As filed with the U.S. Securities and Exchange Commission on January 16, 2025.

Registration Statement No. 333-             

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Agroz Inc.

(Exact name of registrant as specified in its charter) 

No. 2, Lorong Teknologi 3/4A, Taman Sains Selangor, Kota Damansara,

47810 Petaling Jaya, Selangor, Malaysia

+60 18-218 2300

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

Sichenzia Ross Ference Carmel LLP

1185 Avenue of the Americas
31st Floor, New York, NY 10036
Telephone: (212) 930-9700

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

Copies to:

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

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

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

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

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

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

Emerging growth company ☒

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

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

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

Ordinary Shares

Agroz Inc.

This is the initial public offering of the ordinary shares (“Offering”), par value US$0.0001 per share (“Ordinary Shares” or “Shares”), of Agroz Inc. (“Agroz”), an exempted company with limited liability incorporated under the laws of the Cayman Islands, whose operating subsidiary is established in Malaysia. We are offering 2,500,000 Ordinary Shares of Agroz.

Prior to this Offering, there was no public market for the Ordinary Shares. The offering price of the Shares in this Offering is expected to be $4.00 per share. We have reserved the ticker symbol “AGRZ” for the Shares on The Nasdaq Stock Market (“Nasdaq”). Listing of the Shares on Nasdaq is a condition to this Offering. There is no assurance that our Nasdaq application will be approved, and if our application is not approved, this Offering will not be completed.

Investing in the Shares is highly speculative and involves a high degree of risk. Before purchasing any Ordinary Shares, you should carefully read the discussion of material risks of investing in the Shares in “Risk Factors” beginning on page 16 of this prospectus.

We are an “emerging growth company” and a “foreign private issuer” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. See “Prospectus Summary — Implications of Being an Emerging Growth Company and a Foreign Private Issuer” for additional information.

Upon the completion of this Offering, the outstanding shares of Agroz will consist of Ordinary Shares, assuming the Underwriters of this Offering (the “Underwriters”) do not exercise their Over-Allotment Option (as defined below), assuming the Over-Allotment Option is exercised in full.

We expect our total cash expenses for this Offering (including cash expenses payable to our Underwriters for their out-of-pocket expenses) to be approximately US$1,449,560, exclusive of the above discounts and non-accountable expenses. In addition, we will pay additional items of value in connection with this Offering that are viewed by the Financial Industry Regulatory Authority (“FINRA”), as underwriting compensation. These payments will further reduce proceeds available to us before expenses. See “Underwriting.

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

This Offering is being conducted on a firm commitment basis. The Underwriters are obligated to take and pay for all of the Ordinary Shares. We have granted the Underwriters an option for a period of forty-five (45) days after the closing date of this Offering (the “Closing Date”) to purchase up to 375,000 additional Ordinary Shares from us at the IPO price (or 15% of the Ordinary Shares sold in this Offering), less underwriting discounts to cover over-allotments, if any. If the Underwriters exercise the Over-Allotment Option (as defined below) in full, assuming the public offering price per Ordinary Share is US$4.00, the total underwriting discounts payable will be US$805,000, the non-accountable expenses payable will be $115,000 and the total proceeds to us, before expenses, will be US$10,580,000.

If we complete this Offering, net proceeds will be delivered to us on the Closing Date.

The Underwriters expect to deliver the Ordinary Shares against payment as set forth under “Underwriting” on or about           , 2025.

US Tiger Securities, Inc.

The date of this prospectus is            , 2025.

TABLE OF CONTENTS

We are responsible for the information contained in this prospectus and any free writing prospectus we prepare or authorize. We have not, and the Underwriters have not, authorized anyone to provide you with different information, and we and the Underwriters take no responsibility for any other information others may give you. We are not, and the Underwriters are not, making an offer to sell the Shares in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or the sale of any Ordinary Shares.

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

Agroz is an exempted company with limited liability incorporated under the laws of the Cayman Islands and a majority of our outstanding Ordinary Shares are owned by non-U.S. residents. Under the rules of the SEC, we currently qualify for treatment as a “foreign private issuer.” As a foreign private issuer, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as domestic registrants whose securities are registered under the Exchange Act.

Until and including           , 2025 (25 days after the date of this prospectus), all dealers that buy, sell or trade the Shares, whether or not participating in this Offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as Underwriters and with respect to their unsold allotments or subscriptions.

DEFINED TERMS IN THIS PROSPECTUS 

Unless otherwise indicated or the context otherwise requires, all references in this prospectus to:

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the Underwriters of their Over-Allotment Option.

Agroz is a holding company with operations conducted in Malaysia through its operating subsidiary in Malaysia, Agroz Group. The reporting currency of Agroz Group is MYR. This prospectus contains translations of MYR into U.S. dollars solely for the convenience of the reader. Unless otherwise noted, all translations from MYR to U.S. dollars and from U.S. dollars to MYR in this prospectus for the six months ended on June 30, 2024 were calculated at the rate of US$1 = MYR4.7157, representing the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of June 28, 2024. Translations of amounts from MYR into US$ for the fiscal year ended December 31, 2023 were calculated at the rate of US$1 = MYR4.5903, representing the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of December 31, 2023. No representation is made that the MYR amount represents or could have been, or could be converted, realized or settled into US$ at that rate, or at any other rate.

 

In May of 2024, we announced that we would be using the latest generative artificial intelligence (GenAI) technologies made available through Microsoft Azure OpenAI Service to build and develop Agroz Copilot.

 

Our CEA methods and technology solutions have enabled us to improve crop productivity and farm efficiency using less space than conventional agricultural methods of production do. These methods and solutions have also enabled us to precisely manage our water use and deploy tailored artificial lighting to maximize the growth potential of our vegetables, eliminating the need to irrigate vast expanses of land like traditional farms do.

 

Healthy, clean and fresh vegetables

 

We deliver healthy, clean, and fresh vegetables to our customers. We go beyond organic practices by growing clean and fresh vegetables in a safe and sustainable manner. The CEA vertical farms we operate utilize non-genetically modified organism (“non-GMO”) seeds and organic nutrients that are free from harmful chemicals, pesticides, fungicide, insecticide and herbicide.

 

Strategic Partnership with AEON Co. (M) Berhad

 

We have established a strategic business partnership with AEON, a leading Malaysian retailer which we believe can revolutionize the traditional grocery shopping experience and attract more high-consumption customers. We grow fresh vegetables within the EduFarm which are sold directly to visitors at the EduFarm and to shoppers at supermarkets operated by AEON. We, through Agroz Group, have a showcase display at the AEON MaxValu Prime at The Sphere, Bangsar South, Malaysia, a shopping center (“AEON MaxValu Prime”), where customers can choose the vegetables they wish to purchase at our sales counter, thereby applying a unique concept we introduced called “Farm-in-Supermarket.” This business partnership exists pursuant to the terms of that certain Concessionaire Agreement between Agroz Group and AEON dated May 31, 2023 (the “Concessionaire Agreement”), which specifies various material terms by reference to the Yearly Contract entered into between Agroz Group and AEON (the “Yearly Contract”). Under the Concessionaire Agreement, AEON agreed to permit Agroz Group to operate a sales counter at the AEON MaxValu Prime. Each month, AEON pays Agroz Group the account balance of the total gross receipt of sales of fresh produce sold at the sales counter, after deducting all costs, Margins (as defined below), reimbursement, indemnities and other related expenses for the month’s sales period. Agroz Group is required to pay AEON 30% of the total of the amount registered on AEON’s cash register per month (such percentage, the “Margin”). The Concessionaire Agreement currently has no expiration date, as specified in the Yearly Contract. However, the Concessionaire Agreement is terminable upon the occurrence of: (i) the Margin or any other sums or any part thereof payable by Agroz Group being in arrears for seven (7) days after the same becomes due and payable; (ii) there is a breach by Agroz Group of any other terms contained in the Concessionaire Agreement and such breach is not cured within three (3) days of Agroz Group’s receipt of a written notice from AEON requiring such breach to be cured, including the breach of Agroz Group’s obligation to meet or fulfill AEON’s imposed sales or trading target on Agroz Group for three (3) consecutive months or such other time frame specified by AEON; (iii) Agroz Group’s bankruptcy or a petition filed for bankruptcy, winding up, or Agroz Group’s entry into an arrangement with its creditors or cancellation of its business registration certificate; (iv) Agroz Group being forbidden by law to perform its obligations under the Concessionaire Agreement or loss of Agroz Group’s agency to sell or deal with its fresh produce; vi) a breach of the representations or warranties in the Concessionaire Agreement; or vii) in the opinion of AEON, Agroz Group becoming unable to pay Agroz Group’s debts. The Concessionaire Agreement is filed herein as Exhibit 10.5 and the Yearly Contract between Agroz Group and AEON is filed herein as Exhibit 10.6.

 

We believe this “Farm-in-Supermarket” concept revolutionizes the traditional grocery shopping experience, made possible in part through our partnership with AEON.

