Form 424B3 JE Cleantech Holdings

May 23, 2022 6:10 AM EDT

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Filed pursuant to Rule 424(b)(3)

Registration No. 333-263457

 

PROSPECTUS

 

JE Cleantech Holdings Limited

 

3,000,000 Ordinary Shares

and

750,000 Ordinary Shares offered by the Selling Shareholder

 

This is an initial public offering of our ordinary shares, US$0.001 par value per share (“Ordinary Shares”). We are offering, on a firm commitment engagement basis, 3,000,000 Ordinary Shares. The Selling Shareholder (as defined herein) is offering 750,000 Ordinary Shares to be sold in the offering pursuant to this prospectus. We will not receive any proceeds from the sale of the Ordinary Shares to be sold by the Selling Shareholder. The assumed initial public offering price of the Ordinary Shares is US$4.00 per Ordinary Share.

 

Prior to this offering, there has been no public market for our Ordinary Shares. Our Ordinary Shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol JCSE.

 

Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 19 to read about factors you should consider before buying our Ordinary Shares.

 

We are an “Emerging Growth Company” and a “Foreign Private Issuer” under applicable U.S. federal securities laws and, as such, are eligible for reduced public company reporting requirements. Please see “Prospectus Summary — Implications of Our Being an Emerging Growth Company” and “Prospectus Summary — Implications of Our Being a Foreign Private Issuer” beginning on pages 14 and 15, respectively, of this prospectus for more information.

 

We are a holding company that is incorporated in the Cayman Islands. As a holding company with no operations, we conduct all of our operations through our subsidiaries in Singapore. The Ordinary Shares offered in this offering are shares of the holding company that is incorporated in the Cayman Islands. Investors in our Ordinary Shares should be aware that they may never directly hold equity interests in our subsidiaries.

 

Upon completion of this offering, our issued and outstanding shares will consist of 15,562,500 Ordinary Shares, assuming the over-allotment option is exercised in full. We will be a controlled company as defined under Nasdaq Marketplace Rule 5615(c) because JE Cleantech Global Limited, our controlling shareholder, owns 64.0% of our total issued and outstanding Ordinary Shares, representing 64.0% of the total voting power, and it will own 61.7% of our total issued and outstanding Ordinary Shares, representing 61.7% of the total voting power, if the over-allotment option is exercised in full.

 

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.

 

   Per Share   Total(3) 
Initial public offering price  US$4.00   US$17,250,000(4)
Underwriting discounts and commissions(1)  US$0.32   US$1,380,000 
Proceeds to the Company before expenses(2)  US$3.68   US$13,110,000 
Proceeds to the Selling Shareholder  US$3.68   US$2,760,000 

 

(1) We have agreed to pay the underwriters a discount equal to 8.0% of the gross proceeds of the offering. This table does not include a non-accountable expense allowance equal to 1.0% of the gross proceeds of this offering payable to the representative of the underwriters. For a description of the other compensation to be received by the underwriters, see “Underwriting” beginning on page 144.

 

(2) Excludes fees and expenses payable to the underwriters. The total amount of underwriters’ expenses related to this offering is set forth in the section entitled “Underwriting— Discounts, Commission and Expenses” commencing on page 145.

 

(3) Assumes that the underwriters exercise their over-allotment option in full. As of the date of this prospectus, the underwriters have exercised their over-allotment option to the extent of 20,000 Ordinary Shares.

 

(4) Includes US$14,250,000 gross proceeds from the sale of 3,562,500 Ordinary Shares offered by our Company, including 562,500 Shares underlying the underwriters’ over-allotment option, and US$3,000,000 gross proceeds from the sale of 750,000 Ordinary Shares offered by the Selling Shareholder. As of the date of this prospectus, gross proceeds to the Company have been US$12,080,000 and to the Selling Shareholder have been US$3,000,000.

 

We have granted the underwriters an option, exercisable from time to time in whole or in part, to purchase up to 562,500 additional Ordinary Shares from us at the initial public offering price, less underwriting discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments, if any. As of the date of this prospectus, the underwriters have exercised their over-allotment option to the extent of 20,000 Ordinary Shares.

 

If we complete this offering, net proceeds will be delivered to us on the final closing date.

 

You should not assume that the information contained in the registration statement to which this prospectus is a part is accurate as of any date other than the date hereof, regardless of the time of delivery of this prospectus or of any sale of the Ordinary Shares being registered in the registration statement of which this prospectus forms a part.

 

No dealer, salesperson or any other person is authorized to give any information or make any representations in connection with this offering other than those contained in this prospectus and, if given or made, the information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the securities offered by this prospectus, or an offer to sell or a solicitation of an offer to buy any securities by anyone in any jurisdiction in which the offer or solicitation is not authorized or is unlawful.

 

 

VIEWTRADE SECURITIES, INC.

 

The date of this prospectus is May 19, 2022.

 

 

 

 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS 2
PRESENTATION OF FINANCIAL INFORMATION 2
MARKET AND INDUSTRY DATA 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 3
INITIAL CLOSING ON OFFERING 4
DEFINITIONS 4
PROSPECTUS SUMMARY 7
RISK FACTORS 19
ENFORCEABILITY OF CIVIL LIABILITIES 35
USE OF PROCEEDS 36
CAPITALIZATION AND INDEBTEDNESS 37
DIVIDENDS AND DIVIDEND POLICY 37
DILUTION 38
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA 38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 41
HISTORY AND CORPORATE STRUCTURE 61
INDUSTRY OVERVIEW 64
BUSINESS 77
REGULATORY ENVIRONMENT 109
MANAGEMENT 122
PRINCIPAL AND SELLING SHAREHOLDERS 129
RELATED PARTY TRANSACTIONS 131
DESCRIPTION OF SHARE CAPITAL 131
CERTAIN CAYMAN ISLANDS COMPANY CONSIDERATIONS 133
SHARES ELIGIBLE FOR FUTURE SALE 138
MATERIAL TAX CONSIDERATIONS 140
UNDERWRITING 144
LEGAL MATTERS 148
EXPERTS 148
WHERE YOU CAN FIND ADDITIONAL INFORMATION 149
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

 

Until June 13, 2022 (the 25th day after the date of this prospectus), all dealers that effect transactions in these Ordinary Shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

 

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ABOUT THIS PROSPECTUS

 

Neither we, the Selling Shareholder nor any of the underwriters have authorized anyone to provide you with any information or to make any representations other than as contained in this prospectus or in any related free writing prospectus. Neither we, the Selling Shareholder nor the underwriters take responsibility for, or provide any assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.

 

For investors outside the United States: Neither we nor the Selling Shareholder 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.

 

We obtained statistical data, market data and other industry data and forecasts used in this prospectus from market research, publicly available information and industry publications. While we believe that the statistical data, industry data, forecasts and market research are reliable, we have not independently verified the data.

 

PRESENTATION OF FINANCIAL INFORMATION

 

Basis of Presentation

 

Unless otherwise indicated, all financial information contained in this prospectus is prepared and presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP” or “GAAP”).

 

Certain amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, amounts, percentages and other figures shown as totals in certain tables or charts may not be the arithmetic aggregation of those that precede them, and amounts and figures expressed as percentages in the text may not total 100% or, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

 

For the sake of undertaking a public offering of its Ordinary Shares, on December 28, 2021, the Company completed a series of re-organizing transactions resulting in 12,000,000 Ordinary Shares outstanding that have been retroactively restated to the beginning of the first period presented herein.

 

Financial Information in U.S. Dollars

 

Our reporting currency is the Singapore dollar. This prospectus also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Singapore dollars into U.S. dollars were made at S$1.3520 to US$1.00, the exchange rate set forth in the statistical release of the Federal Reserve Board on December 30, 2021. We make no representation that the Singapore dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate or at all.

 

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MARKET AND INDUSTRY DATA

 

Certain market data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, reports of governmental and international agencies and industry publications and surveys. Industry publications and third-party research, surveys and reports generally indicate that their information has been obtained from sources believed to be reliable. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that relate to our current expectations and views of future events. These forward-looking statements are contained principally in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry Overview” and “Business.” These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, these forward-looking statements can be identified by words or phrases such as “believe,” “plan,” “expect,” “intend,” “should,” “seek,” “estimate,” “will,” “aim” and “anticipate,” or other similar expressions, but these are not the exclusive means of identifying such statements. All statements other than statements of historical facts included in this document, including those regarding future financial position and results, business strategy, plans and objectives of management for future operations (including development plans and dividends) and statements on future industry growth are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are forward-looking statements, including in our periodic reports that we will file with the SEC, other information sent to our shareholders and other written materials.

 

These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, regional, national or global political, economic, business, competitive, market and regulatory conditions, the risk factors set forth in “Risk Factors” and the following:

 

 

our business and operating strategies and our various measures to implement such strategies;

     
 

our operations and business prospects, including development and capital expenditure plans for our existing business;

     
 

changes in policies, legislation, regulations or practices in the industry and those countries or territories in which we operate that may affect our business operations;

     
 

our financial condition, results of operations and dividend policy;

     
 

changes in political and economic conditions and competition in the area in which we operate, including a downturn in the general economy;

     
 

the regulatory environment and industry outlook in general;

     
 

future developments in the cleaning solutions market and actions of our competitors;

     
 

catastrophic losses from man-made or natural disasters, such as fires, floods, windstorms, earthquakes, diseases, epidemics, other adverse weather conditions or natural disasters, war, international or domestic terrorism, civil disturbances and other political or social occurrences;

 

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the loss of key personnel and the inability to replace such personnel on a timely basis or on terms acceptable to us;

     
  the overall economic environment and general market and economic conditions in the jurisdictions in which we operate;
     
  our ability to execute our strategies;
     
  changes in the need for capital and the availability of financing and capital to fund those needs;
     
  our ability to anticipate and respond to changes in the markets in which we operate, and in client demands, trends and preferences;
     
  exchange rate fluctuations, including fluctuations in the exchange rates of currencies that are used in our business;
     
  changes in interest rates or rates of inflation; and
     
  legal, regulatory and other proceedings arising out of our operations.

 

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. 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 is a part, completely and with the understanding that our actual future results or performance may be materially different from what we expect.

 

This prospectus contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. The markets for cleaning systems and centralized dishwashing services may not grow at the rate projected by such market data, or at all. Failure of this industry to grow at the projected rate may have a material and adverse effect on our business and the market price of our Ordinary Shares. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

 

INITIAL CLOSING ON OFFERING

 

The offering is being conducted as a firm commitment underwriting with View Trade Securities Inc. serving as the Representative of the several underwriters pursuant to a Registration Statement on Form F-1 that was filed with the Securities Exchange Commission on March 10, 2022 and declared effective on March 31, 2022. On April 26, 2022, the Company closed on the sale of 3,020,000 of its Ordinary Shares pursuant to its Initial Public Offering and the Selling Shareholder closed on the sale of 750,000 Ordinary Shares of the Company owned by it (the “Initial Closing”). Gross proceeds to the Company from the sale of the Ordinary Shares were $12,080,000, for net proceeds after underwriting discount and commissions and expenses of the offering of $10,068,126 and gross proceeds to the Selling Shareholder were $3,000,000, for net proceeds to the Selling Shareholder of $2,730,000. The Ordinary Shares of the Company closed on included 20,000 of the 562,500 Shares underlying the underwriters’ over-allotment option, leaving a balance of 542,500 Shares subject thereto, which may be sold not later than June 6, 2022.

 

DEFINITIONS

 

“AI” means artificial intelligence, which refers to intelligence demonstrated by machines.

 

“Amended and Restated Memorandum of Association” or “Amended Memorandum” means the amended and restated memorandum of association of our Company adopted on January 18, 2022 and as supplemented, amended or otherwise modified from time to time, a copy of which is filed as Exhibit 3.1 to our Registration Statement filed with the SEC on March 10, 2022.

 

“Amended and Restated Articles of Association” means the amended and restated articles of association of our Company adopted on January 18, 2022, as amended from time to time, a copy of which is filed as Exhibit 3.2 to our Registration Statement filed with the SEC on March 10, 2022.

 

“ASEAN “ means the Association of Southeast Asian Nations.

 

“B2B” means business-to-business, the exchange of products, services or information between businesses, rather than between businesses and consumers.

 

bizSAFE” means a five-step program to assist companies build up their workplace safety and health capabilities in order to achieve quantum improvements in safety and health standards at the workplace, and organized under the Workplace Safety and Health Council of Singapore.

 

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“Business Day” means a day (other than a Saturday, Sunday or public holiday in the U.S.) on which licensed banks in the U.S. are generally open for normal business to the public.

 

“BVI” means the British Virgin Islands.

 

“CAGR” means compound annual growth rate.

 

“Circuit Breaker Period” means the period from April 7, 2020 to June 1, 2020 (inclusive).

 

“CNC” means computer numerical control, which is the automated operation of machines using computers.

 

“Company” or “our Company” means JE Cleantech Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability under the Companies Act on January 29, 2019.

 

“Companies Act” means the Companies Act (2022 Revision) of the Cayman Islands.

 

“COVID-19” means the Coronavirus Disease 2019.

 

“Euromonitor” means Euromonitor International Limited, a business consulting firm involved in market research, analysis and growth strategy consulting and an Independent Third Party.

 

“Evoluxe” means Evoluxe Pte. Ltd., a company incorporated in Singapore with limited liability on May 6, 2016 and an indirect wholly-owned subsidiary of the Company.

 

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

 

“Greater China” means mainland China, Hong Kong, Macau and Taiwan in East Asia.

 

Group,” “our Group,” “we,” “us” or “our” means our Company and its subsidiaries or any of them, or where the context so requires, in respect of the period before our Company became the holding company of its present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time or the businesses which have since been acquired or carried on by them or as the case may be their predecessors.

 

“Halal certification” means an award of endorsement given by a credible Islamic body to attest that a product or service is suitable for Muslim consumption or use.

 

“Halal dishware” means dishware used at food and beverage establishments that have obtained a Halal certification and are suitable for Muslim use.

 

“HDD” means hard-disk drive.

 

“Hygieia” means Hygieia Warewashing Pte. Ltd., a company incorporated in Singapore on December 29, 2010 and an indirect wholly-owned subsidiary of the Company.

 

“Hygieia Facility” means the centralized dishwashing facility and office leased by Hygieia, located at 17 Woodlands Sector 1, Singapore 738354.

 

“Independent Third Party” means a person or company who or which is independent of and is not a 5% owner of, does not control and is not controlled by or under common control with any 5% owner and is not the spouse or descendant (by birth or adoption) of any 5% owner of the Company.

 

“Industry 4.0” means the Fourth Industrial Revolution, which is the ongoing automation of traditional manufacturing and industrial practices, using modern smart technology. In Singapore the movement toward the Industry 4.0 model is backed by government support and funding.

  

“Initial Closing” means the initial closing on April 26, 2022 on the initial public offering of the Company’s Ordinary Shares.

 

“Initial Public Offering” means the initial public offering of 3,000,000 of the Company’s Ordinary Shares, plus 562,500 Ordinary Shares subject to the underwriters’ over-allotment option and 750,000 Ordinary Shares offered by the Selling Shareholder, pursuant to the Registration Statement on Form F-1, which was filed with the Securities and Exchange Commission on March 10, 2022 and declared effective on March 31, 2022.

 

“IoT” means Internet of Things, which describes physical objects that are embedded with sensors, processing ability, software and other technologies that connect and exchange data with other devices and systems over the Internet or other communications networks.

 

“ISO 9001: 2015” means a quality management system standard that is based on a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach and continual improvement.

 

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“ISO 45001:2018” means a quality management system standard that specifies requirements for an occupational health and safety management system and gives guidance for its use enabling organizations to provide safe and healthy workplaces by preventing work-related injury and ill health as well as by proactively improving its occupational health and safety management system performance.

 

“ISO 22000:2005” means a quality management system standard that specifies requirements for a food safety management system where an organization in the food chain needs to demonstrate its ability to control food safety hazards in order to ensure that food is safe at the time of human consumption.

 

“JCS” means JCS-Echigo Pte Ltd., a company incorporated in Singapore with limited liability on November 25, 1999 and an indirect wholly-owned subsidiary of the Company.

 

“JCS Facility” means the manufacturing and office facility leased by JCS, located at 3 Woodlands Sector 1 Singapore 738361.

 

“JOBS Act” means the U.S. Jumpstart Our Business Startups Act of 2012.

 

“kHz” means kiloHertz, which is equivalent to 1,000 Hertz or 1,000 cycles per second.

 

“megasonic” means frequency acoustic energy of between 0.8 to 1.2 mHz.

 

“mHz” means megaHertz, which is equivalent to 1,000,000 Hertz, or 1,000,000 cycles per second.

 

‘‘MYR’’ means Ringgit Malaysia, the lawful currency of Malaysia.

 

“NAS” means North Asian sources, being countries from which foreign workers can be employed by Singapore entities, comprising Hong Kong, Macau, South Korea and Taiwan.

 

“Non-IPO Selling Shareholders” means Ever Bloom Properties Company Limited, a company incorporated in Samoa that owns 4% of our outstanding shares prior to this offering and Aqua Lady Group Limited, a company incorporated in the British Virgin Islands that owns 2% of our outstanding shares prior to this offering.

 

“PRC” means the People’s Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan.

 

“Pre-IPO Investors” means Triple Business Limited, a company incorporated in the British Virgin Islands that owns 14% of our outstanding shares prior to this offering, and the Non-IPO Selling Shareholders.

 

“R&D” means research and development.

 

S$” or “SGD” means Singapore dollars(s), the lawful currency of Singapore.

 

“SEC” or “Securities and Exchange Commission” means the United States Securities and Exchange Commission.

 

“Securities Act” means the U.S. Securities Act of 1933, as amended.

 

“Selling Shareholder” means Triple Business Limited, a company formed under the laws of the British Virgin Islands and an existing shareholder of the Company that is selling a portion of its Ordinary Shares pursuant to this prospectus.

 

“SME 1000” means the part of the Singapore Family of Ranking organized by Experian, the official ranking body of companies in Singapore, which is a guide that profiles the success of businesses based on financial indicators such as revenue, net profit, return on equity and overseas revenue.

 

“SSD” means solid state drive.

 

“ultrasonic” means frequency acoustic energy of generally between 20 and 200 kHz.

 

“US$,” “$” or “USD” means United States dollar(s), the lawful currency of the United States.

 

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PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that may be important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements and notes to those statements, included elsewhere in this prospectus, before deciding to invest in our Ordinary Shares. This prospectus includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.”

 

Overview

 

Our Group’s history began in November 1999 when JCS was founded by Ms. Hong Bee Yin, our Chairman, executive Director and chief executive officer, and her then business partner, Mr. Yeo Hock Huat. Our Group commenced business in the selling of cleaning systems in 2005, before starting our business in the design, development, manufacture and sale of cleaning systems in Singapore in 2006. We manufacture a broad range of cleaning systems, including aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment. Since 2013, we have also been in the business of providing centralized dishwashing services for the food and beverage industry, mainly for food and beverage establishments in Singapore such as food courts, hawker centers, restaurants, cookhouses, eldercare homes and an inflight catering service provider. We have also provided general cleaning services since 2015, mainly for food courts in Singapore.

 

Our mission is to be an industry leader in the cleaning systems and provision of centralized dishwashing services industry and in the design, development and manufacturing of precision cleaning systems industry.

 

Competitive Advantages

 

We have a long and proven track record in precision cleaning in Singapore.

 

We have been providing cleaning systems to our customers for over 15 years and have accumulated extensive industry experience. We believe our strong research and development and engineering capabilities enable us to design, develop and manufacture quality precision cleaning systems and other cleaning systems for various industrial end-use applications, which are customized for our customers’ specific needs.

 

Our Group was ranked fifth in the precision cleaning equipment manufacturing market in Singapore in 2020, with a market share of approximately 2.0% in terms of revenue. We ranked first in the precision cleaning equipment manufacturing market in Malaysia in 2020, with a market share of approximately 27.0% in terms of revenue.

 

We believe our strong track record in precision cleaning will facilitate the promotion and demand for our products with both existing and new customers, as well as the expansion of our business. We intend to continue to develop products for different industrial end-use applications and to meet the needs of our customers across various industries by expanding our product portfolio. To this end, we have developed an initial prototype of a robot floor scrubber, which comprises a robotic enhancement that can be attached to floor cleaning equipment to enable such floor cleaning equipment to be used without manual operation. We have also entered into a collaboration with a statutory board in Singapore, whose functions and duties include the management and operation of the segment of the public transportation system in Singapore, to co-develop an autonomous train interior cleaning robot that will be capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration.

 

We provide and maintain quality business operations.

 

We strive to provide and maintain quality business operations, and to this end, the management system of JCS, our wholly-owned subsidiary that is engaged in the manufacture and sale of cleaning systems and other equipment, has been assessed as conforming to ISO 9001:2015 and ISO 45001:2018 for design, manufacture, supply, installation and servicing of integrated cleaning systems. The management system of Hygieia, our wholly-owned subsidiary that is engaged in the provision of centralized dishwashing and general cleaning services and leasing of dishwashing equipment, has been assessed and certified as meeting the requirements of ISO 22000:2005 for the cleaning of serviceware and cookware for use in the food industry.

 

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We have stable relationships with our major customers.

 

Since the inception of our business in 2006, we have developed stable relationships with our major customers and we believe that our engineering know-how and ability to design, develop and manufacture customized cleaning systems to meet our customers’ requirements and specifications and our ability to provide centralized dishwashing services have been the key drivers for them to appoint us as their suppliers over the years.

 

We have strived to maintain stable business relationships with our major customers. For the three years ended December 31, 2019, 2020 and 2021, our top five customers included renowned HDD manufacturers, a public transportation operator and food and beverages establishment operators in Singapore, and three of our top five customers have more than 10 years of business relationships with us.

 

We have an experienced team with strong research and development and engineering capabilities that allow us to design and develop customized products to cater to our customers’ needs.

 

We have an experienced research and development and engineering team led by Mr. Zhao Liang, who is also a member of our senior management team. We believe that our Group has strong in-house research and development and engineering capabilities to design high quality precision cleaning systems and other cleaning systems customized to meet the standards and particular needs of our customers, including HDD and semiconductor and industrial electronic equipment/product manufacturers.

 

With our strong research and development and engineering team, we are able to design and develop customized cleaning systems catered to our customers’ requirements and specifications. Against the backdrop of Industry 4.0 and an increasing demand for digitized and automated machinery in the manufacturing space, we have entered into collaborations to develop new customized cleaning solutions. In addition to previously co-developing a high performance dryer with one of our customers, we have also developed an initial prototype of a robot floor scrubber, which comprises a robotic enhancement that can be attached to floor cleaning equipment, which will then enable such floor cleaning equipment to be used without manual operation. We have entered into a collaboration with a statutory board in Singapore, whose functions and duties include the management and operation of the segment of the public transportation system in Singapore, to co-develop an autonomous train interior cleaning robot that would be capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. We believe that such customized cleaning systems and collaborations demonstrate our customers’ belief in the strength of our research and development and engineering capabilities.

 

We have an experienced management team.

 

We have an experienced management team, led by Ms. Hong, our Chairman, executive Director and chief executive officer, who has been instrumental in spearheading the growth of our Group. Ms. Hong has over 20 years of experience in the cleaning solutions industry in Singapore and is primarily responsible for planning and execution of our Group’s business strategies, including product development, and managing our Group’s customer relationships.

 

Our Group is supported by a senior management team with substantial experience in the cleaning solutions industry. Our senior management team includes members such as Mr. Zhao Liang, the head of our research and development and engineering team, who has over 13 years of experience in the precision cleaning equipment industry.

 

Growth strategies

 

Our principal objective is to sustain a continuous growth in our business and strengthen our market position in the cleaning systems industry in Singapore, Malaysia and other countries such as Thailand, Belgium and South Korea, and in the centralized dishwashing services industry in Singapore with the following strategies:

 

  Expand our product portfolio;
     
  Expand our research and development and engineering team;

 

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  Improve the production efficiency of our centralized dishwashing services business;
     
  Expand our production capability for cleaning systems and other equipment;
     
  Acquire additional software systems and hardware; and
     
  Establish a new office in Malaysia.

 

Risks and Challenges

 

Investing in our Ordinary Shares involves risks. The risks summarized below are qualified by reference to “Risk Factors” beginning on page 19 of this prospectus, which you should carefully consider before making a decision to purchase Ordinary Shares. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our Ordinary Shares would likely decline, and you may lose all or part of your investment.

 

These risks include but are not limited to the following:

 

Risks related to our business and industry:

 

  We only have a limited number of customer groups and our business is significantly dependent on our major customer groups’ demands and our relationships with them. Our aggregate sales generated from our top five customer groups amounted to approximately 68.5%, 88.4% and 80.6% of our revenue for the years ended December 31, 2019, 2020 and 2021, respectively. In particular, our largest customer group, which is principally engaged in the manufacture of HDD, accounted for approximately 28.8%, 61.5% and 32.7% of our revenue for our fiscal years ended December 31, 2019, 2020 and 2021. The concentration of our customers has not changed materially through the date of this prospectus. Thus, any change in our relationship with our largest customer group could result in a material adverse change to our business, financial condition or results of operations. And, in addition to maintaining and growing our business with existing customers, the success of our business also depends on our ability to attract new customers. If we are unable to attract new customers, our business growth will be hampered and our business, financial condition, results of operations and prospects may be materially and adversely affected.
     
  We are exposed to the credit risks of our customers. We extend credit terms to our customers. Our average accounts receivable turnover days were approximately 103.4 days, 120.3 days and 138.5 days for the years ended December 31, 2019, 2020 and 2021, respectively. Our customers may be unable to meet their contractual payment obligations to us, either in a timely manner or at all. We may not be able to enforce our contractual rights to receive payment through legal proceedings. In the event that we are unable to collect payments from our customers, we are still obliged to pay our suppliers in a timely manner and thus our business, financial condition and results of operations may be adversely affected.
     
  We are subject to risks relating to the operation of our production and processing facilities. We are dependent on our JCS Facility and Hygieia Facility for our operations. Our production and processing facilities are subject to the risk of operational breakdowns. Any interruption in, or prolonged suspension of any part of production at, or any damage to or destruction of, any of our production and processing facilities arising from unexpected or catastrophic events may prevent us from carrying out our businesses of the sale of cleaning systems and other equipment and provision of centralized dishwashing services to our customers and/or failure to supply our products and services thus resulting in breach of contract and loss of sales, which in turn may result in a material adverse effect on our results of operations and financial condition. Also, the operation of our production and processing facilities is subject to risks and issues in respect of our production processes, such as mechanical and system failures, equipment upgrades and delays in the delivery of machinery and equipment or accidents or injuries to our workers caused by the use of machinery or equipment, any of which could cause interruption or suspension of the production process and reduced output.

 

9
 

 

  We may be affected by the prospects of the industries in which our customers are engaged. Our cleaning systems and other equipment sales business is largely dependent on orders and contracts from our major customers, which are primarily in the hard disk drive, semiconductor and industrial electronics equipment/product manufacturing industries in Singapore and Malaysia. Our provision of centralized dishwashing services and ancillary services is dependent on contracts from our customers in the food and beverage industry in Singapore. We are therefore dependent on the outlook for these industries and are indirectly exposed to the uncertainties and business fluctuations of these industries, such as any slowdown in the growth and development of such industries. A decline in the number of new contracts and orders due to these factors may cause us to operate in a more competitive environment, and we also may be required to be more competitive in our pricing which, in turn, may adversely impact our business, financial condition, results of operations and prospects.
     
  We are vulnerable to fluctuations in the cost or supply of our raw materials. Expenses for raw materials, such as stainless steel, aluminum and electronic components, constitute most of our cost of revenues, representing approximately 41.8%, 57.8% and 43.5% of our total cost of revenues for the years ended December 31, 2019, 2020 and 2021, respectively. A shortage of raw materials or material increases in the cost of raw materials, which we may not be able to pass on to our customers, will increase our cost of production whereby our gross margin and profitability may be adversely affected.
     
  We are exposed to risks arising from fluctuations of foreign currency exchange rates. Our reporting currency is Singapore dollars and our overseas sales and procurement are denominated in United States dollars. We may be exposed to foreign currency exchange gains or losses arising from transactions in currencies other than our reporting currency.
     
  Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. If we fail to maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud. Moreover, our failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the Ordinary Shares. This also could limit our access to capital markets and harm our results of operations.
     
    Although our management has concluded that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company may also place a burden on our management, operational and financial resources and systems for the foreseeable future such that we may be unable to timely complete our evaluation testing and any required remediation. There can be no assurance that our internal controls will continue to be effectively implemented and ineffective internal control over financial reporting could expose us to increased risk of fraud, misuse of corporate assets and legal actions under the United States securities laws and subject us to potential delisting from Nasdaq, to regulatory investigations and to civil or criminal sanctions.
     
  We may be affected by adverse changes in the political, economic, regulatory or social conditions in the countries in which we and our customers and suppliers operate or into which we intend to expand, such as Singapore, Malaysia, Thailand, Belgium and South Korea. Any economic downturn, changes in policies, currency and interest rate fluctuations, capital controls or capital restrictions, labor laws, changes in environmental protection laws and regulations, duties and taxation and limitations on imports and exports in these countries may materially and adversely affect our business, financial condition, results of operations and prospects.

 

10
 

 

  Our business and operations may be materially and adversely affected in the event of a re-occurrence or a prolonged global pandemic outbreak of COVID-19. If the development of the COVID-19 outbreak becomes more severe or if our customers, suppliers and sub-contractors are forced to close down their businesses after prolonged disruptions to their operations, we may experience a delay or shortage of raw materials, supplies and/or services by our suppliers and sub-contractors, or termination of our orders and contracts by our customers. In addition, if any of our employees or employees of our sub-contractors are suspected of having contracted COVID-19, some or all of our employees or the employees of our sub-contractors may be quarantined thus causing a shortage of labor and we will be required to disinfect our workplace and our production and processing facilities. In such event, our operations may be severely disrupted, which may have a material and adverse effect on our business, financial condition and results of operations.

 

Risks related to our Ordinary Shares:

 

  An active trading market for our Ordinary Shares may not be established or, if established, may not continue and the trading price for our Ordinary Shares may fluctuate significantly. The public offering price for our shares in this offering was determined by negotiation between us and the representative of the underwriter based upon several factors, and we can provide no assurance that the trading price of our shares after this offering will not decline below the public offering price. As a result, investors in our shares may experience a significant decrease in the value of their shares.
     
  We may not maintain the listing of our Ordinary Shares on the Nasdaq which could limit investors’ ability to make transactions in our Ordinary Shares and subject us to additional trading restrictions. In order to continue listing our shares on the Nasdaq, we must maintain certain financial and share price levels and we may be unable to meet these requirements in the future. If the Nasdaq delists our Ordinary Shares and we are unable to list our shares on another national securities exchange, we expect our shares could be quoted on an over-the-counter market in the United States causing us to face significant material adverse consequences, such as reduced liquidity, decreased ability to obtain additional financing and limited availability of market quotations for our Ordinary Shares.
     
  Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return on your investment. We currently intend to retain all of our available funds and any future earnings after this offering to fund the development and growth of our business. Therefore, you should not rely on an investment in our shares as a source for any future dividend income. There is no guarantee that our Ordinary Shares will appreciate in value after this offering or even maintain the price at which you purchased our shares. You may not realize a return on your investment in our shares and you may even lose your entire investment.
     
  Because our public offering price per share is substantially higher than our net tangible book value per share, you will experience immediate and substantial dilution. You will experience immediate and substantial dilution of US$3.26 per share, representing the difference between our pro forma as adjusted net tangible book value per share of US$0.74 as of December 31, 2021, after giving effect to the net proceeds to us from this offering and assuming no additional exercise by the underwriters of the over-allotment option, and a public offering price of US$4.00 per share.
     
  As a company incorporated in the Cayman Islands, 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. However, our audit committee is required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq. Therefore, we intend to have a fully independent audit committee upon effectiveness of the registration statement of which this prospectus is a part, in accordance with Rule 10A-3 of the Exchange Act. However, because we are a foreign private issuer, our audit committee is not subject to additional Nasdaq corporate governance requirements applicable to listed U.S. companies, including the requirements to have a minimum of three members and to affirmatively determine that all members are “independent,” using more stringent criteria than those applicable to us as a foreign private issuer.

 

11
 

 

  You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against our directors and us, 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 rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws than the United States, and provide significantly less protection to investors. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.
     
  Certain judgments obtained against us by our shareholders may not be enforceable. Substantially all of our assets are located outside the United States. In addition, all of our current directors and officers are nationals and residents of countries other than the United States and substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
     
  We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements applicable to other public companies that are not emerging growth companies. Most significantly this includes not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important. We will also not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain new and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.
     
  We are a foreign private issuer within the meaning of the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. Certain of these exemption provisions are: (i) rules under the Exchange Act requiring the filing of quarterly reports or current reports with the SEC or the solicitation of proxies; and (ii) sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities. We will be required to file an annual report on Form 20-F within four months after the end of each fiscal year. In addition, we intend to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of the Nasdaq. 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 if you were investing in a U.S. domestic issuer.

 

12
 

 

  Our controlling shareholder has substantial influence over the Company. Its interests may not be aligned with the interests of our other shareholders, and it could prevent or cause a change of control or other transactions. Our controlling shareholder could control the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate actions, including the power to prevent or cause a change in control. The interests of our largest shareholder may differ from the interests of our other shareholders.
     
  If securities or industry analysts do not publish research or reports about our business causing us to lose visibility in the financial markets or if they adversely change their recommendations regarding our Ordinary Shares, the market price for our Ordinary Shares and trading volume could decline. The trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business.

 

Corporate Information

 

We were incorporated in the Cayman Islands on January 29, 2019. Our registered office in the Cayman Islands is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111 Cayman Islands. Our principal executive office is at 3 Woodlands Sector 1, Singapore 738361. Our telephone number at this location is +65 6368 4198. Our principal website address is http://www.jecleantech.sg. The information contained on our website does not form part of this prospectus. Our agent for service of process in the United States is Cogency Global Inc., 122 E. 42nd Street, 18th Floor, New York, New York 10168.

 

Because we are incorporated under the laws of the Cayman Islands, you may encounter difficulty protecting your interests as a shareholder, and your ability to protect your rights through the U.S. federal court system may be limited. Please refer to the sections entitled “Risk Factors” and “Enforceability of Civil Liabilities” for more information.

 

13
 

 

Corporate Structure

 

The chart below sets out our corporate structure as of the date of this prospectus.

 

 

 

Implications of Our Being a “Controlled Company”

 

Upon completion of this offering, JE Cleantech Global Limited, our controlling shareholder, will be the beneficial owner of an aggregate of 9,600,000 Ordinary Shares, which will represent 63.91% of the then total issued and outstanding Ordinary Shares (or 61.69% of the then total issued and outstanding Ordinary Shares if the underwriters exercise their option to purchase additional Ordinary Shares in full). As a result, we will remain a “controlled company” within the meaning of the Nasdaq Stock Market Rules and therefore we are eligible for, and, as long as we remain a controlled company as defined under Rule 5615(c)(1), we intend to rely on, certain exemptions from the corporate governance listing requirements of the Nasdaq.

 

14
 

 

Implications of Our Being an Emerging Growth Company

 

As a company with less than US$1.07 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include:

 

  being permitted to provide only two years of selected financial information (rather than five years) and only two years of audited financial statements (rather than three years), in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; and
     
  an exemption from compliance with the auditor attestation requirement of the Sarbanes-Oxley Act on the effectiveness of our internal control over financial reporting.

 

We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which the fifth anniversary of the completion of this offering occurs, (2) the last day of the fiscal year in which we have total annual gross revenue of at least US$1.07 billion, (3) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which means the market value of our Ordinary Shares that are held by non-affiliates exceeds US$700.0 million as of the prior, and (4) the date on which we have issued more than US$1.0 billion in non-convertible debt during the prior three-year period. We may choose to take advantage of some, but not all, of the available exemptions. We have included two years of selected financial data in this prospectus in reliance on the first exemption described above. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

 

Implications of Our Being a Foreign Private Issuer

 

Upon completion of this offering, we will report under the Exchange Act as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

 

  the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
     
  the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
     
  the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or the SEC, of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events.

 

Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither emerging growth companies nor foreign private issuers.

 

In addition, as a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the corporate governance listing requirements of the Nasdaq. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing requirements of the Nasdaq. Following this offering, we will rely on home country practice to be exempted from certain of the corporate governance requirements of the Nasdaq, such that a majority of the directors on our board of directors are not required to be independent directors, our audit committee is not required to have a minimum of three members and neither our compensation committee nor our nomination committee is required to be comprised entirely of independent directors.

 

15
 

 

The Offering

 

Offering Price The initial public offering price is US$4.00 per Ordinary Share.
   
Ordinary Shares offered by us 3,000,000 Ordinary Shares (or 3,562,500 Ordinary Shares if the underwriters exercise the over-allotment option in full)
   
Ordinary Shares sold by us at Initial Closing 3,020,000 Ordinary Shares
   
Ordinary Shares offered by the Selling Shareholder 750,000 Ordinary Shares
   
Ordinary Shares sold by the Selling Shareholder at the Initial Closing 750,000 Ordinary Shares
   
Ordinary Shares issued and outstanding prior to this offering 12,000,000 Ordinary Shares
   
Ordinary Shares to be issued and outstanding immediately after this offering 15,020,000 Ordinary Shares (or 15,562,500 Ordinary Shares if the underwriters exercise the over-allotment option in full)
   
Over-allotment option We have granted to the underwriters an option, exercisable until June 7, 2022, to purchase up to an aggregate of 562,500 Ordinary Shares at the initial public offering price, less underwriting discounts and commissions, solely for the purpose of covering over-allotments.
   
Indemnification escrow Net proceeds of this offering in the amount of $600,000 have been used to fund an escrow account for a period of 12 months following the closing date of this offering, which account shall be used in the event we have to indemnify the underwriters pursuant to the terms of the underwriting agreement with the underwriters.
   
Use of proceeds We currently intend to use the net proceeds from this offering to (i) expand our product portfolio, including an autonomous robot floor scrubber for industrial and commercial use; (ii) strengthen our production capability for cleaning systems and other equipment by purchasing more advanced machinery and equipment; (iii) improve production efficiency of our centralized dishwashing services by purchasing new machinery and equipment and enhancing our processing facility; (iv) build our brand by establishing a showroom, attendance at trade shows, exhibitions and industry forums and revamping our website; (v) repay interest free loans made to us by our controlling shareholder for paying the expenses of obtaining a listing of our Ordinary Shares and for general working capital and corporate purposes; (vi) build up our business development team and increase marketing efforts; (vii) set up a new office in Malaysia; and (viii) fund working capital and other general corporate purposes. We will not receive any proceeds from the sale of Ordinary Shares by the Selling Shareholder.
   
Dividend policy We do not intend to pay any dividends on our Ordinary Shares for the foreseeable future. Instead, we anticipate that all of our earnings, if any, will be used for the operation and growth of our business. See “Dividends and Dividend Policy” for more information.

 

16
 

 

Lock-up

 

 

We, each of our directors and executive officers and our principal shareholders, except for the Selling Shareholder with respect to its Ordinary Shares sold in this offering, have agreed, subject to certain exceptions, for a period of 12 months after the date of this prospectus, not to, except in connection with this offering, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or any other securities convertible into or exercisable or exchangeable for Ordinary Shares, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Ordinary Shares. See “Shares Eligible for Future Sale” and “Underwriting — Lock-Up Agreements.”
   
Risk factors Investing in our Ordinary Shares involves risks. See “Risk Factors” beginning on page 19 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Ordinary Shares.
   
Listing Our Ordinary Shares are listed on the Nasdaq.
   

Trading symbol

JCSE
   
Transfer agent VStock Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598; telephone: 212-828-8436, toll-free: 855-9VSTOCK; facsimile: 646-536-3179

 

17
 

 

Summary Financial Data

 

You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus, “Selected Consolidated Financial and Other Data,” “Capitalization and Indebtedness” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have derived the financial data for the fiscal years ended December 31, 2019, 2020 and 2021 from our audited financial statements included in this prospectus.

 

Results of Operations Data:

 

   For the years ended December 31, 
   2019   2020   2021   2021 
   SGD’000   SGD’000   SGD’000   USD’000(1) 
                 
Revenues   18,219    21,397    14,764    10,920 
Net income   342    1,727    2    1 
Basic and diluted net income per Ordinary Share   0.03    0.14    0.00    0.00 
Weighted average number of Ordinary Shares outstanding   12,000,000    12,000,000    12,000,000    12,000,000 

 

(1) Calculated at the rate of US$0.7396 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 30, 2021.

 

Balance Sheet Data:

 

   As of December 31, 
   2020   2021   2021 
   SGD’000   SGD’000   US$’000 
             
Cash and cash equivalents   550    1,108    820 
Working capital   1,867    --    -- 
Total assets   21,763    18,440    13,639 
Total liabilities   15,818    15,417    11,403 
Total shareholders’ equity   5,945    3,023    2,236 

 

(1) Calculated at the rate of US$0.7396 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 30, 2021.

 

18
 

 

RISK FACTORS

 

Investing in our shares is highly speculative and involves a significant degree of risk. You should carefully consider the following risks, as well as other information contained in this prospectus, before making an investment in our Company. The risks discussed below could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the trading price of our shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

We only have a limited number of customer groups and our business is significantly dependent on our major customer groups’ needs and our relationships with them. We may be unsuccessful in attracting new customers.

 

Our aggregate sales generated from our top five customer groups amounted to approximately 68.5%, 88.4% and 80.6% of our revenue for the years ended December 31, 2019, 2020 and 2021, respectively. In particular, sales to our largest customer group, which is principally engaged in the manufacture of HDD, amounted to approximately S$5.2 million, S$13.2 million and S$4.8 million, representing approximately 28.8%, 61.5% and 32.7% of our revenue, for the years ended December 31, 2019, 2020 and 2021, respectively. The concentration of our customers has not changed materially during the year ending December 31, 2022. Accordingly, our sales would be significantly affected by changes in our relationship with or in the needs of our major customer groups, particularly our largest customer group, as well as other factors that may affect their purchases from us, many of which are beyond our control. Any adverse changes in the economic conditions in the markets in which our customer groups operate and in their business expansion plans may negatively affect their purchasing practices and result in a reduction in demand for our products and services. Furthermore, we have a limited number of customer groups for both our sale of cleaning systems and other equipment business and our centralized dishwashing and general cleaning services business. We sold cleaning systems and other equipment to 15, 14 and 11 customer groups during the years ended December 31, 2019, 2020 and 2021, respectively. Our centralized dishwashing services and general cleaning services business provided centralized dishwashing services to 35, 38 and 54 customer groups during the years ended December 31, 2019, 2020 and 2021, respectively, and provided general cleaning services to seven, customer groups during each of those years. If our major customer groups do not place their new orders with us, our business, financial condition, results of operations and prospects could be materially and adversely affected. In addition to maintaining and growing our business with existing customers, the success of our business also depends on our ability to attract new customers. If we are unable to attract new customers, our business growth will be hampered and our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

We are dependent upon our largest customer group for a substantial amount of our revenue.

 

We derived a significant portion of our revenue from our largest customer group during the years ended December 31, 2019, 2020 and 2021. Our sales to that customer group amounted to approximately S$5.2 million, S$13.2 million and S$4.8 million for the years ended December 31, 2019, 2020 and 2021, respectively, which accounted for approximately 28.8%, 61.5% and 32.7% of our total revenue for the years ended December 31, 2019, 2020 and 2021, respectively. This dependence on our largest customer group has not changed materially and we expect that this customer group will continue to account for a significant portion of our total revenue for a considerable period of time if we cannot expand our customer base and our geographical coverage. There is no assurance that we will be able to maintain the same or achieve even higher sales amounts to that customer group. Our sales to such customer group will be affected by the results of operations of the companies within that group, which may in turn be affected by many factors such as global and/or regional political, economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime, demand for their products and implementation of sales and marketing strategies for their products. If the companies within our largest customer group are unable to launch their marketing plans for their products successfully, or if there is any material and adverse change in political, economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime or if the demand for their products weakens materially, and if we are unable to develop new customers and secure purchase orders of comparable size or under substantially the same terms, our business, financial condition, results of operations and prospects may be materially and adversely affected. Further, if we fail to achieve more diversified income or reduce our reliance on such customer group, or if we fail to secure a similar level of business from other customers on comparable commercial terms, such that the reduction in revenue from our largest customer group could be partly or wholly offset, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

19
 

 

In addition, there is generally no long-term commitment from customers of our cleaning systems and other equipment business to purchase an agreed amount from us. Therefore, any material change in a customer’s product development plan may also directly affect its demand for our products. If we fail to quote a competitive price to our customer, if the quality of our products does not meet our customer’s specifications or if there is any disruption to our business relationship with our customer, we may be unable to secure further business from such customer. Any significant decrease in sales to any of our customers for any reason, including any disruption to our business relationship with them, may materially and adversely affect our business, financial condition, results of operations and prospects.

 

We are subject to risks relating to the operation of our production and processing facilities.

 

We are dependent on our JCS Facility and Hygieia Facility for our operations. Our production and processing facilities are subject to the risk of operational breakdowns caused by accidents occurring during the production process, including, but not limited to, faulty machines, suspension of utilities, human error or subpar output or efficiency. Any interruption in, or prolonged suspension of any part of production at, or any damage to or destruction of, any of our production and processing facilities arising from unexpected or catastrophic events or otherwise may prevent us from carrying out our businesses of the sale of cleaning systems and other equipment and provision of centralized dishwashing services to our customers, which in turn may result in a material adverse effect on our results of operations and financial condition. In addition, any interruption or suspension of the production process or failure to supply our products and/or services to our customers in a timely manner may result in breach of contract and loss of sales, as well as expose us to liability and the requirement to pay compensation under the relevant contracts with our customers, lawsuits and damage to our reputation, which may have a material and adverse effect on our business, financial condition, results of operations and prospects.

 

The operation of our production and processing facilities is also subject to risks and issues in respect of our production processes such as mechanical and system failures, equipment upgrades and delays in the delivery of machinery and equipment, any of which could cause interruption or suspension of the production process and reduced output.

 

Additionally, there may be accidents or injuries to our workers caused by the use of machinery or equipment at our production and processing facilities, which could interrupt our operations and result in legal and regulatory liabilities. While none of our workers were involved in any work-related accidents or suffered any work-related injuries during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 through the date of this prospectus, there is no assurance that there will not be any such accidents or injuries in the future, which could cause operational breakdowns. Any such operational breakdowns, interruptions or suspensions may affect our business, financial condition, results of operations and prospects.

 

The non-recurring nature of our cleaning systems and other equipment business means that there is no guarantee that we will be able to secure new orders, leading to fluctuations in revenue.

 

We do not enter into any long term agreements with our customers for sale of cleaning systems and other equipment, and sell cleaning systems and other equipment on an order-by-order basis. Therefore, our customers are under no obligation to continue to award contracts to or place orders with us and there is no assurance that we will be able to secure new orders in the future. In this regard, the number of contracts and orders and the amount of revenue that we are able to derive therefrom are affected by a series of factors including but not limited to changes in our customers’ businesses and changes in market and economic conditions.

 

20
 

 

Accordingly, there is uncertainty as to whether we will be able to secure new contracts and orders in the future and in the event that our Group fails to secure new contracts or orders of contract values, size and/or margins comparable to previous orders, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

We do not enter into long-term agreements for the provision of centralized dishwashing and general cleaning services and there is no assurance that such agreements will be renewed in the future.

 

The term of our agreements for our provision of centralized dishwashing services and general cleaning services is usually for a period of one to two years. Our customers are not obliged to renew the agreement or engage us again for the provision of such services upon the expiration of the agreement. We do not have any long-term agreements with our customers.

 

There is no assurance that our existing customers will renew their agreements or that we will be able to secure new contracts from our existing and new customers with similar or better terms. In the event we are unable to secure new contracts from existing or new customers, there may be a significant decrease in revenue and our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

We depend on our key management team and our experienced and skilled personnel and our business may be severely disrupted if we are unable to retain them or to attract suitable replacements.

 

Our performance depends on the continued service and performance of our Directors and senior management because they play an important role in guiding the implementation of our business strategies and future plans. We also depend on our key employees, Mr. Wui Chin Hou and Mr. Zhao Liang. The relationships that our experienced management team has developed with our customers over the years is important to the future development of our business. If any of our Directors, any members of our senior management or either of our key employees were to terminate their services or employment, there is no assurance that we would be able to find suitable replacements in a timely manner. The loss of services of either of these key personnel and/or the inability to identify, hire, train and retain other qualified engineering, technical and operations personnel in the future may materially and adversely affect our business, financial condition, results of operations and prospects.

 

As Ms. Bee Yin Hong, our Chairman, executive Director and chief executive officer, contributes significantly to various key aspects of our business, including business development and operations, the continued success and growth of our Group is dependent on our ability to retain her services. We do not carry key person life insurance on the life of Ms. Hong or any of our Directors or executive officers. The loss of Ms. Hong’s services as our Chairman, executive Director and chief executive officer may materially and adversely affect our business, future plans and prospects.

 

We also rely on experienced and skilled personnel for our operations and our ability to design and manufacture quality products and provide good customer care service depends to a large extent on whether we are able to secure adequately skilled personnel for our operations. In particular, we rely on our team of qualified engineers for the design and manufacture of our cleaning systems. If we are unable to employ suitable personnel, or if our personnel do not fulfil their roles or if we experience a high turnover of experienced and skilled personnel without suitable, timely or sufficient replacements, the quality of our products and/or services may decline, which may adversely affect our business, financial condition, results of operations and prospects.

 

We may be affected by the prospects of the industries in which our customers are engaged.

 

Our cleaning systems and other equipment sales business is largely dependent on orders and contracts from our major customers, which are primarily in the hard disk drive, semiconductor and industrial electronics equipment/product manufacturing industries in Singapore and Malaysia. Our provision of centralized dishwashing services and ancillary services is dependent on contracts from our customers in the food and beverage industry in Singapore. We are therefore dependent on the outlook for these industries, and are indirectly exposed to the uncertainties and business fluctuations of these industries. Accordingly, our business may be adversely affected if there is any slowdown in the growth and development of such industries that compels industry participants to reduce their capital expenditures and budgets. These industries are also subject to the impact of the industry cycle, general market and economic conditions and government policies and expenditures, which are factors beyond our control. A decline in the number of new contracts and orders due to these factors may cause us to operate in a more competitive environment, and we also may be required to be more competitive in our pricing which, in turn, may adversely impact our business, financial condition, results of operations and prospects.

 

The war in Ukraine could materially and adversely affect our business and results of operations.

 

The recent outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect our customers’ businesses and our business, even though we do not have any direct exposure to Russia or the adjoining geographic regions. In addition, Russia and Ukraine are major exporters of critical minerals needed for semiconductors, which could have a significant negative impact on many of our customers. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects.

 

21
 

 

We may be unable to meet the specifications of our customers or keep up with fast-changing technological developments.

 

The needs of our customers may change as a result of new developments in technology. Our future success depends on our ability to launch better cleaning systems that meet evolving market demands of our customers, and in particular, new cleaning systems that are compatible with new products sold by our customers. The preferences and purchasing patterns of our customers can change rapidly due to technological developments in their respective industries. There is no assurance that we will be able to respond to changes in the specifications of our customers in a timely manner. Our success depends on our ability to adapt our products to the requirements and specifications of our customers. There is also no assurance that we will be able to sufficiently and promptly respond to changes in customer preferences to make corresponding adjustments to our products or services, and failing to do so may have a material and adverse effect on our business, financial condition, results of operations and prospects.

 

We are vulnerable to fluctuations in the cost or supply of our raw materials.

 

Expenses for raw materials, such as stainless steel, aluminum, and electronic components, constitute most of our cost of revenues, representing approximately 41.8%, 57.8% and 43.5% of our total cost of revenues for the years ended December 31, 2019, 2020 and 2021, respectively. Expenses for raw materials as a percentage of our total cost of revenue have not materially changed through the date of this prospectus. A shortage of raw materials or material increases in the cost of raw materials may materially and adversely affect our operations and profitability, and there is no assurance that we will be able to identify suitable alternatives at comparable prices and quality in order to meet our contract requirements.

 

As our contract price is fixed at the time that our customer confirms an order, it is difficult for us to manage the pricing of our cleaning systems and other equipment to pass on any increase in costs to our customers. In the event of a shortage of raw materials, there may be a resultant material increase in the purchase prices of such key materials. In such event, if we are unable to pass on such price increases to our customers, our cost of production will increase whereupon our gross margin and profitability may be adversely affected.

 

We are subject to risks relating to computer hardware or software systems and potential computer system failure and disruptions.

 

Part of our work is carried out by computers and software systems used for design and engineering works such as the ANSYS Discovery, SolidWorks and AutoCAD software systems. During the years ended December 31, 2019, 2020 and 2021 and during the period from January 1, 2022 to the date of this prospectus, we engaged third party information technology service providers to provide support services for our various hardware and software systems. The computer systems of our Group are currently located at our office in Singapore, with access restricted to authorized personnel. A physical breakdown of and/or damage to our computer hardware and software systems and/or data storage facilities may lead to a loss of data. In addition, our software systems may be vulnerable to interruptions due to events beyond our control, including, but not limited to, telecommunications or electricity failure, computer viruses, hackers and other security issues, and any such interruption or failure could disrupt our business and operations. There is no assurance that we have sufficient ability to protect our computer hardware and software systems and data storage facilities from all possible damage, including telecommunications or electricity failure or other unexpected events.

 

22
 

 

We are subject to environmental, health and safety regulations and penalties, and may be adversely affected by new and changing laws and regulations.

 

We are subject to laws, regulations and policies relating to the protection of the environment and to workplace health and safety. We are required to adopt measures to control the discharge of polluting matters, toxic substances or hazardous substances and noise at our production and processing facilities in accordance with such applicable laws and regulations and to implement such measures that ensure the safety and health of our employees. Changes to current laws, regulations or policies or the imposition of new laws, regulations and policies in the cleaning systems or the dishwashing industry could impose new restrictions or prohibitions on our current practices. We may incur significant costs and expenses and need to budget additional resources to comply with any such requirements, which may have a material and adverse effect on our business, financial condition, results of operations and prospects.

 

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

 

As part of our business strategies and future plans, we intend to expand our product portfolio, expand our research and development and engineering team, strengthen our production capability for cleaning systems and other equipment and improve the production efficiency of our centralized dishwashing services business. While we have planned such expansion based on our outlook regarding our business prospects, there is no assurance that such expansion plans will be commercially successful or that the actual outcome of those expansion plans will match our expectations. The success and viability of our expansion plans are dependent upon our ability to successfully implement our research and development projects, hire and retain skilled employees to carry out our business strategies and future plans and implement strategic business development and marketing plans effectively and upon an increase in demand for our products and services by existing and new customers in the future.

 

Further, the implementation of our business strategies and future plans may require substantial capital expenditure and additional financial resources and commitments. There is no assurance that these business strategies and future plans will achieve the expected results or outcome such as an increase in revenue that will be commensurate with our investment costs or the ability to generate any costs savings, increased operational efficiency and/or productivity improvements to our operations. There is also no assurance that we will be able to obtain financing on terms that are favorable, if at all. If the results or outcome of our future plans do not meet our expectations, if we fail to achieve a sufficient level of revenue or if we fail to manage our costs efficiently, we may not be able to recover our investment costs and our business, financial condition, results of operation and prospects may be adversely affected.

 

Increased labor costs could affect our financial performance.

 

We intend to recruit additional staff to expand our research and development and engineering team and to build up our business development team. Both the cleaning equipment industry and the dishwashing industry face labor shortages and rising labor costs in Singapore. This may result in a need to employ more foreign workers for companies involved in the manufacturing sector in Singapore. If we are unable to recruit and retain sufficient and qualified staff, including foreign workers, for us to execute our business, or if we have to increase our costs to attract and maintain such staff, our results of operations and financial performance may be materially and adversely affected and our future growth may be inhibited. Further, we may be unable to recruit additional staff necessary to implement our business strategies. We incurred employee benefit expenses of approximately S$3.3 million, S$3.1 million and S$3.2 million, representing approximately 18.1%, 14.4% and 21.6% of our total revenue for the years ended December 31, 2019, 2020 and 2021, respectively. Although our labor costs will increase upon recruitment of additional staff, there is no assurance that our revenue or gross profit will increase accordingly. As such, in the event we are unable to obtain more orders for both our sale of cleaning systems and other equipment business and our centralized dishwashing and ancillary services business after implementation of such planned investment, our business, financial position and profitability may be adversely affected.

 

23
 

 

Non-renewal of permits and business licenses would have a material adverse effect on our operations.

 

In order to carry on our business operations, we are required to obtain certain permits, licenses and certificates from various governmental authorities and organizations. As of the date of this prospectus, we have obtained all material permits and licenses for our business operations. However, certain of these permits and licenses are subject to periodic renewal and reassessment by the relevant government authorities and organizations, and the standards of compliance required in relation thereto may be subject to change. Non-renewal of our permits, licenses and certificates would have a material adverse effect on our operations. We would be unable to carry on our business without such permits, licenses and certificates being granted or renewed. In addition, if there are any subsequent modifications of, additions or new restrictions to compliance standards for our permits, licenses or certificates, it may be costly for us to comply with such subsequent modifications of, additions or new restrictions to, these compliance standards. In such event, we may incur additional costs to comply with such new or modified standards which may adversely affect our profitability.

 

We depend on the quality of the work of our sub-contractors.

 

We engage third party sub-contractors, mainly for specific works during the production and manufacturing of our cleaning systems and other equipment and for the provision of labor for our centralized dishwashing operations and on-site cleaning services from time to time. We generally select our sub-contractors based on their pricing, quality of services, capacity and market reputation. However, there is no assurance that the sub-contractors will meet the requirements of our Group and our customers. We may be unable to monitor the performance of our sub-contractors as directly and efficiently as with our own staff. As we remain contractually responsible for the delivery of products and/or services in accordance with the requirements and contract terms of our customers, any delay, non-performance or poor performance by our sub-contractors may cause us to breach our contracts with our customers and expose us to the risk of damages. If such events were to occur, there may be a material and adverse effect on our business, financial condition and results of operations, as well as reputational damage to our Group.

 

We are exposed to the credit risks of our customers.

 

We extend credit terms to our customers. Our average accounts receivable turnover days were approximately 103.4 days, 120.3 days and 138.5 days for the years ended December 31, 2019, 2020 and 2021, respectively. Our customers may be unable to meet their contractual payment obligations to us, either in a timely manner or at all. The reasons for payment delays, cancellations or default by our customers may include insolvency or bankruptcy, or insufficient financing or working capital due to late payments by their respective customers. While we did not experience any material order cancellations by our customers during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 to the date of this prospectus, there is no assurance that our customers will not cancel their orders and/or refuse to make payment in the future in a timely manner or at all. We may not be able to enforce our contractual rights to receive payment through legal proceedings. In the event that we are unable to collect payments from our customers, we are still obliged to pay our suppliers in a timely manner and thus our business, financial condition and results of operations may be adversely affected.

 

If we are unable to maintain and protect our intellectual property, or if third parties assert that we infringe on their intellectual property rights, our business could suffer.

 

Our business depends, in part, on our ability to identify and protect proprietary information and other intellectual property such as our client lists and information and business methods. We rely on trade secrets, confidentiality policies, non-disclosure and other contractual arrangements and copyright and trademark laws to protect our intellectual property rights. However, we may not adequately protect these rights, and their disclosure to, or use by, third parties may harm our competitive position. Our inability to detect unauthorized use of, or to take appropriate or timely steps to enforce, our intellectual property rights may harm our business. Also, third parties may claim that our business operations infringe on their intellectual property rights. These claims may harm our reputation, be a financial burden to defend, distract the attention of our management and prevent us from offering some services. Intellectual property is increasingly stored or carried on mobile devices, such as laptop computers, which increases the risk of inadvertent disclosure if the mobile devices are lost or stolen and the information has not been adequately safeguarded or encrypted. This also makes it easier for someone with access to our systems, or someone who gains unauthorized access, to steal information and use it to our disadvantage. Advances in technology, which permit increasingly large amounts of information to be stored on mobile devices or on third-party “cloud” servers, may increase these risks.

 

24
 

 

If we fail to maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.

 

Although our management has concluded that our internal control over financial reporting is effective, our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. After conducting its own independent testing, it may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company may also place a burden on our management, operational and financial resources and systems for the foreseeable future such that we may be unable to timely complete our evaluation testing and any required remediation.

 

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. There can be no assurance that our internal controls will continue to be effectively implemented.

 

Our failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the Ordinary Shares.

 

Upon the completion of our Initial Public Offering in April 2022, we became a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. In addition, if we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting on an annual basis.

 

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify material weaknesses and deficiencies in our internal control over financial reporting. The Public Company Accounting Oversight Board, or PCAOB, has defined a material weakness as “a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim statements will not be prevented or detected on a timely basis.”

 

In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations and lead to a decline in the trading price of our Ordinary Shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud, misuse of corporate assets and legal actions under the United States securities laws and subject us to potential delisting from Nasdaq, to regulatory investigations and to civil or criminal sanctions.

 

We may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees or other third parties.

 

We are exposed to the risk of fraud or other misconduct by our employees and other third parties. Misconduct by such parties may include theft, unauthorized business transactions, bribery or breaches of applicable laws and regulations, which may be difficult to detect or prevent. We are not aware of any instances of fraud, theft and other misconduct involving employees and other third parties that had any material and adverse impact on our business and results of operations during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 to the date of this prospectus. However, there is no assurance that there will not be any such instances in the future. We may be unable to prevent, detect or deter all instances of misconduct. Any misconduct committed against our interests, which may include past acts that have gone undetected or future acts, could subject us to financial losses and harm our reputation and may have a material and adverse effect on our business, financial condition, results of operations and prospects.

 

25
 

 

We may be harmed by negative publicity.

 

We operate in highly competitive industries and there are other companies in the market that offer similar products and services. We derive most of our customers through word of mouth and we rely on the positive feedback of our customers. Thus, customer satisfaction with our cleaning systems and other equipment, and with our centralized dishwashing and ancillary services, is critical to the success of our business as this will also result in potential referrals from our existing customers. If we fail to meet our customers’ expectations, there may be negative feedback regarding our products and/or services, which may have an adverse impact on our business and reputation. In the event we are unable to maintain a high level of customer satisfaction or any customer dissatisfaction is inadequately addressed, our business, financial condition, results of operations and prospects may also be adversely affected.

 

Our reputation may also be adversely affected by negative publicity in reports, publications such as major newspapers and forums, or any other negative publicity or rumors. There is no assurance that our Group will not experience negative publicity in the future or that such negative publicity will not have a material and adverse effect on our reputation or prospects. This may result in our inability to attract new customers or retain existing customers and may in turn adversely affect our business and results of operations.

 

Our insurance coverage may be inadequate.

 

We maintain insurance coverage for our major assets and operations, including insurance covering plant and machinery, fire, theft and accident. However, we do not have or are unable to obtain insurance in respect of losses arising from certain operating risks, such as acts of terrorism. Our insurance policies may be insufficient to cover all of our losses in all events. The occurrence of certain incidents, including fraud, confiscation by investigating authorities or misconduct committed by our employees or third parties, severe weather conditions, war, flooding and power outages may not be covered adequately, if at all, by our insurance policies. If our losses exceed the insurance coverage or are not covered by our insurance policies, we may be liable to bear such losses. Our insurance premiums may also increase substantially due to claims made. In such circumstances, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

We are exposed to risks in respect of acts of war, terrorist attacks, epidemics, political unrest, adverse weather conditions and other uncontrollable events.

 

Unforeseeable circumstances and other factors such as power outages, labor disputes, adverse weather conditions or other catastrophes, epidemics or outbreaks of communicable diseases such as COVID-19, Severe Acute Respiratory Syndrome, Middle East Respiratory Syndrome, Ebola or other contagious diseases, may disrupt our operations and cause loss and damage to our production and processing facilities, and acts of war, terrorist attacks or other acts of violence may further materially and adversely affect the global financial markets and consumer confidence. Our business may also be affected by macroeconomic factors in the countries in which we operate, such as general economic conditions, market sentiment, social and political unrest and regulatory, fiscal and other governmental policies, all of which are beyond our control. Any such events may cause damage or disruption to our business, markets, customers and suppliers, any of which may materially and adversely affect our business, financial condition, results of operations and prospects.

 

26
 

 

Our business and operations may be materially and adversely affected in the event of a re-occurrence or a prolonged global pandemic outbreak of COVID-19.

 

The global pandemic outbreak of COVID-19 announced by the World Health Organization in early 2020 has disrupted our operations, and the operations of our customers, suppliers and/or sub-contractors. If the development of the COVID-19 outbreak becomes more severe or if our customers, suppliers and sub-contractors are forced to close down their businesses after prolonged disruptions to their operations, we may experience a delay or shortage of raw materials, supplies and/or services by our suppliers and sub-contractors, or termination of our orders and contracts by our customers. In such event, our operations may be severely disrupted, which may have a material and adverse effect on our business, financial condition and results of operations. In addition, if any of our employees or employees of our sub-contractors are suspected of having contracted COVID-19, some or all of our employees or the employees of our sub-contractors may be quarantined and we will be required to disinfect our workplace and our production and processing facilities. In the event our employees are placed under quarantine orders under the Infectious Diseases Act 1976 of Singapore, we may face a shortage of labor and our operations may be severely disrupted. Our revenue and profitability may also be materially affected if the COVID-19 outbreak continues to materially affect the overall economic and market conditions in Singapore and the economic slowdown and/or negative business sentiment could potentially have an adverse impact on our business and operations. We are uncertain as to when the outbreak of COVID-19 will be contained, and we cannot predict if the impact of the outbreak will be short-lived or long-lasting. If the outbreak of COVID-19 is not effectively controlled within a short period of time, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

We are exposed to risks arising from fluctuations of foreign currency exchange rates.

 

Our business is exposed to certain foreign currency exchange risks as our reporting currency is Singapore dollars and our overseas sales and procurement were denominated in United States dollars during the years ended December 31, 2019, 2020 and 2021. To the extent that our Group’s sales and purchases and operating costs are not denominated in the same currency and to the extent that there are timing differences between invoicing and payment from our customers and to our suppliers, we may be exposed to foreign currency exchange gains or losses arising from transactions in currencies other than our reporting currency.

 

We may be affected by adverse changes in the political, economic, regulatory or social conditions in the countries in which we and our customers and suppliers operate or into which we intend to expand.

 

We and our customers and suppliers are governed by the laws, regulations and government policies in each of the countries in which we and our customers and suppliers operate or into which we intend to expand our business and operations, such as Singapore, Malaysia, Thailand, Belgium and South Korea. Our business and future growth are dependent on the political, economic, regulatory and social conditions in these countries, which are beyond our control. Any economic downturn, changes in policies, currency and interest rate fluctuations, capital controls or capital restrictions, labor laws, changes in environmental protection laws and regulations, duties and taxation and limitations on imports and exports in these countries may materially and adversely affect our business, financial condition, results of operations and prospects.

 

We may face the risk of inventory obsolescence.

 

As of December 31, 2019, 2020 and 2021, we had inventories of S$3.1 million, S$1.4 million and S$2.6 million, respectively. The higher inventory for the year ended December 31, 2021 was primarily the result of purchasing more raw materials in anticipation of slower delivery times due to supply chain issues and increased orders for 2022. Our inventory turnover days for the years ended December 31, 2019, 2020 and 2021 were 87.5 days, 51.7 days, and 75 days, respectively. The higher number of days for the year ended December 31, 2021 was mainly due to increased raw materials inventory purchased in anticipation of slower delivery lead times and increased orders for 2022. Our business relies on customer demand for our products. Any reduction in customer demand for our products may have an adverse impact on our product sales, which may in turn lead to inventory obsolescence, decline in inventory value or inventory write-off. In that case, our business, financial condition, results of operations and prospects may be materially and adversely affected.

 

Our business is subject to various cybersecurity and other operational risks.

 

We face various cybersecurity and other operational risks relating to our businesses on a daily basis. We rely heavily on financial, accounting, communication, and other data processing systems as well as the experienced staff who operate them to securely process, transmit and store sensitive and confidential customer information, and communicate with our staff, customers, partners, and suppliers. We also depend on various third-party software and cloud-based storage platforms as well as other information technology systems in our business operations. These systems may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our control.

 

Our customers typically provide us with sensitive and confidential information as part of our business arrangements. We are susceptible to attempts to obtain unauthorized access to such sensitive and confidential customer information. We also may be subject to cyber-attacks involving leaks and destruction of sensitive and confidential customer information and our proprietary information, which could result from an employee’s or agent’s failure to follow data security procedures or from actions by third parties, including actions by government authorities. Although cyber-attacks have not had a material impact on our operations to date, breaches of our or third-party network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to and disclose sensitive and confidential customer information and our proprietary information, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses and other means, and could originate from a wide variety of sources, including state actors or other unknown third parties. The increase in using mobile technologies can heighten these and other operational risks.

 

We cannot assure you that we or the third parties on which we rely will be able to anticipate, detect or implement effective preventative measures against frequently changing cyber-attacks. We may incur significant costs in maintaining and enhancing appropriate protections to keep pace with increasingly sophisticated methods of attack. In addition to the implementation of data security measures, we require our employees to maintain the confidentiality of the proprietary information that we hold. If an employee’s failure to follow proper data security procedures results in the improper release of confidential information, or our systems are otherwise compromised, malfunctioning or disabled, we could suffer a disruption of our business, financial losses, liability to customers, regulatory sanctions and damage to our reputation.

 

27
 

 

Risks Related to Our Securities and This Offering

 

An active trading market for our Ordinary Shares may not continue and the trading price for our Ordinary Shares may fluctuate significantly.

 

We cannot assure you that a liquid public market for our Ordinary Shares will continue. If an active public market for our Ordinary Shares does not continue, the market price and liquidity of our shares may be materially and adversely affected. The public offering price for our shares in our Initial Public Offering was determined by negotiation between us and the representative of the underwriter based upon several factors, and we can provide no assurance that the trading price of our shares will not decline below the public offering price. As a result, investors in our shares may experience a significant decrease in the value of their shares.

 

We may not maintain the listing of our Ordinary Shares on the Nasdaq which could limit investors’ ability to make transactions in our Ordinary Shares and subject us to additional trading restrictions.

 

Our Ordinary Shares are listed on Nasdaq. In order to continue listing our shares on Nasdaq, we must maintain certain financial and share price levels and we may be unable to meet these requirements in the future. We cannot assure you that our shares will continue to be listed on Nasdaq in the future.

 

If Nasdaq delists our Ordinary Shares and we are unable to list our shares on another national securities exchange, we expect our shares could be quoted on an over-the-counter market in the United States. If this were to occur, we could face significant material adverse consequences, including:

 

  a limited availability of market quotations for our Ordinary Shares;
     
  reduced liquidity for our Ordinary Shares;
     
  a determination that our Ordinary Shares are “penny stock,” which will require brokers trading in our shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares;
     
  a limited amount of news and analyst coverage; and
     
  a decreased ability to issue additional securities or obtain additional financing in the future.

 

As long as our Ordinary Shares are listed on Nasdaq, U.S. federal law prevents or preempts the states from regulating their sale. However, the law 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 their sale. Further, if we were no longer listed on the Nasdaq, we would be subject to regulations in each state in which we offer our shares.

 

The trading price of our Ordinary Shares has been volatile, which could result in substantial losses to investors.

 

Since our Ordinary Shares commenced trading on April 22, 2022, the trading price of our Ordinary Shares has been volatile and has fluctuated widely due to factors beyond our control. This may continue in the future because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in Singapore that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our shares may be highly volatile for factors specific to our own operations, including the following:

 

  fluctuations in our revenues, earnings and cash flow;
     
  changes in financial estimates by securities analysts;
     
  additions or departures of key personnel;

 

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  release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and
     
  potential litigation or regulatory investigations.

 

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

 

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

 

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our Ordinary Shares, the market price for our Ordinary Shares and trading volume could decline.

 

The trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts downgrade our shares, the market price for our shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our shares to decline.

 

The sale or availability for sale of substantial amounts of our Ordinary Shares could adversely affect their market price.

 

Sales of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales could occur, could adversely affect the market price of our shares and could materially impair our ability to raise capital through equity offerings in the future. We currently have 15,020,000 Ordinary Shares outstanding, of which 4,490,000 shares are freely tradable without restriction or further registration under the Securities Act. The remaining shares may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements. In conjunction with our Initial Public Offering in April 2022, our directors and officers and certain shareholders agreed not to sell any shares until April 22, 2023 without the prior written consent of the representative of the underwriters of that offering, subject to certain exceptions, although the representative of the underwriters may release these securities from these restrictions at any time. In addition, the shares that are the subject of the Resale Prospectus may be sold in the public market only in accordance with that prospectus. In addition, the shares that are the subject of the Resale Prospectus may be sold in the public market only in accordance with that prospectus. We cannot predict what effect, if any, market sales of securities held by our controlling shareholder or any other shareholder or the availability of these securities for future sale will have on the market price of our shares.

 

Short selling may drive down the market price of our Ordinary Shares.

 

Short selling is the practice of selling shares that the seller does not own but rather has borrowed from a third party with the intention of buying identical shares back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the shares between the sale of the borrowed shares and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the shares to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling the shares short. These short attacks have, in the past, led to selling of shares in the market. If we were to become the subject of any unfavorable publicity, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.

 

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Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return on your investment.

 

We currently intend to retain all of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our shares as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Singapore law. Even if our 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, our financial condition, contractual restrictions and other factors as determined by our board of directors. Accordingly, the return on your investment in our Ordinary Shares will likely depend entirely upon any future price appreciation of our Ordinary Shares. There is no guarantee that our Ordinary Shares will appreciate in value or even maintain the price at which you purchase our shares. You may not realize a return on your investment in our shares and you may even lose your entire investment.

 

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

 

If you purchase shares in this offering, you will pay substantially more than our net tangible book value per share. As a result, you will experience immediate and substantial dilution of US$3.26 per share, representing the difference between our pro forma as adjusted net tangible book value per share of US$0.74 as of December 31, 2021, after giving effect to the net proceeds to us from this offering, assuming no additional exercise by the underwriters of the over-allotment option, at a 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.

 

Our founders and initial investors purchased their shares at a price that may be significantly less than the current trading price of the shares and will be able to sell their shares after expiration of the restrictions under Rules 144 and 701 and their lock-up agreements.

 

Our founders and initial investors purchased their shares at an average price of approximately US$1.41 per share, which may be substantially lower than the current trading price of our shares. The Ordinary Shares issued to our founders and initial investors are “restricted” securities under applicable U. S. federal and state securities laws and may be sold in the public market only in accordance with Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements entered into in conjunction with our Initial Public Offering. Because these shareholders paid a lower price per Ordinary Share, when they are able to sell their shares, they may be more willing to accept a lower sales price than public investors. This fact could impact the trading price of the Ordinary Shares to the detriment of our public investors.

 

If we are classified as a passive foreign investment company, United States taxpayers who own our securities may have adverse United States federal income tax consequences.

 

We are a non-U.S. corporation and, as such, we will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either

 

  At least 75% of our gross income for the year is passive income; or
     
  The average percentage of our assets (determined at the end of each quarter) during the taxable year that produce passive income or that are held for the production of passive income is at least 50%.

 

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Passive income generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

 

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our securities, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

 

It is possible that, for our current taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. We treat our affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.

 

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Material Tax Considerations — Passive Foreign Investment Company Considerations.”

 

Our controlling shareholder has substantial influence over the Company. Its interests may not be aligned with the interests of our other shareholders, and it could prevent or cause a change of control or other transactions.

 

Ms. Hong, our Chairman, executive director and chief executive officer, beneficially owns an aggregate of approximately 64% of our issued and outstanding Ordinary Shares. Accordingly, our controlling shareholder could control the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate actions, including the power to prevent or cause a change in control. The interests of our largest shareholder may differ from the interests of our other shareholders. Without the consent of our controlling shareholder, we may be prevented from entering into transactions that could be beneficial to us or our other shareholders. The concentration in the ownership of our shares may cause a material decline in the value of our shares. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related Party Transactions – Major Shareholders.”

 

As a “controlled company,” we are exempt from certain Nasdaq corporate governance requirements, which may result in our independent directors not having as much influence as they would if we were not a controlled company.

 

We are a “controlled company” as defined under the Nasdaq Stock Market Rules, because one of our shareholders holds more than 50% of our voting power. As a result, for so long as we remain a controlled company as defined under that rule, we are exempt from, and our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements, including that:

 

  a majority of our board of directors must be independent directors;
     
  our compensation committee must be composed entirely of independent directors; and
     
  our corporate governance and nomination committee must be composed entirely of independent directors.

 

Although we intend to have a majority of independent directors, that may change in the future.

 

As a company incorporated in the Cayman Islands, 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 whose Ordinary Shares are traded on Nasdaq, we rely on a provision in the Nasdaq corporate governance listing standards that allows us to follow Cayman Islands law with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on Nasdaq.

 

For example, we are exempt from Nasdaq regulations that require a listed U.S. company to:

 

  have a majority of the board of directors consist of independent directors;
     
  require non-management directors to meet on a regular basis without management present;

 

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  have an independent compensation committee;
     
  have an independent nominating committee; and
     
  seek shareholder approval for the implementation of certain equity compensation plans and dilutive issuances of Ordinary Shares, such as transactions, other than a public offering, involving the sale of 20% or more of our Ordinary Shares for less than the greater of book or market value of the shares.

 

As a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. Our audit committee is required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq. Therefore, we intend to maintain a fully independent audit committee in accordance with Rule 10A-3 of the Exchange Act. However, because we are a foreign private issuer, our audit committee is not subject to additional Nasdaq corporate governance requirements applicable to listed U.S. companies, including the requirements to have a minimum of three members and to affirmatively determine that all members are “independent,” using more stringent criteria than those applicable to us as a foreign private issuer.

 

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

 

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our Amended Memorandum and Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against our directors and us, 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 English common law, which are generally of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws than the United States, and provide significantly less protection to investors. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

 

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the Amended Memorandum and Articles of Association) or to obtain copies of lists of shareholders of these companies. Our directors are not required under our Amended Memorandum and Articles of Association to make our corporate records available for inspection by our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.

 

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as U.S. states. Currently, we plan to rely on home country practice with respect to any corporate governance matter. Accordingly, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

 

As a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as shareholders of a company incorporated in a U.S. state.

 

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

 

We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all of our current directors and officers are nationals and residents of countries other than the United States and substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment against our assets or the assets of our directors and officers. As a result of all of the above, our shareholders may have more difficulties in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

 

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

 

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various 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 the Sarbanes-Oxley Act for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

 

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain new and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.

 

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

 

Because we are 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:

 

  the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current  reports on Form 8-K with the SEC;
     
  the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
     
  the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
     
  the selective disclosure rules by issuers of material non-public information under Regulation FD.

 

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We are required to file an annual report on Form 20-F within four months after the end of each fiscal year. In addition, we intend to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of Nasdaq. 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 if you were investing in a U.S. domestic issuer.

 

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

 

As discussed above, 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, and, accordingly, the next determination will be made with respect to us on, 2022. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer status, 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 comply with U.S. federal proxy requirements, and our officers, directors and 10% 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 listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we do not incur as a foreign private issuer.

 

We will incur significantly increased costs and devote substantial management time as a result of the listing of our Ordinary Shares on Nasdaq.

 

We will incur additional legal, accounting and other expenses as a public reporting company, particularly after we cease to qualify as an emerging growth company. For example, we will be required to comply with the additional requirements of the rules and regulations of the SEC and the Nasdaq rules, including applicable corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the number of additional costs we may incur as a result of becoming a public company or the timing of such costs.

 

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidelines are provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us and our business may be adversely affected.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

Our Company is an exempted company incorporated with limited liability under the laws of the Cayman Islands. We are incorporated in the Cayman Islands because of certain benefits associated with being a Cayman Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control or currency restrictions and the availability of professional and support services. However, the Cayman Islands has a less developed body of securities laws as compared to the United States and provides less protection for investors. In addition, Cayman Islands companies may not have standing to sue before the U.S. federal courts.

 

All of our current operations are conducted outside of the United States and all of our current assets are located outside of the United States, with the majority of our operations and current assets being located in Singapore. All of the directors and executive officers of our Company and the auditors of our Company reside outside the United States and substantially all of their assets are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or any such persons, or to enforce in the United States any judgment obtained in the U.S. courts against us or any of such persons, including judgments based upon the civil liability provisions of the U.S. securities laws or any U.S. state or territory.

 

We have appointed Cogency Global Inc., 122 E. 42nd Street, 18th Floor, New York, New York 10168 as our agent upon whom process may be served in any action brought against us under the securities laws of the United States.

 

Cayman Islands

 

Conyers Dill & Pearman, our counsel as to Cayman Islands law, has advised us that there is uncertainty as to whether the courts of the Cayman Islands would (i) recognize or enforce judgments of the U.S. courts obtained against us or our directors or executive officers that are predicated upon the civil liability provisions of the U.S. securities laws or any U.S. state; or (ii) entertain original actions brought in the Cayman Islands against us or our directors or executive officers that are predicated upon the U.S. securities laws or the securities laws of any U.S. state.

 

We have been advised by Conyers Dill & Pearman that although there is no statutory enforcement in the Cayman Islands of judgments obtained in the federal or state courts of the United States (and the Cayman Islands are not a party to any treaties for the reciprocal enforcement or recognition of such judgments), the courts of the Cayman Islands would recognize as a valid judgment, a final and conclusive judgment in personam obtained in the federal or state courts of the United States against the Company under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that (a) such courts had proper jurisdiction over the parties subject to such judgment; (b) such courts did not contravene the rules of natural justice of the Cayman Islands; (c) such judgment was not obtained by fraud; (d) the enforcement of the judgment would not be contrary to the public policy of the Cayman Islands; (e) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the Cayman Islands; and (f) there is due compliance with the correct procedures under the laws of the Cayman Islands. However, the Cayman Islands courts are unlikely to enforce a judgment obtained from United States courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature. Because such a determination has not yet been made by a court of the Cayman Islands, it is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands. A Cayman Islands court may stay enforcement proceedings if concurrent proceedings are being brought elsewhere.

 

Singapore

 

There is uncertainty as to whether judgments of courts in the United States based upon the civil liability provisions of the securities laws of the United States or any state or territory of the United States will be recognized or enforced by the Singapore courts, and there is doubt as to whether the Singapore courts will enter judgments in original actions brought in the Singapore courts based solely on the civil liability provisions of these securities laws. An in personam final and conclusive judgment in the federal or state courts of the United States under which a fixed or ascertainable sum of money is payable may generally be enforced as a debt in the Singapore courts under the common law as long as it is established that the Singapore courts have jurisdiction over the judgment debtor. However, the Singapore courts are unlikely to enforce a foreign judgment if (a) the foreign judgment is inconsistent with a prior local judgment that is binding on the same parties; (b) the enforcement of the foreign judgment would contravene the public policy of Singapore; (c) the proceedings in which the foreign judgment was obtained were contrary to principles of natural justice; (d) the foreign judgment was obtained by fraud; or (e) the enforcement of the foreign judgment amounts to the direct or indirect enforcement of a foreign penal, revenue or other public law.

 

In particular, the Singapore courts may potentially not allow the enforcement of any foreign judgment for a sum payable in respect of taxes, fines, penalties or other similar charges, including the judgments of courts in the United States based upon the civil liability provisions of the securities laws of the United States or any state or territory of the United States. In respect of civil liability provisions of the United States federal and state securities laws that permit punitive damages against us and our directors or executive officers, we are unaware of any decision by the Singapore courts that has considered the specific issue of whether a judgment of a United States court based on such civil liability provisions of the securities laws of the United States or any state or territory of the United States is enforceable in Singapore.

 

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USE OF PROCEEDS

 

As of the Initial Closing, we have received approximately US$10,029,626 of net proceeds from this offering after deducting underwriting discounts and commissions of US$966,400 and offering expenses of approximately US$1,083,974 paid by us. If the underwriter exercises its over-allotment option in full, we expect to receive approximately US$11,985,926 of net proceeds from this offering after deducting underwriting discounts of US$1,140,000 and estimated offering expenses of approximately US$1,105,674 payable by us. We will not receive any proceeds from the sale of Ordinary Shares by the Selling Shareholder.

 

Proceeds from this offering in the amount of $600,000 shall be used to fund an escrow account for a period of 12 months following the closing date of this offering, which account shall be used in the event we have to indemnify the underwriters pursuant to the terms of an underwriting agreement with the underwriters.

 

We currently intend to use:-

 

  (i) approximately US$3.1 million (US$3.8 million if the over-allotment is exercised in full) to expand our product portfolio, including an autonomous robot floor scrubber for industrial and commercial use, leveraging on our know-how from the design and development of an autonomous train interior cleaning robot;
     
  (ii) approximately US$2.0 million (US$2.4 million if the over-allotment is exercised in full) to strengthen our production capability for cleaning systems and other equipment by purchasing more advanced machinery and equipment;
     
  (iii) approximately US$0.7 million (US$0.8 million if the over-allotment is exercised in full) to improve the production efficiency of our centralized dishwashing services business by purchasing new machinery and equipment to enhance the capabilities and productivity of our Hygieia Facility;
     
  (iv) approximately US$0.9 million (US$1.1 million if the over-allotment is exercised in full) for brand building, including the establishment of a showroom at our JCS Facility and attending trade shows, exhibitions and industry forums, as well as revamping our corporate website;
     
  (v) approximately US$1.0 million to repay interest free loans made to us by our controlling shareholder for the purpose of paying the expenses of obtaining a listing of our Ordinary Shares, as well as for general working capital and corporate purposes;
     
  (vi) approximately US$0.4 million (US$0.5 million if the over-allotment is exercised in full) for building up our business development team and increasing our marketing efforts, including the hiring of business development managers and business development executives;
     
  (vii) approximately US$0.3 million (US$0.4 million if the over-allotment is exercised in full) to set up a new office in Malaysia; and
     
  (viii) approximately US$1.6 million (US$2.0 million if the over-allotment is exercised in full) for working capital and other general corporate purposes, including the $600,000 to be held in the indemnification escrow account.

 

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CAPITALIZATION AND INDEBTEDNESS

 

The following table sets forth our capitalization and our indebtedness as of December 31, 2021:

 

  on an actual basis; and
     
  on a pro forma as adjusted basis to reflect (i) the above; (ii) the issuance and sale of 3,020,000 Ordinary Shares by us in this offering at an initial public offering price of US$4.00 per Ordinary Share, which includes 20,000 Shares underlying the underwriters’ over-allotment option that were issued at the Initial Closing; and (iii) the issuance and sale of 3,562,500 Ordinary Shares by us in this offering at an initial public offering price of US$4.00 per Ordinary Share, assuming the underwriters exercise the over-allotment option in full, after deducting underwriting discounts and offering expenses paid by us.

 

The pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering is subject to adjustment based on the actual net proceeds to us from the offering. You should read this table in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

   Actual  

As adjusted

for Initial Closing(1)

   As adjusted for  Exercise of Full Over-Allotment Option(2) 
   Audited         
   (US$’000)   (US$’000)   (US$’000) 
Cash and Cash Equivalents  $820   $10,888   $12,863 
                
Total Liabilities  $11,403   $11,403   $11,403 
                
Shareholders’ Equity               
Ordinary Shares, par value US$0.001 per share, 100,000,000 Ordinary Shares authorized, 12,000,000 Ordinary Shares outstanding on an actual basis, 15,020,000 Ordinary Shares outstanding as adjusted for the Initial Closing and 15,562,500 Ordinary Shares outstanding on an as adjusted basis (assuming the over-allotment option is exercised in full)  $12   $15   $16 
Additional paid-in capital   2,683    12,710    14,665 
Retained earnings/deficit   (433)   (433)   (433)
Accumulated other comprehensive loss   (26)   (26)   (26)
Total Shareholders’ Equity   2,236    12,266    14,222 
Total Capitalization  $13,639   $23,669    25,625 

 

(1) Reflects the issuance and sale of 3,020,000 Ordinary Shares at the Initial Closing, including 20,000 Shares issued by the Company pursuant to the underwriters’ over-allotment option

 

(2) Assuming full exercise of the underwriters’ over-allotment option

 

DIVIDENDS AND DIVIDEND POLICY

 

Dividends of approximately S$1.5 million and nil were paid by the companies comprising our Group for the years ended December 31, 2019 and 2020. On September 24, 2021, the companies comprising our Group declared a further dividend of S$2.9 million payable on or before December 31, 2021, to our shareholders. The dividend has been paid to our shareholders. Such dividend payments should not be considered as a guarantee or indication that those companies will declare and pay dividends in such manner in the future or at all.

 

We have adopted a dividend policy, according to which our board of directors shall take into account, among other things, the following factors when deciding whether to propose a dividend and in determining the dividend amount: (a) operating and financial results; (b) cash flow situation; (c) business conditions and strategies; (d) future operations and earnings; (e) taxation considerations; (f) interim dividend paid, if any; (g) capital requirement and expenditure plans; (h) interests of shareholders; (i) statutory and regulatory restrictions; (j) any restrictions on payment of dividends; and (k) any other factors that our board may consider relevant. The payment of dividends, in certain circumstances is also subject to the approval of our Shareholders, the Cayman Islands Companies Act and our Articles of Association as well as any other applicable laws. Currently, we do not have any predetermined dividend distribution ratio.

 

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Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. In addition, we are a holding company and depend on the receipt of dividends and other distributions from our subsidiaries to pay dividends on our Ordinary Shares.

 

There are no foreign exchange controls or foreign exchange regulations under current applicable laws of the various places of incorporation of our significant subsidiaries that would affect the payment or remittance of dividends.

 

DILUTION

 

Investors purchasing our Ordinary Shares in this offering will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value of their Ordinary Shares. Dilution in pro forma as adjusted net tangible book value represents the difference between the initial public offering price of our Ordinary Shares and the pro forma as adjusted net tangible book value per share of our Ordinary Shares immediately after the offering.

 

As of December 31, 2021, we had a historical net tangible book value of US$1,138,000, or US$0.09 per share. Historical net tangible book value per share represents our total tangible assets (total assets excluding goodwill and other intangible assets, net) less total liabilities, divided by the number of outstanding Ordinary Shares. After giving effect to the sale of 3,020,000 Ordinary Shares in this offering by the Company at an Initial Public Offering price of US$4.00 per share, after deducting US$966,400 in underwriting discounts and commissions and offering expenses paid by the Company of US$1,083,974, the pro forma as adjusted net tangible book value as of December 31, 2021 would have been approximately US$11,167,626, or US$0.74 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of US$0.65 per share to our existing stockholders and an immediate dilution of US$3.26 per share to new investors purchasing Ordinary Shares in this offering.

 

The following table illustrates this dilution on a per share basis to new investors.

 

   US$ 
Initial public offering price per share       4.00 
Historical net tangible book value per share as of December 31, 2021(1)   0.09      
Increase in as adjusted net tangible book value per share attributable to the investors included in the Initial Closing   0.65      
Pro forma net tangible book value per share after the Initial Closing        0.74 
Dilution per share to new investors participating in this offering        3.26 

 

(1) Total historical net tangible book value as of December 31, 2021 was US$1,138,000.

 

If the representative exercises the option to purchase additional shares to cover over-allotments in full, the pro forma net tangible book value per Ordinary Share after giving effect to this offering would be approximately US$0.84 per share, and the dilution to investors in this offering would be approximately US$3.16 per Ordinary Share.

 

The following table sets forth the number of Ordinary Shares owned, the total amount paid and the average price per Ordinary Share paid by (i) the Pre-IPO Investors, and (ii) investors purchasing Ordinary Shares in this offering, before deducting the estimated discounts to the underwriters and the estimated offering expenses payable by the Company.

 

   Shares purchased   Total consideration     
   Number   Percent(1)(3)  

Amount

(US$)

   Percent  

Average price per share

(US$)

 
Pre-IPO Investors(2)   2,400,000(3)   16.0%  $3,374,400    18.3%  $1.41 
New Investors from
Public Offering
   3,770,000(3)   25.1%  $15,080,000(3)   81.7%(3)  $4.00 
                          
Total   6,170,000(4)   41.1%(4)  $18,454,400    100.0%     

 

(1) Represents the percent ownership after this offering. Prior to the offering, the Pre-IPO Investors owned an aggregate of 20% of the outstanding Ordinary Shares of the Company.

 

(2) Comprised of Triple Business Limited, which owned 1,680,000 Ordinary Shares prior to the offering, Ever Bloom Properties Company Limited, which owned 480,000 Ordinary Shares and Aqua Lady Group Limited, which owned 240,000 Ordinary Shares. Triple Business Limited sold 750,000 Ordinary Shares in this offering, which reduced the ownership of the Pre-IPO Investors to 1,650,000. These 750,000 shares have been included in the number of shares to be purchased by new investors from the public offering.

 

(3) Assumes no additional exercise of the over-allotment option by the underwriters. The underwriters exercised their option to purchase 20,000 Shares pursuant to the over-allotment option at the Initial Closing.

 

(4) The remaining 9,599,999 Ordinary Shares, or 64% of the outstanding Ordinary Shares following this offering, are owned by JE Cleantech Global Limited, which is 100% owned by Ms. Hong, our CEO. Ms. Hong and one other person founded the Company in 1999 and she is our only remaining founder-shareholder. The Company’s current business and financial position are the direct result of Ms. Hong’s investment of time, money and labor over approximately the last 23 years, the value of which cannot be accurately calculated.

 

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

 

The following selected consolidated financial data as of December 31, 2020 and 2021 and for the years ended December 31, 2019, 2020 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected financial data set forth below should be read in conjunction with, and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future period.

 

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS

(Amounts in thousands, except for share and per share data, or otherwise noted)

 

   For the years ended December 31, 
   2019   2020   2021   2021 
    SGD’000      SGD’000      SGD’000     USD’000(1) 
                     
Revenues   18,219    21,397    14,764    10,920 
Cost of revenues   (13,268)   (15,493)   (12,416)   (9,183)
Gross profit   4,951    5,904    2,348    1,737 
                     
Operating expenses:                    
Selling and marketing expenses   (46)   (20)   (22)   (16)
General and administrative expenses   (2,592)   (2,350)   (2,267)   (1,677)
Total operating expenses   (2,638)   (2,370)   (2, 289)   (1,693)
                     
Income from operations   2,313    3,534    59    44 
                     
Other income (loss):                    
Other income   529    753    707    523 
Interest expense   (458)   (320)   (217)   (161)
Other expense   (1,743)   (1,623)   (550)   (407)
Change in fair value in financial instrument   (57)   1    3    2 
Total other income (loss)   (1,729)   (1,189)   (57)   (43)
                     
Income before tax expense   584    2,345    2    1 
Income tax expense   (242)   (618)   -    - 
Net income   342    1,727    2    1 
Other comprehensive income                    
Foreign currency translation gain/ (loss), net of taxes   (49)   54    (24)   (18)
Total comprehensive income   293    1,781    (22)   (17)
                     
Net income per share attributable to ordinary shareholders                    
basic and diluted   0.03    0.14    0.00    0.00 
Weighted average number of ordinary shares used in computing net income per share                    
basic and diluted   12,000,000    12,000,000    12,000,000    12,000,000 

 

(1) Calculated at the rate of US$0.7396 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 30, 2021.

 

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CONSOLIDATED BALANCE SHEETS
(Amount in thousands, except for share and per share data, or otherwise noted)

 

   As of December 31, 
   2020   2021   2021 
   SGD’000   SGD’000   US$’000(1)  
             
Assets               
Current assets:               
Cash and cash equivalents   550    1,108    820 
Accounts receivable, net   9,230    3,220    2,382 
Prepaid expenses and other current assets, net   326    847    624 
Inventory   1,380    2,557    1,892 
Total current assets   11,486    7,732    5,718 
                
Financial instrument   240    243    180 
Property, plant and equipment, net   8,914    8,981    6,643 
Deferred financing costs   960    1,321    977 
Deferred tax assets   163    163    121 
Total non-current assets   10,277    10,708    7,921 
TOTAL ASSETS   21,763    18,440    13,639 
                
Liabilities               
Current liabilities:               
Bank loans - current   5,654    5,457    4,036 
Lease payable - current   110    158    117 
Accounts payable, accruals, and other current liabilities   3,296    2,290    1,694 
Warranty liabilities   28    22    16 
Income taxes payable   531    -    - 
Loan from controlling shareholder   -    1,523    1,126 
Total current liabilities   9,619    9,450    6,989 
                
Bank loans – non-current   4,862    4,421    3,270 
Lease payable – non-current   1,149    1,395    1,032 
Deferred tax liabilities   188    151    112 
Total non-current liabilities   6,199    5,967    4,414 
                
TOTAL LIABILITIES   15,818    15,417    11,403 
                
Shareholders’ equity               
Ordinary shares US$0.001 par value per share; 100,000,000 authorized as of December 31, 2020 and 2021; 12,000,000 shares issued and outstanding   16    16    12 
Additional paid-in capital   3,626    3,626    2,683 
Retained earnings/(deficit)   2,313    (593)   (439)
Accumulated other comprehensive income   (10)   (26)   (20)
Total shareholders’ equity   5,945    3,023    2,236 
                
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   21,763    18,440    13,639 

 

(1) Calculated at the rate of US$0.7396 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 31, 2021

 

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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.

 

Overview

 

Our Group is based in Singapore and is principally engaged in (i) the sale of cleaning systems and other equipment; and (ii) the provision of centralized dishwashing and ancillary services. Our Group commenced business in the selling of cleaning systems in 2005, before starting our business in the design, development, manufacture and sale of cleaning systems in Singapore in 2006. We design, develop, manufacture and sell cleaning systems for various industrial end-use applications to our customers mainly in Singapore and Malaysia. We also have provided centralized dishwashing services since 2013 and general cleaning services since 2015 mainly for food and beverage establishments in Singapore.

 

For the years ended December 31, 2019, 2020 and 2021, our revenue amounted to approximately S$18.2 million, S$21.4 million and S$14.8 million, respectively. Our net income amounted to approximately S$0.3 million, S$1.7 million and S$2,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

 

Key Factors Affecting the Results of Our Group’s Operations

 

Our financial condition and results of operation have been and will continue to be affected by a number of factors, many of which may be beyond our control, including those factors set out in the section headed ‘‘Risk Factors’’ in this prospectus and those set out below:

 

Demand from our major customer groups

 

Our aggregate sales generated from our top five customers were approximately 68.5%, 88.4% and 80.6% of our revenue for the years ended December 31, 2019, 2020 and 2021, respectively. In particular, sales to our largest customer amounted to approximately S$5.2 million, S$13.2 million and S$4.8 million, representing approximately 28.8%, 61.5% and 32.7% of our revenue for the years ended December 31, 2019, 2020 and 2021, respectively. Accordingly, our sales would be significantly affected by the demands of our top five customer groups, and particularly our largest customer group, as well as certain inherent risks, among others, changes and development in the local political, regulatory and business conditions, that may affect their purchases from us, many of which are beyond our control. These uncertainties could have a material adverse effect on our business, results of operations and financial conditions, and affect our ability to remain profitable and achieve business growth.

 

Non-recurring nature of our sale of cleaning systems and other equipment business

 

We design, manufacture and sell cleaning systems and other equipment on an order-by-order basis. Our customers are under no obligation to continue to award contracts to or place orders with us and there is no assurance that we will be able to secure new orders in the future. Moreover, our Group generally must go through a tendering or quotation process to secure new orders, and the number of orders and the amount of revenue that we are able to derive therefrom are affected by a series of factors including but not limited to changes in our clients’ businesses and changes in market and economic conditions. The result of such process is beyond our control and there is no assurance that our Group will secure new projects from future tender submissions or new orders. Accordingly, our results of operations, revenue and financial performance may be adversely affected if our Group is unable to obtain new orders from our customers of contract values, size and/or margins comparable to previous orders.

 

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Fluctuations in the cost of our raw materials

 

Raw materials, such as steel and electronic components, are the largest component of our cost of revenues, representing approximately 41.8%, 57.8% and 46.3% of our total cost of revenues for the years ended December 31, 2019, 2020 and 2021, respectively. As our contract price is fixed once our customer confirms an order for a cleaning system or other equipment, it is difficult for us to manage the pricing of our cleaning systems and other equipment to pass on any increase in costs to our customers. Any fluctuations in the cost of raw materials would affect our profitability.

 

The prices at which we purchase such raw materials are determined principally by market forces such as the relevant supply and demand of such raw materials, as well as our bargaining power with our suppliers. During the years ended December 31, 2019, 2020 and 2021, the majority of our raw materials were commonly available from the market and their prices have been fairly stable. We monitor supply and cost trends of these raw materials and take appropriate action to obtain the materials we need for production. We expect fluctuations in the cost of key materials to continue to affect our margins.

 

All of the raw materials we procure, including stainless steel, aluminum and electronic components, are purchased from a number of suppliers to ensure adequate supply and efficient delivery to our production and processing facilities.

 

Financial impact of COVID-19

 

We experienced a steady growth in our business for several years until the outbreak of COVID-19 in 2020 when the government in Singapore and other countries where we had sales implemented measures as attempts to reduce the number of local transmissions of COVID-19, including closing most physical workplace premises and suspending all business, social and other activities that could not be conducted through telecommuting from home, save for certain essential services (“Lockdown Measures”). These measures restricted our business activities in a significant manner in 2020. In the last quarter of 2020, the Lockdown Measures eased off, but our operations were still affected by the safe distancing measures, COVID-19 testing and other COVID-19 precautionary measures imposed by the governments in Singapore and other countries where we have sales. During the first half of 2021, restrictions were eased and our centralized dishwashing and ancillary services business rebounded such that our revenue for the year exceeded that for the year ended December 31, 2020 by 30%. Nonetheless, our sale of cleaning systems and other equipment business has been negatively affected by the safe distancing measures, COVID-19 testing and other COVID-19 precautionary measures imposed by the governments in other countries where we have sales, and revenue from that business decreased by 47% between the year ended December 31, 2020 and the year ended December 31, 2021. For further details, see “Business — Impact of COVID-19 on our business and operations.”

 

Description and Analysis of Principal Components of Our Results of Operations

 

The following discussion is based on our Group’s historical results of operations and may not be indicative of our Group’s future operating performance.

 

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Revenue

 

During the years ended December 31, 2019, 2020 and 2021, our revenue was derived from (i) sale of cleaning systems and other equipment business; and (ii) provision of centralized dishwashing and ancillary services business. The following table sets out the revenue generated from each of our business sectors during the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Sale of cleaning systems and other equipment business                              
Sale of precision cleaning systems   8,283    45.5    12,920    60.4    4,757    32.2 
Sale of other cleaning systems and other equipment   2,440    13.4    2,863    13.4    3,056    20.7 
Repair and servicing of cleaning systems and sale of related parts   1,503    8.2    1,162    5.4    1,162    7.9 
Sub-total   12,226    67.1    16,945    79.2    8,975    60.8 
                               
Provision of centralized dishwashing and ancillary services business                              
Provision of centralized dishwashing and general cleaning services   5,901    32.4    4,357    20.4    5,636    38.2 
Leasing of dishwashing equipment   92    0.5    95    0.4    153    1.0 
Sub-total   5,993    32.9    4,452    20.8    5,789    39.2 
                               
Total   18,219    100.0    21,397    100.0    14,764    100.0 

 

Our total revenue increased by approximately S$3.2 million or 17.4% to approximately S$21.4 million for the year ended December 31, 2020 from approximately S$18.2 million in December 31, 2019, and it decreased by approximately S$6.6 million or 31.0% to approximately S$14.8 million for the year ended December 31, 2021. The increase from 2019 to 2020 was mainly attributable to the increase in revenue generated from our sale of cleaning systems and other equipment business of approximately S$4.7 million, while partially offset by the decrease in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately S$1.5 million. The decrease from 2020 to 2021 was mainly attributable to the decrease in revenue generated from our sale of cleaning systems and other equipment business of approximately S$8.0 million, while partially offset by the increase in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately S$1.3 million. The decrease in revenue generated from our sale of cleaning systems and other equipment business for the year ended December 31, 2021 was primarily attributable to an approximately S$8.3 million decrease in revenue from subsidiaries of a certain customer group in Malaysia caused by the disruption by COVID-19 of their expansion in production facilities that resulted in the postponement of delivery of their orders until the year ending December 31, 2022. Our group did not experience any material order cancellations by our customers during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 to the present date. The outstanding contract value as of April 24, 2022 is approximately S$34.4 million. For further details of the movement in orders backlog, please refer to the paragraphs headed “Sale of Cleaning Systems” in this prospectus.

 

For the years ended December 31, 2019, 2020 and 2021, our revenue amounted to approximately S$18.2 million, S$21.4 million and S$14.8 million, respectively. Our net income amounted to approximately S$0.3 million, S$1.7 million and S$2,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

 

For the years ended December 31, 2019, 2020 and 2021, approximately 46.6%, 25.8% and 43.6% of our total revenue, respectively, was generated from customers located in Singapore and approximately 26.2%, 57.4% and 33.1% of our total revenue, respectively, was generated from customers located in Malaysia. For the same years, our revenue generated from customers located in other countries accounted for approximately 27.2%, 16.8% and 23.3% of our total revenue, respectively.

 

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Revenue by geographical locations

 

Our Group’s provision of centralized dishwashing and ancillary services business is located in Singapore. During the years ended December 31, 2019, 2020 and 2021, the customers for our cleaning systems and other equipment were mainly located in Singapore and Malaysia. The following table sets out a breakdown of our revenue by geographic location of our customers for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
    SGD’000    %    SGD’000    %    SGD’000    % 
                               
Singapore                              
Sale of precision cleaning systems   1,876    10.2    142    0.7         
Sale of other cleaning systems and other equipment   32    0.2    502    2.3    83    0.6 
Repair and servicing of cleaning systems and sale of related parts   593    3.3    431    2.0    568    3.8 
Provision of centralized dishware washing and general cleaning services   5,901    32.4    4,357    20.4    5,636    38.2 
Leasing of dishware washing equipment   92    0.5    95    0.4    153    1.0 
Sub-total   8,494    46.6    5,527    25.8    6,440    43.6 

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Malaysia                              
Sale of precision cleaning systems   3,940    21.7    11,672    54.5    4,415    29.9 
Sale of other cleaning systems and other equipment   40    0.2                 
Repair and servicing of cleaning systems and sale of related parts   791    4.3    617    2.9    462    3.2 
Sub-total   4,771    26.2    12,289    57.4    4,877    33.1 

 

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   Year ended December 31, 
   2019   2020   2021 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Other countries(1)                              
Sale of precision cleaning systems   2,467    13.5    1,106    5.2    343    2.3 
Sale of other cleaning systems and other equipment   2,368    13.0    2,361    11.0    2,998    20.3 
Repair and servicing of cleaning systems and sale of related parts   119    0.7    114    0.6    106    0.7 
Sub-total   4,954    27.2    3,581    16.8    3,447    23.3 
Total   18,219    100.0    21,397    100.0    14,764    100.0 

 

(1) For the years ended December 31, 2019, 2020 and 2021, other countries include the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC.

 

The following table sets out a breakdown of number of customers by geographical locations of our customers for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
             
Singapore               
Sale of precision cleaning systems   3    2     
Sale of other cleaning systems and other equipment       3    2 
Repair and servicing of cleaning systems and sale of related parts   19    18    27 
Provision of centralized dishware washing and general cleaning services   23    28    67 
Leasing of dishware washing equipment   16    18    23 
Sub-total   61    69    119 

 

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   Year ended December 31, 
   2019   2020   2021 
             
Malaysia               
Sale of precision cleaning systems   1    2    1 
Sale of other cleaning systems and other equipment   1         
Repair and servicing of cleaning systems and sale of related parts   8    9    9 
Sub-total   10    11    10 

 

   Year ended December 31, 
   2019   2020   2021 
             
Other countries(1)               
Sale of precision cleaning systems   5    2    1 
Sale of other cleaning systems and other equipment   5    5    4 
Repair and servicing of cleaning systems and sale of related parts   15    13    10 
Sub-total   25    20    15 
Total   96    100    144 

 

(1) For the years ended December 31, 2019, 2020 and 2021, other countries include the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC.

 

Singapore

 

The decrease in revenue in Singapore for the year ended December 31, 2020 was mainly because of (i) the decrease in revenue from the year ended December 2019 to the year ended December 31, 2020 from a particular customer of approximately S$1.1 million; (ii) two customers only procured our repairing services and/or related parts, which contributed revenue of approximately S$24,000 for the year ended December 31, 2020, whereas they purchased precision cleaning systems and contributed revenue of approximately S$0.8 million in aggregate for the year ended December 31, 2019; and (iii) the decrease in revenue generated from provision of centralized dishwashing and general cleaning services as discussed above.

 

The increase in revenue in Singapore for the year ended December 31, 2021 was mainly due to the increase in revenue generated from provision of centralized dishwashing and general cleaning services by approximately S$1.3 million.

 

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Malaysia

 

The increase in revenue in Malaysia for the year ended December 31, 2020 was primarily attributable to the increase in revenue from subsidiaries of a certain customer group in Malaysia of approximately S$7.6 million.

 

The decrease in revenue in Malaysia for the year ended December 31, 2021 was primarily attributable to the decrease in revenue from subsidiaries of a certain customer group in Malaysia of approximately S$8.3 million mainly due to the delivery for the orders received for the sales of precision cleaning machines will take place in FY2022 as their progress of expansion in production facilities has been disrupted by COVID-19.

 

Other countries

 

The decrease in revenue in other countries for the year ended December 31, 2020 was primarily due to (i) a decrease in revenue from a customer in the Philippines of approximately S$1.0 million; and (ii) the failure of a customer in Thailand to place orders for the year ended December 31, 2020, whereas it contributed revenue of approximately S$0.7 million for the year ended December 31, 2019.

 

Revenue in other countries for the year ended December 31, 2021 is relatively stable with only marginal fluctuation as compared to revenue in other countries for the year ended December 31, 2020.

 

Cost of revenues

 

During the years ended December 31, 2019, 2020 and 2021, our Group’s cost of revenues was mainly comprised of raw materials costs, labor costs, sub-contracting costs and production overhead. For the years ended December 31, 2019, 2020 and 2021, our cost of revenues amounted to approximately S$13.3 million, S$15.5 million, and S$12.4 million, respectively.

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Cost of sale of cleaning systems and other equipment   7,697    58.0    11,224    72.4    6,885    55.5 
Cost of provision of centralized dishwashing and ancillary services   5,571    42.0    4,269    27.6    5,531    44.5 
Total   13,268    100.0    15,493    100.0    12,416    100.0 

 

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Gross profit and gross profit margin

 

The table below sets forth our Group’s gross profit and gross profit margin by business sector during the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
       Gross       Gross       Gross 
   Gross   Profit   Gross   Profit   Gross   Profit 
   profit   Margin   profit   Margin   profit   Margin 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Sale of precision cleaning systems and other equipment business                              
Sale of precision cleaning systems   3,245    39.2    4,601    35.6    1,509    30.8 
Sale of other cleaning systems and other equipment   840    34.5    847    29.6    475    15.9 
Repair and servicing of cleaning systems and sale of related parts   444    29.5    273    23.4    106    9.7 
Sub-total/overall   4,529    37.0    5,721    33.8    2,090    23.3 

 

   Year ended December 31, 
   2019   2020   2021 
       Gross       Gross       Gross 
   Gross   Profit   Gross   Profit   Gross   Profit 
   profit   Margin   profit   Margin   profit   Margin 
   SGD’000   %   SGD’000   %   SGD’000   % 
Provision of centralized dishwashing and ancillary services business   422    7.0    183    4.1    258    4.5 
Total/overall   4,951    27.2    5,904    27.6    2,348    15.9 

 

Our total gross profit amounted to approximately S$5.0 million, S$5.9 million and S$2.3 million for the years ended December 31, 2019, 2020 and 2021, respectively. Our overall gross profit margins were approximately 27.2%, 27.6% and 15.9% for the years ended December 31, 2019, 2020 and 2021, respectively. Our total gross profit increased during the years ended December 31, 2019 and 2020, which was generally in line with our revenue growth for those periods.

 

Our total gross profit decreased by approximately S$3.6 million, from approximately S$5.9 million for the year ended December 31, 2020 to approximately S$2.3 million for the year ended December 31, 2021, and our overall gross profit margin decreased from approximately 27.6% for the year ended December 31, 2020 to approximately 15.9% for the year ended December 31, 2021, which was mainly due to the decrease in our revenue from the sales of precision cleaning systems and other equipment business, thereby leading to a relatively higher proportion of fixed costs such as direct labor cost and depreciation as an overall percentage of revenue.

 

Selling and marketing expenses

 

Our selling and marketing expenses mainly included promotion and marketing expenses and transportation expenses. The following table sets forth the breakdown of our selling and distribution expenses for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   SGD’000   SGD’000 
             
Promotion and marketing expenses   29    12    13 
Transportation expenses   17    8    9 
Total   46    20    22 

 

Our selling and marketing expenses amounted to approximately S$46,000, S$20,000 and S$22,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

 

The substantially lower selling and marketing expenses, as a percent, for the year ended December 31, 2020 was primarily attributable to the decrease in participation in exhibitions as a result of the Circuit Breaker Measures.

 

The slight increase in promotion and marketing expenses for the year ended December 31, 2021 was primarily attributable to an increase in online marketing activities.

 

Administrative expenses

 

Our administrative expenses primarily consist of (i) staff cost; (ii) depreciation; (iii) office supplies and upkeep expenses; (iv) travelling and entertainment; (v) legal and professional fees; (vi) property and related expenses; and (vii) miscellaneous expenses. The following table sets forth the breakdown of our administrative expenses for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Staff costs   1,370    52.9    1,412    60.1    1,383    61.0 
Depreciation   399    15.4    339    14.4    379    16.7 
Office supplies and upkeep expenses   176    6.8    160    6.8    150    6.6 
Travelling and entertainment   263    10.1    123    5.2    105    4.6 
Legal and professional fees   121    4.7    120    5.1    49    2.2 
Property and related expenses   180    6.9    147    6.3    176    7.8 
Miscellaneous expenses   83    3.2    49    2.1    25    1.1 
Total   2,592    100.0    2,350    100.0    2,267    100.0 

 

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Our administrative expenses remained relatively stable at approximately S$2.6 million, S$2.4 million, and S$2.3 million for the years ended December 31, 2019, 2020 and 2021, respectively, representing approximately 14.2%, 11.0% and 15.4% of our total revenue for the corresponding years.

 

Staff costs mainly represented the salaries, employee benefits and retirement benefit costs to our employees and Directors’ remuneration. The staff costs of our Group remained relatively stable at approximately S$1.4 million for the years ended December 31, 2019, 2020 and 2021.

 

Depreciation expense is charged on our property, plant and equipment which included (i) leasehold buildings; (ii) right-of-use assets; (iii) plant and machinery; and (iv) furniture and fittings.

 

Office supplies and upkeep expenses mainly represented office supplies, cleaning cost and the relevant utilities expenses such as electricity and water.

 

Travelling and entertainment mainly represented expenditure for business travel and cost incurred for social gathering and refreshment for our staff.

 

Legal and professional fees mainly represented auditor’s remuneration and other professional fees for training and development and staff recruitment services.

 

Property and related expenses mainly represented property tax and related expenses in Singapore.

 

Miscellaneous expenses were mainly comprised of insurance expenses, donation and other miscellaneous expenses.

 

Other income

 

Other income of our Group amounted to approximately S$0.5 million, S$0.8 million and S$0.7 for the years ended December 31, 2019, 2020 and 2021, respectively. The income was mainly derived from wholesale sales of STICO anti-slip shoes, Jobs Support Scheme, foreign worker levy rebate and net foreign exchange gain. The following table sets forth the breakdown of our other income for these periods:

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   SGD’000   SGD’000 
             
Wholesale sales of STICO anti-slip shoes   177    97    120 
Impairment loss reversed   21    -    49 
Jobs Support Scheme   -    320    87 
Jobs Growth Incentive   -    -    72 
Foreign worker levy rebate   -    70    - 
Gain on disposal of plant and equipment   -    -    71 
Other(1)   331    266    308 
Total   529    753    707 

 

(1) Other mainly consists of sale of scrap materials, other government grant and other miscellaneous income.

 

Wholesale of STICO anti-slip shoes represented the income generated from wholesale of STICO anti-slip shoes mainly to F&B establishments in Singapore, which amounted to approximately S$0.2 million for the year ended December 31, 2019. For the year ended December 31, 2020, our wholesale sales of STICO anti-slip shoes decreased by approximately 45.2% as compared to the previous year mainly because of the decrease in demand from F&B establishments during the outbreak of COVID-19, and for the year ended December 31, 2021 the wholesale sales of STICO anti-slip shoes increased by approximately 24% due to resumption of demand from F&B establishments.

 

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During the year ended December 31, 2019, we reversed the loss allowance provision of approximately S$21,000 which we had previously impaired.

 

Jobs Support Scheme is an initiative introduced by the Singapore Government in February 2020 in response to the outbreak of COVID-19, and further enhanced in April, May and August 2020, to provide wage support to employers to help them retain local employees by co-funding 25% to 75% of the first S$4,600 of monthly salaries paid to each local employee in a 10-month period up to August 2020, and 10% to 50% of the same in the subsequent seven-month period from September 2020 to March 2021. For the year ended December 31, 2020, our Jobs Support Scheme amounted to approximately S$0.3 million.

 

Foreign worker levy rebate refers to the rebate received by employers of work permit or S pass holders to relieve the cost of retaining foreign workers in April and May 2020, which amounted to approximately S$70,000 for the year ended December 31, 2020.

 

Interest expense

 

Our interest expense arose from lease liabilities and secured bank loans. For the years ended December 31, 2019, 2020 and 2021, our interest expense remained relatively stable at approximately S$0.5 million, S$0.3 million, and S$0.2 million, respectively. For more details of our bank borrowings, please see the paragraph headed ‘‘Bank Indebtedness’’ in this section.

 

Other expenses

 

Other expenses of our Group mainly consist of extraordinary expenses, cost of STICO anti-slip shoes, bank charges and net foreign exchange loss. The following table sets forth the breakdown of our other expenses for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
   SGD’000   SGD’000   SGD’000 
             
Cost of STICO anti-slip shoes   98    72    96 
Bank charges   17    28    22 
Net foreign exchange loss   65    155    92 
Extraordinary expenses   1,476    1,264    234 
Others(1)   87    104    106 
                
Total   1,743    1,623    550 

 

(1) Others mainly consist of professional training expenses, withholding tax expenses and other miscellaneous expenses.

 

Other expenses of our Group decreased from approximately S$1.7 million for the year ended December 31, 2019 to approximately S$1.6 million for the year ended December 31, 2020. Such decrease was primarily attributable to a decrease in extraordinary expenses incurred related to business advisories and consultation. Other expenses of our Group decreased to approximately S$0.6 million for the year ended December 31, 2021, also mainly due to a decrease in extraordinary expenses incurred related to business advisories and consultation. The increase in net foreign exchange loss in 2020 was a result of depreciation of US$ assets against S$ assets.

 

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Income tax

 

During the years ended December 31, 2019, 2020 and 2021, our income tax expense was comprised of our current tax expense and deferred tax for the year. The following table sets forth the breakdown of our income tax for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
    SGD’000    SGD’000    SGD’000 
                
Current tax expense   48    534    37 
Deferred tax   194    84    (37)
                
Total   242    618    - 

  

Pursuant to the rules and regulations of the Cayman Islands and the BVI, our Group is not subject to any income tax in the Cayman Islands and the BVI. Our Group’s operations are based in Singapore and we are subject to income tax on an entity basis on the estimated chargeable income arising in Singapore at the statutory rate of 17%.

 

For the year ended December 31, 2019, our income tax was approximately S$0.2 million, and our effective tax rate, calculated as income tax divided by profit before income tax, was approximately 41.4%. The relatively high effective tax rate for the year ended December 31, 2019, as compared to our tax rate for the year ended December 31, 2020, was mainly attributable to non-deductible expenses incurred for business advisories and consultation.

 

For the year ended December 31, 2020, our income tax increased to approximately S$0.6 million and our effective tax rate was approximately 26.3% due to decreased non-deductible expenses. Such income tax increase was generally in line with the increase in our profit for the year.

 

Our income tax decreased to nil for the year ended December 31, 2021. Such decrease was generally in line with the decrease in our profit for the year.

 

Our Group had no tax obligation arising from other jurisdictions during the years ended December 31, 2019, 2020 and 2021. During the years ended December 31, 2019, 2020 and 2021, our Group had no material dispute or unresolved tax issues with the relevant tax authorities.

 

Net Income for the Year

 

As a result of the foregoing, our net income for the year amounted to approximately S$0.3 million, S$1.8 million and S$2,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

  

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Liquidity and Capital Resources

 

Our liquidity and working capital requirements primarily related to our operating expenses. Historically, we have met our working capital and other liquidity requirements primarily through a combination of cash generated from our operations and loans from banking facilities. Going forward, we expect to fund our working capital and other liquidity requirements from various sources, including but not limited to cash generated from our operations, loans from banking facilities, the net proceeds from our Initial Public Offering and other equity and debt financings as and when appropriate.

 

On September 24, 2021, prior to the reorganization and the Company’s Initial Public Offering, the Company declared a dividend of SGD2.9 million (approximately US$2.1 million) payable in cash to its shareholders – JE Cleantech Global Limited, which is wholly-owned by Ms. Bee Yin Hong, the Company’s controlling shareholder, and Triple Business Limited. The dividend was subsequently paid in full. Of this amount, SGD2.5 million (approximately US$1.9 million) was paid to JE Cleantech Global Limited and SGD406,000 (approximately US$0.3 million) was paid to Triple Business Limited. On October 5, 2021, the Company entered into a loan facility agreement with Ms. Bee Yin Hong, the Company’s controlling shareholder, for a revolving loan facility of up to US$1.1 million for general working capital and general corporate purposes, including the payment of expenses related to the Company’s initiative to raise capital through an initial public offering and simultaneous listing of the Company’s Ordinary Shares on a globally recognized stock exchange. Ms. Hong and the Company entered into a subsequent revolving loan facility on October 6, 2021 in the amount of US$0.7 million to be used for the same purposes. The total amount of the loan of approximately US$1.8 million from Ms. Bee Yin Hong, the Company’s controlling shareholder, is non-trade, unsecured, interest-free and payable on demand.

 

Cash flows

 

The following table summarizes our cash flows for the years ended December 31, 2019, 2020 and 2021:

 

   Year ended December 31, 
   2019   2020   2021 
    SGD’000        SGD’000      SGD’000 
                
Cash and cash equivalents at beginning of the year   1,276    843    550 
                
Net cash generated from operating activities   1,545    1,114    3,373 
Net cash used in investing activities   (670)   (280)   (717)
Net cash used in financing activities   (1,259)   (1,181)   (2,082)
Foreign currency effect   (49)   54    (16)
Net increase/(decrease) in cash and cash equivalents   (433)   (293)   558 
                
Cash and cash equivalents as at end of the year..   843    550    1,108 

  

Cash flows from operating activities

 

During the years ended December 31, 2019, 2020 and 2021, the cash inflows from our operating activities were primarily derived from the revenue generated from our sale of cleaning systems and other equipment and provision of centralized dishwashing and ancillary services, whereas the cash outflows for our operating activities mainly comprised the purchase of raw materials, sub-contracting fees, staff costs and administrative expenses.

 

Our net cash generated from operating activities primarily reflected our net income, as adjusted for non-operating items, such as depreciation, loss on disposal of property, plant and equipment, reversal/provision of loss allowance change in fair value of financial instruments and effects of changes in working capital such as increase or decrease in inventories, accounts receivable, accounts and other payables, contract liabilities and accruals.

 

For the year ended December 31, 2019, our net cash generated from operating activities was approximately S$1.5 million, which primarily reflected our net income of approximately S$0.3 million, as positively adjusted by (i) the non-cash depreciation of property, plant and equipment of approximately S$1.0 million; (ii) the decrease in accounts receivable of approximately S$1.1 million; and (iii) the decrease in inventories of approximately S$0.3 million, while partially offset by the decrease in accounts and other payables, contract liabilities and provision of approximately S$1.2 million.

 

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For the year ended December 31, 2020, our net cash generated from operating activities was approximately S$1.1 million, which primarily reflected our net income of approximately S$1.7 million, as positively adjusted by (i) the non-cash depreciation of property, plant and equipment of approximately S$0.8 million; (ii) the increase in accounts and other payables and accruals of approximately S$1.5 million; and (iii) the decrease in inventories of approximately S$1.6 million. The effect of these adjustments was offset by the increase in accounts receivable of approximately S$4.5 million

 

For the year ended December 31, 2021, our net cash generated from operating activities was approximately S$3.4 million, which primarily reflected our profit before tax of approximately S$2,000, as positively adjusted by (i) the non-cash depreciation of property, plant and equipment of approximately S$0.6 million; (ii) the increase in accounts receivable of approximately S$5.5 million; and (iii) the decrease in inventory of approximately S$1.2 million. The effect of these factors was partially mitigated by the decrease in accounts and other payables, contract liabilities and provision of approximately S$1.5 million.

 

Cash flows from investing activities

 

Our cash flows used in investing activities primarily consisted of (i) the proceeds from disposal of property, plant and equipment; (ii) the purchase of property, plant and equipment; and (iii) the purchase of financial assets at Fair Value Through Profit or Loss (the “FVTPL”).

 

For the year ended December 31, 2019, our net cash used in investing activities was approximately S$0.7 million, primarily attributable to (i) the purchase of property, plant and equipment of approximately S$0.6 million for replacement of obsolete equipment; and (ii) the purchase of financial assets at FVTPL of approximately S$0.3 million, while mitigated by (i) the release of pledged fixed deposit of approximately S$0.2 million; and (ii) the proceeds from disposal of property, plant and equipment of approximately S$41,000.

 

For the year ended December 31, 2020, our net cash used in investing activities was approximately S$0.3 million, primarily due to the purchase of property, plant and equipment of approximately S$0.3 million for replacement of obsolete equipment.

 

For the year ended December 31, 2021, our net cash used in investing activities was approximately S$0.7 million, primarily due to the purchase of property, plant and equipment of approximately S$0.8 million for replacement of obsolete equipment and offset by the proceed from disposal of plant and equipment of approximately S$0.1 million.

 

Cash flows from financing activities

 

Our cash flows used in financing activities primarily consists of interest paid, proceeds from loans, repayment of loans, payment for interest portion of lease liabilities, payment for capital portion of lease liabilities, dividends paid and proceeds from issue of shares.

 

For the year ended December 31, 2019, our Group recorded net cash used in financing activities of approximately S$1.3 million, which was mainly attributable to (i) net repayment of bank borrowings of approximately S$1.3 million; (ii) payment for lease liabilities of approximately S$0.1 million; and (iii) dividends paid of approximately S$1.5 million, while mitigated by the proceeds from the issuance of Ordinary Shares of approximately S$1.6 million as a result of Pre-IPO Investments.

 

For the year ended December 31, 2020, our Group recorded net cash used in financing activities of approximately S$1.2 million, which was mainly attributable to the repayment of loans and lease liabilities of approximately S$0.8 million.

 

For the year ended December 31, 2021, our Group recorded net cash used in financing activities of approximately S$2.1 million, which was mainly attributable to (i) dividends paid of S$2.9 million; and (ii) net repayment of bank loans of approximately S$ 0.3 million (iii) payment of deferred financing costs of approximately S$0.4 million while mitigated by the cash inflow from the proceeds from a controlling shareholder loan of S$1.5 million.

 

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Working Capital

 

We believe that our Group has sufficient working capital for our requirements for at least the next 12 months from the date of this prospectus, in the absence of unforeseen circumstances, taking into account the financial resources presently available to us, including cash and cash equivalents on hand, cash flows from our operations and the net proceeds from our Initial Public Offering.

 

Accounts receivable

 

Our accounts receivable, net, increased from approximately S$4.8 million as of December 31, 2019 to approximately S$9.2 million as of December 31, 2020. The increase was primarily attributable to an increase of approximately S$6.2 million in amount due from our largest customer as of December 31, 2020, which resulted from an increase in revenue from that customer of approximately S$4.3 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019. As of December 31, 2021, our accounts receivable decreased to approximately S$3.2 million mainly due to the receipt of payments from our largest customer group for increased amounts owed to us as of December 31, 2020.

 

We did not charge any interest on, or hold any collateral as security over these accounts receivable balances. We generally offer credit periods of 30 to 60 days to our customers in respect of the manufacture and sale of cleaning systems and other equipment, whereas our customers will be offered credit terms of seven days to 30 days in respect of the provision of centralized dishwashing services and general cleaning services.

 

The following table sets forth the ageing analysis of our accounts receivable, net, based on the invoiced date as of the dates mentioned below:

 

    As of December 31,  
    2019     2020     2021  
      SGD’000       SGD’000       SGD’000  
                         
Within 30 days     2,804       5,097       1,511  
Between 31 and 60 days     883       1,290       587  
Between 61 and 90 days     589       2,073       282  
More than 90 days     563       770       840  
                         
Total accounts receivable, net     4,839       9,230       3,220  

  

Movements in the provision for impairment of accounts receivable are as follows:

 

    As of December 31,  
    2019     2020     2021  
      SGD’000       SGD’000       SGD’000  
                         
Opening balance     40       19       82  
(Reversal)/provision of loss allowance     (21 )     63       (48 )
                         
Closing balance     19       82       34  

 

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We have a policy for determining the allowance for impairment based on the evaluation of collectability and ageing analysis of accounts receivable and on management’s judgement, including the change in credit quality, the past collection history of each customer and the current market condition.

 

The loss allowance for accounts receivable related to a general provision for accounts receivable applying the simplified approach to providing for expected credit loss(es) (the ‘‘ECL(s)’’). Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default. An ECL rate is calculated based on historical loss rates of the industry in which our customers operate and ageing of the accounts receivable.

 

During the years ended December 31, 2019, 2020 and 2021, other than the loss allowance provision discussed above, no impairment loss was provided for amounts that were past due.

 

The following table sets forth our average accounts receivable turnover days for the years ended December 31, 2019, 2020 and 2021:

 

    Year ended December 31,  
    2019     2020     2021  
                         
Average accounts receivable turnover days(1)     103.4       120.3       138.5  

 

(1) Average accounts receivable turnover days is calculated as the average of the beginning and ending of accounts receivable balance for the respective year divided by revenue for the respective year and multiplied the number of days in the respective year.

 

Our average accounts receivable turnover days were approximately 103.4 days, 120.3 days and 138.5 days for the years ended December 31, 2019, 2020 and 2021, respectively. The increase in average accounts receivable turnover days for the years ended December 31, 2020 and 2021 was mainly due to slower collection of our accounts receivable as it generally took a longer time for our customers to settle our invoices as a result of the COVID-19 outbreak. During the years ended December 31, 2019, 2020 and 2021, the credit term offered to our major customers ranged from 7 days to 60 days. For details of the credit terms of our top five customers for the years ended December 31, 2019, 2020 and 2021, please refer to the section headed ‘‘Business — Our Customers’’ in this prospectus. Having taken into consideration the long-term business relationship with, the reputation of and the past settlement history of two customers, which in aggregate accounted for approximately 44.9%, 84.4% and 24.9% of our accounts receivable, net of loss allowance, as of December 31, 2019, 2020 and 2021, respectively, we permitted them to settle the payment after testing and commissioning of our products. Hence, our Group’s average accounts receivable turnover days for the years ended December 31, 2019, 2020 and 2021were longer than the credit periods granted to our customers.

 

As of December 31, 2021, our accounts receivable as of December 31, 2020 have been fully settled. During the years ended December 31, 2019, 2020 and 2021, accounts receivable were closely monitored and reviewed on a regular basis to identify any potential non-payment or delay in payment. Our Group conducted an individual review on each of the customers to determine the impairment, which is aligned with external credit rating agencies’ definition when it is available or based on other data such as available press information about the customer and past due status. Considering the increase in the average accounts receivable turnover days for the year ended December 31, 2020 and the increase in the balance of accounts receivable as of December 31, 2020, we have further implemented certain procedures to strengthen our credit control. For instance, we are actively monitoring the credit terms of our customers and follow up on collection regularly to ensure greater control over our accounts receivable. For details of the background of our top five customers for the years ended December 31, 2019, 2020 and 2021, please refer to the section headed ‘‘Business — Our Customers’’ in this prospectus.

 

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Prepaid expenses and other current assets, net

 

Prepaid expenses and other current assets, net of our Group mainly represents amounts due from investors and prepayment of expenses of listing our Ordinary Shares. The following table sets forth the breakdown of the prepaid expenses and other current assets, net as of the dates indicated:

 

    As of December 31,  
    2019     2020     2021  
      SGD’000       SGD’000       SGD’000  
                         
Other receivables     86       68       132  
Deposits     79       79       68  
Prepayments     55       179       647  
                         
Total     220       326       847  

 

Our total other receivables, deposits and prepayments increased from approximately S$0.2 million as of December 31, 2019 to approximately S$0.3 million as of December 31, 2020, primarily attributable to the increase in prepayments of approximately S$0.1 million as a result of an increase in upfront payments to raw materials suppliers. Our total prepaid expenses and other current assets, net increased from approximately S$0.2 million as of December 31, 2020 to approximately S$0.6 million as of December 31, 2021, primarily attributable to the increase in prepayments of approximately S$0.6 million as a result of an increase in upfront payments to raw materials suppliers.

 

Accounts and other payables

 

Accounts payable

 

The general credit terms from our major suppliers are 15 to 90 days. Our accounts payable increased from approximately S$1.8 million as of December 31, 2019 to approximately S$2.4 million as of December 31, 2020, which was generally in line with the increase in our raw material costs. Our accounts payable decreased to S$1.9 million as of December 31, 2021, primarily due to more purchases from suppliers with payment on delivery terms.

 

The following table sets forth the ageing analysis of our accounts payable based on the invoice date as of the dates mentioned below:

 

    As of December 31,  
    2019     2020     2021  
      SGD’000       SGD’000       SGD’000  
                         
Within 30 days     1,076       1,040       1,712  
Between 31 and 60 days     486       930       196  
Between 61 and 90 days     192       394       5  
More than 90 days     8       74       3  
                         
Total     1,762       2,438       1,916  

 

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The following table sets forth our average accounts payable turnover days for the years ended December 31, 2019, 2020 and 2021:

 

    Year ended December 31,  
    2019     2020     2021  
Average accounts payable turnover days(1)     53.6       48.5       64.0  

  

(1) Average accounts payable turnover days is calculated as the average of the beginning and ending of accounts payable balance for the respective year/period divided by cost of revenues for the respective year and multiplied the number of days in the respective year/period.

 

Our average payables turnover days remained relatively stable and amounted to approximately 53.6 days for the year ended December 31, 2019. The decrease in our average accounts payable turnover days to approximately 48.5 days for the year ended December 31, 2020 primarily resulted from the timing of billings of our raw materials suppliers and sub-contractors, and our timely settlement of the payments. Our average accounts payable turnover days increased to approximately 64.0 days for the year ended December 31, 2021, primarily due to the timing of billings by our raw materials suppliers and sub-contractors.

 

As of December 31, 2021, our accounts payable as of December 31, 2020 have been fully settled.

 

Our Group did not have any material default in payment of accounts payable during the years ended December 31, 2019, 2020 and 2021.

 

Accrued expenses

 

Accrued expenses mainly represented expenses related to our listing of our Ordinary Shares, salaries and bonus. As of December 31, 2019, our Group’s accrued expenses amounted to approximately S$0.4 million, which was mainly due to the accrued listing expenses of approximately S$0.6 million recognized in 2018. Our Group’s accrued expenses increased to approximately S$0.9 million as of December 31, 2020, primarily attributable to accrued listing expenses of approximately S$0.4 million. Our Group’s accrued expenses decreased to approximately S$0.4 million as of December 31, 2021, primarily attributable to the repayment of accrued listing expenses.

 

Our Group did not have any material default in payment of other payables during the years ended December 31, 2019, 2020 and 2021.

 

Contract liabilities

 

Our contract liabilities represent the sales deposits and instalments received during the year in respect of machineries still under production but not yet recognized as revenue under our revenue recognition policies. Our contract liabilities amounted to approximately S$29,000, nil and nil as of December 31, 2019, 2020 and 2021, respectively.

 

Bank indebtedness

 

As of December 31, 2021, our bank indebtedness equaled an aggregate of S$9,878,000, of which S$9,691,000 is denominated in Singapore dollars and bears interest at a variable rate ranging from 1.25% to 1.5% above the Singapore Interbank Offered Rate (“SIBOR”) and S$187,000 is denominated in US dollars and bears interest at 1.25% above the London Interbank Offer Rate (“LIBOR”). S$5,547,000 of our bank indebtedness constitutes current liability and S$4,421,000 constitutes non-current liability.

 

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Provisions

 

Our provisions during the years ended December 31, 2019, 2020 and 2021 mainly represented the provision for warranty for machines sold, which usually covers a 12-month period from the date on which the machines are delivered. The provision is based on estimates made from historical warranty data associated with similar products and services. As of December 31, 2019, 2020 and 2021, our Group recorded provision of approximately S$47,000, S$28,000 and S$16,000, respectively.

 

Tax payables

 

Our tax payables remained relatively stable at approximately S$59,000, S$0.5 million and nil as of December 31, 2019, 2020 and 2021, respectively. The decrease in our tax payables as of December 31, 2021 was generally due to our settlement of tax payable for 2020 in 2021.

 

Deferred tax (assets)/liabilities

 

Our deferred tax (assets)/liabilities during the years ended December 31, 2019, 2020 and 2021 mainly represented the Singapore tax implication on the temporary difference between the tax written down value and the net book value of the property, plant and equipment, which are owned by our Group. As of December 31, 2021, our deferred tax liabilities remained relatively stable.

 

Commitments

 

Operating lease commitments as a lessor

 

Our Group leases out the dishwashing machines pursuant to leases that are classified as non-cancellable operating leases.

 

The future minimum lease receivables under non-cancellable operating leases contracted for as of December 31, 2019, 2020 and 2021, but not recognized as receivables, are as follows:

 

    As of December 31,  
    2019     2020     2021  
      SGD’000       SGD’000       SGD’000  
                         
Within one year     28       40       40  
After one but within two years     16              
Total     44       40       40  

 

Capital commitments

 

As of December 31, 2019, December 31, 2020 and December 31, 2021, our Group did not have any capital commitments.

 

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Capital Expenditures

 

Historical capital expenditures

 

Our capital expenditures during the years ended December 31, 2019, 2020 and 2021 mainly related to replacement of obsolete equipment. For the years ended December 31, 2019, 2020 and 2021, our capital expenditures in relation to property, plant and equipment were approximately S$0.6 million, S$0.3 million and S$0.8 million, respectively. We principally funded our capital expenditures through cash flows from operations and borrowings during the years ended December 31, 2019, 2020 and 2021.

 

Critical Accounting Policies and Estimates

 

Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. While our significant accounting policies are more fully described in Note 2 to the consolidated financial statements included elsewhere in this prospectus, we believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.

 

We are an “emerging growth company” as defined under the federal securities laws and, as such, will be subject to reduced public company reporting requirements. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act. As a result of our election, our financial statements may not be comparable to those of companies that comply with public company effective dates.

 

Use of Estimates and Assumptions

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in our consolidated financial statements include the useful lives of plant and equipment and intangible assets, impairment of long-lived assets, allowance for doubtful accounts, and allowance for deferred tax assets and uncertain tax position, and inventory allowance. Actual results could differ from these estimates.

 

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Revenue Recognition

 

We recognized our revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC606). We recognize revenue to depict the transfer of promised goods or services (that is, an asset) to customers in an amount that reflects the consideration to which we expect to receive in exchange for those goods or services. An asset is transferred when the customer obtains control of that asset. It also requires us to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. We elected the modified retrospective method which required a cumulative adjustment to retained earnings instead of retrospectively adjusting prior periods. The adoption of ASC 606 did not have a material impact on the consolidated financial statements.

 

To achieve that core principle, we apply the five steps defined under Topic 606: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

 

We account for a contract with a customer when the contract is committed in writing, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration to collect is substantially probable.

 

In accordance with ASC 340-40,which requires the capitalization of all incremental costs from obtaining and fulfilling a contract with a customer if such costs are expected to be recovered with the period of more than one year, we capitalize certain contract acquisition costs consisting primarily of consulting fees, and expect such consulting fees as a result of obtaining customer contracts to be recoverable. For contracts with the realization period of less than one year, the guidance provides a practical expedient that permits an entity to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less.

 

Revenue recognition policies for each type of revenue stream are as follows:

 

(a) Goods and services sold

 

We recognize revenue for our goods and services sold when we have satisfied a performance obligation by transferring control of a promised good or service to the customer. The amount of revenue recognized is the amount of the transaction price allocated to the satisfied performance obligation, which is the amount of the consideration in the contract to which our Group expects to be entitled in exchange for transferring the promised goods or services.

 

Revenue may be recognized at a point in time or over time following the timing of satisfaction of the performance obligation. If a performance obligation is satisfied over time, revenue is recognized based on the percentage of completion reflecting the progress towards complete satisfaction of that performance obligation.

 

(b) Rental of dishware washing machines

 

We recognize revenue for our rental of our dishware washing machines on a straight-line basis over the term of the lease.

 

Recent Accounting Pronouncements

 

See Note 2 of the notes to the consolidated financial statements included elsewhere in this prospectus for a discussion of recently issued accounting standards.

 

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Impact of Inflation

 

In accordance with the Monetary Authority of Singapore, the year-over-year percentage changes in the consumer price index for 2019 and 2020 were 0.57% and -0.18%, respectively. The rate of inflation in 2021 was significantly higher and is expected to reach 0.9%. Inflation in Singapore has not materially affected our profitability and operating results. However, we can provide no assurance that we will be unaffected by higher inflation rates in Singapore in the future.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Interest Rate Risk

 

We are exposed to interest rate risk while we have short-term bank loans outstanding. Although interest rates for our short-term loans are typically fixed for the terms of the loans, the terms are typically twelve months and interest rates are subject to change upon renewal.

 

Credit Risk

 

Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. We manage credit risk through in-house research and analysis of the relevant economy and the underlying obligors and transaction structures. We identify credit risk collectively based on industry, geography and customer type. In measuring the credit risk of our sales to our customers, we mainly reflect the “probability of default” by the customer on its contractual obligations and consider the current financial position of the customer and the current and likely future exposures to the customer.

 

Liquidity Risk

 

We are also exposed to liquidity risk, which is risk that we will be unable to provide sufficient capital resources and liquidity to meet our commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to financial institutions and related parties to obtain short-term funding to cover any liquidity shortage.

 

Foreign Exchange Risk

 

While our reporting currency is the U.S. dollar, almost all of our consolidated revenues and consolidated costs and expenses are denominated in S$. All of our assets are denominated in S$. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between the U.S. dollar and S$. If the S$ depreciates against the U.S. dollar, the value of our S$ revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

 

HISTORY AND CORPORATE STRUCTURE

 

Our Group’s history can be traced back to November 1999 when JCS was founded by Ms. Hong, our Chairman, Executive Director and Chief Executive Officer, together with her then partner Mr. Yeo Hock Huat. Our Group commenced business in 2005. We have manufactured a broad range of cleaning systems, including aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment for our customers. Our business in the provision of centralized dishwashing services for the food and beverage industry commenced in 2013.

 

As of the date of this prospectus, our Group is comprised of the Company and its subsidiaries, JE Cleantech International Limited, JCS-Echigo Pte Ltd., Hygieia Warewashing Pte. Ltd. and Evoluxe Pte. Ltd.

 

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Corporate Structure

 

Our Company was incorporated in the Cayman Islands on January 29, 2019 under the Companies Act as an exempted company with limited liability. Our authorized share capital is US$100,000 divided into 100,000,000 Ordinary Shares, par value US$0.001 each. Prior to a group reorganization, JE Cleantech International Limited was the holding company of our group of companies comprised of JCS Echigo Pte. Limited, Hygieia Warewashing Pte. Limited and Evoluxe Pte. Limited. JE Cleantech International Limited was held 80% by JE Cleantech Global Limited (which is wholly-owned by Ms. Hong, our CEO), 14% by Triple Business Limited, 4% by Ever Bloom Properties Company Limited and 2% by Aqua Lady Group Limited. Upon completion of our reorganization, we are owned as to 9,600,000, 1,680,000, 480,000 and 240,000 Ordinary Shares by JE Cleantech Global Limited, Triple Business Limited, Ever Bloom Properties Company Limited and Aqua Lady Group Limited, respectively, and JE Cleantech International Limited, JCS Echigo Pte. Limited, Hygieia Warewashing Pte. Limited and Evoluxe Pte. Limited are our direct and indirect subsidiaries.

 

Organization Chart

 

The chart below sets out our corporate structure as of the date of this prospectus.

 

 

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Entities

 

A description of our subsidiaries is set out below.

 

JE Cleantech International Limited (“JEC International”)

 

On April 9, 2018, JEC International was incorporated in the BVI as a BVI business company with limited liability. JEC International is authorized to issue a maximum of 50,000 shares of a single class of US$1.00 par value each. As part of a group reorganization on December 28, 2021, JEC International became a direct wholly-owned subsidiary of our Company.

 

JEC International has been an investment holding company with no business operations since its incorporation.

 

JCS-Echigo Pte Ltd (“JCS”)

 

On November 25, 1999, JCS was incorporated in Singapore as a private company with limited liability. JCS commenced business in 2005 and is principally engaged in the manufacture and sale of cleaning systems and other equipment. As part of a group reorganization on December 28, 2021, JCS became an indirect wholly-owned subsidiary of our Company.

 

Hygieia Warewashing Pte. Ltd. (“Hygieia”)

 

On December 29, 2010, Hygieia was incorporated in Singapore as a private company with limited liability. Hygieia commenced business in 2013 and is principally engaged in the provision of centralized dishwashing services, general cleaning services and leasing of dishwashing equipment. As part of an internal reorganization on December 28, 2021, Hygieia became an indirect wholly-owned subsidiary of our Company.

 

Evoluxe Pte. Ltd. (“Evoluxe”)

 

On May 6, 2016, Evoluxe was incorporated in Singapore as a private company with limited liability. Evoluxe has been dormant since incorporation and has not engaged in any business activities since its incorporation. As part of an internal reorganization on December 28, 2021, Evoluxe became an indirect wholly-owned subsidiary of our Company.

 

Key Milestones

 

The key milestones in the development of our Group are highlighted chronologically below:

 

Year   Milestones
1999   JCS was established.
     
2005   JCS began its business in the sale of cleaning systems.
     
2006  

We established the JCS Facility and commenced the business of the design, development, manufacture and sale of cleaning systems.

 

We completed our first order for a cassette washing system for a customer in the HDD industry.

     
2007   We registered our first patent in Singapore under JCS for a cleaning process and apparatus.
     
2010   Hygieia was established.
     
2011  

We completed our first order for a medical cleaning system.

     
2012   We completed our first order for a dish cleaning system.
     
2013   Hygieia commenced provision of centralized dishwashing services at a customer’s premises.
     
2014   We established the Hygieia Facility.
     
2018   We received an invitation from a statutory board in Singapore to showcase a prototype of a robot floor scrubber for the interior of public trains.

 

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INDUSTRY OVERVIEW

 

We are principally engaged in (i) the sale of cleaning systems and other equipment; and (ii) provision of centralized dishwashing and ancillary services. Our cleaning systems business commenced in 2005. We design, develop, manufacture and sell cleaning systems for various industrial end-use applications to our customers primarily in Singapore and Malaysia.

 

PRECISION CLEANING INDUSTRY IN SINGAPORE AND MALAYSIA

 

The precision cleaning industry often requires the provision of a sophisticated cleaning process and equipment to ensure that items can be cleaned to a level that would meet the relevant industry standards for their specific use. In Singapore and Malaysia, the precision cleaning industry can be divided into two sub-segments of precision cleaning services and precision cleaning equipment manufacturing.

 

There are two major business models within the precision cleaning industry: (i) companies without manufacturing capability but providing precision cleaning product and services by selling standardized equipment and products to end-clients; and (ii) precision cleaning equipment manufacturers that offer both standardized and customized equipment and products to end-clients.

 

Precision Cleaning Industry in Singapore

 

The precision cleaning industry in Singapore saw a CAGR of 5.8% from 2016 to 2020, and market size was approximately S$88.8 million in 2020. Growth before COVID-19 was driven by technology advancement and demand for miniaturized components for machinery which in turn increased demand for precision cleaning services and equipment for these components. However, growth was slightly dampened when the airlines were adversely affected by COVID-19. Nonetheless, other industries such as electronics saw stable growth while pharmaceutical and medical devices saw accelerated growth in 2020, helping to cushion the decreased sales to the airline industry so the overall market only saw a slight decline.

 

The Singapore government’s initiatives to support Industry 4.0 has been supporting the growth of the precision cleaning industry. Presently, both the manufacturing sector and the cleaning sector fall under the S$4.5 billion Industry Transformation Map (ITM), and the Singapore government has been supporting technology trials for cleaning and waste management systems under the INCUBATE program.

 

                       CAGR 
Industry Revenue Receipts (SGD million)  2016   2017   2018   2019   2020   2016-2020 
Precision Cleaning Industry   70.8    85.2    92.2    99.0    88.8    5.8%
Growth Rate (%)   4.0    20.3    8.2    7.3    –10.3     
— Precision Cleaning Services   32.6    30.0    33.3    37.8    33.6    0.8%
—Precision Cleaning Equipment Manufacturing   38.3    50.0    55.1    60.7    55.2    9.6%

 

Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Singapore.

 

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Since the outbreak of the first COVID-19 case in Singapore on January 23, 2020, the Singapore government raised the DORSCON (the Disease Outbreak Response System Condition, a color-coded framework that shows the current disease situation in Singapore) level from yellow to orange and introduced several restrictions which tightened alongside increasing cases. This eventually culminated in a nationwide partial lockdown, known as the ‘‘circuit breaker’’ from April 7, 2020 to May 4, 2020 (which was eventually extended to June 1, 2020), where, apart from shopping for necessities and work for essential workers, all Singaporeans were required to stay at home.

 

Despite the significant impact on most of the retail and service industries, the overall cleaning industry, especially the precision cleaning industry, was less impacted since the key end client group are business-to-business (“B2B”) clients who are less likely to suffer direct impact from the downturn of consumer demand.

 

The precision cleaning industry is estimated to see an accelerated CAGR of 9.0% between 2021 and 2025. Such growth is expected to be driven by the manufacturing segment with a CAGR of 10.7% over the same period, which is expected to be benefited from Industry 4.0 as the industry continues to transform. Nonetheless, as Industry 4.0 requires a hefty capital outlay, this will favor larger players who are managing large facilities. In the near future, it is expected that precision cleaning companies will continue to invest in AI technology and data to fully automate tasks, linking to cloud drive storage, and potentially leveraging the latest 5G technology to enhance data transmission and processing speed.

 

Precision Cleaning Industry in Singapore, Forecast (2021F–2025F)

 

                       CAGR 
Industry Revenue Receipts (SGD million)  2021F   2022F   2023F   2024F   2025F   2021F–2025F 
Precision Cleaning Industry   101.2    112.7    123.3    132.5    143.0    9.0%
Growth Rate (%)   14.0    11.4    9.4    7.4    7.9     
— Precision Cleaning Services   39.4    42.8    45.1    47.1    50.2    6.2%
— Precision Cleaning Equipment Manufacturing   61.8    70.0    78.2    85.4    92.8    10.7%

 

Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Singapore.

 

Precision Cleaning Industry in Malaysia

 

The precision cleaning industry in Malaysia experienced a CAGR of 22.9% from 2016 to 2020, with a market size of MYR213.4 million in 2020. Sharp growth of 77.2% in the industry in 2020 was driven by the strong momentum in the manufacturing segment, resulting in 166.8% growth in 2020, due to the launch of 5G technology, the increase in demand experienced by the HDD and semiconductor industries and geopolitical issues that arose over that period.

 

Precision Cleaning Industry in Malaysia, Historic (2016–2020)

 

                       CAGR 
Industry Revenue Receipts (MYR million)  2016   2017   2018   2019   2020   2016–2020 
Precision Cleaning Industry   93.5    105.1    112.6    120.4    213.4    22.9%
Growth Rate (%)   8.1    12.4    7.1    6.9    77.2     
— Precision Cleaning Services   58.4