QUALITAS MEDICAL GROUP LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200717959H) This announcement and its contents have been reviewed by the Company's sponsor, United Overseas Bank Limited ("Sponsor"), for compliance with the relevant rules of the SGX-ST. The Sponsor has not independently verified the contents of this announcement. This announcement has not been approved or examined by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this announcement, including the correctness of any statements or opinions made or reports contained in this announcement. The contact person for the Sponsor is Mr. Khong Choun Mun, Managing Director, Corporate Finance, at 80 Raffles Place, #03-03, UOB Plaza 1, Singapore 048624, telephone (65) 6539 4288. ACQUISITION OF 75.0% OF THE EQUITY INTEREST IN THE CAPITAL OF DR MARCUS COONEY & ASSOCIATES PTE LTD 1. BACKGROUND The Board of Directors of Qualitas Medical Group Limited (the Company or Group ) is pleased to announce that Qualitas Healthcare International Sdn. Bhd. ( QHI ), a subsidiary of the Company s subsidiary, Qualitas Healthcare Corporation Sdn. Bhd., has on 24 December 2009, entered into an agreement for the sale and purchase of shares in Dr Marcus Cooney & Associates Pte Ltd (the Agreement ) with Dr. Marcus Philip Cooney ( Dr Marcus ), Angela Alice Cooney (the Vendor ) and Dr Marcus Cooney & Associates Pte Ltd ( DMCA ) to acquire 75% of the enlarged issued and paid-up capital (or 3 shares) (the Sale Shares ) (the Investment ) of DMCA in Singapore, subject to the terms of the Agreement. 2. PARTICULARS OF DMCA DMCA is a limited liability company incorporated in the Republic of Singapore with company number 199700857E. Prior to QHI s investment, DMCA has a total of 2 shares issued and paid-up held by Dr Marcus and the Vendor in equal proportions. DMCA operates a dental clinic in Singapore currently located at units #08-02/03 and #14-01/02/03, Camden Medical Centre, 1 Orchard Boulevard, Singapore 248649 under the trade name of SmileFocus and provides various dentistry services to customers including cosmetic dentistry, family dentistry and implant and restorative dentistry. 3. CONSIDERATION 3.1 The consideration for Sale Shares (the Consideration ) is arrived at on a willing buyer and willing seller basis, considering, inter alia, the net tangible asset value of DMCA and various commercial factors such as the business model and growth potential of the business of DMCA. Page 1 of 8
3.2 The Consideration shall be satisfied in two tranches in the following manner: (a) (b) An amount of S$3,093,829 ("First Tranche Payment") will be paid in cash upon signing of the Agreement, the amount being equivalent to 2/3 of 75% of the Provisional Valuation of DMCA. The Provisional Valuation of DMCA is S$6,187,658 being the amount equal to 7.5 times the forecast profit after tax ( PAT ), for financial year ending 31 December ( FY ) 2009 of S$825,021; The second and final tranche payment ( Second Tranche Payment ) comprising of the balance of the Consideration will be payable within thirty (30) days from the determination of the audited FY2010 Valuation, defined as 7.5 times the FY2010 audited PAT, either wholly by cash or wholly by issuance and delivery of the Company s shares to the Vendor ( Consideration Shares ) or partly by cash and partly by Consideration Shares at the option of Dr. Marcus, as follows: (i) (ii) In the event that the FY2010 Valuation is equal to or less than the Provisional Valuation, then the Second Tranche Payment will be satisfied, subject to the requirements of the SGX-ST, by issuance of Consideration Shares for an amount equal to 75% of the FY2010 Valuation minus the First Tranche Payment. The Consideration Shares will be valued at 22.5 Singapore cents per share or at the price to be determined in accordance to paragraph 3.2 (c) below, as the case may be, and the total number of Consideration Shares will be rounded down to the nearest whole number; or In the event that the FY2010 Valuation is more than the Provisional Valuation, by delivery of 6,875,175 Consideration Shares to the Vendor plus an amount in cash equal to 75% of the FY2010 Valuation minus S$4,640,743; (iii) in the event that the FY2010 PAT is negative or the computation of FY2010 Valuation results in the Consideration falling below the First Tranche Payment, the minimum Consideration payable shall remain at S$3,093,829; (iv) The Consideration shall be capped at a maximum of S$9,000,000 ( Maximum Consideration ). (c) (d) (e) In the event that (i) the weighted average of the Company s share price quoted on Catalist over the three months preceding the due date of the Second Tranche Payment exceeds 22.5 Singapore cents, and (ii) the volume of the Company s shares traded over the said three months exceeds 2% of the total number of outstanding shares of the Company in issue, the price of the Consideration Shares shall be reviewed and agreed between QHI and the Vendor, failing which the entire Second Tranche Payment shall be paid in cash. For the purpose of arriving at the PAT for FY2010 Valuation, any director s fees paid or payable to any of the nominee directors of QHI in DMCA shall be excluded from the expenses. For the avoidance of doubt, the maximum number of Consideration Shares to be issued shall in no event exceed 6,875,175. Page 2 of 8
The Company s Sponsor will be submitting an additional listing confirmation for the listing and quotation of the Consideration Shares on Catalist, if applicable, prior to the issuance of the Consideration Shares. The Consideration will be satisfied partly by the proceeds from the Initial Public Offering ( IPO ) and partly by internally generated funds. 4. CONDITIONS PRECEDENT Completion is conditional on, inter alia, the following conditions having been fulfilled (or waived): (a) (b) (c) (d) (e) (f) (g) (h) the Vendor, Dr Marcus and DMCA shall procure that the issued and paid-up capital of DMCA be increased to S$4.00 consisting of four (4) ordinary shares of S$1.00 each by issuance of two (2) new ordinary shares of S$1.00 each to the Vendor. DMCA shall enter into a consultancy agreement with Dr Marcus (the Consultancy Agreement ) the terms of which shall include the payment of consultancy fees to Dr Marcus as he is currently receiving as of the date of the Agreement as well as, among others, a consolidated payment of 2.5% of the gross revenue of DMCA in the form of Dental Director s Fees. Each of Dr Marcus and the Vendor shall and undertakes to procure that those of the key employees of DMCA shall at or prior to Completion enter into employment agreements with DMCA as specified by the Purchaser, in agreed terms. The Company providing a letter of comfort in agreed form to procure the fulfilment of obligation by QHI under the Agreement. All amounts owing by DMCA to the Vendor, Directors or shareholders of DMCA, including any dividends or interim dividends distributable with respect to periods up to 31st December 2009, shall have been paid or otherwise settled. Each of the Vendor and Dr Marcus shall have transferred to DMCA all trademarks and other intellectual property rights used in SmileFocus which are owned or licensed from third parties by the Vendor or Dr Marcus and licensed to DMCA by any of them and used in the business of SmileFocus without charge, except that DMCA shall pay the actual transfer costs. From the date of signing of the Agreement until the Completion or termination of the Agreement, the Vendor, Dr Marcus and DMCA shall procure that DMCA shall make all registrations, filings and applications and give all notices, obtain all governmental and third party consents and approvals and take all such other actions as may be reasonably necessary or appropriate for the consummation of the transactions contemplated under the Agreement. Dr Marcus shall acquire the motor vehicle, owned by DMCA and provided to him for his use, at the prevailing book value of such vehicle as at 31 December 2009, prior to Completion. Page 3 of 8
5. ADDITIONAL TERMS OF THE AGREEMENT Call and Put Option (a) (b) (c) (d) Dr Marcus shall have the right but not the obligation to require QHI between 1 April 2015 and 30 June 2018 (both days inclusive) to purchase all the 25% shares held by him in DMCA (the Option Shares )(the Put Option ). Provided Dr Marcus has not exercised his rights under the Put Option, QHI shall have the right but not the obligation to require Dr Marcus at any time between 1 July 2018 to 31 December 2018 (both days inclusive) to sell the Option Shares to QHI or its nominee (the Call Option ). The purchase consideration for the Option Shares shall be 25% of 7.5 times the audited PAT for the FY preceding the date of exercise of the Put Option or the Call Option, as the case may be, and is payable in cash. The PAT for this purpose shall exclude any director s fees payable or paid by DMCA in respect of the nominee directors of QHI in DMCA for the relevant FY. Dr Marcus shall have a further option of early exercise of the Put Option between the period 1 April 2013 and 30 June 2013 or between the period 1 April 2014 and 30 June 2014 under the following circumstances: (i) (ii) in the event that the gross revenue of DMCA exceeds S$10 million and the PAT is in excess of 12% of the gross revenue for FY2012, Dr Marcus may exercise his Put Option between the period 1 April 2013 and 30 June 2013 (both days inclusive); and in the event that the gross revenue of DMCA exceeds S$10 million and the PAT is in excess of 12% of the gross revenue for FY2013, Dr Marcus may exercise his Put Option between the period 1 April 2014 and 30 June 2014 (both days inclusive). (e) Upon the mutual termination of the Consultancy Agreement, Dr Marcus shall have the right to exercise the Put Option. Where the Consultancy Agreement is terminated by DMCA for reasons spelt out in the Consultancy Agreement, Dr Marcus shall have the right to exercise the Put Option save that: (i) (ii) where he has served 5 years or more under the Consultancy Agreement, the purchase consideration for the sale and purchase of the Option Shares shall be equal to 25% of 7.5 times the PAT for FY ended preceding the date of exercise of the Put Option; and where he has served less than 5 years under the Consultancy Agreement, the purchase consideration for the sale and purchase of the Option Shares shall be equal to 25% of 6.5 times the PAT for FY ended preceding the date of exercise of the Put Option QHI s liability for Second Tranche Payment (a) If QHI fails to pay the Second Tranche Payment whether in whole or in part, the Vendor shall be entitled to make a claim for the unpaid Second Tranche Payment against QHI. Page 4 of 8
(b) The Vendor, at her sole election, may at any time opt to waive her rights to sue for the unpaid Second Tranche Payment (or such part that remains outstanding),and instead require that QHI receives only such percentage of shares in DMCA as paid for. In such a case, the parties agree that DMCA shall issue a further 96 shares (making a total of 100 issued shares), and that QHI shall become the holder of only such number of shares that it has paid for based on the FY2010 Valuation, rounded down to the nearest whole number of shares (representing a pro-rata purchase of 75% of the shares in DMCA as were paid for). Dr Marcus shall be the holder of 25 shares (or the 25% unsold shares in the Company), and the Vendor and/or her nominee shall be the holder of the balance of the shares in DMCA. The calculation of QHI s, Vendor s and Dr Marcus shareholdings shall be worked out as follows:- Value of each of the 100 shares = FY2010 Valuation 100 shares = $x QHI s number of shares Amount paid to Vendor $x and rounded down to nearest whole number Dr Marcus number of shares 25 shares (or 25% of DMCA s share capital) Vendor s number of shares 100 Shares minus 25 shares minus QHI s number of shares 6. RATIONALE FOR THE INVESTMENT In line with the Group s business strategy to expand into regional markets and other healthcare-related business, the Investment is an opportunity to enable the Group to expand its presence in Singapore and in the business of dentistry. With positive outlook for the dental care business due to the awareness of dental hygiene, the Board is confident of the demand for DMCA s dentistry services. 7. FINANCIAL EFFECTS OF THE INVESTMENT 7.1 Relative Figures Computed on the Bases Set Out in Rule 1006 of the Listing Manual. For the purpose of Chapter 10 of the Listing Manual of the SGX-ST, Section B: Rules of Catalist, the relative figures computed on the bases set out in Rule 1006 of the Listing Manual are as follows: a. Rule 1006 (a) The net asset value of the assets to be disposed of, compared with the Group s net asset value. b. Rule 1006 (b) The net profits attributable to the assets acquired or disposed of, compared with the Group s net profits (i) Not applicable 18.52% c. Rule 1006 (c) The aggregate value of the consideration (based on the Provisional Valuation) given or received compared with the issuer s market Page 5 of 8 19.80%
capitalisation based on the total number of issued shares excluding (ii) (iv) treasury shares The aggregate value of the consideration (based on the Maximum Consideration) given or received compared with the issuer s market capitalisation based on the total number of issued shares excluding (iii) (iv) treasury shares d. Rule 1006(d) The number of equity securities issued by the issuer as consideration for the acquisition, compared with the number of equity securities previously in issue. 38.40% 5.10% Note: (i) Based on the unaudited net profits of the Group for the period from 01 Jan 09 to 30 Jun 09 being the latest announced consolidated results and the unaudited net profits of DMCA for the period from 01 Jan 09 to 30 Jun 09. (ii) Based on the Consideration of S$4,640,743 being 75.0% of the Provisional Valuation of S$6,187,658 as set out under paragraph 3.2 (a) and assuming full settlement of the Consideration in cash. (iii) Based on the Consideration of S$9.000,000, the maximum consideration payable as set under paragraph 3.2(b)(iv) and assuming full settlement of the Consideration in cash. (iv) Market capitalisation is determined by multiplying the number of shares in issue, being 134,684,221 as at the date of this announcement, by the weighted average price of S$0.174 per share on 21 Dec 2009, being the last market day where the Company s shares were traded on the SGX-ST. As shown in the table, as the relative figures computed on the basis set out in Rule 1006(b) to (d) of the Catalist Rules exceed 5.0%, the Investment will constitute a Discloseable Transaction under Chapter 10 of the Catalist Rules. 7.2 Illustrative effects of the investment in DMCA on the EPS and NTA of the Company. The pro forma unaudited financial effects of the Investment are purely for illustrative purposes and are neither indicative of the actual financial effects of the Investment on the net tangible asset value for the Group ( NTA ) and earnings per share ( EPS ) of the Company nor indicative of the future financial performance of the Company. The effects of the Investment on the EPS for the year ended 31 Dec 2008 ( FY08) (assuming that the Investment had been effected on 1 Jan 2008) and the NTA per share as at 31 Dec 2008 (assuming that the Investment had been effected on 31 Dec 2008) are illustrated below: Earnings Per Share Profit attributable to equity holders of the Company (RM 000) Before Investment After Investment (Without Issuance of Consideration Shares) (ii) 6,178 7,330 (i) 7,330 (i) After Investment (With Issuance of Consideration Shares) (iii) No. of shares ( 000) 119,948 (iv) 119,948 (iv) 126,823 EPS (RM sen) 5.15 6.11 5.78 Page 6 of 8
Net Tangible Asset NTA based on Provisional Valuation (RM 000) Before Investment After Investment (Without Issuance of Consideration Shares) (ii) 40,321 29,891 29,891 After Investment (With Issuance of Consideration Shares) (iii) No. of shares ( 000) 134,684 134,684 141,559 NTA per share (RM sen) 29.94 22.19 21.12 NTA based on Maximum Valuation (RM 000) 40,321 19,280 19,280 No. of shares ( 000) 134,684 134,684 141,559 NTA per share (RM sen) 29.94 14.31 13.62 Note: (i) (ii) (iii) (iv) Profit attributable to equity holders of the Company included profit attributable to the Investment of approximately RM1,152,000. No Consideration Shares will be issued and the investment will be fully settled by cash. Includes 6,875,175 Consideration Shares, the maximum Consideration Shares that can be issued under the Agreement as set out under paragraph 3.2. Weighted average number of shares in issue during FY08. The Investment will not have any effect on the gearing of the company as the Investment will be satisfied partly by the balance of the proceeds from the IPO and internally generated funds. The net asset value and net profit attributable to the Investment, based on the latest audited financial statement for the financial year ended 31 Dec 2008 are RM867,252 and RM1,394,169 respectively (based on the exchange rate of S$1.00 = RM2.4343). 8. DIRECTORS AND CONTROLLING SHAREHOLDERS INTEREST IN THE PROPOSED INVESTMENT None of the Directors or substantial shareholders of the Company or any of their respective associates has any interest, direct or indirect, in the above transaction. 9. DOCUMENTS FOR INSPECTION A copy of the Agreement is available for inspection during normal business hours at the registered office of the Company at c/o M & C Services Private Limited, 138 Robinson Road, #17-00 The Corporate Office, Singapore 068906 for a period of three (3) months commencing from the date of this Announcement. Page 7 of 8
By Order of the Board Dato Dr. Noorul Ameen Bin Mohamed Ishack Chairman and Managing Director 24 December 2009 Page 8 of 8