 

View of the Agroz Indoor CEA Vertical Farm at AEON Alpha Angle in Wangsa Maju, Kuala Lumpur	Agroz AgTech combines digital automation with agronomy to grow quality greens closest to consumers

 

 

On September 13, 2024, the Ministry of Agriculture and Food Security, a ministry of the government of Malaysia, awarded us with the Best Agrotechnology Award of 2024. This award is given to certain individuals, groups, organizations, and entities who have contributed to the field of agriculture and demonstrated outstanding achievements.

 

 

 

In January of 2024, we joined the Microsoft AI Cloud Partner Program pursuant to the terms of the Microsoft Cloud Partner Program Agreement.

 

As a program participant in the MCPP, we currently use the latest GenAI technologies made available through Microsoft Azure OpenAI Service to develop Agroz Copilot for Farmers (“Agroz Copilot”). Agroz Copilot is a GenAI application which enables human farmers to input queries and instructions into the application and receive recommendations from the application to assist with daily tasks. Early feedback from the pilot rollout of Agroz Copilot has been encouraging. We launched this pilot rollout at the EduFarm and the vertical farms we operate in Kota Damansara. We received positive feedback from the farm managers at such vertical farm locations. All of the farm managers at these vertical farms indicated to us that the Agroz Copilot enhanced their productivity in managing their teams and educating produce growers on the Company’s cultivation processes. We were also one of four (4) companies selected by Microsoft to showcase the Agroz Copilot to Satya Nadella, Microsoft’s current Chairman and Chief Executive Officer, during the Microsoft artificial intelligence event in Malaysia on May 2, 2024. We hope that when launched in the future, Agroz Copilot will support human farmers in their cultivation of diverse crops within CEA vertical farms, improve farm efficiency, increase crop productivity, and boost existing farm revenues. We believe Agroz Copilot will be transformative for farmers and fundamentally agriculture.

 

In July of 2023, we installed a 10,021 square foot indoor CEA vertical farm in Kota Damansara, Malaysia.

 

In August of 2023, we installed a “Farm In Supermarket” in the shopping center at AEON MaxValu Prime. Unlike the vertical farms we operate in Kota Damansara and AEON Alpha Angle, this installation is a showcase display used only for sales and promotional purposes, and is not a fully operational vertical farm. Visitors to AEON MaxValu Prime may choose the produce they would like to purchase, which come pre-harvested and packaged within the “Farm in Supermarket.”

 

 

The above photos were taken from the Agroz Farm-in-Supermarket at AEON MaxValu Prime at The Sphere, Bangar South.

 

 

Intellectual Property

 

Trademarks

 

As of the date of this prospectus, we have the following registered trademarks:

 

No.

Trademark

Country of   registration

Trademark number

Owner

Class

Application Status

1

Malaysia

TM2023037737

Agroz Group

44**

Registered

2

Malaysia

TM2023037736

Agroz Group

31*

Registered

 

As of the date of this prospectus, we have the following trademarks pending application approval with the Intellectual Property Corporation of Malaysia:

 

No.

Trademark

Country of   registration

Trademark number

Owner

Class

Application Status

3

Freshness You Can See, Hear and Taste

Malaysia

TM2023037738

Agroz Group

31*

Pending approval

4

Freshness You Can See, Hear and Taste

Malaysia

TM2023037739

Agroz Group

44**

Pending approval

 

*	Raw and unprocessed agricultural, aquacultural, horticultural and forestry products; raw and unprocessed grains and seeds; fresh fruits and vegetables, fresh herbs; natural plants and flowers; bulbs, seedlings and seeds for planting; live animals; foodstuffs and beverages for animals; malt.

 

**	Medical services; veterinary services; hygienic and beauty care for human beings or animals; agriculture, horticulture and forestry services.

 

Copyrights

 

As of the date of this prospectus, we have the following copyrights. We hold all of these copyrights in Malaysia. None of the following copyrights are currently registered. *

 

i)

The source code to the PLC integrated into Agroz OS, which enables automation of various tasks within the indoor vertical farms we design, construct, operate, and manage;

 

ii)

The source code to Agroz OS and Agroz ERP;

 

iii)

The source code to Agroz Copilot for Farmers;

 

iv)

The source code to our Agroz DTC online marketplace; and

 

v)

The codified standard operating procedure for the various vertical farms we operate and manage.

 

*

Copyrights are protected under the Malaysia Copyright Act 1987. Under the Malaysia Copyright Act 1987, subject to the relevant criteria under the Malaysia Copyright Act 1987 being achieved, upon creation, original work becomes owned by the creator as copyrighted material and such original work becomes automatically protected. Registration of copyrights in Malaysia are optional but not necessary to achieve protection. Copyright owners can voluntarily register their copyrights to provide additional legal certainty if disputes arise concerning their copyrights. The Malaysia Copyright Act 1987 confers 50 years of protection for copyrights in literary works, including computer programs and manuals owned by corporate entities (which is applicable to our case), with the period beginning from the start of the calendar year following the literary work’s first publication or first made available to the public (whichever is the latest).

 

RISK FACTORS

An investment in the Shares involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this prospectus, before deciding to invest in the Shares. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations, and future growth prospects. In these circumstances, the market price of the Shares could decline, and you may lose all or part of your investment.

Risks Related to our Business and Industry

We have a limited operating history.

We have a limited operating history from which to evaluate our business and it will continue to be difficult to make accurate predictions and forecasts on our growth and future prospects. There is no guarantee that our products or services will remain attractive to potential and current clients as our business continues to develop.

We operate in an industry that is still relatively new and subject to many uncertainties.

The vertical farming industry is still very new and subject to much uncertainty. New market participants may also emerge in this sector which we cannot anticipate. There is no guarantee that this sector will grow, or grow at a level that will benefit our business, or even if it grows, we cannot assure that our business will operate profitably in spite of favorable market conditions in this industry.

We may incur significant operating costs in the near future and cannot assure that we can recoup these potential costs to continue operating profitably or as a going concern.

High startup costs are one of the most significant concerns for market entrants in the CEA vertical farming industry. CEA vertical farming requires a significant initial investment of funds, including to pay for infrastructure like building facilities and climate control systems. Additionally, there are high electricity costs required to maintain the LED lighting system within vertical farms as well as labor costs. We cannot guarantee a return on our investment into the vertical farms we have developed thus far or that we will build and develop in the future. If we fail to do so, our financial performance may be adversely affected and there is a risk we cannot continue as a going concern.

We cannot assure that we can maintain a steady labor supply of personnel with sophisticated knowledge necessary to operate CEA vertical farms. If we fail to do so, our financial performance may be negatively impacted.

CEA vertical farms require a high level of technical expertise to establish, monitor, and sustain effectively. Our CEA technology minimizes the need for manual labor for crop production but requires sophisticated levels of knowledge to configure, supervise, and maintain them successfully. Furthermore, operating a profitable vertical farming operation necessitates not only advanced expertise in horticulture and engineering but also the presence of leadership abilities, prior management experience, financial literacy, effective communication skills, and keen powers of observation. We cannot assure that we can retain personnel with such technical expertise. If we fail to do so, our financial performance may be negatively impacted.

Failure to adequately manage our planned growth strategy may harm our business or increase our risk of failure.

For the foreseeable future, we intend to pursue a growth strategy for the expansion of our operations by further developing and improving our products and services. Our ability to rapidly expand our operations will depend upon many factors, including our ability to work in a regulated environment, establish and maintain strategic relationships with suppliers, and obtain adequate and necessary capital resources on acceptable terms. Any restrictions on our ability to expand may have a materially adverse effect on our business, results of operations, and financial condition. Accordingly, we may be unable to achieve our targets for sales growth, and our operations may not be successful or achieve anticipated operating results.

We may become subject to additional regulation of agricultural products.

Our business is subject to certain Malaysian laws and regulations, including the Food Act 1983 and the Federal Agricultural Marketing Authority Act 1965, which govern the safety, hygiene, grading, packaging and labeling of agricultural products. Save and except for these laws and their corresponding regulations, in particular the Food Regulations 1985 and the Federal Agricultural Marketing Authority (Grading, Packaging and Labelling of Agricultural Produce) Regulations 2008, we do not believe that our products are subject to any further regulation in Malaysia or any state agency. However, changes in the industry, including growth, make it possible that additional regulations may be put into place and that such regulations could impact sales or otherwise negatively impact our revenues and business opportunities.

We could be adversely affected by a change in consumer preferences, perception and spending habits in the food industry, and failure to develop and expand our product offerings or gain market acceptance of our products may negatively impact our business.

The market in which we operate is subject to changes in consumer preference, perception and spending habits. Our performance will depend significantly on factors that may affect the level and pattern of consumer spending in Malaysia. Such factors include consumer preference, consumer income, consumer confidence in and perception of the safety and quality of our products and shifts in the perceived value for our products relative to alternatives.

Consumer Preferences. There is no guarantee that the variety of produce we offer will continue to sustain popularity, that consumers will prefer the varieties of produce we offer, or that we will be successful in capturing a sufficient market share. If we are able to expand our product offerings, our financial performance will similarly be impacted by changes in consumer preferences.

