Company Overview - The company is a Nasdaq-listed entity incorporated in the British Virgin Islands on August 26, 2021[17]. - The founder shareholders collectively own 45% of the company's shares, with each holding 15% prior to the IPO[17]. - The company executed a forward split of all issued and outstanding shares at a ratio of 1,600:1 on December 19, 2022[17]. - The company operates through several subsidiaries, including Galaxy Payroll (HK), Galaxy HR (Macau), and Galaxy Payroll (TW)[18]. - The financial year for the company ends on June 30[17]. - The company has undergone a reorganization, details of which are outlined in the report[21]. Financial Performance - Revenue for the year ended June 30, 2023, was HKD 31,466,673, a decrease of 3.4% from HKD 30,124,952 in 2024[31]. - Gross profit for 2023 was HKD 18,467,001, while it dropped to HKD 16,173,283 in 2024, reflecting a decline of 12.4%[31]. - Net income for 2023 was HKD 9,010,680, compared to HKD 5,505,489 in 2024, indicating a decrease of 38.5%[31]. - Cash and cash equivalents at the end of 2024 were HKD 10,855,128, significantly lower than HKD 17,449,250 at the end of 2023[31]. - Total assets increased from HKD 26,586,491 in 2024 to HKD 39,135,372 in 2025, representing a growth of 47.2%[32]. - Total liabilities decreased from HKD 20,111,008 in 2024 to HKD 12,036,130 in 2025, a reduction of 40.1%[32]. - Shareholders' equity rose from HKD 6,475,483 in 2024 to HKD 27,099,242 in 2025, marking an increase of 318.5%[32]. - The company reported net cash provided by operating activities of HKD 16,086,260 in 2023, which fell to HKD 6,725,500 in 2024[31]. - Research and development expenses for 2025 were HKD 18,686,290, indicating a significant investment in innovation[31]. Market and Operational Focus - The company plans to expand its market presence and enhance its product offerings, focusing on payroll outsourcing and employment services in the PRC and Hong Kong[42]. - The company’s operations are primarily focused in Hong Kong, Macau, Taiwan, and the PRC[18]. - The company has a major in-country partner in China for local payroll outsourcing services[19]. Regulatory and Compliance Risks - The company is subject to various risks and uncertainties that may affect future performance, including competition and regulatory changes[26]. - Recent regulatory developments in China may lead to additional compliance costs and scrutiny for companies with China-based operations, potentially affecting business operations and financial results[48]. - The Personal Information Protection Law, effective November 1, 2021, imposes significant fines for violations, up to RMB 50 million or 5% of annual revenues from the prior year[53]. - The Holding Foreign Companies Accountable Act (HFCAA) could result in delisting if the PCAOB cannot inspect the company's auditors for two consecutive years[58]. - Compliance with China's new Data Security Law and Cybersecurity Review Measures may entail significant expenses and operational changes[51]. - The SEC has requested additional disclosures from offshore issuers associated with China-based companies, which could impact capital raising activities[49]. - The interpretation and enforcement of Chinese laws and regulations may be inconsistent and unpredictable, creating uncertainties for business operations[48]. - The company has not faced any investigations related to cybersecurity or data security as of the report date, but compliance uncertainties remain[56]. - The SEC is assessing how to implement HFCAA requirements, which could impact the company if its auditor is not subject to PCAOB inspection[63]. Customer and Revenue Concentration - The company generated significant revenue from a concentrated customer base, with the five largest customers accounting for approximately HKD 18.3 million (US$ 2.3 million), HKD 22.0 million (US$ 2.8 million), and HKD 22.5 million (US$ 2.9 million), representing 66.7%, 73.0%, and 71.4% of total revenue for the years ended June 30, 2025, 2024, and 2023, respectively[105]. - As of June 30, 2025, three customers accounted for 23.6%, 18.7%, and 13.2% of the Group's total revenues, indicating high customer concentration risks[107]. - The top vendor accounted for 100% of the Group's total accounts payable as of June 30, 2025, and contributed 30.3%, 34.4%, and 37.9% of total in-country partner costs for the years ended June 30, 2025, 2024, and 2023, respectively[108]. Legal and Governance Issues - The company may face challenges in expanding its business operations in the PRC due to the dominance of local enterprises in the payroll outsourcing service industry[119]. - There is no assurance that the company will be able to retain key management personnel, which could adversely affect business operations and financial results[115]. - The company may be exposed to legal