NOVA MSC BERHAD
17 Aug 2018
(Unless otherwise specified, where applicable throughout this announcement, the exchange rate used shall be RM2.9834 Singapore Dollars (“SGD”): RM1.00, based on the middle rate at 5.00 p.m. published by Bank Negara Malaysia on 16 August 2018)
1. INTRODUCTION
The Board of Directors of NOVAMSC (“Board”) wishes to announce that novaHEALTH Pte Ltd (“novaHEALTH”) had on 17 August 2018 entered into a shareholders agreement (“Shareholders Agreement”) with Lai Teik Kin (“Mr. Lai”), Wong Tien Yin, Wynne Shu Wei, Mong Li, Haslina Binte Hamzah, and Gilbert Lim for the subscription of new ordinary shares in EyRIS Pte Ltd (“EyRIS”) (“EyRIS Shares”) in the following manner:
| Party | No. of EyRIS Shares subscribed for | Shareholding of enlarged issued shares of EyRIS*1 | Initial consideration | Additional consideration *2 | Total consideration | |||
| % | SGD | RM’ equivalent | SGD | RM’ equivalent | SGD | RM’ equivalent | ||
| novaHEALTH | 41,999 | 42.00 | 203,227 | 606,307 | Up to 541,935 | Up to 1,616,809 | Up to 745,162 | Up to 2,223,116 |
| Party A | ||||||||
| Mr. Lai | 18,999 | 19.00 | 95,773 | 285,729 | Up to 258,065 | Up to 769,911 | Up to 353,838 | Up to 1,055,640 |
| Party B | ||||||||
| Prof Wong Tien Yin | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Dr Ting Shu Wei | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Prof Wynne Hsu | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Prof Mong Li | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Ms Haslina bte Hamzah | 1,000 | 1.00 | 1 | 3 | – | – | 1 | 3 |
| Dr Gilbert Lim | 1,000 | 1.00 | 1 | 3 | – | – | 1 | 3 |
| Total | 98,998 | 99.00 | 299,006 | 892,054 | Up to 800,000 | Up to 2,386,720 | Up to 1,099,006 | Up to 3,278,774 |
Notes:
*1 Based on the enlarged issued share capital of 99,998 Eyris Shares after the completion of the Proposed Joint Venture.
*2 To be loaned to EyRIS based on the needs of EyRIS within a 15-month period from 9 February 2018, being the date of incorporation of EyRIS Pte Ltd (i.e. 9 May 2019)(“Startup Period”) with the maximum amount indicated in the table above and to be loaned in proportion to the shareholding of novaHEALTH and Mr. Lai. At the end of the Startup Period, the amount paid will be capitalized as 1 EyRIS Share each for novaHEALTH and Mr. Lai. For avoidance of doubt, the amount to be released to EyRIS shall be collectively decided by novaHEALTH and Mr. Lai as and when funds are required.
Upon completion of the Proposed Investment, EyRIS will be a 42%-owned indirect subsidiary of NOVAMSC as novaHEALTH will be able to govern the financial and operating policies of EyRIS through the Shareholders Agreement with the other shareholders.
2. DETAILS OF THE PROPOSED INVESTMENT
2.1 Information of the EyRIS
EyRIS was incorporated in Singapore under the Companies Act (Chapter 50) on 8 February 2018. As at the LPD, the company is dormant and will serve as the special purpose vehicle for novaHEALTH together with Mr. Lai and Party B to enter into an arrangement for the purpose of undertaking the following activities:
- Negotiate and license SELENA+, an artificial intelligence software from SingHealth-NUS for the international market;
- Design and development of a cloud-based diabetes retinopathy screening application (“DRS”), which scans the eyes of patients to detect diabetes eye diseases in the patient and integrating SELENA+ into a single and ready-to-deploy solution;
- Marketing of EyRIS artificial intelligence solutions with the primary focus on the DRS in the Territory;
- Selling, implementing and supporting the DRS via novaHEALTH in the international market (including appointment and licensing to 3rd party resellers); and
- Undertaking research and development of new modules that are complementary to SELENA+ and any subsequent derivative technology.
The sole shareholder of EyRIS as at 16 August 2018, being the latest practicable date prior to this announcement (“LPD”) is Mr. Lai who holds 1,000 EyRIS Shares. He is also the sole director of EyRIS.
As at the LPD, EyRIS does not have any subsidiary and associate companies. As EyRIS was incorporated on 8 February 2018, no financial statement for EyRIS has been prepared.
2.3 Basic of arriving the subscription consideration
The subscription consideration to be injected by novaHEALTH to EyRIS of up to SGD745,162 (equivalent to RM2,223,116) (“Subscription Consideration”) was arrived on a negotiated basis on a “willing-buyer willing-seller basis” after taking into consideration of the estimated funds required by EyRIS to market and sell the EyRIS artificial intelligence solutions during the Startup Period. .
The Board further notes that Mr. Lai, who is a director of novaHEALTH, will also subscribe to the new EyRIS Shares and his subscription consideration is in proportion to the amount paid by novaHEALTH. Party B, who had contributed to the development and validation of SELENA+, are required to pay a nominal sum of SGD1 (equivalent to RM3) each.
For avoidance of doubt, only the initial consideration of SGD203,227 (equivalent to RM606,307) is required to be paid to complete the subscription of the 41,999 EyRIS Shares while the remaining SGD541,935 (equivalent to RM1,616,809) will only be released to EyRIS as and when there is a need for funding. This is done to safeguard the interest of novaHEALTH to avoid novaHEALTH from providing funds in excess of the needs of EyRIS during the Startup Period.
The Board is of the opinion that the Subscription Consideration is justifiable having considered the rationale of the Proposed Investment as well as the prospects of EyRIS as set out in Sections 3 and 4 of this announcement.
2.4 Liabilities to be assumed
There will be no liabilities, including contingent liabilities and guarantees to be assumed by the novaHEALTH in relation to the Proposed Investment.
2.5 Source of funding
The Subscription Consideration will be funded entirely by internally generated funds.
2.6 Salient terms of the Shareholders Agreement
2.6.1 Subscription
In consideration of the respective roles and responsibilities of each parties of the Shareholders Agreement, by which the parties may for mutual benefit co-operate with each other for the purpose of combining their respective strengths and experience with a view towards the betterment of EyRIS, EyRIS intends to issue new EyRIS Shares to novaHEALTH, Mr. Lai and Party B who intends to subscribe for the new EyRIS Shares.
2.6.2 Capital Structure
EyRIS agrees to allot and issue the new EyRIS Shares in the following manner:
| Party | No. of EyRIS Shares subscribed for | Shareholding of enlarged issued shares of EyRIS*1 | Initial consideration | Additional consideration *2 | Total consideration | |||
| % | SGD | RM’ equivalent | SGD | RM’ equivalent | SGD | RM’ equivalent | ||
| novaHEALTH | 41,999 | 42.00 | 203,227 | 606,307 | Up to 541,935 | Up to 1,616,809 | Up to 745,162 | Up to 2,223,116 |
| Party A | ||||||||
| Mr. Lai | 18,999 | 19.00 | 95,773 | 285,729 | Up to 258,065 | Up to 769,911 | Up to 353,838 | Up to 1,055,640 |
| Party B | ||||||||
| Prof Wong Tien Yin | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Dr Ting Shu Wei | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Prof Wynne Hsu | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Prof Mong Li | 9,000 | 9.00 | 1 | 3 | – | – | 1 | 3 |
| Ms Haslina bte Hamzah | 1,000 | 1.00 | 1 | 3 | – | – | 1 | 3 |
| Dr Gilbert Lim | 1,000 | 1.00 | 1 | 3 | – | – | 1 | 3 |
| Total | 98,998 | 99.00 | 299,006 | 892,054 | Up to 800,000 | Up to 2,386,720 | Up to 1,099,006 | Up to 3,278,774 |
Notes:
*1 Based on the enlarged issued share capital of 99,998 EyRIS Shares after the completion of the Proposed Joint Venture.
*2 To be loaned to EyRIS based on the needs of EyRIS within a 15-month period from 9 February 2018, being the date of incorporation of EyRIS Pte Ltd (i.e. 9 May 2019)(“Startup Period”) with the maximum amount indicated in the table above and to be loaned in proportion to the shareholding of novaHEALTH and Mr. Lai. At the end of the Startup Period, the amount paid will be capitalized as 1 EyRIS Share each for novaHEALTH and Mr. Lai. For avoidance of doubt, the amount to be released to EyRIS shall be collectively decided by novaHEALTH and Mr. Lai as and when funds are required.
All issued shares in EyRIS shall have equal rights of 1 vote per EyRIS Share and that there shall only be 1 class of equity shares.
Unless otherwise mutually agreed by the parties, any new EyRIS Shares for the time being unissued, and any new EyRIS Shares from time to time to be issued shall be issued only to each of the parties based on the proportions set out above, provided that the approval of shareholders holding 75% of the issued shares of EyRIS was obtained.
Within 60 days of the signing of the Shareholders Agreement (“Subscription Date”), each party must pay to EyRIS their respective subscription consideration. On the Subscription Date, EyRIS will issue and allot the new EyRIS Shares to the respective parties.
2.6.3 Pre-emptive Rights
Except where novaHEALTH buy,sell or transfer its shareholding to Mr. Lai or a transfer made with by a shareholder of EyRIS with a related corporation or a family member of the said shareholder, no EyRIS Shares can be transferred to any other persons unless the preemptive rights accorded in the Shareholders Agreement is fulfilled.
2.6.4 Board of Directors
The Board of Directors of EyRIS shall consist of 4 members, 3 members of whom shall be nominated by novaHEALTH and 1 member shall be nominated by Party B.
The Chairman and Chief Executive Officer shall be appointed by novaHEALTH and the Chairman shall have a casting vote.
3. PROSPECTS OF EYRIS
EyRIS is a special purpose vehicle incorporated to design and develop the DRS and integrating SELENA+ into a single and ready-to-deploy solution. SELENA+ is an artificial intelligence software which performs automated image analysis for diabetic eye diseases such as diabetic retinopathy, age-related macular degeneration and glaucoma. Currently, the diagnosis and screening of the diabetic eye diseases are mainly performed using manual assessments of retinal photographs involving large team of trained professionals. With the DRS, it will help increase the efficiency and reduce the cost.
4. RATIONALE FOR THE PROPOSED INVESTMENT
The Proposed Investment is part of NOVAMSC’s strategy to continuously improve the Smart Healthcare solution offering by novaHEALTH. The Proposed Investment will allow novaHEALTH to introduce artificial intelligence into the industry. This disruptive technology has potentially positive growth in the international market. Barring any unforeseen circumstances and subject to the risk factors as set out in Section 5 of this announcement, the management of NOVAMSC expects EyRIS to be able to contribute positively to the financial position of NOVAMSC once the DRS is ready to be marketed, which is expected to be between two to three years.
5. RISK FACTORS
The risk factors associated with the Proposed Investment includes but not limited to the following:
5.1 Business risks
The Proposed Investment is subject to certain risks inherent in the healthcare industry, to which NOVAMSC is already presently exposed. These risks includes, but not limited to market fluctuations caused by economic cycles, political and regulatory conditions such as changes in government policies and administrative, interest rates, taxes and competition from other industry players.
The management of NOVAMSC seeks to limit these risks through, amongst others, continuous review of operations to improve efficiency, careful planning and identification of changes to political and regulatory conditions as well as competition from other industry players.
5.2 Non-completion risks
EyRIS is still in negotiation with SingHealth-NUS for the granting of the license for SELENA+ to EyRIS. There can be no assurance that the license will be granted to EyRIS.
Nevertheless, novaHEALTH, Mr. Lai and Party B have been proactively engaging SingHealth-NUS for the license for SELENA+ to be granted to EyRIS. Several rounds of negotiations has taken place and the management of NOVAMSC has endeavor to take all steps necessary to allow for the license for SELENA+ to be granted to EyRIS.
6. FINANCIAL EFFECTS OF THE PROPOSED INVESTMENT
6.1 Share Capital
The Proposed Investment will not have any effect on the issued and paid-up share capital of NOVAMSC as the Proposed Investment does not involve issuance of new NOVAMSC Shares.
6.2 Substantial Shareholders’ Shareholding
The Proposed Investment will not have any effect on the substantial shareholdings in NOVAMSC the Proposed Investment does not involve issuance of new NOVAMSC Shares.
6.3 Net Asset and Gearing
The Proposed Investment will not have any material effect on the net assets and gearing of NOVAMSC as the entire Subscription Consideration will be funded vide internally generated funds.
6.4 Earnings and earnings per Share (“EPS”)
The Proposed Investment which is expected to be completed by the 3rd quarter of 2018 and will not have a material effect to the consolidated earnings and EPS of NOVAMSC for the financial year ended 31 March 2019.
Barring any unforeseen circumstances, the Proposed Investment is expected to contribute positively to the consolidated earnings and EPS of NOVAMSC in the future when the DRS is ready to be marketed.
7. HIGHEST PERCENTAGE RATIO APPLICABLE
The highest percentage ratio applicable to the Proposed Investment pursuant to the Rule 10.02 (g) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad is 5.46%.
8. APPROVALS REQUIRED AND INTER-CONDITIONALITY
The issuance is not subjected to any other approvals being obtained and is not conditional upon any other proposals undertaken or to be undertaken by NOVAMSC.
9. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM
Save as disclosed below, none of the Directors, major shareholders and/or persons connected to them have any interest, direct and/or indirect, in the Proposed Investment.
Mr. Lai is not a Director or major shareholder of NOVAMSC but is a Director of novaHEALTH. He is also a director and shareholder of EyRIS, and is a party to the Shareholders Agreement.
However, pursuant to Paragraph 10.08(9) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company is exempted from the following:-
(i) issuing a circular to shareholders;
(ii) obtaining shareholders’ approval of the transaction in general meeting; and
(iii) appointing a main adviser and independent adviser, as the case may be.
10. TRANSACTION WITH RELATED PARTIES FOR THE PRECEDING 12 MONTHS
There were no transactions between the NOVAMSC Group and Mr. Lai for the past 12 months preceding the date of this announcement.
11. DIRECTORS’ STATEMENT
The Board having considered all aspects of the Proposed Acquisition, including but not limited to the basis of the Subscription Consideration, rationale, prospects and financial effects of the Proposed Investment, is of the opinion that the Proposed Investment:-
(i) is in the best interest of the Company;
(ii) is fair, reasonable and on normal commercial terms; and
(iii) is not detrimental to the interest of the minority shareholders of the Company.
12. AUDIT COMMITTEE’S STATEMENT
The Audit Committee of NOVAMSC, having taking into consideration all aspects of the Proposed Investment, including but not limited to the basis of the purchase consideration, rationale, prospects and financial effects of the Proposed Investment, is of the opinion that the Proposed Investment:-
(i) is in the best interest of the Company;
(ii) is fair, reasonable and on normal commercial terms; and
(iii) is not detrimental to the interest of the minority shareholders of the Company.
13. ESTIMATED TIMEFRAME FOR COMPLETION
Barring any unforeseen circumstances, the Board expects the new EyRIS Shares to be issued and allotted to novaHEALTH by the fourth quarter of 2018.
14. DOCUMENTS FOR INSPECTION
A copy of the Shareholders Agreement will be made available for inspection at the registered office of NOVAMSC at No. 1 & 1A, 2nd Floor (Room 2), Jalan Ipoh Kecil, 50350 Kuala Lumpur during normal business hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.
This announcement is dated 17 August 2018.
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