Safety and Quality Concerns. Media coverage regarding the safety or quality of, or diet or health issues relating to, our products or the processes involved in the growth of our produce, may damage consumer confidence in our products. Any widespread safety or quality issues involving fresh fruits or vegetables — even if not involving us — could adversely affect consumer confidence in and demand for such vegetables or other fresh produce.

Consumer Income. A general decline in the consumption of our products could occur at any time as a result of change in consumer spending habits, including an unwillingness to pay a premium or an inability to purchase our products due to financial hardship, expectations of inflation, or increased price sensitivity.

The success of our products will depend on a number of factors, including our ability to accurately anticipate changes in market demand and consumer preferences, our ability to differentiate the quality of our products from those of our competitors, and the effectiveness of marketing and advertising campaigns for our products. We may not be successful in identifying trends in consumer preferences and growing or developing products that respond to such trends in a timely manner. We or our partners also may not be able to effectively promote our products by marketing and advertising campaigns and gain market acceptance. If our products fail to gain market acceptance, are restricted by regulatory requirements, have quality problems, or are affected by consumer perceptions of safety and quality even arising from our competitors’ products, we may not be able to fully recover costs and expenses incurred in our operations, and our business, financial condition or results of operations could be materially and adversely affected.

We build, manage and develop CEA vertical farms, which may be subject to unexpected costs and delays due to reliance on third parties for construction, material delivery, supply-chains and fluctuating material prices.

We build, manage, and develop CEA vertical farms that are dependent on a number of key inputs and their related costs, including materials such as steel and glass and other supplies, as well as electricity and other local utilities. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact our business, financial condition and operating results. If our suppliers encounter unexpected costs, delays or other problems in providing us with supplies, materials, or utilities, our financial position and ability to execute on our growth strategy could be negatively affected. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on our business, financial condition and operating results.

The price of production, sale and distribution of these supplies may fluctuate widely based on the impact of numerous factors beyond our control, including international, economic and political trends, transportation disruptions, expectations of inflation, global or regional consumptive patterns, speculative activities and increased production due to new production and distribution developments and improved production and distribution methods. Additionally, we import some of the equipment and materials used to build CEA vertical farms facilities. Any prolonged disruption of third-party delivery and shipping services for materials may negatively affect development schedules for the CEA vertical farms we operate and manage, and delay the rates at which we ship produce to consumers and the rates in which our distributors ship produce to consumers. Rising costs associated with these delivery services may also adversely impact our building schedule and crop season planning, and more generally our business, financial condition, results of operations and prospects.

We face strong competition in the agricultural technology and vertical farming industries and cannot assure that we can maintain a competitive position against other market participants.

There are many competitors in the agricultural technology and vertical farming industry. There can be no guarantees that in the future other market participants will not enter these sectors by developing products and services that are in direct competition with us. One particularly strong limitation of CEA vertical farming compared to traditional crop production methods is that CEA vertical farming currently permits production of a restricted range of crops. The production of staple crops such as wheat and rice is a roadblock for large scale vertical farming due to these crops’ specific growth requirements and current vertical farming technology limitations. As a result, competitors with mega-farms, efficient transport connections, established distribution networks, and advanced food preservation technologies have competed more effectively than vertical farms in this respect.

We anticipate the presence as well as entry of other companies in our market space. There is a risk that we may not be able to establish, or if established, to maintain a competitive advantage in our market space. Some competing companies may have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales and marketing resources. This may allow them to respond more quickly than us to market opportunities. It may also allow them to devote greater resources to the marketing, promotion and sale of their products and/or services. These competitors may also adopt more aggressive pricing policies and make more attractive offers to existing and potential customers, employees, strategic partners, distribution channels and advertisers. Increased competition is likely to result in price reductions, reduced gross margins and a potential loss of market share.

We may experience unexpected network interruptions, security breaches or malware attacks (computer virus attacks) and failures in our and our subsidiary’s information technology systems, which may negatively impact our financial performance.

Information technology systems substantially support our and our operating subsidiary’s operations. If these systems fail to perform, we could experience disruptions in operations, slower response time and diminished operating results. System interruptions, errors, or downtime can result from a variety of causes, including unexpected interruptions to the internet infrastructure, technological failures, changes to the systems, erroneous or corrupted data, changes in client usage patterns, linkages with third-party systems, and power, employee misconduct, unauthorized trading, malware attacks (including but not limited to computer viruses, worms, ransomware, and spyware), cyberattacks, terrorist attacks, natural disaster, power outage, capacity constraints, software flaws, and other similar events.

Any failure to maintain the performance, reliability, security, or availability of the network infrastructure may cause significant damage to our and our operating subsidiary’s ability to continue operating profitably.

We may not successfully develop our products and services or improve existing ones.

Our future success depends on successfully competing in markets for our products and services and our ability to improve our existing product lines and services and to develop and offer them to meet consumer needs. We cannot provide any assurance that we will be successful in doing so. We also cannot assure that we can provide product and service innovations that satisfy consumer needs or achieve market acceptance, or that we will do so in a timely manner to meet market demands. If we fail to do so, our ability to maintain or grow our market share may be adversely affected, which could materially adversely affect our business, financial condition and results of operations. In addition, the development and introduction of new products and services lines may require substantial research and development expenditures, which we may be unable to recoup if our products and services do not generate adequate revenue.

Investors should be aware of our related party transactions.

Agroz Inc. and Agroz Group, on a consolidated basis, have had and continue to have significant related party transactions, set forth in more detail in the “Related Party Transactions” section. Our material related party transactions notably involve transactions for which the value involved is sizeable in comparison to the amount of assets we own. For instance, Agroz Group has two software development service contracts with Braiven Co., Ltd., an entity significantly influenced by our Chief Technology Officer, in amounts of approximately $500,000 and $4,000,000. Agroz Group has also in the past sold CEA vertical farm solutions to Agroz Ventures, an entity significantly influenced by the Company, which totaled approximately $900,000 in the fiscal year ended December 31, 2023. Additionally, Agroz Group provided CEA vertical farm design and construction services to Agroz Vertical Farms, an entity significantly influenced by the Company, which totaled $222,678 during the six months ended June 30, 2024. Investors should carefully review and consider the existence of these related party transactions before making an investment into the Company. To the best of its knowledge, the Company does not believe its past related party transactions were entered into on more favorable terms than terms in non-related party transactions. However, investors should be aware that the Company cannot assure the absence of conflicts of interests or influence of related parties over such related party transactions, despite its pricing practices.

Disruptions to transportation channels that we use to distribute our products may adversely affect our margins and profitability.

We may experience disruptions to the transportation channels used to distribute our products, including increased congestion, a lack of transportation capacity, increased fuel expenses, import or export controls or delays, and labor disputes or shortages. Disruptions in our trucking capacity may result in reduced sales or increased costs, including the additional use of more expensive or less efficient alternatives to meet demand. Congestion can affect previously negotiated contracts with shipping companies, resulting in unexpected increases in shipping costs, reduction in our profitability or reduced sales.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

Our ability to compete effectively depends in part on our rights to copyright, service marks, trademarks, trade names and other intellectual property rights we own or license. If we are unable to protect our intellectual property, proprietary information and/or brand names, we could suffer a material adverse effect on our business, financial condition and results of operations. In particular, we own copyrights to (i) the software components of the future developmental version of Agroz OS; (ii) the PLC, an essential component enabling automation and environmental condition control and management, which PLC is integrated within the current version of Agroz OS; (iii) the source code to Agroz Copilot for Farmers; (iv) the source code to the Agroz DTC online marketplace; and (v) the codified standard operating procedure for various vertical farms we operate and manage. Malaysia copyright law grants protection automatically for such copyrights upon their creation, subject to the relevant criteria under the Malaysia Copyright Act 1987 being achieved. However, we cannot predict whether disputes concerning these copyrights may not arise. Further, while we are not required to register our copyrights, registering them provides additional legal certainty if disputes arise.

Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products or services infringe their intellectual property rights. Any litigation or claims brought by or against us could result in substantial costs and diversion of our resources. A successful claim of trademark, patent or other intellectual property infringement against us, or any other successful challenge to the use of our intellectual property, could subject us to damages or prevent us from providing certain products or services, or using certain of our recognized brand names, which could have a material adverse effect on our business, financial condition and results of operations.

Our failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our Ordinary Shares. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.

Section 404 of the Sarbanes-Oxley Act of 2002, (“Section 404”), requires that after this Offering, we maintain internal control over financial reporting that meets applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations in all control systems, there can be no assurance that all control issues have been or will be detected. If we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease in our stock price.

Following this Offering, we will be required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. Such report will not be required until our second annual report filed on Form 20-F. We will need to disclose any material weaknesses identified by our management in our internal control over financial reporting. As an “emerging growth company,” we will avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption if and when we cease to be an “emerging growth company.” When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the U.S. Securities and Exchange Commission, or SEC, or other regulatory authorities, which would require additional financial and management resources.

As of the date of this prospectus, management has identified certain material weaknesses in our internal controls pertaining to (i) our current lack of independent directors and audit committee; (ii) our lack of effective information technology (“IT”) general controls (ITGC) (which are the basic set of controls for our IT systems, including applications, operating systems, databases, and IT infrastructure), (iii) our lack of sufficient financial reporting and accounting personnel with knowledge of IFRS and SEC reporting requirements, and (iv) our inadequate segregation of duties on sale and customers’ data management.

Following the identification of the material weaknesses and control deficiencies, we plan to take remedial measures, including: 1) hiring experienced IT staff to formalize and strengthen our ITGC; 2) hiring additional finance and accounting staff with qualifications and work experiences in IFRS and SEC reporting requirements to formalize and strengthen key internal controls over financial reporting; and 3) allocating sufficient resources to prepare and review financial statements and related disclosures in accordance with IFRS and SEC reporting requirements.

If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting in the future, we may be late with the filing of our periodic reports, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation, financial condition or divert financial and management resources from our core business, and would have a material adverse effect on our business, financial condition and results of operations.

We may be unable to successfully implement our future business plans and objectives.

Our future business plans may be hindered by factors beyond our control, such as competition within the industry we operate; our ability to cope with high exposure to financial risk, operational risk, and market risk as our business expands; and our ability to provide, maintain, and improve the level of human and other resources in generating products and providing services. As such, we cannot assure you that our future business plans will materialize, that our objectives will be accomplished fully or partially, or that our business strategies will generate the intended benefits to us as initially contemplated. If we fail to implement our business development strategies successfully, our business performance could be materially and adversely affected.

We are exposed to potential disruptions and risks from unforeseen disasters or crises.

Our operations and business continuity depend on our ability to operate CEA vertical farms and systems without significant interruption. Unforeseen events such as natural disasters, pandemics, power outages, or other catastrophic events could potentially disrupt our operations, leading to business interruption, financial loss, and damage to our reputation. While we have in place business continuity plans, these plans might not be sufficient to mitigate all potential disruptions. Furthermore, in the context of a global pandemic, our operations may be severely impacted due to government-imposed restrictions, widespread illness among our employees, or disruptions in our supply chain. There is no guarantee that our contingency plans could fully prevent or remediate the effects of such unforeseen disasters or crises. Thus, our financial condition, results of operations, and business prospects may be adversely affected.

We depend on key management personnel and our operation may suffer if we are unable to retain or replace them.

We have a team of experienced and competent management which is responsible for directing and managing daily operations, monitoring and supervising compliance and risk management, overseeing financial condition and performance, allocating and budgeting human resources, and formulating business strategies. However, we cannot assure you that we can retain the services of our key management and find suitable replacement if any of them terminate their engagement with us, are unable or unwilling to continue their services, or in the event of death.

Other than our senior management, we also rely on our professional staff in different business operations to implement our business strategies, provide quality services to clients, manage our compliance and risks, identify and capture business opportunities, maintain relationship with clients, and procure new clients. Loss of our professional staff and failure to recruit replacements for such staff will materially and adversely affect our business operations.

We may be subject to the threat or possibility of litigation, arbitration, or other legal proceedings.

We and our directors and officers may from time to time become subject to or involved in various claims, controversies, lawsuits, and regulatory or legal proceedings. Claims, lawsuits, and litigations are subject to inherent uncertainties, and we are uncertain whether the foregoing claims would develop into a lawsuit. Lawsuits and litigations may cause us to incur defense costs, utilize a significant portion of our resources and divert management’s attention from our day-to-day operations, any of which could harm our business. Any settlements or judgments against us could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, negative publicity regarding claims or judgment made against us may damage our reputation and may result in a material adverse impact on us.

As of the date of this prospectus, we are not a party to, and are not aware of any threat of, any legal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition, or operations. Actions brought against us may result in settlements, awards, injunctions, fines, penalties, and other results adverse to us. A substantial judgment, settlement, fine, or penalty could be material to our operating results or cash flows for a particular period, depending on our results for that period, or could cause us significant reputational harm, which could harm our business prospects.

Risks Related to The Shares

There was no public market for our Ordinary Shares prior to this Offering; if an active trading market does not develop, you may not be able to resell the Shares at any reasonable price.

This Offering is an IPO of the Shares. Prior to this Offering, there was no public market for the Shares. While we plan to list the Shares on the Nasdaq Capital Market, our listing application may not be approved. If our application to the Nasdaq Capital Market is not approved or we otherwise determine that we will not be able to secure the listing of the Shares on the Nasdaq Capital Market, we will not complete the Offering. In addition, an active trading market may not develop following the closing of this Offering, or, if developed, may not be sustained. The lack of an active market may impair your ability to sell the Shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair our ability to raise capital by selling the Shares and may impair our ability to acquire other companies by using the Shares as consideration.

The trading price of the Shares may be volatile, which could result in substantial losses to you.

The trading prices of the Shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen due to broad market and industry factors, such as performance and fluctuation in the market prices or underperformance or deteriorating financial results of other listed companies. The securities of some of these companies have experienced significant volatility since their IPOs, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of other Malaysian companies’ securities after their IPOs may affect the attitudes of investors toward Malaysia-based, U.S.-listed companies, which consequently may affect the trading performance of the Shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure, or matters of other Malaysian companies may also negatively affect the attitudes of investors toward Malaysian companies in general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant price and volume fluctuations that are unrelated to our operating performance.

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

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.

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

Agroz is a holding company, and we rely on dividends and other distributions on equity paid by our operating subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and to service any debt we may incur. There was no transfer of assets between Agroz Group and Agroz in the fiscal year ended December 31, 2023, and no transfer during the six months ended June 30, 2024, and we do not expect Agroz Group to pay us dividends in the foreseeable future. We do not expect to pay cash dividends in the foreseeable future. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

According to the Malaysian Companies Act 2016, a Malaysian company may only make dividends distribution out of profits of the company if the company is solvent. Such company is deemed solvent if the company is able to pay its debts as they fall due within twelve (12) months immediately after the distribution is made. Under the current practice of the Inland Revenue Board of Malaysia, no tax is payable in Malaysia in respect to dividends paid by us. Any limitation on the ability of our Malaysia subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Any limitation on the ability of our subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

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

Assuming the Shares are listed on Nasdaq, we cannot assure you that we will be able to meet the continued listing standards of Nasdaq in the future. If we fail to comply with the applicable listing standards and Nasdaq delists the Shares, we and our shareholders could face significant material adverse consequences, including:

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

If you purchase Shares in this Offering, you will incur immediate and substantial dilution in the book value of your Ordinary Shares.

If you purchase Shares in this Offering, you will pay substantially more than our net tangible book value per Share. As a result, you will experience immediate and substantial dilution of US$3.54 per share, representing the difference between our pro forma as adjusted net tangible book value per share of US$0.46 as of June 30, 2024, after giving effect to (1) the issuance of 371,500 RCPS and the conversion of these RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (2) the surrender of 1,030,494 Ordinary Shares, as if such surrender had occurred on June 30, 2024; (3) the conversion of 419,929 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (4) the issuance of 3,556 Ordinary Shares, as if such issuance had occurred on June 30, 2024; (5) the conversion of all of our outstanding 528,420 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis, and the net proceeds to us from this Offering, assuming no change to the number of shares offered by us as set forth on the cover page of this prospectus, and an assumed public offering price of US$4.00 per share. See “Dilution” for a more complete description of how the value of your investment in our shares will be diluted upon the completion of this Offering.

You may have a diminished return on your investment due to the Company’s issued and outstanding RCPS. Holders of Shares also have certain rights junior to those of the RCPS holders.

Our RCPS holders may, at their election, convert each RCPS into one (1) Ordinary Share on or before the second anniversary of the issuance date of the RCPS (the “Maturity Date”). No further consideration is payable for such conversion. If the RCPS holders elect conversion, your ownership stake in the Ordinary Shares will be diluted. If we determine to issue more RCPS in the future, your ownership stake in the Ordinary Shares will also be diluted upon the RCPS holders’ election to convert their RCPS.

RCPS holders may also at their election redeem their RCPS in whole or in part for the subscription amount of the RCPS at any time after the RCPS share issuance date, after which we must pay the redemption proceeds to the RCPS shareholder. Further, all RCPS which are outstanding as of the Maturity Date and have not been converted into Ordinary Shares will be fully redeemed by us at the subscription price of the RCPS. The funds which we use towards redemption payments will be diverted from funds we could have used for other corporate purposes. Therefore, you may experience a diminished return on your investment in the Company through your ownership of the Ordinary Shares.

Further, holders of RCPS are entitled to receive dividends out of any assets legally available prior to any dividends payable to the Ordinary Shares, at a rate of 10% per annum of the RCPS holders’ subscription amount for the RCPS. The funds allocated towards these interest payments will also divert from funds we could have used for other corporate purposes and dividend payments to holders of Ordinary Shares. Investors should be aware of the risk of diminished returns on their investment and certain junior rights to those of RCPS holders before purchasing Shares.

