聯合 國

證券 交易委員會

華盛頓， 特區20549

形式 20-F

（馬克 一）

☐ 根據1934年《證券交易所法》第12（b）或（g）條的登記聲明

或

☒ 根據1934年《證券交易所法》第13或15（d）條提交的年度報告

為 日終了的財政年度 六月30, 2024

或

☐ 根據1934年《證券交易所法》第13或15（d）條提交的過渡報告

或

☐ 殼牌公司根據1934年《證券交易所法》第13或15（d）條報告

日期 需要該空殼公司報告的事件_

為 從_

委員會檔案編號 333-269043

證券 根據該法案第12（b）條登記或即將登記：

證券 根據該法案第12（g）條登記或即將登記：

證券 根據該法案第15（d）條有報告義務的：

指定每股已發行股份的數量 截至年度報告涵蓋期間結束時發行人的資本或普通股類別。截至2024年6月30日， 有16，000，000股已發行普通股，每股面值0.000625美金。

指示 如果註冊人是《證券法》第405條規定的知名經驗豐富的發行人，則勾選標記。

☐ 是的 沒有

如果 本報告為年度報告或過渡報告，如果註冊人無需根據第節提交報告，則用複選標記表示 1934年證券交易法第13或15（d）條。

☒ 是的 否

注意 - 勾選上述方框不會免除任何根據證券第13或15（d）條提交報告的登記人的負擔 1934年《交易法》免除其在這些條款下的義務。

指示 勾選註冊人（1）是否已提交證券交易所第13或15（d）條要求提交的所有報告 過去12個月內的1934年法案（或要求登記人提交此類報告的較短期限內），和（2） 在過去90天內一直遵守此類提交要求。

☒ 是的 否

指示 檢查註冊人是否已以電子方式提交了根據規則需要提交的所有交互數據文件 S-t法規第405條（本章第232.405條）在過去12個月內（或註冊人 被要求提交此類文件）。

☒ 是的 否

指示 通過勾選註冊人是大型加速文件管理者、加速文件管理者、非加速文件管理者還是新興增長者 公司請參閱「大型加速文件夾」、「加速文件夾」和「新興成長型公司」的定義 在《交易法》第120條第2款中。

如果 一家根據美國公認會計原則編制財務報表的新興成長型公司，通過勾選標記表明註冊人是否 已選擇不使用延長的過渡期來遵守任何新的或修訂的財務會計準則 * 根據《交易法》第13（a）條。 ☐

指示 檢查註冊人是否已提交其管理層對其有效性評估的報告和證明 根據《薩班斯-奧克斯利法案》（15 USC）第404（b）條對其財務報告的內部控制7262（b）由註冊人 編制或出具審計報告的公共公證事務所。 ☐

如果 證券是根據該法案第12（b）條登記的，通過複選標記表明登記人的財務報表是否 文件中包含的內容反映了對之前發布的財務報表錯誤的更正。 ☐

指示 勾選這些錯誤更正是否是需要對基於激勵的薪酬進行恢復分析的重述 根據§240.10D-1（b），註冊人的任何執行官員在相關恢復期內收到。☐

指示 勾選註冊人使用的會計基礎來編制本文件中包含的財務報表：

如果 針對上一個問題已勾選「其他」，通過勾選標記指明哪個財務報表項目 註冊人已選擇遵循。

項目 17項目18

如果 這是一份年度報告，通過勾選標記表明註冊人是否為空殼公司（定義見交易所規則120第2條 法案）。

☐ 是的 ☒ 沒有

（適用 僅針對過去五年內參與銀行破產程式的發行人）

指示 勾選註冊人是否已提交證券第12、13或15（d）條要求提交的所有文件和報告 根據法院確認的計劃分配證券後的1934年交易法。

☐ 是的否

表 內容

居間

除非文意另有所指，以下措辭應 具有以下含義。

在 除非另有說明或上下文另有要求，本報告，

前瞻性 信息

這 年度報告包含涉及重大風險和不確定性的前瞻性陳述。在某些情況下，您可以識別具有前瞻性 「可能」、「可能」、「將」、「可以」、「會」、「會」、「應該」等詞語的陳述 「期望」、「意圖」、「計劃」、「目標」、「預期」 「相信」、「估計」、「預測」、「潛力」、「繼續」和「正在進行」， 或這些術語的否定，或其他旨在識別有關未來的陳述的類似術語。這些陳述涉及 已知和未知的風險、不確定性和其他可能導致我們實際結果、活動水平、績效的重要因素 或成就與這些前瞻性陳述所表達或暗示的信息存在重大差異。前瞻性 本年度報告中包含的陳述和意見基於截至本年度報告日期我們掌握的信息 並且，雖然我們相信此類信息構成此類聲明的合理基礎，但此類信息可能是有限的或不完整的，並且 我們的聲明不應被解讀為表明我們已經對所有可能可用的內容進行了詳盡的調查或審查 相關信息前瞻性陳述包括有關以下方面的陳述：

你 應參閱標題為 「第3項。關鍵信息- D。風險因素」 討論重要的問題 可能導致我們的實際結果與我們前瞻性陳述中表達或暗示的結果存在重大差異的因素。作為 由於這些因素，我們無法向您保證本年度報告中的前瞻性陳述將被證明是準確的。 此外，如果我們的前瞻性陳述被證明不準確，則不準確可能是重大的。鑑於重大不確定性 在這些前瞻性陳述中，您不應將這些陳述視為我們或任何其他人的陳述或保證 我們將在任何指定的時間範圍內或根本實現我們的目標和計劃。我們沒有義務公開更新任何 前瞻性陳述，無論是由於新信息、未來事件還是其他原因，除非法律要求。

部分 我

項目 1.董事、高級管理人員和顧問的身份

不 適用因

項目 2.報價統計數據和預計時間表

不 適用因

項目 3.密鑰信息

A. 精選財務數據

的 下表列出了我們公司的選定合併財務信息。我們的歷史結果並不一定表明 未來任何時期的預期結果。所選合併財務數據應與之一起閱讀，並符合條件 參考我們的經審計合併財務報表和相關附註全文，以及 「第5項。操作和 財務回顧與展望」 下面我們的經審計綜合財務報表是根據以下標準編制和列報的 符合美國公認會計原則。

的 合併經營和現金流量表摘要

的 截至2023年和2024年6月30日的合併資產負債表摘要

我們 管理層相信，我們財務報表和上述分配的假設是合理的。我們的金融 然而，報表可能不一定反映我們的經營結果、財務狀況和現金流，就好像我們經營的那樣 在所述期間是一家獨立的獨立公司。您不應該將我們的歷史結果視為我們未來的指標 性能

B. 資本化和負債。

不 適用因

C. 提供和使用收益的原因。

不 適用因

D. 危險因素

一個 投資我們的普通股涉及高度風險。您應該仔細考慮以下有關這些的信息 在決定投資我們的普通股之前，請了解風險以及本年度報告其他地方出現的其他信息。 以下任何風險的發生可能會對我們的業務、財務狀況、經營運績產生重大不利影響 以及未來的增長前景。在這種情況下，我們普通股的市場價格可能會下跌，您可能會損失全部或部分 你的投資。

風險 與中華人民共和國、香港、台灣和澳門有關

實質性 中國政府政治經濟政策以及中國法律法規的不確定性和限制 可能會對我們在中國可能開展的業務以及相應的運營運績產生重大影響 和財務狀況。

Galaxy Payroll Group Limited是一家控股公司，通過我們位於香港、中國大陸、澳門和台灣的子公司提供薪資 外包和就業服務。由於我們的大部分業務位於中國和香港，經濟、政治 中國的法律發展將對我們的業務、財務狀況、經營運績和前景產生重大影響。

我們的 商業運作可能會受到中國當前和未來政治環境的不利影響。中國政府施加了 對我們必須進行商業活動的方式有實質性的影響和控制。我們在中國的運營能力可能會 受到中國法律法規變化的不利影響。在本屆政府領導下，中華人民共和國政府 一直在推行改革政策，這些政策對中國的運營公司產生了不利影響，這些公司的證券在美國上市 在沒有事先通知的情況下，不時作出重大的政策變動。有很大的不確定性，關於 中華人民共和國法律法規的解釋和適用。直到1979年以後，中國政府才開始頒佈全面的 規範經濟事務的法律體系通俗易懂，處理經濟事務鼓勵外商投資中國。雖然 法律的影響力一直在增加，中國沒有制定出完全完整的法律體系，最近又制定了法律法規 可能不足以涵蓋中國經濟活動的方方面面。另外，因為這些法律法規比較新， 由於公佈的案例數量有限，而且缺乏作為先例的效力，這些法律的解釋和執行 而監管涉及重大不確定性。影響現有和擬議中的未來企業的新法律法規也可能 可追溯適用。此外，在過去的30年裡，法律法規不斷變化和修改 為了跟上中國快速變化的社會和經濟。因為政府機構和法院提供解釋 法律法規和裁決合同糾紛和問題，他們在裁決新業務和新政策方面缺乏經驗，或 某些欠發達地區的法規會帶來不確定性，並可能影響我們的業務。因此，我們不能預測未來。 中國對外商投資企業的立法活動方向或執法效力 中國的法律法規。不確定性，包括新的法律和條例以及現有法律的變化以及司法 在某些領域，機構和法院中缺乏經驗的官員進行解釋，可能會給外國投資者帶來可能的問題。 此外，法律執行方面的不確定性以及中國的規章制度可能很快就會改變 在幾乎沒有事先通知的情況下，以及中國政府可能隨時幹預或影響我們的運營的風險，或者 可能對在海外進行的發行施加更多控制和/或外國投資中國的發行人可能會導致實質性的 改變我們的運營、財務業績和/或我們普通股的價值，否則會削弱我們籌集資金的能力。儘管 中國政府二十多年來一直推行經濟改革政策，中國政府繼續實施重大的 通過資源配置、控制外幣支付、制定貨幣政策來控制中國的經濟增長 政策和實施以不同方式影響特定行業的政策。我們不能向您保證中華人民共和國政府將繼續 實行有利於市場經濟的政策，或者現行政策不會有太大變化，特別是在 發生領導層更迭、社會或政治動亂或其他影響政治、經濟和社會生活的情況 在中國。中國法律法規的任何不利變化以及中國政府的重大監督和自由裁量權 可能會大大限制或完全阻礙我們提供或繼續提供證券的能力 並導致我們的證券價值大幅下降或一文不值，我們還可能產生物質成本，以確保 合規，將被罰款，並不再被允許繼續我們目前的業務運營。

那裡 中國和香港法律、規則和法規的解釋和執行存在不確定性。

一 我們的大部分業務在香港進行，主要受香港法律、規則和法規管轄。 香港的法律制度是普通法制度，以英國普通法、本地判例和本地法相結合為基礎 立法然而，我們位於香港的子公司可能會受到適用於外國的法律、規則和法規的約束 對中國的投資。中華人民共和國法律體系是以成文法為基礎的大陸法律體系。與普通法制度不同，先前法院 決定可以引用以供參考，但先例價值有限。這些法律法規有時很模糊，甚至可能 這取決於未來的變化，而且它們的官方解釋和執行可能在很少提前通知的情況下是不可預測的， 這可能導致我們的運營和/或普通股價值發生重大變化。

在 1979年，中華人民共和國政府開始頒布一套全面的經濟法律、法規和法規體系。 過去三十年立法的總體效果顯著加強了對各種形式的保護 外國投資中國。然而，中國尚未建立起完全完整的法律體系，最近頒布了法律、法規和 法規可能不足以涵蓋中國經濟活動的所有方面，或者可能受到很大程度的解釋 由中國監管機構執行。特別是，因為這些法律、規則和法規相對較新，而且由於有限 已發布的決定的數量以及此類決定的不具約束力性質，並且因為法律、規則和法規經常給予 相關監管機構在如何執行、解釋和執行這些法律、規則和法規方面擁有重大自由裁量權 涉及不確定性，並且可能不一致和不可預測。此外，中國法律體系部分基於政府政策 以及內部規則，其中一些規則沒有及時發布或根本沒有發布，並且可能具有追溯力。結果， 直到違規行為發生後，我們可能才會意識到我們違反了這些政策和規則。

任何 中國的行政和法院訴訟可能會曠日持久，導致巨額成本以及資源和管理的轉移 關注由於中華人民共和國行政和法院當局在解釋和實施法定和 合同條款，評估行政和法院訴訟的結果以及法律保護水平可能會更加困難 我們比更發達的法律體系更享受。

不良 中國的監管發展可能會使我們接受額外的監管審查、額外的披露要求和監管 美國證券交易委員會為應對與中國最近監管發展相關的風險而採取的審查可能會強制執行額外的合規性 對像我們這樣在中國開展業務的公司的要求，所有這些都可能增加我們的合規成本，並使我們承擔額外的費用 披露要求。

的 中國最近的監管動態，特別是對中國公司離岸融資的限制， 可能會導致中國對我們在美國的融資和融資活動進行額外的監管審查。此外， 我們可能會受到中國相關當局可能採用的全行業法規的約束，這些法規可能具有限制的效果 我們在中國的業務範圍，或導致我們在中國的業務運營完全暫停或終止，所有這些 將對我們的業務、財務狀況和運營運績產生重大不利影響。我們可能必須調整、修改或完全 為了應對不利的監管變化或政策發展而改變我們的業務運營，我們無法向您保證任何補救措施 我們採取的行動可以及時、具有成本效益或不負責任的方式完成，甚至完全可以完成。

對 2021年7月30日，為了應對中國近期的監管動態和中國政府採取的行動，主席 美國證券交易委員會發表聲明，要求美國證券交易委員會工作人員尋求與中國業務相關的離岸發行人的更多披露 公司的註冊聲明將被宣布生效。2021年8月1日，中國證券監督管理委員會 在一份聲明中表示，已注意到美國證券交易委員會宣布的有關中國人上市的新披露要求 公司和中國最近的監管發展，兩國應加強有關中國監管的溝通 發行人。我們無法保證我們不會受到更嚴格的監管審查，也可能受到政府干預 在中國

合規 中國新的數據安全法、網絡安全審查辦法、個人信息保護法、法規和指南 與多層次保護計劃和任何其他未來法律和法規相關可能會產生大量費用，並且可能會產生重大影響 影響我們的業務。

最近，中國領導的網信辦對幾家中國互聯網採取了行動 涉嫌國家安全風險和不當行為的公司在美國證券交易所進行首次公開募股 收集和使用中文數據主體的個人資訊。根據官方公告，這一行動是由 以《國家安全法》、《網路安全法》和《網路安全審查辦法》為依據，旨在 國家數據安全風險，維護國家安全，維護公共利益。2021年12月28日，網路空間 中國等部門發佈了《網路安全審查辦法》，自2022年2月15日起施行。 《網路安全審查辦法》進一步重申和擴大了現行網路安全審查的適用範圍。根據 網路安全審查措施，採購互聯網產品和服務以及網路的關鍵資訊基礎設施運營商 從事數據處理活動的平臺運營商，如果其活動影響或可能 影響國家安全。《網路安全審查辦法》進一步規定，網路平臺經營者持有個人資訊 超過100萬的用戶必須在外國上市前向網路安全審查辦公室申請網路安全審查。

作為 截至本報告發布之日，我們認為我們目前不屬於持有超過 一百萬用戶，如上所述。然而，由於法律、法規或政策的可能性，不確定性仍然存在 中國未來可能會迅速變化。中國政府未來擴大行業和公司類別的任何行動 其境外證券發行須接受中國網際網路信息管理局審查的，可能會大幅限制或完全限制 阻礙我們向投資者提供或繼續提供證券的能力，並可能導致此類證券的價值大幅下跌 衰落或一文不值。

另外， 2021年8月20日，全國人大通過了個人資訊保護法，自11月1日起施行， 2021年。該法律制定了一套適用於個人資訊處理的全面的數據隱私和保護要求 並將遵守數據保護的義務擴展到組織和個人對個人個人資訊的處理 在中國，以及在中國以外的人的個人資訊的處理，如果這種處理的目的是提供 向中國中的人提供產品和服務，或者分析和評估其行為。該法律還建議，關鍵資訊 處理滿足待設置的數量閾值的個人資訊的基礎設施運營商和個人資訊處理實體 中國網路空間監管機構還要求將中國產生或收集的個人資訊存儲在中國中，並通過 由中國網路空間監管機構對此類個人資訊的任何出口進行的安全評估。最後，個人 《資訊保護法》規定，嚴重違規的，處以最高5,000元人民幣的萬或年收入的5%的巨額罰款 前一年。

解讀， 這些法律、規章制度的適用和執行不時發生變化，其範圍可能不斷變化， 通過新的立法、對現有立法的修訂和執法方面的改變。遵守《網路安全法》和 數據安全法可能會顯著增加我們提供服務的成本，需要對我們的 或甚至阻止我們在我們目前開展業務或我們所在的司法管轄區提供某些服務 可能會在未來運作。儘管我們努力遵守適用的法律、法規和其他與隱私有關的義務， 在數據保護和資訊安全方面，我們的做法、產品或平臺可能無法滿足所有要求 《網路安全法》、《數據安全法》和/或相關實施條例強加於我們。我方未能遵守的任何事項 或與隱私、數據保護或資訊安全有關的任何其他義務，或任何妥協 導致未經授權訪問、使用或發佈個人身分資訊或其他數據的安全性，或 或聲稱發生了上述任何類型的失敗或妥協，可能會損害我們的聲譽，阻礙新的和 現有交易對手不得與我們簽約，或導致中國政府進行調查、罰款、停職或其他處罰 當局和私人索賠或訴訟，其中任何一項都可能對我們的業務、財務狀況和業績產生實質性的不利影響 行動計劃。即使我們的做法不會受到法律挑戰，對隱私問題的看法，無論是否合理，也可能 損害我們的聲譽和品牌，並對我們的業務、財務狀況和經營結果產生不利影響。此外，法律上的不確定性 《數據安全法》和中國政府最近的行動可能會對我們的能力產生實質性的不利影響，對我們有利 條款，以籌集資金，包括參與我們的證券在美國市場的後續發行。

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The recent joint statement by the SEC, proposed rule changes submitted by Nasdaq, and an act passed by the U.S. Senate and the U.S. House of Representatives all call for additional and more stringent criteria to be applied to emerging market companies. These developments could add uncertainties to our offering, business operations, share price, and reputation.

U.S. public companies with substantially all of their operations in China (including in Hong Kong) have been the subject of intense scrutiny, criticism, and negative publicity by investors, financial commentators, and regulatory agencies, such as the SEC. Much of the scrutiny, criticism, and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies, or a lack of adherence thereto and, in many cases, allegations of fraud.

On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China, reiterating past SEC and PCAOB statements on matters including the difficulty associated with inspecting accounting firms and audit work papers in China and higher risks of fraud in emerging markets and the difficulty of bringing and enforcing SEC, Department of Justice and other U.S. regulatory actions, including in instances of fraud, in emerging markets generally.

On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the HFCA Act.

On May 21, 2021, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in a “Restrictive Market”; (ii) prohibit Restrictive Market companies from directly listing on Nasdaq Capital Market, and only permit them to list on Nasdaq Global Select or Nasdaq Global Market in connection with a direct listing; and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

As a result of this scrutiny, criticism, and negative publicity, the traded stock of many U.S.-listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism, and negative publicity will have on us, our offerings, business, and our share price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected and you could sustain a significant decline in the value of our share.

The enactment of the Law of the PRC on Safeguarding National Security in the Hong Kong Special Administrative Region (the “Hong Kong National Security Law”) could impact our Hong Kong operating subsidiary.

On June 30, 2020, the Standing Committee of the PRC National People’s Congress adopted the Hong Kong National Security Law. This law defines the duties and government bodies of the Hong Kong National Security Law for safeguarding national security and four categories of offenses — secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security — and their corresponding penalties. On July 14, 2020, former U.S. President Donald Trump signed the Hong Kong Autonomy Act (“HKAA”) into law, authorizing the U.S. administration to impose blocking sanctions against individuals and entities who are determined to have materially contributed to the erosion of Hong Kong’s autonomy. On August 7, 2020, the U.S. government imposed HKAA-authorized sanctions on 11 individuals, including the then HKSAR chief executive, Carrie Lam, and, John Lee, who succeeded to HKSAR chief executive on July 1, 2022. On October 14, 2020, the U.S. State Department submitted to relevant committees of Congress the report required under HKAA, identifying persons materially contributing to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.” In July 2021, President Joe Biden warned investors about the risks of doing business in Hong Kong, issuing an advisory saying China’s push to exert more control over Hong Kong threatens the rule of law and endangers employees and data. The HKAA further authorizes secondary sanctions, including the imposition of blocking sanctions, against foreign financial institutions that knowingly conduct a significant transaction with foreign persons sanctioned under this authority. The imposition of sanctions may directly affect the foreign financial institutions as well as any third parties or customers dealing with any foreign financial institution that are targeted. It is difficult to predict the full impact of the Hong Kong National Security Law and HKAA on Hong Kong and companies located in Hong Kong. If our subsidiaries are determined to be in violation of the Hong Kong National Security Law or the HKAA by competent authorities, our business operations could be materially and adversely affected.

If we become subject to the recent scrutiny, criticism, and negative publicity involving U.S.-listed China-based companies, we may have to expend significant resources to investigate and/or defend the matter, which could harm our business operations, our reputation, and could result in a loss of your investment in our Ordinary Shares, in particular if such matter cannot be addressed and resolved favorably.

During the last several years, U.S.-listed companies that have substantially all of their operations in China have been the subject of intense scrutiny by investors, financial commentators, and regulatory agencies. Much of the scrutiny has centered on financial and accounting irregularities and mistakes, lack of effective internal controls over financial reporting, and, in many cases, allegations of fraud. As a result of the scrutiny, the publicly traded stock of many U.S.-listed Chinese companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or SEC enforcement actions that are conducting internal and/or external investigations into the allegations.

If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and/or defend the Company. Such investigations or allegations would be costly and time consuming and likely would distract our management from our normal business and could result in our reputation being harmed. Our stock price could decline because of such allegations, even if the allegations are false.

A downturn in the Hong Kong, China, or the global economy, or a change in economic and political policies of China, could materially and adversely affect our business and financial condition.

Our business may be influenced to a significant degree by political, economic, and social conditions in Hong Kong and China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange, and allocation of resources. While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but they may have a negative effect on us.

Economic conditions in Hong Kong and China are sensitive to global economic conditions. Any prolonged slowdown in the global or Chinese economy may affect potential clients’ confidence in financial market as a whole and have a negative impact on our business, results of operations, and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.

Because our business is conducted in Hong Kong dollars and the price of our Ordinary Shares is quoted in U.S. dollars, changes in currency conversion rates may affect the value of your investments.

Our business is conducted in Hong Kong through our operating subsidiary; our books and records are maintained in Hong Kong dollars, which is the currency of Hong Kong; and the financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars. Changes in the exchange rate between the Hong Kong dollar and U.S. dollar affect the value of our assets and the results of our operations in U.S. dollars. The value of the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the Hong Kong’s political and economic conditions and perceived changes in the economy of Hong Kong and the United States. Any significant revaluation of the Hong Kong dollar may materially and adversely affect our cash flows, revenue, and financial condition. Further, our Ordinary Shares offered are denominated in U.S. dollars, and we will need to convert the net proceeds we receive into Hong Kong dollar in order to use the funds for our business. Changes in the conversion rate between the U.S. dollar and the Hong Kong dollar will affect that amount of proceeds we will have available for our business.

Since 1983, Hong Kong dollars have been pegged to the U.S. dollars at the rate of approximately HKD7.80 to US$1.00. We cannot assure you that this policy will not be changed in the future. If the pegging system collapses and Hong Kong dollars suffer devaluation, the Hong Kong dollar cost of our expenditures denominated in foreign currency may increase. This would in turn adversely affect the operations and profitability of our business.

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

During the years ended June 30, 2024, 2023 and 2022, we also operate our business in Hong Kong, Taiwan and Macau. Any adverse changes in the economic, political, legal and social conditions of Hong Kong, Taiwan and Macau may lead to an adverse impact on the demand for our services and may result in deteriorating financial performance of our Group.

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

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

The Hong Kong legal system embodies uncertainties that could limit the availability of legal protections.

Hong Kong is a Special Administrative Region of the PRC. Following British colonial rule from 1842 to 1997, China assumed sovereignty under the “one country, two systems” principle. The Hong Kong Special Administrative Region’s constitutional document, the Basic Law, ensures that the current political situation will remain in effect for 50 years. The laws previously in force in Hong Kong, that is, the common law, rules of equity, ordinances, subordinate legislation and customary law are maintained. Hong Kong has enjoyed the freedom to function with a high degree of autonomy for its affairs, including currencies, immigration and customs operations, and its independent judiciary system and parliamentary system. On July 14, 2020, the United States signed an executive order to end the special status enjoyed by Hong Kong post-1997. As the autonomy currently enjoyed may be compromised, it could potentially impact Hong Kong’s common law legal system and may, in turn, bring about uncertainty in, for example, the enforcement of our contractual rights. This could, in turn, materially and adversely affect our business and operations. Additionally, intellectual property rights and confidentiality protections in Hong Kong may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the Hong Kong legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with our clients.

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

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

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

Exchange rate fluctuations between the U.S. dollar and the Hong Kong dollar, as well as inflation in Hong Kong may negatively affect our earnings. A portion of our revenues and expenses are denominated in U.S. dollars. However, a significant portion of the expenses associated with our subsidiaries’ Hong Kong operations, including facilities-related expenses, are incurred in Hong Kong dollars, and personnel-related expenses are expected to be incurred in Hong Kong dollars. Consequently, inflation in Hong Kong will have the effect of increasing the dollar cost of our operations in Hong Kong, unless it is offset on a timely basis by a devaluation of the Hong Kong dollar, as applicable, relative to the U.S. dollar. We cannot predict any future trends in the rate of inflation in Hong Kong or the rate of devaluation of the Hong Kong dollar, as applicable, against the U.S. dollar. In addition, we are exposed to the risk of fluctuation in the value of the Hong Kong dollar vis-a-vis the U.S. dollar. While the Hong Kong government has continued to pursue a fixed exchange rate policy, with the Hong Kong dollar pegged at approximately HKD7.80 to $1.00, we cannot assure you that such policy will be maintained. Any significant appreciation of the Hong Kong dollar against the U.S. dollar would cause an increase in our Hong Kong dollar expenses, as applicable, as recorded in our U.S. dollar denominated financial reports, even though the expenses denominated in Hong Kong dollars, as applicable, will remain unchanged. In addition, exchange rate fluctuations in currency exchange rates in countries or areas other than Hong Kong where we operate and do business may also negatively affect our earnings.

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

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

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

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

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

Risks Related to Our Corporate Structure

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

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

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

According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. Dividends cannot be paid out of share capital.  Under the current practice of the Inland Revenue Department of Hong Kong, no tax is payable in Hong Kong in respect of dividends paid by us. 

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

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

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

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

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

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

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

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

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

Risks Related to Our Business and Industry

We have a concentrated customer base and any decrease in the number of projects with our major customers would adversely affect our operations and financial results.

For the years ended June 30, 2024, 2023 and 2022, a significant portion of our revenue was derived from a small number of customers. Our five largest customers accounted for approximately HKD22.0 million (US$2.8 million), HKD22.5 million (US$2.9 million) and HKD28.0 million (US$3.6 million), representing approximately 73.0%, 71.4% and 59.7% of our revenue for the same periods, respectively.

There is no assurance that our major customers will continue to engage us for the provision of our payroll outsourcing services, employment services and consultancy and market research services and/or increase their demand for our services in the future. If there is any significant decrease in the number and scale of engagements awarded by such customers, our financial condition and operating results would be materially and adversely affected. Furthermore, in the event that our major customers experience any liquidity problems, the business, financial position and prospects of our Group may be materially and adversely affected. We cannot guarantee that we will be able to diversify our customer base by obtaining a significant number of new projects from our existing and potential customers.

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

Our customers include both enterprises and individuals. A limited number of our major customers, however, have contributed a significant portion of our revenues in the past. As of June 30, 2024, four customers accounted for 29.0%, 23.5%, 21.0% and 18.5%, respectively, of the Group’s total accounts receivable. As of June 30, 2023, our top three customers accounted for 39.5%, 26.7% and 18.2%, respectively, of the Group’s total accounts receivable. For the year ended June 30, 2024, three major customers accounted for 23.3%, 22.1% and 12.8% of the Group’s total revenues. For the year ended June 30, 2023, our top three major customers accounted for 36.4%, 14.7% and 13.4%, respectively, of the Group’s total revenues. For the year ended June 30, 2022, our top two major customers accounted for 28.2% and 10.6%, respectively, of the Group’s total revenues Although we continually seek to diversify our customer base, we cannot assure you that the proportion of the revenue contribution from these customers to our total revenues will decrease in the near future. Dependence on a limited number of major customers will expose us to the risks of substantial losses and extend the turnover days if any of them reduces or even ceases business collaborations with us.

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

A limited number of our major vendors, however, have contributed a significant portion of our supplies in the past. As of June 30, 2024 and 2023, our top vendor accounted for 100% of the Group’s total account payable. For the years ended June 30, 2024, 2023 and 2022, our top vendor accounted for 34.4%, 37.9% and 54.3% of the Group’s total in-country partner costs, respectively. We will actively expand our suppliers base, but for now we still depend on a limited number of major vendors and will expose us to the risks of substantial losses and extend the turnover days if any of them reduces or even ceases business collaborations with us.

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

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

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

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

The Major In-country Partner accounted for over 34%, 35% and 50% of our in-country partner costs throughout the year ended June 30, 2024, 2023 and 2022, respectively. Any deterioration, termination of relationship or change of service offerings from The Major In-country Partner may adversely affect our business and results of operations.

We have entered into a human resources outsourcing service agreement with the Major In-country Partner for the provision of payroll outsourcing services and employment services by the Major In-country Partner to us in the mainland China. The Major In-country Partner accounted for over 34%, 35% and 50% of our in-country partner costs throughout the year ended June 30, 2024, 2023 and 2022 respectively. In the event that our relationship with the Major In-country Partner deteriorates or terminates, or there is a significant change in scope of services provided by the Major In-country Partner, our business and results of operations may be adversely affected.

 
Our success depends on our key management personnel  

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

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

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

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

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

We may not be able to implement our business plans successfully

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

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

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

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

For the years ended June 30, 2024, 2023 and 2022, our revenue derived from our channel customers accounted for approximately 63.7%, 74.0% and 55.9% of our revenue, respectively. We entered into master service agreements with more than half of our channel customers for the provision of our payroll outsourcing services and employment services. Such agreements do not impose any guaranteed and/or minimum number of employees of our end-users for our payroll outsourcing services, or the minimum number of employees to be seconded by us. In the event, among others, that (i) our Group becomes the subject of a resolution or petition of winding-up; (ii) we are unable or are deemed unable or admit inability to pay our debts when they fall due; or (iii) any of our executive Directors is being charged or convicted of any criminal offence, the agreements may be terminated without the need of any notice. As such, our channel customers may terminate their master service agreements with immediate effect which will affect the number of end-users engaging us for our payroll outsourcing services and/or employment services, through our channel customers. We may consequently experience unexpected fluctuation of our revenue, and our business and results of operations may be materially and adversely affected.

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

Our revenue decreased by approximately -4% to approximately HKD30.1 million (US$3.9 million) for the year ended June 30, 2024 from HKD31.5 million (US$4.0 million) for the year ended June 30, 2023. Our net income decreased by approximately -39% to approximately HKD5.5 million (approximately US$0.7 million) for the year ended June 30, 2024 from approximately HKD9.0 million (approximately US$1.1 million) for the year ended June 30, 2023, which was primarily attributable to an increase in cost of revenues by HKD0.9 million (US$0.1 million), or 7%, and an increase in selling, general and administration expenses by HKD0.9 million (US$0.1 million), or 11%.

Our revenue may decline for an array of reasons, including failure to retain our existing customers and/or attract new customers, intensified market competition, slowdown in the growth of the overall payroll outsourcing service market and the employment service market and any unfavorable changes in government policies with respect to the payroll outsourcing service market and employment service market or the general economic conditions in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia or other Asian countries. Therefore, historical figures for our financial performance are reflective of our past performance only and may not necessarily be indicative of our financial performance in the future. We cannot assure you that there is a positive trend for our business prospects. We may not achieve comparable or higher level of financial performance in the future as we achieved during June 30, 2024, 2023 and 2022.

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

We have been conducting business in the payroll outsourcing service industry and the employment service industry for more than nine years. We recorded revenue of approximately HKD30.1 million, HKD31.5 million and HKD46.9 million (approximately US$3.9 million, US$4.0 million and US$6.0 million), respectively, and net income of approximately HKD5.5 million, HKD9.0 million and HKD22.6 million (approximately US$0.7 million, US$1.1 million and US$2.9 million), respectively, for the years ended June 30, 2024, 2023 and 2022, respectively. The sustainability of our revenue and profit will depend on the ability to maintain our competitiveness in the payroll outsourcing service industry and employment service industry through providing high quality services.

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

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

As of June 30, 2024, 2023 and 2022, we had 6, 7 and 4 seconded employees in Hong Kong, 63, 37 and 11 seconded employees in Taiwan and 3, 3 and 6 seconded employees in Macau employed by our Group directly, respectively. The seconded employees work for and are under the supervision of our end-users during the employment period but they remain as our employees pursuant to the employment contracts entered into between the seconded employees and us. As such, we may be vicariously liable for their acts or omissions while they carry out or purport to carry out the respective responsibilities entrusted to them by our end-users. Vicarious liability refers to the liability of a person for the tort committed by another person, for example, an employer would be liable for the acts and omissions of its employees even if the employer has not personally committed such acts and omissions. When providing employment services directly as our seconded employees’ employers of record, we may also be exposed to the following risks:

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

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

We may distribute dividends by way of cash or by other means that we consider appropriate. As a holding company, we mainly rely on receipt of funds from our Hong Kong subsidiary, Galaxy Payroll (HK) by way of dividends payments for our cash and financing requirements. According to the Companies Ordinance of Hong Kong, a Hong Kong company may only make a distribution out of profits available for distribution or other distributable reserves. In addition, there can be no assurance that in the future the PRC government will not intervene or impose restrictions on Galaxy Payroll (HK)’s ability to transfer or distribute cash/assets to entities outside of Hong Kong, which could result in an inability or prohibition on making transfers or distributions to us and adversely affect our business. A decision to declare and pay any dividends would require the approval of our Board and will be at its discretion. In addition, any final dividend for a financial year will be subject to Shareholders’ approval. During the year ended June 30, 2024, our group declared dividends of approximately HKD9.4 million (US$1.2 million) and paid approximately HKD9.5 million (US$1.2 million). During the year ended June 30, 2023, our group declared dividends of approximately HKD13.8 million (US$1.8 million) and paid approximately HKD9.9 million (US$1.3 million). During the year ended June 30, 2022, our group declared dividends of approximately HKD14.4 million (US$1.8 million) and paid approximately HKD18.9 million (US$2.4 million). Any historical dividend payment should not be regarded as an indication of future dividend policy or our payment of dividends in the future. 

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

We are exposed to credit risk in relation to our accounts receivable from customers. Our accounts receivable amounted to approximately HKD2.6 million and HKD2.2 million (US$0.3 million and US$0.3 million) as of June 30, 2024 and 2023, respectively. Our accounts receivable turnover days were approximately 29 days and 66 days for the years ended June 30, 2024 and 2023, respectively. Our business operations and cash flow are subject to the risk of delay in settlement from our customers. Our customers’ settlement date may be affected by their internal policies and we cannot assure you that our customers will settle in a timely manner. Our effort in strengthening our accounts receivable collection and management may not be effective and we cannot assure you that we will be able to fully recover the outstanding amounts due from our customers, if at all, or that our customers will settle the amounts in a timely manner.

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

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

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

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

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

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

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

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

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

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

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

To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to filing the registration statement, we were a private company with limited accounting personnel and other resources for addressing our internal control over financial reporting. Our management has not completed an assessment of the effectiveness of our internal control over financial reporting and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in connection with the audits of our consolidated financial statements as of June 30, 2024, 2023 and 2022, we and our independent registered public accounting firms identified material weaknesses in our internal control over financial reporting as well as other control deficiencies for the above mentioned periods. As defined in the standards established by the Public Company Accounting Oversight Board (“PCAOB”) of the United States, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to i) inadequate segregation of duties for certain key functions due to limited staff and resources; ii) a lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to formalize key controls over financial reporting and to prepare consolidated financial statements and related disclosures; iii) a lack of independent directors and an audit committee to establish formal risk assessment process and internal control framework; and iv) a lack of an effective control framework in place and critical information technology general controls (“ITGC”) have design deficiencies in areas including logical access, privileged access, IT operations and cybersecurity.

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

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

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

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

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

We operate in a highly competitive market. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An active trading market for our Shares may not be sustained.

Prior to our initial public offering, there has not been a public market for our Ordinary Shares. An active public market for our Shares, however, may not develop or be sustained after the IPO, in which case the market price and liquidity of our Shares will be materially and adversely affected. In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of certain publicly traded companies. Broad market and industry factors may significantly affect the market price of our Ordinary Shares, regardless of our actual operating performance.

In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following any volatility in the price of our Shares, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business. 

The trading price of our Ordinary Shares could be subject to rapid and substantial volatility, which could make it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares and result in substantial losses to the investors.

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares.

The trading prices volatility and wide fluctuations could be due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies. For example, if the trading volumes of our Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Ordinary Shares. This low volume of trades could also cause the price of our Ordinary Shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. The trading performances of other Hong Kong and Chinese companies’ securities after their offerings may affect the attitudes of investors toward Hong Kong-based, U.S.-listed companies, which consequently may affect the trading performance of our Ordinary Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure, or matters of other Hong Kong and Chinese companies may also negatively affect the attitudes of investors toward Hong Kong and Chinese companies in general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are unrelated to our operating performance, which may have a material and adverse effect on the trading price of our Ordinary Shares.

In addition to the above factors, the price and trading volume of our Ordinary Shares may be highly volatile due to multiple factors, including the following:

Any of these factors may result in large and sudden changes in the volume and price at which our Ordinary Shares will trade. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. A decline in the market price of our Ordinary Shares also could adversely affect our ability to issue additional Ordinary Shares and our ability to obtain additional financing in the future. No assurance can be given that an active market in our Ordinary Shares will develop or be sustained. If an active market does not develop, holders of our Ordinary Shares may be unable to readily sell the shares they hold or may not be able to sell their shares at all. 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.

If we fail to meet applicable listing requirements, Nasdaq may delist our Ordinary Shares from trading, in which case the liquidity and market price of our Ordinary Shares could decline.

Even though our Ordinary Shares have been approved for listing on Nasdaq, we cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the applicable listing standards and Nasdaq delists our Ordinary Shares, we and our shareholders could face significant material adverse consequences, including:

The U.S. National Securities Markets Improvement Act of 1996 prevents or pre-empts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because we expect that our Ordinary Shares will be listed on Nasdaq, such securities will be covered securities. Although states are pre-empted from regulating the sale of our securities, this statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulations in each state in which we offer our securities.

Our pre-IPO shareholders will be able to sell their shares subject to restrictions under Rule 144.

Our pre-IPO shareholders may be able to sell their Ordinary Shares pursuant to Rule 144 under the Securities Act. Because these shareholders have paid a lower price per Ordinary Share than participants in our initial public offering, when they are able to sell their pre-IPO shares under Rule 144, they may be more willing to accept a lower sales price than the IPO price. This fact could impact the trading price of the stock following completion of the initial public offering, to the detriment of participants in the initial public offering. Under Rule 144, before our pre-IPO shareholders can sell their shares, in addition to meeting other requirements, they must meet the required holding period.

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

As of the date of this report, our directors, officers, and 5% or greater shareholders hold in aggregate 55.9% or more of our shares.

The interests of these shareholders may not be the same as or may even conflict with your interests. For example, these shareholders could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of us or our assets and might affect the prevailing market price of our Ordinary Shares due to investors’ perceptions that conflicts of interest may exist or arise. As a result, this concentration of ownership may not be in the best interests of our other shareholders.

Our board of directors may decline to register the transfer of Ordinary Shares in certain circumstances.

Our board of directors may under certain circumstances decline to register a transfer including any Ordinary Share which is not fully paid up or on which we have a lien. Further, our board of directors may generally require any shareholder or any person proposing to acquire our shares to provide information to show the right to make the transfer. If any such shareholder or proposed acquirer does not provide such information, or if our board of directors has reason to believe that any certification or other information provided pursuant to any such request is inaccurate or incomplete, our board of directors may delay or decline to register any transfer or to effect any issuance or purchase of shares to which such request is related.

Our directors may also decline to register any transfer of any Ordinary Share unless (i) a fee of such maximum as Nasdaq may from time to time determine to be payable (or such lesser sum as our board of directors may from time to time require) has been paid to our Company; (ii) the instrument of transfer is lodged at the registered office or, as the case may be, the transfer office accompanied by the certificate of the Shares to which it relates, and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do); (iii) the instrument of transfer is in respect of only one class of Share; (iv) the Shares concerned are free of any lien in favor of the Company; and (v) if applicable, the instrument of transfer is properly stamped.

If our directors refuse to register a transfer, they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor was lodged and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

This, however, is unlikely to affect market transactions of the Ordinary Shares purchased by investors in the public offering. Once the Ordinary Shares have been listed, the legal title to such Ordinary Shares and the registration details of those Ordinary Shares in the Company’s register of members will remain with the Depository Trust Company. All market transactions with respect to those Ordinary Shares will then be carried out without the need for any kind of registration by the directors, as the market transactions will all be conducted through the Depository Trust Company systems.

Our management has broad discretion to determine how to use the funds raised in the initial public offering and may use them in ways that may not enhance our results of operations or the price of our Ordinary Shares.

We anticipate that we will use the net proceeds from our initial public offering for our construction business and other corporate purposes. Our management will have significant discretion as to the use of the net proceeds to us from our initial public offering and could spend the proceeds in ways that do not improve our results of operations or enhance the market price of our Ordinary Shares.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

After our initial public offering, we have become subject to the periodic reporting requirements of the Exchange Act. We will design our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

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

We conduct substantially all of our operations in PRC and Hong Kong and substantially all of our assets are located in PRC and Hong Kong. In addition, three executive officers, namely Mr. Lao, Mr. But and Mr. Yeung, and two of our management personnel, namely Ms. Lo and Mr. Wong, live in Hong Kong and their nationalities are Hong Kong. One of our senior managements, namely Mr. Wu, lives in United Kingdom, but his nationality is Hong Kong. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside PRC or Hong Kong. Although the enforcement of a foreign judgment may be enforced in Hong Kong at common law by bringing an action in a Hong Kong court since the judgment may be regarded as creating a debt between the parties to it, direct recognition and enforcement in PRC or Hong Kong of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult, time-consuming, costly or even impossible.

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our Ordinary Share price or trading volume to decline.

If a trading market for our shares develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a new public company, we may be slow to attract research coverage and the analysts who publish information about our Ordinary Shares will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our share price, our share price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our share price or trading volume to decline and result in the loss of all or a part of your investment in us.

You may have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation.

We are an exempted company incorporated under the laws of the British Virgin Islands. Our corporate affairs are governed by the provisions of our Memorandum and Articles of Association, and by the provisions of the [BVI Act] and the common law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary duties of our directors to us under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin 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 British Virgin Islands.

The rights of shareholders and the fiduciary responsibilities of our directors and officers under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law than the British Virgin Islands. In addition, British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Certain corporate governance practices in the British Virgin Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practices with respect to corporate governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

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 management, members of the board of directors, or our Controlling Shareholder 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 and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

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

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

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 will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. Press releases relating to financial results and material events will also be furnished to the SEC 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 adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance matters. Certain corporate governance practices in our home country, the British Virgin Islands, may differ significantly from corporate governance listing standards. Currently, we plan to rely on some home country practices with respect to our corporate governance. However, if we choose to follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

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

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

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

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

We are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than 50% of our Ordinary Shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the Nasdaq rules. As a U.S.-listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting, and other expenses that we will not incur as a foreign private issuer in order to maintain a listing on a U.S. securities exchange.

There can be no assurance that we will not be a PFIC for U.S. federal income tax purposes for any taxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our Ordinary Shares.

A non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income, or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”). Based on our current and expected income and assets (taking into account the cash proceeds and our market capitalization following our initial public offering), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However, no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets. In addition, there can be no assurance that the Internal Revenue Service (“IRS”) will agree with our conclusion or that the IRS would not successfully challenge our position. Fluctuations in the market price of our Ordinary Shares may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of the asset test may be determined by reference to the market price of our Ordinary Shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in our initial public offering. If we were to be or become a PFIC for any taxable year during which a U.S. holder holds our Ordinary Shares, certain adverse U.S. federal income tax consequences could apply to such U.S. holder. See “Material Tax Income Consideration — Material U.S. Federal Income Tax Considerations for U.S. Holders — PFIC Consequences.”

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies, including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley for so long as we remain an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We do not plan to opt out of such exemptions afforded to an emerging growth company. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective data.

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

We will incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30; and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period. 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 Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.

Compliance with these rules and regulations increases our legal and financial compliance costs and makes some corporate activities more time consuming and costly. After we are no longer an “emerging growth company,” or until five years following the completion of our IPO, whichever is earlier, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of Sarbanes-Oxley and the other rules and regulations of the SEC. For example, as a public company, we will be required to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We will incur additional costs in obtaining director and officer liability insurance. 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 are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

Item 4. Information on the Company

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

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

Upon the acquisition of Galaxy Payroll (HK) in 2013, we commenced our business in Hong Kong and entered into contracts for the provision of payroll outsourcing and employment services with our customers. Our customers included (i) channels which are global human resources service providers engaged by companies/organizations to handle payroll and employment related matters for their branch offices in different regions; and (ii) end-users that outsource their payroll or employment functions to us directly. The end-users of our services included mainly multinational companies/organizations engaging in a wide variety of industries. For payroll outsourcing services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the retail and trading, industrial, IT, financial and professional services industries. For employment services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the IT, retail and trading, industrial, professional institution and education and healthcare industries. In the same year, we extended our payroll outsourcing and employment services to the PRC. Starting from July 2021, the Company has offered consultancy and market research services, a majority of our end-users during the year ended June 30, 2022 engaged in the IT, industrial, media, advertising and entertainment, professional services. The Company temporarily ceased the consultancy and market research services since July 2022.

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

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

Our Corporate Developments

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

Our Company

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

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

Melkweg Holdings Limited

Melkweg Holdings Limited was incorporated in the Cayman Islands on October 31, 2019 as an exempted company with members’ limited liability. The initial authorized share capital of Melkweg Holdings Limited is HKD380,000 (US$48,932) divided into 38,000,000 Shares of HKD0.01 (US$0.001) each. Upon incorporation of Melkweg Holdings Limited, on October 31, 2019, it allotted and issued one fully paid share to an initial subscriber, an independent third party, at par value, and was subsequently transferred to JEAN Oceania on October 31, 2019.

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

Melkweg BVI

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

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

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

Galaxy Payroll (HK)

Galaxy Payroll (HK) was incorporated in Hong Kong on February 21, 2013 as a private company limited by shares. Upon its incorporation, Galaxy Payroll (HK) allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held as to 9,999 shares by Mr. Lao and one share by Mr. But. On April 5, 2013, Mr. Lao and Mr. But transferred their respective shares in Galaxy Payroll (HK) to Galaxy (Seychelles), the former holding company of our Group, at a consideration of HKD9,999 (US$1,288) and HKD1 (US$0.13), respectively. The consideration was determined with reference to the nominal value of the shares. Upon completion of the said transfers, the entire issued share capital of Galaxy Payroll (HK) was owned by Galaxy (Seychelles).

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

Galaxy Payroll (TW)

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

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

Galaxy GEO Services

Galaxy GEO Services was incorporated in Hong Kong on February 5, 2013 as a private company limited by shares. Upon its incorporation, Galaxy GEO Services allotted and issued 10,000 Ordinary Shares, all of which were credited as fully paid and were held by the Former Shareholder. On April 5, 2013, the Former Shareholder transferred the 10,000 shares in Galaxy GEO Services to Galaxy (Seychelles), the former holding company of our Group, at a consideration of HKD10,000 (US$1,288). The consideration was determined with reference to the nominal value of the shares. Upon completion of the said transfer, the entire issued share capital of Galaxy Payroll (HK) was owned by Galaxy (Seychelles).

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

Galaxy Payroll (China)

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

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

Galaxy HR (Macau)

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

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

Galaxy HR (TW)

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

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

Galaxy HR (SZ)

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

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

Reorganization

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

1. Incorporation of our Company

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

2. Incorporation of Melkweg Holdings Limited

Melkweg Holdings Limited was incorporated in the Cayman Islands on October 31, 2019 as an exempted company with members’ limited liability. The initial authorized share capital of Melkweg Holdings Limited is HKD380,000 (US$48,932) divided into 38,000,000 Shares of HKD0.01 (US$0.001) each. Upon incorporation of Melkweg Holdings Limited, on October 31, 2019, it allotted and issued one fully paid share to an initial subscriber, an independent third party, at par value, and was subsequently transferred to JEAN Oceania on October 31, 2019.

3. Incorporation of Melkweg BVI

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

4. The subsidiaries of Melkweg BVI

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

Galaxy HR (Macau) is owned as to 98.0% by Galaxy Payroll (HK). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (HK) from Galaxy (Seychelles) at a consideration of HKD8,478,836 (US$1,091,817). The consideration was determined with reference to the net asset value of Galaxy Payroll (HK) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

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

Galaxy HR (TW) is a direct wholly-owned subsidiary of Galaxy Payroll (TW). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (TW) from Galaxy (Seychelles) at a consideration of HKD10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy Payroll (TW) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

C. Galaxy GEO Services

On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy GEO Services from Galaxy (Seychelles) at a consideration of HKD10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy GEO Services as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

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

Galaxy HR (SZ) is a direct wholly-owned subsidiary of Galaxy Payroll (China). On December 12, 2019, Melkweg BVI was issued with 10,000 shares, representing the entire issued share capital of Galaxy Payroll (China) from Galaxy (Seychelles) at a consideration of HKD10,000 (US$1,288). The consideration was determined with reference to the paid-up capital of Galaxy Payroll (China) as of September 30, 2019, which was satisfied by the allotment and issue of and crediting as fully paid of 1,000 shares of Melkweg BVI to Pine Mountain, 1,000 shares of Melkweg BVI to Agapao Investment and 1,000 shares of Melkweg BVI to JEAN Oceania, upon the instructions of Galaxy (Seychelles). The above share transfer was legally completed and settled on January 10, 2020.

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

5. Share transfer of Galaxy HR (Macau)

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

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

6. Share swap

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

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

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

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

Galaxy Payroll BVI, Melkweg Cayman and Melkweg BVI and all subsidiaries are under common control which results in the consolidation of Melkweg Cayman and Galaxy Payroll BVI at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements.

Corporate Information

Our principal executive office is located at 25th Floor, Ovest, 77 Wing Lok Street, Sheung Wan, Hong Kong. Our phone number is +852 3105 2611. Our registered office in the British Virgin Islands is located at Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.

Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, DE, 19711.

SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website http://www.galaxy-hk.com/. Information contained on, or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this annual report.

Initial Public Offering and Exercise of Over-Allotment Option

On September 11, 2024, the Company entered into an underwriting agreement with L. F. Lafferty & Co., Inc., as underwriter named thereof, in connection with its IPO of 1,750,000 Ordinary Shares at a price of $4.00 per share. The Company’s Registration Statement on Form F-1 (File No. 333-269043) for the IPO, originally filed with the U.S. Securities and Exchange Commission (the “Commission”) on December 28, 2022 (as amended, the “Registration Statement”) was declared effective by the Commission on September 10, 2024.

On September 11, 2024, the Company and listed its Ordinary Shares on the Nasdaq Capital Market under the symbol “GLXG”.

Pursuant to the underwriting agreement with L. F. Lafferty & Co., Inc., there is an option for a period of 45 days from the effective date of the Registration Statement to purchase up to an aggregate of 15% of the total number of Ordinary Shares.

On October 15, 2024, L. F. Lafferty & Co., Inc. fully exercised the over-allotment option for the IPO, acquiring 262,500 Ordinary Shares at a price of $4.00 per share and the Company completed the exercise of over-allotment option.

Overview

We are a holding company incorporated in the British Virgin Islands with most of our operations conducted by the Operating Entities in Hong Kong, Taiwan, Macau and the PRC.

We are a payroll outsourcing service, employment service and consultancy and market research service provider based in Hong Kong, providing services to our customers which are mainly categorized as (i) channels which are global human resources service providers engaged by companies/organizations to handle payroll and/or employment-related matters for their branch offices in different regions; (ii) end-users which are mainly multinational companies/organizations that outsource their payroll and/or employment functions to us directly; and (iii) end-users consult us for their future expansion worldwide. Galaxy HR (SZ), Galaxy Payroll (HK), Galaxy HR (TW) and Galaxy HR (Macau) provide payroll outsourcing services in the PRC, Hong Kong, Taiwan and Macau; Galaxy Payroll (HK), Galaxy GEO Services, Galaxy HR (TW) and Galaxy HR (Macau) provide employment services in the PRC, Hong Kong, Japan, Taiwan and Macau; and Galaxy Payroll (HK) provides consultancy and market research services in Hong Kong. End-users of our services may either be (i) our indirect customers engaging us through channels; or (ii) our direct customers.  

Our Competitive Strengths

We believe the following competitive strengths differentiate us from our competitors:

We are a reputable in-country payroll outsourcing and employment service provider engaged by multinational channels and end-users from different industries.

We have built up our reputation in providing in-country payroll outsourcing services and employment services in the PRC and Hong Kong since our establishment. End-users of our services may either be (i) our indirect customers engaging us through our various channels; or (ii) our direct customers. During years ended June 30, 2024, 2023 and 2022, end-users of our services included mainly multinational companies/engaging in a wide variety of industries. For payroll outsourcing services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the retail and trading, industrial, IT, financial and professional services industries. For employment services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the IT, retail and trading, industrial, professional institution and education and healthcare industries. We believe that our reputation established in the industry has given our customers and end-users confidence in engaging our Group, and the chance of being replaced by our market players is relatively low.  

We have well-established business relationships with our customers.

A company’s payroll function is highly confidential in nature. Large companies including multinational companies/organizations with small employment scale (e.g. less than 15 employees) in their overseas subsidiaries and with limited knowledge of local employment regulations, tend to outsource their payroll function to independent service providers whom they can rely on to avoid the confidential information being leaked among employees within their companies. Furthermore, since large amount of funds is involved during the payroll process, it is important for us to gain trust from our channel customers and end-users. We have maintained long-term and stable business relationships with our five largest customers, ranging from approximately four to seven years, but with the development of our business, these five largest customers may change.

During the years ended June 30, 2024, 2023 and 2022, 21%, 40% and 26% of the Group’s revenue was conducted through cooperating with our in-country partners where appropriate, 79%, 60% and 74% of the Group’s revenue was conducted through cooperating with the Group’s subsidiaries. It was our well-established business relationship with our customers that made them engage our Group for services in the PRC instead of directly engaging the service providers in the PRC. Our customers (both channels and end-users) are mainly multinational companies/organizations, and they believe that engaging a service provider in Hong Kong can facilitate the communication with the PRC service providers and relevant government authorities. The quality of our services and our well-established business relationships with our customers have increased our competitiveness in providing our services in the PRC.

Over the years ended June 30, 2024, 2023 and 2022, we had solid business relationship with global channels in the payroll outsourcing service market and employment service market. Once business relationship with our channel customers is developed, we normally have steady flow of business from end-users through our channel customers. We believe that our major customers will continue to engage us as their in-country payroll outsourcing and employment service providers, which serve as solid foundation for our Group to further develop a broader customer base. 

We are capable of providing high quality payroll outsourcing services and employment services to our customers to ensure compliance with local regulations for our end-users.

A company’s payroll and employment functions are costly, time-consuming and require local knowledge for each jurisdiction. Multinational companies that are not familiar with local regulations generally prefer outsourcing their payroll and employment functions to specialized human resources outsourcing service providers with local expertise whom they can rely on to reduce the risk of non-compliance with local laws and regulations, such as contribution to MPF in Hong Kong and social security, housing provident funds and individual income tax in the PRC. Since our Directors and senior management personnel possess extensive experience in the industry, our Group is capable of providing high quality payroll outsourcing services and employment services in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries.

With our capability in providing high quality payroll outsourcing services and employment services, our end-users can rely on our Group to ensure compliance with local regulations, which can in turn achieve cost-savings. Multinational corporations may not have local offices in all regions that they have business operation in. Instead of setting up a local entity with a human resources department for employing employees and handling salary payment themselves, engaging our Group will be more cost efficient.

We have an experienced and strong management team with proven track record.

We have more than seven years of experience in the payroll outsourcing services and employment services industries and our success is attributable to our experienced and strong management team. Each of our executive officers, Mr. Lao, Mr. But and Mr. Yeung, has accumulated over 15 years of experience in the payroll outsourcing service industry and employment service industry. Prior to the establishment of our Group, Mr. Lao, Mr. But and Mr. Yeung had experience working in a payroll outsourcing and employment service company and their insights in the industries enable them to manage the overall business operation and execute the business strategies of our Group. Our senior management personnel Ms. Lo Ho and Mr. Wu Chunlei also possess extensive experience in the payroll outsourcing service industry and employment service industry for over 14 and 17 years, respectively.

We believe that the extensive experience and in-depth market knowledge of our management team enable us to keep abreast of the latest market trends, understand the needs of our customers and end-users and continue to provide flexible and high quality services to our customers and end-users.

For details and biographies of our executive Directors and senior management, please refer to “Directors and Senior Management” in this report.

Business Strategies

We aim to continue to leverage on our experience in the payroll outsourcing service industry and employment service industry to expand our business operation in the PRC and Hong Kong, with a focus on the PRC market. To achieve these objectives, we intend to utilize the net proceeds to implement the following business strategies:

Expand our business operation in the payroll outsourcing service industry and employment service industry in the PRC.

The overall payroll outsourcing service industry in the PRC recorded a significant which was mainly driven by the rapid economic growth and growing participation of foreign enterprises and it is expected that the overall payroll outsourcing service industry will continue to grow. At the same time, the overall employment service industry in the PRC has also seen a significant growth which was mainly attributable to the increasing demand for human resources outsourcing services resulting from the expansion of enterprises in the PRC. We believe that it is crucial to our business growth and development to expand our business operation in the payroll outsourcing service industry and employment service industry in the PRC. As the overall payroll outsourcing service industry and employment service industry in the PRC are highly fragmented, our Directors believe that our Group is able to capture new business opportunities in the PRC by leveraging our competitive advantages including (i) our well-established business relationships with our customers; and (ii) our reputation in the payroll outsourcing service industry and employment service industry among channels and end-users from different industries. Our established relationships with such channel customers serve as solid foundation for our Group to pursue new business opportunities with them in the PRC.

Given the potential market growth in the PRC and the demand from our existing customers for services in the PRC, we plan to focus our expansion plan in the PRC.

Expand our service capacity in Hong Kong

Our client account managers are stationed in Hong Kong. They are responsible for liaising with our channel customers and end-users and coordinating the delivery of services in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries. In order to cope with the anticipated expansion of our Group upon the Listing, we plan to expand our service capacity in Hong Kong by recruiting one additional staff.

The size of our existing Hong Kong office is approximately 1,900 square feet. Due to the limited space in our existing Hong Kong office, we plan to lease additional office space of approximately 2,300 square feet to 3,000 square feet in the Central & Western District / Eastern District in Hong Kong. We expect to secure the additional office space, purchase furniture and equipment and renovate the office by December 31, 2025.  

Our Directors believe that building up a stronger team of client account managers can (i) handle the increased workload resulting from our Group’s planned expansion; and (ii) enhance our efficiency in delivery of services, which will increase our competitiveness and strengthen our relationship with our customers.

Develop marketing capability and conduct marketing campaigns to promote our payroll outsourcing services and employment services to direct end-users

We strive to expand our customer base by exploring business opportunities from direct end-users. Therefore, we plan to exert more marketing efforts in connecting with direct end- users through social media and online platforms. During the years ended June 30, 2024, 2023 and 2022, our revenue was mainly derived from channel customers. To successfully implement our strategy in expanding our business for our long-term sustainability and growth, it is important for us to enhance customers’ awareness of our Group and services among direct end-users while maintaining our relationships with channel customers concurrently. Our Directors believe that by conducting marketing campaigns through social media and online platforms targeting at direct end-users, we will be able to promote the cost-effectiveness to outsource the payroll and employment functions to independent service providers like our Group and stimulate the demands for our services, while enabling us to stand higher chance of establishing business relationships with well-established brands and potential customers. As such, we intend to allocate more resources to develop our marketing capability.

Enhance our IT system to support our business operation

We intend to enhance our IT system to support our business expansion and increase our operational efficiency by engaging a third-party system developer to (i) develop an ERP system to consolidate the workflows of our payroll operation; and (ii) enhance the security level of our IT system.

Our Directors believe, (i) extension of service offerings and quality by investing in IT and system development; and (ii) implementing safeguard measures to protect customers personal data to satisfy customers’ growing emphasis on data security, became the key development trend for the payroll outsourcing service industry and the employment service industry. As such We intend to enhance our IT system to support our business expansion and increase our operational efficiency by engaging a third-party system developer to (i) develop an ERP system to consolidate the workflows of our payroll operation; and (ii) enhance the security level of our IT system.

OUR BUSINESS OPERATIONS

We provide in-country payroll outsourcing services and employment services to our customers from diversified industries. We have also provided consultancy and market research services to our customers from diversified industries. The table below sets out our customers, scope of services, geographical locations of the employees or seconded employees and service fees charged by our Group under each business during the years ended June 30, 2024, 2023 and 2022:

We have more than seven years of experience in the payroll outsourcing service industry and employment service industry in the PRC and Hong Kong. Each of our executive officers, Mr. Lao, Mr. But and Mr. Yeung, has accumulated over 15 years of experience in the payroll outsourcing service industry and employment service industry. Our senior management personnel, Ms. Lo Ho and Mr. Wu Chunlei, also have more than 14 and 17 years of experience in the payroll outsourcing service industry and employment service industry. Leveraging on our industry experience and our established relationship with our major customers since our establishment, we entered into the first agreements for the provision of services in Macau, Taiwan, Japan, Australia and other Asian countries starting from 2015 till now. With more than a decade of experience and understanding in payroll outsourcing service industry and employment service industry and human capital market, we periodically operated a new business, consultancy and market research services, in the fiscal year ended June 30, 2022.

PAYROLL OUTSOURCING SERVICES

We provide payroll outsourcing services to our end-users by handling payroll-related matters for their employees in the PRC, Hong Kong, Taiwan, Macau and India. Majority of our revenue generated from payroll outsourcing services were generated from the PRC and Hong Kong.

Our Directors understand that a company’s payroll function is a sensitive and highly confidential administrative task which is costly and time-consuming. By outsourcing their payroll functions to us, our Directors believe that our end-users can concentrate on developing and growing their core businesses and at the same time minimize the risk of leaking confidential information in relation to salaries among employees in their companies.

We assist our end-users in (i) conducting computation of salaries and the amounts of contributions to be paid for MPF in Hong Kong, social security, housing provident funds and individual income tax in the PRC and any other deductions required to be made under the laws of the respective jurisdictions; (ii) arranging for payment to the employees’ bank accounts; (iii) monitoring and maintaining payroll records; and (iv) preparing and filing employment-related tax returns.

Our channels

Channels are global human resources service providers engaged by companies/organizations to handle payroll and employment-related matters for their branch offices in different regions.

Our end-users

During the years ended June 30, 2024, 2023 and 2022, we served end-users (both direct and through channels) from different industries for payroll outsourcing services and we served employees of our end-users (both direct and through channels) engaging us for payroll outsourcing services were located in the PRC, Hong Kong, Taiwan, Macau and other Asian countries.

Service fees of our payroll outsourcing services

The service fees of our payroll outsourcing services are generally calculated based on a fixed amount per employee per month during the years ended June 30, 2024, 2023 and 2022 subject to a fixed amount of minimum charge per end-user per month. We issue a pricing schedule to our channel customers to confirm the service fees to be charged when it is necessary to adjust our fees. As for our direct end-users, we may re-negotiate the service fees before the end of the contract period or when it is necessary to adjust our fees. During the years ended June 30, 2024, 2023 and 2022, we did not adjust our pricing schedule for our payroll outsourcing services with our customers.

Operational workflow for payroll outsourcing services

Our operation process typically involves three major phases, as follows:

Note: As of the date of this report, we cooperated with in-country partners to provide payroll outsourcing services in the PRC where appropriate.

Engagement of services

Understanding of our customer

When a new customer (channel customer or end-user) first approaches us, we will hold an initial meeting to understand its needs. During the meeting, we provide details of our services and explain the local regulations in relation to our services in the relevant region.

For a channel customer, we assist in closing the deal with the end-user. We have to understand the needs of our channel customer as well as that of the end-user. During our communication process, we agree on our communication models with our channel customer which will be established to enable our Group, our channel customer and our end-user to communicate effectively with each other during the process of providing our services. During our communication process, we also identify the services that our channel customer and our end-user require us to provide and go through a checklist of services that our Group can offer.

Formulation of service plans and negotiation on service terms

After the initial meeting, we provide a proposal to our customer including a detailed implementation plan, service terms and fee quote. A pricing schedule is also agreed between our Group and our channel customer specifying the service fees to be charged based on the number of employees involved and the scope of services procured. As for our end-user customer, a fee proposal will be provided. During the negotiation process, the responsible person and communication points for different parties will also be confirmed. Revised proposals may be provided when necessary.

Background check against the customer and end-user

Upon completion of the negotiation stage, we conduct background check against the channel customer and end-user through a subscribed database. We also conduct online search on the background of the channel customer. As for an end-user, we require the end-user to provide us with its business registration certificate, certificate of incorporation, business license (for PRC company), tax registration certificate (for PRC company), housing provident funds records (for PRC company) and social security certificate (for PRC company) to verify the existence and validity of the entity.

Signing of agreement

Once the background check is completed, we enter into a master service agreement with our channel customer that engages us for the first time which serves as a framework governing the services provided by our Group in the future for all end-users engaged through that channel customer. Our channel customer then issues an engagement letter or confirmation email detailing the scope of services required by each of its end-users, service fees and implementation procedures. For an end-user engaging our Group directly, we enter into an agreement with our end-user for the services procured.

Project implementation

Formation of implementation group

After signing of an agreement and issuance of an engagement letter, an implementation group will be formed comprising members of our Group, our channel customer and our end- user. Members of our Group may include a division manager, an implementation manager and a team member. Member of the channel may include an implementation manager to facilitate communication among the channel, the end-user and our Group. Member of the end-user may include a human resources personnel.

Creation of implementation checklist and payroll calendar

The implementation group then formulates an implementation checklist specifying the tasks to be performed during the implementation stage, the implementation timeline and procedures. The implementation group will also agree on a payroll calendar specifying the schedule for each major task to be performed for that year, including the date for provision of employees’ documents, calculation of salaries and other pay items, issuance of invoice, receipt of funds, instructions to bank for payment and dispatch of funds. Towards the end of the then existing payroll calendar period, the following 12-month payroll calendar will be formulated.

Collection of employees’ information

Based on the payroll calendar, the implementation group will collect employees’ information in an agreed format for inputting into the system in the latter stage. Information collected include the employees’ name, position, identity card number, marital status, bank account details and salary.

Configuration of payroll system and performance of test run

The implementation group discusses among itself the logics of the payroll system and configure the system based on the logics. The implementation group will then input or upload employees’ information collected into the system. As part of our standard procedure, we perform test run to make sure that the output for each employee is accurate. Test run may be conducted for one to two months during the implementation period for comparing our calculations generated through our system with those done by the end-user using their existing payroll procedures. Adjustments have to be made if there is any error identified during the test run. Once the test run is completed, the implementation group will conduct a “penny test” as part of our standard procedure by depositing a dollar to each employee’s bank account to ensure that the transaction can be completed successfully. The test run on the system and the “penny test” may be conducted more than once until no transaction error is identified.

When the implementation group is satisfied with the test results of the payroll system, the payroll system will be ready for delivery of monthly services.

Monthly delivery of services

Updating of monthly information

We require our end-users to provide an update on the employees’ information every month on the day specified on the payroll calendar using an agreed monthly change form. Information to be updated includes the information of newly hired employees or terminated employees, change of bank account, work location and salaries of the employees and other relevant information in relation to payroll such as attendance and leave record every month. We will then calculate the monthly salaries and other pay items for the employees through our IT system.

Generation of payroll report and bank file

After updating the particulars on the IT system, we will calculate the amount to be paid to each employee of our end-user through the system. The calculation includes the amount of salary each employee is entitled to, the amounts of contributions to be paid for MPF in Hong Kong, social security, housing provident funds and individual income tax in the PRC and any other deductions required to be made under the laws of the respective jurisdictions. After processing the data and checking the data internally, the payroll report containing details of our end-user’s employees in relation to their payroll will be sent to our channel customer and end-user for their approval.

Once the payroll report is approved, our client account manager will generate a bank file from our IT system and check the information on the bank file, such as the pay date, payment amount and employees’ information. The bank file will then be sent to our end-user if the end-user does not require us to process payment on their behalf.

Invoice to customer

Upon receiving the confirmation on the monthly payroll report from our channel customer and end-user, we will issue an invoice for payment of funds for the employees’ salary and other statutory contributions (if applicable), and an invoice for payment of service fees to our customer. We generally issue invoices for payroll funds and service fees once a month. Our customers or end-users are required to remit the payroll funds to our designated bank account at least two working days before dispatch of salary to the end-users’ employees for both direct and indirect end-users. For payment of service fees, we generally require our customers to settle the payment within 30 to 90 days from the date of invoice. During the years ended June 30, 2024, 2023 and 2022, our customers or end users generally settled our invoices for payroll funds before dispatch of salary to the end-users’ employees. During the years ended June 30, 2024, 2023 and 2022, our customers generally settled our invoices for service fees within the credit period granted by us which was within 30 to 90 days.

Payment of salary (where applicable)

If the end-user requires our Group to pay the salary to its employees on its behalf, our client account manager will upload the bank file to our internet banking account and provide the payroll report and fund proof to our finance team for their approval for dispatch of salary. After our finance team approves payment and payment is completed, a payment confirmation will be sent to the client account manager. The payment confirmation will then be uploaded to our channel customer’s IT system and sent to our end-user for their records.

Filing and payment of MPF, social security, housing provident funds and individual income tax (where applicable)

For an end-user that engages us in Hong Kong, we assist in handling MPF-related matters upon request. After receiving the funds from our customer, we provide the MPF statement to our customer for its review and signature, and submit the MPF statement with the MPF funds to the MPF provider. For an end-user who adopts on-line MPF system, we will fill in the monthly MPF information and submit it online on behalf of our end-user. Our Group will then make the MPF payment to the MPF provider. After payment, our Group will provide the MPF payment proof to the channel customer and end-user for their records.

For an end-user that engages us in the PRC, we assist in handling social security, housing provident funds and individual income tax-related matters upon request. For newly-hired and outgoing employees, we assist in enrolling or deregistering the social security accounts. If adjustment to the contribution base of an employee has to be done as required by local regulations, we will update our IT system for payroll calculation. After receiving the funds from our customer, we will make the payment on behalf of our end-user.

During the years ended June 30, 2024, 2023 and 2022, our Group did not receive any query or investigation from relevant government authorities in relation to our end-users’ MPF, social security, housing provident funds and individual income tax. For services provided by our Group directly, our Group will be responsible for handling the queries. For services provided through our in-country partners, such queries will be handled by our in-country partners.

Post-completion record keeping

After dispatch of funds to our end-user’s employees, a payment proof will be obtained. We will then file the final payroll report, invoice, payment proof and any other reports to our server for record keeping. We will also issue pay slips to our end-user’s employees by way of email, post or online portal.

Other administrative services

Other than payment of salary to our end-users’ employees, we also assist our end-users in handling other administrative work such as preparing and filing of employers’ return including filing of employer’s return of remuneration and pension (Form IR56B) to the IRD in compliance with the Inland Revenue Ordinance for employees in Hong Kong and other employment-related tax, insurance and notifications in the PRC, Taiwan and Macau.

EMPLOYMENT SERVICES

In addition to our payroll outsourcing services, we also offer employment services to our end-users in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries, under which we (i) employ candidates, directly or through our in-country partners, who are sourced by our end-users themselves and second them back to our end-users; and (ii) handle the seconded employees’ payroll and other administrative matters as their employers of record directly or through our in-country partners.

Our end-users source and provide candidates who meet with their requirements and engage our Group to enter into employment contracts with such candidates directly or through our in-country partners. Under the employment arrangement, we will provide all the required assistance to our customer as the candidates’ employer of record, the scope of which includes (i) conducting payroll calculations; (ii) arranging for salary payment; (iii) maintaining payroll records; (iv) conducting computation of the amounts of contributions to be paid for MPF in Hong Kong, social security, housing provident funds and individual income tax in the PRC and any other deductions required to be made under the laws of the respective jurisdictions; (v) administering employment-related insurances such as employee compensation insurance in Hong Kong and national health insurance in Taiwan covering our seconded employees; (vi) preparing and filing employment-related tax returns; (vii) making MPF payments; and (viii) providing pay slips. As the employer of record of the seconded employees, we or our in-country partners (as the case may be) are responsible for payment of the long service payment, leave entitlement, staff benefits, severance payment and other employees’ entitlements as prescribed by the applicable laws and regulations, by utilizing the payroll funds provided by our end-users. Upon our end-users’ requests, we also acquire life insurance, health insurance and travel insurance for our seconded employees in Hong Kong.

As of the date of this report, we provided employment services in Hong Kong, Taiwan and Macau directly and cooperated with in-country partners to provide employment services in the PRC, Japan, Australia and other Asian countries where appropriate. As confirmed by our Directors, during the years ended June 30, 2024, 2023 and 2022, our Group provided employment services in the PRC through our in-country partners for certain overseas end-users which did not have business entities in the PRC and were unable to hire any personnel in the PRC on their own in the absence of a PRC entity. Such arrangement was in compliance in material respects with the relevant laws and regulations in the PRC. According to the Administrative Measures on the Registration of Foreign (Regional) Enterprises Engaged in Production and Operation Activities in China (2017 Revision), foreign enterprises are not allowed to engage in production and operation activities in the PRC without the approval of the relevant authority and the registration authority. The engagement of our Group by end-users which did not have business entities in the PRC during their preparatory stage of setting up their entities in the PRC to provide employment services for them through in-country partners is unlikely to constitute engaging in production and operation activities without permissions or approvals and therefore, was in compliance in material respects with the relevant laws and regulations in the PRC. In respect of our employment services in Taiwan, Galaxy Payroll (HK) cooperated with in-country partners during the year ended June 30, 2020. Galaxy HR (TW) began to provide the employment services in Taiwan starting from July 1, 2020.

Reasons for procuring our employment services

During the years ended June 30, 2024, 2023 and 2022, the reasons for our end-users to engage us for employment services instead of directly employing candidates themselves mainly include:

Our Directors believe that our employment services can generally offload the human resources function of our end-users. Our Directors believe that the provision of our employment services enables our end-users to focus on their core businesses, reduce and control their operating costs and minimize their administrative burden.

Seconded employees

During the years ended June 30, 2024, 2023 and 2022, our seconded employees were seconded to work in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries for our end-users.

We and our in-country partners have adopted standard forms of employment contracts for our seconded employees. Pursuant to the instructions of our customers, the seconded employees are seconded to work at premises requested by our end-users. The salient terms of the employment contracts with our seconded employees mainly include pre-determined monthly salary rate, commencement date of employment, job title, leave entitlement, staff benefits and termination notice. Our Group is entitled to terminate the contracts of our seconded employees by giving one month of notice, making a payment in lieu of notice, by mutual agreement or in accordance with the relevant laws and regulations. We also require our customers or end-users to make a deposit equivalent to one month of salary of the seconded employee to protect us from the loss that we may suffer from the termination of employment with our seconded employees. We have taken out professional indemnity insurance to cover the risks that we may face when providing employment services in Hong Kong. Our seconded employees in Taiwan are also covered by the national health insurance scheme. We are required to comply with the relevant employment laws and regulations in Hong Kong, the PRC, Japan, Taiwan, Macau, Australia or other Asian countries (as the case may be) for operating our employment services. For further details of the applicable laws and regulations that our Group should comply with, please refer to “Regulations” in this report.

Our Directors confirmed that all of our seconded employees have been remunerated in accordance with their contracts with us or our in-country partners and the relevant laws and regulations in Hong Kong, the PRC, Japan, Taiwan, Macau, Australia or other Asian countries (as the case may be) during the years ended June 30, 2024, 2023 and 2022, and up to the date of this report had been complied with.

Service fees of our employment services

The basic service fees of our employment services are generally calculated based on an agreed percentage of the seconded employee’s monthly remuneration package at the currency which the remuneration is paid during the years ended June 30, 2024, 2023 and 2022. The seconded employee’s remuneration package generally includes the monthly salary, bonus, commission, insurance, social security and housing provident funds. In some cases, we may agree to charge a fixed fee with our channel customers or our end-users. The monthly remuneration package of each seconded employee may vary from month to month, hence the payroll funds we handle for each end-user (which may include monthly salary of seconded employees plus other payments (e.g. commission and bonus) and contributions (e.g. MPF, social security)) may also vary from month to month. In addition, the commencement date and termination date of employment of each seconded employee may fall on any date of a year (which may not be the first day or last day of a month). Accordingly, our basic service fees for each end-user depend on a number of variables, and generally vary from month to month. During the years ended June 30, 2024, 2023 and 2022, we did not adjust our service fees for employment services with our customers.

When providing our services, we may accept payment at a currency that is different from the currency which the remuneration is paid to the seconded employees.

Operational workflow for employment services

Employment of the seconded employee and follow up actions

Once an end-user has decided to hire a candidate, we will negotiate on the employment service terms including the scope of services and service fees. For an end-user engaging us through a channel, our channel customer will issue an engagement letter or confirmation email to us in relation to the employment services provided to the end-user. For a direct end-user, we enter into a service agreement directly with the end-user. After we receive the engagement letter from our channel customer or enter into a service agreement with our direct end-user, our customer will make deposit to our Group in the amount equivalent to the candidate’s salary for one month. We will then collect personal information from the candidate by requiring the candidate to fill in our standard form. We will also take a copy of the candidate’s identity card for records.

The following table summarizes the salient terms of the service agreements we entered into with our major direct end-users for provision of our employment services:

The seconded employee’s remuneration package may include the monthly salary, bonus, commission, insurance, social security and housing provident funds.

If our channel customer and end-user confirm the employment terms and the final candidate accepts the offer, we will prepare and sign the employment contract with such candidate. Under the employment contract we entered into with our seconded employee, we are entitled to terminate the employment by giving one-month notice, payment in lieu of notice, by mutual agreement or in accordance with the relevant laws. The deposit paid to us can fully cover our termination cost. In this way, we would be able to provide flexible staffing solutions to our end-users for them to manage their staffing levels according to their business needs, while at the same time limit our potential financial exposures to our seconded employees should our end-users scale down their business or terminate their relationships with us.

During the employment period, the seconded employee remains as our Group’s or our in-country partner’s employee but works under the supervision or assignment of our end-user through secondment.

CONSULTANCY AND MARKET RESEARCH SERVICES

Apart from providing payroll outsourcing services and employment services, we provide consultancy and market research services to our end-users by providing monthly general consulting services and delivering market research report with policy consultation service in advance.

Our customers have intentions to explore the foreign markets, however, our customers do not have sufficient knowledge of the foreign labor policy and the labor environment. We provide our customers opportunities to reach the foreign markets by understanding local human capital market and policies, payroll and employment environment and the country information.

We assist our end-users in (i) providing consultation for local policy in advanced level and delivery of country profile reports; (ii) delivering general consultation on different topics as well as Q&A session with local experts on a monthly basis. During the year ended June 30, 2022, we provided consultancy and market research services in Hong Kong directly. The Company temporarily ceased the consultancy and market research services since July 2022.

PRICING POLICY

With respect to our payroll outsourcing services, the pricing of our services was determined based on (i) the prevailing market rates charged by market players; (ii) the expected transaction volume of our customers; and (iii) the business relationships with our customers. As for our employment services, we generally negotiate the pricing with our customers on a case-by-case basis taking into consideration of various factors including (i) the prevailing market rates charged by market players; (ii) the expected salary level of the seconded employee; (iii) the amount of administrative work required; and (iv) the business relationships with our customers. Our management team considers that our service fees charged is in line with the industry norm in the payroll outsourcing service industry and employment service industry.

SALES AND MARKETING

During the years ended June 30, 2024, 2023 and 2022, our revenue was mainly derived from channel customers, and our business opportunities mainly arose from our existing channel customers’ referral. When potential end-user customers approach our channel customers for payroll outsourcing services and/or employment services, our channel customers may invite our Group to participate in the negotiation process and to provide details of the services to the potential end-user. As such, we assist our channel customers in securing the engagements with end-users. We also promote our corporate profile and services through participating in marketing events, such as human resources forum, and through the internet, which connects our Group with potential customers. During the years ended June 30, 2024, 2023 and 2022, there were customers approaching our Group through the internet after reviewing our profile on our website.

Our management team constantly keeps contact with our customers and end-users through emails, telephone calls and physical meetings. During the years ended June 30, 2024, 2023 and 2022, the management team also participated in events to gain exposure to potential new customers. We fully appreciate the maintenance of long-term business relationships and place great emphasis on customer satisfaction. We believe our long-term trusted relationship with our customers helps us build strong reputation in the industry. We intend to use the proceeds from the Listing to develop market capability and conduct more marketing campaigns to promote our payroll outsourcing services and employment services to direct end-users. For further details on our marketing plans, please refer to “Business strategies” above in this section.

SEASONALITY

It is normal for companies/organizations to review their human resources strategies shortly after their respective year-ends. Our Directors consider that the demands for our payroll outsourcing services and employment services are generally not subject to seasonality.

CUSTOMERS

Our customers are mainly categorized as (i) channels which are global human resources service providers engaged by companies/organizations to handle payroll and employment-related matters for their branch offices in different regions; and (ii) end-users which are mainly multinational companies/organizations that outsource their payroll or employment functions to us directly. During the years ended June 30, 2024, 2023 and 2022, end-users of our services included mainly multinational companies/organizations engaging in a wide variety of industries. For payroll outsourcing services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the retail and trading, industrial, IT, financial and professional services industries. For employment services, a majority of our end-users during the years ended June 30, 2024, 2023 and 2022 engaged in the IT, retail and trading, industrial, professional institution and education and healthcare industries. We have established stable business relationships with our major customers. During the year ended June 30, 2022, the Company has offered consultancy and market research services, a majority of our end-users engaged in the IT, industrial, media, advertising and entertainment, professional services. The Company temporarily ceased the consultancy and market research services since July 2022.

IN-COUNTRY PARTNERS

As of the date of this report, we cooperated with eight in-country partners to provide local support in relation to human resources in the PRC, including the Major In-country Partner which we have been cooperating with since the founding of our Group. We also cooperated with one in-country partner in Japan, one in-country partner in Thailand and Malaysia, one in-country partner in Australia, one in-country partner in India, one in-country partner in Indonesia, one in-country partner in Bangladesh, one in-country partner in Taiwan, one in-country partner in Singapore and one in-country partner in Vietnam, one in-country partner in Hong Kong and one in-country partner in Thailand to provide local support in relation to human resources.

The Major In-country Partner

During the year ended June 30, 2024 and up to the date of this report, we principally cooperated with the Major In-country Partner in the PRC, China-Key HR Outsourcing Co., Limited, which is an independent third party, on a non-exclusive basis to provide payroll outsourcing services and employment services in the PRC as our executive Directors consider that cooperating with the Major In-country Partner is an efficient way to minimize our business risks and legal risks, is cost-effective and is in the best interest of our Group, having taken into account the qualifications and quality of services provided by the Major In-country Partner and its subsidiaries (which are based in Shanghai, the PRC), the cost of engaging the Major In-country Partner and its subsidiaries and the local knowledge and support of the Major In-country Partner and its subsidiaries. We have been cooperating with the Major In-country Partner since the founding of our Group in 2013 and have maintained good business relationship with it since then. The Major In-country Partner was incorporated in Hong Kong with limited liability in December 2004 and is a human resources outsourcing service provider holding the Labor Dispatch Permit, with its headquarter in Shanghai, the PRC. It provides services in more than 80 cities in the PRC to approximately 700 customers, including customers other than ours. As of the date of this report, one of the founders of our Group who ceased to be a shareholder of our Group in 2015 was a member of the senior management of a subsidiary of the Major In-country Partner. As of the date of this report, a company secretarial service company co-owned by our executive Directors provided company secretarial services to the Major In-country Partner.

We entered into a human resources outsourcing service agreement with the Major In-country Partner in April 2016. Pursuant to the agreement, the services to be provided by the Major In-country Partner comprise: (i) computation of salary; (ii) computation of individual income tax, social security and housing provident fund contribution; (iii) assisting in the filing of individual income tax; (iv) provision of employment services as employer of record; (v) assisting in the filing of social security, new hire and termination of employees; (vi) assisting in the filing of housing provident fund; (vii) assisting in the filing of disabled persons’ employment security fund; and (viii) settlement of payment of salary, social security, housing provident fund, disabled persons’ employment security fund and comprehensive insurance. The agreement shall be in force unless otherwise agreed between our Group and the Major In-country Partner. This human resources outsourcing service agreement can be terminated by negotiation of both parties under the circumstance that one of the parties suffers force majeure and is not able to perform the agreement. An English translation of such human resources outsourcing service agreement has been filed as an exhibit of this Registration Statement. The Major In-country Partner’s service fees are calculated based on the pricing schedule to be agreed between our Group and the Major In-country Partner from time to time, and are settled by telegraphic transfer. The pricing schedule with the Major In-country Partner covers the service fees charged for (i) computation and payment of salary and tax filing; (ii) handling of social security and housing provident funds; and (iii) provision of employment services. For the computation and payment of salary and tax filing, the service fees per employee decrease when the number of employees increases. For handling of social security and housing provident funds and provision of employment services, the service fees are fixed. For the provision of employment services, the Major In-country Partner acts as the seconded employees’ employer of record and handles the payroll and other administrative matters for the seconded employees while our Group assists in coordinating with the channel customers, end-users and the Major In-country Partner. The Major In-country Partner charged our Group at a fixed fee per seconded employee during the years ended June 30, 2024, 2023 and 2022. We are generally required to settle the service fees on the 15th day of a month. Our Directors considered that, during the years ended June 30, 2024, 2023 and 2022, the service fees charged by the Major In-country Partner were determined on an arm’s length basis and on normal commercial terms, and the service fees charged to our Group were comparable to those charged by other entities providing similar services.

Other in-country partners

Apart from cooperating with the Major In-country Partner, we also, to a much lesser extent, cooperated, on a non-exclusive basis, with seven other in-country partners in the PRC, one in-country partner in Japan, one in-country partner in Taiwan, Thailand and Malaysia, one in-country partner in Australia, one in-country partner in India and Bangladesh, one in-country partner in Indonesia, one in-country partner in Singapore, one in-country partner in Vietnam, one in-country partner in Hong Kong and one in-country partner in Thailand. They are CIIC Human Resources Consulting (Zhuhai) Hengqin Branch, FESCO Adecco Shanghai Co. Ltd., Shanghai Foreign Service (Group) co., Ltd., Dalian Pengyu Management Consulting Service Co., Ltd., Shanghai Firstray China Human Resources Service Co. Ltd., CIIC Guangzhou Economic & Technical Cooperation Corp., Shenzhen Yicai Manpower Zi Consultancy Co., Ltd., SBC G.K., Eos Global Partners Limited, People 2.0 Australia (ESS) Pty Ltd, Procloz Services Private Limited, PT. Tuas Solusi Karya, Volt Solution Kabushiki Kaisha, Tuas Solutions Pte Ltd, Innovative Human Resources Outsourcing Partners Limited, InterLoop Solutions & Consultancy (Singapore) Pte Ltd and Horizons Global Technology Pte. Ltd. During the years ended June 30, 2024, 2023, 2022 and up to the date of this report, we provides employment services in the PRC through our in-country partners even though our PRC subsidiary is capable of providing employment services directly as seconded employees’ employer of record after obtaining the Labor Dispatch Permit on January 24, 2019 in PRC. Our Directors considered the costs and benefits of engaging in-country partners as the seconded employees’ employers of record and decided that engaging in-country partners was in the best interest of our Group and would minimize the business risks and legal risks that our Group has to bear as an employer of record. In addition, the geographical proximity of our in-country partners with our end-users in the cities where our Group does not have presence could facilitate the handling of administrative matters for the seconded employees. Our Directors considered that the percentage of in-country partner costs attributable to the in-country partners to the total revenue derived from the in-country partner for employment services during the years ended June 30, 2024, 2023 and 2022 to be relatively low. As such, with current operation scale and cost structure, our Directors considered it more favorable for our Group to provide employment services in the PRC through in-country partners. In view of the above, our Group does not plan to provide employment services in the PRC directly in the near future. Our Directors expect that there will not be any major change in our cost structure for employment services due to the engagement of in-country partners in the PRC in the near future.

When providing employment services through our in-country partners in the PRC, the percentage of in-country partner costs attributable to our in-country partners to the revenue derived through our in-country partners is usually lower than that for payroll outsourcing services, as our in-country partners charge us at a fixed fee per seconded employee while we generally charge our customers by a percentage of the monthly remuneration package.

When comparing the nature of payroll outsourcing services and employment services, the risks that our Group has to bear when providing employment services directly is higher than that of providing payroll outsourcing services directly, because acting as the seconded employees’ employer of record exposes our Group to liabilities of an employer. Since the in-country partners were charging our Group at a relatively low fixed fee per seconded employee in the PRC as compared to the fee we charged our customers per seconded employee, our Directors considered it more favorable to continue engaging in-country partners as seconded employees’ employers of record.

As for payroll outsourcing services, the percentage of in-country partner costs attributable to the in-country partners to the revenue derived through the in-country partners was relatively higher, while the risk our Group would be exposed to when providing such services directly to our customers was relatively low. Therefore, our Directors plan to provide payroll outsourcing services to new customers in the PRC directly without engaging in-country partners in the future, which is expected to increase our staff costs.

When providing our payroll outsourcing services and employment services in the PRC through our in-country partners, our Directors understood that our end-users were required to enter into separate service agreements with our in-country partners as required by local authorities and banks to establish contractual relationship between the in-country partners and the end-users so as to enable our in-country partners to complete the transactions for payment of salary, social security and housing provident funds on behalf of the end-users. To the best of our Directors’ knowledge, save for the above, our customers have no other business relationship with our in-country partners.

IMPACT OF THE OUTBREAK OF COVID-19 ON OUR BUSINESS

In view of the outbreak of COVID-19 around the world, our Directors have considered its impact in so far as it relates to our business operation and our financial condition.

Impact on our business operation

Since 2013, our Group’s operations are mainly carried out by our client account managers in Hong Kong and our employees in the PRC. We assigned our employees to work on a rotation basis. However, our Group’s services do not require face-to-face meetings with our customers on a day to day basis given that the nature of our Group’s business mainly involves online communications and to a lesser extent, telephone conversations among our channel customers, end-users and in-country partners, therefore, our internal employees managed to maintain our business operation while working from home. Our Directors confirmed that there was no material disruption to the transfer of payroll funds from our channel customers and/or end-users to our Group and the transfer from our Group or our in-country partners to end-users’ employees.

In light of the above, our Directors confirmed that our Group is able to discharge the obligations under all existing agreements with our customers, and therefore, there is no impact on our long-term relationship with our customers.

Impact on our financial condition

Despite the impact of COVID-19 on the economy in general, our end-users are still required to maintain the payroll of their employees. The outbreak of COVID-19 did not have material impact on the number of payroll transactions we made. As advised by our Directors, the travel restrictions imposed by the governments of the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries may hinder end-users from hiring overseas employees and may lead to termination of projects or delay in the implementation of new projects.

Our Directors believe that the possible termination of projects and the delay in project implementation are not expected to result in recurrent losses or fundamental deterioration of the commercial or operational viability of our Group and will not adversely affect our Group’s sustainability.

Considering the latest development of the outbreak of COVID-19 in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries, our Directors believe that our Group may not have to temporarily suspend the provision of payroll outsourcing services and employment services in the PRC, Hong Kong, Japan, Taiwan, Macau, Australia and other Asian countries.

HEALTH AND WORK SAFETY MATTERS

Our Directors believe that our business operation does not involve substantial risks relating to health and work safety matters.

In view of the outbreak of COVID-19, our Group has formulated our business contingency plan (“BCP”) in February 2020. As part of our Group’s BCP, our Group sets out measures to ensure safety of our internal employees, safety within our Group’s premises and business continuity in the event of disaster caused by factors beyond our Group’s control. These measures include, inter alia, monitoring our internal employees, ensuring good personal hygiene practices are adopted by our internal employees, temperature screening, limiting social contact within and outside of our workspace and cleaning our office premises. Our Group has also taken measures to maintain sufficient stock for personal protective equipment, hand sanitizer and disinfectant products. As of the date of this report, our Group had incurred approximately HKD40,000 (US$5,121) to implement the above measures.

ENVIRONMENTAL MATTERS

Because of our business nature, no material pollutant is produced, emitted or discharged during the course of provision of our payroll outsourcing services and employment services. As such, we are not subject to any specific rules and regulation in relation to the environmental protection matters.

INSURANCE

As of the date of this report, we maintained life insurance, health insurance and employees’ compensation insurance, in accordance with the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong), for our internal employees in Hong Kong. As of the date of this report, we maintained health insurance and employees’ compensation insurance in accordance with the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) for our seconded employees in Hong Kong, and also maintained professional indemnity insurance for our operating subsidiaries in Hong Kong, Galaxy Payroll (HK) and Galaxy GEO Services.

We have made contributions to social security for our employees in the PRC and contributions to housing provident funds for our applicable employees in the PRC pursuant to the applicable laws of the PRC in material respects. The Company relies on its own administrative staff to maintain its compliance status regarding Taiwan and Macau, therefore, based on management belief, our seconded employees in Taiwan are covered by the national health insurance scheme.

Our Directors are of the view that we have obtained adequate insurance coverage for the operation of our business and such insurance coverage is in line with the industry norm. Our Directors believe that there is no material risk in connection with our business operation which is not covered by the abovementioned insurance. During the years ended June 30, 2024, 2023 and 2022 and up to the date of this report, we had not made nor been the subject of any material insurance claims.

EMPLOYEES

The total number of employees of the Group as of June 30, 2024, 2023 and 2022 are 29, 26 and 25, respectively.

The Group hired one employee in Hong Kong, China, Malaysia and Singapore respectively during the year ended June 30, 2024. One employee was laid off in China during the year ended June 30, 2024.

The Group hired one and three employees in Taiwan and China respectively during the year ended June 30, 2023. Three employees were laid off in Hong Kong during the year ended June 30, 2023.

The Group hired one employee in Macau and China respectively during the year ended June 30, 2022. Two employees were laid off in Hong Kong during the year ended June 30, 2022.

None of our employees is associated with any labor union in Hong Kong, China, Macau or Taiwan, and we didn’t hire any temporary employees for past 3 years.

Our directors confirm that we had not experienced any significant problems with the employees or disruption to the operations due to labor disputes nor had we experienced any difficulties in the retention of experienced staff or skilled personnel during the years ended June 30, 2024, 2023 and 2022.

PROPERTIES

Our Group did not own any real properties and we lease three premises, the details of which are set out below: 

INTELLECTUAL PROPERTY RIGHTS

On August 10, 2022, we applied to register our business logo in trademark class 35. On August 23, 2022, the registration was approved. Our Group did not hold other trademarks or patents which are material to our business.

Country

Trademark

Application Date

Application Number

Classes

Status

Hong Kong

August 10, 2022

306032943

35

Approved

As of the date of this report, our Group had registered the following domain names:

As of the date of this report, we were not aware of any dispute or infringement by (i) us of any intellectual property rights owned by third parties; or (ii) any third parties of any intellectual property rights owned or being applied by us.

MARKET AND COMPETITION

The payroll outsourcing service industry and employment service industry in the PRC and Hong Kong are highly fragmented and competitive with various market participants. Some of the factors affecting market competition include (i) economies of scale enjoyed by companies with wide geographic coverage, services offerings, technology and security level; (ii) industry reputation and image; and (iii) value-added services provided by market participants.

Some of the entry barriers to the payroll outsourcing service industry and employment service industry include (i) capital and credit requirements for setting high credit limits for bank accounts to handle large amount of transactions made regularly; (ii) market know-how and experience in local laws and regulations in relation to employment and data privacy; and (iii) industry connection with channel customers and direct end-users.

Nevertheless, our Directors believe that we will continue to maintain the following competitive advantages which will enable us to compete with our competitors:

For details of our Group’s competitive strengths, please refer to “Competitive strengths” in this section.

QUALITY CONTROL

As a payroll outsourcing service provider and employment service provider, the ability to maintain the quality and accuracy of our services is crucial to our long term growth. Emphasis is therefore placed on monitoring service quality and staff training. Our division managers are responsible for the day-to-day monitoring of work quality, progress of our client account managers and manage and train staff on delivery of services.

Our Directors confirmed that, during the years ended June 30, 2024, 2023 and 2022, there were no material complaints made against us by our customers and end-users.

RISK MANAGEMENT AND INTERNAL CONTROL

Key risks relating to our business are set out in “Risk Factors” in this report. The following sets out the key measures adopted by us under our risk management and internal control system for managing the more particular operational and financial risks relating to our business operation.

Data security

We handle a substantial amount of personal data related to individual employees and our end-users and customers in our business operation. These information contain personal data and are valuable to our business operation. Therefore, we have implemented internal control measures to safeguard the security and confidentiality of the information of our customers, end- users and their employees as follows:

Anti-money laundering

Due to the business nature of the provision of payroll outsourcing services and employment services, our Group may become vulnerable to money laundering. Therefore, we have adopted policies, procedures and internal controls to prevent, detect and cause the reporting to appropriate authorities of any known or suspected money laundering, other criminal activity or suspicious transactions. Under our policy, we have appointed Mr. But as our anti-money laundering compliance officer. His duties include (i) developing, implementing and updating appropriate anti-money laundering policies and procedures; (ii) providing ongoing training to relevant employees of our Group; (iii) preparing, reviewing and filing suspicious transaction reports; and (iv) monitoring the day-to-day operations and implementation of our anti-money laundering policy.

We have also implemented our “Know Your Customers” policies for conducting customer due diligence. Some of the measures include (i) verifying the true identity of all customers and legal and beneficial ownership of the customer; and (ii) screening for politically exposed person by undertaking a search at the database available in the market. During the due diligence process, if a customer is found to be suspicious, it should be reported to the anti-money laundering compliance officer. Due to the nature of our business, transaction monitoring and customer due diligence shall be conducted on an ongoing basis.

Furthermore, it is expected that the source of funds are from our customer themselves. In case the funds are received from a third party, we would identify and verify the identity of the third party where necessary and consider the rationale for the payment by such third party.

Apart from the above, we also provide trainings to our employees and senior officers and encourage reporting of violations so as to reduce the risks of money laundering among our Group.

APPROVALS, LICENCES AND PERMITS

During the years ended June 30, 2024, 2023 and 2022, we had obtained all requisite licenses, permits and approvals for our business operation. 

We had obtained all requisite licenses, permits and approvals for our business operations in Hong Kong including the business registration certificates and the employment agency license, and we are not required to obtain any industry-specific license, permit and approval for our provision of payroll outsourcing services in Hong Kong, and based on management belief, we are not required to obtain any industry-specific license, permit and approval for our provision of payroll outsourcing services in Taiwan and Macau and our provision of employment services in Taiwan during the years ended June 30, 2024, 2023 and 2022. As of the date of this report, we had obtained the following current licenses which are relevant to our business operation in the Hong Kong:

We had obtained all requisite licenses, permits and approvals to our provision of payroll outsourcing services and employment services during the years ended June 30, 2024, 2023 and 2022. As of the date of this report, we had obtained the following license which is relevant to our business operation in the PRC:

Labor Dispatch Operation Permit has a term of three years. Galaxy HR (SZ) has renewed its Permit and now has the Permit to be expired on January 23, 2025.

LEGAL PROCEEDINGS

As of the date of this report, we are not a party to, and we are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition, or operations.

From time to time, we may become involved in legal proceedings arising in the ordinary course of business. Other than the civil proceeding mentioned above, we are not involved in any litigation, arbitration, or claim of material importance, nor any material impact non-compliance incidents or systemic non-compliance incidents in respect to applicable laws and regulations.

REGULATIONS

This section sets out summaries of the relevant laws and regulations which are relevant to our business in Hong Kong, the PRC, Macau and Taiwan.

LAWS AND REGULATIONS RELATING TO OUR BUSINESS IN HONG KONG

Employment Ordinance (Chapter 57 of the Laws of Hong Kong) and Employment Agency Regulations (Chapter 57A of the Laws of Hong Kong)

The Employment Ordinance (Chapter 57 of the Law of Hong Kong) (the “EO”) regulates the conditions of employment in Hong Kong, all employees covered by the EO are entitled to basic protection under the EO including but not limited to payment of wages, restrictions on wages deductions and the granting of statutory holidays. Our Group is subject to the requirements under the EO relating to the payment of wages to both our employees and the employees of our clients. Our Group is further subject to the requirements under the Part XII of the EO and the employment agency regulations (Chapter 57A of the Laws of Hong Kong) (“EAR”) relating to the operation and management of an employment agency.

Under section 22 of the EO, in the absence of any express agreement to the contrary, the wage period of a contract of employment is deemed to be 1 month. Under section 23 of the EO, wages shall become due on the expiry of the last day of the wage period and shall be paid as soon as is practicable but in any case not later than 7 days thereafter.

Under the section 23 of the EO, an employer shall pay wages to the employee under a contract of employment as soon as is practicable but in any case not later than seven days after the last day of the wage period. Any employer who willfully and without reasonable excuse contravenes such requirement commits an offence and is liable on conviction to a maximum fine of HKD350,000 (US$44,809) and to imprisonment for three years.

Under section 24 of the EO, where a contract of employment has been completed, wages and any other sum payable in respect of his contract shall be due to him on the day of the completion of the contract and shall be paid as soon as is practicable but in any case not later than 7 days thereafter.

Under section 25(1) and (2) of the EO, where a contract of employment is terminated, any sum due to the employee, which includes, amongst others, the equivalent of the amount earned by the employee for work done over the period commencing on the expiry of his wage period preceding the time of termination and up to the time of termination and any other sums due to the employee in respect of his contract of employment, etc., shall be paid to him as soon as is practicable and in any case not later than 7 days after the day of termination. Any employer who willfully and without reasonable excuse contravenes such requirement commits an offence and is liable on conviction to a maximum fine of HKD10,000 (US$1,280).

Section 26(1) of the EO stipulates that wages shall be paid on a working day directly to an employee at his place of employment or at any office or other place customarily used by the employer for the purpose of payment of wages or at any other place mutually agreed.

Under section 25A of the EO, if, any wages or the equivalent of the amount earned by the employee for work done over the period commencing on the expiry of his wage period preceding the time of termination and up to the time of termination are not paid within 7 days from the day on which they become due under sections 23, 24 and 25 above, the employer shall pay interest, currently at the rate of 8.000% per annum, on the outstanding amount of wages or sum from the date on which such wages or sum become due up to the date of actual payment.

Also, under section 63C of the EO, any employer who willfully and without reasonable excuse fails to pay wages in accordance with section 23, 24 or 25 commits an offence and is liable to a fine of HKD350,000 (US$44,809) and to imprisonment for 3 years. Pursuant to section 64B of the EO, where the employer concerned is a body corporate, if the above offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any of its director, manager, secretary or other similar officer, the director, manager, secretary or other similar officer concerned shall be guilty of the same offence.

Under the section 51(1) of the EO, no person shall operate, manage or assist in the management of an employment agency unless he is the holder of an employment agency license or certificate of exemption issued by the Commissioner for labor in respect of the employment agency. Any person who contravenes such requirement commits an offence and is liable on conviction to a fine at HKD350,000 (US$44,809) and to imprisonment for three years.

Under the section 51(2) of the EO, no person shall operate, manage or assist in the management of an employment agency at any place other than the place of business specified in the license. Any person who contravenes such requirement commits an offence and is liable on conviction to a fine at HKD10,000 (US$1,280).

Under Sections 52(2A) and 52(2B) of EO and Regulation 10 of the EAR, the license, duplicate license(s) (if applicable) and the second schedule on maximum commission must be displayed at all times in a conspicuous position at all of the employment agency licensee’s offices. Any person contravenes such requirement commits an offence and shall be liable on conviction to a fine of HKD10,000 (US$1,280).

Under section 53(1) of EO, the Commissioner for Labor may refuse to renew or revoke the license of an employment agency licensee if its licensee or person intending to be an employment agency licensee, the related persons of or persons employed by its licensee or person intending to be an employment agency licensee has contravened Part XII of EO (such as overcharging job-seekers), EAR or has not complied with the Cop.

Under Section 56 of the Employment Ordinance (EO), an employment agency licensee should maintain records showing particulars of all job applicants who registered with, or were placed in employment by his employment agency. Such record should contain the person’s name, address, Hong Kong identity card number (in the case of a non-resident, passport number and citizenship), commission received, date of employment and name and address of employer. The record should be available for inspection by the Commissioner for Labor at all reasonable times. The records shall be retained by an employment agency licensee for a period of not less than 12 months. Any person contravenes such requirement commits an offence and shall be liable on conviction to a fine of HKD10,000 (US$1,280).

The section 57 of the EO sets out that an employment agency licensee shall not, directly or indirectly, receive from any person any form of reward, payment, advantage (except the prescribed commission) for having obtained, for obtaining or to obtain employment for that person. Any person contravenes such requirement commits an offence and is liable on conviction to a fine at HKD350,000 (US$44,809) and to imprisonment for 3 years. The section 57 of the EO further sets out that an employment agency licensee shall not share with any person the prescribed commission which he is permitted to charge and receive, other than another licensee or shareholder in his employment agency. Any person contravenes such requirement commits an offence and is liable on conviction to a fine at HKD50,000 (US$6,401).

Under section 62A of EO, an employment agency licensee shall comply with the laws and the Code of Practice for Employment Agencies (the “CoP”) which was promulgated by the Commissioner for Labor. The CoP sets out the salient legislative requirements as well as the standards which the Commissioner for Labor expects from a employment agency licensee. The Labor Department will closely monitor compliance through regular and surprise inspections as well as complaint investigations, etc. and may issue warning letters to an employment agency licensee for rectification of irregularities detected, including but not limited to failing to meet the statutory requirements and/or standards set out in the CoP. The Commissioner for Labor may also consider, amongst other relevant factors, the relevant track record of the EAs and/or their capability of meeting such requirements / standards, in making decision of revoking, or refusing to grant or renew EA licenses.

The regulation 6 of the EAR sets out that an employment agency licensee shall not lend, transfer or assign the license to another person. Regulation 10(2) of the EAR sets out the maximum commission which can be charged and received by an employment agency in connection with the employment of any person. The maximum commission which may be received by an employment agency from each job applicant is an amount not exceeding 10% of his/her first month’s wages received after he/she has been successfully placed. Under the regulation 17 of the EAR, any person contravenes such requirement commits an offence and is liable on conviction to a fine at HKD10,000 (US$1,280).

Under the regulation 7 of the EAR, an employment agency licensee shall notify the Commissioner for Labor within 14 days after any change in the management (partner/director/nominated operator) of the employment agency licensee with full particulars of the change, and submit form EA-LOA after any change of the related person(s) or individual(s) employed by the employment agency licensee; under regulation 8 of the EAR, an employment agency licensee shall notify the Commissioner for Labor within 7 days after the cessation of operation of an employment agency and the license must be delivered to the Commissioner for Labor; and under the regulation 9 of the EAR, an employment agency licensee shall notify the Commissioner for Labor at least 14 days before any change of place of business of an employment agency. Any person failing to notify the Commissioner for Labor in the above manner commits an offence and is liable on conviction to a fine at HKD10,000 (US$1,280).

The EO applies to all employment agencies in Hong Kong except those are:

Business Registration Ordinance (Chapter 310 of the Laws of Hong Kong)

Our Group carries on business in Hong Kong, hence we are subject to the Business Registration Ordinance which requires every person, whether a company or an individual, who carries on a business in Hong Kong to apply for business registration certificate from the Inland Revenue Department within one month from the date of commencement of the business, and to display the valid business registration certificate at the place of business. Any person who fails to apply for business registration or display a valid business registration certificate at the place of business shall be guilty of an offence, and shall be liable to a fine of HKD5,000 (US$640) and to imprisonment for one year.

Inland Revenue Ordinance (Chapter 112 of the Laws of Hong Kong)

The Inland Revenue Ordinance (the “IRO”) imposes a tax on property, earnings and profits in Hong Kong. Our Group is subject to the requirements of keeping proper business records and compiling returns to the Inland Revenue Department.

Pursuant to section 51C of the IRO, every person carrying on a business in Hong Kong shall keep sufficient records, which includes books of account, as well as vouchers, bank statements, invoices, receipts and other documents necessary to verify the entries in the books of account, in the English or Chinese language of his income and expenditure so as to readily ascertain the tax-assessable profits of the business concerned. Such records shall be retained by the business for a period not less than 7 years after the completion of the transactions, acts or operations to which they relate. Also, such a person carrying on a business shall keep records of, amongst others, assets and liabilities, all goods purchased and sold and all sums of money received and expended, etc.

Pursuant to sections 52(2) and (3) of the IRO, upon receipt of notice in writing given by an assessor of the Inland Revenue Department, every person who is an employer shall furnish within a reasonable time stated in such notice a return containing the names and places of residence and the full amount of the remuneration, whether in cash or otherwise, of all persons employed by the employer (which includes any director of a company or a person engaged in the management of a company, and in excess of a minimum figure to be fixed by the assessor) and any other persons employed by him named by the assessor.

IRO also stipulates the required timeframe for giving notice to the assessor with respect to the commencement and cessation of employment of an individual, as well as the individual leaving Hong Kong for any period exceeding 1 month.

Pursuant to section 80(1A) of the IRO, any person without reasonable excuse fails to comply with the requirements of keeping sufficient records commits an offence and is liable on conviction to a fine at HKD100,000 (US$12,803) and the court may order the person convicted within a time specified in the order to keep sufficient records.

Also, pursuant to section 80(1) of the IRO, any person who without reasonable excuse fails to furnish a return within the stipulated time to the assessor commits an offence and is liable on conviction to a fine at HKD100,000 (US$12,803) and the court may order the person convicted within a time specified to furnish a return. Pursuant to section 80(2) of the IRO, any person who without reasonable excuse makes an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person commits an offence and is liable on conviction to a fine at HKD10,000 (US$1,280) and a further fine of treble the undercharged amount.

Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong)

We collect, use, make use and retain the personal data of our clients and its employees in the normal course of our business and therefore, our business operation is regulated by the Personal Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong Kong) (the “PDPO”) and our Group falls within the definition of “data user” and “data processor” as defined under the PDPO.

We are required to follow the practices as set out in the data protection principles under the PDPO regarding the collection, use, retention, accuracy and security of and access to personal data, which are:

Section 58 of the PDPO provides that if personal data are used for any of the purposes referred to in Section 58(1) of the PDPO (which includes but not limited to prevention or detection of crimes, prosecution or detention of offenders and prevention, preclusion or remedying of unlawful or seriously improper conduct or dishonesty or malpractice by persons etc.) (“Exempted Matters”) and the application of the personal data protection principle(s) in relation to such use would be likely to prejudice any of the Exempted Matters, then

Under Section 65 of the PDPO, any act done or practice engaged by the employee shall be treated as an act done or engaged by his employer as well as by the employee, whether or not it was done or engaged with the employer’s knowledge or approval. However, it is a defense if the employer can prove that he has taken practicable steps to prevent the employee from breaching the PDPO.

Part 6A of the PDPO regulates the use and provision of personal data in direct marketing by business entities. If the personal data of our client or its employees are intended to be used in direct marketing, our clients and its employees must be notified and their consent must be obtained before using or transferring any of their personal data to another person.

Furthermore, our clients and its employees must be notified of their opt-out right when using their personal data indirect marketing for the first time. Our clients and its employees are entitled to require us to cease using their personal data at any time.

Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong)

The Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) provides for the establishment of non-governmental mandatory provident fund (“MPF”) schemes. Our Group, as an employer, is required to enroll our regular employees (except for certain exempt persons) aged between at least 18 but under 65 years of age and employed for a continuous period of 60 days or more in a MPF scheme within the first 60 days of employment.

For both employees and employers, it is mandatory to make regular contributions into a MPF scheme. For an employee, subject to the maximum and minimum levels of income (HKD25,000 (US$3,201) and HKD7,100 (US$909) per month, respectively before June 1, 2014 or HKD30,000 (US$3,841) and HKD7,100 (US$909) per month, respectively on or after 1 June 2014), an employer will deduct 5% of the relevant income on behalf of an employee as mandatory contributions to a registered MPF scheme with a ceiling of HKD1,250 (US$160) before June 1, 2014 or HKD1,500 (US$192) on or after 1 June 2014. An employer will also be required to contribute an amount equivalent to 5% of an employee’s relevant income to the MPF scheme, subject only to the maximum level of income (HKD25,000 (US$3,201) per month before June 1, 2014 or HKD30,000 (US$3,841) on or after June 1, 2014).

Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong)

Our Group is subject to the Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) (the “MWO”), which provides for a prescribed minimum hourly wage rate (currently set at HKD37.5 (US$4.8) per hour) during the wage period for every employee engaged under a contract of employment under the EO (except those specified under section 7 of the MWO).

Any provision in a contract of employment which purports to extinguish or reduce any right, benefit or protection conferred on an employee by the MWO is void.

Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong)

The Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong) (the “OSHO”) provides for the safety and health protection to employees in workplaces, both industrial and non-industrial. Employers must as far as reasonably practicable ensure the safety and health in their workplaces by:

An employer who fails to comply with any of the above provisions commits an offence and is liable on conviction to a maximum fine of HKD200,000 (US$25,605). An employer who intentionally knowingly or recklessly fails to comply with any of the above provisions commits an offence and is liable on conviction to a maximum fine of HKD200,000 and to imprisonment for 6 months.

Under the sections 9(1) and 10(1) of OSHO, the Commissioner for Labor may issue an improvement notice against non-compliance of the OSHO. The Commissioner for Labor may also issue a suspension notice against activity or condition of workplace which may create imminent risk of death or serious bodily injury. An employer who fails to comply with an improvement notice without reasonable excuse commits an offence punishable by a maximum fine of HKD200,000 (US$25,605) and imprisonment for 12 months. An employer who contravenes a suspension notice without reasonable excuse commits an offence punishable by a maximum fine of HKD500,000 (US$64,013) and imprisonment for 12 months.

Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong)

The Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) (the “ECO”) establishes a no-fault and non-contributory employee compensation system for work injuries and lays down the rights and obligations of employers and employees in respect of injuries or death caused by accidents arising out of and in the course of employment, or by prescribed occupational diseases.

Under the ECO, if an employee sustains an injury or dies as a result of an accident arising out of and in the course of his employment, his employer is in general liable to pay compensation even if the employee might have been at fault or negligent when the accident occurred. Similarly, an employee who suffers incapacity or dies arising from an occupational disease is entitled to receive the same compensation as that payable to employees injured in occupational accidents.

According to Section 40 of the ECO, all employers are required to take out policies of insurance to cover their liabilities both under the ECO and at common law for injuries at work in respect of all their employees (including full-time and part-time employees). An employer who fails to comply with the ECO to secure an insurance cover commits an offence and is liable on conviction to a fine of HKD100,000 (US$12,802) and imprisonment for 2 years.

According to Section 48 of the ECO, an employer shall not, without the consent of the Commissioner for Labor, terminate, or give notice to terminate, the contract of service of an employee (who has suffered incapacity in circumstances which entitle him to compensation under the ECO) before occurrence of certain events. An employer who commits breach of this provision commits an offence and is liable on conviction to a maximum fine of HKD100,000 (US$12,802).

Competition Ordinance (Chapter 619 of the Laws of Hong Kong)

The Competition Ordinance (Chapter 619 of the Laws of Hong Kong) came into force on December 14, 2015 to (i) prohibit conduct that prevents, restricts or distorts competition in Hong Kong; (ii) prohibit mergers that substantially lessen competition in Hong Kong; and (iii) provide for incidental and connected matters. The Competition Ordinance prohibits restrictions on competition through three rules, namely, the First Conduct Rule, the Second Conduct Rule, and the Merger Rule.

The First Conduct Rule provides that an undertaking must not: (a) make or give effect to an agreement; (b) engage in a concerted practice; or (c) act as a member of an association of undertakings, or make or give effect to a decision of the association, if the object or effect of the agreement, concerted practice or decision is to prevent, restrict or distort competition in Hong Kong. The First Conduct Rule applies to an agreement, concerted practice or decision preventing, restricting or distorting competition in Hong Kong even if the agreement, decision or concerted practice is made outside of Hong Kong or if any party to the agreement, concerted practice, any undertaking or association of undertakings is outside Hong Kong.

The Second Conduct Rule provides that an undertaking having a substantial degree of market power in a market must not abuse that power by engaging in conduct that has as its object or effect the prevention, restriction or distortion of competition in Hong Kong. Conducts under the Second Conduct Rule may constitute an abuse if it involves predatory behavior towards competitors or limiting production, markets or technical development to the prejudice of consumers. When determining whether an undertaking has a substantial degree of market power in a market, factors which may be taken into account for such determination include the market share of the undertaking, the undertaking’s power to make pricing and other decisions and any barriers to entry to competitors into the relevant market. As with the First Conduct Rule, the Second Conduct Rule also applies even if the undertaking engaging in the conduct is outside of Hong Kong or the conduct is engaged in outside of Hong Kong.

Where a person has contravened or been involved in contravention of a competition rule, the Competition Tribunal may impose a pecuniary penalty and make all or any of the orders specified in Schedule 3 of the Competition Ordinance which it considers appropriate, such as, awards of damages, disposal of operations, declare agreements to be void, etc. For conduct that constitutes a single contravention, the amount of pecuniary penalty imposed will be capped at 10% of the turnover of the undertaking concerned for each year in which the contravention occurred, up to a maximum of 3 years with the 3 highest yearly turnovers.

The Competition Tribunal may also make a disqualification order against the director of a company for a period not exceeding 5 years if it considers that the company of which the person is a director has contravened a competition rule and that the person’s conduct as a director makes the person unfit for being involved in the management of the company.

Trade Descriptions Ordinance (Chapter 362 of the Laws of Hong Kong)

The Trade Descriptions Ordinance (Chapter 362 of the Laws of Hong Kong) (“TDO”) aims to prohibit false trade description, false, misleading or incomplete information, false marks and misstatements in respect of goods and services provided in the course of trade. The definition of trade description under section 2 of TDO covers a broad range of matters including but not limited to: quantity, method of manufacture, composition, fitness for purpose, availability, compliance with a standard specified or recognized by any person, price, approval by any person, a person by whom they have been acquired, the goods being of same kind as goods supplied to a person, place or date of manufacture, etc. Section 2 also provides that a trade description which is false to a material degree or which, though not false, is misleading, that is to say, likely to be taken for a trade description of a kind that would be false to a material degree, would be regarded as a false trade description.

Section 7A provides that it is an offence for a trader who applies a false trade description to a service supplied or offered to be supplied to a consumer, or supplies or offers to supply to a consumer a service to which a false trade description is applied.

Sections 13E, 13F, 13G, 13H and 131 of TDO provide that a trader commits an offence if the trader engages, in relation to a consumer, in a commercial practice that is a misleading omission, or is aggressive, or constitutes bait advertising, or constitutes a bait and switch, or wrongly accepting payment for a product.

Any person who commits an offence under sections 7A, 13E, 13F, 13G, 13H or 131 of TDO shall be liable, on conviction on indictment, to a fine of HKD500,000 (US$64,013) and to imprisonment for 5 years, and on summary conviction, to a level 6 fine of HKD100,000 (US$12,803) and imprisonment for 2 years. However, sections 30L and 30M provides that an officer authorized by the Commissioner of Customs and Excise may, with the consent in writing of the Secretary for Justice, accept a written undertaking from businesses or individuals not to continue, repeat or engage in conduct that constitutes an offence under the TDO, and on the acceptance of such undertaking, neither the Commissioner of Customs and Excise nor the authorized officer may commence or continue an investigation or proceedings relating to the matter to which the undertaking relates.

Regulations on Distributions

Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the “CO”) provides for prohibition on certain distributions.

According to section 297 of the CO, a company may only make a distribution out of profits available for distribution and a company’s profits available for distribution are its accumulated, realized profits, so far as not previously utilized by distribution or capitalization, less its accumulated, realized losses, so far as not previously written off in a reduction or reorganization of capital. A distribution which is in breach of this provision is unlawful and ultra vires.

According to section 301 of the CO, if a company makes a distribution, or part of a distribution, to one of its members in contravention of section 297 of the CO and at the time of the distribution, the member knows or has reasonable grounds for believing that the distribution, or that part of the distribution (as the case may be) is made in contravention of that section or modified prohibition or restriction, if the distribution is made in cash, the member is liable to repay the distribution, or that part of the distribution (as the case may be) to the company, or if the distribution is made otherwise than in cash, the member is liable to pay to the company a sum equal to the value of the distribution or that part of the distribution (as the case may be) at the time of the distribution. A director who authorized the payment of an unlawful dividend in breach of his duty may be liable to repay to the company under the common law.

LAWS AND REGULATIONS RELATING TO OUR BUSINESS IN THE PRC

Regulations Relating to Incorporation, Operation and Management of Corporate Entities

We conduct business in China through our wholly-owned PRC subsidiary, Galaxy HR (SZ), which falls within the definition of wholly foreign-owned enterprise under PRC laws.

The establishment, operation and management of corporate entities in China are governed by the Company Law of the PRC (the “Company Law”), which was promulgated by Standing Committee of the NPC on 29 December 1993 and became effective on 1 July 1994. It was subsequently amended on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013 and October 26, 2018. The Company Law also applies to foreign-invested companies. According to the Company Law, the provisions otherwise prescribed by the laws on foreign investment prevail.

Upon taking effect on January 1, 2020, the Foreign Investment Law of the PRC (the “Foreign Investment Law”) has replaced the Wholly Foreign- owned Enterprises Law of the PRC, and became the legal foundation for foreign investment in the PRC.

Any investments conducted by foreign investors in the PRC shall be subject to the Catalogue of Industries for Encouraged Foreign Investment, the latest version of which was promulgated by the National Development and Reform Commission and the Ministry of Commerce of the People ’s Republic of China on December 27, 2020 and became effective on January 27, 2021, and the Special Management Measures for the Market Entry of Foreign Investment (Negative List) (2021 Version) (the “Negative List”) which was promulgated on December 27, 2021 and became effective on January 1, 2022. Foreign investment industries are classified into two categories, (1) industries in which foreign investments are encouraged; and (2) industries in which foreign investments are regulated by the Negative List. The Negative List has further classified regulated foreign investment industries into industries in which foreign investments are restricted and industries in which foreign investments are prohibited. Our business does not fall under the “restricted” or “prohibited” category in the Negative List.

Regulations Relating to Foreign Investment

All limited liability companies incorporated and operating in the PRC are governed by the Company Law of the People’s Republic of China, or the Company Law, which was amended and promulgated by the Standing Committee of the National People’s Congress on October 26, 2018. However, on December 24, 2021, the Standing Committee of the National People’s Congress issued the Company Law of the People’s Republic of China (Draft for Comments) (the “Revised Company Law”) for public comments. The Revised Company Law further stipulates the establishment and withdrawal of the company, the organizational structure and the capital system of the company, and strengthens the responsibilities of shareholders and management personnel and corporate social responsibility. Foreign invested projects must also comply with the Company Law, with exceptions as specified in foreign investment laws.

With respect to the establishment and operation of wholly foreign-owned projects, or WFOE, the MOFCOM and NDRC, promulgated the Special Administrative Measures for the Access of Foreign Investment (Negative List) (2021 Version) (the “2021 Negative List”) on December 27, 2021, which became effective on January 1, 2022. The 2021 Negative List replaces the Special Administrative Measures for the Access of Foreign Investment (2020 Version) (the “2020 Negative List”) and serves as the main basis for management and guidance for the MOFCOM to manage and supervise foreign investments. Those industries not set out on the 2021 Negative List shall be classified as industries permitted for foreign investment. None of our businesses are on the 2021 Negative List, nor on the 2020 Negative List. Therefore, we are able to conduct our business through our wholly owned PRC subsidiary without being subject to restrictions on access imposed by the foreign investment laws and regulations of the PRC.

The Foreign Investment Law of the People’s Republic of China (the “Foreign Investment Law”) was adopted by the National People’s Congress on March 15, 2019, which became effective on January 1, 2020. On December 26, 2019, the State Council promulgated Regulation for Implementing the Foreign Investment Law of the People’s Republic of China (the “Regulation”), which became effective on January 1, 2020.

The Foreign Investment Law and the Regulation apply the administrative system of pre-establishment national treatment plus negative list to foreign investment and clarify the state shall develop a catalogue of industries for encouraging foreign investment to specify the industries, fields, and regions where foreign investors are encouraged and directed to invest, which refers to the Catalogue of Industries for Guiding Foreign Investment Industries (amended in 2020).

Regulations Relating to Wholly Foreign-owned Enterprises

The Company Law of the People’s Republic of China provides that companies established in the PRC may take the form of company of limited liability or company limited by shares. Each company has the status of a legal person and owns its assets itself. Assets of a company may be used in full for the company’s liability. The Company Law applies to foreign-invested companies unless relevant laws provide otherwise.

The Foreign Investment Law replaced Law of the People’s Republic of China on Wholly Foreign-owned Enterprises. It stipulates that the PRC implements a system of pre-establishment national treatment plus negative list for the administration of foreign investment. Foreign investors are not allowed to invest in fields or sectors prohibited in the market access negative list for foreign investment. Foreign investors that intend to invest in the fields subject to access restrictions stipulated in market access negative list for foreign investment shall satisfy the conditions stipulated in such negative list. The PRC policies supporting enterprise development are equally applicable to foreign-invested enterprises. The PRC does not impose expropriation on foreign investment. Under special circumstances, if it requires imposing expropriation on foreign investment due to the need of public interest, expropriation shall be imposed according to legal procedures, and the foreign-invested enterprises concerned shall receive fair and reasonable compensation. Foreign-invested enterprises can raise funds through public issuance of stocks, corporate bonds and other securities in accordance with the law. Overall, the Foreign Investment Law establishes the clear principle of applying national treatment to foreign-invested enterprises except those engaged in industries on the 2020 Negative List (as amended).

Regulations Relating to Human Resources Services

On June 29, 2018, the State Council promulgated the Interim Regulations on Human Resources Market, which became effective on October 1, 2018. Human resources service institutions are classified into two categories, namely, public human resources service institutions and commercial human resources service institutions. Public human resources service institutions shall refer to the public employment and talent services institutions established by the People’s governments at or above county level. Commercial human resources service institutions shall refer to the institutions legally established and engaging in business activities in human resources services. Our subsidiary in the PRC, Galaxy HR (SZ), falls within the definition of commercial human resources service institution. To engage in employment intermediary activities, a commercial human resources service institution shall apply to the administrative department of human resources and social security for an administrative permit in accordance with the law and obtain a human resources service license. Where a commercial human resources service institution engages in the business of human resources services such as collection and release of the information on supply and demand of human resources, guidance of employment and entrepreneurship, consultation on human resources management, assessment of human resources, training on human resources and acceptance of outsourcing of human resources services, it shall complete record-filing formalities with the administrative department of human resources and social security within 15 days from the date of commencement of the business. In addition, the Ministry of Human Resources and Social Security of the PRC (the “MOHRSS”) promulgated the Interim Provisions concerning the Management of Foreign-invested Job Intermediaries and the Interim Provisions on Administration of Establishment of Foreign-funded Employment Agencies on December 31, 2019, which emphasizes on the management and supervision of foreign-invested entities engaging in employment intermediary businesses and require foreign-invested entities to obtain a human resources service license for foreign-invested entities prior to conducting employment intermediary businesses. Galaxy HR (SZ) has completed the record-filing formalities with the human resources and social security administrative authorities with its business scope limited to acceptance of outsourcing of human resources services. Since Galaxy HR (SZ) does not provide employment intermediary services, we do not believe human resources service license is required for the acceptance of outsourcing of human resources services and the labor dispatch businesses conducted by Galaxy HR (SZ).

According to the Civil Code of the PRC (the “Civil Code”) promulgated by the National People’s Congress (the “NPC”) on May 28, 2020 and came into force on January 1, 2021, a human resources service contract is classified as a mandate contract under which a principal and an agent agree that the agent shall handle the principal’s affairs. The principal may provide the agent with specific authority to handle one matter or a number of matters on its behalf, or the principal may provide the agent with general authority to handle all of its affairs. Pursuant to the Civil Code, the principal shall pay in advance any expenses associated with the handling of those affairs which have been delegated. When the agent has completed its handling of the delegated affairs, the principal shall reimburse the agent for any amount of associated expenses paid by the agent plus interests. Where, due to circumstances for which the agent cannot be held responsible, the mandate contract is rescinded or the handling of the delegated affairs cannot be completed, the principal shall pay a corresponding amount of compensation to the agent. Where the parties agree otherwise, their agreement shall apply. Where the agent sustains losses in the course of handling delegated affairs due to circumstances for which the agent cannot be held responsible, the agent may demand the principal to provide compensation for the said losses. With respect to non-gratuitous mandate contracts, the principal may demand compensation for any losses sustained due to the error of the agent. Some of our contracts with customers regarding provision of human resources services governed by the PRC law are mandate contracts under the Civil Code.

Pursuant to the Implementing Measures for Labor Dispatch Administrative Licensing, which was promulgated by MOHRSS on June 20, 2013 and became effective on July 1, 2013, to engage in labor dispatch business, an applicant shall apply for administrative licensing in accordance with the law to the competent administrative department of human resources and social security at its domicile. No entity and individual may engage in labor dispatch business without being licensed. Where the application submitted by an applicant satisfies statutory conditions, the relevant licensing authority shall grant the Labor Dispatch Operation Permit to the applicant. On January 28, 2019, Galaxy HR (SZ) obtained the Labor Dispatch Operation Permit, which has been renewed and will remain effective until January 23, 2025, enabling Galaxy HR (SZ) to act as employers of record for our end-users in providing employment services in the PRC.

On January 24, 2014, the MOHRSS promulgated the Interim Provisions on Labor Dispatch, which became effective on March 1, 2014. Pursuant to the Interim Provisions on Labor Dispatch, a labor dispatch service provider shall fulfill the following obligations towards a dispatched worker: (1) truthfully inform the dispatched worker of the matters prescribed by the Labor Contract Law, the rules and regulations to be complied with, as well as the contents of the relevant labor dispatch agreement; (2) establish a training system to provide job-related knowledge training, and safety and education training for the dispatched worker; (3) pursuant to relevant provisions of the PRC law and the relevant labor dispatch agreement, pay labor remunerations and relevant benefits to the dispatched worker in accordance with the law; (4) pursuant to relevant provisions of the PRC and the relevant labor dispatch agreement, contribute social insurance premiums for the dispatched worker in accordance with the law, and go through relevant formalities relating to social insurance; (5) urge the relevant employer to provide labor protection, and labor safety and health conditions for the dispatched worker in accordance with the law; (6) issue the proof for rescission or termination of the relevant labor contract in accordance with the law; (7) assist in handling the disputes between the dispatched worker and the employer; and (8) deal with other matters prescribed by laws, regulations and rules.

Regulations Relating to Employment and Social Welfare

The Labor Law of the PRC which was promulgated on July 5, 1994, became effective on January 1, 1995 and amended on August 27, 2009 and December 29, 2018, sets out the regulatory framework and the principles for the rights and obligations of the employers and employees.

The Labor Contract Law of the PRC was promulgated on June 29, 2007, became effective on January 1, 2008 and amended on December 28, 2012. According to the Labor Contract Law, employers and employees shall enter into written employment contracts to establish their employment relationship. The employment contracts shall set forth the terms, duties, remunerations, disciplinary rules of the employment, conditions to terminate the employment contracts and other issues required by laws and regulations to be included in the employment contracts.

The PRC governmental authorities have passed a variety of laws and regulations regarding social insurance and housing funds from time to time, including, among others, the Social Insurance Law of the People’s Republic of China, the Regulation of Insurance for Labor Injury, the Regulations of Insurance for Unemployment, the Provisional Insurance Measures for Maternal Employees, the Interim Administrative Provisions on Registration of Social Insurance and the Administrative Regulations on the Housing Provident Fund. Pursuant to these laws and regulations, enterprises in the PRC shall provide their employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, occupational injury insurance and medical insurance, as well as housing fund and other welfare plans. Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insurance and housing fund regulatory authorities.

Pursuant to the PRC Social Insurance Law promulgated on October 28, 2010, which became effective on July 1, 2011 and amended on December 29, 2018, and other relevant PRC laws and regulations, employers in the PRC must register with the relevant social insurance authority and make contributions to the pension insurance fund, basic medical insurance fund, unemployment insurance fund, maternity insurance fund and work-related injury insurance fund. An employer must declare and make social insurance contributions in full and on time. The social insurance contributions payable by employees must be withheld and paid by employers on behalf of the employees. Pursuant to the Regulations on the Administration of Housing Provident Fund effective on April 3, 1999, as amended on March 24, 2002 and March 24, 2019, a unit (including a foreign investment enterprise) shall undertake the registration with the administrative center of housing provident funds and pay the funds for their staff.

On July 20, 2018, the General Office of the Communist Party of China and the General Office of the State Council issued the Tax Reform Plan on Reforming the State and Local Tax Collection and Administration Systems, or the Tax Reform Plan. Under the Tax Reform Plan, beginning from January 1, 2019, tax authorities are responsible for the collection of social insurance contributions in the PRC. Pursuant to the Urgent Notice on Effectively Implementing the Spirit of the Standing Meeting of the State Council and Effectively Conducting the Collection of Social Insurance Premiums in a Stable Manner, which was issued by the General Office of the MOHRSS on September 21, 2018, before the reform of the social insurance collection authorities being in place, the relevant levying policies, including the base and rate of the social insurance premiums, shall remain unchanged. The Urgent Notice also clarified that it is strictly prohibited for the local authorities themselves to organize and conduct centralized collection of enterprises historical social insurance arrears.

Regulations Relating to Personal Information Protection

In accordance with the Civil Code, the personal information of a natural person is protected by law. Any organization or individual needing to obtain the personal information of other persons shall legally obtain and ensure the security of such information, and shall not illegally collect, use, process, or transmit the personal information of other persons, nor illegally buy, sell, provide, or publish the personal information of other persons. In case of infringement upon civil rights and interests, the victim shall have the right to request that the tortfeasor assume tort liability. The Civil Code stipulates that the limitation of action regarding applications to a people’s court for protection of civil rights shall be three years. Where the laws provide otherwise, such provisions shall prevail.

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

Regulations Relating to Information Security

In November 2016, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law of the PRC, or the Cyber Security Law, which took effect on June 1, 2017. In accordance with the Cyber Security Law, network operators must comply with applicable laws and regulations and fulfill their obligations to safeguard network security in conducting business and providing services. Network service providers must take technical and other necessary measures as required by laws, regulations, and mandatory requirements to safeguard the operation of networks, respond to network security effectively, prevent illegal and criminal activities, and maintain the integrity, confidentiality and usability of network data.

On December 28, 2021, the Cyberspace Administration of China and other PRC authorities promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022, and further restates and expands the applicable scope of the cybersecurity review in effect. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services and network platform operators engaging in data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators holding personal information of over one million users must apply to the Cybersecurity Review Office for a cybersecurity review before an overseas listing.

On July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure, or the Regulations. Pursuant to the Regulations, critical information infrastructure shall mean the important network facilities or information systems of key industries or fields such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, and important network facilities or information systems which may endanger national security, people’s livelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures, or endanger the security of any critical information infrastructures. The Regulations also require that critical information infrastructure operators shall establish a cybersecurity protection system and accountability system, and that the main responsible person of a critical information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures operated by it. In addition, relevant administration departments of each important industry and sector shall be responsible for formulating the rule of critical information infrastructure determination applicable to their respective industry or sector and determine the critical information infrastructure operators in their industry or sector.

Regulations Relating to PRC Taxation

Enterprise Income Tax

According to the Enterprise Income Tax Law of the PRC (the “EIT Law”) promulgated on March 16, 2007, effective on January 1, 2008, amended on February 24, 2017 and December 29, 2018 and the Implementation Rules of Enterprise Income Tax Law of the PRC (the “Implementation Rules”) effective on January 1, 2008 and amended on April 23, 2019, a uniform income tax rate of 25% for all enterprises in the PRC (including foreign-invested enterprises) and revoke many of the tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises since January 1, 2008.

Value-added Tax

All entities and individuals engaged in the sales of goods, provision of processing, repairs and replacement services, and the importation of goods within the territory of the PRC shall pay value-added tax (VAT) in accordance with the Provisional Regulations on Value-added Tax of the PRC (the “Provisional Regulations on VAT”) and its implementation rules. The Provisional Regulations on VAT was promulgated by the State Council on December 13, 1993 which became effective on January 1, 1994 and subsequently amended on November 10, 2008, February 6, 2016 and November 19, 2017. Pursuant to the Provisional Regulations on VAT and its implementation rules, VAT payable is calculated as “output VAT ” minus “input VAT. “ The rate of VAT is 17% or 11% in certain limited circumstances depending on the product type.

Further to the Circular on Comprehensively Promoting the Pilot Programme of the Collection of Value-added Tax in Lieu of Business Tax, the Ministry of Finance and State Administration of Taxation published a Circular on Adjusting Value-added Tax Rates on April 4, 2018 to announce that a taxpayer engages in a taxable sales activity for the VAT purpose or imports goods, the previous applicable tax rates 17% and 11% will be adjusted to 16% and 10% respectively. This Circular became effective since May 1, 2018.

According to the Announcement of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on Relevant Policies for Deepening Value-added Tax Reform implemented on April 1, 2019, for the VAT taxable sales or imports by a general taxpayer of VAT (hereinafter referred to as “taxpayer”), the applicable tax rate shall be adjusted to 13% from the original 16% and to 9% from original 10%. For the exported goods or labor services subject to the applicable tax rate at 16% and the export tax refund rate at 16% originally, the export tax refund rate is adjusted to 13%; for the exported goods or cross- border taxable acts subject to the tax rate at 10% and export tax refund rate at 10% originally, the export tax refund rate is adjusted to 9%.

Regulations Relating to Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange 

The Renminbi is subject to foreign exchange control and is not freely convertible into foreign currencies. The State Administration of Foreign Exchange of the PRC, or the SAFE, is responsible for administering all matters relating to foreign exchange, including the enforcement of the Foreign Exchange Administration Rules of the PRC (the “Foreign Exchange Administration Rules”). It was promulgated by the State Council on January 29, 1996, became effective on April 1, 1996 and was amended on January 14, 1997 and August 5, 2008. Pursuant to the Foreign Exchange Administration Rules, Renminbi is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless prior approval is obtained from SAFE and prior registration with SAFE is made. 

In May 2013, SAFE promulgated the Circular of the SAFE on Printing and Distributing the Administrative Provision on Foreign Exchange in Domestic Direct Investment by Foreign Investors and Relevant Supporting Documents, or the Circular, which was amended in October 2018 and partially annulled in December 2019. The Circular provides for and simplifies the operational steps and regulations on foreign exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use, receipt and payment of funds, and settlement and sales of foreign exchange. 

Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, or the SAFE Notice 13, which was promulgated on February 13, 2015 and partially annulled in December 30, 2019, the foreign exchange registration under domestic direct investment and the foreign exchange registration under overseas direct investment is directly reviewed and handled by banks in accordance with the SAFE Notice 13, and the SAFE and its branches shall perform indirect regulation over the foreign exchange registration via banks.

Dividend Distribution

According to the PRC Company Law and Foreign Investment Law, our PRC subsidiary, as a foreign-invested enterprise, or FIE, are required to draw 10% of its after-tax profits each year, if any, to fund a common reserve, which may stop drawing its after-tax profits if the aggregate balance of the common reserve has already accounted for over 50% of its registered capital. The reserve funds are not distributable as cash dividends.

Pursuant to the EIT Law, non-resident enterprises which have not set up agencies or offices in the PRC, or agencies or offices are set up but there is no actual relationship with the income obtained by the agencies or offices, shall pay enterprise income tax in relation to the income originating from China at the tax rate of 20%. However, the Implementation Rules reduced the rate from 20% to 10%.

The PRC and the government of Hong Kong signed Arrangement between the Mainland China and Hong Kong for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the “Arrangement”) on August 21, 2006. According to the Arrangement, no more than 5% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong resident, provided that the recipient is a company that holds at least 25% of the capital of the PRC company. The Notice on Issues relating to the Administration of the Dividend Provision in Tax Treaties (the “Notice 81”) was promulgated on February 20, 2009 by the State Administration of Taxation. The Notice 81 reaffirms the qualification for a dividend recipient to enjoy a tax preferential levied at 5% rate as follows: (1) the recipient of the dividend must be a corporation; (2) the recipient ’s ownership in the PRC company must meet the prescribed direct ownership thresholds at all times during the 12 consecutive months preceding the receipt of the dividends; (3) the deal or arrangement is not mainly for the purpose of obtaining the tax preferential.

LAWS AND REGULATIONS RELATING TO OUR BUSINESS IN MACAU

The following sets forth the most significant aspects of Macau Law relating to our business operations in Macau.

Laws and regulations regarding development and promotion of human resources system platform and human resources training

Labor Laws