damages or liabilities in the course of our business operations, we would not have insurance coverage to provide funds to cover any such losses, damages or product claim liabilities. Therefore, there may be instances when we will sustain losses, damages and liabilities because of our lack of insurance coverage, which may in turn materially and adversely affect our financial condition and results of operations.

Our planned expansions outside Malaysia and in the ASEAN region subject us to risks inherent in international operations that can harm our business, results of operations, and financial condition.

A key element of our strategy is to operate and sell our solutions to customers across the ASEAN region. Operating internationally requires significant resources and management attention. We cannot be certain that the investment and additional resources required to operate internationally will produce desired levels of revenue or profitability. Further, operating internationally subjects us to various risks, including:

Any of the above risks could adversely affect our planned international operations in the future, including reducing revenue from customers outside of Malaysia or increasing operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects. Some of our business partners also have international operations and are subject to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely affected if our business partners are not able to successfully manage these risks.

As a IoT solution service provider, our success depends on our ability to recruit, deploy and manage employees.

Our profitability and service costs are affected by the utilization rates of our employees. If we are unable to maintain appropriate utilization rates and productivity levels for our employees in delivering our services, our profit margin may suffer. Our employee utilization rates are subject to an array of factors including:

Our revenue could also suffer if we misjudge demand patterns and do not recruit sufficient personnel to satisfy our future demand. Employee shortages could prevent us from completing our contractual commitments in a timely manner and cause us to lose contracts or clients. Further, to the extent that we lack sufficient personnel with lower levels of seniority and daily or hourly rates, we may be required to deploy more senior employees with higher rates on projects without the ability to pass such higher rates along to our clients, which could adversely affect our profitability.

If demand for our services and solutions does not develop as expected, our projected revenues and profits may not materialize.

Our future profits are influenced by many factors, including economics, technology advancements, and world events and changing customer preferences. We believe that our target markets will continue to grow, that we will be successful in marketing our services and solutions in these markets. If our expectations as to the size of these markets and our ability to sell our products and services in such markets are not correct, our revenue may not materialize, and our business will be adversely affected.

A failure or breach of our security systems or infrastructure as a result of cyber-attacks could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.

Information security risks for technology companies, such as us, have significantly increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties. These threats may derive from fraud or malice on the part of our employees or third parties or may result from human error or accidental technological failure. These threats include cyber-attacks such as computer viruses, malicious code, phishing attacks or information security breaches.

Our operations will, in part, rely on the secure processing, transmission and storage of confidential proprietary and other information in our computer systems and networks. Our customers will rely on our digital technologies, computer, email and messaging systems, software and networks to conduct their operations or to utilize our products or services. In addition, to access our products and services, our customers may use personal smartphones, tablet computers and other mobile devices that may be beyond our control.

If a cyber-attack or other information security breach occurs, it could lead to security breaches of the networks, systems or devices that our customers use to access our products and services which could result in the unauthorized disclosure, release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information (including account data information) or data security compromises. Such events could also cause service interruptions, malfunctions or other failures in the physical infrastructure or operations systems that will support our businesses and customers, as well as the operations of our customers or other third parties. Any actual attacks could lead to damage to our reputation with our customers and other parties and the market, additional costs to the Company (such as repairing systems, adding new personnel or protection technologies or compliance costs), regulatory penalties, financial losses to both us and our customers and partners and the loss of customers and business opportunities. If such attacks are not detected immediately, their effect could be compounded. Although we will attempt to mitigate these risks, there can be no assurance that we will be immune to these risks and not suffer losses in the future.

If we fail to develop or protect our intellectual property adequately, our business could suffer.

The Company has attempted, and may attempt, to develop certain intellectual property of its own, but cannot assure that it will be able to develop and/or obtain exclusive rights in trade secrets, patents, trademark registrations and copyright registrations. Aside from two Malaysian trademark applications, we currently own no patents or copyrights in any jurisdiction. The cost of developing, applying for and obtaining such enforceable rights is expensive. Even after such enforceable rights are obtained, there are significant costs for maintaining and enforcing them. The Company may lack the resources to put in place exclusive protection and enforcement efforts. Also, certain of the Company’s product or service offerings initially draws from publicly available technology in the marketplace. The Company’s failure to obtain or maintain adequate protection of its intellectual property rights for any reason could have a material adverse effect on its business, financial condition and results of operations.

If the Company were to develop intellectual property, the Company may seek to enforce its intellectual property rights on others through litigation. The Company’s claims, even if meritorious, may be found invalid or inapplicable to a party the Company believes infringes or has misappropriated its intellectual property rights. In addition, litigation can:

The Company may rely on trademarks or service marks to establish a market identity for its products or services. To maintain the value of the Company’s trademarks or service marks, the Company might have to file lawsuits against third parties to prevent them from using marks confusingly similar to or dilutive of the Company’s registered or unregistered trademarks or service marks. The Company also might not obtain registrations for its pending or future trademark or service marks applications, and might have to defend its registered trademark or service marks and pending applications from challenge by third parties. Enforcing or defending the Company’s registered and unregistered trademarks or service marks might result in significant litigation costs and damages, including the inability to continue using certain marks.

The laws of foreign countries in which the Company may contemplate doing business in the future may not recognize intellectual property rights or protect them to the same extent as do the laws of Malaysia. Adverse determinations in a judicial or administrative proceeding could prevent the Company from offering or providing its products or services or prevent the Company from stopping others from offering or providing competing products, and thereby have a material adverse effect on the Company’s business, financial condition, and results of operations.

Our products, services or processes could be subject to claims of infringement of the intellectual property of others.

Claims that products, services, business methods, or processes infringe upon the proprietary rights of others often are not asserted until after commencement of commercial sales. Third parties may make claims of infringement against the Company in connection with the use of its technology. Any claims, even those without merit, could:

The Company cannot be certain of the outcome of any litigation. Any royalty or licensing agreement, if required, may not be available to the Company on acceptable terms or at all. The Company’s failure to obtain the necessary licenses or other rights could prevent the development, or distribution of the Company’s products and services and, therefore, could have a material adverse effect on the Company’s business.

We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results and financial condition.

Our businesses depend on the skills, reputation, and professional experience of our senior management and key employees, the network of resources and relationships they generate during the ordinary course of their activities, and the synergies among the diverse fields of expertise and knowledge held by our senior professionals. Therefore, the success of our business depends on the continued services of these individuals. If we lose their services, we may not be able to execute our existing business strategy effectively, and we may have to change our current business direction. These disruptions to our business may take up significant energy and resources of our company, and materially and adversely affect our future prospects. Specifically, our future performance depends on the continued services and contributions of our Chief Executive Officer, Dato’ Sri Liew Kok Leong, our Chief Financial Officer nominee, Ng Kok Wah and our Chief Technology Officer nominee, Hong Zi Shen who have in-depth knowledge and experience in the technological industry and in managing our operations. Without these key executives and employees, we may not have the ability to execute on our business plans and to identify and pursue new opportunities and innovations. The loss of services of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. The loss of the services of our senior management or other key employees for any reason could adversely affect our business, financial condition and operating results. We do not presently maintain any key man life insurance policies.

The COVID-19 pandemic has and may continue to cause a material adverse effect on our business.

The COVID-19 pandemic continues to rapidly evolve. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results. The Malaysian government has imposed varying measures to combat COVID-19, ranging from different degrees of movement control orders to nationwide lockdowns. See also “—Risks Related to Operations in Malaysia—Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.” We implemented workplace protocols for our employees in accordance with government requirements. The implementation of measures to prevent the spread of COVID-19 have resulted in disruptions to our business development efforts which depend, in part, on attendance at in-person meetings, industry conferences and other events. In addition, economic slowdowns and uncertainty brought by COVID-19 have negatively affected market demand and customer spending on certain of our services and products such as smart home installations.

For the year ended June 30, 2022, revenue from the IoT Smart Home and Building line of business was RM0.7 million ($0.2 million), as compared to RM29.7 million ($6.7 million) for the year ended June 30, 2021, a decrease of RM29.0 million ($6.6 million) or 97.6%. The Malaysian property market had softened since 2021 primarily as a result of the COVID-19 pandemic, which led developers to eschew integrating smart home solutions into their projects in order to cut costs and price their properties at more competitive levels. This market has seen gradual recovery recently as the Malaysian Government decided to lift pandemic restrictions on all economic sectors and move away from widespread restrictive measures in all economic sectors.

The extent to which the COVID-19 pandemic may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this prospectus, including the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of the pandemic and steps taken to contain the pandemic or treat its impact, among others. The pandemic and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Increases in costs, disruption of supply or shortage of materials, in particular for hardware and software, could harm our business.

We may experience increases in the cost or a sustained interruption in the supply or shortage of materials. Any such increase, supply interruption or shortage could materially and negatively impact our business, prospects, financial condition and operating results. We use various materials in our business, including hardware and software, from suppliers.

The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, and could adversely affect our business and operating results.

These risks include:

Substantial increases in the prices for our materials or prices charged to us would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased prices. Any attempts to increase prices in response to increased material costs could result in cancellations of orders for our services and solutions and therefore materially and adversely affect our brand, image, business, prospects and operating results.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business. In addition, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this registration statement.

We may experience in the future, delays or other complications in the design and manufacture of products we distribute or source for use in our projects which could harm our brand, business, prospects, financial condition and operating results.

We may encounter unanticipated challenges, such as supply chain or logistics constraints, that lead to delays in producing products we distribute or use in our projects. Any significant delay or other complication in the production of such products, including complications associated with expanding our supply chain or obtaining or maintaining regulatory approvals, and/or coronavirus impacts, could materially damage our brand, business, prospects, financial condition and operating results.

Changes in our supply chain may result in increased cost. If we are unsuccessful in our efforts to control supplier costs, our operating results may suffer.

There is no assurance that our suppliers will ultimately be able to meet our cost, quality and volume needs, or do so at the times needed. Furthermore, as the scale of our business increases, we will need to accurately forecast, purchase, warehouse and transport to our project sites components at much higher volumes than we have experience with. If we are unable to accurately match the timing and quantities of components purchases to our actual needs, or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain, we may incur unexpected disruption, storage, transportation and write-off costs, which could have a material adverse effect on our financial condition and operating results.

Risks Related to Our Relationship with Our Controlling Shareholder

As long as ARB Berhad controls us, your ability to influence matters requiring shareholder approval will be limited.