For a more complete discussion of the rights of the RCPS holders, see “Description of Share Capital – Redeemable Convertible Preference Shares” below.

If a limited number of participants in this Offering purchase a significant percentage of this Offering, the effective public float may be smaller than anticipated and the price of the Shares may be more volatile than it otherwise would be.

As a company conducting a relatively modest public offering, we are subject to the risk that a small number of investors may hold a high percentage of the Shares sold in this Offering, even if the initial sales by the Underwriters are designed to comply with the Nasdaq listing requirements. If this were to happen, investors could find the Shares to be more volatile than they might otherwise anticipate. Companies that experience such volatility in their stock price may be more likely to be the subject of securities litigation. In addition, if a large portion of our public float were to be held by a few investors, smaller investors may find it more difficult to sell their shares and we may cease to meet the Nasdaq public stockholder requirements.

Because the amount, timing, and whether or not we distribute dividends at all is entirely at the discretion of the Board of Directors, you must rely on price appreciation of the Shares for return on your investment.

The Board of Directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law and our Memorandum and Articles of Association. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by the Board of Directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that under no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if the Board of Directors decides to declare and pay dividends, the timing, amount, and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow; our capital requirements and surplus; the amount of distributions, if any, received by us from our subsidiaries; and our financial condition, contractual restrictions, and other factors deemed relevant by the Board of Directors. Accordingly, the return on your investment in the Ordinary Shares will likely depend entirely upon any future price appreciation of the Ordinary Shares. We cannot assure you that the Shares will appreciate in value after this Offering or even maintain the price at which you purchased the Ordinary Shares. You may not realize a return on your investment in the Ordinary Shares, and you may even lose your entire investment in the Ordinary Shares. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.

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

To the extent (i) we raise more money from this Offering than required for the purposes explained in the section entitled “Use of Proceeds,” or (ii) we determine that the proposed uses set forth in that section are not no longer in the best interests of our Company, we cannot specify with any certainty the particular uses of such net proceeds that we will receive from this Offering. Our management will have broad discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and we may spend or invest these proceeds in a way with which our shareholders disagree. The failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from this Offering in a manner that does not produce income or that loses value.

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

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

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

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

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

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

We are an exempted company with limited liability 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 and the experts named in this prospectus 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 jurisdictions may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

Our counsel as to the laws of the Cayman Islands, Carey Olsen Cayman Limited, has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of U.S. courts obtained against us based on certain civil liability provisions of the federal securities laws of the United States or any state, and (ii) in original actions brought in the Cayman Islands, impose liabilities against us based on the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature.

There is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a foreign judgment, without any re-examination or re-litigation of matters adjudicated upon, provided such judgment: (a) is given by a foreign court of competent jurisdiction; (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty; e) was not obtained by fraud; and (f) is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

Subject to the above limitations, in appropriate circumstances, a Cayman Islands court may give effect in the Cayman Islands to other kinds of final foreign judgments such as declaratory orders, orders for performance of contracts and injunctions. 

Our counsel as to the laws of Malaysia has advised us that there is uncertainty as to whether the courts of Malaysia would (i) recognize or enforce judgments of U.S. courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States, or (ii) entertain original actions brought in Malaysia against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. A judgment of a court in the United States predicated upon U.S. federal or state securities laws may be enforced in Malaysia at common law by bringing an action in a Malaysia court on that judgment for the amount due thereunder and then seeking summary judgment on the strength of the foreign judgment, provided that the foreign judgment, among other things, is (1) for a debt or a definite sum of money (not being taxes or similar charges to a foreign government taxing authority or a fine or other penalty), and (2) final and conclusive on the merits of the claim, but not otherwise. Such a judgment may not, in any event, be so enforced in Malaysia if (a) it was obtained by fraud, (b) the proceedings in which the judgment was obtained were opposed to natural justice, (c) its enforcement or recognition would be contrary to the public policy of Malaysia, (d) the court of the United States was not jurisdictionally competent, or (e) the judgment was in conflict with a prior Malaysia judgment. Malaysia has no arrangement for the reciprocal enforcement of judgments with the United States. As a result, there is uncertainty as to the enforceability in Malaysia, in original actions or in actions for enforcement, of judgments of U.S. courts of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state or territory within the United States. See “Enforceability of Civil Liabilities.”

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

We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by the provisions of our Memorandum and Articles of Association, and by the provisions of the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against the Board of Directors, actions by 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 shareholders and the fiduciary duties of our directors and officers under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law than the 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 obtain copies of the register of members or inspect corporate records (other than the memorandum and articles of association and any special resolutions passed by such companies, and the register of mortgages and charges of such companies) of the company. Our directors have discretion under our Memorandum and Articles of Association that will become effective immediately prior to completion of this Offering 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 motion 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 management, or members of the Board of Directors than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital — Differences in Corporate Law.”

Cayman Islands economic substance requirements may have an effect on our business and operations.

Pursuant to the International Tax Cooperation (Economic Substance) Act (as revised) of the Cayman Islands (“ES Act”), which became effective on January 1, 2019, a “relevant entity” conducting a “relevant activity” is required to satisfy the applicable economic substance test set out in the ES Act. A “relevant entity” includes, among other things, an exempted company incorporated in the Cayman Islands which is not a tax resident outside of the Cayman Islands. There are nine designated “relevant activities” under the ES Act, and for so long as our Company is a “relevant entity” carrying on a “relevant activity”, it is required to comply with all applicable requirements under the ES Act. If the only business activity that the Company carries on is to hold equity participation in other entities and only earns dividends and capital gains, then based on the current interpretation of the ES Act, the Company is a “pure equity holding company” and will therefore be subject to a reduced economic substance test which currently would require us to (i) comply with all applicable requirements under the Companies Act and (ii) have adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations.

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

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

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

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.

As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq rules that allow us to follow our home country law for certain governance matters. Certain corporate governance practices in our home country, the Cayman Islands, may differ significantly from corporate governance listing standards, except for general fiduciary duties and duties of care, Cayman Islands law has no corporate governance regime which prescribes specific corporate governance standards. Currently, we do not intend to rely on home country practices with respect to our corporate governance after we complete this Offering. However, if we choose to follow home country practices in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

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

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

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

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

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

Upon consummation of this Offering, we will incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. We are an “emerging growth company,” as defined in the JOBS Act and will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this Offering, (b) in which we have total annual gross revenue of at least US$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of the Shares that is held by non-affiliates exceeds US$700 million as of the end of any second fiscal quarter before that time; and (2) the date on which we have issued more than US$1 billion in non-convertible debt during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay the adoption of new or revised accounting standards until such time as those standards apply to private companies.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “goal,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this prospectus are based upon information available to us as of the date of this prospectus and, while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements include statements about:

You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus forms a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

INDUSTRY AND MARKET DATA

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties, as well as estimates by our management based on such data. None of these third parties are affiliated with us, and the information contained in this prospectus has not been reviewed or endorsed by any of them. The market data and estimates used in this prospectus involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data and estimates. Industry publications, research, surveys, studies, and forecasts generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. We have not commissioned any of the industry and market data included in this prospectus. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus.

While we believe that the information from these industry publications, surveys, and studies is reliable, the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of important factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. 

USE OF PROCEEDS

Based upon an initial public offering price of $4.00 per Ordinary Share, we estimate that we will receive net proceeds from this Offering, after deducting the estimated underwriting discounts, non-accountable expense allowance and the estimated offering expenses payable by us, of approximately $7,750,440 if the Underwriters do not exercise their Over-Allotment Option, and $9,130,440 if the Underwriters exercise their Over-Allotment Option in full, after deducting the underwriting discounts and commissions, non-accountable expense allowance, and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $4.00 per Ordinary Share would increase (decrease) the net proceeds to us from this Offering by $2,300,000, assuming that the number of Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of 1 million in the number of Shares we are offering would increase (decrease) the net proceeds to us from this Offering by $3,680,000, assuming the assumed IPO price remains the same, and after deducting the underwriting discounts and commissions, non-accountable expense allowance, and estimated offering expenses payable by us.

The primary purpose of this Offering is to create a public market for the Shares for the benefit of all shareholders. We plan to use the net proceeds of this Offering as follows:

The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this Offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this Offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this Offering differently than as described in this registration statement. We reserve the right to change the use of proceeds that we presently anticipate and describe in this prospectus.

The Company does not currently anticipate using any of the proceeds from this Offering to settle its liabilities and operating expenses for related parties. The Company plans to settle such liabilities and operating expenses using operating income instead.

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

DIVIDEND POLICY

We currently intend to retain all available funds and future earnings, if any, for the operation and expansion of our business, and we do not anticipate declaring or paying any dividends in the foreseeable future.

During the fiscal year ended December 31, 2023, Agroz did not declare or pay any dividends and there was no transfer of assets among Agroz and its subsidiary, Agroz Group.

During the 2024 Interim Period, Agroz did not declare or pay any dividends and there was no transfer of assets among Agroz and its subsidiary, Agroz Group.

Subject to the Cayman Islands laws and our Memorandum and Articles of Association, our Board of Directors has complete discretion as to whether to distribute dividends. Our Company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid if this would result in our Company being unable to pay its debts as they fall due in the ordinary course of business.

Even if our Board of Directors decides to pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors. Please see the section entitled “Material Income Tax Considerations – Cayman Islands Taxation” of this prospectus for information on the potential tax consequences of any cash dividends declared.

As we are a holding company incorporated in the Cayman Islands, we rely on dividends paid to us by our subsidiaries for our cash requirements, including funds to pay any dividends and other cash distributions to our shareholders, service any debt we may incur, and pay our operating expenses. Our ability to pay dividends to our shareholders will depend on, among other things, the availability of dividends from our subsidiaries. According to the Malaysian Companies Act 2016, a Malaysian company may make dividends distribution out of profits of the company if the company is solvent. Such company is deemed solvent if the company is able to pay its debts as they fall due within twelve months immediately after the distribution is made.

Cash dividends, if any, on the Shares will be paid in U.S. dollars.

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2024, on:

You should read this information together with our audited consolidated financial statements appearing elsewhere in this prospectus and the information set forth under the sections titled “Exchange Rate,” “Use of Proceeds,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

DILUTION

If you invest in the Shares in this Offering, your ownership interest will be immediately diluted to the extent of the difference between the IPO price per Ordinary Share in this Offering and the net tangible book value per Ordinary Share after this Offering. Dilution results from the fact that the IPO price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share. Our net tangible book value per Ordinary Share represents total tangible assets less intangible asset, all divided by the number of Ordinary Shares outstanding as of June 30, 2024. As of June 30, 2024, we had a historical net tangible book value of US$(238,576), or US$(0.0113) per Ordinary Share. As of June 30, 2024, our pro forma net tangible book value was US$2,876,633, or US$0.1349 per Ordinary Share, after giving effect to (1) the issuance of 371,500 RCPS and the conversion of all of these RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (2) the surrender of 1,030,494 Ordinary Shares, as if such surrender had occurred on June 30, 2024; (3) the conversion of 419,929 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (4) the issuance of 3,556 Ordinary Shares, as if such issuance had occurred on June 30, 2024; (5) the conversion of all of our outstanding 528,420 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis.

After further giving effect to the sale of 2,500,000 Ordinary Shares in this Offering at the assumed IPO price of US$4.00 per Ordinary Share, we will have 23,823,405 Ordinary Shares outstanding, and after deducting the underwriting discounts and commissions, non-accountable expense allowance, and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at June 30, 2024, would have been US$10,977,355, or US$0.46 per Ordinary Share. This represents an immediate increase in pro forma net tangible book value of US$0.33 per Ordinary Share to existing investors and immediate dilution in pro forma as adjusted net tangible book value of US$3.54 per Ordinary Share to new investors. The following table illustrates this dilution to new investors purchasing Ordinary Shares in this Offering:

Each US$1.00 increase (decrease) in the assumed IPO price of US$4.00  per Ordinary Share would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2024, after this Offering by approximately US$0.10 per Ordinary Share, and would increase (decrease) dilution to new investors by US$0.90 per Ordinary Share, assuming that the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions, non-accountable expense allowance, and estimated offering expenses payable by us, assuming the Underwriters do not exercise the Over-Allotment Option

If the Underwriters exercise their Over-Allotment Option in full, the pro forma as adjusted net tangible book value per Ordinary Share after this Offering would be US$0.51, the increase in pro forma net tangible book value per Ordinary Share to existing shareholders would be US$0.38, and the immediate dilution in net tangible book value per Ordinary Share to new investors in this Offering would be US$3.49, in each case taking into account an initial public offering price of US$4.00 per share.

To the extent that we issue additional Ordinary Shares in the future, there will be further dilution to new investors participating in this Offering.

The following table summarizes, as of June 30, 2024, after giving effect to (1) the issuance of 371,500 RCPS and the conversion of all of these RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (2) the surrender of 1,030,494 Ordinary Shares, as if such surrender had occurred on June 30, 2024; (3) the conversion of 419,929 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis; (4) the issuance of 3,556 Ordinary Shares, as if such issuance had occurred on June 30, 2024; and (5) the conversion of all of our outstanding 528,420 RCPS into Ordinary Shares, as if such conversion had occurred on June 30, 2024, on a one-for-one basis, the differences between the existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us in this Offering, the total consideration paid, and the average price per Ordinary Share paid at the assumed IPO price of US$4.00 per Ordinary Shares, before deducting estimated underwriting discounts and estimated offering expenses. The total number of Ordinary Shares does not include the Over-Allotment Option.

EXCHANGE RATE INFORMATION

Agroz is a holding company with operations conducted in Malaysia through its operating subsidiary, Agroz Group. The currency of Agroz Group is MYR. Translations of amounts from MYR into US$ are solely for the convenience of the reader for the six months ended on June 30, 2024 were calculated at the rate of US$1 = MYR4.7157, representing the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of June 28, 2024. Translations of amounts from MYR into US$ for the fiscal year ended December 31, 2023 were calculated at the rate of US$1 = MYR4.5903, representing the noon buying rate in The City of New York for cable transfers of MYR as certified for customs purposes by the Federal Reserve Bank of New York on the last trading day of December 31, 2023. No representation is made that the MYR amount represents or could have been, or could be converted, realized or settled into US$ at that rate, or at any other rate.

CORPORATE HISTORY AND STRUCTURE

Agroz is an exempted company with limited liability incorporated under the laws of the Cayman Islands on August 8, 2023. Agroz’s operating subsidiary is Agroz Group, a Malaysian private limited company incorporated on November 20, 2020.

Agroz Group is the owner of the intellectual property supporting Agroz’s technology and the operator of Agroz’s indoor CEA vertical farms. Agroz Group also distributes and sells Agroz’s farm produce.

The chart below illustrates our corporate structure and identifies our subsidiaries as of the date of this prospectus and upon completion of this Offering (assuming the Underwriters do not exercise the Over-Allotment Option):

We are offering 2,500,000 Ordinary Shares of Agroz, our Cayman Islands holding company, representing              % of the Ordinary Shares following completion of the offering of Agroz, assuming the Underwriters do not exercise the Over-Allotment Option.

At each general meeting, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each Ordinary Share that such shareholder holds. There are no prohibitions to cumulative voting under the laws of the Cayman Islands, but our Memorandum and Articles of Association do not provide for cumulative voting.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section, the terms “the Group,” “we,” “our” and “us” refer to Agroz Inc. and Agroz Group, collectively. “Agroz Group” refers solely to Agroz Group Sdn. Bhd., a Malaysian private limited company, our operating subsidiary.

OVERVIEW

We are a vertically integrated agricultural technology company applying technology solutions, innovative business models, processes, and systems to design, build, manage, and operate indoor CEA vertical farms. We also operate CEA vertical farms which produce clean, pesticide free, fresh and nutritious rich vegetables directly to consumers and businesses. Our EduFarm at AEON Alpha Angle was also aimed to educate the public on how our vegetables are grown. Our CEA practices are a combination of various digital technologies, including IoT, data analytics, artificial learning, machine learning, automation, cloud and edge computing, and 5G communications. We use 5G communications primarily to enhance internet connectivity within our CEA practices, which is essential for real-time monitoring and control of our agricultural operations.

Our mission is to improve food safety, food security, and sustainability for society by creating a reliable, accessible food supply through our AgTech products and services. We believe we are revolutionizing and transforming agricultural production through our CEA technology and methods. We believe our technology enables us to grow more food in less space safely without the use of pesticides, herbicides and other dangerous chemicals, while reducing the need for storage and refrigeration. We aim to improve food security and deliver freshness by growing food locally, nearer to where it is consumed, which reduces transportation and therefore lowers the food miles generated and our carbon emissions impact, leading to more environmentally friendly outcomes for food production.

We believe there is vast market potential for the AgTech and CEA vertical farming markets globally and in the Southeast Asian region. Starting with Malaysia, we aim to match the top-grade products we have available to the markets in which they are the most highly demanded.

Principal activities

We primarily derive our revenue from:

Our goal is to create efficient, sustainable, and environmentally controlled vertical farms which maximize crop yield and crop quality and allow for precise management of temperature, humidity, light and nutrients.

We design and/or construct indoor CEA vertical farms for our clients according to their specific needs. This involves planning each CEA vertical farm’s layout, designing its infrastructure, building the farm’s structural framework, setting up equipment, and implementing the Agroz OS within the farm. The Agroz OS, at its most current stage of development, integrates certain hardware and software solutions detailed below. Through Agroz OS, we aim to improve productivity, boost yield, and improve the quality of produce generated within CEA vertical farms.

Agroz OS is currently comprised of digitally automated hardware systems capable of: (i) managing various environmental conditions within the CEA vertical farms and water quality and volume, (ii) providing irrigation and nutrient fertigation; (iii) providing light to crops; (iv) managing energy use; and (v) collecting data to enable management of temperature and lighting within the farms, as well as nutrient provision, irrigation and fertigation.

As of the date of this prospectus, we have only implemented in Agroz OS (i) the above digitally automated hardware systems for Agroz OS and (ii) software solutions enabling email and communication systems for farm organization. The software solutions mentioned in the preceding sentence are supported by Microsoft Azure and Microsoft AI, which solutions are possible pursuant to being Microsoft ISV and Microsoft AI Cloud Partner under the Microsoft Publisher Agreement and Microsoft AI Cloud Partner Program Agreement filed herein as Exhibits 10.7 and 10.8, respectively.

We are currently in the process of integrating an AI agent system into Agroz OS, which system is supported by Microsoft AI and capable of presenting complex agricultural decisions to farm managers and farm owners and autonomously executing such decisions after human approval is received. When fully deployed, we envision that the AI system's agents can undertake complex multi-step autonomous actions within vertical farms and result in vertical farms which can be independently and automatically operated. We anticipate full deployment of this AI agent system by Q2 of 2025. Investors should be aware that such AI agent system is distinct from the Agroz Copilot; by contrast, Agroz Copilot is a GenAI application separate from Agroz OS, which enables human farmers to input queries and instructions into an application to receive recommendations for assistance with daily tasks, not a system for autonomous functioning of vertical farms. Although we have launched a pilot rollout for Agroz Copilot, this application is still under development and we do not currently have a date certain for the official launch of Agroz Copilot to the public.

We envision that at a more advanced developmental stage, Agroz OS will include software solutions for: (i) the aforementioned AI agent system, and software solutions which enable: (ii) tracking of every aspect of the vertical farm’s business activities through our proprietary Agroz ERP and (iii) financial accounting and bookkeeping, supported by Intuit Quickbooks software solutions. We expect that these software solutions will be fully integrated into Agroz OS in 2025.

For more detail on the components of Agroz OS, see “Our Products and Services.”

Following the successful design and/or construction of CEA vertical farms, our clients may also receive, at their option, farm operation and management services. The services we offer in this respect include the overseeing of day-to-day CEA vertical farm operations and performing regular maintenance of our clients’ CEA vertical farm systems, using all of the intellectual property we have developed, including Agroz OS and the standard operating procedure supporting CEA vertical farm operations. We began generating revenue from the operation and management services for our clients’ CEA vertical farms in fiscal year 2024.

Currently, the CEA vertical farms we operate and manage include: (i) a 10,021 square foot indoor vertical farm in Kota Damansara and (ii) a 5,239 square foot educational vertical farm (“EduFarm”) at the AEON Mall Alpha Angle, a shopping center in Wangsa Maju, Kuala Lumpur, Malaysia (“AEON Alpha Angle”). The Malaysia Book of Records, a publication of record setting achievements, recognizes the vertical farm we operate and manage at AEON Alpha Angle as the largest indoor vertical farm located inside a shopping mall in Malaysia. Additionally, in June of 2024, the Malaysian government, through the Ministry of Agriculture and Food Security, recognized the EduFarm for meeting Malaysian Good Agricultural Practices (“myGAP.PF”) requirements in being pesticide free. MyGAP.PF is a certification scheme recognizing farms which adopt agricultural practices with an environmentally friendly concept, safeguarding the welfare and safety of workers and do not use synthetic pesticides to produce quality, safe and edible products. This certification covers 20 types of vegetables grown in the CEA vertical farms we manage and operate, including green butterhead, red butterhead, green coral, red coral, wild rocket, green kale, and arugula, to name a few.

Through the EduFarm, we also supply fresh produce sold at AEON Alpha Angle and at certain supermarkets operated by AEON Co. (M) Berhad (“AEON”). 

We sell CEA vertical farms to potential buyers separate from the services that comprise the first and second revenue streams identified in the “Principal activities” subsection above. Our completed CEA vertical farms are fully operational and optimized. Each CEA vertical farm includes Agroz OS. We aim to achieve high-yield crop production and resource management through the CEA vertical farms.

We also generate revenue from sales of fresh produce, which produce consist of (i) produce grown in the leased CEA vertical farms we operate and (ii) produce outsourced from our clients’ CEA vertical farms and other suppliers. To date, we have successfully grown 50 different crops and are currently offering 21 varieties of crops for sale. For a complete list of varieties that we have grown and those we are currently offering, see “Our Products and Services” above. Our key distribution avenue is the direct distribution of fresh produce to Malaysian-based wholesale distributors, and large supermarket brand retailers, such as AEON, and recently we have expanded our distribution to Village Grocer.

RESULTS OF OPERATIONS

Financial information in U.S. dollars

Our financial statements contain translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. The conversion of Malaysian Ringgit into U.S. dollars in the financial statements is based on the exchange rates set forth in the statistical release of The Federal Reserve, the central bank of the United States. Unless otherwise noted, all translations from Malaysian Ringgit to U.S. dollars and from U.S. dollars to Malaysian Ringgit for the 2024 Interim Period were made at a month-end spot rate of MYR4.7157 to US$1.00 and for the six-month period ending on June 30, 2023 (the “2023 Interim Period”) were made at a month-end spot rate of MYR4.6650 to US$1.00. Translations from Malaysian Ringgit to U.S. dollars and from U.S. dollars to Malaysian Ringgit for the fiscal year ending on December 31, 2023 (the “2023 Fiscal Year”) were made at a month-end spot rate of MYR4.5903 to US$1.00 and for the fiscal year ending on December 31, 2022 (the “2022 Fiscal Year”) were made at a month-end spot rate of MYR4.4002 to US$1.00.

Revenue

For the 2023 Interim Period, Agroz Group sold CEA vertical farm equipment at AEON Alpha Angle. Revenue generated from our operations for the 2023 Interim Period was $951,338 (MYR4,437,990). Our revenue is primarily derived from offering farm solutions to clients, which included of sales of CEA vertical farms. Revenue generated for the 2024 Interim Period was $1,444,867 (MYR6,813,559), representing an increase of 53.53% from revenue in the 2023 Interim Period. This increase in revenue was due to increased sales of vegetables to wholesale customers in the 2024 Interim Period, from $93,889 (MYR 437,990) to $798,074 (MYR 3,763,478), representing an increase of $704,185 (MYR3,325,488).

Revenue

For the 2023 Fiscal Year, Agroz Group sold (i) CEA vertical farm equipment at AEON Alpha Angle (“Aeon Farm”) and (ii) a CEA vertical farm it created which was located at Kota Damansara, Malaysia (“KD Farm”). Revenue generated from our operations for the 2022 Fiscal Year was $651,025 (MYR2,864,640). Our revenue is primarily derived from offering CEA vertical farm solutions to clients, especially for construction-related services. Revenue generated for the 2023 Fiscal Year was $4,023,979 (MYR18,471,272), representing an increase of 544.8% from revenue in the 2022 Fiscal Year. This increase in revenue was due to (i) sales of CEA vertical farms, which amounted to $1,721,020 (MYR7,900,000), and (ii) additional revenue generated from providing design services for CEA vertical farms, amounting to $1,832,669 (MYR8,412,500). Vegetable sales for the 2023 Fiscal Year increased from $219,226 (MYR 964,640) to $448,505 (MYR 2,058,772), representing an increase of $229,279 (MYR1,094,132). This increase was due to the increased sales of vegetables to wholesale customers in the 2023 Fiscal Year.

Costs of revenue

Our costs of revenue include costs incurred directly from CEA vertical farm construction, employee wages and benefits, depreciation and amortization of farms and machinery, consulting fees, vegetable costs, as well as costs related to CEA vertical farm operations, such as seed and fertilizer expenses, utilities and packaging fees. For the 2023 Interim Period, our costs of revenue amounted to $648,001 (MYR3,022,923), of which $557,582 (MYR2,601,121) were construction costs. Our costs of revenue amount increased from $648,001 (MYR3,022,923) in the 2023 Interim Period to $1,144,855 (MYR5,398,795) in the 2024 Interim Period. The reason for this increase was additional costs incurred in tandem with the increase in the vegetable costs.

Our costs of revenue include costs incurred directly from CEA vertical farm construction, employee wages and benefits, depreciation and amortization of farms and machinery, consulting fees, vegetable costs, as well as costs related to CEA vertical farm operations, such as seed and fertilizer expenses, utilities and packaging fees. For the 2022 Fiscal Year, our costs of revenue amounted to $588,593 (MYR2,589,929), of which $445,771 (MYR1,961,480) were construction costs. Our costs of revenue increased from $588,593 (MYR2,589,929) in the 2022 Fiscal Year to $2,223,771 (MYR10,207,774) in the 2023 Fiscal Year. The reason for this increase was additional costs incurred in tandem with the sale of additional farm assets and CEA vertical farm design services provided during the 2023 Fiscal Year.

Selling and promotion expenses

The following table sets forth a breakdown of our selling and promotion expenses for the periods indicated:

The Group’s selling and promotion expenses are derived from marketing fees and entertainment expenses. We incurred marketing and advertising expenses on popular media platforms, with the intention of boosting our media presence and brand awareness and generating more visitors (and potentially customers) to our website.

Marketing fees for the 2024 Interim Period $19,342 (MYR91,211) were significantly higher than marketing expenses for the 2023 Interim Period $1,866 (MYR8,706), due to the Group’s engagement of an agency to develop the Group’s marketing solutions in the 2024 Interim Period. The Group hopes to build brand awareness by working with this agency.

The following table sets forth a breakdown of our selling and promotion expenses for the fiscal years indicated:

The Group’s selling and promotion expenses are derived from marketing fees, entertainment expenses and sponsorship expenses. We incurred marketing and advertising expenses on popular media platforms, with the intention of boosting our media presence and brand awareness and generating more visitors (and potentially customers) to our website.

Marketing fees for the 2023 Fiscal Year $83,050 (MYR381,224) were significantly higher than marketing expenses for the 2022 Fiscal Year $11,126 (MYR48,958), due to the Group’s engagement of an agency to develop the Group’s marketing solutions in the 2023 Fiscal Year. The Group hopes to build brand awareness by working with this agency.

General and administrative expenses

The following table sets forth a breakdown of our general and administrative expenses for the interim periods indicated:

The following table sets forth a breakdown of our administrative expenses for the fiscal years indicated:

Director fee

During the 2024 Interim Period and the 2023 Interim Period, Gerard Kim Meng Lim, the director of Agroz, who is also one of its shareholders, was entitled to director’s fee of $186,611 (MYR880,000) and $12,862 (MYR60,000), respectively for his services to Agroz. During the 2023 Interim Period, Mr. Lim waived payment for this director’s fee and was accordingly treated as a contribution by a shareholder.

During the 2022 and 2023 Fiscal Years, Gerard Kim Meng Lim, a director of Agroz, who is also one of its shareholders, was entitled to an annual director’s fee of MYR120,000 for his services to Agroz Group. Mr. Lim waived payment for this director’s fee and was accordingly treated as a contribution by a shareholder.

Professional fees

Our legal and professional fees for the 2023 Interim Period totaled $1,756 (MYR8,191), which increased to $199,258 (MYR939,645) in the 2024 Interim Period. This increase is mainly attributed to audit fees and other professional fees in preparation for our prospective IPO incurred in the 2024 Interim Period.

Our legal and professional fees for the 2022 Fiscal Year totaled $19,482 (MYR85,725), which increased to $109,700 (MYR503,556) in the 2023 Fiscal Year. This increase is mainly attributed to audit fees and other professional fees in preparation for our prospective IPO incurred in the 2023 Fiscal Year.

Wages and benefits

Wages and benefits mainly included staff salaries, Employees Provident Fund, Social Security Organization, Employment Insurance System and allowances. Staff costs increased by $105,604 (MYR498,809) from $15,994 (MYR74,611) in the 2023 Interim Period to $121,598 (MYR573,420) in the 2024 Interim Period due to our recruitment of new staff increase from 3 staffs to 13 staffs in the 2024 Interim Period.

Wages and benefits mainly included staff salaries, Employees Provident Fund, Social Security Organization, Employment Insurance System, and allowances. Staff costs increased by $63,811 (MYR293,859) from $4,978 (MYR21,903) in the 2022 Fiscal Year to $68,789 (MYR315,762) in the 2023 Fiscal Year due to our recruitment of new staff during the 2023 Fiscal Year.

Depreciation and amortization

Depreciation and amortization charges for the 2023 Interim Period in general and administrative expenses amounted to $7,615 (MYR35,523). These charges mainly include depreciation charges on Agroz Group’s fixed assets, such as furniture and fittings, fire system, computer and equipment, motor vehicle, computer software and websites. For the 2024 Interim Period, our depreciation and amortization charges were $58,854 (MYR277,536), representing an increase of $51,239 (MYR242,013) from the 2023 Interim Period. This significant increase was due to the Group’s newly leased office premises for operation.

Depreciation and amortization charges for the 2022 Fiscal Year in general and administrative expenses amounted to $4,234 (MYR18,629). These charges in the 2022 Fiscal Year mainly include depreciation charges on Agroz Group’s fixed assets, such as furniture and fittings, fire system, computer and equipment, and a motor vehicle. For the 2023 Fiscal Year, our depreciation and amortization charges were $59,810 (MYR274,545), representing an increase of $55,576 (MYR255,916) from the 2022 Fiscal Year. This significant increase was due to the Group’s entry into two new lease agreements in the 2023 Fiscal Year.

Other (expense)/income

Note:

Expected credit losses on trade receivables

The following table sets forth a breakdown of our expected credit losses (“ECL”) on trade receivables for the periods indicated:

The Group recognizes loss allowances for ECL on financial assets measured at amortized cost. For the periods ended June 30, 2024 and 2023, the Group measures the loss allowance for a financial instrument in an amount equal to the ECL which result from all possible default events over the expected life of such financial instrument (“lifetime expected credit losses”) for trade receivable or if the credit risk on such financial instrument has significant increase since initial recognition. For the 2023 Interim Period, ECL amounted to $960 (MYR4,479). ECL decreased to $866 (MYR4,085) in the 2024 Interim Period due to the decrease in trade receivables.

Loss allowances for trade receivables are always measured in an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date.

For all other financial instruments, the Group recognizes a loss allowance equal to 12-month ECLs unless there has been a significant increase in credit risk of the financial instrument since initial recognition, in which case the loss allowance is measured at an amount equal to lifetime ECLs.

The following table sets forth a breakdown of our expected credit losses (“ECL”) on trade receivables for the years indicated:

Loss allowances for trade receivables are always measured in an amount equal to lifetime ECLs. ECLs on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors and an assessment of both the current and forecast general economic conditions at the reporting date. For the 2022 Fiscal Year, ECL for trade receivables amounted to $3,564 (MYR15,682). ECL for trade receivables increased to $14,577 (MYR66,915) in the 2023 Fiscal Year due to the increase in trade receivables’ credit risk.

Finance costs

The following table sets forth a breakdown of our financial expenses for the years indicated:

Our finance costs include bank charges and interest charges. For the 2024 Interim Period, our finance costs increase significantly from $31,831 (MYR148,490) to $162,066 (MYR764,254), mainly attributable to the increase of the interest paid to RCPS holders from $29,028 (MYR135,417) to $132,104 (MYR622,964). This significant increase was due to an increase in shareholder subscriptions for RCPS.

The following table sets forth a breakdown of our financial expenses for the years indicated:

Our finance costs include bank charges and interest charges. For the 2022 Fiscal Year, our finance costs amounted to $20,660 (MYR90,910), mainly attributable to the interest paid to RCPS holders of $19,530 (MYR85,938). Finance costs increased from $20,660 (MYR90,910) for the 2022 Fiscal Year to $110,195 (MYR505,826) for the 2023 Fiscal Year. This significant increase was due to an increase in shareholder subscriptions for RCPS.

Loss on redeemable convertible preference share redemption

For the 2023 Fiscal Year, 3,000,000 shares of Agroz Group RCPS (“AG RCPS”) were fully redeemed along with the related unpaid interests by issuing 336,366 shares of Agroz Inc. RCPS (“AI RCPS”) which had a fair value $840,915 (MYR3,882,500). On December 1, 2023, the redemption date of the AG RCPS, the net book value of AG RCPS along with the related unpaid dividends was $692,242 (MYR3,177,600). The loss arising from the redemption of the RCPS redemption amounted to $153,563 (MYR704,900) was incurred from the difference between fair value of the AI RCPS and the net book value of AG RCPS in the 2023 Fiscal Year.

Income tax expenses - Malaysia profits tax

For the 2024 Interim Period and the 2023 Interim Period, the tax rate is 24% for companies incorporated in Malaysia with paid-in capital of MYR2.5 million or more. The Company is subject to income taxes on entities based on profit arising in or derived from the jurisdiction in which the Company and its subsidiaries are domiciled or operate in.

For the 2024 Interim Period, Agroz Group did not incur any income tax expenses due to the loss incurred during the six months period but there is under provision of tax in prior years. For the 2023 Interim Period, Agroz Group incurred an income tax expense amounted to $50,421 (MYR235,215).

Under the Income Tax Act of Malaysia, for the 2023 Fiscal Year, the tax rate is 24% for companies incorporated in Malaysia with paid-in capital of MYR 2.5 million or more; for the 2022 Fiscal Year, companies with paid up capital not more than MYR 2.5 million and gross business income of not more than MYR 50 million use 17% tax rate on first MYR 600,000 income, and 24% on the subsequent balance.

The Company is subject to income taxes on entities based on profit arising in or derived from the jurisdiction in which the Company and its subsidiaries are domiciled or operate in.

For the 2023 Fiscal Year, Agroz Group’s income tax expenses amounted to $295,380 (MYR1,355,882).

LIQUIDITY AND CAPITAL RESOURCES

The following table sets forth our non-current assets, current assets, equity, non-current liabilities and current liabilities as of the dates indicated: