424B3 1 form424b3.htm

 

Filed pursuant to Rule 424(b)(3)

Registration No. 333-276744

 

SKK Holdings Limited

 

 

PROSPECTUS

 

Through and including November 2, 2024 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

 

SKK Holdings Limited

 

2,272,374 Ordinary Shares

 

This prospectus relates to the resale of 636,812 Ordinary Shares held by Ace Champion, 636,812 Ordinary Shares held by Falcon Summit, 374,375 Ordinary Shares held by Ease Joy, and 624,375 Ordinary Shares held by Novel Challenge (collectively the “Resale Shareholders”). We will not receive any of the proceeds from the sale of Ordinary Shares by the Resale Shareholders.

 

The Resale Shareholders will not make any sales until our Ordinary Shares are listed on the Nasdaq Capital Market at the public offering price of the Ordinary Shares which we are selling in our initial public offering, at US$4.00 per Ordinary Share. Thereafter, any sales will occur at prevailing market prices or in privately negotiated prices. The distribution of securities offered hereby may be effected in one or more transactions that may take place in ordinary brokers’ transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Resale Shareholders. No sales of the shares covered by this prospectus shall occur until the Ordinary Shares sold in our initial public offering begin trading on the Nasdaq Capital Market.

 

On September 18, 2024, a registration statement under the Securities Act with respect to our initial public offering of Ordinary Shares was declared effective by the Securities and Exchange Commission. We received approximately US$5.26 million in net proceeds from the offering after payment of underwriting discounts and commissions.

 

Concurrent with our initial public offering, our Ordinary Shares were listed on the Nasdaq Capital Market under the symbol “SKK.”

 

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and we have elected to comply with certain reduced public company reporting requirements.

 

An investment in our Ordinary Shares involves significant risks. You should carefully consider the risk factors beginning on page 14 of this prospectus before you make your decision to invest in our Ordinary Shares.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is October 8, 2024

 

 
 


 

TABLE OF CONTENTS

 

  Page
ABOUT THIS PROSPECTUS 1
PRESENTATION OF FINANCIAL INFORMATION 2
MARKET AND INDUSTRY DATA 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 4
DEFINITIONS 5
PROSPECTUS SUMMARY 8
RISK FACTORS 14
ENFORCEABILITY OF CIVIL LIABILITIES 33
USE OF PROCEEDS 34
DIVIDENDS AND DIVIDEND POLICY 35
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA 36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 37
HISTORY AND CORPORATE STRUCTURE 53
INDUSTRY OVERVIEW 55
BUSINESS 61
REGULATORY ENVIRONMENT 76
MANAGEMENT 82
PRINCIPAL AND SELLING SHAREHOLDERS 89
RESALE SHAREHOLDERS 89
RELATED PARTY TRANSACTIONS 90
DESCRIPTION OF SHARE CAPITAL 91
CERTAIN CAYMAN ISLANDS COMPANY CONSIDERATIONS 99
SHARES ELIGIBLE FOR FUTURE SALE 102
EXPENSES RELATED TO THIS OFFERING 103
MATERIAL TAX CONSIDERATIONS 104
PLAN OF DISTRIBUTION 108
LEGAL MATTERS 109
EXPERTS 110
WHERE YOU CAN FIND ADDITIONAL INFORMATION 111
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1

 

Through and including November 2, 2024 (the 25th day after the date of this prospectus), all dealers that effect transactions in these Ordinary Shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.

 

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ABOUT THIS PROSPECTUS

 

Neither we, the Selling Shareholders, nor the underwriter have authorized anyone to provide you with any information or to make any representations other than as contained in this prospectus or in any related free writing prospectus. Neither we, the Selling Shareholders nor the underwriter take responsibility for, and provide no assurance about the reliability of, any information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities. Our business, financial condition, results of operations and prospects may have changed since that date.

 

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

 

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PRESENTATION OF FINANCIAL INFORMATION

 

Basis of Presentation

 

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

 

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

 

Our financial year ends on December 31 of each year. References in this prospectus to a financial year, such as “financial year 2023”, relate to our financial year ended December 31 of that calendar year.

 

For the sake of undertaking a public offering of its Ordinary Shares, effective January 8, 2024, the Company completed a series of reorganizing transactions resulting in 13,875,000 Ordinary Shares outstanding as of the date of this prospectus, which have been retroactively restated to the beginning of the first period presented herein.

 

On January 8, 2024, for purposes of recapitalization in anticipation of the initial public offering, the Company’s shareholders passed resolutions to effect a 1:4 share sub-division (a “forward stock split”) and to change the Company’s authorized share capital to $500,000 divided into 2,000,000,000 ordinary shares, of a par value of $0.00025 each. Concurrently, Xiaoyan Liao surrendered 3,298,095 ordinary shares, Chun Seong Ng surrendered 936,869 ordinary shares, Teck Shen Tang surrendered 278,250 ordinary shares, Ease Joy surrendered 250,425 ordinary shares, Novel Challenge surrendered 250,425 ordinary shares, Ace Champion surrendered 275,468 ordinary shares and Falcon Summit surrendered 275,468 ordinary shares to the Company, respectively. Unless otherwise indicated, all references to Ordinary Shares, share data, per share data, and related information have been retroactively adjusted, where applicable, in this prospectus to reflect the 1:4 forward stock split of our Ordinary Shares and the shares surrendered by our existing shareholders on January 8, 2024 as if they had occurred at the beginning of the earlier period presented.

 

Financial Information in United States Dollars

 

Our reporting currency is the United States Dollar. This prospectus also contains translations of certain foreign currency amounts into United States Dollars for the convenience of the reader. Unless otherwise stated, all translations of Singapore Dollars into United States Dollars were made at S$1.3181 to US$1.00 for amounts relevant to the financial year ended December 31, 2023, and S$1.3468 to US$1.00 for amounts relevant to the financial year ended December 31, 2022, in accordance with our internal exchange rate. We make no representation that the Singapore Dollar or United States Dollar amounts referred to in this prospectus could have been or could be converted into United States Dollars or Singapore Dollars, as the case may be, at any particular rate or at all.

 

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MARKET AND INDUSTRY DATA

 

Certain market data, statistical data and other industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, reports of governmental and international agencies and industry publications and surveys including the Report of Frost & Sullivan, a third independent party global research organization, commissioned by the Company. Although industry publications and third-party research, surveys and reports generally indicate that their information has been obtained from sources believed to be reliable, we have not independently verified such data and forecasts. This information involves a number of assumptions and limitations, and if any one or more of the assumptions or limitations underlying such data and forecasts are later found to be incorrect, actual results may differ from the projections based on these assumptions. You are cautioned not to give undue weight to such data and forecasts. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

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

 

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

 

changes in the laws, regulations, policies and guidelines in Singapore;
the regulatory environment in Singapore;
competition in the civil engineering services sector of the construction industry in Singapore;
reliance on certain customers for a significant portion of our revenue;
developments related to the COVID-19 pandemic, including with respect to the success of any vaccines and the ability of economies and our customers to recover from the economic effects of the pandemic;
political instability in Singapore;
breaches of laws or regulations in the operation and management of our current and future businesses and assets;
the overall economic environment and general market and economic conditions in Singapore;
our ability to execute our strategies;
changes in the need for capital and the availability of financing and capital to fund these needs;
our ability to anticipate and respond to changes in the civil engineering services sector of the construction industry (more particularly that in relation to subsurface utility works), the markets in which we operate, and in customer demands, trends and preferences;
war, acts of international or domestic terrorism, civil disturbances, occurrences of catastrophic events, man-made disasters and acts of God such as floods, earthquakes, typhoons and other adverse weather and natural conditions that affect our business or assets;
the loss of key personnel and the inability to replace such personnel on a timely basis or on terms acceptable to us;
exchange rate fluctuations, including fluctuations in the exchange rates of currencies that are used in our business;
changes in interest rates or rates of inflation; and
legal, regulatory and other proceedings arising out of our operations.

 

The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should not place undue reliance on these forward-looking statements.

 

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results or performance may be materially different from what we expect.

 

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DEFINITIONS

 

Except where the context otherwise requires and for purposes of this prospectus only, references in this prospectus to:

 

“Ace Champion” means Ace Champion Investments Limited, a company incorporated in the BVI and wholly-owned by Mr. Ching Ping Cheung, Stephen, an Independent Third Party, which owns 4.95% of our issued and outstanding Shares prior to this offering and is one of the Selling Shareholders.

 

“Amended and Restated Memorandum and Articles of Association” means the amended and restated memorandum and articles of association of our Company adopted on February 5, 2024 and as supplemented, amended or otherwise modified from time to time. A copy of the Amended and Restated Memorandum and Articles of Association are filed as Exhibit 3.1 to our Registration Statement of which this prospectus forms a part.

 

“BCA” means Building and Construction Authority of Singapore.

 

“Board” means the board of directors of our Company.

 

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

 

“BVI” means British Virgin Islands.

 

“Company” or “our Company” means SKK Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability under the Companies Act on March 27, 2023.

 

“Companies Act” means the Companies Act (2023 Revision) of the Cayman Islands.

 

“Control Order Regulations” means the COVID-19 (Temporary Measures) (Control Order) Regulations 2020 of Singapore, as amended, supplemented and/or otherwise modified from time to time.

 

“COVID-19” means the Coronavirus Disease 2019.

 

“COVID-19 Act” means COVID-19 (Temporary Measures) Act 2020 (No. 14 of 2020) of Singapore, as amended, supplemented and/or otherwise modified from time to time.

 

“Directors” means the directors of our Company as at the date of this prospectus, unless otherwise stated.

 

“Ease Joy” means Ease Joy Holdings Limited, a company incorporated in the BVI and wholly-owned by Mr. Kok Chuah Tan, an Independent Third Party, which owns 4.50% of our issued and outstanding Shares prior to this offering and is one of the Selling Shareholders.

 

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

 

“Executive Directors” means the executive Directors of our Company as at the date of this prospectus, unless otherwise stated.

 

“Executive Officers” means the executive officers of our Company as at the date of this prospectus, unless otherwise stated.

 

“Falcon Summit” means Falcon Summit Holdings Limited, a company incorporated in the BVI and owned as to 50.0% and 50.0% by Mr. Seow Gee Tan and Mr. Teo Siong Gay, both Independent Third Parties, respectively, which owns 4.95% of our issued and outstanding Shares prior to this offering and is one of the Selling Shareholders.

 

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

 

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“FWL” means foreign worker levy, which is a pricing mechanism to regulate the number of foreign workers in Singapore.

 

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

 

“GST” means the Goods and Services Tax chargeable pursuant to the Goods and Services Tax Act 1993 of Singapore.

 

“HDD” means horizontal directional drilling which is a trenchless method of installing underground pipes, cables, or conduits with minimal surface disruption.

 

“Independent Directors Nominees” means the independent non-Executive Directors of our Company as at the date of this prospectus, unless otherwise stated.

 

“Independent Third Party” means a person or company who or which is independent of and is not a 5.0% owner of, does not control and is not controlled by or under common control with any 5.0% owner and is not the spouse or descendant (by birth or adoption) of any 5.0% owner of our Company.

 

“ISO 9001” means the internationally recognized standard for quality management systems.

 

“ISO 45001” means the internationally recognized standard for occupational health and safety management systems, which replaced OHSAS 18001 since March 2018.

 

“JTC” means JTC Corporation, formerly known as Jurong Town Corporation, a statutory board under the Ministry of Trade and Industry that champions sustainable industrial development.

 

“Lockdown Measures” means measures taken by governmental authorities, businesses, other organizations and individuals in response to the COVID-19 pandemic, including travel bans and restrictions, quarantines, shelter in place, stay at home or total lock-down orders and business limitations and shutdowns.

 

“MOM” means the Ministry of Manpower of Singapore.

 

“Mr. Ng” means Mr. Chun Seong Ng, one of our Executive Directors, our Chief Operating Officer and a shareholder of our Company.

 

“Mr. Sze” means Mr. Koon Kiat Sze, our Chief Executive Officer and the spouse of Ms. Liao.

 

“Mr. Tang” means Mr. Teck Shen Tang, our Project Director (M&E) and a shareholder of our Company.

 

“Mr. Wong” means Mr. Kok Leong Wong, James, our Project Director (Power/Telecom).

 

“Ms. Liao” means Ms. Xiaoyan Liao, one of our Executive Directors, our Human Resources and Administrative Director, the controlling shareholder of our Company, the spouse of Mr. Sze and one of the Selling Shareholders.

 

“Novel Challenge” means Novel Challenge Limited, a company incorporated in the BVI and wholly-owned by Mr. Che Wah Quek, an Independent Third Party and which owns 4.50% of our issued and outstanding Shares prior to this offering.

 

“OHSAS 18001” means the international standard for occupational health and safety management systems, which was replaced by ISO 45001 since it was published in March 2018 and organizations that are certified to OHSAS 18001 were able to migrate to ISO 45001 by March 2021 to retain a recognized certification.

 

“Resale Shareholders” means collectively Ace Champion, Falcon Summit, Ease Joy and Novel Challenge and each a “Resale Shareholder”.

 

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

 

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

 

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

 

“Selling Shareholders” mean collectively (i) Ms. Liao as to 400,000 Ordinary Shares, (ii) Ace Champion as to 50,000 Ordinary Shares; (iii) Falcon Summit as to 50,000 Ordinary Shares and (iv) Ease Joy as to 250,000 Ordinary Shares; all being existing shareholders of our Company that are selling a portion of their Ordinary Shares pursuant to this prospectus.

 

“Shares” or “Ordinary Shares” means ordinary shares of par value of US$0.00025 each in the share capital of our Company.

 

“Singapore Companies Act” means the Companies Act 1967 of Singapore, as amended, supplemented or modified from time to time.

 

“SKK (M&E)” means SKK Works M & E Pte. Ltd., a company incorporated in Singapore on March 1, 2018 and a direct wholly-owned subsidiary of SKK.

 

“SKK” means SKK Works Pte. Ltd., a company incorporated in Singapore on October 16, 2013 and an indirect wholly-owned subsidiary of our Company.

 

“SKK Group” means SKK Group Limited, a company incorporated in the BVI on April 19, 2023, and a wholly-owned subsidiary of our Company.

 

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

 

“WSH” means the Workplace Safety and Health Council of Singapore, a statutory body under the MOM.

 

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PROSPECTUS SUMMARY

 

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

 

Our Mission

 

Our mission is to deliver our subsurface civil engineering services in a timely, reliable and cost-efficient manner, with integrity and good workmanship to meet customers, safety and regulatory requirements. Our corporate objective is to achieve sustainable growth in our business and create long-term shareholders’ value for construction projects in Singapore.

 

Overview

 

We are a civil engineering service provider that specializes in subsurface utility works in Singapore and have participated in numerous public utility projects, including but not limited to power and telecommunication cable laying works, water pipeline works and sewer rehabilitation works. We were founded in 2013 by Mr. Sze, our Chief Executive Officer, together with, among others, Mr. Ng, one of our Executive Directors and our Chief Operating Officer. Our Executive Officers including Mr. Sze, Mr. Ng, Mr. Wong and Mr. Tang have over 28, 26, 18 and 15 years of experience in the field, respectively. As of May 31, 2024, we were equipped with a fleet of six HDD rigs, 20 excavators and 37 vehicles and a staff over 137. We are one of the five major contractors in Singapore for horizontal directional drilling, or HDD works.

 

Competitive Strengths

 

We have over 10 years of established track record in providing timely, reliable and cost-effective civil engineering services in Singapore that cover subsurface utility works including power and telecommunication cable laying works, water pipeline works and sewer rehabilitation works.

 

We are committed to risk management, health and safety standards, quality assurance and environmental impact control.

 

We have an experienced and dedicated management team with over 10 years of combined experience in civil engineering.

 

We are equipped with a diversified fleet of HDD rigs, excavators and vehicles in addition to dozens of other specialized pieces of equipment that enable us to take on various large-scale civil engineering services projects.

 

We have long-term strong and stable relationships with our material suppliers, subcontractors and customers.

 

Business strategies

 

Our principal objective is to sustain continuous growth in our business and strengthen our market position in the civil engineering service sector of the construction industry in Singapore. As such, we endeavor to expand our capacity as follows:

 

upgrade registration as a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, which is a designation under the Singapore building protocols that will enable us to take on larger and more sophisticated projects
   
expand and renew our fleet of equipment and vehicles
   
enhance and/or expand our workforce and facilities to keep up with our business expansion
   
expand our business through acquisitions, joint ventures and/or strategic alliances

 

While implementing the above strategies and business plans, we intend to adhere to prudent financial management to ensure sustainable growth and capital sufficiency.

 

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Risks and Challenges

 

Investing in our Ordinary Shares involves risks. The risks summarized below are qualified by reference to “Risk Factors” beginning on page 14 of this prospectus, which you should carefully consider before making a decision to purchase Ordinary Shares. If any of these risks actually occurs, our business, financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our Ordinary Shares would likely decline, and you may lose all or part of your investment.

 

These risks include but are not limited to the following:

 

Risks Related to Our Business and Industry

 

we determine the tender price or quotation for a project based on our estimation of the time and costs involved, which may not be accurate, and any material deviation from our estimate may lead to cost overruns or even losses on our projects;

   

if we fail to retain business relationships with any of our five largest customers or to secure new customers, our business may be adversely affected;

   

inability to renew our existing registrations and licenses or cancellation or suspension of our existing registrations and licenses could materially affect our operations and financial performance;

   

social, economic, political and legal developments or instability, as well as any changes in government policies in Singapore could materially and adversely affect our business, results of operations, financial condition and business prospects;

   

any deterioration in the market conditions in the civil engineering services sector of the construction industry in Singapore may affect our business, results of operations, financial condition and business prospects;

   

we operate in a competitive market;

   

higher prices of material, subcontracting, labor and our other indirect costs may affect our results of operations and financial performance;

   

changes in existing laws, regulations and government policies, including those relating to environmental protection and labor safety, may cause us to incur additional costs; 

   

over 85.0% of our workforce is made up of foreign labor and our inability to recruit and/or retain foreign labor could materially affect our operations and financial performance;

   

our business and operations may be materially and adversely affected in the event of a resurgence of COVID-19;

   

we depend in part on our subcontractors to assist us in the implementation of our projects, and our failure to maintain stability in subcontracting costs and to monitor the performance of our subcontractors could harm our business;

   

the amount recognized as revenue by us may not be the same as the value of works eventually certified by our customers;

 

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inability to complete our projects on a timely basis could materially affect our financial performance and reputation or subject us to claims;

   

our operating margin may decline as a result of increasing material, subcontracting, labor and other indirect costs;

   

our customers may omit certain contract works by variation orders which can cause the total contract sum of that project to be reduced;

   

our success depends on our ability to maintain our reputation and our business and financial results may be harmed if there are events that damage our reputation;

   

the nature of our business exposes us to product liability claims and other legal proceedings;

   

we may not convert all of our backlog into revenue and cash flows;

   

failure to implement construction and engineering measures and procedures may lead to breach of laws or occurrence of personal injuries, property damage or fatal accidents;

   

we rely on a stable supply of skilled labor to complete our projects and may be unable to attract and retain enough labor to complete our projects in a timely manner;

   

our business operations are subject to adverse weather conditions and other construction risks which could affect our ability to meet scheduled commitments;

   

all of our revenue is derived from competitive tendering or quotation and the contracts are not recurring in nature;

   

there is no guarantee that we will receive progress payments in full on time, or at all;

   

we may implement business strategies and future plans that may not be successful;

   

we may need additional capital, and financing may not be available on terms acceptable to us, or at all;

   

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;

   

we may fail to implement or maintain an effective system of internal control over financial reporting;

   

our business could be adversely affected by information technology systems breakdown or disruption; and

   

natural disasters and other catastrophic events beyond our control could adversely affect our business operations and financial performance.

 

Risks Related to Our Securities and This Offering

 

an active trading market for our Ordinary Shares may not be established or, if established, may not continue and the trading price for our Ordinary Shares may fluctuate significantly;
   
we may not maintain the listing of our Ordinary Shares on the Nasdaq Capital Market which could limit investors’ ability to make transactions in our Ordinary Shares and subject us to additional trading restrictions;
   
the trading price of our Ordinary Shares may be volatile, which could result in substantial losses to investors;

 

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certain recent initial public offerings of companies with public floats comparable to our anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our ordinary shares;
   
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 sale or availability for sale of substantial amounts of our Ordinary Shares, including the Ordinary Shares held by our Resale Shareholders that are being registered in this Prospectus, could adversely affect the market price;
   
short selling may drive down the market price of our Ordinary Shares;
   
you must rely on the judgment of our management as to the uses of the net proceeds from this offering, and such uses may not produce income or increase our share price;
   
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;
   
as a “controlled company” within the meaning of the Nasdaq Capital Market Rules, we may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies;
   
Ms. Liao, and our Executive Directors and Executive Officers as a whole, will continue to have significant influence over us after this offering, including control over decisions that require the approval of shareholders, which will limit your ability to influence the outcome of matters submitted to shareholders for a vote;
   
as a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq Capital Market corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Capital Market corporate governance listing standards;
   
you may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law;
   
recently introduced economic substance legislation of the Cayman Islands may impact us or our operations;
   
certain judgments obtained against us by our shareholders may not be enforceable;
   
we are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements;
   
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;
   
we may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us;
   
we will incur significantly increased costs and devote substantial management time as a result of the listing of our Ordinary Shares on the Nasdaq Capital Market;
   
if we fail to meet applicable listing requirements, the Nasdaq Capital Market may delist our Shares from trading, in which case the liquidity and market price of our Shares could decline; and

 

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Corporate Information

 

We were incorporated in the Cayman Islands as an exempted company on March 27, 2023. Our registered office in the Cayman Islands is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111 Cayman Islands. Our principal executive office is at 27 First Lok Yang Road Singapore 629735. Our telephone number at this location is +65 6334 3831. Our principal website address is https://devwww.skkworks.com.sg. The information contained on or accessible through our website does not form part of this prospectus. Our agent for service of process in the United States is Cogency Global Inc., 122 E. 42nd Street, 18th Floor, New York, New York 10168.

 

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

 

Implications of Being a “Controlled Company”

 

Upon completion of this offering, Ms. Liao will own approximately 50.07% of our total issued and outstanding Ordinary Shares, representing approximately 50.07% of the total voting power. As a result, we will be a “controlled company” within the meaning of the Nasdaq Capital Market Rules and therefore eligible for certain exemptions from the corporate governance requirements of the Nasdaq Capital Market listing rules. If we cease to be a foreign private issuer, we intend to rely on these exemptions. In addition, our controlling shareholders will be able to exert significant control over our management and affairs, including approval of significant corporate transactions, and may have interests that differ from yours. See “Risk factors - As a “controlled company” within the meaning of the Nasdaq Capital Market Rules, we may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.”

 

Implications of Our Being an Emerging Growth Company

 

As a company with less than US$1.235 billion in revenue during our last financial year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include:

 

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

 

We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) the last day of the financial year in which the fifth anniversary of the completion of this offering occurs, (2) the last day of the financial year in which we have total annual gross revenue of at least US$1.235 billion, (3) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which means the market value of our Ordinary Shares that are held by non-affiliates exceeds US$700.0 million as of the prior December 31, and (4) the date on which we have issued more than US$1.0 billion in non-convertible debt during the three-year period prior thereto. We may choose to take advantage of some, but not all, of the available exemptions. We have included two years of selected financial data in this prospectus in reliance on the first exemption described above. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.

 

Implications of Our Being a Foreign Private Issuer

 

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

 

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

 

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

 

In addition, as a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the corporate governance listing requirements of the Nasdaq Capital Market or another national securities exchange. These practices may afford less protection to shareholders than they would enjoy if we complied fully with corporate governance listing requirements of the Nasdaq Capital Market or another national securities exchange. Following this offering, we will rely on home country practice that a majority of the Directors on our Board of Directors are not required to be independent Directors.

 

Going Concern

 

Our independent auditors have issued a report raising doubt of our ability to continue as a going concern.

 

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THE OFFERING

 

Ordinary Shares being offered   In aggregate 2,272,374 Ordinary Shares (as to 636,812 Ordinary Shares by Ace Champion, 636,812 Ordinary Shares by Falcon Summit, 374,375 Ordinary Shares by Ease Joy and 624,375 Ordinary Shares by Novel Challenge)
     
Ordinary Shares outstanding after this offering   15,625,000 Ordinary Shares
     
Use of proceeds   We will not receive any proceeds from the sale of Ordinary Shares held by the Resale Shareholders being registered in this prospectus.
     
Nasdaq Capital Market symbol   SKK
     
Risk factors   An investment in our securities involves a high degree of risk. See “Risk Factors” beginning on page 14 of this prospectus and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Ordinary Shares.

 

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RISK FACTORS

 

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

 

This prospectus also contains forward-looking statements having direct and/or indirect implications on our future performance. Our actual results may differ materially from those anticipated by these forward-looking statements due to certain factors, including the risks and uncertainties faced by us, as described below and elsewhere in this prospectus.

 

Risks Related to Our Business and Industry

 

We determine the tender price or quotation for a project based on our estimation of the time and costs involved, which may not be accurate, and any material deviation from our estimate may lead to cost overruns or even losses on our projects

 

We determine the tender price or quotation for a project based on our estimated project costs (which will largely depend on the amount of time required to complete the project) plus a mark-up margin. We have to maintain the competitiveness of our pricing while maximizing our profit margin. If we perceive keen competition on a particular project, we may submit a more competitive tender price or quotation with a lower mark-up margin, thereby reducing profitability. If the mark-up margin set by us is too low, we may be unable to cover the financial impact of any unfavorable circumstances during project implementation. On the other hand, if we try to allow for unfavorable circumstances and set a higher mark-up margin, our tender or quotation may become uncompetitive. There is no assurance that our pricing strategy and policy will be effective or responsive to market price changes and changes in customers’ demand or that we will always be able to price our tenders or quotations competitively, failing which may cause us to be unsuccessful in the tender or quotation, thereby resulting in a decrease in the number of projects that may be awarded to us. In turn, this would adversely affect our business, results of operations, financial condition and business prospects. Most of our contracts with customers do not have any price adjustment mechanisms to accommodate any fluctuation in costs. As there is no assurance that the costs estimated at the beginning of a contract will not be increased during the contract period, we have to bear the risk of increasing costs accordingly. Cost overruns may result from inaccurate estimations of time and costs, increases in the costs of labor, materials and subcontracting, additional costs derived from unexpected technical difficulties encountered during the progress of the projects and rectification of work defects, adverse weather conditions, disputes with parties involved in the projects, changes in the regulatory requirements and government policies, inflation and unforeseen problems and circumstances, some of which are beyond our control. Changes or disagreements regarding project execution such as workmanship and choice of materials, among other things, may occur in a project. Any of these may also give rise to delays in completion of works or even unilateral termination of contracts by our customers due to unsatisfactory performance. If we are unable to control our costs within our estimates or recover the extra costs and control the progress of our projects, we may suffer cost overruns or even losses on our projects which may adversely affect our profit margin and results of operations.

 

If we fail to retain business relationships with our five largest customers or secure new customers, our business may be adversely affected

 

During the financial years ended December 31, 2023 and 2022, revenue derived from our five largest customers, in the aggregate, accounted for approximately 87.0% and 85.9%, respectively, of our total revenue and our largest customer accounted for approximately 26.9% and 24.5% of our revenue, respectively. Because we have not entered into long-term contracts with any of our five largest customers, and our services are provided to them on a project-by-project basis, our ability to obtain new business and generate recurring revenue from them is dependent on our maintaining good business relationships with them and subject to the stability of their operations and to their business strategies, both of which are beyond our control and our ability to predict. If our key customers decide to change their business strategies, such as downsizing their business or suspending or ceasing their marketing, development or expansion plans, their demand for our services may decrease or they may switch to only working with contractors that are willing to offer highly competitive tender/quotation prices or a longer progress payment period or to accept less commercially favorable terms. Any significant decrease in the number or contract value of projects obtained from our key customers and/or their significant delay in or failure to make payments could lead to loss of revenue and/or affect our liquidity and thus adversely affect our business. Accordingly, if we are unable to enter into business relationships with new customers to diversify our customer portfolio, our business may be adversely affected.

 

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Inability to renew our existing registrations and licenses or cancellation or suspension of our existing registrations and licenses could materially affect our operations and financial performance

 

We are regulated by the BCA and various other regulatory bodies in Singapore. These regulatory bodies stipulate the criteria that must be satisfied before registrations and licenses are granted to, and/or renewed and/or maintained for, our business. The maintenance and renewal of our registrations and licenses are subject to compliance with the relevant regulations. In particular, we are a Grade GB2 licensed general builder, Grade C1 contractor under the CW02 (civil engineering) workhead, Grade L5 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, Grade L1 contractor under the ME11 (mechanical engineering) workhead and Grade L6 contractor under the SY05 (electrical & electronic materials, products & components). The grading under the workhead also reflects the profile of a contractor and the limit on the value of each public sector project that a contractor can undertake, which potential customers may consider during tender/quotation invitation and/or tender/quotation evaluation. The requirements laid down by the BCA may change from time to time, and there is no assurance that we will be able to meet the changing requirements and maintain and/or renew our registrations and licenses.

 

Our registrations and licenses may be downgraded, suspended or cancelled if we fail to comply with the applicable requirements. Delay or refusal may also occur when renewing such registrations and licenses upon expiry. As we are a civil engineering service provider that specialize in subsurface utility works, all our projects are in the public sector and an inability to renew or maintain our existing workhead grading may reduce the number of project opportunities and the value of the public sector projects that we can tender/quote for, and have an adverse impact on our operations and financial performance. Failure to keep or renew our existing workhead categories could result in suspension of our business operations, restriction or prohibition of certain business activities, or commencement of new business, thereby materially and adversely affecting our business operation, financial position, financial results and prospects.

 

Social, economic, political and legal developments or instability, as well as any changes in government policies, in Singapore, could materially and adversely affect our business, results of operations, financial condition and business prospects

 

All our assets and business operations are located in Singapore and all of our revenue during the financial years ended December 31, 2023 and 2022 was derived from Singapore. Therefore, our business, results of operations, financial condition and business prospects are significantly exposed to the social, economic, political and legal developments primarily in Singapore. Uncertainties in these areas include, but are not limited to, the risks of war, regional conflicts, terrorism, extremism, nationalism, nullification of contracts, changes in interest rates, imposition of capital controls, foreign ownership restrictions and international sanctions, changes in government policies and introduction of new rules or regulations concerning our industry (such as minimum wage), as well as methods of taxation. In particular, events with adverse impact on investors’ confidence and risk appetites, such as general deterioration of the economy, mass civil disobedience movements (such as strikes and industrial actions), significant fluctuations in the stock exchange, deterioration of political relations or tightening of foreign investment may lead to a reduction in investment/development in the real estate sector and, in turn, affect our business, results of operations, financial condition and business prospects. We anticipate that Singapore will continue to be the principal base of our business operations in the near future. There is no assurance that any future changes in the existing government policies, economic, social and political conditions and the business environment in Singapore, some of which are beyond our control (such as natural disasters, pandemics/epidemics like the outbreak of COVID-19, severe acute respiratory syndrome, the H5N1 strain of avian influenza and the H1N1 strain of swine flu, acts of God and other disasters), will not have a negative effect on our business operations. Specifically, our business and results of operations could be materially and adversely affected by changes in laws and regulations concerning the construction industry, foreign investment, foreign labor, taxation and ownership and expropriation of property, as well as environmental or health and safety matters, in Singapore.

 

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Any deterioration in the market conditions in the civil engineering services sector of the construction industry in Singapore may affect our business, results of operations, financial condition and business prospects

 

All our projects are located in Singapore. The future growth and level of profitability of the civil engineering services sector of the construction industry in Singapore depend primarily upon the continuation of construction and building activities, the nature, extent and timing of which will be determined by the interplay of a variety of factors, in particular, the investments in infrastructure projects, as well as the general conditions and prospects of the local economy. Economic growth, urbanization, population growth, growth in construction output and/or tourism may increase the demand for infrastructure projects in Singapore, which in turn will increase the demand for civil engineering services in Singapore. Many other factors affect the civil engineering services sector of the construction industry in Singapore, including (i) general political, economic, financial and social developments in Singapore; (ii) fluctuations in interest rates; (iii) availability of skilled labor; (iv) local government policies; and (v) cyclical trends of the regional and global economies. If the civil engineering services sector of the construction industry in Singapore declines for any reason, our business, results of operations, financial condition and future prospects could be adversely affected.

 

We operate in a competitive market

 

The civil engineering services sector in Singapore is competitive and relatively fragmented. As of June 19, 2024, there were 834 contractors registered with the BCA under the CW02 (civil engineering) workhead (of which 165 are of Grade C1), 451 contractors registered with the BCA under the CR07 (cable/pipe laying & road reinstatement) workhead (of which 59 are of Grade L5 and 15 are of Grade L6), 841 contractors registered with the BCA under the ME11 (mechanical engineering) workhead (of which 567 are of Grade L1), and 336 contractors registered with the BCA under the SY05 (electrical & electronic materials, products & components) workhead (of which 48 are of Grade L6). Industry players generally compete with each other on market position, industry reputation, track record, relationships with project owners, main contractors and industry professionals, such as project managers, and financial standing. Some of our competitors may have more manpower and resources, more qualifications entitling them to provide a wider scope of civil engineering and/or construction services, longer operating histories, greater financial strength, stronger relationships with customers and/or more established brand names and market recognition than we have. When we price our tenders or quotations or fix a contract price with our customers, we may face keen competition and significant downward pricing pressure, thereby reducing our profit margins, which will have an adverse effect on our profitability and results of operations. If we fail to adapt to market conditions and customer preferences expediently or otherwise fail to provide a competitive bid as compared to our competitors, our potential customer may turn to our competitors. As a result, our business, results of operations, financial condition and business prospects may be materially and adversely affected.

 

Higher prices of material, subcontracting, labor and other indirect costs may affect our results of operations and financial performance

 

A significant portion of our cost of sales is comprised of material costs, subcontracting costs, project related employee benefits expenses and miscellaneous project expenses. During the financial year ended December 31, 2023, our material costs, subcontracting costs, project related employee benefit expenses and miscellaneous project expenses totaled approximately $6.2 million and were approximately $5.0 million for the financial year ended December 31, 2022. Other ancillary costs include management costs, administrative costs, insurance costs and costs of institutional measures and government requirements. If labor costs, material costs and/or other indirect costs increase, our subcontractors may pass on the increase in their costs to us by increasing their subcontracting fees. If these costs continue to rise and we fail to pass on the increase to our customers, it could adversely impact our financial condition, operating results and cash flows.

 

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Changes in existing laws, regulations and government policies, including those relating to environmental protection and labor safety, may cause us to incur additional costs

 

Our business operations are governed by various laws, regulations and government policies in Singapore. The licensing requirements for contractors in our industry, as well as environmental protection and labor safety requirements, may change from time to time in each jurisdiction. We may be unable to comply with all these requirements in time, or at all, or we may need to incur substantial costs to be compliant, which may adversely affect our business operations and financial condition.

 

Over 85.0% of our workforce is made up of foreign labor and inability to recruit and/or retain foreign labor could materially affect our operations and financial performance

 

Our business is highly dependent on foreign workers as the local construction labor force is of limited supply and more costly. As of May 31, 2024, over 85.0% of our workforce was made up of foreign employees (including site workers and other employees). Any shortage in the supply of foreign workers, increase in FWL for foreign workers, or restriction on the number of foreign workers that we can employ will adversely affect our operations and financial performance. The supply of foreign labor in Singapore is subject to the policies and regulations imposed by the MOM.

 

For example, the MOM imposes a quota on the number of foreign workers that the main contractor and its subcontractors can employ in respect of each construction project. Depending on the requirements of our projects, the tightening of such quota on the number of foreign workers that the main contractors and their subcontractors can employ could affect our operations and accordingly our business and financial performance. Any changes in the policies of the foreign workers’ countries of origin may affect the supply of foreign labor and cause disruptions to our operations which in turn may result in a delay in the completion of our projects. The MOM also imposes FWL for foreign workers (subject to changes as and when announced by the Singapore government) whereby the FWL for basic skilled workers under the construction sector is set at S$700 per head. Any increase in FWL will increase our operating expenses and will affect our financial performance.

 

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

 

The global pandemic outbreak of COVID-19 announced by the World Health Organization in March 2020 has generally only caused minor disruption to our operations as well as the operations of most of our customers and suppliers (except during the beginning of the COVID-19 pandemic when clusters were detected at multiple migrant worker dormitories in late March and April 2020 and a lot of our foreign workers were infected with COVID-19 or otherwise required to quarantine in their dormitories for over four months), as our businesses are classified as essential services by the Singapore government which were allowed to operate normally during the COVID-19 pandemic. If the development of the COVID-19 outbreak becomes more severe and/or new variants of COVID-19 evolve to be more transmissible and virulent than the existing strains, this may result in a tightening of restrictions and regulations on businesses which may impact us and our customers and suppliers. If we or our customers and suppliers are forced to close down our/their businesses with prolonged disruptions to our/their operations, we may fail to fulfill our orders on time to our customers, experience a delay or shortage of raw materials, supplies and/or services by our suppliers or subcontractors, or termination of our orders and contracts by our customers. In addition, if any of our employees are suspected of having contracted COVID-19, some or all of our employees may be quarantined thus causing a shortage of labor and we will be required to disinfect our offices and workshop. In such event, our operations may be severely disrupted. If there is a resurgence of COVID-19, it may have a negative impact on the local, regional and global economy, which will have negative impacts on our customers’ businesses and hence our businesses will also be affected. All these may have a material and adverse effect on our business, financial condition and results of operations.

 

In addition, tightened travel restrictions by the Singapore or other governments may make it more difficult for us to hire suitable manpower from overseas jurisdictions. This may lead to a stagnation in our workforce strength, thereby affecting our potential growth as we rely heavily on skilled labor which may be a material and adverse effect on our business, financial condition and results of operations.

 

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We depend in part on our subcontractors to assist us in the implementation of our projects, and our failure to maintain stability in subcontracting costs and to monitor the performance of our subcontractors could harm our business

 

Subcontracting costs may fluctuate as a result of changes in costs of labor and materials or project-specific requirements. Certain of our contracts with our customers are fixed-price contracts. Accordingly, if the amounts that we are required to pay to our subcontractors exceed our estimation due to project delays resulting from weather conditions or other unforeseen circumstances, we may suffer cost overruns or even losses. Moreover, if a subcontractor fails to provide services as required under a contract for any reason, we could be required to source another subcontractor. If we are unable to do so in a timely manner, delays or higher than anticipated subcontracting costs may be triggered, which can impact our overall project costs and hence our profitability.

 

There is also no assurance that our subcontractor selection and management system will always be effective to facilitate our monitoring of the performance of our subcontractors. If our subcontractors fail to deliver or they deliver substandard works, we may be unable to engage a replacement subcontractor to complete the works or rectify the substandard works in time, or at all. We also may be unable to replace materials of inferior quality procured by our subcontractors in time, or at all, other than at extra costs. Any material non-performance, delayed performance or substandard performance of our subcontractors could result in deterioration of the quality of our services or unexpected delays of our scheduled commitment dates or even our ability to complete the projects, which could in turn harm our reputation and potentially expose us to liability and damage claims under our contracts with our customers. Moreover, our subcontractors are subject to various laws, rules and regulations, such as laws, rules and regulations in relation to work site safety and work permits for foreign workers. There is no assurance that there will not be any violations by our subcontractors of any such laws, rules or regulations. If such a violation occurs in the sites for which we are responsible as a main contractor and results in fines, claims or lawsuits, either associated with personal injuries, death or damages to properties, against us or otherwise, our reputation, business, results of operations and financial conditions may be adversely affected. The stability of the operations of our major subcontractors, which is beyond our control, may also affect us. Any material disruptions to our subcontractors’ operations due to weather, riots, pandemic/epidemic, natural disaster, fire, breach of internal controls or other technical or mechanical problems could affect our project completion. If that occurs, our ability to achieve timely completion of our projects may be adversely affected and this, in turn, will affect our reputation, business, results of operations, financial condition and business prospects.

 

The amount recognized as revenue by us may not be the same as the value of works eventually certified by our customers

 

We generally recognize revenue from our projects with reference to the value of work performed based on the percentage of completion. Payments from our customers are generally made pursuant to our invoices prepared in accordance with the interim payment certificates as certified by our customers. Nevertheless, for any project where payment application has yet to be made by us, or where payment application has been made by us but is not yet certified as of the end of the relevant reporting period, we recognize the estimated revenue and the corresponding contract assets (being the right to payment for work performed that is conditional on something other than the passage of time) with reference to the percentage of completed works as confirmed by our in-house project manager. Disputes may arise between our customers and us as to whether the projects are properly done or whether the specified milestones are achieved satisfactorily for a particular period, and we may not recover the contract assets and/or receive the progress payments to which we are entitled for the relevant period within an expected timeframe. As such, revenue and the corresponding contract assets recognized by us on the projects may not necessarily be the same amount that is eventually certified.

 

Inability to complete our projects on a timely basis could materially affect our financial performance and reputation or subject us to claims

 

Our revenue is recognized on the percentage of completion method, and billing is based on approved monthly progress claims. Any delay in a project will therefore affect our billings, revenue, operational cash flows and financial performance. We are also required to pay our material suppliers and subcontractors regardless of such delay if the purchase orders have been fulfilled, therefore affecting our operational cash flows. A delay in the project can be due to various factors, including but not limited to, a shortage of manpower, a shortage of materials, delays by subcontractors or adverse weather. If the delay is caused by us, we are liable to pay our contracting parties for the liquidated damages stipulated in our contracts and our reputation (including the chance of being invited for future tenders/quotations and our tender/quotation success rate) could also be materially affected. If the delay is caused by our customers, we will also be unable to terminate our contracts with them or seek compensation from them as such clauses are typically not included in our contracts.

 

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Moreover, other than liquidated damages, we may also have to bear additional costs as our customers have the discretion, after giving us notice and regardless of our objections, hire or employ additional subcontractor, labor, machinery and equipment as they deem fit, to avoid or minimize further delay. We will have to bear the aforementioned costs, with administrative charges calculated as a percentage of the incurred costs. In addition, to minimize further delay, we are also obliged to incur overtime man hours and the related labor costs at our own expense. In such circumstances, our financial performance and operations will be adversely affected.

 

Our operating margin may decline as a result of increasing material, subcontracting, labor and other indirect costs

 

Our cost of sales is mainly comprised of material costs, subcontracting costs and project related employee benefit expenses. Other indirect costs include management costs, administrative costs, insurance costs and costs of government requirements. Indirect costs are affected by, among other things requirements imposed on contractors or subcontractors to implement more safety, environmental and health enhancements to keep accident rates low, to improve welfare requirements to ensure the well-being of workers, to obtain more certifications to fit customers’ tender/quotation requirements and to increase overhead costs for administrative purposes. If labor costs, material costs and/or the other indirect costs increase, our subcontractors may pass the increase in their costs onto us by increasing their subcontracting fees.

 

Material, subcontracting, labor and other indirect costs mentioned above are subject to increase by other factors that are generally unpredictable and beyond the control of contractors or subcontractors. If these costs continue to rise, and we fail to pass the increases on to our customers, our business may be materially and adversely affected.

 

Our customers may omit certain contract works by variation orders which can cause the total contract sum of that project to be reduced

 

Our project contracts generally have provisions empowering our customers to give instructions to vary the contract works by the issuance of variation orders, which we are obliged to follow. Such variation orders could relate to the addition, modification or omission of the contract works. For any cancellation of contract works, the total contract sum of that project will be reduced according to the schedule of rates included in the project contracts. If a customer omits or reduces a substantial amount of contract works resulting in a significant reduction of the total contract sum of a high-value sizeable project accounting for a significant portion of our revenue, our business, results of operations and financial conditions may be adversely affected.

 

Our success depends on our ability to maintain our reputation and our business and financial results may be harmed if there are events that damage our reputation

 

Our business, results of operations and prospects depend, in part, on our ability to maintain our reputation for providing high quality services. We could lose existing or potential customers and/or opportunities for securing new projects if our reputation were to be associated with any negative publicity, including negative complaints raised by unsatisfied customers that comes to the public’s attention. If we fail to successfully maintain, promote and position our brand and protect our reputation, our business, financial condition and operating results may be adversely affected.

 

The nature of our business exposes us to product liability claims and other legal proceedings

 

Our customers generally require a defect liability period (typically a period of 12 to 18 months after practical completion of a project) during which we are responsible for rectifying all defective works (if any) and may require a warranty period (which could range from two to three years after the issue of the certificate of practical completion) after practical completion during which we are responsible for making good all defects, damage or other faults arising from the choice of materials and performance of the works, which are our responsibilities under the relevant project contracts. There is no assurance that we and/or our subcontractors will be able to satisfy the aforementioned defect fixing requests. Even if we rectify such defects, or if we defend or settle such claims, our reputation, business, results of operations, financial condition and business prospects may be adversely affected.

 

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We could be involved in disputes, claims or lawsuits with our customers, material suppliers, subcontractors, workers (including our subcontractors’ workers) and other parties concerned with the projects from time to time (collectively the “Claims”), the nature of which may include (i) delay in completion of works; (ii) contractual disputes as to the value of work completed; (iii) defects of works or materials; (iv) damage to property and equipment; (v) personal injuries or death resulting from accidents or contracting disease; and (vi) labor compensation. Regardless of the merits of the Claims, we have to divert management resources and incur costs to handle them, which may affect our corporate image and reputation in the industry, especially if there were negative press coverage on the Claims. Other than for work injury insurance pursuant to Work Injury Compensation Act 2019 of Singapore, we currently do not maintain insurance coverage with respect to such Claims and we cannot assure that we will obtain insurance coverage with respect to such Claims on acceptable terms, if at all, or that any such insurance that we might obtain in the future will provide adequate coverage against potential claims. We may also face prosecutions relating to labor safety offenses arising from our or our subcontractors’ failure to comply with relevant work safety, health or environmental legislation from time to time. We cannot assure you that our safety measures and procedures are always sufficient and effective in ensuring our compliance with safety requirements or that they are strictly adhered to. We do not have full control over the manner in which our subcontractors deliver their services or implement their safety measures. Prosecutions relating to labor safety may cause us to incur significant costs or losses, and, if we are convicted of serious offenses or of a series of offenses within any prescribed period (where applicable), we may be unable to renew and/or maintain our qualifications and/or certifications. All these may materially and adversely affect our reputation and business.

 

We may not convert all of our backlog into revenue and cash flows

 

As of May 31, 2024, our sales backlog was approximately $10.5 million, which represented the total estimated contract value of works that remained to be completed as of that date. The total value of the sales backlog represents all amounts that are expected to be received as of the relevant date under the terms of signed agreements, assuming the agreements are performed in accordance with their terms.

 

Any substantial and unexpected downward adjustments to and cancellations of these contracts, especially with regard to any one or more sizeable contracts, would cause a substantial and immediate reduction in our backlog and the revenue and profit that we can actually generate, thereby potentially forcing us to draw on working capital to pay expenses that otherwise would have been paid out of cash flow from operations.

 

Projects may remain in our backlog for an extended period of time beyond the initially anticipated date due to various factors beyond our control. We cannot guarantee that the contract sums estimated in our backlog will be realized in a timely manner, or at all, or that they will result in profits if realized. Specifically, as a result of the effects of the COVID-19 pandemic, past and additional government mandated lockdowns and regulations may halt or delay project progress indefinitely. As a result, investors should not unduly rely on our backlog information or consider it as a reliable indicator of our future profits or results of operations.

 

Failure to implement construction and engineering measures and procedures may lead to breach of laws or occurrence of personal injuries, property damage or fatal accidents

 

If we or our subcontractors fail to follow and adopt all applicable construction and engineering measures and procedures, or to comply with any laws, rules or regulations, particularly in relation to health, safety and environmental matters, regardless of whether the violation is substantial or minor in nature, we may expose ourselves as primary obligor to prosecutions by the relevant authorities, and we may also be subject to claims for losses and damages if the violation causes personal injuries or death or damage to property, or to fines or other remedial measures. If such events occur, our reputation, business, results of operations and financial condition will be adversely affected. If there are any changes to such laws, rules or regulations which are applicable to us or our subcontractors, we may have to incur additional costs in complying with them, which in turn may adversely affect our profitability.

 

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We rely on a stable supply of skilled labor to complete our projects

 

Our projects are labor intensive. For any given project, we need to involve a large number of workers from different trades with different skills. Between 2014 and 2019, the number of construction employees in Singapore declined at a compounded annual rate of approximately 1.6%, and it is expected to decline further at a compounded annual rate of approximately 1.1% from 2020 to 2024 due to the aging workforce and the tertiary industry competing for workers in Singapore. The shortage in local labor has also driven up local labor costs, especially for skilled workers, and this, in turn, has caused our subcontractors to increase their subcontracting costs as they face the same labor shortage problem. As a result, we have been employing foreign workers in Singapore to make up for the local labor shortage and to reduce our labor costs. As of May 31, 2024, we employed 117 foreign employees, representing over 85.0% of our total number of employees. Any shortage in the supply of foreign labor or any unfavorable change in the relevant laws and regulations in relation to the employment of foreign labor in Singapore, such as a substantial increase in foreign worker levy, a substantial decrease in quota for foreign workers or any additional restriction on the types of foreign labor that we can employ, may materially and adversely affect our operations and financial performance. Any increase in foreign worker levy will also increase our operating expenses and affect our results of operations and financial condition. Any increased difficulty in recruiting and/or retaining foreign labor or any material adverse change in the relevant laws and regulations in relation to the employment of foreign labor in Singapore could affect our ability and costs to recruit, retain or replace foreign workers and if we do not have sufficient workforce to implement our current or future projects in a timely manner within our budget, our business, results of operations, financial condition and business prospects will be materially and adversely affected.

 

Our business operations are subject to adverse weather conditions and other construction risks which could affect our ability to meet scheduled commitments

 

Most of our project contracts are subject to specific completion schedule requirements with a liquidated damages penalty if we fail to meet the schedule. Such liquidated damages are typically levied at an agreed upon rate of the contract sum for each day of delay caused by us or by our subcontractors. We may be unable to extend the contractual time allowed for completing a project undertaken by us even though additional time is required due to (i) bad weather conditions and other acts of God; (ii) construction risks such as accidents, fire, suspension of water and electricity supplies and shortage of labor, materials and equipment; (iii) additional variations to the agreed upon plans as requested by customers; (iv) changing technical needs; (v) disputes with material suppliers or subcontractors; or (vi) changes in market conditions and other unforeseen problems that are beyond our control. In the event that delay is caused by the aforesaid circumstances, we may have to accelerate our work progress so as to meet the scheduled time for completion, and such accelerated works will typically incur additional costs (such as overtime payments to our workers), thereby adversely affecting the profitability of our business. Any delay in a project will affect our billing, revenue, operating cash flows and financial condition. Moreover, there may be an overlap in time between the completion of the delayed projects and the commencement of subsequent projects, which may create pressure on our Group’s manpower and financial resources. Further, if there is a delay in completion of our projects which subjects us to the payment of liquidated damages under the project contracts, this may adversely affect our liquidity and cash flows and our profit on such contracts may be reduced or we may have to suffer a net loss, which may have a material adverse effect on our reputation, business, results of operations, financial condition and business prospects.

 

All of our revenue is derived from competitive tendering or quotation and the contracts are not recurring in nature

 

We derive all of our revenue from contracts awarded through a competitive tender or quotation process and the contracts are not recurring in nature. The growth of our business depends on our tendering or quoting successfully. Our existing customers are not under any contractual obligation to give us the first right for any future projects nor are they obliged to enter into any contracts with us or engage our services for their subsequent projects. We have to go through a new tender or quotation process with them for each new project. Even if we are awarded with the contract in the end, there is no assurance that the terms and conditions of the new contract will be substantially the same as the old one. New tender or quotation is more challenging as we are not familiar with the working style and underlying requirements of the new customers, thus our chances of success are more uncertain. For each new tender or quotation, there is no assurance that (i) we would be able to meet the prerequisite requirements for tendering or quotation; (ii) we would be invited to or made aware of the tender or quotation process; (iii) the terms and conditions of the new contracts would be comparable to the existing contracts or commercially acceptable to us; and (iv) our tender or quotation would ultimately be selected by our existing or potential customer. In order to enhance our competitiveness in the tender or quotation process, we may have to agree to a contract price that is lower than our proposed tender price or quotation and/or offer more favorable terms to our customers. Even if we are prepared to do so, there is still no assurance that we will be awarded with the contract, thus we cannot guarantee that there will be sufficient new and sizeable projects in our pipeline to sustain our business and maintain or improve our current results of operations and financial conditions.

 

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There is no guarantee that we will receive progress payments in full on time, or at all

 

We generally receive progress payments with reference to the percentage of works done or the reaching of specified milestones. The customers issue an interim payment certificate certifying the work progress upon receiving our payment application. Depending on the terms and conditions of the relevant contract, our customers generally pay us within 30 to 45 days after the presentation of our invoice, which is issued after our receipt of the interim payment certificate. There is no assurance that our customers will remain solvent or that our customers will pay us the progress payments in full in a timely manner, or at all. We could be engaged in prolonged negotiation with our customers with respect to the settlement of progress payments or the final payment and could incur costs to enforce such payments from time to time. Any failure by our customers to make any payment on time or in full may have a material adverse effect on our liquidity. Any failure by our customers to eventually repay the retained amount to us may have a material adverse effect on our business, results of operations and financial condition.

 

We may implement business strategies and future plans that may not be successful

 

The successful implementation of our business strategies and future plans depends on a number of factors including general market conditions, government policies, the availability of funds, competition and our ability to retain and recruit competent employees. There is no assurance that our business strategies and future plans can be implemented effectively and successfully, as some of these factors are beyond our control. If any implementation of these strategies and plans fails or is delayed, we may be adversely affected by investment expenses that have not led to the anticipated results, by the distraction of management from our core business or by damage to our brand or reputation. Additionally, if we fail to secure adequate funds in a timely manner, we may also be unable to pursue opportunities to expand our business.

 

We may need additional capital, and financing may not be available on terms acceptable to us, or at all

 

Although our current cash and cash equivalents, anticipated cash flows from operating activities and the proceeds from this offering will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for at least 12 months following this offering, there is a risk that we may need additional cash resources in the future to fund our growth plans or if we experience adverse changes in business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue opportunities for new investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. The issuance and sale of additional equity would result in further dilution to our shareholders. The occurrence of any of these risks could adversely affect our operations or financial condition.

 

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 customer lists and information and business methods. We rely on a combination of 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, cost us money to defend, distract the attention of our management and prevent us from offering some services. Confidential intellectual property is increasingly stored or carried on mobile devices, such as laptop computers, which increases the risk of inadvertent disclosure where 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 exacerbate these risks.

 

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If we fail to implement and 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.

 

Prior to the completion of this offering, we have been a private company with limited accounting personnel. Furthermore, prior to the completion of this offering, our management has not performed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. 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.

 

Our failure to implement and maintain effective internal controls over financial reporting or have appropriate accounting personnel with appropriate knowledge of US GAAP (as disclosed below) 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 our ordinary shares.

 

Upon the completion of this offering, we will become 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, will require 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. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a burden on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

 

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 be unable 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 achieve and 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 the Nasdaq Capital Market, to regulatory investigations and to civil or criminal sanctions.

 

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We currently lack financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements.

 

We have implemented and planned to implement a number of measures to address this material weakness. Prior to listing, we will engage an external consulting firm to assist us after listing with our financial reporting in US GAAP. We have allocated additional resources, including an external consultant with relevant U.S. GAAP and SEC reporting experience, to improve financial oversight function, to introduce formal business performance review process, and to prepare and review the consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements. In addition, we intend to conduct regular and continuous U.S. GAAP accounting and financial reporting training programs.

 

Our business could be adversely affected by information technology systems breakdown or disruption

 

We depend on our information technology systems to (i) oversee our project progress; (ii) manage our working schedule; (iii) allocate our resources; (iv) review our performance; and (v) review our capacity, trace our project information and assess our project progress in a timely and systematic manner. We also depend on our information technology systems to assist us in providing material takeover estimates in our tendering/quotation process as well as our communication with our customers and their consultants. An extended breakdown or failure of our information technology systems could disrupt our operations and adversely affect our business, financial condition and results of operations.

 

Natural disasters and other catastrophic events beyond our control could adversely affect our business operations and financial performance

 

The occurrence of one or more other natural disasters, such as fires, hurricanes, tornados, tsunamis, floods and earthquakes; geo-political events, such as civil unrest in a country in which our material suppliers are located or terrorist or military activities disrupting transportation, communication or utility systems, or other highly disruptive events, such as nuclear accidents, pandemics, unusual weather conditions or cyberattacks, could adversely affect our operations and financial performance. The occurrence of the global COVID-19 pandemic has resulted in, and such other events could result in, among other things, operational disruptions, physical damage to or destruction or disruption of one or more of our properties or properties used by third parties in connection with the supply of products or services to us, the lack of an adequate workforce in parts or all of our operations and communications and transportation disruptions. The occurrence of the global COVID-19 pandemic has caused, and these factors could also cause, consumer confidence and spending to decrease or result in increased volatility in local and global financial markets and economy. Such occurrences have had and could in the future have a material adverse effect on us and could also have indirect consequences, such as increases in the costs of insurance, if they result in significant loss of property or other insurable damage.

 

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Risks Related to Our Securities and This Offering

 

An active trading market for our Ordinary Shares may not be established or, if established, may not continue and the trading price for our Ordinary Shares may fluctuate significantly

 

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

 

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

 

We intend to list our Ordinary Shares on the Nasdaq Capital Market concurrently with this offering. In order to continue listing of our Ordinary Shares on the Nasdaq Capital Market, we must maintain certain financial and share price levels and we may be unable to meet these requirements in the future. We cannot assure you that our Shares will continue to be listed on the Nasdaq Capital Market in the future.

 

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

 

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

 

As long as our Ordinary Shares are listed on the Nasdaq Capital Market, U.S. federal law prevents or preempts the states from regulating their sale. However, the law does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar their sale. Further, if we were no longer listed on the Nasdaq Capital Market, we would be subject to regulations in each state in which we offer our shares.

 

The trading price of our Ordinary Shares may be volatile, which could result in substantial losses to investors

 

The trading price of our Ordinary Shares may be subject to rapid and substantial volatility, which could make it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares and result in substantial losses to investors

 

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our Ordinary Shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares.

 

The trading price of our Ordinary Shares may be volatile and could fluctuate widely due to factors beyond our control and for reasons that are unrelated to our actual or expected performance. In addition, if the trading volumes of our Ordinary Shares are low, persons buying or selling in relatively small quantities may easily influence prices of our Ordinary Shares. This low volume of trades could also cause the price of our Ordinary Shares to fluctuate greatly. Holders of our Ordinary Shares may also 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.

 

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 issued and outstanding equity securities or sales of additional equity securities; and
  potential litigation or regulatory investigations.

 

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

 

In the event of market volatility, 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.

 

Certain recent initial public offerings of companies with public floats comparable to our anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our Ordinary Shares

 

In addition to the risks addressed above in “The trading price of our Ordinary Shares may be volatile, which could result in substantial losses to investors,” our Ordinary Shares may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable public floats and initial public offering sizes 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 company’s underlying performance. Although the specific cause of such volatility is unclear, our anticipated public float may amplify the impact the actions taken by a few shareholders have on the price of our shares, which may cause our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Should our Ordinary Shares experience run-ups and 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 after this offering or if such investors purchase our Ordinary Shares prior to any price decline.

 

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 Ordinary Shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts downgrade our Ordinary Shares, the market price for our Ordinary 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 Ordinary Shares to decline.

 

The sale or availability for sale of substantial amounts of our Ordinary Shares, including the Ordinary Shares held by our Resale Shareholders that are being registered in this Resale Prospectus, could adversely affect the market price.

 

Sales of substantial amounts of our Ordinary Shares in the public market after the completion of the primary offering and from the sale of up to 2,272,374 Ordinary Shares held by our Resale Shareholders through this Prospectus, 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. Prior to the sale of our shares in this offering, we had 13,875,000 Ordinary Shares outstanding. The Ordinary Shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and, subject to the terms of the lock-up agreements, shares held by the Selling Shareholders that are not being sold in this offering may also be sold in the public market subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements. The 2,272,374 Ordinary Shares held by the Resale Shareholders that are being registered for resale in this Prospectus are not subject to lock-up agreements. There will be 15,625,000 Ordinary Shares outstanding immediately after this offering. In connection with this offering, our Directors and Executive Officers named in the section “Management,” have agreed not to sell any shares until 180 days after the date of this prospectus without the prior written consent of the representative of the underwriters, subject to certain exceptions, unless the underwriters release these securities from these restrictions. Because the Ordinary Shares held by the Resale Shareholders that are being registered in this Resale Prospectus are not subject to similar lock-up restrictions, the Resale Shareholders may freely sell such Ordinary Shares in the open market pursuant to this Prospectus or subject to the restrictions in Rule 144 and Rule 701 under the Securities Act. The Resale Shareholders may be willing to accept a lower sales price than the price investors pay in this offering, which could substantially lower the market price of our Ordinary Shares. We cannot predict what effect, if any, market sales of securities held by the Resale Shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our shares. See “Plan of Distribution” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

 

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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.

 

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 75.0% 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 50.0%.

 

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.

 

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It is possible that, for our current taxable year or for any subsequent year, more than 50.0% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. 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 25.0% 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.”

 

As a “controlled company” within the meaning of the Nasdaq Capital Market Rules, we may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies

 

We are and, upon the completion of this offering, will continue to be a “controlled company” as defined under the Nasdaq Capital Market Rules, because one of our shareholders holds more than 50.0% of our voting power. As a result, for so long as we remain a controlled company as defined under that rule, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules of the Nasdaq Capital Market Rules, including (i) the requirement that a majority of our Board of Directors must be independent Directors; (ii) the requirement that our Director nominees must be selected or recommended solely by independent Directors and (iii) the requirement that we have a corporate governance and nominating committee that is composed entirely of independent Directors with a written charter addressing the committee’s purpose and responsibilities. As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

 

Ms. Liao, and our Executive Directors and Executive Officers as a whole, will continue to have significant influence over us after this offering, including control over decisions that require the approval of shareholders, which will limit your ability to influence the outcome of matters submitted to shareholders for a vote.

 

We are currently controlled, and after this offering is completed will continue to be controlled, by Ms. Liao. Upon completion of this offering, Ms. Liao will control 50.07% of the voting power of our Ordinary Shares. As long as Ms. Liao owns or controls at least a majority of our outstanding voting power, she will have the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including the election and removal of Directors and the size of our Board of Directors, any amendment of our charter documents, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. Even if Ms. Liao’s ownership falls below 50.0%, she will continue to be able to strongly influence or effectively control our decisions. Ms. Liao, collectively with our Executive Directors and Executive Officers (and their affiliated parties), will collectively control 69.46% of the voting power of our Ordinary Shares following the completion of this offering. Additionally, Ms. Liao’s interests, or the interests of our Executive Directors and Executive Officers as a whole, may not align with the interests of our other shareholders.

 

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

 

As a foreign private issuer that has applied to list our Ordinary Shares on the Nasdaq Capital Market, we rely on a provision in the Nasdaq Capital Market 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 the Nasdaq Capital Market.

 

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For example, we are exempt from the Nasdaq Capital Market 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; 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 20.0% or more of our Ordinary Shares for less than the greater of book or market value of the Shares.

 

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

 

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

 

We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act and the common law of the Cayman Islands. We will also be subject to the U.S. securities laws. 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 governed by our Amended and Restated Memorandum and Articles of Association, the Companies Act and 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 compared to the U.S. law) as well as from English common law. The decisions of the English courts are of highly persuasive authority, but are not binding on Cayman Islands courts (except for those decisions handed down from the Judicial Committee of the Privy Council to the extent that these have been appealed from the Cayman Islands courts). The rights of our shareholders and the fiduciary duties of our Directors under Cayman Islands law are broadly similar to those in other common law jurisdictions, but there may be differences in the 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, if shareholders want to proceed against the Company outside of the Cayman Islands, they will need to demonstrate that they have the standing to initiate a shareholder derivative action in a federal court of the United States. There is no guarantee that the courts of the Cayman Islands would automatically recognize or enforce against us judgments of courts of Singapore or the United States predicated upon the civil liability provisions of the Singapore securities laws or the federal securities laws of the United States or any state. In addition, the courts of the Cayman Islands will not recognize and enforce a judgment predicated upon the civil liability provisions of the federal securities laws of the United States or any state, so far as the liabilities imposed by those provisions are taxes, fines or penal in nature, or otherwise contrary to public policy, including punitive damages.

 

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 Articles of Association, the register of mortgages and charges and any special resolutions passed by shareholders) or to obtain copies of lists of shareholders of these companies. Our Directors are not required under our Amended and Restated Memorandum and Articles of Association to make our corporate records available for inspection by our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.

 

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

 

As a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the Board or controlling shareholders than they would as shareholders of a company incorporated in a U.S. state. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in a U.S. state and their shareholders, see “Certain Cayman Islands Company Considerations — Differences in Corporate Law.”

 

Recently introduced economic substance legislation of the Cayman Islands may impact us or our operations

 

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. Effective January 1, 2019, the International Tax Co-operation (Economic Substance) Act (as amended) (the “Substance Law”) and issued Regulations and Guidance Notes came into force in the Cayman Islands introducing certain economic substance requirements for “relevant entities” which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. A “relevant entity” includes an exempted company incorporated in the Cayman Islands; however, it does not include an entity that is tax resident outside the Cayman Islands. Accordingly, for so long as we are a tax resident outside the Cayman Islands, we are not required to satisfy the economic substance test under the Substance Law. Although it is presently anticipated that the Substance Law will have little material impact on us or our operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on us.

 

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

 

We are a Cayman Islands exempted company with limited liability and substantially all of our assets are located outside of the United States. In addition, all of our current Directors and Executive 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. Service of court documents on a Cayman Islands company can be effected by serving the documents at the company’s registered office and it may be is possible to enforce foreign judgments in the Cayman Islands against a Cayman Islands company, subject to some exceptions. However, if investors wish to serve documents on and/or enforce foreign judgments against our Directors and Executive Officers, they will need to ensure that they comply with the rules of the jurisdiction where our Directors and Executive Officers are located. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment against our assets or the assets of our Directors and Executive Officers. For more information regarding the relevant laws of the Cayman Islands, see “Enforcement of Civil Liabilities.” As a result of all of the above, our shareholders may have more difficulties in protecting their interests through actions against us or our Directors, Executive Officers or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States, depending on where our Directors and Executive Officers are located.

 

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. 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 will be required to file an annual report on Form 20-F within four months of the end of each financial year. In addition, we intend to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of the Nasdaq Capital Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you 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 financial 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 50.0% 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 Directors, Executive Officers and 10.0% shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq Capital Market. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting and other expenses that we will not incur as a foreign private issuer.

 

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

 

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

 

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

 

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

 

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

 

  a limited availability of market quotations for our Shares;
     
  reduced liquidity for our Shares;
     
  a determination that our Shares are “penny stock”, which would 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 Shares;
     
  a limited amount of news about us and analyst coverage of us; and
     
  a decreased ability for us to issue additional equity securities or obtain additional equity or debt financing in the future.

 

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

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

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

 

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

 

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

 

Cayman Islands

 

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

 

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

 

Singapore

 

There is no treaty between the United States and Singapore providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters and a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the federal securities laws, would, therefore, not be automatically enforceable in Singapore.

 

In making a determination as to enforceability of a foreign judgment, the Singapore courts need to be satisfied that the foreign judgment was final and conclusive and on the merits of the case, given by a court of law of competent jurisdiction, and was expressed to be for a fixed sum of money. In general, a foreign judgment would be enforceable in Singapore unless procured by fraud, or if the proceedings in which such judgments were obtained were not conducted in accordance with principles of natural justice, or if the enforcement thereof would be contrary to the public policy of Singapore, or if the judgment would conflict with earlier judgments from Singapore or earlier foreign judgments recognized in Singapore, or if the judgment would amount to the direct or indirect enforcement of foreign penal, revenue or other public laws. Civil liability provisions of the federal and state securities law of the United States permit the award of punitive damages against us, our Directors and Executive Officers. The Singapore courts do not allow the enforcement of foreign judgments which amount to the direct or indirect enforcement of foreign penal, revenue or other public laws. It is uncertain as to whether a judgment of the courts of the United States awarding such punitive damages would be regarded by the Singapore courts as being pursuant to foreign, penal, revenue or other public laws. Such determination has yet to be conclusively made by a Singapore court in a reported decision.

 

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USE OF PROCEEDS

 

The Resale Shareholders will receive all of the proceeds from any sales of the Ordinary Shares offered hereby. However, we will incur expenses in connection with the registration of our Ordinary Shares offered hereby.

 

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DIVIDENDS AND DIVIDEND POLICY

 

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

 

Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit, retained earnings, or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. If our Board decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board may deem relevant. In addition, we are a holding company and depend on the receipt of dividends and other distributions from our subsidiaries to pay dividends on our Ordinary Shares.

 

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

 

On December 30, 2022, SKK Works Pte Ltd declared a dividend of approximately $4.9 million (S$6.8 million) to Ms. Liao and Mr. Ng, which dividend is still outstanding and is unsecured, interest-free and repayable on demand. The dividend is considered a short term liability, though the Company does not expect to repay it in the next 12 months. Ms. Liao is our Executive Director, our Human Resources and Administrative Director and the controlling shareholder of our Company and Mr. Ng is our Executive Director, our Chief Operating Officer and a shareholder of our Company. See “Related Party Transactions.

 

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

 

The following summary consolidated financial data as of December 31, 2023 and 2022, and the financial years ended December 31, 2023 and 2022 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary financial data set forth below should be read in conjunction with, and are qualified by reference to, “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future period.

 

You should read the following summary financial data together with our financial statements and the related notes appearing at the end of this prospectus, “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have derived the financial data for the financial years ended December 31, 2023 and 2022 from our audited financial statements included in this prospectus.

 

Results of Operations Data

 

    Financial Years Ended December 31, 
    2023   2022 
    $’000   $’000 
      
Revenues    9,759    9,621 
Net income    198    1,448 
            
Basic and diluted net income per Ordinary Share    0.02    0.10 
Weighted average number of Ordinary Shares outstanding (’000)    13,875    13,875 

 

(1) Retrospectively restated for effect of 1:4 forward stock split and share surrender on January 8, 2024.

 

Balance Sheet Data:

 

    As of December 31, 
    2023   2022 
    $’000   $’000 
          
Capital and cash equivalents    350    1,427 
Working capital    (3,200)   (1,560)
Total assets    15,306    12,352 
Total liabilities    13,253    10,540 
Total shareholder’s equity    2,053    1,812 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

 

Overview

 

We are a civil engineering service provider that specialize in subsurface utility works in Singapore and we have participated in numerous public utility projects, including but not limited to power cable and telecommunication cable laying works, water pipeline works and sewer rehabilitation works. We were founded in 2013 by Mr. Sze, our Chief Executive Officer, together with, among others, Mr. Ng, one of our Executive Directors and our Chief Operating Officer. Our Executive Officers including Mr. Sze, Mr. Ng, Mr. Wong and Mr. Tang, have over 28, 26, 18 and 15 of experience in the field, respectively. As of May 31, 2024, we were equipped with a fleet of six HDD rigs, 20 excavators and 37 vehicles and a staff over 137. We are one of the five major contractors in Singapore for HDD works.

 

For the financial years ended December 31, 2023 and 2022, our net revenue amounted to approximately $9.8 million and approximately $9.6 million, respectively, of which revenue from cable or pipe laying works accounted for approximately $6.2 million for the financial year ended December 31, 2023 and approximately $6.8 million for the financial year ended December 31, 2022, respectively. Revenue from pipeline and sewerage repair and maintenance accounted for approximately $2.4 million for the financial year ended December 31, 2023 and approximately $1.6 million for the financial year ended December 31, 2022, respectively, and revenue from other services accounted for approximately $1.2 million for the financial year ended December 31, 2023 and approximately $1.2 million for the financial year ended December 31, 2022, respectively.

 

Our net income amounted to approximately $0.2 million and approximately $1.4 million for the financial years ended December 31, 2023 and 2022, respectively.

 

KEY FACTORS AFFECTING THE RESULTS OF OUR GROUP’S OPERATIONS

  

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

 

 

Demand from our major customer groups – Our aggregate sales generated from our top five customers were approximately 87.0% and 85.9% of our revenue for the financial years ended December 31, 2023 and 2022, respectively. In particular, sales to our largest customer amounted to approximately $2.6 million, representing approximately 26.9% of our revenue for the financial year ended December 31, 2023. Our sales are significantly affected by the demands of our largest customer due to vigorous price competition in cost of labor to complete the project contract within the project’s timeline.

     
 

Fluctuations in the cost of our revenues – Material costs, subcontracting costs, project related employee benefits expenses and miscellaneous project expenses are the largest part of our cost of revenue, representing approximately 63.7% and 51.6% of our total cost of revenues for the financial years ended December 31, 2023 and 2022, respectively. Specifically, the costs at which we can complete our project contracts are determined mainly by the demand and supply in labor markets and the manpower regulations in this industry. Fluctuations in the price, availability, quality, cost of labor and professional services will impact the completion of the project contracts, and ultimately in the overall projects margins. We are unable to pass all or any of these higher costs on to our customers, as such, such fluctuations could have a material adverse effect on our profitability.

     
  Financial impact of COVID-19 - The COVID-19 pandemic caused general business disruptions in Singapore and the rest of the world. We expect that the onset of another pandemic would impede our ability to conduct our business due to supply chain issues, stay at home mandates, decreased economic activity that slows or halts development projects that we work on, and labor shortages.
     
  Competitive market - The subsurface works industry in Singapore is highly regulated, with strict safety and environmental standards, and companies are expected to have a strong track record of delivering high-quality projects. As of June 19, 2024, there were 834 contractors registered with the BCA under the CW02 (civil engineering) workhead (of which 165 are of Grade C1), 451 contractors registered with the BCA under the CR07 (cable/pipe laying & road reinstatement) workhead (of which 59 are of Grade L5 and 15 are of Grade L6), 841 contractors registered with the BCA under the ME11 (mechanical engineering) workhead (of which 567 are of Grade L1), and 336 contractors registered with the BCA under the SY05 (electrical & electronic materials, products & components) workhead (of which 48 are of Grade L6). The industry players generally compete with each other on market position, industry reputation, track record and relationship with project owners and main contractors, as well as financial standing. Some of our competitors may have more manpower and resources, more qualifications entitling them to provide a wider scope of integrated building envelope solution services, longer operating histories, more financial strength, stronger relationships with clients and owners and more established brand names and market recognition than we have. When we price our tenders/quotations or fix contract prices with our clients and owners, we may face keen competition and significant downward pricing pressure, thereby reducing our profit margins, which will have an adverse effect on our profitability and results of operations.
     
  Labor shortages - Our business is highly dependent on foreign workers as the local construction labor force is of limited supply and more costly. As of May 31, 2024, over 85.0% of our workforce was made up of foreign employees (including site workers and other employees). Any shortage in the supply of foreign workers, increase in FWL for foreign workers, or restriction on the number of foreign workers that we can employ will adversely affect our operations and financial performance. The supply of foreign labor in Singapore is highly regulated under the policies and restrictions imposed by the MOM.
     
  Inflation risk - Inflationary factors, such as increases in material costs, subcontracting costs, project related employee benefits expenses and miscellaneous project expenses, could impair our operating results. A high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the revenues do not increase with such increased costs.

 

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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.

 

Comparison of operating results for the financial years ended December 31, 2023 and 2022

 

Revenue

 

As set forth in the following table, during the financial years ended December 31, 2023 and 2022, our revenue was derived from subsurface utility works in Singapore, including cable or pipe laying works, pipeline and sewerage repair and maintenance, and other services:

 

  

Financial Years ended December 31,

 
   2023   2022 
   $’000   %   $’000   % 
         
Cable or pipe laying works   6,163    63.2    6,844    71.1 
Pipeline and sewerage repair and maintenance   2,413    24.7    1,599    16.6 
Maintenance works and services and others*   1,183    12.1    1,178    12.3 
                     
Total   9,759    100.0    9,621    100.0 

 

* Maintenance works and services and others is comprised of revenue from service fee, labor cost charged, rental of machinery and equipment, transportation costs incurred, maintenance works charged, among other things.

 

Our total revenue increased by approximately $0.2 million or 1.4% to approximately $9.8 million for the year ended December 31, 2023 from approximately $9.6 million for the financial year ended December 31, 2022. Such increase was mainly attributable to the increase in revenue for the pipeline and sewerage repair and maintenance of approximately $0.8 million from new projects and offset by the decrease in revenue generated from cable or pipe laying works of approximately $0.7 million as a result of existing projects which are near completion.

 

For the financial years ended December 31, 2023 and 2022, our net income amounted to approximately $0.2 million and approximately $1.4 million for the financial years ended December 31, 2023 and 2022, respectively. The decrease in net income for the financial year ended December 31, 2023 was mainly caused by higher costs.

 

For the financial years ended December 31, 2023 and 2022, approximately 45.3% and 56.9% of our total revenue, respectively, was generated from projects derived from public sectors and approximately 42.3% and 30.8% of our total revenue, respectively, was generated from projects derived from the private sectors. For the same financial years, our revenue generated from non-projects accounted for approximately 12.4% and 12.3% of our total revenue, respectively.

 

Cost of revenues (exclusive of depreciation and amortization expenses)

 

During the financial years ended December 31, 2023 and 2022, our Group’s cost of revenues increased by approximately $1.2 million or 25.3% to approximately $6.2 million for the financial year ended December 31, 2023 from approximately $5.0 million for the financial year ended December 31, 2022. Such increase was mainly attributable to the increase of materials cost and project miscellaneous expenses of approximately $0.8 million.

 

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Selling and distribution expenses

 

Our selling and distribution expenses mainly included promotion and marketing expenses and local transportation expenses. The following table sets forth the breakdown of our selling and distribution expenses for the financial years ended December 31, 2023 and 2022:

 

   Financial Years ended December 31, 
   2023   2022 
   $’000   %   $’000   % 
         
Entertainment   240    99.2    231    100.0 
Transport charges   *    *    *    * 
Travelling costs   2   0.8   *    * 
                     
Total   242    100.0    231    100.0 

 

* Reflects expenses that are immaterial in amount.

 

Our selling and distribution expenses remained relatively stable at approximately $0.2 million and approximately $0.2 million for the financial years ended December 31, 2023 and 2022, respectively, representing approximately 2.4% and 2.4% of our total revenue for the corresponding financial years.

 

General and Administrative expenses

 

The following table sets forth the breakdown of our general and administrative expenses for the financial years ended December 31, 2023 and 2022:

 

   Financial Years ended December 31, 
   2023   2022 
   $’000   %   $’000   % 
         
Depreciation   1,299    45.2    1,142    39.8 
Staff salaries and related costs   1,283    44.6    1,208    42.1 
Upkeep of motor vehicles   84    2.9    78    2.7 
Miscellaneous expenses   208    7.3    444    15.4 
                     
Total   2,874    100.0    2,872    100.0 

 

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General and administrative expenses amounted to approximately $2.9 million for the financial year ended December 31, 2023 and approximately $2.9 million for the financial year ended December 31, 2022, representing approximately 29.5% and 29.9% of our total revenue, respectively for the corresponding financial years.

 

Staff costs mainly represented the salaries, employee benefits and retirement benefit costs to our employees and directors’ remuneration. The staff costs of our Group remained the same at approximately $1.3 million and approximately $1.2 million for the financial years ended December 31, 2023 and 2022, respectively.

 

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

 

Miscellaneous expenses were mainly comprised of insurance expenses, office supplies, legal and professional fees, repair and maintenance, vehicles upkeep and other miscellaneous expenses.

 

Other Income (Expenses), Net

 

The following table sets forth the breakdown of our other income (expense) for the financial years ended December 31, 2023 and 2022:

 

   Financial Years ended December 31, 
   2023   2022 
   $’000   $’000 
         
Interest income   6    70 
Interest costs   (221)   (154)
Investment written off   -    (191)
Gain on disposal of property and equipment   87    15 
Government grants   27    176 
Other incomes   5    397 
           
Total   (96)   313 

 

Interest expenses were approximately $0.2 million and approximately $0.2 million for each of the financial years ended December 31, 2023 and 2022, respectively, resulting from interest charged on our bank loans and financing facilities. For more details of our bank borrowings, please see the paragraph headed “Bank Indebtedness” in this section.

 

Jobs Support Scheme is an initiative introduced by the Singapore Government in February 2020 in response to the outbreak of COVID-19, and further enhanced in April, December and August 2020, to provide wage support to employers to help them retain local employees by co-funding 25% to 75% of the first S$4,600 of monthly salaries paid to each local employee in a 9-month period up to July 2020, and 10% to 50% of the same in the subsequent seven-month period from October 2020 to March 2021. The final payout under the Jobs Support Scheme was made in March 2022. At this time, we do not anticipate receiving any future income from the Jobs Support Scheme.

 

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Income Tax Expenses

 

During the financial years ended December 31, 2023 and 2022, our income tax expense comprised of our current tax expense and deferred tax for the financial year.

 

For the financial year ended December 31, 2023, our income tax increased to approximately $0.1 million and our effective tax rate, calculated as income tax divided by profit before income tax, was approximately 39.3% due to the increase on non-deductible expenses. Such income tax increase was generally in line with the increase in our profit for the financial year.

 

For the financial year ended December 31, 2022, our income tax increased to approximately $0.4 million and our effective tax rate, calculated as income tax divided by profit before income tax, was approximately 22.4% due to the increase on non-deductible expenses. Such income tax increase was generally in line with the increase in our profit for the financial year.

 

Net Income

 

As a result of the foregoing, our net income amounted to approximately $0.2 million and approximately $1.4 million for the financial years ended December 31, 2023 and 2022, respectively.

 

Liquidity and Capital Resources

 

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

 

Cash flows

 

The following table summarizes our cash flows for the financial years ended December 31, 2023 and 2022:

 

   Financial Years ended December 31, 
   2023   2022 
   $’000   $’000 
         
Cash and cash equivalents at beginning of the financial year   1,427    2,142 
           
Net cash provided by operating activities   194    2,607 
Net cash used in investing activities   (2,339)   (867)
Net cash used in financing activities   1,011    (2,527)
Effect on exchange rate change on cash and cash equivalents   57    72 
           
Net change in cash and cash equivalents   (1,077)   (715)
           
Cash and cash equivalents as at end of the financial year   350    1,427 

 

Cash flows from operating activities

 

For the financial year ended December 31, 2023, our net cash provided by operating activities was approximately $0.2 million, which primarily consisted of our net income of approximately $0.2 million, adding back (i) the non-cash depreciation of property and equipment, amortization of intangible assets of approximately $1.3 million, (ii) the increase in accounts payables, accrued liabilities and provision of approximately $1.0 million, (iii) the decrease in inventories of approximately $0.02 million, (iv) the decrease in contract assets of accounts receivables of approximately $0.3 million, and was partially offset by (a) the increase in accounts receivables of approximately $2.2 million; (b) the decrease in tax payable of approximately $0.3 million, and (c) the gain on disposal of property, plant and equipment of approximately $0.1 million.

 

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For the financial year ended December 31, 2022, our net cash provided by operating activities was approximately $2.6 million, which primarily consisted of our net income of approximately $1.4 million, adding back (i) the non-cash depreciation of property and equipment, amortization of intangible assets and loss on disposal of property and equipment of approximately $1.2 million, (ii) the increase in accounts payables, accrued liabilities and provision of approximately $0.4 million, (iii) the decrease in inventories of approximately $0.1 million, (iv) the decrease in income tax payables of approximately $0.1 million, (v) the decrease in contract assets of accounts receivables of approximately $0.1 million, and was partially offset by the increase in accounts receivables of approximately $0.6 million.

 

Cash flows from investing activities

 

For the financial year ended December 31, 2023, our net cash used in investing activities was approximately $2.3 million, primarily consisting of the purchase of property and equipment and offset by the proceeds from disposal of property and equipment.

 

For the financial year ended December 31, 2022, our net cash used in investing activities was approximately $0.9 million, primarily consisting of the purchase of property and equipment and offset by the proceeds from disposal of property and equipment.

 

Cash flows from financing activities

 

Our cash flows provided by/used in financing activities primarily consists of proceeds/repayment of bank loans, the payment for interest and capital portion of lease liabilities and the dividend payment.

 

For the financial year ended December 31, 2023, our net cash provided by financing activities was approximately $1.0 million, which mainly consisted of net proceed from bank loans, the dividend payment to related parties and the payment for capital and interest portion of lease liabilities.

 

For the financial year ended December 31, 2022, our net cash used in financing activities was approximately $2.5 million, which mainly consisted of bank loans repayment, the payment for interest and capital portion of lease liabilities and the dividend payment to related parties.

 

Accounts receivable

 

Our net accounts receivable increased to approximately $2.3 million as of December 31, 2023 from approximately $0.4 million as of December 31, 2022. The increase was primarily attributable to an overall increase in project sales invoices billing during the financial year ended December 31, 2023.

 

We did not charge any interest on or hold any collateral as security over these accounts receivable balances. We generally offer credit periods of 30 to 90 days to our customers. We have not had, and do not expect to have, issues collecting payment from these longer ageing invoices.

 

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

 

   As of December 31, 
   2023   2022 
   $’000   $’000 
Within 30 days   859    149 
Between 31 and 60 days   88    204 
Over 60 days   1,386    35 
           
    2,333    388 

 

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

 

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

 

During the financial year ended December 31, 2023 and 2022, other than the loss allowance provision discussed above, no impairment loss was provided for amounts that were past due.

 

Accounts payable

 

The general credit terms from our major suppliers are payment within 30 days. Our accounts payable increased to approximately $1.7 million as of December 31, 2023 from $0.9 million as of December 31, 2022. We generally pay our accounts payable within 30 days of receipt of invoice.

 

We did not have any material default in payment of accounts payable during the financial years ended December 31, 2023 and 2022.

 

Material Cash Requirements

 

Our cash requirements consist primarily of day-to-day operating expenses, capital expenditures and contractual obligations with respect to facility leases and other operating leases. We lease all our office facilities. We expect to make future payments on existing leases from cash generated from operations. We have limited credit available from our major vendors and are required to prepay the majority of our inventory purchases, which further constrains our cash liquidity.

 

We had the following contractual obligations and lease commitments as of December 31, 2023:

 

Contractual Obligations  Total  

Less than

1 year

  

More than 1

Year

 
   $’000    $’000  $’000 
            
Operating lease commitment   1,575    348    1,227 
Bank loan repayment   5,050    4,177    873 
                
Total obligations   6,625    4,525    2,100 

 

We believe that we have sufficient working capital for our requirements for at least the next 12 months from the date of this prospectus, absent unforeseen circumstances, taking into account the financial resources presently available to us, including cash and cash equivalents on hand, cash flows from our operations and the estimated net proceeds from this offering.

 

Bank Indebtedness

 

Bank Borrowings  Terms of repayments  

Annual

interest rate

  As of December 31, 
          2023   2022 
            $’000    $’000 
                   
Term loans   5 - 15 years   2.0% to 3.7%   2,411    3,862 
Bank overdraft   On demand   -   2,639    - 
                   
Total           5,050    3,862 

 

As of December 31, 2023 and 2022, bank borrowings were comprised of term loans which bear annual interest at fixed rates ranging from 2.0 % to 3.7% per year and are repayable in 5 to 15 years and bank overdrafts payable on demand that were obtained from several financial institutions in Singapore.

 

The Company’s bank borrowings currently are guaranteed by personal guarantees from Ms. Liao and Mr. Ng. We will seek a waiver for the requirement of personal guarantees for future borrowings following the completion of this offering.

 

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Capital Commitments

 

As of December 31, 2023 and 2022, we did not have any capital commitments.

 

Off-Balance Sheet Transactions

 

As of December 31, 2023, we have not entered into any material off-balance sheet transactions or arrangements.

 

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified as shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

 

Critical Accounting Policies and Estimates

 

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

 

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

 

Use of Estimates and Assumptions

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates in the period include the allowance for doubtful accounts on accounts and other receivables, impairment loss on inventories, assumptions used in assessing right of use assets, and impairment of long-lived assets, and deferred tax valuation allowance.

 

The inputs into the management’s judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Actual results could differ from these estimates.

 

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Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

 

Foreign Currency Translation and Transaction

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the date of the balance sheet dates. The resulting exchange differences are recorded in the statement of operations.

 

Our reporting currency is the United States Dollar or “US$” and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company and subsidiaries are operating in Singapore, maintain their books and record in their local currency, Singapore Dollars or “S$”, which is a functional currency as being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, Translation of Financial Statement, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the year. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity.

 

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

 

Cash and Cash Equivalents

 

Cash and cash equivalents consist primarily of cash in readily available checking and saving accounts. Cash and cash equivalents consist of highly liquid investments that are readily convertible to cash and that mature within three months or less from the date of purchase. The carrying amounts approximate fair value due to the short maturities of these instruments. We maintain most of our bank accounts in Singapore. There are no material accounts of the Company or any subsidiary in other jurisdictions.

 

Restricted Cash

 

Restricted cash held by foreign subsidiaries relate to fixed deposits within or more than twelve months that also serve as security deposits and guarantees under the banking facilities.

 

Accounts Receivable, net

 

Accounts receivables, net includes amounts billed under the contract terms. Depending on the established process between each individual client and the Company, payment terms are set forth in either the purchase orders, the Letter of Award (LOA), or the contract; the typical payment terms require settlement between 30 and 45 days after the work has been certified. The contract receivable amounts are stated at their net realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated number of receivables that will not be collected. The Company considers several factors in its estimate of the allowance, including knowledge of a client’s financial condition, its historical collection experience, the age of the accounts receivable balances, current economic conditions, and other factors relevant to assessing the collectability of such receivables. In applying the foregoing accounting policy for receivables, management regularly assesses gross outstanding receivables and the related allowance for bad debt by first considering certain qualitative factors, such as seeing how much is owed by the client, whether the balance is overdue or delinquent. In the event that the balance is overdue, management will conduct a root cause analysis to determine why it is overdue. Potential causes may dispute regarding the amount due because of agreed upon deliverables or product quality (amounts that are carried in contracts receivable should not be subject to dispute over quality or amount because all such amounts accounted for as contract receivable are only accrued if they are reasonably expected to be collected). Further, in the management’s assessment, if the client is still an ongoing client, which means that he is either regularly making payment in entirety or material partial payments against his balance, or the Company is still performing working on a project and that clients has historically made payment(s); management typically considers these type of clients and their related receivables as collectable and in good standing.

 

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Contract assets

 

Projects with performance obligations recognized over time that have revenue recognized to date in excess of cumulative billings are reported on consolidated balance sheets as “Contract assets.” Contract retentions, included in contract assets, represent amounts withheld by clients, in accordance with underlying contract terms, until certain conditions are met or the project is completed. Provisions for estimated losses of contract assets on uncompleted contracts are made in the period in which such losses are determined.

 

Contract assets have billing term with unconditional right to be billed beyond one year are classified as non-current assets.

 

Expected credit loss

 

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. The Company adopted the new standard effective January 1, 2019, the first day of the Company’s fiscal year and applied to contracts receivables, contract assets, retention receivable and other financial instruments. The adoption of this guidance did not materially impact on the net earning and financial position and has no impact on the cash flows.

 

Inventories

 

Inventories are valued at the lower of cost or net realizable value. Cost is determined by the average cost method. We record adjustments to its inventory for estimated obsolescence or diminution in net realizable value equal to the difference between the cost of the inventory and the estimated net realizable value. At the point of loss recognition, a new cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

 

Property and Equipment, net

 

Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

 

    Expected useful life
Computer and software   3 years
Furniture and fittings   5 years
Leasehold property   Remaining balance years
Machinery and equipment   1 – 10 years
Motor vehicles   10 years
Office equipment   3 – 5 years
Renovation   3 years

 

Expenditure for repairs and maintenance is expensed as incurred. When assets have retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.

 

Contract liabilities

 

Contract liabilities on uncompleted contracts represent the amounts of cash collected from clients, billings to clients on contracts in advance of work performed and revenue recognized and provisions for losses. The majority of these amounts are expected to be earned within twelve months and are classified as current liabilities.

 

Impairment of Long-Lived Assets

 

In accordance with the provisions of ASC Topic 360, Impairment or Disposal of Long-Lived Assets, all long-lived assets such as property, plant and equipment owned and held by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset as of December is not recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of an asset to its estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

 

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Revenue Recognition

 

The Company adopted the revenue standard Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, starting January 1, 2020 using the modified retrospective method for contracts that were not completed as of the date of adoption. The adoption of this ASC 606 did not have a material impact on the Company’s consolidated financial statements. As discussed in Note 1, the Company provides civil engineering services to clients in numerous public utility projects, including but not limited to electrical and telecommunication cable laying works, water pipeline works and sewer rehabilitation works. The Company enters into agreements with clients that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as goods and services transfer to the clients. It is customary practice for the Company to have written agreements with its clients and revenue on oral or implied arrangements is generally not recognized.

 

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

 

1. Identify the contract(s) with a client;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenue when (or as) the entity satisfies a performance obligation.

 

Revenue from contracts

 

The Company enters into agreements with customers that create enforceable rights and obligations and for which it is probable that the Company will collect the consideration to which it will be entitled as services transfer to the customer. It is customary practice for the Company to have the agreements with its customers in writing. The Company recognizes revenue based on the consideration specified in the applicable agreement.

 

Projects with performance obligations recognized over time that have revenue recognized to date in excess of cumulative billings are reported on the Company’s consolidated balance sheets as “Contract assets”. Contract retentions, included in contract assets, represent amounts withheld by clients, in accordance with underlying contract terms, until certain conditions are met or the project is completed.

 

The contracts which the Company enters into with the clients are fixed price and provide for milestone billings based upon the attainment of specific project objectives to ensure the Company meets its contractual requirements. Additionally, contracts may include retentions or holdbacks paid at the end of a project to ensure that Company meets the contract requirements. The Company does not assess whether a contract contains a significant financing component if the Company expects, at contract inception, that the period between payment by the customers and the transfer of promised services to the customers will be less than one year.

 

Since the Company has concluded that the promises to be delivered on the contract would be one single performance obligation, no allocation of the transaction price is required and expected. As a civil engineering service provider, the Company recognizes revenue based on the Company’s effort or inputs to the satisfaction of a performance obligation over time as work progresses because of the continuous transfer of control to the customer and the Company’s right to bill the customer as costs are incurred.

 

The Company’s contract with the customer has payment terms specified based upon certain conditions completed. The Company will submit progress claim to the customer when the stage of the project is completed, and after the Company received the certificate from customer, the Company will issue a tax invoice to the customer. The final tax invoice is generally issued after the project completion and agreed by customer and the Company. As the Company’s customers are required to pay the Company at different billing stages over the contract period, as such, the Company believes the progress payments limit the Company’s exposure to credit risk and that the Company would be able to collect substantially all of the consideration gradually at different stages. The timing of the satisfaction of the Company’s performance obligations is based upon the cost-to-cost measure of progress method, which is generally different than the timing of unconditional right of payment, and is based upon certain conditions completed as specified in the contract. The timing between the satisfaction of the Company’s performance obligations and the unconditional right of payment would contribute to contract assets and contract liabilities.

 

The Company uses the ratio of actual costs incurred to total estimated costs since costs incurred (an input method) represent a reasonable measure of progress towards the satisfaction of a performance obligation in order to estimate the portion of revenue earned. This method faithfully depicts the transfer of value to the customer when the Company is satisfying a performance obligation that entails a number of interrelated tasks or activities for a combined output that requires the Company to coordinate the work of employees and subcontractors. Contract costs typically include direct labor, subcontract and consultant costs, materials and indirect costs related to contract performance. Changes in estimated costs to complete these obligations result in adjustments to revenue on a cumulative catch-up basis, which causes the effect of revised estimates to be recognized in the current period. Changes in estimates can routinely occur over the contract term for a variety of reasons including, changes in scope, unanticipated costs, delays or favorable or unfavorable progress than original expectations. When the outcome of the contract cannot be reasonably measured, revenue is recognized only to the extent of contract costs incurred that are expected to be recovered.

 

When the current estimates of the total amount of consideration expected to be received in exchange for transferring promised goods or services to the customer, and contract cost indicate a loss, a provision for the entire loss on the contract is made as soon as the loss become evident. An adjustment is also made to reflect the effects of the customer’s credit risk. The loss on a contract is reported as an additional contract cost (an operating expense), and not as a reduction of revenue or a non-operating expense.

 

The Company’s contracts may contain variable consideration in the form of unpriced or pending change orders or claims that either increase or decrease the contract price. Variable consideration is generally estimated using the expected value method but may from time to time be estimated using the most likely amount method depending on the circumstance. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are based upon historical experience and known trends. 

 

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The Company generally provides limited warranties for work that it has performed under its contracts; these warranty periods are known as the defect liabilities period (the “DLP”). The DLP typically extends for a duration ranging from 12 months to 18 months from the substantial completion of the project for the client. Historically, warranty claims have not resulted in significant costs. Contracts will include a provision whereby the client will typically withhold approximately 5.0% of the total contract value until the end of the DLP at which point the client will release the retention amounts to the Company.

 

Contract assets

 

Contract assets are recognized when progress towards completion of revenue earning activities on contracts exceeds amounts billed under the contract.

 

Revenue from maintenance works and services and others

 

Revenue is recognized to depict the transfer of promised services to its customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. The Company’s revenue recognition policies are in compliance with ASC 606, as follows:

 

Revenue from maintenance works and services and others is comprised of revenue from service fee, labor cost charged, rental of machinery and equipment, transportation costs incurred and maintenance works charged, among other things. Such revenue is recognized when the entity has satisfied the performance obligation at a point in time as the services are typically provided for a duration of less than one month. The Company typically receives purchase orders or emails from its customers which will establish the terms and conditions of service, including the transaction price, works or services to be performed, terms of performance, and terms of payment. The terms and conditions serve as the basis of the performance obligations that the Company must fulfill in order to recognize revenue. The key performance obligation is the completion of the contracted services to the customer according to the terms and conditions. The maintenance work and services and others consist of a single performance obligation that the Company satisfies at a point in time. The Company recognizes the revenue when the following events have occurred: (a) the Company has performed the contracted services; (b) the Company has a present right to payment; (c) the customer has legal rights to the services upon completion of works done, and (d) the customer bears significant risks and rewards of ownership of the services. The completion of this revenue process is evidenced by the customer acceptance on our document for the maintenance works and services and others.

 

Cost of revenue

 

Cost of revenue consists of direct payroll costs, sub-contract costs, material costs and other indirect costs. Direct payroll costs represent the portion of salaries and wages incurred in connection with the production of deliverables under client assignments and contracts. Direct payroll costs include allocated fringe costs (i.e. health benefits, employer payroll taxes, and retirement plan contributions), paid leave and incentive compensation. Sub-contract comprises job outside to third parties. Material costs are raw materials used for the projects. Other indirect costs will be professional and miscellaneous costs associated with the projects, excluding significant machinery or other long term depreciable assets, and our cost of revenue presented are excluded of depreciation and amortization.

 

Contract costs

 

Contract costs consist of direct payroll costs, sub-consultant costs, material costs and other indirect costs which might include professional and miscellaneous costs associated to the projects and allocated overheads. Direct payroll costs represent the portion of salaries and wages incurred in connection with the production of deliverables under client assignments and contracts. Direct payroll costs include allocated fringe costs (i.e. health benefits, employer payroll taxes, and retirement plan contributions), paid leave and incentive compensation. Sub-contract and direct expenses include both sub-con-contract and other outside costs associated with performance under our contracts. Performance under our contracts does not involve significant machinery or other long term depreciable assets. We present direct costs exclusive of depreciation and amortization and as such we do not present gross profit on our combined financial statements.

 

Sales and Marketing

 

Sales and marketing expenses include related expenses associated with sales and marketing personnel, and the costs of advertising, promotions, seminars, and other programs.

 

Government Grant

 

A government grant or subsidy is not recognized until there is reasonable assurance that: (a) the enterprise will comply with the conditions attached to the grant; and (b) the grant will be received. When we receive government grant or subsidies but the conditions attached to the grants have not been fulfilled, such government subsidies are deferred and recorded under other payables and accrued expenses, and other long-term liability. The classification of short-term or long-term liabilities is depended on the management’s expectation of when the conditions attached to the grant can be fulfilled.

 

Comprehensive Income (Loss)

 

ASC Topic 220, Comprehensive Income, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statement of shareholder’s equity, consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

 

Income Taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

For the financial years ended December 31, 2023 and 2022, the Company did not have any interest and penalties associated with tax positions. As of December 31, 2023 and 2022, the Company did not have any significant unrecognized uncertain tax positions.

 

The Company is subject to tax in local and foreign jurisdiction. As a result of its business activities, we file tax returns that are subject to examination by the relevant tax authorities.

 

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Leases

 

Effective from January 1, 2020, we adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. On February 25, 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. ASC 842 requires that lessees recognize right of use assets and lease liabilities calculated based on the present value of lease payments for all lease agreements with terms that are greater than twelve months. It requires for leases longer than one year, a lessee to recognize in the statement of financial condition a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. ASC 842 distinguishes leases as either a finance lease or an operating lease that affects how the leases are measured and presented in the statement of operations and statement of cash flows. ASC 842 supersedes nearly all existing lease accounting guidance under GAAP issued by the Financial Accounting Standards Board (“FASB”) including ASC Topic 840, Leases.

 

The accounting update also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. In addition, this accounting update requires expanded disclosures about the nature and terms of lease agreements.

 

Retirement Plan Costs

 

Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the accompanying statements of operation as the related employee service are provided. The Company is required to make contribution to their employees under a government-mandated multi-employer defined contribution pension scheme for its eligible full-times employees in Singapore. The Company is required to contribute a specified percentage of the participants’ relevant income based on their ages and wages level.

 

Segment Reporting

 

FASB ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. For the financial years ended December 31, 2023 and 2022, we had one reporting business segment.

 

Related Parties

 

The Company follows the ASC 850-10, Related Party for the identification of related parties and disclosure of related party transactions.

 

Pursuant to section 850-10-20 the related parties include: (a) affiliates of the Company; (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and Income-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company December deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amount due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

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Commitments And Contingencies

 

The Company follows the ASC 450-20, Commitments to report accounting for contingencies. Certain conditions December exist as of the date the financial statements are issued, which December result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that December result in such proceedings, we evaluate the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time that these matters will have a material adverse effect on our financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, restricted cash, and accounts receivable. Cash and cash equivalents are maintained with high credit quality institutions, the composition and maturities of which are regularly monitored by management. From April 1, 2024, the Singapore Deposit Protection Board pays compensation up to a limit of S$100,000 (approximately $74,360) if the bank with which an individual/a company hold its eligible deposit fails. As of December 31, 2023, bank and cash balances of approximately $0.4 million were maintained at financial institutions in Singapore, of which approximately $0.1 million was subject to credit risk. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

For accounts receivable, we determine, on a continuing basis, the allowance for doubtful accounts are based on the estimated realizable value. The Company identifies credit risk on a customer by customer basis. The information is monitored regularly by management. Concentration of credit risk arises when a group of customers having similar characteristics such that their ability to meet their obligations is expected to be affected similarly by changes in economic conditions.

 

Liquidity Risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Our policy is to ensure that it has sufficient cash to meet its liabilities when they become due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. A key risk in managing liquidity is the degree of uncertainty in the cash flow projections. If future cash flows are fairly uncertain, the liquidity risk increases.

 

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Fair Value Measurement

 

The Company follows the guidance of the ASC Topic 820-10, Fair Value Measurement and Disclosure (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1: Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

 

Level 2: Inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. Black-Scholes Option-Pricing model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs; and

 

Level 3: Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, restricted cash, accounts receivable, loans receivable, amount due to a related party, accounts payable, escrow liabilities, income tax payable, other payables and accrued liabilities approximate their fair values because of the short-term nature of these financial instruments.

 

Management believes, based on the current market prices or interest rates for similar debt instruments, the fair value of note payable approximate the carrying amount. We account for loans receivable at cost, subject to impairment testing. We obtain a third-party valuation based upon loan level data including note rate, type and term of the underlying loans.

 

The Company’s non-marketable equity securities are investments in privately held companies, which are without readily determinable market values and are classified as Level 3, due to the absence of quoted market prices, the inherent lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment.

 

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

Recent Accounting Pronouncements

 

In September 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities on an annual basis to disclose (1) specific categories in the tax rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis, though retrospective application is permitted.

 

In July 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and certain other segment items on an interim and annual basis if they are regularly provided to the chief operating decision maker (the “CODM”). This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

 

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Impact of Inflation

 

According to the Monetary Authority of Singapore (the “MAS”), the year-over-year percentage changes in the consumer price index for 2023 and 2022 were 4.2% and 4.1%, respectively as reported by the MAS at www.mas.gov.sg/news/monetary-policy-statements/2024/mas-monetary-policy-statement-29jan24. The MAS core inflation as of March 2024 was 3.1% and barring unforeseen circumstances, we expected to not continue to increase. Inflation in Singapore has not materially affected our profitability and operating results. However, we can provide no assurance that we will be unaffected by higher inflation rates in Singapore or globally in the future.

 

Seasonality

 

We have not observed any significant seasonal trends. Our Directors believe that there is no apparent seasonality factor affecting the industry in which our Group is operating.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Interest Rate Risk

 

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

 

Credit Risk

 

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

 

Liquidity Risk

 

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

 

Foreign Currency Exchange Risk

 

Our reporting currency is the U.S. dollar and the accompanying consolidated financial statements have been expressed in U.S. dollars. However, the Company and its subsidiaries are operating in Singapore, maintain their books and record in their local currency, Singapore dollars, and almost all of our consolidated revenues and consolidated costs and expenses are denominated in Singapore dollars. In general, for consolidation purposes, assets and liabilities denominated in Singapore dollars are translated into U.S. dollars using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the financial year. The gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other comprehensive income within the statements of changes in shareholders’ equity. We do not currently hedge for currency fluctuations with our foreign subsidiaries.

 

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HISTORY AND CORPORATE STRUCTURE

 

Corporate Structure

 

Our Company was incorporated in the Cayman Islands on March 27, 2023 under the Companies Act as an exempted company with limited liability. On incorporation, our authorized share capital was US$500,000 divided into 500,000,000 Ordinary Shares, par value of US$0.001 each. On January 8, 2024, the Company’s shareholders passed resolutions to effect a 1:4 share sub-division (a “forward stock split”) and to change the Company’s authorized share capital to $500,000 divided into 2,000,000,000 ordinary shares, of a par value of $0.00025 each. Following incorporation, our share capital was held as to approximately 100.0% by Ms. Liao. On January 26, 2024, Ms. Liao, Mr. Ng, Mr. Tang, Ease Joy and Novel Challenge subscribed for approximately 67.00%, 19.00%, 5.00%, 4.50% and 4.50% of the issued share capital of our Company. On December 21, 2023, Ace Champion and Falcon Summit acquired in aggregate 4.95% and 4.95% respectively of our issued share capital as to 7.41% from Ms. Liao and 2.49% from Mr. Ng respectively. Historically, our Group was comprised of SKK and SKK (M&E). Prior to the effective date of the registration statement of which this prospectus forms a part, we completed a reorganization whereby SKK Group and we were formed and the entire share capital of SKK was transferred to SKK Group resulting in our Group being comprised SKK Group, SKK and SKK (M&E) as our direct and indirect wholly-owned subsidiaries, respectively.

 

Organization Chart

 

The chart below sets out our corporate structure as at the date of this prospectus with percentages held pre and post offering.

 

 

  (1) Ace Champion, a company incorporated in the BVI is wholly-owned by Mr. Ching Ping Cheung, Stephen, an Independent Third Party.
  (2) Falcon Summit, a company incorporated in the BVI is owned 50.0% by each of Mr. Seow Gee Tan and Mr. Teo Siong Gay, both Independent Third Parties.
  (3) Ease Joy, a company incorporated in the BVI is wholly-owned by Mr. Kok Chuah Tan, an Independent Third Party.
  (4) Novel Challenge, a company incorporated in the BVI is wholly-owned by Mr. Che Wah Quek, an Independent Third Party.

 

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Entities

 

A description of our principal operating subsidiaries is set out below.

 

SKK

 

On October 16, 2013, SKK was incorporated in Singapore as a private company limited by shares. SKK commenced business in 2013 and is principally engaged in construction installation, with business in communications and power line construction, and also engaged in subsurface utility works including underground piping works, underground utility infrastructure construction and maintenance and HDD works in Singapore. As part of a group reorganization, SKK became an indirect wholly-owned subsidiary of our Company as of January 26, 2024.

 

SKK (M&E)

 

On March 1, 2018, SKK (M&E) was incorporated in Singapore as a private company limited by shares. SKK (M&E) is principally engaged in construction installation, with business in water and gas pipe-line and sewer construction, and also engaged in subsurface utility works including underground piping works, underground utility infrastructure construction and maintenance, HDD works, sewer rehabilitation, plumbing and sanitary works in Singapore primarily for smaller scale projects. As part of a group reorganization, SKK (M&E) became an indirect wholly-owned subsidiary of our Company.

 

Key Milestones

 

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

 

Year   Milestones
     
2013   SKK was established.
     
2015   SKK accredited with ISO 9001, OHSAS 18001 and bizSAFE Level Star certification.
     
2018   SKK (M&E) was established and SKK acquired 80.0% interest in SKK (M&E).
     
    SKK obtained the Singapore Enterprise Medal of Honor (Top 100 Elite & Trustworthy SMEs Category) from the Singapore Enterprise Association.
     
2020   SKK accredited with ISO 45001 certification (which has replaced OHSAS 18001).
     
    SKK obtained the Certificate of Excellence from SP Group in recognition for being the Top 5 Contractors for Civil Engineering and Construction Related Works.
     
    SKK completed the first subsurface utility project with total notional contract sum that exceeded S$10 million.
     
2023   SKK acquired the remaining 20.0% interest in SKK (M&E).

 

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INDUSTRY OVERVIEW

 

All the information and data presented in this section have been derived from Frost & Sullivan Limited (“Frost & Sullivan”)’s industry report commissioned by us entitled “The Interconnect Product Market Independent Market Research” (the “Frost & Sullivan Report”) unless otherwise noted. Frost & Sullivan has advised us that the statistical and graphical information contained herein is drawn from its database and other sources. The following discussion contains projections for future growth, which may not occur at the rates that are projected or at all.

 

OVERVIEW OF MACROECONOMIC IN SINGAPORE

 

Value of progress payment refers to the payment certified by the construction contractors and correlates to the overall performance of the construction industry in Singapore. The value of progress payment recorded in Singapore in the past five years recorded an increase from SGD26.6 billion in 2018 to SGD29.8 billion in 2022, representing a compound annual growth rate, or CAGR of 2.9%. We believe the growth is primarily driven by the infrastructure development and the rising housing supply. The Singaporean government has made significant investments in infrastructure projects such as the expansion of Changi Airport, the development of the Tuas Mega Port, and the construction of new MRT lines. These projects create demand for construction services and contribute to the growth of the construction industry. Another factor that drives growth in the construction market is the rising investment in construction projects related to residential, commercial, and industrial properties.

 

 

Source: Building Construction Authority of Singapore, The Frost & Sullivan Report

 

OVERVIEW OF CIVIL ENGINEERING AND INFRASTRUCTURE WORKS MARKET IN SINGAPORE

 

Definition and Business Process of Civil Engineering Works

 

Civil engineering is a branch of engineering that deals with the design, construction, and maintenance of the built environment, including structures such as buildings, roads, bridges, tunnels, and water systems. Civil engineers use their knowledge of physics, mathematics, and materials science to develop and implement infrastructure projects that meet the needs of society while protecting public safety, health, and the environment.

 

Civil engineering encompasses a wide range of activities, including surveying, site investigations, feasibility studies, design, construction management, and maintenance. Civil engineers work closely with architects, contractors, and other professionals to ensure that projects are completed safely, efficiently, and to the required standards. They also consider factors such as sustainability, environmental impact, and economic feasibility when planning and executing projects.

 

In the civil construction industry, the property developers and government generally tender for service providers under contracts. Contracts are entered into between the contractors, usually government or property developers, and main contractors, pursuant to which the said main contractor shall be responsible for providing services in connection with civil engineering.

 

 

Source: The Frost & Sullivan Report

 

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Definition of Subsurface Works

 

Subsurface works are a subset of civil engineering and refer to any kind of activity or task that takes place underground or beneath the surface of the Earth. This can include drilling, mining, tunneling, excavation, and other forms of subsurface exploration and engineering. Subsurface works are performed to extract natural resources, build infrastructure, or conduct scientific research.

 

Examples of subsurface works include drilling for oil and gas, mining for minerals, constructing tunnels and underground railways, building underground storage facilities, and conducting geological surveys to study the Earth’s crust. These activities require specialized equipment, techniques, and safety measures to ensure that they are performed safely and effectively.

 

Value Chain

 

 

Source: The Frost & Sullivan Report

 

Market Size of Civil Engineering and Infrastructure Works

 

The market size of civil engineering and infrastructure works in Singapore increased from SGD6,566.6 million in 2018 to SGD7,480.6 million in 2022, representing a CAGR of 3.3%, driven by the government’s focus on infrastructure development and urban planning. The Singapore government has launched several initiatives to improve the country’s infrastructure, including the development of new transport systems, housing, and industrial parks.

 

Supported by the rapid development of Singapore’s economy and the need of expanding infrastructures to consolidate Singapore’s financial standing in Southeast Asia, it is expected that the market size of civil engineering and infrastructure works in Singapore will continue to climb at a CAGR of 3.2%, reaching SGD 8,780.2 million in 2027.

 

 

Source: Building Construction Authority of Singapore, The Frost & Sullivan Report

 

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Market Size of Subsurface Works

 

Subsurface works are performed for many infrastructure projects in Singapore, including building foundations, tunnels, underground utilities, and transportation systems. The development of new commercial and residential areas and continued urbanization are driving the growth of subsurface works in Singapore. The market size of subsurface works in Singapore increased from SGD1,959.9 million in 2018 to SGD2,244.2 million in 2022, representing a CAGR of 3.4%.

 

The market size of subsurface works in Singapore is expected to register an increase at a CAGR of 3.1% from 2023 to 2027, reaching SGD2,634.1 million in 2027, primarily driven by the promotion of the use of underground space for infrastructure development and higher efficiency as a result of the use of advanced building technology.

 

 

Source: Building Construction Authority of Singapore, The Frost & Sullivan Report

 

Market Drivers Analysis

 

Surging Demand from the Construction of Infrastructure and Buildings: According to the Building Construction Authority (BCA), total construction demand for 2022 reached SGD29.8 billion. The continued firm demand was largely supported by residential and infrastructure projects in both public and private sectors. Over the medium-term, BCA expects the total construction demand to reach between SGD25 billion and SGD32 billion per year from 2024 to 2027. Such strong demand is supported by a continued strong pipeline of public housing projects and MRT line construction and other infrastructure works. The robust demand in the coming years of the construction of infrastructure and buildings are expected to serve as impetus to civil engineering works in Singapore.

 

Smart City Initiatives: Smart city initiatives have been a key driver for civil engineering works in Singapore. The government of Singapore has been implementing various initiatives to transform the city into a smart city, leveraging technology to improve urban living, enhance sustainability, and increase efficiency. Civil engineering works are crucial for the implementation of smart city initiatives, as it involves designing and constructing buildings and infrastructure that incorporate the latest technology and support smart city applications. For example, civil engineers play a vital role in designing and constructing energy-efficient smart buildings that are equipped with sensors, automation systems, and advanced communication networks. Additionally, civil engineering works are performed to develop and construct intelligent transportation systems, which include connected and autonomous vehicles, public transport infrastructure, and advanced traffic management systems. Other smart city infrastructures include water and waste management systems, renewable energy infrastructure, and green buildings.

 

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Increasing Adoption of HDD: In view of a growing concern for the environmental impact in Singapore, Horizontal Directional Drilling (HDD) provides a solution for the installation of pipelines without disrupting the natural habitat or causing soil erosion. HDD provides a more sustainable and environmentally-friendly option for the installation of these pipelines. Technology advancements have led to the development of more powerful and efficient drilling equipment, including drill bits, drill pipes, and drilling fluid systems. These improvements have increased the speed and accuracy of HDD operations while reducing the environmental impact. In addition, navigation systems have become more advanced, enabling HDD operators to accurately track the progress of the drill head and adjust the direction of the drill in real-time, which increase the accuracy of installations, reduces downtime, and improves safety. Technology advancements in HDD have made it possible to install pipelines with larger diameters and longer lengths. This has increased the demand for HDD in Singapore, as it enables the installation of larger utility pipelines with minimal disruption to the surface.

 

Growing Demand for LIV Trenching Works: Live Insertion Valve (LIV) trenching works involves the installation of water valves into existing water mains without interrupting the water supply. The demand for LIV trenching works in Singapore is supported by the aging water infrastructure and growing awareness of environmental-friendly design. The aging water infrastructure in Singapore increases the need for upgrade and maintenance. Singapore’s water infrastructure was largely built in the 1960s and 1970s and is now reaching the end of its design life. The Public Utilities Board (PUB) operates an ongoing asset renewal program to inspect and rehabilitate old and defective public sewers, by restoring their structural integrity and performance. The program started in 1996 and is already in its fifth phase. Phase 5, which began in October 2017, aims to rehabilitate another 200 km of sewers by 2024. As water infrastructure ages, the valves that control the flow of water deteriorate and become less reliable, leading to leaks and disruptions in the water supply. LIV trenching works provide a solution to replace or repair aging water valves quickly and efficiently, without interrupting the water supply. LIV trenching works are also more environmentally-friendly compared to traditional open-cut methods as they require less excavation, which reduces soil erosion, dust, and noise pollution.

 

Growing Demand for Electrical Cable Laying Works: Singapore is a major hub for data centers, hyperscalers and cloud service providers in Southeast Asia. We expect demand for data in Singapore will remain high with the rapid growth of digital apps, e-commerce, IoT, Artificial intelligence, crypto-trading, blockchain activities, online gaming and other activities. The shift to hybrid working and business digitalization has also contributed to the demand for data center space. The expansion of these data-heavy industries fuels demand for high-speed network connections and electrical cable laying. In particular, Singapore has around 70 operational data centers, with 30-40 new centers in the pipeline. We expect this will require massive investments in electrical cabling for power and connectivity. Further, multinational leading companies such as Amazon Web Services, Microsoft Azure and Google Cloud are rapidly expanding their presence in Singapore. Each new data center facility can require dozens of megawatts of power and extensive electrical cabling, which in turn fueling the demand for electrical cable laying works in Singapore.

 

On-going Sewer Rehabilitation and Repair Works: Singapore’s sewer system was largely constructed in the 1960s to 1980s and parts of it are nearing the end of their operational lifespan. On the other hand, Singapore’s population and land development is continuously expanding, placing strain on its sewer system and increasing needs for upgrades and expansions. Coupled with natural and climatic factors such as more extreme temperatures, heavier downpours and disruption caused by tropical storms and typhoons in recent years that collectively accelerate deterioration of pipes and materials. The aging infrastructure requires significant rehabilitation and repair to prevent failures and disruptions. As urbanization continue to expand, the construction of thousands of new housing units and put more pressure on sewer infrastructure, hence propelling the on-going sewer rehabilitation and repair works.

 

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Key Trends

 

Sustainable and Environmentally-Friendly Construction Methods and Materials: The adoption of sustainable and environmentally-friendly construction methods and materials is the rising trend in road works and pavement in Singapore. The Singaporean government is placing a greater emphasis on decreasing the carbon footprint of infrastructure projects such as road works and pavement, as there are mounting apprehensions about climate change and its impact on the environment. Recycled materials, such as crushed concrete and asphalt, are being used in the construction of roads and pavements in Singapore. This reduces the amount of waste sent to landfills and reduces the need for virgin materials. Furthermore, to curtail energy consumption and carbon emissions, road works and pavement in Singapore are being equipped with energy-efficient lighting and traffic management systems.

 

Upgrading and Expanding Singapore’s Electrical Infrastructure: In view of the surging demand of a growing population and economy in Singapore, there has been a growing focus on upgrading and expanding Singapore’s electrical infrastructure. This includes the improvement of the reliability and efficiency of the electricity grid, as well as incorporation of renewable energy sources into the mix. Additionally, there has been a push to incorporate smart technologies and digital solutions into the electrical grid to improve monitoring and management capabilities, which is the increasing trend in civil engineering works in Singapore, including electrical cable laying works.

 

Subsidies and incentives for qualified enterprises: With a view to encouraging companies to adopt eco-friendly lighting solutions, governments may grant subsidies or provide tax relief for adopting energy-saving solutions such as LED lighting upgrades. Schemes may include but not limited to Low Carbon Across the Southeast (LoCASE).

 

Continued Urban Redevelopment: Southeast Asia as one of the fastest growing regions regarding infrastructure, and Singapore is no exception. Infrastructure development and population growth naturally results in a rising demand for buildings. Ample of construction and redevelopment projects are in the pipeline of the Government. Singapore has undergone several urban redevelopment projects over the years, aimed at rejuvenating older areas of the city and improving the living standards of its residents. One of the examples is the ongoing redevelopment of the Greater Southern Waterfront, which will transform over 2,000 hectares of prime waterfront land into a new residential, commercial, and lifestyle destination. Other redevelopment projects include the Punggol Digital District, which is a new development in Singapore located in the northeastern part of the city. The Punggol Digital District will house a mix of residential, commercial, and institutional facilities, including a business park, a university, and community spaces. Correspondingly, the continued urban redevelopment will translate into business opportunity for civil engineering works providers in Singapore.

 

Emergence of Smart Solutions during Implementation: The civil engineering and infrastructure works industry in Singapore is underpinned by the emergence of technology-enabled solutions and services. For instance, in the water pipeline installation works sector, the use of smart water metering systems and leak detection sensors is increasing to improve monitoring, efficiency and loss prevention, which drives the demand for new installation project of advanced pipelines and connections to facilitate smart solutions. In the electrical cable laying sector, the installation of smart power meters, sensors and management systems across electrical infrastructure is becoming prevalent, which includes smart substations, distribution automation, outage management systems, etc. In the HDD sector, technologies like gyroscopic guidance, magnetic guidance and global positioning system (GPS) are used to accurately steer the drill bit to the intended target location, which helps to complete HDD boring with minimal errors, lower costs and safety risks.

 

COMPETITION OVERVIEW

 

The civil engineering market in Singapore is competitive and relatively fragmented. As of June 2024, there are 1,400 civil engineering registered contractors in the Building and Construction Authority, of which 84 are admitted as approved contractors under Grading A1 without tendering limit. Large scale players within the industry are usually A1-graded contractors with proven track record and sufficient capital who are on the tender list of major property developers and government.

 

The Singapore Government plays a significant role in driving demand for civil engineering works, as it invests heavily in infrastructure projects to support economic growth and improve the quality of life for citizens. These projects include new road and rail networks, public housing developments, and major land reclamation projects. The public sector contributes to the majority revenue of civil engineering works industry in Singapore. Going forward, the competition in civil engineering works in Singapore is expected to remain intense, as the government continues to prioritize infrastructure development to support economic growth and meet the needs of a growing population.

 

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The civil engineering industry in Singapore is open to many large international players from China, India, Australia, Europe, etc, who compete with local Singaporean firms for projects. Some of the largest international players in Singapore include China State Construction Engineering Corporation, China Railway Group, Leighton Asia, Samsung C&T, etc.

 

The subsurface works industry in Singapore is highly regulated, with strict safety and environmental standards, and companies are expected to have a strong track record of delivering high-quality projects. Overall, the subsurface works industry in Singapore is competitive and dynamic, with a range of companies offering different expertise and capabilities, including HDD works, LIV trenching works, water pipeline installation works, electrical cable laying works, road works and pavement, and sewer rehabilitation and repair works. As estimated, there are approximately 200 market participants in the subsurface industry with less than 30 market participants specializing in HDD works.

 

Entry Barriers

 

Initial Capital Requirements: Sufficient capital flow is important for civil engineering service providers to satisfy their operational and capital needs. Failure to make timely payments for production or construction costs may delay project schedules and affect their credibility. In addition, a proportion of capital is required for the issuance of surety bond and other performance bonds. Such substantial amount of capital requirements present barrier for the new entrants of civil engineering industry in Singapore.

 

Track Record: Proven track record is the key competitive factor in the civil engineering industry. Credible track record for quality of works, efficient division of labor, timely delivery within budget control is the critical metrics for the companies to perform civil engineering works. New entrants without sound reputation built on the past collaboration with the industry stakeholders and experience in delivering civil engineering works would compromise a company’s overall competitiveness in the market.

 

Industry Expertise: Extensive experience combined with deep industry knowledge and expertise is the strong indicator in evaluating the civil engineering contractors. Being recognized and having a good reputation allows the companies to win trust of customers and other industry stakeholders, more importantly increases the possibilities of landing projects. From other perspectives, this can also be a barrier for new entrants to enter the civil engineering industry since they are new to the market and have limited experience and reputation among the industry.

 

Factors of Competition

 

Business portfolio: Provision of consistent quality services to clients is the core competitiveness to civil engineering companies, especially to those with diversified service offerings, including HDD works, LIV trenching works, water pipeline installation works, electrical cable laying works road works and pavement and other related rehabilitation and repair works. Contractors engaging in comprehensive business portfolio would, therefore, have the advantages in receiving the impetus from the civil engineering industry in Singapore. Moreover, extensive capacity is one of the most important criteria for selecting contractors during tendering process, which in turn increases the possibility of bidding large scale projects.

 

Qualification and Licenses: Qualification and license is another major competition focus in the civil engineering industry. The market participants are registered contractors in the Building and Construction Authority. Based on the capital requirements and project reference, the registered contractors are classified to 7 grades with different tendering limits. The A1-graded contractors are able to bid projects without tender limits. Thus, the qualification of BCA registered contractors comes as the cutting edge to the service providers in the market.

 

Collaboration with Industry Stakeholders: The leading players in the civil engineering industry have established long-term relationship with customers, contractors and suppliers, which facilitates the resources deployment and division of labor for certain area of construction works based on business relationship, track record, ability in project delivery. By leveraging the good working relationship built on collaboration with industry stakeholders, time and cost could be greatly saved in the day-to-day operation. As such, it would further enhance the execution capacity of the civil engineering services providers.

 

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BUSINESS

 

Overview

 

We are a civil engineering service provider that specializes in subsurface utility works in Singapore. We seek to plan, construct and maintain various public works and infrastructure projects that serve the society and the environment. We have over 10 years of experience in providing civil engineering services to our customers in Singapore in numerous public utility projects, including but not limited to power and telecommunication cable laying works, water pipeline works and sewer rehabilitation works. In the financial years ended December 31, 2023 and 2022, our Group has completed seven and four civil engineering services projects, respectively, and our revenue was approximately $9.8 million and approximately $9.6 million, respectively. As of May 31, 2024, we had four civil engineering services projects in progress with total amount of outstanding notional contract sum at approximately S$10.5 million. Since January 1, 2023 and up to the date of this prospectus, we have successfully tendered/quoted for five additional, new civil engineering services projects with total amount of notional contract sum at approximately S$8.5 million.

 

Our projects are primarily the subsurface work related to projects undertaken by the Public Utilities Board (PUB) and Singapore Telecommunications Limited, which are our major customers. The nature of these projects is related to repairing of pumping mains, sewer maintenance and pipe cable laying. These projects generally take two to three years to complete.

 

First, we must go through a bidding process whereby the scope, cost and timeline of the job is presented, and we must compete with other similar situated companies to win the business, requiring us to provide very competitive terms and timelines for completion that are expeditious as possible because we are bidding against other providers, but that we believe are still attainable. Typically, if we win a contract, then we finalize the terms of payment, which performance bonds issued by a bank or insurance company and is generally 5.0% of the total contract sum Our customers generally pay us by progress payments pursuant to contract with reference to the percentage of works done or the reaching of specified milestones Our customers normally specify a defect liability period in the contract, during which we are responsible to rectify defects identified at our cost and he defect liability period of our projects typically lasted for 12 to 18 months after the issue of the certificate of practical completion. Our customers may require a warranty period after practical completion during which we are responsible to make good all defects, damages or other faults arising from the choice of materials and the performance of the works which are our responsibilities under the relevant project contracts. The warranty period generally ranges from two to three years after the issue of the certificate of practical completion.

 

Our Group was co-founded by Mr. Sze, our Chief Executive Officer in 2013, together with, inter alia, Mr. Ng, one of our Executive Directors and our Chief Operating Officer, who together have worked in the provision of civil engineering services for over 26 years. Mr. Sze is very experienced in the provision of civil engineering services and he has been engaging in this business since 1995. As at May 31 2024, we were equipped with a fleet of six HDD rigs, 20 excavators, 37 vehicles and a staff over 137 individuals.

 

Our competitive advantage lies in our ability to manage and execute civil engineering services projects in a timely, reliable and cost-efficient manner, including larger scale and complex projects which involves HDD. Our established track record and experienced management team are key factors that build up our reputation in the local construction industry.

 

Our Qualifications and Certifications

 

We are registered with the BCA as a (i) Grade GB2 licensed general builder; (ii) Grade C1 contractor under the CW02 (civil engineering) workhead; (iii) Grade L5 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead; (iv) Grade L1 contractor under the ME11 (mechanical engineering) workhead; and (v) Grade L6 contractor under the SY05 (electrical & electronic materials, products & components), which enable us to undertake public sector projects up to S$6.0 million, S$5.0 million, S$16.0 million, S$0.8 million and unlimited amount in value for each project, respectively. We have already satisfied the financial, personnel and management & development requirements for a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, and we are working towards meeting the track record requirement. Our Directors expect that we should meet the track record requirement in the first half of 2025. Once we are registered as a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, we can undertake public sector projects of unlimited contract value.

 

We are committed to risk management, health and safety standards, quality assurance and environmental impact control. We have been accredited with ISO 9001 (quality management), ISO 45001 (occupational health and safety) and bizSAFE Level Star certifications. We did not encounter any (i) material work-related incidents; or (ii) severe or fatal accidents, during the financial years ended December 31, 2023 and 2022 and during the interim period running through the date of this prospectus.

 

Our Business Model

 

Civil Engineering is a professional engineering discipline that deals with the design, construction, and maintenance of the physical and naturally built environment. This field is divided into a number of specialties, each with its own focus and area of expertise, which includes (i) construction engineering that involves the planning and construction of buildings, bridges, roads and other infrastructure; (ii) structural engineering that deals with the design, construction and analysis of structures, such as the safety and stability of buildings and bridges; (iii) environmental engineering that deals with protecting the environment and minimizing the negative impact of human activity on the environment, such as cleaning up contaminated sites, designing systems to reduce pollution or developing plans to mitigate the effects of climate change; (iv) geotechnical engineering that deals with the design and construction of foundations, slopes, tunnels and embankments with the knowledge of soil and rock; and (v) transportation engineering that deals with the planning, design and operation of transportation systems.

 

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Our principal business activity is the provision of civil engineering services to public utility projects in Singapore and we specialize in subsurface utility works, such as power and telecommunication cable laying works, water pipeline works and sewer rehabilitation works.

 

The following is a breakdown of our revenue in the financial years ended December 31, 2023 and 2022 based on the nature of the subsurface utility works projects we undertook during such period:

 

   Financial Years ended December 31, 
   2023   2022 
   $’000   %   $’000   % 
         
Cable or pipe laying works   6,163    63.2    6,844    71.1 
Pipeline and sewerage repair and maintenance   2,413    24.7    1,599    16.6 
Other services*   1,183    12.1    1,178    12.3 
                     
   9,759    100.0    9,621    100.0 

 

* Maintenance works and services and others is comprised of revenue from service fee, labor cost charged, rental of machinery and equipment, transportation costs incurred, maintenance works charged, among other things. 

 

Our service scope includes the planning, supervising and management of all aspects of a project, from its inception to completion. The scope of our contracts may require earthworks (such as land clearing, demolition, rock breaking, mass excavation, deep basement excavation, foundation excavation, earth disposal, earth filling and shore protection) and preparation of geotechnical reports, which we normally subcontract to third parties. We acted as the main contractor in over 50.0% of our contracts (in terms of revenue generated) in the financial years ended December 31, 2023 and 2022. For the remaining projects, we acted as the subcontractor for main contractors, whose contracts were for the whole public works or infrastructure project and who subcontracted the civil engineering portion to us.

 

Cable or pipe laying works

 

Underground infrastructure such as telecom and power cable conduits, water lines, sewer lines, gas lines, oil lines, product pipelines and environmental remediation casings can be installed by conventional trenching or HDD. No matter which method to use, we are required to carefully plan a route that causes minimal damage and find a layout that meets our customer’s needs, avoids utility lines and minimizes damage to valuable property. In the financial years ended December 31, 2023 and 2022, our Group had generated revenue of approximately $6.2 million and approximately $6.8 million in projects relating to cable or pipe laying works, respectively, accounted for approximately 63.2% and 71.1% of our total revenue in such period.

 

Conventional trenching

 

Conventional trenching is a method for building or maintaining underground infrastructure which involves digging and excavating a trench in the ground that is eventually deep and long enough to install, construct, maintain or inspect a conduit, pipe or tunnel with the use of excavators. Upon project completion, the underground structure is buried and the surface restored.

 

HDD

 

HDD is a trenchless method of installing underground infrastructure in a relatively shallow arc or radius with minimal surface disruption. It uses a surface-launched drilling rig that can steer the drill bit along a curved bore path, avoiding obstacles and reducing environmental impact by minimizing extensive open cut trenches. After careful pre-site planning, we will first drill the pilot hole, then followed by expansion of the hole via reaming and then pullback of the drill string which has the cable, pipe or conduit attached to it, thus creating a continuous segment of cable, pipe or conduit underground exposed only at the two initial endpoints.

 

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HDD is a preferred way for installing underground infrastructure as it can be used to cross any number of surface obstacles of varying sizes/depths including waterways, roadways, railroads, wetlands, shore approaches, congested areas, environmentally sensitive areas and areas where other methods (such as conventional trenching and excavating) are costlier or not practical/possible. Apart from offering significant environmental advantages over traditional cut and cover pipeline/utility installations, it also has the following benefits: less traffic disruption, lower cost, deeper and/or longer installation, no access pit, shorter completion times, directional capabilities and environmental safety. We are one of the five major contractors in Singapore for HDD works.

 

Pipeline and sewerage repair and maintenance

 

We have the technical know-how and the equipment for air-water-jetting and live valve insertion, which are essential for pipeline and sewerage repair and maintenance. In the financial years ended December 31, 2023 and 2022, our Group had generated revenue of approximately $2.4 million and approximately $1.6 million in projects relating to pipeline and sewerage repair and maintenance, respectively, accounted for approximately 24.7% and 16.6% of our total revenue in such period.

 

Cleaning of drinking water pipes

 

Drinking water pipes may be contaminated with sediments such as iron, manganese, lime, humus, sludge, sand and other deposits which may pose the risk of water turbidity, odor and taste nuisance. Our air-water-jetting system can clean drinking water pipes effectively in a reliable way without the use of chemicals and can be carried out practically everywhere without structural measures. Our air-water-jetting system can also offer a choice of different cleaning cycles, matched to the material, diameter and length of the pipe. The cleaning will ensure no turbidity of drinking water, effectively prevent incrustations which in turn will lengthen the maintenance intervals, improve the function of valves, relieves the load on pumps in pump pressure lines and thus also reduces energy costs during operation. During the cleaning, a selected pipe section is separated from the rest of the pipe network. Based on the network parameters, the cleaning section is supplied with air in a controlled manner via a hydrant, which is provided by the computer-controlled air treatment unit of our air-water-jetting system. At the same time, water is supplied by slightly opening a slide valve at the beginning of the line. As a result, the air-water mixture reaches very high flow velocities. The cavitation phenomena that occur cause a jet effect through turbulence, whereby a loosening of the deposits from the pipe walls is achieved and the deposits are flushed out together with the air-water mixture. The process is a constant pressure process, whereby the pressure is always selected lower than the nominal operating pressure and hence there is no danger of pipe bursts.

 

Cleaning of wastewater pressure pipelines

 

Wastewater pressure pipelines have to be cleaned regularly to remove sediments such as sludge, sand and grease deposits in order to reduce the pumping pressure and increase operational safety. Our air-water-jetting system can clean up wastewater pressure pipelines effectively in a reliable way and can be carried out practically everywhere without structural measures. Our air-water-jetting system offers a wide range of cleaning programs. Specific flushing algorithms are selected depending on the material, diameter, height difference and length of the wastewater pressure pipe. The cleaning is normally done at a pumping station or other suitable location and air and water are introduced into the wastewater pressure pipeline in a computer-controlled manner. During the cleaning, the pipeline is not subject to any additional mechanical loads and hence pump operation can be continued almost without interrupting operation.

 

Live valve insertion

 

When a water distribution system starts aging, it will require repairs and modernization. For instance, valves are designed to only last about 75 years and valve failure can constitute a serious problem for any water utility as they can lead to service disruption to thousands of customers, including but not limited to critical systems like fire protection, hospitals, data centers and schools. However, removing and replacing inoperable valves can create the potential of system shutdowns which could leave customers without service for extended periods. A live valve insertion is a specialty gate valve inserted into an existing water or wastewater main at where a control point is needed through a single circular hole cut into the water or wastewater main, while the existing pipeline is under working pressure, without interruption of flow or service. The life valve is permanently installed to the pipe, allowing for system control and maintenance in the same manner as a traditional resilient, seated gate valve. As a live valve can be installed and operated easily, it is ideal for planned, routine or emergency maintenance and is an effective, economical and reliable solution to utilities and municipalities that need to ensure that their water infrastructure remains in service, while also upgrading and updating those systems.

 

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Maintenance works and services and others

 

We also provide service fee, labor cost charged, rental of machinery and equipment, transportation costs incurred, maintenance works charged, among other things.

 

Our Operations

 

Identification of business opportunities

 

As we are a civil engineering service provider that specialize in subsurface utility works, we only engage in public projects. Over 85.0% of our awarded contracts (in terms of revenue) during the financial years ended December 31, 2023 and 2022 were obtained through open tenders, and for the remaining projects, our customers send us requests for quotations to seek our services. We obtain information on open tenders from GeBIZ (Singapore Government’s one-stop e-procurement portal where suppliers can access public sector business opportunities online). For requests for quotations, such requests are normally made by main contractors through referrals, word of mouth or contacts established from previous tenders/quotations or contracts, and we also receive requests from repeat customers. Our tender department is responsible for fostering, building and maintaining relationships with these existing and potential customers.

 

Preliminary tender/quotation processes

 

Our tender department takes the lead in the tender/quotation process, and an internal tender/quotation process is initiated when a project director identifies an opportunity for open tender or receives an invitation to quote from a potential customer. Such project director will be in charge of the internal tender/quotation workflow process. Before we decide to tender/quote, our potential customers will typically provide us with documents relevant to the tender/quotation. Tender documents typically consist of conditions of tender, specifications, schedule of rates and a set of submission criteria including time, date and place of submission. Quotation documents typically consist of standard checks, conditions of quotation, specifications, schedule of rates and the timing of submission.

 

Tender

 

Tender assessment

 

To initiate the internal tender workflow process, the responsible project director will complete a tender brief form which will indicate, among other things, his estimate of the proposed price after assessing the feasibility of the project based on the following points:

 

review the customer’s requirements, specifications and schedule of the project;

 

determine the scope of works required;

 

review contractual risks and obligations;

 

assess the customer’s credit profile to ascertain their ability to pay based on the proposed payment terms;

 

review all other risks, including financial, operational, cash flows, political and regulatory; and

 

assess whether we can cumulate positive cash flows after we have commenced the project for a designated period and achieve at least the minimum gross profit margin we desire.

 

This form, together with the tender documents, will be handed to our Chief Executive Officer who, in turn, will evaluate our existing commitments, available resources and competency and then assess, review and decide whether to proceed and allocate resources (if any) for tender preparation. If our Chief Executive Officer decides to proceed with tender preparation, he will assign a reference number and inform the responsible project director to update information regarding the tender in the ongoing tender record list. If the information we collected in relation to the tender does not present favorable contract conditions, our Chief Executive Officer will ask the responsible project director not to proceed with tender preparation.

 

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Tender preparation

 

During tender preparation, the responsible project director will ascertain the pricing of the tender by estimating internal costing and budgetary evaluation on costs such as labor and materials and, where applicable, work with the material suppliers and subcontractors to obtain pricing for base price submission to our Chief Executive Officer. In order to deliver a more precise and cost-effective project proposal, the responsible project director may conduct a site visit to the project location to further assess the complexity of the project requirements. The responsible project director will continue to maintain/develop a relationship with the potential customer to obtain budget and job intelligence and other market intelligence on competitors and forward the relevant information to our Chief Executive Officer for pricing refinement.

 

Once the base price is determined and submitted to our Chief Executive Officer, he will review and approve the proposed bid price and pricing strategy. After our Chief Executive Officer has agreed on and signed off on the final bid price, the responsible project director will submit the tender to the potential customer based on the final bid price and follow up on the tender outcome (including clarification of tender documents) and provide management updates.

 

The period from our receipt of tender documents to submission of tender proposal to a potential customer is generally about four to six weeks.

 

Quotation

 

For projects where we act as a subcontractor, our customers, who are the main contractors, may request quotations from us directly. In these cases, the responsible project director will be responsible for the preparation of the quotation, and the review process will be similar to those described above for tenders.

 

Tender/quotation pricing

 

We adopt a cost estimate plus mark-up pricing model for pricing our tenders/quotations. Contracts with our major customers are either at (i) fixed prices with a pre-determined quantity and schedule for project completion which generally commit us to provide the resources required to complete a project for a fixed sum; or (ii) notional contract sums, if the quantity for project completion cannot be predetermined, where the work performed will be measured and valued against agreed rates for progress and/or final payment. As such, when deciding on our tender price/quotation, we also make reference to price trends of materials, trends in the labor market, previous tender/quotation records and awarded tender price/quotation of previous similar jobs on top of getting quotations from material suppliers and subcontractors. After we have determined the estimated costs (which will include but not limited to the costs of equipment, materials, subcontractors, labor, professional engineering, safety and environmental measures and insurance cost), we add on our desired profit margin before we propose a tender price/quotation.

 

Award of contract

 

The period for a tender and a request for quotation to become an awarded contract is generally three to six months and three months, respectively. If the contract is awarded by tender, we will typically enter into a formal contract with our customer. If the contract is awarded by quotation, our customers will either give us a confirmation or issue a purchase order to us.

 

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Project implementation

 

Formation of operations team and handing over

 

After we have been formally awarded with the contract, our tender department in charge of the tender/quotation will hand over the project to our operations department. The handover to the responsible operations team is done over two kick-off meetings.

 

The first kick-off meeting, which is normally held within five days of the award of the project, will be attended by the responsible operations team, and the responsible project director of our tender department will brief the operations team on the scope of work required, construction phases, contract period, budget and cost structure and any other special requirements of the project.

 

At the second kick-off meeting, which is normally held within 14 days of the first kick-off meeting, the responsible operations team will evaluate and confirm the feasibility and profitability of the project and achieve a common understanding of the project scope and estimated profit. Following this meeting, the finance team will record details of the project into our accounting system, which sets down the approval required for different types of project expenses and the system for budget control and facilitates us to track real-time project costs.

 

Preparation of work plan

 

The project manager of the designated operations team will prepare the comprehensive and practical work plan based on customer’s specifications, which include detailed particulars of materials, products and/or equipment to be used in the project, and submit the same to our customer for approval. Such project manager will also prepare and submit a master program for the project setting out key milestone dates (e.g., commencement date and date of practical completion) to our customer for approval. The master program is reviewed and updated regularly throughout project implementation.

 

Taking out performance bonds and insurance

 

For projects where we act as the main contractor, we are typically required to provide performance bonds issued by a bank or insurance company backed by cash or other collaterals and/or guarantees in favor of our customers to secure our performance under contracts, which is common in our industry. The amount of the performance bond required for each project is generally 5.0% of the total contract sum for such project. Our performance bonds normally expire or are released upon completion of the projects or as otherwise specified in the contracts.

 

In cases in which we are the main contractor, we may be required to take out contractor’s all risks, work injury compensation and public liability insurance to comply with the applicable laws and regulations and the requirements under the contracts. However, when we are acting in the capacity of a subcontractor, the main contractor’s insurance policies will normally cover us in these areas, and we usually just have to take out insurance policies to cover the exclusions and excesses which we are required to pay under the insurance policies of the main contractor (see “- Insurance” in this section for details).

 

Selection of material suppliers and subcontractors

 

Our procurement team under the operations department maintains and regularly reviews and updates a list of qualified material suppliers and subcontractors that meet our stringent requirements, including the ability to meet our quality and safety specifications and our time schedule for supply of services and materials. As of December 31, 2023, there were approximately five qualified material suppliers on the list, and we select material suppliers for our projects from this list.

 

Procurement process

 

Our procurement team is in charge of procurement for project execution, and it is also responsible for budget and supplier management to ensure that the project will meet the contract specifications and follow the schedule within the limit of the agreed budget.

 

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Project execution process

 

An operations team is typically led by a project manager and supported by a project engineer, a site supervisor and procurement staff, and their main responsibilities are as follows:

 

project manager – mainly responsible for ensuring that the project is completed on time based on the needs of our customer and within budget, including the budgeting, organization, implementation and scheduling of the project as well as dealing with the internal and external stakeholders of the project;

 

project engineer – mainly responsible for managing the project budget, schedule, personnel and technical activities to ensure project accuracy, quality and safety;

 

site supervisor – mainly responsible for supervising and monitoring the overall workforce and work progress on site, supervising workmanship and quality on site and coordinating with our outsourced safety officer to implement our integrated quality, health, safety, security and environmental management system which was developed with reference to ISO9001 (quality management) and ISO45001 (occupational health and safety); and

 

procurement staff – mainly responsible for material takeoff estimates for the project, dealing with material suppliers and subcontractors and ensuring that their quotations are in compliance with all requirements, and for the preparation of building contracts, progress claims, payment certificates and other documentation relating to our material suppliers and subcontractors.

 

The operations team conducts regular meetings with subcontractors to ensure that site work progresses according to schedule. Daily site inspections (including visual/photographic inspections and measurements) are conducted to ensure that works are carried out according to proper procedures. Safety and construction quality are our areas of critical focus, and we have appointed external specialist safety and quality teams to closely monitor our work sites during the project execution process. Our Chief Operating Officer, who is in charge of supervising the operation of the project, conducts regular project reviews with the responsible project manager. Our Chief Operating Officer will present and review the project status with our Chief Executive Officer on a bi-monthly basis. In terms of the financial management of the project, our finance manager will prepare six-month cash flow forecasts for the project on a bi-monthly basis and will also review the financial report and forecast results of the project with our Chief Executive Officer on a monthly basis.

 

We have adopted ISO 9001 (quality management) systems to ensure that the works undertaken by our subcontractors are delivered on schedule and conform with the standards of our customers.

 

Progress payment and certification

 

Our customers generally pay us by progress payments pursuant to contract with reference to the percentage of works done or the reaching of specified milestones. We generally do not receive any deposit or advance payment from our customers but, depending on the unique circumstances of each project, we may require our customers to pay us a refundable deposit upon the signing of contract. We typically submit a payment application to our customer team summarizing the works done on a monthly basis or after the specified milestone is reached. Our project manager or procurement staff prepares our payment application based on an internal assessment of work progress and quantity of works completed and an estimation of subcontracting costs likely to be incurred. Our customer then assesses our payment application and issues an interim payment certificate to us certifying the percentage of works done or the reaching of the specified milestone. In general, the interim payment certificate is issued within 21 to 30 days from the date of our payment application. We then present our invoice to our customer after our receipt of the interim payment certificate to request for payment. Our customer will, upon receiving our invoice, make payment to us based on the certified amount. In general, such payment is made within 30 to 45 days from the date of the presentation of our invoice to our customer.

 

Variation orders

 

Customers in general have the right to order variations during the course of a project pursuant to the relevant contract terms. Variation orders may include: (i) additions, omissions, substitutions, alterations, changes in quality, form, character, kind, position or dimension; and (ii) changes to any sequence, method or timing of works, which may result in additional works. The rates for the works under such variation orders follow the schedule of rates as provided in the relevant contracts or the fair value of work, day rates or estimated cost and profit agreed upon between the customer and ourselves. In general, after receiving instruction of a variation order, we make an estimation of the costs likely to be involved and may obtain quotations from our subcontractors, and then we submit a proposed rate for such variation order to our customer for approval. We continue to apply for progress payments for such variation orders during the course of the project.

 

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Duration

 

Our customers fix an expected project duration at the tender/quotation stage. During the financial years ended December 31, 2023 and 2022, the duration of most of our civil engineering services projects from commencement to practical completion varied from seven and a half months to five years. If we are aware of any circumstances which may prolong the expected duration of a project, we advise our customers on ways to mitigate any impact from the extra time and cost involved. If the progress of the works is likely to be delayed due to variation orders or certain unforeseen situations, such as inclement weather on the site, we discuss with our customers in estimating the length of the delay and agreeing to a fair and reasonable extension of time for completion.

 

Project completion and post completion

 

Practical completion

 

Several procedures will follow after the completion of our works, including inspection and rectification works by the operations team and an official handover to the customer. Upon practical completion, our operations team will inspect the completed works to identify defects and instruct rectification works be carried out. After the rectification works are duly completed, we will arrange an official project handover to the customer. Our customer will conduct inspection to check whether the works are satisfactorily completed, and the customer will issue a certificate of practical completion certifying that the project is substantially completed and is approved for handover. Upon the issue of such certificate, the performance bond, if any, is normally released.

 

Defect liability period

 

Our customers normally specify a defect liability period in the contract, during which we are responsible to rectify defects identified at our cost. During the financial years ended December 31, 2023 and 2022, the defect liability period of our projects typically lasted for 12 to 18 months after the issue of the certificate of practical completion. Generally, we require a back-to-back defect liability period from our subcontractors for risk management purposes so that our subcontractors are generally responsible for rectifying the defects in their works or materials procured at their costs.

 

Warranty period

 

Some of our customers may require a warranty period after practical completion during which we are responsible to make good all defects, damages or other faults arising from the choice of materials and the performance of the works which are our responsibilities under the relevant project contracts. The warranty period could range from two to three years after the issue of the certificate of practical completion. Generally, we require a back-to-back warranty period from our material suppliers and subcontractor and for risk management purposes so that they are generally responsible for rectifying the defects in their works or repairing and replacing the defective materials supplied (as the case may be) at their costs.

 

There were no material claims made under any warranty we provided to our customers during the financial years ended December 31, 2023 and 2022, or during the interim period as of the date of this prospectus.

 

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Competitive landscape of the civil engineering services sector in Singapore

 

The civil engineering services sector accounted for approximately 7.5% of the construction industry in Singapore (in terms of the value of certified progress payments in the construction industry) in 2022, and this sector is competitive and relatively fragmented. As of June 19, 2024, there were 834 contractors registered with the BCA under the CW02 (civil engineering) workhead (of which 165 are of Grade C1), 451 contractors registered with the BCA under the CR07 (cable/pipe laying & road reinstatement) workhead (of which 59 are of Grade L5 and 15 are of Grade L6), 841 contractors registered with the BCA under the ME11 (mechanical engineering) workhead (of which 567 are of Grade L1), and 336 contractors registered with the BCA under the SY05 (electrical & electronic materials, products & components) workhead (of which 48 are of Grade L6). Apart from competition from local contractors, there is also competition from many large international players from China, India, Australia and Europe. Frost & Sullivan estimated that there are approximately 200 market participants in the civil engineering services sector that specialize in subsurface utility works in Singapore, with less than 30 market participants that specialize in HDD works and we are one of the five key players for HDD works in Singapore.

 

Our Competitive Strengths

 

We have an established track record of over 10 years providing timely, reliable and cost-efficient civil engineering services and are one of the five major contractors in Singapore for HDD works

 

We have an established track record of over 10 years of providing timely, reliable and cost-effective civil engineering services in Singapore that covers subsurface utility works including power and telecommunication cable laying works, water pipeline works and sewer rehabilitation works. We endeavor to adopt state-of-the-art technology in performing our services, such as HDD and live valve insertion. We are one of the five major contractors in Singapore for HDD works, which is a trenchless method of installing underground infrastructure offering significant environmental and cost advantages over traditional cut and cover pipeline/utility installations. Our experienced management team under the leadership of our founder and Chief Executive Officer, Mr. Sze, who has over 28 years of experience in the provision of civil engineering services in Singapore, allows us to evaluate a project’s specifications, resource needs and level of difficulty accurately which helps us to make sure that the technical, resource and scheduling challenges are addressed and monitored closely throughout the project. We believe that our experienced management team and our capabilities in civil engineering services, and to do so in a timely, reliable and cost-efficient manner have contributed to our reputation and track record. We believe our Group’s long-term presence in the industry also gives our customers an overall confidence in our ability to complete quality works in a timely manner.

 

We are committed to risk management, health and safety standards, quality assurance and environmental impact control

 

We are committed to risk management, health and safety standards, quality assurance and environmental impact control. We have been accredited with ISO 9001 (quality management), OHSAS 18001 and subsequently ISO 45001 (occupational health and safety) as well as bizSAFE Level Star certifications. We did not encounter any (i) material work-related incidents; or (ii) severe or fatal accidents, for the financial years ended December 31, 2023 and 2022 and as of the date of this prospectus.

 

We have an experienced and dedicated management team

 

Our Executive Directors and Executive Officers are all very experienced in the provision of civil engineering services in Singapore. Our Group was founded in 2013 by Mr. Sze, our Chief Executive Officer, who has over 28 years of experience in the provision of civil engineering services with the resources of his spouse Ms. Liao (one of our Executive Directors who is in charge of our Group’s human resources and administrative matters) together with, inter alia, Mr. Ng, one of our Executive Directors and our Chief Operating Officer, who has worked with Mr. Sze in the provision of civil engineering services for over 26 years. Mr. Tang, our Project Director (M&E), also has more than 15 years of experience in the provision of civil engineering services. Mr. Wong, our Project Director (Power/Telecom), who joined our Group since 2021, has over 18 years of experience in the provision of civil engineering services. As our Executive Directors or Executive Officers, they have been instrumental in the growth and development of our Group over our 10 years of operations. We believe that the combination of our strong management expertise and knowledge of the industry, together with our qualified employees to complete civil engineering services projects in a timely, reliable and cost-efficient manner, have been and will continue to be our Group’s valuable assets.

 

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We are equipped with a fleet of six HDD rigs, 20 excavators and 37 vehicles in addition to dozens of other specialized pieces of equipment that enable us to take on various large-scale civil engineering services projects

 

We have in-house civil engineering expertise and we are equipped with a fleet of six HDD rigs, 20 excavators and 37 vehicles as well as close to 42 other supporting equipment, such as air-water-jetting machine, live valve insertion machine, reduct mapping systems and pipeline robot closed circuit television (CCTV) inspection crawler, which enable us to take on various large-scale civil engineering services projects with different requirements at the same time. Having our own machines and equipment allow us to expediently deploy them to various locations as required as we do not need to rely on rental from third parties. We also have an experienced in-house servicing team for our HDD rigs and excavators to ensure that they are well maintained and operating efficiently. Our operations department and our civil engineers works closely with the main contractor on-site, ensuring that the civil engineering works are carried out as per the project schedule and specifications. The following are pictures of our HDD rig, mini excavator and hydraulic excavator:

 

 

We have strong and stable relationships with our material suppliers, subcontractors and customers

 

Since the inception of our business in 2013, we have developed stable relationships with our major material suppliers, subcontractors and customers in Singapore. We have strived to maintain stable business relationships with our major customers and also established healthy and stable relationships with our major material suppliers and subcontractors, which form a solid source of demand and supply for our business operations. For the financial years ended December 31, 2023 and 2022, our top five customers accounted for approximately 87.0% and 85.9% of total sales, respectively, and our top five customers have more than 10 years of business relationships with us. For the financial years ended December 31, 2023 and 2022, our top five material suppliers and subcontractors accounted for approximately 50.8% and 44.8% of total purchases, respectively, and our top five material suppliers and subcontractors have more than 10 years of business relationships with us.

 

Business Objectives and Strategies

 

Our mission is to deliver our services in a timely, reliable and cost-efficient manner, with integrity and good workmanship to meet customers, safety and regulatory requirements. Our corporate objective is to achieve sustainable growth in our business, create long-term shareholders’ value and strengthen our market position in the civil engineering service sector of the construction industry in Singapore. We intend to achieve this by implementing the following corporate strategies:

 

Upgrade registration as a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, which is a designation under the Singapore building protocols that will enable us to take on larger and more sophisticated projects

 

We are currently registered as a Grade L5 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead that enables us to undertake public sector projects up to S$16.0 million in value for each project. We endeavor to upgrade our registration as a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead that will enable us to undertake public sector projects of unlimited contract value. At the date of this prospectus, we have already satisfied the financial, personnel and management & development requirements for a Grade L6 contractor under the CR07 (cable/pipe laying & road reinstatement) workhead, and we are working towards meeting the track record requirement. We expect that we should meet the track record requirement in the first half of 2025 and we are on track to take up larger scale civil engineering services projects.

 

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Expand and renew our fleet of equipment and vehicles

 

We have in-house civil engineering expertise and we are equipped with a fleet of six HDD rigs, 20 excavators and 37 vehicles as well as close to 42 other supporting equipment, such as air-water-jetting machine, live valve insertion machine, reduct mapping systems and pipeline robot closed circuit television (CCTV) inspection crawler, which enable us to take on various large-scale civil engineering services projects with different requirements at the same time. Some of our equipment and vehicles are aged and are due for replacement and as we intend to take up larger scale civil engineering services projects, we plan to expand our capacity by purchasing more HDD rigs, excavators and vehicles as well as other supporting equipment.

 

Enhance and/or expand our workforce and facilities to keep up with our business expansion

 

For our expansion, we will intend to expand and enhance our workforce, in terms of both the staff strength and staff skills. We intend to increase the number of workers, including office staff, site staff and vehicle operators, and enhance our staff skills by providing opportunities for them to attend courses. We will also review our remuneration packages to ensure they are sufficiently attractive to acquire and retain a talented workforce. To support a larger workforce, we intend to make addition and alteration works to our existing head office to provide for more office area and additional physical storage facilities to house our equipment. As over 85.0% of our workforce as at May 31, 2024 were foreign workers, we also plan to build a dormitory at our head office to house our foreign workers to cater for a larger workforce.

 

Expand our business through acquisitions, joint ventures and/or strategic alliances

 

Although we have no definitive plans in place to do so, apart from expanding our business through organic growth, we also plan to expand our business through acquisitions, joint ventures and/or strategic alliances as this will be the most effective and time-efficient way for us to increase our market penetration and expand our customer base. Moreover, we can also achieve cost savings through economies of scale by having a larger operation because the same level of overhead such as human resources, administration and marketing can be utilized by more business units and these in turn will improve our profitability.

 

While implementing the above strategies and business plans, we will adhere to prudent financial management to ensure sustainable growth and capital sufficiency.

 

Sales and Marketing

 

We strive to maintain good business relationships with our customers. Our tender department is generally responsible for fostering, building and maintaining our relationships with customers and keeping abreast of market developments and potential business opportunities. As of December 31, 2023, our tender department consisted of three employees.

 

Contracts and Pricing Model

 

Approximately 45.3% and 57.7% of our awarded contracts (in terms of revenue) during the financial years ended December 31, 2023 and 2022, respectively, were obtained through an open tender process and the remaining approximately 54.7% and 42.3%, respectively, were through submitting quotations after our customers sent us requests for quotations to seek our services. Depending on the relevant contract terms: (i) we generally receive progress payments from customers within 30 to 45 days after we present our invoices (which are issued after our receipt of the relevant interim payment certificates) to them; and (ii) for projects where we act as the main contractor, we are typically required to provide performance bonds at 5.0% of the total contract sum for such contracts issued by a bank or insurance company backed by cash or other collateral and/or guarantees in favor of our customers to secure our performance under such contracts. We adopt a cost estimate plus mark-up pricing model for pricing our tenders/quotations. Contracts with our major customers are either at (a) fixed-prices with a pre-determined quantity and schedule for project completion, which generally commits us to provide the resources required to complete a project for a fixed sum; or (b) notional contract sums if the quantity for project completion cannot be predetermined where the work performed will be measured and valued against agreed rates for progress and/or final payment.

 

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We typically pay the start-up costs, such as project insurance fees, costs of materials, subcontracting fees and surveying service fees for certain start-up works, in advance of payment from our customers during the first three to four months following the commencement of a project. Apart from the start-up costs, we are typically required to provide performance bonds backed by cash or other collateral and/or guarantees in favor of our customers for an amount equal to 5.0% of the total contract sum in projects where we act as the main contractor. While we typically have to pay the start-up costs and the cash collateral required to secure performance bonds for projects during the first three to four months following the commencement of a project, our customers generally make progress payments pursuant to the contract with reference to the percentage of work done or the reaching of specified milestones and with no advance payment. This could result in a cash flow mismatch. We generally manage the cash flow mismatch by closely monitoring our capital and cash positions, closely managing our progress billings and using available banking facilities. In terms of management of projects, our Chief Operating Officer, who is in charge of supervising the operation of projects, conducts regular project reviews with our project managers. Our Chief Operating Officer generally presents and reviews the status of our projects with our Chief Executive Officer on a bi-monthly basis. In terms of financial management of projects, our finance manager prepares six-month cash flow forecasts for our projects on a bi-monthly basis, and he reviews the financial report and forecast results of our projects with our Chief Executive Officer on a monthly basis.

 

Quality Control

 

We have a quality control policy and we are committed to complying with and continually improving our quality management system to ensure that we provide quality civil engineering services that consistently meet our customers’ expectations, legal requirements and safety standards. Our Group has ISO 9001, ISO 45001 and bizSAFE Level Star certifications.

 

We maintain an approved vendor list and a vendor is first admitted to our list based on their market reputation, quality, responsiveness, track record, and existence of quality, environmental, health and safety management systems. The approved vendor list is reviewed annually and each approved vendor will be reviewed based on its performance, such as its quality, timeliness, responsiveness and environmental, health and safety record. For incoming purchases at our warehouse, such as spare parts for our trucks and excavators, our operations department will conduct incoming inspections. For incoming purchases at our work sites such as pipes, cables, cement, concrete and drilling fluids, our site supervisors will conduct visual inspections and sample tests. The criteria include ensuring the right quantity, type, grade or size of materials (as the case may be) and evidence of defects such as dent, grease, rust or coating defects.

 

During the project, our operations department have assigned site supervisors to inspect the works being carried out by our workers and by our subcontractors. In-process inspection includes ensuring that project specifications are met, such as ensuring that there is no damage to the cable, pipe or conduit during retraction for HDD works, adherence to control levels and horizontal alignment for excavation, compaction effort for earth fill works and that no excessive pressure is exerted to the pipes which may cause the pipes to burst during pipeline and sewerage repair and maintenance works. Our site supervisors will also inspect the works completed at each stage to ensure that the relevant requirements are met.

 

At the completion of the project, our operations staff will conduct a final check before arranging for handover to our customer. The checks include ensuring that all control levels are in accordance with the project specifications. Safety and regulatory requirements are also to be complied with. Our Group has not experienced any material disputes on our projects relating to the quality of our civil engineering services nor significant delay in the delivery of our projects during the financial years ended December 31, 2023 and 2022 and up to the date of this prospectus.

 

Workplace Safety and Health Policy

 

We are committed to ensuring the health and safety of our staff, who are valuable to our Group and to the successful execution of our projects. We have an occupational health and safety management system in place which was developed based on ISO 45001. Due to the nature of the construction industry, incidents at work sites may have detrimental effects on the health and safety of our workers. In cases where we are the subcontractors, the main contractors will have established workplace safety and health procedures which all their subcontractors are required to comply with on-site. For every project, our site supervisor will work with our outsourced safety officer(s) to ensure that workplace safety procedures are complied with by our employees and subcontractors.

 

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We have established a safety and health policy with the following objectives and corresponding measures:

 

(i)Achievement of an accident-free workplace - safe work practices include the provision of safety helmets, safety glasses, respirators, hearing protection, gloves, safety harness and safety shoes where necessary and in conformance to the relevant regulations and/or codes of practice.

 

(ii)Ensuring that safety and health are an integral part of managerial and supervisory position – The relevant project manager or site supervisor is in-charge of conducting meetings to address any potential workplace safety and health issues. In projects where we are the subcontractor, we will attend the toolbox and safety coordination meetings organized by our customer. In projects where we are the main contractor, we have an established safety committee headed by our Chief Executive Officer. We also have site safety committee headed by project manager for each project which will convene daily toolbox meetings, weekly co-ordination meetings and any ad-hoc meetings to inform of potential hazards.

 

(iii)Involvement of our staff in the decision-making processes through regular communication, consultation and training.

 

(iv)Provision of a continuous program of education and learning to ensure that our staff work in the safest possible manner - A safety orientation briefing is conducted for all new staff, in addition to the mandatory Construction Safety Orientation Course (the “CSOC”) conducted by the MOM and appropriate training courses are also provided for relevant personnel.

 

(v)Continual improvement of occupational safety and health management system at our work sites.

 

(vi)Identification and control of all potential hazards in the workplace through hazard identification and risk analysis - We have a risk management procedure to conduct risk assessment in order to reduce risks at source. This involves an assessment of the risks involved, prioritizing of the measures to control the potential hazards, implementing these measures, keeping record of the steps taken and a review of the risk assessment plan.

 

(vii)Ensuring that all potential accidents or incidents are controlled and prevented - Should there be an accident or incident, it will be reported following our reporting procedure, followed by an investigation. There will be an investigation panel and the investigation steps comprise the following: (a) obtaining initial information for accident investigation; (b) special considerations for fatal cases; (c) facts gathering; (d) facts analysis; and (e) preparation of the accident investigation record for corrective actions to be taken. Subsequent to the investigation record, there will be an analysis report to formulate preventive actions.

 

(viii)Provision of an effective injury management and rehabilitation plan for our staff – This is addressed in our occupational health program that includes our hearing conservation program, respiratory protection program, eye protection program, industrial dermatitis program and work-related injury and strain program.

 

Our subcontractors must also ensure that their workmen follow strictly to our safety policy or that of the main contractor on site, and have to employ workers who have safety orientation certificates. Such safety orientation certificate is issued after the attendance of safety courses. All foreign workers in the construction sector must attend the CSOC, a full-day course conducted by various training centers accredited by the MOM and obtain a valid CSOC Pass. The CSOC is to (i) ensure that construction workers are familiar with common safety requirements and health hazards in the industry; (ii) educate them on the required measures to prevent accidents and diseases; and (iii) ensure that they are aware of their rights and responsibilities under employment law. Safety equipment such as safety helmets/safety boots and safety belts shall be provided by the subcontractor, and workers who fail to comply shall be removed from the work site. When selecting our subcontractors, we will take their safety standards into consideration. This includes evaluating our subcontractors on their safety management system, their machinery and equipment, their safety track record and safety training records. Subcontractors are also required to be involved in our monthly safety committee meetings and tool box meetings to provide them with updated industry rules and regulations, where applicable.

 

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Customers

 

Our major customers include a number of government authorities, utility companies or main contractors which specialize in public utility or infrastructure projects in Singapore. Consistent with market practice, our customers normally award contracts to us on a project-by-project basis that are non-recurring in nature. We have not entered into any long-term contracts with any of our customers but, during the financial years ended December 31, 2023 and 2022, our five largest customers accounted for an aggregate of approximately 87.0% and 85.9%, respectively, of our revenue, and our largest customer accounted for approximately 26.9% and 24.5% of our revenue, respectively.

 

Vendors

 

Our major vendors include material suppliers and subcontractors. We purchase certain materials, such as different kinds of pipes, cables, cement, concrete and drilling fluids, to facilitate our own project works. We also engage subcontractors from different trades for works which are generally labor intensive (such as earth works) or require specific skill sets (such as geotechnical reports) so that we can focus on our core competencies of civil engineering, HDD, air-water-jetting and live valve insertion. During the financial years ended December 31, 2023 and 2022, we did not enter into any long-term contracts with our material suppliers and subcontractors, nor have we entered into any such contracts as of the date of this prospectus. We have over 10 years of cooperation with our five largest vendors (material suppliers and subcontractors) and have established healthy and stable relationships with them, which form a solid source of supply for our operation.

 

During the financial years ended December 31, 2023 and 2022, purchases attributable to our five largest vendors accounted for approximately 50.8% and 44.8% of our total purchases, respectively, and purchases attributable to our largest vendor accounted for approximately 19.5% and 15.8% of our total purchases, respectively.

 

Employees

 

At December 31, 2023, we employed a total of 136 persons, over 85.0% of whom were foreign workers, as compared to 148 employees at December 31, 2022, 84.0% of whom were foreign workers. Our foreign workers are mainly from Bangladesh and India.

 

Employees are not represented by a labor organization or covered by collective bargaining agreements. We consider our global labor practices and employee relations to be good, and to date, we have not experienced any significant labor disputes.

 

Real Property

 

We currently operate in two premises, namely:

 

1.Head office, workshop and warehouse – A leasehold estate at 27 First Lok Yang Road, Singapore 629735 of approximately 6,503 square meters leased by SKK from JTC during the leasehold period of up to October 15, 2031 (unless further extended by JTC) which is used as our head office, a workshop for welding and fabrication of pipe fittings and steel pipes and a warehouse. SKK is required to pay monthly land rent to JTC at S$12,084.93 per month (excluding GST).

 

2.Site office – A site office at Seletar North Link, Singapore of approximately 28.8 square meters licensed to SKK by the Singapore Land Authority at a license fee of S$21,378 per month (excluding GST), which is used for work site, construction storage and temporary access road for one of our on-going projects. The license will expire on August 27, 2026.

 

We have also entered into monthly license arrangements with an independent dormitory facility provider for accommodation of up to 72 of our foreign workers at 50 Toh Guan Road East #06-01, Singapore 608587 at a fixed fee per room per month.

 

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Intellectual Property

 

Our Group has been providing our civil engineering services under the brand name of “SKK”. We do not have any registered trademarks but we have registered the domain name https://devwww.skkworks.com.sg.

 

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

 

Insurance

 

We maintain machinery and industrial all risks 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 and public liability insurance, in compliance with applicable regulations. We do not carry general business interruption or “key person” insurance. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical. We consider our insurance coverage to be sufficient for our business operations both at home and abroad. We will continue to review and assess our risk portfolio and make any necessary and appropriate adjustments to our insurance practices to align with our needs and with industry practice in Singapore.

 

Litigation and Other Legal Proceedings

 

As of the date of this prospectus, we know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any of our subsidiaries, involved as a plaintiff or defendant in any material proceeding or pending litigation.

 

We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation, or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.

 

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REGULATORY ENVIRONMENT

 

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 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.

 

Contractors Registration System

 

The industry we operate in is regulated by the Building and Construction Authority (the “BCA”), whose primary role is to develop and regulate Singapore’s built environment, comprising buildings, structures and infrastructure in Singapore. A built environment includes, among other things, power grids, sewer pipelines, water pipelines and gas pipelines for the distribution of electricity, water and gas from central and substations, as well as the channeling of sewage and waste to a central collection point.

 

Although business entities which are not registered with the BCA are not precluded from conducting business as contractors or suppliers outside the Singapore public sector, registration in the Contractors Registration System (the “CRS”) maintained by the BCA is a pre-requisite to tendering for projects in the Singapore public sector. The CRS is administered by the BCA to serve the procurement needs of government departments, statutory bodies and other public sector organizations including first level sub-contractors involved in government projects. At present, there are five major categories of registration which may be further sub-classified into several grades depending on the category of registration. The differences in BCA gradings relate to the tendering limits for Singapore public sector projects.

 

Registration of a contractor with the BCA is dependent on the contractor fulfilling certain requirements such as financial capability with valid audited accounts, paid-up capital and net worth, having relevant technical personnel, and a track record with valid projects with documentation proof, endorsed and assessed by clients.

 

General Builder License

 

The Building Control Act 1989 of Singapore and the Building Control (Licensing of Builders) Regulations 2008 of Singapore set out the requirements for the licensing of builders. All builders carrying out building works where plans are required to be approved by the Commissioner of Building Control (the “CBC”) and builders who work in specialist areas which have a high impact on safety will require a builders’ license.

 

There are two types of builder’s licenses, namely the GB License and the specialist builder’s license. Further, there are two classes of GB License: a GB1 License which authorizes the builder to carry on the business of a general builder generally; and a GB2 License which authorizes the builder to carry on the business of a general builder restricted to contracts or engagements for an estimated final price of each not more than S$3.0 million. Any person who advertises or holds himself out to be or conducts himself in any way or by any means as a person who is authorized to carry on the business of a general builder or a specialist builder, or carries on the business of a general builder or a specialist builder, without a valid GB License or a specialist builder’s license (as the case may be) shall be guilty of an offence and liable on conviction to (a) a fine not exceeding S$20,000 or to imprisonment for a term not exceeding 12 months or to both; (b) a further fine not exceeding S$500 for each day or part thereof the person fails, without reasonable excuse, to comply with the relevant requirements; and (c) in the case of a continuing offence after the conviction, to a further fine not exceeding S$1,000 for every day or part thereof during which the offence continues after conviction.

 

The CBC may by order revoke any general builder’s licence or specialist builder’s licence if he is satisfied that, among other things, (i) the licensee has failed to comply with the relevant requirements of the conditions of the builder’s licence, (ii) the licensee has been convicted of an offence under the Building Control Act 1989, and (iii) the conduct of any director, manager or employee of the corporation, or any partner or employee of the partnership, that is a licensee provides grounds for believing that the corporation or partnership (as the case may be) will not carry on the business of a general builder or specialist builder (as the case may be) in Singapore in accordance with any written law and with honesty and integrity.

 

The CBC may, in any case which he considers that no cause of sufficient gravity for revoking any GB licence or specialist builder’s licence exists, by order (i) suspend the licence for a period not exceeding 6 months, (ii) impose on the licensee concerned a financial penalty not exceeding $20,000 for certain grounds, (iii) censure the licensee concerned, (iv) direct that, for a period specified by the CBC, the licensee must not enter into or undertake any contract or engagement to carry out all or any general building works or specialist building works; or may enter into or undertake any further contract or engagement to carry out any general building works or specialist building works, provided that the value of the further contracts or engagements must not exceed an amount specified in the order, or (v) modify the conditions of the licence, immediately or upon renewal of the licence in question.

 

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Building and Construction Industry Security of Payments