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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

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

 

OR

 

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

For the Fiscal Year Ended December 31, 2023

 

OR

 

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

 

OR

 

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

 

Commission File Number: 001-41335

 

JE CLEANTECH HOLDINGS LIMITED

(Exact name of Registrant as specified in its charter)

 

Cayman Islands

(Jurisdiction of incorporation or organization)

 

3 Woodlands Sector 1

Singapore 738361 

(Address of principal executive offices)

 

Bee Yin Hong, CEO

Tel: +65 6368 4198

Email: Elise.hong@jcs-echigo.com.sg

3 Woodlands Sector 1

Singapore 738361 

(Name, Telephone, email and/or fax number and address of Company Contact Person)

 

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

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Ordinary Shares, par value US$0.001   JCSE   The Nasdaq Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:1 None

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

 

5,006,666 Ordinary Shares, $0.003 par value, at December 31, 2023

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.

Yes ☐ No

 

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

Yes ☐ No

 

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

Yes ☒ No ☐

 

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

Yes ☒ No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.

 

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-accelerated filer
    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 13(a) of the Exchange Act.

 

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

 

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

 

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

 

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

 

U.S. GAAP   International Financial Reporting Standards as issued by the International Accounting Standards Board ☐   Other ☐

 

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

Item 17 ☐ Item 18 ☐

 

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

Yes ☐ No

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
PART I    
     
Item 1. Identity of Directors, Senior Management and Advisors 3
Item 2. Offer Statistics and Expected Timetable 3
Item 3. Key Information 3
Item 4. Information on the Company 21
Item 4A. Unresolved Staff Comments 58
Item 5. Operating and Financial Review and Prospects 58
Item 6. Directors, Senior Management and Employees 78
Item 7. Major Shareholders and Related Party Transactions 84
Item 8. Financial Information 86
Item 9. The Offer and Listing 86
Item 10. Additional Information 86
Item 11. Quantitative and Qualitative Disclosures about Market Risk 97
Item 12. Description of Securities Other Than Equity Securities 97
     
PART II    
     
Item 13. Defaults, Dividend Arrearages and Delinquencies 97
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 97
Item 15. Controls and Procedures 97
Item 16. Reserved 98
Item 16A. Audit Committee Financial Expert 98
Item 16B. Code of Ethics 98
Item 16C. Principal Accountant Fees and Services 99
Item 16D. Exemptions from the Listing Standards for Audit Committees 99
Item 16E. Purchases of Equity Securities by the Issuer and Affiliates Purchasers 99
Item 16F. Changes in Registrant’s Certifying Accountants 99
Item 16G. Corporate Governance 99
Item 16H. Mine Safety Disclosure 100
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 100
Item 16J. Insider Trading Policies 100
Item 16K. Cybersecurity 100
     
PART III    
     
Item 17. Financial Statements 101
Item 18. Financial Statements 101
Item 19. Exhibits 102
SIGNATURES 103

 

2
 

 

FORWARD-LOOKING STATEMENTS

 

This Annual Report on Form 20-F contains forward-looking statements. A forward-looking statement is a projection about a future event or result, and whether the statement comes true is subject to many risks and uncertainties. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. The actual results or activities of the Company will likely differ from projected results or activities of the Company as described in this Annual Report, and such differences could be material.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results and performance of the Company to be different from any future results, performance and achievements expressed or implied by these statements. In other words, our performance might be quite different from what the forward-looking statements imply. You should review carefully all information included in this Annual Report.

 

You should rely only on the forward-looking statements that reflect management’s view as of the date of this Annual Report. We undertake no obligation to publicly revise or update these forward-looking statements to reflect subsequent events or circumstances. You should also carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). The Private Securities Reform Act of 1995 contains a safe harbor for forward-looking statements on which the Company relies in making such disclosures. In connection with the “safe harbor,” we are hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statements made by us or on our behalf. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors” under Item 3. - “Key Information.”

 

FINANCIAL STATEMENTS AND CURRENCY PRESENTATION

 

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and publish our financial statements in United States Dollars.

 

REFERENCES

 

In this Annual Report, “China” refers to all parts of the People’s Republic of China other than the Special Administrative Region of Hong Kong. The terms “we,” “our,” “us,” “the Group” and the “Company” refer to JE Cleantech Holdings Limited and, where the context so requires or suggests, our direct and indirect subsidiaries. References to “dollars,” “U.S. Dollars” or “US$” are to United States Dollars and “SGD” are to Singaporean Dollars.

 

PART I

 

Item 1. Identity of Directors, Senior Management and Advisors

 

Not Applicable

 

Item 2. Offer Statistics and Expected Timetable

 

Not Applicable

 

Item 3. Key Information

 

A. Reserved

 

B. Capitalization and Indebtedness

 

Not applicable

 

C. Reasons for the Offer and Use of Proceeds.

 

Not applicable

 

D. Risk Factors

 

You should carefully consider the following risks, together with all other information included in this Annual Report. The realization of any of the risks described below could have a material adverse effect on our business, results of operations and future prospects.

 

3
 

 

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 80.6%, 68.1% and 66.1% of our revenue for the years ended December 31, 2021, 2022 and 2023, respectively. In particular, sales to our largest customer group, which is principally engaged in the manufacture of hard disk drives (“HDD”) and semiconductors, amounted to approximately SGD4.8 million, SGD4.1 million and SGD4.4 million, representing approximately 32.7%, 22.0% and 24.2% of our revenue, for the years ended December 31, 2021, 2022 and 2023, 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. Our centralized dishwashing services and general cleaning services business provided centralized dishwashing services to 54, 60 and 123 customer groups during the years ended December 31, 2021, 2022 and 2023, respectively, and provided general cleaning services to 7, 3 and 4 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.

 

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, 2021, 2022 and 2023. Our sales to that customer group amounted to approximately SGD4.8 million, SGD4.1 million and SGD4.4 million for the years ended December 31, 2021, 2022 and 2023, respectively, which accounted for approximately 32.7%, 22.0% and 24.2% of our total revenue for the years ended December 31, 2021, 2022 and 2023, respectively. 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.

 

4
 

 

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

 

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

 

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

 

Additionally, there may be accidents or injuries to our workers caused by the use of machinery or equipment at our production and processing facilities, which could interrupt our operations and result in legal and regulatory liabilities. While none of our workers were involved in any work-related accidents or suffered any work-related injuries during the years ended December 31, 2021, 2022 and 2023, 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 prospect 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 that 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.

 

5
 

 

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 are important to the future development of our business. If any of our directors, any members of our senior management or either of our key employees were to terminate their services or employment, there is no assurance that we would be able to find suitable replacements in a timely manner. The loss of services of either of these key personnel and/or the inability to identify, hire, train and retain other qualified engineering, technical and operations personnel in the future may materially and adversely affect our business, financial condition, results of operations and prospects.

 

As Ms. 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 carry key person life insurance on the life of Ms. Hong. 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 fulfill 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 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 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.

 

6
 

 

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

 

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

 

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

 

Expenses for raw materials, such as stainless steel, aluminum and electronic components, constitute most of our cost of revenues, representing approximately 43.5%, 57.8% and 40.5% of our total cost of revenues for the years ended December 31, 2021, 2022 and 2023, 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, 2021, 2022 and 2023 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.

 

7
 

 

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

 

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

 

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

 

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

 

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

 

Increased labor costs could affect our financial performance.

 

We intend to recruit additional staff to expand our research and development and engineering team and to build up our business development team. Both the cleaning equipment industry and the dishwashing industry face labor shortages and rising labor costs in Singapore. This may result in a need to employ more foreign workers for companies involved in the manufacturing sector in Singapore. If we are unable to recruit and retain sufficient and qualified staff, including foreign workers, for us to execute our business, or if we have to increase our costs to attract and maintain such staff, our results of operations and financial performance may be materially and adversely affected and our future growth may be inhibited. Further, we may be unable to recruit additional staff necessary to implement our business strategies. We incurred employee benefit expenses of approximately SGD3.2 million, SGD4.5 million and SGD4.0 million, representing approximately 21.6%, 24.2% and 22.2% of our total revenue for the years ended December 31, 2021, 2022 and 2023, 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.

 

8
 

 

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

 

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

 

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

 

We are exposed to the credit risks of our customers.

 

We extend credit terms to our customers. Our average accounts receivable turnover days were approximately 86.7 days and 96.7 days for the years ended December 31, 2022 and 2023, 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, 2021, 2022 and 2023, or during the period from January 1, 2024 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.

 

9
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

We are exposed to the risk of fraud or other misconduct by our employees and other third parties. Misconduct by such parties may include theft, unauthorized business transactions, bribery or breaches of applicable laws and regulations, which may be difficult to detect or prevent. We are not aware of any instances of fraud, theft and other misconduct involving employees and other third parties that had any material and adverse impact on our business and results of operations during the years ended December 31, 2021, 2022 and 2023, or during the period from January 1, 2024 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.

 

10
 

 

We may be harmed by negative publicity.

 

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

 

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

 

Our insurance coverage may be inadequate.

 

We maintain insurance coverage for our major assets and operations, including insurance covering plant and machinery, fire, theft, accident and key person life insurance. 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.

 

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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 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 or in any of the other countries in which we have significant operations, as an economic slowdown and/or negative business sentiment could potentially have an adverse impact on our business and operations.

 

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 are denominated in United States dollars during the years ended December 31, 2021, 2022 and 2023. To the extent that our Group’s sales, 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, 2022 and 2023, we had inventories of SGD11.9 million and SGD14.1 million, respectively. The higher inventory for the year ended December 31, 2023 was primarily the result of purchasing more raw materials in anticipation of slower delivery times due to supply chain issues and increased orders received for precision cleaning systems. Our inventory turnover days for the years ended December 31, 2022 and 2023 were 122.0 days and 346.7 days, respectively. The higher number of days for the year ended December 31, 2023 was mainly due to the extension by a major customer of its delivery schedule for certain projects to 2024 and 2026. 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.

 

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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 to communicate with our staff, customers, partners and suppliers. We also depend on various third-party software and cloud-based storage platforms as well as other information technology systems in our business operations. These systems may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our control.

 

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

 

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

 

Risks Related to Our Securities

 

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 “2022 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 Listing Rule”). As of November 3, 2023, we regained compliance with the Minimum Bid Requirement Listing Rule, and the matter was closed.

 

On December 14, 2023, we received another written notification from the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “2023 Nasdaq Notification”) stating that our Ordinary Shares failed to maintain a minimum bid price of $1.00 over the last 30 consecutive business days as required by the Minimum Bid Price Requirement Listing Rule. Receipt of the 2023 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 the symbol “JCSE.”

 

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we now have a compliance period of 180 calendar days from the date of the 2023 Nasdaq Notification, or until June 11, 2024, to regain compliance with the Minimum Bid Requirement Listing Rule. In the event that we do not regain compliance by June 11, 2024, we may be eligible for additional time to qualify. In the event that we do not regain compliance with the Minimum Bid Price Requirement Listing Rule by June 11, 2024, and are ineligible for an additional grace period, Nasdaq will provide further written notice that our Ordinary Shares are subject to delisting 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 the OTCQX of the OTC Markets. See “Item 4. Information on the Company - History of the Company - Recent and Other Developments - Nasdaq Deficiency.”

 

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If our Ordinary Shares are delisted from Nasdaq, we could face significant material adverse consequences, including:

 

  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
     
  decreased ability to issue additional securities or obtain additional financing in the future.

 

In addition, 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.

 

Certain recent initial public offerings of companies with public floats comparable to our public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of their businesses. We have experienced similar volatility, which makes it difficult to assess the value of our Ordinary Shares.

 

In addition to the risks addressed below in “- An active trading market for our Ordinary Shares may not continue and the trading price for our Ordinary Shares may fluctuate significantly,” our Ordinary Shares have been subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with public floats and initial public offering sizes comparable to ours have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective companies’ underlying performance. Although the specific cause of such volatility is unclear, our public float may amplify the impact that 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 may not be able to readily liquidate their investments or may be forced to sell at depressed prices due to low trading volume. 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 public investors regarding 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 understand the value thereof.

 

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

 

We cannot assure you that an active public market for our Ordinary Shares will continue. If an active public market for our Ordinary Shares does not continue, the market price and liquidity of our Ordinary Shares may be materially and adversely affected. As a result, investors in our Ordinary Shares may experience a significant decrease in the value of their Ordinary Shares.

 

The trading price and trading volume 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, such as 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.

 

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.

 

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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 5,006,666 Ordinary Shares outstanding, of which 1,806,666 shares are freely tradable without restriction or further registration under the Securities Act. The remaining 3,200,000 shares, all of which are beneficially owned by our controlling shareholder, may also be sold in the public market in the future in accordance with Rule 144 and Rule 701 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.

 

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.

 

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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.

 

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. Her interests may not be aligned with the interests of our other shareholders, and she 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 “Item 7. Major Shareholders and Related Party Transactions - Major Shareholders.”

 

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

 

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

 

a majority of our board of directors must be independent directors;

 

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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 and for our compensation and our corporate governance and nomination committees to be composed entirely of independent directors, that may change in the future so long as we remain a controlled company.

 

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

 

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

 

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

 

have a majority of the board of directors consist of independent directors;
   
require non-management directors to meet on a regular basis without management present;
   
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. Although we intend to have a majority of independent directors and for our compensation and our corporate governance and nomination committees to be composed entirely of independent directors, that may change in the future.

 

However, our audit committee is required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on 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.

 

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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 and Restated Memorandum of Association (our “Amended and Restated Memorandum”) and our Amended and Restated Articles of Association (our “Amended and Restated 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 and Restated Memorandum and Amended and Restated Articles) or to obtain copies of lists of shareholders of these companies. Our directors are not required under our Amended and Restated Memorandum or our Amended and Restated 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 do not plan to follow home country practice with respect to most corporate governance matters. However, if we so choose, we may do so in the future. 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.

 

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 and Singapore 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.

 

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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.

 

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, 2024. 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.

 

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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.

 

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.

 

Item 4. Information on the Company

 

History of the Company

 

Our Group’s history can be traced back to November 1999 when JCS-Echigo Pte. Ltd. (“JCS”) was founded by Ms. Hong Bee Yin, our Chairman, Executive Director and Chief Executive Officer. 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 for our customers. 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.

 

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

 

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”). As of November 3, 2023, we regained compliance with the Minimum Bid Requirement Listing Rule, and the matter was closed.

 

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On December 14, 2023, we received another written notification from the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “2023 Nasdaq Notification”) stating that our Ordinary Shares failed to maintain a minimum bid price of $1.00 over the last 30 consecutive business days as required by the Minimum Bid Price Requirement Listing Rule. Receipt of the 2023 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 the symbol “JCSE.”

 

Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we now have a compliance period of 180 calendar days from the date of the 2023 Nasdaq Notification, or until June 11, 2024, to regain compliance with the Minimum Bid Requirement Listing Rule. If at any time before June 11, 2024, the closing bid of our Ordinary Shares is at least $1.00 for a minimum of 10 consecutive business days, we will be deemed to have regained compliance with the Minimum Bid Requirement Listing Rule following which Nasdaq will provide a written confirmation of compliance and the matter will be closed.

