Republic Power Group Ltd F-1/A, filed Sep 22, 2023
Republic Power Group Ltd (RPGL)
As filed with the U.S. Securities and Exchange Commission on September 22, 2023
Registration No. 333-266256
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 8
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Republic Power Group Limited
(Exact name of registrant as specified in its charter)
| British Virgin Islands | 7371 | Not Applicable | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
158 Kallang Way #06-08
Singapore, Republic of Singapore
S349245
+65 6908 9825
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19711
(302) 738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)
With a Copy to:
Joan Wu, Esq. Ying Li, Esq. Guillaume de Sampigny, Esq. Hunter Taubman Fischer & Li LLC New York, NY 10022 |
Mark E. Crone, Esq. Liang Shih, Esq. Ron Levy, Esq. The Crone Law Group P.C. 420 Lexington Avenue, Suite 2446 New York, New York 10170 (646) 861-7891 |
Approximate date of commencement of proposed sale to the public: Promptly after the effective date of this registration statement.
| If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. | ☐ | |
| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. | ☐ | |
| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering | ☐ | |
| If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering | ☐ | |
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 | ||
| Emerging growth company | ☒ | |
| If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act | ☐ |
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
| The information in this prospectus is not complete and may be changed. Neither we nor the Selling Shareholders may sell the securities until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting any offer to buy these securities in any jurisdiction where such offer or sale is not permitted. |
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 22, 2023
1,280,000 Ordinary Shares Offered by Republic Power Group Limited
730,000 Ordinary Shares Offered by two Selling Shareholders
Republic Power Group Limited
This is an initial public offering of our ordinary shares, par value $0.000625 per share (“Ordinary Shares”). We are offering 1,280,000 Ordinary Shares, and the selling shareholders named herein (the “Selling Shareholders”) are offering 730,000 Ordinary Shares, in each case, to be sold on a firm commitment basis in this offering. Prior to this offering, there has been no public market for our Ordinary Shares. We expect the initial public offering price will be in the range of $5.00 to $6.00 per Ordinary Share. We have reserved the symbol “RPGL” for purposes of listing our Ordinary Shares on the Nasdaq Capital Market (“Nasdaq”) and have applied to list our Ordinary Shares on Nasdaq. The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application. We cannot assure you that our application will be approved; if it is not approved by Nasdaq, we will not proceed with this offering.
Investing in our Ordinary Shares involves a high degree of risk, including the risk of losing your entire investment. See “Risk Factors” beginning on page 12 to read about factors you should consider before buying our Ordinary Shares.
Upon the completion of this offering, Sai Bin Loi, the chairman of our board of directors, will hold more than 50% of the shareholder voting power of our outstanding share capital, as further described under “Principal Shareholders” in this prospectus. As a result, Mr. Loi could exert substantial influence over matters such as electing directors and approving material mergers, acquisitions, strategic collaborations or other business combination transactions. As a result, we are a “controlled company” as defined under the Nasdaq Stock Market Rules. For so long as we remain a controlled company as defined under those rules, we are exempt from, and our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements. Please read the disclosures beginning on page 23 of this prospectus for more information.
The Selling Shareholders will sell the Ordinary Shares held by them at a fixed price equal to the initial public offering price in this offering. We will not receive any proceeds from the sales of any of the Ordinary Shares being offered by the Selling Shareholders.
We are an “emerging growth company” as defined under the federal securities laws and will be subject to reduced public company reporting requirements. Please read the disclosures beginning on page 23 of this prospectus for more information.
| Initial Public Offering Price | Underwriting Discounts(1) | Proceeds
to Our Company Before Expenses(2)(4) | ||||||||||
| Per Share | $ | 5.50 | $ | 0.44 | $ | 5.06 | ||||||
| Total | $ | 7,040,000 | $ | 563,200 | $ | 6,476,800 | ||||||
| Initial Public Offering Price | Underwriting Discounts(1) | Proceeds
to Selling Shareholders Before Expenses(3)(4) | ||||||||||
| Per Share | $ | 5.50 | $ | 0.44 | $ | 5.06 | ||||||
| Total | $ | 4,015,000 | $ | 321,200 | $ | 3,693,800 | ||||||
| (1) | We have agreed to pay Prime Number Capital LLC (“PNCP”, or the “Representative”) a discount equal to 8% of the gross proceeds of the offering. In addition to the underwriting discounts, we have also agreed to reimburse PNCP, the representative of the underwriters, a non-accountable expense allowance equal to 1% of the gross proceeds of the offering. See “Underwriting” in this prospectus for more information regarding our arrangements with the underwriter. |
| (2) | The total estimated expenses related to this offering are set forth in the section entitled “Discounts and Expenses.” |
| (3) | This only includes the proceeds of the sale of the Ordinary Shares underwritten by the underwriter. We will not receive any proceeds from the sale of Ordinary Shares by the Selling Shareholders. |
| (4) | Assumes that the underwriter does not exercise any portion of its over-allotment option. |
The underwriter is selling our Ordinary Shares in this offering on a firm commitment basis. One of the conditions to our obligation to sell any securities through the underwriter is that, upon the closing of the offering, the Ordinary Shares would qualify for listing on Nasdaq.
We have granted the underwriter an option for a period of 45 days after the closing of this offering to purchase up to 15% of the total number of our ordinary shares to be offered by us (excluding ordinary shares offered by the Selling Shareholders) pursuant to this offering, solely for the purpose of covering over-allotments, at the initial public offering price less the underwriting discounts. If the underwriter exercises its option in full, the total underwriting discounts payable by us will be $647,680 (excluding discounts payable by the Selling Shareholder) based on an assumed offering price of $5.50 per ordinary share, and the total gross proceeds to us, after underwriting discounts and before other offering expenses, will be $7,448,320. The total underwriting discounts payable by the Selling Shareholders are $321,200, based on an assumed offering price of $5.50 per share, and the total proceeds to the Selling Shareholders, after underwriting discounts and before other offering expenses, will be $3,693,800.
Neither the U.S. Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriter expects to deliver the shares to purchasers in the offering on or about [●], 2023.
Prospectus dated [●], 2023.
TABLE OF CONTENTS
i
About this Prospectus
We, the Selling Shareholders and the underwriter have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the Ordinary Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted or where the person making the offer or sale is not qualified to do so or to any person to whom it is not permitted to make such offer or sale. For the avoidance of doubt, no offer or invitation to subscribe for Ordinary Shares is made to the public in the British Virgin Islands. The information contained in this prospectus is current only as of the date on the front cover of the prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.
Other Pertinent Information
Unless otherwise indicated or the context requires otherwise, references in this prospectus to:
| ● | “RP” are to Republic Power Group Limited, a company limited by shares organized under the laws of British Virgin Islands; |
| ● | “RP Singapore” are to Republic Power Pte. Ltd., a wholly owned subsidiary of Republic Power Group Limited and a private limited company incorporated under the laws of Singapore; |
| ● | “SGD” are to the legal currency of Singapore; |
| ● | “shares,” “Shares,” or “Ordinary Shares” are to the ordinary shares of the Company, par value US$0.000625 per share; |
| ● | “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States; and |
| ● | “we,” “us,” or the “Company” are to one or more of RP and its subsidiary, RP Singapore, as the case may be. |
Our consolidated financial statements are presented in SGD, which is RP Singapore’s functional currency. SGD is the currency of the primary economic environment in which we operate. This is also the currency that mainly influences the revenue from and cost of rendering products and services. The balances in the consolidated balance sheets, consolidated statements of income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the year ended and as of June 30, 2022 were translated from SGD into USD are solely for the convenience of the readers, at the rate of USD1.00=SGD1.3903, representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 30, 2022. The balances in the unaudited interim condensed consolidated balance sheets, unaudited interim condensed consolidated statements of income, unaudited interim condensed consolidated statements of changes in shareholders’ equity and unaudited interim condensed consolidated statements of cash flows for the six months ended and as of December 31, 2022 were translated from SGD into USD are solely for the convenience of the readers, at the rate of USD1.00 = SGD1.3404, representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 31, 2022.
ii
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements included elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our Ordinary Shares, discussed under “Risk Factors,” before deciding whether to buy our Ordinary Shares.
Overview
Our Company
We are a provider of customized software development services, technology solutions, consulting and technical support services, and peripheral hardware to large and small to medium corporate clients and government agencies based in Singapore, Indonesia and Malaysia, including but not limited to airports, cruise terminals, technology companies, and law enforcement agencies. Our customized software provides clients with real-time monitoring, efficient resources allocation, planning surveillance and threat detection.
We offer customized software and relevant consulting and technical support services and product sales, catered to each client’s specific needs. One of our key strengths is our ability to fulfill complex requirements by using artificial intelligence for prediction and applying algorithm, modules and plugins to select and analyze operational data captured. We are uniquely positioned in the customization software sector with our ability to further deploy sensors, controls and other hardware and integrate the hardware to provide an IoT connectivity with an autonomous or semiautonomous outcome. Because our core algorithm and modules are pluggable, we are able to quickly develop software for clients in different industries and complete the customization in a much shorter period.
As the world starts to recover from the onslaught of COVID-19, a post COVID-19 paradigm has surfaced, where enterprises and governmental agencies are increasingly focused on understanding existing users’ needs and leveraging technology in new ways to meet those needs through the use of digital products and services which includes conceptualizing, designing, personalizing, prototyping, developing and delivering new digital experiences and products. Our business has benefitted from such trend. Many multinational corporations (the “MNCs”) and small and medium enterprises (“SMEs”) are adopting digital enhancement in their operations by deploying solutions that allow remote operations involving AI for operational predictability and efficiency. By integrating sensors and controls in their operational workflow, the captured data is then analyzed for better planning and supervision. One example of our customized software is our customized trolley management solution designed for an airport client based in Singapore, which allows real-time data capture to predict the number of trolleys required for each inflight at the gates. This solution has greatly benefited the client in terms of their workflow and cost efficiencies. Another example of our solutions is a software developed for a cruise terminal client, which predicts the number and types of languages required by the ground staff to receive each arriving cruise and thus avoids bottlenecks due to language barriers among the ground staff and cruise passengers. The software also integrates the passport photo images from the scanner to a database which greatly improved the entry and departure process at such cruise terminal.
1
Our Competitive Strengths
The market for IT services is highly competitive and we expect competition to intensify. In Singapore, our major competitors in the system integrator space include Singapore Technology Engineering Ltd. and NCS Pte. Ltd., which are both more established and larger than us.
However, we believe the following key strengths differentiate us from our competitors and will continue to contribute to our growth and success:
| ● | Our Scalable Technology. Our core algorithms, modules and plugins, which select and analyze operational data captured, are highly scalable across industries with minimal production cost. We customize the software solutions which contain our core algorithms, modules and plugins in accordance with the specific needs of each client. This cost-saving approach will help us to achieve higher operating margins as we increase the number of our clients. |
| ● | Our Deep Domain Knowledge and Specialization in Selected Industry Verticals. We have deep domain knowledge and expertise in industry verticals including airports, cruise terminals and law enforcement. We leverage footprint and network of highly-talented IT professionals to provide comprehensive capabilities in software development services and consulting services. We believe that our robust emerging technology capabilities and solid track record of execution enable us to drive digital transformation for our clients. |
| ● | Our Comprehensive Offering. We provide comprehensive service offerings including the development and operations (“DevOps”) IT solutions, sale of peripheral hardware, and consulting and technical support services as well as other services. As a result, we are able to generate revenue from a wide range of clientele; and |
| ● | Our dynamic management team with proven track record. Our management team has extensive experience with large-scale nation-wide deployment in countries including Indonesia, Singapore, East Timor, Bhutan, and Republic of Mongolia. Our Chief Operating Officer, Mr. Chan Chee Wai, has worked with the Singaporean government during his employment with Toppan Ecquaria Pte. Ltd. to successfully deliver digital government solutions. Our consultant, Mr. Loi Wee Chong, who was the Deputy Managing Director of ST Teleport c/o ST Telemedia, has worked with RigNet, Inc. (NASDAQ: RNET), a U.S. listed and networking providing company on implementing satellite communication onto offshore rigs and deployed Communication systems with Timor Telecom, an East Timorese telecommunications company; some of the projects include software deployment and communication hardware and software deployment onto offshore rigs. As such, we have already established a seasoned management team with deep industry expertise in several markets where we have enjoyed similar success. |
2
Our Growth Strategies
We have developed and intend to implement the following strategies to expand and grow our business:
| ● | To solidify our industry position by gaining additional market share. By continuing to deliver high quality services and solutions, we intend to pursue additional revenue opportunities from our existing clients, including airports, cruise terminals, technology companies and law enforcement agencies. We will also continue to promote our comprehensive services and solutions to attract new clients in industries including airports, cruise terminals and law enforcement, where we can leverage our deep domain knowledge and expertise. Furthermore, we will continue to invest in a cloud-based IoT platform that benefits both existing clients and new clients, capturing synergies between the companies’ and emerging technologies’ needs to increase operational efficiencies. |
| ● | To leverage domain expertise to expand into new industry segments. As we grow our industry and service area expertise and accumulate deep domain knowledge in the airport, cruise terminal and law enforcement industry verticals, we intend to leverage such experience and knowledge, and partner with top industry experts from other segments to extend our service offerings to the other verticals. In addition, we will continue to invest in research and development (“R&D”) in certain targeted segments, including hospitality and medical technology industries, to develop applications to address the specific needs of those segments. |
| ● | To attract, train, incentivize and retain talented professionals. We believe our success greatly depends on our ability to attract, train, incentivize and retain talented professionals. We will continue to build our professional talent pool through our Talent Creation Program (“TCP”) and Talent Development Program (“TDP”) to ensure we can attract and retain professionals who have in-depth knowledge and understanding of the technologies we deploy and the industries in which we operate. We are discussing with local universities in Singapore to co-develop projects and engage talent internship with us. We will also sponsor competitions in the IT industry in Southeast Asia to promote our reputation among the young talents. We will also work with tertiary institutions to develop on campus hiring, bursary and scholarship programs. |
| ● | To drive efficiencies through ongoing improvements in operational excellence. We strive to gain significant operating efficiencies by leveraging historical and ongoing investments in infrastructure, research and development, and human capital. We will continue to invest in our in-house tools to enhance our efficiencies in operations. On an integrated approach level, we will institute certification across all our process flow via ISO certification, BizSafe certification and Personal Data Protection Policy. |
| ● | To capture new growth opportunities through strategic alliances and acquisitions. We will continue to pursue selective alliances and acquisitions in order to enhance our industry-specific technology and service delivery capabilities by building up acquisitions, collaboration and integrating targeted companies. We will continue to identify and assess opportunities to enhance our abilities to better serve our clients. We will focus on enhancing our technology capabilities, deepening our penetration into key clients, expanding our portfolio of service offerings and expanding our operations geographically in Southeast Asia. |
3
Summary of Risk Factors
Investing in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our Ordinary Shares. The main risks set forth below and others you should consider are discussed more fully in the section entitled “Risk Factors”, which you should read in its entirety.
Risks and uncertainties related to our business and industry include, but are not limited to, the following:
| ● | The COVID-19 pandemic could adversely affect, and is expected to continue to pose risks to, our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact (see page 12 of this prospectus). |
| ● | We are subject to risks associated with operating in the rapidly evolving Southeast Asia region, and we are therefore exposed to various risks inherent in operating and investing in the region (see page 13 of this prospectus). |
| ● | Our ability to continue to develop and expand our service offerings to address emerging business demands and technological trends, including our ability to sell differentiated services, may impact our future growth. If we are not successful in meeting these business challenges, our business, financial condition and results of operations may be materially and adversely affected (see page 14 of this prospectus). |
| ● | Our business is dependent on certain major clients. For the six months ended December 31, 2022, three clients Appiclogy Pte Ltd, Ren Ci Hospital and McCoy Holdings Private Limited, accounted for 52.7%, 23.2 % and 20.0%, of the Company’s total revenues, respectively. For the year ended June 30, 2022, three clients, Payestation Private Limited (“PYS”), Australia Marine Services Pty Ltd (“AMS”), and Smorboll Pte Ltd. accounted for 48.7%, 16.5%, and 15.8% respectively, of the Company’s total revenues. For the six months ended December 31, 2021, three clients, AMS, Heha Pte Ltd (“Heha”), and Appiclogy Pte Ltd accounted for 40.4%, 33.0% and 14.4% of the Company’s total revenues, respectively. For the year ended June 30, 2021, one client, Heha, accounted for 95.1% of the Company’s total revenues (see page 15 of this prospectus). |
| ● | Our business is dependent on our collaboration with our vendors. For the six months ended December 31, 2022, Pangu Procurement Pte Ltd. (“Pangu”), Jenny Liu, and Ottawa Sign Technology Pte Ltd, accounted for 34.1%, 24.0%, and 16.3% of the Company’s total purchases, respectively. For the year ended June 30, 2022, two vendors, LYC Supply and Trading and Pangu, accounted for 17.7% and 16.3% respectively, of the Company’s total purchases. For the six months ended December 31, 2021, two vendors, Pangu, a specialized equipment procurement and consulting company, and Mr. Wee Chong Loi, son of the Mr. Sai Bin Loi who is Company’s shareholder and sole director, accounted for 55.0% and 29.3% of our total purchases, respectively. For the year ended June 30, 2021, two vendors, Ad Navitas Pte Ltd. (“Ad Navitas”) and Mr. Wee Chong Loi, accounted for 42.7% and 39.8%, respectively, of the Company’s total purchases. Changes or difficulties in our relationships with our major vendors may harm our business and financial results (see page 16 of this prospectus). |
| ● | Our independent registered public accounting firm expressed substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations (see page 16 of this prospectus). |
4
| ● | We are subject to privacy, data protection and information security laws in the jurisdictions in which we operate (see page 17 of this prospectus). |
| ● | We might be required to use open-source software in providing services to our clients. There are risks associated with the use of open-source software that may have an adverse effect on our results of operations and financial condition (see page 19 of this prospectus). |
Risks and uncertainties related doing business in Southeast Asia include, but are not limited to, the following:
| ● | Uncertainties with respect to the legal system in certain markets in Southeast Asia could adversely affect us (see page 20 of this prospectus). |
| ● | It will be difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets outside the United States (see page 20 of this prospectus). |
Risks related to this offering and our ordinary shares include, but are not limited to, the following:
| ● | There has been no public market for our ordinary shares prior to this offering, and you may not be able to resell our ordinary shares at or above the price you pay for them, or at all (see page 21 of this prospectus). |
| ● | We do not intend to pay dividends for the foreseeable future (see page 21 of this prospectus). |
| ● | The initial public offering price for our ordinary shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile (see page 21 of this prospectus). |
| ● | We are a “foreign private issuer” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects (see page 25 of this prospectus). |
| ● | We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors (see page 25 of this prospectus). |
5
Corporate Structure
We are a holding company incorporated in the British Virgin Islands on November 17, 2021 under the BVI Business Companies Act (Law Revision 2020) (the “BVI Act”). We conduct all our operations through RP Singapore, which was incorporated on January 1, 2015 under the laws of Republic of Singapore. On November 17, 2021, we acquired all the equity interest of RP Singapore via a certain share exchange agreement with Mr. Sai Bin Loi, who was the owner of 100% of the equity interest of RP Singapore.
Increase of Authorized Shares and Forward Split
On April 21, 2022, our shareholders and the board approved the Company’s amended and restated memorandum and articles of association to effectuate an increase of the authorized shares of our Company to unlimited shares and a forward split of the then issued and outstanding shares at a ratio of 1:1,600. The increase of authorized shares and the forward split became effective on April 21, 2022.
Forward Split and Reverse Split in 2023
On August 16, 2023, we implemented a 1 for 1.5625 forward share split of our ordinary shares under British Virgin Islands law, or the “Forward Split”. As a result of the Forward Split, the total of 16,000,000 issued and outstanding ordinary shares prior to the Forward Split was increased to a total of 25,000,000 issued and outstanding ordinary shares. The Forward Split was implemented in connection with the valuation of the Company. The Forward Split maintained our existing shareholders’ percentage ownership interests in our Company. The Forward Split also decreased the par value of our ordinary shares from $0.000625 to $0.0004 and the number of authorized shares of our Company remained as unlimited.
However, due to ASC 505-10-S-99-4 (SAB Topic 4.C) and ASC 260-10-55-12, we have to revise the consolidated financial statements included in Form F-1 to reflect the Forward Split. Due to the merger between Friedman (our former auditor) and Marcum Asia (our current auditor), which resulted in the pending withdrawal of Friedman’s registration with the PCAOB, Friedman cannot revise its audit report included in Form F-1 to reflect the retrospective restatement for the change in capital structure. Rather than restating the previously issued financial statements and obtaining a revised audit report, on August 29, 2023, we implemented a 1.5625 for 1 reverse share split (the “Reverse Split”) of our ordinary shares under British Virgin Islands Law. As a result of the Reverse Split, the total of 25,000,000 issued and outstanding ordinary shares prior to the Reverse Split was decreased back to a total of 16,000,000 issued and outstanding ordinary shares. The Reverse Split maintained our existing shareholders’ percentage ownership interests in our Company. The Reverse Split also increased the par value of our ordinary shares from $0.0004 back to $0.000625, and the number of authorized shares remains as unlimited.
The following diagram illustrates our corporate structure as of the date of this prospectus and as of the closing of this offering (for purpose of the illustration of this chart only, assuming the over-allotment option is not exercised). For more details on our corporate history, please refer to “Corporate History and Structure.”
6
Implications of Being an Emerging Growth Company
As a company with less than US$1.235 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015), or the JOBS Act. An “emerging growth company” may take advantage of reduced reporting requirements that are otherwise applicable to larger public companies. In particular, as an emerging growth company, we:
| ● | may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations; |
| ● | are not required to provide a detailed narrative disclosure discussing our compensation principles, objectives and elements and analyzing how those elements fit with our principles and objectives, which is commonly referred to as “compensation discussion and analysis”; |
| ● | are not required to obtain an attestation and report from our auditors on our management’s assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; |
| ● | are not required to obtain a non-binding advisory vote from our shareholders on executive compensation or golden parachute arrangements (commonly referred to as the “say-on-pay,” “say-on frequency” and “say-on-golden-parachute” votes); |
| ● | are exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and chief executive officer pay ratio disclosure; |
| ● | are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act; and |
| ● | will not be required to conduct an evaluation of our internal control over financial reporting until our second annual report on Form 20-F following the effectiveness of our initial public offering. |
We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under §107 of the JOBS Act.
Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions until we no longer meet the definition of an emerging growth company. The JOBS Act provides that we would cease to be an “emerging growth company” at the end of the fiscal year in which the fifth anniversary of our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, herein referred to as the Securities Act occurred, if we have more than $1.235 billion in annual revenue, have more than $700 million in market value of our Ordinary Share held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.
7
Implication of Being a Foreign Private Issuer
We are a “foreign private issuer,” as defined in Rule 405 under the Securities Act and Rule 3b-4(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.
As we intend to be listed on the Nasdaq Capital Market, we will be subject to the Nasdaq corporate governance listing standards. However, Nasdaq permits a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in British Virgin Islands which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. For instance, we are not required to:
| ● | adhere to certain more stringent disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements applicable to U.S. domestic public companies; |
| ● | have a majority of the board to be independent (although all of the members of the audit committee must be independent under the Exchange Act); |
| ● | have a compensation committee or a nominating or corporate governance committee consisting entirely of independent directors; |
| ● | have regularly scheduled executive sessions for non-management directors; or |
| ● | have annual meetings and director election; |
Following this offering, we expect to rely on home country practice to be exempted from certain of the corporate governance requirements of Nasdaq, such that a majority of the directors on our board of directors are not required to be independent directors, and we are not required to have a compensation committee or corporate governance committee comprised entirely of independent directors.
Implications of being 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 those rules, we are exempt from, and our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements, including that:
| ● | a majority of our board of directors must be independent directors; |
| ● | our compensation committee must be composed entirely of independent directors; and |
| ● | our corporate governance and nomination committee must be composed entirely of independent directors. |
Corporate Information
Our principal executive offices are located at 158 Kallang Way #06-08, Singapore, Republic of Singapore, S349245, and our phone number is +65 6908 9825. Our registered office in the British Virgin Islands is located at Vistra Corporate Services Center, Wickhams Cay II, Road Town, Tortola. VG1110, British Virgin Islands. We maintain a corporate website at https://republicpower.net/. The information contained in, or accessible from, our website or any other website does not constitute a part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711.
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THE OFFERING
| Ordinary Shares offered by us | 1,280,000 Ordinary Shares (or 1,472,000 Ordinary Shares, assuming that the underwriter’s over-allotment option is exercised in full) | |
| Over-Allotment Option | We have granted the underwriter an over-allotment option exercisable up to 45 days after the closing of this offering to purchase up to an additional 15% of the ordinary shares sold in this offering by us (not including ordinary shares offered by the Selling Shareholders) on the same terms as the other ordinary shares being purchased by the underwriter from us. | |
| Price per Ordinary Share | We estimate that the initial public offering price will be between US$5.00 and US$6.00 per Ordinary Share. | |
| Ordinary Shares offered by the Selling Shareholders | 730,000 Ordinary Shares | |
|
Ordinary Shares issued and outstanding prior to completion of this offering
|
16,000,000 Ordinary Shares | |
| Ordinary Shares outstanding immediately after this offering | 17,280,000 Ordinary Shares (or 17,472,000 Ordinary Shares, assuming that the underwriter’s over-allotment option is exercised in full) | |
| Listing | We have applied to list our Ordinary Shares on Nasdaq under the symbol “RPGL.” The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application. We cannot assure you that our application will be approved; if it is not approved by Nasdaq, we will not proceed with this offering. | |
| Ticker symbol | “RPGL” | |
| Transfer Agent | Transhare Corporation | |
| Use of proceeds |
We estimate that the net proceeds to us from the Ordinary Shares offered by us in the Offering will be approximately US$5,593,969, assuming the initial public offering price is $5.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, and the over-allotment option is not exercised. We intend to use the net proceeds from this Offering for research and development, investment in marketing and branding, and other capital expenditures, recruitment of talented professionals, and general corporate purposes and possible future acquisitions and growth opportunities.
We will not receive any of the proceeds from the sale of the Ordinary Shares being offered by the Selling Shareholders.
See “Use of Proceeds” on page 30 for more information. | |
| Risk factors | The Ordinary Shares offered hereby involve a high degree of risk. You should read “Risk Factors,” beginning on page 12 for a discussion of factors to consider before deciding to invest in our Ordinary Shares. |
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The following tables summarize our selected consolidated financial data for the periods and as of the dates indicated. The summary consolidated statements of income for the years ended June 30, 2021 and 2022, and the summary consolidated balance sheet data as of June 30, 2021 and 2022 are derived from our consolidated financial statements, which have been prepared in accordance with U.S. GAAP and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), and included elsewhere in this prospectus. The summary consolidated statements of income for the six months ended December 31, 2021 and 2022, and the summary consolidated balance sheet data as of December 31, 2022 and 2021 are derived from our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP, and included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data together with our consolidated financial statements and related notes appearing elsewhere in this prospectus as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements appearing elsewhere in the prospectus.
Selected Statements of Operations Information:
| For the Six Months Ended December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Consolidated Statements of Income: | ||||||||||||
| Operating revenues | 1,237,768 | 150,010 | 111,914 | |||||||||
| Cost of revenues | (181,815 | ) | (51,269 | ) | (38,249 | ) | ||||||
| Gross profit | 1,055,953 | 98,741 | 73,665 | |||||||||
| Operating expenses | (810,001 | ) | (1,484,408 | ) | (1,107,437 | ) | ||||||
| Income (loss) from operations | 245,952 | (1,385,667 | ) | (1,033,772 | ) | |||||||
| Other expense, net | (36,719 | ) | (1,155 | ) | (861 | ) | ||||||
| Income taxes expense | (36,451 | ) | (744 | ) | (555 | ) | ||||||
| Net income (loss) | 172,782 | (1,387,566 | ) | (1,035,188 | ) | |||||||
| Weighted average number of ordinary shares outstanding, basic and diluted* | 16,000,000 | 16,000,000 | 16,000,000 | |||||||||
| Earnings per share, basic and diluted* | 0.01 | (0.09 | ) | (0.06 | ) | |||||||
| For the Years Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Consolidated Statements of Income: | ||||||||||||
| Operating revenues | 8,818,182 | 4,465,134 | 3,211,634 | |||||||||
| Cost of revenues | (4,300,206 | ) | (1,009,077 | ) | (725,798 | ) | ||||||
| Gross profit | 4,517,976 | 3,456,057 | 2,485,836 | |||||||||
| Operating expenses | (1,871,984 | ) | (1,411,788 | ) | (1,015,456 | ) | ||||||
| Income from operations | 2,645,992 | 2,044,269 | 1,470,380 | |||||||||
| Other expense, net | (15,845 | ) | (70,605 | ) | (50,784 | ) | ||||||
| Income taxes expense | (454,144 | ) | (332,921 | ) | (239,460 | ) | ||||||
| Net income | 2,176,003 | 1,640,743 | 1,180,136 | |||||||||
| Weighted average number of ordinary shares outstanding, basic and diluted* | 16,000,000 | 16,000,000 | 16,000,000 | |||||||||
| Earnings per share, basic and diluted* | 0.14 | 0.10 | 0.07 | |||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
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| As of December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Summary Consolidated Balance Sheet Data | ||||||||||||
| Cash | 194,646 | 27,104 | 20,220 | |||||||||
| Total current assets | 1,609,472 | 1,811,353 | 1,351,352 | |||||||||
| Total other assets | 3,209,329 | 3,499,773 | 2,610,992 | |||||||||
| Total assets | 4,998,811 | 5,455,565 | 4,070,102 | |||||||||
| Total current liabilities | 1,695,297 | 2,079,635 | 1,551,502 | |||||||||
| Total other liabilities | 68,289 | 60,310 | 44,995 | |||||||||
| Total liabilities | 1,763,586 | 2,139,945 | 1,596,497 | |||||||||
| Total shareholders’ equity | 3,235,225 | 3,315,620 | 2,473,605 | |||||||||
| As of June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Summary Consolidated Balance Sheet Data | ||||||||||||
| Cash | 4,142 | 23,311 | 16,767 | |||||||||
| Total current assets | 2,342,064 | 3,226,609 | 2,320,800 | |||||||||
| Total other assets | 2,865,183 | 3,499,773 | 2,517,279 | |||||||||
| Total assets | 5,381,790 | 6,889,692 | 4,955,543 | |||||||||
| Total current liabilities | 1,116,164 | 2,123,251 | 1,527,189 | |||||||||
| Total other liabilities | 70,183 | 63,255 | 45,497 | |||||||||
| Total liabilities | 1,186,347 | 2,186,506 | 1,572,686 | |||||||||
| Total shareholders’ equity | 4,195,443 | 4,703,186 | 3,382,857 | |||||||||
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An investment in our Ordinary Shares involves a high degree of risk. Before deciding whether to invest in our Ordinary Shares, you should consider carefully the risks described below, together with all of the other information set forth in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes. If any of these risks actually occurs, our business, financial condition, results of operations or cash flow could be materially and adversely affected, which could cause the trading price of our Ordinary Shares to decline, resulting in a loss of all or part of your investment. The risks described below and in the documents referenced above are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business. You should only consider investing in our Ordinary Shares if you can bear the risk of loss of your entire investment.
Risks Related to Our Business and Industry
The COVID-19 pandemic could adversely affect, and is expected to continue to pose risks to, our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.
The spread of COVID-19 pandemic has caused significant disruptions in Singapore and the global economies, and the impact may continue to be significant during the rest of the calendar year and potentially beyond. We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The COVID-19 pandemic has caused disruptions to our operations starting in January 2020. Our operations were closed in April 2020 due to Singapore government mandates. We moved quickly to transition our employee base to a fully remote working mode at all our locations since then. From the beginning of December 2021, substantially all of our employees came back in person in our office. Since the COVID-19 pandemic has been gradually contained in Singapore and Southeast Asia, our revenue and gross margin for the years ended June 30, 2022 and for the 6 month period ended December 31 2022 were not significantly affected. We continue to evaluate the global risks and the slowdown in business activity related to COVID-19, including the potential impacts on our employees, customers, suppliers and financial results.
COVID-19 has impacted Singapore’s economy resulting in significant economic contraction and high unemployment rates during fiscal year 2021. In fiscal year 2022, Singapore has slowly opened up and remove some of the COVID-19 restriction, however, the general economy recovery has been slow. The general economic downturn may affect the ability of our counterparties to perform their obligations in a timely manner or at all. Singapore government measures to alleviate the economic impact of COVID-19 such as the imposition of relief from actions for inability to perform scheduled contracts, or relief for financially distressed individuals, firms and other businesses could adversely affect our ability to enforce and require our counterparties to perform their obligations under our contracts.
The COVID-19 pandemic or other epidemics or outbreaks of infectious diseases could materially adversely impact our results of operations, financial condition and liquidity in several ways. In particular, the continued spread of COVID-19 and efforts to contain the virus could:
| ● | impair the Company’s ability to manage day-to-day service and product delivery; |
| ● | continue to impact customer demand of our products and services; |
| ● | cause disruptions in or closures of the Company’s operations or those of its customers and suppliers; |
| ● | impact global liquidity and the availability of capital; |
| ● | cause the Company to experience an increase in costs as a result of the Company’s emergency measures, delayed payments from customers and uncollectible accounts; |
| ● | cause delays and disruptions in the supply chain resulting in disruptions in the commercial operations of our businesses; |
| ● | cause limitations on our employees’ ability to work and travel; |
| ● | impact availability of qualified personnel; |
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| ● | increase cybersecurity risks as remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic; and |
| ● | cause other unpredictable events. |
As the situation surrounding COVID-19 remains fluid, it is difficult to predict the duration of the pandemic and the impact on our business, operations, financial condition and cash flows. For the six months ended December 31, 2022, we have not experienced material impacts of the COVID-19. The severity of the impact on our business in the fiscal year ended June 30, 2023 will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic (including the advent of variants and the impact of vaccination on infection and hospitalization rates), the extent and severity of the impact on our customers and suppliers, the continued disruption to the manufacturing of and demand for our products and services; the effect of federal, state or local regulations regarding safety measures to address the spread of COVID-19, and the impact of the global business and economic environment on liquidity and the availability of capital, all of which are uncertain and cannot be predicted. Due to the evolving and uncertain nature of this event, we cannot predict at this time the full extent to which the COVID-19 pandemic will adversely impact our business, results and financial condition, which will depend on many factors that are not known at this time. We are staying in close communication with our employees, customers and suppliers, and acting to mitigate the impact of this dynamic and evolving situation, but there is no guarantee we will be able to do so.
We are subject to risks associated with operating in the rapidly evolving Southeast Asia region, and we are therefore exposed to various risks inherent in operating and investing in the region.
For the six months ended December 31, 2022, and for the years ended June 30, 2022 and 2021, we derived 100%, 100% and 100% of our revenue from our operations in countries located in Southeast Asia. We intend to continue to develop and expand our business and capacity in Southeast Asia with our current and potential clients. Our operations in Southeast Asia are subject to various risks related to the economic, political and social conditions of the countries in which we operate, including risks related to the following:
| ● | inconsistent regulations, licensing and legal requirements may increase our cost of operations among the countries in Southeast Asia in which we operate; |
| ● | currencies may be devalued or may depreciate or currency restrictions or other restraints on transfer of funds may be imposed; |
| ● | the effects of inflation within Southeast Asia generally and/or within any specific country in which we operate in Southeast Asia; |
| ● | governments may impose new or more burdensome regulations, taxes or tariffs; |
| ● | political changes may lead to changes in the business environments in which we operate; |
| ● | economic downturns, political instability, civil disturbances, military conflict, terrorism and general security concerns in the countries in which either we or our clients operate may negatively affect our operations; |
| ● | enactment or any increase in the enforcement of regulations related to personal data protection in the areas in which we operate that may incur compliance costs; |
| ● | health epidemics (including the COVID-19 pandemic) may affect our operations and demand for our services; and |
| ● | natural disasters like volcano and earthquakes may impact our operational sites severely. |
Additionally, the laws in the countries in which we operate may change and their interpretation and enforcement may involve significant uncertainties that could limit the reliability of the legal protections available to us. We cannot predict the effects of future developments in the legal regimes in the countries in which we operate.
13
Our business is dependent on our ability to attract and retain highly skilled professionals.
Our business is people and skill-driven and, accordingly, our success depends on our ability to attract, develop, motivate, retain and effectively utilize highly skilled professionals in our offices in Singapore, among other places. We believe that there is significant competition for talented personnel with such skills in these geographic regions and that such competition is likely to continue for the foreseeable future. We compete for such talented personnel not only with other companies in our industry but also with companies in adjacent industries, such as financial services and technology generally.
Increased hiring and increasing worldwide competition for skilled personnel may lead to a shortage in the availability of suitable personnel in the locations where we operate and hire and, accordingly, we may not be able to retain or hire all of the personnel necessary to meet our ongoing and future business needs. In addition, any reductions in headcount for economic or business reasons, however temporary, could negatively affect our reputation as an employer and our ability to hire engineering personnel to meet our business requirements.
If we fail to attract and retain highly skilled engineering personnel, we may not have the necessary resources to properly staff projects, and the failure to successfully compete for such personnel could materially and adversely affect our ability to provide high quality services to our clients. These factors may, as a result, have a material adverse effect on our business, financial condition and results of operations.
Our ability to continue to develop and expand our service offerings to address emerging business demands and technological trends, including our ability to sell differentiated services, may impact our future growth. If we are not successful in meeting these business challenges, our business, financial condition and results of operations may be materially and adversely affected.
Our ability to implement solutions for our customers, incorporating new developments and improvements in technology that translate into productivity improvements for our customers, and our ability to develop digital and other new service offerings that meet current and prospective customers’ needs, as well as evolving industry standards, are critical to our success. The markets we serve are highly competitive and characterized by rapid technological change which has resulted in deflationary pressure in the price of services, which in turn can adversely impact our margins. Our competitors may develop solutions or services that make our offerings obsolete or may force us to decrease prices on our services, which can result in lower margins. Our ability to develop and implement up-to-date solutions utilizing new technologies that meet evolving customer needs in consulting, industry software and solutions, and application services markets, and in areas such as artificial intelligence, in a timely or cost-effective manner, will impact our ability to retain and attract customers and our future revenue growth and earnings.
However, there can be no assurance that our existing and new service offerings can meet prospective customers’ needs and evolving industry standards. If we are unable to continue to execute our strategy and develop and expand our service offerings in a highly competitive and rapidly evolving environment, or if we are unable to commercialize such services and solutions and expand and scale them with sufficient speed and versatility, our growth, productivity objectives and profit margins could be adversely affected.
Technological developments may materially affect the cost and use of technology by our customers. Customers may delay spending under existing contracts and engagements and entering into new contracts while they evaluate new technologies. Such delays can negatively impact our results of operations if the pace and level of spending on new technologies by some of our customers is not sufficient to make up any shortfall from delays from other customers. Our growth strategy focuses on responding to these types of developments by driving innovation that will enable us to expand our services offering. If we do not sufficiently invest in new technology and adapt to industry developments, or evolve and expand our business at sufficient speed and scale, or if we do not make the right strategic investments to respond to these developments and successfully drive innovation, our business, financial condition and results of operations, as well as our services and solutions and our ability to develop and maintain a competitive advantage and to execute on our growth strategy could be adversely affected.
14
If we do not succeed in attracting new clients for our technology services and/or growing revenues from existing clients, we may not achieve our revenue growth goals.
We plan to significantly expand the number of clients we serve to diversify our client base and grow our revenues. We continue to invest in marketing and new business development as part of our growth strategy. Revenues from a new client often rise quickly over the first several years following our initial engagement as we expand the services that we provide to that client. Therefore, obtaining new clients is important for us to achieve rapid revenue growth. Our ability to attract new clients, as well as our ability to grow revenues from our existing clients, depends on a number of factors, including our ability to offer high quality technology services at competitive prices, the strength of our competitors and the capabilities of our marketing and sales teams to attract new clients and to sell additional services to existing clients. If we fail to attract new clients or to grow our revenues from existing clients in the future, we may not be able to grow our revenues as quickly as we anticipate or at all.
Our business is dependent on certain major clients and changes or difficulties in our relationships with our major clients may harm our business and financial results.
For the six months ended December 31, 2022, three clients Appiclogy Pte Ltd, Ren Ci Hospital and McCoy Holdings Private Limited, accounted for 52.7%, 23.2 % and 20.0% of the Company’s total revenues, respectively. For the year ended June 30, 2022, three clients, PYS, AMS, and Smorboll Pte Ltd. Accounted for 48.7%, 16.5%, and 15.8% respectively, of the Company’s total revenues. For the six months ended December 31, 2021, three clients, AMS, Heha Pte Ltd (“Heha”), and Appiclogy Pte Ltd accounted for 40.4%, 33.0% and 14.4% of the Company’s total revenues, respectively. For the year ended June 30, 2021, one client, Heha, accounted for 95.1% of the Company’s total revenues.
If we cannot maintain long-term relationships with the major client or replace the major clients from period to period with equivalent clients, the loss of such sales could have an adverse effect on our business, financial condition and results of operations. In addition, some of our clients are also concentrated in certain highly regulated industries like airports, cruise terminals and law enforcement agencies, that are, or may be, increasingly subject to governmental regulation, sanctions and intervention. Increased regulation, changes in existing regulation or increased governmental intervention in the industries in which our clients operate may adversely affect the growth of their respective businesses and therefore negatively impact our revenues. Any economic or political event or regulatory developments or worsening economic conditions affecting our clients could cause a reduction of the ability of our clients to purchase our services, which may adversely affect our business, financial condition and results of operations.
15
Our business is dependent on our collaboration with our vendors and changes or difficulties in our relationships with our vendors may harm our business and financial results.
Our business is substantially dependent on our collaboration with our vendors. We consider major vendors in each period to be those that accounted for more than 10% of overall purchases, or whose accounts payable balances individually represented 10% or more of our total accounts payable in such period.
For the six months ended December 31, 2022, three vendors, Pangu, Jenny Liu, and Ottawa Sign Technology Pte Ltd, accounted for 34.1%, 24.0%, and 16.3% of the Company’s total purchases, respectively. For the year ended June 30, 2022, two major vendors, LYC Supply and Trading and Pangu, accounted for 17.7% and 16.3% respectively, of the Company’s total purchases. For the six months ended December 31, 2021, two vendors, Vendor D, a specialized equipment procurement and consulting company, and Mr. Wee Chong Loi, son of the Company’s shareholder and sole director, Mr. Sai Bin Loi, accounted for 55.0% and 29.3% of our total purchases, respectively. For the year ended June 30, 2021, two vendors, Ad Navitas and Mr. Wee Chong Loi, accounted for 42.7% and 39.8%, respectively, of the Company’s total purchases.
Our vendors may fail to meet timelines or contractual obligations, which may adversely affect our business. RP Singapore generally enters into agreements with them without imposing any contractual obligations requiring them to maintain their relationships with us beyond the contractual term. Although we believe that relationships with our existing vendors are strong, there is no guarantee for future cooperation and there is no assurance that RP Singapore can maintain stable and long-term business relationships with any vendors. If a significant number of the industry vendors terminate or do not renew their agreements with RP Singapore and it is not able to replace these business partners on commercially reasonable terms in a timely manner or at all, our business, results of operations and financial condition would be materially and adversely affected.
Our independent registered public accounting firm expressed substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations.
Our financial statements appearing at the end of this prospectus have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties related to our ability to operate on a going concern basis. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.
Our independent registered public accounting firm included an explanatory paragraph in its audit report on our financial statements as of and for the year ended June 30, 2022, stating that we did not have sufficient cash balance as of June 30, 2022, which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to raise additional capital. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all. Further, if we cannot continue as a going concern, we may be forced to discontinue operations and liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, which would cause holders of our ordinary shares and our shareholders to lose all or a part of their investment.
16
We are subject to privacy, data protection and information security laws in the jurisdictions in which we operate.
Generally, personal information which is captured, selected and analyzed by our software is stored in our client’s proprietary systems to which our employees have user access. Although we have employed measures to protect against unauthorized access of such personal, confidential and proprietary information, as the complexity of information infrastructure continues to grow, the potential risk of security breaches and cyber-attacks increases. Such breaches can lead to shutdowns or system interruptions, and potential unauthorized disclosure of sensitive or confidential information which may result in potentially costly litigation. If any person, including any of our employees, penetrates our network security or otherwise mismanages or misappropriates sensitive or confidential client or customer data, we could be subject to significant fines for violating privacy or data protection and consumer laws or lawsuits from our clients or their customers for breaching contractual confidentiality provisions which could result in negative publicity, legal liability, loss of clients and damage to our reputation. We may be liable for any misappropriation of customers’ personal information which could also harm our relationship with our clients, and/or cause us to suffer financial losses and/or reputational harm. We may also be liable for damages in the case of such a security or network breach that results in an unauthorized or impermissible disclosure of client or customer data and information. Moreover, our insurance coverage for breaches or mismanagement of such data may not be sufficient to cover one or more large claims against us and our insurers may disclaim coverage as to any future claims.
Under data protection and personal information laws, we are typically required to manage, utilize and store sensitive or confidential client and customer data in connection with the services we provide. In Singapore, under the Personal Data Protection Act 2012, No. 26 of 2012 of Singapore, we are also required to, among others, notify individuals of: the purposes for the collection, use or disclosure of their personal data prior to such collection, use or disclosure and obtain the consent of individuals for any collection, use or disclosure of their personal data.
Furthermore, we are subject to local data protection laws, consumer laws and/or “do not call list” regulations in most of the countries in which we operate, all of which may require us to make additional expenditures to ensure compliance with these regulations or future additional regulations. We also believe that we will be subject to additional such laws and regulations in the future that may be stricter than those currently in force. Although we take extensive efforts to comply with such applicable laws and regulations, failure or perceived failure by us to comply with rapidly evolving privacy and security laws, policies (including our own policies, which we may update from time to time), legal obligations or industry standards may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity, could require us or our clients to change our or their business practices and could cause our clients to lose trust in us.
We seek to implement measures to protect sensitive and confidential client and customer data in accordance with client contracts and data protection laws and consumer laws. If any person, including any of our employees, penetrates our network security or otherwise mismanages or misappropriates sensitive or confidential client or customer data, we could be subject to significant fines for violating privacy or data protection and consumer laws or lawsuits from our clients or their customers for breaching contractual confidentiality provisions which could result in negative publicity, legal liability, loss of clients and damage to our reputation. We may be liable for any misappropriation of customers’ personal information which could also harm our relationship with our clients, and/or cause us to suffer financial losses and/or reputational harm.
We may also be subject to laws and regulations that restrict the flow of personal data across countries; such laws may constrain our activities and have an adverse impact on our business. Laws and regulations that impact our business, and particularly laws, regulations and other measures governments may take based on privacy and data protection concerns, are increasing in complexity, change frequently and at times conflict among the various jurisdictions where we do business.
We may also be liable for damages in the case of such a security or network breach that results in an unauthorized or impermissible disclosure of client or customer data and information. Moreover, our insurance coverage for breaches or mismanagement of such data may not be sufficient to cover one or more large claims against us and our insurers may disclaim coverage as to any future claims. Any of the foregoing could adversely affect our business, financial condition and results of operations.
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Our inability to protect our systems and data from continually evolving cybersecurity risks or other technological risks could affect our reputation among our clients and their customers and may expose us to liability.
In conducting our business, we process, and transmit sensitive business information and personal information about our clients, their customers and other parties. We have certain responsibilities to card networks and their member financial institutions for any failure, including the failure of our associated third parties, to protect this information.
We may be a target of malicious third-party attempts to identify and exploit system vulnerabilities and penetrate or bypass our security measures in order to gain unauthorized access to our networks and systems or those of our associated third parties. A successful attempt could lead to the compromise of sensitive, business, personal or confidential information. As a result, we proactively employ multiple barriers and controls at different layers of our systems to defend our systems against intrusion and attack and to protect the data we collect. However, we cannot be certain that these measures will continue to successfully counter all current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information. We also rely on third party vendors for aspects of our cybersecurity strategy, such as to conduct security reviews and penetration tests, and there can be no assurance that the tests conducted by these vendors, or measures we take in response to such tests, will be effective at identifying or preventing any cybersecurity threat.
Our computer systems and the computer systems of our clients could be in the future subject to breach, and our data protection measures may not prevent unauthorized access. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and are often difficult to detect. Threats to our systems and our associated third parties’ systems can derive from human error, fraud or malice on the part of employees or third parties, or may result from accidental technological failure. Computer viruses and other malware can be distributed and could infiltrate our systems or those of our associated third parties. In addition, denial of service or other attacks could be launched against us for a variety of purposes, including to interfere with our services or create a diversion for other malicious activities. Our defensive measures may not prevent downtime, unauthorized access or use of sensitive data. While we maintain cyber errors and omissions insurance coverage that may cover certain aspects of cyber risks, our insurance coverage may be insufficient to cover all losses. Further, while we carefully select third parties with which we associate, we do not control their actions. Any problems experienced by these third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyber-attacks and security breaches, could adversely affect our ability to service our clients or their customers or otherwise conduct our business.
Furthermore, the costs of systems and procedures associated with any protective measures that we are required to take by our clients may increase and could adversely affect our ability to compete effectively. Any failure to adequately enforce or provide these protective measures could result in liability, protracted and costly litigation, governmental and card network intervention and fines and, with respect to misuse of our clients’ information, lost revenue and reputational harm.
Our investment costs incurred in developing our software products and platforms may not yield the intended results and can adversely impact our results of operations.
Our investments in technology may not yield the intended results, especially from our research and development. Research and development investments and the consequent adoption of new technology solutions, patents, intellectual property and software products on an ongoing basis are essential elements of our business strategy. This helps us to move up the value chain and be a more relevant technology partner to our customers. While we strive to ensure that our research and development expenditure will yield a sustained customer base and increased revenue, customer buy-in for any new investments in research and development carries with it a possibility of not yielding expected investment results, thereby hampering our growth prospects.
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Software failures, breakdowns in the operations of our servers and communications systems or the failure to implement system enhancements could harm our business.
Our success depends on the efficient and uninterrupted operation of our servers and communications systems. A failure of our network or data gathering procedures could impede services. While our operations have disaster recovery plans in place, they might not adequately protect us. Despite any precautions we take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins, and similar events at our computer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a server failure, we could be required to transfer our client data collection operations to an alternative provider of server hosting services. Such a transfer could result in delays in our ability to deliver our products and services to our clients.
Additionally, significant delays in the planned delivery of system enhancements, improvements and inadequate performance of the systems once they are completed could damage our reputation and harm our business. Long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities and acts of terrorism, particularly involving cities in which we have offices, could adversely affect our business, financial condition and results of operations. Although we carry property and business interruption insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or that exceeds our insurance coverage, or are required to pay higher insurance premiums, our business, financial condition and results of operations could be materially and adversely affected.
We might be required to use open-source software in providing services to our clients. There are risks associated with the use of open-source software that may have an adverse effect on our results of operations and financial condition.
We may be required to use open-source software in providing services to our clients. Further, some of our clients may also be using open-source software on which some of our products and services may need to operate. There are significant benefits and risks associated with open-source software. If a company were to buy a commercial closed source solution for enterprise use, there is an elaborate procedure followed for finalizing and purchasing a product. This includes requirement analysis, defining acceptance criteria, evaluating the product, security considerations, etc. An open-source product, however, might not undergo this kind of evaluation. This could pose business and security risks and lead to some unanticipated costs and may have an adverse effect on our results of operations and financial condition.
Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use, or grant other licenses to our intellectual property. If we combine our software with open source software in a certain manner, we could, under certain open source licenses, be required to release or license the source code of our software to the public. From time to time, we may be subject to claims asserting ownership of, or demanding release of, the source code, the open source software and/or derivative works that were developed using such software, requiring us to provide attributions of any open source software incorporated into our distributed software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to re-engineer our software or change our products or services, any of which may have an adverse effect on our results of operations and financial condition.
Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, and this may have a material adverse effect on our results of operations and financial condition.
Our insurance policies are subject to exclusions, deductibles and limitations. There can be no assurance that any claim under our insurance policies will be honored fully or timely, our insurance coverage will be sufficient in any respect or our insurance premiums will not change substantially. Although we carry property and business interruption insurance for our business operations, our coverage might not be adequate to compensate us for all losses that may occur. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or that exceeds our insurance coverage, or are required to pay higher insurance premiums, our business, financial condition and results of operations could be materially and adversely affected. In addition, there may be certain risks for which we are unable to insure at a reasonable cost, or at all.
We are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Singapore Dollars and Indonesian Rupiah, and any volatility in these currencies could adversely affect our business, financial condition and results of operations.
We mainly operate in Singapore and Indonesia, which exposes us to the effects of fluctuations in currency exchange rates. We earn revenue denominated in Singapore Dollars and US Dollars. Fluctuations in foreign currency exchange rates will affect our financial results, which we report in Singapore Dollars. Furthermore, fluctuations in currency exchange rates may also affect the comparability of our financial results from period to period, as we convert our subsidiaries’ statement of financial position into Singapore Dollars from foreign currencies at the period-end exchange rate, and income and cash flow statements at average exchange rates for the year. We cannot assure you that movements in foreign currency exchange rates will not have a material adverse effect on our results of operations in future periods.
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Risks Related to Doing Business in Southeast Asia
Uncertainties with respect to the legal system in certain markets in Southeast Asia could adversely affect us.
The interpretation and enforcement of laws and regulations involve uncertainties and inconsistencies. Since local administrative and court authorities and in certain cases, independent organizations, have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we may enjoy in many of the localities in which we operate. Moreover, local courts may have broad discretion to reject enforcement of foreign awards. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.
It is possible that a number of laws and regulations may be adopted or construed to apply to us in Southeast Asia and elsewhere that could restrict our business segments. Scrutiny and regulation of the business segments in which we operate may further increase, and we may be required to devote additional legal and other resources to addressing these regulations. Changes in current laws or regulations or the imposition of new laws and regulations in Southeast Asia or elsewhere regarding our business segments may slow the growth of our business segments and adversely affect our business, financial condition, results of operations and prospects.
Developments in the social, political, regulatory and economic environment in the countries where we operate, may have a material and adverse impact on us.
Our business, prospects, financial condition and results of operations may be adversely affected by social, political, regulatory and economic developments in countries in which we operate. Such political and economic uncertainties include, but are not limited to, the risks of war, terrorism, nationalism, nullification of contract, changes in interest rates, imposition of capital controls and methods of taxation. We have considerable operations in Singapore, and negative developments in Singapore’s socio-political environment may adversely affect our business, financial condition, results of operations and prospects. Although the overall economic environment in Singapore and other countries where we operate appears to be positive, there can be no assurance that this will continue to prevail in the future.
It will be difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets outside the United States.
Substantially all of our assets are currently located outside of the United States. Additionally, our director, director nominees, and officers resides outside of the United States, in Singapore. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under Federal securities laws. Moreover, we have been advised that Singapore does not have a treaty providing for the reciprocal recognition and enforcement of judgments of courts with the United States.
Natural events, wars, terrorist attacks and other acts of violence involving any of the countries in which we or our clients have operations could adversely affect our operations and client confidence.
Natural disaster events (such as volcanos, floods and earthquakes), terrorist attacks and other acts of violence or war may adversely disrupt our operations, lead to economic weakness in the countries in which they occur and affect worldwide financial markets, and could potentially lead to economic recession, which could have an adverse effect on our business, financial condition and results of operations. These events could adversely affect our clients’ levels of business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and to our business operations.
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Risks Related to this Offering and our Ordinary Shares
There has been no public market for our ordinary shares prior to this offering, and you may not be able to resell our ordinary shares at or above the price you pay for them, or at all.
Prior to this offering, there has not been a public market for our ordinary shares. We have applied to list our ordinary shares on the Nasdaq Capital Market. However, an active public market for our ordinary shares may not develop or be sustained after the offering, in which case the market price and liquidity of our ordinary shares will be materially and adversely affected.
The initial public offering price for our ordinary shares may not be indicative of prices that will prevail in the trading market and such market prices may be volatile.
The initial public offering price for our ordinary shares will be determined by negotiations between us, the Selling Shareholders, and the underwriter, and does not bear any relationship to our earnings, book value or any other indicia of value. We cannot assure you that the market price of our ordinary shares will not decline significantly below the initial public offering price. The financial markets in the United States and other countries have experienced significant price and volume fluctuations in the last few years. Volatility in the price of our ordinary shares may be caused by factors outside of our control and may be unrelated or disproportionate to changes in our results of operations.
We do not intend to pay dividends for the foreseeable future.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our ordinary shares if the market price of our ordinary shares increases.
If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding our ordinary shares, the price of our ordinary shares and trading volume could decline.
The trading market for our ordinary shares may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of our ordinary shares would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of our ordinary shares and the trading volume to decline.
The market price of our ordinary shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
The initial public offering price for our ordinary shares will be determined through negotiations between the underwriter, the Selling Shareholders, and us and may vary from the market price of our ordinary shares following our initial public offering. If you purchase our ordinary shares in our initial public offering, you may not be able to resell those shares at or above the initial public offering price. We cannot assure you that the initial public offering price of our ordinary shares, or the market price following our initial public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our initial public offering. The market price of our ordinary shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
| ● | actual or anticipated fluctuations in our revenue and other operating results; |
| ● | the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; |
| ● | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
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| ● | announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; |
| ● | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
| ● | lawsuits threatened or filed against us; and |
| ● | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. |
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
Certain recent initial public offerings of companies with public floats comparable to our anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our Ordinary Shares.
In addition to the risks addressed above in “— The market price of our Ordinary Shares may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price”, our Ordinary Shares may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable public floats and initial public offering sizes have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective company’s underlying performance. Upon the consummation of this offering, we will have a relatively small public float due to the relatively small size of this offering, the ownership percentage of our executive officers and directors, and greater than 5% shareholders. As a result of our small public float, our Ordinary Shares may be less liquid and have greater stock price volatility than the shares of companies with broader public ownership. The rapid and substantial price volatility, including any stock run-up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our Ordinary Shares. This volatility may prevent you from being able to sell your securities at or above the price you paid for your securities. In addition, you may experience losses, which may be material, if the price of our Ordinary Shares declines after this offering or if you purchase our Ordinary Shares prior to any price decline.
Resales of our Ordinary Shares in the public market during this offering by the Selling Shareholders or investors in this offering may cause the market price of our Ordinary Shares to decline.
Sales of resale shares, as well as the issuance of Ordinary Shares in this Offering could result in resales of our Ordinary Shares by our current shareholders concerned about the potential dilution of their holdings. In turn, these resales could have the effect of depressing the market price for our Ordinary Shares.
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We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”
Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Capital Market, impose various requirements on the corporate governance practices of public companies. As an “emerging growth company” pursuant to the JOBS Act, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with increased disclosure requirements.
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 Mr. Sai Bin Loi, our chairman, may hold more than 50% of our voting power upon completion of the offering. As a result, for so long as we remain a controlled company as defined under those rules, we are exempt from, and our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements, including that:
| ● | a majority of our board of directors must be independent directors; |
| ● | our compensation committee must be composed entirely of independent directors; and |
| ● | our corporate governance and nomination committee must be composed entirely of independent directors. |
We intend to take advantage of corporate governance exemptions available to controlled companies. As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.
Our board of directors may decline to register transfers of ordinary shares in certain circumstances.
Except in connection with the settlement of trades or transactions entered into through the facilities of a stock exchange or automated quotation system on which our ordinary shares are listed or traded from time to time, our board of directors may, in its sole discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any share unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such maximum sum as the Nasdaq Capital Market may determine to be payable, or such lesser sum as our board of directors may from time to time require, is paid to us in respect thereof.
If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.
This, however, is unlikely to affect market transactions of the ordinary shares purchased by investors in the public offering. Once the ordinary shares have been listed, the legal title to such ordinary shares and the registration details of those ordinary shares in the Company’s register of members will remain with DTC/Cede& Co. All market transactions with respect to those ordinary shares will then be carried out without the need for any kind of registration by the directors, as the market transactions will all be conducted through the DTC systems.
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The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.
Upon completion of this offering, we will be a publicly listed company in the United States. As a publicly listed company, we will be required to file periodic reports with the U.S. Securities and Exchange Commission upon the occurrence of matters that are material to our company and shareholders. In some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company. Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors, which are mostly private companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud.
Prior to this offering, we were a private company with limited accounting personnel. Furthermore, prior to this offering, our management has not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting.
Upon the completion of this offering, we will become a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or “Section 404”, will require that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our first required annual report for the prior fiscal year after completion of this offering. In addition, if we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting on an annual basis. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a burden on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
In connection with the audits of our consolidated financial statements as of and for the years ended June 30, 2022 and 2021, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting as well as other control deficiencies. As defined in standards established by the Public Company Accounting Oversight Board (United States), a “material weakness” is 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 our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to (1) our lack of sufficient skilled personnel with U.S. GAAP knowledge and the SEC reporting knowledge for the purpose of financial reporting as well as the lack in formal accounting policies and procedures manual to ensure proper financial reporting in accordance with U.S. GAAP and SEC reporting requirements; and (2) our lack of an audit committee and internal audit function to establish formal risk assessment process and internal control framework.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. 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 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
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We are a “foreign private issuer” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.
We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.
As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.
We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our stock price may be more volatile.
Pursuant to the JOBS Act, we have elected to take advantage of the benefits of this extended transition period for complying with new or revised accounting standards. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
The requirements of being a public company may strain our resources and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.
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As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
We have broad discretion in the use of the net proceeds from our initial public offering and may not use them effectively.
To the extent (i) we raise more money than required for the purposes explained in the section titled “Use of Proceeds” or (ii) we determine that the proposed uses set forth in that section are no longer in the best interests of our Company, we cannot specify with any certainty the particular uses of such net proceeds that we will receive from our initial public offering. Our management will have broad discretion in the application of such net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and we may spend or invest these proceeds in a way with which our shareholders disagree. The failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from our initial public offering in a manner that does not produce income or that loses value.
There may not be an active, liquid trading market for our ordinary shares.
Prior to this offering, there has been no public market for our ordinary shares. An active trading market for our ordinary shares may not develop or be sustained following this offering. You may not be able to sell your shares at the market price, if at all, if trading in our shares is not active. The initial public offering price will be determined by negotiations between us and the underwriter based upon a number of factors. The initial public offering price may not be indicative of prices that will prevail in the trading market.
Shares eligible for future sale may adversely affect the market price of our ordinary shares, as the future sale of a substantial amount of outstanding ordinary shares in the public marketplace could reduce the price of our ordinary shares.
The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our ordinary shares. 19,000,000 shares will be outstanding immediately after this offering. All of the shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. See “Shares Eligible for Future Sale.”
You will experience immediate and substantial dilution.
The initial public offering price of our shares is substantially higher than the pro forma net tangible book value per ordinary share. Assuming the completion of the firm commitment offering, if you purchase shares in this offering, you will incur immediate dilution of approximately $4.17 in the pro forma net tangible book value per share from the price per share that you pay for the shares. Accordingly, if you purchase shares in this offering, you will incur immediate and substantial dilution of your investment. See “Dilution.”
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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under British Virgin Islands law.
The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary duties of our directors under British Virgin 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 British Virgin Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the British Virgin Islands. In addition, British Virgin Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.
Shareholders of British Virgin Islands business companies like us have no general rights under British Virgin Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our current memorandum and articles of association if they are satisfied that it would be contrary to the Company’s interests to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but in such circumstances are not obliged to make them available to 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.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
Assumption about our future financial and operating results, including revenues, income, expenditures, cash balances and other financial items;
| ● | our ability to execute our growth, and expansion, including our ability to meet our goals; |
| ● | current and future economic and political conditions; |
| ● | our capital requirements and our ability to raise any additional financing which we may require; |
| ● | impact of COVID-19 pandemic on our business, results of operations, financial condition and cash flows; |
| ● | our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business; and |
| ● | other assumptions described in this prospectus underlying or relating to any forward-looking statements. |
We describe certain material risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.
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ENFORCEABILITY OF CIVIL LIABILITIES
We were incorporated under the laws of British Virgin Islands because there are certain benefits associated with being a British Virgin Islands business company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of foreign exchange control of currency exchange control or currency restriction and the availability of professional and support services. The British Virgin Islands, however, has a less developed body of securities laws as compared to the United States and provides significantly less protection for investors than the United States.
Substantially all of our assets are located in Singapore. In addition, almost all of our directors and officers are nationals or residents of Republic of Singapore and all or a substantial portion of their assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.
We have appointed Puglisi & Associates as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.
Forbes Hare, our counsel with respect to the laws of the British Virgin Islands, and Insights Law LLC, our counsel with respect to Singapore law, have advised us that there is uncertainty as to whether the courts of the British Virgin Islands or Singapore would (i) recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States or (ii) entertain original actions brought in the British Virgin Islands or Singapore against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.
Forbes Hare, has further advised us that there is currently no statutory enforcement or treaty between the United States and the British Virgin Islands providing for enforcement of judgments. A judgment obtained in the United States, however, may be recognized and enforced in the courts of the British Virgin Islands at common law, without any re-examination on the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Commercial Division of the Eastern Caribbean Supreme Court in the British Virgin Islands, provided such judgment: (i) is given by a foreign court of competent jurisdiction; (ii) is final; (iii) is not in respect of taxes, a fine or a penalty; and (iv) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or public policy of the British Virgin Islands. Furthermore, it is uncertain that British Virgin Islands courts would enforce: (1) judgments of U.S. courts obtained in actions against us or other persons that are predicated upon the civil liability provisions of the U.S. federal securities laws; or (2) original actions brought against us or other persons predicated upon the Securities Act. Forbes Hare has informed us that there is uncertainty with regard to British Virgin Islands law relating to whether a judgment obtained from the U.S. courts under civil liability provisions of the securities laws will be determined by the courts of the British Virgin Islands as penal or punitive in nature.
Insights Law LLC has advised us that there is uncertainty as to whether judgments of courts in the United States based upon the civil liability provisions of the securities laws of the United States or any state or territory of the United States will be recognized or enforced by the Singapore courts, and there is doubt as to whether the Singapore courts will enter judgments in original actions brought in the Singapore courts based solely on the civil liability provisions of these securities laws. An in personam final and conclusive judgment in the federal or state courts of the United States under which a fixed or ascertainable sum of money is payable may generally be enforced as a debt in the Singapore courts under the common law as long as it is established that the Singapore courts have jurisdiction over the judgment debtor. However, the Singapore courts are unlikely to enforce a foreign judgment if (a) the foreign judgment is inconsistent with a prior local judgment that is binding on the same parties; (b) the enforcement of the foreign judgment would contravene the public policy of Singapore; (c) the proceedings in which the foreign judgment was obtained were contrary to principles of natural justice; (d) the foreign judgment was obtained by fraud; or (e) the enforcement of the foreign judgment amounts to the direct or indirect enforcement of a foreign penal, revenue or other public law.
In particular, the Singapore Courts may potentially not allow the enforcement of any foreign judgment for a sum payable in respect of taxes, fines, penalties or other similar charges, including the judgments of courts in the United States based upon the civil liability provisions of the securities laws of the United States or any state or territory of the United States. In respect of civil liability provisions of the United States federal and state securities law which permit punitive damages against us and our directors or executive officers, we are unaware of any decision by the Singapore courts which has considered the specific issue of whether a judgment of a United States court based on such civil liability provisions of the securities laws of the United States or any state or territory of the United States is enforceable in Singapore.
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We estimate that we will receive net proceeds from this offering of approximately US$5,593,969, after deducting the estimated underwriting discounts and the estimated offering expenses payable by us and based upon an assumed initial public offering price of US$5.50 per Ordinary Share. If the underwriter exercises its over-allotment option in full, we estimate that the net proceeds to us from this offering will be approximately US$6,554,929, after deducting the underwriting discounts and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of the Ordinary Shares being offered by the Selling Shareholders.
We plan to use the net proceeds we receive from this offering for the following purposes:
| ● | 20% for research and development; |
| ● | 20% for investment in marketing and branding, and other capital expenditures; |
| ● | 20% for recruitment of talented professionals; and |
| ● | 40% for general corporate purposes and possible future acquisitions and growth opportunities. |
The foregoing represents our current intentions based upon our present plans and business conditions to use and allocate the net proceeds of this offering. Our management, however, will have significant flexibility and discretion to apply the net proceeds of this offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus. To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.
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We intend to keep any future earnings to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future.
Subject to the BVI Act and our memorandum and articles of association, our board of directors may authorize and declare a dividend to shareholders at such time and of such an amount as they think fit if they are satisfied, on reasonable grounds, that immediately following the dividend the value of our assets will exceed our liabilities and we will be able to pay our debts as they become due. There is no further British Virgin Islands statutory restriction on the amount of funds which may be distributed by us by dividend.
If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Singapore subsidiary, RP Singapore.
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The following table sets forth our capitalization as of December 31, 2022:
| ● | on an actual basis; and |
| ● | on a pro forma as adjusted basis to reflect the issuance and sale of 1,280,000 Ordinary Shares by us in this offering at the assumed initial public offering price of $5.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, after deducting the estimated discounts to the underwriter, non-accountable expense allowance, and the estimated offering expenses payable by us. |
You should read this capitalization table in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.
| December 31, 2022 | ||||||||||||||||
| Actual | Actual | Pro Forma As adjusted without over-allotment option exercised | Pro Forma As adjusted with over-allotment option exercised in full | |||||||||||||
| SGD | USD | USD(1) | USD(2) | |||||||||||||
| Shareholders’ Equity: | ||||||||||||||||
| Ordinary shares, US$0.000625 par value, unlimited Shares authorized, 16,000,000 Shares issued and outstanding, 17,280,000 Shares issued and outstanding pro forma as adjusted, as of December 31, 2022* | 13,453 | 10,037 | 10,837 | 10,957 | ||||||||||||
| Additional paid-in capital | 986,547 | 736,009 | 6,329,178 | 7,290,018 | ||||||||||||
| Retained earnings | 2,315,620 | 1,727,559 | 1,727,559 | 1,727,559 | ||||||||||||
| Total Shareholders’ Equity | 3,315,620 | 2,473,605 | 8,067,574 | 9,028,534 | ||||||||||||
| Total Capitalization | 3,315,620 | 2,473,605 | 8,067,574 | 9,028,534 | ||||||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
| (1) | Reflects the sale of Ordinary Shares in this offering at an assumed initial public offering price of $5.50 per share, assuming the over-allotment option is not exercised, and after deducting the estimated underwriting discounts and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. Additional paid-in capital reflects the net proceeds we expect to receive, after deducting the underwriting discounts, estimated offering expenses payable by us and advisory fees. We estimate that such net proceeds will be approximately $5,593,969. |
| (2) | Assuming the over-allotment option is exercised in full and the initial public offering price is $5.50, the pro forma as adjusted book value will be 10,957, the pro forma as adjusted additional paid-in capital will be 7,290,018, the pro forma as adjusted retained earnings will be 1,727,559, and the pro forma as adjusted total shareholders’ equity will be 9,028,534. |
Each $1.00 increase (decrease) in the assumed initial public offering price of $5.50 per Ordinary Share would increase (decrease) the pro forma as adjusted amount of total capitalization by $1,164,800, assuming that the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts, non-accountable expense allowance and estimated offering expenses payable by us. An increase (decrease) of one million in the number of Ordinary Shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as the adjusted amount of total capitalization by $5,005,000, assuming no change in the assumed initial public offering price per ordinary share as set forth on the cover page of this prospectus.
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If you invest in our Ordinary Shares, your interest will be diluted for each Ordinary Share you purchase to the extent of the difference between the initial public offering price per Ordinary Share and our net tangible book value per Ordinary Share after this offering. Dilution results from the fact that the initial public offering price per Ordinary Share is substantially in excess of the net tangible book value per Ordinary Share attributable to the existing shareholders for our presently outstanding Ordinary Shares.
Our net tangible book value as of December, 31, 2022, was USD 1,993,448, or USD 0.12 per Ordinary Share. Net tangible book value represents the amount of our total consolidated tangible assets, less the amount of our total consolidated liabilities. Dilution is determined by subtracting the as adjusted net tangible book value per Ordinary Share from the initial public offering price per Ordinary Share and after deducting the estimated discounts and non-accountable expense allowance payable to the underwriter and the estimated offering expenses payable by us.
Without taking into account any other changes in net tangible book value after December 31, 2022, other than to give effect to our sale of 1,280,000 Ordinary Shares offered in this offering (assuming no exercise of the over-allotment option) based on the initial public offering price of US$5.50 per Ordinary Share after deduction of the estimated discounts and non-accountable expense allowance payable to the underwriter and the estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2022, would have been USD 8,067,574 or USD 0.47 per outstanding Ordinary Share. This represents an immediate increase in net tangible book value of USD 0.35 per Ordinary Share to the existing shareholders, and an immediate dilution in net tangible book value of USD 5.03 per Ordinary Share to investors purchasing Ordinary Shares in this offering. The as adjusted information discussed above is illustrative only. The following table illustrates such dilution:
| Assuming no exercise of over-allotment option | Assuming full exercise of over-allotment option | |||||||
| Initial public offering price per Ordinary Share | US$ | 5.50 | US$ | 5.50 | ||||
| Net tangible book value per Ordinary Share as of December 31, 2022 | US$ | 0.12 | US$ | 0.12 | ||||
| Increase in net tangible book value per Ordinary Share attributable to payments by new investors | US$ | 0.35 | US$ | 0.40 | ||||
| Pro forma net tangible book value per Ordinary Share immediately after this offering | US$ | 0.47 | US$ | 0.52 | ||||
| Amount of dilution in net tangible book value per Ordinary Share to new investors in the offering | US$ | 5.03 | US$ | 4.98 | ||||
The following table summarizes, on an as adjusted basis as of December 31, 2022, the differences between existing shareholders and the new investors with respect to the number of Ordinary Shares purchased from us, assuming no over-allotment is exercised, the total consideration paid and the average price per Ordinary Share before deducting the estimated discounts and non-accountable expense allowance payable to the underwriter and the estimated offering expenses payable by us.
| Ordinary Shares purchased | Total consideration | Average price per ordinary | ||||||||||||||||||
| Number | Percent | Amount | Percent | share | ||||||||||||||||
| Existing shareholders | 16,000,000 | 92.59 | % | US$ | 746,046 | 9.58 | % | US$ | 0.05 | |||||||||||
| New investors | 1,280,000 | 7.41 | % | US$ | 7,040,000 | 90.42 | % | US$ | 5.50 | |||||||||||
| Total | 17,280,000 | 100.00 | % | US$ | 7,786,046 | 100.00 | % | US$ | 0.45 | |||||||||||
The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.
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CORPORATE HISTORY AND STRUCTURE
Our Corporate History
We are a holding company incorporated in the British Virgin Islands on November 17, 2021 under the BVI Act. We conduct all our operations through RP Singapore, which was incorporated on January 1, 2015 under the laws of the Republic of Singapore. On November 17, 2021, we acquired all the equity interest of RP Singapore via a certain share exchange agreement with Mr. Sai Bin Loi, who was the owner of 100% of the equity interest of RP Singapore.
Increase of Authorized Shares and Forward Split in 2022
On April 21, 2022, our shareholders and the board approved the Company’s amended and restated memorandum and articles of association to effectuate an increase of the authorized shares of our Company to unlimited shares and a forward split of the then issued and outstanding shares at a ratio of 1:1,600. The increase of authorized shares and the forward split became effective on April 21, 2022.
Forward Split and Reverse Split in 2023
On August 16, 2023, we implemented a 1 for 1.5625 forward share split of our ordinary shares under British Virgin Islands law, or the “Forward Split”. As a result of the Forward Split, the total of 16,000,000 issued and outstanding ordinary shares prior to the Forward Split was increased to a total of 25,000,000 issued and outstanding ordinary shares. The Forward Split was implemented in connection with the valuation of the Company. The Forward Split maintained our existing shareholders’ percentage ownership interests in our Company. The Forward Split also decreased the par value of our ordinary shares from $0.000625 to $0.0004 and the number of authorized shares of our Company remained as unlimited.
However, due to ASC 505-10-S-99-4 (SAB Topic 4.C) and ASC 260-10-55-12, we have to revise the consolidated financial statements included in Form F-1 to reflect the Forward Split. Due to the merger between Friedman (our former auditor) and Marcum Asia (our current auditor), which resulted in the pending withdrawal of Friedman’s registration with the PCAOB, Friedman cannot revise its audit report included in Form F-1 to reflect the retrospective restatement for the change in capital structure. Rather than restating the previously issued financial statements and obtaining a revised audit report, on August 29, 2023, we implemented a 1.5625 for 1 reverse share split (the “Reverse Split”) of our ordinary shares under British Virgin Islands Law. As a result of the Reverse Split, the total of 25,000,000 issued and outstanding ordinary shares prior to the Reverse Split was decreased back to a total of 16,000,000 issued and outstanding ordinary shares. The Reverse Split maintained our existing shareholders’ percentage ownership interests in our Company. The Reverse Split also increased the par value of our ordinary shares from $0.0004 back to $0.000625, and the number of authorized shares remains as unlimited.
Our Corporate Structure
The following diagram illustrates our corporate structure, including our subsidiaries, as of the date of this prospectus and as of the closing of this offering (for the purpose of the illustration of this chart only, assuming no exercise of the over-allotment option).
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are a provider of customized software development services, technology solutions, consulting and technical support services, and peripheral hardware to large and small to medium corporate clients and government agencies based in Singapore, Indonesia and Malaysia, including but not limited to airports, cruise terminals, technology companies, and law enforcement agencies. Our customized software provides clients with real-time monitoring, efficient resources allocation, planning surveillance and threat detection. All of our clients are located in Southeast Asia. We currently generate most of our revenues from software development services, which represented 96.3% and 58.6% of total revenue in the six months ended December 31, 2022 and 2021, respectively. We also generate revenue from consulting and technical support services, which represented 3.7% and 41.4% of our revenue in the six months ended December 31, 2022 and 2021, respectively. For the six months ended December 31, 2022 and 2021, our revenues were SGD 150,010 (USD 111,914) and SGD 1,237,768, respectively. The software development services represented 71.1% and 92.2% of total revenue in fiscal years ended June 30, 2022 and 2021, respectively. The consulting and technical support services represented 28.9% and 6.8% of our revenue in fiscal years ended June 30, 2022 and 2021, respectively. For the years ended June 30, 2022 and 2021, our revenues were SGD 4,465,134 (USD 3,331,195) and SGD 8,818,182, respectively.
Key Factors Affecting Results of operations
We believe the key factors affecting our financial condition and results of operations include the following:
Strategic Acquisitions and Investments
We may selectively pursue acquisitions, investments, joint ventures and partnerships that we believe are strategic and complementary to our operations and technology. The business or financial performance of the companies in which we have invested as well as our ability to successfully integrate these investments with our existing business would impact our results of operations and financial conditions.
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Impact of COVID-19 on Our Operations and Financial Performance
The COVID-19 pandemic has caused disruptions to our operations starting in January 2020. Our operations were closed in April 2020 due to Singapore government mandates. We moved quickly to transition our employee base to a fully remote working mode at all our locations since then. From the beginning of December 2021, substantially all of our employees came back in person in our office. Since the COVID-19 pandemic has been gradually contained in Singapore and Southeast Asia, our revenue and gross margin for the six months ended December 31, 2022 were not significantly affected.
The extent of the impact on our 2023 fiscal year results will be dependent on future developments such as the easement of the travel restrictions of the pandemic, the potential resurgence of the pandemic, future government actions in response to the pandemic and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. We continue taking actions to help mitigate, as best we can, the impact of the COVID-19 pandemic on the health and well-being of our employees, the communities in which we operate and our partners, as well as the impact on our operations and business as a whole. For a detailed description of the risks associated with COVID-19, see “Item 3.D. Risk Factors—Risks Related to Our Business and industry—Our business could be materially harmed by the ongoing coronavirus (COVID-19) pandemic.” Due to the significant uncertainties surrounding the outbreak of COVID-19, the extent of the business disruption and the related financial impacts on our business cannot be reasonably estimated at this time.
Critical Accounting Policies, Judgments and Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. While our significant accounting policies are more fully described in Note 3 to the consolidated financial statements included elsewhere in this prospectus, we believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.
Revenue recognition
Effective July 1, 2019, we adopted ASC Topic 606, Revenue from Contracts with Clients, which replaced ASC Topic 605, using the modified retrospective method of adoption. Results for the reporting period beginning after July 1, 2019 are presented under ASC Topic 606 while prior period amounts are not adjusted and continue to be presented under our historic accounting under ASC Topic 605. Our accounting for revenue remains substantially unchanged. There were no cumulative effect adjustments for service contracts in place prior to July 1, 2019. The effect from the adoption of ASC Topic 606 was not material to our consolidated financial statements.
The five-step model defined by ASC Topic 606 requires us to (1) identify our contracts with clients, (2) identify our performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to our performance obligations in those contracts and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the client in an amount that reflects the consideration expected in exchange for those goods or services.
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We applied practical expedient when sales taxes were collected from clients, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently remitted to governmental authorities and are excluded from the transaction price. We do not offer rights of refund of previously paid or delivered amounts, rebates, rights of return or price protection. In all instances, we limit the amount of revenue recognized to the amounts for which it has the right to bill our clients.
For the six months ended December 31, 2022, we derived revenues from two sources: (1) revenue from software development services, and (2) revenue from consulting and technical support services. For the years ended June 30, 2022 and 2021, we derived revenues from three sources: (1) revenue from software development services, (2) revenue from consulting and technical support services, and (3) revenue from product sales. All of our contracts with clients do not contain cancelable and refund-type provisions.
(1) Software development services
Revenue from Software Development
The contract is typically fixed priced and does not provide any post contract client support or upgrades. We design software based on clients’ specific needs which require us to perform services including design, development, and integration. These services also require significant production and customization. Upon delivery of the services, client acceptance is generally required. We assess that software development services is considered as one performance obligation as the clients do not obtain benefit for each separate service. The duration of the development period is short, usually less than one year.
Our software development service revenues are generated from contracts with government or related agencies, state-owned enterprises, and commercial enterprises. The contracts contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a portion of contract amount usually is billed upon the completion of the related projects. Pursuant to the contract terms, we have enforceable rights on payments for the work performed.
Our revenue from software development contracts are generally recognized over time as our performance creates or enhances the project controlled by the clients and the control is transferred continuously to our clients. We use an input method based on cost incurred as we believe that this method most accurately reflects our progress toward satisfaction of the performance obligation, which usually takes less than one year. Under this method, we could appropriately measure the fulfillment of a performance obligation. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period.
Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect labor, supplies, and tools. Cost-based input method requires us to make estimates of revenues and costs to complete the service. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development, including materials, labor, and other system costs. Our estimates are based upon the professional knowledge and experience of our engineers and project managers to assess the contract’s schedule, performance, and technical matters. We have adequate cost history and estimating experience, with respect to which management believes it can reasonably estimate total development costs. If the estimated costs are greater than the related revenues, we recognize the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Changes in estimates for software development services include but are not limited to cost forecast changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. To date, we have not incurred a material loss on any contracts. However, as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if we entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values.
In certain software development service arrangements, we sell equipment to be customized and integrated with the developed software. We assess the customized equipment and service are interdependent and highly interrelated. In these cases, we control the customized equipment before it is transferred to the clients. We have the right to direct the suppliers and control the goods or assets transferred to our clients. Thus, we consider that we should recognize revenue as a principal in the gross amount of consideration to which we are entitled in exchange for the customized equipment delivered.
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(2) Consulting and technical support services
Revenue from consulting and technical support services is primarily comprised of fixed-fee contracts, which require us to provide professional consulting and technical support services over contract terms beginning on the commencement date of each contract, which is the date our service is made available to clients. Billings to the clients are generally on a monthly or quarterly basis over the contract term, which is typically 1 to 12 months. The consulting and technical support services contracts typically include a single performance obligation. The revenue from consulting and technical support services is recognized over the contract term as clients receive and consume benefits as such services are provided.
(3) Product sales
We engage in the sale of medical equipment, hardware and related accessories. We typically enter into contracts with our client where the rights of the parties, including payment terms, are identified and sales prices to the clients are fixed with no separate sales rebate, discount, or other incentive and no right of return exists on sales of inventory. Our performance obligation is to deliver products according to contract specifications. We recognize product revenue at a time when the control of products is transferred to clients.
Revenue includes reimbursements of travel and out-of-pocket expenses, with equivalent amounts of expense recorded in cost of revenue.
Deferred contract costs
We capitalized incremental costs incurred to fulfill contracts that (1) relate directly to the contract, (2) are expected to generate resources that will be used to satisfy the performance obligation under the contract, and (3) are expected to be recovered through revenue generated under the contract. The compensation expenses of workforce hired solely for the purpose of providing certain customize software solution are considered incremental costs to fulfill the contracts. These contract costs are recorded as cost of revenues upon the recognition of the related revenues. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. As of December 31, 2022 and June 30, 2022, we have deferred contract costs of SGD237,357 (USD177,079) and nil, respectively. The amount of deferred contract costs charged to cost of revenues were nil and nil, for the six months ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and June 30, 2022, no impairment allowance was recorded.
Practical Expedient and Exemptions
We do not disclose the value of unsatisfied performance obligations within one year by applying the right to invoice practical expedient provided by ASC 606-10-55-18.
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Recent Accounting Pronouncements
See the discussion of the recent accounting pronouncements contained in Note 3 to the consolidated financial statements, “Summary of Significant Accounting Policies.”
Key Components of Our Results of Operations
Revenues
For the six months ended December 31, 2022, we derived revenues from two sources: (1) revenue from software development services, and (2) revenue from consulting and technical support services. For the years ended June 30, 2022 and 2021, we derived revenues from three sources: (1) revenue from software development services, (2) revenue from consulting and technical support services, and (3) revenue from product sales.
We are focusing on developing global software and solutions equipped with our core technologies in big data analytics, AI and IoT applications. We believe new technology development is the key driver for our future growth.
Our breakdown of revenues for the six months ended December 31, 2022 and 2021, respectively, is summarized below:
| For the Six Months Ended December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Revenues | ||||||||||||
| Software development service | 724,925 | 144,510 | 107,811 | |||||||||
| Consulting and technical support services | 512,843 | 5,500 | 4,103 | |||||||||
| Total revenues | 1,237,768 | 150,010 | 111,914 | |||||||||
Our breakdown of revenues for the years ended June 30, 2022 and 2021, respectively, is summarized below:
| For the Years Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Revenues | ||||||||||||
| Software development service | 8,128,595 | 3,175,165 | 2,283,799 | |||||||||
| Consulting and technical support services | 601,590 | 1,289,969 | 927,835 | |||||||||
| Product sales | 87,997 | - | - | |||||||||
| Total revenues | 8,818,182 | 4,465,134 | 3,211,634 | |||||||||
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Cost of Revenues
Our cost of revenues consists primarily of personnel costs (including salaries and benefits) for employees associated with technical support and subcontractors, professional services organizations, third party license fees, allocable overhead, and depreciation of related property and equipment.
Our breakdown of cost of revenues for the six months ended December 31, 2022 and 2021, respectively, is summarized below:
| For the Six Months Ended December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Cost of revenues | ||||||||||||
| Software development service | 27,960 | 21,469 | 16,017 | |||||||||
| Consulting and technical support services | 153,855 | 29,800 | 22,232 | |||||||||
| Total cost of revenues | 181,815 | 51,269 | 38,249 | |||||||||
Our breakdown of cost of revenues for the years ended June 30, 2022 and 2021, respectively, is summarized below:
| For the Years Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Cost of revenues | ||||||||||||
| Software development service | 3,991,623 | 876,177 | 630,207 | |||||||||
| Consulting and technical support services | 287,380 | 132,900 | 95,591 | |||||||||
| Product sales | 21,203 | - | - | |||||||||
| Total cost of revenues | 4,300,206 | 1,009,077 | 725,798 | |||||||||
Operating expenses
Operating expenses include selling and marketing, general and administrative and research and development expenses. Selling expenses are mainly salary and benefits expenses for our sales team and related travel expenses. General and administrative expenses are mainly salary and benefits of management, professional fees, services fees, rental and other operating expenses attributable to general and administrative activities. Research and development expenses are mainly salary and benefits for in-house software engineers and payments made to outside subcontractors.
We anticipate that our operating expenses will increase as we hire additional personnel and incur additional costs in connection with the expansion of our business operations as well as becoming a publicly traded company.
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Results of Operations
Results of Operations for the Six Months Ended December 31, 2022 and 2021
Our consolidated results of operations for the years ended December 31, 2022 and 2021 are summarized below:
| For the six months Ended December 31, | ||||||||||||||||||||
| 2021 | 2022 | 2022 | Variance | Change | ||||||||||||||||
| SGD | SGD | USD | SGD | % | ||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||
| Revenues | 1,237,768 | 150,010 | 111,914 | (1,087,758 | ) | (87.9 | %) | |||||||||||||
| Cost of Revenues | (181,815 | ) | (51,269 | ) | (38,249 | ) | 130,546 | (71.8 | %) | |||||||||||
| Gross profit | 1,055,953 | 98,741 | 73,665 | (957,212 | ) | (90.6 | %) | |||||||||||||
| Selling and marketing expenses | (35,687 | ) | (12,940 | ) | (9,654 | ) | 22,747 | (63.7 | %) | |||||||||||
| General and administrative expenses | (704,269 | ) | (1,471,468 | ) | (1,097,783 | ) | (767,199 | ) | 108.9 | % | ||||||||||
| Research and development expenses | (70,045 | ) | - | - | 70,045 | (100,0 | %) | |||||||||||||
| Total Operating Expenses | (810,001 | ) | (1,484,408 | ) | (1,107,437 | ) | (674,407 | ) | 83.3 | % | ||||||||||
| Income (loss) from operations | 245,952 | (1,385,667 | ) | (1,033,772 | ) | (1,631,619 | ) | (663.4 | %) | |||||||||||
| Other expenses, net | (36,719 | ) | (1,155 | ) | (861 | ) | 35,564 | (96.9 | %) | |||||||||||
| Income (loss) before provision for income taxes | 209,233 | (1,386,822 | ) | (1,034,633 | ) | (1,596,055 | ) | (762.8 | %) | |||||||||||
| Provision for income taxes | (36,451 | ) | (744 | ) | (555 | ) | 37,707 | (98 | %) | |||||||||||
| Net income (loss) | 172,782 | (1,387,566 | ) | (1,035,188 | ) | (1,560,348 | ) | (903.1 | %) | |||||||||||
Six Months Ended December 31, 2022 Compared to Six Months Ended December 31, 2021
Revenues
For the six months ended December 31, 2022, our total revenue was SGD 150,010 (USD 111,914) as compared to SGD1,237,768 for the six months ended December 31, 2021. Our total revenue decreased by SGD 1,087,758 (USD 811,517), or 87.9%. The overall decrease in total revenue was primarily attributable to a decrease of SGD 580,415 in revenue from software development services and a decrease of SGD 507,343 in consulting and technical support services.
For the six months ended December 31, 2022, our software development services revenue was SGD 144,510 (USD 107,811) as compared to SGD 724,925 for the six months ended December 31, 2021. The decrease in software development service revenue was SGD 580,415 or 80.1% due to the fact that we did not manage to secure major software development contract in the six month ended December 31, 2022. However, we have some deployment of software solution projects are still work in progress for the six months ended December 31, 2022. We have commercialized our new modular software solution, and our customers engaged us to implement it with minimal customization. These contracts have a short duration, typically ranging from 4 to 6 months. The customers gain complete access to the software only after we conduct an onsite User Acceptance Test, at which point we recognize these software development revenue. However, it’s worth noting that within the 6-month period, we have not yet completed the User Acceptance Test for these contracts. Nevertheless, we anticipate fulfilling the performance obligations for the projects in the latter half of the financial year. We plan to continue to expand our ability to provide our software development service by investing in software development and client support to address the business needs of local markets and continuous growth of these services. In addition, by providing software development services, we gain extensive understanding and knowledge of each client’s unique business needs, often resulting in opportunities for us to cross-sell our consulting and technical support services.
For the six months ended December 31, 2022, our consulting and technical support services revenue was SGD 5,500 (USD 4,103) as compared to SGD 512,843 for the six months ended December 31, 2021, representing a decrease of SGD 507,343 or 98.9%, which was due to the fact that we did not enter into new consulting and technical support contracts during such six month-period. At the same time we are more focused on deploying our customized software solutions in the six months ended December 31, 2022. We intend to continue investing for long-term growth in the big data analysis market and we plan to continue to expand our ability to sell more technical consulting services to our existing clients.
For the six months ended December 31, 2022, our product sales revenue remain nil as in the six months ended December 31, 2021 mainly because there was no product sales during these periods. We have begun developing our own platforms and products which will be available for sale for the rest of 2023.
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Cost of Revenues
Our cost of revenues decreased by SGD 130,546 or 71.8% from SGD 181,815 for the six months ended December 31, 2021 to SGD 51,269 (USD 38,249) for the six months ended December 31, 2022, which was mainly attributable to a decrease of SGD 6,491 in cost of revenue from software development services in line with the decreased software development service revenue. The decrease was primarily due to a decrease of software development revenue. On the other hand, our cost of revenue from consulting and technical support services was approximately SGD 29,800 (USD 22,232) for the six months ended December 31, 2022, representing a decrease of SGD 124,055 from SGD 153,855 for the six months ended December 31, 2021. It is due to the reduction in hardware deployment and technical consultation revenue stream in the same period. Thus our cost of revenue from consulting and technical support services has decreased significantly.
Gross Profit
Our gross profit decreased by SGD 957,212 from SGD 1,055,953 for the six months ended December 31, 2021 to SGD 98,741 (USD 73,665) for the six months ended December 31, 2022. The decrease was mainly due to the significant decrease in software development service revenues during the six months ended December 31, 2022. For the six months ended December 31, 2022 and 2021, our overall gross margin was 65.8% and 85.3%, respectively. The decrease in gross margin was primarily due to the fact that we have increased our development and technical team size significantly.
Our gross profit and gross profit margin from our major revenue streams are summarized as follows:
| For the Six Months ended December 31, | Variance | |||||||||||||||
| 2021 | 2022 | 2022 | Amount % | |||||||||||||
| SGD | SGD | USD | SGD | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Software development service | ||||||||||||||||
| Gross profit | 696,965 | 123,041 | 91,794 | (573,924 | ) | |||||||||||
| Gross margin | 96.1 | % | 85.1 | % | 85.1 | % | (82.3 | )% | ||||||||
| Consulting and technical support services | ||||||||||||||||
| Gross profit | 358,988 | (24,300 | ) | (18,129 | ) | (383,288 | ) | |||||||||
| Gross margin | 70.0 | % | (441.8 | )% | (441.8 | )% | (106.8 | )% | ||||||||
| Product sales | ||||||||||||||||
| Gross profit | - | - | - | - | ||||||||||||
| Gross margin | - | % | - | % | - | % | - | % | ||||||||
| Total | ||||||||||||||||
| Gross profit | 1,055,953 | 98,741 | 73,665 | (957,212 | ) | |||||||||||
| Gross margin | 85.3 | % | 65.8 | % | 65.8 | % | (90.6 | )% | ||||||||
Gross profit for software development services decreased by SGD 573,924 or 82.3% from SGD 696,965 in the six months ended December 31, 2021 to SGD 123,041 (USD 91,794) in the six months ended December 31, 2022. Gross profit margin for the six months ended December 31, 2022 and 2021 was 85.1% and 96.1%, respectively. The decrease in gross margin was primarily due to the increase of staff cost, but at the same time due to the insufficient manpower; we have to rely on third party service providers to maintain our project timeline in the six months ended December 31, 2022.
Gross profit for consulting and technical support services decreased by SGD 383,288 or 106.8% from SGD 358,988 in the six months ended December 31, 2021 to a gross loss of SGD 24,300 (USD 18,129) in the six months ended December 31, 2022, which was mainly due to engaging external consultants for a project consultation which resulted in a higher costs for the six months ended December 31, 2022. Gross profit margin for the six months ended December 31, 2022 and 2021 was (441.8%) and 70.0%, respectively.
Gross profit for product sales remained nil or 0% in the six months ended December 31, 2021 and 2022, which was mainly because there was no product sales during these periods. As a result, gross profit margin for the six months ended December 31, 2021 and 2022 remained nil.
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Operating Expenses
For the six months ended December 31, 2022, we incurred SGD 1,484,408 (USD 1,107,437) in operating expenses, representing an increase of SGD 674,407, or 83.3%, from SGD 810,001 for the six months ended December 31, 2021, primarily due to increases in general and administrative expenses.
Selling and marketing expenses primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and included market research expenses relating to our sales and marketing activities. Selling and marketing expenses decreased by SGD 22,747, or 63.7%, from SGD 35,687 for the six months ended December 31, 2021 to SGD 12,940 (USD 9,654) for the six months ended December 31, 2022. The decrease was mainly due to no advertising expense in the six months ending December 31, 2022, compared to the six months ending December 31, 2021, and a decline in the marketing expense on six months ended December 31, 2022 compared to six months ended December 31, 2021. Selling expenses accounted for 0.9% and 2.9% of total revenue for the six months ended December 31, 2022 and 2021, respectively.
General and administrative expenses primarily consisted of salary and compensation expenses relating to our accounting, human resources and executive office personnel, and included rental expenses, depreciation expenses, office overhead, professional service fees and travel and transportation costs. General and administrative expenses increased by SGD 767,199, or 108.9%, from SGD 704,269 for the six months ended December 31, 2021 to SGD 1,471,468 (USD 1,097,783) for the six months ended December 31, 2022. The increase was mainly due to an increase of doubtful expenses SGD 413,020, an increase of director’s fee expense of approximately SGD 166,000, including legal and accounting fees of approximately SGD 40,000 and staff wages of approximately SGD 28,000. As a percentage of revenues, general and administrative expenses were 103.6% and 56.9% of our total revenue in the six months ended December 31, 2022 and 2021, respectively. The percentage of revenues for general and administrative expenses was higher for the six months ended December 31, 2022, due to the increased of staff headcount and allowance for doubtful accounts.
Research and development expenses primarily consisted of compensation and benefit expenses relating to our research and development personnel and other expenses relating to our research and development activities. Research and development expenses decreased by SGD 70,045 from SGD 70,045 for the six months ended December 31, 2021 to nil for the six months ended December 31, 2022, representing 0.0% and 5.7% of our total revenues for the six months ended December 31, 2022 and 2021, respectively. We expect to continue to invest in research and development. We expect that our ability to effectively utilize our research and development capabilities significantly affects our results of operations in the future.
Other expenses, net
Other expenses primarily consists of interest income net of interest expense, the exchange gain and loss, and other income and expenses. Our net other expense was approximately SGD 1,155 (USD 861) for the six months ended December 31, 2022, compared with a net other expense of approximately SGD 36,719 for the six months ended December 31, 2021. Other expenses incurred for the six months ended December 31, 2022 included an interest expense SGD 23,939 (USD 17,859), finance expenses SGD 3,345 (USD 2,495) and exchange loss SGD 3,470 (USD 2,589) offset by an other income in an amount of SGD 29,599 (USD 22,082). For the six months ended December 31, 2021, other expenses included an interest expense of SGD 39,406, finance expense of SGD 825, net other expenses SGD 524, offset by lease income SGD 3,228 and foreign currency exchange gain of SGD 808. The exchange loss was primarily due to the depreciation of the United States Dollar (USD) against the Singapore Dollar (SGD) for the transactions settled in USD during the six months ended December 31, 2022. The decrease in interest expense was due to the reduction in borrowings during the six months ended December 31, 2022. The increase in finance expenses was due to new borrowing facilities obtained during the six months ended December 31, 2022. The other income was primarily due to company support schemes from the Singapore government during 6 months ended December 31, 2022.
Income (loss) before provision for income taxes
As a result of the foregoing, our income before provision for income taxes decreased by SGD 1,596,055, or 762.8%, from SGD 209,233 for the six months ended December 31, 2021 to loss before provision for income taxes SGD 1,386,822 (USD 1,034,633) for the six months ended December 31, 2022.
Provision for income taxes
Our income tax expenses decreased by SGD 35,707, or 98.0%, from SGD 36,451 for the six months ended December 31, 2021 to SGD 744 (USD 555) for the six months ended December 31, 2022. Current income tax decreased by SGD 35,707 due to deferred income tax liabilities in Singapore.
Net income (loss)
As a result of the foregoing, our net income decreased by approximately 903.1% to a loss of SGD 1,387,566 (USD 1,035,188) for the six months ended December 31, 2022 from a profit of SGD 172,782 for the six months ended December 31, 2021.
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LIQUIDITY AND CAPITAL RESOURCES
In assessing our liquidity, we monitor and analyze our cash and our operating expenditure commitment. Our liquidity needs are to meet our working capital requirements and operating expenses obligation. For the year ended June 30, 2022, PYS accounted for 48.8%, AMS accounted for 16.5%, Smorboll Pte Ltd accounted for 17.4% of our total revenues but for the six months ended December 31, 2022, three clients accounted for 95.9% of our total revenues: Appiclogy Pte Ltd for 52.7% , Ren Ci Hospital for 23.2% and McCoy Holdings Private Limited for 20.0%. While we had three major customers prior, we decided to leverage our core competencies and successfully pursued new clients to diversify our revenue stream. With these new clients onboarded, we had to aggressively acquire more talents to better service our expanded client base. To date, we have financed our daily operations and business development through cash generated from our operations. As of December 31, 2022 and June 30, 2022, our cash balance was SGD 27,104 (USD 20,220) and SGD 23,311, respectively. Our main working capital commitments are staff salaries and marketing expenses. The costs of revenue are relatively low since we have minimal hardware cost as most of our projects are software development. In order to reduce the operating expenses, we are exploring the options to hire overseas staff with lower cost, and to allocate the office space more efficiently by encouraging hybrid working. We managed to keep our monthly rental commitment from July 2022 to August 2023 to be same as the previous year.
For customized software development projects, sales cycle is usually long. Payments are based on the Company’s ability to meet certain performance goals. We are developing a range of solutions for a specific industry. These solutions are designed to need little adjustment to suit future customers. As a result, we can implement solutions and finish the project more rapidly, usually within 12 months. By shortening the sales to project completion cycle, we are striving to improve our overall liquidity situation.
We are making efforts on timely collections on accounts We recognize that there were some inefficiencies in collections of receivables, mainly due to one client. We are actively monitoring the situation and communicating with this client to ensure that the amounts due are fully collected.
As of the date of this prospectus, we have secured a SGD 1,200,000 (USD 895,255) trade financing facility from an international banking institution. We intend to obtain additional financing through commercial lending and project financing. If we managed to secure debt financing from local banks or financial institutions, such debts would likely rank higher than payment to our shareholders in the event of a liquidation proceeding. We are also seeking to raise funding through this offering. Furthermore, a grant of SGD734,922 (USD548,285) over 18 months, which is from the Singapore government regarding our R&D expenses incurred during a project that leverages 5G technology was approved on December 21, 2022. With such grant, our operating expenditure commitment can then be further reduced. However, there can be no assurance that we can raise the required capital we need to build and expand as expected, nor can we assure that this offering will be able to complete and to fund our business as applications are still in process.
We believe that our existing cash and cash equivalents, anticipated cash raised from financings, and expected cash flow from operations will be sufficient to meet our capital requirements for a minimum period of 6 months until March 31, 2024 from the date of this prospectus. This assessment is based on our current financial projections, including revenue expectations, cost management strategies, and anticipated funding sources. We have considered various factors, including but not limited to:
| 1. | Revenue Streams: Our revenue projections take into account our diverse client base. In addition to our existing clients mentioned above, we have expanded our client base to Malaysia customer. We expect these revenue streams to continue supporting our operations. |
| 2. | Cost Management: Our key financial commitments are staff salaries, sales and marketing costs, office rental, and other fixed costs, amounting to approximately SGD 70,000 (USD 52,223) monthly. We are proactively implementing cost-saving measures, such as exploring overseas staffing options, optimizing office space usage to ensure efficient resources allocation, and hiring project-based freelance technical staff. |
| 3. | Government Grant: We expect to receive the first disbursement of the 5G technology grant, approximately SGD199,208 (USD 148,618), in the second quarter of fiscal year 2024. With our current efficient cost structure, this grant will further enhance our liquidity position. |
While we acknowledge that unforeseen circumstances or changes in market conditions could impact our liquidity, we remain committed to monitoring our financial health and will take necessary actions to secure additional financing if needed. In the event of unforeseen circumstances that disrupt the above-mentioned financial projection and strategies, the Company believes it possesses adequate capital resources to sustain planned operations for a minimum of 3 months from the date of this prospectus with the current available capital resources.
44
Factors that may affect the Company’s liquidity are continuously monitored. These factors include general worldwide economic conditions, competitive pricing in the software development industry, the continuing impact of the COVID-19 pandemic, the Company’s operating results continuing to deteriorate, and the Company’s banks and shareholders not being able to provide continued financial support. Our ability to manage our working capital, including receivables and other assets and liabilities and accrued liabilities, may materially affect our financial condition and results of operations. In the event that the Company is adversely affected by any of these factors and, as a result, the operating cash flows are not sufficient to meet the Company’s working capital requirements, there is no guarantee that the Company would be able to raise additional capital on acceptable terms to fund a potential cash shortfall. Consequently, the Company is subject to liquidity risk. The Company will need to procure additional financing in order to fund its ongoing operation. The Company intends to obtain such financing through equity financing, and there can be no assurance that the Company can raise the required capital it needs to build and expand as expected, nor that the capital markets will fund the business of the Company. Without this additional financing, the Company may be unable to achieve positive cash flow and earnings as quickly as anticipated, these uncertainties cast a significant doubt about the Company’s ability to continue as a going concern.
The following table sets forth a summary of our cash flows for the periods indicated:
| For the six months ended December 31 | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
| Net cash provided by (used in) operating activities | 371,901 | (99,460 | ) | (74,203 | ) | |||||||
| Net cash provided by (used in) investing activities | 927,403 | (5,202 | ) | (3,881 | ) | |||||||
| Net cash provided by (used in) financing activities | (1,108,800 | ) | 108,455 | 80,913 | ||||||||
Cash provided (used in) by operating activities:
For the six months ended December 31, 2022, net cash used in operating activities of SGD 99,460 (USD 74,203) primarily resulted from the net loss of SGD 1,387,566 (USD 1,035,188) as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property and equipment SGD 24,073 (USD 17,959), increased provision for doubtful accounts SGD 413,020 (USD 308,132) and increased deferred tax provision SGD 744 (USD 555). Changes in operating assets and liabilities mainly included a decrease in accounts receivables SGD 1,370,156 (USD 1,022,200), a decrease in other assets SGD 6,483 (USD 4,837) and an increase in taxes payable SGD 408 (USD 304). This is offset by an increase in deferred contract costs SGD 237,357 (USD 177,080), an increase in inventories SGD 132,967 (USD 99,200), an increase in deposits SGD 286 (USD 213), a decrease in accounts payables SGD 71,848 (USD53,602) and other payables and accrued liabilities SGD 84,320 (USD 62,907).
For the six months ended December 31, 2021, net cash provided by operating activities of SGD 371,901 (USD 275,074) primarily resulted from the net income of SGD 172,782 (USD 127,797) as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property and equipment SGD 20,531 (USD 15,186), provision for doubtful accounts SGD 13,815 (USD 10,218), inventory provision SGD 13,120 (USD 9,704), and deferred tax benefit provision SGD 1,650 (USD 1,220). Changes in operating assets and liabilities mainly included a decrease in deposits – related party SGD 740,344 (USD 547,592), an increase in accounts payables, other payables and accrued liabilities SGD 153,719 (USD 113,697), and an increase in taxes payable SGD 44,512 (USD 32,924), partially offset by an increase in accounts receivables SGD 749,120 (US 554,083), an increase in prepayments SGD 2,590 (USD 1,916), and an increase in deposits SGD 36,862 (USD 27,265).
Cash provided by (used in) investing activities:
For the six months ended December 31, 2022, net cash used in investing activities, SGD 5,202 (USD 3,881) was comprised of the purchase of property and equipment of SGD 5,202 (USD 3,881).
For the six months ended December 31, 2021, net cash provided by investing activities, SGD 927,403 (USD 685,949) was comprised of the repayment of loans from related party in the amount of SGD13,400 (USD 9,911), the repayment of loans from a director SGD 100,000 (USD 73,964) and the repayment of loans from third parties SGD 840,000 (USD 621,302). There was a net cash flow, partially offset by purchase of property and equipment of SGD 25,997 (USD19,228).
Cash provided by (used in) financing activities:
For the six months ended December 31, 2022, net cash provided by financing activities, SGD 108,455 (USD 80,913) was comprised of proceeds from financial institute loans SGD 185,000 (USD 138,019) and proceeds from related party SGD 50,000 (USD 37,302), offset by repayment to financial institute loans SGD 58,000 (USD 43,271), repayment to related party SGD 65,000 (USD 48,493) and finance lease payments to our lessor SGD 3,545 (USD 2,644).
For the six months ended December 31, 2021, net cash used in financing activities SGD 1,108,800 (USD 820,118) was comprised of dividend payment SGD 1,133,000 (USD 838,018), deferred IPO costs SGD 353,158 (USD 261,212), repayment of bank loans SGD 230,194 (USD 170,261), repayment of shareholder loans SGD 59,042 (USD 43,670) and finance lease payments to our lessor SGD 3,406 (USD 2,519), offset by SGD 670,000 (USD 495,562) proceeds from bank loans.
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The following table sets forth a summary of our working capital as of December 31, 2022 and June 30, 2022:
| As of June 30, | As of December 31, | |||||||||||
| 2022 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Current assets | 3,226,609 | 1,811,353 | 1,351,352 | |||||||||
| Current liabilities | 2,123,251 | 2,079,635 | 1,551,502 | |||||||||
| Working capital | 1,103,358 | (268,282 | ) | (200,150 | ) | |||||||
Current assets as of December 31, 2022 was SGD 1,811,353 (USD 1,351,352). Out of this balance, we had cash in an amount of SGD 27,104 (USD 20,220) of which approximately SGD 27,030 (USD 20,166) was denominated in Singapore Dollars, and SGD 74 (USD 54) denominated in United States Dollars. The current asset balance also included the following: accounts receivable, net SGD 1,309,009 (USD 976,581), inventories SGD 132,967 (USD 99,200), prepayment SGD 13,500 (USD 10,072), deferred contract costs SGD 237,357 (USD 177,079) and short-term deposits SGD 91,416 (USD 68,200).
Current liabilities as of December 31, 2022 was SGD 2,079,635 (USD 1,551,502). This amount was composed of accounts payable SGD 148,088 (USD 110,481), other payables and accrued liabilities SGD 189,796 (USD 141,596), loan payable - financial institution loans SGD 249,000 (USD 185,765), loan payable - related party SGD 50,000 (USD 37,302), finance lease obligation, current portion SGD 7,304 (USD 5,449) and taxes payable SGD 1,435,447 (USD 1,070,909).
Current assets as of June 30, 2022 was SGD 3,226,609. Out of this balance, we had cash in an amount of SGD 23,311 of which approximately SGD 22,138 was denominated in Singapore Dollars, and SGD 1,172 denominated in United States Dollars. The current asset balance also included the following: accounts receivable, net SGD 3,092,185, prepayments SGD 13,500, short-term deposits SGD 91,130, and other receivable, net SGD 6,483.
Current liabilities as of June 30, 2022 was SGD 2,123,251. This amount was composed of accounts payable SGD 219,936, loans payable to related parties SGD 65,000, loans payable to third party SGD 122,000 (USD 91,018), other payables and accrued liabilities SGD 274,116, finance lease obligation, current portion SGD 7,160 and taxes payable SGD 1,435,039.
We have commenced a strategy to raise debt and equity. However, there can be no certainty that these additional financings will be available on acceptable terms or at all. If management is unable to execute this plan, there would likely be a material adverse effect on our business. All of these factors raise substantial doubt about our ability to continue as a going concern. The unaudited interim condensed consolidated financial statements for the six months ended December 31, 2022 and 2021 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from our inability to continue as a going concern.
Capital Expenditures
We made capital expenditures of SGD 5,202 (USD 3,881) and SGD 25,997 for the six months ended December 31, 2022 and 2021, respectively. In these periods, our capital expenditures were mainly used for purchases of office equipment. We will continue to make capital expenditures to meet the expected growth of our business.
Commitments and Contingencies
In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450-20, “Loss Contingencies”, we will record accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Contractual Obligations
As of December 31, 2022, the future minimum payments under certain of our contractual obligations were as follows:
| Payments Due In | ||||||||||||||||||||
| Total SGD | Less than 1 year | 1 - 2 years | 3 - 5 years | Thereafter | ||||||||||||||||
| Contractual obligations | ||||||||||||||||||||
| Finance lease obligation | 73,619 | 9,708 | 9,708 | 29,124 | 25,079 | |||||||||||||||
| Total | 73,619 | 9,708 | 9,708 | 29,214 | 25,079 | |||||||||||||||
| Payments Due In | ||||||||||||||||||||
| Total USD | Less than 1 year | 1 - 2 years | 3 - 5 years | Thereafter | ||||||||||||||||
| Contractual obligations | ||||||||||||||||||||
| Finance lease obligation | 54,925 | 7,243 | 7,243 | 21,729 | 18,710 | |||||||||||||||
| Total | 54,925 | 7,243 | 7,243 | 21,729 | 18,710 | |||||||||||||||
Future Financings
We may sell our ordinary shares in order to fund our business growth. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that we will achieve sales of the equity securities or arrange for debt or other financing to fund our growth in case it is necessary, or if we are able to do so, there is no guarantee that existing shareholders will not be substantially diluted.
Quantitative and Qualitative Disclosure about Market Risk
Concentration of credit risk
Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash and accounts receivable. We place our cash and cash equivalents with financial institutions with high credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the service clients. To reduce credit risk, we perform on-going credit evaluations of the financial condition of these service clients. We establish a provision for doubtful accounts based upon estimates, factors surrounding the credit risk of specific service clients and other information.
Concentration of clients and vendors
Concentration of clients
For the six months ended December 31, 2022, three major clients Appiclogy Pte Ltd, Ren Ci Hospital and McCoy Holdings Private Limited accounted for 52.7%, 23.2% and 20.0% of the Company’s total revenues, respectively. For the six months ended December 31, 2021, three clients AMS, Heha, and Appiclogy accounted for 40.4%, 33.0% and 14.4% of the Company’s total revenues, respectively.
As of December 31, 2022, two clients, PYS and Smorball Pte Ltd., accounted for 83.4% and 15.1%, respectively, of the Company’s total accounts receivable. As of June 30, 2022, two clients accounted for 74.6% and 24.1%, respectively, of the Company’s total accounts receivable.
Concentration of vendors
For the six months ended December 31, 2022, three vendors, Pangu, Jenny Liu, and Ottawa Sign Technology Pte Ltd, accounted for 34.1%, 24.0%, and 16.3% of the Company’s total purchases, respectively. For the six months ended December 31, 2021, two vendors, Pangu and Mr. Wee Chong Loi, son of our shareholder and sole director, Mr. Sai Bin Loi, accounted for 55.0% and 29.3% of the Company’s total purchases, respectively. As of December 31, 2022, two vendors accounted for more than 10% of the Company’s accounts payable: Hunter Taubman Fischer & Li LLP for 56.3% and Insight Law LLC for 13.0%, respectively.
RP Singapore and Mr. Wee Chong Loi entered into a commission fee agreement dated March 15, 2020, pursuant to which RP Singapore agreed to pay certain fees to Mr. Wee Chong Loi as he is the key agent helping RP Singapore secure and complete certain project as contemplated therein. The agreement became effective upon execution and will expire upon mutual agreement of both parties. The commission fee agreement was filed as the exhibit 10.5 to the registration statement of which this prospectus forms a part.
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Results of Operations for the Years Ended June 30, 2022 and 2021
Our consolidated results of operations for the years ended June 30, 2022 and 2021 are summarized below:
| For the Years Ended June 30, | ||||||||||||||||||||
| 2021 | 2022 | 2022 | Variance | Change | ||||||||||||||||
| SGD | SGD | USD | SGD | % | ||||||||||||||||
| Revenues | 8,818,182 | 4,465,134 | 3,211,634 | (4,353,048 | ) | (49.4 | )% | |||||||||||||
| Cost of revenues | (4,300,206 | ) | (1,009,077 | ) | (725,798 | ) | 3,291,129 | (76.5 | )% | |||||||||||
| Gross profit | 4,517,976 | 3,456,057 | 2,485,836 | (1,061,919 | ) | (23.5 | )% | |||||||||||||
| Selling and marketing expenses | (844,023 | ) | (155,976 | ) | (112,189 | ) | 688,047 | (81.5 | )% | |||||||||||
| General and administrative expenses | (937,553 | ) | (1,108,153 | ) | (797,060 | ) | (170,600 | ) | 18.2 | % | ||||||||||
| Research and development expenses | (90,408 | ) | (147,659 | ) | (106,207 | ) | (57,251 | ) | 63.3 | % | ||||||||||
| Total Operating Expense | (1,871,984 | ) | (1,411,788 | ) | (1,015,456 | ) | 460,196 | (24.6 | )% | |||||||||||
| Income from operations | 2,645,992 | 2,044,269 | 1,470,380 | ) | (601,723 | ) | (22.7 | )% | ||||||||||||
| Other expense, net | (15,845 | ) | (70,605 | ) | (50,784 | ) | (54,760 | ) | 345.6 | % | ||||||||||
| Income before provision for income taxes | 2,630,147 | 1,973,664 | 1,419,596 | (656,483 | ) | (25.0 | )% | |||||||||||||
| Provision for income taxes | (454,144 | ) | (332,921 | ) | (239,460 | ) | 121,223 | (26.7 | )% | |||||||||||
| Net income | 2,176,003 | 1,640,743 | 1,180,136 | (535,260 | ) | (24.6 | )% | |||||||||||||
Year Ended June 30, 2022 Compared to Year Ended June 30, 2021
Revenues
For the year ended June 30, 2022, our total revenue was SGD 4,465,134 (USD 3,211,634) as compared to SGD 8,818,182 for the year ended June 30, 2021. Our total revenue decreased by SGD 4,353,048 (USD 3,131,013), or 49.4%. The overall decrease in total revenue was primarily attributable to a decrease of SGD 4,953,430 in revenue from software development services but offset by an increase of SGD 688,379 in consulting and technical support services and product sales revenue.
For the year ended June 30, 2022, our software development service revenue was SGD 3,175,165 (USD 2,283,799) as compared to SGD 8,128,595 for the year ended June 30, 2021. The decrease in software development service revenue was SGD 4,953,430 or 60.9%. In 2021, we have completed a major contract from a single major customer. This contract was secured before COVID-19 started in 2020, and we commenced work in the fiscal year of 2020. However in 2022, the Company was only able to secure projects with a smaller contract value due the ongoing difficult economic climate. As a result, we experienced a decrease in software development service revenue.
Concurrently, we strategically redirected resources towards the productization of our software solution using the past projects knowledge and experience, developing our own software product that specialized in a certain industry. We are confident that this will positively impact our future revenue generation, as our software solution demands minimal customization and can be effortlessly deployed. As a result, resources were shifted from sales and marketing to software productization efforts, We have decreased the budget and spending on sales and marketing, but we have reallocated those capital resources toward the recruitment of additional technical engineers to bolster our productization efforts. Consequently, this has indirectly resulted in a reduction in revenue from our software development services.
We plan to continue to expand our ability to provide our software development service by investing in software development and client support to address the business needs of local markets and continuous growth of these services. In addition, by providing software development services, we gain extensive understanding and knowledge of each client’s unique business needs, often resulting in opportunities for us to cross-sell our consulting and technical support services.
For the year ended June 30, 2022, our consulting and technical support service revenue was SGD 1,289,969 (USD 927,835) as compared to SGD 601,590 for the year ended June 30, 2021, representing an increase of SGD 688,379 or 114.4%. In 2022, we successfully secured two major contracts involving consulting and technical support services. We fulfilled these obligations within the fiscal year ending on June 30, 2022. In contrast, in 2021, we had only one significant project related to consulting and technical support. As a result, this contributed to the growth in our consulting and technical support service revenue. With the increasing revenue trend in big data analysis related consulting and technical support services revenue in the year ended June 30, 2022, we intend to continue investing for long-term growth in the big data analysis market and we plan to continue to expand our ability to sell more technical consulting services to our existing clients.
For the year ended June 30, 2022, we had no product sales as compared to SGD 87,997. The decrease in product sales revenue was mainly due to the focus on our software productization and focus on more software-centric projects. We continue to expand the scope of our services and enhance the features and functionalities of our software and improve our marketing efforts, and thus we expect our sale of products revenue will grow with an expanded offering and increasing market awareness.
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Cost of Revenues
Our cost of revenues decreased by SGD 3,291,129 or 76.5% from SGD 4,300,206 for the year ended June 30, 2021 to SGD 1,009,077 (USD 725,798) for the year ended June 30, 2022, which was mainly attributable to a decrease of SGD 3,115,446 in cost of revenue from software development services in line with the decreased software development service revenue. The decrease was primarily due to the shift on projects that are less reliant on hardware deployment. Our cost of revenue from consulting and technical support services was approximately SGD 132,900 (USD 95,591) in the year ended June 30, 2022, representing a decrease of SGD 154,480 from SGD 287,380 in the year ended June 30, 2021. Our cost of revenue from consulting and technical support services decreased due to service contracts not continuing in the same period. Our cost of revenue from product sales was nil in the year ended June 30, 2022, representing a decrease of SGD 21,203 from SGD 21,203 in the year ended June 30, 2021.
Gross Profit
Our gross profit decreased by SGD 1,061,919, from SGD 4,517,976 for the year ended June 30, 2021 to SGD 3,456,057 (USD 2,485,836) during the year ended June 30, 2022. The decrease was mainly due to the decrease in software development service revenues during the year ended June 30, 2022. For the years ended June 30, 2022 and 2021, our overall gross margin was 77.4% and 51.2%, respectively. The increase in gross margin was primarily due to the fact that we have certain ongoing projects for our software development service, which accounted for approximately 40% of our revenue in the year ended June 30, 2022.
Our gross profit and gross profit margin from our major revenue streams are summarized as follows:
| For the Years ended June 30, | Variance | |||||||||||||||
| 2021 | 2022 | 2022 | Amount % | |||||||||||||
| SGD | SGD | USD | ||||||||||||||
| Software development service | ||||||||||||||||
| Gross profit | 4,136,972 | 2,298,988 | 1,653,592 | (1,837,984 | ) | |||||||||||
| Gross margin | 50.9 | % | 72.4 | % | (44.4 | )% | ||||||||||
| Consulting and technical support services | ||||||||||||||||
| Gross profit | 314,210 | 1,157,069 | 832,244 | 842,859 | ||||||||||||
| Gross margin | 52.2 | % | 89.7 | % | 268.2 | % | ||||||||||
| Product sales | ||||||||||||||||
| Gross profit | 66,794 | - | - | (66,794 | ) | |||||||||||
| Gross margin | 75.9 | % | - | % | (100 | )% | ||||||||||
| Total | ||||||||||||||||
| Gross profit | 4,517,976 | 3,456,057 | 2,485,836 | (1,061,919 | ) | |||||||||||
| Gross margin | 51.2 | % | 77.4 | % | (23.5 | )% | ||||||||||
Gross profit for software development services decreased by SGD 1,837,984 or 44.4% from SGD 4,136,972 in the year ended June 30, 2021 to SGD 2,298,988 (USD 1,653,592) in the year ended June 30, 2022 mainly due to the decrease in overall software development revenue. Gross profit margin for the years ended June 30, 2022 and 2021 was 72.4% and 50.9%, respectively. The increase in gross margin was primarily because we provided more comprehensive solutions to our clients and completed several high-value contracts in the fiscal year ended June 30, 2022. These solutions and projects have been developed and deployed utilizing the foundation of our previously technical know-how, resulting in a substantial reduction in development cost.
Gross profit for consulting and technical support services increased by SGD 842,859 or 268.2% from SGD 314,210 in the year ended June 30, 2021 to SGD 1,157,069 (USD 832,244) in the year ended June 30, 2022, which was mainly because we started a few major software development projects which requires consulting before development work can begin; for the year ended June 30, 2022. Gross profit margin for the years ended June 30, 2022 and 2021 was 89.7% and 52.2%, respectively.
Gross profit for product sales decreased by SGD66,794 or 100% from SGD66,794 in the year ended June 30, 2021 to nil in the year ended June 30, 2022, which was due to the shift in focus towards the software base solution and project instead of hardware. As a result, gross profit margin for the year ended June 30, 2022 was nil, a decrease from 100% in the year ended June 30, 2021.
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Operating Expenses
For the year ended June 30, 2022, we incurred SGD 1,411,788 (USD 1,015,456) in operating expenses, representing a decrease of SGD 460,196, or 24.6%, from SGD 1,871,984 for the year ended June 30, 2021, primarily due to significant decreases in selling and marketing expenses.
Selling and marketing expenses primarily consisted of salary and compensation expenses relating to our sales and marketing personnel, and also included other expenses relating to our sales and marketing activities. Selling and marketing expenses decreased by SGD688,047, or 81.5%, from SGD844,023 for the year ended June 30, 2021 to SGD 155,976 (USD 112,189) for the year ended June 30, 2022. The decrease was mainly due to the decrease in salary and benefit expenses for our sales team and related product market research expenses of approximately SGD 711,223. Selling expenses accounted for 3.5% and 9.6% of total revenue for the years ended June 30, 2022 and 2021, respectively.
General and administrative expenses primarily consisted of salary and compensation expenses relating to our accounting, human resources and executive office personnel, and included rental expenses, depreciation expenses, office overhead, professional service fees and travel and transportation costs. General and administrative expenses increased by SGD 170,600 or 18.2%, from SGD 937,553 for the year ended June 30, 2021 to SGD 1,108,153 (USD797,060) for the year ended June 30, 2022. The increase was mainly due to an increase other office expense, including rent and salary of approximately SGD 191,000. As a percentage of revenues, general and administrative expenses were 24.8% and 10.6% of our total revenue in the years ended June 30, 2022 and 2021, respectively. Driven by developing our business, hiring more employees and offering competitive packages to retain our high caliber employees for business growth.
Research and development expenses primarily consisted of compensation and benefit expenses relating to our research and development personnel and other expenses relating to our research and development activities. Research and development expenses increased by SGD 57,251 from SGD 90,408 for the year ended June 30, 2021 to SGD 147,659 (USD 106,207) for the year ended June 30, 2022, representing 3.3% and 1.0% of our total revenues for the years ended June 30, 2022 and 2021, respectively. We expect to continue to invest in research and development. We expect that our ability to effectively utilize our research and development capabilities significantly affect our results of operations in the future.
Other expenses, net
Other income (expense) primarily consists of interest income net of interest expense, the exchange gain and loss, and other income and expenses. Our net other expense was approximately SGD 70,605 (USD 50,784) in the year ended June 30, 2022, compared with a net other expense of approximately SGD 15,845 in the year ended June 30, 2021. Other expenses incurred for the year ended June 30, 2022 included an exchange loss in an amount of SGD 1,651 (USD 1,188), a finance expense in an amount of SGD 2,018 (USD 1,415), an interest expense in an amount of SGD 56,257 (USD 40,464), and other expense in an amount of SGD 13,907 (USD 10,003), offset by lease income in an amount of SGD 3,228 (USD 2,322). For the year ended June 30, 2021, other expenses included an exchange loss of SGD 58,746 and a finance expense in an amount of SGD 2,838, offset by interest income of SGD30,019 and other income of SGD3,245. The loss was primarily due to the depreciation of the United States Dollar (USD) against the Singapore Dollar (SGD) for the transactions settled in United States Dollars (USD) during the years ended June 30, 2022 and 2021.
Income before provision for income taxes
As a result of the foregoing, our income before provision for income taxes decreased by SGD 656,483, or 26.7%, from SGD 2,630,147 for the fiscal year ended June 30, 2021 to SGD 1,973,664 (USD 1,419,596) for the fiscal year ended June 30, 2022.
Provision for income taxes
Our income tax expenses decreased by SGD121,223, or 26.7%, from SGD454,144 for the year ended June 30, 2021 to SGD332,921 (USD239,460) for the year ended June 30, 2022. Under the Inland Revenue Authority of Singapore (IRAS), RP Singapore is generally subject to income tax at a rate of 17%.
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Net income
As a result of the foregoing, our net income decreased by approximately 24.6% to SGD 1,640,743 (USD 1,180,136) in the fiscal year ended June 30, 2022 from SGD 2,176,003 for the fiscal year ended June 30, 2021.
LIQUIDITY AND CAPITAL RESOURCES
In assessing our liquidity, we monitor and analyze our cash and our operating expenditure commitment. Our liquidity needs are to meet our working capital requirements and operating expenses obligation. For the year ended June 30, 2021, Heha accounted for 95.1% of our total revenues but for the year ended June 30, 2022, three clients accounted for more than 82% of our total revenues, including PYS, which is a solution provider, for 48.7%, AMS, which is a marine related services provider for 16.5% and Smorboll Pte Ltd., which is a solution provider for 15.8%. While we had only one major customer prior, we decided to leverage our core competencies and successfully pursued new clients to diversify our revenue stream. With these new clients onboarded, we had to aggressively acquire more talents to better service our expanded client base. To date, we have financed our daily operations and business development through cash generated from our operations. As of June 30, 2022 and 2021, our cash balance was SGD23,311 (USD16,767) and SGD4,142, respectively.
The Company’s main working capital commitments are staff salaries and marketing expenses. The costs of revenue are relatively low since the Company has minimal hardware cost as most of its projects are software development. In order to reduce the operating expenses, the Company has hired overseas staff with lower cost, and allocated the office space more efficiently by encouraging hybrid working. The Company managed to keep its monthly rental commitment from July 2022 to August 2023 to be same as the previous year. The Company plans to request a higher deposit amount from its clients, and to pay its vendors on a back-to-back basis after the payment from customers is received. Once in place, this payment arrangement with its clients and vendors is expected to hugely reduce the Company’s operating cash out-flows. The Company’s management is of opinion that the Company will be able to conduct planned operations using only currently available capital resources until June 30, 2023.
The Company has started to seek additional financing for an aggregate amount of at least SGD500,000 (USD359,634) from the local banks and financial institutions via debt financing to fund its ongoing operation. The Company also intends to obtain additional financing through commercial lending and project financing. The Company is in the final stages of obtaining trade financing with one of its banking partners, which should commence in the first quarter of 2023. However, some of the discussion with the local banks and financial institutions are in initial stage. As of the date of this prospectus, the Company has successfully obtained an overdraft facility of SGD200,000 (USD143,854) and SGD 1,200,000 (USD 895,254) under a trade financing facility from a bank. If the Company manages to secure additional debt financing from the local banks or financial institutions, such debts will likely be ranked higher than payment to its shareholders, in the event of a liquidation proceeding. The Company is also seeking to raise funding through this offering. Furthermore, a grant from the Singapore government regarding the Company’s R&D expenses incurred during a project that leverages 5G technology was approved on December 21, 2022. The Company expects to receive the first disbursement of the grant, approximately SGD199,208 (USD 148,618) in the second quarter of fiscal year 2024. With such grant, the Company’s operating expenditure commitment can then be further reduced. However, there can be no assurance that the Company can raise the required capital it needs to build and expand as expected, nor can the Company assure that this offering will be able to complete and to fund the business of the Company as applications are still in process.
Factors that may affect the Company’s liquidity are continuously monitored. These factors include general worldwide economic conditions, competitive pricing in the connectivity industry, the continuing impact of the COVID-19 pandemic, the Company’s operating results continuing to deteriorate, and the Company’s banks and shareholders not being able to provide continued financial support. In the event that the Company is adversely affected by any of these factors and, as a result, the operating cash flows are not sufficient to meet the Company’s working capital requirements, there is no guarantee that the Company would be able to raise additional capital on acceptable terms to fund a potential cash shortfall. Consequently, the Company is subject to liquidity risk. The Company will need to procure additional financing in order to fund its ongoing operation. The Company intends to obtain such financing through equity financing, and there can be no assurance that the Company can raise the required capital it needs to build and expand as expected, nor that the capital markets will fund the business of the Company. Without this additional financing, the Company may be unable to achieve positive cash flow and earnings as quickly as anticipated, these uncertainties cast a significant doubt about the Company’s ability to continue as a going concern.
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The following table sets forth a summary of our cash flows for the periods indicated:
| For the years ended June 30 | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Net cash provided by operating activities | 2,722,841 | 760,136 | 546,743 | |||||||||
| Net cash (used in) provided by investing activities | (2,832,394 | ) | 914,557 | 657,812 | ||||||||
| Net cash used in financing activities | (1,307,335 | ) | (1,655,524 | ) | (1,190,767 | ) | ||||||
Cash provided by operating activities:
For the year ended June 30, 2022, net cash provided by operating activities of SGD 760,136 (USD 546,743) primarily resulted from the net income of SGD 1,640,743 (USD 1,180,136) as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property and equipment, SGD 43,593 (USD 31,355), an increase in provision for doubtful accounts, SGD 22,122 (USD 15,912), an increase in inventory provision SGD 13,120 (USD 9,437), an increase in deferred tax benefit provision, SGD 232 (USD 167). Changes in operating assets and liabilities mainly included a decrease in prepayment SGD 572,500 (USD 411,782) due to refund of uncompleted services, a decrease in deposits to related party SGD 740,344 (USD 532,507), an increase in accounts payable SGD 219,936 (USD 158,193), an increase in other payables and accrued liabilities SGD 244,933 (USD 176,173) and an increase in taxes payable SGD 413,980 (USD 297,763). The net cash inflow was partially offset by an increase in accounts receivable SGD 3,069,349 (USD 2,207,689) due to extended settlement from our clients; and increase in deposits SGD 82,018 (USD 58,993).
For the year ended June 30, 2021, net cash provided by operating activities of SGD 2,722,842 primarily resulted from the net income of SGD 2,176,003 as adjusted for non-cash items and change in operating activities. Adjustments for non-cash items consisted of depreciation of property and equipment, SGD 28,185, an increase in provision for doubtful accounts, SGD 5,568, and an increase in deferred tax benefit provision, SGD 3,227. Changes in operating assets and liabilities mainly included a decrease in accounts receivable, SGD 1,180,767 due to settlement from our clients, a decrease in other current assets, SGD 100,000 due to settlement from insurance institution, an increase in other payables and accrued liabilities, SGD 29,184, and an increase in income tax payable, SGD 565,724, partially offset by an increase in prepayments, SGD 561,887 due to future services and rent deposits, an increase in inventories, SGD 3,830, an increase in deposits, SGD 100, an increase in deposits- related party, SGD 400,000 due to the service increase of software development projects assisted by the related party, and a decrease in accounts payable, SGD 400,000 due to the fact that we repaid our accounts payable with the source of funds generated from our operations.
Cash (used in) provided by investing activities:
For the year ended June 30, 2022, net cash used in investing activities, SGD 914,557 (USD 657,812) was comprised of purchase of property and equipment of SGD 32,360 (USD 23,276). The cash outflow was offset by the repayment of loans to third parties in the amount of SGD 840,000 (USD 604,186), repayment of amount due from a director SGD 100,000 (USD 71,927) and repayment of loans to related parties SGD 6,917 (USD 4,975).
For the year ended June 30, 2021, net cash used in investing activities, SGD 2,832,394 (USD 2,105,400) was comprised of an amount loaned to third parties, SGD 840,000 (USD 624,396), amount loaned to related party, SGD 400,000 (USD 297,331), related to the deposit for the business acquisition – related party of SGD 1,856,171 (USD 1,379,745) and purchase of property and equipment of SGD 122,823 (USD 91,298). The cash outflow was offset by the repayment of loans from related party in the amount of SGD 386,600 (USD 287,370).
Cash used in financing activities:
For the year ended June 30, 2022, net cash used in financing activities, SGD 1,655,524 (USD 1,190,767) was comprised of repayment of due to a director SGD 59,042 (USD 42,467), deferred IPO cost SGD 643,602 (USD 462,923), repayment to financial institutions SGD 688,000 (USD 494,857), repayment of finance lease SGD 6,880 (USD4,948), and dividend payments SGD 1,133,000 (USD 814,932). The cash outflow was offset by proceeds from financial institution SGD 810,000 (USD 582,608) and proceeds from the related parties loans SGD 65,000 (USD 46,752).
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For the year ended June 30, 2021, net cash used in financing activities SGD 1,307,335 (USD 971,780) was comprised of dividend payment SGD 1,140,000 (USD 847,395), repayment of shareholder loans SGD 161,266 (USD 119,874) and finance lease payments to our lessor SGD 6,069 (USD 4,511).
The following table sets forth a summary of our working capital as of June 30, 2022 and 2021:
| As of June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Current assets | 2,342,064 | 3,226,609 | 2,320,800 | |||||||||
| Current liabilities | 1,116,164 | 2,123,251 | 1,527,189 | |||||||||
| Working capital | 1,225,900 | 1,103,358 | 793,611 | |||||||||
Current assets as of June 30, 2022 was SGD 3,226,609 (USD 2,320,799). Out of this balance, we had cash in an amount of SGD 23,311 (USD 16,767) of which approximately SGD 22,138 (USD 15,923) was denominated in Singapore Dollars, and SGD 1,172 (USD 843) denominated in United States Dollars. The current asset balance also included the following: accounts receivable, net SGD 3,092,185 (USD 2,224,113), prepayments SGD 13,500 (USD 9,710), short-term deposits SGD 91,130 (USD 65,547), and other receivable, net SGD 6,483 (USD 4,663).
Current liabilities as of June 30, 2022 was SGD 2,123,252 (USD 1,527,189). This amount was composed of accounts payable SGD 219,936 (USD 158,193), loans payable to related parties SGD 65,000 (USD 46,752), loans payable to third party SGD 122,000 (USD 87,751), other payables and accrued liabilities SGD 274,116 (USD 197,163), finance lease obligation, current portion SGD 7,160 (USD 5,150) and taxes payable, SGD 1,435,040 (USD 1,032,180).
Current assets as of June 30, 2021 was SGD 2,342,064 (USD 1,740,924). Out of this balance, we had cash in an amount of SGD 4,142 (USD 3,079) of which approximately SGD 4,022 (USD 2,987) was denominated in Singapore Dollars, and SGD 120 (USD 89) denominated in United States Dollars. The current asset balance also included the following: accounts receivable, net SGD 44,958 (USD 33,419), inventories SGD 13,120 (USD 9,752), loans to third parties SGD 840,000 (USD 624,396), prepayments SGD 586,000 (USD 435,591), short-term deposits SGD 100 (USD 74), short-term deposits – related party SGD 740,344 (USD 550,319), amount due from a director SGD 100,000 (USD 74,333) and loan to a related party, net SGD 13,400 (USD 9,961).
Current liabilities as of June 30, 2021 was SGD 1,116,164 (USD 829,677). This amount was composed of other payables and accrued liabilities SGD 29,183 (USD 21,693), due to a director SGD 59,042 (USD 43,888), finance lease obligation, current portion SGD 6,880 (USD 5,114) and taxes payable SGD 1,021,059 (USD 758,982).
We have commenced a strategy to raise debt and equity. However, there can be no certainty that these additional financings will be available on acceptable terms or at all. If management is unable to execute this plan, there would likely be a material adverse effect on our business. All of these factors raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements for the years ended June 30, 2022 and 2021 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from our inability to continue as a going concern.
Capital Expenditures
We made capital expenditures of SGD 32,360 (USD 23,276) and SGD 122,823 for the years ended June 30, 2022 and 2021, respectively. In these periods, our capital expenditures was mainly used for purchases of office equipment, furniture and vehicles. We will continue to make capital expenditures to meet the expected growth of our business.
Commitments and Contingencies
In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450-20, “Loss Contingencies”, we will record accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Contractual Obligations
As of June 30, 2022, the future minimum payments under certain of our contractual obligations were as follows:
| Payments Due In | ||||||||||||||||||||
| Total SGD | Less than 1 year | 1 - 2 years | 3 - 5 years | Thereafter | ||||||||||||||||
| Contractual obligations | ||||||||||||||||||||
| Finance lease obligation | 78,473 | 9,708 | 9,708 | 29,124 | 29,933 | |||||||||||||||
| Total | 78,473 | 9,708 | 9,708 | 29,124 | 29,933 | |||||||||||||||
| Payments Due In | ||||||||||||||||||||
| Total USD | Less than 1 year | 1 - 2 years | 3 - 5 years | Thereafter | ||||||||||||||||
| Contractual obligations | ||||||||||||||||||||
| Finance lease obligation | 56,443 | 6,983 | 6,983 | 20,949 | 21,528 | |||||||||||||||
| Total | 56,443 | 6,983 | 6,983 | 20,949 | 21,528 | |||||||||||||||
Future Financings
We may sell our ordinary shares in order to fund our business growth. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that we will achieve sales of the equity securities or arrange for debt or other financing to fund our growth in case it is necessary, or if we are able to do so, there is no guarantee that existing shareholders will not be substantially diluted.
Quantitative and Qualitative Disclosure about Market Risk
Concentration of credit risk
Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash and accounts receivable. We place our cash and cash equivalents with financial institutions with high credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the service clients. To reduce credit risk, we perform on-going credit evaluations of the financial condition of these service clients. We establish a provision for doubtful accounts based upon estimates, factors surrounding the credit risk of specific service clients and other information.
Concentration of clients and vendors
Concentration of clients
As of June 30, 2022, two major clients accounted for 74.6%, and 24.1%, respectively, of the Company’s total accounts receivable. As of June 30, 2021, three major clients accounted for 39.6%, 32.9% and 21.9%, of the Company’s total accounts receivable.
For the year ended June 30, 2022, three major clients, Payestation Pte Ltd., AMS and Smorboll Pte Ltd. accounted for 48.7%, 16.5%, and 15.8% respectively, of the Company’s total revenues. For the year ended June 30, 2021, one major client, Heha Pte Ltd. accounted for 95.1% of the Company’s total revenues.
Concentration of vendors
As of June 30, 2022, one major vendor accounted for 81.0% of the Company’s accounts payable.
For the year ended June 30, 2022, two major vendors, LYC Supply and Trading and Pangu, accounted for 17.7% and 16.3% respectively, of the Company’s total purchases. For the year ended June 30, 2021, two vendors, Ad Navitas and Wee Chong Loi, accounted for 42.7% and 39.8%, respectively, of the Company’s total purchases.
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The accelerated digitization of processes and business models now make consumers and enterprises more digitally connected than ever before. Emerging technologies today drive change and at the same time also ensure resilience. The rapid pace at which technology is changing and the need for highly-skilled technology professionals are driving businesses and governmental agencies to rely on third parties to realize their strategic technology objectives. In this digital age, enterprises and governmental agencies are increasingly focused on understanding existing users’ needs and leveraging technology in new ways to meet those needs through the use of digital products and services which includes conceptualizing, designing, personalizing, prototyping, developing and delivering new digital experiences and products.
Overview of the Global Market for Customized Technology Solutions Services
Digital business acceleration is putting pressure on IT leaders to dramatically increase application delivery speed and Time to Value. The increased demand for custom software solutions in support of digital transformation has sparked the emergence of citizen developers outside of IT, which, in turn has influenced the rise in demand of customized technology solutions services.
Gartner, Inc. reported on February 16, 2021 that up to 41% of employees outside of IT – or business technologists – customize or build data or technology solutions. In addition, half of all new customized technology solutions service clients are expected to come from business buyers that are outside the IT organization by year-end 2025.
Overview of AI Focused Customized Technology Solutions Services in Southeast Asia
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On Figure 2, the Kearney Report shows that there are many adopters in the early stages but on average, less than 10% of the adopters are in the late stages. These provide ample opportunities for any tech companies to venture into this space.
Furthermore, Figure 3 shows that the current level of investment into AI in South East Asia is minimal compared to the global AI players. There is a strong push for AI investment in Singapore, with Singapore being the market leader in Southeast Asia, we believe that the trend toward AI investment will “pull” other countries into the AI race so that they themselves are more technologically equipped.
We are currently focusing on governmental productivity and efficiency tender, along with transports & logistics and the communications sectors which collectively comprise of 48% of the market segment. These sectors would be our main focus group as we believe our current opportunities allow us to expand to these sectors across the region.
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A report from Kearney Analysis issued in October 2020 suggest that AI in Asia holds high potential for growth in the coming years. Kearney’s analysis suggests that 70% of all incremental AI value in Southeast Asia will be attributed to marketing and the supply chain. Also, 70% of the companies focusing on AI in Asia aim towards productivity and efficiency.
AI adoption around the world tends to be correlated to the degree of digitization. In Association of Southeast Asian Nations (“ASEAN”), digitization is growing and the pace of change is accelerating. In 2011, only 6% of the region’s large corporations mentioned terms such as “big data”, “advanced analytics”, “AI”, “machine learning”, and the “internet of things” in their annual reports. By 2016, one-third did, indicating that these technologies are gaining traction and becoming strategic priorities. Across all industries, we find that early adopters of AI reported higher profit margins relative to their peers, particularly in the manufacturing, financial services, and transportation and logistics industries. Most of these companies are giving this surplus value to customers in a bid to consolidate the market and eliminate competition. This winner-takes-all dynamic further exacerbates the “digitize or die” scenario in which many incumbents find themselves. However, adoption of AI has not followed some of the largest value pools. Experimentation and subsequent adoption require a forward-looking and expansive view of how AI could be applied in a company’s core business, and implementation can be daunting for firms in traditional, non-tech industries. To date, high-tech, telecom, and financial services companies have led the way in ASEAN. We also see a burst of activity in public services such as transportation and health care, driven by multiple government agencies and the region’s proliferation of “smart city” programs. At a country level, Singapore is leading the region in AI experimentation across multiple industries. But there are initiatives in countries across the entire ASEAN region.
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Overview of Customized Technology Solution Services in Singapore
On November 13, 2021, Singapore announced its five national AI-centered projects, covering the areas of transport and logistics, smart cities and estates, healthcare, education, as well as safety and security. It aims to become the center point for developing, test-bedding, deploying and scaling AI solutions as well as learning to govern and manage the impact of AI. We have recently benefited from the national 5G testbed program in Singapore. This program was initiated to test the connectivity and latency efficiency as well as stability of data transmission in a full 5G enabled environment hosted by Infocomm Media Development Authority (“IMDA”) of Singapore. We were approved to use 5G test sites from the Singapore government to test our pipeline projects and to work on applications that adopt AI and 5G networks.
We believe that our existing client base, including the airport, cruise terminal, technology companies, and law enforcement agencies in Singapore will continue to invest in digital transformation and to adopt emerging technologies including AI and Machine Learning to further improve their operational efficiency.
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Our Business
We provide customized software development, technology solutions and peripheral hardware to large and small to medium corporate clients and government agencies based in Singapore, Indonesia and Malaysia, including but not limited to airports, cruise terminals, technology companies, and law enforcement agencies. Our customized software provides clients with real-time monitoring, efficient resources allocation, planning surveillance and threat detection.
We provide customized software catered to each client’s specific needs. One of our key strengths is our ability to fulfill complex requirements by using artificial intelligence for prediction and applying algorithms, modules and plugins to select and analyze operational data captured. We are uniquely positioned in the customization software sector with our ability to further deploy sensors, controls and other hardware and integrate the hardware to provide an IoT connectivity with an autonomous or semiautonomous outcome. Because our core algorithm and modules are pluggable, we are able to quickly develop software for clients in different industries and complete the customization in a much shorter period.
As the world starts to recover from the onslaught of COVID-19, a post COVID-19 paradigm has surfaced, where enterprises and governmental agencies are increasingly focused on understanding existing users’ needs and leveraging technology in new ways to meet those needs through the use of digital products and services which includes conceptualizing, designing, personalizing, prototyping, developing and delivering new digital experiences and products. Our business has benefitted from such trend. Many multinational corporations (the “MNCs”) and small and medium enterprises (“SMEs”) are adopting digital enhancement in their operations by deploying solutions that allow remote operations involving AI for operational predictability and efficiency. By integrating sensors and controls in their operational workflow, the captured data is then analyzed for better planning and supervision. One example of our customized software is our customized trolley management solution designed for an airport client based in Singapore, which allows real-time data capture to predict the number of trolleys required for each inflight at the gates. This solution has greatly benefitted the client in terms of their workflow and cost efficiencies. Another example of our solutions is a software developed for a cruise terminal client, which predicts the number and types of languages required by the ground staff to receive each arriving cruise and thus avoids bottlenecks due to language barriers among the ground staff and cruise passengers. The software also integrates the passport photo images from the scanner to a database which greatly improved the entry and departure process at such cruise terminal.
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Our Growth Strategies
We have developed and intend to implement the following strategies to expand and grow our business:
| ● | To solidify our industry position by gaining additional market share. By continuing to deliver high quality services and solutions, we intend to pursue additional revenue opportunities from our existing clients, including airports, cruise terminals, technology companies and law enforcement agencies. We will also continue to promote our comprehensive services and solutions to attract new clients in these industries, where we can leverage our deep domain knowledge and expertise. Furthermore, we will continue to invest in a cloud-based IoT platform that improves our operational efficiencies and therefore benefits both our existing clients and new clients. |
| ● | To leverage domain expertise to expand into new industry segments. As we grow our industry and service area expertise and accumulate deep domain knowledge in the airport, cruise terminal and law enforcement industry verticals, we intend to leverage such experience and knowledge, and partner with top industry experts from other segments to extend our service offerings to the other verticals. In addition, we will continue to invest in R&D in certain targeted segments, including but not limited to the hospitality and medical technology industries, to develop applications to address the specific needs of those segments. |
| ● | To attract, train, incentivize and retain talented professionals. We believe our success greatly depends on our ability to attract, train, incentivize and retain talented professionals. We will continue to build our professional talent pool through our Talent Creation Program (“TCP”) and Talent Development Program (“TDP”) to ensure we can attract and retain professionals who have in-depth knowledge and understanding of the technologies we deploy and the industries in which we operate. We are discussing with local universities in Singapore to co-develop projects and engage talent internship with us. We will also sponsor competitions in the IT industry in Southeast Asia to promote our reputation among the young talents. We will also work with tertiary institutions to develop on campus hiring, bursary and scholarship programs. |
| ● | To drive efficiencies through ongoing improvements in operational excellence. We strive to gain significant operating efficiencies by leveraging historical and ongoing investments in infrastructure, research and development, and human capital. On an integrated approach level, we will institute certifications across all our process flow via ISO certification, and BizSafe certification, all of which help us build a structured workflow for our operation. We will continue to invest in our in-house tools to enhance our efficiencies in operations. |
| ● | To capture new growth opportunities through strategic alliances and acquisitions. We will continue to pursue selective alliances and acquisitions in order to enhance our industry-specific technology and service delivery capabilities by building up acquisitions, collaborations and integrating targeted companies. We will continue to identify and assess opportunities to enhance our abilities to better serve our clients. We will focus on enhancing our technology capabilities, deepening our penetration into key clients, expanding our portfolio of service offerings and expanding our operations geographically in Southeast Asia. |
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Our Competitive Strengths
The market for IT services is highly competitive and we expect competition to intensify. In Singapore, our major competitors in the system integrator space include ST Engineering and NCS which are both more established and larger than us.
However, we believe the following key strengths differentiate us from our competitors and will continue to contribute to our growth and success:
| ● | Our Scalable Technology. Our core algorithms, modules and plugins, which select and analyze operational data captured, are highly scalable across industries with minimal production cost. We customize the software solutions which contain our core algorithms, modules and plugins in accordance with the specific needs of each client. This cost-saving approach will help us to achieve higher operating margins as we increase the number of our clients. |
| ● | Our Deep Domain Knowledge and Specialization in Selected Industry Verticals. We have deep domain knowledge and expertise in industry verticals including airports, cruise terminals and law enforcement. We leverage footprint and network of highly-talented IT professionals to provide comprehensive capabilities in software development services and consulting services. We believe that our robust emerging technology capabilities and solid track record of execution enable us to drive digital transformation for our clients. |
| ● | Our Comprehensive Offering. We provide comprehensive service offerings including the DevOps IT solutions, sale of peripheral hardware, and consulting and technical support services as well as other services. As a result, we are able to generate revenue from a wide range of clientele; and |
| ● | Our dynamic management and professional team with proven track record. Our management team has extensive experience with large-scale nation-wide deployment in countries including Indonesia, Singapore, East Timor, Bhutan, and Republic of Mongolia. Our Chief Operating Officer, Mr. Chan Chee Wai, has worked with the Singaporean government during his employment in Toppan Ecquaria Pte. Ltd. to successfully deliver digital government solutions. Our consultant, Mr. Wee Chong Loi, who was the Deputy Managing Director of ST Teleport c/o ST Telemedia, has worked with RigNet, Inc. (NASDAQ: RNET), a U.S. listed and networking providing company on implementing satellite communication onto offshore rigs and deployed Communication systems with Timor Telecom, an East Timorese telecommunications company; some of the projects include software deployment and communication hardware and software deployment onto offshore rigs. As such, we have already established a seasoned management team with deep industry expertise in several markets where we have enjoyed similar success. |
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Our Services and Products
Software development and customization services and product sales
We develop customized software based on clients’ specific needs. Before we are engaged, we provide consultation to the clients to understand their needs and requirements and provide a preliminary proposal to address their needs. Once the proposals are accepted by our clients, we then design, develop, test and install the software for clients. The contract is typically fixed priced and does not provide any post contract client support or upgrades. The duration of the development period is relatively short, usually less than one year. We offer project management in connection with our software products. Our project management services include consultation, design, development, and testing. We also sell equipment and related accessories to clients who acquired our customized software. Before the installation of the equipment, we deliver the equipment or instruct the supplier to deliver the hardware to the clients.
Consulting and technical support services
We provide training to the client’s personnel and technical support services to clients according to fixed-fee contracts in connection with software development with the client who acquired customized software from us. Usually the term of the contract is one year. We also provide stand-alone IT consulting services based on our expertise in these industry segments to some clients.
Clients
Our clients include large corporations, small to medium enterprises and government agencies based in Southeast Asia. By serving both large corporations and small to medium enterprises, we are more aware of the issues faced during the different stages of company growth and better positioned to address a wide range of concerns.
Sales and Marketing
Generally, our customized software is sold to the clients who may be project owners or the general contractors via bidding. We provide proposal to the project owners or the general contractors who will decide whether to select us based on the quality and price of our proposal. We follow local government bidding announcements and participate in public bidding. Upon winning a contract through bidding, we enter into contracts with the project owner according to the corresponding bidding process. In some cases, we are also approached and engaged by the general contractors who win the bid and we, as subcontractors, assist the general contractor to develop and deliver the final products.
Currently, we have a cost-efficient referral system to market our services and solutions. Given the deep domain knowledge in each industry segment we serve, we are able to impress the clients and as such many of our clients are willing to introduce us to their industry peers. We intend to expand our business development team by hiring members with backgrounds or network specific to the industry in which our potential clients operate and thus may market our services and products to a more targeted audience. We plan to hire sales consultants in Malaysia in the future.
Research and Development
R&D is an integral part of our continued growth. In order to serve our clients’ needs better, we focus on exploring and studying emerging technologies and how to best integrate them into our existing and new solutions.
Currently, we are utilizing emerging technologies and tools to enhance our project delivery capability and efficiency. For instance, we applied the DevOps methodology and tools in our project delivery process and platform. This methodology has greatly enhanced development, operational efficiency and project quality. We are able to pinpoint the client’s issues, and focus on capturing and analyzing data from clients quickly without having the need to set up expensive hardware leveraging on cloud native applications developed by us. The DevOps methodology has greatly improved our project delivery timeline and client satisfaction and the client is able to now walk through his data with us and be engaged with facts before embarking on customization. As a result, we have expanded our technological capabilities, improved efficiency of project delivery, and enhanced our solutions offerings, which drive new revenue opportunities and improve our core competencies.
Employees
We believe human resource management and planning is important to support our growth. Therefore, we are committed to effectively recruiting, training, developing and retaining our human capital. As of the date of this prospectus, we have 22 employees. Our technical capability has also expanded from capabilities in software skills in Java, .Net, C, C++, python, mobile development, testing tools, android or IOS app, blockchain, big data, cloud computing to electronic circuitry, sensor designs to communication protocol.
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None of our employees are represented by a labor union or collective bargaining agreements. We consider our employee relations to be good. We believe that attracting and retaining highly experienced associates and sales and marketing personnel is a key to our success. In addition, we believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations.
The following table sets forth the numbers of our employees categorized by function as of June 30, 2023:
| As of June 30, 2023 | ||||
| Function: | ||||
| Finance | 3 | |||
| Technical Service | 13 | |||
| Sales Department | 2 | |||
| Research and Development | 3 | |||
| Operation and Maintenance | 1 | |||
| Total | 22 | |||
Intellectual Property
We rely on a combination of copyright, trade secret laws, confidentiality procedures and contractual provisions with our employees, contractors and others to protect our proprietary know-how. Our success depends in part upon our ability to obtain, maintain and enforce proprietary protection for our products, technology, and know-how, to operate without infringing the proprietary rights of others, and to prevent others from infringing our proprietary rights.
We intend to continue to assess regularly opportunities for seeking intellectual property protection for those aspects of our technology, designs and methodologies that we believe provide a meaningful competitive advantage. However, our ability to do so may be limited until such time as we are able to generate cash flow from operations or otherwise raise sufficient capital to continue to invest in our intellectual property. If we are unable to so invest in our intellectual property, our ability to protect it or prevent others from infringing on our proprietary rights may be impaired.
Data privacy/data protection
We believe in protecting the clients’ data security during the course of development. Generally, our clients have their own IT infrastructure where data is hosted on their premises and therefore are not accessible to us without authorization.
We are subject to a number of foreign and domestic laws and regulations relating to data privacy and data protection in the jurisdictions in which we operate our business, including but not limited to the Personal Data Protection Act 2012 of Singapore (the “PDPA”), which generally requires organizations to give notice and obtain consents prior to collection, use or disclosure of personal data (being data, whether true or not, about an individual who can be identified from that data or from that data and other information to which organizations have or are likely to have access), and to provide individuals with the right to access and correct (any error or omission in) their own personal data. Organizations have mandatory obligations to assess if the data breaches they suffer are notifiable data breaches, and are required to notify the Singapore Personal Data Protection Commission (“PDPC”) and the affected individuals where the data breach is of a certain severity (where the data breach results in, or is likely to result in significant harm to the affected individual, and/or is, or is likely to be of significant scale). The PDPA was last amended by the Personal Data Protection (Amendment) Act 2020 (the “Amendment Act”), which is only partially in force. As of the date of this prospectus, key portions of the Amendment Act not yet in force include a requirement for organizations to transfer personal data of an individual (that is held in electronic form) to a different organization where requested by the individual (generally referred to as “data portability”), and enhanced financial penalties (for organizations with more than SGD10 million annual turnover in Singapore, the maximum financial penalty the PDPC may impose will be 10% of their annual turnover in Singapore, or in any other case, SGD1 million). Please see “Regulations” starting on page 64 of this prospectus for more information.
Insurance
We currently do not have directors and officers liability insurance or group comprehensive life insurance for employees, property insurance, business interruption insurance, or general third-party liability insurance. We believe the insurance coverage we maintain is in line with the industry. See “Risk Factors—Risks Related to Our Business and Industry— Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, and this may have a material adverse effect on our results of operations and financial condition.”
Seasonality
We do not have a seasonal business cycle.
Legal Proceedings
From time to time, we are involved in litigation or other legal proceedings incidental to our business. We are not currently a party to any litigation the outcome of which, if determined adversely to us, would individually or in aggregate be reasonably expected to have a material adverse effect on our business, operating results, cash flows or financial condition.
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We currently operate our business in Singapore and Indonesia and plan to expand our business into other Southeast Asia countries. This section summarizes the principal laws and related to our business.
Singapore
The PDPA generally requires organizations to give notice and obtain consents prior to collection, use or disclosure of personal data (being data, whether true or not, about an individual who can be identified from that data or from that data and other information to which organizations have or are likely to have access), and to provide individuals with the right to access and correct (any error or omission in) their own personal data. Organizations have mandatory obligations to assess if the data breaches they suffer are notifiable data breaches, and are required to notify the PDPC and the affected individuals where the data breach is of a certain severity (where the data breach results in, or is likely to result in significant harm to the affected individual, and/or is, or is likely to be of significant scale). The PDPA also imposes various baseline obligations on organizations in connection with permitted uses of, accountability for, the protection of, the retention of, and overseas transfers of, personal data. In addition, the PDPA requires organizations to check “Do-Not-Call” registries prior to sending marketing messages (whether in sound, text, visual or other forms) addressed to Singapore telephone numbers (or other telephone numbers as may be prescribed), through voice calls, fax, text messages or other means.
The PDPA creates various offenses in connection with the improper use and/or disclosure of personal data, certain methods of collecting personal data and certain failures to comply with the requirements under the PDPA. These offences may be applicable to organizations, their officers and/or their employees. Offenders are liable on conviction to fines and/or imprisonment. The PDPA empowers the PDPC with significant regulatory powers to ensure compliance with the PDPA, including powers to investigate, give directions and impose a financial penalty of up to SGD1 million on convicted organizations and SGD200,000 in the case of an individual. In addition, the PDPA creates a right of private action, pursuant to which the Singapore courts may, upon such persons’ application, grant damages, injunctions, declarations and such other relief the courts deem fit to persons who suffer loss or damages directly as a result of contraventions of certain requirements under the PDPA.
The PDPA was last amended by the Personal Data Protection (Amendment) Act 2020 (the “Amendment Act”), which is only partially in force. Since October 1, 2022, the maximum financial penalty for the breaches of PDPA have been increased. The financial penalty cap which may be imposed on organizations for breaches under the PDPA has increased from the previously fixed SGD1 million, to 10% of the organization’s annual turnover in Singapore for organizations with annual local turnover exceeding SGD10 million, whichever is higher. As of the date of this prospectus, key portions of the Amendment Act not yet in force include a requirement for organizations to transfer personal data of an individual (that is held in electronic form) to a different organization where requested by the individual (generally referred to as “data portability”).
The Employment of Foreign Manpower Act 1990, provides that no person shall employ a foreign employee unless the foreign employee has a valid work pass. Work passes are issued by the Controller of Work Passes.
The Employment Act 1968 (the “Singapore EA”) prescribes certain minimum conditions of service that employers are required to provide to their employees, including (i) minimum days of statutory annual and sick leave; (ii) paid public holidays; (iii) statutory protection against wrongful dismissal; (iv) provision of key employment terms in writing; and (v) statutory maternity leave and childcare leave benefits. In addition, certain statutory protections relating to overtime and hours of work are prescribed under the Singapore EA, but only apply to limited categories of employees, such as an employee (other than a workman or a person employed in a managerial or an executive position) who receives a basic salary of up to SGD2,600 a month (excluding any other payment, supplement or allowance however described).
Other employment-related benefits which are prescribed by law include (i) contributions to be made by an employer to the Central Provident Fund, under the Central Provident Fund Act 1953 in respect of each employee who is a citizen or permanent resident of Singapore; (ii) the provision of statutory maternity, paternity, childcare and adoption leave benefits (in each case subject to the fulfilment of certain eligibility criteria) under the Child Development Co-Savings Act 2001; (iii) statutory protections against dismissal on the grounds of age, and statutory requirements to offer re-employment to an employee who attains the prescribed minimum retirement age, under the Retirement and Re-employment Act 1993; and (iv) statutory requirements relating to work injury compensation, and workplace safety and health, under the Work Injury Compensation Act 2019 and the Workplace Safety and Health Act 2006, respectively.
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British Virgin Islands
Regulations related to the British Virgin Islands Data Protection Act, 2021
The Data Protection Act, 2021 (the “BVI DPA”) came into force in the British Virgin Islands on 9 July 2021. The BVI DPA establishes a framework of rights and duties designed to safeguard individuals’ personal data, balanced against the need of public authorities, businesses and organizations to collect and use personal data for lawful purposes. The BVI DPA is centered around seven data protection principles (the General Principle, the Notice and Choice Principle, the Disclosure Principle, the Security Principle, the Retention Principle, the Data Protection Principle and the Access Principle) which require that:
| ● | personal data must not be processed without consent unless specific conditions are met and must not be transferred outside the British Virgin Islands, unless there is proof of adequate data protection safeguards or consent from the data subject; |
| ● | Where consent has been given to processing of personal data, the data subject may at any time withdraw his or her consent; |
| ● | a data controller must inform a data subject of specific matters, for instance the purposes for which it is being collected and further processed; |
| ● | personal data must not be disclosed for any purpose other than the purpose for which it was to be disclosed at the time of collection or a purpose directly related thereto or to any party other than a third party of a class previously notified to the data subject; |
| ● | a data controller shall, when processing personal data, take practical steps to protect personal data from loss, misuse, modification, unauthorized or accidental access or disclosure, alteration or destruction; |
| ● | personal data must not be kept for longer than is necessary for the purpose; |
| ● | personal data must be accurate, complete, not misleading and kept up to date; and |
| ● | a data subject must be given access to his or her own personal data and be able to correct that data where it is inaccurate, incomplete, misleading or not up to date, except where a request for such access or correction is refused under the BVI DPA. |
The BVI DPA imposes specific obligations on data controllers, including the duty to (i) apply the data protection principles; and (ii) respond in a timely fashion to requests from data subjects in relation to their personal data.
The Information Commissioner is the regulator responsible for the proper functioning and enforcement of the BVI DPA. Offences under the BVI DPA include,
| ● | processing sensitive personal data in contravention of the BVI DPA; |
| ● | willfully obstructing the Information Commissioner or an authorized officer in the conduct of his or her duties and functions; |
| ● | willfully disclosing personal information in contravention of the BVI DPA; and |
| ● | collecting, storing or disposing of personal information in a manner that contravenes the BVI DPA. Offences committed under the BVI DPA may result in fines (up to US$500,000 in certain cases) or imprisonment. Further, a data subject who suffers damage or distress as a result of their data being processed in contravention of the DPA may institute civil proceedings in the British Virgin Islands courts. |
There is no minimum statutorily prescribed wage in Singapore. Singapore employment law also does not prescribe any mandatory annual wage supplement, bonus payments or severance payments to be provided by an employer to its employees. Any such payment to be made to an employee (including as to frequency and amount) is at the discretion of the employer. An employer and its employee are generally free to agree on a notice period for termination of employment. If the employment contract does not provide for a notice period, the employer must adhere to the minimum notice periods stipulated in the Singapore EA. The Singapore EA confers a statutory right on either party to terminate the employment relationship immediately without waiting for the expiry of the notice period by paying salary in lieu of notice.
Indonesia
Data Privacy
Minister of Communication and Informatics’s (“MOCI”) Regulation No. 20 of 2016 regarding Personal Data Protection in Electronic Systems, dated November 7, 2016 (“MOCI Reg. 20/2016”), imposes certain requirements on electronic system providers to ensure the proper processing of personal data. As PT Grab Teknologi Indonesia and PT Kudo Teknologi Indonesia collects personal data of customers, partners and other third parties, these entities are also subject to MOCI Reg. 20/2016. These obligations include obtaining proper prior consent from the data subject before personal data is collected, processed, shared, accessed, disclosed, transferred or erased. In case of non-compliance with the foregoing obligations, MOCI may impose administrative sanctions, i.e., verbal warning, written warning, temporary suspension of business activities and/or announcement of noncompliance in the MOCI’s online website.
Under Government Regulation No. 71 of 2019 regarding the Organization of Electronic Systems and Transactions, dated October 10, 2019 (“GR 71/2019”), electronic system providers are required to notify the personal data owner of any breach involving such owner’s personal data. Failure to comply with the notification obligation under GR 71/2019 may subject the relevant electronic system provider to administrative sanctions in the form of written warnings, fines, temporary suspension of parts of or the entire components or services of an Electronic System, termination of access (such as access blocking, account closure, and/or content removal), and/or removal from the list of registered electronic system providers.
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Regulations on Competition
Business competition and monopolistic practices in Indonesia are generally regulated under Law No. 5 of 1999 regarding Prohibition of Monopolistic Practices and Unfair Competition, dated March 5, 1999, as amended by the Omnibus Law (the “Competition Law as amended”). Pursuant to the Competition Law as amended, business actors in Indonesia are prohibited from, among other things, (i) entering into anti-competitive agreements or engaging in conduct that results in oligopoly and/or oligopsony, price-fixing and resale price maintenance, market allocations, boycotts, vertical integration or closed agreements; (ii) engaging in actions such as monopoly, monopsony or market control; and (iii) abusing dominant positions. There are two types of standard of proof recognized under the Competition Law, depending on the provision thereof, namely the “rule of reason” and “illegal per se.” The “rule of reason” requires the assessment of the anti-competitive effects of the business activity, while “illegal per se” provides that a violation exists insofar as all elements provided under the Competition Law are met.
The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha (“KPPU”)) has the authority to supervise the implementation of the Competition Law. The KPPU is an independent institution that reports to the President of the Republic of Indonesia. Further, transactions that meet certain thresholds set forth in the Competition Law and KPPU regulations must be reported post factum to the KPPU within 30 business days of the date the transaction is legally effective. The KPPU has the authority to substantively review whether the transaction is in violation of the Competition Law, which may then be subjected to certain structural and/or behavioral remedies.
Pursuant to the Competition Law, and as further elaborated by Government Regulation No. 44 of 2021 regarding Implementation of Prohibition of Monopolistic Practices and Unfair Competition, dated February 2, 2021, non-compliance with the Competition Law could subject the offending party to administrative sanctions imposed by the KPPU. These administrative sanctions are annulment of the relevant agreement, order of cessation of the prohibited action, unwinding of the relevant transaction, payment of compensation, and administrative fine. The administrative fine is a minimum of IDR1 billion (approximately $69,000) and a maximum of (i) 50% of the net profit received by the perpetrator in the relevant market during the period in which the non-compliance persists, (ii) 10% of the total sales in the relevant market during the period in which the non-compliance persists or (iii) IDR25 billion (approximately $1.7 million), which applies only for failure to report a notifiable transaction to the KPPU in a timely manner.
Malaysia
Regulation on Data Protection
Personal Data Protection Act 2010 of Malaysia (“Malaysia PDPA”)
The Malaysia PDPA governs the processing of personal data in commercial transactions in Malaysia to protect personal data of common interest and to ensure information security, network reliability and integrity and is enforced by the Personal Data Protection Commissioner.
The Malaysia PDPA enunciates 7 fundamental principles of data protection (the General Principle, the Notice and Choice Principle, the Disclosure Principle, the Security Principle, the Retention Principle, the Data Integrity Principle and the Access Principle) which data users are required to adhere to during the processing of personal data within Malaysia. The overarching principle in the Malaysia PDPA (as expounded under the General Principle) provides that a data user is prohibited from processing a data subject’s personal data without his/her consent, unless such processing is necessary for, among others, the performance of a contract to which the data subject is the party. Such principles are applicable to persons (i.e. data users) who engage in the processing of personal data, whether independently or jointly with others, and possess the authority to control or authorize the said processing (with the exception of processors).
Non-compliance by a data user of any of the fundamental principles constitutes an offense under the Malaysia PDPA and in the event of conviction, the data user is liable to a fine not exceeding RM300,000 (approximately $65,000) or imprisonment for a term not exceeding two (2) years or both. Non-compliance of other provisions of the Malaysian PDPA may also lead to other financial penalties, imprisonment terms or both. The Malaysian Personal Data Protection Commissioner also has broad powers to order the data user to comply with the provisions of the Malaysia PDPA.
Transferring of personal data to places outside Malaysia
A data user is prohibited from transferring any personal data of a data subject to a location outside of Malaysia, unless it falls under any of the exceptions outlined in Section 129(3) of the Malaysian PDPA, including where the data subject has provided his/her consent to the transfer.
Non-compliance with Section 129 of the Malaysia PDPA constitutes an offense. In the event of conviction, the data user may be subject to a fine not exceeding RM300,000 (approximately $65,000) or imprisonment for a period not exceeding two (2) years, or both.
General Code of Practice of Personal Data Protection (“Malaysia PDPA Code”)
The Malaysia PDPA Code sets out the best practices for a data user to assist the data user in meeting the requirements under the Malaysia PDPA when undertaking a commercial transaction.
Section 29 of the Malaysia PDPA provides that the Malaysia PDPA Code carries the force of law. Non-compliance of the Malaysia PDPA Code constitutes an offence and can lead up to a fine of up RM100,000 (approximately $22,000), imprisonment for a maximum term of 1 year, or both.
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Set forth below is information concerning our directors, executive officers and other key employees.
The following individuals are members of the Board and executive management of the Registrant.
| Name | Age | Position(s) | ||
| Sai Bin Loi | 75 | Chairman of the Board and Director | ||
| Ziyang Long | 36 | Chief Executive Officer and Director Nominee * | ||
| Keng Yan Yoon | 42 | Chief Financial Officer | ||
| Chan Chee Wai | 46 | Chief Operating Officer | ||
| Jeffrey Stagg | 62 | Independent Director Nominee * | ||
| Ying Shu Wang | 48 | Independent Director Nominee * | ||
| Yi Wei Yeo | 44 | Independent Director Nominee * |
| * | Each director nominee has indicated his assent to occupy such position upon the effectiveness of the registration statement of which this prospectus forms a part. |
The following is a brief biography of each of our executive officers and directors.
Sai Bin Loi
Mr. Loi has served as a director of RP Singapore since 2015. He has more than 50 years of experience in the elevators, systems & control industry. Prior to joining our company, Mr. Loi founded 9G Elevator Pte. Ltd. in 2003, which is a private elevator company and was later sold to Ryoden (Singapore) Pte. Ltd. in 2008. Mr. Loi served as Head of Technical Service at Ryoden (S) Pte. Ltd. c/o Mitsubishi Elevators and Escalator from 1990 to 2002, maintaining large infrastructure control system and had 100 service technicians who reported to him. He obtained Technical Proficiency from a certification body and technical diploma in 1981.
Ziyang Long
Mr. Long has served as the CEO of the Company since December 2021. Mr. Long will become a director of our company upon the effectiveness of the registration statement of which this prospectus forms a part. From December 2021 to June 2022, Mr. Long also served as the interim CFO of the Company. Mr. Long joined RP Singapore in September 2020 and has acted as the CEO of RP Singapore since then. He has extensive experiences in entrepreneur management, accounting and financial reporting in different industries, including food and beverages, blockchain, and education technology. He has served as the finance manager of RP Singapore from September 2020 to present. Prior to that, he was the director and the owner of Accouncity Pte. Ltd., responsible for the operation and overseeing the outsourcing of the accounting and book-keeping business of such company. From 2018 to 2021, he served on the board of directors of FRV Solutions Pte. Ltd. Mr. Long obtained his bachelor’s degree of Science (Hon) in Accounting and Finance from University of London in 2013.
Keng Yan Yoon
Mr. Yoon has served as the CFO of the Company and RP Singapore since July 2022. He has over 17 years as a financial controller in investment funds and property management companies. Prior to joining RP Singapore, Mr. Yoon served as the financial controller of Fusion Medical Group Pte Ltd. from September 2019 to October 2021, a financial manager at Aura Group from January 2018 to June 2019, where he managed the financials of a portfolio of 30 companies across Singapore and Australia, and the general manager at Acumen Business Consulting from May 2013 to December 2017, where he provided ad-hoc CFO and CTO services to clients. Mr. Yoon obtained his bachelor’s degree of Commerce in Accounting and Finance from the Australian National University in 2003 and has been a chartered accountant of the Institute of Chartered Accountants in Australia since 2010.
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Chan Chee Wai
Mr. Wai is specialized in the field of IoT & enterprise application development, mobile solutions, and analytic solution, workflow applications, portal and collaboration solutions. He has 20 years of extensive experience in planning and implementing corporate application or design, and the associated technology infrastructures required to support business objectives. From February 2021 to present, he has been the Chief Operation Officer and Director of Sales of RP Singapore, responsible for the day-to-day operations and generating business opportunities. He also served as the managing director at CONSAP Pte. Ltd., in charge of the business and sales of such company and management of the technical team. He has worked with clients from both government and enterprise, including but not limited to NCS Communications Engineering Pte. Ltd., Singapore Changi Airport, Singtel, NEC Asia Pacific Pte. Ltd., the Housing & Development Board in Singapore, Ministry of Home Affairs in Singapore. He obtained his bachelor’s degree in Advertising & Communication at One Academy of Communication Design Malaysia in 1999.
Jeffrey Stagg
Mr. Stagg will become an independent director of our company upon the effectiveness of the registration statement of which this prospectus forms a part. Mr. Stagg has more than 20 years of experience in IT and telecommunication. Currently, Mr. Stagg servers as the CEO and president of S&S Equipment Holdings, Inc., a company engaged in the equipment, offshore and onshore Oil & Gas business, industrial marine, and Petroleum trading fields. Prior to that, he was a sales director at Hydrasat LLC, a firm that specializes in helping clients optimize their IT from April 2012 to July 2020. Mr. Stagg earned his bachelor’s degree of Science in Electrical Engineering from University of Louisiana.
Ying Shu Wang
Mr. Wang will become an independent director of our company upon the effectiveness of the registration statement of which this prospectus forms a part. In July 2017, Mr. Wang founded Capital Asia Investment Pte. Ltd., a Monetary Authority of Singapore (MAS) licensed fund management company. Since April 2021, Mr. Wang has been serving as Chief Operating Officer at Capital Asia Investment Pte. Ltd., in charge of the operations and the profit and loss of such company. Prior to that, he was the Group Chief Financial Officer of JL Asia Resources Pte. Ltd., a company engaged in the industries of real estate development, hospitality, leisure and entertainment from April 2014 to December 2017, responsible for the group’s finance, mergers and acquisitions. Ying Shu is a CFA charter holder. He obtained his bachelor’s degree of Electronics and Electrical Engineering (Hons) at University of Edinburgh on an Economic Development Board of Singapore Scholarship and his master’s degree of Science (Applied Finance) from Singapore Management University.
Yi Wei Yeo
Mr. Yeo will become an independent director of our company upon the effectiveness of the registration statement of which this prospectus forms a part. Mr. Yeo has over 19 years of international tax advisory experience in Singapore, Asia-pacific and Europe. He has been serving as the director of the tax consulting team at the asset management department at KPMG, Singapore since March 2021, responsible for generating new business and the management of the profit and loss of the department. He was a director of the tax consulting team at PricewaterhouseCoopers Services Pte. Ltd., Singapore from July 2019 to March 2021. From September 2016 to July 2019, he was a director of the tax consulting team at Clearbell Capital LLP, London. He is qualified as a Chartered Accountant in Singapore and has the qualification of ADIT issued by United Kingdom CIOT (Chartered Institute of Taxation). He obtained a bachelor’s degree in Accounting from Nanyang Technological University in 2002.
Family Relationships
None of the directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.
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Board of Directors
Currently, our sole director is Mr. Sai Bin Loi. Our board of directors will consist of five directors immediately prior to the effective date of the registration statement of which this prospectus forms a part.
Duties of Directors
Under British Virgin Islands law, our directors owe fiduciary duties both at common law and under statute, including a statutory duty to act honestly, in good faith and with a view to our best interests. When exercising powers or performing duties as a director, our directors also have a duty to exercise the care, diligence and skills that a reasonable director would exercise in comparable circumstances, taking into account without limitation the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken by him. In exercising the powers of a director, the directors must exercise their powers for a proper purpose and shall not act or agree to the company acting in a manner that contravenes our memorandum and articles of association or the BVI Act. See “Description of Share Capital - Differences in Corporate Law” for additional information on our directors’ fiduciary duties under British Virgin Islands law. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. We have the right to seek damages if a duty owed by our directors is breached.
The functions and powers of our board of directors include, among others:
| ● | appointing officers and determining the term of office of the officers; |
| ● | authorizing the payment of donations to religious, charitable, public, or other bodies, clubs, funds, or associations as deemed advisable; |
| ● | exercising the borrowing powers of the company and mortgaging the property of the company; |
| ● | executing checks, promissory notes, and other negotiable instruments on behalf of the company; and |
| ● | maintaining or registering a register of mortgages, charges, or other encumbrances of the company. |
Terms of Directors and Executive Officers
Each of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by the board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for re-election. All of our executive officers are appointed by and serve at the discretion of our board of directors.
Qualification
There is currently no shareholding qualification for directors, although a shareholding qualification for directors may be fixed by our shareholders by ordinary resolution.
Executive Compensation
For the year ended June 30, 2023, the aggregate cash compensation accrued for the Company’s executive officers as a group was SGD117,600. The Company does not separately set aside any amounts for pensions, retirement or other benefits for our executive officers, other than pursuant to relevant statutory requirements.
Employment Agreements with Named Executive Officers
We will enter into employment agreements with each of our executive officers prior to the effective date of the registration statement of which this prospectus forms a part, the form which is filed as Exhibit 10.3 to this registration statement.
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On December 1, 2021, we entered into an employment agreement with Mr. Ziyang Long, who acts as our CEO. Pursuant to such agreement, he shall receive a monthly base salary of SGD1,400, and is also eligible for bonus, benefits and reasonable expenses reimbursement. Under the employment agreement, Mr. Long works as our CEO and the term is annual basis, which automatically renews for additional one-year terms unless either party provides a written notice one (1) month prior to the termination date, or otherwise proposes to renegotiate the terms of the employment with the other party within three (3) months prior to the expiration of the applicable term. We can also terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties.
On July 1, 2022, we entered into an employment agreement with Mr. Keng Yan Yoon, who acts as our CFO. Pursuant to such agreement, he shall receive a monthly base salary of SGD5,000, and is also eligible for bonus, benefits and reasonable expenses reimbursement. Under the employment agreement, Mr. Yoon works as our CFO and the term is annual basis, which automatically renews for additional one-year terms unless either party provides a written notice one (1) month prior to the termination date, or otherwise proposes to renegotiate the terms of the employment with the other party within three (3) months prior to the expiration of the applicable term. We can also terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a felony or grossly negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties.
Compensation of Directors
For the fiscal year ended June 30, 2023, we have not paid cash compensation to our director for the director’s services.
We will enter into letter agreements with each of our directors prior to the effective date of the registration statement of which this prospectus forms a part, the form which is filed as Exhibit 10.4 to this registration statement. Under these agreements, we will agree to indemnify our directors against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director of our company.
Insider Participation Concerning Executive Compensation
Mr. Loi was making all determinations regarding executive officer compensation from the inception of the Company up until the time when our compensation committee is set up (please see discussion below).
Committees of the Board of Directors
We will establish three committees under the board of directors immediately upon effectiveness of this registration statement: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of the three committees which will be effective upon consummation of this offering. Each committee’s members and functions are described below.
Audit Committee. Our audit committee will consist of Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo. Mr. Yi Wei Yeo will be the chairman of our audit committee. We have determined that Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo will satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. Our board also has determined that Mr. Yi Wei Yeo qualifies as an audit committee financial expert within the meaning of the SEC rules or possesses financial sophistication within the meaning of the Nasdaq Listing Rules. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among other things:
| ● | appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
| ● | reviewing with the independent auditors any audit problems or difficulties and management’s response; |
| ● | discussing the annual audited financial statements with management and the independent auditors; |
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| ● | reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
| ● | reviewing and approving all proposed related party transactions; |
| ● | meeting separately and periodically with management and the independent auditors; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
Compensation Committee. Our compensation committee will consist of Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo upon the effectiveness of their appointments. Mr. Jeffrey Stagg will be the chairman of our compensation committee. We have determined that Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo will satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:
| ● | reviewing and recommending to the board with respect to the total compensation package for our most senior executive officers; |
| ● | approving and overseeing the total compensation package for our executives other than the most senior executive officers; |
| ● | reviewing and recommending to the board with respect to the compensation of our directors; |
| ● | reviewing periodically and approving any long-term incentive compensation or equity plans; |
| ● | selecting compensation consultants, legal counsel or other advisors after taking into consideration all factors relevant to that person’s independence from management; and |
| ● | reviewing programs or similar arrangements, annual bonuses, and employee pension and welfare benefit plans. |
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee will consist of Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo upon the effectiveness of their appointments. Mr. Ying Shu Wang will be the chairperson of our nominating and corporate governance committee. Mr. Jeffrey Stagg, Mr. Ying Shu Wang and Mr. Yi Wei Yeo satisfy the “independence” requirements of Section 5605(a)(2) of the Nasdaq Listing Rules and Rule 10A-3 under the Securities Exchange Act. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee will be responsible for, among other things:
| ● | identifying and recommending nominees for election or re-election to our board of directors or for appointment to fill any vacancy; |
| ● | reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and availability of service to us; |
| ● | identifying and recommending to our board the directors to serve as members of committees; |
| ● | advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and |
| ● | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
Code of Business Conduct and Ethics
Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors, officers and employees. We will make our code of business conduct and ethics publicly available on our website prior to the initial closing of this offering.
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The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Ordinary Shares as of the date of this prospectus, and as adjusted to reflect the sale of the Ordinary Shares offered in this offering for
| ● | each of our director, director nominees and executive officers who beneficially own our Ordinary Shares; and |
| ● | each person known to us to own beneficially more than 5% of our Ordinary Shares. |
Beneficial ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership of each listed person prior to this offering is based on 16,000,000 Ordinary Shares issued and outstanding as of the date of this prospectus. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this prospectus are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. As of the date of the prospectus, we have eight shareholders of record, none of which are located in the United States. We will be required to have at least 300 shareholders at closing in order to satisfy the Nasdaq listing standards.
| Ordinary Shares Beneficially Owned Prior to this Offering | Ordinary
Shares Beneficially Owned After this Offering(4) | Percentage of Votes Held After this Offering | ||||||||||||||||||
| Number | Percent | Number | Percent | Percent | ||||||||||||||||
| Directors and Executive Officers: | ||||||||||||||||||||
| Sai Bin Loi | 11,000,000 | 68.75 | % | 10,635,000 | 60.87 | % | 60.87 | % | ||||||||||||
| Jeffrey Stagg | - | - | - | - | - | |||||||||||||||
| Yi Wei Yeo | - | - | - | - | - | |||||||||||||||
| Ying Shu Wang | - | - | - | - | - | |||||||||||||||
| Ziyang Long | - | - | - | - | - | |||||||||||||||
| Chee Wai Chan | - | - | - | - | - | |||||||||||||||
| All Director, Director Nominees and Executive Officers (6 Persons) | 11,000,000 | 68.75 | % | 10,635,000 | 60.87 | % | 60.87 | % | ||||||||||||
| 5% Shareholders: | ||||||||||||||||||||
| Breydales Limited(1) | 1,160,000 | 7.25 | % | 795,000 | 4.55 | % | 4.55 | % | ||||||||||||
| Cosmic Paramount Enterprises Limited(2) | 800,000 | 5 | % | 800,000 | 4.63 | % | 4.63 | % | ||||||||||||
| Lucky Champion Ventures Limited(3) | 800,000 | 5 | % | 800,000 | 4.63 | % | 4.63 | % | ||||||||||||
| (1) | These shares are held by Breydales Limited, a British Virgin Islands business company 100% owned by it’s a single shareholder, Ching Shyang Koh. Its business address is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands. |
| (2) | These shares are held by Cosmic Paramount Enterprises Limited, a British Virgin Islands business company 100% owned by its sole director, Chan Kong. Its business address is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. |
| (3) | These shares are held by Lucky Champion Ventures Limited, a British Virgin Islands exempted company 100% owned by its sole director, TAM Chung Wai. Its business address is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands. |
| (4) | Mr. Sai Bin Loi will sell 365,000 Ordinary Shares pursuant to this prospectus. Breydale Limited will sell 365,000 Ordinary Shares pursuant to this prospectus. The Underwriter is obligated to take and pay for all of the Ordinary Shares offered by this prospectus if any such Ordinary Shares are taken, including 730,000 Ordinary Shares of the Selling Shareholders. |
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The following table sets forth the name of the Selling Shareholders, the number of Ordinary Shares owned by each of them immediately prior to the date of this prospectus and the number of Ordinary Shares to be offered by them pursuant to this prospectus. The table also provides information regarding the beneficial ownership of our Ordinary Shares by the Selling Shareholders as adjusted to reflect the assumed sale of all of the shares offered under this prospectus.
Percentage of beneficial ownership before this offering is based on 16,000,000 of our Ordinary Shares outstanding as of the date of this prospectus. Beneficial ownership is based on information furnished by the Selling Shareholders. Unless otherwise indicated and subject to community property laws where applicable, the Selling Shareholders named in the following table have, to our knowledge, sole voting and investment power with respect to the shares beneficially owned by them.
One of the Selling Shareholders named in the following table, Mr. Sai Bin Loi, is our chairman of the Board. None of the Selling Shareholders is not a broker dealer or an affiliate of a broker dealer. The Selling Shareholders are going to enter into an underwriting agreement with us and the underwriter for resale and offering of an aggregate of 730,000 Ordinary Shares. The table below assumes that the Selling Shareholders will sell all of the shares offered for sale hereby.
| Name of Selling Shareholders | Shares Beneficially Owned Prior to Offering | Maximum Number of Shares to be Sold Pursuant to the Public Offering Prospectus | Number of Shares owned After Offering | Percentage Ownership After Offering | ||||||||||||
| Sai Bin Loi | 11,000,000 | 365,000 | 10,635,000 | 60.87 | % | |||||||||||
| Breydales Limited | 1,160,000 | 365,000 | 795,000 | 4.55 | % | |||||||||||
Note: Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, securities that are currently convertible or exercisable into our Ordinary Shares, or convertible or exercisable into our Ordinary Shares within 60 days of the date hereof are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the table, each shareholder named in the table has sole voting and investment power with respect to the shares set forth opposite such shareholder’s name.
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Material Transactions with Related Parties
The relationship and the nature of related party transactions are summarized as follows:
| Name of Related Party | Relationship with Us | |
| Mr. Sai Bin Loi | Our Chairman | |
| Ad Navitas | Owned by Mr. Sai Bin Loi | |
| Consap Pte Ltd. (“Consap”) | Controlled by Mr. Chee Wai Chan, our COO | |
| Republic SC Pte Ltd. | Owned by Mr. Sai Bin Loi and Mr. Loi’s daughter | |
| Mr. Wee Chong Loi | Son of Mr. Sai Bin Loi | |
a. Short-term and long-term deposits to a related party
The Company entered into a service agreement with Ad Navitas. Ad Navitas agreed to assist the Company to provide software development projects. Per terms set forth in the agreement, the Company agreed and has maintained a minimum security amount of SGD 1,000,000 as a long-term deposit to Ad Navitas since February 11, 2019. The Company also agreed to make short-term deposit to Ad Navitas, depending on quantum amount on the service provided. Short-term deposits were nil, nil, SGD 740,344, and SGD 340,344 as of December 31, 2022, June 30, 2022, 2021 and 2020, respectively. As of the date of this prospectus, there is no short-term deposit made to this related party. As of December 31, 2022 and June 30, 2022, 2021 and 2020, long-term deposits to related party was SGD 1,000,000 (USD 746,046), SGD 1,000,000, SGD 1,000,000 and SGD 1,000,000 respectively.
b. Deposit paid to a related party for acquisition of subsidiary
On December 1, 2020, RP Singapore entered into an acquisition agreement with Consap, to acquire the 100% equity interest in Consap, a limited company incorporated in Singapore, for total cash consideration of USD 2,400,000 (equivalent to SGD 3,216,960).
The acquisition is not completed on December 31, 2022 and the completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement.
Deposit of USD 1,400,000 (equivalent to SGD 1,856,171) has been paid to Consap on June 30, 2021. The remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on December 31, 2022, if the conditions are met. Pursuant to the acquisition agreement, in case the aforesaid acquisition is not completed, the deposits would be fully refundable to RP Singapore. This agreement has been superseded by a new addendum mentioned below.
The acquisition had not been completed and the remaining consideration of USD 1,000,000 has not been paid by RP Singapore to Consap on December 31, 2022. The completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement. The acquisition was conditional upon Consap entering into one or more definitive sales agreements, with clients approved by RP Singapore, for total contracts value of not less than USD 2,000,000 on or before November 30, 2022. In the event that Consap fails to secure enough sales agreements for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from March 31, 2023.
On January 31, 2023, an addendum to the acquisition agreement has been signed. Pursuant to the addendum, Consap should enter into one or more definitive sales agreements with client approved by RP Singapore, for a total contract value of not less than USD2,000,000 on or before November 30, 2023. The expected completion date will be within 30 days from the date of fulfilment of the condition precedents or March 31, 2024, whichever earlier, the remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on the completion date. In the event that Consap fails to secure enough sales agreement for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from December 31, 2023. As of December 31, 2022 and June 30, 2022, 2021 and 2020, deposit paid to a related party for acquisition of subsidiary amounted to SGD 1,856,171 (USD 1,384,789), SGD 1,856,171, SGD 1,856,171 and nil, respectively.
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c. Loans from related parties
The Company borrowed SGD 59,042 from Mr. Sai Bin Loi in June 11, 2021 for operation purpose. This loan was interest-free and with no collateral. The amount was settled in cash on November 30, 2021.
On June 15, 2022, the Company had unsecured loan with annual interest of 6% from Republic SC Pte Ltd., which is co-owned by the Company’s shareholder and sole director, Mr. Sai Bin Loi, and his daughter, amounted to SGD 65,000 (USD 46,752) as of June 30, 2022. This loan was fully paid in October 2022.
On October 10, 2022, the Company had another unsecured loan with annual interest of 6% from Republic SC Pte Ltd, amounted to SGD 50,000 (USD 37,302) as of December 31, 2022. This loan was fully paid in January 2023.
As of December 31, 2022 and June 30, 2022, 2021 and 2020, the loans from related parties amounted to SGD 50,000 (USD 37,302), SGD 65,000, SGD 59,042 and nil, respectively.
d. Service agreements with related parties
Company’s Vendors
On February 11, 2019, the Company entered into a service agreement with Ad Navitas. Ad Navitas agreed to assist the Company to provide software development. For the six months ended December 31, 2022, and 2021, and for the years ended June 30, 2022, 2021 and 2020, the Company paid service fee of nil, nil, nil, SGD 1,834,719 and SGD 273,235 to Ad Navitas, respectively.
The Company has entered into a service agreement with Mr. Wee Chong Loi, who agreed to provide IT advisory services to assist in the Company’s software development projects, with a term from April 1, 2020 to December 31, 2021. For the six months ended December 31, 2022 and 2021 and for the years ended June 30, 2022, 2021 and 2020, the Company paid service fee of nil, SGD 53,255, SGD 48,021, SGD 1,709,986 and SGD 658,959 to Mr. Wee Chong Loi, respectively.
Company’s Clients
Since July 1, 2020, the Company had entered into multiple service agreements with Consap to assist Consap in several software development projects. As of the date of this prospectus, the Company has received an aggregate of SGD 220,000 from Consap for the services the Company provided. For the six months ended December 31, 2022 and 2021, and for the years ended June 30, 2022, 2021 and 2020, Consap paid to the Company in consideration of nil, SGD 36,355, SGD 130,000, SGD 90,000 and nil respectively.
On December 6, 2022, the Company entered into a service agreement with Republic SC Pte Ltd., to provide consulting services to Republic SC Pte Ltd. for a software development project. For the six months ended December 31, 2022 and 2021, the project was completed and Republic SC Pte Ltd. paid to the Company in consideration SGD 5,500 (USD 4,103) and nil. The Company had no transactions with Republic SC Pte Ltd for the years ended June 30, 2022, 2021 and 2020.
Employment Agreements
See “Management—Employment Agreements with Named Executive Officers.”
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We are a British Virgin Islands business company with limited liability and our affairs are governed by our Memorandum and Articles of Association, the BVI Act, the common law of the British Virgin Islands, our corporate government documents and the rules and regulations of the stock exchange on which our Ordinary Shares (after the completion of this Offering, our Ordinary Shares) are traded.
Forward Split and Reverse Split in 2023
On August 16, 2023, we implemented a 1 for 1.5625 forward share split of our ordinary shares under British Virgin Islands law, or the “Forward Split”. As a result of the Forward Split, the total of 16,000,000 issued and outstanding ordinary shares prior to the Forward Split was increased to a total of 25,000,000 issued and outstanding ordinary shares. The Forward Split was implemented in connection with the valuation of the Company. The Forward Split maintained our existing shareholders’ percentage ownership interests in our Company. The Forward Split also decreased the par value of our ordinary shares from $0.000625 to $0.0004 and the number of authorized shares of our Company remained as unlimited.
However, due to ASC 505-10-S-99-4 (SAB Topic 4.C) and ASC 260-10-55-12, we have to revise the consolidated financial statements included in Form F-1 to reflect the Forward Split. Due to the merger between Friedman (our former auditor) and Marcum Asia (our current auditor), which resulted in the pending withdrawal of Friedman’s registration with the PCAOB, Friedman cannot revise its audit report included in Form F-1 to reflect the retrospective restatement for the change in capital structure. Rather than restating the previously issued financial statements and obtaining a revised audit report, on August 29, 2023, we implemented a 1.5625 for 1 reverse share split (the “Reverse Split”) of our ordinary shares under British Virgin Islands Law. As a result of the Reverse Split, the total of 25,000,000 issued and outstanding ordinary shares prior to the Reverse Split was decreased back to a total of 16,000,000 issued and outstanding ordinary shares. The Reverse Split maintained our existing shareholders’ percentage ownership interests in our Company. The Reverse Split also increased the par value of our ordinary shares from $0.0004 back to $0.000625, and the number of authorized shares remains as unlimited.
Ordinary Shares
All of our issued and outstanding Ordinary Shares are fully paid and non-assessable. Certificates evidencing the shares are issued in registered form. There are no limitations imposed by our memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed. Under the BVI Act, the Ordinary Shares are deemed to be issued when the name of the shareholder is entered in our register of members. If (a) information that is required to be entered in the register of members is omitted from the register or is inaccurately entered in the register, or (b) there is unreasonable delay in entering information in the register, a shareholder of the company, or any person who is aggrieved by the omission, inaccuracy or delay, may apply to the British Virgin Islands Courts for an order that the register be rectified, and the court may either refuse the application or order the rectification of the register, and may direct the company to pay all costs of the application and any damages the applicant may have sustained.
Our Company is authorized to issue unlimited Ordinary shares, par value US$0.000625 per share. Subject to the provisions of the BVI Act and our articles regarding redemption and purchase of the shares, the directors have general and unconditional authority to allot (with or without confirming rights of renunciation), grant options over or otherwise deal with any unissued shares to such persons, at such times and on such terms and conditions as they may decide. Such authority could be exercised by the directors to allot shares which carry rights and privileges that are preferential to the rights attaching to Ordinary Shares. No share may be issued at a discount except in accordance with the provisions of the BVI Act. The directors may refuse to accept any application for shares, and may accept any application in whole or in part, for any reason or for no reason.
At the completion of this offering, there will be 19,000,000 Ordinary Shares issued and outstanding held by at least 300 shareholders and beneficial owners which is the minimum requirement by Nasdaq Capital Market.
Listing
We have applied to list the Ordinary Shares on the Nasdaq Capital Market under the symbol “RPGL.”
Transfer Agent and Registrar
The transfer agent and registrar for the Ordinary Shares is Transhare Corporation with offices located at Bayside Center 1, 17755 North US Highway 19, Suite No. 140, Clearwater, FL 33764.
Dividends
Shareholders holding shares in the Company are entitled to receive such dividends as may be declared by our board of directors subject to the BVI Act and our memorandum and articles of association.
Voting Rights
Subject to any rights or restrictions as to voting attached to any shares, unless any share carries special voting rights. On a poll, every shareholder who is present in person and every person representing a shareholder by proxy shall have one vote for each share of which he or the person represented by proxy is the holder. In addition, all shareholders holding shares of a particular class are entitled to vote at a meeting of the holders of that class of shares. Votes may be given either personally or by proxy.
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Calls on Shares and Forfeiture
Subject to the terms of allotment, the directors may make calls on the shareholders in respect of any monies unpaid on their shares including any premium and each shareholder shall (subject to receiving at least 14 clear days’ notice specifying when and where payment is to be made), pay to us the amount called on his shares. Shareholders registered as the joint holders of a share shall be jointly and severally liable to pay all calls in respect of the share. If a call remains unpaid after it has become due and payable the person from whom it is due and payable shall pay interest on the amount unpaid from the day it became due and payable until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the call or if no rate is fixed, at the rate of ten percent per annum. The directors may waive payment of the interest wholly or in part.
We have a first and paramount lien on all shares (whether fully paid up or not) registered in the name of a shareholder (whether solely or jointly with others). The lien is for all monies payable to us by the shareholder or the shareholder’s estate:
(a) either alone or jointly with any other person, whether or not that other person is a shareholder; and
(b) whether or not those monies are presently payable.
At any time the directors may declare any share to be wholly or partly exempt from the lien on shares provisions of the articles.
We may sell in such manner as the directors may determine, any share on which the sum in respect of which the lien exists is presently payable, if due notice that such sum is payable has been given (as prescribed by the articles) and, within 14 days of the date on which the notice is deemed to be given under the articles, such notice has not been complied with.
Variation of Rights of Shares
Subject to the BVI Act, all or any of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, be varied or modified with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class.
Unless the terms on which a class of shares was issued state otherwise, the rights conferred on the shareholder holding shares of any class shall not be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
Redemption and Purchase of Own Shares
Subject to the provisions of the BVI Act, we may issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner as may be determined by our memorandum and articles of association and subject to any applicable requirements imposed from time to time by, the BVI Act, the SEC, or by any recognized stock exchange on which our securities are listed.
Inspection of Books and Records
Under the BVI Act, members of the general public, on payment of a nominal fee, can obtain copies of the public records of a company available at the office of the Registrar of Corporate Affairs which will include the company’s certificate of incorporation, its memorandum and articles of association (with any amendments) and records of license fees paid to date and will also disclose any articles of dissolution, articles of merger and a register of charges if the company has elected to file such a register.
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General Meetings
Under our memorandum and articles of association, a copy of the notice of any meeting of shareholders shall be given not less than 7 days before the date of the proposed meeting to those persons whose names appear as shareholders in the register of members on the date of the notice and are entitled to vote at the meeting. Our board of directors shall call a meeting of shareholders upon the written request of shareholders holding at least 30% of our outstanding voting shares. In addition, our board of directors may call a meeting of shareholders on its own motion. A meeting of shareholders may be called on short notice if at least 90% of the shares entitled to vote on the matters to be considered at the meeting have agreed to short notice of the meeting, or if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice and presence at the meeting shall be deemed to constitute waiver for this purpose.
At any meeting of shareholders, a quorum will be present if there are shareholders present in person or by proxy representing not less than 50 percent of the shares entitled to vote on the resolutions to be considered at the meeting. Such quorum may be represented by only a single shareholder or proxy. If no quorum is present within two hours of the start time of the meeting, the meeting shall be dissolved if it was requested by shareholders. In any other case, the meeting shall be adjourned to the next business day, and if shareholders representing not less than one-third of the votes of the common shares or each class of shares entitled to vote on the matters to be considered at the meeting are present within one hour of the start time of the adjourned meeting, a quorum will be present. If not, the meeting will be dissolved. No business may be transacted at any meeting of shareholders unless a quorum is present at the commencement of business. If present, the chair of our board of directors shall be the chair presiding at any meeting of the shareholders. If the chair of our board is not present then the members present shall choose a shareholder to act to chair the meeting of the shareholders. If the shareholders are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares present in present of by proxy shall preside as chairman, failing which the oldest individual member or member representative shall take the chair.
A corporation that is a shareholder shall be deemed for the purpose of our memorandum and articles of association to be present in person if represented by its duly authorized representative. This duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were our individual shareholder.
Directors
There is nothing under British Virgin law which specifically prohibits or restricts the creation of cumulative voting rights for the election of our directors. Our memorandum and articles of association do not provide for cumulative voting for elections of directors.
Liquidation Rights
As permitted by the BVI Act and our memorandum and articles of association, we may be voluntarily liquidated under Part XII of the BVI Act by resolution of directors and resolution of shareholders if our assets exceed our liabilities and we are able to pay our debts as they fall due. We also may be wound up in circumstances where we are insolvent in accordance with the terms of the BVI Insolvency Act (Law Revision 2020).
If we wound up and the assets available for distribution among our shareholders are more than sufficient to repay all amounts paid to us on account of the issue of shares immediately prior to the winding up, the excess shall be distributable pari passu among those shareholders in proportion to the amount paid up immediately prior to the winding up on the shares held by them, respectively. If we are wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the amounts paid to us on account of the issue of shares, those assets shall be distributed so that, to the greatest extent possible, the losses shall be borne by the shareholders in proportion to the amounts paid up immediately prior to the winding up on the shares held by them, respectively. If we are wound up, the liquidator appointed by us may, in accordance with the BVI Act, divide among our shareholders in specie or kind the whole or any part of our assets (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.
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Differences in Corporate Law
The BVI Act and the laws of the British Virgin Islands affecting British Virgin Islands companies like us and our shareholders differ from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the laws of the British Virgin Islands applicable to us and the laws applicable to companies incorporated under the Delaware General Corporation Law in the United States and their shareholders.
Mergers and Similar Arrangements
Under the laws of the British Virgin Islands, two or more companies may merge or consolidate in accordance with Section 170 of the BVI Act. A merger means the merging of two or more constituent companies into one of the constituent companies (the “surviving company”) and a consolidation means the uniting of two or more constituent companies into a new company (the “consolidated company”). The procedure for a merger or consolidation between the company and another company (which need not be a British Virgin Islands company, and which may be the company’s parent or subsidiary, but need not be) is set out in the BVI Act. In order to merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation, which with the exception of a merger between a parent company and its subsidiary, must also be approved by a resolution of a majority of the shareholders voting at a quorate meeting of shareholders or by written resolution of the shareholders of the British Virgin Islands company or British Virgin Islands companies which are to merge. While a director may vote on the plan of merger or consolidation, or any other matter, even if he has a financial interest in the plan, the interested director must disclose the interest to all other directors of the company promptly upon becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the company. A transaction entered into by our company in respect of which a director is interested (including a merger or consolidation) is voidable by us unless the director’s interest was (a) disclosed to the board prior to the transaction or (b) the transaction is (i) between the director and the company and (ii) the transaction is in the ordinary course of the company’s business and on usual terms and conditions. Notwithstanding the above, a transaction entered into by the company is not voidable if the material facts of the interest are known to the shareholders and they approve or ratify it or the company received fair value for the transaction. In any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are entitled to vote at the meeting to approve the plan of merger or consolidation. A foreign company which is able under the laws of its foreign jurisdiction to participate in the merger or consolidation is required by the BVI Act to comply with the laws of that foreign jurisdiction in relation to the merger or consolidation. The shareholders of the constituent companies are not required to receive shares of the surviving or consolidated company but may receive debt obligations or other securities of the surviving or consolidated company, other assets, or a combination thereof. Further, some or all of the shares of a class or series may be converted into a kind of asset while the other shares of the same class or series may receive a different kind of asset. As such, not all the shares of a class or series must receive the same kind of consideration. After the plan of merger or consolidation has been approved by the directors and authorized, if required, by a resolution of the shareholders, articles of merger or consolidation are executed by each company and filed with the Registrar of Corporate Affairs in the British Virgin Islands. The merger is effective on the date that the articles of merger are registered with the Registrar or on such subsequent date, not exceeding thirty days, as is stated in the articles of merger or consolidation.
As soon as a merger becomes effective: (a) the surviving company or consolidated company (so far as is consistent with its memorandum and articles of association, as amended or established by the articles of merger or consolidation) has all rights, privileges, immunities, powers, objects and purposes of each of the constituent companies; (b) in the case of a merger, the memorandum and articles of association of any surviving company are automatically amended to the extent, if any, that changes to its memorandum and articles of association are contained in the articles of merger or, in the case of a consolidation, the memorandum and articles of association filed with the articles of consolidation are the memorandum and articles of the consolidated company; (c) assets of every description, including choses-in-action and the business of each of the constituent companies, immediately vest in the surviving company or consolidated company; (d) the surviving company or consolidated company is liable for all claims, debts, liabilities and obligations of each of the constituent companies; (e) no conviction, judgment, ruling, order, claim, debt, liability or obligation due or to become due, and no cause existing, against a constituent company or against any member, director, officer or agent thereof, is released or impaired by the merger or consolidation; and (f) no proceedings, whether civil or criminal, pending at the time of a merger by or against a constituent company, or against any member, director, officer or agent thereof, are abated or discontinued by the merger or consolidation; but: (i) the proceedings may be enforced, prosecuted, settled or compromised by or against the surviving company or consolidated company or against the member, director, officer or agent thereof; as the case may be; or (ii) the surviving company or consolidated company may be substituted in the proceedings for a constituent company. The Registrar of Corporate Affairs shall strike off the register of companies each constituent company that is not the surviving company in the case of a merger and all constituent companies in the case of a consolidation. If the directors determine it to be in the best interests of the company, it is also possible for a merger to be approved as a Court approved plan of arrangement or scheme of arrangement in accordance with the BVI Act.
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A shareholder may dissent from (a) a merger if the company is a constituent company, unless the company is the surviving company and the member continues to hold the same or similar shares; (b) a consolidation if the company is a constituent company; (c) any sale, transfer, lease, exchange or other disposition of more than 50 per cent in value of the assets or business of the company if not made in the usual or regular course of the business carried on by the company but not including: (i) a disposition pursuant to an order of the court having jurisdiction in the matter, (ii) a disposition for money on terms requiring all or substantially all net proceeds to be distributed to the members in accordance with their respective interest within one year after the date of disposition, or (iii) a transfer pursuant to the power of the directors to transfer assets for the protection thereof; (d) a compulsory redemption of 10 per cent, or fewer of the issued shares of the company required by the holders of 90 percent, or more of the shares of the company pursuant to the terms of the BVI Act; and (e) a plan of arrangement, if permitted by the British Virgin Islands Court (each, an Action). A shareholder properly exercising his dissent rights is entitled to a cash payment equal to the fair value of his shares.
A shareholder dissenting from an Action must object in writing to the Action before the vote by the shareholders on the merger or consolidation, unless notice of the meeting was not given to the shareholder. If the merger or consolidation is approved by the shareholders, the company must give notice of this fact to each shareholder within 20 days who gave written objection. Such objection shall include a statement that the member proposes to demand payment for his or her shares if the Action is taken. These shareholders then have 20 days to give to the company their written election in the form specified by the BVI Act to dissent from the Action, provided that in the case of a merger, the 20 days starts when the plan of merger is delivered to the shareholder. Upon giving notice of his election to dissent, a shareholder ceases to have any shareholder rights except the right to be paid the fair value of his shares. As such, the merger or consolidation may proceed in the ordinary course notwithstanding his dissent. Within seven days of the later of the delivery of the notice of election to dissent and the effective date of the merger or consolidation, the company shall make a written offer to each dissenting shareholder to purchase his shares at a specified price per share that the company determines to be the fair value of the shares. The company and the shareholder then have 30 days to agree upon the price. If the company and a shareholder fail to agree on the price within the 30 days, then the company and the shareholder shall, within 20 days immediately following the expiration of the 30-day period, each designate an appraiser and these two appraisers shall designate a third appraiser. These three appraisers shall fix the fair value of the shares as of the close of business on the day prior to the shareholders’ approval of the transaction without taking into account any change in value as a result of the transaction.
Shareholders’ Suits
There are both statutory and common law remedies available to our shareholders as a matter of British Virgin Islands Law. These are summarized below:
Prejudiced Members
A shareholder who considers that the affairs of the company have been, are being, or are likely to be, conducted in a manner that is, or any act or acts of the company have been, or are, likely to be oppressive, unfairly discriminatory or unfairly prejudicial to him in that capacity, can apply to the court under Section 184I of the BVI Act, inter alia, for an order that his shares be acquired, that he be provided compensation, that the Court regulate the future conduct of the company, or that any decision of the company which contravenes the BVI Act or our memorandum and articles of association be set aside.
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Derivative Actions
Section 184C of the BVI Act provides that a shareholder of a company may, with the leave of the Court, bring an action in the name of the company in certain circumstances to redress any wrong done to it. Such actions are known as derivative actions. The British Virgin Islands Court may only grant permission to bring a derivative action where the following circumstances apply:
| ● | the company does not intend to bring, diligently continue or defend or discontinue proceedings; and |
| ● | it is in the interests of the company that the conduct of the proceedings not be left to the directors or to the determination of the shareholders as a whole. |
When considering whether to grant leave, the British Virgin Islands Court is also required to have regard to the following matters:
| ● | whether the shareholder is acting in good faith; |
| ● | whether a derivative action is in the company’s best interests, taking into account the directors’ views on commercial matters; |
| ● | whether the action is likely to proceed; |
| ● | the cost of the proceedings; and |
| ● | whether an alternative remedy is available. |
Just and Equitable Winding Up
In addition to the statutory remedies outlined above, shareholders can also petition the British Virgin Islands Court for the winding up of a company under the BVI Insolvency Act, 2003 (Law Revision 2020) for the appointment of a liquidator to liquidate the company and the court may appoint a liquidator for the company if it is of the opinion that it is just and equitable for the court to so order. Save in exceptional circumstances, this remedy is generally only available where the company has been operated as a quasi-partnership and trust and confidence between the partners has broken down.
Indemnification of Directors and Executive Officers and Limitation of Liability
Our memorandum and articles of association provide that, subject to certain limitations, we indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings for any person who:
| ● | is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was our director; or |
| ● | is or was, at our request, serving as a director or officer of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise. |
These indemnities only apply if the person acted honestly and in good faith with a view to our best interests and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of the memorandum and articles of association, unless a question of law is involved. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the company or that the person had reasonable cause to believe that his conduct was unlawful.
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This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Anti-Takeover Provisions in Our Memorandum and Articles of Association
Some provisions of our articles of association may discourage, delay or prevent a change in control of our company or management that shareholders may consider favorable. Under the BVI Act there are no provisions that specifically prevent the issuance of preferred shares or any such other “poison pill” measures. Our memorandum and articles of association also do not contain any express prohibitions on the issuance of any preferred shares. Therefore, the directors without the approval of the holders of ordinary shares may issue preferred shares that have characteristics that may be deemed to be anti-takeover. Additionally, such a designation of shares may be used in connection with plans that are poison pill plans. However, under British Virgin Islands law, our directors in the exercise of their powers granted to them under our memorandum and articles of association and performance of their duties, are required to act honestly and in good faith in what the director believes to be in the best interests of our company.
Directors’ Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction.
The duty of loyalty requires that a director act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction and that the transaction was of fair value to the corporation.
Under British Virgin Islands law, our directors owe fiduciary duties both at common law and under statute including, among others, a statutory duty to act honestly, in good faith, for a proper purpose and with a view to what the directors believe to be in the best interests of the company. Our directors are also required, when exercising powers or performing duties as a director, to exercise the care, diligence and skill that a reasonable director would exercise in comparable circumstances, taking into account without limitation, the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken. In the exercise of their powers, our directors must ensure neither they nor the company acts in a manner which contravenes the BVI Act or our memorandum and articles of association. A shareholder has the right to seek damages for breaches of duties owed to us by our directors.
Pursuant to the BVI Act and our memorandum and articles, a director of a company who has an interest in a transaction and who has declared such interest to the other directors, may:
(a) vote on a matter relating to the transaction;
(b) attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and
(c) sign a document on behalf of the Company, or do any other thing in his capacity as a director, that relates to the transaction.
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In certain limited circumstances, a shareholder has the right to seek various remedies against the company in the event the directors are in breach of their duties under the BVI Act. Pursuant to Section 184B of the BVI Act, if a company or director of a company engages in, or proposes to engage in or has engaged in, conduct that contravenes the provisions of the BVI Act or the memorandum or articles of association of the company, the British Virgin Islands Court may, on application of a shareholder or director of the company, make an order directing the company or director to comply with, or restraining the company or director from engaging in conduct that contravenes the BVI Act or the memorandum or articles. Furthermore, pursuant to section 184I(1) of the BVI Act a shareholder of a company who considers that the affairs of the company have been, are being or likely to be, conducted in a manner that is, or any acts of the company have been, or are likely to be oppressive, unfairly discriminatory, or unfairly prejudicial to him in that capacity, may apply to the British Virgin Islands Court for an order which, inter alia, can require the company or any other person to pay compensation to the shareholders.
Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. British Virgin Islands law provides that, subject to the memorandum and articles of association of a company, an action that may be taken by members of the company at a meeting may also be taken by a resolution of members consented to in writing.
Shareholder Proposals
Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings. British Virgin Islands law and our memorandum and articles of association allow our shareholders holding 30% or more of the votes of the outstanding voting shares to requisition a shareholders’ meeting. There is no requirement under British Virgin Islands law to hold shareholders’ annual general meetings, but our memorandum and articles of association do permit the directors to call such a meeting. The location of any shareholders’ meeting can be determined by the board of directors and can be held anywhere in the world.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. As permitted under the British Virgin Islands law, our memorandum and articles do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, directors can be removed from office, with or without cause, by a resolution of shareholders. Directors can also be removed with cause by a resolution of directors passed at a meeting of directors called for the purpose of removing the director or for purposes including the removal of the director.
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Transactions With Interested Shareholders
The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or group who or which owns or owned 15% or more of the target’s outstanding voting shares within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public corporation to negotiate the terms of any acquisition transaction with the target’s board of directors. British Virgin Islands law has no comparable statute and our memorandum and articles of association fails to expressly provide for the same protection afforded by the Delaware business combination statute.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under the BVI Act and our memorandum and articles of association, we may appoint a voluntary liquidator by a resolution of the shareholders or directors, provided that the directors have made a declaration of solvency that the company is able to discharge its debts as they fall due and that the value of the company’s assets exceed its liabilities.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our memorandum and articles of association, if at any time our shares are divided into different classes of shares, the rights attached to any class may only be varied, whether or not our company is in liquidation, with the consent in writing of or by a resolution passed at a meeting by not less than 50 percent of the votes cast by those entitled to vote at a meeting of the holders of the issued shares in that class. For these purposes the creation, designation or issue of shares with rights and privileges ranking pari passu to an existing class of shares is deemed not to be a variation of the rights of such existing class and may in accordance with our memorandum and articles of association be effected by resolution of directors without shareholder approval.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by British Virgin Islands law, our memorandum and articles of association may be amended by a resolution of shareholders and, subject to certain exceptions, by a resolution of directors. An amendment is effective from the date it is registered at the Registry of Corporate Affairs in the British Virgin Islands.
Anti-Money Laundering Laws
In order to comply with legislation or regulations aimed at the prevention of money laundering we are required to adopt and maintain anti-money laundering procedures, and may require subscribers to provide evidence to verify their identity. Where permitted, and subject to certain conditions, we also may delegate the maintenance of our anti-money laundering procedures (including the acquisition of due diligence information) to a suitable person.
We reserve the right to request such information as is necessary to verify the identity of a subscriber. In the event of delay or failure on the part of the subscriber in producing any information required for verification purposes, we may refuse to accept the application, in which case any funds received will be returned without interest to the account from which they were originally debited.
If any person resident in the British Virgin Islands knows or suspects that another person is engaged in money laundering or terrorist financing and the information for that knowledge or suspicion came to their attention in the course of their business the person will be required to report his belief or suspicion to the Financial Investigation Agency of the British Virgin Islands, pursuant to the Proceeds of Criminal Conduct Act (Law Revision 2020). Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.
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SHARES ELIGIBLE FOR FUTURE SALE
Before our initial public offering, there has not been a public market for our Ordinary Shares, and although we have made an application for the Ordinary Shares to be listed on the Nasdaq Capital Market, a regular trading market for our Ordinary Shares may not develop. Future sales of substantial amounts of our Ordinary Shares in the public market after our initial public offering, or the possibility of these sales occurring, could cause the prevailing market price for our Ordinary Shares to fall or impair our ability to raise equity capital in the future. Upon completion of this offering, we will have 19,000,000 Ordinary Shares issued and outstanding. All of the Ordinary Shares sold in this offering will be freely transferable by persons other than our “affiliates” without restriction or further registration under the Securities Act.
Rule 144
All of our Ordinary Shares outstanding prior to this offering are “restricted securities” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirement such as those provided by Rule 144 and Rule 701 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person who is not deemed to have been our affiliate at any time during the three months preceding a sale and who has beneficially owned restricted securities within the meaning of Rule 144 for more than six months would be entitled to sell an unlimited number of those shares, subject only to the availability of current public information about us. A non-affiliate who has beneficially owned restricted securities for at least one year from the later of the date these shares were acquired from us or from our affiliate would be entitled to freely sell those shares.
A person who is deemed to be an affiliate of ours and who has beneficially owned “restricted securities” for at least six months would be entitled to sell, within any three-month period, a number of shares that is not more than the greater of:
| ● | 1% of the number of Ordinary Shares then outstanding, in the form of Ordinary Shares or otherwise, which will equal approximately 190,000 shares immediately after this offering; or |
| ● | the average weekly trading volume of the Ordinary Shares on the Nasdaq Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
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Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. If any of our employees, executive officers or directors purchase shares under a written compensatory plan or contract, they may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares would be required to wait until ninety (90) days after the date of this prospectus before selling any such shares. However, the Rule 701 shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
Regulation S
Regulation S under the Securities Act provides an exemption from registration requirements in the United States for offers and sales of securities that occur outside the United States. Rule 903 of Regulation S provides the conditions to the exemption for a sale by an issuer, a distributor, their respective affiliates or anyone acting on their behalf. Rule 904 of Regulation S provides the conditions to the exemption for a resale by persons other than those covered by Rule 903. In each case, any sale must be completed in an offshore transaction, as that term is defined in Regulation S, and no directed selling efforts, as that term is defined in Regulation S, may be made in the United States.
We are a foreign issuer as defined in Regulation S. As a foreign issuer, securities that we sell outside the United States pursuant to Regulation S are not considered to be restricted securities under the Securities Act, and, subject to the offering restrictions imposed by Rule 903, are freely tradable without registration or restrictions under the Securities Act, unless the securities are held by our affiliates. We are not claiming the potential exemption offered by Regulation S in connection with the offering of newly issued shares outside the United States and will register all of the newly issued shares under the Securities Act.
Subject to certain limitations, holders of our restricted shares who are not our affiliates or who are our affiliates by virtue of their status as our officer or director of may resell their restricted shares in an “offshore transaction” under Regulation S if:
| ● | none of the shareholder, its affiliate nor any person acting on their behalf engages in directed selling efforts in the United States, and |
| ● | in the case of a sale of our restricted shares by an officer or director who is our affiliate solely by virtue of holding such position, no selling commission, fee or other remuneration is paid in connection with the offer or sale other than the usual and customary broker’s commission that would be received by a person executing such transaction as agent. |
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The following discussion of material British Virgin Islands, Singapore, and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our Ordinary Shares, such as the tax consequences under state, local, and other tax laws. To the extent that the discussion relates to matters of British Virgin Islands tax law, it represents the opinion of Forbes Hare, our British Virgin Islands counsel. To the extent that the discussion relates to matters of Singapore tax law, it represents the opinion of Insights Law LLC, our Singapore counsel.
WE URGE POTENTIAL PURCHASERS OF OUR ORDINARY SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR ORDINARY SHARES.
Republic of Singapore Taxation
Dividends or Other Distributions with Respect to Ordinary Shares
Under the one-tier corporate tax system which currently applies to all Singapore tax resident companies, tax on corporate profits is final, and dividends paid by a Singapore tax resident company will be income tax exempt in the hands of a shareholder, whether or not the shareholder is a company or an individual and whether or not the shareholder is a Singapore tax resident.
Capital Gains upon Distribution of Ordinary Shares
Under current Singapore tax laws, there is no tax on capital gains. There are no specific laws or regulations which deal with the characterization of whether a gain is income or capital in nature. Gains arising from the disposal of the Company’s ordinary shares may be construed to be of an income nature and subject to Singapore income tax, if they arise from activities which the Inland Revenue Authority of Singapore regards as the carrying on of a trade or business in Singapore. However, under Singapore tax laws, any gains derived by a divesting company from its disposal of ordinary shares in an investee company between June 1, 2012 and December 31, 2027 are generally not taxable if immediately prior to the date of the relevant disposal, the divesting company has held at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months.
Goods and Services Tax
The issue or transfer of ownership of the Company’s ordinary shares should be exempt from Singapore Goods and Services Tax. Hence, the holders would not incur any Goods and Services Tax on the subscription or subsequent transfer of the shares.
Stamp Duty
If the Company’s ordinary shares evidenced in certificated forms are acquired in Singapore, stamp duty is payable on the instrument of their transfer at the rate of 0.2% of the consideration for or market value of the Company’s ordinary shares, whichever is higher. Where an instrument of transfer is executed outside Singapore or no instrument of transfer is executed, no stamp duty is payable on the acquisition of the Company’s ordinary shares. However, stamp duty may be payable if the instrument of transfer is executed outside Singapore and is received in Singapore. The stamp duty is borne by the purchaser unless there is an agreement to the contrary.
On the basis that any transfer instrument in respect of the Company’s shares traded on Nasdaq are executed outside Singapore through the Company’s transfer agent/transfer secretary and share registrar in the United States for registration in the Company’s branch registers of members maintained in the United States (without any transfer instrument being received in Singapore), no stamp duty should be payable in Singapore on such transfers.
Tax Treaties Regarding Withholding Taxes
There is no comprehensive avoidance of double taxation agreement between the United States and Singapore which applies to withholding taxes on dividends or capital gains.
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British Virgin Islands Taxation
The British Virgin Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the British Virgin Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the British Virgin Islands. No stamp duty is payable in the British Virgin Islands on the issue of shares by, or any transfers of shares of, British Virgin Islands companies (except those which hold interests in land in the British Virgin Islands). The British Virgin Islands is not party to any double tax treaties that are applicable to any payments made to or by the Company. There are no exchange control regulations or currency restrictions in the British Virgin Islands.
Payments of dividends and capital in respect of our Ordinary Shares will not be subject to taxation in the British Virgin Islands and no withholding will be required on the payment of a dividend or capital to any holder of our Ordinary Shares, as the case may be, nor will gains derived from the disposal of our Ordinary Shares be subject to British Virgin Islands income or corporation tax.
British Virgin Islands Economic Substance Legislation
The British Virgin Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the Economic Substance (Companies and Limited Partnerships) Act, 2018 (the “ESA”) came into force in the British Virgin Islands introducing certain economic substance requirements for British Virgin Islands tax resident companies which are engaged in certain “relevant activities.” However, it is not anticipated that the Company itself will be subject to any such requirements. Although it is presently anticipated that the ESA will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on the Company.
United States Federal Income Taxation
The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:
| ● | banks; |
| ● | financial institutions; |
| ● | insurance companies; |
| ● | regulated investment companies; |
| ● | advertising investment trusts; |
| ● | broker-dealers; |
| ● | persons that elect to mark their securities to market; |
| ● | U.S. expatriates or former long-term residents of the U.S.; |
| ● | governments or agencies or instrumentalities thereof; |
| ● | tax-exempt entities; |
| ● | persons liable for alternative minimum tax; |
| ● | persons holding our Ordinary Shares as part of a straddle, hedging, conversion or integrated transaction; |
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| ● | persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Ordinary Shares); |
| ● | persons who acquired our Ordinary Shares pursuant to the exercise of any employee share option or otherwise as compensation; |
| ● | persons holding our Ordinary Shares through partnerships or other pass-through entities; |
| ● | beneficiaries of a Trust holding our Ordinary Shares; or |
| ● | persons holding our Ordinary Shares through a Trust. |
Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares.
Material Tax Consequences Applicable to U.S. Holders of Our Ordinary Shares
The following sets forth the material U.S. federal income tax consequences related to the ownership and disposition of our Ordinary Shares. It is directed to U.S. Holders (as defined below) of our Ordinary Shares and is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This description does not deal with all possible tax consequences relating to ownership and disposition of our Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences under non-U.S. tax laws, state, local and other tax laws.
The following brief description applies only to U.S. Holders (defined below) that hold Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this prospectus and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this prospectus, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.
The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of Ordinary Share and you are, for U.S. federal income tax purposes,
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia; |
| ● | an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
Taxation of Dividends and Other Distributions on our Ordinary Shares
Subject to the PFIC (defined below) rules discussed below, the gross amount of distributions made by us to you with respect to the Ordinary Shares (including the amount of any taxes withheld therefrom) will generally be includable in your gross income as dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). With respect to corporate U.S. Holders, the dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.
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With respect to non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) the Ordinary Shares are readily tradable on an established securities market in the United States, or we are eligible for the benefits of an approved qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are not a PFIC (defined below) for either our taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. Because there is no income tax treaty between the United States and the British Virgin Islands, clause (1) above can be satisfied only if the Ordinary Shares are readily tradable on an established securities market in the United States. Under U.S. Internal Revenue Service authority, Ordinary Shares are considered for purpose of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Capital Market. You are urged to consult your tax advisors regarding the availability of the lower rate for dividends paid with respect to our Ordinary Shares, including the effects of any change in law after the date of this prospectus.
Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced rate divided by the highest rate of tax normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our Ordinary Shares will constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”
To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
Taxation of Dispositions of Ordinary Shares
Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.
Passive Foreign Investment Company (“PFIC”)
We were not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the taxable year ended June 30, 2022. Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our taxable year ending June 30, 2023 or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse US federal income tax consequences for US taxpayers who are shareholders. We will make this determination following the end of any particular tax year. PFIC status is a factual determination for each taxable year which cannot be made until the close of the taxable year. A non-U.S. corporation is considered a PFIC, as defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:
| ● | at least 75% of its gross income for such taxable year is passive income; or |
| ● | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
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Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we raise in this offering will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based on the market value of our Ordinary Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets (including the cash raised in this offering) on any particular quarterly testing date for purposes of the asset test.
Based on our operations and the composition of our assets we do not expect to be treated as a PFIC under the current PFIC rules. However, we must make a separate determination each year as to whether we are a PFIC, and there can be no assurance with respect to our status as a PFIC for our current taxable year or any future taxable year. Depending on the amount of cash we raise in this offering, together with any other assets held for the production of passive income, it is possible that, for our current taxable year or for any subsequent taxable year, more than 50% of our assets may be assets held for the production of passive income. We will make this determination following the end of any particular tax year. In addition, because the value of our assets for purposes of the asset test will generally be determined based on the market price of our Ordinary Shares and because cash is generally considered to be an asset held for the production of passive income, our PFIC status will depend in large part on the market price of our Ordinary Shares and the amount of cash we raise in this offering. Accordingly, fluctuations in the market price of the Ordinary Shares may cause us to become a PFIC. In addition, the application of the PFIC rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we spend the cash we raise in this offering. We are under no obligation to take steps to reduce the risk of our being classified as a PFIC, and as stated above, the determination of the value of our assets will depend upon material facts (including the market price of our Ordinary Shares from time to time and the amount of cash we raise in this offering) that may not be within our control. If we are a PFIC for any year during which you hold Ordinary Shares, we will continue to be treated as a PFIC for all succeeding years during which you hold Ordinary Shares. However, if we cease to be a PFIC and you did not previously make a timely “mark-to-market” election as described below, you may avoid some of the adverse effects of the PFIC regime by making a “purging election” (as described below) with respect to the Ordinary Shares.
If we are a PFIC for your taxable year(s) during which you hold Ordinary Shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the Ordinary Shares; |
| ● | the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and |
| ● | the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the Ordinary Shares cannot be treated as capital, even if you hold the Ordinary Shares as capital assets.
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A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election under Section 1296 of the US Internal Revenue Code for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close of such taxable year over your adjusted basis in such Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close of the taxable year. However, such ordinary loss is allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “— Taxation of Dividends and Other Distributions on our Ordinary Shares” generally would not apply.
The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the Nasdaq Capital Market. If the Ordinary Shares are regularly traded on the Nasdaq Capital Market and if you are a holder of Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.
Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election under Section 1295(b) of the US Internal Revenue Code with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold Ordinary Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year and provide certain annual information regarding such Ordinary Shares, including regarding distributions received on the Ordinary Shares and any gain realized on the disposition of the Ordinary Shares.
If you do not make a timely “mark-to-market” election (as described above), and if we were a PFIC at any time during the period you hold our Ordinary Shares, then such Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless you make a “purging election” for the year we cease to be a PFIC. A “purging election” creates a deemed sale of such Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value of the Ordinary Shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your Ordinary Shares for tax purposes.
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IRC Section 1014(a) provides for a step-up in basis to the fair market value for our Ordinary Shares when inherited from a decedent that was previously a holder of our Ordinary Shares. However, if we are determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) our Ordinary Shares, or a mark-to-market election and ownership of those Ordinary Shares are inherited, a special provision in IRC Section 1291(e) provides that the new U.S. Holder’s basis should be reduced by an amount equal to the Section 1014 basis minus the decedent’s adjusted basis just before death. As such if we are determined to be a PFIC at any time prior to a decedent’s passing, the PFIC rules will cause any new U.S. Holder that inherits our Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will receive a carryover basis in those Ordinary Shares.
You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in our Ordinary Shares and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect to our Ordinary Shares and proceeds from the sale, exchange or redemption of our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. However, transactions effected through certain brokers or other intermediaries may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.
Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to our Ordinary Shares, subject to certain exceptions (including an exception for Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold Ordinary Shares.
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In connection with this offering, we and the Selling Shareholders will enter into an underwriting agreement with Prime Number Capital LLC (the “Underwriter”) with respect to the Ordinary Shares being offered. Under the terms and subject to the conditions contained in the underwriting agreement, the Underwriter has agreed to purchase 1,280,000 Ordinary Shares from us and 730,000 Ordinary Shares from the Selling Shareholders.
The Underwriter is offering the Ordinary Shares subject to its acceptance of the Ordinary Shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the Underwriter to pay for and accept delivery of the Ordinary Shares offered by this prospectus are subject to the approval of certain legal matters by its counsel and to certain other conditions. The Underwriter is obligated to take and pay for all of the Ordinary Shares offered by this prospectus if any such Ordinary Shares are taken.
The Underwriter initially proposes to offer the Ordinary Shares directly to the public at the public offering price listed on the cover page of this prospectus. The Underwriter is expected to make offers and sales both inside and outside the United States through its selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC.
Over-Allotment Option
We have granted to the Underwriter a 45-day option to purchase up to an aggregate of 192,000 additional Ordinary Shares (equal to 15% of the number of Ordinary Shares sold in the offering by us and not including the Ordinary Shares offered by the Selling Shareholders) at the offering price per Ordinary Share less underwriting discounts. The Underwriter may exercise this option for 45 days from the date of closing of this offering solely to cover sales of Ordinary Shares by the Underwriter in excess of the total number of Ordinary Shares set forth above.
Underwriter’s Compensation
Except as disclosed in this prospectus, the Underwriter has not received and will not receive from us any other item of compensation or expense in connection with this offering considered by the Financial Industry Regulatory Authority, Inc. (“FINRA”) to be underwriting compensation under its rules of fair price.
Discount
The underwriting discount is equal to the public offering price per share, less the amount paid by the Underwriter to us per share. The underwriting discount was determined through an arms’ length negotiation between us and the Underwriter. We have agreed to sell the shares to the Underwriter, at the initial offering price of $[●] per share, which represents the initial public offering price of the shares set forth on the cover page of this prospectus less an 8.0% underwriting discount.
The following tables show the per-share price and total underwriting discounts to be paid to the Underwriter for underwriting 1,280,000 Ordinary Shares to be sold by us and 730,000 Ordinary Shares to be sold by the Selling Shareholder. Such amounts are shown assuming both no exercise and full exercise of the Underwriter’s option to purchase additional Ordinary Shares.
| Per Share(1) | Total | |||||||||||
| No exercise | Full exercise | |||||||||||
| Initial public offering price | $ | 5.50 | $ | 11,055,000 | $ | 12,111,000 | ||||||
| Discounts to be paid by the Company | $ | 0.44 | $ | 563,200 | $ | 647,680 | ||||||
| Discounts to be paid by the Selling Shareholders | $ | 0.44 | $ | 321,200 | $ | 321,200 | ||||||
| Proceeds to the Company, before expenses | $ | 5.06 | $ | 6,476,800 | $ | 7,448,320 | ||||||
| Proceeds to the Selling Shareholders, before expenses | $ | 5.06 | $ | 3,693,800 | $ | 3,693,800 | ||||||
| (1) | Assuming the initial public offering price is $5.50 per Ordinary Share, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus. |
Expense Reimbursement
We have agreed to reimburse the Underwriter up to a maximum of $300,000 for out-of-pocket accountable expenses, including: (i) all reasonable travel and lodging expenses incurred by the Underwriter and its counsel in connection with visits to, and examinations of, our company; (ii) background check on our principal shareholders, directors and officers; (iii) the reasonable cost for road show meetings; (iv) all due diligence expenses; and (v) legal counsel fees; provided, however, any expense exceeding $5,000 shall be approved by us in writing in advance. In addition, at the closing of the offering, we shall reimburse the Underwriter one percent (1%) of the gross proceeds of the offering as a non-accountable expense allowance.
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We have agreed to pay $100,000 as an advance to be applied towards reasonable out-of-pocket expenses, or the Advance, which was paid upon the execution of the engagement letter between us and the Underwriter dated August 30, 2023 (the “Engagement Letter”). Any portion of the Advance shall be returned back to us to the extent not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).
Furthermore, pursuant to the underwriting agreement, the Underwriter’s obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the Underwriter of officers’ certificates and legal opinions.
We estimate that our share of the total expenses of the offering, excluding underwriting discounts, will be approximately $0.75 million.
Right of First Refusal
We have agreed to grant the Underwriter, for the twelve-month period following the closing of this offering, a right of first refusal, exercisable at the sole discretion of the Underwriter, to provide investment banking, book-running, and/or placement agent services for any future public and private equity, convertible or debt offerings of our securities during such period. The Right of First Refusal shall be subject to FINRA Rule 5110(g)(5), including that it may be terminated by us for cause, which shall be a breach by the Underwriter of the Engagement Letter or a material failure by the underwriter to provide the services as contemplated by the Engagement Letter.
Tail Financing Payments
We have also agreed to pay the Underwriter a tail fee equal to the compensation commensurate with those set forth in the Engagement Letter, if we complete an offering with a party first introduced to us by the Underwriter during the 12-month period following expiration or termination of our engagement of the Underwriter. This right shall be subject to FINRA Rule 5110(g)(5), including that it may be terminated by us for cause, which shall be a breach by the Underwriter of the Engagement Letter or a material failure by the underwriter to provide the services as contemplated by the Engagement Letter.
Lock-up Agreements
Each of our executive officers and directors and 5% or more holders of all of our shares outstanding prior to the effective date of this offering, have agreed with the Underwriter not to directly or indirectly sell, offer, contract or grant any option to sell, pledge, transfer (excluding intra-family transfers, transfers to a trust for estate planning purposes or to beneficiaries of officers, directors and shareholders upon their death), or otherwise dispose of or enter into any transaction which may result in the disposition of any Ordinary Shares or securities convertible into, exchangeable or exercisable for any Ordinary Shares, without the prior written consent of the Underwriter, as representative of the Underwriter, for a period of 180 days after the date of this prospectus.
Price Stabilization
In connection with this offering, the underwriter may engage in activities that stabilize, maintain or otherwise affect the price of our Ordinary Shares during and after this offering, including:
| ● | stabilizing transactions; |
| ● | short sales; |
| ● | purchases to cover positions created by short sales; |
| ● | imposition of penalty bids; and |
| ● | syndicate covering transactions. |
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Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our Ordinary Shares while this offering is in progress. Stabilization transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. These transactions may also include making short sales of our Ordinary Shares, which involve the sale by the underwriter of a greater number of Ordinary Shares than it is required to purchase in this offering and purchasing Ordinary Shares on the open market to cover short positions created by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriter’s option to purchase additional shares, or may be “naked short sales,” which are short positions in excess of that amount.
The underwriter may close out any covered short position by purchasing shares in the open market.
Naked short sales are short sales made in excess of any over-allotment option. The underwriter must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that there may be downward pressure on the price of the Ordinary Shares in the open market that could adversely affect investors who purchased in this offering.
The underwriter also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriter a portion of the underwriting discount received by it because the Underwriter has repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
These stabilizing transactions, short sales, purchases to cover positions created by short sales, the imposition of penalty bids and syndicate covering transactions may have the effect of raising or maintaining the market price of our Ordinary Shares or preventing or retarding a decline in the market price of our Ordinary Shares. As a result of these activities, the price of our Ordinary Shares may be higher than the price that otherwise might exist in the open market. The underwriter may carry out these transactions on the Nasdaq Capital Market, in the over-the-counter market or otherwise. Neither we nor the underwriter make any representation or prediction as to the effect that the transactions described above may have on the price of the shares. Neither we, nor the underwriter make any representation that the underwriter will engage in these stabilization transactions or that any transaction, once commenced, will not be discontinued without notice.
Indemnification
We have agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act and the Exchange Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the Underwriter may be required to make in respect of those liabilities.
Determination of Offering Price
Prior to this offering, there has not been a public market for our Ordinary Shares. The public offering price of the Ordinary Shares offered by this prospectus has been determined by negotiation between us, the Selling Shareholders, and the Underwriter. Among the factors considered in determining the public offering price of the Ordinary Shares were:
| ● | Our history and our prospects; |
| ● | Our financial information and historical performance; |
| ● | The industry in which we operate; |
| ● | The status and development prospects for our products and services; |
| ● | The experience and skills of our executive officers; and |
| ● | The general condition of the securities markets at the time of this offering. |
The offering price stated on the cover page of this prospectus should not be considered an indication of the actual value of the Ordinary Shares. That price is subject to change as a result of market conditions and other factors, and we cannot assure you that the Ordinary Shares can be resold at or above the public offering price.
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Listing
We have applied to list our Ordinary Shares on Nasdaq under the symbol “RPGL.” The closing of this offering is conditioned upon Nasdaq’s final approval of our listing application. We cannot assure you that our application will be approved; if it is not approved by Nasdaq, we will not proceed with this offering.
Electronic Distribution
A prospectus in electronic format will be made available on the websites maintained by the Underwriter. The Underwriter may distribute prospectuses electronically. The underwriter may agree to allocate a number of Ordinary Shares for sale to its online brokerage account holders. Ordinary Shares to be sold pursuant to an Internet distribution will be allocated on the same basis as other allocations. In addition, Ordinary Shares may be sold by the Underwriter to securities dealers who resell Ordinary Shares to online brokerage account holders.
Other Relationships
The Underwriter is a full service financial institution engaged in various activities, which may include the sales and trading of securities, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, financing, brokerage and other financial and non-financial activities and services. The Underwriter may in the future perform a variety of such activities and services for us and for persons or entities with relationships with us for which they received or will receive customary fees, commissions and expenses.
In addition, in the ordinary course of its business activities, the Underwriter, its affiliates, directors, officers and employees may at any time purchase, sell or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and other financial instruments (including bank loans) for its own account and for the accounts of its customers.
Such investments and securities activities may involve assets, securities and/or instruments of ours or our affiliates. The Underwriter and its affiliates, directors, officers and employees may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions outside the United States
Notice to Prospective Investors in Canada
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the Underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
The ordinary shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the ordinary shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
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Notice to Prospective Investors in the United Kingdom
This prospectus is only being distributed to and is only directed at persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 within, and/or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) (all such persons together being referred to as “relevant persons”).
This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom who is not a relevant person should not act or rely on this prospectus or any of its contents.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ordinary shares may not be circulated or distributed, nor may the ordinary shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act 2001(the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Notice to Prospective Investors in the People’s Republic of China
This prospectus may not be circulated or distributed in China and the ordinary shares may not be offered or sold, and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of China except pursuant to applicable laws, rules and regulations of China. For the purpose of this paragraph only, China does not include Taiwan and the special administrative regions of Hong Kong and Macau.
Notice to Prospective Investors in Hong Kong
The ordinary shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to our ordinary shares be issued or may be in possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to our ordinary shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Taiwan
The ordinary shares have not been and will not be registered with the Financial Supervisory Commission of (“Taiwan”), pursuant to relevant securities laws and regulations and may not be offered or sold in Taiwan through a public offering or in any manner which would constitute an offer within the meaning of the Securities and Exchange Act of Taiwan or would otherwise require registration with or the approval of the Financial Supervisory Commission of Taiwan.
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EXPENSES RELATED TO THIS OFFERING
Set forth below is an itemization of the total expenses, excluding the underwriting discounts and non-accountable expense allowance, which are expected to be incurred in connection with the sale of Ordinary Shares in this offering. With the exception of the registration fee payable to the SEC, the Nasdaq Capital Market listing fee and the filing fee payable to Financial Industry Regulatory Authority, Inc., or FINRA, all amounts are estimates.
| SEC registration fee | $ | 3,392 | ||
| The Nasdaq Capital Market listing fee | $ | 85,000 | ||
| FINRA filing fee | $ | 5,990 | ||
| Printing expenses | $ | 15,000 | ||
| Legal fees and expenses | $ | 486,729 | ||
| Accounting fees and expenses | $ | 52,000 | ||
| Transfer agent and registrar fee and expenses | $ | 200 | ||
| Miscellaneous | $ | 164,120 | ||
| Total | $ | 812,431 |
These expenses will be borne by us. Underwriting discounts will be borne by us in proportion to the numbers of Ordinary Shares sold in the offering. The Selling Shareholders will bear the underwriting discounts in proportion to the number of Ordinary Shares resold by the Underwriter.
The validity of the Ordinary Shares offered in this offering and certain other legal matters as to British Virgin Islands law will be passed upon for us by Forbes Hare. Certain legal matters as to United States Federal and New York State law in connection with this offering will be passed upon for us by Hunter Taubman Fischer & Li LLC. Legal matters as to Singapore law will be passed upon for us by Insights Law LLC. The Crone Law Group P.C. is acting as counsel to the Underwriter.
The unaudited interim condensed consolidated financial statements for the six months ended December 31, 2022 and 2021 appearing in this prospectus have been reviewed by Marcum Asia CPAs LLP. The office of Marcum Asia CPAs LLP is located at 7 Penn Plaza, Suite 830, New York, NY 10001. The consolidated financial statements for the years ended June 30, 2022 and 2021 appearing in this prospectus have been audited by Friedman LLP, independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph relating to substantial doubt about the ability of Republic Power Group Limited to continue as a going concern, as described in Note 2 to the consolidated financial statements), appearing elsewhere in this prospectus and are included in reliance upon such report given on the authority of said firm as experts in auditing and accounting. The office of Friedman LLP is located at One Liberty Plaza, 165 Broadway, 21st Floor, New York, New York 10006.
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CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Effective September 1, 2022, Friedman LLP (“Friedman”), our then independent registered public accounting firm, combined with Marcum LLP and continued to operate as an independent registered public accounting firm. On February 7, 2023, we engaged Marcum Asia to serve as our independent registered public accounting firm. The services previously provided by Friedman are now provided by Marcum Asia CPAs LLP (“Marcum Asia”).
Friedman’s reports on our consolidated financial statements for the years ended June 30, 2022 and 2021 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. Furthermore, during our two most recent fiscal years and through February 7, 2023, there have been no disagreements with Friedman on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Friedman’s satisfaction, would have caused Friedman to make reference to the subject matter of the disagreement in connection with its reports on our financial statements for such periods.
For our two most recent fiscal years and through February 7, 2023, there were no “reportable events” as that term is described in Item 16F(a)(1)(v) of the Form 20-F, other than the material weaknesses reported by management in the Risk Factors section of this registration statement on Form F-1.
We provided Friedman with a copy of the above disclosure and requested that Friedman furnish us with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not it agrees with the above statement. A copy of Friedman’s letter is filed as Exhibit 16.1 to the registration statement of which this prospectus is a part.
During our two most recent fiscal years and through February 7, 2023, neither our Company nor anyone acting on our behalf consulted Marcum Asia with respect to any of the matters or reportable events set forth in Item 16F(a)(2)(i) and (ii) of the Form 20-F.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form F-1, including relevant exhibits and schedules under the Securities Act, covering the Ordinary Shares offered by this prospectus. You should refer to our registration statements and their exhibits and schedules if you would like to find out more about us and about the Ordinary Shares. This prospectus summarizes material provisions of contracts and other documents that we refer you to. Since the prospectus may not contain all the information that you may find important, you should review the full text of these documents.
Immediately upon the completion of this offering, we will be subject to periodic reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders under the federal proxy rules contained in Sections 14(a), (b) and (c) of the Exchange Act, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
The SEC maintains a website that contains reports, proxy statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this prospectus.
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REPUBLIC POWER GROUP LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Republic Power Group Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Republic Power Group Limited and Subsidiaries (collectively, the “Company”) as of June 30, 2022 and 2021, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph — Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company does not have sufficient cash balance at June 30, 2022, which raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding this matter are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Friedman LLP
Friedman LLP
We served as the Company’s auditor from 2021 through 2022.
New York, New York
December 22, 2022
F-2
REPUBLIC POWER GROUP LIMITED
| June 30, | June 30, | June 30, | ||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash | 4,142 | 23,311 | 16,767 | |||||||||
| Accounts receivable, net | 44,958 | 3,092,185 | 2,224,113 | |||||||||
| Inventories | 13,120 | - | - | |||||||||
| Loans to third parties | 840,000 | - | - | |||||||||
| Prepayments | 586,000 | 13,500 | 9,710 | |||||||||
| Short-term deposits | 100 | 91,130 | 65,547 | |||||||||
| Short-term deposits - related party | 740,344 | - | - | |||||||||
| Amount due from a director | 100,000 | - | - | |||||||||
| Loans to related party | 13,400 | - | - | |||||||||
| Other current assets, net | - | 6,483 | 4,663 | |||||||||
| Total current assets | 2,342,064 | 3,226,609 | 2,320,800 | |||||||||
| PROPERTY AND EQUIPMENT, NET | 174,543 | 163,310 | 117,464 | |||||||||
| OTHER ASSETS | ||||||||||||
| Deposit paid for acquisition of subsidiary - related party | 1,856,171 | 1,856,171 | 1,335,087 | |||||||||
| Deferred IPO Costs | - | 643,602 | 462,923 | |||||||||
| Long-term deposits | 9,012 | - | - | |||||||||
| Long-term deposits - related party | 1,000,000 | 1,000,000 | 719,269 | |||||||||
| Total non-current assets | 2,865,183 | 3,499,773 | 2,517,279 | |||||||||
| Total assets | 5,381,790 | 6,889,692 | 4,955,543 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Loans Payable – Related Party | - | 65,000 | 46,752 | |||||||||
| Loans Payable – Financial Institution | - | 122,000 | 87,751 | |||||||||
| Accounts payable | - | 219,936 | 158,193 | |||||||||
| Other payables and accrued liabilities | 29,183 | 274,116 | 197,163 | |||||||||
| Amount due to a director | 59,042 | - | - | |||||||||
| Finance lease obligation, current portion | 6,880 | 7,160 | 5,150 | |||||||||
| Taxes payable | 1,021,059 | 1,435,039 | 1,032,180 | |||||||||
| Total current Liabilities | 1,116,164 | 2,123,251 | 1,527,189 | |||||||||
| OTHER LIABILITIES | ||||||||||||
| Finance lease obligation, net of current portion | 66,956 | 59,796 | 43,009 | |||||||||
| Deferred tax liabilities, net | 3,227 | 3,459 | 2,488 | |||||||||
| Total other liabilities | 70,183 | 63,255 | 45,497 | |||||||||
| Total liabilities | 1,186,347 | 2,186,506 | 1,572,686 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Ordinary shares, US$0.000625 par value, unlimited shares authorized, 16,000,000 shares issued and outstanding as of June 30, 2021 and 2022, respectively* | 13,453 | 13,453 | 10,000 | |||||||||
| Additional paid-in capital | 986,547 | 986,547 | 709,269 | |||||||||
| Retained earnings | 3,195,443 | 3,703,186 | 2,663,588 | |||||||||
| Total shareholders’ equity | 4,195,443 | 4,703,186 | 3,382,857 | |||||||||
| Total liabilities and shareholders’ equity | 5,381,790 | 6,889,692 | 4,955,543 | |||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
REPUBLIC POWER GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME
| For the Years Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| OPERATING REVENUES | ||||||||||||
| Software development service | 8,128,595 | 3,175,165 | 2,283,799 | |||||||||
| Consulting and technical support services | 601,590 | 1,289,969 | 927,835 | |||||||||
| Product sales | 87,997 | - | - | |||||||||
| Total operating revenues | 8,818,182 | 4,465,134 | 3,211,634 | |||||||||
| COST OF REVENUES | (4,300,206 | ) | (1,009,077 | ) | (725,798 | ) | ||||||
| GROSS PROFIT | 4,517,976 | 3,456,057 | 2,485,836 | |||||||||
| OPERATING EXPENSES | ||||||||||||
| Selling and marketing expenses | (844,023 | ) | (155,976 | ) | (112,189 | ) | ||||||
| General and administrative expenses | (937,553 | ) | (1,108,153 | ) | (797,060 | ) | ||||||
| Research and development expenses | (90,408 | ) | (147,659 | ) | (106,207 | ) | ||||||
| Total operating expenses | (1,871,984 | ) | (1,411,788 | ) | (1,015,456 | ) | ||||||
| INCOME FROM OPERATIONS | 2,645,992 | 2,044,269 | 1,470,380 | |||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest Income (Expense) | 30,019 | (56,257 | ) | (40,464 | ) | |||||||
| Lease income | 12,475 | 3,228 | 2,322 | |||||||||
| Finance expenses | (2,838 | ) | (2,018 | ) | (1,451 | ) | ||||||
| Foreign exchange loss | (58,746 | ) | (1,651 | ) | (1,188 | ) | ||||||
| Other Income (Loss), net | 3,245 | (13,907 | ) | (10,003 | ) | |||||||
| Total other expense, net | (15,845 | ) | (70,605 | ) | (50,784 | ) | ||||||
| INCOME BEFORE INCOME TAXES | 2,630,147 | 1,973,664 | 1,419,596 | |||||||||
| PROVISION FOR INCOME TAX | ||||||||||||
| Current | (450,917 | ) | (332,689 | ) | (239,293 | ) | ||||||
| Deferred | (3,227 | ) | (232 | ) | (167 | ) | ||||||
| Total provision for income tax | (454,144 | ) | (332,921 | ) | (239,460 | ) | ||||||
| NET INCOME | 2,176,003 | 1,640,743 | 1,180,136 | |||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||
| Basic and diluted* | 16,000,000 | 16,000,000 | 16,000,000 | |||||||||
| EARNINGS PER SHARE | ||||||||||||
| Basic and diluted* | 0.14 | 0.10 | 0.07 | |||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
REPUBLIC POWER GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Ordinary shares | Additional paid-in | Retained | ||||||||||||||||||||||
| Shares* | Par Value | capital | earnings | Total | Total | |||||||||||||||||||
| SGD | SGD | SGD | SGD | USD | ||||||||||||||||||||
| BALANCE, June 30, 2020 | 16,000,000 | 13,453 | 986,547 | 2,159,440 | 3,159,440 | 2,272,488 | ||||||||||||||||||
| Dividends paid | - | - | - | (1,140,000 | ) | (1,140,000 | ) | (819,967 | ) | |||||||||||||||
| Net income | - | - | - | 2,176,003 | 2,176,003 | 1,565,132 | ||||||||||||||||||
| BALANCE, June 30, 2021 | 16,000,000 | 13,453 | 986,547 | 3,195,443 | 4,195,443 | 3,017,653 | ||||||||||||||||||
| Dividends paid | - | - | - | (1,133,000 | ) | (1,133,000 | ) | (814,932 | ) | |||||||||||||||
| Net income | - | - | - | 1,640,743 | 1,640,743 | 1,180,136 | ||||||||||||||||||
| BALANCE, June 30, 2022 | 16,000,000 | 13,453 | 986,547 | 3,703,186 | 4,703,186 | 3,382,857 | ||||||||||||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
REPUBLIC POWER GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years Ended June 30, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net income | 2,176,003 | 1,640,743 | 1,180,136 | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation of property and equipment | 28,185 | 43,593 | 31,355 | |||||||||
| Provision for doubtful accounts | 5,568 | 22,122 | 15,912 | |||||||||
| Inventory Provision | - | 13,120 | 9,437 | |||||||||
| Deferred tax benefit provision | 3,227 | 232 | 167 | |||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Accounts receivable | 1,180,767 | (3,069,349 | ) | (2,207,689 | ) | |||||||
| Prepayments | (561,887 | ) | 572,500 | 411,782 | ||||||||
| Inventories | (3,830 | ) | - | - | ||||||||
| Deposits | (100 | ) | (82,018 | ) | (58,993 | ) | ||||||
| Deposits - related party | (400,000 | ) | 740,344 | 532,507 | ||||||||
| Other current assets – related party | 100,000 | - | - | |||||||||
| Accounts payable | (400,000 | ) | 219,936 | 158,193 | ||||||||
| Other payables and accrued liabilities | 29,184 | 244,933 | 176,173 | |||||||||
| Taxes payable | 565,724 | 413,980 | 297,763 | |||||||||
| Net cash provided by operating activities | 2,722,841 | 760,136 | 546,743 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Deposit paid for acquisition of subsidiary - related party | (1,856,171 | ) | - | - | ||||||||
| Amount loans to third parties | (840,000 | ) | - | - | ||||||||
| Repayments of loans to third parties | - | 840,000 | 604,186 | |||||||||
| Repayment of amount due from a director | - | 100,000 | 71,927 | |||||||||
| Repayment of loans to related parties | - | 6,917 | 4,975 | |||||||||
| Amount loans to related parties | (400,000 | ) | - | - | ||||||||
| Repayment of loans from related parties | 386,600 | - | - | |||||||||
| Purchases of property and equipment | (122,823 | ) | (32,360 | ) | (23,276 | ) | ||||||
| Net cash (used in) provided by investing activities | (2,832,394 | ) | 914,557 | 657,812 | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Repayment of due to a director | (161,266 | ) | (59,042 | ) | (42,467 | ) | ||||||
| Deferred IPO Costs | - | (643,602 | ) | (462,923 | ) | |||||||
| Proceeds from financial institutions | - | 810,000 | 582,608 | |||||||||
| Proceeds from the related parties loans | - | 65,000 | 46,752 | |||||||||
| Repayment to financial institutions | - | (688,000 | ) | (494,857 | ) | |||||||
| Repayment of finance lease | (6,069 | ) | (6,880 | ) | (4,948 | ) | ||||||
| Dividend payments | (1,140,000 | ) | (1,133,000 | ) | (814,932 | ) | ||||||
| Net cash used in financing activities | (1,307,335 | ) | (1,655,524 | ) | (1,190,767 | ) | ||||||
| CHANGE IN CASH | (1,416,888 | ) | 19,169 | 13,788 | ||||||||
| CASH, beginning of year | 1,421,030 | 4,142 | 2,979 | |||||||||
| CASH, end of year | 4,142 | 23,311 | 16,767 | |||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for income tax | - | - | - | |||||||||
| Cash paid for interest expense | 2,829 | 56,546 | 40,671 | |||||||||
| NON-CASH FINANCING ACTIVITIES: | ||||||||||||
| Property and equipment - finance lease | 79,905 | - | - | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Nature of business and organization
Republic Power Group Limited (the “Company” or “RP”) is a holding company incorporated on November 17, 2021 under the British Virgin Islands (“BVI”) law. The Company has no substantial operations other than holding all of the equity interest of Republic Power Pte. Ltd. (“RP Singapore”), a Singapore Company incorporated on January 1, 2015. The Company, through RP Singapore, is a provider of customized software, technology solutions and peripheral hardware to large and small to medium corporate clients and government agencies. The Company’s headquarters is located in Singapore. All of the Company’s business activities are carried out by RP Singapore.
On November 17, 2021, RP completed a reorganization of RP Singapore under common control of its then existing shareholders, who collectively owned all of the equity interests of RP prior to the reorganization. RP and RP Singapore are under common control which results in the consolidation of RP Singapore at carrying value. The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of RP.
The consolidated financial statements reflect the activities of each of the following entities:
| Name | Background | Ownership | Principal activity | ||||
| Republic Power Group Limited (“RP”) |
● A BVI company ● Incorporated on November 17, 2021 |
- | Investment holding
|
||||
| Republic Power Pte. Ltd. (“RP Singapore”) |
● A Singapore company ● Incorporated on January 1, 2015 |
100% owned by RP | Providing of software development and technology services | ||||
Note 2—Liquidity and going concern
The Company’s accounts have been prepared assuming that the company will continue as a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company’s ability to continue as a going concern depends upon aligning its sources of funding (debt and equity) with the expenditure requirements of the Company and repayment of the short-term debt facilities as and when they fall due.
The Company has considered whether there is a substantial doubt about its ability to continue as a going concern. As of June 30, 2022, the Company has cash flow from operating activities of SGD 760,136 (USD 546,743). The Company’s working capital was SGD 1,103,358 (USD 793,611) as of June 30, 2022. The Company had SGD 23,311 (USD 16,767) in cash, which is unrestricted as to withdrawal and use as of June 30, 2022. In view of these circumstances, the management of the Company has given consideration to the future liquidity and performance of the Company and its available sources of finance in assessing whether the Company will have sufficient financial resources to continue as a going concern.
To sustain its ability to support the Company’s operating activities, the Company may have to consider supplementing its available sources of funds through the following sources:
| ● | cash and cash equivalents generated from operations; |
| ● | other available sources of financing from Singapore banks and other financial institutions; and |
| ● | financial support from the Company’s related party and shareholders. |
F-7
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management has commenced a strategy to raise debt and equity. However, there can be no certainty that these additional financings will be available on acceptable terms or at all. If management is unable to execute this plan, there would likely be a material adverse effect on the Company’s business. All of these factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements for the years ended June 30, 2022 and 2021 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from the inability of the Company to continue as a going concern.
Note 3—Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All inter-company transactions have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property and equipment, impairment of long-lived assets, allowance for doubtful accounts, revenue recognition, and deferred taxes. Actual results could differ from these estimates.
The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The Company has experienced, and may continue to experience, an adverse impact on certain parts of its business, including a lengthening in the sales cycle for some prospective clients and delays in the delivery of products, professional services and training to clients. As certain clients or partners experience downturns or uncertainty in their own business operations or revenue resulting from COVID-19, the Company may continue to decrease or delay the Company’s spending, request pricing discounts, or seek renegotiations of the Company’s contracts, any of which may result in decreased revenue and cash receipts for the Company in future periods. In addition, the Company may experience client losses, including due to bankruptcy or clients ceasing operations, which may result in an inability to collect accounts receivable from these clients. The full extent to which the COVID-19 pandemic, including any new virus strains or mutations, will directly or indirectly impact the Company’s business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.
Given the uncertainty regarding the length, severity, and ability to combat the COVID-19 pandemic, the Company cannot reasonably estimate the impact on its future results of operations, cash flows, or financial condition. As of the date of issuance of the consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, its judgments, or the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s consolidated financial statements.
F-8
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Foreign currency transaction
The Company uses Singapore Dollars (“SGD”) as its reporting currency. The functional currency of the Company and its subsidiary in the British Virgin Islands is United States Dollars (“USD”) and its subsidiary which is incorporated in Singapore is SGD, which is its respective local currency based on the criteria of ASC 830, “Foreign Currency Matters”.
Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rates at the balance sheet dates. Net gains and losses resulting from foreign exchange transactions are included in exchange gains/(losses) on the consolidated statements of income and comprehensive income.
Convenience translation
Translations of balances in the consolidated balance sheets, consolidated statements of income, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows from SGD into USD as of June 30, 2022 are solely for the convenience of the readers and are calculated at the rate of USD1.00=SGD1.3903, representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 30, 2022. No representation is made that the SGD amounts could have been, or could be, converted, realized or settled into USD at such rate, or at any other rate.
Cash
Cash primarily consists of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. The Company maintains most of its bank accounts in Singapore.
Accounts receivable, net
Accounts receivable include trade accounts due from clients. Accounts are considered overdue after 90 days. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and provides allowance when necessary. The allowance is based on management’s best estimates of specific losses on individual customer exposures, as well as the historical trends of collections. Account balances are charged off against the allowance after all means of collection have been exhausted and the likelihood of collection is not probable. As of June 30, 2022 and 2021, the Company made SGD 27,690 (USD 19,917) and SGD 5,568 allowance for doubtful accounts for accounts receivable, respectively.
Inventories
Inventories are comprised of finished goods and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence and cost in excess of net realizable value periodically when appropriate and records a reserve against the inventory when the carrying value exceeds net realizable value. As of June 30, 2022 and 2021, the Company determined that no allowance was necessary.
Prepayments
Prepayments are mainly payments made to vendors or services providers for future services that have not been provided and prepaid rent. These amounts are refundable and bear no interest. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. As of June 30, 2022 and 2021, no allowance was deemed necessary.
F-9
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Short-term deposits and long-term deposits
Short-term deposits and long-term deposits are mainly for rent, utilities and money deposited with certain suppliers. These amounts are refundable and bear no interest. The short-term deposits usually have one year term and are refundable upon contract termination. The long-term deposits are refunded from suppliers when term and conditions set forth in the agreements have been satisfied.
Deferred IPO costs
Pursuant to ASC 340-10-S99-1, IPO costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related to the registration preparation, the SEC filing and print related costs. As of June 30, 2022, the Company did not conclude its IPO. As of June 30, 2022 and June 30, 2021, the accumulated deferred IPO cost was SGD 643,602 (USD 462,923) and nil, respectively.
Other current assets, net
Other current assets, net, primarily consists of other receivables from third parties. These other receivables are unsecured and are reviewed periodically to determine whether their carrying value has become impaired.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment if applicable. Depreciation is computed using the straight-line method after consideration of the estimated useful lives. The estimated useful lives are as follows:
| Useful Life | ||
| Office equipment | 3 years | |
| Office furniture and fixtures | 3 years | |
| Leasehold improvements | lesser of lease term or expected useful life | |
| Automobiles | 10 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
Impairment for long-lived assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of June 30, 2022 and 2021, no impairment of long-lived assets was recognized.
F-10
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair value measurement
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Revenue recognition
Effective July 1, 2019, the Company adopted ASC Topic 606, Revenue from Contracts with Clients, which replaced ASC Topic 605, using the modified retrospective method of adoption. Results for reporting periods beginning after July 1, 2019 are presented under ASC Topic 606 while prior period amounts are not adjusted and continue to be presented under the Company’s historic accounting under ASC Topic 605. The Company’s accounting for revenue remains substantially unchanged. There were no cumulative effect adjustments for service contracts in place prior to July 1, 2019. The effect from the adoption of ASC Topic 606 was not material to the Company’s consolidated financial statements.
The five-step model defined by ASC Topic 606 requires the Company to (1) identify its contracts with clients, (2) identify its performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance obligations in those contracts and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the client in an amount that reflects the consideration expected in exchange for those goods or services.
The Company applied practical expedient when sales taxes were collected from clients, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently remitted to governmental authorities and are excluded from the transaction price. The Company does not offer rights of refund of previously paid or delivered amounts, rebates, rights of return or price protection. In all instances, the Company limits the amount of revenue recognized to the amounts for which it has the right to bill its’ clients.
The Company derives its revenues from three sources: (1) revenue from software development services, (2) revenue from consulting and technical support services, and (3) revenue from product sales. All of the Company’s contracts with clients do not contain cancelable and refund-type provisions.
(1) Software development services
The contract is typically fixed priced and does not provide any post contract client support or upgrades. The Company designs software based on clients’ specific needs which require the Company to perform services including design, development, and integration. These services also require significant customization. Upon delivery of the services, client acceptance is generally required. The Company assesses that software development services is considered as one performance obligation as the clients do not obtain benefit for each separate service. The duration of the development period is short, usually less than one year.
F-11
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s software development service revenues is generated primarily from contracts with government or related agencies and state-owned enterprises. The contracts contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a portion of contract amount usually is billed upon the completion of the related projects. Pursuant to the contract terms, the Company has enforceable right on payments for the work performed.
The Company’s revenue from software development contracts are generally recognized over time as the Company’s performance creates or enhances the project controlled by the clients and the control is transferred continuously to the Company’s clients. The Company uses an input method based on cost incurred as the Company believes that this method most accurately reflects the Company’s progress toward satisfaction of the performance obligation, which usually takes less than one year. Under this method, the Company could appropriately measure the fulfillment of a performance obligation. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period.
Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect labor, supplies, and tools. Cost-based input method requires the Company to make estimates of revenues and costs to complete the service. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development, including materials, labor, and other system costs. The Company’s estimates are based upon the professional knowledge and experience of the Company’s engineers and project managers to assess the contract’s schedule, performance, and technical matters. The Company has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total development costs. If the estimated costs are greater than the related revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Changes in estimates for software development services include but are not limited to cost forecast changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. To date, the Company has not incurred a material loss on any contracts. However, as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Company entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values.
In certain software development service arrangements, the Company sells equipment to be customized and integrated with the developed software. The Company assesses the customized equipment and service are interdependent and highly interrelated. In these cases, the Company controls the customized equipment before it is transferred to the clients. The Company has the right to direct the suppliers and control the goods or assets transferred to its clients. Thus, the Company considers it should recognize revenue as a principal in the gross amount of consideration to which it is entitled in exchange for the customized equipment delivered.
(2) Consulting and technical support services
Revenue from consulting and technical support services is primarily comprised of fixed-fee contracts, which require the Company to provide professional consulting and technical support services over contract terms beginning on the commencement date of each contract, which is the date its service is made available to clients. Billings to the clients are generally on a monthly or quarterly basis over the contract term, which is typically 1 to 12 months. The consulting and technical support services contracts typically include a single performance obligation. The revenue from consulting and technical support services is recognized over the contract term as clients receive and consume benefits of such services as provided.
F-12
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) Product sales
The Company engages in sale of medical equipment, hardware and related accessories. The Company typically enters into contracts with its client where the rights of the parties, including payment terms, are identified and sales prices to the clients are fixed with no separate sales rebate, discount, or other incentive and no right of return exists on sales of inventory. The Company’s performance obligation is to deliver products according to contract specifications. The Company recognizes product revenue at a time when the control of products is transferred to clients.
Revenue includes reimbursements of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenue.
Practical Expedient and Exemptions
The Company does not disclose the value of unsatisfied performance obligations within one year by applying the right to invoice practical expedient provided by ASC 606-10-55-18.
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries and benefits) for employees associated with technical support and subcontractors, professional services organizations, third party license fees, allocable overhead, and depreciation of related property and equipment.
Advertising expenditures
Advertising expenditures are expensed as incurred and such expenses were minimal for the periods presented. Advertising expenditures have been included as part of selling and marketing expenses. For the years ended June 30, 2022 and 2021, the advertising expense amounted to SGD 24,672 (USD 17,746) and SGD 1,496, respectively.
Selling and marketing expenses
Selling and marketing expenses consist primarily of advertising and marketing research expenses. For the years ended June 30, 2022 and 2021, the Company’s selling and marketing expenses were SGD 155,976 (USD 112,189) and SGD 844,023, respectively.
Research and development
Research and development expenses include salaries and other compensation-related expenses to the Company’s research and product development personnel, outsourced subcontractors, as well as related expenses for the Company’s research and product development team.
Leases
Effective July 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities.
The Company determines if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancelable lease term in calculating the right-of-use assets and lease liabilities.
F-13
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company determines if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancelable lease term in calculating the right-of-use assets and lease liabilities.
The Company may recognize the lease payments in the consolidated statements of income on a straight-line basis over the lease terms and variable lease payments in the periods in which the obligations for those payments are incurred, if any. The lease payments under the lease arrangements are fixed.
The Company elected the package of practical expedients under the transition guidance which allows the Company to carryforward its historical lease classification, its assessment on whether a contract is or contains a lease and its initial direct costs for any lease that exists prior to adoption of the new standard.
The Company elected to apply the short-term lease exception for lease arrangements with a lease term of 12 months or less at commencement. Lease terms used to compute the present value of lease payments do not include any option to extend, renew or terminate the lease that the Company is not able to be reasonably certain to exercise upon the lease inception. Accordingly, operating lease right-of-use assets and liabilities do not include leases with a lease term of 12 months or less.
The Company did not adopt the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Non-lease components include payments for building management, utilities and property tax. It separates the non-lease components from the lease components to which they relate.
ROU lease assets are included in property and equipment, net.
Operating lease expense is recognized on a straight-line basis over the lease term. Upon completion of lease term, the Company does not have control of the renewal option on all leases as the lessor can terminate the renewal option with advance notice.
The Company evaluates the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of finance lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the years ended June 30, 2022 and 2021, the Company did not have any impairment loss against its finance lease ROU assets.
Income taxes
Republic Power Group Limited is not subject to tax on income or capital gains under the current laws of the British Virgin Islands. In addition, upon payments of dividends by Republic Power Group Limited and the Company’s subsidiary in Singapore, Republic Power Pte. Ltd. to the Company’s shareholders, no British Virgin Islands withholding tax will be imposed.
The Company accounts for income tax in accordance with U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred tax.
The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
F-14
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company had no uncertain tax positions for the years ended June 30, 2022 and 2021. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
Earnings per share
Basic earnings per share is computed by dividing net income attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period presented. Diluted income per share is calculated by dividing net income attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. However, ordinary share equivalents are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
Employee benefit
(1) Defined contribution plan
The Company participates in the national pension schemes as defined by the laws of Singapore’s jurisdictions in which it has operations. Contributions to defined contribution pension schemes are recognized as an expense in the period in which the related service is performed.
(2) Employees leave entitlement
Employee entitlements to annual leave are recognized as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly before twelve months after the end of the reporting period is recognized for services rendered by employees up to the end of the reporting period.
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical performance and the specific facts and circumstances of each matter.
F-15
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Risks
Concentration of credit risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and account receivable. The Company places its cash with financial institutions with high-credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the service clients. To reduce credit risk, the Company performs on-going credit evaluations of the financial condition of these service clients. The Company establishes a provision for doubtful accounts based upon estimates, factors surrounding the credit risk of specific service clients and other information.
Concentration of clients
As of June 30, 2022, two major clients accounted for 74.6% and 24.1%, respectively, of the Company’s total accounts receivable. As of June 30, 2021, three major clients accounted for 39.6%, 32.9% and 21.9%, of the Company’s total accounts receivable.
For the year ended June 30, 2022, three major clients, Payestation Pte Ltd., Australia Marine Services Pty Ltd. and Smorboll Pte Ltd. accounted for 48.7%, 16.5%, and 15.8% respectively, of the Company’s total revenues. For the year ended June 30, 2021, one major client, Heha Pte Ltd., accounted for 95.1% of the Company’s total revenues.
Concentration of vendors
As of June 30, 2022, one vendor; LYC Supply and Trading, accounted for 81% of the Company’s accounts payable. There were no accounts payable as of June 30, 2021.
For the year ended June 30, 2022, two major vendors, LYC Supply and Trading and Pangu Procurement Pte Ltd., accounted for 17.7% and 16.3% respectively, of the Company’s total purchases. For the year ended June 30, 2021, two vendors, accounted for 42.7% and 39.8%, respectively, of the Company’s total purchases.
Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major clients in the consolidated financial statements for detailing the Company’s business segments. Based on the criteria established by ASC 280, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. As a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. As the Company’s long-lived assets are substantially located in Singapore, no geographical segments are presented.
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
F-16
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. On May 15, 2019, the FASB issued ASU 2019-05, which provides transition relief for entities adopting the Board’s credit losses standard, ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of the credit losses guidance in ASC 326-20, (3) are eligible for the fair value option under ASC 825-10, and (4) are not held-to-maturity debt securities. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods therein. An entity may early adopt the ASU in any interim period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU 2019-11 amendment provides clarity and improves the codification to ASU 2016-03. The pronouncement would be effective concurrently with the adoption of ASU 2016-03. The pronouncement is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. In February 2020, the FASB issued ASU No. 2020-02, which provides clarifying guidance and minor updates to ASU No. 2016-13 – Financial Instruments – Credit Loss (Topic 326) (“ASU 2016-13”) and related to ASU No. 2016-02 - Leases (Topic 842). ASU 2020-02 amends the effective date of ASU 2016-13, such that ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
On December 18, 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there is not a business combination, 2) policy election to not allocate consolidated taxes on a separate entity basis to entities not subject to income tax, 3) accounting for tax law changes or rates during interim periods, 4) ownership changes from equity method investment to subsidiary or vice versa, 5) elimination of exception to intrapetrous allocation when there is gain in discontinued operations and a loss from continuing operations, and 6) treatment of franchise taxes that are partially based on income. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company is currently evaluating the impact of this new standard on the Company’s consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The amendments in this Update should be applied retrospectively. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, consolidated statements of income and consolidated statements of cash flows.
F-17
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4—Revenues
Revenues are recognized when control of the promised services and deliverables are transferred to the Company’s clients in an amount that reflects the consideration to which the Company expects to be entitled to and receive in exchange for services and deliverables rendered.
The following table presents the Company’s revenues disaggregated by service lines for the years ended June 30, 2022 and 2021:
| For the years ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Software development service | 8,128,595 | 3,175,165 | 2,283,799 | |||||||||
| Consulting and technical support services | 601,590 | 1,289,969 | 927,835 | |||||||||
| Product sales | 87,997 | - | - | |||||||||
| Total revenues | 8,818,182 | 4,465,134 | 3,211,634 | |||||||||
The following table presents the Company’s revenues disaggregated by the timing of revenue recognition for the years ended June 30, 2022 and 2021:
| For the years ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Services and deliverables transferred at a point in time | 87,997 | - | - | |||||||||
| Services and deliverables transferred over time | 8,730,185 | 4,465,134 | 3,211,634 | |||||||||
| Total revenues | 8,818,182 | 4,465,134 | 3,211,634 | |||||||||
The Company elected to utilize practical expedients to exclude from this disclosure the remaining performance obligations that have an original expected duration of one year or less.
F-18
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5—Accounts receivable, net
Accounts receivable, net consisted of the following:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Accounts receivable | 50,526 | 3,119,875 | 2,244,030 | |||||||||
| Less: allowance for doubtful accounts | (5,568 | ) | (27,690 | ) | (19,917 | ) | ||||||
| Accounts receivable, net | 44,958 | 3,092,185 | 2,224,113 | |||||||||
The following table summarizes the changes in allowance for doubtful accounts:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Beginning balance | - | 5,568 | 4,005 | |||||||||
| Addition | 5,568 | 22,122 | 15,912 | |||||||||
| Write-off | - | - | ||||||||||
| Ending balance | 5,568 | 27,690 | 19,917 | |||||||||
Note 6—Loans to third parties
Loans to third parties consisted of the following:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Unsecured loan receivable from third parties (1) | 840,000 | — | — | |||||||||
| Less: Long term portion | — | — | — | |||||||||
| Loans to third parties – current portion | 840,000 | — | — | |||||||||
(1) The Company had unsecured, interest-bearing loan receivables from various third parties. The maturity of these loans are generally within one year. As of June 30, 2021, the loans to third parties amounted to SGD 840,000 (USD 624,396) with annual interest rates approximately 4.0%. The amounts were wholly settled in cash subsequently in November 2021.
F-19
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7—Prepayments
Prepayments consist of the following:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Service prepayment | 586,000 | 13,500 | 9,710 | |||||||||
| Total prepayments | 586,000 | 13,500 | 9,710 | |||||||||
Note 8—Property and equipment, net
Property and equipment consist of the following:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Office equipment | 22,499 | 48,571 | 34,936 | |||||||||
| Office furniture and fixtures | 5,808 | 12,096 | 8,700 | |||||||||
| Leasehold improvements | 94,516 | 94,516 | 67,982 | |||||||||
| Automobiles | 79,905 | 79,905 | 57,473 | |||||||||
| Subtotal | 202,728 | 235,088 | 169,091 | |||||||||
| Less: accumulated depreciation | (28,185 | ) | (71,778 | ) | (51,627 | ) | ||||||
| Total | 174,543 | 163,310 | 117,464 | |||||||||
Depreciation expense for the years ended June 30, 2022 and 2021 amounted to SGD 43,593 (USD 31,355) and SGD 28,185, respectively.
No impairment loss had been recognized during the years ended June 30, 2022 and 2021, respectively.
Automobile under finance lease
On August 21, 2020, the Company entered into a finance lease agreement with a third party to lease an automobile for 120 months for SGD 79,905 (USD 59,396). The lease required monthly lease payments of SGD 809 from August 21, 2020 through July 20, 2030 and interest rate per annum of 4.00%. The Company placed this vehicle into service in August 2020; accordingly, it has been capitalized. As of June 30, 2022 and 2021, the accumulated depreciation of the automobile was SGD 7,991 (USD 5,748) and SGD 7,325, respectively.
Note 9—Other payables and accrued liabilities
Other payables and accrued liabilities consist of the following:
| June 30, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Salary payables | 22,083 | 82,330 | 59,217 | |||||||||
| Accrued Expenses | 7,100 | 191,786 | 137,946 | |||||||||
| Total other payables and accrued liabilities | 29,183 | 274,116 | 197,163 | |||||||||
Note 10—Loans Payable – third parties
On July 15, 2021, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 150,000 (USD 110,947) for a term of four months and at a fixed monthly interest rate of 4%. The bank loan was unsecured and guaranteed by a third party. The loan was fully repaid upon maturity.
On August 17, 2021, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 20,000 (USD 14,793) for a term of one year and at a fixed monthly interest rate of 1.35%. The bank loan was unsecured and guaranteed by a third party. The loan was fully repaid in cash in December 2021 before maturity.
F-20
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On August 26, 2021, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 50,000 (USD 36,982) for a term of five months and at a fixed monthly interest rate of 4%. The bank loan was unsecured and guaranteed by a third party. The loan was fully repaid in cash in December 2021 before maturity.
On September 13, 2021, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 450,000 (USD 332,840) for a term of five years and at a fixed annual interest rate of 4.50%. The bank loan was unsecured and guaranteed by a third party. The loan was fully repaid in cash subsequently in May 2022 before maturity.
On March 23, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 40,000 (USD 28,771) for a term of ten months and at a fixed monthly interest rate of 1.88%. The bank loan was unsecured and guaranteed by a third party. As of June 30, 2022 the outstanding balance is SGD 32,000 (USD 23,017).
On May 5, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 100,000 (USD 71,927) for a term of ten months and at a fixed monthly interest rate of 3.50%. The bank loan was unsecured and guaranteed by a third party. As of June 30, 2022 the outstanding balance is SGD 90,000 (USD 64,734).
Note 11—Related party balances and transactions
Related party balances
a. Short-term and long-term deposits – related party
On February 11, 2019, the Company entered into a service agreement with AD Navitas Pte Ltd. (“Ad Navitas”), which is owned by our shareholder and sole director, Mr. Sai Bin Loi. Ad Navitas will assist the Company to provide software development projects. Per terms set forth in the agreement, the Company is required to maintain a minimum security amount of SGD 1,000,000 to Ad Navitas after signing the agreement. The amount of short-term deposit may increase depending on quantum amount on the service provided. Short-term deposits were nil and SGD 740,344 as of June 30, 2022 and 2021, respectively. Long-term deposit is at SGD 1,000,000 (USD 719,269) and remained unchanged.
b. Loans Payable - related party
The Company had unsecured, interest-bearing loan from Republic SC Pte Ltd., which is co-owned by the Company’s shareholder and sole director, Mr. Sai Bin Loi, and his daughter, amounted to SGD 65,000 (USD 46,752) as of June 30, 2022. There were no loans from related party as of June 30, 2021.
c. Loans to related party
The Company had unsecured, interest-bearing loan from Republic SC Pte Ltd., which is co-owned by the Company’s shareholder and sole director, Mr. Sai Bin Loi, and his daughter, amounted to SGD 400,000 (USD 297,331) in July 2020. The Company received the repayment of SGD 386,600 (USD 287,370) during the year ended June 30, 2021. As of June 30, 2022 and 2021, the loans of related party amounted to nil and SGD13,400 with annual interest rates approximately 6.0%. The amounts were wholly settled in cash in July 2021.
F-21
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d. Deposit paid for acquisition of subsidiary - related party
On December 1, 2020, RP Singapore entered into an acquisition agreement with Consap Pte Ltd. (“Consap”), which company is controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, to acquire the 100% equity interest in Consap, a limited company incorporated in Singapore, for total cash consideration of USD 2,400,000 (equivalent to SGD 3,336,720).
The acquisition is not completed on June 30, 2022 and the completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement.
Deposit of USD 1,400,000 (equivalent to SGD 1,856,171) has been paid to Consap on June 30, 2021. The remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on December 31, 2022 if the conditions are met. Pursuant to the acquisition agreement, in the event that Consap fails to secure enough sales agreements for a total contracts value of at least USD 3,500,000, the deposits would be fully refundable to RP Singapore.
e. Amount due from a director
The Company had unsecured, interest bearing loan to Consap (which company is currently controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021) amounted to SGD 100,000 in June 2020. As of June 30, 2022 and 2021, the amounts due from a director amounted to nil and SGD100,000.
f. Amount due to a director
Mr. Sai Bin Loi (“Mr. Loi”) is a director of Republic Power Pte Limited.
The Company borrows from Mr. Loi, the Company’s major shareholder for operation purpose. The loans are interest free and no collateral. The amount was settled in cash on November 30, 2021.
| Name of Related Party | Relationship | Nature
of transactions |
June 30, 2021 |
June 30, 2022 |
June 30, 2022 |
|||||||||||
| SGD | SGD | USD | ||||||||||||||
| Mr. Sai Bin Loi | Mr. Loi is a shareholder and director of Republic Power Pte Limited | Loan | 59,042 | — | — | |||||||||||
| 59,042 | — | — | ||||||||||||||
Related party transactions
a. Revenue
On March 5, 2021, the Company entered into a service agreement with Consap, which company is currently controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, with a term from March 5, 2021, to complete a software development project. For the year ended June 30, 2021, the project was completed and Consap paid to the Company in consideration SGD 90,000 (USD 66,900).
As at 30 June, 2022, the company has entered into multiple service agreements with Consap Pte Ltd., which company is currently controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021. The projects were completed by June 30, 2022 and Consap Pte Ltd. paid to the company in consideration SGD 130,000 (USD93,505) for the year ended June 30, 2022.
F-22
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b. Cost of revenue
On February 11, 2019, the Company entered into a service agreement with Ad Navitas, which is owned by the shareholder and sole director, Mr. Sai Bin Loi. Ad Navitas will assist the Company to provide software development. During the years ended June 30, 2022 and 2021, the Company paid service fee of nil and SGD 1,834,719 to Ad Navitas,
The Company entered into a service agreement with Wee Chong Loi, son of the shareholder of the Company, who agreed to provide IT advisory services to assist in the Company’s software development projects, with a term from April 1, 2020 to December 31, 2021. During the years ended June 30, 2022 and 2021, the Company paid service fee of SGD 48,021 (USD 34,540) and SGD 1,709,986 to Wee Chong Loi, respectively.
Note 12—Taxes
Income tax
British Virgin Islands
Republic Power Group Limited is incorporated in the British Virgin Islands and conducts all of the Company’s businesses through the Company’s subsidiary in Singapore, Republic Power Pte Limited. Under the current laws of the British Virgin Islands, Republic Power Group Limited is not subject to tax on income or capital gains. In addition, upon payments of dividends by Republic Power Group Limited and the Company’s subsidiary in Singapore, Republic Power Pte. Limited to the Company’s shareholders, no British Virgin Islands withholding tax will be imposed.
Singapore
Republic Power Pte Limited is incorporated in Singapore and is subject to Singapore Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Singapore tax laws. The applicable tax rate is 17% in Singapore, with 75% of the first SGD 10,000 (approximately USD 7,193) taxable income and 50% of the next SGD 190,000 (approximately USD 136,661) taxable income exempted from income tax.
Net operating loss will be carried forward indefinitely under Singapore profits tax regulation. As of June 30, 2022 and 2021, the Company did not generate net operating loss carry forwards available to offset future taxable income.
F-23
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of the provision for income taxes are as follows:
| For the year ended June 30, 2021 | For the year ended June 30, 2022 | For the year ended June 30, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Current | 450,917 | 332,689 | 239,293 | |||||||||
| Deferred | 3,227 | 232 | 167 | |||||||||
| Provision for income taxes | 454,144 | 332,921 | 239,460 | |||||||||
A reconciliation between the Company’s actual provision for income taxes and the provision at the Singapore statutory rate was as follows:
| For the years ended June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Income before income tax | 2,630,147 | 1,973,664 | 1,419,596 | |||||||||
| Singapore income tax rate | 17.00 | % | 17.00 | % | 17.00 | % | ||||||
| Income tax expense computed at statutory rate | 447,125 | 335,523 | 241,331 | |||||||||
| Reconciling items: | ||||||||||||
| Non-deductible items in Singapore | 24,444 | 14,823 | 10,662 | |||||||||
| Tax credit * | (17,425 | ) | (17,425 | ) | (12,533 | ) | ||||||
| Total income tax expense | 454,144 | 332,921 | 239,460 | |||||||||
| Effective tax rate | 17.3 | % | 16.9 | % | 16.9 | % | ||||||
*A partial tax exemption is eligible for the first SGD200,000 of chargeable income. Under this condition, 75% of the first SGD10,000 of chargeable income is tax exempt and 50% of the next SGD190,000 of chargeable income is tax exempt.
Deferred tax
Significant components of deferred tax were as follows:
| As of June 30, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Deferred tax assets: | ||||||||||||
| Provision for doubtful accounts | 947 | - | - | |||||||||
| Total deferred tax assets | 947 | - | - | |||||||||
| Deferred tax liabilities: | ||||||||||||
| Depreciation | (4,174 | ) | (3,459 | ) | (2,488 | ) | ||||||
| Total deferred tax liabilities | (4,174 | ) | (3,459 | ) | (2,488 | ) | ||||||
| Deferred tax liabilities, net | (3,227 | ) | (3,459 | ) | (2,488 | ) | ||||||
The Company believes that a valuation allowance is not necessary for the deferred assets because there will be sufficient operating income generated in future years based on the fact that the Company’s subsidiary in Singapore generated profits historically and for the years ended June 30, 2022 and 2021.
F-24
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of June 30, 2022 and 2021, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income tax expenses for the years ended June 30, 2022 and 2021 and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from June 30, 2022.
Goods and services taxes (“GST”)
Revenue represents the invoiced value of service, net of GST. The GST are based on gross sales price. GST rate is generally 7% in Singapore.
Taxes payable consisted of the following:
| June 30, 2021 |
June 30, 2022 |
June 30, 2022 |
||||||||||
| SGD | SGD | USD | ||||||||||
| GST taxes payable | 114,807 | 196,895 | 141,620 | |||||||||
| Income taxes payable | 906,252 | 1,238,144 | 890,560 | |||||||||
| Total | 1,021,059 | 1,435,039 | 1,032,180 | |||||||||
Note 13—Equity
Ordinary shares
On November 17, 2021, 10,000 ordinary shares of the Company were issued to the participating shareholders in connection with the restructuring of the Company.
On April 21, 2022, the majority shareholders and the board of the Company approved, upon the consummation of the offering, to increase the authorized shares of the Company from 10,000 ordinary shares, par value $1.00 per share to unlimited ordinary shares, par value $0.000625 per share and effectuate a forward share split all issued and outstanding shares at a ratio of 1,600:1. On April 21, 2022, the majority shareholders and the board of the Company approved that the effective date of the increase of the authorized shares and effectuate share split shall be April 21, 2022, prior to the consummation of the offering. The Company completed this share split on April 21, 2022, resulting in the Company having a total of 16,000,000 ordinary shares outstanding, par value $0.000625 per share, and effected a forward share split of all issued and outstanding shares at a ratio of 1,600:1, effective immediately following the filing of the Amended and Restated Charter. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to share split or dividend pursuant to ASC 260. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the 1,600 for 1 share split.
F-25
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends
The Company declared and paid SGD 1,133,000 (USD 814,932) to its shareholder on December 31, 2021. The dividend per share was SGD 0.07 (USD 0.05).
Capital contributions
There were no capital contributions during the years ended June 30, 2022 and 2021.
Note 14—Commitments and contingencies
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which results in an economic penalty.
The Company has two property lease agreements with lease terms ranging for one year and ten years, respectively. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Upon adoption of ASU 2016-02, no right-of-use (“ROU”) assets nor lease liability was recorded for the lease with lease term with one year.
The Company recognized SGD 79,905 (USD 57,473) ROU assets and finance lease obligation for the ten years lease. Lease expense is recognized on a straight-line basis over the lease term.
For the years ended June 30, 2022 and 2021, rent expenses for the short term lease amounted to approximately SGD 31,080 (USD22,355) and SGD 44,208, respectively.
The Company’s commitment for minimum lease payments under the operating lease that is within twelve months as of June 30, 2022 as follow:
| Twelve months ending June 30, | Minimum lease payment | |||||||
| SGD | USD | |||||||
| 2023 | 2,590 | 1,863 | ||||||
| Thereafter | — | — | ||||||
| Total future lease payments | 2,590 | 1,863 | ||||||
F-26
REPUBLIC POWER GROUP LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Finance Lease Obligation
As of June 30, 2022 and 2021, finance lease obligation was SGD 66,956 (USD 48,159) and SGD 73,836, respectively. The finance lease obligation bears interest at a rate of 4.0% per annum. As of June 30, 2022, the Company’s finance lease has a weighted-average remaining lease term of approximately eight (8) years.
The following is a schedule of future lease payments as of June 30, 2022:
| Year ending June 30, | Amount (SGD) | Amount (USD) | ||||||
| 2023 | 9,708 | 6,983 | ||||||
| 2024 | 9,708 | 6,983 | ||||||
| 2025 | 9,708 | 6,983 | ||||||
| 2026 | 9,708 | 6,983 | ||||||
| 2027 | 9,708 | 6,983 | ||||||
| Thereafter | 29,933 | 21,528 | ||||||
| Total future lease payments | 78,473 | 56,443 | ||||||
| Amount representing interest | (11,517 | ) | (8,284 | ) | ||||
| Present value of future payments | 66,956 | 48,159 | ||||||
| Less: current portion | 7,160 | 5,150 | ||||||
| Long term portion | 59,796 | 43,009 | ||||||
Acquisition Commitments
On December 1, 2020, RP Singapore entered into an acquisition agreement with Consap Pte Ltd. (“Consap”), which company is currently controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, to acquire the 100% equity interest in Consap, a limited company incorporated in Singapore at a total cash consideration of USD 2,400,000 (equivalent to SGD 3,228,720). Pursuant to the agreement, RP Singapore is required to pay the consideration in cash with the amount of USD 1,400,000 (equivalent to SGD 1,856,171) due upon signing of the acquisition agreement. The remaining acquisition consideration in the amount of USD 1,000,000 will be paid by RP Singapore to Consap on December 31, 2022 if conditions are met. The acquisition is conditional upon Consap entering into one or more definitive sales agreements, with clients approved by RP Singapore, for total contracts value of not less than USD 3,500,000 on or before November 30, 2022. In the event that Consap fails to secure enough sales agreements for a total contracts value of at least USD 3,500,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from March 31, 2023.
Coronavirus (“COVID-19”)
In December 2019, a novel strain of coronavirus (COVID-19) surfaced. COVID-19 spread rapidly to Singapore and other parts of the world in the first quarter of 2020, which has caused significant volatility in the Singapore and international markets. The ongoing COVID-19 pandemic has resulted in a reduction in economic activity by adversely affecting production, and creating supply chain and market disruption. Substantially most of the Company’s revenues and workforce are concentrated in Southeast Asia. Consequently, the Company has experienced delayed client payments and rescheduled client orders. Since the COVID-19 pandemic has been gradually contained in Southeast Asia, the Company’s revenue and gross margin for the year ended June 30, 2022 has not been adversely affected. However, any potential impact to the Company’s results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities to contain the COVID-19 pandemic or treat its impact, almost all of which are beyond the Company’s control.
Note 15—Subsequent events
Management evaluated subsequent events of the Company through December 22, 2022, the date the consolidated financial statements were issued, and concluded that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the Notes to the consolidated financial statements.
F-27
REPUBLIC POWER GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | December 31, | ||||||||||
| 2022 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS | ||||||||||||
| Cash | 23,311 | 27,104 | 20,220 | |||||||||
| Accounts receivable, net | 3,092,185 | 1,309,009 | 976,581 | |||||||||
| Inventories | - | 132,967 | 99,200 | |||||||||
| Prepayments | 13,500 | 13,500 | 10,072 | |||||||||
| Short-term deposits | 91,130 | 91,416 | 68,200 | |||||||||
| Deferred contract costs | - | 237,357 | 177,079 | |||||||||
| Other current assets, net | 6,483 | - | - | |||||||||
| Total current assets | 3,226,609 | 1,811,353 | 1,351,352 | |||||||||
| PROPERTY AND EQUIPMENT, NET | 163,310 | 144,439 | 107,758 | |||||||||
| OTHER ASSETS | ||||||||||||
| Deposit paid for acquisition of subsidiary – related party | 1,856,171 | 1,856,171 | 1,384,789 | |||||||||
| Deferred initial public offering (“IPO”) costs | 643,602 | 643,602 | 480,157 | |||||||||
| Long-term deposits – related party | 1,000,000 | 1,000,000 | 746,046 | |||||||||
| Total non-current assets | 3,499,773 | 3,499,773 | 2,610,992 | |||||||||
| Total assets | 6,889,692 | 5,455,565 | 4,070,102 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| CURRENT LIABILITIES | ||||||||||||
| Loan payable – Financial Institutions | 122,000 | 249,000 | 185,765 | |||||||||
| Loan payable – Related party | 65,000 | 50,000 | 37,302 | |||||||||
| Accounts payable | 219,936 | 148,088 | 110,481 | |||||||||
| Other payables and accrued liabilities | 274,116 | 189,796 | 141,596 | |||||||||
| Finance lease obligation, current portion | 7,160 | 7,304 | 5,449 | |||||||||
| Taxes payable | 1,435,039 | 1,435,447 | 1,070,909 | |||||||||
| Total current Liabilities | 2,123,251 | 2,079,635 | 1,551,502 | |||||||||
| OTHER LIABILITIES | ||||||||||||
| Finance lease obligation, net of current portion | 59,796 | 56,107 | 41,859 | |||||||||
| Deferred tax liabilities, net | 3,459 | 4,203 | 3,136 | |||||||||
| Total other liabilities | 63,255 | 60,310 | 44,995 | |||||||||
| Total liabilities | 2,186,506 | 2,139,945 | 1,596,497 | |||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||||
| SHAREHOLDERS’ EQUITY | ||||||||||||
| Ordinary shares, US$0.000625 par value, authorized unlimited shares; 16,000,000 shares issued and outstanding as of December 31, 2022 and June 30, 2022, respectively* | 13,453 | 13,453 | 10,037 | |||||||||
| Additional paid-in capital | 986,547 | 986,547 | 736,009 | |||||||||
| Retained earnings | 3,703,186 | 2,315,620 | 1,727,559 | |||||||||
| Total shareholders’ equity | 4,703,186 | 3,315,620 | 2,473,605 | |||||||||
| Total liabilities and shareholders’ equity | 6,889,692 | 5,455,565 | 4,070,102 | |||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-28
REPUBLIC POWER GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| For the Six Months Ended December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| OPERATING REVENUES | ||||||||||||
| Software development service | 724,925 | 144,510 | 107,811 | |||||||||
| Consulting and technical support services | 512,843 | 5,500 | 4,103 | |||||||||
| Total operating revenues | 1,237,768 | 150,010 | 111,914 | |||||||||
| COST OF REVENUES | (181,815 | ) | (51,269 | ) | (38,249 | ) | ||||||
| GROSS PROFIT | 1,055,953 | 98,741 | 73,665 | |||||||||
| OPERATING EXPENSES | ||||||||||||
| Selling and marketing expenses | (35,687 | ) | (12,940 | ) | (9,654 | ) | ||||||
| General and administrative expenses | (704,269 | ) | (1,471,468 | ) | (1,097,783 | ) | ||||||
| Research and development expenses | (70,045 | ) | - | - | ||||||||
| Total operating expenses | (810,001 | ) | (1,484,408 | ) | (1,107,437 | ) | ||||||
| INCOME (LOSS) FROM OPERATIONS | 245,952 | (1,385,667 | ) | (1,033,772 | ) | |||||||
| OTHER INCOME (EXPENSE) | ||||||||||||
| Interest Expense | (39,406 | ) | (23,939 | ) | (17,859 | ) | ||||||
| Lease income | 3,228 | - | - | |||||||||
| Finance expenses | (825 | ) | (3,345 | ) | (2,495 | ) | ||||||
| Foreign exchange gain (loss) | 808 | (3,470 | ) | (2,589 | ) | |||||||
| Other income (expense), net | (524 | ) | 29,599 | 22,082 | ||||||||
| Total other expense, net | (36,719 | ) | (1,155 | ) | (861 | ) | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 209,233 | (1,386,822 | ) | (1,034,633 | ) | |||||||
| PROVISION FOR INCOME TAX | ||||||||||||
| Current | (34,801 | ) | - | - | ||||||||
| Deferred | (1,650 | ) | (744 | ) | (555 | ) | ||||||
| Total provision for income tax | (36,451 | ) | (744 | ) | (555 | ) | ||||||
| NET INCOME (LOSS) | 172,782 | (1,387,566 | ) | (1,035,188 | ) | |||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||||||
| Basic and diluted* | 16,000,000 | 16,000,000 | 16,000,000 | |||||||||
| EARNINGS (LOSS) PER SHARE | ||||||||||||
| Basic and diluted* | 0.01 | (0.09 | ) | (0.06 | ) | |||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-29
REPUBLIC POWER GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the six months ended December 31, 2021
| Additional | ||||||||||||||||||||||||
| Ordinary shares | paid-in | Retained | ||||||||||||||||||||||
| Shares* | Par Value | capital | earnings | Total | Total | |||||||||||||||||||
| SGD | SGD | SGD | SGD | USD | ||||||||||||||||||||
| BALANCE, June 30, 2021 | 16,000,000 | 13,453 | 986,547 | 3,195,443 | 4,195,443 | 3,103,139 | ||||||||||||||||||
| Dividends distribution | - | - | - | (1,133,000 | ) | (1,133,000 | ) | (838,018 | ) | |||||||||||||||
| Net income | - | - | - | 172,782 | 172,782 | 127,797 | ||||||||||||||||||
| BALANCE, December 31, 2021 | 16,000,000 | 13,453 | 986,547 | 2,235,225 | 3,235,225 | 2,392,918 | ||||||||||||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
For the six months ended December 31, 2022
| Additional | ||||||||||||||||||||||||
| Ordinary shares | paid-in | Retained | ||||||||||||||||||||||
| Shares* | Par Value | capital | earnings | Total | Total | |||||||||||||||||||
| SGD | SGD | SGD | SGD | USD | ||||||||||||||||||||
| BALANCE, June 30, 2022 | 16,000,000 | 13,453 | 986,547 | 3,703,186 | 4,703,186 | 3,508,793 | ||||||||||||||||||
| Net loss | - | - | - | (1,387,566 | ) | (1,387,566 | ) | (1,035,188 | ) | |||||||||||||||
| BALANCE, December 31, 2022 | 16,000,000 | 13,453 | 986,547 | 2,315,620 | 3,315,620 | 2,473,605 | ||||||||||||||||||
| * | Giving retroactive effect to the 1,600 for 1 share split effected on April 21, 2022. |
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-30
REPUBLIC POWER GROUP LIMITED
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended December 31, | ||||||||||||
| 2021 | 2022 | 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
| Net income (loss) | 172,782 | (1,387,566 | ) | (1,035,188 | ) | |||||||
| Adjustments to reconcile net income to net cash provided by | ||||||||||||
| operating activities: | ||||||||||||
| Depreciation of property and equipment | 20,531 | 24,073 | 17,959 | |||||||||
| Provision for doubtful accounts | 13,815 | 413,020 | 308,132 | |||||||||
| Inventory provision | 13,120 | - | - | |||||||||
| Deferred tax provision | 1,650 | 744 | 555 | |||||||||
| Change in operating assets and liabilities: | ||||||||||||
| Accounts receivables | (749,120 | ) | 1,370,156 | 1,022,200 | ||||||||
| Prepayments | (2,590 | ) | - | - | ||||||||
| Inventories | - | (132,967 | ) | (99,200 | ) | |||||||
| Short-term deposits | (36,862 | ) | (286 | ) | (213 | ) | ||||||
| Deposits – related party | 740,344 | - | - | |||||||||
| Deferred contract costs | - | (237,357 | ) | (177,080 | ) | |||||||
| Other current assets | - | 6,483 | 4,837 | |||||||||
| Accounts payable | 153,719 | (71,848 | ) | (53,602 | ) | |||||||
| Other payables and accrued liabilities | - | (84,320 | ) | (62,907 | ) | |||||||
| Taxes payable | 44,512 | 408 | 304 | |||||||||
| Net cash provided by (used in) operating activities | 371,901 | (99,460 | ) | (74,203 | ) | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Repayments of loans to third parties | 840,000 | - | - | |||||||||
| Repayments of amount due from a director | 100,000 | - | - | |||||||||
| Repayments of loans to related party | 13,400 | - | - | |||||||||
| Purchases of property and equipment | (25,997 | ) | (5,202 | ) | (3,881 | ) | ||||||
| Net cash provided by (used in) investing activities | 927,403 | (5,202 | ) | (3,881 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Deferred initial public offering (“IPO’) costs | (353,158 | ) | - | - | ||||||||
| Proceeds from financial institutions | 670,000 | 185,000 | 138,019 | |||||||||
| Repayment to financial institutions | (230,194 | ) | (58,000 | ) | (43,271 | ) | ||||||
| Proceeds from related party | - | 50,000 | 37,302 | |||||||||
| Repayment to related party | - | (65,000 | ) | (48,493 | ) | |||||||
| Repayment to due to a director | (59,042 | ) | - | - | ||||||||
| Repayment to finance lease | (3,406 | ) | (3,545 | ) | (2,644 | ) | ||||||
| Dividend payments | (1,133,000 | ) | - | - | ||||||||
| Net cash provided by (used in) financing activities | (1,108,800 | ) | 108,455 | 80,913 | ||||||||
| CHANGE IN CASH | 190,504 | 3,793 | 2,829 | |||||||||
| CASH, beginning of the period | 4,142 | 23,311 | 17,391 | |||||||||
| CASH, end of the period | 194,646 | 27,104 | 20,220 | |||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||
| Cash paid for income tax | - | - | - | |||||||||
| Cash paid for interest expense | 39,566 | 24,096 | 17,977 | |||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
F-31
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Nature of business and organization
Republic Power Group Limited (the “Company” or “RP”) is a holding company incorporated on November 17, 2021 under the British Virgin Islands (“BVI”) law. The Company has no substantial operations other than holding all of the equity interest of Republic Power Pte. Ltd (“RP Singapore”), a Singapore Company incorporated on January 1, 2015. The Company, through RP Singapore, is a provider of customized software, technology solutions and peripheral hardware to large and small to medium corporate clients and government agencies. The Company’s headquarters is located in Singapore. All of the Company’s business activities are carried out by RP Singapore.
On November 17, 2021, RP completed a reorganization of RP Singapore under common control of its then existing shareholders, who collectively owned all of the equity interests of RP prior to the reorganization. RP and RP Singapore are under common control which results in the consolidation of RP Singapore at carrying value. The unaudited interim condensed consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying unaudited interim condensed consolidated financial statements of RP.
The unaudited interim condensed consolidated financial statements reflect the activities of each of the following entities:
| Name | Background | Ownership | Principal activity | ||||
| Republic Power Group Limited (“RP”) |
● A BVI company ● Incorporated on November 17, 2021 |
- |
Investment holding
|
||||
| Republic Power Pte. Ltd. (“RP Singapore”) |
● A Singapore company ● Incorporated on January 1, 2015 |
100% owned by RP | Providing of software development and technology services | ||||
Note 2 - Liquidity and going concern
The Company’s accounts have been prepared assuming that the company will continue as a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the unaudited interim condensed consolidated financial statements. The Company’s ability to continue as a going concern depends upon aligning its sources of funding (debt and equity) with the expenditure requirements of the Company and repayment of the short-term debt facilities as and when they fall due.
The Company has considered whether there is substantial doubt about its ability to continue as a going concern. Cash flow from operations and loans from external lenders have been utilized to finance the working capital requirements of the Company. As of December 31, 2022, the Company has cash outflow from operating activities of SGD 99,460 (USD 74,203). The Company had SGD 27,104 (USD 20,220) in cash, which is unrestricted as to withdrawal and use as of December 31, 2022. In view of these circumstances, the management of the Company has given consideration to the future liquidity and performance of the Company and its available sources of finance in assessing whether the Company will have sufficient financial resources to continue as a going concern.
To sustain its ability to support the Company’s operating activities, the Company may have to consider supplementing its available sources of funds through the following sources:
| ● | cash and cash equivalents generated from operations; |
| ● | other available sources of financing from Singapore banks and other financial institutions; and |
| ● | financial support from the Company’s related party and shareholders. |
F-32
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Management has commenced a strategy to raise debt and equity. However, there can be no certainty that these additional financings will be available on acceptable terms or at all. If management is unable to execute this plan, there would likely be a material adverse effect on the Company’s business. All of these factors raise substantial doubt about the ability of the Company to continue as a going concern. The unaudited interim condensed consolidated financial statements for the six months ended December 31, 2022 and 2021 have been prepared on a going concern basis and do not include any adjustments to reflect the possible future effects on the recoverability and classifications of assets or the amounts and classifications of liabilities that may result from the inability of the Company to continue as a going concern.
Note 3 - Summary of significant accounting policies
Basis of presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”), and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results. The results of operations for the six months ended December 31, 2022 are not necessarily indicative of results to be expected for the full year ending June 30, 2023. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements thereto as of and for the years ended June 30, 2022 and 2021.
Principles of consolidation
The unaudited interim condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All inter-company transactions have been eliminated upon consolidation.
Use of estimates and assumptions
The preparation of unaudited interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited interim condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited interim condensed consolidated financial statements include the useful lives of property and equipment, impairment of long-lived assets, allowance for doubtful accounts, revenue recognition, and deferred taxes. Actual results could differ from these estimates.
The COVID-19 pandemic has caused general business disruption worldwide beginning in January 2020. The Company has experienced, and may continue to experience, an adverse impact on certain parts of its business, including a lengthening in the sales cycle for some prospective clients and delays in the delivery of products, professional services and training to clients. As certain clients or partners experience downturns or uncertainty in their own business operations or revenue resulting from COVID-19, the Company may continue to decrease or delay the Company’s spending, request pricing discounts, or seek renegotiations of the Company’s contracts, any of which may result in decreased revenue and cash receipts for the Company in future periods. In addition, the Company may experience client losses, including due to bankruptcy or clients ceasing operations, which may result in an inability to collect accounts receivable from these clients. The full extent to which the COVID-19 pandemic, including any new virus strains or mutations, will directly or indirectly impact the Company’s business, results of operations, cash flows, and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Given the uncertainty regarding the length, severity, and ability to combat the COVID-19 pandemic, the Company cannot reasonably estimate the impact on its future results of operations, cash flows, or financial condition. As of the date of issuance of the unaudited interim condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require it to update its estimates, its judgments, or the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the unaudited interim condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates, and any such differences may be material to the Company’s unaudited interim condensed consolidated financial statements.
Foreign currency transaction
The Company uses Singapore Dollars (“SGD”) as its reporting currency. The functional currency of the Company and its subsidiary in the British Virgin Islands is United States Dollars (“USD”) and its subsidiary which is incorporated in Singapore is SGD, which is its respective local currency based on the criteria of ASC 830, “Foreign Currency Matters”.
Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rates at the balance sheet dates. Net gains and losses resulting from foreign exchange transactions are included in exchange gains/(losses) on the unaudited interim condensed consolidated statements of income and comprehensive income.
Convenience translation
Translations of balances in the unaudited interim condensed consolidated balance sheets, unaudited interim condensed consolidated statements of income, unaudited interim condensed consolidated statements of changes in shareholders’ equity and unaudited interim condensed consolidated statements of cash flows from SGD into USD as of December 31, 2022 are solely for the convenience of the readers and are calculated at the rate of USD1.00=SGD1.3404, representing the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2022. No representation is made that the SGD amounts could have been, or could be, converted, realized or settled into USD at such rate, or at any other rate.
Cash
Cash primarily consists of bank deposits with original maturities of three months or less, which are unrestricted as to withdrawal and use. The Company maintains most of its bank accounts in Singapore.
Accounts receivable, net
Accounts receivable include trade accounts due from clients. Accounts are considered overdue after 90 days. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate and provides allowance when necessary. The allowance is based on management’s best estimates of specific losses on individual customer exposures, as well as the historical trends of collections. Account balances are charged off against the allowance after all means of collection have been exhausted and the likelihood of collection is not probable. As of December 31, 2022 and June 30, 2022, the Company made SGD 440,710 (USD 328,790) and SGD 27,690 allowance for doubtful accounts for accounts receivable, respectively.
Inventories
Inventories are comprised of finished goods and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence and cost in excess of net realizable value periodically when appropriate and records a reserve against the inventory when the carrying value exceeds net realizable value. As of December 31, 2022 and June 30, 2022, the Company made nil allowance for inventory valuation and obsolescence loss, respectively.
Deferred contract costs
The Company capitalized incremental costs incurred to fulfill contracts that (1) relate directly to the contract, (2) are expected to generate resources that will be used to satisfy the performance obligation under the contract, and (3) are expected to be recovered through revenue generated under the contract. The compensation expenses of workforce hired solely for the purpose of providing certain customize software solution are considered incremental costs to fulfill the contracts. These contract costs are recorded as cost of revenues upon the recognition of the related revenues. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. As of December 31,2022 and June 30, 2022, the Company has deferred contract costs of SGD237,357 (USD177,079)and nil respectively. The amount of deferred contract costs charged to cost of revenues were nil and nil, for the six months ended December 31, 2022 and 2021, respectively. As of December 31, 2022 and June 30, 2022, no impairment allowance was recorded.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Prepayments
Prepayments are mainly payments made to vendors or services providers for future services that have not been provided and prepaid rent. These amounts are refundable and bear no interest. Management reviews its prepayments on a regular basis to determine if the allowance is adequate and adjusts the allowance when necessary. As of December 31, 2022 and June 30, 2022, no allowance was deemed necessary.
Short-term deposits and long-term deposits
Short-term deposits and long-term deposits are mainly for rent, utilities and money deposited with certain suppliers. These amounts are refundable and bear no interest. The short-term deposits usually have one year term and are refundable upon contract termination. The long-term deposits are refunded from suppliers when term and conditions set forth in the agreements have been satisfied.
Deferred IPO costs
Pursuant to ASC 340-10-S99-1, IPO costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. These costs include legal fees related to the registration drafting and counsel, consulting fees related to the registration preparation, the SEC filing and print related costs. As of December 31, 2022, the Company did not conclude its IPO. As of December 31, 2022 and June 30, 2022, the accumulated deferred IPO cost was SGD 643,602 (USD 480,157) and SGD 643,602, respectively.
Other current assets, net
Other current assets, net, primarily consists of other receivables from third parties. These other receivables are unsecured and are reviewed periodically to determine whether their carrying value has become impaired.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment if applicable. Depreciation is computed using the straight-line method after consideration of the estimated useful lives. The estimated useful lives are as follows:
| Useful Life | ||
| Office equipment | 3 years | |
| Office furniture and fixtures | 3 years | |
| Leasehold improvements | lesser of lease term or expected useful life | |
| Automobiles | 10 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the unaudited interim condensed consolidated statements of income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Impairment for long-lived assets
Long-lived assets, including property and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognizes an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. As of December 31, 2022 and June 30, 2022, no impairment of long-lived assets was recognized.
Fair value measurement
The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.
The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:
| ● | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
| ● | Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments included in current assets and current liabilities are reported in the unaudited interim condensed consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.
Revenue recognition
Effective July 1, 2019, the Company adopted ASC Topic 606, Revenue from Contracts with Clients, which replaced ASC Topic 605, using the modified retrospective method of adoption. Results for reporting periods beginning after July 1, 2019 are presented under ASC Topic 606 while prior period amounts are not adjusted and continue to be presented under the Company’s historic accounting under ASC Topic 605. The Company’s accounting for revenue remains substantially unchanged. There were no cumulative effect adjustments for service contracts in place prior to July 1, 2019. The effect from the adoption of ASC Topic 606 was not material to the Company’s unaudited interim condensed consolidated financial statements.
The five-step model defined by ASC Topic 606 requires the Company to (1) identify its contracts with clients, (2) identify its performance obligations under those contracts, (3) determine the transaction prices of those contracts, (4) allocate the transaction prices to its performance obligations in those contracts and (5) recognize revenue when each performance obligation under those contracts is satisfied. Revenue is recognized when promised goods or services are transferred to the client in an amount that reflects the consideration expected in exchange for those goods or services.
The Company applied practical expedient when sales taxes were collected from clients, meaning sales tax is recorded net of revenue, instead of cost of revenue, which are subsequently remitted to governmental authorities and are excluded from the transaction price. The Company does not offer rights of refund of previously paid or delivered amounts, rebates, rights of return or price protection. In all instances, the Company limits the amount of revenue recognized to the amounts for which it has the right to bill its’ clients.
The Company derives its revenues from two sources: (1) revenue from software development services and (2) revenue from consulting and technical support services. All the Company’s contracts with clients do not contain cancelable and refund-type provisions.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Software development services
Revenue from Software Development
The contract is typically fixed priced and does not provide any post contract client support or upgrades. The Company designs software based on clients’ specific needs which require the Company to perform services including design, development, and integration. These services also require significant customization. Upon delivery of the services, client acceptance is generally required. The Company assesses that software development services is considered as one performance obligation as the clients do not obtain benefit for each separate service. The duration of the development period is short, usually less than one year.
The Company’s software development service revenues is generated primarily from contracts with government or related agencies and state-owned enterprises. The contracts contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a portion of contract amount usually is billed upon the completion of the related projects. Pursuant to the contract terms, the Company has enforceable right on payments for the work performed.
The Company’s revenue from software development contracts are generally recognized over time as the Company’s performance creates or enhances the project controlled by the clients and the control is transferred continuously to the Company’s clients. The Company uses an input method based on cost incurred as the Company believes that this method most accurately reflects the Company’s progress toward satisfaction of the performance obligation, which usually takes less than one year. Under this method, the Company could appropriately measure the fulfillment of a performance obligation. Assumptions, risks and uncertainties inherent in the estimates used to measure progress could affect the amount of revenues, receivables and deferred revenues at each reporting period.
Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect labor, supplies, and tools. Cost-based input method requires the Company to make estimates of revenues and costs to complete the service. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development, including materials, labor, and other system costs. The Company’s estimates are based upon the professional knowledge and experience of the Company’s engineers and project managers to assess the contract’s schedule, performance, and technical matters. The Company has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total development costs. If the estimated costs are greater than the related revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Changes in estimates for software development services include but are not limited to cost forecast changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. To date, the Company has not incurred a material loss on any contracts. However, as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Company entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values.
In certain software development service arrangements, the Company sells equipment to be customized and integrated with the developed software. The Company assesses the customized equipment and service are interdependent and highly interrelated. In these cases, the Company controls the customized equipment before it is transferred to the clients. The Company has the right to direct the suppliers and control the goods or assets transferred to its clients. Thus, the Company considers it should recognize revenue as a principal in the gross amount of consideration to which it is entitled in exchange for the customized equipment delivered.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(2) Consulting and technical support services
Revenue from consulting and technical support services is primarily comprised of fixed-fee contracts, which require the Company to provide professional consulting and technical support services over contract terms beginning on the commencement date of each contract, which is the date its service is made available to clients. Billings to the clients are generally on a monthly or quarterly basis over the contract term, which is typically 1 to 12 months. The consulting and technical support services contracts typically include a single performance obligation. The revenue from consulting and technical support services is recognized over the contract term as clients receive and consume benefits of such services as provided.
Revenue includes reimbursements of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenue.
Practical Expedient and Exemptions
The Company does not disclose the value of unsatisfied performance obligations within one year by applying the right to invoice practical expedient provided by ASC 606-10-55-18.
Cost of Revenue
Cost of revenue consists primarily of personnel costs (including salaries and benefits) for employees associated with technical support and subcontractors, professional services organizations, third party license fees, allocable overhead, and depreciation of related property and equipment.
Advertising expenditures
Advertising expenditures are expensed as incurred and such expenses were minimal for the periods presented. Advertising expenditures have been included as part of selling and marketing expenses. For the six months ended December 31, 2022 and 2021, the advertising expense amounted to SGD nil (USD nil) and SGD 7,704 respectively.
Selling and marketing expenses
Selling and marketing expenses consist primarily of advertising and marketing research expenses. For the six months ended December 31, 2022 and 2021, the Company’s selling and marketing expenses were SGD 12,940 (USD 9,654) and SGD 35,687, respectively.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Research and development expenses
Research and development expenses include salaries and other compensation-related expenses to the Company’s research and product development personnel, outsourced subcontractors, as well as related expenses for the Company’s research and product development team.
Leases
Effective July 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require the Company to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities.
The Company determines if an arrangement is a lease at inception. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate based on the information available at the lease commencement date. The Company generally uses the base, non-cancelable lease term in calculating the right-of-use assets and lease liabilities.
The Company may recognize the lease payments in the consolidated statements of income on a straight-line basis over the lease terms and variable lease payments in the periods in which the obligations for those payments are incurred, if any. The lease payments under the lease arrangements are fixed.
The Company elected the package of practical expedients under the transition guidance which allows the Company to carryforward its historical lease classification, its assessment on whether a contract is or contains a lease and its initial direct costs for any lease that exists prior to adoption of the new standard.
The Company elected to apply the short-term lease exception for lease arrangements with a lease term of 12 months or less at commencement. Lease terms used to compute the present value of lease payments do not include any option to extend, renew or terminate the lease that the Company is not able to be reasonably certain to exercise upon the lease inception. Accordingly, operating lease right-of-use assets and liabilities do not include leases with a lease term of 12 months or less.
The Company did not adopt the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. Non-lease components include payments for building management, utilities and property tax. It separates the non-lease components from the lease components to which they relate.
ROU lease assets are included in property and equipment, net.
Operating lease expense is recognized on a straight-line basis over the lease term. Upon completion of lease term, the Company does not have control of the renewal option on all leases as the lessor can terminate the renewal option with advance notice.
The Company evaluates the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of finance lease liabilities in any tested asset group and include the associated lease payments in the undiscounted future pre-tax cash flows. For the six months ended December 31, 2022 and 2021, the Company did not have any impairment loss against its finance lease ROU assets.
F-39
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Income taxes
Republic Power Group Limited is not subject to tax on income or capital gains under the current laws of the British Virgin Islands. In addition, upon payments of dividends by Republic Power Group Limited and the Company’s subsidiary in Singapore, Republic Power Pte. Ltd to the Company’s shareholders, no British Virgin Islands withholding tax will be imposed.
The Company accounts for income tax in accordance with U.S. GAAP. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred tax.
The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the unaudited interim condensed consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.
Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. Singapore tax returns filed for 2019 and after are subject to examination by any applicable tax authorities. The Company had no uncertain tax positions for the six months ended December 31, 2022 and 2021. The Company does not expect that its assessment regarding unrecognized tax positions will materially change over the next 12 months.
Earnings per share
Basic earnings per share is computed by dividing net income attributable to the holders of ordinary shares by the weighted average number of ordinary shares outstanding during the period presented. Diluted income per share is calculated by dividing net income attributable to the holders of ordinary shares as adjusted for the effect of dilutive ordinary share equivalents, if any, by the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the period. However, ordinary share equivalents are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Employee benefit
(1) Defined contribution plan
The Company participates in the national pension schemes as defined by the laws of Singapore’s jurisdictions in which it has operations. Contributions to defined contribution pension schemes are recognized as an expense in the period in which the related service is performed.
(2) Employees leave entitlement
Employee entitlements to annual leave are recognized as a liability when they are accrued to the employees. The undiscounted liability for leave expected to be settled wholly before twelve months after the end of the reporting period is recognized for services rendered by employees up to the end of the reporting period.
Related parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence, such as a family member or relative, shareholder, or a related corporation.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical performance and the specific facts and circumstances of each matter.
Concentration of Risks
Concentration of credit risk
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and account receivable. The Company places its cash with financial institutions with high-credit ratings and quality.
Accounts receivable primarily comprise of amounts receivable from the service clients. To reduce credit risk, the Company performs on-going credit evaluations of the financial condition of these service clients. The Company establishes a provision for doubtful accounts based upon estimates, factors surrounding the credit risk of specific service clients and other information.
Concentration of clients
As of December 31, 2022, two clients, Payestation Private Limited (“PYS”), accounted for 83.4% and Smorball Pte Ltd accounted for 15.1% of the Company’s total accounts receivable. As of June 30, 2022, two major clients accounted for 74.6% and 24.1% respectively, of the Company’s total accounts receivable.
For the six months ended December 31, 2022, three major clients Appiclogy Pte Ltd, Ren Ci Hospital and McCoy Holdings Private Limited, accounted for 52.7%, 23.2% and 20.0%, of the Company’s total revenues, respectively. For the six months ended December 31, 2021, three major clients, Australia Marine Services Pty Ltd (“AMS”), Heha Pte Ltd (“Heha”), and Appiclogy accounted for 40.4%, 33.0% and 14.4% of the Company’s total revenues, respectively.
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REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Concentration of vendors
As of December 31, 2022, two vendors accounted for more than 10% of the Company’s accounts payable: Hunter Taubman Fischer & Li LLP for 56.3% and Insight Law LLC for 13.0%, respectively.
As of June 30, 2022, one vendor; LYC Supply and Trading, accounted for 81% of the Company’s accounts payable.
For the six months ended December 31, 2022, three vendors, Pangu Procurement Pte Ltd., Jenny Liu and Ottawa Sign Technology Pte Ltd, accounted for 34.1%, 24.0%, and 16.3% of the Company’s total purchases, respectively. For the six months ended December 31, 2021, two vendors, Pangu Procurement Pte Ltd and Mr. Wee Chong Loi, son of the Company’s shareholder and Sole director, Mr. Sai Bin Loi, accounted for 55.0% and 29.3% of the Company’s total purchases, respectively.
Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major clients in unaudited interim condensed consolidated financial statements for detailing the Company’s business segments. Based on the criteria established by ASC 280, the Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer, who reviews unaudited interim condensed consolidated results when making decisions about allocating resources and assessing performance of the Company. As a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. As the Company’s long-lived assets are substantially located in Singapore, no geographical segments are presented.
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In June 2016, the FASB amended guidance related to the impairment of financial instruments as part of ASU2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which will be effective January 1, 2020. The guidance replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, which clarified that receivables from operating leases are not within the scope of Topic 326 and instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842. On May 15, 2019, the FASB issued ASU 2019-05, which provides transition relief for entities adopting the Board’s credit losses standard, ASU 2016-13. Specifically, ASU 2019-05 amends ASU 2016-13 to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for financial instruments that (1) were previously recorded at amortized cost and (2) are within the scope of the credit losses guidance in ASC 326-20, (3) are eligible for the fair value option under ASC 825-10, and (4) are not held-to-maturity debt securities. For entities that have adopted ASU 2016-13, the amendments in ASU 2019-05 are effective for fiscal years beginning after December 15, 2019, including unaudited periods therein. An entity may early adopt the ASU in any unaudited period after its issuance if the entity has adopted ASU 2016-13. For all other entities, the effective date will be the same as the effective date of ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” ASU 2019-11 is an accounting pronouncement that amends ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU 2019-11 amendment provides clarity and improves the codification to ASU 2016-03. The pronouncement would be effective concurrently with the adoption of ASU 2016-03. The pronouncement is effective for fiscal years beginning after December 15, 2019 and unaudited periods within those fiscal years. In February 2020, the FASB issued ASU No. 2020-02, which provides clarifying guidance and minor updates to ASU No. 2016-13 – Financial Instruments – Credit Loss (Topic 326) (“ASU 2016-13”) and related to ASU No. 2016-02 - Leases (Topic 842). ASU 2020-02 amends the effective date of ASU 2016-13, such that ASU 2016-13 and its amendments will be effective for the Company for unaudited and annual periods in fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact this ASU will have on its unaudited interim condensed consolidated financial statements and related disclosures.
F-42
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 18, 2019, the FASB issued ASU No. 2019-12, Income taxes (Topic 740), Simplifying the Accounting for Income Taxes. This guidance amends ASC Topic 740 and addresses several aspects including 1) evaluation of step-up tax basis of goodwill when there is not a business combination, 2) policy election to not allocate unaudited interim condensed consolidated taxes on a separate entity basis to entities not subject to income tax, 3) accounting for tax law changes or rates during unaudited periods, 4) ownership changes from equity method investment to subsidiary or vice versa, 5) elimination of exception to intrapetrous allocation when there is gain in discontinued operations and a loss from continuing operations, and 6) treatment of franchise taxes that are partially based on income. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2021, and unaudited periods within fiscal years beginning after December 15, 2022. The Company is evaluating the impact of this guidance on its unaudited interim condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for fiscal years beginning after December 15, 2021 and unaudited periods within fiscal years beginning after December 15, 2022. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company is currently evaluating the impact of this new standard on the Company’s unaudited interim condensed consolidated financial statements and related disclosures.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements”. The amendments in this Update represent changes to clarify the Codification or correct unintended application of guidance that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments in this Update affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 is effective for the Company for fiscal years beginning after December 15, 2021 and unaudited periods within fiscal years beginning after December 15, 2022.The amendments in this Update should be applied retrospectively. The adoption of this standard by the Company does not have a material impact on its unaudited interim condensed consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited interim condensed consolidated balance sheets, unaudited interim condensed consolidated statements of income and unaudited interim condensed consolidated statements of cash flows.
Note 4 - Revenues
Revenues are recognized when control of the promised services and deliverables are transferred to the Company’s clients in an amount that reflects the consideration to which the Company expects to be entitled to and receive in exchange for services and deliverables rendered.
The following table presents the Company’s revenues disaggregated by service lines for the six months ended December 31, 2022 and 2021:
| For the six months ended December 31, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Software development service | 724,925 | 144,510 | 107,811 | |||||||||
| Consulting and technical support services | 512,843 | 5,500 | 4,103 | |||||||||
| Total revenues | 1,237,768 | 150,010 | 111,914 | |||||||||
F-43
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s revenues disaggregated by the timing of revenue recognition for the six months ended December 31, 2022 and 2021:
| For the six months ended December 31, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Services and deliverables transferred at a point in time | - | - | - | |||||||||
| Services and deliverables transferred over time | 1,237,768 | 150,010 | 111,914 | |||||||||
| Total revenues | 1,237,768 | 150,010 | 111,914 | |||||||||
The Company elected to utilize practical expedients to exclude from this disclosure the remaining performance obligations that have an original expected duration of one year or less.
Note 5 - Accounts receivable, net
Accounts receivable, net consisted of the following:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Accounts receivable | 3,119,875 | 1,749,719 | 1,305,371 | |||||||||
| Less: allowance for doubtful accounts | (27,690 | ) | (440,710 | ) | (328,790 | ) | ||||||
| Accounts receivable, net | 3,092,185 | 1,309,009 | 976,581 | |||||||||
The following table summarizes the changes in allowance for doubtful accounts:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Beginning balance | 5,568 | 27,690 | 20,658 | |||||||||
| Addition | 22,122 | 413,020 | 308,132 | |||||||||
| Write-off | - | - | - | |||||||||
| Ending balance | 27,690 | 440,710 | 328,790 | |||||||||
Provision for doubtful accounts amounted is SGD 413,020 (USD 308,132) and SGD 13,815 for the six months ended December 31, 2022 and 2021, respectively.
Note 6 - Prepayments
Prepayments consist of the following:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Service prepayment | 13,500 | 13,500 | 10,072 | |||||||||
| Total prepayments | 13,500 | 13,500 | 10,072 | |||||||||
Note 7 – Deferred contract costs
Deferred contract cost consist of the following:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Compensation expenses of workforce | - | 237,357 | 177,079 | |||||||||
| Total deferred contract costs | - | 237,357 | 177,079 | |||||||||
F-44
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Property and equipment, net
Property and equipment consist of the following:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Office equipment | 48,571 | 53,773 | 40,117 | |||||||||
| Office furniture and fixtures | 12,096 | 12,096 | 9,024 | |||||||||
| Leasehold improvements | 94,516 | 94,516 | 70,513 | |||||||||
| Automobiles | 79,905 | 79,905 | 59,613 | |||||||||
| Subtotal | 235,088 | 240,290 | 179,267 | |||||||||
| Less: accumulated depreciation | (71,778 | ) | (95,851 | ) | (71,509 | ) | ||||||
| Total | 163,310 | 144,439 | 107,758 | |||||||||
Depreciation expense for the six months ended December 31, 2022 and 2021 amounted to SGD 24,073 (USD 17,959) and SGD 20,531, respectively.
No impairment loss had been recognized during the six months ended December 31, 2022 and 2021, respectively.
Automobile under finance lease
On August 21, 2020, the Company entered into a finance lease agreement with a third party to lease an automobile for 120 months for SGD 79,905 (USD 59,613). The lease required monthly lease payments of SGD 809 from August 21, 2020 through July 20, 2030 and interest rate per annum of 4.00%. The Company placed this vehicle into service in August 2020; accordingly, it has been capitalized. As of December 31, 2022 and June 30, 2022, the accumulated depreciation of the automobile was SGD 19,310 (USD 14,406) and SGD 15,315, respectively.
Note 9 – Loan Payable – Financial Institutions
On March 23, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 40,000 (USD 29,842) for a term of ten months and at a fixed monthly interest rate of 1.88%. The bank loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 4,000 (USD 2,984). This loan has been settled as of January 2023.
On May 5, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 100,000 (USD 74,605) for a term of ten months and at a fixed monthly interest rate of 3.50%. The bank loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 60,000 (USD 44,762). This loan has been settled as of April 2023.
On October 21, 2022, RP Singapore entered into a loan agreement with a financial institution to obtain a loan of SGD 40,000 (USD 29,842) for a term of 10 months and at a fixed annual interest rate of 1.88%. The loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 40,000 (USD 29,842).
On November 2, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 20,000 (USD 14,921) for a term of ten months and at a fixed monthly interest rate of 3.00%. The bank loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 20,000 (USD 14,921).
On November 3, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 100,000 (USD 74,605) for a term of ten months and at a fixed monthly interest rate of 1.75%. The bank loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 85,000 (USD 63,414).
On November 14, 2022, RP Singapore entered into a short term loan agreement with a financial institution to obtain a loan of SGD 40,000 (USD 29,842) for a term of ten months and at a fixed monthly interest rate of 5.00%. The bank loan was unsecured and guaranteed by a third party. As of December 31, 2022 the outstanding balance is SGD 40,000 (USD 29,842).
Interest expense pertaining to the above loans for the six months ended December 31, 2022 and 2021 amounted to SGD 23,939 (USD 17,859) and SGD 36,117, respectively.
F-45
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Other payables and accrued liabilities
Other payables and accrued liabilities consist of the following:
| June 30, 2022 | December
31, 2022 | December
31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Salary payables | 82,330 | 103,919 | 77,528 | |||||||||
| Accrued expenses | 191,786 | 85,877 | 64,068 | |||||||||
| Total other payables and accrued liabilities | 274,116 | 189,796 | 141,596 | |||||||||
Note 11 - Related party balances and transactions
Related party balances
a. Long-term deposits – related party
On February 11, 2019, the Company entered into a service agreement with Ad Navitas Pte Ltd, which is owned by our shareholder and sole director, Mr. Sai Bin Loi. Ad Navitas Pte Ltd will assist the Company to provide software development projects. Per terms set forth in the agreement, the Company is required to maintain a minimum security amount of SGD 1,000,000 to Ad Navitas Pte Ltd after signing the agreement. Long-term deposits - related party was SGD 1,000,000 (USD 746,046) and SGD 1,000,000 as of December 31, 2022 and June 30, 2022, respectively.
b. Deposit paid for acquisition of subsidiary - related party
On December 1, 2020, RP Singapore entered into an acquisition agreement with Consap Pte Ltd. (“Consap”), which company is controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, to acquire the 100% equity interest in Consap, a limited company incorporated in Singapore, for total cash consideration of USD 2,400,000 (equivalent to SGD 3,216,960).
The acquisition is not completed on December 31, 2022 and the completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement.
Deposit of USD 1,400,000 (equivalent to SGD 1,856,171) has been paid to Consap on June 30, 2021. The remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on December 31, 2022 if the conditions are met. Pursuant to the acquisition agreement, in case the aforesaid acquisition is not completed, the deposits would be fully refundable to RP Singapore. This agreement has been superseded by a new addendum mentioned below.
The acquisition had not been completed and the remaining consideration of USD 1,000,000 has not been paid by RP Singapore to Consap on December 31, 2022. The completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement. The acquisition was conditional upon Consap entering into one or more definitive sales agreements, with clients approved by RP Singapore, for total contracts value of not less than USD 2,000,000 on or before November 30, 2022. In the event that Consap fails to secure enough sales agreements for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from March 31, 2023.
On January 31, 2023, an addendum to the acquisition agreement has been signed. Pursuant to the addendum, Consap should enter into one or more definitive sales agreements with client approved by RP Singapore, for a total contract value of not less than USD2,000,000 on or before November 30, 2023. The expected completion date will be within 30 days from the date of fulfilment of the condition precedents or March 31, 2024, whichever earlier, the remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on the completion date. In the event that Consap fails to secure enough sales agreement for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from December 31, 2023. As of December 31, 2022 and June 30, 2022, deposit paid to a related party for acquisition of subsidiary amounted to SGD 1,856,171 (USD 1,384,789) and SGD 1,856,171, respectively.
F-46
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
c. Loan payable – related party
On June 15, 2022, the Company had unsecured loan with annual interest of 6% from Republic SC Pte Ltd., which is co-owned by the Company’s shareholder and sole director, Mr. Sai Bin Loi, and his daughter, amounted to SGD 65,000 (USD 46,752) as of June 30, 2022. This loan was fully paid in October 2022.
On October 10, 2022, the Company had another unsecured loan with annual interest of 6% from Republic SC Pte Ltd, amounted to SGD 50,000 (USD 37,302) as of December 31, 2022. This loan was fully paid in January 2023.
Related party transactions
a. Revenue
On May 10, 2021, the Company entered into a service agreement with Consap, which company is currently controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, with a term from May 10, 2021, to complete a software development project. For the six months ended December 31, 2021, the project was not completed and Consap paid to the Company in consideration SGD 36,355 (USD 26,890).
On December 6, 2022, the Company entered into a service agreement with Republic SC Pte Ltd., to provide consulting services to Republic SC Pte Ltd. for a software development project. For the six months ended December 31, 2022 and 2021, the project was completed and Republic SC Pte Ltd. paid to the Company in consideration SGD 5,500 (USD 4,103) and nil.
b. Cost of revenue
On February 11, 2019, the Company entered into a service agreement with Ad Navitas. Ad Navitas agreed to assist the Company to provide software development. For the six months ended December 31, 2022, and 2021, the Company paid service fee of nil and nil to Ad Navitas, respectively.
The Company has entered into a service agreement with Mr. Wee Chong Loi, who agreed to provide IT advisory services to assist in the Company’s software development projects, with a term from April 1, 2020 to December 31, 2021. For the six months ended December 31, 2022 and 2021, the Company paid service fee of SGD nil and SGD 53,255 to Mr. Wee Chong Loi, respectively.
Note 12 - Taxes
Income tax
British Virgin Islands
Republic Power Group Limited is incorporated in the British Virgin Islands and conducts all of the Company’s businesses through the Company’s subsidiary in Singapore, Republic Power Pte Limited. Under the current laws of the British Virgin Islands, Republic Power Group Limited is not subject to tax on income or capital gains. In addition, upon payments of dividends by Republic Power Group Limited and the Company’s subsidiary in Singapore, Republic Power Pte. Limited to the Company’s shareholders, no British Virgin Islands withholding tax will be imposed.
Singapore
Republic Power Pte Limited is incorporated in Singapore and is subject to Singapore Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Singapore tax laws. The applicable tax rate is 17% in Singapore, with 75% of the first SGD 10,000 (approximately USD 7,460) taxable income and 50% of the next SGD 190,000 (approximately USD 141,749) taxable income exempted from income tax.
F-47
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Net operating loss will be carryforward indefinitely under Singapore profits tax regulation. As of December 31, 2022, the Company generated a loss of SGD 1,387,566 (USD 1,035,188). As of December 31, 2021, the Company did not generate net operating loss carry forwards available to offset future taxable income.
Significant components of the provision for income taxes are as follows:
| For
the six months ended December 31, 2021 | For
the six months ended December 31, 2022 | For
the six months ended December 31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| Current | 34,801 | - | - | |||||||||
| Deferred | 1,650 | 744 | 555 | |||||||||
| Provision for income taxes | 36,451 | 744 | 555 | |||||||||
A reconciliation between the Company’s actual provision for income taxes and the provision at the Singapore statutory rate was as follows:
| For the six months ended December 31, | ||||||||||||
| 2021 | 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Income (loss) before tax | 209,233 | (1,386,822 | ) | (1,034,633 | ) | |||||||
| Singapore income tax rate | 17.0 | % | 17.0 | % | 17.0 | % | ||||||
| Income tax expense computed at statutory rate | 35,570 | (235,760 | ) | (175,888 | ) | |||||||
| Reconciling items: | ||||||||||||
| Non-deductible items in Singapore | 6,006 | 5,755 | 4,293 | |||||||||
| Non- taxable income | - | (1,595 | ) | (1,190 | ) | |||||||
| Change in valuation allowance | - | 230,856 | 172,230 | |||||||||
| Tax credit * | (5,125 | ) | - | - | ||||||||
| Total income tax expense | 36,451 | 744 | 555 | |||||||||
| Effective tax rate | 17.4 | % | 0.1 | % | 0.1 | % | ||||||
| * | A partial tax exemption is eligible for the first SGD 200,000 of chargeable income. Under this condition, 75% of the first SGD 10,000 of chargeable income is tax exempt and 50% of the next SGD190,000 of chargeable income is tax exempt. |
F-48
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax
Significant components of deferred tax were as follows:
| As of June 30, 2022 | As of December 31, 2022 | |||||||||||
| SGD | SGD | USD | ||||||||||
| Deferred tax assets: | ||||||||||||
| Net operating loss carry forward | - | 230,856 | 172,230 | |||||||||
| Valuation allowance | - | (230,856 | ) | (172,230 | ) | |||||||
| Total deferred tax assets | - | - | - | |||||||||
| Deferred tax liabilities: | ||||||||||||
| Depreciation | (3,459 | ) | (4,203 | ) | (3,136 | ) | ||||||
| Total deferred tax liabilities | (3,459 | ) | (4,203 | ) | (3,136 | ) | ||||||
| Deferred tax liabilities, net | (3,459 | ) | (4,203 | ) | (3,136 | ) | ||||||
Uncertain tax positions
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2022 and June 30, 2022, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income tax expenses for the six months ended December 31, 2022 and 2021 and also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from December 31, 2022.
Goods and services taxes (“GST”)
Revenue represents the invoiced value of service, net of GST. The GST are based on gross sales price. GST rate is generally 7% in Singapore.
Taxes payable consisted of the following:
| June 30, 2022 | December 31, 2022 | December 31, 2022 | ||||||||||
| SGD | SGD | USD | ||||||||||
| GST taxes payable | 196,895 | 197,303 | 147,197 | |||||||||
| Income taxes payable | 1,238,144 | 1,238,144 | 923,712 | |||||||||
| Total | 1,435,039 | 1,435,447 | 1,070,909 | |||||||||
Note 13 - Equity
Ordinary shares
On November 17, 2021, 10,000 ordinary shares of the Company were issued to the participating shareholders in connection with the restructuring of the Company.
On April 21, 2022, the majority shareholders and the board of the Company approved, upon the consummation of the offering, to increase the authorized shares of the Company from 10,000 ordinary shares, par value $1.00 per share to unlimited ordinary shares, par value $0.000625 per share and effectuate a forward share split all issued and outstanding shares at a ratio of 1,600:1. On April 21, 2022, the majority shareholders and the board of the Company approved that the effective date of the increase of the authorized shares and effectuate share split shall be April 21, 2022, prior to the consummation of the offering. The Company completed this share split on April 21, 2022, resulting in the Company having a total of 16,000,000 ordinary shares outstanding, par value $0.000625 per share, and effected a forward share split of all issued and outstanding shares at a ratio of 1,600:1, effective immediately following the filing of the Amended and Restated Charter. The Company believed it is appropriate to reflect the above transactions on a retroactive basis similar to share split or dividend pursuant to ASC 260. All references made to share or per share amounts in the accompanying unaudited interim condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the 1,600 for 1 share split.
Dividends
For the six months ended December 31, 2021, the Company declared and paid SGD 1,133,000 (USD 838,018) dividend to its shareholders. The dividend per share was SGD 0.07 (USD 0.05).
For the six months ended December 31, 2022, the Company did not declare and pay dividends to shareholders.
F-49
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Commitments and contingencies
The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which results in an economic penalty.
The Company has two property lease agreements with lease terms ranging for one year and ten years, respectively. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Upon adoption of ASU 2016-02, no right-of-use (“ROU”) assets nor lease liability was recorded for the lease with lease term with one year.
The Company recognized SGD 79,905 (USD 59,613) ROU assets and finance lease obligation for the ten years lease. Lease expense is recognized on a straight-line basis over the lease term.
For the six months ended December 31, 2022 and 2021, rent expenses for the short term lease amounted to approximately SGD 17,254 (USD 12,872) and SGD 20,706, respectively.
The Company’s commitment for minimum lease payments under the operating lease that is within twelve months as of December 31, 2022 as follow:
| Twelve months ending December 31, | Minimum lease payment | |||||||
| SGD | USD | |||||||
| 2023 | 18,130 | 13,526 | ||||||
| Thereafter | — | — | ||||||
| Total future lease payments | 18,130 | 13,526 | ||||||
Finance Lease Obligation
As of December 31, 2022 and June 30, 2022, finance lease obligation was SGD 63,411 (USD 47,308) and SGD 66,956, respectively. The finance lease obligation bears interest at a rate of 4.0% per annum. As of December 31, 2022, the Company’s finance lease has a weighted-average remaining lease term of approximately eight (8) years.
The following is a schedule of future lease payments as of December 31, 2022:
| Year ending December 31, | Amount (SGD) | Amount (USD) | ||||||
| 2023 | 9,708 | 7,243 | ||||||
| 2024 | 9,708 | 7,243 | ||||||
| 2025 | 9,708 | 7,243 | ||||||
| 2026 | 9,708 | 7,243 | ||||||
| 2027 | 9,708 | 7,243 | ||||||
| Thereafter | 25,079 | 18,710 | ||||||
| Total future lease payments | 73,619 | 54,925 | ||||||
| Amount representing interest | (10,208 | ) | (7,617 | ) | ||||
| Present value of future payments | 63,411 | 47,308 | ||||||
| Less: current portion | 7,304 | 5,449 | ||||||
| Long term portion | 56,107 | 41,859 | ||||||
F-50
REPUBLIC POWER GROUP LIMITED
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Acquisition Commitments
On December 1, 2020, RP Singapore entered into an acquisition agreement with Consap Pte Ltd. (“Consap”), which company is controlled by Chee Wai Chan, who was appointed as RP Singapore’s COO and director in February 2021, to acquire the 100% equity interest in Consap, a limited company incorporated in Singapore, for total cash consideration of USD 2,400,000 (equivalent to SGD 3,216,960).
The acquisition is not completed on June 30, 2022 and the completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement.
Deposit of USD 1,400,000 (equivalent to SGD 1,856,171) has been paid to Consap on June 30, 2021. The remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on December 31, 2022 if the conditions are met. Pursuant to the acquisition agreement, in case the aforesaid acquisition is not completed, the deposits would be fully refundable to RP Singapore. This agreement has been superseded by a new addendum mentioned below.
The acquisition had not been completed and the remaining consideration of USD 1,000,000 has not been paid by RP Singapore to Consap on December 31, 2022. The completion is contingent and subject to certain conditions, including target sales performance, set out in the acquisition agreement. The acquisition was conditional upon Consap entering into one or more definitive sales agreements, with clients approved by RP Singapore, for total contracts value of not less than USD 2,000,000 on or before November 30, 2022. In the event that Consap fails to secure enough sales agreements for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from March 31, 2023.
On January 31, 2023, an addendum to the acquisition agreement has been signed. Pursuant to the addendum, Consap should enter into one or more definitive sales agreements with client approved by RP Singapore, for a total contract value of not less than USD2,000,000 on or before November 30, 2023. The expected completion date will be within 30 days from the date of fulfilment of the condition precedents or March 31, 2024, whichever earlier, the remaining of consideration of USD 1,000,000 will be paid by RP Singapore to Consap on the completion date. In the event that Consap fails to secure enough sales agreement for a total contracts value of at least USD 2,000,000, Consap shall return USD 1,400,000 to RP Singapore within seven days from December 31, 2023. As of December 31, 2022 and June 30, 2022, 2021 and 2020, deposit paid to a related party for acquisition of subsidiary amounted to SGD 1,856,171 (USD 1,384,789), SGD 1,856,171, SGD 1,856,171 and nil, respectively.
Note 15 - Subsequent events
The Company evaluated all events and transactions that occurred after December 31, 2022 up through the date the Company issued these unaudited interim condensed consolidated financial statements on May 25, 2023.
Forward share split
On August 16 2023, the Company implemented a 1 for 1.5625 forward share split of our ordinary shares under British Virgin Islands law, or the “Forward Split”. As a result of the Forward Split, the total of 16,000,000 issued and outstanding ordinary shares prior to the Forward Split was increased to a total of 25,000,000 issued and outstanding ordinary shares. The Forward Split was implemented in connection with the valuation of the Company. The Forward Split maintained our existing shareholders’ percentage ownership interests in the Company. The Forward Split also decreased the par value of our ordinary shares from $0.000625 to $0.0004 and the number of authorized shares of the Company remained as unlimited.
Reverse share split
However, due to ASC 505-10-S-99-4 (SAB Topic 4.C) and ASC 260-10-55-12, the Company have to revise the consolidated financial statements included in Form F-1 to reflect the Forward Split. Due to the merger between Friedman (Company’s former auditor) and Marcum Asia (Company’s current auditor), which resulted in the pending withdrawal of Friedman’s registration with the PCAOB, Friedman cannot revise its audit report included in Form F-1 to reflect the retrospective restatement for the change in capital structure. Rather than restating the previously issued financial statements and obtaining a revised audit report, on August 29, 2023, the Company implemented a 1.5625 for 1 reverse share split (the “Reverse Split”) of our ordinary shares under British Virgin Islands Law. As a result of the Reverse Split, the total of 25,000,000 issued and outstanding ordinary shares prior to the Reverse Split was decreased back to a total of 16,000,000 issued and outstanding ordinary shares. The Reverse Split maintained our existing shareholders’ percentage ownership interests in the Company. The Reverse Split also increased the par value of our ordinary shares from $0.0004 back to $0.000625, and the number of authorized shares remains as unlimited.
The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited interim condensed consolidated financial statements.
F-51
Republic Power Group Limited
1,280,000 Ordinary Shares Offered by Republic Power Group Limited
730,000 Ordinary Shares Offered by two Selling Shareholders
______________________
PROSPECTUS
______________________
Prospectus dated [●], 2023
Until [●], 2023 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
No dealer, salesperson or any other person is authorized to give any information or make any representations in connection with this offering other than those contained in this prospectus and, if given or made, the information or representations must not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the securities offered by this prospectus, or an offer to sell or a solicitation of an offer to buy any securities by anyone in any jurisdiction in which the offer or solicitation is not authorized or is unlawful.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
British Virgin Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our articles of association provide that, we may indemnify against all expenses, including legal fees, and against all judgements, fines, and amounts paid in settlement and reasonably incurred in connection with legal, administrative, or investigative proceedings any Eligible Person (which is defined in the memorandum and articles of association as any “individuals, corporations, trusts, the estates of deceased individuals, partnerships, and unincorporated associations of persons”) who is or was:
(a) a party or is threatened to be made a party to any threatened, pending, or completed proceedings, whether civil, criminal, administrative, or investigative, by reason of the fact that the Eligible Person is or was a director; or
(b) at our request, serving as a director of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust, or other enterprise.
The above does not apply unless the Eligible Person acted honestly and in good faith and in what he or she believed to be in our best interests and, in the case of criminal proceedings, the Eligible Person had no reasonable cause to believe that his or her conduct was unlawful.
For the purposes of the above, where the Company is a wholly owned subsidiary or a parent, a director acts in our best interests if he or she acts in the best interests of our parent, in either case, in the circumstances specified in the BVI Act, as the case may be.
The decision of our directors as to whether the person acted honestly and in good faith and with a view to our best interests and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of our articles of association, unless a question of law is involved.
The termination of any proceedings by any judgement, order, settlement, conviction, or the entering of a nolle prosequi does not, by itself, create a presumption that the Eligible Person did not act honestly and in good faith and with a view to our best interests or that the Eligible Person had reasonable cause to believe that his or her conduct was unlawful.
Expenses, including legal fees, incurred by our director (or our former director) in defending any legal, administrative, or investigative proceedings may be paid by us in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of such director (or a former director) to repay the amount if it shall ultimately be determined that the director (or a former director) is not entitled to be indemnified by us in accordance with the provisions stated above and upon such other terms and conditions, if any, as we deem appropriate.
The indemnification and advancement of expenses provided by, or granted pursuant to our memorandum and articles of association is not exclusive of any other rights to which the Eligible Person seeking indemnification or advancement of expenses may be entitled under any agreement, resolution of members, resolution of disinterested directors, or otherwise, both as to acting in the Eligible Person’s official capacity and as to acting in another capacity while serving as a Director.
To the extent permitted by law, we may make a payment, or agree to make a payment, whether by way of advance, loan or otherwise, for any legal costs incurred by an existing or former secretary or any of our officers in respect of any matter identified above on condition that the secretary or officer must repay the amount paid by us to the extent that we are ultimately found not liable to indemnify the secretary or that officer for those legal costs.
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Pursuant to indemnification agreements, the form of which is filed as Exhibit 10.2 to this Registration Statement, we will agree to indemnify our directors and officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or officer.
The underwriting agreement, the form of which will be filed as Exhibit 1.1 to this Registration Statement, will also provide for indemnification of us and our officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 7. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, we have issued the following securities which were not registered under the Securities Act.
On November 17, 2021, we issued an aggregate of 10,000 Ordinary Shares to our founder. We believe that such issuance was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions. No underwriters were involved in these issuances of securities.
ITEM 8. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
| (a) | Exhibits |
See Exhibit Index beginning on page II-4 of this registration statement.
| (b) | Financial Statement Schedules |
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
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(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(4) For the purpose of determining any liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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EXHIBIT INDEX
| * | Filed herewith |
| ** | Previously filed |
| *** | To be filed by amendment |
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Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Singapore, on September 22, 2023.
| Republic Power Group Limited | |||
| By: | /s/ Ziyang Long | ||
| Name: | Ziyang Long | ||
| Title: | Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Ziyang Long | Chief Executive Officer | September 22, 2023 | ||
| Name: Ziyang Long | (Principal Executive Officer) | |||
| /s/ Keng Yan Yoon | Chief Financial Officer | September 22, 2023 | ||
| Name: Keng Yan Yoon | (Principal Accounting and Financial Officer) | |||
| /s/ Sai Bin Loi | Chairman of the Board and Director | September 22, 2023 | ||
| Name: Sai Bin Loi |
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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
Pursuant to the Securities Act of 1933 as amended, the undersigned, the duly authorized representative in the United States of America, has signed this registration statement thereto in Newark, DE, on September 22, 2023.
| By: | /s/ Donald J. Puglisi | ||
| Name: | Donald J. Puglisi | ||
| Title: | Managing Director Puglisi & Associates | ||
II-6
Exhibit 1.1
REPUBLIC POWER GROUP LIMITED
UNDERWRITING AGREEMENT
[●], 2023
Prime Number Capital LLC
12 E 49 St, Floor 27,
New York, NY 10017
Ladies and Gentlemen:
The undersigned, Republic Power Group Limited, a company limited by shares organized under the laws of British Virgin Islands (the “Company”), and certain shareholders of the Company (the “Selling Shareholders”) named on Schedule A hereto hereby confirm their agreement (this “Agreement”) with Prime Number Capital LLC (the “Underwriter”) to severally issue and sell an aggregate of 2,010,000 ordinary shares (the “Firm Shares”) of the Company, par value of $0.000625 per share (the “Ordinary Shares”), of which 1,280,000 Ordinary Shares are to be issued and sold by the Company and 730,000 Ordinary Shares are to be sold by the Selling Shareholders, each Selling Shareholder selling the amount set forth opposite such Selling Shareholder’s name on Schedule A hereto.
The Company has also granted to the Underwriter an option to purchase up to 192,000 additional Ordinary Shares, on the terms and conditions for the purposes set forth in Section 3(c) hereof (the “Additional Shares”). The Firm Shares and any Additional Shares purchased pursuant to this Agreement are herein collectively referred to as the “Offered Securities.” The offering and sale of the Offered Securities contemplated by this Agreement is referred to herein as the “Offering.”
The Company and each of the Selling Shareholders, severally and not jointly, confirm its agreement with the Underwriter as follows:
SECTION 1. Representations and Warranties of the Company.
The Company represents and warrants to the Underwriter as follows with the understanding that the same may be relied upon by the Underwriter in the Offering, as of the date hereof and as of the Closing Date (as defined below) and each Option Closing Date (as defined below), if any:
(a) Filing of the Registration Statement. The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form F-1 (File No. 333-266256), which contains a form of prospectus to be used in connection with the Offering. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto contained in the registration statement at the time such registration statement became effective, in the form in which it was declared effective by the Commission under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder (the “Securities Act Regulations”), and including any required information deemed to be a part thereof at the time of effectiveness pursuant to Rule 430A under the Securities Act, or pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder (the “Exchange Act Regulations”), is called the “Registration Statement.” Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act is called the “Rule 462(b) Registration Statement,” and from and after the date and time of filing of the Rule 462(b) Registration Statement, the term “Registration Statement” shall include the Rule 462(b) Registration Statement. Such prospectus, in the form first filed pursuant to Rule 424(b) under the Securities Act after the date and time that this Agreement is executed and delivered by the parties hereto, or, if no filing pursuant to Rule 424(b) under the Securities Act is required, the form of final prospectus relating to the Offering included in the Registration Statement at the effective date of the Registration Statement (“Effective Date”), is called the “Prospectus.” All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, the preliminary prospectus included in the Registration Statement (each, a “preliminary prospectus”), the Prospectus, or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”). The preliminary prospectus that was included in the Registration Statement immediately prior to the Applicable Time (as defined below) is hereinafter called the “Pricing Prospectus.” Any reference to the “most recent preliminary prospectus” shall be deemed to refer to the latest preliminary prospectus included in the registration statement. Any reference herein to any preliminary prospectus or the Prospectus or any supplement or amendment to either thereof shall be deemed to refer to and include any documents incorporated by reference therein as of the date of such reference.
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(b) “Applicable Time” means 5:00 pm, Eastern Standard Time (EST), on the date of this Agreement.
(c) Compliance with Registration Requirements. The Registration Statement has been declared effective by the Commission under the Securities Act and the Securities Act Regulations on [●], 2023. The Company has complied, to the Commission’s satisfaction, with all requests of the Commission for additional or supplemental information. No stop order preventing or suspending the effectiveness of the Registration Statement, or any Rule 462(b) Registration Statement is in effect and no proceedings for such purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated or threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied or will comply in all material respects with the Securities Act and, if filed by electronic transmission pursuant to EDGAR (except as may be permitted by Regulation S-T under the Securities Act), was identical in content to the copy thereof delivered to the Underwriter for use in connection with the Offering, other than with respect to any artwork and graphics that were not filed. Each of the Registration Statement and any post-effective amendment to the Registration Statement, at the time it became effective and at all subsequent times until the expiration of the prospectus delivery period required under Section 5(b) of the Securities Act, complied and will comply in all material respects with the Securities Act and the Securities Act Regulations and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus, as amended or supplemented, as of its date and at all subsequent times until the Underwriter has completed the Offering, did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement or any post-effective amendment to the Registration Statement, or in the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, made in reliance upon and in conformity with information relating to the Underwriter furnished to the Company in writing expressly for use therein, it being understood and agreed that the only such information furnished on behalf of the Underwriter consists of (i) the name of the Underwriter contained on the cover page of the Registration Statement, the Pricing Prospectus and Prospectus and (ii) the sub-sections titled “Indemnification,” “Lock-up Agreements,” “Listing,” “Price Stabilization,” “Electronic Distribution,” “Selling Restrictions outside the United States, “and “Other Relationships” in each case under the caption “Underwriting” in the Registration Statement, the Pricing Prospectus, the Prospectus (the “Underwriter Information”). There are no contracts or other documents required to be described in the Registration Statement, the Pricing Prospectus or the Prospectus or to be filed as exhibits to the Registration Statement that have not been fairly and accurately described in all material respects or filed as required.
(d) Disclosure Package. The term “Disclosure Package” shall mean (i) the Pricing Prospectus, as amended or supplemented, (ii) each issuer free writing prospectus, as defined in Rule 433 under the Securities Act (each, an “Issuer Free Writing Prospectus”), if any, identified in Schedule B hereto, (iii) the pricing terms set forth in Schedule C to this Agreement, and (iv) any other free writing prospectus that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package. As of the Applicable Time, the Disclosure Package did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with the Underwriter Information.
(e) Company Not Ineligible Issuer. (i) At the time of filing the Registration Statement and (ii) as of the date of the execution and delivery of this Agreement (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 under the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 under the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer.
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(f) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus includes any information that conflicts with the information contained in the Registration Statement, including any document incorporated by reference therein that has not been superseded or modified. The foregoing sentence does not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with the Underwriter Information.
(g) Offering Materials Furnished to the Underwriter. The Company has delivered to the Underwriter copies of the Registration Statement and of each consent and certificate of experts filed as a part thereof, and each preliminary prospectus and the Prospectus, as amended or supplemented, in such quantities and at such places as the Underwriter has reasonably requested in writing.
(h) Distribution of Offering Material by the Company. The Company has not distributed or authorized the distribution of, and will not distribute, prior to the completion of the Offering, any offering material in connection with the Offering other than a preliminary prospectus, the Pricing Prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the Underwriter, and the Registration Statement.
(i) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company, enforceable in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable law and except as the enforcement hereof may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or affecting the rights and remedies of creditors or by general equitable principles.
(j) Authorization of the Offered Securities. The Offered Securities to be sold by the Company through the Underwriter have been duly and validly authorized by all required corporate action and have been reserved for issuance and sale pursuant to this Agreement and, when so issued and delivered by the Company, will be validly issued, fully paid and non-assessable, free, and clear of all Liens (as defined below under Section 1(r)) imposed by the Company. The Company has a sufficient number of authorized Ordinary Shares for the issuance of the maximum number of Offered Securities issuable pursuant to the Offering as described in the Prospectus.
(k) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any securities of the Company registered for sale under the Registration Statement and included in the Offering.
(l) No Material Adverse Change. Except as otherwise disclosed in the Disclosure Package, subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations, whether or not arising from transactions in the ordinary course of business, of the Company (any such change, a “Material Adverse Change”, and any resulting effect, a “Material Adverse Effect”); (ii) the Company has not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company in respect of its Ordinary Shares.
(m) Independent Accountant. Friedman LLP, which has expressed its opinions with respect to the audited financial statements (which term as used in this Agreement includes the related notes thereto) of the Company filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, and Marcum Asia CPAs LLP (together with Friedman LLP, the “Accountants”), which has reviewed the unaudited interim condensed consolidated financial statements of the Company for the six months ended December 31, 2022 filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the Prospectus, are each an independent registered public accounting firm as required by the Securities Act and the Exchange Act.
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(n) Preparation of the Financial Statements. The financial statements of the Company included in the Registration Statement, the Disclosure Package, and the Prospectus, presents fairly the information provided as of and at the dates and for the periods indicated (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”). Such financial statements comply as to form with the applicable accounting requirements of the Securities Act and the Securities Act Regulations and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto. Except as included therein, no other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the Disclosure Package, or the Prospectus.
(o) Incorporation and Good Standing. The Company has been duly formed and is validly existing as a company limited by shares under the laws of the jurisdiction of its formation and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the Disclosure Package, and the Prospectus and to enter and perform its obligations under this Agreement. As of the Closing Date, the Company does not own or control, directly or indirectly, any corporation, association or other entity that is not otherwise disclosed in the Registration Statement, the Disclosure Package, or the Prospectus.
(p) Capitalization and Other Share Capital Matters. The authorized, issued, and outstanding shares of the Company is as set forth in each of the Disclosure Package and the Prospectus (other than for subsequent issuances, if any, pursuant to employee benefit plans described in each of the Disclosure Package and the Prospectus or upon exercise of outstanding options or warrants described in the Disclosure Package and Prospectus, as the case may be). The Ordinary Shares conform, and, when issued and delivered as provided in this Agreement, the Offered Securities will conform, in all material respects to the description thereof contained in each of the Disclosure Package and Prospectus. All the issued and outstanding Ordinary Shares have been duly authorized and validly issued, are fully paid and non-assessable and have been issued in compliance with applicable laws. None of the outstanding Ordinary Shares were issued in violation of any preemptive rights, rights of first refusal or other similar rights to subscribe for or purchase securities of the Company. There are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any shares of the Company other than those described in the Disclosure Package and the Prospectus. The description of the Company’s stock option and other stock plans or arrangements, and the options or other rights granted thereunder, set forth in the Disclosure Package and the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options, and rights. No further approval from Nasdaq or authorization of any shareholder, the Board of Directors or others is required for the issuance and sale of the Offered Securities. Except as set forth in the Registration Statement, the Disclosure Package and the Prospectus, there are no shareholders agreements, voting agreements or other similar agreements with respect to the Company’s Ordinary Shares to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s shareholders.
(q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. The Company is not in violation of its memorandum and articles of association, as amended and restated or in default (or, with the giving of notice or lapse of time, would be in default) (“Default”) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other instrument to which it is a party or by which it may be bound (including, without limitation, any agreement or contract filed as an exhibit to the Registration Statement or to which any of the property or assets of the Company are subject (each, an “Existing Instrument”), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. The Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the amended and restated memorandum and articles of association of the Company, as amended and restated, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, or require the consent of any other party to, any Existing Instrument and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company, except in the case of each of clauses (ii) and (iii), to the extent such conflict, breach Default or violation could not reasonably be expected to result in a Material Adverse Effect. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby, except the registration or qualification of the Offered Securities under the Securities Act and applicable state securities or blue sky laws and from the Financial Industry Regulatory Authority Inc. (“FINRA”).
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(r) Subsidiaries. Each of the Company’s direct and indirect subsidiaries (each a “Subsidiary,” and collectively, the “Subsidiaries”) has been identified on Schedule E hereto. Each of the Subsidiaries has been duly formed, is validly existing under the laws of its jurisdiction of incorporation or organization, as the case may be, and in good standing under the laws of the jurisdiction of its incorporation, has full power and authority (corporate or otherwise) to own its property and to conduct its business as described in the Registration Statement, the Disclosure Package, the Prospectus, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not result in a Material Adverse Change on the Company and its Subsidiaries, taken as a whole. Except as otherwise disclosed in the Registration Statement, the Disclosure Package, and the Prospectus, all of the equity interests of each Subsidiary have been duly and validly authorized and issued, are owned or controlled directly or indirectly by the Company, are fully paid in accordance with its articles of association, memorandum of association or charter documents, as amended and restated from time to time and non-assessable and are free and clear of all liens, encumbrances, equities or claims (“Liens”). None of the outstanding share capital or equity interest in any Subsidiary was issued in violation of preemptive or similar rights of any security holder of such Subsidiary. All the constitutive or organizational documents of each of the Subsidiaries comply with the requirements of applicable laws of its jurisdiction of incorporation or organization and are in full force and effect. Apart from the Subsidiaries, the Company has no direct or indirect subsidiaries or any other company over which it has direct or indirect effective control. Other than the Subsidiaries, the Company does not directly or indirectly control any entity through contractual arrangements or otherwise such that the entity would be deemed a consolidated affiliated entity whose financial results would be consolidated under U.S. GAAP with the financial results of the Company on the consolidated financial statements of the Company, regardless of whether the Company directly or indirectly owns less than a majority of the equity interests of such entity.
(s) No Material Actions or Proceedings. Except as otherwise disclosed in the Disclosure Package and the Prospectus, there are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings (collectively, “Actions”) pending or, to the Company’s knowledge, (i) threatened against the Company or any of its Subsidiaries or (ii) have as the subject thereof any of the executive officers, directors, or key employees of the Company or any of its Subsidiaries or any of the properties owned or leased by the Company or any of its Subsidiaries, where in any such case (A) there is a reasonable possibility that such Action might be determined adversely to the Company and (B) any such Action, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or adversely affect the consummation of the transactions contemplated by this Agreement. Except as otherwise disclosed in the Disclosure Package and the Prospectus, no material labor dispute with the employees of the Company exists or, to the Company’s knowledge, is threatened or imminent. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. No executive officer, to the knowledge of the Company, is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. Except as otherwise disclosed in the Disclosure Package and the Prospectus, the Company and its Subsidiaries are in compliance with all applicable laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change. Except as otherwise disclosed in the Disclosure Package and the Prospectus, neither the Company or any Subsidiary, nor to the knowledge of the Company any director or officer of the Company, is or has within the last 10 years been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Except as otherwise disclosed in the Disclosure Package and the Prospectus, there has not been, and to the knowledge of the Company, there is no pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.
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(t) Intellectual Property Rights. The Company owns, possesses or licenses, and otherwise has legally enforceable rights to use all patents, patent applications, trademarks, trade names, copyrights, domain names, licenses, approvals and trade secrets (collectively, “Intellectual Property Rights”) reasonably necessary to conduct its business as now conducted or, otherwise, as disclosed in the Registration Statement, the Disclosure Package and the Prospectus, except to the extent such failure to own, possess or have other rights to use such Intellectual Property would not be expected to result in a Material Adverse Change. Except as otherwise disclosed in the Registration Statement, the Disclosure Package and the Prospectus: (i) the Company has not received any written notice of infringement or conflict with asserted Intellectual Property Rights of others; (ii) the Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, Disclosure Package and the Prospectus and are not described in all material respects; (iii) none of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, in violation of the rights of any persons; and (iv) the Company is not subject to any judgment, order, writ, injunction or decree of any court or any governmental department, commission, board, bureau, agency or instrumentality, or any arbitrator, nor has it entered into nor is it a party to any agreement made in settlement of any pending or threatened litigation, which materially restricts or impairs its use of any Intellectual Property Rights.
(u) All Necessary Permits, etc. Except as otherwise disclosed in the Disclosure Package and the Prospectus, the Company, each of its Subsidiaries, possesses such valid and current certificates, authorizations or permits issued by the applicable regulatory agencies or bodies necessary to conduct its business, and has made all declarations and filings with, the appropriate national, regional, local or other governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or assets or the conduct of their respective businesses as described in (the Registration Statement), the Disclosure Package and the Prospectus, except where any lack of the licenses would not reasonably be expected to have, individually or in aggregate, a Material Adverse Effect, and has not received any notice of proceedings relating to the revocation or modification of any such licenses and, to the knowledge of the Company, the Company has no reason to believe that such licenses will not be renewed in the ordinary course of their respective businesses that, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect. Such licenses are valid and in full force and effect and contain no materially burdensome restrictions or conditions not described in the Registration Statement, the Disclosure Package, or the Prospectus.
(v) Title to Properties. Except as otherwise disclosed in the Disclosure Package and the Prospectus, the Company has good and marketable title to all the properties and assets reflected as owned by it in the financial statements referred to in Section 1(n) above (or elsewhere in the Disclosure Package and the Prospectus), in each case free and clear of any security interest, mortgage, lien, encumbrance, equity, adverse claim or other defect, except such as do not materially and adversely affect the value of such property and do not materially interfere with the use made or proposed to be made of such property by the Company. The real property, improvements, equipment, and personal property held under lease by the Company are held under valid and enforceable leases, with such exceptions as are not material and do not materially interfere with the use made or proposed to be made of such real property, improvements, equipment, or personal property by the Company.
(w) Tax Law Compliance. (i) Except as otherwise disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company and its Subsidiaries have each filed all federal, state, local and foreign income tax returns required to be filed as of the date of this Agreement or has timely and properly filed requested extensions thereof and has paid taxes required to be paid by them and, if due and payable, any related or similar assessment, fine or penalty levied against any of them in all material respects. (ii) No tax deficiency has been determined adversely to the Company or any of its Subsidiaries that has had (nor does the Company nor any of its Subsidiaries have any notice or knowledge of any tax deficiency which could reasonably be expected to be determined adversely to the Company or its Subsidiaries and which could reasonably be expected to have) a Material Adverse Effect. (iii) The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(n) above in respect of all federal, state, and foreign income and franchise taxes for all periods as to which the tax liability of the Company has not been finally determined. (iv) All local and national governmental tax credit, exemptions, waivers, financial subsidies, and other local and national tax relief, concessions and preferential treatment enjoyed by the Company or any of the Subsidiaries as disclosed in the Registration Statement, the Disclosure Package and the Prospectus and the Prospectus are valid, binding and enforceable and do not violate any laws, regulations, rules, orders, decrees, guidelines, judicial interpretations, notices or other legislation of the Republic of Singapore.
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(x) Company Not an “Investment Company.” The Company is not, and after giving effect to payment for the Offered Securities and the application of the proceeds as contemplated under the caption “Use of Proceeds” in each of the Disclosure Package and the Prospectus will not be, required to register as an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”).
(y) No Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed to, or that might be reasonably expected to cause or result in, stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Offered Securities.
(z) Related Party Transactions. There are no business relationships or related-party transactions, directly or indirectly, involving the Company or its Subsidiaries with any related person required to be described or filed in the Registration Statement, or described in the Disclosure Package or the Prospectus, that have not been as set forth in the Registration Statement, the Prospectus, and the Pricing Prospectus.
(aa) Disclosure Controls and Procedures. To the extent required, the Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act Regulations) designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the Commission’s rules and forms. Except as otherwise disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company is not aware of (a) any significant deficiency in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data or any material weaknesses in internal controls or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.
(bb) Company’s Accounting System. To the extent required, the Company maintains a system of accounting controls designed to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(cc) Money Laundering Law Compliance. The operations of the Company are and have been conducted at all times in material compliance with all applicable financial recordkeeping and reporting requirements, including those of the United States Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of jurisdictions where the Company conducts business, and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any competent governmental agency (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to any Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(dd) No Accounting Issues. The Company has not received any notice, oral or written, from its Board of Directors or Audit Committee stating that it is reviewing or investigating, and neither the Company’s independent auditors nor its internal auditors have recommended that the Board of Directors or Audit Committee review or investigate, (i) adding to, deleting, changing the application of, or changing the Company’s disclosure with respect to, any of the Company’s material accounting policies; or (ii) any matter which could result in a restatement of the Company’s financial statements for any annual or interim period during the current or prior two fiscal years.
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(ee) OFAC. (i) Neither the Company, any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee or affiliate of the Company or any Subsidiary, is an individual or entity (“Person”) that is, or is owned or controlled by a Person that is:
A. the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union (“EU”), His Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor
B. located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan and Syria).
(ii) The Company will not, directly, or indirectly, use the proceeds of the Offering, or lend, contribute or otherwise make available such proceeds to any Subsidiary or affiliated entity, joint venture partner or other Person:
A. to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
B. in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the Offering, whether as underwriter, advisor, investor or otherwise).
(ff) Foreign Corrupt Practices Act. Neither the Company nor any of its Subsidiaries to the best of the Company’s knowledge, any director, officer, employee or affiliate of the Company, any Subsidiary or any other person acting on behalf of the Company has, directly or indirectly, taken any action that (i) would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”) or otherwise subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding; (ii) if done in the past, might reasonably be expected to have a Material Adverse Effect or (iii) if continued in the future, might reasonably be expected to materially and adversely affect the assets, business, or operations of the Company. The foregoing includes, without limitation, giving or agreeing to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction).
(gg) Internal Control and Compliance with Sarbanes-Oxley Act of 2002. The Company, its Subsidiaries and the Company’s Board of Directors have taken all reasonably necessary actions to ensure that, upon the effectiveness of the Registration Statement, the Company will be in compliance with any provision applicable to it of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules and regulations promulgated in connection therewith, including, without limitation, Section 402 related to loans and Sections 302 and 906 related to certifications of the Sarbanes-Oxley Act, and all applicable rule of the Exchanges. Except as otherwise disclosed in the Registration Statement, the Disclosure Package and the Prospectus, the Company maintains a system of internal controls, including, but not limited to, disclosure controls and procedures, internal controls over accounting matters and financial reporting, an internal audit function and legal and regulatory compliance controls (collectively, “Internal Controls”) to comply with all applicable laws and regulations including without limitation the Securities Act, the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of the Commission, and the rules of the listing exchanges.
(hh) Exchange Act Filing. A registration statement in respect of the Offered Securities has been filed on Form 8-A pursuant to Section 12(b) of the Exchange Act, which registration statement complies in all material respects with the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Offered Securities under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.
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(ii) Earning Statements. The Company will make generally available (which includes filings pursuant to the Exchange Act made publicly through the EDGAR system) to its security holders as soon as practicable, but in any event not later than 16 months after the end of the Company’s current fiscal year, an earnings statement (which need not be audited) covering a 12-month period that shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and Regulations.
(jj) Periodic Reporting Obligations. During the Prospectus Delivery Period (as defined below), the Company shall file, on a timely basis, with the Commission all reports and documents required to be filed under the Exchange Act. Additionally, the Company shall report the use of proceeds from the issuance of the Firm Shares as may be required under Rule 463 under the Securities Act.
(kk) Forward-looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Disclosure Package, the Prospectus, or shall be contained in any amendments and supplements thereof, has been made, or will be made, without a reasonable basis as reasonably determined by the Company at the moment such a statement is made or will be made, or has been disclosed or will be disclosed other than in good faith.
(ll) Foreign Tax Compliance. Except as otherwise disclosed in the Disclosure Package and the Prospectus, no transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding taxes or duties are payable in the Republic of Singapore or the British Virgin Islands to any taxing authority in connection with the issuance, sale and delivery of the Offered Securities, and the delivery of the Offered Securities to or for the account of the Underwriter.
(mm) [Omitted.]
(nn) [Omitted.]
(oo) D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers prior to the Offering (the “Insiders”) as well as in the Lock-up Agreement in the form attached hereto as Exhibit A provided to the Underwriter is true and correct in all respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires completed by each Insider to become inaccurate and incorrect.
(pp) Solvency. Based on the consolidated financial condition of the Company as of each Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Offered Securities hereunder, the current cash flow of the Company, together with the proceeds the Company would receive, were to liquidate all of its assets, after taking into account all anticipated uses of the cash, are sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as set forth in the Registration Statement and the Prospectus, the Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from each Closing Date. The Registration Statement and the Prospectus set forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (A) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (B) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (C) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with U.S. GAAP. Except as set forth in the Registration Statement and the Prospectus, neither the Company nor any Subsidiary is in default with respect to any Indebtedness.
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(qq) Regulation M Compliance. The Company has not, and to its knowledge no one authorized to act on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Offered Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Offered Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Underwriter in connection with the Offering.
(rr) EGC Status and Testing-the-Waters Communications. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Test-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company”, as defined in Section 2(a) of the Act (“Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act. The Company (i) has not alone engaged in any Testing-the-Waters Communications other than Testing-the-Waters Communications with the consent of the Underwriter with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Underwriter to engage in Testing-the-Waters Communications. The Company reconfirms that the Underwriter has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule F hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act. As of the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers, no individual Written Testing-the-Waters Communications, when considered together with the Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(ss) Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Offered Securities to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
(tt) Insurance. The Company maintains cyber errors and omissions, property, and business interruption insurance coverage, in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(uu) No Finder’s Fee. There are no contracts, agreements, or understandings between the Company or its Subsidiaries and any other person that would give rise to a valid claim against the Company or its Subsidiaries or the Underwriter for a brokerage commission, finder’s fee or other like payment in connection with this Offering, or any other arrangements, agreements, understandings, payments, or issuance with respect to the Company, or its Subsidiaries, or any of their respective officers, directors, shareholders, partners, employees or related parties that may affect the Underwriter’s compensation as determined by FINRA.
(vv) No FINRA Affiliations. To the Company’s knowledge and except as disclosed to the Underwriter in writing, no (i) officer or director of the Company or its subsidiaries, (ii) owner of 10% or more of any class of the Company’s securities or (iii) owner of any amount of the Company’s unregistered securities acquired within the 180-day immediately prior to the date that the Registration Statement was initially filed to the Commission, has any direct or indirect affiliation or association with any FINRA member. The Company will advise the Underwriter and counsel to the Underwriter if it becomes aware that any such person described in (i) to (iii) under this Section 1(vv) is or becomes an affiliate or associated person of a FINRA member participating in the offering.
(ww) Operating and Other Data. All operating and other data pertaining to the Disclosure Package and the Prospectus are true and accurate in all materials respects.
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(xx) Third-party Data. Any statistical, industry-related and market-related data, which are included in the Disclosure Package and the Prospectus, is based on or derived from sources that the Company reasonably and in good faith believes to be reliable and accurate, and such data agrees with the sources from which it is derived, and the Company has obtained the written consent for the use of such data from such sources to the extent required.
(yy) Compliance with Environmental Laws. The Company and its Subsidiaries are (A) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (B) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (C) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such non-compliance with applicable Environmental Laws, failure to receive required permits, licenses or other approvals, or liability would not have a Material Adverse Effect.
(zz) Compliance with Law, Constitutive Documents and Contracts. Neither the Company nor any of the Subsidiaries is (A) in breach or violation of any provision of applicable law (including, but not limited to, any applicable law concerning information collection and user privacy protection) or (B) in breach or violation of its respective constitutive documents, or (C) in default under (nor has any event occurred that, with notice, lapse of time or both, would result in any breach or violation of, constitute a default under or give the holder of any indebtedness (or a person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a part of such indebtedness under) any agreement or other instrument that is binding upon the Company or any of the Subsidiaries, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any of the Subsidiaries, except in the cases of (A) and (B) above, where any such breach, violation or default would not have a Material Adverse Effect.
(aaa) No Unlawful Influence. The Company has not offered, or caused the Underwriter to offer, shares to any person or entity with the intention of unlawfully influencing: (a) a customer or supplier of the Company or any affiliate of the Company to alter the customer’s or supplier’s level or type of business with the Company or such affiliate or (b) a journalist or publication to write or publish favorable information about the Company or any such affiliate.
(bbb) Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.
(ccc) Representation of Officers. Any certificate signed by an officer of the Company and delivered to the Underwriter or to counsel for the Underwriter shall be deemed to be a representation and warranty by the Company to the Underwriter as to the matters set forth therein. The Company acknowledges that the Underwriter and, for purposes of the opinions to be delivered pursuant to Section 8 hereof, counsel to the Company, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.
SECTION 2. Representations and Warranties of the Selling Shareholders.
Each Selling Shareholder, severally and not jointly, represents and warrants to and agrees with the Underwriter that:
(a) This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Shareholder.
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(b) The execution and delivery by such Selling Shareholder of, and the performance by such Selling Shareholder of its obligations under, this Agreement, will not contravene (i) any provision of applicable law, or (ii) the certificate of incorporation or bylaws or equivalent of such Selling Shareholder (if such Selling Shareholder is a company or corporation), or (iii) any agreement or other instrument binding upon such Selling Shareholder or (iv) any judgment, order or decree of any governmental body, agency or court having jurisdiction over such Selling Shareholder, except in the case of clauses (i), (iii) and (iv) as would not, individually or in the aggregate, have a material adverse effect on the ability of the Selling Shareholder to consummate the transactions contemplated by this Agreement, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by such Selling Shareholder of its obligations under this Agreement of such Selling Shareholder, except such as have been obtained and made under the Securities Act, such as may be required by the Exchange Act or the rules and regulations thereunder or may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Ordinary Shares.
(c) Such Selling Shareholder has, and on the Closing Date will have, good and marketable title to the Ordinary Shares to be sold by such Selling Shareholder hereunder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind, other than pursuant to this Agreement; and upon delivery of such Ordinary Shares and payment of the purchase price therefor as herein contemplated, assuming the Underwriter has no notice of any adverse claim, the Underwriter will receive good and marketable title to the Ordinary Shares purchased by it from such Selling Shareholder, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind.
(f) Such Selling Shareholder is not prompted by any information concerning the Company or its Subsidiaries which is not set forth in the Disclosure Package to sell its Ordinary Shares pursuant to this Agreement.
(g) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not, as of the date of such amendment or supplement, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Disclosure Package does not, and at the time of each sale of the Shares in connection with the offering when the Prospectus is not yet available to prospective purchasers and at the Closing Date (as defined in Section 3), the Disclosure Package, as then amended or supplemented by the Company, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (iii) each broadly available road show, if any, when considered together with the Disclosure Package, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (iv) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that the representations and warranties set forth in this Section 2(g) are limited to statements or omissions made in reliance upon and in conformity with information relating to such Selling Shareholder furnished to the Company in writing by such Selling Shareholder expressly for use in the Registration Statement, the Disclosure Package, the Prospectus or any amendments or supplements thereto, it being understood and agreed that the only information furnished by such Selling Shareholder consists of the name of such Selling Shareholder, the number of offered shares and the address and other information with respect to such Selling Shareholder (excluding percentages) which appear in the Registration Statement, Disclosure Package, and the Prospectus in the table (and corresponding footnotes) under the caption “Selling Shareholders” (with respect to each Selling Shareholder, the “Selling Shareholder Information”).
(h) Such Selling Shareholder will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person:
(i) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
(ii) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise).
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SECTION 3. Firm Shares; Additional Shares.
(a) Purchase of Firm Shares. Based on the representations and warranties herein contained, but subject to the terms and conditions herein set forth, severally and not jointly, the Company agrees to issue and sell to the Underwriter an aggregate of 1,280,000 Firm Shares and the Selling Shareholders agree to sell to the Underwriter an aggregate of 730,000 Firm Shares, each Selling Shareholder selling the amount set forth opposite such Selling Shareholder’s name on Schedule A hereto, and the Underwriter agrees to purchase from the Company and the Selling Shareholders the Firm Shares at a purchase price (net of discounts) of $[●] per Ordinary Share.
(b) Delivery of and Payment for Firm Shares. Delivery of and payment for the Firm Shares shall be made at 10:00 A.M., Eastern time, on the third (3rd) business day following the Applicable Time, or at such time as shall be agreed upon by the Underwriter, the Company, and the Selling Shareholders at a place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Underwriter, the Company, and the Selling Shareholders. The hour and date of delivery of and payment for the Firm Shares is called the “Closing Date.” The closing of the payment of the purchase price for, and delivery of certificates representing the Firm Shares, is referred to herein as the “Closing.” Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds upon delivery to the Underwriter of certificates (in form and substance reasonably satisfactory to the Underwriter) representing the Firm Shares (or if uncertificated through the full fast transfer facilities of the Depository Trust Company (the “DTC”)) for the account of the Underwriter. The Firm Shares shall be registered in such names and in such denominations as the Underwriter may request in writing at least two business days prior to the Closing Date. If certificated, the Company and the Selling Shareholders will permit the Underwriter to examine and package the Firm Shares for delivery at least one full business day prior to the Closing Date. The Company and the Selling Shareholders shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Underwriter for all the Firm Shares.
(c) Additional Shares. The Company hereby grants to the Underwriter an option (the “Over-allotment Option”) to purchase up to an additional 192,000 Ordinary Shares (the “Additional Shares”), in each case solely for the purpose of covering over-allotments of such securities, if any. The Over-allotment Option is exercised at the Underwriter’s sole discretion.
(d) Exercise of Over-allotment Option. The Over-allotment Option granted pursuant to Section 3(c) hereof may be exercised by the Underwriter no later than forty-five (45) days after the Closing Date. The purchase price to be paid per Additional Shares shall be equal to the price per Firm Share in Section 3(a). The Underwriter shall not be under any obligation to purchase any Additional Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may only be exercised by a formal written notice signed by authorized signature of the Underwriter setting forth the number of Additional Shares to be purchased and the date and time for delivery of and payment for the Additional Shares (the “Exercise Notice”). Any oral notice or email notice to the Company from the Underwriter shall be confirmed by the Exercise Notice via overnight mail or facsimile or other electronic transmission. The date and time for delivery of and payment for the Additional Shares (the “Option Closing Date”) shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Underwriter, at the offices of the Underwriter’s counsel at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Underwriter. If such delivery and payment for the Additional Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Additional Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriter the number of Additional Shares specified in such notice and (ii) the Underwriter shall purchase that portion of the total number of Additional Shares.
(e) Delivery and Payment of Additional Shares. Payment for the Additional Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, upon delivery to the Underwriter of certificates (in form and substance satisfactory to the Underwriter) representing the Additional Shares (or through the facilities of DTC) for the account of the Underwriter. The Additional Shares shall be registered in such name or names and in such authorized denominations as the Underwriter may request in writing at least two (2) full Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Additional Shares except upon tender of payment by the Underwriter for applicable Additional Shares. The Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time and date are simultaneous with the Closing Date, the term “Closing Date” shall refer to the time and date of delivery of the Firm Shares and Additional Shares.
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SECTION 4. Covenants of the Company.
The Company also covenants and agrees with the Underwriter as follows:
(a) Underwriter’s Review of Proposed Amendments and Supplements. During the period beginning at the Applicable Time and ending on the later of the Closing Date or such date as, in the opinion of counsel for the Underwriter, the Prospectus is no longer required by law to be delivered in connection with sales by the Underwriter or selected dealers, including under circumstances where such requirement may be satisfied pursuant to Rule 172 under the Securities Act (the “Prospectus Delivery Period”), prior to amending or supplementing the Registration Statement or the Prospectus, including any amendment or supplement through incorporation by reference of any report filed under the Exchange Act, the Company shall furnish to the Underwriter for review a copy of each such proposed amendment or supplement, and the Company shall not file any such proposed amendment or supplement to which the Underwriter reasonably objects.
(b) Securities Act Compliance. After the date of this Agreement, during the Prospectus Delivery Period, the Company shall promptly advise the Underwriter in writing (i) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (ii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to the Pricing Prospectus or the Prospectus, (iii) of the time and date that any post-effective amendment to the Registration Statement becomes effective and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order or notice preventing or suspending the use of the Registration Statement, the Pricing Prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Offered Securities from any securities exchange upon which they are listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. If the Commission shall enter any such stop order or order or notice of prevention or suspension at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment or will file a new registration statement and use its best efforts to have such new registration statement declared effective as soon as practicable. Additionally, the Company agrees that it shall comply with the provisions of Rules 424(b) and 430A, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder and will confirm that any filings made by the Company under such Rule 424(b) were received in a timely manner by the Commission.
(c) Exchange Act Compliance. During the Prospectus Delivery Period, to the extent the Company becomes subject to reporting obligation under the Exchange Act, the Company will file all documents required to be filed with the Commission pursuant to Sections 13, 14 or 15 of the Exchange Act in the manner and within the time periods required by the Exchange Act.
(d) Amendments and Supplements to the Registration Statement, Prospectus and Other Securities Act Matters. If, during the Prospectus Delivery Period, any event or development shall occur or condition exist as a result of which the Disclosure Package or the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, as the case may be, not misleading, or if it shall be necessary to amend or supplement the Disclosure Package or the Prospectus, in order to make the statements therein, in the light of the circumstances under which they were made, as the case may be, not misleading, or if in the opinion of the Underwriter it is otherwise necessary to amend or supplement the Registration Statement, the Disclosure Package or the Prospectus, or to file a new registration statement containing the Prospectus, in order to comply with law, including in connection with the delivery of the Prospectus, the Company agrees to (i) notify the Underwriter of any such event or condition (unless such event or condition was previously brought to the Company’s attention by the Underwriter during the Prospectus Delivery Period) and (ii) promptly prepare (subject to Section 4(a) and Section 4(e) hereof), file with the Commission (and use its best efforts to have any amendment to the Registration Statement or any new registration statement to be declared effective) and furnish at its own expense to the Underwriter and to dealers, amendments or supplements to the Registration Statement, the Disclosure Package or the Prospectus, or any new registration statement, necessary in order to make the statements in the Disclosure Package or the Prospectus as so amended or supplemented, in the light of the circumstances under which they were made, as the case may be, not misleading or so that the Registration Statement, the Disclosure Package or the Prospectus, as amended or supplemented, will comply with law.
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(e) Permitted Free Writing Prospectuses. The Company represents that it has not made, and agrees that, unless it obtains the prior written consent of the Underwriter, it will not make, any offer relating to the Offered Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405 under the Securities Act) required to be filed by the Company with the Commission or retained by the Company under Rule 433 under the Securities Act; provided that the prior written consent of the Underwriter hereto shall be deemed to have been given in respect of each free writing prospectuses listed on Schedule B hereto. Any such free writing prospectus consented to by the Underwriter is hereinafter referred to as a “Permitted Free Writing Prospectus.” The Company agrees that (i) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and (ii) has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 under the Securities Act applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.
(f) Copies of any Amendments and Supplements to the Prospectus. The Company agrees to furnish the Underwriter, without charge, during the Prospectus Delivery Period, as many copies of each of the preliminary prospectuses, the Prospectus and the Disclosure Package and any amendments and supplements thereto (including any documents incorporated or deemed incorporated by reference therein) as the Underwriter may reasonably request.
(g) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Offered Securities sold by it substantially in the manner described under the caption “Use of Proceeds” in the Disclosure Package and the Prospectus.
(h) Transfer Agent. The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Offered Securities.
(i) Internal Controls. The Company will maintain a system of internal accounting controls designed to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with U.S. GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The internal controls, upon consummation of the Offering, will be overseen by the audit committee of the Company’s board of directors in accordance with the rules of the Nasdaq Stock Market (“Nasdaq”).
(j) Exchange Listing. The Ordinary Shares have been duly authorized for listing on the Nasdaq Capital Market, subject to official notice of issuance. Upon consummation of the Offering, the Company will be in material compliance with the provisions of the rules and regulations promulgated by Nasdaq and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements (to the extent applicable to the Company as of the date hereof or the Closing Date; and subject to all exemptions and exceptions from the requirements thereof as are set forth therein, to the extent applicable to the Company). Without limiting the generality of the foregoing and subject to the qualifications above: (i) all members of the Company’s board of directors who are required to be “independent” (as that term is defined under applicable laws, rules and regulations), including, without limitation, all members of each of the audit committee, compensation committee and nominating and corporate governance committee of the Company’s board of directors, meet the qualifications of independence as set forth under such laws, rules and regulations, (ii) the audit committee of the Company’s board of directors has at least one member who is an “audit committee financial expert” (as that term is defined under such laws, rules and regulations), and (iii) that, based on discussions with Nasdaq, the Company meets all requirements for listing on the Nasdaq Capital Market.
(k) Absence of Further Requirements. No consent, approval, authorization, or order of, or filing or registration with, any person (including any governmental or regulatory agency or body or any court) is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the Offering, issuance and sale of the Offered Securities, except such as have been obtained, or made on or prior to the Closing Date, and are, or on the Closing Date will be, in full force and effect, including (i) under applicable blue sky laws in any jurisdiction in which the Offered Securities are offered and sold and (ii) under the rules and regulations of the FINRA. No authorization, consent, approval, license, qualification or order of, or filing or registration with any person (including any governmental agency or body or any court) in any foreign jurisdiction is required for the consummation of the transactions contemplated by this Agreement in connection with the Offering, issuance and sale of the Offered Securities under the laws and regulations of such jurisdiction except such as have been obtained or made.
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(l) Future Reports to the Underwriter. For one year after the date of this Agreement, the Company will furnish, if not otherwise available on EDGAR, to the Underwriter pursuant to the addresses and contacts provided in Section 15 of this Agreement: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, shareholders’ equity and cash flows for the year then ended and the opinion thereon of the Company’s independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 20-F, interim financial statements using a Form 6-K or other report filed by the Company with the Commission; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its shares.
(m) No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company.
(n) Existing Lock-up Agreements. Except as described in the Registration Statement, the Disclosure Package and the Prospectus, there are no existing agreements between the Company and its shareholders that prohibit the sale, transfer, assignment, pledge, or hypothecation of any of the Company’s Ordinary Shares. The Company will direct the transfer agent to place stop transfer restrictions upon the Ordinary Shares of the Company that are bound by such “lock-up” agreements for the duration of the periods contemplated therein.
(o) Company Lock-Up.
(a) The Company will not, without the prior written consent of the Underwriter, from the date of execution of this Agreement and continuing for a period of one hundred eighty (180) days after the Effective Date (the “Lock-Up Period”), (i) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to, any Ordinary Share or any securities convertible into or exercisable or exchangeable for Ordinary Shares, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Ordinary Shares or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise, except to the Underwriter pursuant to this Agreement. The Company agrees not to accelerate the vesting of any option or warrant or the lapse of any repurchase right prior to the expiration of the Lock-Up Period.
(b) The restrictions contained in Section 4(o)(a)(i) hereof shall not apply to: (i) the Offered Securities to be sold hereunder, (ii) the issuance by the Company of Ordinary Shares upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof and disclosed in the Registration Statement, the Disclosure Package or the Prospectus, (iii) the issuance by the Company, or the filing by the Company of a Registration Statement related thereto, of stock options or shares of the Company under any equity compensation plan of the Company and (iv) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the Lock-Up Period and provided that any such issuance shall only be to a Person (or to the equity holders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital.
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(p) Right of First Refusal. Provided that the Firm Shares are sold in accordance with the terms of this Agreement, the Underwriter shall have an irrevocable right of first refusal (the “Right of First Refusal”), for a period of twelve (12) months after the Closing Date, to act as lead or joint investment banker, lead or joint book-runner, and/or lead or joint placement agent, at the Underwriter’s sole discretion, for each and every future public and private equity and debt offering, including but not limited to, (i) any equity, equity-linked, debt or mezzanine financing or other investment in the Company (including a secondary sale or offering by security holders effected with the Company’s assistance); (ii) any tender offer or exchange offer for debt or convertible debt securities; (iii) any merger, consolidation, sale, transfer or other disposition of all or a material portion of the Company’s stocks or asset; (iv) restructuring transactions including extraordinary dividend, stock repurchases, and spin-offs (each, a “Subject Transaction”), during such twelve (12) month period, of the Company, or any successor to or Subsidiary of the Company, on terms and conditions customary for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction during the twelve (12) month period referred to above without the express written consent of the Underwriter. The Company shall notify the Underwriter of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by electronic mail or overnight courier service addressed to the Underwriter. If the Underwriter declines the terms of such Subject Transaction or fails to exercise its Right of First Refusal with respect to any Subject Transaction within five (5) Business Days after the mailing of such written notice, then the Underwriter shall have no further claim or right with respect to the Subject Transaction. The Underwriter may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by the Underwriter shall not adversely affect the Underwriter’s Right of First Refusal with respect to any other Subject Transaction during the twelve (12) month period agreed to above. The terms and conditions of any such engagements shall be set forth in separate agreements and may be subject to, among other things, satisfactory completion of due diligence by the Underwriter, market conditions, the absence of a material adverse change to the Company’s business, financial condition and prospects, approval of the Underwriter’s internal committee and any other conditions that the Underwriter may deem appropriate for transactions of such nature.
(q) Tail Financing. The Underwriter shall be entitled to a cash fee equal to eight percent (8.0%) of the gross proceeds received by the Company from the sale of the securities to any investor actually introduced by the Underwriter to the Company during the period of engagement between the Company and the Underwriter, as amended (the “Engagement Period”) (the “Tail Financing”), and such Tail Financing is consummated at any time during the Engagement Period or within the twelve (12) month period following the expiration of the Engagement Period, provided that such financing is by a party actually introduced to the Company in an offering in which the Company has direct knowledge of such party’s participation.
SECTION 5. Covenants of the Selling Shareholders.
Each Selling Shareholder, severally and not jointly, covenants with the Underwriter as follows:
(a) No Fiduciary Duties. Such Selling Shareholder acknowledges and agrees that the Underwriter’s responsibility to such Selling Shareholder is solely contractual in nature and that the Underwriter or its affiliates or any selling agent shall not be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to such Selling Shareholder or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
(b) Blue Sky Qualifications. Such Selling Shareholder shall use its best efforts, in cooperation with the Underwriter, if necessary, to qualify the Ordinary Shares for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Underwriter may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Shares; provided, however, that such Selling Shareholder shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
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SECTION 6. Payment of Fees and Expenses. The Company will pay the Underwriter a non-accountable expense allowance of 1.0% of the gross proceeds from the Offering upon the Closing of the Offering. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay reasonable, actual and accountable costs, fees and expenses incurred in connection with the transactions contemplated hereby, including without limitation to, (i) all expenses incident to the issuance and delivery of the Offered Securities (including all printing and engraving costs, if any), (ii) all fees and expenses of the clearing firm, registrar and transfer agent of the Offered Securities, (iii) all necessary issue, transfer and other stamp taxes in connection with the Offering, (iv) all fees and expenses of the Company’s counsel, independent public or certified public accountants and other advisors, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each Issuer Free Writing Prospectus, each preliminary prospectus and the Prospectus, and all amendments and supplements thereto, and this Agreement, and (vi) all filing fees, attorneys’ fees and expenses incurred by the Company, or the Underwriter, in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Offered Securities for offer and sale under the state securities or blue sky laws, and, if requested by the Underwriter, preparing and printing a “Blue Sky Survey” or memorandum, and any supplements thereto, advising the Underwriter of such qualifications, registrations and exemptions, less any advances previously paid which as of the date hereof.
The Company will also reimburse the Underwriter’s accountable expenses, promptly upon receipt of an invoice therefore, for out-of-pocket costs and expenses, in total up to three hundred thousand dollars ($300,000) including but not limited to, (A) fees of legal counsel incurred by the Underwriter in connection with the offering; (B) all third party due diligence include the cost of any background checks; (C) IPREO book-building and prospectus tracking software; (D) reasonable roadshow expenses; (E) preparation of bound volumes and Lucite cube mementos in such quantities as the Underwriter including Underwriter’s US & local counsel shall reasonably request, and (F) background check consultant. The Company has advanced one hundred thousand dollars ($100,000) to the Underwriter to partially cover its out-of-pocket accountable expenses. Any expense over $5,000 shall require prior written or email approval of the Company. The advances against OPE will be returned to the Company to the extent such out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4).
SECTION 7. [Intentionally Omitted]
SECTION 8. Conditions of the Obligations of the Underwriter. The obligations of the Underwriter to purchase the Offered Securities as provided herein on the Closing Date or the Option Closing Date shall be subject to (1) the accuracy of the representations and warranties on the part of the Company and the Selling Shareholders set forth in Section 1 and Section 2, respectively, hereof as of the date hereof and as of the Closing Date or the Option Closing Date as though then made; (2) the timely performance by the Company and the Selling Shareholders of their covenants and other obligations hereunder; (3) no objections from FINRA as to the amount of compensation allowable or payable to the Underwriter as described in the Registration Statement; and (4) each of the following additional conditions:
(a) Accountant’s Comfort Letter. On the date hereof, the Underwriter shall have received from each Accountant, a letter dated the date hereof addressed to the Underwriter, in form and substance satisfactory to the Underwriter, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to the Underwriter, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement and the Prospectus.
(b) Effectiveness of Registration Statement; Compliance with Registration Requirements; No Stop Order. During the period from and after the execution of this Agreement to and including the Closing Date or the Option Closing Date, as applicable:
(i) the Company shall have filed the Prospectus with the Commission (including the information required by Rule 430A under the Securities Act) in the manner and within the period required by Rule 424(b) under the Securities Act; or the Company shall have filed a post-effective amendment to the Registration Statement containing the information required by such Rule 430A, and such post-effective amendment shall have become effective; and
(ii) no stop order suspending the effectiveness of the Registration Statement, or any post-effective amendment to the Registration Statement, shall be in effect and no proceedings for such purpose shall have been instituted or threatened by the Commission.
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(c) No Material Adverse Change. For the period from and after the date of this Agreement to and including the Closing Date or the Option Closing Date, as applicable, in the reasonable judgment of the Underwriter there shall not have occurred any Material Adverse Change.
(d) Officers’ Certificate. On the Closing Date and/or the Option Closing Date, the Underwriter shall have received a written certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Company, dated as of such date, to the effect that the signers of such certificate have reviewed the Registration Statement, the Disclosure Package and the Prospectus and any amendment or supplement thereto, each Issuer Free Writing Prospectus and this Agreement, to the effect that, to the knowledge of such individual:
(i) The representations and warranties of the Company in this Agreement are true and correct, as if made on and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date;
(ii) No stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus has been issued and no proceedings for that purpose have been instituted or are pending or, to the Company’s knowledge, threatened under the Securities Act; no order having the effect of ceasing or suspending the distribution of the Offered Securities or any other securities of the Company has been issued by any securities commission, securities regulatory authority or stock exchange in the United States and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, contemplated by any securities commission, securities regulatory authority or stock exchange in the United States; and
(iii) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been: (a) any Material Adverse Change; (b) any transaction that is material to the Company and the Subsidiaries taken as a whole, except transactions entered into in the ordinary course of business; (c) any obligation, direct or contingent, that is material to the Company and the Subsidiaries taken as a whole, incurred by the Company or any Subsidiary, except obligations incurred in the ordinary course of business; (d) any material change in the share capital (except changes thereto resulting from the exercise of outstanding options or warrants or conversion of outstanding indebtedness into Ordinary Shares of the Company) or outstanding indebtedness of the Company or any Subsidiary (except for the conversion of such indebtedness into Ordinary Shares of the Company); (e) any dividend or distribution of any kind declared, paid or made on Ordinary Shares of the Company; or (f) any loss or damage (whether or not insured) to the property of the Company or any Subsidiary which has been sustained or will have been sustained which has a Material Adverse Effect.
(e) Secretary’s Certificate. On the Closing Date and/or the Option Closing Date, the Underwriter shall have received a certificate of the Company signed by the Secretary of the Company, dated such Closing Date, certifying: (i) that the Company’s memorandum and articles of association, as amended and restated, attached to such certificate is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s board of directors relating to the Offering attached to such certificate are in full force and effect and have not been modified; and (iii) the good standing of the Company. The documents referred to in such certificate shall be attached to such certificate.
(f) Bring-down Comfort Letter. On the Closing Date and/or the Option Closing Date, the Underwriter shall have received from each Accountant, a letter dated such date, in form and substance satisfactory to the Underwriter, to the effect that each Accountant reaffirms the statements made in the letter furnished by it pursuant to subsection (a) of this Section 8, except that the specified date referred to therein for the carrying out of procedures shall be no more than three (3) business days prior to the Closing Date and/or the Option Closing Date.
(g) Lock-up Agreement from Certain Securityholders of the Company. On or prior to the date hereof, the Company shall have furnished to the Underwriter an agreement substantially in the form of Exhibit A hereto from each of the Company’s officers, directors, security holders of five (5%) or more of the Company’s Ordinary Shares or securities convertible into or exercisable for Ordinary Share prior to the Offering listed on Schedule D hereto.
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(h) Exchange Listing. The Offered Securities to be delivered on the Closing Date and/or the Option Closing Date shall have been approved for listing on the Nasdaq Capital Market, subject to official notice of issuance.
(i) Company Counsel Opinions. On the Closing Date and/or the Option Closing Date, the Underwriter shall have received
| (i) | the opinion of Hunter Taubman Fischer & Li LLC, counsel to the Company, in form and substance reasonably satisfactory to the Underwriter including negative assurance language; |
| (ii) | the opinion of Forbes Hare, British Virgin Islands counsel to the Company, in form and substance reasonably satisfactory to the Underwriter; and |
| (iii) | the opinion of Insights Law LLC, Singapore counsel to the Company, in form and substance reasonably satisfactory to the Underwriter. |
The Underwriter shall rely on the opinions of Forbes Hare, filed as Exhibit 5.1 to the Registration Statement, as to the due incorporation, validity of the Offered Securities and due authorization, execution, and delivery of the Agreement.
(j) Opinion and Negative Assurance Letter of Counsel to the Underwriter. The Crone Law Group P.C., counsel to the Underwriter, shall have furnished to the Underwriter its (i) written opinion, addressed to the Underwriter and dated the Closing Date and/or Option Closing Date, as the case may be, and (ii) negative assurance letter, addressed to the Underwriter and dated the Closing Date and/or Option Closing Date, as the case may be, and the Company shall have furnished to such counsel such documents and information as such counsel may reasonably request to enable them to pass on such matters.
(k) Additional Documents. On or before the Closing Date or the Option Closing Date, as applicable, the Underwriter and counsel for the Underwriter shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Offered Securities as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 8 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Underwriter by written notice to the Company at any time on or prior to the Closing Date or the Option Closing Date, as applicable, which termination shall be without liability on the part of any party to any other party, except that Section 6 (with respect to the reimbursement of out-of-pocket accountable, bona fide expenses actually incurred by the Underwriter) and Section 10 shall at all times be effective and shall survive such termination.
SECTION 9. Effectiveness of this Agreement. This Agreement shall not become effective until the later of (i) the execution of this Agreement by the parties hereto and (ii) notification (including by way of oral notification from the reviewer at the Commission) by the Commission to the Company of the effectiveness of the Registration Statement under the Securities Act.
SECTION 10. Indemnification.
(a) Indemnification by the Company and the Selling Shareholders. The Company shall indemnify and hold harmless the Underwriter, its respective affiliates and each of its respective directors, officers, members, employees and agents and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Underwriter Indemnified Parties,” and each a “Underwriter Indemnified Party”) from and against any losses, claims, damages or liabilities (including in settlement of any litigation if such settlement is effected with the prior written consent of the Company) arising out of (i) an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act Regulations, or arise out of or are based upon the omission from the Registration Statement, or alleged omission to state therein, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; or (ii) an untrue statement or alleged untrue statement of a material fact contained in the Prospectus, or any amendment or supplement thereto, or in any other materials used in connection with the Offering, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and shall reimburse such Underwriter Indemnified Party for any legal or other expenses reasonably incurred by it in connection with evaluating, investigating or defending against such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense or liability arises out of or is based upon an untrue statement in, or omission from any preliminary prospectus, the Registration Statement or the Prospectus, or any such amendment or supplement thereto, or any Issuer Free Writing Prospectus or in any other materials used in connection with the Offering made in reliance upon and in conformity with the Underwriter Information.
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Each Selling Shareholder severally and not jointly, agrees to indemnify and hold harmless the Underwriter Indemnified Parties from and against any losses, claims, damages or liabilities (including in settlement of any litigation if such settlement is effected with the prior written consent of the Company) arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including the information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to Rules 430A and 430B of the Securities Act Regulations, any preliminary prospectus or Prospectus, or any amendment or supplement thereto, or in any other materials used in connection with the Offering, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (i) except in so far as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon any Underwriter Information and (ii) only to the extent such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with the Selling Shareholders Information and, provided, further, that the aggregate liability of any Selling Shareholder pursuant to this subsection and the contribution provisions below shall be limited to an amount equal to the aggregate Public Offering Price, less underwriting discounts, of the Ordinary Shares sold by the Selling Shareholders under this Agreement (with respect to each Selling Shareholder, the “Selling Shareholder Proceeds”). The indemnification obligations under this Section 10(a) are not exclusive and will be in addition to any liability, which the Underwriter might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to each Underwriter Indemnified Party.
(b) Indemnification by the Underwriter. The Underwriter shall indemnify and hold harmless the Company, the Selling Shareholders, and the Company’s affiliates and each of their respective directors, officers, employees, agents and each person, if any, who controls the Company and the Selling Shareholders within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Company and Selling Shareholder Indemnified Parties” and each a “Company and Selling Shareholder Indemnified Party”) from and against any losses, claims, damages or liabilities (including in settlement of any litigation if such settlement is effected with the prior written consent of the Underwriter) arising out (i) any untrue statement of a material fact contained in any preliminary prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d) of the Securities Act Regulations, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, or (ii) the omission to state in any preliminary prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d) of the Securities Act Regulations, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or omission was made in reliance upon and in conformity with the Underwriter Information and shall reimburse the Company and/or the Selling Shareholders for any legal or other expenses reasonably incurred by such party in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability, action, investigation or proceeding, as such fees and expenses are incurred. Notwithstanding the provisions of this Section 10(b), in no event shall any indemnity by the Underwriter under this Section 10(b) exceed the total discounts received by the Underwriter in connection with the Offering. The indemnification obligations under this Section 10(b) are not exclusive and will be in addition to any liability, which the Company and/or the Selling Shareholders might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to each Company and Selling Shareholder Indemnified Party.
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(c) Procedure. Promptly after receipt by an indemnified party under this Section 10 of notice of the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party under this Section 10, notify such indemnifying party in writing of the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 10 except to the extent it has been materially adversely prejudiced by such failure; and, provided, further, that the failure to notify an indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 10. If any such action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense of such action with counsel reasonably satisfactory to the indemnified party (which counsel shall not, except with the written consent of the indemnified party, be counsel to the indemnifying party). After notice from the indemnifying party to the indemnified party of its election to assume the defense of such action, except as provided herein, the indemnifying party shall not be liable to the indemnified party under Section 10(a) or 10(b), as applicable, for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense of such action other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense of such action but the fees and expenses of such separate counsel (other than reasonable costs of investigation) shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized in writing by the Company and/or the Selling Shareholders in the case of a claim for indemnification under Section 10(a), (ii) such indemnified party shall have been advised by its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party within a reasonable period of time after notice of the commencement of the action or the indemnifying party does not diligently defend the action after assumption of the defense, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of (or, in the case of a failure to diligently defend the action after assumption of the defense, to continue to defend) such action on behalf of such indemnified party and the indemnifying party shall be responsible for reasonable legal or other expenses subsequently incurred by such indemnified party in connection with the defense of such action; provided, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for any such indemnified party (in addition to any local counsel), which firm shall be designated in writing by the Underwriter if the indemnified party under this Section 10 is an Underwriter Indemnified Party or by the Company and/or the Selling Shareholders if an indemnified party under this Section 10 is a Company and Selling Shareholder Indemnified Party. Subject to this Section 10(c), the amount payable by an indemnifying party under Section 10 shall include, but not be limited to, (x) reasonable legal fees and expenses of counsel to the indemnified party and any other expenses in investigating, or preparing to defend or defending against, or appearing as a third party witness in respect of, or otherwise incurred in connection with, any action, investigation, proceeding or claim, and (y) all amounts paid in settlement of any of the foregoing. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of judgment with respect to any pending or threatened action or any claim whatsoever, in respect of which indemnification or contribution could be sought under this Section 10 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party in form and substance reasonably satisfactory to such indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. Subject to the provisions of the following sentence, no indemnifying party shall be liable for settlement of any pending or threatened action or any claim whatsoever that is effected without its written consent (which consent shall not be unreasonably withheld or delayed), but if settled with its written consent, if its consent has been unreasonably withheld or delayed or if there be a judgment for the plaintiff in any such matter, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, if at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated herein effected without its written consent if (i) such settlement is entered into more than ninety (90) days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least sixty (60) days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
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(d) Contribution. If the indemnification provided for in this Section 10 is unavailable or insufficient to hold harmless an indemnified party under Section 10(a) or Section 10(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid, payable or otherwise incurred by such indemnified party as a result of such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof), as incurred, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other hand from the Offering, or (ii) if the allocation provided by clause (i) of this Section 10(d) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) of this Section 10(d) but also the relative fault of the indemnifying party on the one hand and the indemnified party on the other with respect to the statements, omissions, acts or failures to act which resulted in such loss, claim, damage, expense or liability (or any action, investigation or proceeding in respect thereof) as well as any other relevant equitable considerations as determined in a final judgment by a court of competent jurisdiction. The relative benefits received by the Company, the Selling Shareholders, and the Underwriter with respect to such offering shall be deemed to be in the same proportion as the total proceeds from the Offering purchased by investors as contemplated by this Agreement (before deducting expenses) received by the Company and the Selling Shareholders bear to the total underwriting discounts received by the Underwriter in connection with the Offering, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company, the Selling Shareholders, and the Underwriter shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Shareholder, or the Underwriter, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company by the Underwriter for use in any preliminary prospectus, the Registration Statement or the Prospectus, or in any amendment or supplement thereto, consists solely of the Underwriter Information. The Company, the Selling Shareholders, and the Underwriter agree that it would not be just and equitable if contributions pursuant to this Section 10(d) be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage, expense, liability, action, investigation or proceeding referred to above in this Section 10(d) shall be deemed to include, for purposes of this Section 10(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. Notwithstanding the provisions of this Section 10(d), the Underwriter shall not be required to contribute any amount in excess of the total discounts received in cash by the Underwriter in connection with the Offering less the amount of any damages that the Underwriter have otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement, omission or alleged omission, act or alleged act or failure to act or alleged failure to act. No person, guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
SECTION 11. Termination of this Agreement. Prior to the Closing Date, whether before or after notification by the Commission to the Company of the effectiveness of the Registration Statement under the Securities Act, this Agreement may be terminated by the Underwriter by written notice given to the Company and the Selling Shareholders if at any time (i) trading or quotation in the Company’s Ordinary Shares shall have been suspended or limited by the Commission or by Nasdaq; (ii) a general banking moratorium shall have been declared by any U.S. federal authorities; or (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development involving a prospective substantial change in United States’ or international political, financial or economic conditions that, in the reasonable judgment of the Underwriter, is material and adverse and makes it impracticable to market the Offered Securities in the manner and on the terms described in the Prospectus or to enforce contracts for the sale of the Offered Securities. Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company and the Selling Shareholders to the Underwriter, except that the Company shall be, subject to demand by the Underwriter, obligated to reimburse the Underwriter for only those reasonable, accountable and properly documented out-of-pocket expenses (including the reasonable fees and expenses of their counsel, and expenses associated with a due diligence report), actually incurred by the Underwriter in connection herewith as allowed under FINRA Rule 5110, less any amounts previously paid by the Company; provided, however, that all such expenses shall not exceed $300,000 in the aggregate, (b) the Underwriter to the Company or the Selling Shareholder, or (c) of any party hereto to any other party except that the provisions of Section 6 (with respect to the reimbursement of out-of-pocket accountable, bona fide expenses actually incurred by the Underwriter) and Section 10 shall at all times be effective and shall survive such termination.
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SECTION 12. No Advisory or Fiduciary Responsibility. The Company and the Selling Shareholders hereby acknowledge that the Underwriter is acting solely as underwriter in connection with the Offering. The Company and the Selling Shareholders further acknowledge that the Underwriter is acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s-length basis and in no event do the parties intend that the Underwriter act or be responsible as a fiduciary to the Company or the Selling Shareholders, their management, shareholders, creditors or any other person in connection with any activity that the Underwriter may undertake or have undertaken in furtherance of the Offering, either before or after the date hereof. The Underwriter hereby expressly disclaim any fiduciary or similar obligations to the Company or the Selling Shareholders, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company and the Selling Shareholders hereby confirm their understanding and agreement to that effect. The Company and the Selling Shareholders hereby further confirm their understanding that the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the Company or the Selling Shareholders with respect to the Offering contemplated hereby or the process leading thereto, including, without limitation, any negotiation related to the pricing of the Offered Securities; and the Company and the Selling Shareholders have consulted their own legal and financial advisors to the extent it has deemed appropriate in connection with this Agreement and the Offering. The Company, the Selling Shareholders, and the Underwriter agree that they are each responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the Underwriter to the Company and/or the Selling Shareholders regarding such transactions, including but not limited to any opinions or views with respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company or the Selling Shareholders. The Company and Selling Shareholders hereby waive and release, to the fullest extent permitted by law, any claims that the Company or the Selling Shareholders may have against the Underwriter with respect to any breach or alleged breach of any fiduciary or similar duty to the Company or the Selling Shareholders in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
SECTION 13. Underwriter Default.
(a) If the Underwriter shall default in its obligation to purchase Firm Shares, the Underwriter may in its discretion arrange for another party to purchase the Firm Shares with respect to which such default relates (the “Default Securities”) on the terms contained herein. In the event that within five (5) calendar days after such a default the Underwriter does not arrange for the purchase of the Default Securities as provided in this Section 13, this Agreement shall thereupon terminate, without liability on the part of the Company and the Selling Shareholders with respect thereto (except in each case as provided in Sections 6, 10, 11, 13 and 14) or the Underwriter, but nothing in this Agreement shall relieve the defaulting Underwriter of its liability, if any, to the Company and the Selling Shareholders for damages occasioned by its default hereunder.
(b) In the event that any Default Securities are to be purchased by another party or parties as aforesaid, the Underwriter, the Company, or the Selling Shareholders shall have the right to postpone the Closing Date for a period, not exceeding five (5) Business Days, in order to effect whatever changes may thereby be necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the reasonable opinion of Underwriter’s counsel, may be necessary or advisable. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 13 with like effect as if it had originally been a party to this Agreement with respect to such Default Securities.
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SECTION 14. Representations and Indemnities to Survive Delivery; Third Party Beneficiaries. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers, of the Selling Shareholders, and of the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Underwriter, the Selling Shareholders, or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Offered Securities sold hereunder and any termination of this Agreement.
SECTION 15. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered, emailed or telecopied and confirmed to the parties hereto as follows:
If to the Underwriter:
Prime Number Capital LLC
12 E 49 St, Floor 27,
New York, NY 10017
Attn: Xiaoyan Jiang
Email: xj@pncps.com
Phone No.: 212-590-2303
With a copy (which shall not constitute notice) to:
The Crone Law Group P.C.
420 Lexington Avenue, Suite 2446
New York, NY 10170
Attention: Liang Shih, Esq.
Email: lshih@cronelawgroup.com
If to the Company:
Republic Power Group Limited
158 Kallang Way #06-08
Singapore, Republic of Singapore
S349245
Attn: Ziyang Long
Email: ziyang@republicpower.net
Phone No.: +65 6908 9825
With a copy (which shall not constitute notice) to:
Hunter Taubman Fischer & Li LLC
950 Third Avenue, 19th Floor
New York, NY 10022
Attention: Ying Li
Email: yli@htflawyers.com
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If to the Selling Shareholders:
Mr. Sai Bin Loi
APT Blk 53 Pipit Road #06-92
Singapore 370053
Attention: Sai Bin Loi
Breydales Limited
P.O. Box 957, Offshore Incorporation Centre,
Road Town, Tortola, British Virgin Islands
Attention: Ker Sin Tan
With a copy (which shall not constitute notice) to:
[ ]
Any party hereto may change the address for receipt of communications by giving written notice to the others.
SECTION 16. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and to the benefit of the employees, officers and directors and controlling persons referred to in Section 10, and in each case their respective successors, and no other person will have any right or obligation hereunder. The term “successors” shall not include any purchaser of the Offered Securities as such merely by reason of such purchase.
SECTION 17. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph, or provision hereof. If any Section, paragraph, or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
SECTION 18. Governing Law; Submission to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without giving effect to the choice of law or conflict of laws principles thereof.
Any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York (each, a “New York Court”), and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company and the Selling Shareholders hereby waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company or the Selling Shareholders may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 15 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company and the Selling Shareholders in any action, proceeding or claim. The Company, the Selling Shareholders, and the Underwriter agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor as determined in a final judgment by a court of competent jurisdiction. The Company, the Selling Shareholders, and the Underwriter hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
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SECTION 19. Enforceability of Judgment. The Company and the Selling Shareholders agree that any final judgment against the Company or any of the Selling Shareholders for a fixed or readily calculable sum of money rendered by a New York Court having jurisdiction under its own domestic laws in respect of any suit, action or proceeding against the Company or the Selling Shareholders based upon this Agreement or any transaction contemplated herein and therein would be recognized and enforced, without re-examination or review of the merits of the underlying dispute by the courts of the British Virgin Islands and the Republic of Singapore, or the cause of action in respect of which the original judgment was given or re-litigation of the matters adjudicated upon, by an action commenced on the foreign judgment debt in the courts of the British Virgin Islands and the Republic of Singapore, provided that (i) with respect to courts of the British Virgin Islands and the Republic of Singapore (a) such New York Court had proper jurisdiction over the parties subject to such judgment; (b) such judgment was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the British Virgin Island; (c) such judgment was not obtained by fraud; (d) such judgment is not in respect of taxes, a fine or a penalty; (e) such judgement is final, no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the British Virgin Islands and/or the Republic of Singapore; and (f) there is due compliance with the correct procedures under the laws of the British Virgin Islands and/or the Republic of Singapore. The Company and the Selling Shareholders are not aware of any reason why the enforcement in the British Virgin Islands or the Republic of Singapore of such a New York Court judgment would be, as of the date hereof, contrary to natural justice of the public policy of the British Virgin Islands or the Republic of Singapore.
SECTION 20. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings, and negotiations with respect to the Offering. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.
Each of the parties hereto acknowledges that it is a sophisticated businessperson who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification and contribution provisions of Section 10, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Section 10 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any preliminary prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act.
The respective indemnities, contribution agreements, representations, warranties and other statements of the Company, the Selling Shareholders, and the Underwriter set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of the Underwriter, the officers or employees of the Underwriter, any person controlling any of the Underwriter, the Company, the Selling Shareholders, the officers or employees of the Company and the Selling Shareholders, or any person controlling the Company or the Selling Shareholders, (ii) acceptance of the Offered Securities and payment for them as contemplated hereby and (iii) termination of this Agreement.
[Signature Page Follows]
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If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to the Company and the Selling Shareholders the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.
| Very truly yours, | |||
| REPUBLIC POWER GROUP LIMITED | |||
| By: | |||
| Name: | |||
| Title: | |||
| Sai Bin Loi | |||
| BREYDALES LIMITED | |||
| By: | |||
| Name: | |||
| Title: | |||
The foregoing Underwriting Agreement is hereby confirmed and accepted by the Underwriter as of the date first above written.
| PRIME NUMBER CAPITAL LLC | |||
| By: | |||
| Name: | Xiaoyan Jiang | ||
| Title: | Chairman | ||
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SCHEDULE A
| Selling Shareholder | Number of Firm Shares | |||
| Sai Bin Loi | 365,000 | |||
| Breydales Limited, a British Virgin Islands business company | 365,000 | |||
| Total | 730,000 | |||
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SCHEDULE B
Issuer Free Writing Prospectus(es)
[●]
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SCHEDULE C
Pricing Information
Number of Firm Shares: [●]
Number of Additional Shares: [●]
Public Offering Price per Firm Share: $[●]
Public Offering Price per Additional Share: $[●]
Underwriting Discount per one Share: 8.0% per Firm Share (or $[●] per share)
Underwriting Discount per one Share: 8.0% per Additional Share (or $[●] per share)
Non-accountable expense allowance per Firm Share: 1.0% per share (or $[●] per share)
Non-accountable expense allowance per Additional Share: 1.0% per share (or $[●] per share)
Proceeds to Company per one Firm Share (before expenses): $[●]
Proceeds to Company per one Additional Share (before expenses): $[●]
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SCHEDULE D
Lock-Up Parties
| Name |
| [●] |
| [●] |
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SCHEDULE E
SUBSIDIARIES OF THE REGISTRANT
| Subsidiaries | Place of Incorporation | |
| Republic Power Pte. Ltd. | Singapore |
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EXHIBIT A
Form of Lock-up Agreement
[●], 2023
Prime Number Capital LLC,
12 E 49 St, Floor 27,
New York, NY 10017
Ladies and Gentlemen:
The undersigned understands that Prime Number Capital LLC (the “Underwriter”), propose to enter into an underwriting agreement (the “Underwriting Agreement”), with Republic Power Group Limited (the “Company”) and the certain selling shareholders, in connection to the initial public offering (the “Offering”) of the Company’s ordinary shares, par value $0.000625 per share (the “Shares”).
To induce the Underwriter to continue its efforts in connection with the Offering, the undersigned hereby agrees that, without the prior written consent of the Underwriter, the undersigned will not, during the period commencing on the date hereof and ending one hundred eighty (180) days from the effective date of the registration statement associated with the Offering (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for the Shares (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of the Lock-Up Securities, in cash or otherwise. The foregoing sentence shall not apply to (a) transactions relating to the Shares or other securities acquired in open market transactions after the completion of the Offering, or (b) transfers of the Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of a family member (for purposes of this Lock-up Agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); provided that in the case of any transfer or distribution pursuant to clause (b), each donee or distributee shall sign and deliver a lock-up letter substantially in the form of this Lock-up Agreement; (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be; (e) if the undersigned is a trust, to a trustee or beneficiary of the trust; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) or (d), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Underwriter a Lock-up Agreement substantially in the form of this Lock-up Agreement, (iii) no filing under Section 13 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) or other filing or public announcement shall be required or shall be voluntarily made, (f) the receipt by the undersigned from the Company of ordinary shares upon the vesting of restricted share awards or share units or upon the exercise of options to purchase the Company’s ordinary shares issued under an equity incentive plan of the Company or an employment arrangement described in the Pricing Prospectus (as defined in the Underwriting Agreement) (the “Plan Shares”) or the transfer of ordinary shares or any securities convertible into ordinary shares to the Company upon a vesting event of the Company’s securities or upon the exercise of options to purchase the Company’s securities, in each case on a “cashless” or “net exercise” basis or to cover tax obligations of the undersigned in connection with such vesting or exercise, but only to the extent such right expires during the Lock-up Period, provided that no filing under Section 13 of the Exchange Act or other public announcement shall be required or shall be voluntarily made within 90 days after the date of the Underwriting Agreement, and after such 90th day, if the undersigned is required to file a report under Section 13 or Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of ordinary shares during the Lock-Up Period, the undersigned shall include a statement in such schedule or report to the effect that the purpose of such transfer was to cover tax withholding obligations of the undersigned in connection with such vesting or exercise and, provided further, that the Plan Shares shall be subject to the terms of this Lock-up Agreement; (g) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Lock-Up Securities, provided that (i) such plan does not provide for the transfer of Lock-Up Securities during the Lock-Up Period and (ii) no public announcement or filing under the Exchange Act will be voluntarily made by or on behalf of the undersigned or the Company regarding the establishment of such plan; (h) the transfer of Lock-Up Securities that occurs by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement, provided that the transferee agrees to sign and deliver a Lock-up Agreement substantially in the form of this Lock-up Agreement for the balance of the Lock-Up Period, and provided further, that any filing under Section 13 of the Exchange Act that is required to be made during the Lock-Up Period as a result of such transfer shall include a statement that such transfer has occurred by operation of law (collectively, “Permitted Transfers”); and (i) sales of Shares by the undersigned to the Underwriter pursuant to the Underwriting Agreement. In addition, the undersigned agrees that, without the prior written consent of the Underwriter, it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to, the registration of any Shares or any security convertible into or exercisable or exchangeable for Shares. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent against the transfer of the undersigned’s Lock-Up Securities except in compliance with the foregoing restrictions.
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No provision in this Lock-up Agreement shall be deemed to restrict or prohibit (i) the adoption of an equity incentive plan and the grant of awards or equity pursuant to any equity incentive plan, and the filing of a registration statement on Form S-8; provided, however, that any sales by parties to this Lock-up Agreement shall be subject to this Lock-up Agreement, (ii) the issuance of ordinary shares in connection with the exercise of outstanding warrants of the Company; provided that this Lock-up Agreement shall apply to any of the undersigned’s shares issued upon such exercise, or (iii) the issuance of securities in connection with an acquisition or a strategic relationship which may include the sale or equity securities; provided, that none of such shares shall be saleable in the public market until the expiration of the 180 day period described above.
If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable to any securities that the undersigned may purchase in the Offering; and (ii) the Underwriter agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Underwriter will notify the Company of the impending release or waiver. Any release or waiver granted by the Underwriter hereunder to any such officer or director shall only be effective two (2) business days after the release or waiver. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration or in connection with any other Permitted Transfer and (b) the transferee has agreed in writing to be bound by the same terms described in this Lock-up Agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
The undersigned understands that the Company and the Underwriter are relying upon this lock-up agreement in proceeding toward consummation of the Offering. The undersigned further understands that this Lock-up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal Representative, successors, and assigns.
The undersigned understands that, if (i) the Underwriting Agreement is not executed by [●], 2023, (ii) the Company notifies the Underwriter in writing that it does not intend to proceed with the Offering or (iii) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, the undersigned shall be released from all obligations under this letter agreement.
Whether or not the Offering actually occurs depends on a number of factors, including market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriter. The undersigned acknowledges that no assurances are given by the Company or the Underwriter that any Offering will be consummated. This Lock-up Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York.
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| Very truly yours, | ||
| (Signature) | ||
| Address: | ||
| Email: | ||
| Date: | ||
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