After this offering, ARB Berhad will indirectly own 25,000,000 ordinary shares of the Company, representing approximately 95.42% of our outstanding ordinary shares (or approximately 94.77% if the underwriters exercise their option to purchase additional shares in full). For so long as ARB Berhad beneficially owns our outstanding shares representing at least a majority of the votes entitled to be cast by the holders of our outstanding ordinary shares, ARB Berhad will be able to elect all of the members of our board of directors. We anticipate that, at the completion of this offering, Dato’ Sri Liew Kok Leong will continue to serve as the Executive Director and chief executive officer of ARB Berhad. See “Management.”

Our historical financial information is not necessarily representative of the results we would have achieved as a stand-alone public company and may not be a reliable indicator of our future results.

Our historical consolidated financial statements included in this prospectus are prepared on a stand-alone basis in accordance with IFRS and are derived from ARB Berhad’s consolidated financial statements and accounting records using the historical results of operations and assets and liabilities attributed to our operations, and include allocations of expenses from ARB Berhad. The historical financial information included in this prospectus does not reflect what our financial condition, results of operations or cash flows would have been had we been a stand-alone entity during the historical periods presented, or what our financial condition, results of operations or cash flows will be in the future as an independent entity.

The assets and resources that we acquire from ARB Berhad in the separation may not be sufficient for us to operate as a stand-alone company, and we may experience difficulty in separating our assets and resources from ARB Berhad.

We may need to acquire assets in addition to those contributed by ARB Berhad and its subsidiaries to us and our subsidiaries in connection with our separation from ARB Berhad. We may also face difficulty in separating our assets from ARB Berhad’s assets and integrating newly acquired assets into our business. Our business, financial condition and results of operations could be harmed if we fail to acquire assets that prove to be important to our operations or if we incur unexpected costs in separating our assets from ARB Berhad’s assets or integrating newly acquired assets.

Our ability to operate our business effectively may suffer if we are unable to cost-effectively establish our own administrative and other support functions in order to operate as a stand-alone company after this offering.

As an operating segment of ARB Berhad, we relied on administrative and other resources of ARB Berhad to operate our business. Following the completion of this offering, we will become a stand-alone public company and we will need to create our own administrative and other support systems or contract with third parties to replace the existing services ARB Berhad provides to us. Any failure in our efforts to establish our own administrative function could result in unexpected costs and adversely affect our operating results, financial condition and business prospect.

Some of our directors and executive officers own shares of ARB Berhad or other securities or rights to acquire ARB Berhad’s shares and hold positions with ARB Berhad, which could cause conflicts of interest, or the appearance of conflicts of interest.

Some of our directors and executive officers own ARB Berhad’s outstanding shares and other securities or rights to purchase ARB Berhad’s shares. In addition, we anticipate that, at the completion of this offering, Dato’ Sri Liew Kok Leong will continue to serve as the Executive Director and chief executive officer of ARB Berhad.

Ownership of ARB Berhad’s shares and other securities or rights to purchase ARB Berhad’s shares by our directors and executive officers after this offering and the presence of executive officers or directors of ARB Berhad on our board of directors could create, or appear to create, conflicts of interest with respect to matters involving both us and ARB Berhad that could have different implications for ARB Berhad than they do for us. Potential conflicts of interest could also arise if we enter into commercial arrangements with ARB Berhad in the future. As a result of these actual or apparent conflicts of interest, we may be precluded from pursuing certain growth initiatives.

Risks Related to Our Industry and Governmental Regulation

The market we compete is competitive.

The market for IoT solutions and services is competitive. Companies in our industry compete on the basis of a number of factors, including technical expertise and industry knowledge, innovation competence, location, price, reputation, scale, financial stability, responsiveness to market demand and effective personnel training and retention.

Our current and potential competitors include traditional software companies developing IoT technologies to seize new growth opportunities, existing IoT players in agriculture, property development and logistics industries and consumer electronics brands that are investing in in-house IoT capabilities, and other smaller companies focused on single niche segments. Our competitors and potential competitors could have substantial competitive advantages such as substantially greater financial, technical and marketing resources, greater name recognition, longer operating histories, greater client support resources, lower labor and development costs, and larger and more mature intellectual property portfolios. As a result, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IoT services.

In addition, we have faced, and expect to continue to face, competition from new market entrants. Further, there is a risk that our clients may elect to increase their internal resources to satisfy their services needs as opposed to relying on a third-party service providers like us. Moreover, as we expand the scope and reach of our solutions, we may face additional competition. If one or more of our competitors were to merge or partner with other competitors, the change in the competitive landscape could also adversely affect our ability to compete effectively. Increased competition could also result in price reductions, reduced operating margins and loss of our market share. We may be unable to compete successfully with existing or new competitors and competitive pressures may materially adversely affect our business, financial condition, results of operations and prospects.

If we fail to adopt new technologies to address evolving customer needs or emerging industry standards, our business may be materially and adversely affected.

The information technology industry has experienced rapid technological developments, changes in industry standards, changes in customer requirements and frequent new product introductions and improvements. If we are unable to respond quickly and successfully to these developments, we may lose our competitive position, and our products or technologies may become uncompetitive or obsolete.

Recent new technology trends such as artificial intelligence (AI), cloud computing, 5G, robotic process automation (RPA), IoT and hyper-connectivity continue to shape our industry and require us to keep pace with the changing technologies and evolving industry standards. Our ability to develop, alone or with third parties, or to acquire new products and services that are technologically innovative requires the investment of significant resources and can affect our competitive position. These acquisition and development efforts divert resources from other potential investments in our businesses, and they may not lead to the development of new commercially successful technologies, products, or services on a timely basis.

Our long-term success will depend on our ability to adapt quickly to rapidly changing technologies, to adapt our services and products to evolving industry standards and to improve the performance and reliability of our services and products. To achieve market acceptance for our product and service offerings, we must effectively anticipate and offer products and services that meet changing customer demands in a timely manner. Customers may require features and functionality that our current products and services do not have or cannot obtain. If we fail to develop products and services that satisfy customer preferences in a timely and cost-effective manner, our ability to retain existing customers and our ability to create or increase demand for our products will be harmed.

If we fail to comply with constantly evolving laws, regulations, and industry standards addressing information and technology networks, privacy, and data security, we could face penalties, liability, and reputational harm, and our business, operations, and financial condition could be adversely affected.

Along with our own confidential data and information retained in the normal course of our business, we or our partners collect and retain third party data, some of which is subject to certain laws and regulations. Our ability to analyze this data to provide the customer with an improved user experience is a valuable component of our services, but we cannot provide assurance that the data we require will be available from these sources in the future or that the cost of such data will not increase. If the data that we require is not available to us on commercially reasonable terms or at all, we may not be able to provide certain parts of our current or planned products and services, and our business, financial condition, results of operations, and cash flows could be materially adversely affected.

In addition, we may also collect and retain other sensitive types of data, including, among other things, audio recordings of telephone calls and video images of customer sites. We must comply with applicable laws and regulations governing the collection, retention, processing, storage, disclosure, access, use, security, and privacy of such information in addition to our own information security and privacy policies and applicable industry standards. The legal, regulatory, and contractual environment surrounding the foregoing continues to evolve, and there has been an increasing amount of focus on privacy and data security issues with the potential to affect our business. These privacy and data security laws, regulations, and standards, as well as contractual requirements, could increase our cost of doing business, and failure to comply with these laws, regulations, standards, and contractual requirements could result in government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity.

In the event of a breach of personal information that we hold or that is held by third parties on our behalf, we may be subject to governmental fines, imprisonment, legal claims, remediation expenses, and/or harm to our reputation. We could incur significant legal costs in defending existing or new claims or in the ultimate resolution of such claims, and we may suffer reputational harm and damage to our brand as a result of such claims or any related publicity. Further, if we fail to comply with applicable privacy and security laws, regulations, policies, and standards; properly protect the integrity and security of our facilities and systems and the data located within them; or defend against cybersecurity attacks; or if our third-party service providers, partners, or vendors fail to do any of the foregoing with respect to data and information assessed, used, stored, or collected on our behalf, our business, reputation, financial condition, results of operations, and cash flows could be materially adversely affected.

Examples of certain requirements we face include those with respect to Personal Data Protection Act 2010, Personal Data Protection Regulations 2013 and Communications and Multimedia Act 1998. These laws and regulations are examples of our need to comply with costly and complex requirements at state, federal, and international levels. As these requirements continue to evolve, and expand to additional jurisdictions, we may incur or be required to incur costs or change our business practices in a manner adverse to our business and failure to comply could result in significant penalties that may materially adversely affect our business, reputation, financial condition, results of operations, and cash flows.

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet, physical and e-commerce retail, digital content, web services, electronic devices, advertising, and other products and services that we offer or sell. Unfavorable changes could harm our business.

We are subject to general business regulations and laws, as well as regulations and laws specifically governing our business activities. These regulations and laws cover taxation, privacy, data protection, cybersecurity, copyrights, trademarks, distribution of goods, employment, operation of unmanned aircraft systems, premises occupied by us and other matters.

Unfavorable regulations, laws, decisions, or interpretations by government or regulatory authorities applying those laws and regulations, or inquiries, investigations, or enforcement actions initiated by them, could increase our cost of doing business and require us to change our business practices in a manner materially adverse to our business, damage our reputation, impede our growth, or otherwise have a negative effect on our operations.

Our business depends on our customers’ continued and unimpeded access to the Internet and the development and maintenance of Internet infrastructure. Internet access providers may be able to block, degrade or charge for access to certain of our products and services, which could lead to additional expenses and the loss of customers.

Our products and services depend on the ability of our customers to access the Internet. Currently, this access is provided by companies having significant market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers. Some of these providers have the ability to take measures including legal actions, that could degrade, disrupt or increase the cost of user access to certain of our products and services by restricting or prohibiting the use of their infrastructure to support our products or services or charging increased fees to Internet users. Such interference could result in a loss of existing users, advertisers and goodwill, and could result in increased costs and could impair our ability to attract new customers, thereby harming our revenue and growth. Moreover, the adoption of any laws or regulations adversely affecting the growth, popularity or use of the Internet, including laws impacting Internet neutrality, could decrease the demand for our products and services and increase our operating costs. The legislative and regulatory landscape regarding the regulation of the Internet is subject to uncertainty.

Internationally, government regulation concerning the Internet, and in particular, network neutrality, may be developing or non-existent. Within such a regulatory environment, we could experience discriminatory or anticompetitive practices impeding both our and our customers’ domestic and international growth, increasing our costs or adversely affecting our business. Additional changes in the legislative and regulatory landscape regarding the regulation of the Internet, could harm our business, operating results and financial condition.

The drone industry is subject to various laws and government regulations which could complicate and delay our ability to introduce services, maintain compliance, and avoid violations, which could lead to increased costs or the interruption of business operations that could negatively impact our financial condition and results of operations.