claims related to the acts or omissions of seconded employees, which could impact its reputation and financial condition[126]. - The company is subject to complex laws and regulations, and failure to comply could result in substantial costs and damage to its reputation[146]. - The company may not be able to initiate shareholder derivative actions in U.S. federal courts, limiting shareholders' ability to address corporate wrongdoing[185]. - The company is subject to increased legal and financial compliance costs due to public company status, which may complicate corporate activities[193]. Shareholder and Market Risks - The trading price of the company's Ordinary Shares could experience rapid volatility, making it difficult for investors to assess value and potentially leading to substantial losses[156]. - Factors such as regulatory developments, revenue variations, and negative publicity could contribute to high volatility in the company's share price and trading volume[158]. - The company’s directors, officers, and principal shareholders collectively hold 55.9% or more of the Ordinary Shares, allowing them significant control over shareholder matters[163]. - If the company fails to meet Nasdaq's listing requirements, it may face delisting, leading to decreased liquidity and market price for its Ordinary Shares[160]. - The company anticipates using net proceeds from its IPO for construction and corporate purposes, with management having broad discretion over these funds[170]. Operational Challenges - The company is exposed to risks from acts of God, war, and epidemics, which could adversely affect financial performance and operations[88]. - The company has limited ability to diversify its customer base, which may lead to substantial losses if major customers reduce or cease business collaborations[106]. - Historical financial performance may not be indicative of future results, with potential risks including intensified market competition and unfavorable changes in government policies[123]. - The company is focused on safeguarding personal and business information, investing significant resources to maintain and update systems against increasingly sophisticated cyber threats[132]. - The company has encountered material weaknesses in internal controls over financial reporting, which could lead to misstatements in financial results[139]. - The company intends to implement measures to improve internal controls, including establishing a formal financial and system control framework[140]. Intellectual Property and Innovation - The company relies on intellectual property rights for competitive advantage, and failure to protect these rights could adversely affect its business[152]. - The company may face significant expenses and damages due to potential infringement claims on intellectual property rights, which could adversely affect its financial condition and operations[153]. - The company continues to invest in product development to meet changing client needs, but the return on investment may take time[143]. Company Structure and Incorporation - Galaxy Payroll Group Limited was incorporated in the British Virgin Islands on August 26, 2021, as a BVI business company with an initial authorized share capital of 50,000 Ordinary Shares, par value US$1.00 per share[200]. - The company expanded its business to Macau and Taiwan in 2015 and 2016, respectively, and established Galaxy HR (SZ) in 2018 to develop the PRC market[199]. - Galaxy HR (SZ) obtained the Labor Dispatch Operation Permit in 2019, enabling the company to act as an employer of record for providing employment services in the PRC[199]. - On March 19, 2025, the company re-designated its ordinary shares into Class A and Class B Ordinary Shares, with a total of 14,412,500 Class A shares and 3,600,000 Class B shares[201]. - A share consolidation was approved on September 8, 2025, at a ratio of ten shares to one share, increasing the par value per share from US$0.000625 to US$0.00625[202]. - Galaxy Payroll (HK) was incorporated on February 21, 2013, and engages in payroll outsourcing and employment services in Hong Kong[208][209]. - Galaxy Payroll (TW) was incorporated on December 31, 2018, and is currently an investment holding company without active business operations[210][211]. - Galaxy Solutions Partner was incorporated on February 5, 2013, and was transferred to Galaxy (Seychelles) at a consideration of HKD10,000 (US$1,288)[212]. - The company’s end-users for payroll outsourcing services primarily include multinational companies in retail, industrial, IT, financial, and professional services industries[196]. - The company’s end-users for employment services mainly engage in IT, retail, industrial, professional institutions, education, and healthcare industries[196].
Galaxy Payroll(GLXG) - 2025 Q4 - Annual Report