Item
3. Key Information
A.
Reserved
B.
Capitalization and Indebtedness
Not
applicable
C.
Reasons for the Offer and Use of Proceeds.
Not
applicable
D.
Risk Factors
You
should carefully consider the following risks, together with all other information included in this Annual Report. The realization of
any of the risks described below could have a material adverse effect on our business, results of operations and future prospects.
Risks
Related to Our Business and Industry
We
only have a limited number of customer groups and our business is significantly dependent on our major customer groups’ needs and
our relationships with them. We may be unsuccessful in attracting new customers.
Our
aggregate sales generated from our top five customer groups amounted to approximately 88.4%, 80.6% and 68.1% of our revenue for the financial
years ended December 31, 2020, 2021 and 2022, respectively. In particular, sales to our largest customer group, which is principally
engaged in the manufacture of HDD, amounted to approximately $13.2 million, S$4.8 million and S$4.1 million, representing approximately
61.5%, 32.7% and 22.0% of our revenue, for the financial years ended December 31, 2020, 2021 and 2022, respectively. Accordingly, our
sales would be significantly affected by changes in our relationship with or in the needs of our major customer groups, particularly
our largest customer group, as well as other factors that may affect their purchases from us, many of which are beyond our control. Any
adverse changes in the economic conditions in the markets in which our customer groups operate and in their business expansion plans
may negatively affect their purchasing practices and result in a reduction in demand for our products and services. Furthermore, we have
a limited number of customer groups for both our sale of cleaning systems and other equipment business and our centralized dishwashing
and general cleaning services business. We sold cleaning systems and other equipment to 14, 11 and 14 customer groups during the financial
years ended December 31, 2020, 2021 and 2022, respectively. Our centralized dishwashing services and general cleaning services business
provided centralized dishwashing services to 38, 54 and 60 customer groups during the financial years ended December 31, 2020, 2021 and
2022, respectively, and provided general cleaning services to 7, 7, and 3 customer groups, respectively, during those periods. If our
major customer groups do not place their new orders with us, our business, financial condition, results of operations and prospects could
be materially and adversely affected. In addition to maintaining and growing our business with existing customers, the success of our
business also depends on our ability to attract new customers. If we are unable to attract new customers, our business growth will be
hampered and our business, financial condition, results of operations and prospects may be materially and adversely affected.
We
are dependent upon our largest customer group for a substantial amount of our revenue.
We
derived a significant portion of our revenue from our largest customer group during the financial years ended December 31, 2020, 2021
and 2022. Our sales to that customer group amounted to approximately S$13.2 million, S$4.8 million and S$4.1 million for the financial
years ended December 31, 2020, 2021 and 2022, respectively, which accounted for approximately 61.5% 32.7% and 22.0% of our total revenue
for the financial years ended December 31, 2020, 2021 and 2022, respectively. This dependence on our largest customer group has not changed
materially and we expect that this customer group will continue to account for a significant portion of our total revenue for a considerable
period of time if we cannot expand our customer base and our geographical coverage. There is no assurance that we will be able to maintain
the same or achieve even higher sales amounts to that customer group. Our sales to such customer group will be affected by the results
of operations of the companies within that group, which may in turn be affected by many factors such as global and/or regional political,
economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime, demand
for their products and implementation of sales and marketing strategies for their products. If the companies within our largest customer
group are unable to launch their marketing plans for their products successfully, or if there is any material and adverse change in political,
economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime or if
the demand for their products weakens materially, and if we are unable to develop new customers and secure purchase orders of comparable
size or under substantially the same terms, our business, financial condition, results of operations and prospects may be materially
and adversely affected. Further, if we fail to achieve more diversified income or reduce our reliance on such customer group, or if we
fail to secure a similar level of business from other customers on comparable commercial terms, such that the reduction in revenue from
our largest customer group could be partly or wholly offset, our business, financial condition, results of operations and prospects may
be materially and adversely affected.
In
addition, there is generally no long-term commitment from customers of our cleaning systems and other equipment business to purchase
an agreed amount from us. Therefore, any material change in a customer’s product development plan may also directly affect its
demand for our products. If we fail to quote a competitive price to our customer, if the quality of our products does not meet our customer’s
specifications or if there is any disruption to our business relationship with our customer, we may be unable to secure further business
from such customer. Any significant decrease in sales to any of our customers for any reason, including any disruption to our business
relationship with them, may materially and adversely affect our business, financial condition, results of operations and prospects.
We
are subject to risks relating to the operation of our production and processing facilities.
We
are dependent on our JCS Facility and Hygieia Facility for our operations. Our production and processing facilities are subject to the
risk of operational breakdowns caused by accidents occurring during the production process, including, but not limited to, faulty machines,
suspension of utilities, human error or subpar output or efficiency. Any interruption in, or prolonged suspension of any part of production
at, or any damage to or destruction of, any of our production and processing facilities arising from unexpected or catastrophic events
or otherwise may prevent us from carrying out our businesses of the sale of cleaning systems and other equipment and provision of centralized
dishwashing services to our customers, which in turn may result in a material adverse effect on our results of operations and financial
condition. In addition, any interruption or suspension of the production process or failure to supply our products and/or services to
our customers in a timely manner may result in breach of contract and loss of sales, as well as expose us to liability and the requirement
to pay compensation under the relevant contracts with our customers, lawsuits and damage to our reputation, which may have a material
and adverse effect on our business, financial condition, results of operations and prospects.
The
operation of our production and processing facilities is also subject to risks and issues in respect of our production processes such
as mechanical and system failures, equipment upgrades and delays in the delivery of machinery and equipment, any of which could cause
interruption or suspension of the production process and reduced output.
Additionally,
there may be accidents or injuries to our workers caused by the use of machinery or equipment at our production and processing facilities,
which could interrupt our operations and result in legal and regulatory liabilities. While none of our workers were involved in any work-related
accidents or suffered any work-related injuries during the financial years ended December 31, 2020, 2021 and 2022, or during the period
from January 1, 2023 through the present date, there is no assurance that there will not be any such accidents or injuries in the future,
which could cause operational breakdowns. Any such operational breakdowns, interruptions or suspensions may affect our business, financial
condition, results of operations and prospects.
The
non-recurring nature of our cleaning systems and other equipment business means that there is no guarantee that we will be able to secure
new orders, leading to fluctuations in revenue.
We
do not enter into any long term agreements with our customers for sale of cleaning systems and other equipment, and sell cleaning systems
and other equipment on an order-by-order basis. Therefore, our customers are under no obligation to continue to award contracts to or
place orders with us and there is no assurance that we will be able to secure new orders in the future. In this regard, the number of
contracts and orders and the amount of revenue that we are able to derive therefrom are affected by a series of factors including but
not limited to changes in our customers’ businesses and changes in market and economic conditions.
Accordingly,
there is uncertainty as to whether we will be able to secure new contracts and orders in the future and in the event that our Group fails
to secure new contracts or orders of contract values, size and/or margins comparable to previous orders, our business, financial condition,
results of operations and prospects may be materially and adversely affected.
We
do not enter into long-term agreements for the provision of centralized dishwashing and general cleaning services and there is no assurance
that such agreements will be renewed in the future.
The
term of our agreements for our provision of centralized dishwashing services and general cleaning services is usually for a period of
one to two years. Our customers are not obliged to renew the agreement or engage us again for the provision of such services upon the
expiration of the agreement. We do not have any long-term agreements with our customers.
There
is no assurance that our existing customers will renew their agreements or that we will be able to secure new contracts from our existing
and new customers with similar or better terms. In the event we are unable to secure new contracts from existing or new customers, there
may be a significant decrease in revenue and our business, financial condition, results of operations and prospects may be materially
and adversely affected.
We
depend on our key management team and our experienced and skilled personnel and our business may be severely disrupted if we are unable
to retain them or to attract suitable replacements.
Our
performance depends on the continued service and performance of our Directors and senior management because they play an important role
in guiding the implementation of our business strategies and future plans. We also depend on our key employees, Mr. Wui Chin Hou and
Mr. Zhao Liang. The relationships that our experienced management team has developed with our customers over the years is important to
the future development of our business. If any of our Directors, any members of our senior management or either of our key employees
were to terminate their services or employment, there is no assurance that we would be able to find suitable replacements in a timely
manner. The loss of services of either of these key personnel and/or the inability to identify, hire, train and retain other qualified
engineering, technical and operations personnel in the future may materially and adversely affect our business, financial condition,
results of operations and prospects.
As
Ms. Hong Bee Yin, our Chairman, executive Director and chief executive officer, contributes significantly to various key aspects of our
business, including business development and operations, the continued success and growth of our Group is dependent on our ability to
retain her services. We do not carry key person life insurance on the life of Ms. Hong or any of our Directors or executive officers.
The loss of Ms. Hong’s services as our Chairman, executive Director and chief executive officer may materially and adversely affect
our business, future plans and prospects.
We
also rely on experienced and skilled personnel for our operations and our ability to design and manufacture quality products and provide
good customer care service depends to a large extent on whether we are able to secure adequately skilled personnel for our operations.
In particular, we rely on our team of qualified engineers for the design and manufacture of our cleaning systems. If we are unable to
employ suitable personnel, or if our personnel do not fulfil their roles or if we experience a high turnover of experienced and skilled
personnel without suitable, timely or sufficient replacements, the quality of our products and/or services may decline, which may adversely
affect our business, financial condition, results of operations and prospects.
We
may be affected by the prospects of the industries in which our customers are engaged.
Our
cleaning systems and other equipment sales business is largely dependent on orders and contracts from our major customers, which are
primarily in the hard disk drive, semiconductor and industrial electronics equipment/product manufacturing industries in Singapore and
Malaysia. Our provision of centralized dishwashing services and ancillary services is dependent on contracts from our customers in the
food and beverage industry in Singapore. We are therefore dependent on the outlook for these industries, and are indirectly exposed to
the uncertainties and business fluctuations of these industries. Accordingly, our business may be adversely affected if there is any
slowdown in the growth and development of such industries that compels industry participants to reduce their capital expenditures and
budgets. These industries are also subject to the impact of the industry cycle, general market and economic conditions and government
policies and expenditures, which are factors beyond our control. A decline in the number of new contracts and orders due to these factors
may cause us to operate in a more competitive environment, and we also may be required to be more competitive in our pricing which, in
turn, may adversely impact our business, financial condition, results of operations and prospects.
The
war in Ukraine could materially and adversely affect our business and results of operations.
The
outbreak of war in February 2022 in Ukraine has already affected global economic markets, including a dramatic increase in the price
of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy.
Russia’s recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United
States, European Union and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely
affect global energy and financial markets and thus could affect our customers’ businesses and our business, even though we do
not have any direct exposure to Russia or the adjoining geographic regions. In addition, Russia
and Ukraine are major exporters of critical minerals needed for semiconductors, which could have a significant negative impact on many
of our customers. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to
predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact
of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and
governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive
sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material
adverse effect on our business, financial condition, results of operations and prospects.
We
may be unable to meet the specifications of our customers or keep up with fast-changing technological developments.
The
needs of our customers may change as a result of new developments in technology. Our future success depends on our ability to launch
better cleaning systems that meet evolving market demands of our customers, and in particular, new cleaning systems that are compatible
with new products sold by our customers. The preferences and purchasing patterns of our customers can change rapidly due to technological
developments in their respective industries. There is no assurance that we will be able to respond to changes in the specifications of
our customers in a timely manner. Our success depends on our ability to adapt our products to the requirements and specifications of
our customers. There is also no assurance that we will be able to sufficiently and promptly respond to changes in customer preferences
to make corresponding adjustments to our products or services, and failing to do so may have a material and adverse effect on our business,
financial condition, results of operations and prospects.
We
are vulnerable to fluctuations in the cost or supply of our raw materials.
Expenses
for raw materials, such as stainless steel, aluminum, and electronic components, constitute most of our cost of revenues, representing
approximately 57.8%, 43.5% and 57.8% of our total cost of revenues for the financial years ended December 31, 2020, 2021 and 2022, respectively.
Expenses for raw materials as a percentage of our total cost of revenue have not materially changed through the present date. A shortage
of raw materials or material increases in the cost of raw materials may materially and adversely affect our operations and profitability,
and there is no assurance that we will be able to identify suitable alternatives at comparable prices and quality in order to meet our
contract requirements.
As
our contract price is fixed at the time that our customer confirms an order, it is difficult for us to manage the pricing of our cleaning
systems and other equipment to pass on any increase in costs to our customers. In the event of a shortage of raw materials, there may
be a resultant material increase in the purchase prices of such key materials. In such event, if we are unable to pass on such price
increases to our customers, our cost of production will increase whereupon our gross margin and profitability may be adversely affected.
We
are subject to risks relating to computer hardware or software systems and potential computer system failure and disruptions.
Part
of our work is carried out by computers and software systems used for design and engineering works such as the ANSYS Discovery, SolidWorks
and AutoCAD software systems. During the financial years ended December 31, 2020, 2021 and 2022 and during the period from January 1,
2023 to the present date, we engaged third party information technology service providers to provide support services for our various
hardware and software systems. The computer systems of our Group are currently located at our office in Singapore, with access restricted
to authorized personnel. A physical breakdown of and/or damage to our computer hardware and software systems and/or data storage facilities
may lead to a loss of data. In addition, our software systems may be vulnerable to interruptions due to events beyond our control, including,
but not limited to, telecommunications or electricity failure, computer viruses, hackers and other security issues, and any such interruption
or failure could disrupt our business and operations. There is no assurance that we have sufficient ability to protect our computer hardware
and software systems and data storage facilities from all possible damage, including telecommunications or electricity failure or other
unexpected events.
We
are subject to environmental, health and safety regulations and penalties, and may be adversely affected by new and changing laws and
regulations.
We
are subject to laws, regulations and policies relating to the protection of the environment and to workplace health and safety. We are
required to adopt measures to control the discharge of polluting matters, toxic substances or hazardous substances and noise at our production
and processing facilities in accordance with such applicable laws and regulations and to implement such measures that ensure the safety
and health of our employees. Changes to current laws, regulations or policies or the imposition of new laws, regulations and policies
in the cleaning systems or the dishwashing industry could impose new restrictions or prohibitions on our current practices. We may incur
significant costs and expenses and need to budget additional resources to comply with any such requirements, which may have a material
and adverse effect on our business, financial condition, results of operations and prospects.
We
may be unable to successfully implement our business strategies and future plans.
As
part of our business strategies and future plans, we intend to expand our product portfolio, expand our research and development and
engineering team, strengthen our production capability for cleaning systems and other equipment and improve the production efficiency
of our centralized dishwashing services business. While we have planned such expansion based on our outlook regarding our business prospects,
there is no assurance that such expansion plans will be commercially successful or that the actual outcome of those expansion plans will
match our expectations. The success and viability of our expansion plans are dependent upon our ability to successfully implement our
research and development projects, hire and retain skilled employees to carry out our business strategies and future plans and implement
strategic business development and marketing plans effectively and upon an increase in demand for our products and services by existing
and new customers in the future.
Further,
the implementation of our business strategies and future plans may require substantial capital expenditure and additional financial resources
and commitments. There is no assurance that these business strategies and future plans will achieve the expected results or outcome such
as an increase in revenue that will be commensurate with our investment costs or the ability to generate any costs savings, increased
operational efficiency and/or productivity improvements to our operations. There is also no assurance that we will be able to obtain
financing on terms that are favorable, if at all. If the results or outcome of our future plans do not meet our expectations, if we fail
to achieve a sufficient level of revenue or if we fail to manage our costs efficiently, we may not be able to recover our investment
costs and our business, financial condition, results of operation and prospects may be adversely affected.
Increased
labor costs could affect our financial performance.
We
intend to recruit additional staff to expand our research and development and engineering team and to build up our business development
team. Both the cleaning equipment industry and the dishwashing industry face labor shortages and rising labor costs in Singapore. This
may result in a need to employ more foreign workers for companies involved in the manufacturing sector in Singapore. If we are unable
to recruit and retain sufficient and qualified staff, including foreign workers, for us to execute our business, or if we have to increase
our costs to attract and maintain such staff, our results of operations and financial performance may be materially and adversely affected
and our future growth may be inhibited. Further, we may be unable to recruit additional staff necessary to implement our business strategies.
We incurred employee benefit expenses of approximately S$3.1 million, S$3.2 million and S$4.5 million, representing approximately 14.4%,
21.6% and 24.2% of our total revenue for the financial years ended December 31, 2020, 2021 and 2022, respectively. Although our labor
costs will increase upon recruitment of additional staff, there is no assurance that our revenue or gross profit will increase accordingly.
As such, in the event we are unable to obtain more orders for both our sale of cleaning systems and other equipment business and our
centralized dishwashing and ancillary services business after implementation of such planned investment, our business, financial position
and profitability may be adversely affected.
Non-renewal
of permits and business licenses would have a material adverse effect on our operations.
In
order to carry on our business operations, we are required to obtain certain permits, licenses and certificates from various governmental
authorities and organizations. As of the date of this Annual Report, we have obtained all material permits and licenses for our business
operations. However, certain of these permits and licenses are subject to periodic renewal and reassessment by the relevant government
authorities and organizations, and the standards of compliance required in relation thereto may be subject to change. Non-renewal of
our permits, licenses and certificates would have a material adverse effect on our operations. We would be unable to carry on our business
without such permits, licenses and certificates being granted or renewed. In addition, if there are any subsequent modifications of,
additions or new restrictions to compliance standards for our permits, licenses or certificates, it may be costly for us to comply with
such subsequent modifications of, additions or new restrictions to, these compliance standards. In such event, we may incur additional
costs to comply with such new or modified standards which may adversely affect our profitability.
We
depend on the quality of the work of our sub-contractors.
We
engage third party sub-contractors, mainly for specific works during the production and manufacturing of our cleaning systems and other
equipment and for the provision of labor for our centralized dishwashing operations and on-site cleaning services from time to time.
We generally select our sub-contractors based on their pricing, quality of services, capacity and market reputation. However, there is
no assurance that the sub-contractors will meet the requirements of our Group and our customers. We may be unable to monitor the performance
of our sub-contractors as directly and efficiently as with our own staff. As we remain contractually responsible for the delivery of
products and/or services in accordance with the requirements and contract terms of our customers, any delay, non-performance or poor
performance by our sub-contractors may cause us to breach our contracts with our customers and expose us to the risk of damages. If such
events were to occur, there may be a material and adverse effect on our business, financial condition and results of operations, as well
as reputational damage to our Group.
We
are exposed to the credit risks of our customers.
We
extend credit terms to our customers. Our average accounts receivable turnover days were approximately 138.5 days and 86.7 days for the
financial years ended December 31, 2021 and 2022 respectively. Our customers may be unable to meet their contractual payment obligations
to us, either in a timely manner or at all. The reasons for payment delays, cancellations or default by our customers may include insolvency
or bankruptcy, or insufficient financing or working capital due to late payments by their respective customers. While we did not experience
any material order cancellations by our customers during the financial years ended December 31, 2020, 2021 and 2022, or during the period
from January 1, 2023 to the present date, there is no assurance that our customers will not cancel their orders and/or refuse to make
payment in the future in a timely manner or at all. We may not be able to enforce our contractual rights to receive payment through legal
proceedings. In the event that we are unable to collect payments from our customers, we are still obliged to pay our suppliers in a timely
manner and thus our business, financial condition and results of operations may be adversely affected.
If
we are unable to maintain and protect our intellectual property, or if third parties assert that we infringe on their intellectual property
rights, our business could suffer.
Our
business depends, in part, on our ability to identify and protect proprietary information and other intellectual property such as our
client lists and information and business methods. We rely on trade secrets, confidentiality policies, non-disclosure and other contractual
arrangements and copyright and trademark laws to protect our intellectual property rights. However, we may not adequately protect these
rights, and their disclosure to, or use by, third parties may harm our competitive position. Our inability to detect unauthorized use
of, or to take appropriate or timely steps to enforce, our intellectual property rights may harm our business. Also, third parties may
claim that our business operations infringe on their intellectual property rights. These claims may harm our reputation, be a financial
burden to defend, distract the attention of our management and prevent us from offering some services. Intellectual property is increasingly
stored or carried on mobile devices, such as laptop computers, which increases the risk of inadvertent disclosure if the mobile devices
are lost or stolen and the information has not been adequately safeguarded or encrypted. This also makes it easier for someone with access
to our systems, or someone who gains unauthorized access, to steal information and use it to our disadvantage. Advances in technology,
which permit increasingly large amounts of information to be stored on mobile devices or on third-party “cloud” servers,
may increase these risks.
If
we fail to maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations
or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.
Although
our management has concluded that our internal control over financial reporting is effective, our independent registered public accounting
firm has not conducted an audit of our internal control over financial reporting. After conducting its own independent testing, it may
issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented,
designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public
company may also place a burden on our management, operational and financial resources and systems for the foreseeable future such that
we may be unable to timely complete our evaluation testing and any required remediation.
Effective
internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure
controls and procedures, is designed to prevent fraud. There can be no assurance that our internal controls will continue to be effectively
implemented.
Our
failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements
that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors
to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the
Ordinary Shares.
Upon
the completion of our initial public offering in April 2022, we became a public company in the United States subject to the Sarbanes-Oxley
Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal
control over financial reporting in our annual report on Form 20-F. In addition, if we cease to be an “emerging growth company”
as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness
of our internal control over financial reporting on an annual basis.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify
material weaknesses and deficiencies in our internal control over financial reporting. The Public Company Accounting Oversight Board,
or PCAOB, has defined a material weakness as “a deficiency, or a combination of deficiencies in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim statements will not be prevented
or detected on a timely basis.”
In
addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented
or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial
reporting in accordance with Section 404. Generally speaking, if we fail to maintain an effective internal control environment, we could
suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors
to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of
operations and lead to a decline in the trading price of our Ordinary Shares. Additionally, ineffective internal control over financial
reporting could expose us to increased risk of fraud, misuse of corporate assets and legal actions under the United States securities
laws and subject us to potential delisting from Nasdaq, to regulatory investigations and to civil or criminal sanctions.
We
may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees or other third parties.
We
are exposed to the risk of fraud or other misconduct by our employees and other third parties. Misconduct by such parties may include
theft, unauthorized business transactions, bribery or breaches of applicable laws and regulations, which may be difficult to detect or
prevent. We are not aware of any instances of fraud, theft and other misconduct involving employees and other third parties that had
any material and adverse impact on our business and results of operations during the financial years ended December 31, 2021 and 2022,
or during the period from January 1, 2023 to the present date. However, there is no assurance that there will not be any such instances
in the future. We may be unable to prevent, detect or deter all instances of misconduct. Any misconduct committed against our interests,
which may include past acts that have gone undetected or future acts, could subject us to financial losses and harm our reputation and
may have a material and adverse effect on our business, financial condition, results of operations and prospects.
We
may be harmed by negative publicity.
We
operate in highly competitive industries and there are other companies in the market that offer similar products and services. We derive
most of our customers through word of mouth and we rely on the positive feedback of our customers. Thus, customer satisfaction with our
cleaning systems and other equipment, and with our centralized dishwashing and ancillary services, is critical to the success of our
business as this will also result in potential referrals from our existing customers. If we fail to meet our customers’ expectations,
there may be negative feedback regarding our products and/or services, which may have an adverse impact on our business and reputation.
In the event we are unable to maintain a high level of customer satisfaction or any customer dissatisfaction is inadequately addressed,
our business, financial condition, results of operations and prospects may also be adversely affected.
Our
reputation may also be adversely affected by negative publicity in reports, publications such as major newspapers and forums, or any
other negative publicity or rumors. There is no assurance that our Group will not experience negative publicity in the future or that
such negative publicity will not have a material and adverse effect on our reputation or prospects. This may result in our inability
to attract new customers or retain existing customers and may in turn adversely affect our business and results of operations.
Our
insurance coverage may be inadequate.
We
maintain insurance coverage for our major assets and operations, including insurance covering plant and machinery, fire, theft and accident.
However, we do not have or are unable to obtain insurance in respect of losses arising from certain operating risks, such as acts of
terrorism. Our insurance policies may be insufficient to cover all of our losses in all events. The occurrence of certain incidents,
including fraud, confiscation by investigating authorities or misconduct committed by our employees or third parties, severe weather
conditions, war, flooding and power outages may not be covered adequately, if at all, by our insurance policies. If our losses exceed
the insurance coverage or are not covered by our insurance policies, we may be liable to bear such losses. Our insurance premiums may
also increase substantially due to claims made. In such circumstances, our business, financial condition, results of operations and prospects
may be materially and adversely affected.
We
are exposed to risks in respect of acts of war, terrorist attacks, epidemics, political unrest, adverse weather conditions and other
uncontrollable events.
Unforeseeable
circumstances and other factors such as power outages, labor disputes, adverse weather conditions or other catastrophes, epidemics or
outbreaks of communicable diseases such as COVID-19, Severe Acute Respiratory Syndrome, Middle East Respiratory Syndrome, Ebola or other
contagious diseases, may disrupt our operations and cause loss and damage to our production and processing facilities, and acts of war,
terrorist attacks or other acts of violence may further materially and adversely affect the global financial markets and consumer confidence.
Our business may also be affected by macroeconomic factors in the countries in which we operate, such as general economic conditions,
market sentiment, social and political unrest and regulatory, fiscal and other governmental policies, all of which are beyond our control.
Any such events may cause damage or disruption to our business, markets, customers and suppliers, any of which may materially and adversely
affect our business, financial condition, results of operations and prospects.
Our
business and operations may be materially and adversely affected in the event of a re-occurrence or a prolonged global pandemic outbreak
of COVID-19.
The
global pandemic outbreak of COVID-19 announced by the World Health Organization in early 2020 has disrupted our operations, and the operations
of our customers, suppliers and/or sub-contractors. If the development of the COVID-19 outbreak becomes more severe or if our customers,
suppliers and sub-contractors are forced to close down their businesses after prolonged disruptions to their operations, we may experience
a delay or shortage of raw materials, supplies and/or services by our suppliers and sub-contractors, or termination of our orders and
contracts by our customers. In such event, our operations may be severely disrupted, which may have a material and adverse effect on
our business, financial condition and results of operations. In addition, if any of our employees or employees of our sub-contractors
are suspected of having contracted COVID-19, some or all of our employees or the employees of our sub-contractors may be quarantined
and we will be required to disinfect our workplace and our production and processing facilities. In the event our employees are placed
under quarantine orders under the Infectious Diseases Act 1976 of Singapore, we may face a shortage of labor and our operations may be
severely disrupted. Our revenue and profitability may also be materially affected if the COVID-19 outbreak continues to materially affect
the overall economic and market conditions in Singapore and the economic slowdown and/or negative business sentiment could potentially
have an adverse impact on our business and operations. We are uncertain as to when the outbreak of COVID-19 will be contained, and we
cannot predict if the impact of the outbreak will be short-lived or long-lasting. If the outbreak of COVID-19 is not effectively controlled
within a short period of time, our business, financial condition, results of operations and prospects may be materially and adversely
affected.
We
are exposed to risks arising from fluctuations of foreign currency exchange rates.
Our
business is exposed to certain foreign currency exchange risks as our reporting currency is Singapore dollars and our overseas sales
and procurement were denominated in United States dollars during the financial years ended December 31, 2020, 2021 and 2022. To the extent
that our Group’s sales and purchases and operating costs are not denominated in the same currency and to the extent that there
are timing differences between invoicing and payment from our customers and to our suppliers, we may be exposed to foreign currency exchange
gains or losses arising from transactions in currencies other than our reporting currency.
We
may be affected by adverse changes in the political, economic, regulatory or social conditions in the countries in which we and our customers
and suppliers operate or into which we intend to expand.
We
and our customers and suppliers are governed by the laws, regulations and government policies in each of the countries in which we and
our customers and suppliers operate or into which we intend to expand our business and operations, such as Singapore, Malaysia, Thailand,
Belgium and South Korea. Our business and future growth are dependent on the political, economic, regulatory and social conditions in
these countries, which are beyond our control. Any economic downturn, changes in policies, currency and interest rate fluctuations, capital
controls or capital restrictions, labor laws, changes in environmental protection laws and regulations, duties and taxation and limitations
on imports and exports in these countries may materially and adversely affect our business, financial condition, results of operations
and prospects.
We
may face the risk of inventory obsolescence.
As
of December 31, 2021 and 2022, we had inventories of S$2.6 million and S$11.9 million, respectively. The higher inventory for the financial
year ended December 31, 2022 was primarily the result of purchasing more raw materials in anticipation of slower delivery times due to
supply chain issues and increased orders for 2023. Our inventory turnover days for the financial years ended December 31, 2021 and 2022
were 75 days and 122 days, respectively. The higher number of days for the financial year ended December 31, 2022 was mainly due to increased
raw materials inventory purchased closer to financial year end in anticipation of slower delivery lead times and increased orders for
2023. Our business relies on customer demand for our products. Any reduction in customer demand for our products may have an adverse
impact on our product sales, which may in turn lead to inventory obsolescence, decline in inventory value or inventory write-off. In
that case, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Our
business is subject to various cybersecurity and other operational risks.
We
face various cybersecurity and other operational risks relating to our businesses on a daily basis. We rely heavily on financial, accounting,
communication, and other data processing systems as well as the experienced staff who operate them to securely process, transmit and
store sensitive and confidential customer information, and communicate with our staff, customers, partners, and suppliers. We also depend
on various third-party software and cloud-based storage platforms as well as other information technology systems in our business operations.
These systems may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or
otherwise, including for reasons beyond our control.
Our
customers typically provide us with sensitive and confidential information as part of our business arrangements. We are susceptible to
attempts to obtain unauthorized access to such sensitive and confidential customer information. We also may be subject to cyber-attacks
involving leaks and destruction of sensitive and confidential customer information and our proprietary information, which could result
from an employee’s or agent’s failure to follow data security procedures or from actions by third parties, including actions
by government authorities. Although cyber-attacks have not had a material impact on our operations to date, breaches of our or third-party
network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to and disclose sensitive
and confidential customer information and our proprietary information, destroy data or disable, degrade or sabotage our systems, often
through the introduction of computer viruses and other means, and could originate from a wide variety of sources, including state actors
or other unknown third parties. The increase in using mobile technologies can heighten these and other operational risks.
We
cannot assure you that we or the third parties on which we rely will be able to anticipate, detect or implement effective preventative
measures against frequently changing cyber-attacks. We may incur significant costs in maintaining and enhancing appropriate protections
to keep pace with increasingly sophisticated methods of attack. In addition to the implementation of data security measures, we require
our employees to maintain the confidentiality of the proprietary information that we hold. If an employee’s failure to follow proper
data security procedures results in the improper release of confidential information, or our systems are otherwise compromised, malfunctioning
or disabled, we could suffer a disruption of our business, financial losses, liability to customers, regulatory sanctions and damage
to our reputation.
Risks
Related to Our Securities
We
received a written notification from the Listing Qualifications Department of The Nasdaq Stock Market LLC stating that our Ordinary Shares
failed to maintain a minimum bid price of $1.00 over the last 30 consecutive business days as required by Nasdaq Listing Rule 5550(a)(2).
On
November 3, 2022, we received a written notification from the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “Nasdaq
Notification”). The Notification stated that our Ordinary Shares failed to maintain a minimum bid price of $1.00 over the last
30 consecutive business days as required by Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Receipt
of the Nasdaq Notification does not result in the immediate delisting of our Ordinary Shares and has no immediate effect on the listing
or the trading of our Ordinary Shares on the Nasdaq Capital Market under our symbol “JCSE.”
Pursuant
to Nasdaq Listing Rule 5810(c)(3)(A), we have a compliance period of 180 calendar days from the date of the Nasdaq Notification, or until
May 2, 2023, to regain compliance with the Minimum Bid Requirement. If at any time before May 2, 2023 the closing bid of our Ordinary
Shares is at least $1.00 for a minimum of 10 consecutive business days, we will be deemed to have regained compliance with the Minimum
Bid Requirement following which Nasdaq will provide a written confirmation of compliance and the matter will be closed. In the event
that we do not regain compliance by May 2, 2023, we may be eligible for additional time to qualify. To qualify for additional time, we
will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards
for The Nasdaq Capital Market with the exception of the bid price requirement. Further, in the event that we do not regain compliance
with the Minimum Bid Price Requirement by May 2, 2023 and are ineligible for an additional grace period, Nasdaq will provide further
written notice that our Ordinary Shares are subject to delisting from The Nasdaq Capital Market. In that event, we may appeal the determination
to a Nasdaq hearings panel or consider transferring the listing and trading of our Ordinary Shares to the OTCQX of the OTC Markets. There
can be no assurance that we will be able to maintain the listing of our Ordinary Shares on Nasdaq.
Based
on receipt of the Nasdaq Notification, we may not maintain the listing of our Ordinary Shares on Nasdaq which could limit investors’
ability to make transactions in our Ordinary Shares and subject us to trading restrictions.
Our
Ordinary Shares are listed on Nasdaq. In order to continue listing our shares on Nasdaq, we must maintain certain financial and share
price levels and we may be unable to meet these requirements in the future. We cannot assure you that our shares will continue to be
listed on Nasdaq in the future.
If
Nasdaq delists our Ordinary Shares and we are unable to list our shares on another national securities exchange, we expect our shares
could be quoted on an over-the-counter market in the United States. If this were to occur, we could face significant material adverse
consequences, including:
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a
limited availability of market quotations for our Ordinary Shares; |
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reduced
liquidity for our Ordinary Shares; |
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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; |
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limited amount of news and analyst coverage; and |
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decreased ability to issue additional securities or obtain additional financing in the future. |
As
long as our Ordinary Shares are listed on Nasdaq, U.S. federal law prevents or preempts the states from regulating their sale. However,
the law does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity,
then the states can regulate or bar their sale. Further, if we were no longer listed on Nasdaq, we would be subject to regulations in
each state in which we offer our shares.
Certain
recent initial public offerings of companies with public floats comparable to our public float have experienced extreme volatility that
was seemingly unrelated to the underlying performance of the respective company. We have experienced similar volatility, which makes
it difficult for prospective investors to assess the value of our Ordinary Shares.
In
addition to the risks addressed below in “— An active trading market for our Ordinary Shares may not continue and the trading
price for our Ordinary Shares may fluctuate significantly,” our Ordinary Shares have been subject to extreme volatility that is
seemingly unrelated to the underlying performance of our business. Recently, companies with 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 public float may amplify the impact the actions taken by a few shareholders have on the price of our Ordinary Shares, which may cause
our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business.
Since our Ordinary Shares have experienced a decline, and may continue to experience either run-ups or declines that are seemingly unrelated
to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing
the rapidly changing value of our Ordinary Shares. In addition, investors of our Ordinary Shares may experience losses, which may be
material, if the price of our Ordinary Shares declines or if such investors purchase shares of our Ordinary Shares prior to any price
decline.
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. As a result of this volatility, investors may experience losses on their investment in our Ordinary Shares. Furthermore,
extreme volatility may confuse the public investors of the value of our stock, distort the market perception of our stock price and our
financial performance and public image and negatively affect the long-term liquidity of our Ordinary Shares, regardless of our actual
or expected operating performance. If we continue to encounter such volatility, including any rapid stock price increases and declines
seemingly unrelated to our actual or expected operating performance and financial condition or prospects, it will likely make it difficult
and confusing for prospective investors to assess the rapidly changing value of our Ordinary Shares and understand the value thereof.
An
active trading market for our Ordinary Shares may not continue and the trading price for our Ordinary Shares has fluctuated significantly.
We
cannot assure you that an active public market for our Ordinary Shares will continue. If an active public market for our Ordinary Shares
does not continue, the market price and liquidity of our Ordinary Shares may be materially and adversely affected. The public offering
price for our Ordinary Shares in our initial public offering was determined by negotiation between us and the representative of the underwriter
based upon several factors, and we can provide no assurance that the trading price of our Ordinary Shares will rise above the public
offering price. As a result, investors in our Ordinary Shares may experience a significant decrease in the value of their Ordinary Shares.
The
trading price of our Ordinary Shares has been volatile, which could result in substantial losses to investors.
Since
our Ordinary Shares commenced trading on April 22, 2022, the trading price of our Ordinary Shares has been volatile and has fluctuated
widely due to factors beyond our control. This may continue in the future because of the broad market and industry factors, like the
performance and fluctuation of the market prices of other companies with business operations located mainly in Singapore that have listed
their securities in the United States. In addition to market and industry factors, the price and trading volume for our shares may be
highly volatile for factors specific to our own operations, including the following:
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fluctuations
in our revenues, earnings and cash flow; |
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changes
in financial estimates by securities analysts; |
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additions
or departures of key personnel; |
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release
of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and |
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potential
litigation or regulatory investigations. |
Any
of these factors may result in significant and sudden changes in the volume and price at which our shares will trade.
In
the past, shareholders of public companies have often brought securities class action suits against those companies following periods
of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount
of our management’s attention and other resources from our business and operations and require us to incur significant expenses
to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our
reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be
required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
If
securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations
regarding our Ordinary Shares, the market price for our Ordinary Shares and trading volume could decline.
The
trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business.
If one or more analysts downgrade our shares, the market price for our shares would likely decline. If one or more of these analysts
cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could
cause the market price or trading volume for our shares to decline.
The
sale or availability for sale of substantial amounts of our Ordinary Shares could adversely affect their market price.
Sales
of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales could occur, could adversely affect
the market price of our shares and could materially impair our ability to raise capital through equity offerings in the future. We currently
have 15,020,000 Ordinary Shares outstanding, of which 4,490,000 shares are freely tradable without restriction or further registration
under the Securities Act. The remaining shares may also be sold in the public market in the future subject to the restrictions in Rule
144 and Rule 701 under the Securities Act and applicable lock-up agreements. In conjunction with our initial public offering in April
2022, our directors and officers and certain other shareholders agreed not to sell any shares until April 22, 2023 without the prior
written consent of the representative of the underwriters of that offering, subject to certain exceptions, although the representative
of the underwriters may release these securities from these restrictions at any time. In addition, 720,000 of the freely tradeable shares
may be sold in the public market only in accordance with the prospectus contained in the registration statement pursuant to which those
shares were registered under the Securities Act of 1933 (the “Securities Act”). We cannot predict what effect, if any, market
sales of securities held by our controlling shareholder or any other shareholder or the availability of these securities for future sale
will have on the market price of our shares.
Short
selling may drive down the market price of our Ordinary Shares.
Short
selling is the practice of selling shares that the seller does not own but rather has borrowed from a third party with the intention
of buying identical shares back at a later date to return to the lender. The short seller hopes to profit from a decline in the value
of the shares between the sale of the borrowed shares and the purchase of the replacement shares, as the short seller expects to pay
less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the shares to decline,
many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its
business prospects in order to create negative market momentum and generate profits for themselves after selling the shares short. These
short attacks have, in the past, led to selling of shares in the market. If we were to become the subject of any unfavorable publicity,
whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such
allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the
manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of
commercial confidentiality.
Because
we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return
on your investment.
We
currently intend to retain all of our available funds and any future earnings to fund the development and growth of our business. As
a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our
shares as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends,
subject to certain requirements of Singapore law. Even if our board of directors decides to declare and pay dividends, the timing, amount
and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital
requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual
restrictions and other factors as determined by our board of directors. Accordingly, the return on your investment in our Ordinary Shares
will likely depend entirely upon any future price appreciation of our Ordinary Shares. There is no guarantee that our Ordinary Shares
will appreciate in value or even maintain the price at which you purchase our shares. You may not realize a return on your investment
in our shares and you may even lose your entire investment.
Our
founders and initial investors purchased their shares at a price that may be significantly less than the current trading price of the
shares and will be able to sell their shares after expiration of the restrictions under Rules 144 and 701 and their lock-up agreements.
Our
founders and initial investors purchased their shares at an average price of approximately US$1.41 per share, which may be substantially
lower than the current trading price of our shares. The Ordinary Shares issued to our founders and initial investors are “restricted”
securities under applicable U. S. federal and state securities laws and may be sold in the public market only in accordance with Rule
144 and Rule 701 under the Securities Act and applicable lock-up agreements entered into in conjunction with our initial public offering.
Because these shareholders paid a lower price per Ordinary Share, when they are able to sell their shares, they may be more willing to
accept a lower sales price than public investors. This fact could impact the trading price of the Ordinary Shares to the detriment of
our public investors.
If
we are classified as a passive foreign investment company, United States taxpayers who own our securities may have adverse United States
federal income tax consequences.
We
are a non-U.S. corporation and, as such, we will be classified as a passive foreign investment company, which is known as a PFIC, for
any taxable year if, for such year, either
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least 75% of our gross income for the year is passive income; or |
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average percentage of our assets (determined at the end of each quarter) during the taxable year that produce passive income or that
are held for the production of passive income is at least 50%. |
Passive
income generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade
or business) and gains from the disposition of passive assets.
If
we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who
holds our securities, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional
reporting requirements.
It
is possible that, for our current taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive
income. We will make this determination following the end of any particular tax year. We treat our affiliated entities as being owned
by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities
but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results
in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its
pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.
For
a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to
be a PFIC, see “Material Tax Considerations — Passive Foreign Investment Company Considerations.”
Our
controlling shareholder has substantial influence over the Company. Its interests may not be aligned with the interests of our other
shareholders, and it could prevent or cause a change of control or other transactions.
Ms.
Hong Bee Yin, our Chairman, executive director and chief executive officer, beneficially owns an aggregate of approximately 64% of our
issued and outstanding Ordinary Shares. Accordingly, our controlling shareholder could control the outcome of any corporate transaction
or other matter submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant
corporate actions, including the power to prevent or cause a change in control. The interests of our largest shareholder may differ from
the interests of our other shareholders. Without the consent of our controlling shareholder, we may be prevented from entering into transactions
that could be beneficial to us or our other shareholders. The concentration in the ownership of our shares may cause a material decline
in the value of our shares. For more information regarding our principal shareholders and their affiliated entities, see “Item
7. Major Shareholders and Related Party Transactions – Major Shareholders.”
As
a “controlled company,” we are exempt from certain Nasdaq corporate governance requirements, which may result in our independent
directors not having as much influence as they would if we were not a controlled company.
We
are a “controlled company” as defined under the Nasdaq Stock Market Rules, because one of our shareholders holds more than
50% of our voting power. As a result, for so long as we remain a controlled company as defined under that rule, we are exempt from, and
our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements,
including that:
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a
majority of our board of directors must be independent directors; |
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our
compensation committee must be composed entirely of independent directors; and |
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corporate governance and nomination committee must be composed entirely of independent directors. |
Although
we intend to have a majority of independent directors, that may change in the future.
As
a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance
matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders
than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As
a foreign private issuer whose Ordinary Shares are traded on Nasdaq, we rely on a provision in the Nasdaq corporate governance listing
standards that allows us to follow Cayman Islands law with regard to certain aspects of corporate governance. This allows us to follow
certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S.
companies listed on Nasdaq.
For
example, we are exempt from Nasdaq regulations that require a listed U.S. company to:
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a majority of the board of directors consist of independent directors; |
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require
non-management directors to meet on a regular basis without management present; |
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an independent compensation committee; |
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have
an independent nominating committee; and |
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seek
shareholder approval for the implementation of certain equity compensation plans and dilutive issuances of Ordinary Shares, such
as transactions, other than a public offering, involving the sale of 20% or more of our Ordinary Shares for less than the greater
of book or market value of the shares. |
As
a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. Our audit committee is
required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq.
Therefore, we intend to maintain a fully independent audit committee in accordance with Rule 10A-3 of the Exchange Act. However, because
we are a foreign private issuer, our audit committee is not subject to additional Nasdaq corporate governance requirements applicable
to listed U.S. companies, including the requirements to have a minimum of three members and to affirmatively determine that all members
are “independent,” using more stringent criteria than those applicable to us as a foreign private issuer.
You
may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because
we are incorporated under Cayman Islands law.
We
are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed
by our Amended Memorandum and Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders
to take action against our directors and us, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman
Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in
part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which are generally of persuasive
authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors
under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in
the United States. In particular, the Cayman Islands has a different body of securities laws than the United States, and provide significantly
less protection to investors. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action
in a federal court of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United
States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent
jurisdiction without retrial on the merits.
Shareholders
of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than
the Amended Memorandum and Articles of Association) or to obtain copies of lists of shareholders of these companies. Our directors are
not required under our Amended Memorandum and Articles of Association to make our corporate records available for inspection by our shareholders.
This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution
or to solicit proxies from other shareholders in connection with a proxy contest.
Certain
corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies
incorporated in other jurisdictions such as U.S. states. Currently, we plan to rely on home country practice with respect to any corporate
governance matter. Accordingly, our shareholders may be afforded less protection than they otherwise would under rules and regulations
applicable to U.S. domestic issuers.
As
a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our
management, members of the board of directors or controlling shareholders than they would as shareholders of a company incorporated in
a U.S. state.
Certain
judgments obtained against us by our shareholders may not be enforceable.
We
are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all
of our current directors and officers are nationals and residents of countries other than the United States and substantially all of
the assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service
of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including
judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment
against our assets or the assets of our directors and officers. As a result of all of the above, our shareholders may have more difficulties
in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of
a corporation incorporated in a jurisdiction in the United States.
We
are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We
are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various
requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth
company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain
information they may deem important.
The
JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards
until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words,
an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain
new and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future
financial statements may not be comparable to other public companies that comply with the public company effective dates for these new
or revised accounting standards.
We
are a foreign private issuer within the meaning of the Exchange Act, and as such we are exempt from certain provisions applicable to
United States domestic public companies.
Because
we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations
in the United States that are applicable to U.S. domestic issuers, including:
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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; |
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the
sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act; |
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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 |
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the
selective disclosure rules by issuers of material non-public information under Regulation FD. |
We
are required to file an annual report on Form 20-F within four months after the end of each fiscal year. In addition, we intend to publish
our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of Nasdaq. Press
releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we
are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the
SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to
you if you were investing in a U.S. domestic issuer.
We
may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
As
discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business
Day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect
to us on June 30, 2023. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting
securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we
fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer
status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are
more detailed and extensive than the forms available to a foreign private issuer. We will also have to comply with U.S. federal proxy
requirements, and our officers, directors and 10% shareholders will become subject to the short-swing profit disclosure and recovery
provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance
requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur
significant additional legal, accounting and other expenses that we do not incur as a foreign private issuer.
Item
4. Information on the Company
History
of the Company
Our
Group’s history can be traced back to November 1999 when JCS-Echigo Pte. Ltd. (“JCS”) was founded by Ms. Hong Bee Yin,
our Chairman, Executive Director and Chief Executive Officer. Our Group commenced business in 2005. We have manufactured a broad range
of cleaning systems, including aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment for
our customers. Our business in the provision of centralized dishwashing services for the food and beverage industry commenced in 2013.
As
of the date of this Annual Report, our Group is comprised of the Company and its subsidiaries, JE Cleantech International Limited, JCS-Echigo
Pte Ltd., Hygieia Warewashing Pte. Ltd. and Evoluxe Pte. Ltd.
Corporate
Structure
Our
Company was incorporated in the Cayman Islands on January 29, 2019 under the Companies Act as an exempted company with limited liability.
Our authorized share capital is US$100,000 divided into 100,000,000 Ordinary Shares, par value US$0.001 each. Prior to a group reorganization,
JE Cleantech International Limited was the holding company of our group of companies comprised of JCS-Echigo Pte. Ltd., Hygieia Warewashing
Pte. Ltd. and Evoluxe Pte. Ltd. JE Cleantech International Limited was held 80% by JE Cleantech Global Limited (which is wholly-owned
by Ms. Hong Bee Yin, our CEO), 14% by Triple Business Limited, 4% by Ever Bloom Properties Company Limited and 2% by Aqua Lady Group
Limited. Upon completion of our reorganization, we were owned as to 9,600,000, 1,680,000, 480,000 and 240,000 Ordinary Shares by JE Cleantech
Global Limited, Triple Business Limited, Ever Bloom Properties Company Limited and Aqua Lady Group Limited, respectively, and JE Cleantech
International Limited, JCS-Echigo Pte. Ltd., Hygieia Warewashing Pte. Ltd. and Evoluxe Pte. Ltd. became our direct and indirect subsidiaries.
In
April 2022, we closed on the sale of 3,020,000 newly issued Ordinary Shares and Triple Business Limited sold 750,000 of our Ordinary
Shares in our initial public offering. See “Item 7. Major Shareholders and Related Party Transactions – Major Shareholders,”
for information on the current shareholdings of our major shareholders.
Organization
Chart
The
chart below sets out our corporate structure as of the date of this Annual Report.
Entities
A
description of our subsidiaries is set out below.
JE
Cleantech International Limited (“JEC International”)
On
April 9, 2018, JEC International was incorporated in the BVI as a BVI business company with limited liability. JEC International is authorized
to issue a maximum of 50,000 shares of a single class of US$1.00 par value each. As part of a group reorganization on December 28, 2021,
JEC International became a direct wholly-owned subsidiary of our Company.
JEC
International has been an investment holding company with no business operations since its incorporation.
JCS-Echigo
Pte. Ltd. (“JCS”)
On
November 25, 1999, JCS was incorporated in Singapore as a private company with limited liability. JCS commenced business in 2005 and
is principally engaged in the manufacture and sale of cleaning systems and other equipment. As part of a group reorganization on December
28, 2021, JCS became an indirect wholly-owned subsidiary of our Company.
Hygieia
Warewashing Pte. Ltd. (“Hygieia”)
On
December 29, 2010, Hygieia was incorporated in Singapore as a private company with limited liability. Hygieia commenced business in 2013
and is principally engaged in the provision of centralized dishwashing services, general cleaning services and leasing of dishwashing
equipment. As part of an internal reorganization on December 28, 2021, Hygieia became an indirect wholly-owned subsidiary of our Company.
Evoluxe
Pte. Ltd. (“Evoluxe”)
On
May 6, 2016, Evoluxe was incorporated in Singapore as a private company with limited liability. Evoluxe has been dormant since incorporation
and has not engaged in any business activities since its incorporation. As part of an internal reorganization on December 28, 2021, Evoluxe
became an indirect wholly-owned subsidiary of our Company.
Key
Milestones
The
key milestones in the development of our Group are highlighted chronologically below:
| Year |
|
Milestones |
| 1999 |
|
JCS
was established. |
| |
|
|
| 2005 |
|
JCS
began its business in the sale of cleaning systems. |
| |
|
|
| 2006 |
|
We
established the JCS Facility and commenced the business of the design, development, manufacture
and sale of cleaning systems.
We
completed our first order for a cassette washing system for a customer in the HDD industry. |
| |
|
|
| 2007 |
|
We
registered our first patent in Singapore under JCS for a cleaning process and apparatus. |
| |
|
|
| 2010 |
|
Hygieia
was established. |
| |
|
|
| 2011 |
|
We
completed our first order for a medical cleaning system. |
| |
|
|
| 2012 |
|
We
completed our first order for a dish cleaning system. |
| |
|
|
| 2013 |
|
Hygieia
commenced provision of centralized dishwashing services at a customer’s premises. |
| |
|
|
| 2014 |
|
We
established the Hygieia Facility. |
| |
|
|
| 2018 |
|
We
received an invitation from a statutory board in Singapore to showcase a prototype of a robot floor scrubber for the interior of
public trains. |
| |
|
|
| 2022 |
|
Our
Company was listed on Nasdaq. |
Business
of Our Operating Subsidiaries
Overview
Our
Group is based in Singapore and is principally engaged in (i) the sale of cleaning systems and other equipment; and (ii) the provision
of centralized dishwashing and ancillary services. Our cleaning systems business started in 2006 and we design, develop, manufacture
and sell cleaning systems for various industrial end-use applications to customers mainly in Singapore and Malaysia. We have also provided
centralized dishwashing since 2013 and general cleaning services since 2015, mainly for food and beverage establishments in Singapore.
We are also a leading centralized dishwashing services provider in Singapore.
For
the financial years ended December 31, 2020, 2021 and 2022, our Group generated approximately S$16.9 million, S$9.0 million and S$11.4
million of revenue from our sale of cleaning systems and other equipment business, representing approximately 79.2%, 60.8% and 61.4%
of our total revenue, respectively.
For
the financial years ended December 31, 2020, 2021 and 2022, our Group generated approximately S$5.8 million and S$7.8 million of revenue
from our provision of centralized dishwashing and ancillary services business, representing approximately 20.8%, 39.2% and 38.6% of our
total revenue, respectively.
The
portion of our revenue from each business line has not changed substantially through April 30, 2023.
Our
Products And Services
Our
Products
The
cleaning systems and other equipment we manufacture and sell can be categorized into four different categories, namely aqueous washing
systems, plating and cleaning systems, train cleaning systems and other equipment, such as filtration units. The product lives of our
cleaning systems and other equipment range from two to ten years.
While
the focus of our sale of cleaning systems and other equipment business is on precision cleaning, we are also able to design, develop
and manufacture other cleaning systems for various industrial end-use applications using our R&D and engineering capabilities.
Depending
on our customers’ requirements and specifications, our cleaning systems are designed to enable our users to monitor various parameters
and control the cleaning system or equipment. This enables our customers to monitor critical data and information such as water level,
wash and rinse tank temperatures, flow rate of water and chemicals, megasonic or ultrasonic generator power, ultrasonic or megasonic
frequency and pH value of the chemicals and waste water. Such critical data and information are crucial to our customers for their cleaning
systems, particularly in the HDD, semiconductor and industrial electronic equipment/product manufacturing industries.
Our
cleaning systems are mainly designed for precision cleaning, with features such as particle filtration, ultrasonic or megasonic rinses
with a wide range of frequencies, high pressure drying technology, high flow rate spray and deionized water rinses, which are designed
for effective removal of contaminants and to minimize particle generation and entrapment. In particular, precision cleaning systems to
be installed in cleanrooms (enclosed spaces in which airborne particulates, contaminants and pollutants
are kept within strict limits), such as those sold to HDD customers, will need to meet stringent cleanliness standards and requirements,
and are also equipped with High Efficiency Particulate Air (HEPA) filters to trap particles that are 0.3 microns and larger in size and/or
Ultra Low Particulate Air (ULPA) filters to trap particles that are 0.12 microns and larger in size, in order to ensure stringent cleanliness
performance.
Our
cleaning systems are designed and developed for megasonic cleaning or ultrasonic cleaning, and have megasonic or ultrasonic generators
to generate rinses with a wide range of frequencies. In particular, megasonic cleaning uses higher frequencies to produce controlled
cavitations, with cleaning bubbles that are smaller and less energetic but more numerous, thereby providing more gentle cleaning of fragile
and delicate components and the removal of microscopic contaminants. Megasonic cleaning also reduces or eliminates cavitation erosion
and the likelihood of surface damage to the product being cleaned.
The
table below sets forth the revenue generated from our sale of cleaning systems and other equipment by product type during the financial
years ended December 31, 2020, 2021 and 2022:
| | |
2020 | | |
2021 | | |
2022 | |
| | |
SGD’000 | | |
% | | |
SGD’000 | | |
% | | |
SGD’000 | | |
% | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Aqueous washing systems | |
| 12,920 | | |
| 81.9 | | |
| 4,757 | | |
| 60.9 | | |
| 5,171 | | |
| 49.3 | |
| Plating and cleaning systems | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Other equipment | |
| 2,863 | | |
| 18.1 | | |
| 3,056 | | |
| 39.1 | | |
| 5,311 | | |
| 50.7 | |
| Total | |
| 15,783 | | |
| 100.0 | | |
| 7,813 | | |
| 100.0 | | |
| 10,482 | | |
| 100.0 | |
The
table below sets out the features and major types of industrial end-use applications of the different types of cleaning systems:
Our
cleaning systems are designed and customized based on our customers’ requirements and specifications, and accordingly the cleaning
systems that we manufacture and sell are of varying sizes and have different features and functions. Our cleaning systems also are comprised
of different modules and components, parts and materials and the production and manufacturing process for each cleaning system will vary
between orders, depending on the complexity of the design and the component lead time.
In
addition, we also provide repair and servicing of the cleaning systems that we sell to our customers, and we also sell related parts
used in such cleaning systems which we purchase from third party suppliers such as proximity sensors and transducer plates. Provision
of repair and servicing of cleaning systems and sale of related parts amounted to approximately S$1.2 million, S$1.2 million and S$1.0
million in revenue, representing approximately 5.4%, 7.9% and 5.2% of our total revenue, for the financial years ended December 31, 2020,
2021 and 2022, respectively.
We
are the sole distributor of STICO anti-slip shoes in Singapore, and our customers are mainly food and beverage establishments in Singapore.
The STICO anti-slip shoes are made of ethylene-vinyl acetate (EVA) material and are light with an anti-slip resistance function, making
them suitable for wear on wet and oily surfaces. Sale of such STICO anti-slip shoes amounted to approximately S$97,000, S$120,000 and
S$159,000 in revenue, recognized as other income, for the financial years ended December 31, 2020, 2021 and 2022, respectively.
We
generally provide a one-year warranty period for the cleaning systems manufactured and sold to our customers from acceptance of delivery
of such cleaning systems. During the warranty period, we offer free replacement for components and related parts, as well as repair and
servicing of our cleaning systems. After expiry of the warranty period, repair and maintenance services will be provided with additional
charges, based on the complexity of the services and cost of components required for any such repair or maintenance. Other equipment
is warranted to be in good working order without faulty workmanship or faulty materials. We generally do not offer any product return
or refunds for our cleaning systems and other equipment as our customers acknowledge that our products are functional and met their technical
specifications upon delivery and inspection by them.
Our
Services
We
provide centralized dishwashing services at our Hygieia Facility in Singapore. Leveraging on our expertise in designing, developing and
manufacturing cleaning systems, we set up our Hygieia Facility in 2014 with semi-automated washing lines, which are designed and manufactured
in-house, for our centralized dishwashing operations. As of the date of this Annual Report, four semi-automated dishwashing lines are
installed at our Hygieia Facility, of which two are for washing Halal dishware and another two are for washing non-Halal dishware. Our
dishwashing lines have the flexibility to process dishware made of different materials including melamine, stainless steel, porcelain
and glass. The Halal washing lines at our Hygieia Facility have obtained a Halal certification, and are thus suitable for the washing
of Halal dishware.
Incorporating
our experience and know-how from precision cleaning, each of our in-house designed semi-automated washing lines are over 20 meters in
length and are designed for automated cleaning and washing of dishware, with high capacity to handle large volume and each washing line
can wash up to 20 to 30 tubs per hour, depending on the size and number of items in each tub.
Our
washing lines also have proper segregation to minimize cross contamination. Each of the washing lines at our Hygieia Facility is standalone
and separate, and the configuration of our Hygieia Facility is such that all the soiled dishware will be loaded on the respective washing
lines at the same end and the cleaned dishware is removed and unloaded from the washing lines at the other end, thus keeping the soiled
dishware and tubs completely separate from the cleaned dishware and tubs and Halal dishware completely separate from the non-Halal dishware.
Our technical support team at our Hygieia Facility oversees our centralized dishwashing operations and provides maintenance services
for our washing lines in order to ensure high reliability for our customers.
Soiled
dishware is collected from our customers’ premises and transported to our Hygieia Facility for centralized dishwashing and then
sent back to our customers’ premises daily throughout the year. As the soiled dishware can be loaded into our washing lines without
the need for pre-rinsing, this removes the need for dishwashers at our customers’ premises and saves time and labor costs. The
risks of contamination due to food remnants or cleaning detergent is also eradicated. Our off-site centralized dishwashing services also
allows our customers to cut down on manpower needed to wash dishware as well as the space allocated to dishwashing in order to maximize
the dining area.
Since
2015, we also provide general cleaning services to food courts and hawker centers in Singapore, which comprise off-site centralized dishwashing
services and on-site cleaning services. For such general cleaning services, we provide the off-site centralized dishwashing services
at our Hygieia Facility and generally outsource the on-site cleaning services to third party sub-contractors. Such customers enter into
general cleaning service contracts with our Group to appoint us as the main contractor to provide integrated cleaning solutions and services
for their food courts or hawker centers, thereby reducing their administrative burden in having to liaise with various service providers
for the cleaning of different aspects of the food and beverage establishment. As our Group specializes in centralized dishwashing services,
we generally outsource the labor-intensive on-site cleaning services to our sub-contractors in order to focus our resources on our core
competencies. Such on-site cleaning services include, among others, cleaning and maintenance of the entire food and beverage establishment
and pest control, as well as the removal and disposal of food waste, litter, rubbish and refuse.
We
typically enter into contracts for our provision of centralized dishwashing and general cleaning services with our customers for a term
of one to two years. In view of the continued long-term relationship of at least three to four years with most of the customer groups
with whom the Group has expiring contracts, we are confident that the Group will be able to renew those contracts upon expiry.
We
generally charge our customers a fixed monthly fee for both our centralized dishwashing services and general cleaning services, and additional
fees if extra services are required. Such extra services include ad hoc logistics services and extra manpower for the decolorization
or de-staining of the dishware. Our sub-contractors are then paid a monthly fee for their on-site cleaning services, depending on the
number of on-site staff required to work at the relevant food and beverage establishment during the relevant period. For further details,
please refer to the paragraphs headed “Key contract terms with customers — Provision of general cleaning services”
and “Sub-contracting” in this section.
Dishwashing
equipment that we lease to customers
We
also provide leasing services of dishwashing equipment to our customers, mainly for use at food and beverage establishments in Singapore.
The terms of such leases are typically for a period of one to two year(s) and renew automatically, and our customers are charged a fixed
monthly fee for such leasing services. For further details, please refer to the paragraphs headed “Key contract terms with customers—
Provision of dishwashing equipment leasing services.” The dishwashing equipment leased to our customers typically enables a food
and beverage establishment to wash up to 150 racks of items per hour, depending on the size of the equipment. Such dishwashing equipment
is designed and manufactured in-house and can be customized to accommodate the needs of different customers.
Sale
of Cleaning Systems
The
cleaning systems designed, developed, manufactured and sold by our Group can generally be divided into two categories, namely precision
cleaning systems and other cleaning systems, and are designed and customized based on our customers’ requirements and specifications.
Precision cleaning systems consist of equipment and machines designed for the cleaning of critical surfaces in precision equipment with
minimal particle generation and entrapment. Such cleaning processes aim to meet a measured limit of contaminants such as the particle
count and/or non-volatile residue requirements, which are supplied by the customer or industry standards. Our cleaning systems are generally
sold to HDD, semiconductor manufacturers or industrial electronic equipment/product manufacturers and are designed for cleaning of surfaces
and product parts in various industrial end-use applications. Leveraging on our engineering know-how and expertise, we are able to design,
develop and manufacture quality and customized products that suit our customers’ varying needs. Ancillary to our sale of cleaning
systems, our Group also manufactures and sells other equipment such as filtration units, provides repair and servicing of cleaning systems
and sells related parts.
Design,
Development and Sale Process
A
brief description of our design and development process of our cleaning systems is set out as follows:
(1)
Customers contact our sales team to inquire about our cleaning systems or we submit tenders to potential customers to bid for contracts
Generally,
customers will approach our sales team to inquire about the purchase of our cleaning systems and may inform us of their specifications
or requirements. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain
contracts based on customers’ tender requirements.
(2)
Our R&D and engineering team will evaluate our customer’s requirements and specifications
Based
on the customer’s initial instructions, our R&D and engineering team will evaluate and will have internal discussions on the
design and development plan for the proposed cleaning system. Such discussions include product functions, fabrication and assembly requirements,
components, parts and materials required and any customized designs and/or functions required to be implemented in order to develop and
manufacture the proposed cleaning system according to our customer’s requirements.
(3)
Our R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer
Our
R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer,
in order to understand their specific needs and requirements, the proposed budget and intended usage for such cleaning systems. We will
also discuss market developments and trends with our customer, in order to better understand the latest cleaning systems technology utilized
in its industry, so that we can provide a comprehensive proposal to our customer.
After
such discussions with our customer, we will provide a proposal, which may include draft designs with suggestions on the technical specifications
and materials to be used for the cleaning system. The technical specifications of any cleaning system largely depend on its intended
use, type and desired outcome of our customer, including washing or rinsing frequency, spray rinse flow rate, drying speed, cleanroom
standards, desired residual liquid or air particle count or non-volatile residual levels. It generally takes approximately one to two
weeks for us to deliver a proposal to a customer, depending on the complexity of the design.
(4)
Our sales team will provide a price quotation to our customers
After
the proposal and the designs of the cleaning system have been finalized and confirmed by our customer, our R&D and engineering team
will discuss the proposed requirements with our procurement team in order to provide a price quotation to our customer. The quotation
will take into account the complexity of the cleaning system to be manufactured and sold, the cost of the relevant parts and materials
and the expected duration of the project. It generally takes approximately one to two weeks for us to deliver a quotation to a customer,
depending on the complexity of the design and the time required to source for and obtain quotations from our suppliers for certain parts
and components.
(5)
After receiving confirmation from our customer, we will prepare detailed drawings, 3D designs and/or model simulations
After
the quotation has been accepted by our customer, our R&D and engineering team will prepare the designs and detailed drawings for
fabrication, manufacture and assembly of the cleaning system. Depending on the nature of the project, we may also use our software systems
to prepare design simulations to enable the customer to have a preview of the proposed cleaning system upon the request of the customer,
and to demonstrate the feasibility and functionality of the design. It generally takes approximately one to two weeks for our R&D
and engineering team to prepare such detail drawings and designs and/or model simulations for our customer.
(6)
Once the drawings and designs are finalized, we will procure the relevant parts, materials and components
Once
the design and development plan for the cleaning system has been finalized, our R&D and engineering team will prepare the finalized
list of relevant parts, materials and components required for the manufacturing and production process, which will then be handed over
to our procurement team. Our procurement team will then proceed to source for and place orders for such parts, materials and components
from our suppliers.
(7)
Production and manufacturing
Generally,
our production process begins with the fabrication of the outer enclosure or tank for the cleaning system or equipment while we wait
for the necessary parts, materials and components to be delivered. Once we have the necessary supplies on hand, our engineering and technical
support team manufactures and assembles the various modules and components, which will comprise the cleaning system or equipment based
or the detailed drawings and designs.
Our
JCS Facility is well-equipped for the fabrication, production, assembly and in-house testing of our cleaning systems and equipment. In
particular, our JCS Facility is fitted with machines, which utilize the CNC manufacturing process for automated control of tools and
machinery using pre- programmed computer software. We also have various machinery and tools at our JCS Facility which are used in the
production and manufacturing of the modules and components of the cleaning systems, including laser cutting machines and welding machines.
Once the various modules and components have been produced, they are sent to our sub-assembly and system integration units for assembly
and implementation. Once the final product has been assembled and completed, we conduct in-house testing on the cleaning system or equipment
prior to delivery to our customer.
A
brief description of the flow of our production and manufacturing process of cleaning systems and equipment is set out as follows:
(a)
Fabrication of outer body of the cleaning system or equipment
Once
the design and development plan for the cleaning system or equipment has been finalized, our engineers and technical support team will
commence the production and manufacturing process by starting the fabrication of the outer body, which is usually the structure, enclosure
or tank for the cleaning system or equipment, mainly using stainless steel. Such fabrication of the outer body is done in-house using
(a) laser cutting machines which cut the metal sheets; (b) hydraulic press brake machines which bend the metal sheets to form the shape
of the enclosure or tanks; and (c) welding machines to join the material together by welding.
(b)
Delivery of components, parts and materials which undergo quality checks
Once
the relevant components, parts and materials required for the manufacture of the cleaning system and equipment have been delivered to
our JCS Facility, our quality control team will conduct an inspection upon their arrival to determine whether such components, parts
and materials conform to our quality standards and the requirements stated in our purchase orders, or whether there are any defects,
dents or scratches.
(c)
Production and manufacturing of modules and components
Once
the relevant components, parts and materials have been inspected, we will proceed to produce and manufacture the cleaning system or equipment.
Our engineers and technical support team will use the designs created for our customer to start fabrication of the cleaning system or
equipment. The production and manufacturing process utilizes CNC machines for automated control of tools and machinery using pre-programmed
computer software, thus minimizing the manual operation and labor required, and enabling us to manufacture each component more efficiently.
Once the software program has been input, we will conduct a trial run to ensure that the cleaning system or equipment meets our customer’s
requirements and specifications.
The
production and manufacturing processes for the modules and components of our cleaning systems and equipment include (a) laser cutting
machines to cut metal sheets to form the machine cover and various parts required to assemble the cleaning system or equipment, such
as brackets and air knives; (b) welding machines to weld together and assemble the fabricated tanks or enclosures with the various parts
manufactured; and (c) machining tools to manufacture precision parts such as robotic arms.
(d)
Sub-assembly and system integration of modules and components
Once
each module and component has been manufactured, it is sent to our sub-assembly and system integration units for assembly and implementation.
At this stage, the various manufactured modules and components are assembled together, together with the additional related parts such
as pipings, pumps and filters, as well as the control panels and electrical wiring to establish the electrical connection for the cleaning
systems and equipment. Certain modules and components will also undergo electropolishing prior to assembly to provide additional protection
to their stainless steel surface.
At
the sub-assembly stage, our engineers and technical support team also conduct quality checks on the functionality and performance of
each cleaning system module and component.
(e)
In-house testing of assembled cleaning systems and modules
Once
the final product has been assembled and completed, the cleaning system or equipment is sent for in-house testing prior to delivery to
our customer. Our technical support team will conduct functionality tests to ensure that the overall performance of the cleaning system
or equipment is satisfactory and that none of the modules and components are malfunctional, perform in-house quality checks and ensure
that the final product functions and performs in accordance with our customer’s order and specifications. A programmer will also
check all the input/output points with an electrician, before conducting the program testing and testing the cleaning system or equipment
for load and dryness.
(f)
Delivery, implementation and inspection by our customer
After
production, manufacturing and in-house testing have been completed, the cleaning system or equipment will be delivered to our customer’s
designated location. Our technical support team will assist with the implementation of the cleaning system or equipment at our customer’s
premises and assist our customer during any inspection or tests conducted. Our customers will typically use cleanliness testing devices,
such as a liquid particle counter which is an analytical instrument used to size and count particles in a liquid, to verify that the
cleaned item achieves the desired limit of post-cleaning residual contaminants and meets their standards. After our customer conducts
its inspections or tests, it is required to sign on a checklist to acknowledge that the cleaning system was functional and met their
technical specifications. If required, we will also provide on-site training to our customer on the use and maintenance of the cleaning
system or equipment.
The
lead time from confirmation of an order by our customer to delivery of the final product generally takes approximately eight to 18 weeks,
depending on the complexity of the design and the component lead time.
Provision
of Centralized Dishwashing Services
We
provide centralized dishwashing services at our Hygieia Facility which has four semi- automated dishwashing lines, of which two are for
washing Halal dishware and the other two are for washing non-Halal dishware.
A
brief description of the flow of the centralized dishwashing process is set out as follows:
(1)
Customers contact our sales team and inquire about our centralized dishwashing services or we may submit tenders to potential customers
to bid for contracts
Generally,
customers will approach us to inquire about the scope and fees for our centralized dishwashing services and request a quotation for such
services. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain contracts.
Some
customers may also request a quotation for general cleaning services for the food and beverage establishments, which will comprise both
off-site centralized dishwashing services and on-site cleaning services. In such instances, we may request a quotation for such on-site
cleaning services from our sub-contractors or may undertake such on-site cleaning services ourselves.
(2)
Our sales team conducts site visit at our customer’s premises and assesses the services required
Our
sales team will conduct a site visit at the customer’s premises, to inspect the space and the logistical arrangements to be made
for collection of the soiled dishware to our Hygieia Facility and delivery of the cleaned dishware from our Hygieia Facility.
(3)
Our sales team will provide a price quotation to our customer. After receiving confirmation, we proceed with provision of centralized
dishwashing services
Based
on our customers’ requirements, our sales team will prepare a price quotation, which will take into account, among other things,
(a) the size of the food and beverage establishment, number of seats and expected customer turnover, (b) frequency of collection and
delivery of dishware on a daily basis; (c) whether thermo stickers are required; (d) whether the services of a third party logistics
provider for collection and return of the dishware are required; and (e) whether the services of our sub-contractor for on-site cleaning
services are required.
After
the quotation has been accepted by our customer and the service contract has been entered into, we will proceed with the provision of
centralized dishwashing services based on the agreed terms of the contract.
(4)
We or a third party logistics services provider will collect and deliver the soiled dishware from our customer to our facility
On
a daily basis, the soiled dishware will be placed in tubs and trolleys provided by us at our customer’s premises, with Halal dishware
being separated from non-Halal dishware. Generally, we or a third party logistics services provider will collect the soiled dishware
from our customer’s premises, which will be delivered to our Hygieia Facility, usually one to two times per day depending on the
customers’ needs. Upon arrival at our Hygieia Facility, the soiled dishware will be unpacked from the tubs by our staff and food
remnants will be removed, if necessary, before the dishware is placed onto the respective Halal and non-Halal semi-automated washing
lines for washing, rinsing and blow-drying. The rinsing is performed with high temperatures to sanitize the dishware. In addition, our
customers may also request that thermo stickers are placed on a random sample of dishware to ensure that the temperature during the dishwashing
process is maintained at a certain minimum temperature for sanitization purposes.
The
lead time from collection of the soiled dishware from our customer’s premises to completion of the dishwashing process takes approximately
four to 12 hours, depending on the location of our customer’s premises and frequency of collection.
(5)
Our team will perform quality checks, and any dishware that requires further washing will be put back onto the washing lines. Cleaned
dishware will be packed for delivery
After
the dishware has been washed, rinsed and dried, the cleaned dishware is inspected by our staff before it is packed for delivery back
to our customer’s premises. If any of the dishware does not pass our quality checks, the dishware will be put back onto the washing
lines for re-washing. Once the cleaned dishware has passed our quality checks, it will be packed into clean tubs and trolleys, and moved
to the storage area at our Hygieia Facility and will be ready for delivery back to our customers’ premises according to the delivery
schedule, usually one to two times per day depending on our customers’ needs.
(6)
The cleaned dishware will be packed and delivered by us or the third party logistics services provider to our customer’s
premises
At
the scheduled time, we or our third party logistics services provider will pick up the cleaned dishware from our Hygieia Facility for
delivery back to our customer’s premises.
The
lead time from the inspection and quality checks on the cleaned dishware to the delivery of the cleaned dishware back to our customers’
premises takes approximately three to 12 hours, depending on the delivery schedule for each customer.
Pricing
Policy
In
respect of the sale of cleaning systems and other equipment, we generally determine the price on a cost-plus basis for each cleaning
system or equipment that we manufacture and produce as our cleaning systems are customized. The unit selling price and gross profit margin
of each product may fluctuate significantly from order to order, depending on various factors and considerations, including but not limited
to the following:
●
complexity of the design, particularly for aqueous washing systems and train cleaning systems, as the cleaning systems may include different
features and various modules, components and parts, such as ultrasonic wash and rinse stations, spray rinse stations, vacuum oven, cleaning
stations with robotic transfer functions, washing baskets, pneumatic control systems, heaters, sensors and pumps;
●
the type and availability of the components and materials, such as stainless steel or aluminum, used for the cleaning system or equipment,
which would vary in terms of cost price and component lead time;
●
technical requirements for the production, including whether the customer’s approval is required for any changes to the processes,
products or services for the production and manufacturing process;
●
size and dimensions of the cleaning system or equipment, including the overall machine dimension, tank dimension and the size and number
of modules, components and parts installed;
●
level and number of functionality tests to be conducted, including whether test reports and certificates are to be provided to the customer;
●
the customer’s specifications for certain designated suppliers and/or sub-contractors to be used for the production and manufacture
of the cleaning system;
●
purchase quantity, as certain customers may place orders for more than one unit of the same cleaning system or equipment;
●
timeline for the production and manufacture of the cleaning system or equipment;
●
provision of installation, testing and commissioning services;
●
provision of on-site training by our technical personnel for our customer’s employees; and
●
the expected number of units to be placed by our customer in the future.
The
selling price and the corresponding profit margin for each cleaning system or equipment which we manufacture and sell will depend on
the above factors and considerations, and in particular, the complexity of the cleaning system or equipment to be manufactured and sold,
the cost of the relevant parts and materials and the expected duration of the project. Complex aqueous washing systems and train cleaning
systems which are generally larger in size and comprised of various modules, components and parts will require a longer time for our
R&D and engineering team to prepare the detailed drawings, designs and/or model simulations and will also require a longer time for
production and manufacture, with a corresponding increase in the cost of production and the number of relevant parts and materials. Less
complex aqueous washing systems such as standalone cleaning machines will require a comparatively shorter time for design, production
and manufacture, as well as lower cost of production. From a commercial perspective, our Group will usually quote an initial higher selling
price taking into consideration the aforesaid factors and with reference to the range of selling prices for similar cleaning systems
and equipment sold by our Group with an aim to maximizing our profit. During the price negotiation process, our Group will adopt different
negotiation strategies for different customers and our pricing is affected by various factors, such as the budget and cost consciousness
of the customer, size of the customer, our relationship with the customer, the customer’s specifications and requirements, the
features and functions of each product and the needs of the customer. The final selling price for each cleaning system or equipment will
be arrived at after arm’s length negotiation and largely dependent on the respective bargaining power of our Group and the customer.
In
respect of the sale of related parts used in our cleaning systems, we generally determine the price based on the selling price suggested
by our suppliers or at a mark-up of our own costs.
In
respect of the provision of centralized dishwashing services and general cleaning services, we generally charge our customers a fixed
monthly fee which is determined with reference to factors such as the size, number of seats and expected customer turnover of the food
and beverage establishment, frequency of delivery and collection of dishware on a daily basis, our costs of dishwashing (including staff
costs, cleaning detergent costs and utilities costs), sub-contracting costs, logistic costs, expected costs to be incurred by our customers
if they had the capacity and were to engage their own staff to wash the dishware, duration of the contract and the capacity and utilization
rate of our dishwashing lines. We may charge our customers additional fees if extra services are required.
In
respect of the dishwashing equipment leasing services, the rental of our dishwashing equipment to our customers is determined with reference
to prevailing market rates. In respect of our wholesale sale of STICO anti-slip shoes, the prices are determined with reference to the
suggested retail price under our distributorship arrangement and the purchase quantity.
Credit
period and payment methods
In
respect of the manufacture and sale of cleaning systems, depending on, among other things, the technical requirements, project amount
and size, project costs, relationship with our customers and the credit period offered by our suppliers to our Group in respect of the
materials and components used in the cleaning systems, our customers may be required to pay a deposit and settle the remaining purchase
price upon delivery and acceptance of the product, according to the terms of the contract. In other cases, our customers are generally
offered credit terms of 30 to 60 days from delivery. In respect of the sale of other equipment, our customers are generally offered credit
terms of 30 to 45 days from the day on which the order is completed.
In
respect of the sale of related parts used in our cleaning systems, our customers are generally offered credit periods ranging from 30
days to 60 days.
In
respect of the provision of centralized dishwashing services and general cleaning services, our customers are generally offered credit
terms of seven to 30 days upon the receipt of invoice. In respect of the provision of dishwashing equipment leasing services, our customers
are generally offered credit terms of 30 days upon receipt of invoice.
Settlements
with our customers who purchase cleaning systems and other equipment from us are mainly in S$ or US$ by way of check or telegraphic transfers.
Settlements with our customers who use our centralized dishwashing services, general cleaning services and dishwashing equipment leasing
services are mainly in S$ by way of check or telegraphic transfers.
Seasonality
Our
Directors believe that both our sale of cleaning systems and other equipment operations and our provision of centralized dishwashing
services and ancillary services operations are not subject to any seasonality.
Our
Customers
During
the financial years ended December 31, 2020, 2021 and 2022, our customers were from various industries, including HDD manufacturing,
semiconductor manufacturing, food and beverage and public transportation. As of the date of this Annual Report, our customers continue
to be from such various industries. Our cleaning systems and other equipment are mainly sold in Singapore and Malaysia, and we provided
centralized dishwashing and ancillary services to customers in Singapore.
Top
five customers
For
the financial years ended December 31, 2020, 2021 and 2022, our top five customers accounted for approximately 88.4%, 80.6% and 68.1%
of our total revenue, respectively. Our Group’s largest customer accounted for approximately 61.5%, 32.7% and 22.0% of our total
revenue, respectively, for the corresponding financial year. During the financial years ended December 31, 2020, 2021 and 2022 and up
to the date of this Annual Report, we have not experienced any material disputes with our customers.
The
following table sets out information on our top five customers for the periods indicated:
For
the financial year ended December 31, 2020
| Customer | |
Country of Incorporation/Establishment | |
Product/Services | |
Year of Commencement of Business Relationship | |
General Payments | |
Credit Terms | |
Transaction
Amounts (SGD) | | |
% of Total Sales | |
| Group A(1) | |
Malaysia, the United States and PRC | |
Cleaning systems | |
2009 | |
60 days | |
Telegraphic transfer | |
$ | 13,163 | | |
| 61.5 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group B(2) | |
Taiwan, South Korea, Thailand, Belgium and the United States | |
Other equipment & related parts | |
2008 | |
45 days | |
Telegraphic transfer | |
$ | 2,361 | | |
| 11.0 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group C(3) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2015 | |
30 days | |
Telegraphic transfer | |
$ | 1,395 | | |
| 6.5 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group D(4) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2016 | |
7 to 30 days | |
Telegraphic transfer | |
$ | 1,230 | | |
| 5.8 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group F(6) | |
Singapore | |
Centralized dishwashing & general cleaning services, repair & servicing
of cleaning systems | |
2015 | |
30 or 60 days | |
Telegraphic transfer | |
$ | 765 | | |
| 3.6 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| | |
| |
| |
| |
| |
TOTAL | |
$ | 18,914 | | |
| 88.4 | |
For
the financial year ended December 31, 2021
| Customer | |
Country of Incorporation/Establishment | |
Product/Services | |
Year of Commencement of Business Relationship | |
General Payments | |
Credit Terms | |
Transaction
Amounts (SGD) | | |
% of Total Sales | |
| Group A(1) | |
Malaysia and the United States | |
Cleaning systems | |
2009 | |
60 days | |
Telegraphic transfer | |
$ | 4,833 | | |
| 32.7 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group B(2) | |
South Korea, Thailand, Belgium and the United States | |
Other equipment & related parts | |
2008 | |
60 days | |
Telegraphic transfer | |
$ | 3,188 | | |
| 21.6 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group C(3) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2015 | |
30 days | |
Telegraphic transfer | |
$ | 1,441 | | |
| 9.8 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group D(4) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2016 | |
45 - 60 days | |
Telegraphic transfer | |
$ | 1,188 | | |
| 8.0 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group E(5) | |
Singapore | |
Centralized dishwashing & general cleaning services | |
2015 | |
30 days | |
Telegraphic transfer | |
$ | 1,254 | | |
| 8.5 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| | |
| |
| |
| |
| |
TOTAL | |
$ | 11,904 | | |
| 80.6 | |
For
the financial year ended December 31, 2022
| Customer | |
Country of Incorporation/Establishment | |
Product/Services | |
Year of Commencement of Business Relationship | |
General Payments | |
Credit Terms | |
Transaction
Amounts (SGD) | | |
% of Total Sales | |
| Group A(1) | |
Malaysia and the United States | |
Cleaning systems | |
2009 | |
60 days | |
Telegraphic transfer | |
$ | 4,094 | | |
| 22.0 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group B(2) | |
South Korea, Thailand, Belgium and the United States | |
Other equipment & related parts | |
2008 | |
60 days | |
Telegraphic transfer | |
$ | 3,902 | | |
| 20.9 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group C(3) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2016 | |
30 days | |
Telegraphic transfer | |
$ | 1,801 | | |
| 9.7 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group D(4) | |
Singapore | |
General cleaning services & leasing of dishwashing equipment | |
2015 | |
45 - 60 days | |
Telegraphic transfer | |
$ | 1,522 | | |
| 8.2 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| Group F(6) | |
Singapore | |
Centralized dishwashing & general cleaning services | |
2015 | |
30 days | |
Telegraphic transfer | |
$ | 1,370 | | |
| 7.3 | |
| | |
| |
| |
| |
| |
| |
| | | |
| | |
| | |
| |
| |
| |
| |
TOTAL | |
$ | 12,689 | | |
| 68.1 | |
(1)
Four of the entities in Customer Group A, which are principally engaged in the manufacture of HDD, were our customers for the financial
years ended December 31, 2020, 2021 and 2022, respectively. The ultimate holding company of Customer Group A is headquartered in the
United States with international offices, and is listed on Nasdaq.
(2)
Four, five and four entities in Customer Group B, which are principally engaged in the provision of engine and industrial solutions,
were our customers for the financial years ended December 31, 2020, 2021 and 2022, respectively. The ultimate holding company of Customer
Group E is headquartered in the United States with international offices, and is listed on the New York Stock Exchange.
(3)
Two of the entities in Customer Group C, which are principally engaged as operators of food courts, were our customers for the
financial years ended December 31, 2020, 2021 and 2022, respectively. The shares of Customer Group D’s parent company were listed
on the Mainboard of the Singapore Exchange Securities Trading Limited prior to June 5, 2020. The company is now privatized.
(4)
Three, four and four of the entities in Customer Group D, all of which are principally engaged as operators of food courts and
retail malls or health and eldercare service providers, were our customers for the financial years ended December 31, 2020, 2021 and
2022, respectively. The holding entity of Customer Group C is headquartered in Singapore.
(5)
One entity in Customer Group E, which is principally engaged as an operator of food courts, was our customer for the financial
years ended December 31, 2020, 2021 and 2022. The company is headquartered in Singapore and is listed on the Mainboard of the Singapore
Exchange Securities Trading Limited.
(6)
Four entities in Customer Group F, which are principally engaged as ground-handling and in-flight catering services providers,
were our customers for the financial years ended December 31, 2020, 2021 and 2022. The parent company of Customer Group F is headquartered
in Singapore and is listed on the Mainboard of the Singapore Exchange Securities Trading Limited.
Competitive
Strengths
Long
and proven track record in precision cleaning in Singapore
We
have been providing cleaning systems to our customers for over 13 years and have accumulated extensive industry experience. We believe
our strong R&D and engineering capabilities enable us to design, develop and manufacture quality precision cleaning systems and other
cleaning systems for various industrial end-use applications, which are customized to each of our customers’ needs.
In
April 2018, JCS was awarded the Singapore Quality Class Certification by Enterprise Singapore, which validates JCS’s commitment
towards continuous improvement and sustainable business performance and commendable management practices. The management system of JCS
has also been assessed as conforming to ISO 9001: 2015 and ISO 45001: 2018 for design, manufacture, supply, installation and serving
of integrated cleaning systems.
We
believe our strong track record in precision cleaning will facilitate the promotion and demand for our products with both existing and
new customers, as well as the expansion of our business. We will continue to develop products for different industrial end-use applications
and to meet the needs of our customers across various industries by expanding our product portfolio.
Stable
relationships with our major customers
Since
2006, we have developed stable relationships with our major customers and we believe that our engineering know-how and ability to design,
develop and manufacture customized cleaning systems to meet our customers’ requirements and specifications and our ability to provide
centralized dishwashing services have been the key drivers for them to appoint us as their suppliers over the years.
We
have maintained stable business relationships with a majority of our major customers. During the financial years ended December 31, 2020,
2021 and 2022, our top five customers included renowned HDD manufacturers, international engine and industrial solutions provider and
food and beverage establishment operators in Singapore, three of which have more than 10 years of business relationships with us. As
of the date of this Annual Report, our customers continue to be from such various industries. We believe that certain customers, such
as multinational corporations, may have stringent selection processes for their suppliers and we have had to meet certain criteria and
audit checks before becoming an approved qualified supplier.
Experienced
R&D and engineering team
We
have an experienced R&D and engineering team led by Mr. Zhao Liang, who is also a member of our senior management team. Our Directors
believe that our Group has strong in-house R&D and engineering capabilities to design high quality precision cleaning systems and
other cleaning systems customized to meet the standards and particular needs of our customers, including HDD, semiconductors and industrial
electronic equipment/product manufacturers. As of the date of this Annual Report, our R&D and engineering team has 11members, six
of whom have obtained a bachelor’s degree in engineering.
With
our strong R&D and engineering team, we are able to design and develop customized cleaning systems catered to our customers’
requirements and specifications. Against the backdrop of Industry 4.0 and an increasing demand for digitized and automated machinery
in the manufacturing space, we have entered into collaborations with a customer, as well as other parties, to develop new customized
cleaning solutions. In addition to previously co-developing a high performance dryer with one of our customers, we have also developed
an initial prototype of a robot floor scrubber, which comprises a robotic enhancement that can be attached to floor cleaning equipment,
which will then enable such floor cleaning equipment to be used without manual operation. Following from this, we have entered into a
collaboration with a statutory board whose functions and duties include the management and operation of the segment of the public transportation
system in Singapore (“Collaboration Partner”) to co-develop an autonomous train interior cleaning robot, which is capable
of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. Our Directors believe
that such customized cleaning systems and collaborations demonstrate our customers’ belief in the strength of our R&D and engineering
capabilities.
Experienced
management team
We
have an experienced management team, led by Ms. Hong Bee Yin, our Chairman, executive Director, chief executive officer and founder,
who has been instrumental in spearheading the growth of our Group. Ms. Hong has over 16 years of experience in the cleaning solutions
industry in Singapore and she is primarily responsible for planning and execution of our Group’s business strategies, including
product development, as well as managing our Group’s relationships.
Our
Group is supported by a senior management team with substantial experience in the cleaning solutions industry. Our senior management
team includes members such as Mr. Zhao Liang, who is the head of our R&D and engineering team and has over 13 years of experience
in the precision cleaning equipment industry.
For
details of the profiles of the senior management team, please refer to “Management” in this Annual Report.
Business
Strategies
We
intend to expand our business and strengthen our market position in the cleaning systems industry in Singapore, Malaysia and other countries
and in the centralized dishwashing services industry in Singapore by implementing the following business strategies and future plans.
Expand
our product portfolio and R&D and engineering team
We
believe that our R&D capabilities and engineering expertise are vital in maintaining our long-term competitiveness and driving our
business growth. We expect Industry 4.0 and artificial intelligence is the current trend for automation of industrial manufacturing and
it has been an ongoing process in Singapore. As part of the Industry 4.0 and robotic initiatives, the Singapore government has allocated
investment in R&D projects that speed up industry transformation projects to help local manufacturers undergo the industry transformation.
Such ongoing initiatives help create the demand for both digitized and automated machinery in the manufacturing space.
(1)
Expand our product portfolio
We
have a long track record in the manufacture and sale of precision cleaning systems and other equipment and we are committed to continuing
to increase our R&D and engineering capabilities so as to align ourselves with the Industry 4.0 initiatives and to cope with the
continuously increasing standards and requirements of our customers. Going forward, against the backdrop of Industry 4.0, we expect an
increase in demand for total automation products and solutions and we intend to leverage on our established reputation and engineering
know-how, as well as industry expertise to capture opportunities arising therefrom. In this regard, we intend to further grow our automated
cleaning systems and equipment business by expanding our product portfolio and developing cleaning systems which can be used across various
industries for industrial and/or commercial uses.
To
expand our product portfolio and as part of our R&D efforts, we have developed an initial prototype of a robot floor scrubber, which
comprises a robotic enhancement that can be attached to floor cleaning equipment, which will then enable such floor cleaning equipment
to be used without manual operation. The development of this initial prototype led us to enter into a collaboration with our Collaboration
Partner, to co-develop an autonomous train interior cleaning robot which is capable of cleaning the floor of the interior of public trains
autonomously based on the train type and car configuration. Our Group intends to further develop, build on and customize our initial
prototype of a robot floor scrubber to develop an autonomous train interior cleaning robot, which can operate in the required space and
configuration of public trains, for the collaboration with our Collaboration Partner.
In
particular, we believe that we will be able to market and sell the autonomous robot floor scrubbers to our existing customers in the
food and beverage industry for our centralized dishwashing and ancillary services, given that such customers are already using our products
and services to automate the dishwashing process at their respective food and beverage establishments and commercial properties. There
is a push by the Singapore government for Industry 4.0 initiatives to elevate productivity in the food and beverage services sector,
including the introduction of centralized dishwashing services at hawker centers, allocating investment into R&D projects that speed
up industry transformation projects and strengthening the workforce’s skillsets, to boost productivity in the face of manpower
challenges in the food and beverage industry. In light of the fact that such push will drive growth in the dishwashing cleaning sector,
our Directors believe that there also will be a corresponding increase in demand for other automation cleaning products and solutions
by food and beverage establishments. On the other hand, our existing customers, such as cookhouses, eldercare homes and hospitals for
which we have provided centralized dishwashing and ancillary services, may become our potential customers for the sale and marketing
of the autonomous robot floor scrubbers in the future.
We
believe that we can leverage on our existing customer base to market and sell the autonomous robot floor scrubbers in place of or to
supplement our on-site cleaning services, while still retaining the customer base for our centralized dishwashing services. We believe
that there will be sufficient demand for the autonomous robot scrubbers, which will also reduce our reliance on third party sub-contractors
given that our on-site cleaning services are generally outsourced to third party sub-contractors in order to focus our resources on our
core competencies, and therefore the autonomous robot scrubbers will not cannibalize our general cleaning services business. The autonomous
robotic cleaning equipment industry is relatively new in Singapore. This is seen as a potential solution for the labor squeeze in Singapore’s
cleaning force, especially for the commercial property and food and beverage cleaning sectors. Since the industry was still in its fast-growing
stage in 2021, with a strong push due to the COVID-19 pandemic which increased the demand for unmanned cleaning solutions for commercial
properties and public spaces in Singapore, the overall industry is expected to grow at a CAGR of 30.5% from 2021 to 2025. With the launch
of grants and incentives to companies for adoption of the technology (for example, the Ministry of Education of Singapore has put out
a tender to have these cleaning robots in schools), the growth of the industry is supported by the Singapore government. It is also expected
that there will be further advancement in cloud infrastructure, artificial intelligence and 5G that will make the robots more attractive
and cost competitive. Accordingly, we believe that there will be sufficient market demand for the commercial sale of the autonomous robot
floor scrubbers for the public transportation, food and beverage and other industries.
We
believe our engineering know-how is the key to our success and we plan to increase our R&D efforts in order to support the expansion
of our product portfolio and strengthen our competitive edge. Accordingly, we intend to utilize part of the net proceeds from our initial
public offering to increase our manpower by hiring at least three engineers for our R&D and engineering team.
(2)
Strengthen our production capability for cleaning systems and other equipment
There
is expected growth at a CAGR of approximately 10.7% from 2021 to 2025 in respect of the manufacture of precision cleaning equipment in
Singapore. The growth will largely be driven by the expansion in the electronics sector in Singapore. We strive to leverage on this upward
trend so as to strengthen our market presence in the cleaning equipment manufacturing industry by taking on more projects. Our ability
to strengthen our production capabilities and expand our product portfolio, as well as take on more projects concurrently is dependent
on, among other things, us having sufficient and quality machinery and equipment. We intend to achieve this by purchasing upgraded or
new production machinery and equipment for our JCS Facility.
Real
Property
A
description of our leased real properties is below:
| Location | |
Usage | |
Lease period | |
Annual
Rent (SGD) | | |
Approximate gross floor area (sq.
ft.) | |
JCS Facility
3 Woodlands Sector 1
Singapore 738361 | |
Manufacturing facility and office | |
To November 15, 2027, with a further term of 30 years from expiry | |
| 36,759 | | |
| 31,223.9 | |
| | |
| |
| |
| | | |
| | |
Hygieia Facility
17 Woodlands Sector 1
Singapore 738354 | |
Centralized dishwashing facility and office | |
To March 15, 2044 | |
| 52,020 | | |
| 34,276.7 | |
Production
Capacity and Utilization Rate
JCS
Facility
It
is difficult to quantify the production capacity and utilization rates of our JCS Facility as the cleaning systems and other equipment
manufactured by us at our JCS Facility are customized depending on our customers’ specific requirements, and are therefore of varying
sizes, scale and capacity. Our JCS Facility is fitted with various types of machinery and equipment and the manufacturing process for
each cleaning system utilizes different types of machinery and equipment with different components, parts and materials. The production
and manufacturing process will also vary between orders, depending on the complexity of design and component lead time. We periodically
monitor the overall usage and capacity of the machinery and equipment at our JCS Facility.
The
following table sets forth the average utilization rates of certain major machinery and equipment used at our JCS Facility in respect
of the production and manufacture of cleaning systems and other equipment during the fiscal years ended December 31, 2020, 2021 and 2022:
| | |
Year ended December 31, | |
| | |
2020 | | |
2021 | | |
2022 | |
| | |
Average
utilization
rate(1)(2) (%) | | |
Average
utilization
rate(1)(2) (%) | | |
Average
utilization
rate(1)(2) (%) | |
| CNC lathe machine | |
| 122.1 | | |
| 103.5 | | |
| 137.2 | |
| Laser cutting machine | |
| 121.6 | | |
| 112.5 | | |
| 134.7 | |
(1)
For illustration purposes only, the utilization rate is calculated by dividing the number of hours of usage of the relevant machine
per year by the number of operating hours of our JCS Facility for the same financial year, which is calculated based on the assumption
that there are 8.5 operating hours per working day on weekdays and 3.5 operating hours on Saturdays.
(2)
While the utilization rates may serve as proxies for the overall utilization rates of our JCS Facility, the production and manufacturing
process for our cleaning systems will vary among orders, depending on the type of machinery and equipment utilized, the components, parts
and materials required, complexity of design and component lead time. The usage time of the machines includes engineering work and machining
work (i.e. cutting). Engineering work includes machine set up and pre-programming for laser cutting and machining, and jig and fixture
preparation.
The
average utilization rates of the above machinery and equipment used at our JCS Facility generally exceeded 100% as these machines have
been operated past the normal operating hours of our JCS Facility in order to fill our orders for cleaning systems and other equipment
based on contract requirements. The average utilization rates were lower in the year ended December 31, 2021, as compared to the year
ended December 31, 2020, corresponding with the decrease in orders for cleaning systems completed in 2021. The average utilization rates
were higher in the year ended December 31, 2022, as compared to the year ended December 31, 2021, corresponding with the increase in
orders for cleaning systems completed in 2022. During the period from January 1, 2023 and the date of this Annual Report, the average
utilization rates for our CNC lathe machine and our laser cutting machine were approximately the same as during the same period in our
financial year ended December 31, 2022.
Notwithstanding
that the average utilization rate of the aforesaid machinery and equipment at our JCS Facility generally exceeded 100% during the fiscal
years ended December 31, 2020, 2021 and 2022, our directors are of the view that our JCS Facility has sufficient capacity to process
the orders for cleaning systems and other equipment for at least the next 12 months for the following reasons:
●
during the production process, the most time-consuming process is engineering. Engineering work includes machine set up and pre-programming
for laser cutting and machining, and jig and fixture preparation. All the above work could generally take more than 60% of the machine’s
total production lead time. The average production lead time for the production and manufacturing of bulk orders for the same cleaning
system/module is shorter as less time is required to use the relevant machinery and equipment for the aforesaid engineering work. In
general, our Group can reduce the engineering process time of the subsequent units by about 90% as compared to the first machine built;
and
●
the operating hours of our JCS Facility may be increased from time to time in order to meet the delivery schedule of the orders for cleaning
systems and other equipment as needed.
The
utilization rates of the CNC lathe machine and the laser cutting machine are calculated based on 8.5 operating hours per working day
on weekdays and 3.5 operating hours on Saturdays. In the event that the current hours of usage cannot meet the demand, our management
will consider adding one or two more shifts on weekdays, and/or increasing the number of working hours on weekends to increase the production
capacity of the CNC lathe machine and the laser cutting machine to meet the production schedule.
The
production floor at our JCS Facility has a total usable floor area of approximately 1,470.1 square meters; the total estimated usable
floor area which is utilized by our machinery and equipment is approximately 1,219.4 square meters, representing approximately 83.0%
of the available space.
Hygieia
Facility
The
processing capacity and utilization rates at our Hygieia Facility with respect to our provision of centralized dishwashing services during
the fiscal years ended December 31, 2020, 2021 and 2022 are as follows:
| | |
Year ended December 31, | |
| | |
2020 | | |
2021 | | |
2022 | |
| | |
Actual
annual processing (tubs) | | |
Annual
processing capacity(1) (tubs) | | |
Average
daily utilization rate(2) (%) | | |
Actual
annual processing (tubs) | | |
Annual
processing capacity(1) (tubs) | | |
Average
daily utilization rate(2) (%) | | |
Actual
annual processing (tubs) | | |
Annual
processing capacity(1) (tubs) | | |
Average daily
utilization rate(2) (%) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Halal semi-automated washing line A | |
| 84,257 | | |
| 148,010 | | |
| 56.9 | | |
| 91,289 | | |
| 148,010 | | |
| 61.7 | | |
| 101,979 | | |
| 148,010 | | |
| 68.9 | |
| Halal semi-automated washing line B | |
| 95,237 | | |
| 214,614 | | |
| 44.4 | | |
| 78,119 | | |
| 214,614 | | |
| 36.4 | | |
| 39,489 | | |
| 214,614 | | |
| 18.4 | |
| Non-Halal semi-automated washing line C | |
| 175,930 | | |
| 310,821 | | |
| 56.6 | | |
| 196,110 | | |
| 310,821 | | |
| 63.1 | | |
| 285,023 | | |
| 310,821 | | |
| 91.7 | |
| Non-Halal semi-automated washing line D | |
| 45,695 | | |
| 155,410 | | |
| 29.4 | | |
| 69,157 | | |
| 155,410 | | |
| 44.5 | | |
| 108,165 | | |
| 155,410 | | |
| 69.6 | |
(1)
For illustration purposes only, the processing capacity is determined by identifying the maximum number of tubs (which will contain
the soiled dishware) we can wash per year. In this regard, the processing capacity is calculated based on the following assumptions:
(i) 20.5 operating hours per working day (excluding equipment cleaning time and workers’ lunch break); and (ii) 361 working days
each year for the years ended December 31, 2020, 2021 and 2022 (excluding holidays and regular maintenance).
(2)
For illustration purposes only, the utilization rate is calculated by dividing the actual processing volume by the processing capacity
for the same financial year, which is calculated based on the assumptions set out above.
Other
than for our Halal semi-automated washing line, there was a steady increase in the utilization rates of the washing lines at our Hygieia
Facility from the year ended December 31, 2020 to the year ended December 31, 2022 as (i) the number of food establishments utilizing
our centralized dishwashing services increased; (ii) there was higher footfall and demand for dine-in services at our customers’
food and beverage establishments as a result of the resumption of dine-in services, which resulted in a higher volume of soiled dishware
from our customers; and (iii) additional customers contracted for our centralized dishwashing services.
As
diners in food and beverage establishments usually finish their meals at approximately the same time, customers of our centralized dishwashing
services business generally require the soiled dishware to be washed and returned to their food and beverage establishments during the
day and particularly after mealtimes, with the peak hours being from 3:30 p.m. to 9:30 p.m. on weekdays, even though our Hygieia Facility
operates in three shifts and 20.5 hours per day. Therefore, the average utilization rate of the Halal and non-Halal washing lines at
our Hygieia Facility during peak hours reaches 100%, calculated based on the number of tubs washed divided by the processing capacity
of the respective washing lines, as we have more tubs arriving at our Hygieia Facility than we can process during peak hours.
Impact
of COVID-19 on our business and operations
Singapore
Control Order Regulations
On
April 3, 2020, the Multi-Ministry Taskforce of the Singapore government approved an elevated set of safe distancing measures (“Circuit
Breaker Measures”) due to increasing local transmission of COVID-19. On April 7, 2020, the Singapore Parliament passed the COVID-19
(Temporary Measures) Act 2020 (“COVID-19 Act”), which provides the Singapore government the legal basis to enforce the Circuit
Breaker Measures, and the COVID-19 (Temporary Measures) (Control Order) Regulations 2020 (“Control Order Regulations”) under
the COVID-19 Act to implement the Circuit Breaker Measures. The Control Order Regulations imposed restrictions on premises and businesses
in relation to the closure of premises and controls on essential and non-essential service providers, and the movement of people, both
in public places and in their places of residence. The Control Order Regulations required the closing of most physical workplace premises
and suspension of all business, social and other activities that could not be conducted through telecommuting from home, except for those
providing essential services and in selected economic sectors which are critical for local and global supply chains (“Essential
Services”). Entities providing Essential Services were required to operate with the minimum number of staff on their premises to
ensure the continued running of those services, and to implement strict safe distancing measures. The Control Order Regulations could
be varied or extended, depending on the assessment of the then situation by the Singapore government. The Circuit Breaker Measures were
imposed under the Control Order Regulations during the period between April 7, 2020 and June 1, 2020.
On
May 19, 2020, the Multi-Ministry Taskforce announced that the Circuit Breaker Measures would end on June 1, 2020 and the Multi-Ministry
Taskforce would embark on a controlled approach to resume economic and community activities by progressively lifting the control measures
still in place after June 1, 2020 over three phases, with the first phase to be implemented with effect from June 2, 2020. The three
phases were (a) a “Safe Re-opening” phase, implemented from June 2, 2020 to June 18, 2020 (inclusive), during which economic
activities that did not pose a high risk of transmission (“Permitted Services”) were resumed while social, economic and entertainment
activities that carry a higher risk remained closed, and everyone was advised to continue to leave home only for essential activities
and to wear a mask when doing so (“Phase 1”); (b) a “Safe Transition” phase with the gradual resumption of more
activities including the re-opening of more firms and businesses (“Permitted Enterprises”), subject to safe management measures
being implemented and practiced by employers and employees in these workplaces and their ability to also maintain a safe environment
for their customers, and social activities in small groups of not more than five persons, which were implemented with effect from June
19, 2020 (“Phase 2”); and (c) a “Safe Nation” phase, implemented with effect from December 28, 2020, whereby
social, cultural, religious and business gatherings or events were resumed, although gathering sizes still had to be limited in order
to prevent large clusters from arising, and services and activities that involved significant prolonged close contact or significant
crowd management risk in an enclosed space also were allowed to be re-opened, subject to their ability to implement strict safe management
measures effectively (“Phase 3”).
Between
May 16, 2021 and August 6, 2021, the Singapore government introduced two phases, namely the Phase 2 (Heightened Alert) and Phase 3 (Heightened
Alert), along with the easing of certain measures within each of such phases. In summary, the Phase 2 (Heightened Alert) measures, which
were in effect from May 16, 2021 to June 13, 2021, included reductions in prevailing social gathering group size, sizes of larger scale
events or activities and reinstatement of “work-from-home” as the default at workplaces to minimize workplace interactions,
and the Phase 3 (Heightened Alert) measures, which were in effect from June 14, 2021 to July 19, 2021, were contemplated as a calibrated
reopening and included increases in social gathering group sizes, event size and capacity limits, and subsequently the resumption of
dining in at food and beverage establishments. On July 20, 2021, the Singapore government announced the reversion back to Phase 2 (Heightened
Alert) measures from July 22, 2021 to August 18, 2021, which superseded the measures introduced on July 19, 2021, during which “work
from home” remained the default, employers who needed staff to return to workplaces were required to ensure that there was no cross-deployment
at various worksites, enforce staggered start times and flexible working hours and social gatherings at workplaces were not allowed.
On
August 6, 2021, the Singapore government announced the easing of some safe management measures, with the first phase to take effect on
August 10, 2021 and the second phase to take effect on August 19, 2021, which superseded those introduced on July 22, 2021 as part of
Singapore’s transition towards COVID-19 resilience. The eased measures allowed for an increase in social gathering group size,
event size and capacity limits for fully vaccinated individuals and easing of “work-from-home” requirements. A further easing
of community measures was announced on August 19, 2021. Subsequently, given the exponential rise in COVID-19 cases from the end of August
2021, on September 24, 2021, the Singapore government announced a tightening of safe management measures during the stabilization period
between September 27, 2021 and October 24, 2021, which was later extended to November 21, 2021, with a mid-point review. On November
8, 2021, the Singapore government announced calibrated adjustment of safe management measures including the easing of dine-in restrictions
and updates to border measures. On December 22, 2021, in response to the global emergence of the Omicron variant, the Singapore government
introduced travel restrictions for affected countries or regions and enhanced the testing requirements for travelers. Effective March
29, 2022, the Singapore government significantly eased COVID-19 restrictions by, among other things, lifting the requirement to wear
masks outdoors, doubling the group size limit to 10 people and lifting the ban on alcohol sales in pubs and eateries after 10:30 p.m.
It also eased testing and quarantine requirements for travelers and declared that up to 75% of employees who can work from home are allowed
to return to their workplaces. Effective April 26, 2022, the Singapore government further eased COVID-19 restrictions by, among other
things, (i) allowing employees to remove their masks at their workstations when they are not interacting physically with others and when
they are not in customer-facing areas; (ii) removing the group size limit and safe distancing requirement between individuals or between
groups; (iii) allowing all employees to return to their workplaces; and (iv) removing all capacity limits.
Impact
on our suppliers and sub-contractors
Our
suppliers and sub-contractors were affected by the Circuit Breaker Measures if they did not constitute providers of Essential Services
and were required to suspend their businesses and operations. During the Circuit Breaker Period, our Group did not experience any material
supply chain disruption (including delivery time and pricing) in respect of our sale of cleaning systems and other equipment business
and our centralized dishwashing and ancillary services business. In addition, during the Circuit Breaker Period, we agreed with all our
sub-contractors for on-site cleaning services for food and beverage establishment and logistics service providers on reductions in fees
given that they had provided reduced manpower and/or services as our customers, which are food and beverage establishments, were required
to suspend dine-in operations under the Circuit Breaker Measures, which had resulted in reduced sub-contracting costs for our on-site
cleaning services and reduced logistics costs.
During
Phase 1, entities providing Permitted Services, which included manufacturing and wholesale trade, were allowed to resume normal operations.
As of April 24, 2022, (i) we had not been informed by any supplier and/or sub-contractor for our sale of cleaning systems and other equipment
business that their business had not yet resumed operations or that there would be any delays in parts required for our ongoing orders;
and (ii) we had not encountered any disruption in the supply of rinsing aids and drying aids from our supplier for our provision of centralized
dishwashing services.
As
of April 2023, our businesses have essentially returned to pre-COVID-19 levels.
Impact
on our business and revenue
(1)
Sale of cleaning systems and other equipment business
In
respect of our sale of cleaning systems and other equipment business, we were permitted under our Continued Operations Plans to continue
operations for the design and manufacture of cleaning systems and other equipment for the semiconductor sector during the Circuit Breaker
Period. During the Circuit Breaker Period from April 7, 2020 to June 1, 2020 (inclusive), our Group obtained four new orders for the
semiconductor industry and three new orders from customers in non-semiconductor sectors for sale of cleaning systems and other equipment,
with total contract value of approximately S$0.6 million, and delivered 12 orders, with total contract value of approximately S$0.4 million.
In addition, while there were short delays experienced for certain contracts, the affected customers agreed to the revised delivery schedule
with no additional costs or penalties to be incurred by us, and none of our customers cancelled or terminated their orders and agreements
with our Group.
During
the Circuit Breaker Period, we were permitted to continue operations at our JCS Facility with a reduced workforce and with safe distancing
measures in place. Notwithstanding the reduced workforce during the Circuit Breaker Period, there were sufficient employees carrying
out the technical support and manufacturing functions at our JCS Facility to fulfill the outstanding orders, while the rest of the employees,
such as those carrying out finance and accounting, research and development and engineering functions, were able to carry out their work
from home. Accordingly, we were able to continue to operate with a reduced workforce physically attending work at our production facilities
during the Circuit Breaker Period, to fulfill outstanding orders and to ensure continuity of our Group’s business operations during
such period.
During
Phases 1, 2 and 3, we generally resumed normal business operations at our JCS Facility and in respect of the sale of cleaning systems
and other equipment business of our Group. During the period from January 1, 2021 to November 30, 2021, we had 53 orders for our cleaning
systems and other equipment with an aggregate contract value of approximately S$7.2 million, all of which were delivered during the year
ended December 31, 2021. Between April 7, 2020 (the commencement date of the Circuit Breaker Measures) and April 24, 2023, none of our
customers for our sale of cleaning systems and other equipment business have cancelled or terminated or expressed their intention to
cancel or terminate their contracts or agreements with our Group due to the outbreak of COVID-19.
(2)
Centralized dishwashing and ancillary services business
In
respect of our centralized dishwashing and ancillary services business, we experienced a decrease in revenue of approximately 80% in
April and May 2020 during the Circuit Breaker Period, as compared to our revenue in February 2020, as only 17 food and beverage establishments
for which we provided centralized dishwashing services maintained normal operations.
As
dine-in operations at food and beverage establishments continued to be suspended during Phase 1, we experienced a further decrease in
revenue of approximately 62.6% in June 2020, as compared to our revenue in February 2020.
During
Phases 2 and 3, we resumed the provision of our centralized dishwashing services and general cleaning services for most of our customers.
From January 1, 2021 to April 24, 2022, we obtained new contracts for 42 food and beverage establishments, with total annual contract
value of approximately S$0.4 million for our provision of centralized dishwashing and general cleaning services business. As of April
24, 2022, we had ongoing contracts with 92 food and beverage establishments for the provision of centralized dishwashing services and
general cleaning services and ongoing contracts with 16 customers for the leasing of dishwashing equipment. For the period beginning
from April 7, 2020 (the commencement date of the Circuit Breaker Measures) to April 24, 2022, only 11 of our customers for our provision
of centralized dishwashing and ancillary services business cancelled or terminated or expressed their intention to cancel or terminate
their contracts or agreements with our Group due to the outbreak of COVID-19.
In
view of the exceptional situation, we agreed on a fee reduction arrangement with our customers who requested such reduction in fees due
to the lower footfall at their food and beverage establishments even though dine-in services had resumed in Phase 2 and Phase 3, and
hence required less centralized dishwashing and general cleaning services from our Group. We experienced a decrease in revenue from our
provision of centralized dishwashing and ancillary services business of approximately 25.7% for the year ended December 31, 2020, as
compared to our revenue for the year ended December 31, 2019. Our revenue for the year ended December 31, 2021 from our provision of
centralized dishwashing and ancillary services business showed an increase of approximately 30.0% as compared to our revenue for the
year ended December 31, 2020. Our revenue for the year ended December 31, 2022 from our provision of centralized dishwashing and ancillary
services business showed an increase of approximately 24.2% as compared to our revenue for the year ended December 31, 2021.
Impact
on our financial performance
Although
we were able to continue operations and fulfill outstanding orders under our sale of cleaning systems and other equipment business, the
global outbreak of the COVID-19 pandemic disrupted our operations, as well as the operations of our customers, suppliers and/or sub-contractors.
Accordingly, during the year ended December 31, 2020, there were delays in a total of 12 orders with total contract value of approximately
S$7.3 million under our sale of cleaning systems and other equipment business, of which (i) nine orders with total contract value of
approximately S$4.5 million were delayed for one to three months and were subsequently delivered and the relevant revenue was fully recognized
for the year ended December 31, 2020; and (ii) three orders with total contract value of approximately S$2.8 million were delayed for
seven to 10 months, S$1.1 million of which were delivered during the year ended December 31, 2021 and the balance of which were delivered
during the year ended December 31, 2022. The revenue from these orders was recognized upon delivery to the respective customers.
Such orders were delayed primarily due to (a) delay in delivery by the supplier of materials and components; (b) delay in finalizing
the design of the products by the customer; and (c) request by the customer to delay delivery as its production facilities were not ready
to receive products.
In
addition, one customer requested that three orders be expedited to meet their production schedule. These orders, which had a total contract
value of approximately S$0.3 million, were originally due for delivery during the year ended December 31, 2021. Instead, we completed
and delivered these three orders during the year ended December 31, 2020 and the revenue from these orders was recognized upon delivery
to the customer.
No
delays of orders occurred during the financial year ended December 31, 2022.
Impact
on our workforce
During
the Circuit Breaker Period, a certain number of employees per day were permitted to carry out operations at our JCS Facility with safe
distancing measures in place under our Continued Operations Plans, which were sufficient to carry out the technical support and manufacturing
function at our JCS Facility and fulfil outstanding orders during such period. The rest of the employees, such as those carrying out
finance and accounting, research and development and engineering functions, were able to carry out their work from home. The average
daily utilization rate of our major machinery, namely the CNC lathe machine and the laser cutting machine, at our JCS Facility was approximately
122.1% and 121.6%, respectively, for the year ended December 31, 2020. During the Circuit Breaker Period, all our employees employed
by Hygieia were permitted to continue carrying out operations at our Hygieia Facility with safe distancing measures in place.
Further,
pursuant to announcements by the Singapore government on April 21, 2020 and May 2, 2020, daily movement of workers in and out of all
dormitories (i.e., purpose built dormitories, factory converted dormitories, construction temporary quarters and temporary occupation
license quarters) would no longer be allowed from April 21, 2020 to the end of the Circuit Breaker Period (i.e. June 1, 2020). Notwithstanding
the foregoing, JCS received the approval from MTI on April 28, 2020 for our workers to be allowed to move between the dormitory and their
worksite, and the foreign workers employed by Hygieia were unaffected by the advisory as they were not housed in the dormitories or quarters
to which such advisory was applicable.
Upon
the commencement of Phase 1, our employees resumed work at our JCS Facility and Hygieia Facility, with the appropriate safe distancing
measures in place.
Control
measures
During
the height of the COVID-19 pandemic, our Group adopted control measures to protect our employees, workers and customers from outbreaks
of infectious diseases, in line with the advisories issued by the Singapore Ministry of Manpower (the “MOM”) on best practices
to be adopted by workplaces in Singapore, which included (i) asking our staff and workers who interact with our suppliers and other service
providers to wear personal protective equipment (such as face masks and gloves) provided by the Company; and (ii) evaluating our service
contracts and our customers’ food and beverage establishments for the need for increased frequency of on-site cleaning services
to ensure that our services were suitable for their enhanced cleaning needs due to COVID-19. As the COVID-19 pandemic subsided during
2022, we discontinued these practices.
Licenses
and Permits
The
following licenses are material for our Group’s operations:
| Description |
|
Issuing
Authority |
|
Expiry
Date |
|
Issued
to |
| |
|
|
|
|
|
|
| License
to operate a cleaning business |
|
National
Environment Agency (NEA) |
|
February
26, 2024 |
|
Hygieia |
| |
|
|
|
|
|
|
| License
/ Certificate issued under the Radiation Protection Act |
|
NEA |
|
June
30, 2023 |
|
JCS |