We are developing our drone services business. The commercial drone operations industry is a regulated industry in Malaysia and many other jurisdictions. Flying drones is subject to permissions, licensing or clearance requirements from Civil Aviation Authority of Malaysia. These regulations include Civil Aviation Regulations 2016. While we endeavor to take all the steps necessary to comply with these laws and regulations, there can be no assurance that we can maintain compliance on a continuing basis. Failure to comply could result in monetary liabilities and other sanctions which could increase our costs or decrease our revenue resulting in a negative impact on our business, financial condition and results of operations.

Changes in trade policy such as the imposition of tariffs and the resulting consequences, may have adverse impacts on our business, results of operations and financial condition.

We cannot predict future trade policy, or tariffs and their impact on our business. To the extent that trade tariffs and other restrictions imposed by Malaysia or other countries increase the price of, or limit the amount of, components or materials used in our products and services imported into Malaysia or other countries we operate in the future, or create adverse tax consequences, the sales, cost or gross margin of our operations may be adversely affected and the demand from our customers for products and services may be diminished. Uncertainty surrounding international trade policy and disputes and protectionist measures could also have an adverse effect on consumer confidence and spending. If we deem it necessary to alter all or a portion of our activities or operations in response to such policies, agreements or tariffs, our capital and operating costs may increase. As a result, changes in international trade policy, changes in trade agreements and tariffs could adversely affect our business, results of operations and financial condition.

Risks Related to Operations in Malaysia

Our operations are subject to various laws and regulations in Malaysia.

Our business is regulated by various laws and regulations in Malaysia such as regulations on business licenses, intellectual property rights, employment, personal data and privacy, dividends, unmanned aircraft, distribution trade services and cybersecurity. See “Regulations.” Certain registrations, certificates and/or licenses for the conduct of our business are required under the above laws.

Based on our experience, some of the laws and regulations of the place where we operate our business are subject to amendments, uncertainty in interpretation and administrative actions from time to time. Therefore, we cannot assure you that, for the implementation of our business plans and the introduction of any new services or products, we will be able to obtain all the necessary registrations, certificates and/or licenses. Any failure to comply with the above laws and regulations may give rise to fines, administrative penalties and/or prosecution against us, which may adversely affect our reputation, financial condition or results of operation.

The economy of Malaysia in general might not grow as quickly as expected, which could adversely affect our revenues and business prospects.

Our business and prospects depend on the continuing development of the economy in Malaysia. We cannot assure you that the Malaysian economy will continue to grow at the same pace as in the past. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of absolute certainty. In the event that the Malaysian economy suffers, demand for the products we currently offer may diminish, which would in turn result in decreased likelihood of profitability. This could in turn result in a substantial need for restructuring of our business objectives and could result in a partial or entire loss of an investment in our company.

Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.

Our business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in Malaysia. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation.

Negative developments in Malaysia’s socio-political environment may adversely affect our business, financial condition, results of operations and prospects. The Malaysian economy registered modest growth of approximately 3.1% in 2021 and after contraction of 5.6% in 2020, according to the Department of Statistics Malaysia. Although the overall Malaysian economic environment (in which we predominantly operate) appears to be positive, there can be no assurance that this will continue to prevail in the future. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of absolute certainty. Furthermore, on March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. To help counter the transmission of COVID-19, the government of Malaysia initiated movement control orders (“MCO”), the first effective March 18, 2020. The MCO had resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia. The first MCO was extended three times, each for a two-weeks period, until May 12, 2020. On May 13, 2020, the MCO was eased to a Conditional Movement Control Order (“CMCO”) where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia. The CMCO was further relaxed, and on June 8, 2020, Malaysia moved into the Recovery Movement Control Order (“RMCO”). Due to a resurgence of COVID-19, CMCO was reimposed in the states of Sabah, Selangor, Kuala Lumpur and Putrajaya effective October 14, 2020. On November 7, 2020, the CMCO was extended to a wider geographical area to include another six states in the country. Effectively, ten of thirteen states in Malaysia were placed under CMCO with the exceptions of Perlis, Pahang and Kelantan. On January 1, 2021, the Government of Malaysia extended the Recovery Movement Control Order (“RMCO”) through March 31, 2021. On January 12, 2021, the Malaysian government declared a state of emergency nationwide to combat COVID-19. Intermittent lockdowns were imposed in various states and districts in the country. On March 5, 2021, lockdowns in most part of the country was eased to a CMCO, nevertheless, COVID-19 cases in the country continue to rise. On May 12, 2021, Malaysia was again put under a full lockdown nationwide, until the earlier of (i) daily COVID-19 cases infection of the country fall below 4,000; (ii) intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii) 10% of the Malaysian population is fully vaccinated. The country is administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021, the full lockdown was slightly eased as 13.9% of the Malaysian population was fully vaccinated, with another 30% having received at least one dose of the vaccine. As of March 2022, Malaysia stood at position 26 as the country with the highest COVID-19 cases as recorded under the coronavirus statistics of the “worldometer”. Total COVID-19 cases in Malaysia hit approximately 3.6 million and associated fatality of 33, 228. These figures are huge relative to the small size economy of the country. We are witnessing the adverse impact on the purchasing power of consumers in Malaysia, where our operations are mainly conducted as a direct result of the prolonged pandemic. A such, the extent to which the coronavirus may continue to adversely impact the Malaysian economy is uncertain. In the event that the Malaysia economy suffers, demand for our products may diminish, which would in turn result in adverse impacts on our revenues, cash flows, financial condition and business prospect.

We face the risk that changes in the policies of the Malaysian government could have a significant impact upon the business we may be able to conduct in Malaysia and the profitability of such business.

Policies of the Malaysian government can have significant effects on the economic conditions of Malaysia. A change in policies by the Malaysian government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. We cannot assure you that the government will continue to pursue current policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting Malaysia’s political, economic and social environment.

Fluctuations in exchange rates could adversely affect our business and the value of our securities.

The value of the RM against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in Malaysia’s political and economic conditions. The value of our ordinary shares will be indirectly affected by the foreign exchange rate between U.S. dollars and RM and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RM relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Currently, we rely entirely on revenues earned in Malaysia, any significant revaluation of RM may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert U.S. dollars we receive from an offering of our securities into RM for our operations, appreciation of the RM against the U.S. dollar could cause the RM equivalent of U.S. dollars to be reduced and therefore could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert our RM into U.S. dollars for the purpose of making dividend payments on our ordinary shares or for other business purposes and the U.S. dollar appreciates against the RM, the U.S. dollar equivalent of the RM we convert would be reduced. In addition, the depreciation of significant U.S. dollar denominated assets could result in a change to our operations and a reduction in the value of these assets.

We are subject to foreign exchange control policies in Malaysia.

The ability of our subsidiaries to pay dividends or make other payments to us may be restricted by the foreign exchange control policies in the countries where we operate. For example, there are foreign exchange policies in Malaysia which support the monitoring of capital flows into and out of the country in order to preserve its financial and economic stability. The foreign exchange policies are administered by the Foreign Exchange Administration, an arm of Bank Negara Malaysia (“BNM”), the central bank of Malaysia. The foreign exchange policies monitor and regulate both residents and non-residents. Under the current Foreign Exchange Administration rules issued by BNM, non-residents are free to repatriate any amount of funds from Malaysia in foreign currency other than the currency of Israel at any time (subject to limited exceptions), including capital, divestment proceeds, profits, dividends, rental, fees and interest arising from investment in Malaysia, subject to any withholding tax. In the event BNM or any other country where we operate introduces any restrictions in the future, we may be affected in our ability to repatriate dividends or other payments from our subsidiaries in Malaysia or in such other countries. Since we are a Cayman Islands holding company and rely principally on dividends and other payments from our subsidiaries for our cash requirements, any restrictions on such dividends or other payments could materially and adversely affect our liquidity, financial condition and results of operations.

Because our principal assets are located outside of the United States and all of our directors and officers reside outside of the United States, it may be difficult for you to enforce your rights based on U.S. federal securities laws against us or our officers and directors or to enforce a judgment of a United States court against us or our officers and directors in Malaysia.

All of our directors and officers are nationals and residents of a country other than the United States and all of their assets are located outside the United States. In addition, all of our assets are located outside of the United States. It may therefore be difficult for investors in the United States to effect service of process within the United States upon us or our directors and officers or to enforce their legal rights based on the civil liability provisions of the U.S. federal securities laws against us or our directors and officers in the courts of either the U.S., Cayman Islands or Malaysia and, even if civil judgments are obtained in U.S. courts, to enforce such judgments in Malaysian courts.

Failure to comply with the U.S. Foreign Corrupt Practices Act and Malaysia anti-corruption laws could subject us to penalties and other adverse consequences.

We are required to comply the Malaysia’s anti-corruption laws and the United States Foreign Corrupt Practices Act (“FCPA”), which generally prohibit U.S.-based companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business, directing business to another, or securing an advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. Under the FCPA, U.S. companies may be held liable for the corrupt actions taken by directors, officers, employees, agents, or other strategic or local partners or representatives. As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation, governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, operating results and financial condition.

Risks Related to This Offering and Ownership of Our Ordinary shares

This offering is subject to the approval of the shareholders of ARB Berhad.

Under the listing requirements of Main Market of Bursa Malaysia Securities Berhad, the approval of the shareholders of ARB Berhad is required prior to the closing of this offering. There can be no assurance that ARB Berhad will receive the shareholder approval of this offering and any failure of ARB Berhad to obtain such approval in a timely manner could cause significant delays or even result in an inability for us to successfully complete this offering. .. We have and expect to continue to incur significant costs in connection with this offering, including legal fees and expenses, accounting fees and expenses, printing fees, filing fees and other expenses, before ARB Berhad’s shareholders vote on this offering, regardless of whether this offering can be closed. In the event that ARB Berhad fails to receive the shareholder approval for this offering, we will have to abandon this offering and our business, operating results and financial condition could be materially adversely affected as a result of diversion of attention of our management and employees from our operations and the administrative costs and expenses incurred in connection therewith.

There has been no public market for our ordinary shares prior to this offering and an active trading market for our ordinary shares may not develop following the completion of this offering.

Prior to this offering, there has been no public market for our ordinary shares. We have applied for the listing of our ordinary shares on Nasdaq under the symbol “ARBB.” Even if our ordinary shares are approved for listing on Nasdaq, a liquid public market for our ordinary shares may not develop following the completion of this offering. The initial public offering price for our ordinary shares has been determined by us based upon several factors, including prevailing market conditions, our historical performance, estimates of our business potential and earnings prospects, and the market valuations of similar companies. The price at which the ordinary shares are traded after this offering may decline below the initial public offering price and the liquidity of the ordinary shares may decrease significantly, meaning that you may experience a significant decrease in the value of your ordinary shares regardless of our operating performance or prospects.

Our ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

The public offering price of our ordinary shares has been determined by us based upon many factors and may not be indicative of prices that will prevail following the closing of this offering. After this offering, the market price for our ordinary shares is likely to be volatile and could fluctuate widely due to multiple factors beyond our control, including the following:

Any of these factors may result in large and sudden changes in the volume and price at which the ordinary shares will trade. In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations. Volatility in the market price of our ordinary shares may prevent investors from being able to sell their shares at or above the initial public offering price. As a result, you may suffer a loss on your investment.

We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our ordinary shares.

The US stock market has witnessed instances of extreme stock price run-ups followed by rapid price declines in 2022 and such stock price volatility seemed unrelated to the issuers’ performance subsequent to their recent initial public offerings. After the consummation of this offering, the share price of our ordinary shares may experience extreme volatility, such as rapid stock price run-ups and declines, that may not be related to our operating performance. The potential extreme volatility may confuse public investors regarding the value of our shares, distort the market perception of our share price and our company’s financial performance and public image, and negatively affect the long-term liquidity of our ordinary shares, regardless of our actual or expected operating performance. If our share price confronts such volatility, including any rapid rise and drop in share price seemingly unrelated to our actual or expected operating performance, financial condition or prospects, our ability to access the capital market may be materially adversely affected.

We may not be able to maintain a listing of our ordinary shares on Nasdaq.

Assuming that our ordinary shares are listed on Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing. If we fail to meet Nasdaq’s continued listing requirements, our ordinary shares may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of our ordinary shares from Nasdaq may materially impair our shareholders’ ability to buy and sell our ordinary shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our ordinary shares. The delisting of our ordinary shares could significantly impair our ability to raise capital and the value of your investment.

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

The trading market for our ordinary shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our ordinary shares or publishes inaccurate or unfavorable research about our business, the market price for our ordinary shares would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ordinary shares to decline.

As our initial public offering price is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution.

If you purchase shares in this offering, you will pay more for your shares of ordinary shares than the amount paid by our existing shareholders for their shares on a per share basis. As a result, you will experience immediate and substantial dilution in net tangible book value per share in relation to the price that you paid for your shares. We expect the dilution as a result of the offering to be $3.27 per share to new investors purchasing our shares in this offering, assuming a public offering price of $5.00 per share and no exercise of the over-allotment option by the underwriters. See “Dilution” for a more complete description of how the value of your investment in our shares will be diluted upon completion of this offering.

We have broad discretion as to the use of the net proceeds from this offering and our use of the offering proceeds may not yield a favorable return on your investment. Additionally, we may use these proceeds in ways with which you may not agree or in the most effective way.

The Company intends to use the net proceeds of this offering for several purposes including (i) future strategic acquisition or investment in other business or technologies, (ii) research and development activities, and (iii) working capital and general corporate purposes. Accordingly, management of the Company will have substantial discretion in applying the net proceeds to be received by the Company. However, based on unforeseen technical, commercial or regulatory issues, we could spend the proceeds in ways with which you may not agree. Moreover, the proceeds may not be invested effectively or in a manner that yields a favorable or any return, and consequently, this could result in financial losses that could have a material adverse effect on our business, financial condition and results of operations. There can be no assurance that the Company will utilize the net proceeds in a manner that enhances value of the Company. If the Company fails to spend the proceeds effectively, the Company’s business and financial condition could be harmed, and there may be the need to seek additional financing sooner than expected.

We have never paid cash dividends on our ordinary shares and do not intend to pay dividends for the foreseeable future.

We have paid no cash dividends on our ordinary shares to date and we do not anticipate paying cash dividends in the near term. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our ordinary shares. Accordingly, investors must be prepared to rely on sales of their ordinary shares after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our ordinary shares. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

Raising additional capital may cause dilution to our shareholders, including purchasers of ordinary shares in this offering, or restrict our operations.

To support our expanding business, we may need additional capital to continue to make significant investments in our new and existing business. We cannot assure you that cash generated by our operations will be sufficient to allow us to fund such expansion. If cash flows from operations are not sufficient, we may need additional equity or debt financing to provide the funds required to expand our business. If such financing is not available on satisfactory terms or at all, we may be unable to expand our business or to develop new business at the rate desired and our operating results may suffer. Debt financing increases expenses which may contain covenants that restrict the operation of our business, and must be repaid regardless of operating results. Equity financing, or debt financing that is convertible into equity, could result in additional dilution to our existing shareholders.

Our inability to obtain adequate capital resources, whether in the form of equity or debt, to fund our business and growth strategies may require us to delay, scale back or eliminate some or all of our operations or the expansion of our business, which may have a material adverse effect on our business, operating results, financial condition or prospects.

We may issue additional equity or debt securities, which are senior to our ordinary shares as to distributions and in liquidation, which could materially adversely affect the market price of our ordinary shares.

In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our shareholders. In addition, any additional preferred stock, if issued by our company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make distributions to our shareholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing.

Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your ordinary shares and diluting your interest in our company.

We will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, and our shareholders could receive less information than they might expect to receive from more mature public companies.

Upon the completion of this offering, we will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:

In addition, Section 107 of the JOBS Act also 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. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company for up to five years, although if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the end of any second fiscal quarter before that time, we would cease to be an emerging growth company as of the following year end.

Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our ordinary shares less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our ordinary shares.

Upon the completion of this offering, we will be a “controlled company” under the rules of Nasdaq and as a result, we may choose to exempt our company from certain corporate governance requirements that could have an adverse effect on our public shareholders.

Under Nasdaq’s rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including, without limitation, (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating committee comprised solely of independent directors. Upon the completion of this offering, ARB Berhad will beneficially own approximately 25,000,000 ordinary shares and will be able to exercise approximately 94.77% of our total voting power, assuming we issue and sell 1,380,000 ordinary shares and the over-allotment option is fully exercised. As a result, we will be a “controlled company” within the meaning of the Nasdaq listing rules. Although we currently do not intend to rely on the “controlled company” exemption, we could elect to rely on this exemption in the future. If we elected to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our ordinary shares to look less attractive to certain investors or otherwise harm our trading price.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Act (2022 Revision) of the Cayman Islands and the common law of the Cayman Islands. The rights of our shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act (2022 Revision) of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders. See “Description of Share Capital—Differences in Corporate Law.”

Certain judgments obtained against us by our shareholders may not be enforceable.

We are a company incorporated under the laws of the Cayman Islands. We conduct our operations outside the United States and substantially all of our assets are located outside the United States. In addition, substantially all of our directors and executive officers reside outside the United States, and most of their assets are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against them in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Malaysia or other relevant jurisdiction may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and Malaysia, see “Enforceability of Civil Liabilities.”

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we may publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Stock Market. Press releases relating to financial results and material events will also be furnished to the SEC in reports on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As a foreign private issuer, we are permitted to rely on exemptions from certain Nasdaq corporate governance standards applicable to domestic U.S. issuers. This may afford less protection to holders of our shares.

We are exempted from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. As a foreign private issuer, we are permitted to follow the governance practices of our home country, the Cayman Islands, in lieu of certain corporate governance requirements of Nasdaq. As result, the standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to:

Although we do not currently intend to rely these “home country” exemptions, we may rely on some of these exemptions in the future. As a result, our shareholders may not be provided with the benefits of certain corporate governance requirements of Nasdaq.

If the ownership of our ordinary shares continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.

Upon completion of this offering, ARB Berhad will own approximately 95.42% of our outstanding voting shares (or approximately 94.77% if the underwriters exercise its option to purchase additional shares in full). As a result, it owns shares sufficient for majority votes over all matters requiring shareholder votes, including: the election of directors; mergers, consolidations, and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; amendments to our amended and restated memorandum and articles of association; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of ARB Berhad may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our company. Also, ARB Berhad may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders, including investors in this offering. As a result, the market price of our shares could decline, or shareholders might not receive a premium over the then-current market price of our shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our shares because investors may perceive disadvantages in owning shares in a company with significant shareholders.

We have limited experience operating as a stand-alone public company.

We are a holding company incorporated under the laws of Cayman Islands on March 1, 2022, with all of our shares held by ARB IOT Limited, an indirect wholly owned subsidiary of ARB Berhad. ARB Berhad is a Malaysia-headquartered IT software and platform provider listed on the Main Market of Bursa Malaysia Securities Berhad (KLSE: ARBB). However, we have limited experience conducting our operations as a stand-alone public company. Prior to this offering, our ARB Berhad has provided us with financial, administrative, human resources, and legal services, and also has provided us with the services of a number of its executives and employees. After we become a stand-alone public company, we expect ARB Berhad to continue to provide us with certain support services, but to the extent ARB Berhad does not continue to provide us with such support, we will need to create our own support system. We may encounter operational, administrative, and strategic difficulties as we adjust to operating as a stand-alone public company. This may cause us to react more slowly than our competitors to industry changes and may divert our management’s attention from running our business or otherwise harm our operations.

In addition, since we are becoming a public company, our management team will need to develop the expertise necessary to comply with the numerous regulatory and other requirements applicable to public companies, including requirements relating to corporate governance, listing standards and securities and investor relationships issues. As a stand-alone public company, our management will have to evaluate our internal controls system with new thresholds of materiality, and to implement necessary changes to our internal controls system. We cannot guarantee that we will be able to do so in a timely and effective manner.

Our amended and restated memorandum and articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders’ opportunity to sell their shares at a premium.

Our amended and restated memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ordinary shares may fall and the voting and other rights of the holders of our ordinary shares may be materially and adversely affected. In addition, our amended and restated memorandum and articles of association contain other provisions that could limit the ability of third parties to acquire control of our company or cause us to engage in a transaction resulting in a change of control.

There is a risk that we will be a passive foreign investment company for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ordinary shares.

In general, a non-U.S. corporation is a passive foreign investment company, or PFIC, for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and certain gains. Cash is a passive asset for these purposes.

Based on the expected composition of our income and assets and the value of our assets, including goodwill, we do not expect to be a PFIC for our current taxable year. However, the proper application of the PFIC rules to a company with a business such as ours is not entirely clear. Because the proper characterization of certain components of our income and assets is not entirely clear, and because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of our ordinary shares, which could be volatile), there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year.

If we were a PFIC for any taxable year during which a U.S. investor holds ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. investor.

General Risk Factors

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, imposes various requirements on the corporate governance practices of public companies. We qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under SOX 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of SOX 404 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

We may have difficulty scaling and adapting our existing infrastructure to accommodate a larger customer base, technology advances or customer requirements.

In the future, advances in technology, increases in traffic, and new customer requirements may require us to change our infrastructure, expand our infrastructure or replace our infrastructure entirely. Scaling and adapting our infrastructure are likely to be complex and require additional technical expertise. If we are required to make any changes to our infrastructure, we may incur substantial costs and experience delays or interruptions in our service. These delays or interruptions may cause customers to become dissatisfied with our service and move to competing service providers. Our failure to accommodate increased traffic, increased costs, inefficiencies or failures to adapt to new technologies or customer requirements and the associated adjustments to our infrastructure could harm our business, financial condition and results of operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

This prospectus also contains certain data and information, which we obtained from various government and private publications. Although we believe that the publications and reports are reliable, we have not independently verified the data. Statistical data in these publications includes projections that are based on a number of assumptions. If any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Although we will become a public company after this offering and have ongoing disclosure obligations under United States federal securities laws, we do not intend to update or otherwise revise the forward-looking statements in this prospectus, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $4.6 million, or approximately $5.4 million if the underwriter exercises the over-allotment option in full, after deducting underwriting discounts and the estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of $5.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus. A $1.00 increase (decrease) in the assumed initial public offering price of $5.00 per share would increase (decrease) the net proceeds to us from this offering by $1.1 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

The primary purposes of this offering are to create a public market for our ordinary shares for the benefit of all shareholders, retain talented employees by providing them with equity incentives and obtain additional working capital. We currently intend to use the net proceeds of this offering as follows:

The foregoing represents our current intentions to use and allocate the net proceeds of this offering based upon our present plans and business conditions. Our management, however, will have broad discretion in the way that we use the net proceeds of this offering. Pending the final application of the net proceeds of this offering, we intend to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade securities. See “Risk Factors—Risks Related to this Offering and the Market for Our Ordinary Shares Generally—We have broad discretion as to the use of the net proceeds from this offering and our use of the offering proceeds may not yield a favorable return on your investment. Additionally, we may use these proceeds in ways with which you may not agree or in the most effective way.”

DIVIDEND POLICY

We have not previously declared, or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares. We currently intend to retain most, if not all, of our available funds and future earnings to operate and expand our business.

We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our subsidiaries for our cash requirements, including any payment of dividends to our shareholders.

Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides 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.

CAPITALIZATION

The following table sets forth our total capitalization as of June 30, 2022:

You should read this table together with our consolidated financial statements, the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

DILUTION

If you invest in the ordinary shares, your interest will be diluted 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 assumed 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 tangible book value was approximately $40.8 million, or $1.63 per ordinary share. Our net tangible book value represents the amount of our total consolidated tangible assets (which is calculated by subtracting intangible asset and tax recoverable from our total consolidated assets), less the amount of our total consolidated liabilities (which is calculated by subtracting deferred tax liabilities and current tax liabilities from our total consolidated liabilities). Our net tangible book value per ordinary share at June 30, 2022 is determined by the quotient of our net tangible book value at June 30, 2022 divided by 25,000,000 ordinary shares, including 15,000,000 ordinary shares issued on September 19, 2022, as if such issuance had occurred on June 30, 2022. Dilution is determined by subtracting net tangible book value per ordinary share after giving effect to the proceeds we will receive from this offering, at an assumed initial public offering price of $5.00 per ordinary share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

After giving effect to the sale of $6,000,000 of ordinary shares in this offering at an assumed initial public offering price of $5.00 per ordinary share, the midpoint of the estimated initial public offering price range, assuming no exercise of over-allotment option and after deducting underwriting commissions and estimated offering expenses payable by us, but without adjusting for any other change in our net tangible book value subsequent to June 30, 2022, our pro forma as adjusted net tangible book value would have been $1.73 per ordinary share. This represents an immediate increase in net tangible book value of $0.10 per ordinary share to our existing shareholders and immediate dilution of $3.27 per ordinary share to new investors purchasing ordinary shares in this offering. The following table illustrates this per ordinary share dilution to the new investors purchasing ordinary shares in this offering:

Note:

A $1.00 increase (decrease) in the assumed public offering price of $5.00 per ordinary share would increase (decrease) our pro forma net tangible book value after giving effect to the offering by $1.1 million, the net tangible book value per ordinary share after giving effect to this offering by $0.04 per ordinary share and the dilution in net tangible book value per ordinary share to new investors in this offering by $0.96 per ordinary share, assuming no change to the number of ordinary shares offered by us as set forth on the cover page of this prospectus, no exercise of over-allotment option and after deducting underwriting commissions and estimated offering expenses payable by us.

The pro forma information discussed above is illustrative only. Our net tangible 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 pricing.

The following tables summarize the differences between our existing shareholders and the new investors with respect to the number of ordinary shares purchased from us in this offering, the total consideration paid and the average price per ordinary share paid at an assumed initial public offering price of $5.00 per ordinary share, and before deducting estimated underwriting discounts and commissions and estimated offering expenses (assuming no exercise of over-allotment option).

The discussion and the table above exclude shares issuable upon exercise of warrants to be issued to the underwriters in this offering.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those which we discuss under “Risk Factors” and elsewhere in this prospectus. See “Special Note Regarding Forward-Looking Statements.”

Overview

We are a provider of complete solutions to our clients for the integration of IoT systems and devices from designing to project deployment and our mission is to become a leading player in the IoT landscape in the ASEAN region. We offer a wide range of IoT systems as well as provide customers a substantial range of services such as system integration and system support service. We deliver holistic solutions with full turnkey deployment from designing, installation, testing, pre-commissioning, and commissioning of various IoT systems and devices as well as integration of automated systems, including installation of wire and wireless and mechatronic works.

Recent new technology trends such as artificial intelligence, cloud computing, 5G, robotic process automation, IoT and hyper-connectivity continue to transform businesses and drive companies to seek digital changes to meet evolving demands of customers. We have built up an IoT development ecosystem to help our customers address the challenges and opportunities brought by new digital technologies, offering an array of design and development system software, application software and other software in providing digital solutions for various processes, sub-processes, transactions and activities.

Currently, we have organized our operations into four business lines:

We have benefited from ARB Berhad’s experience, reputation and network in Malaysian information technology industry. As an operating segment of a seasoned Malaysian public company, we have gained from established business processes and a veteran leadership team, allowing us to focus our attention on growing and developing our IoT business. While our history with ARB Berhad has provided us with certain competitive advantages, we believe that the separation and this offering will promote clearer segregation of business responsibilities and operations for the IoT segment, thereby enabling efficient allocation of resources to accelerate the growth of our IoT business, and allow us to have direct access to a globally recognized stock exchange, which would increase our financial flexibility to explore expansion and growth prospects and enhance our corporate reputation and recognition. See “Corporate History and Structure” and “Related Party Transactions—Historical Relationship with ARB Berhad.”

Our business has grown rapidly as demonstrated by the increase in revenue from approximately RM50.3 million ($11.4 million) for the fiscal year ended June 30, 2021 to approximately RM443.0 million ($100.6 million) for the fiscal year ended June 30, 2022, an increase of RM392.7 million ($89.1 million), or 780.7%, and in profit from approximately RM18.9 million ($4.3 million) for the fiscal year ended June 30, 2021 to approximately RM73.4 million ($16.7 million) for the fiscal year ended June 30, 2022, an increase of 289.0%. For additional information regarding our financial performance, see “Summary Consolidated Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Effects of COVID-19

The COVID-19 pandemic and resulting disruptions have affected our businesses, particularly our Smart Home and Building line of business, as well as those of our customers, suppliers, and third-party distributors. To serve our customers while also providing for the safety of our employees, we have implemented a number of employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. We will continue to prioritize employee and customer safety and comply with evolving federal, state, and local standards of Malaysia as well as to implement standards or processes that we determine to be in the best interests of our employees, customers, and communities.  Also see “Risk Factors —Risks Related to Our Business—The COVID-19 pandemic has and may continue to cause a material adverse effect on our business.”

Principal Factors Affecting Our Financial Performance

Our business, results of operations and financial condition are affected by general factors driving Malaysia’s economy, the IoT industry, and the markets where our customers operate such as property development, agriculture, logistics and consumer electronics sectors. These factors include urbanization rate, levels of per capita disposable income, levels of consumer spending, rate of internet and mobile penetration, development of technologies such as 5G and cloud computing, domestic and international supply chain stability, overall enterprise spending, and other general economic conditions in Malaysia that affect consumption and business activities in general.

While our business is influenced by general factors affecting our industry, especially for our IoT Gadget Distribution business, our operating results are more directly affected by company-specific factors, including the following major factors:

Our ability to secure IoT projects. The operations of our IoT Smart Home and Building, IoT Smart Agriculture and IoT System Development business lines are on a project-by-project basis. While we are still in the early stages of penetrating our addressable market, we have benefited from rapid customer growth. We believe there are significant untapped opportunities to win new large enterprises across different industries in Malaysia and the ASEAN region. In addition to large enterprises, we also seek to work with smaller, fast-growing companies that require a different set of services that allow us to test new offerings and develop new capabilities.

Our customers’ financial condition and ability to make payments. Our customers generally purchase our products on credit, and as a result, our results of operations and financial condition may be adversely affected if our customers experience financial difficulties. We provide a long credit period from 210 days to 365 days to some large customers to secure contracts from them. Although we had significant amounts of accounts receivable as of the end of fiscal 2022 and 2021, we were able to collect all of such accounts receivable subsequently. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.

Our ability to complete IoT projects on schedule. All of our projects have agreed milestones and specific completion dates. Our ability to meet agreed milestones depends on our ability to manage overall projects as well as product sourcing and supply chain. We source hardware and software products for our IoT projects from Malaysian suppliers. Proximity to origin enables us to develop stronger relationships with local suppliers and contractors, which give us access to a stable supply of products and services. In addition, we lay out specific and measurable metrics in advance and remain focused and disciplined through the life of the projects which enable us to promptly identify any underlying issues and resolve them proactively. We believe that our strong project management ability and procedures are key to ensuring a high level of completion rate.

In addition, other significant factors affecting our performance and results of our operations include:

Please refer to “Risk Factors” for additional information on factors that may affect our results of operations.

Comparability of Historical Results

Our historical consolidated financial statements, which are discussed below, are prepared on a stand-alone basis in accordance with IFRS and are derived from ARB Berhad’s consolidated financial statements and accounting records using the historical results of operations and assets and liabilities attributed to our operations, and include allocations of expenses from ARB Berhad. Our consolidated results are not necessarily indicative of our future performance and do not reflect what our financial performance would have been had we been a stand-alone public company during the periods presented.

ARB Berhad has provided administrative support services to us, and costs associated with these functions have been allocated to us. Such costs primarily related to human resources and have been primarily reflected within operating expenses in our consolidated statements of operations. These costs were allocated on the basis of gross profit contribution and assets. Management believes the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to, or the benefit received by, us during the periods presented. The amount of such expenses allocated to us was RM0.7 million ($0.2 million) and RM0.1 million ($0.03 million) for the years ended June 30, 2022 and 2021, respectively, which comprised RM0.7 million ($0.2 million) and RM0.1 million ($0.03 million) in general and administrative expense.

Following the completion of this offering, we will be subject to the reporting requirements of the Exchange Act. We will be required to establish procedures and practices as a stand-alone public company in order to comply with our obligations under the Exchange Act and related rules and regulations. As a result, we will incur additional costs, including internal audit, investor relations, share administration and regulatory compliance costs. These additional costs may differ from the costs that were historically allocated to us from ARB Berhad.

Our Reportable Segment

An operating segment is defined as a component of an entity for which discrete financial information is available and whose operating results are regularly reviewed by our Chief Executive Officer. We report our results of operations in a single reportable segment dedicated to the provision of IoT solutions and the Chief Executive Officer makes decisions about allocating resources and assessing performance based on the Company as a whole. We provide breakdowns by business lines for certain components of our operating results as appropriate.

Key Components of Results of Operations

Revenue

Our revenue consists of (i) project management fees, (ii) sales of goods, and (iii) rendering of information technology system.

Revenue from project management and rendering of information technology system are recognized at a point in time when control of the goods is passed to the customer, which is the point in time when the significant risks and rewards are transferred to the customer and the transaction has met the probability of inflows and measurement reliability requirements of IFRS 15.

Revenue from sale of goods is recognized at a point in time when the Group satisfies a performance obligation by transferring a promised good (i.e. an asset) to a customer. An asset is transferred as and when a customer obtains control of that asset which coincides with the delivery of goods and acceptance by the customer. There is no material right of return and warranty provided to the customers on the sale of goods and there is no significant financing component in the revenue arising from sale of goods as the sales are made on the normal credit terms not exceeding twelve months.

We are engaged in supply and installation of customized IoT software or hardware. The majority of the sale of goods contracts relate to the supply and installation of a set of customized IoT Smart Agriculture solutions, sale of customized source codes in accordance with client requirements for IoT system development, as well as resale of mobile gadgets and accessories.

Cost of Revenue

Cost of Project Management and Rendering of Information Technology System Revenue

Cost of project management and rendering of information technology system revenue primarily consist of costs related to providing implementation and configuration services, personnel-related costs directly associated with our professional services, including costs of contracted third-party vendors.

Cost of Sales of Goods

Cost of sales of goods mainly consists of cost of products purchased from third party suppliers. 

Total Expenses

Total expenses consist of depreciation expenses, personnel expenses and general administrative expenses.

Other Income

Other Income consists of bank interest income and gain on bargain purchase in acquisitions.

Tax Expenses

Malaysian income tax is calculated at the statutory tax rate of 24% regarding the estimated taxable profit for the fiscal years.

Results of Operations

Year Ended June 30, 2021 Compared to Year Ended June 30, 2022

The following table shows key components of our results of operations during the years ended June 30, 2022 and 2021.

Revenue. For the year ended June 30, 2022, the revenue increased by RM392.7 million ($89.1 million) or 780% to RM443.0 million ($100.6 million), when compared with RM50.3 million ($11.4 million) for the year ended June 30, 2021, primarily due to expansion of business into the IoT System Development and IoT Smart Agriculture lines and a slight increase in revenue from the IoT Gadget Distribution business.

The following table sets forth the breakdown of our revenue by business lines.

Revenue from the IoT System Development line of business reached RM258.9 million ($58.8 million) for the year ended June 30, 2022 from RM6.0 million ($1.4 million) for the year ended June 30, 2021, an increase of RM252.9 million ($57.4 million), or 4,215%, mainly contributed by providing system integration business application services. The projects completed during the year ended June 30, 2022 included one performed by our wholly-owned Malaysian subsidiary ARB Innovation in the amount of RM154 million ($35 million) for a related party client, Ageson Industrial Sdn. Bhd. (formerly known as AB5 Sdn. Bhd.). Ageson Industrial Sdn. Bhd. is an indirect wholly-owned subsidiary of Ageson Berhad, a Malaysia public listed company primarily involved in property development and construction and Dato’ Sri Liew Kok Leong is the Executive Director of Ageson Berhad. Under this contract, ARB Innovation procured and supplied an industrial building system with IoT technology for the customer’s property development projects.

We had not started the IoT Smart Agriculture business as of June 30, 2021 and recorded nil in revenue for this line during the fiscal year ended June 30, 2021. We entered into this market in the second half of calendar 2021 and generated revenues of RM166.3 million ($37.7 million) for the fiscal year ended June 30, 2022 from delivering a customized hydroponic system with IoT functionality on approximately 30 acres of land in Cameron Highlands, Pahang, Malaysia.

Revenue from the IoT Gadget Distribution line of business amounted to RM17.2 million ($3.9 million) for the year ended June 30, 2022, from RM14.6 million ($3.3 million) for the year ended June 30, 2021, an increase of RM2.6 million ($0.6 million) or 17.4%, as a result of economic recovery from the COVID-19 pandemic in Malaysia and higher sales volume of mobile gadget accessories.

Although our aggregate revenue for the year ended June 30, 2022 increased significantly from the year ended June 30, 2021, revenue from the IoT Smart Home and Building line of business was only RM0.7 million ($0.2 million) for the year ended June 30, 2022, as compared to RM29.7 million ($6.7 million) for the year ended June 30, 2021, a decrease of RM29.0 million ($6.5 million). The property market has a large impact on developers’ spending on smart home and building solutions. The Malaysian property market had softened since 2021 primarily as a result of the COVID-19 pandemic, which led developers to eschew integrating smart home solutions into their projects in order to cut costs and price their properties at more competitive levels. This market has seen gradual recovery recently as the Malaysian Government decided to lift pandemic restrictions on all economic sectors and move away from widespread restrictive measures in all economic sectors.

Cost of revenue. For the year ended June 30, 2022, the cost of revenue increased by RM304.8 million ($69.2 million) or 760.7% to RM344.9 million ($78.3 million), when compared with RM40.1 million ($9.1 million) for the year ended June 30, 2021, which was in line with the increased revenue. The following table sets forth the breakdown of our cost of revenue by business lines. The cost of revenue included amortization of intangible assets of approximately RM12.2 million ($2.8 million) and RM1.3 million ($0.3 million) for the years ended June 30, 2022 and 2021, respectively.

Total expenses. For the year ended June 30, 2022, the total expenses increased to RM10.1 million ($2.3 million) from RM2.8 million ($0.6 million) for the year ended June 30, 2021, an increase of RM7.3 million ($1.7 million), or 260.7%. Our total expenses are comprised of depreciation expenses, personnel expenses and general administrative expenses as further described below.

RM1.1 million ($0.2 million) was recorded as depreciation for the year ended June 30, 2022 following new acquisitions of computer and equipment for IoT Smart Agriculture business activities.

RM3.2 million ($0.7 million) and RM0.3 million ($0.1 million) were recorded as amortization for the years ended June 30, 2022 and 2021, respectively, following recognition of intangible assets arising from acquisition of a subsidiary completed in June 3, 2021. The increase of RM2.9 million ($0.7 million) during the year ended June 30, 2022 from the year ended June 30, 2021 was attributable to amortization over a longer period of 11 months recorded in the year ended June 30, 2022.

The personnel expenses for the year ended June 30, 2022 were consistent with those for the year ended June 30, 2021, which was in line with our retention of a stable workforce and personnel cost control.

For the year ended June 30, 2022, the general administrative expenses increased by RM3.4 million ($0.8 million) or 566.7% to RM4.0 million ($0.9 million), when compared with RM0.6 million ($0.1 million) for the year ended June 30, 2021, mainly attributable to professional and legal advisory expenses as well as the administrative support services provided by our indirect controlling shareholder, ARB Berhad.

Other income. For the year ended June 30, 2022, the other income decreased by RM12.7 million ($2.9 million) or 98.4% to RM0.3 million ($0.1 million), when compared with RM13.0 ($3.0 million) for the year ended June 30, 2021, mainly as a result of absence of gain on bargain purchase arising from acquisition of a subsidiary recorded for the year ended June 30, 2021. 

Tax expenses. We incurred income tax expenses of RM14.9 million ($3.4 million) and RM1.5 million ($0.3 million) for the years ended June 30, 2022 and 2021, respectively. The increase was mainly due to higher taxable profit during the year ended June 30, 2022.

Profit for the year. For the year ended June 30, 2022, the profit increased by RM54.5 million ($12.4 million) or 288.4% to RM73.4 million ($16.7 million) when compared with RM18.9 million ($4.3 million) for the year ended June 30, 2021. This was in line with increased revenues, which were mainly contributed by sale of customized source codes under the IoT System Development business line and provision of IoT Smart Agriculture solutions.

Liquidity and Capital Resources

As of June 30, 2022 and June 30, 2021, we had cash and bank balances of RM28.2 million ($6.4 million) and RM8.1 million ($1.8 million), respectively. To date, we have financed our operations primarily through net cash flow from operations and proceeds from capital contribution from our indirect controlling shareholder ARB Berhad. We expect to finance our operations and working capital needs in the near future from part of our net proceeds of this offering and cash generated through operations.

The following table sets forth a summary of our cash flows for the years ended:

Operating Activities

Operating activities provided RM29.8 million ($6.8 million) in cash for the year ended June 30, 2022 compared to cash provided operating activities of RM3.1 million ($0.7 million) for the year ended June 30, 2021. The change in cash from operating activities was a result of the higher net profit recognized for the year ended June 30, 2022, when compared to the year ended June 30, 2021. 

Investing Activities

The cash used in investing activities for the year ended June 30 2022 was RM136.6 million ($31.0 million) compared to RM25.0 million ($6.0 million) for the year ended June 30, 2021. The increase in cash used in investing activities during the year ended June 30, 2022 was mainly due to additions in property, plant and equipment and computer systems categorized as intangible assets. 

Financing Activities

Cash flows provided by financing activities for the year ended June 30, 2022 were RM126.9 million ($28.8 million) compared to RM23.4 million ($5.3 million) for the year ended June 30, 2021. The increase in cash provided by financing activities during the year ended June 30, 2022 was mainly due to capital contribution from our controlling shareholder ARB Berhad.

We believe that available cash and bank balances, and the current asset, such as accounts receivable, should enable the Company to meet anticipated cash needs for at least the next 12 months.

We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Holding Company Structure

ARB IOT Group is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about the application of our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. The following descriptions of significant accounting judgments, and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this prospectus. When reviewing our financial statements, you should consider (i) our selection of significant accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Intangible Asset and Goodwill

Supply/Service Agreements

Supply Agreement, Service Agreement and the Reseller and Drone Service Agreement (“Supply/Service Agreements”) recognized in a business combination is a contract-based intangible asset at the acquisition date and is initially measured at cost. After initial recognition, Supply/Service Agreement is measured at cost less accumulated amortization and accumulated impairment losses.

For the purpose of initial cost recognition, the Company had appointed Independent Valuer (“the Valuer”) to value Supply/Service Agreement based on Discounted Cash Flow Valuation Model (“DCF valuation model”), where the Valuer has adopted the mid-point cost of equity (“Ke”) as the discount rate for future cash flows on June 3, 2021.

The initial cost recognition was taken the following basis into consideration:

The calculation of initial cost of Supply/Service Agreements is based on the following assumptions:

The selling price per unit of the products is approximately RM5,800 per unit, inflated by 5% per annum for every 3-year intervals. Approximately 272 units are expected to be sold within these ten (10) years.

Drone Services provided will be charged at a rate of approximately RM342,800 per month and shall be inflated by 5% per annum for every 3-year intervals. Approximately 608 times of the monthly service rate are expected to be earned within these ten (10) years.

Computer Systems

Computer systems comprise source codes recognized in a business combination at the acquisition date and source codes purchased from third parties, which were held for use in the production or supply of goods or services to customers. The source codes are initially measured at cost. After initial recognition, source codes are measured at cost less accumulated amortization and accumulated impairment losses.

Amortization is calculated to write down the cost of the assets to their residual values on a straight line basis over their estimated useful lives. The estimated useful lives represent common life expectancies applied in the various business segments of the Company. The principal annual rates used are 20%.

Goodwill

Goodwill recognized in a business combination is an intangible asset at the acquisition date and is initially measured at cost. After initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to the Company’s cash generating units (CGUs) which represent the lowest level within the Company at which the goodwill is monitored for internal management purposes.

The recoverable amounts of the CGUs have been determined based on value in use (“VIU”) calculations. The VIU is calculated using the pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. VIU was determined by discounting the future cash flow generated from the business operation of the CGUs.

The calculations of VIU for the CGUs are most sensitive to the following assumptions:

(i) Revenue growth rates

The forecasted growth rates are determined based on past performance of the CGUs.

(ii) Expenses growth rate

Expenses are projected at annual increase of approximately 3.0% (2020: nil) per annum.

(iii) Pre-tax discount rates

Pre-tax discount rate of 4.09% (2021: 4.09%) per annum has been applied in determining the recoverable amount of the CGUs.

(iv) Profit margin

Profit margins are projected based on the historical profit margin achieved or predetermined profit margin for the CGUs.

With regards to the assessment of the value-in-use of the CGU relating to goodwill, no impairment loss was recognized for the intangible assets on consolidation for current financial year as its recoverable value was in excess of its carrying values.

Recent Accounting Pronouncements

Refer to the notes to the consolidated financial statements for a complete description of recent accounting standards which we have not yet been required to implement and may be applicable to our operation, as well as those significant accounting standards that have been adopted during the current year.

Quantitative and Qualitative Disclosures about Market Risk

Foreign Exchange Risk

All of our revenues and substantially all of our expenses are denominated in RM. Our exposure to foreign exchange risk primarily relates to cash and cash equivalent denominated in U.S. dollars. We do not believe that we currently have any significant direct foreign exchange risk and have not used derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in our shares will be affected by the exchange rate between U.S. dollar and RM because the value of our business is effectively denominated in RM, while our shares will be traded in U.S. dollars.

To the extent that we need to convert U.S. dollars into RM for our operations, appreciation of the RM against the U.S. dollar would have an adverse effect on the RM amount we receive from the conversion. Conversely, if we decide to convert RM into U.S. dollars for business purposes, appreciation of the U.S. dollar against the RM would have a negative effect on the U.S. dollar amounts available to us.

We estimate that we will receive net proceeds of approximately $4.6 million in this offering, based upon an assumed initial public offering price of $5.00 per share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, assuming no exercise of the over-allotment option and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. Assuming that we convert the full amount of the net proceeds from this offering into RM, a 5.0% appreciation of the U.S. dollar against the RM, from the exchange rate of RM4.4055 for $1.00 as of June 30, 2022 to a rate of RM4.6258 to $1.00, will result in an increase of RM0.2 million in our net proceeds from this offering and from the exchange rate of RM4.2175 for $1.00 as of June 30, 2021 to a rate of RM4.4284 to $1.00, will result in an increase of RM0.2 million in our net proceeds from this offering. Conversely, a 5.0% depreciation of the U.S. dollar against the RM, from the exchange rate of RM4.4055 for $1.00 as of June 30, 2022 to a rate of RM4.1852 to $1.00, will result in a decrease of RM0.2 million in our net proceeds from this offering and from the exchange rate of RM4.2175 for $1.00 as of June 30, 2021 to a rate of RM4.0066 to $1.00, will result in a decrease of RM2.0 million in our net proceeds from this offering.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest expenses incurred on income generated by excess cash, which is mostly held in interest-bearing bank deposits. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure. However, our future interest income may fall short of expectations due to changes in market interest rates.

After completion of this offering, we may invest the net proceeds we receive from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

Inflation

To date, inflation in Malaysia has not materially impacted our results of operations. According to the Department of Statistics Malaysia Official Portal, the year-over-year percent changes in the consumer price index for 2020 was decrease of 1.2% and for 2021, increase of 2.5%. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation in Malaysia. For example, certain operating costs and expenses, such as employee compensation and office operating expenses may increase as a result of higher inflation. Additionally, because a substantial portion of our assets consists of cash and cash equivalent, high inflation could significantly reduce the value and purchasing power of these assets. We are not able to hedge our exposure to higher inflation in Malaysia. 

CORPORATE HISTORY AND STRUCTURE

In October 1997, ARB Berhad, our indirect controlling shareholder, was incorporated in Malaysia. In February 2004, it became listed on the Main Market of Bursa Malaysia Securities Berhad. ARB Berhad commenced IoT business in 2019, starting with offering smart home and building solutions.

On March 1, 2022, ARB IOT Group Limited was incorporated under the laws of Cayman Islands as an indirect wholly owned subsidiary of ARB Berhad. Following the completion of a restructuring in March 2022, it became an indirect holding company of our operating subsidiaries which conduct IoT Smart Home & Building, IoT Smart Agriculture, IoT System Development and IoT Gadget Distribution businesses. See “—Restructuring” below. As of the date of this prospectus, ARB Berhad indirectly owns 100% of our outstanding ordinary shares through its wholly owned subsidiaries, ARB Holdings Sdn. Bhd., a company limited by shares under the laws of Malaysia and ARB IOT Limited, a Cayman Islands exempted company.

On June 9, 2022, we subdivided all of our 50,000 authorized shares of par value $1.00 each into 500,000,000 shares, par value $0.0001 each, resulting in our existing shareholder holding 10,000 ordinary shares of par value $0.0001. On June 9, 2022, additional 9,990,000 ordinary shares were issued to ARB IOT Limited for a purchase price of $0.0001 per share. On September 19, 2022, ARB IOT Limited subscribed for another 15,000,000 ordinary shares, at a purchase price of $0.0001 per share. As a result, as of the date of this prospectus, we have 25,000,000 ordinary shares issued and outstanding.

Immediately following this offering, we expect that ARB Berhad will continue to indirectly own approximately 95.42% of our outstanding ordinary shares. If the underwriters exercise their over-allotment option to purchase additional shares in full, immediately following this offering, ARB Berhad is expected to indirectly own approximately 94.77% of our outstanding ordinary shares. We expect that ARB Berhad will continue to have the power acting alone to approve any action requiring the affirmative vote of a majority of the votes entitled to be cast and to elect all of our directors.

We will become a stand-alone public company following the completion of this offering. We plan to adopt a policy that all material transactions with a related party, as well as all material transactions in which there is an actual, or in some cases, perceived, conflict of interest, will be subject to prior review and approval by our Audit Committee and its independent members, who will determine whether such transactions or proposals are fair and reasonable to ARB IOT Group Limited and its shareholders. See “Related Party Transactions—Transactions with Related Parties.”

Restructuring

On March 15, 2022, ARB IOT Group Limited formed ARB IOT (M) Sdn. Bhd., a company limited by shares under the laws of Malaysia. On March 18, 2022, ARB IOT (M) Sdn. Bhd. acquired all equity interest of ARB IOT Group Sdn. Bhd., a company limited by shares incorporated under the laws of Malaysia on October 7, 2021, from ARB Digital Technology Sdn. Bhd., an indirect wholly-owned Malaysian subsidiary of ARB Berhad. As a result of the acquisition of ARB IOT Group Sdn. Bhd., we have acquired and assumed the operations, assets, employees, contracts, facility, equipment and obligations of additional eighteen (18) subsidiaries from ARB Berhad, including ARB Lab Sdn. Bhd., ARB R&D Sdn. Bhd., ARB Innovation Sdn. Bhd., ARB AI Sdn. Bhd., ARBIOT Sdn. Bhd., ARB Midware Sdn. Bhd., ARB Distribution Sdn. Bhd., ARB Robotic Sdn. Bhd., ARB Intelligence Sdn. Bhd., ARB AI Agro Sdn. Bhd., ARB Agro Technology Sdn. Bhd., ARB 5G Sdn. Bhd., ARB Big Data Sdn. Bhd., ARB Techsymbol Sdn. Bhd., ARB Logistic Technologies Sdn. Bhd., ARB WMS Technologies Sdn. Bhd., ARB Information Sdn. Bhd. and ARB AI Technology Sdn. Bhd. On May 10, 2022, we acquired ARB R1 Technology Sdn. Bhd. through our Malaysian subsidiary ARB R&D Sdn. Bhd. from ARB Berhad For more information on our Malaysian subsidiaries, see “—Operating Subsidiaries” below.

We operate our business through our indirect subsidiaries in Malaysia. The following diagram illustrates our corporate structure as of the date of this prospectus.

Operating Subsidiaries

ARB Lab Sdn. Bhd. (“ARB Lab”) was incorporated in Malaysia as a private company limited by shares on December 16, 2020, with an issued and paid-up capital of RM1,000,000 comprising one million (1,000,000) ordinary shares. Subsequently, ARB Lab has issued four hundred thousand (400,000) preference shares with an issue price of RM0.001 to Polo Jasa Sdn. Bhd. Consequently, the issued share capital of ARB Lab has increased to RM1,000,400. The principal activities of ARB Lab are research and development of IT and IoT for software and hardware and investment holding.

ARB R&D Sdn. Bhd. (“ARB R&D”) was incorporated in Malaysia as a private company limited by shares on April 2, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. The principal activities of ARB R&D are research & development of IT and IoT related software and hardware and investment holding.

ARB Innovation Sdn. Bhd. (“ARB Innovation”) formerly known as Aberys Innovation Sdn. Bhd. was incorporated in Malaysia as a private company limited by shares on July 5, 2021, with an issued share capital of RM1 comprising one (1) ordinary share. It was acquired by ARB R&D on September 23, 2021. The principal activities of ARB Innovation are providing hardware, software, product development, installation and training to merchant clients.

ARB R1 Technology Sdn. Bhd. (“ARB R1 Technology”) formerly known as ARB Ukmresearch Technology Sdn. Bhd. was incorporated in Malaysia as a private company limited by shares on September 30, 2021, with an issued share capital of RM1 comprising one (1) ordinary share. It was acquired by ARB R&D on May 10, 2022. The principal activities of ARB R1 Technology are research and development on engineering and technology.

ARB AI Sdn. Bhd. (“ARB AI”) was incorporated in Malaysia as a private company limited by shares on February 3, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. The principal activities of ARB AI are management consultancy services and IT services.

ARBIOT Sdn. Bhd. (“ARBIOT”) was incorporated in Malaysia as a private company limited by shares on March 26, 2019, with an issued and paid-up capital of RM100 comprising one hundred (100) ordinary shares. On May 8, 2019 and February 26, 2021, ARBIOT increased its share capital to RM1,009,900 comprising one hundred million (100,000,000) ordinary shares. On December 31, 2021, ARB AI has acquired the remaining 1% equity interest of ARBIOT from ARB Development Sdn. Bhd. Consequently, ARBIOT became a wholly-owned subsidiary of ARB AI. The principal activities of ARBIOT are providing IoT, internet and multimedia development and consultancy services, and project management information control commission and installation, trading, re-energy solution and marketing consultants.

ARB Midware Sdn. Bhd. (“ARB Midware”) was incorporated in Malaysia as a private company limited by shares on February 8, 2021, with an issued and paid-up capital of RM1 comprising of one (1) ordinary share. The principal activities of ARB Midware are information services and management consultancy services.

ARB Distribution Sdn. Bhd. (“ARB Distribution”) was incorporated in Malaysia as a private company limited by shares on July 1, 2020, with an issued and paid-up capital of RM100 comprising of one hundred (100) ordinary shares. It became a 51% owned subsidiary of ARB Midware after ARB Midware acquired 51% interest from ARBIOT on March 2, 2021. The principal activities of ARB Distribution are management consultancy services and information services.

ARB Robotic Sdn. Bhd. (“ARB Robotic”) was incorporated in Malaysia as a private company limited by shares on February 8, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. On June 25, 2021, ARB Robotic increased its paid-up capital to RM100 comprising one hundred (100) ordinary shares whereby ten (10) ordinary shares were allotted to ARB Distribution and eighty-nine (89) ordinary shares were allotted to ARB Digital Technology Sdn. Bhd. Consequently, ARB IOT Group Sdn. Bhd. acquired 90% equity interests from ARB Digital Technology Sdn. Bhd. on October 8, 2021. As a result, ARB IOT Group Sdn. Bhd. now directly holds 90% equity interests, and its 51% owned subsidiary ARB Distribution owns the remaining 10% equity interests of ARB Robotic. The principal activities of ARB Robotic are management consultancy services and IT services.

ARB Intelligence Sdn. Bhd. (“ARB Intelligence”) was incorporated in Malaysia as a private company limited by shares on June 21, 2018 with an issued share capital of RM100 comprising one hundred (100) ordinary shares. On April 13, 2021, ARB Intelligence has increased its share capital to RM1,000 comprising one thousand (1,000) ordinary shares. Subsequently, ARB Intelligence became a wholly-owned subsidiary of ARB Robotic after ARB Intelligence was acquired by ARB Robotic on July 8, 2021 for 100% of its equity interests. The principal activities of ARB Intelligence are providing information services and management consultancy services.

ARB AI Agro Sdn. Bhd. (“ARB AI Agro”) was incorporated in Malaysia as a private company limited by shares on May 18, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. The principal activities of ARB AI Agro are investment holding and IT services.

ARB Agro Technology Sdn. Bhd. (“ARB Agro Tech”) formerly known as Digital Agrophonic Sdn. Bhd. was acquired by ARB AI Agro on June 3, 2021 for 90% of its equity interests. On October 12, 2021, ARB AI Agro acquired the remaining 10% equity interests of ARB Agro Tech. Consequently, ARB Agro Tech became a wholly-owned subsidiary of ARB AI Agro. ARB Agro Tech was incorporated in Malaysia as a private company limited by shares on May 27, 2021, with an issued share capital of RM1,000 comprising of one thousand (1,000) ordinary shares. The principal activities of ARB Agro Tech are providing investment holding and IT services.

ARB 5G Sdn. Bhd. (“ARB 5G”) was incorporated in Malaysia as a private company limited by shares on March 10, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. On December 20, 2021, ARB 5G increased its share capital to RM100 comprising one hundred (100) ordinary shares. The principal activities of ARB 5G are management consultancy services and IT services.

ARB Big Data Sdn. Bhd. (“ARB Big Data”) was incorporated in Malaysia as a private company limited by shares on June 22, 2021, with an issued and paid-up capital of RM1 comprising of one (1) ordinary share. The principal activities of ARB Big Data are IT services and information services.

ARB Techsymbol Sdn. Bhd. (“ARB Techsymbol”) was incorporated in Malaysia as a private company limited by shares on February 8, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. On October 8, 2021, ARB IOT Group Sdn. Bhd. has acquired the entire equity interest from ARB Digital Technology Sdn. Bhd. The principal activities of ARB Techsymbol are IT services and management consultancy services.

ARB Logistic Technologies Sdn. Bhd. (“ARB Logistic Technologies”) was incorporated in Malaysia as a private company limited by shares on January 25, 2021, with an issued and paid-up capital of RM100,000 comprising one hundred thousand (100,000) ordinary shares. Subsequently, ARB Logistic Technologies became 51% owned subsidiary of ARB Techsymbol on February 22, 2021 after acquiring 51% equity interest from ARB Digital Technology Sdn. Bhd. It became a wholly-owned subsidiary of ARB Techsymbol after ARB Techsymbol acquired the remaining 49% equity interests on July 12, 2021 from BCSSoft Sdn. Bhd. The principal activities of ARB Logistic Technologies are information services and management consultancy services.

ARB WMS Technologies Sdn. Bhd. (“ARB WMS Technologies”) formerly known as Bluewave WMS Technologies was incorporated in Malaysia as a private company limited by shares on July 6, 2021, with an issued share capital of RM1 comprising of one (1) ordinary share. On August 12, 2021, ARB WMS Technologies increased its issued share capital of RM100,000 comprising of one hundred thousand (100,000) ordinary shares whereby fifty one thousand (51,000) ordinary shares were allotted to ARB Techsymbol for 51% of its equity interests. The principal activities of ARB WMS Technologies are providing IT services and investment holding.

ARB Information Sdn. Bhd. (“ARB Information”) was incorporated in Malaysia as a private company limited by shares on March 14, 2022, with an issued and paid-up capital of RM1 comprising of one (1) ordinary share. The principal activities of ARB Information are providing IT services and investment holding.

ARB AI Technology Sdn. Bhd. (“ARB AI Technology”) was incorporated in Malaysia as a private company limited by shares on March 16, 2022, with an issued and paid-up capital of RM1 comprising of one (1) ordinary share. The principal activities of ARB AI Technology are providing IT services and investment holding.

INDUSTRY

Information included in this prospectus relating to our industry, industry size, share of industry sales, industry position, industry capacities, industry demand, growth rates, penetration rates, and other industry data consists of estimates based on reports compiled by professional third-party organizations and analysts, data from external sources, our knowledge of our sales and the industry in which we operate, and our own calculations based on such information. While we have compiled, extracted, and reproduced industry data from external sources, including third-party, industry, or general publications, we have not independently verified the data. Similarly, while we believe our management estimates to be reasonable, they have not been verified by any independent sources. Forecasts and other forward-looking information with respect to industry and ranking are subject to the same qualifications and additional uncertainties regarding the other forward-looking statements in this prospectus.

Among others, we refer to estimates compiled by using publicly available data from the following industry sources:

IoT Market Opportunity in Malaysia

IoT, or Internet of Things, is a convergence of smart devices that generate data through sensors to create new information and knowledge to boost human intelligence, efficacy and productivity to enhance the quality of life. It is a complex yet complete solution encompassing three main technology components: (i) connected things with embedded sensors, (ii) connectivity and infrastructure, and (iii) most importantly, analytics and applications.

Source: National IoT Strategic Roadmap: A Summary

According to Aziz & Nasir [2020], Malaysia is one of the countries that are in the development stage as to IoT technology adoption but is comparable to other countries with growing IoT applications. Malaysia is also one of the few Southeast Asian countries that possess the infrastructure requisite for IoT adoption. The Malaysian government released the National Internet of Things (IoT) Strategic Roadmap in 2015 with the goals of enabling the proliferation of use and industrialization of IoT as a new source of economic growth and making Malaysia the premier regional IoT development hub.

Source: National IoT Strategic Roadmap: A Summary

According to the National IoT Strategic Roadmap, the initial IoT economic potential for Malaysia will be RM9.5 billion GNI creation by 2020 and it is expected to experience exponential growth beyond 2020 and reach RM42.5 billion. Technology opportunities can be created by IoT in Malaysia with forecast technology opportunities for, for example, application and services amounting to RM34 billion in 2025 compared to RM7.5 billion for 2020, and device producers at RM1.0 billion and RM4.3 billion for years 2020 and 2025, respectively. The chart below presents forecasts of IoT technology opportunities globally and in Malaysia across the value chain for years 2020 and 2025, respectively.

Source: National IoT Strategic Roadmap: A Summary

The National IoT Strategic Roadmap concludes that IoT will be the transformative and pervasive driver of change and improvement by potentially adding new dimensions to the industry in the following ways:

The National IoT Strategic Roadmap observes that Malaysia has an encouraging environment and a strong starting point to foster and spur IoT within the domestic market due to the following: