ARBB ARB IOT Group Ltd

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark one)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to _________

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report __________

Commission file number 001-41665

(Exact name of the Registrant as specified in its charter)

(Translation of Registrant’s name into English)

(Jurisdiction of incorporation or organization)

(Address of principal executive offices)

Dato’ Sri Liew Kok Leong, Chief Executive Officer

Tel: +6010-947 5998

Email: contact@arbiotgroup.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered or to be registered pursuant to Section 12(g) of the Act:

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 26,437,500 Ordinary Shares, par value $0.0001 per share, as of June 30, 2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Annual Report on Form 20-F

Year Ended June 30, 2023

TABLE OF CONTENTS

PART II

PART III

CERTAIN INFORMATION

As used in this Annual Report on Form 20-F (the “Annual Report”), unless otherwise indicated or the context otherwise requires, references to:

Our reporting currency and our functional currency is RM. This Annual Report contains translations of RM amounts into USD at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from RM to USD in this Annual Report were made at a rate of RM4.669 to $1.00. We make no representation that any RM could have been, or could be, converted into USD, as the case may be, at any particular rate, at the rates stated below, or at all. The Malaysian government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RM into foreign exchange and through restrictions on foreign trade. On June 30, 2023, the exchange rate was RM4.669 to $1.00. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

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

FORWARD-LOOKING STATEMENTS

This Annual Report contains many statements that are “forward-looking” and uses forward-looking terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “ought to,” “plan,” “possible,” “potentially,” “predicts,” “project,” “should,” “will,” “would,” negatives of such terms or other similar statements. You should not place undue reliance on any forward-looking statement due to its inherent risk and uncertainties, both general and specific. Although we believe the assumptions on which the forward-looking statements are based are reasonable and within the bounds of our knowledge of our business and operations as of the date of this Annual Report, any or all of those assumptions could prove to be inaccurate. As a result, the forward-looking statements based on those assumptions could also be incorrect. The forward-looking statements in this Annual Report include, without limitation, statements relating to:

The forward-looking statements included in this Annual Report are subject to known and unknown risks, uncertainties and assumptions about our businesses and business environments. These statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual results of our operations may differ materially from information contained in the forward-looking statements as a result of risk factors, some of which are described under the headings “Risk Factors,” “Operating and Financial Review and Prospects,” “Information on our Company” and elsewhere in this Annual Report. Such risks and uncertainties are not exhaustive. Other sections of this Annual Report include additional factors which could adversely impact our business and financial performance. The forward-looking statements contained in this Annual Report speak only as of the date of this Annual Report or, if obtained from third-party studies or reports, the date of the corresponding study or report, and are expressly qualified in their entirety by the cautionary statements in this Annual Report. Since we operate in an emerging and evolving environment and new risk factors and uncertainties emerge from time to time, you should not rely upon forward-looking statements as predictions of future events. Except as otherwise required by the securities laws of the United States, we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A. [Reserved]

3.B. Capitalization and Indebtedness

Not applicable.

3.C. Reasons for the Offer and Use of Proceeds

Not applicable.

3.D. Risk Factors

You should carefully consider the following risk factors and all of the information contained in this Annual Report, including but not limited to, the matters addressed in the section titled “Forward-Looking Statements,” and our financial information before you decide whether to invest in our securities. One or more of a combination of these risks could materially impact our business, financial condition or results of operations. In any such case, the market price of our ordinary shares could decline, and you may lose all or part of your investment. Additional risks and uncertainties not currently known to us or that we currently do not consider to be material may also materially and adversely affect our business, financial condition or results of operations.

Summary Risk Factors

Risks Related to Our Business

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

We began operations in 2019, starting with offering smart home and building solutions, and since then, have expanded our product and service offerings to provide IoT solutions for agriculture, construction, consumer electronics, retail and other industries. Following the business expansion, our revenue increased from approximately RM50.3 million ($10.8 million) for the fiscal year ended June 30, 2021 to approximately RM443.0 million ($94.9 million) for the fiscal year ended June 30, 2022, an increase of RM392.7 million ($84.1 million), or 780.7%. Our profit increased from approximately RM18.9 million ($4.0 million) for the fiscal year ended June 30, 2021 to approximately RM73.4 million ($15.7 million) for the fiscal year ended June 30, 2022, an increase of 287.8%. In the fiscal year ended June 30, 2023, we focused on providing IoT solutions such as point-of-sale system, inventory management system and other IoT machines to the retail industry, in order to offset reduced revenues from system development for the construction and property development industries. While pivoting our business strategy, our revenue decreased from approximately RM443.0 million ($94.9 million) for the fiscal year ended June 30, 2022 to approximately RM242.1 million ($51.9 million) for the fiscal year ended June 30, 2023, a decrease of RM200.9 million ($43.0 million) or 45.3%. Profit decreased from approximately RM73.4 million ($15.7 million) for the fiscal year ended June 30, 2022 to approximately RM27.5 million ($5.9 million) for the fiscal year ended June 30, 2023, a decrease of RM45.8 million ($9.8 million) or 62.4%. We have a limited operating history in the Malaysian IoT industry, which makes it difficult to evaluate our business and prospects. Our growth prospects should be considered in light of the risks and uncertainties that companies with a limited operating history and experience in our industry may encounter, including, among others, risks and uncertainties regarding our ability to:

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

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

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

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

Our normal trade credit terms range between 30 to 210 days. As of June 30, 2023, 2022 and 2021, we had approximately RM38.4 million ($8.2 million), RM101.2 million ($21.7 million) and RM23.7 million ($5.1 million) in trade receivables. We provide a long credit period from 210 days to 365 days to some large customers to secure contracts from them. However, our customers sometimes still require additional time for payment, depending on their cash flow. Due to uncertainty of the timing of collection, we establish allowance for doubtful account based on individual account analysis and historical collection trends. We establish a provision for doubtful receivables when there is objective evidence that we may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as on past trends of collections. Considering customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against account receivable balance, with a corresponding charge recorded in the consolidated statements of operations and other comprehensive income. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. We did not have any bad debt write-off during the years ended June 30, 2023, 2022 and 2021.

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

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

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

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

We have entered into a number of transactions with ARB Berhad, our controlling shareholder, and its affiliated companies. See “Item 7B. Related Party Transactions.” We believe the terms obtained or consideration that we paid or received, as applicable, in connection with these transactions were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

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

Our Audit Committee is responsible for reviewing and approving all material related party transactions. We rely on the laws of the Cayman Islands, which provide that the directors owe a duty of care and a duty of loyalty to our company. Under Cayman Islands law, our directors have a duty to act honestly, in good faith, and view our best interests. Our directors also have a duty to exercise the care, diligence, and skills that a reasonably prudent person would exercise in comparable circumstances. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties. These transactions, individually or in aggregate, may have an adverse effect on our business and results of operations or may result in litigation or enforcement actions by the SEC or other agencies. 

There is no assurance that our IoT agriculture projects will operate as intended.

During the year ended June 30, 2023, we completed construction and deployment of a newly developed IoT smart farming system on approximately 35 acres of lands in Kampung Tokdor, Terrengganu, Malaysia. In the year ended June 30, 2022, we completed construction and deployment of our initial hydroponics IoT project on approximately 30 acres of land in Cameron Highlands, Pahang, Malaysia. However, as these projects were recently completed and have not been in operation for long, they are subject to certain risks, including that they may not be able to achieve or maintain the intended benefits, such as high production yields, lower crop losses and reduced operation costs.

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

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

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

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

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

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

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

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

We consider our major customers in each period to be those customers that accounted for more than 10% of overall revenues in such period. For the year ended June 30, 2023, the major customers of the Company were PSSBJAYA Holdings Sdn. Bhd., accounting for 31% of the total revenue, and Annum Industries Sdn. Bhd, accounting for 15% of the total revenue. Both customers were unrelated third parties. For the year ended June 30, 2022, one major customer, Ageson Industrial Sdn. Bhd. (formerly known as AB5 Sdn. Bhd.), accounted for 59.5% of the revenues from the IoT System Development line of business and 34.8% of the total revenues. Ageson Industrial Sdn. Bhd. is a related party. For the year ended June 30, 2022, another major customer, who is an unrelated third party, accounted for 30.9% of the revenues from the IoT System Development line of business and 18.1% of the total revenues. For the year ended June 30, 2021, one (1) major customer, who is an unrelated third party, accounted for 95.1% of the revenues from the IoT Smart Home & Building line of business and 56.2% of the total revenues. For the year ended June 30, 2021, another major customer, ARB Cloud Sdn. Bhd., accounted for 100% of the revenues from the IoT System Development line of business and 11.9% of the total revenues. ARB Cloud Sdn. Bhd. is a related party. The loss of, or a substantial decrease in the volume of, revenues by any of our top customers could harm our revenues and profitability. In addition, an adverse change in the terms of our dealings with, or in the financial wherewithal or viability of, one or more of our significant customers could harm our business, financial condition and results of operations.

We expect that a significant portion of our revenues will continue to be derived from a small number of customers and that the percentage of revenues represented by these customers may increase. As a result, changes in the strategies of our largest customers or in their operating environments may reduce our revenues, as a result of customers modifying their sales, pricing, or spending practices. The loss of such sales could have an adverse effect on our business, financial condition and results of operations.

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

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

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

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

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

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

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

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

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

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

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

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

Our ability to manage approximately 1,100 resellers, distributors and retailers for the distribution of IoT gadgets is subject to a number of risks.

As of the date of this Annual Report, we have a total of approximately 1,100 resellers, distributors and retailers for the distribution of mobile gadget accessories. This business line is primarily based on individual purchase orders placed by these resellers, distributors and retailers. If they fail to successfully market and sell gadget products to end users, or fail to obtain sufficient capital or effectively manage their business operations, consumer relationships, labor relationships or credit risks, it could adversely affect our revenues, as a result of reduced sales of gadget products to them.

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

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

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

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

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

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

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

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

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

As of June 30, 2023, 2022 and 2021, we had recorded goodwill and intangible assets with a net book value of RM116.6 million ($25.0 million), RM139.1 million ($29.8 million) and RM68.7 million ($14.7 million), respectively. Besides amortizing intangible assets over 5 to 10 years, we are required to test for impairment at least annually and whenever evidence of impairment exists. During the year ended June 30, 2023, 2022 and 2021, amortization of intangible assets of approximately RM22.4 million ($4.8 million), RM15.4 million ($3.3 million) and RM1.5 million ($0.3 million) were recorded in our statements of profit or loss, respectively. Other than that, we have not recorded any impairment charges against the carrying value of our goodwill and intangible assets in the past. The carrying value of our goodwill and intangible asset values are measured using a variety of factors, including values of comparable companies, overall stock market and economic data and our own projections of future financial performance. We may be required in the future to record impairment charges that could have a material adverse effect on our reported results.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In the fiscal years ended June 30, 2022 and 2021, the Malaysian government imposed varying measures to combat the COVID-19 pandemic, ranging from different degrees of movement control orders to nationwide lockdowns. See also “—Risks Related to Operations in Malaysia—Developments in the social, political, regulatory and economic environment in Malaysia may have a material adverse impact on us.” We implemented workplace protocols for our employees in accordance with government requirements. The implementation of measures to prevent the spread of COVID-19 resulted in disruptions to our business development efforts which depend, in part, on attendance at in-person meetings, industry conferences and other events. In addition, economic slowdowns and uncertainty brought by COVID-19 negatively affected market demand and customer spending on certain of our services and products such as smart home installations.

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

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

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

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

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

These risks include:

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

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

U.S. and global markets have experienced volatility and disruption following the escalation of geopolitical tensions, including the military conflict between Russia and Ukraine and armed conflicts between Israel and Hamas. Although the length and impact of the ongoing conflicts is highly unpredictable, such conflicts could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situations in Ukraine, the Gaza Strip and globally and assessing their potential impacts on our business. In addition, sanctions on Russia and hostilities involving Israel could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds.

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

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

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

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

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

Risks Related to Our Relationship with Our Controlling Shareholder

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

As of the date of this Annual Report, ARB Berhad owns 25,000,000 ordinary shares of the Company, representing approximately 94.56% of our outstanding ordinary shares. For so long as ARB Berhad beneficially owns our outstanding shares representing at least a majority of the votes entitled to be cast by the holders of our outstanding ordinary shares, ARB Berhad will be able to elect all of the members of our board of directors. Dato’ Sri Liew Kok Leong also serves as an Executive Director and chief executive officer of ARB Berhad.

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

Some of our directors and executive officers own ARB Berhad’s outstanding shares and other securities or rights to purchase ARB Berhad’s shares. Currently, Dato’ Sri Liew Kok Leong also serves as an Executive Director and chief executive officer of ARB Berhad. Hong Zi Shen, our Chief Technology Officer, also serves as an Executive Director of ARB Berhad.

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

Risks Related to Our Industry and Governmental Regulation

The market we compete is competitive.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to Operations in Malaysia

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

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

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

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

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

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

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

Negative developments in Malaysia’s socio-political environment may adversely affect our business, financial condition, results of operations and prospects. The Malaysian economy registered modest growth of approximately 3.1% in 2021 and after contraction of 5.6% in 2020, according to the Department of Statistics Malaysia. Although the overall Malaysian economic environment (in which we predominantly operate) appears to be positive, there can be no assurance that this will continue to prevail in the future. Economic growth is determined by countless factors, and it is extremely difficult to predict with any level of absolute certainty. Furthermore, on March 11, 2020, the World Health Organization or WHO declared the corona virus or COVID-19 a pandemic. To help counter the transmission of COVID-19, the government of Malaysia initiated movement control orders (“MCO”), the first effective March 18, 2020. The MCO had resulted in quarantines, travel restrictions, and the temporary closure of stores and facilities in Malaysia. The first MCO was extended three times, each for a two-weeks period, until May 12, 2020. On May 13, 2020, the MCO was eased to a Conditional Movement Control Order (“CMCO”) where most business sectors were allowed to operate under strict rules and Standard Operating Procedures mandated by the government of Malaysia. The CMCO was further relaxed, and on June 8, 2020, Malaysia moved into the Recovery Movement Control Order (“RMCO”). Due to a resurgence of COVID-19, CMCO was reimposed in the states of Sabah, Selangor, Kuala Lumpur and Putrajaya effective October 14, 2020. On November 7, 2020, the CMCO was extended to a wider geographical area to include another six states in the country. Effectively, ten of thirteen states in Malaysia were placed under CMCO with the exceptions of Perlis, Pahang and Kelantan. On January 1, 2021, the Government of Malaysia extended the Recovery Movement Control Order (“RMCO”) through March 31, 2021. On January 12, 2021, the Malaysian government declared a state of emergency nationwide to combat COVID-19. Intermittent lockdowns were imposed in various states and districts in the country. On March 5, 2021, lockdowns in most part of the country was eased to a CMCO, nevertheless, COVID-19 cases in the country continue to rise. On May 12, 2021, Malaysia was again put under a full lockdown nationwide, until the earlier of (i) daily COVID-19 cases infection of the country fall below 4,000; (ii) intensive Unit Care, or ICU, wards start operating at a moderate level; or (iii) 10% of the Malaysian population is fully vaccinated. The country is administering over 400,000 doses of COVID-19 vaccines daily. On July 17, 2021, the full lockdown was slightly eased as 13.9% of the Malaysian population was fully vaccinated, with another 30% having received at least one dose of the vaccine. Malaysia’s COVID-19 restrictions were eased progressively over the course of 2022, with the country eventually reopening its borders and discontinuing the requirement for face masks. On May 5, 2023, the WHO ended the emergency status for COVID-19. However, COVID-19 is still a significant public health problem and will continue to challenge health systems worldwide long term. The extent to which the coronavirus may continue to adversely impact the Malaysian economy is uncertain. In the event that the Malaysia economy suffers, demand for our products may diminish, which would in turn result in adverse impacts on our revenues, cash flows, financial condition and business prospect.

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

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

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

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

We are subject to foreign exchange control policies in Malaysia.

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

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

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

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

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

Risks Related to Ownership of Our Ordinary Shares

The price of our ordinary shares may be volatile or may decline regardless of our operating performance, and you could lose all or part of your investment.

Our periodic operating results are likely to fluctuate as a publicly traded company. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market, or political conditions, could subject the market price of our ordinary shares to wide price fluctuations regardless of our operating performance. You may not be able to resell your shares at or above price you paid or at all. The trading price of our ordinary shares may fluctuate in response to various factors, including:

Any of these factors may result in large and sudden changes in the volume and price at which the ordinary shares will trade.

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

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

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

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

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

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

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

Raising additional capital may cause dilution to our shareholders or restrict our operations.

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

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

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

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

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

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

We qualify as an “emerging growth company” under the JOBS Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates.

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

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

As of the date of this Annual Report, we are a “controlled company” under the rules of Nasdaq.

Under Nasdaq’s rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including, without limitation, (i) the requirement that a majority of the board of directors consist of independent directors, (ii) the requirement that the compensation of our officers be determined or recommended to our board of directors by a compensation committee that is comprised solely of independent directors, and (iii) the requirement that director nominees be selected or recommended to the board of directors by a majority of independent directors or a nominating committee comprised solely of independent directors. As of the date of this Annual Report, ARB Berhad beneficially owns 25,000,000 ordinary shares of our company and will be able to exercise approximately 94.56% of our total voting power. As a result, we are a “controlled company” within the meaning of the Nasdaq listing rules. Although we currently do not intend to rely on the “controlled company” exemption, we could elect to rely on this exemption in the future. If we elected to rely on the “controlled company” exemption, a majority of the members of our board of directors might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely of independent directors. Our status as a controlled company could cause our ordinary shares to look less attractive to certain investors or otherwise harm our trading price.

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

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

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

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act of the Cayman Islands and the laws applicable to companies incorporated in the United States and their shareholders.

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

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

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

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

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

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

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

As a result, if we rely on some of these exemptions, our shareholders may not be provided with the benefits of certain corporate governance requirements of Nasdaq.

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

As of the date of this Annual Report, ARB Berhad owns approximately 94.56% of the Company’s voting power. As a result, it owns shares sufficient for majority votes over all matters requiring shareholder votes, including: the election of directors; mergers, consolidations, and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; amendments to our amended and restated memorandum and articles of association; and our winding up and dissolution. This concentration of ownership may delay, deter or prevent acts that would be favored by our other shareholders. The interests of ARB Berhad may not always coincide with our interests or the interests of our other shareholders. This concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of our company. Also, ARB Berhad may seek to cause us to take courses of action that, in its judgment, could enhance its investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders. As a result, the market price of our shares could decline, or shareholders might not receive a premium over the then-current market price of our shares upon a change in control. In addition, this concentration of share ownership may adversely affect the trading price of our shares because investors may perceive disadvantages in owning shares in a company with significant shareholders.

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

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

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

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

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

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

General Risk Factors

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

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

ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

Our Corporate History

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

On March 1, 2022, ARB IOT Group Limited was incorporated under the laws of Cayman Islands as an indirect wholly owned subsidiary of ARB Berhad. Following the completion of a restructuring in March 2022, ARB IOT Group Limited became an indirect holding company of our operating subsidiaries which conduct IoT Smart Home & Building, IoT Smart Agriculture, IoT System Development and IoT Gadget Distribution businesses in Malaysia.

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

On April 10, 2023, we closed our initial public offering of 1,250,000 ordinary shares, at an offering price of $4.00 per ordinary share, for gross proceeds of approximately $5.0 million. Our ordinary shares began trading on The Nasdaq Capital Market on April 5, 2023, under the symbol “ARBB.” On April 25, 2023, we completed the sale of an additional 187,500 ordinary shares at the public offering price of $4.00 per share, pursuant to the exercise by the underwriter of the over-allotment option, in full, granted to it in connection with our initial public offering.

On September 29, 2023, ARB IOT Limited who then directly held 25,000,0000 ordinary shares of the Company (the “Shares”), declared a dividend in specie of the Shares to be paid to ARB Holdings Sdn. Bhd., the sole shareholder of ARB IOT Limited. On October 2, 2023, ARB Holdings Sdn. Bhd. declared a dividend in specie of the Shares to be paid to ARB Berhad, the sole shareholder of ARB Holdings Sdn. Bhd. As a result, ARB Berhad directly holds the Shares and owns 94.56% of our outstanding ordinary shares as of the date of this Annual Report.

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

Operating Subsidiaries

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

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

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

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

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

ARBIOT Sdn. Bhd. (“ARBIOT”) was incorporated in Malaysia as a private company limited by shares on March 26, 2019, with an issued and paid-up capital of RM100 comprising one hundred (100) ordinary shares. On May 8, 2019 and February 26, 2021, ARBIOT increased its share capital to RM1,009,900 comprising one hundred million (100,000,000) ordinary shares. On December 31, 2021, ARB AI acquired the remaining 1% equity interest of ARBIOT from ARB Development Sdn. Bhd. Consequently, ARBIOT became a wholly-owned subsidiary of ARB AI. On June 12, 2023, ARBIOT effected a share combination at a ratio of 1:500, as a result of which the company’s share capital has become RM1,009,900, comprising two hundred thousand (200,000) ordinary shares. The principal activities of ARBIOT are providing IoT, internet and multimedia development, consultancy services, information control commission and installation, marketing consultants and smart office system. 

ARB Robotic Sdn. Bhd. (“ARB Robotic”) was incorporated in Malaysia as a private company limited by shares on February 8, 2021, with an issued and paid-up capital of RM1 comprising one (1) ordinary share. On June 25, 2021, ARB Robotic increased its paid-up capital to RM100 comprising one hundred (100) ordinary shares whereby ten (10) ordinary shares were allotted to ARB Distribution and eighty-nine (89) ordinary shares were allotted to ARB Digital Technology Sdn. Bhd. Consequently, ARB IOT Group Sdn. Bhd. acquired 90% equity interests from ARB Digital Technology Sdn. Bhd. on October 8, 2021. As a result, ARB IOT Group Sdn. Bhd. now directly holds 90% equity interests, and its 51% owned subsidiary ARB Distribution owns the remaining 10% equity interests of ARB Robotic. On May 25, 2023, ARB IOT Group Sdn. Bhd. acquired a 10% equity interest in ARB Robotic from ARB Distribution. As a result, ARB IOT Group Sdn. Bhd. directly holds 100% equity interests in ARB Robotic. The principal activities of ARB Robotic are management consultancy services and IT services.

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

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

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

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

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

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

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

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

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

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

Recent Developments

Share Distribution

On September 29, 2023, ARB IOT Limited who then directly held 25,000,0000 ordinary shares of the Company (the “Shares”), declared a dividend in specie of the Shares to be paid to ARB Holdings Sdn. Bhd., the sole shareholder of ARB IOT Limited.

On October 2, 2023, ARB Holdings Sdn. Bhd. declared a dividend in specie of the Shares to be paid to ARB Berhad, the sole shareholder of ARB Holdings Sdn. Bhd. As a result, ARB Berhad directly holds the Shares as of the date of this Annual Report.

On October 17, 2023, ARB Berhad announced that it intends to, upon its shareholders’ approval, distribute up to 23,517,207 of our ordinary shares held by it to its shareholders, at a ratio of 14 of our ordinary shares for every 1,000 shares of ARB Berhad.

Disposition of Subsidiaries

On October 6, 2023, we transferred all the equity interests of ARB Midware Sdn. Bhd., a Malaysian subsidiary engaged in the provision of management consultancy and information services, to a third party in consideration for RM1.00. As a result of this disposition, ARB Midware Sdn. Bhd., as well as its 51% owned subsidiary, ARB Distribution Sdn. Bhd., are no longer part of our company.

4.B. Business Overview

Overview

We are a provider of complete solutions to our clients for the integration of Internet of Things (“IoT”) systems and devices from designing to project deployment. We offer a wide range of IoT systems as well as provide customers a substantial range of services such as system integration and system support service. We deliver holistic solutions with full turnkey deployment from designing, installation, testing, pre-commissioning, and commissioning of various IoT systems and devices as well as integration of automated systems, including installation of wire and wireless and mechatronic works.

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

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

We have benefited from ARB Berhad’s experience, reputation and network in the IT industry. Prior to the completion of our initial public offering on April 10, 2023, we operated as an operating segment of ARB Berhad. As an operating segment of a seasoned public company, we have gained from established business processes and a veteran leadership team, allowing us to focus our attention on growing and developing our IoT business. While our history with ARB Berhad has provided us with certain competitive advantages, we believe that the separation and our initial public offering and listing on the Nasdaq help promote clearer segregation of business responsibilities and operations for the IoT segment, thereby enabling efficient allocation of resources to accelerate the growth of our IoT business, and allow us to have direct access to a globally recognized stock exchange, which may increase our financial flexibility to explore expansion and growth prospects and enhance our corporate reputation and recognition.

Our revenue increased from approximately $10.8 million for the fiscal year ended June 30, 2021 to approximately $94.9 million for the fiscal year ended June 30, 2022, an increase of $84.1 million, or 780.7%. Revenue decreased from approximately $94.9 million for the fiscal year ended June 30, 2022 to approximately $51.9 million for the fiscal year ended June 30, 2023, a decrease of $43.0 million or 45.3%. Our profit increased from approximately $4.0 million for the fiscal year ended June 30, 2021 to approximately $15.7 million for the fiscal year ended June 30, 2022, an increase of $11.7 million or 288.4%. Profit decreased from approximately $15.7 million for the fiscal year ended June 30, 2022 to approximately $5.9 million for the fiscal year ended June 30, 2023, a decrease of $9.8 million or 62.4%.

Our Competitive Strengths

We believe the following competitive strengths are essential to our success and differentiate us from our competitors:

Our Market Opportunity – ASEAN Region

We mainly focus on IoT growth market in ASEAN region, driven by favorable factors such as rapid urbanization, proliferation of technology and mobile devices and shift from traditional agriculture to IoT agriculture in ASEAN countries. We aim to be one of the top IoT player in the ASEAN region, particularly in the agriculture, property development and logistic industries. We anticipate to collaborate with local partners for IoT products and services to penetrate the local market of ASEAN countries.

According to data from Analysys Mason, a world’s leading management consultancy, total IoT revenue in Singapore is projected to be $714 million in 2025, of which connectivity and services will account for $95 million while applications will account for $349 million. The numbers signal Singapore’s position as the epicenter and hub for IoT Technology in ASEAN as infrastructures have been laid out to support IoT deployments in both the public and private sectors.

We expect to set up a regional center in Singapore to support our IoT business for ASEAN countries. Other than the existing sales office in Malaysia, we also plan to establish sales representative offices in other major ASEAN cities such as Jakarta, Phnom Penh, Manila, Bangkok, Hanoi and Ho Chi Minh City.

Our Services and Solutions

IoT Smart Home & Building

We offer smart home solutions which include design, procurement and provision of smart home products and devices, integration services as well as comprehensive professional electrical wire installation and home data network setup for homeowners.

Smart home functionality is fast becoming an essential feature for new home buyers. In a smart home system, various home electrical appliances and devices are integrated thus connecting the kitchen, living room, study room, bed room etc. through a centralized control and remote monitoring smart home network. This allows homeowners to remotely control and monitor various electrical appliances and devices such as closed- circuit television (CCTV), lighting and air-conditioning via mobile devices (iOS and Android). In this way, we create smart surroundings which make the lives of the people more convenient and comfortable. We work closely with all stakeholders to develop a solution that would reflect their idea contributions.

We also provide smart building solutions which include design, procurement, installation, testing, pre-commissioning and commissioning of various IoT systems, solutions and devices as well as integration of automated systems for smart buildings, including installation of wire and wireless and mechatronic works for property developers and contractors.

With a smart building system, building managers will be able to remotely control and monitor various aspects of a building including security, temperature control, ventilation and energy saving features. 

IoT Smart Agriculture

We started venturing into the provision of customized IoT systems and solutions for the agriculture industry in 2021. Hydroponic farming is a type of modern farming technique which involves the usage water to replace soil to grow plants. In the absence of soil, the roots of plants are exposed to water and nutrient rich solutions that contain all the nutrients and substances required to grow a plant. Computerized hydroponics system or smart hydroponic system is a type of agriculture technology that is increasingly used to maximize yield, productivity and efficiency while reducing costs. It plays a role in facilitating better management of limited resources for farming such as land, in order to feed a growing population, thus promoting sustainability.

Features such as sensors, which are connected to the Internet, can be installed in trays filled with water and nutrient solutions to monitor temperature, moisture, lighting, humidity and the pH of the water built within the system. From that, the information and data gathered from the sensors can be uploaded to a cloud server to enable farm operators to remotely monitor and control (via the Internet or through smart devices) parameters such as water level, room temperature and nutrient rich water-based solution in real time. In addition, the smart system can also be designed to alert farmers whenever there are any potential problems detected by the sensors, such as disease and lack of water or nutrients. In turn, this can allow farm operators to take preventive or mitigative actions. These smart features can assist farm operators in maximizing yield and improving crop quality. 

Our IoT smart agriculture solutions involve the following:

IoT System Development

We procure, supply and deliver to our customers industrial building systems to meet their operational requirements. IBS is a technique of construction whereby components are manufactured in a controlled environment, either at site or off site, placed and assembled into construction works. This allows us to increase productivity and quality at construction sites. It needs close management to avoid the issues and obstacles that occur during timely delivery of construction components on the site.

Three main benefits gained by implementing IBS from the contractors’ perspective are (i) IBS increases the productivity of construction works, (ii) IBS reduces concrete mixing activities at construction sites and (iii) IBS reduces the overall duration of construction work. These results indicate that the contractors are focusing more on completing construction works with the help of IBS implementation at construction sites. Also with IBS, our clients are able to minimize the problem of site mismanagement/disorganization through a significant reduction of in-situ wet concrete works.

In addition, our IBS is equipped with IoT technologies that are designed to connect machines and provide accurate tracking of workloads. The adoption of IoT technologies in the construction process can assist with planning and skillful management of human and physical resources, improve productivity levels and reduce construction time and cost. IoT technologies such as building information modeling, sensor, big data and remote operation have the potential to reshape the IBS systems and the overall construction industry. We intend to further develop and optimize our IBS systems with additional IoT applications.

From 2021 to 2023, we began to enter into new sectors such as digital warehouse management systems, point-of-sale systems and agricultural drone services, as we aim to establish a versatile IoT system development ecosystem providing automation technologies and digital solutions for a range of industries.

IoT Gadget Distribution

Our IoT Gadget Distribution line offers supply chain and distribution of smart phones, accessories and ICT and IoT products with an extensive sales and distribution network throughout Malaysia. Our services for the marketing and sales of mobile gadget accessories to resellers, distributors and retailers, who are responsible for distribution to end users in Malaysia include, among other things:

We cover approximately over 500 types of mobile gadget accessories such as smart phones, outdoor and indoor cameras of different types, wireless fast chargers, headphones and ear buds, screen protector, mobile pen, speaker, mobile covers, keyboard and wire ban. As we are well verse in the telecommunication solutions and products distribution, we are able to provide one-stop telecommunication solutions for resellers, distributors and retailers with multitude of IT products and services, thereby gaining loyalty through efficiency, convenience and excellent customer experiences.

Our Customers and Suppliers

IoT Smart Home and Development

Our smart home and building business has secured a large order book since its launch in 2019, serving Selangor, Perak and Penang, the population of which three states in aggregate account for approximately 33.1% of Malaysia’s total population. This provides us with a platform for continuing business success and growth.

We source the hardware and software required for the smart home and building systems from various reputable suppliers and distributors locally. We do not have any long-term supply agreements.

IoT Smart Agriculture

We offer smart farming and hydroponics IoT solutions to farm operators. Our services include initial setup and maintenance such as replacement of sensors, filters, and plant nutrient solutions for the farm operators. With the provision of maintenance service, we are able to retain the farm operators and increase our recurring income, while growing our customer base.

We completed constructing and deploying hydroponics IoT solutions on approximately 30 acres of land in Cameron Highlands, Pahang, Malaysia to plant various types of fruits and vegetables, generating approximately $37.7 million in revenue for the year ended June 30, 2022. Additionally, we completed construction and deployment of our newly developed IoT smart farming system on approximately 35 acres of lands in Kampung Tokdor, Terrengganu, Malaysia to plant fruits and vegetables, generating approximately $35.4 million in revenue for the year ended June 30, 2023.

We do not manufacture any of the smart agriculture products that we sell through our distribution channels. We purchase the hardware and software required for the IoT smart agriculture solutions from local suppliers. We do not have any long-term supply agreements.

IoT System Development – IBS Systems

We started providing IBS systems to developers on construction projects in 2021. Our customers in this space are primarily comprised of large property developers and construction contractors as they are open to and have financial resources for adopting digital and automation technologies. Although we are relatively new to this field, our early-stage approach, focusing on improving efficiency and productivity for companies instead of merely tackling operational issues, distinguishes us and places us in a competitive position to develop potential business and opportunities with clients.

We source the hardware and software required for the IBS systems from local suppliers. We do not have any long-term supply agreements.

IoT System Development – Warehouse Management System

A warehouse management system is a software application designed to support and optimize warehouse functionality and distribution center management. These systems facilitate management in using simplified automatic technologies useful in daily activities like planning, organizing, staffing, directing, warehouse keeping and controlling the utilization of available resources, to move and store materials inside, around and outside of a warehouse, while supporting staff in the performance of material movement and storage in and around a warehouse, without causing any large-scale disruption to business resources.

The warehouse management system uses a database configured to support warehouse operations, containing details describing a variety of standard warehouse elements including:

We began exploring this market in 2021, specifically targeting customers from pharmaceutical, logistic and retail chain industries. We are partnering with a long-established industry player who has more than 20 years of experience in providing complex supply chain solutions and systems. Our value propositions to this partnership include upgrading digital capabilities of the partner’s existing supply chain (based on technical/business know-how) designed to generate an immediate impact on sales and profits. We also improve business outcomes for the sales channels of our partners by allowing our partners to cross-sell their products and/or upsell packages to end consumers through our network.

IoT System Development – Point-of-Sale Systems

We started exploring this market in 2022, with a focus on customers from the retail chain industry. We offer comprehensive solutions to automate processes and transactions, ranging from in-person sales to warehouse management. Our point-of-sale system is compatible with our warehouse management system.

We do not manufacture any of the point-of-sale systems that we sell through our distribution channels. We purchase the hardware and software required for the point-of-sale systems from local suppliers. We do not have any long-term supply agreements.

IoT System Development – Commercial Drone Operations

We, through our wholly-owned Malaysian subsidiary ARB Agro Technology Sdn. Bhd., offer all-in-one drone services to farm operators to streamline workflows on farms and plantations which include spraying pest protection solution for a variety of crops. We also intend to capitalize on our strong IT capabilities to expand into agricultural data management which includes, among other things, collection, compilation, feeding, converting, processing, analysis and testing of agricultural data.

ARB Agro Technology Sdn. Bhd. has entered into a supply agreement with a Malaysian publicly listed company to supply drones to support its business activities. In addition, ARB Agro Technology Sdn. Bhd. will carry out drone services for the customer such as spraying pest protection solution under a ten (10) year service agreement with this customer. We plan to further diversify the supply model for drones and add supplemental service offerings such as lease, maintenance, repair, purchase and import of drones and related components and accessories.

IoT Gadget Distribution

There is a broad customer base for our IoT gadget distribution business. Currently, we have a total of approximately 1,100 resellers, distributors and retailers who spread across eleven (11) major cities in Malaysia for the distribution of electronic gadgets to end users. These resellers, distributors and retailers make direct purchases from us and we do not charge any fee to them for providing various sales and marketing services.

The gadgets have been sourced from a long-standing partner and supplier locally. We believe that we maintain a good relationship with this supplier. As of the date of this Annual Report, we have not experienced any material disputes or supply shortages.

Our Growth Strategies

We will continue to adhere to our business principles of helping businesses capitalize on new opportunities, inspire and implement innovative IoT solutions for businesses to achieve optimal efficiency. We believe that our pursuit of these goals will lead to sustainable growth driven by our capacity expansion based on market demand, solidify our position in the industry, and create long-term value for shareholders. To meet our competitive challenges, further grow our business and enhance our competitive position, we intend to pursue the following strategies:

Our Research and Development

Our R&D team is responsible for the research, design, architecture, development, testing and quality of our software products as well as continued maintenance and improvement of our existing software and IT related solutions.

Our R&D team currently consists of six (6) persons primarily located in Malaysia which we believe is a strategic advantage for us, allowing us to develop and expand our technology capabilities more efficiently.

We invest resources in research and development to enhance our existing IT solutions and develop new IT platform and improve our core technology. We expect to continue to expand the capabilities of our technology in the future and to invest significantly in continued research and development efforts.

Our in-house R&D team is able to provide innovative solutions and user-friendly products. We are a customer-centric aggregator (platform and service enabler) who constantly seek to innovate new solutions and keep abreast with the new industry trends through continuous market research and maintain constant communication with the strategic partners.

Our R&D team is backed by a group of six (6) chief scientific advisors who are responsible for working closely with the industrial needs that eventually will result in new or improved products, processes, systems or services that aim to increase our clients’ productivity. They provide advice and feedback on the R&D projects, review the feasibility of the R&D projects as well as share experience and expertise to innovate R&D projects.

We believe that our team is highly skilled and knowledgeable in current technologies and is able to adapt and incorporate new technological developments in the market as they occur, to allow our products to evolve and improve in line with the market’s needs and demands.

We believe continued investment in our technology and bringing new products to market, is important to attaining our strategic objectives.

Intellectual Property

We primarily rely on internal procedures with our employees and confidentiality agreements with customers, partners, and others to protect our intellectual property. We own a domain name (www.arbiotgroup.com) and have applied for the trademarks as described below. As of the date of this Annual Report, we do not own any patent or copyright registrations in any jurisdiction.

Our Malaysian subsidiaries have applied for the registration of the following trademarks in Malaysia:

Applicant		Trademark		Application No.		Application Date		Status
ARB Big Data				TM2021032095		November 17, 2021		Pending
ARB Big Data				TM2021032093		November 17, 2021		Pending

Competition

We anticipate that the IoT industry will continue to evolve and will see rapid technological changes, evolving industry standards, shifting customer requirements, and frequent innovation. We must continually innovate to remain competitive. Companies in our industry compete on the basis of a number of factors, including technical expertise and industry knowledge, innovation competence, location, price, reputation, scale, financial stability, responsiveness to market demand and effective personnel training and retention.

Our current and potential competitors include traditional software companies that are developing IoT technologies to seize new growth opportunities, existing IoT players in agriculture, property development and logistics industries and consumer electronics brands that are investing in in-house IoT capabilities, and other smaller companies focused on single niche segments.

Although we operate in an attractive market with a large addressable market size and other companies may introduce new business models, innovations, products or services, we believe our strong in-house research and development competencies, extensive distribution network, large-scale execution capability, robust integration ability, experienced management team and visionary business models power and continuously improve client experience and efficiency and will enable us to capture significant market shares.

Regulations

Currently, almost all of our business operations are conducted in Malaysia. This section sets forth a summary of the most significant rules and regulations that affect our business activities in Malaysia and our Cayman Islands holding company’s duties under the Data Protection Act (as revised) of the Cayman Islands, or the DPA, based on internationally accepted principles of data privacy.

Regulations on Business Licenses

Local Government Act 1976

The Local Government Act 1976 provides a local authority with the power to grant a license or permit for any trade, occupation or premises. Such license may be subject to such conditions and restrictions as the local authority may think fit. This license is generally required if a business occupies an office for business use or erects a signboard.

Regulations on Intellectual Property Rights

Trademarks Act 2019

Registration of a trademark under the Trademarks Act 2019 grants the registered proprietor the exclusive right to use the trademark or to authorize other persons to use the trademark. The registered proprietor also has the right to take legal action for infringement against any persons using such registered trademark without its consent. A certificate of registration provides prima facie evidence of ownership of the trademark. A trademark is valid for 10 years from the date of registration and may be renewed for a further period of 10 years.

Copyright Act 1987

The Copyright Act 1987 is the principal legislation that governs the copyright protection in Malaysia. Literary works, musical works, artistic works, films, sound recordings and broadcasts are eligible for copyright protection. Under the Copyright Act 1987, the definition of “literary work” includes computer programs. The copyright in a literary work subsists during the life of the author and shall continue to subsist until the expiry of a period of 50 years after his death. Where a literary work had not been published before the death of the author, copyright shall subsist until 50 years from the beginning of the calendar year next following the year in which the work was first published.

Regulations on Employment

Employees Provident Fund Act 1991

The Employees Provident Fund Act 1991 provides for the law relating to a scheme of savings for employees’ retirement and the management of the savings for the retirement purposes. Under the Employees Provident Fund Act 1991, all employers and employees shall be liable to pay monthly contributions based on the amount of wages received by the employee at the rate set out in the Third Schedule of the Employees Provident Fund Act 1991.

Any person being an employer who fails to pay any contributions which he is liable under the Employees Provident Fund Act 1991 to pay in respect of or on behalf of any employee in respect of any month shall be guilty of an offense and shall, on conviction, be liable to a fine of up to RM10,000 and/or to imprisonment for a term of up to 3 years. Where any contributions remain unpaid by a company, a firm or an association of persons, the directors, the partners or office-bearers of such association of persons (including the directors, the partner or office-bearers of such association of persons during the period in which the contributions were liable to be paid), shall together with the company be jointly and severally liable for payment of the contributions.

Employees’ Social Security Act 1969

The Employees’ Social Security Act 1969, or the SOCSO Act, deals with the provision of social security in certain contingencies. The Social Security Organization, or the SOCSO, was established under the SOCSO Act to administer the SOCSO Act. The SOCSO Act applies to the industry of any business, trade, undertaking, manufacture or calling of employers, and includes any calling, service, employment, handicraft or industrial occupation or avocation of employees.

All employees, including the registered foreign employees, in industries to which the SOCSO Act applies are required to be insured. It is the obligation of the principal employer to pay the contribution (both the employer’s contribution and the employee’s contribution) to SOCSO at the rates according to the Third Schedule of the SOCSO Act. In the event of invalidity, disablement or employment injury, the insured person and their dependents are entitled to benefits stipulated under the SOCSO Act.

Any person being an employer who fails to pay any contributions which he is liable under the SOCSO Act to pay in respect of or on behalf of any employee shall be punishable with a fine of up to RM10,000 and/or to imprisonment for a term of up to 2 years.

Employment Insurance System Act 2017

The Employment Insurance System Act 2017, or the Employment Insurance System Act provides for the establishment of an employment insurance system administered by SOCSO to provide certain benefits and a re-employment placement program for insured persons in the event of loss of employment which will promote active labour market policies.

All employees in the industries to which the Employment Insurance System Act applies shall be registered and insured by the employers according to Section 16 and Section 17 of the Employment Insurance System Act which shall then deemed to be an insured person. Under the Employment Insurance System Act, both employers and employees (age between 18 to 60) are required to contribute to the employment insurance system with the rates, subject to the revision by the Minister, as specified in the Second Schedule based on the amount of the monthly wages of the employee insured under Employment Insurance System Act. An insured person who considers that he has lost his employment shall submit an application to claim for benefits up to 6 months to SOCSO within 60 days from the date he considers that he has lost his employment. After considering if the contributions qualifying conditions are fulfilled (the fulfillment of which depends on the number of past claims and contributions made preceding to the loss of employment) in respect of a claim for benefits by an insured person, SOCSO may approve or reject the claim for benefits.

Income Tax (Deduction From Remuneration) Rules 1994

The Income Tax (Deduction From Remuneration) Rules 1994, or the Income Tax Rules provides that every employer shall deduct in each month or the relevant month the monthly deduction in accordance with the schedule of the Income Tax Rules in respect of income on account of tax from the remuneration of each of his employees. Every employer shall pay to the Director General of Inland Revenue Malaysia, not later than the 15^th day of every calendar month, the total amount of tax deducted or that should have been deducted by him from the remuneration of employees during the preceding calendar month, and shall render to the Director General of Inland Revenue Malaysia a return setting out the details of those employees from whose remuneration he has or should have made deductions. Any person, who without reasonable excuse, fails to comply such rules shall be guilty of an offence and shall on conviction, be liable to a fine not less than RM200 and not more than RM20,000 or to imprisonment for a term not exceeding six months or to both.

Minimum Wages Order 2022

Pursuant to the Minimum Wages Order 2022, commencing from May 1, 2022, the minimum wage for employees employed by an employer who employs five or more employees or employed by an employer who carries out such prescribed professional activity (regardless of the number of employees employed), shall be RM1,500 a month. For employee who is employed by an employer which does not fall under the above categories, such employee will continue to earn RM1,200 minimum wages (for place of employment in the area of City Council or Municipal Council) or RM1,100 minimum wages (other than place of employment in the area of City Council or Municipal Council) until December 31, 2022.

Thereafter, the minimum monthly wage will increase to RM1,500 to align with the minimum wage for employees being employed in Malaysia. Failure to comply with the minimum wages requirement may result in a fine of not more than RM10,000 for each employee. The Malaysian court may also order the employer to pay each employee the difference between statutory minimum wages and the employee’s basic wages paid by the employer to the employee, including outstanding differences.

Industrial Relations Act 1967

Industrial Relations Act 1967 seeks to promote and maintain industrial harmony and provides for the regulation of the relations between employers and workmen and their trade unions and the prevention and settlement of any differences or disputes arising from their relationship and generally to deal with trade disputes. Matters relating to trade disputes, including constructive dismissal and retrenchment may be referred by the Minister of Human Resources to the Industrial Court. Under the Industrial Relations Act 1967, an employer may not terminate the employment of an employee without just cause and excuse, regardless of the express provisions in the terms of employment. In the event that the that where a workman considers that he has been dismissed without just cause or excuse by his employer with notice, the workmen may file a representation at any time during the period of such notice but not later than sixty days from the expiry thereof.

Regulations on Personal Data Protection

Personal Data Protection Act 2010 and Personal Data Protection Regulations 2013

Personal Data Protection Act 2010, or the PDPA deals with the laws and regulations regarding data privacy and the protection of data. The PDPA requires generally that an individual must consent to the processing and disclosure of his/her personal data unless otherwise stated in the provisions of the PDPA. The term “processing” is widely defined to include collecting, recording, holding, or storing personal data or carrying out any operation or set of operations on personal data, including:

The Personal Data Protection Regulations of 2013 provide that consent shall be obtained in relation to the processing of personal data in any form that can be recorded and maintained properly by the data user.

Data users are required to provide written notice of the personal data being processed, and such notice shall include, among others, a description of the personal data being processed, the purpose for which the personal data is being processed, the source of the personal data, the class of persons to whom the personal data will be disclosed to, whether it is obligatory or voluntary for the individual to supply the personal data, the individual’s rights to request access and correct the personal data and choices and means available to the individual to limit the processing of the personal data. The notice must be provided in both English and the national language of Bahasa Malaysia.

Regulations on Dividends

Companies Act 2016

The principal legislation governing the distribution of dividends of a Malaysian company is the Companies Act 2016, or the CA. Under the CA, a Malaysian company may only make a distribution to the shareholders out of profits of the company available if the company is solvent. The company, every officer and any other person or individual who contravene this provision commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding RM3,000,000.00 or to both.

Foreign Exchange Notice by Central Bank of Malaysia

According to Notice 4 of the Foreign Exchange Notice issued by Central Bank of Malaysia, a non-resident is allowed to repatriate from Malaysia, funds including any income earned or proceeds from divestment of RM asset, provided that the repatriation is made in foreign currency. Any person who fails to comply with any direction of the Central Bank of Malaysia commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding ten years or to a fine not exceeding RM50,000,000 or to both.

Regulations on Drone Services

Civil Aviation Regulation 2016

All Unmanned Aircraft System (UAS) or more familiarly known as Drone flight activities are currently bound to regulations 140 -144 of the Civil Aviation Regulation 2016, or the CAR whereby an authorization from the Director General is required for circumstances specified in the CAR.

Regulations on IoT Gadget Distribution

Guidelines on Foreign Participation in Distribution Trade Services in Malaysia by Ministry of Domestic Trade and Consumer Affairs of Malaysia, or the MDTCA

Any foreign involvement in various other distribution formats are required to be in compliance with the following conditions:

Failure to comply with any provisions under these Guidelines by the business operators and for the purpose of national security, the Distributive Trade Committee of MDTCA has the right to reject the application to open a new business branch and to revoke any previous approval given by the Distributive Trade Committee of MDTCA

Regulations on Cybersecurity

Communications and Multimedia Act 1998

The Communications and Multimedia Act 1998, or the CMA, is the principal legislation in Malaysia which regulates the converging communications and multimedia industries and for incidental matters related thereto. The CMA generally prohibits the use of network facilities or network services for the commission of any offense under Malaysian laws, prohibits fraudulent or improper use of network facilities or network services, prohibits the use and possession of counterfeit access devices, prohibits use of equipment or devices in order to obtain unauthorized access to any network services, applications services or content applications service and prohibits interception of any communications unless with lawful authority.

Breach of any of the provisions in the CMA may render a person liable, upon conviction, to a fine ranging between RM10,000 to RM500,000 or imprisonment term of 3 months to 5 years, or both.

The CMA is under the regulatory purview of the Malaysian Communications and Multimedia Commission, or the MCMC.

MCMC Technical Code on Internet of Things – Security Management and High-Level Functional Architecture

Pursuant to section 95 of the CMA, the MCMC registered and issued the Technical Code on Internet of Things, or the Technical Code, which is the voluntary industry code sets out the requirements and best practices to ensure network facilities, services and equipment are interoperable and safe.

Compliance with the registered voluntary Technical Code shall not be mandatory, unless specifically directed by the MCMC according to section 98 and section 99 of the CMA. Compliance with the Technical Code also acts as a legal defense against any prosecution, action or proceeding of any nature, whether in a court or otherwise, taken against a person (who is subject to the Technical Code) regarding a matter dealt with in that code pursuant to section 98(2) of the CMA. A person who fails to comply with a direction of the MCMC to comply with the Technical Code shall be liable, upon conviction, to a fine not exceeding RM200,000.

Computer Crimes Act 1997

The Computer Crimes Act 1997, or the CCA provides for offenses relating to the misuse of computers. Amongst others, it deals with gaining unauthorized access to computer material, unauthorized access with intent to commit other offences, unauthorized modification of any program or data on a computer and wrongful communication of any means of access to a computer to an unauthorized person.

“Computer” in CCA is widely interpreted to include an electronic, magnetic, optical, electrochemical, or other data processing device, or a group of such interconnected or related devices, performing logical, arithmetic, storage and display functions, and includes any data storage facility or communications facility directly related to or operating in conjunction with such device or group of such interconnected or related devices, but does not include an automated typewriter or typesetter, or a portable hand held calculator or other similar device which is non-programmable or which does not contain any data storage facility.

Depending on the type of offense committed, the fine for a convicted offense ranges from RM25,000 to RM150,000 or imprisonment term of 3 to 10 years, or both.

Penal Code

In cases where computer-related crime activities are involved, but do not specifically fall within the ambit of any of the previous mentioned statutes (for example, online fraud, cheating, theft, criminal defamation, intimidation, gambling, and pornography etc.) such offenses may be charged under the Penal Code, which is the primary legislation dealing with criminal offenses in Malaysia.

Cayman Islands Data Protection Act

We have certain duties under the Data Protection Act (as revised) of the Cayman Islands, or the DPA, based on internationally accepted principles of data privacy.

Privacy Notice

This privacy notice puts our shareholders on notice that through your investment into us you will provide us with certain personal information which constitutes personal data within the meaning of the DPA, or personal data.

Investor Data

We will collect, use, disclose, retain and secure personal data to the extent reasonably required only and within the parameters that could be reasonably expected during the normal course of business. We will only process, disclose, transfer or retain personal data to the extent legitimately required to conduct our activities on an ongoing basis or to comply with legal and regulatory obligations to which we are subject. We will only transfer personal data in accordance with the requirements of the DPA, and will apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of the personal data and against the accidental loss, destruction or damage to the personal data.

In our use of this personal data, we will be characterized as a “data controller” for the purposes of the DPA, while our affiliates and service providers who may receive this personal data from us in the conduct of our activities may either act as our “data processors” for the purposes of the DPA or may process personal information for their own lawful purposes in connection with services provided to us.

We may also obtain personal data from other public sources. Personal data includes, without limitation, the following information relating to a shareholder and/or any individuals connected with a shareholder as an investor: name, residential address, email address, contact details, corporate contact information, signature, nationality, place of birth, date of birth, tax identification, credit history, correspondence records, passport number, bank account details, source of funds details and details relating to the shareholder’s investment activity.

Who this Affects

If you are a natural person, this will affect you directly. If you are a corporate investor (including, for these purposes, legal arrangements such as trusts or exempted limited partnerships) that provides us with personal data on individuals connected to you for any reason in relation to your investment in us, this will be relevant for those individuals and you should transit the content of this Privacy Notice to such individuals or otherwise advise them of its content.

How We May Use a Shareholder’s Personal Data

We may, as the data controller, collect, store and use personal data for lawful purposes, including, in particular: (i) where this is necessary for the performance of our rights and obligations under any agreements; (ii) where this is necessary for compliance with a legal and regulatory obligation to which we are or may be subject (such as compliance with anti-money laundering and FATCA/CRS requirements); and/or (iii) where this is necessary for the purposes of our legitimate interests and such interests are not overridden by your interests, fundamental rights or freedoms.

Should we wish to use personal data for other specific purposes (including, if applicable, any purpose that requires your consent), we will contact you.

Why We May Transfer Your Personal Data

In certain circumstances we may be legally obliged to share personal data and other information with respect to your shareholding with the relevant regulatory authorities such as the Cayman Islands Monetary Authority or the Tax Information Authority. They, in turn, may exchange this information with foreign authorities, including tax authorities.

We anticipate disclosing personal data to persons who provide services to us and their respective affiliates (which may include certain entities located outside the US, the Cayman Islands or the European Economic Area), who will process your personal data on our behalf.

The Data Protection Measures We Take

Any transfer of personal data by us or our duly authorized affiliates and/or delegates outside of the Cayman Islands shall be in accordance with the requirements of the DPA.

We and our duly authorized affiliates and/or delegates shall apply appropriate technical and organizational information security measures designed to protect against unauthorized or unlawful processing of personal data, and against accidental loss or destruction of, or damage to, personal data.

We shall notify you of any personal data breach that is reasonably likely to result in a risk to your interests, fundamental rights or freedoms or those data subjects to whom the relevant personal data relates.

4.C. Organizational Structure

See “4A. History and Development of the Company—Our Corporate Structure” above for details of our current organizational structure.

4.D. Plants, Property and Equipment

Our principal executive offices are located at 2F-09, Pusat Perdagangan IOI, No. 1 Persiaran Puchong Jaya Selatan, Bandar Puchong Jaya, 47100 Puchong, Selangor, Malaysia. Our subsidiary, ARB Innovation Sdn. Bhd., has entered into that certain SQV Co-Working Space Membership Agreement to lease this space, which has a floor area of 1,518 square feet. The term of the membership is from September 1, 2023 to August 31, 2024, and the monthly membership fee is RM3,825 (approximately $819).

In addition, we have leased office premises at No. 17-03, Q Sentral, 2A, Jalan Stesen Sentral 2, Kuala Lumpur Sentral, 50470 Kuala Lumpur, Malaysia, occupying approximately 1,366 square meters. The initial term began on August 1, 2021 and expired on April 30, 2023, with an option to renew for an additional two years. On August 1, 2023, we renewed the lease which will expire on July 31, 2025 and maintain an option to renew for an additional two years. The monthly rental fee remains RM11,000 (approximately $2,500).

Also, we have rented a virtual office located at Level 39, Marina Bay Financial Centre Tower 2, 10 Marina Boulevard, 018983 Singapore. The monthly rental fee is SGD150 with a 20% discount. The initial term is from June 9, 2023 to June 8, 2024 and will automatically renew unless a termination notice is provided one month in advance.

We believe the above facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate any such expansion of our operations.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion may contain forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors, including those set forth under Item 3 “Key Information—3.D. Risk Factors” or in other parts of this Annual Report. See also “Introductory Notes—Forward-Looking Information.” 

5.A. Operating Results

Overview

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

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

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

Effects of COVID-19

During the years ended June 30, 2022 and 2021, the COVID-19 pandemic and resulting disruptions had affected our businesses, particularly our Smart Home and Building line of business, as well as those of our customers, suppliers, and third-party distributors. To serve our customers while also providing for the safety of our employees, we implemented a number of employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. Despite adverse impacts of COVID-19, we maintained to prioritize employee and customer safety, complied with federal, state, and local standards of Malaysia, and implemented standards or processes that we determined to be in the best interests of our employees, customers, and communities during this challenging period.

Principal Factors Affecting Our Financial Performance

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

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

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

Our customers’ financial condition and ability to make payments. Our customers generally purchase our products on credit, and as a result, our results of operations and financial condition may be adversely affected if our customers experience financial difficulties. We provide a long credit period from 210 days to 365 days to some large customers to secure contracts from them. Although we had significant amounts of accounts receivable as of the end of fiscal 2023, 2022 and 2021, we were able to collect all of such accounts receivable subsequently. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.

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

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

Our Reportable Segment

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

Key Components of Results of Operations

Revenue

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

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

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

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

Cost of Revenue

Cost of Project Management and Rendering of Information Technology System Revenue

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

Cost of Sales of Goods

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

Total Expenses

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

Other Income

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

Tax Expenses

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

Results of Operations

Year Ended June 30, 2023 Compared to Year Ended June 30, 2022