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As filed with the Securities and Exchange Commission on May 31, 2023

 

Registration No. 333-__________

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

JE Cleantech Holdings Limited

(Exact name of registrant as specified in its charter)

 

Not Applicable

(Translation of Registrants name into English)

 

Cayman Islands   3990   Not Applicable
(State or Other Jurisdiction of Incorporation or Organization)   (Primary Standard Industrial Classification Code Number)  

(I.R.S. Employer

Identification No.)

 

3 Woodlands Sector 1

Singapore 738361

+65 6368 4198

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

 

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, New York 10168

(212) 947-7200

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

 

Copies to:

 

Henry F. Schlueter, Esq.

Celia Velletri, Esq.

Schlueter & Associates, P.C.
5290 DTC Parkway, Suite 150

Greenwood Village, CO 80111
Telephone: (303) 292-3883

Barry I. Grossman, Esq.

Sarah Williams, Esq.

Matthew Bernstein, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

Telephone: (212) 370-1300

 

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

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

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

 

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

 

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

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company

 

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

 

The term new or revised financial accounting standard refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 
 

 

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

 

Subject to Completion, dated __________, 2023

 

PRELIMINARY PROSPECTUS

 

 

JE Cleantech Holdings Limited

 

Up to [●] Ordinary Shares or Pre-Funded Warrants
to Purchase Ordinary Shares

and
Up to [●] Class A Warrants to Purchase Ordinary Shares

 

We are offering up to [●] Ordinary Shares and up to [●] Class A Warrants to purchase Ordinary Shares, on a best efforts basis. Each Class A Warrant will be immediately exercisable for [●] Ordinary Share at an exercise price of $[●] per share and will expire [●] years after the issuance date. The combined public offering price for each Ordinary Share, together with the Class A Warrant, is $[●]. The Ordinary Shares and Class A Warrants will be separately issued, but the Ordinary Shares and Class A Warrants will be issued to purchasers in the ratio of one to one. See “Description of Securities — Securities Offered in this Offering” in this prospectus for more information.

 

We are also offering to each purchaser of Ordinary Shares and Class A Warrants whose investment would otherwise result in the purchaser’s beneficial ownership exceeding 4.99% of our outstanding Ordinary Shares immediately following the consummation of this offering, the opportunity to purchase one Pre-Funded Warrant (in lieu of one Ordinary Share) plus one Class A Warrant. The Ordinary Shares, Pre-Funded Warrants and Class A Warrants shall be referred to herein, together, as the “Securities.” Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of Ordinary Shares outstanding immediately after giving effect to such exercise. Each Pre-Funded Warrant will be exercisable for one Ordinary Share. The purchase price of each Pre-Funded Warrant will be equal to the price of one Ordinary Share, minus $0.01, and the exercise price of each Pre-Funded Warrant will equal $0.01 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

 

Our Ordinary Shares are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol JCSE. On [●] 2023, the sale price of our Ordinary Shares was $[●] per share, as reported by Nasdaq. The actual public offering price per Ordinary Share will be determined between us and the Placement Agent based upon a number of factors, including our history and our prospects, the industry in which we operate, our past and present operating results, the previous experience of our executive officers and the general condition of the securities markets at the time of this offering, and may be at a discount to the current market price of our Ordinary Shares. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final offering price.

 

There is no established trading market for the Class A Warrants or the Pre-Funded Warrants and we do not expect an active trading market to develop. We do not intend to list the Class A Warrants or the Pre-Funded Warrants on any securities exchange or other trading market. Without an active trading market, the liquidity of these securities will be limited.

 

 
 

 

The Securities will be offered at a fixed price and are expected to be issued in a single closing. There is no minimum number of Securities or minimum aggregate amount of proceeds for this offering to close. We expect this offering to be completed not later than two (2) business days following the commencement of this offering and we will deliver all Securities to be issued in connection with this offering delivery versus payment (“DVP”)/receipt versus payment (“RVP”) upon receipt of investor funds received by the Company. Accordingly, neither we nor the Placement Agent have made any arrangements to place investor funds in an escrow account or trust account since the Placement Agent will not receive investor funds in connection with the sale of the Securities offered hereunder.

 

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.

 

We are an “emerging growth company” and a “foreign private issuer” as defined under the U.S. federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. 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 12 and 13, respectively, of this prospectus.

 

Investing in our securities is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 15 of this prospectus before investing in our securities.

 

   

Per Share or Pre-Funded Warrant

and

Class A Warrant

    Total  
Assumed public offering price(1)   US$ [●]     US$ [●]  
Placement Agent fees(2)   US$ [●]     US$ [●]  
Proceeds, before expenses, to us(2)(3)   US$ [●]     US$ [●]  

 

(1) Calculated based on an assumed offering price of US$[●], which represents the closing sales price on Nasdaq of the Company’s Ordinary Shares on [●], 2023.

 

(2) We have agreed to pay the placement agent a total cash fee equal to 7.0% of the gross proceeds of the securities sold by us in this offering.

 

(3) The Placement Agent will receive compensation in addition to the placement agent fees described above. See “Plan of Distribution” for a description of compensation payable to the Placement Agent.

 

We have engaged Maxim Group LLC as our exclusive placement agent (“Maxim” or the “Placement Agent”) to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The Placement Agent has no obligation to purchase any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. Because there is no minimum offering amount required as a condition to closing in this offering, the actual public offering amount, placement agent’s fee and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the Placement Agent the placement agent fees set forth in the table above and to provide certain other compensation to the Placement Agent. There is no arrangement for funds to be received in escrow, trust or similar arrangement. There is no minimum offering requirement. We will bear all costs associated with the offering. See “Plan of Distribution” beginning on page 134 of this prospectus for more information regarding these arrangements.

 

We expect to deliver the Ordinary Shares and Class A Warrants against payment on or about, [●], 2023, subject to satisfaction of certain conditions.

 

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.

 

MAXIM GROUP LLC

 

The date of this prospectus is [●], 2023.

 

 
 

 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS iii
PRESENTATION OF FINANCIAL INFORMATION iii
MARKET AND INDUSTRY DATA iii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS iii
DEFINITIONS v
PROSPECTUS SUMMARY 8
RISK FACTORS 15
ENFORCEABILITY OF CIVIL LIABILITIES 34
USE OF PROCEEDS 35
CAPITALIZATION AND INDEBTEDNESS 36
DIVIDENDS AND DIVIDEND POLICY 37
DILUTION 37
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA 38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 40
HISTORY AND CORPORATE STRUCTURE 58
INDUSTRY OVERVIEW 60
BUSINESS 74
REGULATORY ENVIRONMENT 100
MANAGEMENT 110
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 117
RELATED PARTY TRANSACTIONS 118
DESCRIPTION OF SECURITIES 119
CERTAIN CAYMAN ISLANDS COMPANY CONSIDERATIONS 123
SHARES ELIGIBLE FOR FUTURE SALE 128
MATERIAL TAX CONSIDERATIONS 129
PLAN OF DISTRIBUTION 134
LEGAL MATTERS 137
EXPERTS 137
WHERE YOU CAN FIND ADDITIONAL INFORMATION 138
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

 

ii
 

 

ABOUT THIS PROSPECTUS

 

Neither we nor the Placement Agent has 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, nor the Placement Agent takes responsibility for, or provides 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 Placement Agent has 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 (or Pre-Funded Warrants) and Class A Warrants 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.

 

On December 28, 2021, the Company completed a series of re-organizing transactions that resulted 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$1.7460 to US$1.00, the exchange rate set forth in the statistical release of the Federal Reserve Board on December 31, 2022. 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.

 

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.

 

CAUTIONARY 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.

 

iii
 

 

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;
     
  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.

 

iv
 

 

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.

 

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 was filed as Exhibit 3.1 to our Registration Statement filed with the SEC on March 10, 2022.

 

“Amended and Restated Articles of Association” or “Amended Articles” 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 was 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 in increasing their workplace safety and health capabilities to achieve quantum improvements in safety and health standards at the workplace, and organized under the Workplace Safety and Health Council of Singapore.

 

“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 (2023 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 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.

 

v
 

 

“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 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 a selling shareholder, pursuant to a Registration Statement on Form F-1, which offering was completed in April 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.

 

“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 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.

 

vi
 

 

“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.

 

“MOM” means the Singapore Ministry of Manpower.

 

‘‘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.

 

“NEA” means the National Environment Agency of Singapore.

 

“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.

 

“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.

 

“SME 1000” means the annual recognition program organized by Experian Credit Services Singapore Pte Ltd, 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.

 

vii
 

 

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.

 

Recent and Other Developments

 

Initial Public Offering

 

On April 22, 2022, we closed on our Initial Public Offering of 3,020,000 Ordinary Shares at a price of $4.00 per share. In addition, a selling shareholder affiliated with us sold an aggregate of 750,000 Ordinary Shares in the offering. The gross proceeds of the offering to us, before underwriting discounts and commissions and estimated offering expenses, were approximately $12 million (including the partial exercise of the overallotment option). We did not receive any of the proceeds from the sale of Ordinary Shares by the selling shareholder.

 

Nasdaq Deficiency

 

On November 3, 2022, we received a written notification from Nasdaq indicating that, because the closing bid price of our Ordinary Shares for the last 30 consecutive business days was below $1.00 per share, we no longer met the minimum bid price requirement under Nasdaq rule 5550(a)(2) (the “Rule”). Pursuant to the Nasdaq Listing Rules, the applicable grace period to regain compliance is 180 days, or until May 2, 2023. On May 3, 2023, we were granted an additional 180-day period from the Nasdaq Stock Market, until October 28, 2023, to regain compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market.

 

If at any time before October 28, 2023, the closing bid price of the our Ordinary Shares is at least $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation that the Company has achieved compliance with the Rule. If compliance with the Rule cannot be demonstrated to Nasdaq’s satisfaction by we may appeal Nasdaq’s delisting determination to a Nasdaq Hearings Panel.

 

We intend to continue actively monitoring the bid price for our Ordinary Shares between now and October 28, 2023, and will consider available options to resolve the deficiency and regain compliance with the Rule. These options include, but are not limited to, effecting a reverse stock split, if necessary, to attempt to regain compliance. There is no assurance that we will regain compliance with the Rule or that our Ordinary Shares will not be delisted from Nasdaq.

 

8

 

 

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.

 

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.

 

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, 2020, 2021 and 2022, our top five customers included renowned HDD manufacturers, a public transportation operator and food and beverages establishment operators in Singapore, and two of our top five customers have more than a 10-year business relationship with us.

 

We have an experienced research and development 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. Through 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, we have also developed an autonomous train interior cleaning robot that is 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.

 

9

 

 

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 24 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 17 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;
     
  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 15 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.
     
  We are exposed to the credit risks of our customers.
     
  We may be affected by the prospects of the industries in which our customers are engaged.
     
  We are vulnerable to fluctuations in the cost or supply of our raw materials.
     
  We are exposed to risks arising from fluctuations of foreign currency exchange rates.
     
  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.
     
  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.
     
  Our business and operations may be materially and adversely affected in the event of a re-occurrence of a prolonged global pandemic outbreak of COVID-19 or other epidemic or natural disaster.

 

10

 

 

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.
     
  We may not maintain the listing of our Ordinary Shares on Nasdaq which could limit investors’ ability to make transactions in our Ordinary Shares and subject us to additional trading restrictions.
     
  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.
     
  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.
     
  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.
     
  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.
     
  Certain judgments obtained against us by our shareholders may not be enforceable.
     
  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.
     
  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.
     
  Our controlling shareholder has substantial influence over the Company.
     
  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.

  

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.

 

11

 

 

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 titled “Risk Factors” and “Enforceability of Civil Liabilities” for more information.

 

Implications of Our Being a “Controlled Company”

 

JE Cleantech Global Limited, our controlling shareholder, is the beneficial owner of an aggregate of 9,600,000 Ordinary Shares, which will represent [●]% of the then total issued and outstanding Ordinary Shares if this offering is sold 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 Capital Market.

 

Implications of Our Being an Emerging Growth Company

 

As a company with less than US$1.235 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$1.235 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

 

We 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.

 

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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 Nasdaq corporate governance listing requirements. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing requirements of Nasdaq. Following this offering, we will rely on home country practice to be exempted from certain of the corporate governance requirements of 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.

 

The Offering

 

Securities offered by us   Up to [●]Ordinary Shares or Pre-Funded Warrants on a best efforts basis. Each Ordinary Share or Pre-Funded Warrant will be sold with one (1) Class A Warrant to purchase one (1) Ordinary Share.
     
Offering size   Up to US$[●]
     

Assumed offering price per Ordinary Share or Pre-Funded Warrant and Class A Warrant

  US$[●], which was the closing share price for the Ordinary Shares on[●], 2023
     
Ordinary Shares issued and outstanding prior to this offering   15,020,000 Ordinary Shares
     
Ordinary Shares to be issued and outstanding immediately after this offering   [●] Ordinary Shares (assuming the total offering is sold and assuming no exercise of the Class A Warrants to be issued in this offering)
     
Description of the Pre-Funded Warrants   Subject to limited exceptions, a holder of Pre-Funded Warrants will not have the right to exercise any portion of its Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of Ordinary Shares outstanding immediately after giving effect to such exercise. Each Pre-Funded Warrant will be exercisable for one Ordinary Share. The purchase price of each Pre-Funded Warrant will be equal to the price of one Ordinary Share, minus $0.01, and the exercise price of each Pre-Funded Warrant will equal $0.01 per share. The Pre-Funded Warrants will be immediately exercisable (subject to the beneficial ownership cap) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
     
Description of the Class A Warrants   Each Class A Warrant will have an exercise price of US$[●] per share (not less than 100% of the public offering price of each Unit sold in this offering), will be exercisable upon issuance and will expire [●] years from issuance. Each Class A Warrant is exercisable for [●] Ordinary Share, subject to adjustment in the event of stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting our Ordinary Shares as described herein. The terms of the Class A Warrants will be governed by a Warrant Agency Agreement, dated as of the closing date of this offering, that we expect to be entered into between us and [●], or its affiliate (the “Warrant Agent”). This prospectus also relates to the offering of the Ordinary Shares issuable upon exercise of the Class A Warrants. For more information regarding the Class A Warrants, please read the section titled “Description of Securities – Securities Offered in this Offering” in this prospectus.
     
Placement Agent warrants   In addition, we have agreed to issue to the Placement Agent warrants to purchase up to [●] Ordinary Shares (which represents 5.0% of the aggregate number of Ordinary Shares and Pre-Funded Warrants issued in this offering) with an exercise price of US$[●] per Ordinary Share (representing 110% of the public offering price per Ordinary Share or Pre-Funded Warrant plus Class A Warrrant) and are exercisable commencing six (6) months after the effective date of the registration statement of which this prospectus is a part for three and one half years from the date of the commencement of sales in this offering.

 

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Use of proceeds   We currently intend to use the net proceeds from this offering to (i) _____________________________________________; (ii)______; and ([●]) fund working capital and other general corporate purposes.
     
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.

 

Lock-up

 

 

  We, each of our directors and executive officers and our 5% shareholders have agreed, subject to certain exceptions, for a period of six months after the closing of this offering, 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 “Plan of Distribution — Lock-Up Agreements.”
     
Risk factors   Investing in our Ordinary Shares involves risks. See “Risk Factors” beginning on page 15 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Ordinary Shares.
     
Best efforts offering   We have agreed to offer and sell the securities offered hereby to the purchasers through the Placement Agent. The Placement Agent is not required to buy or sell any specific number or dollar amount of the securities offered hereby, but it will use its reasonable best efforts to solicit offers to purchase the securities offered by this prospectus. See “Plan of Distribution” on page 134 of this prospectus.
     
Listing   Our Ordinary Shares are listed on 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

 

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, 2020, 2021 and 2022 from our audited financial statements included in this prospectus.

 

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Results of Operations Data:

 

   For the years ended December 31, 
   2020   2021   2022   2022 
   SGD’000   SGD’000   SGD’000   USD’000(1) 
Revenues   21,397    14,764    18,631    13,899 
Net income   1,727    2    1,192    889 
Basic and diluted net income per Ordinary Share   0.14    0.00    0.08    0.06 
Weighted average number of Ordinary Shares outstanding   12,000,000    12,000,000    14,101,589    14,101,589 

 

(1) Calculated at the rate of US$0.7460 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 31, 2022.

 

Balance Sheet Data:

 

   As of December 31, 
   2021   2022   2022 
   SGD’000   SGD’000   US$’000 
Cash and cash equivalents   1,108    6,561    4,895 
Working capital       12,534    9,351 
Total assets   18,440    35,465    26,457 
Total liabilities   15,417    19,184    14,311 
Total shareholders’ equity   3,023    16,281    12,146 

 

(1) Calculated at the rate of US$0.7460 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 31, 2021.

 

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 88.4%, 80.6% and 68.1% of our revenue for the years ended December 31, 2020, 2021 and 2022, respectively. In particular, sales to our largest customer group, which is principally engaged in the manufacture of HDD, amounted to approximately $13.2 million, S$4.8 million and S$4.1 million, representing approximately 61.5%, 32.7% and 22.0% of our revenue, for the years ended December 31, 2020, 2021 and 2022, respectively. 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 14, 11 and 14 customer groups during the years ended December 31, 2020, 2021 and 2022, respectively. Our centralized dishwashing services and general cleaning services business provided centralized dishwashing services to 38, 54 and 60 customer groups during the years ended December 31, 2020, 2021 and 2022, respectively, and provided general cleaning services to 7, 7, and 3 customer groups, respectively, during those periods. 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.

 

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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, 2020, 2021 and 2022. Our sales to that customer group amounted to approximately S$13.2 million, S$4.8 million and S$4.1 million for the years ended December 31, 2020, 2021 and 2022, respectively, which accounted for approximately 61.5% 32.7% and 22.0% of our total revenue for the years ended December 31, 2020, 2021 and 2022, 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.

 

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.

 

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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, 2020, 2021 and 2022, or during the period from January 1, 2023 through the present date, 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.

 

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.

 

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As Ms. Hong Bee Yin, 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 outbreak of war in February 2022 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.

 

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.

 

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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 57.8%, 43.5% and 57.8% of our total cost of revenues for the years ended December 31, 2020, 2021 and 2022, respectively. Expenses for raw materials as a percentage of our total cost of revenue have not materially changed through the present date. 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, 2020, 2021 and 2022 and during the period from January 1, 2023 to the present date, 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.

 

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.

 

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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$3.1 million, S$3.2 million and S$4.5 million, representing approximately 14.4%, 21.6% and 24.2% of our total revenue for the years ended December 31, 2020, 2021 and 2022, 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.

 

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.

 

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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 138.5 days and 86.7 days for the years ended December 31, 2021 and 2022, 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, 2020, 2021 and 2022, or during the period from January 1, 2023 to the present date, 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.

 

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.

 

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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, 2021 and 2022, or during the period from January 1, 2023 to the present date. 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.

 

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.

 

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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.

 

Our business and operations may be materially and adversely affected if there is a major resurgence of COVID-19 or another significant natural disaster or pandemic in the future.

 

COVID-19 was initially reported in China in December 2019, and in March 2020, the World Health Organization characterized COVID-19 as a pandemic. Although on May 5, 2023, the WHO declared the end to the COVID-19 pandemic as a global health emergency, it stressed that COVID-19 is here to stay, that it remains a global threat and that the risk remains of new variants emerging that may cause new surges in cases and deaths. COVID-19 has had a widespread and detrimental effect on the global economy as a result of the ongoing number of cases and affected countries and actions taken by public health and governmental authorities, businesses, other organizations and individuals to address the pandemic, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns.

 

The outbreak of COVID-19 had a material adverse impact on the global, regional and local economies of Singapore and other countries in which our clients are or were based, which decreased the demand for our services. A significant recurrence of COVID-19 or the occurrence of another epidemic or natural disaster in Singapore or in any of the countries in which we have significant operations may result in a similar decrease in the demand for our services in the future, may cause delay in the tender and/or quotation processes of prospective contracts and/or may cause termination of our existing orders and contracts by our customers. In addition, such a recurrence or event could result in further disruption of the global supply chain, a delay or shortage of raw materials, supplies and/or services by our suppliers and sub-contractors, the re-imposition of lockdown measures or quarantines or a significant number of our workers being unable to report to work due to illness, any of which may materially and adversely affect our business and operations. Our revenue and profitability also may be materially affected if any such occurrence materially affects the overall economic and market conditions in Singapore, as an economic slowdown and/or negative business sentiment could potentially have an adverse impact on our business and operations.

 

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In addition, we cannot predict if or when any new outbreaks of COVID-19 or another pandemic or natural disaster may occur or how long it may take for any such outbreaks to be contained or for the effects of any such disaster to be rectified, and we cannot predict the impact that any such event may have on our operations. If Singapore or any of the other countries in which we have significant operations experiences a major resurgence of COVID-19 or if another pandemic or a significant natural disaster were to occur in the future, 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, 2020, 2021 and 2022. 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, 2021 and 2022, we had inventories of S$2.6 million and S$11.9 million, respectively. The higher inventory for the year ended December 31, 2022 was primarily the result of purchasing more raw materials in anticipation of slower delivery times due to supply chain issues and increased orders for 2023. Our inventory turnover days for the years ended December 31, 2021 and 2022 were 75 days and 122 days, respectively. The higher number of days for the year ended December 31, 2022 was mainly due to increased raw materials inventory purchased closer to year end in anticipation of slower delivery lead times and increased orders for 2023. 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.

 

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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.

 

Risks Related to Our Securities and This Offering

 

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$[●] per share, representing the difference between our pro forma as adjusted net tangible book value per share of US$[●] as of December 31, 2022, after giving effect to the net proceeds to us from this offering at a public offering price of US$[●] 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.

 

We may not be able to maintain compliance with Nasdaq’s continued listing requirements.

 

On November 3, 2022, we received a written notification from the Listing Qualifications Department of the Nasdaq Stock Market LLC (the “Nasdaq Notification”) stating that our Ordinary Shares had failed to maintain a minimum bid price of $1.00 over the last 30 consecutive business days as required by Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). Receipt of the Nasdaq Notification does not result in the immediate delisting of our Ordinary Shares and has no immediate effect on the listing or the trading of our Ordinary Shares on the Nasdaq Capital Market under our symbol “JCSE.”

 

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had a compliance period of 180 calendar days from the date of the Nasdaq Notification, or until May 2, 2023, to regain compliance with the Minimum Bid Requirement. If at any time before May 2, 2023 the closing bid of our Ordinary Shares had been at least $1.00 for a minimum of 10 consecutive business days, we would have been deemed to have regained compliance with the Minimum Bid Requirement following which the matter would have been closed. We did not regain compliance by May 2, 2023; however, we were granted additional time to qualify, until October 28, 2023, based on the fact that we met the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market with the exception of the bid price requirement. If the closing bid of our Ordinary Shares is not at least $1.00 for a minimum of 10 consecutive business days before October 28, 2023, we will be delisted from the Nasdaq Capital Market. In that event, we may appeal the determination to a Nasdaq hearings panel or consider transferring the listing and trading of our Ordinary Shares to an over-the-counter market in the United States.

 

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Additionally, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “$0.10 Rule”), our Ordinary Shares may be subject to immediate delisting from Nasdaq if our Ordinary Shares have a closing bid price of $0.10 or less for any ten consecutive trading days. In the event that we are in violation of the $0.10 Rule, Nasdaq will issue a Staff Delisting Determination with the potential opportunity for us to appeal that determination. There can be no assurance that we will be able to maintain compliance with the $0.10 Rule, particularly if the price of our Ordinary Shares declines as a result of this offering.

 

If we are unable to regain compliance with the Minimum Bid Requirement or maintain compliance with the $0.10 Rule and our Ordinary Shares are delisted from Nasdaq, 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, although 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. If we were no longer listed on Nasdaq, we would be subject to regulations in each state in which we offer our shares.

 

There may not be an active trading market for our Ordinary Shares and the trading price for our Ordinary Shares may be negatively affected by the lack of active trading.

 

We cannot assure you that there will be an active public market for our Ordinary Shares after this offering. Without an active public market for our Ordinary Shares, the market price and liquidity of our Ordinary Shares may be materially and adversely affected. The public offering price for our Ordinary Shares in this offering was determined by negotiation between us and the Placement Agent based upon several factors, and we can provide no assurance that the trading price of our Ordinary Shares will rise above the public offering price. As a result, investors in our Ordinary Shares may experience a significant decrease in the value of their Ordinary 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 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;
     
  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.

 

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

 

In addition, our Ordinary Shares have been subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Although the specific cause of such volatility is unclear, the relatively small size of our public float may amplify the impact the actions taken by a few shareholders have on the price of our Ordinary Shares, which may cause our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Since our Ordinary Shares have experienced a decline, and may continue to experience either run-ups or declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our Ordinary Shares. In addition, investors of our Ordinary Shares may experience losses, which may be material, if the price of our Ordinary Shares declines or if such investors purchase our Ordinary Shares prior to any price decline.

 

Holders of our Ordinary Shares also may not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our Ordinary Shares. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. Furthermore, extreme volatility may confuse the public investors of the value of our stock, distort the market perception of our stock price and our financial performance and public image and negatively affect the long-term liquidity of our Ordinary Shares, regardless of our actual or expected operating performance. If we continue to encounter such volatility, including any rapid stock price increases and declines seemingly unrelated to our actual or expected operating performance and financial condition or prospects, it will likely make it difficult and confusing for prospective investors to assess the rapidly changing value of our Ordinary Shares and to understand the value thereof.

 

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.

 

The market price and trading volume of our Ordinary Shares may fluctuate widely in the future, and there is no guarantee that an active and liquid public market for you to resell our Ordinary Shares in the future will continue.

 

Our trading volume has been and may continue to be volatile. With respect to such instances of trading volatility, we are not aware of any material changes in our financial condition or results of operations that would explain such price or trading volume volatility, which we believe reflect market and trading dynamics unrelated to our operating business or prospects and outside of our control. We are thus unable to predict when such instances of trading volatility will occur or how long such dynamics may last. Therefore, we cannot assure you that you will be able to sell any of our Ordinary Shares you may have purchased at a price greater than or equal to their original purchase price, or that you will be able to sell our Ordinary Shares at all.

 

The United States federal income taxation of the Pre-Funded Warrants is uncertain.

 

We and holders of our Pre-Funded Warrants may have to take positions that are not yet settled under current U.S. federal income tax law with respect to the Pre-Funded Warrants. In particular, the precise application of the Internal Revenue Code of 1986 (the “Code”) Section 883 exemption and the PFIC rules to the Pre-Funded Warrants is unclear. The Internal Revenue Service (“IRS”) may disagree with the positions taken by the Company, which could result in adverse U.S. federal income tax consequences for us and our shareholders, including holders of the Pre-Funded Warrants. Prospective investors are urged to consult their personal income tax advisers in this regard.

 

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The Class A Warrants and Pre-Funded Warrants are speculative in nature.

 

The Class A Warrants and Pre-Funded Warrants offered hereby do not confer any rights of share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire Ordinary Shares at a fixed price. Specifically, commencing on the date of issuance, holders of the Pre-Funded Warrants may acquire the Ordinary Shares issuable upon exercise of such warrants at an exercise price of $0.01 per share and holders of the Class A Warrants may acquire the Ordinary Shares issuable upon the exercise of such warrants at an assumed exercise price of $[●] per Ordinary Share. Moreover, following this offering, the market value of the Class A Warrants and Pre-Funded Warrants is uncertain and there can be no assurance that the market value of the Class A Warrants and Pre-Funded Warrants will equal or exceed their public offering price.

 

There is no public market for the Class A Warrants or Pre-Funded Warrants being offered in this offering and we do not expect one to develop.

 

There is presently no established public trading market for the Class A Warrants or Pre-Funded Warrants being offered in this offering and we do not expect a market to develop. In addition, we do not intend to apply to list the Class A Warrants or Pre-Funded Warrants on any securities exchange or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the Class A Warrants and Pre-Funded Warrants will be limited.

 

Purchasers of our Class A Warrants or Pre-Funded Warrants will not have any rights of shareholders until such Class A Warrants or Pre-Funded Warrants are exercised.

 

The Class A Warrants and Pre-Funded Warrants being offered do not confer any rights of Ordinary Share ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire Ordinary Shares at a fixed price.

 

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 in accordance with Rule 144 and Rule 701 under the Securities Act. In addition, 720,000 of the freely tradeable shares may be sold in the public market only in accordance with the prospectus contained in the registration statement pursuant to which those shares were registered under the Securities Act. 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.

 

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This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans, including our near-term business plans.

 

The Placement Agent is offering the securities in this offering on a best efforts basis. The Placement Agent is not required to purchase any securities, but will use its best efforts to sell the securities offered. As a “best efforts” offering, we are unable to predict how much of this offering will be sold, and there can be no assurance that the offering contemplated hereby will ultimately be consummated or will result in any proceeds being made available to us. The success of this offering will impact our ability to use the proceeds to execute our business plan. We may have insufficient capital to implement our business plan, potentially resulting in greater operating losses unless we are able to raise the required capital from alternative sources. There is no assurance that alternative capital, if needed, would be available on terms acceptable to us, or at all.

 

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.

 

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.

 

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%.

 

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.

 

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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 Bee Yin, 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 “Security Ownership of Certain Beneficial Owners and Management.”

 

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.

 

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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;
     
  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 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 Amended Articles, 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 Amended Articles) or to obtain copies of lists of shareholders of these companies. Our directors are not required under our Amended Memorandum or our Amended Articles 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 shareholder 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.

 

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.

 

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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 June 30, 2023. In the future, we would lose our foreign private issuer status if (i) more than 50% of our outstanding voting securities are owned by U.S. residents; and (ii) 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 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.

 

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

 

Our management will have broad discretion as to the use of the net proceeds from this offering and could use them for purposes other than those contemplated at the time of commencement of this offering. Accordingly, you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest the net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.

 

Purchasers who purchase our securities in this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit of a securities purchase agreement.

 

At the investor’s option, we will enter into a securities purchase agreement directly with institutional investors who purchase our Securities in this offering. In addition to the rights and remedies available to all purchasers in this offering under federal and state securities laws, the purchasers that enter into a securities purchase agreement will also be able to bring claims for breach of contract against us. The ability to pursue a claim for breach of contract provides those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement. Investors who do not enter into a securities purchase agreement must rely solely on this prospectus in connection with the purchase of our Securities in this offering.

 

Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our environmental, social and governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

 

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.

 

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We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access capital could be harmed.

 

Additionally, certain investors and lenders may exclude companies, such as us, from their investing portfolios altogether due to environmental, social and governance factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our then indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements. The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.

 

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.

 

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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 (i) the foreign judgment is inconsistent with a prior local judgment that is binding on the same parties; (ii) the enforcement of the foreign judgment would contravene the public policy of Singapore; (iii) the proceedings in which the foreign judgment was obtained were contrary to principles of natural justice; (iv) the foreign judgment was obtained by fraud; or (v) the enforcement of the foreign judgment amounts to the direct or indirect enforcement of a foreign penal, revenue or other public law, except where any such component of the judgement can be duly severed form the rest of the judgment sought to be enforced.

 

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. Such a determination has yet to be made by a Singapore court in a reported decision.

 

USE OF PROCEEDS

 

We estimate that the net proceeds from this offering will be approximately $[●] million, after deducting the Placement Agent fees and estimated offering expenses payable by us, and assuming no exercise of the Class A warrants or Pre-Funded Warrants being issued in this offering. However, because this is a best efforts offering and there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, the Placement Agent’s fees and net proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth on the cover page of this prospectus. The table below depicts how we plan to utilize the proceeds in the event that 25%, 50%, 75% and 100% of the securities in this offering are sold, after deducting estimated offering expenses payable by us:

 

Use of Proceeds   100%   75%   50%   25%
                     
Working capital and other general corporate purposes(1)  $[●]   $[●]   $[●]   $[●] 

 

(1) May include expenditures for growth and expansion of our business, including the acquisition of additional machinery and equipment, expenses to be incurred in seeking to identify a target business for possible acquisition and expenses of negotiating and acquiring such business, once identified. Accordingly, our management will have discretion and flexibility in applying the net proceeds of this offering.

 

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These estimates exclude the proceeds, if any, from the exercise of Class A warrants issued in this offering. If all of the Class A Warrants issued in this offering were to be exercised in cash at an assumed exercise price of $[●] per Ordinary Share, we would receive additional proceeds of approximately $[●] million. We cannot predict when or if these Class A Warrants will be exercised. It is possible that these Class A Warrants may expire and may never be exercised. Additionally, the Class A Warrants contain a cashless exercise provision that permits exercise of Class A Warrants on a cashless basis at any time where there is no effective registration statement under the Securities Act covering the issuance of the underlying Ordinary Shares.

 

The expected uses described above represent our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including [ ], and any unforeseen cash needs. As a result, our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds from this offering. Pending application of the net proceeds as described above, we intend to invest the net proceeds of this offering in short-term, investment-grade interest-bearing securities.

  

CAPITALIZATION AND INDEBTEDNESS

 

The following table sets forth our capitalization and our indebtedness as of December 31, 2022:

 

  on an actual basis; and
     
  on a pro forma as adjusted basis to reflect (i) the above; and (ii) the issuance and sale of [●] Ordinary Shares or Pre-Funded Warrants to purchase [●] Ordinary Shares and Class A Warrants to purchase [●] Ordinary Shares, in this offering at an assumed public offering price of $[●] per share, in exchange for gross proceeds of $[●] million, or net proceeds of $[●] million, after deducting Placement Agent fees 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(1)  
    Audited        
    (US$’000)     (US$’000)  
Cash and Cash Equivalents   $ 4,895     $ [●]  
                 
Bank Indebtedness   $ 7,037     $ [●]  
                 
Shareholders’ Equity                
Ordinary Shares, par value US$0.001 per share, 100,000,000 Ordinary Shares authorized, 15,020,000 Ordinary Shares outstanding on an actual basis, and [●] Ordinary Shares outstanding on an as adjusted basis (assuming this total offering is sold)   $ 15     $ [●]  
Additional paid-in capital     11,702       [●]  
Retained earnings     453       453  
Accumulated other comprehensive loss     (24 )     (24 )
Total Shareholders’ Equity     12,146       [●]  
Total Capitalization   $ 19,183     $ [●]  

 

(1) Does not reflect the potential exercise of any Class A Warrants or the issuance of Ordinary Shares underlying those Warrants. Includes Ordinary Shares underlying any Pre-Funded Warrants that may be sold in this offering.

 

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DIVIDENDS AND DIVIDEND POLICY

 

Dividends of approximately S$2.9 million and Nil were paid by the companies comprising our Group for the years ended December 31, 2021 and 2022. Such dividend payment 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: (i) operating and financial results; (ii) cash flow situation; (iii) business conditions and strategies; (iv) future operations and earnings; (v) taxation considerations; (vi) interim dividend paid, if any; (vii) capital requirement and expenditure plans; (viii) interests of shareholders; (ix) statutory and regulatory restrictions; (x) any restrictions on payment of dividends; and (xi) 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.

 

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 Units in this offering will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value of the Ordinary Shares contained in the Units. Dilution in pro forma as adjusted net tangible book value represents the difference between the 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, 2022, we had a historical net tangible book value of US$12,097,000, or US$0.81 per share. Historical net tangible book value per share represents our total tangible assets (total assets excluding goodwill and other intangible assets, net) less total liabilities, divided by the number of outstanding Ordinary Shares. After giving effect to the sale of [●] Ordinary Shares in this offering at an assumed public offering price of US$[●] per share, after deducting US$[●] in Placement Agent fees and offering expenses paid by the Company of US$[●], the pro forma as adjusted net tangible book value as of December 31, 2022 would have been approximately US$[●], or US$[●] per share. This represents an immediate increase in pro forma as adjusted net tangible book value of US$[●] per share to our existing stockholders and an immediate dilution of US$[●] 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  
Assumed public offering price per Ordinary Share or Pre-Funded Warrant and Class A Warrant   $               $        [●]  
Historical net tangible book value per share as of December 31, 2022   $ 0.81     $    
Increase in as adjusted net tangible book value per share attributable to investors in this offering   $ [●] (1)   $    
Pro forma net tangible book value per share after the offering   $       $ [●] (1)
Dilution per share to new investors participating in this offering   $       $ [●] (1)

 

(1) Assumes the sale of this entire offering

 

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Each $0.25 increase or decrease in the assumed public offering price per Ordinary Share and accompanying Class A Warrant of $[●], the last reported sale price of our Ordinary Shares on the Nasdaq Capital Market on [●], 2023, would increase or decrease the net proceeds to us from this offering by $[●], assuming that the number of Ordinary Shares and accompanying Class A Warrants offered by us, as set forth on the cover page of this prospectus, remains the same, assuming no sale of any Class A Warrants, after deducting the estimated placement agent fees and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise of any warrants issued pursuant to this offering. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering as determined between us and the Placement Agent at pricing.

 

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

 

The following selected consolidated financial data as of December 31, 2021 and 2022 and for the years ended December 31, 2020, 2021 and 2022 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.

 

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, 
   2020   2021   2022   2022 
    SGD’000    SGD’000    SGD’000    USD’000 
                     
Revenues   21,397    14,764    18,631    13,899 
Cost of revenues   (15,493)   (12,416)   (13,503)   (10,073)
Gross profit   5,904    2,348    5,128    3,826 
                     
Operating expenses:                    
Selling and marketing expenses   (20)   (22)   (27)   (20)
General and administrative expenses   (2,350)   (2,267)   (3,337)   (2,490)
Total operating expenses   (2,370)   (2,289)   (3,364)   (2,510)
                     
Income from operations   3,534    59    1,764    1,316 
                     
Other income (loss):                    
Other income   753    707    542    404 
Interest expense   (320)   (217)   (336)   (251)
Other expense   (1,623)   (550)   (545)   (406)
Change in fair value in financial instrument   1    3    2    1 
Total other loss   (1,189)   (57)   (337)   (252)
                     
Income before tax expense   2,345    2    1,427    1,064 
Income tax expense   (618)   -    (235)   (175)
Net income   1,727    2    1,192    889 
Other comprehensive income                    
Foreign currency translation gain/ (loss), net of taxes of SGDNil   54    (24)   2    1 
Total comprehensive income (loss)   1,781    (22)   1,194    890 
                     
Net income per share attributable to ordinary shareholders                    
- basic and diluted   0.14    0.00    0.08    0.06 
Weighted average number of Ordinary Shares used in computing net income per share                    
- basic and diluted   12,000,000    12,000,000    14,101,589    14,101,589 

 

(1) Calculated at the rate of US$0.7460 = 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, 
   2021   2022   2022 
   SGD’000   SGD’000   US$’000(1)  
                
Assets               
Current assets:               
Cash and cash equivalents   1,108    6,561    4,895 
Accounts receivable, net   3,220    5,635    4,204 
Prepaid expenses and other current assets, net   847    2,248    1,677 
Inventory   2,557    11,892    8,871 
Total current assets   7,732    26,336    19,647 
                
Financial instrument   243    245    183 
Property, plant and equipment, net   8,981    8,818    6,578 
Deferred financing costs   1,321    -    - 
Deferred tax assets   163    66    49 
Total non-current assets   10,708    9,129    6,810 
TOTAL ASSETS   18,440    35,465    26,457 
                
Liabilities               
Current liabilities:               
Bank loans - current   5,457    5,457    4,071 
Lease payable - current   158    280    209 
Accounts payable, accruals and other current liabilities   2,290    2,664    1,987 
Warranty liabilities   22    22    16 
Income taxes payable   -    319    238 
Contract liabilities   -    4,319    3,222 
Loan from controlling shareholder   1,523    741    553 
Total current liabilities   9,450    13,802    10,296 
                
Bank loans – non-current   4,421    3,976    2,966 
Lease payable – non-current   1,395    1,406    1,049 
Deferred tax liabilities   151    -    - 
Total non-current liabilities   5,967    5,382    4,015 
                
TOTAL LIABILITIES   15,417    19,184    14,311 
                
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    20    15 
Additional paid-in capital   3,626    15,686    11,702 
Retained earnings/(deficit)   (585)   607    453 
Accumulated other comprehensive income   (34)   (32)   (24)
Total shareholders’ equity   3,023    16,281    12,146 
                
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   18,440    35,465    26,457 

 

(1) Calculated at the rate of US$0.7460 = SGD$1, as set forth in the statistical release of the Federal Reserve System on December 31, 2022

 

39

 

 

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, 2020, 2021 and 2022, our revenue amounted to approximately S21.4 million, S$14.8 million and S$18.6 million, respectively. Our net income amounted to approximately S$1.7 million, S$2,000 and S$1.2 million for the years ended December 31, 2020, 2021 and 2022, 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 88.4%, 80.6% and 68.1%of our revenue for the years ended December 31, 2020, 2021 and 2022, respectively. In particular, sales to our largest customer amounted to approximately S$13.2 million, S$4.8 million and S$4.1 million, representing approximately 61.5%, 32.7% and 22.0% of our revenue for the years ended December 31, 2020, 2021 and 2022, 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.

 

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 57.8%, 46.3% and 57.8% of our total cost of revenues for the years ended December 31, 2020, 2021 and 2022, 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, 2020, 2021 and 2022, the majority of our raw materials were commonly available from the market and their prices have been are affected by the market forces. We monitor supply and cost trends of these raw materials and take appropriate actions to obtain the materials we need for production. We expect fluctuations in the cost of key materials to continue to affect our margins.

 

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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.

 

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.

 

Revenue

 

During the years ended December 31, 2020, 2021 and 2022, 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, 2020, 2021 and 2022:

 

   Year ended December 31, 
   2020   2021   2022 
   SGD’000   %   SGD’000   %   SGD’000   % 
                               
Sale of cleaning systems and other equipment business                              
Sale of precision cleaning systems   12,920    60.4    4,757    32.2    6,644    35.7 
Sale of other cleaning systems and other equipment   2,863    13.4    3,056    20.7    3,838    20.6 
Repair and servicing of cleaning systems and sale of related parts   1,162    5.4    1,162    7.9    961    5.1 
Sub-total   16,945    79.2    8,975    60.8    11,443    61.4 
                               
Provision of centralized dishwashing and ancillary services business                              
Provision of centralized dishwashing and general cleaning services   4,357    20.4    5,636    38.2    6,879    36.9 
Leasing of dishwashing equipment   95    0.4    153    1.0    309    1.7 
Sub-total   4,452    20.8    5,789    39.2    7,188    38.6 
                               
Total   21,397    100.0    14,764    100.0    18,631    100.0 

 

Our total revenue increased by approximately S$3.9 million or 26.2% to approximately S$18.6 million for the year ended December 31, 2022 from approximately S$14.8 million for the year ended December 31, 2021. The increase was mainly attributable to the increase in revenue generated from our sale of cleaning systems and other equipment business of approximately S$2.5 million and increase in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately S$1.4 million. The increases were mainly attributable to the recovery of business from the negative impact of COVID-19 pandemic.

 

The decrease in our total revenue by approximately S$6.6 million or 31.0% to approximately S$14.8 million for the year ended December 31, 2021 from approximately S$21.4 million for the year ended December 31, 2020 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$8.4 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.

 

41

 

 

The following table sets forth the movement in orders backlog for our sale of cleaning systems and other equipment in terms of approximate contract value of orders during the years ended December 31, 2020, 2021 and 2022.

 

   Year ended December 31, 
   2020   2021   2022 
   (SGD’000)   (SGD’000)   (SGD’000) 
                
Outstanding contract value as of beginning of year(1)   3,668    5,820    19,997 
New contract value for the year   17,995    22,208    19,515 
Revenue recognized for the year   15,783    8,031    10,462 
Outstanding contract value as of year end(2)   5,820    19,997    29,050 

 

(1) Outstanding contract value as of beginning of year represents the contract value of orders which were not completed as of the beginning of the relevant year.

 

(2) Outstanding contract value as of year end represents the contract value of ongoing orders as of the end of the relevant year that will be carried forward to the next year.

 

For the years ended December 31, 2020, 2021 and 2022, approximately 25.8%, 43.6% and 54.4% of our total revenue, respectively, was generated from customers located in Singapore and approximately 57.4%, 33.1% and 22.9% 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 16.8%, 23.3% and 22.7% of our total revenue, respectively.

 

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, 2020, 2021 and 2022, 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, 2020, 2021 and 2022:

 

   Year ended December 31, 
   2020   2021   2022 
   SGD’000   %   SGD’000   %   SGD’000   % 
                               
Singapore                              
Sale of precision cleaning systems   142    0.7    -    -    917    4.9 
Sale of other cleaning systems and other equipment   502    2.3    83    0.6    1,561    8.4 
Repair and servicing of cleaning systems and sale of related parts   431    2.0    568    3.8    468    2.5 
Provision of centralized dishware washing and general cleaning services   4,357    20.4    5,636    38.2    6,879    36.9 
Leasing of dishware washing equipment   95    0.4    153    1.0    309    1.7 
Sub-total   5,527    25.8    6,440    43.6    10,134    54.4 

 

    Year ended December 31,  
    2020     2021     2022  
    SGD’000     %     SGD’000     %     SGD’000     %  
                                     
Malaysia                                                
Sale of precision cleaning systems     11,672       54.5       4,415       29.9       3,896       20.9  
Sale of other cleaning systems and other equipment     -       -       -       -       -       -  
Repair and servicing of cleaning systems and sale of related parts     617       2.9       462       3.2       368       2.0  
Sub-total     12,289       57.4       4,877       33.1       4,264       22.9  

 

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    Year ended December 31,  
    2020     2021     2022  
    SGD’000     %     SGD’000     %     SGD’000     %  
                                     
Other countries(1)                                                
Sale of precision cleaning systems     1,106       5.2       343       2.3       357       1.9  
Sale of other cleaning systems and other equipment     2,361       11.0       2,998       20.3       3,751       20.1  
Repair and servicing of cleaning systems and sale of related parts     114       0.6       106       0.7       125       0.7  
Sub-total     3,581       16.8       3,447       23.3       4,233       22.7  
Total     21,397       100.0       14,764       100.0       18,631       100.0  

 

(1) For the years ended December 31, 2020, 2021 and 2022, other countries include the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC.

 

Singapore

 

The increase in revenue in Singapore for the year ended December 31, 2022 was mainly due to the increase in revenue generated from sales of precision and other cleaning systems and equipment from our existing and new customers by approximately S$2.4 million and provision of centralized dishwashing and general cleaning services by approximately S$1.4 million attributable to the recovery of business from the negative impact of COVID-19 pandemic.

 

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.

 

Malaysia

 

The decrease in revenue in Malaysia for the year ended December 31, 2022 was primarily attributable to the decrease in revenue from subsidiaries of a certain customer group in Malaysia of approximately S$0.5 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 which will take place in FY2022 as their progress of expansion in production facilities has been disrupted by COVID-19.

 

Other countries

 

The increase in revenue in other countries for the year ended December 31, 2022 was mainly due to the increase in orders from an existing customer in Thailand. The revenue contributed by other countries for the year ended December 31, 2021 is relatively stable as compared with the year ended December 31, 2020 with only marginal fluctuation.

 

Cost of revenues

 

During the years ended December 31, 2020, 2021 and 2022, 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, 2020, 2021 and 2022, our cost of revenues amounted to approximately S$15.5 million, S$12.4 million and S$13.5 million, respectively.

 

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    Year ended December 31,  
    2020     2021     2022  
    SGD’000     %     SGD’000     %     SGD’000     %  
                                     
Cost of sale of cleaning systems and other equipment     11,224       72.4       6,885       55.5       7,113       52.7  
Cost of provision of centralized dishwashing and ancillary services     4,269       27.6       5,531       44.5       6,390       47.3  
Total     15,493       100.0       12,416       100.0       13,503       100.0  

 

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, 2020, 2021 and 2022:

 

    Year ended December 31,  
    2020     2021     2022  
          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     4,601       35.6       1,509       30.8       2,657       40.5  
Sale of other cleaning systems and other equipment     847       29.6       475       15.9       1,456       37.2  
Repair and servicing of cleaning systems and sale of related parts     273       23.4       106       9.7       217       22.6  
Sub-total/overall     5,721       33.8       2,090       23.3       4,330       40.8  

 

    Year ended December 31,  
    2020     2021     2022  
          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     183       4.1       258       4.5       798       11.1  
Total/overall     5,904       27.6       2,348       15.9       5,128       27.5  

 

Our total gross profit amounted to approximately S$5.9 million, S$2.3 million and S$5.1 million for the years ended December 31, 2020, 2021 and 2022, respectively. Our overall gross profit margins were approximately 27.6%, 15.9% and 27.5% for the years ended December 31, 2020, 2021 and 2022, respectively. Our total gross profit increased during the year ended December 31, 2022, which was generally in line with our revenue growth and revenue contributed from precision cleaning machines during the year. Our total gross profit during the year ended December 31, 2021 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 which was mainly due to the decrease in our revenue from the sales of precision cleaning systems and other equipment business.

 

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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 marketing expenses for the years ended December 31, 2020, 2021 and 2022:

 

    Year ended December 31,  
    2020     2021     2022  
    SGD’000     SGD’000     SGD’000  
                   
Promotion and marketing expenses     12       13       12  
Transportation expenses     8       9       15  
Total     20       22       27  

 

Our selling and marketing expenses amounted to approximately S$20,000, S$22,000 and S$27,000 for the years ended December 31, 2020, 2021 and 2022, respectively. The increase for the year ended December 31, 2022 was mainly due to the increase in transportation expenses for overseas business trips to customers’ sites. 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.

 

General and administrative expenses

 

Our general and 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; (vii) directors’ and officers’ liability insurance; and (viii) miscellaneous expenses. The following table sets forth the breakdown of our administrative expenses for the years ended December 31, 2020, 2021 and 2022:

 

    Year ended December 31,  
    2020     2021     2022  
    SGD’000     %     SGD’000     %     SGD’000     %  
                                     
Staff costs     1,412       60.1       1,383       61.0       2,090       62.6  
Depreciation     339       14.4       379       16.7       409       12.2  
Office supplies and upkeep expenses     160       6.8       150       6.6       132       3.9  
Travelling and entertainment     123       5.2       105       4.6       158       4.7  
Legal and professional fees     120       5.1       49       2.2       197       5.9  
Property and related expenses     147       6.3       176       7.8       170       5.1  
Directors’ and officers’ liability insurance                     -       -       136       4.1  
Miscellaneous expenses     49       2.1       25       1.1       45       1.4  
Total     2,350       100.0       2,267       100.0       3,337       100.0  

 

Our general and administrative expenses amounted to approximately S$2.4 million, S$2.3 million and S$3.3 million for the years ended December 31, 2020, 2021 and 2022, respectively, representing approximately 11.0%, 15.4% and 17.9% 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 increased by approximately S$0.7 million mainly due to the directors’ fees paid following the appointment of directors from January 1, 2022, recruitment of operation manager and mechanical and software engineers and increments and promotions to existing staff.

 

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. The increase in depreciation is mainly due to amortization of newly acquired computer equipment, hardware and system.

 

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 gatherings and refreshments for our staff.

 

45

 

 

Legal and professional fees mainly represented auditor’s remuneration and other professional fees for training and development and staff recruitment services. The increase was mainly due to the increase in audit fee.

 

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

 

Directors’ and officers’ liability insurance relates to liability insurance payable to the directors and officers of a company, or to the organization itself, as indemnification (reimbursement) for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.

 

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

 

Other income

 

Other income of our Group amounted to approximately S$0.8 million, S$0.7 million and S$0.5 million for the years ended December 31, 2020, 2021 and 2022, respectively. The income was mainly derived from wholesale sales of STICO anti-slip shoes, Jobs Support Scheme, Jobs Growth Incentive, Government capability development grant and gain on disposal of plant and equipment. The following table sets forth the breakdown of our other income for these periods:

 

   Year ended December 31, 
   2020   2021   2022 
   SGD’000   SGD’000   SGD’000 
                
Wholesale sales of STICO anti-slip shoes   97    120    159 
Impairment loss reversed   -    49    - 
Jobs Support Scheme   320    87    10 
Jobs Growth Incentive   -    72    72 
Government capability development grant        -    150 
Gain on disposal of plant and equipment   -    71    - 
Others(1)   336    308    151 
Total   753    707    542 

 

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

 

Wholesale sales of STICO anti-slip shoes represented the income generated from wholesale of STICO anti-slip shoes mainly to food and beverage establishments in Singapore, which amounted to approximately S$0.1 million, S$0.1 million and S$0.2 million for the years ended December 31, 2020, 2021 and 2022, respectively. For the years ended December 31, 2021 and 2022, the wholesale sales of STICO anti-slip shoes increased by approximately 23.7% and 32.5%, respectively, due to resumption of demand from food and beverage establishments.

 

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 and further extended to September 2021 with final payout received in March 2022.

 

Jobs Growth Incentive is an initiative introduced by the Singapore Government in August 2020 to support local hiring from September 2020 to March 2023, to provide wage support to employers to help them in hiring local employees by co-funding monthly salaries paid to each local employee.

 

The government capability development grant for the year ended December 31, 2022, is a financial support from the Singapore government to support the capabilities in development of autonomous and robotic products.

 

46

 

 

Interest expense

 

Our interest expense arose from lease liabilities and secured bank loans. For the years ended December 31, 2021 and 2022, our interest expense increased by approximately S$0.1 million mainly due to an increase in interest rates. For the years ended December 31, 2020 and 2021, our interest expense decreased by approximately S$0.1 million mainly due to repayment of bank borrowings during the year ended December 31, 2021. 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 cost of STICO anti-slip shoes, bank charges and extraordinary expenses. The following table sets forth the breakdown of our other expenses for the years ended December 31, 2020, 2021 and 2022:

 

   Year ended December 31, 
   2020   2021   2022 
   SGD’000   SGD’000   SGD’000 
                
Cost of STICO anti-slip shoes   72    96    127 
Bank charges   28    22    36 
Extraordinary expenses   1,264    234    145 
Others(1)   259    198    237