 

In the event that we do not regain compliance by June 11, 2024, we may be eligible for additional time to qualify. To qualify for additional time, we will be required to meet 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.

 

In the event that we do not regain compliance with the Minimum Bid Price Requirement Listing Rule by June 11, 2024, and are ineligible for an additional grace period, Nasdaq will provide further written notice that our Ordinary Shares are subject to delisting 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 the OTCQX of the OTC Markets. See “Item 3D - Risk Factors - Risks Related to Our Securities - We may not be able to maintain compliance with Nasdaq’s continued listing requirements” for information regarding the effects of transferring trading to the OTC Markets.

 

We intend to continuously monitor the closing bid price of our Ordinary Shares. Receipt of the 2023 Nasdaq Notification has no effect on our business operations.

 

Share Consolidation

 

At a Special Meeting of Stockholders held on August 29, 2023, our members (Stockholders) approved a share consolidation (the “Share Consolidation”) and granted our Board of Directors the authority to determine the final ratio and when to proceed with the Share Consolidation.

 

We effected the Share Consolidation at a ratio of 1-for-3, effective as of 11:59 pm on October 13, 2023 (the “Effective Time”), in order to regain compliance with the minimum $1.00 bid price per share requirement of Nasdaq’s Marketplace Rule 5450(a)(1). Our Ordinary Shares began trading on a Share Consolidation-adjusted basis on Nasdaq as of the opening of trading on October 16, 2023, under the existing ticker symbol “JCSE. The CUSIP number for the Company’s Ordinary Shares changed to G50875 205 following the Share Consolidation.

 

As of the Effective Time, every three shares of our issued and outstanding Ordinary Shares were combined into one issued and outstanding Ordinary Share, thereby reducing the number of outstanding shares from 15,020,000 to 5,006,666. The total number of authorized Ordinary Shares was reduced from 100,000,000 to 33,333,333.33, and the par value changed from $0.001 per share to $0.003 per share. No fractional Ordinary Shares were issued in connection with the Share Consolidation, and any shareholders of record who otherwise would have been entitled to receive a fraction of a share because they held a number of pre-consolidation Ordinary Shares not evenly divisible by three became entitled to receive such number of Ordinary Shares as rounded down to the nearest whole share.

 

As of the Effective Time, proportional adjustments were also made to the number of Ordinary Shares issuable upon the exercise of any outstanding stock options, the number of shares issuable pursuant to outstanding restricted stock awards and the number of shares authorized and reserved for issuance pursuant to the Company’s 2022 Equity Incentive Plan. The exercise prices and stock price targets of any outstanding stock options, warrants and equity awards were also proportionately adjusted, as applicable.

 

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Following the Share Consolidation, the daily closing bid price of our Ordinary Shares remained above $1.00 per share for ten consecutive business days from October 16, 2023 to October 27, 2023. Consequently, we were in compliance with all applicable Nasdaq listing standards and the prior bid price deficiency matter was closed.

 

Corporate Structure

 

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

 

In April 2022, we closed on the sale of 3,020,000 newly issued Ordinary Shares and Triple Business Limited sold 750,000 of our Ordinary Shares in our Initial Public Offering. See “Item 7. Major Shareholders and Related Party Transactions - Major Shareholders” for information on the current shareholdings of our major shareholders.

 

Organization Chart

 

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

 

 

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Entities

 

A description of our subsidiaries is set out below.

 

JE Cleantech International Limited (“JEC International”)

 

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

 

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

 

JCS-Echigo Pte. Ltd. (“JCS”)

 

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

 

Hygieia Warewashing Pte. Ltd. (“Hygieia”)

 

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

 

Evoluxe Pte. Ltd. (“Evoluxe”)

 

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

 

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Key Milestones

 

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

 

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

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

     
    We completed our first order for a cassette washing system for a customer in the HDD industry.
     
2007   We registered our first patent in Singapore under JCS for a cleaning process and apparatus.
     
2010   Hygieia was established.
     
2011   We completed our first order for a medical cleaning system.
     
2012   We completed our first order for a dish cleaning system.
     
2013   Hygieia commenced provision of centralized dishwashing services at a customer’s premises.
     
2014   We established the Hygieia Facility.
     
2018   We received an invitation from a statutory board in Singapore to showcase a prototype of a robot floor scrubber for the interior of public trains.
     
2022   We completed our Initial Public Offering.
     
    Our Company was listed on Nasdaq.

 

Business of Our Operating Subsidiaries

 

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 cleaning systems business started in 2006 and we design, develop, manufacture and sell cleaning systems for various industrial end-use applications to customers mainly in Singapore and Malaysia. We have also provided centralized dishwashing since 2013 and general cleaning services since 2015, mainly for food and beverage establishments in Singapore. We are also a leading centralized dishwashing services provider in Singapore.

 

For the years ended December 31, 2021, 2022 and 2023, our Group generated approximately SGD9.0 million, SGD11.4 million and SGD11.0 million of revenue from our sale of cleaning systems and other equipment business, representing approximately 60.8%, 61.4% and 61.0% of our total revenue, respectively.

 

For the years ended December 31, 2021, 2022 and 2023, our Group generated approximately SGD5.8 million, SGD7.8 million and SGD7.0 of revenue from our provision of centralized dishwashing and ancillary services business, representing approximately 39.2%, 38.6% and 39.0% of our total revenue, respectively.

 

The portion of our revenue from each business line has not changed substantially through March 31, 2024.

 

Our Products and Services

 

Our Products

 

The cleaning systems and other equipment we manufacture and sell can be categorized into four different categories, namely aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment, such as filtration units. The product lives of our cleaning systems and other equipment range from two to ten years.

 

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While the focus of our sale of cleaning systems and other equipment business is on precision cleaning, we are also able to design, develop and manufacture other cleaning systems for various industrial end-use applications using our R&D and engineering capabilities.

 

Depending on our customers’ requirements and specifications, our cleaning systems are designed to enable our users to monitor various parameters and control the cleaning system or equipment. This enables our customers to monitor critical data and information such as water level, wash and rinse tank temperatures, flow rate of water and chemicals, megasonic or ultrasonic generator power, ultrasonic or megasonic frequency and pH value of the chemicals and waste water. Such critical data and information are crucial to our customers for their cleaning systems, particularly in the HDD, semiconductor and industrial electronic equipment/product manufacturing industries.

 

Our cleaning systems are mainly designed for precision cleaning, with features such as particle filtration, ultrasonic or megasonic rinses with a wide range of frequencies, high pressure drying technology, high flow rate spray and deionized water rinses, which are designed for effective removal of contaminants and to minimize particle generation and entrapment. In particular, precision cleaning systems to be installed in cleanrooms (enclosed spaces in which airborne particulates, contaminants and pollutants are kept within strict limits), such as those sold to HDD customers, will need to meet stringent cleanliness standards and requirements, and are also equipped with High Efficiency Particulate Air (HEPA) filters to trap particles that are 0.3 microns and larger in size and/or Ultra Low Particulate Air (ULPA) filters to trap particles that are 0.12 microns and larger in size, in order to ensure stringent cleanliness performance.

 

Our cleaning systems are designed and developed for megasonic cleaning or ultrasonic cleaning, and have megasonic or ultrasonic generators to generate rinses with a wide range of frequencies. In particular, megasonic cleaning uses higher frequencies to produce controlled cavitations, with cleaning bubbles that are smaller and less energetic but more numerous, thereby providing more gentle cleaning of fragile and delicate components and the removal of microscopic contaminants. Megasonic cleaning also reduces or eliminates cavitation erosion and the likelihood of surface damage to the product being cleaned.

 

The table below sets forth the revenue generated from our sale of cleaning systems and other equipment by product type during the years ended December 31, 2021, 2022 and 2023:

 

   2021   2022   2023 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Aqueous washing systems   4,757    60.9    5,171    49.3    5,600    55.0 
Plating and cleaning systems   -    -    -    -    -    - 
Other equipment   3,056    39.1    5,311    50.7    4,581    45.0 
Total   7,813    100.0    10,482    100.0    10,181    100.0 

 

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The table below sets out the features and major types of industrial end-use applications of the different types of cleaning systems:

 

 

Our cleaning systems are designed and customized based on our customers’ requirements and specifications, and accordingly the cleaning systems that we manufacture and sell are of varying sizes and have different features and functions. Our cleaning systems also are comprised of different modules and components, parts and materials and the production and manufacturing process for each cleaning system will vary between orders, depending on the complexity of the design and the component lead time.

 

In addition, we also provide repair and servicing of the cleaning systems that we sell to our customers, and we also sell related parts used in such cleaning systems which we purchase from third party suppliers such as proximity sensors and transducer plates. Provision of repair and servicing of cleaning systems and sale of related parts amounted to approximately SGD1.2 million, SGD1.0 million and SGD0.8 million in revenue, representing approximately 7.9%, 5.2% and 4.5% of our total revenue, for the years ended December 31, 2021, 2022 and 2023, respectively.

 

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We are the sole distributor of STICO anti-slip shoes in Singapore, and our customers are mainly food and beverage establishments in Singapore. The STICO anti-slip shoes are made of ethylene-vinyl acetate (EVA) material and are light with an anti-slip resistance function, making them suitable for wear on wet and oily surfaces. Sale of such STICO anti-slip shoes amounted to approximately SGD120,000, SGD159,000 and SGD92,000 in revenue, recognized as other income, for the years ended December 31, 2021, 2022 and 2023, respectively.

 

We generally provide a one-year warranty period for the cleaning systems manufactured and sold to our customers from acceptance of delivery of such cleaning systems. During the warranty period, we offer free replacement for components and related parts, as well as repair and servicing of our cleaning systems. After expiry of the warranty period, repair and maintenance services will be provided with additional charges, based on the complexity of the services and cost of components required for any such repair or maintenance. Other equipment is warranted to be in good working order without faulty workmanship or faulty materials. We generally do not offer any product return or refunds for our cleaning systems and other equipment as our customers acknowledge that our products are functional and met their technical specifications upon delivery and inspection by them.

 

Our Services

 

We provide centralized dishwashing services at our Hygieia Facility in Singapore. Leveraging on our expertise in designing, developing and manufacturing cleaning systems, we set up our Hygieia Facility in 2014 with semi-automated washing lines, which are designed and manufactured in-house, for our centralized dishwashing operations. As of the date of this Annual Report, four semi-automated dishwashing lines are installed at our Hygieia Facility, of which two are for washing Halal dishware and another two are for washing non-Halal dishware. Our dishwashing lines have the flexibility to process dishware made of different materials including melamine, stainless steel, porcelain and glass. The Halal washing lines at our Hygieia Facility have obtained a Halal certification, and are thus suitable for the washing of Halal dishware.

 

Incorporating our experience and know-how from precision cleaning, each of our in-house designed semi-automated washing lines are over 20 meters in length and are designed for automated cleaning and washing of dishware, with high capacity to handle large volume and each washing line can wash up to 20 to 30 tubs per hour, depending on the size and number of items in each tub.

 

Our washing lines also have proper segregation to minimize cross contamination. Each of the washing lines at our Hygieia Facility is standalone and separate, and the configuration of our Hygieia Facility is such that all the soiled dishware will be loaded on the respective washing lines at the same end and the cleaned dishware is removed and unloaded from the washing lines at the other end, thus keeping the soiled dishware and tubs completely separate from the cleaned dishware and tubs and Halal dishware completely separate from the non-Halal dishware. Our technical support team at our Hygieia Facility oversees our centralized dishwashing operations and provides maintenance services for our washing lines in order to ensure high reliability for our customers.

 

Soiled dishware is collected from our customers’ premises and transported to our Hygieia Facility for centralized dishwashing and then sent back to our customers’ premises daily throughout the year. As the soiled dishware can be loaded into our washing lines without the need for pre-rinsing, this removes the need for dishwashers at our customers’ premises and saves time and labor costs. The risks of contamination due to food remnants or cleaning detergent is also eradicated. Our off-site centralized dishwashing services also allows our customers to cut down on manpower needed to wash dishware as well as the space allocated to dishwashing in order to maximize the dining area.

 

Since 2015, we also provide general cleaning services to food courts and hawker centers in Singapore, which comprise off-site centralized dishwashing services and on-site cleaning services. For such general cleaning services, we provide the off-site centralized dishwashing services at our Hygieia Facility and generally outsource the on-site cleaning services to third party sub-contractors. Such customers enter into general cleaning service contracts with our Group to appoint us as the main contractor to provide integrated cleaning solutions and services for their food courts or hawker centers, thereby reducing their administrative burden in having to liaise with various service providers for the cleaning of different aspects of the food and beverage establishment. As our Group specializes in centralized dishwashing services, we generally outsource the labor-intensive on-site cleaning services to our sub-contractors in order to focus our resources on our core competencies. Such on-site cleaning services include, among others, cleaning and maintenance of the entire food and beverage establishment and pest control, as well as the removal and disposal of food waste, litter, rubbish and refuse.

 

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We typically enter into contracts for our provision of centralized dishwashing and general cleaning services with our customers for a term of one to two years. In view of the continued long-term relationship of at least three to four years with most of the customer groups with whom the Group has expiring contracts, we are confident that the Group will be able to renew those contracts upon expiry.

 

We generally charge our customers a fixed monthly fee for both our centralized dishwashing services and general cleaning services, and additional fees if extra services are required. Such extra services include ad hoc logistics services and extra manpower for the decolorization or de-staining of the dishware. Our sub-contractors are then paid a monthly fee for their on-site cleaning services, depending on the number of on-site staff required to work at the relevant food and beverage establishment during the relevant period. For further details, please refer to the paragraphs headed “Key contract terms with customers - Provision of general cleaning services” and “Sub-contracting” in this section.

 

Dishwashing equipment that we lease to customers

 

We also provide leasing services of dishwashing equipment to our customers, mainly for use at food and beverage establishments in Singapore. The terms of such leases are typically for a period of one to two year(s) and renew automatically, and our customers are charged a fixed monthly fee for such leasing services. For further details, please refer to the paragraphs headed “Key contract terms with customers- Provision of dishwashing equipment leasing services.” The dishwashing equipment leased to our customers typically enables a food and beverage establishment to wash up to 150 racks of items per hour, depending on the size of the equipment. Such dishwashing equipment is designed and manufactured in-house and can be customized to accommodate the needs of different customers.

 

Sale of Cleaning Systems

 

The cleaning systems designed, developed, manufactured and sold by our Group can generally be divided into two categories, namely precision cleaning systems and other cleaning systems, and are designed and customized based on our customers’ requirements and specifications. Precision cleaning systems consist of equipment and machines designed for the cleaning of critical surfaces in precision equipment with minimal particle generation and entrapment. Such cleaning processes aim to meet a measured limit of contaminants such as the particle count and/or non-volatile residue requirements, which are supplied by the customer or industry standards. Our cleaning systems are generally sold to HDD, semiconductor manufacturers or industrial electronic equipment/product manufacturers and are designed for cleaning of surfaces and product parts in various industrial end-use applications. Leveraging on our engineering know-how and expertise, we are able to design, develop and manufacture quality and customized products that suit our customers’ varying needs. Ancillary to our sale of cleaning systems, our Group also manufactures and sells other equipment such as filtration units, provides repair and servicing of cleaning systems and sells related parts.

 

Design, Development and Sale Process

 

A brief description of our design and development process of our cleaning systems is set out as follows:

 

(1) Customers contact our sales team to inquire about our cleaning systems or we submit tenders to potential customers to bid for contracts

 

Generally, customers will approach our sales team to inquire about the purchase of our cleaning systems and may inform us of their specifications or requirements. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain contracts based on customers’ tender requirements.

 

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(2) Our R&D and engineering team will evaluate our customers requirements and specifications

 

Based on the customer’s initial instructions, our R&D and engineering team will evaluate and will have internal discussions on the design and development plan for the proposed cleaning system. Such discussions include product functions, fabrication and assembly requirements, components, parts and materials required and any customized designs and/or functions required to be implemented in order to develop and manufacture the proposed cleaning system according to our customer’s requirements.

 

(3) Our R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer

 

Our R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer, in order to understand their specific needs and requirements, the proposed budget and intended usage for such cleaning systems. We will also discuss market developments and trends with our customer, in order to better understand the latest cleaning systems technology utilized in its industry, so that we can provide a comprehensive proposal to our customer.

 

After such discussions with our customer, we will provide a proposal, which may include draft designs with suggestions on the technical specifications and materials to be used for the cleaning system. The technical specifications of any cleaning system largely depend on its intended use, type and desired outcome of our customer, including washing or rinsing frequency, spray rinse flow rate, drying speed, cleanroom standards, desired residual liquid or air particle count or non-volatile residual levels. It generally takes approximately one to two weeks for us to deliver a proposal to a customer, depending on the complexity of the design.

 

(4) Our sales team will provide a price quotation to our customers

 

After the proposal and the designs of the cleaning system have been finalized and confirmed by our customer, our R&D and engineering team will discuss the proposed requirements with our procurement team in order to provide a price quotation to our customer. The quotation will take into account the complexity of the cleaning system to be manufactured and sold, the cost of the relevant parts and materials and the expected duration of the project. It generally takes approximately one to two weeks for us to deliver a quotation to a customer, depending on the complexity of the design and the time required to source for and obtain quotations from our suppliers for certain parts and components.

 

(5) After receiving confirmation from our customer, we will prepare detailed drawings, 3D designs and/or model simulations

 

After the quotation has been accepted by our customer, our R&D and engineering team will prepare the designs and detailed drawings for fabrication, manufacture and assembly of the cleaning system. Depending on the nature of the project, we may also use our software systems to prepare design simulations to enable the customer to have a preview of the proposed cleaning system upon the request of the customer, and to demonstrate the feasibility and functionality of the design. It generally takes approximately one to two weeks for our R&D and engineering team to prepare such detail drawings and designs and/or model simulations for our customer.

 

(6) Once the drawings and designs are finalized, we will procure the relevant parts, materials and components

 

Once the design and development plan for the cleaning system has been finalized, our R&D and engineering team will prepare the finalized list of relevant parts, materials and components required for the manufacturing and production process, which will then be handed over to our procurement team. Our procurement team will then proceed to source for and place orders for such parts, materials and components from our suppliers.

 

(7) Production and manufacturing

 

Generally, our production process begins with the fabrication of the outer enclosure or tank for the cleaning system or equipment while we wait for the necessary parts, materials and components to be delivered. Once we have the necessary supplies on hand, our engineering and technical support team manufactures and assembles the various modules and components, which will comprise the cleaning system or equipment based or the detailed drawings and designs.

 

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Our JCS Facility is well-equipped for the fabrication, production, assembly and in-house testing of our cleaning systems and equipment. In particular, our JCS Facility is fitted with machines, which utilize the CNC manufacturing process for automated control of tools and machinery using pre- programmed computer software. We also have various machinery and tools at our JCS Facility which are used in the production and manufacturing of the modules and components of the cleaning systems, including laser cutting machines and welding machines. Once the various modules and components have been produced, they are sent to our sub-assembly and system integration units for assembly and implementation. Once the final product has been assembled and completed, we conduct in-house testing on the cleaning system or equipment prior to delivery to our customer.

 

A brief description of the flow of our production and manufacturing process of cleaning systems and equipment is set out as follows:

 

(a) Fabrication of outer body of the cleaning system or equipment

 

Once the design and development plan for the cleaning system or equipment has been finalized, our engineers and technical support team will commence the production and manufacturing process by starting the fabrication of the outer body, which is usually the structure, enclosure or tank for the cleaning system or equipment, mainly using stainless steel. Such fabrication of the outer body is done in-house using (a) laser cutting machines which cut the metal sheets; (b) hydraulic press brake machines which bend the metal sheets to form the shape of the enclosure or tanks; and (c) welding machines to join the material together by welding.

 

(b) Delivery of components, parts and materials which undergo quality checks

 

Once the relevant components, parts and materials required for the manufacture of the cleaning system and equipment have been delivered to our JCS Facility, our quality control team will conduct an inspection upon their arrival to determine whether such components, parts and materials conform to our quality standards and the requirements stated in our purchase orders, or whether there are any defects, dents or scratches.

 

(c) Production and manufacturing of modules and components

 

Once the relevant components, parts and materials have been inspected, we will proceed to produce and manufacture the cleaning system or equipment. Our engineers and technical support team will use the designs created for our customer to start fabrication of the cleaning system or equipment. The production and manufacturing process utilizes CNC machines for automated control of tools and machinery using pre-programmed computer software, thus minimizing the manual operation and labor required, and enabling us to manufacture each component more efficiently. Once the software program has been input, we will conduct a trial run to ensure that the cleaning system or equipment meets our customer’s requirements and specifications.

 

The production and manufacturing processes for the modules and components of our cleaning systems and equipment include (a) laser cutting machines to cut metal sheets to form the machine cover and various parts required to assemble the cleaning system or equipment, such as brackets and air knives; (b) welding machines to weld together and assemble the fabricated tanks or enclosures with the various parts manufactured; and (c) machining tools to manufacture precision parts such as robotic arms.

 

(d) Sub-assembly and system integration of modules and components

 

Once each module and component has been manufactured, it is sent to our sub-assembly and system integration units for assembly and implementation. At this stage, the various manufactured modules and components are assembled together, together with the additional related parts such as pipings, pumps and filters, as well as the control panels and electrical wiring to establish the electrical connection for the cleaning systems and equipment. Certain modules and components will also undergo electropolishing prior to assembly to provide additional protection to their stainless steel surface.

 

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At the sub-assembly stage, our engineers and technical support team also conduct quality checks on the functionality and performance of each cleaning system module and component.

 

(e) In-house testing of assembled cleaning systems and modules

 

Once the final product has been assembled and completed, the cleaning system or equipment is sent for in-house testing prior to delivery to our customer. Our technical support team will conduct functionality tests to ensure that the overall performance of the cleaning system or equipment is satisfactory and that none of the modules and components are malfunctional, perform in-house quality checks and ensure that the final product functions and performs in accordance with our customer’s order and specifications. A programmer will also check all the input/output points with an electrician, before conducting the program testing and testing the cleaning system or equipment for load and dryness.

 

(f) Delivery, implementation and inspection by our customer

 

After production, manufacturing and in-house testing have been completed, the cleaning system or equipment will be delivered to our customer’s designated location. Our technical support team will assist with the implementation of the cleaning system or equipment at our customer’s premises and assist our customer during any inspection or tests conducted. Our customers will typically use cleanliness testing devices, such as a liquid particle counter which is an analytical instrument used to size and count particles in a liquid, to verify that the cleaned item achieves the desired limit of post-cleaning residual contaminants and meets their standards. After our customer conducts its inspections or tests, it is required to sign on a checklist to acknowledge that the cleaning system was functional and met their technical specifications. If required, we will also provide on-site training to our customer on the use and maintenance of the cleaning system or equipment.

 

The lead time from confirmation of an order by our customer to delivery of the final product generally takes approximately eight to 18 weeks, depending on the complexity of the design and the component lead time.

 

Provision of Centralized Dishwashing Services

 

We provide centralized dishwashing services at our Hygieia Facility which has four semi- automated dishwashing lines, of which two are for washing Halal dishware and the other two are for washing non-Halal dishware.

 

A brief description of the flow of the centralized dishwashing process is set out as follows:

 

(1) Customers contact our sales team and inquire about our centralized dishwashing services or we may submit tenders to potential customers to bid for contracts

 

Generally, customers will approach us to inquire about the scope and fees for our centralized dishwashing services and request a quotation for such services. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain contracts.

 

Some customers may also request a quotation for general cleaning services for the food and beverage establishments, which will comprise both off-site centralized dishwashing services and on-site cleaning services. In such instances, we may request a quotation for such on-site cleaning services from our sub-contractors or may undertake such on-site cleaning services ourselves.

 

(2) Our sales team conducts site visit at our customers premises and assesses the services required

 

Our sales team will conduct a site visit at the customer’s premises, to inspect the space and the logistical arrangements to be made for collection of the soiled dishware to our Hygieia Facility and delivery of the cleaned dishware from our Hygieia Facility.

 

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(3) Our sales team will provide a price quotation to our customer. After receiving confirmation, we proceed with provision of centralized dishwashing services

 

Based on our customers’ requirements, our sales team will prepare a price quotation, which will take into account, among other things, (a) the size of the food and beverage establishment, number of seats and expected customer turnover, (b) frequency of collection and delivery of dishware on a daily basis; (c) whether thermo stickers are required; (d) whether the services of a third party logistics provider for collection and return of the dishware are required; and (e) whether the services of our sub-contractor for on-site cleaning services are required.

 

After the quotation has been accepted by our customer and the service contract has been entered into, we will proceed with the provision of centralized dishwashing services based on the agreed terms of the contract.

 

(4) We or a third party logistics services provider will collect and deliver the soiled dishware from our customer to our facility

 

On a daily basis, the soiled dishware will be placed in tubs and trolleys provided by us at our customer’s premises, with Halal dishware being separated from non-Halal dishware. Generally, we or a third party logistics services provider will collect the soiled dishware from our customer’s premises, which will be delivered to our Hygieia Facility, usually one to two times per day depending on the customers’ needs. Upon arrival at our Hygieia Facility, the soiled dishware will be unpacked from the tubs by our staff and food remnants will be removed, if necessary, before the dishware is placed onto the respective Halal and non-Halal semi-automated washing lines for washing, rinsing and blow-drying. The rinsing is performed with high temperatures to sanitize the dishware. In addition, our customers may also request that thermo stickers are placed on a random sample of dishware to ensure that the temperature during the dishwashing process is maintained at a certain minimum temperature for sanitization purposes.

 

The lead time from collection of the soiled dishware from our customer’s premises to completion of the dishwashing process takes approximately four to 12 hours, depending on the location of our customer’s premises and frequency of collection.

 

(5) Our team will perform quality checks, and any dishware that requires further washing will be put back onto the washing lines. Cleaned dishware will be packed for delivery

 

After the dishware has been washed, rinsed and dried, the cleaned dishware is inspected by our staff before it is packed for delivery back to our customer’s premises. If any of the dishware does not pass our quality checks, the dishware will be put back onto the washing lines for re-washing. Once the cleaned dishware has passed our quality checks, it will be packed into clean tubs and trolleys, and moved to the storage area at our Hygieia Facility and will be ready for delivery back to our customers’ premises according to the delivery schedule, usually one to two times per day depending on our customers’ needs.

 

(6) The cleaned dishware will be packed and delivered by us or the third party logistics services provider to our customers premises

 

At the scheduled time, we or our third party logistics services provider will pick up the cleaned dishware from our Hygieia Facility for delivery back to our customer’s premises.

 

The lead time from the inspection and quality checks on the cleaned dishware to the delivery of the cleaned dishware back to our customers’ premises takes approximately three to 12 hours, depending on the delivery schedule for each customer.

 

Pricing Policy

 

In respect of the sale of cleaning systems and other equipment, we generally determine the price on a cost-plus basis for each cleaning system or equipment that we manufacture and produce as our cleaning systems are customized. The unit selling price and gross profit margin of each product may fluctuate significantly from order to order, depending on various factors and considerations, including but not limited to the following:

 

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● complexity of the design, particularly for aqueous washing systems and train cleaning systems, as the cleaning systems may include different features and various modules, components and parts, such as ultrasonic wash and rinse stations, spray rinse stations, vacuum oven, cleaning stations with robotic transfer functions, washing baskets, pneumatic control systems, heaters, sensors and pumps;

 

● the type and availability of the components and materials, such as stainless steel or aluminum, used for the cleaning system or equipment, which would vary in terms of cost price and component lead time;

 

● technical requirements for the production, including whether the customer’s approval is required for any changes to the processes, products or services for the production and manufacturing process;

 

● size and dimensions of the cleaning system or equipment, including the overall machine dimension, tank dimension and the size and number of modules, components and parts installed;

 

● level and number of functionality tests to be conducted, including whether test reports and certificates are to be provided to the customer;

 

● the customer’s specifications for certain designated suppliers and/or sub-contractors to be used for the production and manufacture of the cleaning system;

 

● purchase quantity, as certain customers may place orders for more than one unit of the same cleaning system or equipment;

 

● timeline for the production and manufacture of the cleaning system or equipment;

 

● provision of installation, testing and commissioning services;

 

● provision of on-site training by our technical personnel for our customer’s employees; and

 

● the expected number of units to be placed by our customer in the future.

 

The selling price and the corresponding profit margin for each cleaning system or equipment which we manufacture and sell will depend on the above factors and considerations, and in particular, the complexity of the cleaning system or equipment to be manufactured and sold, the cost of the relevant parts and materials and the expected duration of the project. Complex aqueous washing systems and train cleaning systems which are generally larger in size and comprised of various modules, components and parts will require a longer time for our R&D and engineering team to prepare the detailed drawings, designs and/or model simulations and will also require a longer time for production and manufacture, with a corresponding increase in the cost of production and the number of relevant parts and materials. Less complex aqueous washing systems such as standalone cleaning machines will require a comparatively shorter time for design, production and manufacture, as well as lower cost of production. From a commercial perspective, our Group will usually quote an initial higher selling price taking into consideration the aforesaid factors and with reference to the range of selling prices for similar cleaning systems and equipment sold by our Group with an aim to maximizing our profit. During the price negotiation process, our Group will adopt different negotiation strategies for different customers and our pricing is affected by various factors, such as the budget and cost consciousness of the customer, size of the customer, our relationship with the customer, the customer’s specifications and requirements, the features and functions of each product and the needs of the customer. The final selling price for each cleaning system or equipment will be arrived at after arm’s length negotiation and largely dependent on the respective bargaining power of our Group and the customer.

 

In respect of the sale of related parts used in our cleaning systems, we generally determine the price based on the selling price suggested by our suppliers or at a mark-up of our own costs.

 

In respect of the provision of centralized dishwashing services and general cleaning services, we generally charge our customers a fixed monthly fee which is determined with reference to factors such as the size, number of seats and expected customer turnover of the food and beverage establishment, frequency of delivery and collection of dishware on a daily basis, our costs of dishwashing (including staff costs, cleaning detergent costs and utilities costs), sub-contracting costs, logistic costs, expected costs to be incurred by our customers if they had the capacity and were to engage their own staff to wash the dishware, duration of the contract and the capacity and utilization rate of our dishwashing lines. We may charge our customers additional fees if extra services are required.

 

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In respect of the dishwashing equipment leasing services, the rental of our dishwashing equipment to our customers is determined with reference to prevailing market rates. In respect of our wholesale sale of STICO anti-slip shoes, the prices are determined with reference to the suggested retail price under our distributorship arrangement and the purchase quantity.

 

Credit period and payment methods

 

In respect of the manufacture and sale of cleaning systems, depending on, among other things, the technical requirements, project amount and size, project costs, relationship with our customers and the credit period offered by our suppliers to our Group in respect of the materials and components used in the cleaning systems, our customers may be required to pay a deposit and settle the remaining purchase price upon delivery and acceptance of the product, according to the terms of the contract. In other cases, our customers are generally offered credit terms of 30 days to 60 days from delivery. In respect of the sale of other equipment, our customers are generally offered credit terms of 30 days to 45 days from the day on which the order is completed.

 

In respect of the sale of related parts used in our cleaning systems, our customers are generally offered credit periods ranging from 30 days to 60 days.

 

In respect of the provision of centralized dishwashing services and general cleaning services, our customers are generally offered credit terms of 7 days to 30 days upon the receipt of invoice. In respect of the provision of dishwashing equipment leasing services, our customers are generally offered credit terms of 30 days upon receipt of invoice.

 

Settlements with our customers who purchase cleaning systems and other equipment from us are mainly in SGD or US$ by way of check or telegraphic transfers. Settlements with our customers who use our centralized dishwashing services, general cleaning services and dishwashing equipment leasing services are mainly in SGD by way of check or telegraphic transfers.

 

Seasonality

 

Our Directors believe that both our sale of cleaning systems and other equipment operations and our provision of centralized dishwashing services and ancillary services operations are not subject to any seasonality.

 

Our Customers

 

During the years ended December 31, 2021, 2022 and 2023, our customers were from various industries, including HDD manufacturing, semiconductor manufacturing, food and beverage and public transportation. As of the date of this Annual Report, our customers continue to be from such various industries. Our cleaning systems and other equipment are mainly sold in Singapore and Malaysia, and we provided centralized dishwashing and ancillary services to customers in Singapore.

 

Top five customers

 

For the years ended December 31, 2021, 2022 and 2023, our top five customers accounted for approximately 80.6%, 68.1% and 66.1% of our total revenue, respectively. Our Group’s largest customer accounted for approximately 32.7%, 22.0% and 24.2% of our total revenue, respectively, for the corresponding year. During the years ended December 31, 2021, 2022 and 2023 and up to the date of this Annual Report, we have not experienced any material disputes with our customers.

 

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The following table sets out information on our top five customers for the periods indicated:

 

For the year ended December 31, 2021

 

Customer  Country of Incorporation/Establishment  Product/Services  Year of Commencement of Business Relationship   Credit Terms  General Payments 

Transaction Amounts

(SGD’000)

   % of Total Sales 
Group A(1)  Malaysia and the United States  Cleaning systems   2009   60 days  Telegraphic transfer  $4,833    32.7 
                            
Group B(2)  South Korea, Thailand, Belgium and the United States  Other equipment & related parts   2008   60 days  Telegraphic transfer  $3,188    21.6 
                            
Group C(3)  Singapore  General cleaning services & leasing of dishwashing equipment   2015   30 days  Telegraphic transfer  $1,441    9.8 
                            
Group D(4)  Singapore  General cleaning services & leasing of dishwashing equipment   2016   45 - 60 days  Telegraphic transfer  $1,188    8.0 
                            
Group E(5)  Singapore  Centralized dishwashing & general cleaning services   2015   30 days  Telegraphic transfer  $1,254    8.5 
                            
                 TOTAL  $11,904    80.6 

 

For the year ended December 31, 2022

 

Customer  Country of Incorporation/Establishment  Product/Services  Year of Commencement of Business Relationship   Credit Terms  General Payments 

Transaction Amounts

(SGD’000)

   % of Total Sales 
Group A(1)  Malaysia and the United States  Cleaning systems   2009   60 days  Telegraphic transfer  $4,094    22.0 
                            
Group B(2)  South Korea, Thailand, Belgium and the United States  Other equipment & related parts   2008   60 days  Telegraphic transfer  $3,902    20.9 
                            
Group C(3)  Singapore  General cleaning services & leasing of dishwashing equipment   2016   30 days  Telegraphic transfer  $1,801    9.7 
                            
Group D(4)  Singapore  General cleaning services & leasing of dishwashing equipment   2015   45 - 60 days  Telegraphic transfer  $1,522    8.2 
                            
Group E(5)  Singapore  Centralized dishwashing & general cleaning services   2015   30 days  Telegraphic transfer  $1,370    7.3 
                            
                 TOTAL  $12,689    68.1 

 

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For the year ended December 31, 2023

 

Customer  Country of Incorporation/Establishment  Product/Services  Year of Commencement of Business Relationship   Credit Terms  General Payments 

Transaction Amounts

(SGD’000)

   % of Total Sales 
Group A(1)  Malaysia and the United States  Cleaning systems   2009   90 days  Telegraphic transfer  $1,212    6.7 
                            
Group B(2)  South Korea, Thailand, Belgium and the United States  Other equipment & related parts   2008   90 days  Telegraphic transfer  $3,495    19.4 
                            
Group D(4)  Singapore  General cleaning services & leasing of dishwashing equipment   2015   60 days  Telegraphic transfer  $1,200    6.7 
                            
Group E(5)  Singapore  Centralized dishwashing & general cleaning services   2015   30 days  Telegraphic transfer  $1,642    9.1 
                            
Group F(6)  Singapore  Cleaning systems   2016   60 days  Telegraphic transfer  $4,372    24.2 
                            
                 TOTAL  $11,921    66.1 

 

(1) Three of the entities in Customer Group A, which are principally engaged in the manufacture of HDD, were our customers for the years ended December 31, 2021, 2022 and 2023, respectively. The ultimate holding company of Customer Group A is headquartered in the United States with international offices, and is listed on Nasdaq.

 

(2) Four, five and four entities in Customer Group B, which are principally engaged in the provision of engine and industrial solutions, were our customers for the years ended December 31, 2021, 2022 and 2023, respectively. The ultimate holding company of Customer Group E is headquartered in the United States with international offices, and is listed on the New York Stock Exchange.

 

(3) Two of the entities in Customer Group C, which are principally engaged as operators of food courts, were our customers for the years ended December 31, 2021, 2022 and 2023, respectively. The shares of Customer Group C’s parent company were listed on the Mainboard of the Singapore Exchange Securities Trading Limited prior to June 5, 2020. The company is now privatized.

 

(4) Four, four, three of the entities in Customer Group D, all of which are principally engaged as operators of food courts and retail malls or health and eldercare service providers, were our customers for the years ended December 31, 2021, 2022 and 2023, respectively. The holding entity of Customer Group D is headquartered in Singapore.

 

(5) Two entities in Customer Group E, which are principally engaged as ground-handling and in-flight catering services providers, were our customers for the years ended December 31, 2021, 2022 and 2023. The parent company of Customer Group F is headquartered in Singapore and is listed on the Mainboard of the Singapore Exchange Securities Trading Limited.

 

(6) One entity in Customer Group F, which are principally engaged in the provision of customized commercial and industrial solution services, were our customers for the years ended December 31, 2021, 2022 and 2023. The parent company of Customer Group F is headquartered in Switzerland and is listed on the Mainboard of the SIX Swiss Exchange.

 

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Competitive Strengths

 

Long and proven track record in precision cleaning in Singapore

 

We have been providing cleaning systems to our customers for over 14 years and have accumulated extensive industry experience. We believe our strong R&D 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 to each of our customers’ needs.

 

In April 2018, JCS was awarded the Singapore Quality Class Certification by Enterprise Singapore, which validates JCS’s commitment towards continuous improvement and sustainable business performance and commendable management practices. The management system of JCS has also been assessed as conforming to ISO 9001: 2015 and ISO 45001: 2018 for design, manufacture, supply, installation and serving of integrated cleaning systems.

 

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 will 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.

 

Stable relationships with our major customers

 

Since 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 maintained stable business relationships with a majority of our major customers. During the years ended December 31, 2021, 2022 and 2023, our top five customers included renowned HDD manufacturers, international engine and industrial solutions provider and food and beverage establishment operators in Singapore, three of which have more than 11 years of business relationships with us. As of the date of this Annual Report, our customers continue to be from such various industries. We believe that certain customers, such as multinational corporations, may have stringent selection processes for their suppliers and we have had to meet certain criteria and audit checks before becoming an approved qualified supplier.

 

Experienced R&D and engineering team

 

We have an experienced R&D and engineering team led by Mr. Zhao Liang, who is also a member of our senior management team. Our Directors believe that our Group has strong in-house R&D 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, semiconductors and industrial electronic equipment/product manufacturers. As of the date of this Annual Report, our R&D and engineering team has 11members, six of whom have obtained a bachelor’s degree in engineering.

 

With our strong R&D 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 with a customer, as well as other parties, 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. Following from this, we have entered into a collaboration with a statutory board whose functions and duties include the management and operation of the segment of the public transportation system in Singapore (“Collaboration Partner”) to co-develop an autonomous train interior cleaning robot, which is capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. Our Directors believe that such customized cleaning systems and collaborations demonstrate our customers’ belief in the strength of our R&D and engineering capabilities.

 

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Experienced management team

 

We have an experienced management team, led by Ms. Hong Bee Yin, our Chairman, Executive Director, Chief Executive Officer and founder, who has been instrumental in spearheading the growth of our Group. Ms. Hong has over 18 years of experience in the cleaning solutions industry in Singapore and she is primarily responsible for planning and execution of our Group’s business strategies, including product development, as well as managing our Group’s 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, who is the head of our R&D and engineering team and has over 15 years of experience in the precision cleaning equipment industry.

 

For details of the profiles of the senior management team, please refer to “Management” in this Annual Report.

 

Business Strategies

 

We intend to expand our business and strengthen our market position in the cleaning systems industry in Singapore, Malaysia and other countries and in the centralized dishwashing services industry in Singapore by implementing the following business strategies and future plans.

 

Expand our product portfolio and R&D and engineering team

 

We believe that our R&D capabilities and engineering expertise are vital in maintaining our long-term competitiveness and driving our business growth. We expect Industry 4.0 and artificial intelligence is the current trend for automation of industrial manufacturing and it has been an ongoing process in Singapore. As part of the Industry 4.0 and robotic initiatives, the Singapore government has allocated investment in R&D projects that speed up industry transformation projects to help local manufacturers undergo the industry transformation. Such ongoing initiatives help create the demand for both digitized and automated machinery in the manufacturing space.

 

(1) Expand our product portfolio

 

We have a long track record in the manufacture and sale of precision cleaning systems and other equipment and we are committed to continuing to increase our R&D and engineering capabilities so as to align ourselves with the Industry 4.0 initiatives and to cope with the continuously increasing standards and requirements of our customers. Going forward, against the backdrop of Industry 4.0, we expect an increase in demand for total automation products and solutions and we intend to leverage on our established reputation and engineering know-how, as well as industry expertise to capture opportunities arising therefrom. In this regard, we intend to further grow our automated cleaning systems and equipment business by expanding our product portfolio and developing cleaning systems which can be used across various industries for industrial and/or commercial uses.

 

To expand our product portfolio and as part of our R&D efforts, we have 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. The development of this initial prototype led us to enter into a collaboration with our Collaboration Partner, to co-develop an autonomous train interior cleaning robot which is capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. Our Group intends to further develop, build on and customize our initial prototype of a robot floor scrubber to develop an autonomous train interior cleaning robot, which can operate in the required space and configuration of public trains, for the collaboration with our Collaboration Partner.

 

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In particular, we believe that we will be able to market and sell the autonomous robot floor scrubbers to our existing customers in the food and beverage industry for our centralized dishwashing and ancillary services, given that such customers are already using our products and services to automate the dishwashing process at their respective food and beverage establishments and commercial properties. There is a push by the Singapore government for Industry 4.0 initiatives to elevate productivity in the food and beverage services sector, including the introduction of centralized dishwashing services at hawker centers, allocating investment into R&D projects that speed up industry transformation projects and strengthening the workforce’s skillsets, to boost productivity in the face of manpower challenges in the food and beverage industry. In light of the fact that such push will drive growth in the dishwashing cleaning sector, our Directors believe that there also will be a corresponding increase in demand for other automation cleaning products and solutions by food and beverage establishments. On the other hand, our existing customers, such as cookhouses, eldercare homes and hospitals for which we have provided centralized dishwashing and ancillary services, may become our potential customers for the sale and marketing of the autonomous robot floor scrubbers in the future.

 

We believe that we can leverage on our existing customer base to market and sell the autonomous robot floor scrubbers in place of or to supplement our on-site cleaning services, while still retaining the customer base for our centralized dishwashing services. We believe that there will be sufficient demand for the autonomous robot scrubbers, which will also reduce our reliance on third party sub-contractors given that our on-site cleaning services are generally outsourced to third party sub-contractors in order to focus our resources on our core competencies, and therefore the autonomous robot scrubbers will not cannibalize our general cleaning services business. The autonomous robotic cleaning equipment industry is relatively new in Singapore. This is seen as a potential solution for the labor squeeze in Singapore’s cleaning force, especially for the commercial property and food and beverage cleaning sectors. Since the industry was still in its fast-growing stage in 2021, with a strong push due to the COVID-19 pandemic which increased the demand for unmanned cleaning solutions for commercial properties and public spaces in Singapore, the overall industry is expected to grow at a CAGR of 30.5% from 2021 to 2025. With the launch of grants and incentives to companies for adoption of the technology (for example, the Ministry of Education of Singapore has put out a tender to have these cleaning robots in schools), the growth of the industry is supported by the Singapore government. It is also expected that there will be further advancement in cloud infrastructure, artificial intelligence and 5G that will make the robots more attractive and cost competitive. Accordingly, we believe that there will be sufficient market demand for the commercial sale of the autonomous robot floor scrubbers for the public transportation, food and beverage and other industries.

 

Real Property

 

A description of our leased real properties is below:

 

Location  Usage  Lease period 

Annual Rent

(SGD)

   Approximate gross floor area (sq. ft.) 
JCS Facility
3 Woodlands Sector 1
Singapore 738361
  Manufacturing facility and office  To November 15, 2027, with a further term of 30 years from expiry   36,759    33,785.6 
                 
Hygieia Facility
17 Woodlands Sector 1
Singapore 738354
  Centralized dishwashing facility and office  To March 15, 2044   52,020    34,276.7 

 

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Production Capacity and Utilization Rate

 

JCS Facility

 

It is difficult to quantify the production capacity and utilization rates of our JCS Facility as the cleaning systems and other equipment manufactured by us at our JCS Facility are customized depending on our customers’ specific requirements, and are therefore of varying sizes, scale and capacity. Our JCS Facility is fitted with various types of machinery and equipment and the manufacturing process for each cleaning system utilizes different types of machinery and equipment with different components, parts and materials. The production and manufacturing process will also vary between orders, depending on the complexity of design and component lead time. We periodically monitor the overall usage and capacity of the machinery and equipment at our JCS Facility.

 

Our directors are of the view that our JCS Facility has sufficient capacity to process the orders for cleaning systems and other equipment for at least the next 12 months for the following reasons:

 

● during the production process, the most time-consuming process is engineering. Engineering work includes machine set up and pre-programming for laser cutting and machining, and jig and fixture preparation. All the above work could generally take more than 60% of the machine’s total production lead time. The average production lead time for the production and manufacturing of bulk orders for the same cleaning system/module is shorter as less time is required to use the relevant machinery and equipment for the aforesaid engineering work. In general, our Group can reduce the engineering process time of the subsequent units by about 90% as compared to the first machine built; and

 

● the operating hours of our JCS Facility may be increased from time to time in order to meet the delivery schedule of the orders for cleaning systems and other equipment as needed.

 

The utilization rates of the CNC lathe machine and the laser cutting machine are calculated based on 8.5 operating hours per working day on weekdays and 3.5 operating hours on Saturdays. In the event that the current hours of usage cannot meet the demand, our management will consider adding one or two more shifts on weekdays, and/or increasing the number of working hours on weekends to increase the production capacity of the CNC lathe machine and the laser cutting machine to meet the production schedule.

 

The production floor at our JCS Facility has a total usable floor area of approximately 1,470.1 square meters; the total estimated usable floor area which is utilized by our machinery and equipment is approximately 1,219.4 square meters, representing approximately 83.0% of the available space.

 

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Hygieia Facility

 

The processing capacity and utilization rates at our Hygieia Facility with respect to our provision of centralized dishwashing services during the fiscal years ended December 31, 2021, 2022 and 2023 are as follows:

 

   Year ended December 31, 
   2021   2022   2023 
  

Actual annual processing

(tubs)

  

Annual processing capacity(1)

(tubs)

  

Average daily utilization

rate(2)

(%)

  

Actual annual processing

(tubs)

  

Annual processing capacity(1)

(tubs)

  

Average daily utilization

rate(2)

(%)

  

Actual annual processing

(tubs)

  

Annual processing capacity(1)

(tubs)

  

Average

daily utilization

rate(2)

(%)

 
                                     
Halal semi-automated washing line A   91,289    148,010    61.7    101,979    148,010    68.9    119,148    148,010    80.5 
Halal semi-automated washing line B   78,119    214,614    36.4    39,489    214,614    18.4    89,494    214,614    41.7 
Non-Halal semi-automated washing line C   196,110    310,821    63.1    285,023    310,821    91.7    271,658    310,821    87.4 
Non-Halal semi-automated washing line D   69,157    155,410    44.5    108,165    155,410    69.6    85,942    155,410    55.3 

 

(1) For illustration purposes only, the processing capacity is determined by identifying the maximum number of tubs (which will contain the soiled dishware) we can wash per year. In this regard, the processing capacity is calculated based on the following assumptions: (i) 20.5 operating hours per working day (excluding equipment cleaning time and workers’ lunch break); and (ii) 361 working days each year for the years ended December 31, 2021, 2022 and 2023 (excluding holidays and regular maintenance).

 

(2) For illustration purposes only, the utilization rate is calculated by dividing the actual processing volume by the processing capacity for the same year, which is calculated based on the assumptions set out above.

 

Other than for our Halal semi-automated washing line, there was a steady increase in the utilization rates of the washing lines at our Hygieia Facility from the year ended December 31, 2022 to the year ended December 31, 2023 as (i) the number of food establishments utilizing our centralized dishwashing services increased; (ii) there was higher footfall and demand for dine-in services at our customers’ food and beverage establishments as a result of the resumption of dine-in services, which resulted in a higher volume of soiled dishware from our customers; and (iii) additional customers contracted for our centralized dishwashing services.

 

As diners in food and beverage establishments usually finish their meals at approximately the same time, customers of our centralized dishwashing services business generally require the soiled dishware to be washed and returned to their food and beverage establishments during the day and particularly after mealtimes, with the peak hours being from 3:30 p.m. to 9:30 p.m. on weekdays, even though our Hygieia Facility operates in three shifts and 20.5 hours per day. Therefore, the average utilization rate of the Halal and non-Halal washing lines at our Hygieia Facility during peak hours reaches 100%, calculated based on the number of tubs washed divided by the processing capacity of the respective washing lines, as we have more tubs arriving at our Hygieia Facility than we can process during peak hours.

 

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Impact of COVID-19 on our business and operations

 

The World Health Organization declared the spread of COVID-19 a pandemic on March 11, 2020. The pandemic disrupted business, trade, commerce, financial and credit markets in Singapore and globally. Beginning in April 2020, in response to COVID-19, the Singapore government implemented extensive regulations imposing restrictions on premises and businesses in relation to the closure of businesses, on essential and non-essential service providers and on the movement of people, both in public places and in residences. On December 28, 2020, social, cultural, religious and business gatherings or events were resumed, although gathering sizes remained limited, and services and activities that involved significant prolonged close contact or significant crowds in an enclosed space were allowed to be re-opened, subject to their ability to effectively implement strict safe management measures.

 

In response to changing conditions and infection rates, throughout the pandemic and through 2022, the Singapore government adjusted restrictions in both directions, such as alternately reducing and increasing allowed gathering group sizes of larger scale events or activities and reinstating or removing “work-from-home” requirements at workplaces to minimize workplace interactions.

 

The lockdown and other measures implemented by the government of Singapore had a material adverse impact on our business, results of operations and financial condition during the fiscal years ended December 31, 2020 and 2021, although our revenue started to rebound during the fiscal year ended December 31, 2022.

 

On May 5, 2023, WHO declared that COVID-19 is now an established and ongoing health issue, which no longer constitutes a public health emergency of international concern. As of the date of this prospectus, our businesses have essentially returned to pre-COVID-19 levels and we do not expect to encounter any further material business disruptions as the outbreak of COVID-19 in Singapore is generally under control and the government has generally relaxed its control measures. However, it is not possible to predict the ongoing impact that long COVID-19 or continuing COVID-19-related global supply chain issues may have on our business, liquidity, capital resources or financial results in the future. In addition, we are uncertain as to if or when any new outbreaks of COVID-19 may occur or how long it may take for any such outbreaks to be contained, and we cannot predict the impact that any such outbreaks may have on our operations. If Singapore experiences a major resurgence of COVID-19, or if another significant natural disaster or pandemic were to occur in the future, our business, financial condition, results of operations and prospects may be materially and adversely affected. We plan to continue to monitor the evolution of COVID-19, which may still be considered a threat in the long term because the virus continues to evolve and spread.

 

Licenses and Permits

 

The following licenses are material for our Group’s operations:

 

Description   Issuing Authority   Expiry Date   Issued to
             
License to operate a cleaning business   NEA   February 26, 2025   Hygieia
             
License / Certificate issued under the Radiation Protection Act   NEA   July 2, 2025   JCS

 

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Certifications

 

As of April 1, 2024, we have received the following certifications:

 

Relevant authority/organization   Recipient   Relevant list/category   Qualification/ License/Grading   Date of grant/registration   Date of expiry
Workplace Safety and Health Council   Hygieia   BizSAFE   Level 3   August 7, 2021   August 10, 2024
Workplace Safety and Health Council   JCS   BizSAFE   Level Star   August 23, 2017   June 22, 2026
Islamic Religious Council of Singapore   Hygieia   Storage management   Halal Certificate   N/A   March 31, 2025
SGS   Hygieia   Food safety management   ISO 22000: 2005   August 26, 2021   August 25, 2024
SOCOTEC Certification International   JCS   Occupational Health and Safety Management   ISO 45001: 2018   July 7, 2017   June 22, 2026
SOCOTEC Certification International   JCS   Quality management system   ISO 9001: 2015   June 23, 2017   June 22, 2026

 

We intend to apply for the renewal of the above relevant certifications prior to their respective expiry dates and based on past experience, our directors do not foresee any material difficulties in renewing the certifications of our Group.

 

Awards and Accreditations

 

Throughout our operating history, our Group has received a number of awards and accreditations in recognition of our performance and quality products and services. The following table sets forth the awards and accreditations we have been granted up to April 1, 2024.

 

Year   Award   Organized/Granted By   Recipient
2013   Enterprise 50 Award   KPMG and the Business Times   JCS
2016   SME 1000 Ranking - Top companies ranked by sales/turnover (745th), net profit (443th) and return on equity (680th)   Experian   JCS
2017   SME 1000 Ranking - Top companies ranked by return on equity (631st)   Experian   JCS
2017   SME 1000 Ranking - Emerging 500 companies ranked by sales turnover (1134th)   Experian   JCS
2018   Singapore Quality Class - Recognition of Commendable Performance in Business Excellence   Enterprise Singapore   JCS
2018   Clean Mark Silver Award   NEA   Hygieia
2018   SME 1000 Ranking - Emerging 500 companies ranked by sale turnover (1118th)   Experian   JCS
2019   SME 1000 Ranking - Emerging 500 companies ranked by sales turnover (1490th)   Experian   Hygieia
2021   Clean Mark Silver Award   NEA   Hygieia
2022   Clean Mark Silver Award   NEA   Hygieia

 

Competition

 

The precision cleaning equipment market in Singapore is niche and relatively consolidated with just over 10 companies in play comprised of a handful of larger global companies that operate offices in Singapore, as well as several small and medium-sized players, with high barriers to entry in the form of high set-up and operating costs, and track record. We are of the view that there is a trend towards consolidation in the wider precision cleaning market by industry players, as companies move towards offering total solutions in the value chain of both cleaning equipment and cleaning services in order to stand out from the competition.

 

We are of the view that the precision cleaning manufacturing industry in Malaysia is highly consolidated, with the top five companies in the industry accounting for more than 80% of industry sales. The leading players in the industry are primarily present in the electronics industry. These manufacturers benefit from the robust growth of Malaysia’s position as a global hub for semiconductor manufacturing.

 

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We are also of the view that the dishwashing services market in Singapore currently has a low penetration rate, and that approximately 80% of the potential food and beverage market remains untapped and relatively consolidated to about 10 players, with four bigger companies, including our Group, dominating the market, and several other smaller players making up the remainder. In particular, there is keen competition for dishwashing services in the food and beverage industry due to low barriers to entry and low switching costs, the relatively low set-up and labor costs compared to other industries and clients being able to easily switch service providers given the relatively short span of contracts, with quality of service as the key differentiating factor.

 

Sales And Marketing

 

As of April 1, 2024, our sales and marketing team consisted of one full-time employee based in Singapore. Our Chairman, Ms. Hong Bee Yin, oversees our sales and marketing department.

 

One of our key channels for marketing is through word of mouth as our new customers are usually referred by our existing customers or business contacts. Our Group and our Chairman, Ms. Hong, have participated in overseas exhibitions, trade shows and industry forums to promote our Group’s products and services. Our Chairman, Ms. Hong has also taken interviews from magazines and newspapers to promote our Group’s products and services. Our Group has also participated in overseas exhibitions and trade shows where we showcase our products to potential customers in order to increase our publicity and presence in the cleaning solutions industry.

 

Our sales and marketing team also communicates with our existing customers to understand their needs and markets trends, so as to improve our cleaning systems and equipment. We consider customer feedback a valuable tool for improving our products and services. Our sales and marketing team is also responsible for handling customers’ complaints and any complaints arising from product defects or service quality and will relay such feedback internally to the relevant teams for follow up.

 

Our Group relates to a few industry associations, with JCS being a member of the Singapore Precision Engineering & Technology Association and a Technology Extension Partner of Singapore Institute of Manufacturing Technology, and Hygieia being a member of the Association of Catering Professionals Singapore.

 

Our Group has developed a strong existing customer base in Singapore and overseas. Our customers are corporate groups with their respective group members incorporated or established in various jurisdictions, such as Malaysia, Australia, the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC, for our sale of cleaning systems and other equipment business during the years ended December 31, 2022 and 2023. Please refer to the paragraph headed “Our Customers - Top five customers” in this section for further details of our top five customers and their respective countries of incorporation or establishment. We have established stable business relationships with our customers, with three out of our top five customers having more than 10 years of business relationships with us. The profile of our existing customer base, coupled with the stable business relationships we have with our customers, allowed our Group (i) to secure orders from repeat customers, which contributed to approximately 100% of the total sales of our cleaning systems and other equipment for the years ended December 31, 2021, 2022 and 2023, and (ii) to gain referrals from our existing customers. Our Group also strives to maintain good customer relationships by producing high quality products and providing professional technical support, and therefore it is not necessary for our Group to actively engage in significant sales and marketing efforts for maintaining such business relationships with our existing customers. In addition, as the average utilization rate of certain major machinery and equipment used at our JCS Facility in respect of the production and manufacture of cleaning systems and other equipment during the years ended December 31, 2021, 2022 and 2023 generally exceeded 100%, our Group was unable to take on a large number of new orders from new customers. Rather, we mainly focused on fulfilling orders from repeat customers to maintain our business relationships. Under such circumstances, we did not actively engage in sales and marketing activities to pursue orders from new customers and only maintained a small sales and marketing team during the year ended December 31, 2023.

 

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The following tables set forth the breakdown of our revenue contributed from the sale of precision and other cleaning systems and equipment from each geographical region during the years ended December 31, 2021, 2022 and 2023:

 

Year ended December 31, 2021

 

Geographical Region  Number of Customers   Number of Completed Orders   Method of Procurement 

Transaction Amount

(SGD’000)

   % of Total Sales 
Singapore   4    3   Orders from existing customers   83    1.1 
Malaysia   1    13   Orders from existing customer   4,414    56.5 
Thailand   1    42   Orders from existing customer   1,559    20.0 
Belgium   1    27   Orders from existing customer   1,182    15.1 
South Korea   1    4   Orders from existing customer   73    0.9 
Taiwan   1    1   Orders from existing customer   -    - 
United States   1    6   Orders from existing customer   376    4.8 
PRC   1    1   Orders from existing customer   126    1.6 
Total   11    97       7,813    100.0 

 

Year ended December 31, 2022

 

Geographical Region  Number of Customers   Number of Completed Orders   Method of Procurement 

Transaction Amount

(SGD’000)

   % of Total Sales 
Singapore   7    28   Orders from existing customers   2,478    23.6 
Malaysia   1    14   Orders from existing customer   3,896    37.2 
Thailand   2    46   Orders from existing customers   2,363    22.5 
Belgium   1    28   Orders from existing customer   1,389    13.2 
South Korea   1    6   Orders from existing customer   178    1.7 
Taiwan   1    2   Orders from existing customer   122    1.2 
United States   1    3   Orders from existing customer   55    0.6 
PRC   -    -   Orders from existing customer   -    - 
Total   14    127       10,481    100.0 

 

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Year ended December 31, 2023

 

Geographical Region  Number of Customers   Number of Completed Orders   Method of Procurement 

Transaction Amount

(SGD’000)

   % of Total Sales 
Singapore   5    50   Orders from existing customers   5,609    55.1 
Malaysia   1    19   Orders from existing customer   758    7.4 
Thailand   1    114   Orders from existing customer   1,945    19.1 
Belgium   1    51   Orders from existing customer   1,470    14.4 
Taiwan   1    2   Orders from existing customer   43    0.5 
United States   1    4   Orders from existing customer   356    3.5 
Total   10    240       10,181    100.0 

 

For the years ended December 31, 2022 and 2023, 100% of our sales were comprised of orders from existing customers.

 

Inventory

 

As we generally manufacture and sell our cleaning systems and other equipment to our customers on an order-by-order basis, we maintain minimal levels of raw materials and components required for the manufacture of cleaning systems and other equipment and we source for raw materials and other components and parts based on the orders made by our customers.

 

Intellectual Property

 

Our Group’s intellectual property rights are important to its business. As of the date of this Annual Report, the Group has:

 

● registered eight trademarks in Singapore and one trademark in Hong Kong;

 

● registered 24 patents in Singapore, Malaysia, the United States, Taiwan and the PRC, and applied for the registration of 9 patents in Singapore, Malaysia and Thailand; and

 

● registered one design in Singapore.

 

As of the date of this Annual Report, we were not involved in any proceedings with regard to, and we have not received notice of any claims of infringement of, any intellectual property rights that may be threatened or pending, in which we may be involved either as a claimant or respondent.

 

Employees

 

As of December 31, 2023, we employed a total of 103 persons, who were all located in Singapore, as compared to 102 as of December 31, 2022 and 90 of December 31, 2021, who were also all located in Singapore. Employees are not covered by collective bargaining agreements. We consider our global labor practices and employee relations to be good.

 

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Insurance

 

We maintain property insurance policies covering our equipment and facilities in accordance with customary industry practice. We carry occupational injury, medical, pension, maternity and unemployment insurance for our employees, in compliance with applicable regulations. We also carry key person life insurance on the life of Ms. Hong Bee Yin, our Chairman, Executive Director and Chief Executive Officer. We will continue to review and assess our risk portfolio and make necessary and appropriate adjustments to our insurance practices to align with our needs and with industry practice in Singapore and in the markets in which we operate.

 

Litigation And Other Legal Proceedings

 

As of the date of this Annual Report, we are not party to any significant proceedings.

 

Laws And Regulations Relating To Our Business In Singapore

 

This section sets forth a summary of the material laws and regulations that affect our Group’s business and operations in Singapore. Information contained in this section should not be construed as a comprehensive summary nor a detailed analysis of laws and regulations applicable to the business and operations of our Group. This overview is provided as general information only and not intended to be a substitute for professional advice. You should consult your own advisers regarding the implication of the laws and regulations of Singapore on our business and operations.

 

Our business operations are not subject to any special legislation or regulatory controls other than those generally applicable to companies and businesses incorporated and/or operating in Singapore.

 

Environmental Public Health Act

 

The Environmental Public Health Act 1987 of Singapore (the “EPHA”) is administered by the NEA and regulates, among other things, the disposal and treatment of industrial waste and public nuisances. Under the EPHA, the Director-General of Public Health of Singapore (the “DGPH”) may, upon receipt of any information with respect to the existence of a nuisance liable to be dealt with summarily under the EPHA and if satisfied of the existence of a nuisance, serve a nuisance order on the person by whose act, default or sufferance the nuisance arises or continues, or if the person cannot be found, on the owner or occupier of the premises on which the nuisance arises. Some of the nuisances which are liable to be dealt with summarily under the EPHA include any factory or workplace which is not kept in a clean state, any place where there exists or is likely to exist any condition giving rise, or capable of giving rise to the breeding of flies or mosquitoes, any place where there occurs, or from which there emanates noise or vibration as to amount to a nuisance and any machinery, plant or any method or process used in any premises which causes a nuisance or is dangerous to public health and safety. If the DGPH receives any information in respect of the existence of a nuisance liable to be dealt with under the EPHA, a nuisance order may be served on the person responsible for the nuisance prescribing the measures to be taken to remedy the nuisance. Any failure to comply with the nuisance order served is an offense and such person is liable upon conviction for a fine not exceeding SGD10,000 for the first offense and to a further fine not exceeding SGD1,000 for every day during which the offense continues after conviction.

 

Cleaning Business License

 

The EPHA also regulates the cleaning standards and productivity of the cleaning industry through the licensing of cleaning businesses which comprises the provision of cleaning work, being work carried out in Singapore that involves, as its main or only component, the bringing of premises or any public place into, or keeping of premises or any public place in, a clean condition, and includes supervising the carrying out of such work but excludes any work that the Minister for the Environment and Water Resources declares not to be cleaning work. Any person who fails to obtain and maintain a cleaning business license while carrying on a cleaning business in Singapore will be guilty of an offense and liable on conviction for a fine not exceeding SGD10,000 or to imprisonment for a term not exceeding 12 months or both, and in the case of a continuing offense, for a further fine not exceeding SGD1,000 for every day or part thereof during which the offense continues after the conviction.

 

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Prior to being licensed, cleaning businesses must meet several track record, training and salary requirements which include (a) in respect of an existing cleaning business, having at least one cleaning contract ongoing or completed in the 12 months preceding the license application (for renewal of an existing cleaning business) and in respect of new start-ups, having at least one employee with no less than 2 years of practical experience in supervising cleaning work or who has attended the requisite training modules under the Environmental Cleaning (EC) Singapore Workforce Skills Qualifications (the “WSQ”); (b) having training for its cleaning workforce, where cleaners attend at least one module under the WSQ framework or the Institute of Technical Education Skills Certificate in Housekeeping Operations (Healthcare). At the point of license application and throughout the license period, at least 50% of the cleaners are to be trained and at the point of license renewal and throughout the license period, 100% of the cleaners are to be trained; and (c) submitting and implementing a progressive wage plan for resident (i.e. Singapore citizens or permanent residents) cleaners employed.

 

Progressive wage model

 

To obtain a cleaning business license, companies must, among other things, submit a progressive wage plan that covers employed resident cleaners (being Singapore citizens and permanent residents) whether they are full-time, part-time or casual employees, and such plan must (a) specify the basic wage for each class of cleaners; and (b) conform to the wage levels specified under the progressive wage model by the Commissioner for Labor, based on the recommendations of the Tripartite Cluster for Cleaners. A tripartite effort which is made up of seven unions, whose members are representatives from the National Trades Union Congress, Singapore National Employers Federation, Employment and Employability Institute, Building Construction and Timber Industries Employees’ Union, Environmental Management Association of Singapore, ISS Facility Services Private Limited, Integrated Property Management Pte Ltd, CapitaLand Mall Asia Limited, City Developments Limited, town councils, the Singapore Ministry of Manpower (“MOM”), the National Environmental Agency of Singapore (“NEA”) and Workforce Singapore. The progressive wage model was introduced in 2014 as a productivity-based wage progression pathway that helps to increase wages of workers through upgrading skills and improving productivity, and is regulated for the cleaning industry in Singapore by the NEA. The progressive wage model covers three broad categories of cleaning jobs: offices and commercial buildings, food & beverage establishments (which includes hawker centers and food courts), and the conservancy sector (which includes town councils and public cleansing).

 

In December 2016, the Tripartite Cluster of Cleaners recommended the introduction of (i) yearly wage adjustments to each wage point in the progressive wage model from 2017 to 2019; (ii) scheduled wage increases from 2020 to 2022; and (iii) an annual bonus equivalent to two weeks of basic monthly wages, for all wage points from 2020 onwards.

 

On June 7, 2021, the Tripartite Cluster of Cleaners recommended the introduction of a six-year schedule of sustained wage increases from July 1, 2023 to June 30, 2029, which will be reviewed in 2025.

 

EC WSQ Qualification

 

Cleaners employed by a cleaning business are required to attend at least one module under the EC WSQ framework. The WSQ is a national credentialing system. The EC WSQ is one of the 33 WSQ industry frameworks developed to date, and is designed to help workers in the cleaning industry improve their employability as well as progress in their careers. This framework caters to the training of cleaning crew, stewards and supervisors in two sub-sectors: (a) commercial and private residential cleaning; and (b) public cleaning. The types of EC WSQ qualifications available include (i) the WSQ Certificate in Environmental Cleaning, which aims to equip cleaning professionals with skills needed to perform basic cleaning activities; (ii) the WSQ Higher Certificate in Environmental Cleaning, which is suitable for cleaning professionals who want to advance their skills with in-depth training and gain the soft skills required of a cleaning steward; and (iii) WSQ Advanced Certificate in Environmental Cleaning, which aims to equip cleaning professionals with skills needed for supervisory positions. Upon the completion of each unit, the worker will be awarded a statement of attainment (“SOA”). The WSQ qualifications will be awarded after the worker completes the required number of SOAs.

 

To help employers meet the challenge of having to release workers for training, Workforce Singapore has introduced the Assessment Only Pathway (“AOP”) qualifying criteria, aimed at allowing workers to obtain their EC WSQ qualification through assessment without having to attend classroom training. These workers would either have some prior training in cleaning or have a number of years of relevant working experience, and will be screened before they are allowed to enroll in the AOP.

 

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On June 7, 2021, the Tripartite Cluster of Cleaners recommended the introduction of enhanced mandatory training requirements under the Skills Framework for Environmental Services and that the number of WSQ training modules be increased as follows:

 

Job Roles   Current   By December 31, 2023   Beyond 2025
             
All cleaners   Minimum of 1 WSQ module (for licensing conditions)   2 modules in total (1 mandatory workplace safety and health related module and 1 core module that is endorsed by the Tripartite Cluster of Cleaners)   3 modules in total
             
Multi-skilled cleaners           4 modules in total
             
Mechanical Driver            
             
Supervisor            

 

Environmental Protection and Management Act

 

The Environmental Protection and Management Act 1999 of Singapore and its subsidiary legislation are administered by the NEA, which provide for, among other things, laws relating to pollution control in Singapore through the regulation of various industries. Pursuant to the Environmental Protection and Management (Boundary Noise Limits for Factory Premises) Regulations (the “EPM Regulations”), the owner or occupier of any factory premises shall ensure that the level of noise emitted from his premises does not exceed the maximum permissible noise levels as set out in the First Schedule to the EPM Regulations. The permissible noise levels may vary depending on the type of affected premises, which include, among others, noise sensitive premises that require peace and quiet, residential premises and commercial premises not including factory premises. Any person who fails to comply with the requirements under the EPM Regulations is guilty of an offense and liable upon conviction for (a) a fine not exceeding SGD5,000 on the first conviction, and in the case of a continuing offense, to a further fine not exceeding SGD200 for every day or part thereof the offense continues after the conviction; and (b) a fine not exceeding SGD10,000 on a subsequent conviction, and in the case of a continuing offense, to a further fine not exceeding SGD300 for every day or part thereof during which the offense continues after conviction.

 

Radiation Protection Act

 

The Radiation Protection Act 2007 of Singapore (the “RPA”) controls and regulates, among other things, the possession and use of radioactive materials and irradiating apparatus. The RPA provides that no person shall, except under and in accordance with a license, have in his possession or under his control or use or otherwise deal in any radioactive material or irradiating apparatus. Any person who contravenes the aforementioned requirement under the RPA is guilty of an offense and liable upon conviction for a fine not exceeding SGD100,000 or imprisonment for a term not exceeding five years or both.

 

Such licenses are issued by the Radiation Protection and Nuclear Science Department under the RPA and its subsidiary legislation, such as the Radiation Protection (Non-Ionizing Radiation) Regulations of Singapore (the “Non-Ionizing Radiation Regulations”), which regulate, among other things, the licenses and requirements for the manufacture or dealing with, keeping or possession for use and the import of a consignment of certain controlled irradiating apparatus, such as ultrasound apparatus and high power lasers. Ultrasound apparatus means any industrial apparatus designed to generate and emit ultrasonic power at acoustic frequencies above 16kHz. High power lasers means any laser apparatus from Class 3b and Class 4 based on the classification set out in the Second Schedule of the Non-Ionizing Radiation Regulations, being those emitting visible and/or invisible laser radiation with specified maximum accessible emission levels and those exceeding the accessible emission limits respectively.

 

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The Non-Ionizing Radiation Regulations further set out the requirements for (a) ultrasound apparatus, including the requirement that every ultrasound apparatus shall be designed and constructed in such a manner that all marks, labels and signs are permanently affixed thereon and clearly visible and all user controls, meters, lights or other indicators are clearly visible, readily discernible and clearly labeled to indicate their function; and (b) high power lasers, including the requirement that every high power laser shall have a protective housing that prevents human access during operation to laser and collateral radiation that exceed the specified accessible emission limits, a safety interlock for each portion of the protective housing that is designed to be removed or displaced during operation or maintenance, a readily available remote control connector, a key-actuated master control and an emission indicator which provides a visible or audible signal during emission of accessible laser radiation in excess of the specified accessible emission limits. Any person who contravenes any of the provisions of the Non-Ionizing Radiation Regulations is guilty of an offense and liable on conviction for a fine not exceeding SGD2,000 or imprisonment for a term not exceeding six months or both.

 

Our subsidiary, JCS, has a license issued under the RPA for the possession of four industrial ultrasound apparatus and one high powered industrial laser.

 

Workplace Safety and Health Act

 

The Workplace Safety and Health Act 2006 of Singapore (the “WSHA”) provides that every employer has the duty to take, so far as is reasonably practicable, such measures as are necessary to ensure the safety and health of its employees at work. These measures include providing and maintaining for the employees a work environment that is safe, without risk to health, and adequate with regards to facilities and arrangements for employees’ welfare at work, ensuring that adequate safety measures are taken in respect of any machinery, equipment, plant, article or process used by the employees, ensuring that the employees are not exposed to hazards arising out of the arrangement, disposal, manipulation, organization, processing, storage, transport, working or use of things in or near their workplace and under the control of the employer, developing and implementing procedures for dealing with emergencies that may arise while those persons are at work and ensuring that the employees at work have adequate instruction, information, training and supervision as is necessary for them to perform their work. The relevant regulatory body is the MOM.

 

Any person who breaches his duty under the WSHA is guilty of an offense and will be liable on conviction, in the case of a body corporate, to a fine not exceeding SGD500,000 and if the contravention continues after the conviction, the body corporate shall be guilty of a further offense and will be liable to a fine not exceeding SGD5,000 for every day or part thereof during which the offense continues after conviction. For repeat offenders, where a person has on at least one previous occasion been convicted of an offense under the WSHA that causes the death of any person and that person is subsequently convicted of the same offense that causes the death of another person, the court may, in addition to any imprisonment, if prescribed, punish the person, in the case of a body corporate, with a fine not exceeding SGD1 million and, in the case of a continuing offense, with a further fine not exceeding SGD5,000 for every day or part thereof during which the offense continues after conviction.

 

Under the WSHA, it is the duty of any person who manufactures any machinery, equipment or hazardous substance (“MEHS”), which includes, among other things, welding equipment, for use at work to ensure, so far as is reasonably practicable, that (a) information regarding the safe use of the MEHS is supplied for use at work (which should include precautions to be taken for the proper use and maintenance of such MEHS, the health hazards associated with the MEHS and the information relating to and the results of any examinations or tests of the MEHS that are relevant to its safe use); (b) the MEHS are safe, and without risk to health, when properly used; and (c) the MEHS are examined and tested in compliance with the obligation imposed by paragraph (b). The duties imposed on any person in respect of the aforementioned shall (i) apply only if the MEHS are manufactured or supplied in the course of a trade or business carried on by the person (whether for profit or not); (ii) apply whether the MEHS are exclusively manufactured or supplied for use by persons at work; (iii) extend to the supply of the MEHS by way of sale, transfer, lease or hire and whether as principal or agent, and to the supply of the MEHS to a person for the purpose of supply to others; and (iv) not apply to a person by reason only that the person supplies the machinery or equipment under a lease-purchase agreement, conditional sale agreement or credit-sale agreement to another (“customer”) in the course of a business of financing the acquisition of the machinery or equipment by the customer from others. In the event any person contravenes the relevant provision in the WSHA that imposes the aforementioned duty on such person, that person is guilty of an offense, and liable on conviction (in the case of a natural person) for a fine not exceeding SGD200,000 or imprisonment for a term not exceeding two years or both, or (in the case of a body corporate) for a fine not exceeding SGD500,000.

 

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Further, the Commissioner for Workplace Safety and Health (the “CWSH”) may serve a remedial order or a stop-work order in respect of a workplace if he is satisfied that (a) the workplace is in such condition, or is so located, or any part of the machinery, equipment, plant or article in the workplace is so used, that any work or process carried on in the workplace cannot be carried on with due regard to the safety, health and welfare of persons at work; (b) any person has contravened any duty imposed by the WSHA; or (c) any person has done any act, or has refrained from doing any act which, in the opinion of the CWSH, poses or is likely to pose a risk to the safety, health and welfare of persons at work. The remedial order shall direct the person served with the order to take such measures, to the satisfaction of the CWSH, to, among other things, remedy any danger so as to enable the work or process in the workplace to be carried on with due regard to the safety, health and welfare of the persons at work, whereas a stop-work order will direct the person served with the order to immediately cease to carry on any work or process indefinitely or until such measures as are required by the CWSH have been taken, to the satisfaction of the CWSH, to remedy any danger so as to enable the work or process in the workplace to be carried on with due regard to the safety, health and welfare of the persons at work, and shall specify the date on which such order is to take effect.

 

Pursuant to the Workplace Safety and Health (Noise) Regulations 2011 of Singapore (the “WSHNR”), the occupier of a workplace must take reasonably practicable measures to reduce or control the noise from any machinery or equipment used or from any process, operation or work carried out by him in the workplace, so that no person at work in the workplace is exposed or likely to be exposed to excessive noise. This may include replacing noisy machinery, equipment, processes, operations or work with less noisy machinery, equipment, processes, operations or work, and such other measures as prescribed under the WSHNR. Where it is not practicable to reduce the noise, the occupier of a workplace shall limit the duration of time persons at work are exposed to the noise in accordance with the time limits prescribed in the Schedule under the WSHNR. Any person who contravenes the aforementioned is guilty of an offense and is liable on conviction for a fine not exceeding SGD10,000, and in the case of a second or subsequent conviction, for a fine not exceeding SGD20,000 or imprisonment for a term not exceeding six months or both.

 

Pursuant to the Workplace Safety and Health (Risk Management) Regulations, the employer in a workplace is supposed to, among other things, conduct a risk assessment in relation to the safety and health risks posed to any person who may be affected by his undertaking in the workplace, take all reasonably practicable steps to eliminate or minimize foreseeable risks, implement measures or safety procedures to address the risks, and to inform workers of the same, maintain records of such risk assessments and measures/safety procedures for a period of not less than three years and submit such records to the CWSH when required by the CWSH from time to time. Any employer who fails to comply with the aforementioned requirements is guilty of an offense and is liable on conviction for a fine not exceeding SGD10,000 for the first offense, and for a fine not exceeding SGD20,000 for a subsequent offense or imprisonment for a term not exceeding six months or both.

 

Work Injury Compensation Act

 

The Work Injury Compensation Act 2019 of Singapore (The “WICA”), which is regulated by the MOM, applies to all employees who are engaged under a contract of service or apprenticeship with an employer regardless of their level of earnings. The WICA does not cover self-employed persons or independent contractors. However, as the WICA provides that, where any person (referred to as the principal) in the course of or for the purpose of his trade or business contracts with any other person (referred to as the subcontractor employer), the principal shall be liable to compensate those employees of the subcontractor employer who were injured while employed in the execution of work for the principal.

 

The WICA provides that if an employee dies or sustains injuries in a work-related accident or contracts occupational diseases in the course of the employment, the employer shall be liable to pay compensation in accordance with the provisions of the WICA. An injured employee is entitled to claim medical leave wages, medical expenses and lump sum compensation for permanent incapacity or death, subject to certain limits stipulated in the WICA.

 

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An employee who has suffered an injury arising out of and in the course of his employment can choose to either:

 

(a) report the accident to his employer in order to submit a claim for compensation through the MOM without needing to prove fault or negligence on anyone’s part. There is a fixed formula in the WICA for the amount of compensation to be awarded; or

 

(b) commence legal proceedings to claim damages under common law against the employer for breach of duty or negligence.

 

Damages under a common law claim are usually more than an award under the WICA and may include compensation for pain and suffering, loss of wages, medical expenses and any future loss of earnings. However, the employee must show that the employer has failed to provide a safe system of work, or breached a duty required by law or that the employer’s negligence caused the injury.

 

Under the WICA, every employer is required to insure and maintain insurance under approved policies with an insurer against all liabilities which he may incur under the provisions of the WICA in respect of all employees employed by him, unless specifically exempted. Further, every employer is required to maintain work injury compensation insurance for all employees engaged in manual work labor regardless of their salary level, as well as all employees doing non-manual work who earn SGD2,100 or less a month. Failure to provide adequate insurance is an offense carrying a fine of up to SGD10,000 or imprisonment for a term of up to 12 months, or both. For further information on our Group’s insurance policies, please refer to Item 4. “Information on the Company - Insurance”.

 

Employment Act

 

The Employment Act 1968 of Singapore (the “Employment Act”) is the main legislation governing employment in Singapore and is administered by the MOM. The Employment Act covers every employee who is under a contract of service with an employer and includes a workman (as defined under the Employment Act) but does not include, among others, any person employed in a managerial or executive position (subject to the exceptions set out below). The definition of “employee” under the Employment Act does not extend to freelance contractors who have entered into a contract for service. Accordingly, freelance contractors are not considered to be employees of our Group.

 

A workman is defined under the Employment Act as including, among others, (a) any person, skilled or unskilled, who has entered into a contract of service with an employer in pursuance of which he is engaged in manual labor, including any apprentice; and (b) any person employed partly for manual labor and partly for the purpose of supervising in person any workman in and throughout the performance of his work.

 

Core employment provisions of the Employment Act, such as public holiday and sick leave entitlements, minimum days of annual leave, payment of salary and allowable deductions and release for wrongful dismissal, cover all employees, including persons employed in a managerial or executive position, except public servants, domestic workers, seafarers and those who are covered separately.

 

In addition to the core employment provisions of the Employment Act, Part IV of the Employment Act contains provisions relating to, among other things, working hours, overtime, rest days, holidays, annual leave, payment of retrenchment benefit, priority of retirement benefit, annual wage supplements and other conditions of work or service (“Part IV”). However, such Part IV provisions only apply to: (a) workmen earning basic monthly salaries of not more than SGD4,500; and (b) employees (excluding workmen) earning basic monthly salaries of not more than SGD2,600.

 

An employer who breaches any provision of Part IV of the Employment Act is guilty of an offense and is liable on conviction for a fine not exceeding SGD5,000, and for a second or subsequent offense a fine not exceeding SGD10,000 or imprisonment for a term not exceeding 12 months or both.

 

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From April 1, 2016, employers are required to issue to their employees who are covered by the Employment Act and who are employed for 14 days or more a written record of the key employment terms of the employee. The key employment terms required to be provided (unless inapplicable to such employee) include, among other things, working arrangements (such as daily working hours, number of working days per week and rest day(s)), salary period, basic salary, fixed allowances and deductions, overtime rate of pay, types of leave and other medical benefits.

 

Employment of Foreign Manpower Act

 

The employment of foreign employees in Singapore is governed by the Employment of Foreign Manpower Act 1990 of Singapore (the “EFMA”) and is regulated by the MOM. The EFMA prescribes the responsibilities and obligations of employers of foreign employees in Singapore.

 

The EFMA provides that no person shall employ a foreign employee unless the foreign employee has obtained a valid work pass from the MOM in accordance with the Employment of Foreign Manpower (Work Passes) Regulations 2012, which allows the foreign employee to work for him. Any person who fails to comply with or contravenes this provision of the EFMA is guilty of an offense and will: (a) be liable on conviction for a fine not less than SGD5,000 and not more than SGD30,000 or imprisonment for a term not exceeding 12 months or both; and (b) on a second or subsequent conviction: (i) in the case of an individual, be liable for a fine of not less than SGD10,000 and not more than SGD30,000 and imprisonment for a term of not less than one month and not more than 12 months; or (ii) in any other case, be punished with a fine of not less than SGD20,000 and not more than SGD60,000.

 

In Singapore, the work pass to be issued to a foreigner is contingent on, among other things, the type of work and salary being received by the foreigner in question. Foreign professionals, managers and executives earning a fixed monthly salary of at least SGD4,500 with acceptable qualifications (such as a good university degree, professional qualifications or specialist skills) may apply for an employment pass, whereas older and more experienced candidates will need higher salaries. Mid-level skilled staff earning a fixed monthly salary of at least SGD2,500 who possess a degree, diploma or technical certificate and have the relevant work experience may apply for an S-pass; and semi-skilled foreign workers from approved source countries working in, among others, the manufacturing sector may apply for a work permit.

 

Further, under the Employment of Foreign Manpower (Work Passes) Regulations 2012, an employer is required to purchase and maintain medical insurance with coverage of at least SGD15,000 per 12-month period of a foreign workers’ employment (or for such shorter period where the foreign workers’ period of employment is less than 12 months) for the foreign workers’ in-patient care and day surgery except as the Controller of Work Passes may otherwise provide by notification in writing.

 

In addition, the employment of foreign workers is also subject to sector-specific rules regulated by the MOM through the following policy instruments: (a) business activity; (b) approved source countries; (c) the imposition of security bonds and levies; and (d) quota (or dependency ratio ceilings) based on the ratio of local to foreign workers.

 

Business activity

 

To be considered to be under the manufacturing sector, a company must have a valid factory notification or registration, use machinery to manufacture or produce items from raw materials and operate in a designated industrial setting area.

 

Approved source countries

 

The approved source countries for manufacturing workers are Malaysia, the PRC, and NAS countries. The minimum age for all foreign workers (other than domestic foreign workers) is 18, and all workers can only work up to 60 years of age. In addition, Malaysian foreign workers must be under 58 years of age and non-Malaysian foreign workers must be under 50 years of age in order to apply for a work permit.

 

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Further, for the manufacturing sector, the maximum number of years a foreign worker can work in Singapore on a work permit is as follows:

 

Nationality   Type of worker   Maximum period of employment
PRC   Basic skilled   14 years
PRC   Higher skilled   22 years
NAS, Malaysia   All   No maximum period of employment

 

Quota and levies

 

The number of foreign workers that employers can hire under a work pass is limited by the quota or dependency ratio ceiling, and employers pay the requisite levy according to the qualification of the foreign worker employed. The levy rates are tiered so that employers who hire close to the maximum quota will be required to pay a higher levy, and the levy rates are subject to changes as and when announced by the Singapore government. The levy rates for the manufacturing sector are set out in the table below:

 

   Basic skilled   Higher skilled 
   Monthly   Daily(1)   Monthly   Daily(1) 
Quota                    
Tier 1:                    
Up to 25% of the total workforce   SGD370    SGD12.17    SGD250    SGD8.22 
Tier 2:                    
Above 25% of the total workforce   SGD470    SGD15.46    SGD350    SGD11.51 
Tier 3:                    
Above 50% to 60% of the total workforce   SGD650    SGD21.37    SGD550    SGD18.09 

 

The levy rates for the services sector are set out in the table below:

 

   Basic skilled   Higher skilled 
   Monthly   Daily(1)   Monthly   Daily(1) 
Tier 1:                    
Up to 10% of the total workforce   SGD450    SGD14.80    SGD300    SGD9.87 
Tier 2:                    
Above 10% to 25% of the total workforce   SGD600    SGD19.73    SGD400    SGD13.16 
Tier 3:                    
Above 25% to 35% of the total workforce   SGD800    SGD26.31    SGD600    SGD19.73 

 

(1) The daily levy rate only applies to work permit holders who did not work for a full calendar month. The daily levy rate is calculated as follows: (Monthly levy rate X 12)/365 = rounding up to the nearest cent.

 

The quota for the services sector is set at 35%. A Singaporean or Permanent Resident employee employed under a contract of service, including the company’s director, is counted as (a) one local employee if they earn the LQS of at least SGD1,400 per month; and (b) 0.5 local employee if they earn half the LQS of at least SGD700 to SGD1,400 per month.

 

Employers pay less levy for higher skilled foreign workers. Foreign workers with the following certificates will qualify as higher skilled workers:

 

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Type of qualification   Certificates needed
Academic qualifications  

- Malaysia: Sijil Pelajaran Malaysia

- NAS: High school certificates

- PRC: Diploma Skills

     
Evaluation Test (“SET”) conducted by the Institute of Technical Education (“ITE”)   SET Level 1 or National ITE Certificate (Nitec)
     
Workforce skills qualification   Composite Assessment for Generic Manufacturing
     
Market-Based Skills Recognition Framework   Earn a fixed monthly salary of at least SGD1,600 and worked at least four years in Singapore as a work permit holder

 

Required safety courses

 

For the manufacturing sector, foreign workers who handle metals and machinery in the metalworking industry, such as our foreign workers employed under JCS, must take a Metalworking Safety Orientation Course or an Apply Workplace Safety and Health in Metal Work course before their work permits can be issued, and such courses may be conducted by either the Occupational Safety and Health Training and Promotion Centre or other training institutions approved by the Chief Inspector appointed by the Minister of Manpower.

 

A work permit cannot be issued to the foreign worker until he has taken the safety course. Employers are responsible for their workers passing the test. If the foreign workers fail the course, they should retake it as soon as possible and are required to pass the course within three months of their arrival or their work permit could be revoked. Foreign workers in the metalworking industry that have worked in the metalworking industry for (a) less than six years must pass the safety course once every two years; and (b) more than six years must pass the safety course once every four years.

 

Employers renewing a work permit must ensure that the foreign worker’s safety course certificate has a validity period of more than one month on the day of renewal, otherwise the work permit will not be renewed.

 

Infectious Diseases Act 1976

 

The Infectious Diseases Act 1976 of Singapore (the “IDA”) relates to the quarantine and the prevention of infectious diseases. Under the IDA, if the Director of Medical Services (the “DMS”) has reason to believe that there exist on any premises conditions that are likely to lead to the outbreak or spread of any infectious disease, he may, among other things, by written notice, order the closure of the premises for a period not exceeding 14 days, and require the owner or occupier of the premises to cleanse or disinfect the premises in the manner and within the time specified in the notice or carry out such additional measures as the DMS may require in the manner and within the time specified in the notice. Such notice directing the owner or the occupier of the premises to close the premises may be renewed by the DMS from time to time for such period, not exceeding 14 days, as the DMS may, by written notice, specify.

 

In addition, the DMS may order any person who is, or is suspected to be, a case or carrier or contact of an infectious disease to be detained and isolated in a hospital or other place for such period of time and subject to such conditions as the DMS may determine. The DMS may also direct any person carrying on any occupation, trade or business in a manner as is likely to cause the spread of infectious disease to take preventative action that the DMS reasonably believes is necessary to prevent the possible outbreak or prevent or reduce the spread of the infectious disease. Under the IDA, “preventative action” in the case of such direction, includes, among other things, requiring the person to stop carrying on, or not carry on, the occupation, trade or business during a period of time specified in the direction.

 

Any person who, without reasonable excuse, fails to comply with any requirement of such notice or direction given to that person by the DMS is guilty of an offense. While there are no specific penalties for such offense, any person guilty of an offense under the IDA for which no penalty is expressly provided shall (a) in the case of a first offense, be liable on conviction for a fine not exceeding SGD10,000 or imprisonment for a term not exceeding 6 months or both; and (b) in the case of a second or subsequent offense, be liable on conviction for a fine not exceeding SGD20,000 or imprisonment for a term not exceeding 12 months or both.

 

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Central Provident Fund Act

 

The Central Provident Fund (“CPF”) system is a mandatory social security savings scheme funded by contributions from employers and employees. Pursuant to the Central Provident Fund Act 1953 of Singapore (“CPFA”), an employer is obliged to make CPF contributions for all employees who are Singapore citizens or permanent residents who are employed in Singapore by an employer (save for employees who are employed as a master, a seaman or an apprentice in any vessel, subject to an exception for non-exempted owners). CPF contributions are not applicable for foreigners who hold employment passes, S passes or work permits. CPF contributions are required for both ordinary wages and additional wages (subject to an ordinary wage ceiling and a yearly additional wage ceiling) of employees at the applicable prescribed rates which is dependent on, among other things, the amount of monthly wages and the age of the employee. An employer must pay both the employer’s and employee’s share of the monthly CPF contribution. However, an employer can recover the employee’s share of CPF contributions by deducting it from their wages when the contributions are paid for that month.

 

Where the amount of the contributions which an employer is liable to pay under the CPFA in respect of any month is not paid within such period as may be prescribed, the employer shall be liable for the payment of interest on the amount for every day the amount remains unpaid commencing from the first day of the month succeeding the month in respect of which the amount is payable and the interest shall be calculated at the rate of 1.5% per month or the sum of SGD5, whichever is greater. Where any employer who has recovered any amount from the monthly wages of an employee in accordance with the CPFA fails to pay the contributions to the CPF within such time as may be prescribed, he will be guilty of an offense and will be liable on conviction for a fine not exceeding SGD10,000 or imprisonment for a term not exceeding seven years or both. Where an offense has been committed under the CPFA but there are no penalties provided, the offender may be liable for a fine not exceeding SGD5,000 or imprisonment for a term not exceeding six months or both, and where the offense is repeated by the same offender, the offender may be liable for a fine not exceeding SGD10,000 or imprisonment for a term not exceeding 12 months or both.

 

Customs Regulations

 

Goods exported from Singapore are regulated under the Customs Act 1960 of Singapore (the “Customs Act”). To export goods from Singapore, the exporter is required to declare the goods to Singapore Customs, a department under the Ministry of Finance, which is the lead agency for trade facilitation and revenue enforcement. The Singapore Goods and Services Tax (the “GST”) is not levied on goods exported from Singapore. A Customs export permit is required for, among other things, the export of locally manufactured goods or local GST paid goods, the export of goods from free trade zones, dutiable goods from licensed warehouses and non-dutiable goods from a zero-rated warehouse. The exporter will be the party that issues the commercial invoice to his overseas customer. Exporters who intend to engage in import and/or export activities in Singapore or appoint a declaring agent to apply for Customs import, export and transhipment permits or certificates will need to activate their Customs Account with Singapore Customs, further to which a declaring agent may be appointed to apply for Customs permits on their behalf. Declaring agents have to be registered with Singapore Customs. Exporters may be penalized if they do not comply with the requirements and conditions imposed under the Customs Act. Making an incorrect declaration or failing to make a declaration of goods imported into, exported from or transhipped in Singapore will result in being liable on conviction for a fine not exceeding SGD10,000, or the equivalent of the amount of the customs duty, excise duty or GST payable, whichever is the greater amount, or imprisonment for a term not exceeding 12 months, or both.

 

Intellectual Property Rights

 

The protection of industrial designs is provided for under the Registered Designs Act 2000 of Singapore. There are two key criteria for registration: the subject matter must be (a) a ‘design’, which means features of shape, configuration, pattern or ornament applied to article by any industrial process; and (b) ‘new’, being a design that is not the same, or substantially the same, as any other design that has been registered or published in Singapore or elsewhere, and publication includes sale or use of any article which embodies the design.

 

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Inventions are protected in Singapore under the Patents Act 1994 of Singapore and may be registered either through a domestic application filed with the Registry of Patents within the Intellectual Property Office of Singapore (the “IPOS”) or an international application filed in accordance with the Patent Cooperation Treaty, with the Registry of Patents acting as the receiving office for the application. A patent may be granted for an invention which is a product or a process, and such invention must (a) be new; (b) involve an inventive step (being a step that is not obvious to a person who is skilled in the relevant art); (c) be capable of industrial application; and (d) not encourage offensive, immoral or anti-social behavior through its publication or exploitation.

 

Trademarks may be protected both under the Trade Marks Act 1998 of Singapore (the “TMA”) and under common law. These two systems are independent of each other. Protection under the TMA is conditional upon registration of the trademark with the Registry of Trade Marks within the IPOS. There are three key criteria for registration: the subject matter must be (a) a ‘trademark’, which is any sign capable of being graphically represented that is used, or proposed to be used, by a trader to distinguish his goods or services from those of other traders; (b) ‘distinctive,’ if it is not descriptive of those goods or services. It is a question of degree in every case whether the sign is so descriptive of the goods or services in question that it will be refused registration; and (c) does not conflict with an earlier trademark, that is an earlier registered trade mark or a trademark (whether registered or not) which is well known in Singapore.

 

Item 4A. Unresolved Staff Comments

 

Not Applicable

 

Item 5. Operating and Financial Review and Prospects

 

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

 

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, 2021, 2022 and 2023, our revenue amounted to approximately SGD14.8 million, SGD18.6 million and SGD18.0 million, respectively. Our net income amounted to approximately SGD2,000, SGD1.2 million and SGD0.5 million for the years ended December 31, 2021, 2022 and 2023, respectively.

 

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The following table shows our Statement of Operations data for the years ended December 31, 2021, 2022 and 2023 in SGD and, for 2023, in USD. For further information regarding the results of our operations, see our consolidated financial statements appearing elsewhere in this Annual Report.

 

   For the financial years ended December 31, 
   2021   2022   2023   2023 
   SGD’000   SGD’000   SGD’000   US$’000 (1) 
                 
Revenues   14,764    18,631    18,032    13,668 
Cost of revenues   (12,416)   (13,503)   (13,666)   (10,359)
Gross profit   2,348    5,128    4,366    3,309 
                     
Operating expenses:                    
Selling and marketing expenses   (22)   (27)   (53)   (40)
General and administrative expenses   (2,267)   (3,337)   (3,303)   (2,504)
Total operating expenses   (2,289)   (3,364)   (3,356)   (2,544)
                     
Income from operations   59    1,764    1,010    765 
                     
Other income (loss):                    
Other income   707    542    728    552 
Interest expense   (217)   (336)   (511)   (387)
Other expense   (550)   (545)   (597)   (453)
Change in fair value in financial instrument   3    2    -    - 
Total other loss   (57)   (337)   (380)   (288)
                     
Income before tax expense   2    1,427    630    477 
Income tax expense   -    (235)   (111)   (84)
Net income   2    1,192    519    393 
Other comprehensive income                    
Foreign currency translation gain/(loss), net   (24)   2    (69)   (52)
Total comprehensive income (loss)   (22)   1,194    450    341 

 

(1) Calculated at the rate of US$1.00 = SGD1.3193 as set forth in the statistical release of the Federal Reserve System on December 29, 2023.

 

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 Annual Report and those set out below:

 

Demand from our major customer groups

 

Our aggregate sales generated from our top five customers were approximately 80.6%, 68.1% and 66.1% of our revenue for the years ended December 31, 2021, 2022 and 2023, respectively. In particular, sales to our largest customer amounted to approximately SGD4.8 million, SGD4.1 million and SGD4.4 million, representing approximately 32.7%, 22.0% and 24.2% of our revenue for the years ended December 31, 2021, 2022 and 2023, respectively. Accordingly, our sales would be significantly affected by the demands of our top five customer groups, and particularly our largest customer group, as well as certain inherent risks, among others, changes and development in the local political, regulatory and business conditions, that may affect their purchases from us, many of which are beyond our control. These uncertainties could have a material adverse effect on our business, results of operations and financial conditions, and affect our ability to remain profitable and achieve business growth.

 

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

 

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

 

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Fluctuations in the cost of our raw materials

 

Raw materials, such as steel and electronic components, are the largest component of our cost of revenues, representing approximately 46.3%, 57.8% and 40.1% of our total cost of revenues for the years ended December 31, 2021, 2022 and 2023, 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, 2021, 2022 and 2023, the majority of our raw materials were commonly available from the marketplace, and their prices are affected by 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.

 

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, 2021, 2022 and 2023, our revenue was derived from (i) our sale of cleaning systems and other equipment business; and (ii) our 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, 2021, 2022 and 2023:

 

   Year ended December 31, 
   2021   2022   2023 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Sale of cleaning systems and other equipment business                              
Sale of precision cleaning systems   4,757    32.2    6,644    35.7    6,687    37.1 
Sale of other cleaning systems and other equipment   3,056    20.7    3,838    20.6    3,494    19.4 
Repair and servicing of cleaning systems and sale of related parts   1,162    7.9    961    5.1    810    4.5 
Sub-total   8,975    60.8    11,443    61.4    10,991    61.0 
                               
Provision of centralized dishwashing and ancillary services business                              
Provision of centralized dishwashing and general cleaning services   5,636    38.2    6,879    36.9    6,710    37.2 
Leasing of dishwashing equipment   153    1.0    309    1.7    331    1.8 
Sub-total   5,789    39.2    7,188    38.6    7,041    39.0 
                               
Total   14,764    100.0    18,631    100.0    18,032    100.0 

 

Our total revenue decreased by approximately SGD0.6 million, or 3.2%, to approximately SGD18.0 million for the year ended December 31, 2023 from approximately SGD18.6 million for the year ended December 31, 2022. The decrease was mainly attributable to the decrease in revenue generated from our sale of cleaning systems and other equipment business of approximately SGD0.5 million and decrease in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately SGD0.1 million. The decreases were mainly attributable to a slowdown in shipments for other cleaning systems and other equipment in the electronics and hard drive industries and decreased sales for general cleaning services of food courts.

 

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Our total revenue increased by approximately SGD3.9 million or 26.2% to approximately SGD18.6 million for the year ended December 31, 2022 from approximately SGD14.8 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 SGD2.5 million and increase in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately SGD1.4 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 SGD6.6 million or 31.0% to approximately SGD14.8 million for the financial year ended December 31, 2021  from approximately SGD21.4 million for the financial 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 SGD8.0 million, while partially offset by the increase in revenue generated from our provision of centralized dishwashing and ancillary services business of approximately SGD1.3 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 SGD8.4 million decrease in revenue from subsidiaries of a certain customer group in Malaysia caused by the disruption by COVlD-19 of their expansion in production facilities that resulted in the postponement of delivery of their orders.

 

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, 2021, 2022 and 2023.

 

  

Year ended

December 31, 2021

  

Year ended

December 31, 2022

  

Year ended

December 31, 2023

 
   SGD’000   SGD’000   SGD’000 
             
Outstanding contract value as of beginning of year(1)   5,820    19,997    29,050 
New contract value for the year   22,208    19,515    6,411 
Revenue recognized for the year   8,031    10,462    10,181 
Outstanding contract value as of year end(2)   19,997    29,050    25,280 

 

(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, 2021, 2022 and 2023, approximately 43.6%, 54.4% and 73.0% of our total revenue, respectively, was generated from customers located in Singapore and approximately 33.1%, 22.9% and 5.6% 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 23.3%, 22.7% and 21.4% 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, 2021, 2022 and 2023, 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, 2021, 2022 and 2023:

 

   Year ended December 31, 
   2021   2022   2023 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Singapore                              
Sale of precision cleaning systems   -    -    917    4.9    5,587    31.0 
Sale of other cleaning systems and other equipment   83    0.6    1,561    8.4    22    0.1 
Repair and servicing of cleaning systems and sale of related parts   568    3.8    468    2.5    519    2.9 
Provision of centralized dishware washing and general cleaning services   5,636    38.2    6,879    36.9    6,710    37.2 
Leasing of dishware washing equipment   153    1.0    309    1.7    331    1.8 
Sub-total   6,440    43.6    10,134    54.4    13,169    73.0 

 

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   Year ended December 31, 
   2021   2022   2023 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Malaysia                              
Sale of precision cleaning systems   4,415    29.9    3,896    20.9    758    4.2 
Repair and servicing of cleaning systems and sale of related parts   462    3.2    368    2.0    260    1.4 
Sub-total   4,877    33.1    4,264    22.9    1,018    5.6 

 

   Year ended December 31, 
   2021   2022   2023 
   SGD’000   %   SGD’000   %   SGD’000   % 
                         
Other countries(1)                              
Sale of precision cleaning systems   343    2.3    357    1.9    342    1.9 
Sale of other cleaning systems and other equipment   2,998    20.3    3,751    20.1    3,473    19.3 
Repair and servicing of cleaning systems and sale of related parts   106    0.7    125    0.7    30    0.2 
Sub-total   3,447    23.3    4,233    22.7    3,845    21.4 
Total   14,764    100.0    18,631    100.0    18,032    100.0 

 

(1) For the years ended December 31, 2021, 2022 and 2023, other countries include the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC.