| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)
Basis of presentation The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”) and pursuant to the regulations of the Securities and Exchange Commission (“SEC”). (b)
Consolidation The
consolidated financial statements include the financial statements of the Company and its subsidiaries. All inter-company transactions,
if any, and balances due to, due from, long-term investment subsidiary, and registered paid in capital have been eliminated upon consolidation. (c)
Use of estimates The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. The most significant estimates relate to allowance for uncollectible accounts receivable,
inventory valuation and fair value of financial instruments. Actual results could vary from the estimates and assumptions that were
used. (d)
Risks and uncertainties The
main operations of the Company are located in Singapore. Accordingly, the Company’s business, financial condition, and results
of operations may be influenced by political, economic, and legal environments in Singapore, as well as by the general state of the economy
in Singapore. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in
Singapore. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing
laws and regulations including its organization and structure disclosed in Note 1, such experience may not be indicative of future results. The
Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters,
extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Company’s
operations. (e)
Foreign currency translation and transaction and Convenience translation The
accompanying consolidated financial statements are presented in the Singaporean dollar (“$”), which is the reporting currency
of the Company. The functional currency of the Company and its subsidiary JEC International are the USD and HKD, respectively. JCS-Echigo,
Hygieia, and Evoluxe use the Singaporean dollar as their functional currencies. Assets
and liabilities denominated in currencies other than the reporting currency are translated into the reporting currency at the rates of
exchange prevailing at the balance sheet date. Translation gains and losses are recognized in the consolidated statements of operations
and comprehensive loss as other comprehensive income or loss. Transactions in currencies other than the reporting currency are measured
and recorded in the reporting currency at the exchange rate prevailing on the transaction date. The cumulative gain or loss from foreign
currency transactions is reflected in the consolidated statements of income and comprehensive income as other income (other expenses). The
value of foreign currencies including, the US Dollar and Hong Kong Dollar, may fluctuate against the Singaporean Dollar. Any significant
variations of the aforementioned currencies relative to the Singaporean Dollar may materially affect the Company’s financial condition
in terms of reporting in SGD. The following table outlines the currency exchange rates that were used in preparing the accompanying consolidated
financial statements: SCHEDULE
OF CURRENCY EXCHANGE RATES
December
31,
2021 2022
SGD
to HKD Year End 5.8300 5.8253
SGD
to HKD Average Rate 5.8348 5.6813
SGD
to USD Year End 0.7396 0.7460
SGD
to USD Average Rate 0.7450 0.7259 Translations
of the consolidated balance sheets, consolidated statements of comprehensive loss and consolidated statements of cash flows from SGD
into US$ as of and for the year ended December 31, 2022 are solely for the convenience of the reader and were calculated at the rate
of US$ 0.7460
= SGD$ 1 ,
as set forth in the statistical release of the Federal Reserve System on December 31, 2022. (f)
Fair Value Measurement Accounting
guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact,
and it considers assumptions that market participants would use when pricing the asset or liability. Accounting
guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based
upon the lowest level of input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs
that may be used to measure fair value:
● Level
1 applies to assets or liabilities for which there are quoted prices, in active markets for identical assets or liabilities.
● Level
2 applies to assets or liabilities for which there are inputs other than quoted prices included
within Level 1 that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical asset or liabilities
in markets with insufficient volume or infrequent transactions (less active markets); or
model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data.
● Level
3 applies to asset or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the
measurement of the fair value of the assets or liabilities. Cash
and cash equivalents, accounts receivable, other current assets, financial instruments, bank loans, leases, accounts payables and accruals
are financial assets and liabilities. Cash and cash equivalents, accounts receivables, prepaid expenses and other currents, accounts
payables and accruals, warranty liabilities, and contract liabilities are subject to fair value measurement; however, because of their
being short term in nature management believes their carrying values approximate their fair value. Financial instruments are fair value
financial assets that are marked to fair value and are accounted for under as Level 3 under the above hierarchy. The Company accounts
for bank loans and leases at amortized cost and has elected NOT to account for them under the fair value hierarchy. (g)
Related parties We
adopted ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions (h)
Cash and cash equivalents Cash
and cash equivalents consist of cash on hand, the Company’s demand deposit placed with financial institutions, which have original
maturities of less than three months and unrestricted as to withdrawal and use. (i)
Restricted cash Restricted
cash are bank deposits that are pledge to the bank as security for outstanding loans and bank borrowings. The carrying amount for restricted
cash was $ 0 ,
and $ 0 as
of December 31, 2021 and 2022, respectively. (j)
Accounts Receivable, net Accounts
receivable, net are stated at the original amount less an allowance for expected credit loss on such receivables. The allowance for expected
credit loss is estimated based upon the Company’s assessment of various factors including historical experience, the age of the
accounts receivable balances, current general economic conditions, future expectations and customer specific quantitative and qualitative
factors that may affect the Company’s customers’ ability to pay. An allowance is also made when there is objective evidence
for the Company to reasonably estimate the amount of probable loss. (k)
Inventories Inventories
are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-out principle, and
includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them
to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate
share of production overheads based on normal operating capacity. (l)
Property, plant and equipment, net Property,
plant and equipment are stated at cost less accumulated depreciation and impairment, if any, and depreciated on a straight-line basis
over the estimated useful lives of the assets. Cost represents the purchase price of the asset and other costs incurred to bring the
asset into its intended use. Estimated useful lives are as follows: SCHEDULE
OF ESTIMATED USEFUL LIVES
Category Estimated
useful lives
Land
use right Over
the lease term
Leasehold
buildings 30
years
Plant
and machinery 5
to 10
years
Equipment,
furniture and fittings 1 - 5
years Expenditure
for repair and maintenance costs, which do not materially extend the useful lives of the assets, are charged to expenses as incurred,
whereas the expenditure for major renewals and betterment that substantially extends the useful lives of property and equipment are capitalized
as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the costs, accumulated depreciation
and impairment with any resulting gain or loss recognized in the consolidated statements of income. (m)
Impairment of long-lived assets The
Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the
long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition.
If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment
loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. No impairment of long-lived assets was recognized
as of December 31, 2021 and 2022. (n)
Contract liabilities A
contract liability is recognized when the customer pays non-refundable consideration before the Company recognizes the related revenue.
A contract liability would also be recognized if the Company has an unconditional right to receive nonrefundable considerations before
the Company recognizes the related revenue. In such cases, a corresponding receivable would also be recognized. (o)
Commitments and contingencies In
the normal course of business, the Company is subject to commitments and contingencies, including operating lease commitments, legal
proceedings and claims arising out of its 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 will occur, and a reasonable
estimate of the loss can be made. The Company may consider many factors in making these assessments on liability for contingencies, including
historical and the specific facts and circumstances of each matter. (p)
Revenue recognition The
Company currently generates its revenue from the following main sources: Revenue
from goods sold and services provided Revenue
from sales of goods and services in the ordinary course of business is recognized when the Company satisfies a performance obligation
(‘‘PO’’) by transferring control of a promised good or service to the customer. The amount of revenue recognized
is the amount of the transaction price allocated to the satisfied PO. The
transaction price is allocated to each PO in the contract on the basis of the relative stand-alone selling prices of the promised goods
or services. The individual standalone selling price of a good or service that has not previously been sold on a stand-alone basis, or
has a highly variable selling price, is determined based on the residual portion of the transaction price after allocating the transaction
price to goods and/or services with observable stand-alone selling price. A discount or variable consideration is allocated to one or
more, but not all, of the performance obligations if it relates specifically to those performance obligations. Transaction
price is the amount of consideration in the contract to which the Group expects to be entitled in exchange for transferring the promised
goods or services. The transaction price may be fixed or variable and is adjusted for time value of money if the contract includes a
significant financing component. Consideration payable to a customer is deducted from the transaction price if the Group does not receive
a separate identifiable benefit from the customer. When consideration is variable, if applicable, the estimated amount is included in
the transaction price to the extent that it is highly probable that a significant reversal of the cumulative revenue will not occur when
the uncertainty associated with the variable consideration is resolved. Revenue
may be recognized at a point in time or over time following the timing of satisfaction of the PO. If a PO is satisfied over time, revenue
is recognized based on the percentage of completion reflecting the progress towards complete satisfaction of that PO. Typically, POs
for products where the process is described as below, the PO is satisfied at point in time. POs for services are more typically satisfied
over time such as in the contracts for provision of centralised dishware washing and general cleaning service where the Company delivers
service daily over the course of a month, and the Company will recognize revenue and charge the client on a monthly basis. For
the sales of sterilization and cleaning systems, related cleaning equipment, equipment parts and components, the Company typically receives
purchase orders from its customers which will set forth the terms and conditions including the transaction price, products to be delivered,
terms of delivery, and terms of payment. The terms serve as the basis of the performance obligations that the Company must fulfil in
order to recognize revenue. The key performance obligation is the delivery of the finished product to the customer at their location
at which point title to that asset passes to the customer. The completion of this earning process is evidenced by a written customer
acceptance indicating receipts of the products. The Company also bundles the delivery of the products and installation/commission services
to their customers in a single contract that are not distinct within the context of the contract, the performance obligation is satisfied
at a point in time upon completion of the installation services and is accepted by customer. The Company includes a warranty on its product
for one year from the point of delivery and acceptance. The warranty is antecedent to the performance obligation set forth above; however,
management develops an estimate of future warranty costs and accrues that amount to cost of sales in the period that revenue is recognized
to the Company’s consolidated statements of income and the corresponding amount to the warrant liabilities on the Company’s
consolidated balance sheets. Details on the changes in the warranty liabilities can be found in Note 11 below. Typical payment terms
set forth in the purchase order ranges from 30 to 90 days from the date of delivery. The amount of revenue recognized from contract liabilities
to the Company’s result of operations can be found in Note 12 below. Revenue
from rental of dishware washing machines In
accordance with ASC 842 Lease Topics. The Company accounts for the rental of dishware washing machines as direct finance leases where,
lease income from the prospective of lessor is recognized to the Company’s statement of income straight-line basis over the term
of the lease once management has determined that the lease payments are reasonably expected to be collected. The performance obligation
under these leasing arrangements is to deliver the unit to the customer at their location and ensure that the equipment is ready for
use, and to ensure that the equipment is available for use over the life of the lease contract. (q)
Cost of revenue Cost
of revenue mainly consists of raw material costs, labor costs, sub-contracting costs and production overhead. (r)
Selling and marketing expenses Selling
expenses mainly consists of promotion and marketing expenses and transportation expenses. The Company does not carry any capitalized
contract acquisition costs that would be amortized to its results of operations over time, and potential expenses related to customer
and contract acquisitions costs if any are accounted for as periodic costs. (s)
General and administrative expenses General
and administrative expenses mainly consist of staff cost, depreciation, office supplies and upkeep expenses, travelling and entertainment,
legal and professional fees, property and related expenses, other miscellaneous administrative expenses. (t)
Operating leases Prior
to the adoption of ASC 842 on January 1, 2019: Leases,
mainly leases of factory buildings, offices and employee dormitories, where substantially all the rewards and risks of ownership of assets
remain with the lessor are accounted for as operating leases. Payments
made under operating leases are recognized as an expense on a straight-line basis over the lease term. The Company had no finance leases
for any of the periods stated herein. Upon
and hereafter the adoption of ASC 842 on January 1, 2019: The
Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”)
assets, operating lease liability, and operating lease liability, non-current in the Company’s consolidated balance sheets. ROU
assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date
based on the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend
or terminate the lease when it is reasonably certain that it will exercise that option, if any. As the Company’s leases do not
provide an implicit rate, the Company used an incremental borrowing rate based on the information available at commencement date in determining
the present value of lease payments. The Company has elected to adopt the following lease policies in conjunction with the adoption of
ASU 2016-02: (i) for leases that have lease terms of 12 months or less and does not include a purchase option that is reasonably certain
to exercise, the Company elected not to apply ASC 842 recognition requirements; and (ii) the Company elected to apply the package of
practical expedients for existing arrangements entered into prior to January 1, 2019 to not reassess (a) whether an arrangement is or
contains a lease, (b) the lease classification applied to existing leases, and (c) initial direct costs. (u)
Income taxes The
Group accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets
to the amount expected to be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The
provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for
consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This
interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The
Company did not accrue any liability, interest or penalties related to uncertain tax positions in its provision for income taxes line
of its consolidated statements of income for the years ended December 31, 2021 and 2022, respectively. The Company does not expect that
its assessment regarding unrecognized tax positions will materially change over the next 12 months. (v)
Earnings per share Basic
earnings per share is computed by dividing net earnings attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities or other
contracts to issue ordinary shares were exercised or converted into ordinary shares. (w)
Recent accounting pronouncements 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 audited consolidated balance sheets, statements of income and comprehensive income and statements of cash
flows. |
