MTOUCHE TECHNOLOGY BERHAD ( MTOUCHE OR THE COMPANY ) (I) (II) DISPOSAL BY MTOUCHE OF ITS ENTIRE EQUITY INTEREST IN MTB SECURENET SDN BHD (A WHOLLY-OWNED SUBSIDIARY OF MTOUCHE) FOR A CASH CONSIDERATION OF RM180,000.00 TO NELSON CHUI CHEE CHUNG AND SHAWN EDGAR LIEW; AND DISPOSAL BY MTOUCHE OF ITS ENTIRE EQUITY INTEREST IN JUZ TECHNOLOGY SDN BHD (A WHOLLY-OWNED SUBSIDIARY OF MTOUCHE) FOR A CASH CONSIDERATION OF RM1.00 TO NELSON CHUI CHEE CHUNG AND SHAWN EDGAR LIEW 1. INTRODUCTION On behalf of the board of directors of mtouche ( Board ), Mercury Securities Sdn Bhd ( Mercury Securities ) wishes to announce that mtouche had on 31 March 2017 entered into a share sale agreement ( SSA ) with Nelson Chui Chee Chung ( Nelson Chui ) and Shawn Edgar Liew ( SEL ) (collectively, Nelson Chui and SEL are referred to as the Purchasers ) in relation to the disposal of MTB Securenet Sdn Bhd ( MTB Securenet ) and Juz Technology Sdn Bhd ( Juz Tech ) for a total cash consideration of RM180,001.00 ( Disposal Consideration ) in accordance with the terms and conditions of the SSA. 2. DETAILS OF THE DISPOSALS In accordance with the terms of the SSA, mtouche shall dispose of:- two (2) ordinary shares in MTB Securenet ( MTB Securenet Shares ), representing the entire issued share capital of MTB Securenet to the Purchasers for a disposal consideration of RM180,000.00 in cash ( MTB Securenet Disposal ); and two (2) ordinary shares in Juz Tech ( Juz Tech Shares ), representing the entire issued share capital of Juz Tech to the Purchasers for a disposal consideration of RM1.00 in cash ( Juz Tech Disposal ), (MTB Securenet Disposal and Juz Tech Disposal shall collectively be referred to as the Disposals while MTB Securenet Shares and Juz Tech Shares shall collectively be referred to as the Sale Shares.) As the payment for the Disposal Consideration has been made and the documents in respect of the Sale Shares in accordance with the terms of the SSA has been transferred to the Purchasers on even date, the Disposals are deemed completed on 31 March 2017. As such, MTB Securenet and Juz Tech has ceased to be subsidiaries of the Company. 2.1 Basis and justification of arriving at the Disposal Consideration The breakdown of the Disposal Consideration is as follows:- disposal consideration of RM180,000.00 for MTB Securenet, which represents a discount of 69.00% over the unaudited net assets ( NA ) of MTB Securenet as at 31 December 2016 of RM580,790.06; and disposal consideration of RM1.00 for Juz Tech, based on the unaudited net liabilities ( NL ) of Juz Tech as at 31 December 2016 of RM28,464,52. [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 1
The Disposal Consideration was arrived at on a willing buyer-willing seller basis after taking into consideration:- the loss making position of MTB Securenet and Juz Tech for the twelve (12)- month financial period ended ( FPE ) 31 December 2016; (iii) the opportunity for the Company to collect the Amount Owing (as defined later) by MTB Securenet and Juz Tech to Mobile Touchetek Sdn. Bhd., mtouche International Sdn. Bhd. and mtouche (Vietnam) Co, Ltd (collectively referred to as MTB Entities ). The MTB Entities are wholly-owned subsidiaries of the Company; and the Company s decision to focus on its core business in the provision of mobile contents and mobile value-added services. The management is of the view that the research and development of new software and mobile applications is not expected to yield significant returns in the near future. Further details on the rationale of the Disposals are set out in Section 4 of this announcement. 2.2 Information on MTB Securenet MTB Securenet was incorporated in Malaysia on 12 March 2014 as a private limited company under the Companies Act, 1965. It is principally engaged in the research and development of existing or new technologies in the field of information technology and mobile application. MTB Securenet s issued share capital is RM2.00 comprising two (2) MTB Securenet Shares. MTB Securenet does not have any subsidiary or associated company. The directors of MTB Securenet, all of whom are Malaysians, are Tang Boon Koon and Chen Huei Ping. 2.3 Information on Juz Tech Juz Tech was incorporated in Malaysia on 21 January 2014 as a private limited company under the Companies Act, 1965. It is principally engaged in the research and development of existing or new technologies in the field of information technology and mobile application. Juz Tech s issued share capital is RM2.00 comprising two (2) Juz Tech Shares. Juz Tech does not have any subsidiary or associated company. The directors of Juz Tech, all of whom are Malaysians, are Tang Boon Koon and Chen Huei Ping. 2.4 Agreement for sale and purchase of the Sale Shares Subject to the terms and conditions contained in the SSA, mtouche, as legal and beneficial owner, shall sell, and the Purchasers shall purchase, the Sale Shares from mtouche, in the following proportions and amounts:- MTB Securenet Purchasers No. of MTB Securenet Shares Percentage of share capital (%) Nelson Chui 1 50 SEL 1 50 Total 2 100 2
Juz Tech Purchasers No. of Juz Tech Shares Percentage of share capital (%) Nelson Chui 1 50 SEL 1 50 Total 2 100 Salient terms of the SSA include, inter alia, the following:- 2.4.1. Manner of payment of the Disposal Consideration The Disposal Consideration shall be satisfied by the Purchasers in a single cash payment in the following manner:- a sum of RM90,000.50 by Nelson Chui to mtouche; and a sum of RM90,000.50 by SEL to mtouche, on a date that falls within 30 days after the date of the SSA, or such other date as may be agreed upon between the parties to the SSA upon which the completion is to take place ( Completion Date ). The payment of the Disposal Consideration amounting to RM180,001.00 has been made and the documents in respect of the Sale Shares in accordance with the terms of the SSA has been transferred to the Purchasers on even date. As such, the Disposals are deemed completed. 2.4.2. Settlement of inter-company debts Based on MTB Securenet s unaudited balance sheet as at 31 December 2016, an aggregate amount of RM4,121,619.45 is due and payable from MTB Securenet to the MTB Entities and mtouche, comprising of the following:- Amount owing / payable by MTB Securenet to mtouche and RM MTB Entities Amount owing by MTB Securenet to mtouche 2,426,007.64 Amount owing by MTB Securenet to Mobile Touchetek Sdn. Bhd. 1,497,005.86 Amount owing by MTB Securenet to mtouche International Sdn. 6,777.95 Bhd. Amount owing by MTB Securenet to mtouche (Vietnam) Co. Ltd 191,828.00 Aggregate amount owing by MTB Securenet to mtouche and MTB Entities 4,121,619.45 Based on Juz Tech s unaudited balance sheet as at 31 December 2016, an aggregate amount of RM56,904.45 is due and payable from Juz Tech to mtouche and the following MTB Entities, comprising of the following:- Amount owing / payable by Juz Tech to mtouche and RM MTB Entities Amount owing by Juz Tech to mtouche 48,392.79 Amount owing by Juz Tech to Mobile Touchetek Sdn. Bhd. 7,313.86 Amount owing to mtouche International Sdn. Bhd 1,197.80 Aggregate amount owing by Juz Tech to mtouche and MTB Entities 56,904.45 3
(iii) (iv) The total amount owing by MTB Securenet and Juz Tech to mtouche and MTB Entities is RM4,178,523.90 ( Amount Owing ). The Purchasers irrevocably and unconditionally and jointly and severally undertake to repay and ensure repayment in full of the Amount Owing in the following manner:- (a) (b) (c) (d) (e) (f) A sum of RM678,523.90 comprised in the Amount Owing shall be repaid within seven (7) working days from the date of the SSA. Owing shall be repaid by the last day of the 6th month after Owing shall be repaid by the last day of the 12th month after Owing shall be repaid by the last day of the 18th month after Owing shall be repaid by the last day of the 24th month after Owing shall be repaid by the last day of the 30th month after (v) The respective MTB Entities shall nominate and appoint mtouche to receive for and on their behalf the Amount Owing which is to be repaid to the respective MTB Entities in accordance with the terms of the SSA. All such payments paid to mtouche shall constitute good and valid payment to the respective MTB Entities and the MTB Entities shall each issue a duly executed letter of nomination in the form set out in the SSA. 2.5 Liabilities to be assumed by the Purchasers pursuant to the Disposals Save for the liabilities arising from the ordinary course of business and the Amount Owing are set out in Section 2.4.2 of this announcement, there are no other liabilities, including contingent liabilities and guarantees to be assumed by the Purchasers pursuant to the Disposals. 2.6 Original cost of investment The original cost of investment for both MTB Securenet and Juz Tech are as follows:- Company Date of investment Number of shares Cost of investment MTB Securenet 18 March 2014 2 RM2.00 Juz Tech 18 March 2014 2 RM2.00 4
3. UTILISATION OF PROCEEDS The Disposal Consideration shall be utilised for general working capital requirements in respect of mtouche and its subsidiaries ( mtouche Group or the Group ) day-to-day operations to support its existing business operations, which shall include, amongst others, the payment of staff salaries, defrayment of operational and administrative expenses such as utilities charges, rental costs, transportation costs, marketing costs and other miscellaneous items. The actual breakdown of these expenses and the timeframe for full utilisation of the proceeds cannot be determined at this juncture as it will depend on the actual working capital requirements of the Group at the relevant time. 4. RATIONALE FOR THE DISPOSALS The Group s principal activities include:- the provision of mobile content and other mobile value-added services. Some of the mobile contents available for download include, amongst others, mobile games, mobile phone wallpaper, stickers used in chat messages to individual mobile phone users, whereas the mobile value-added services provided by the Company include, amongst others, billing and payment gateways as well as bulk messaging services to businesses; and the research and development of new software and mobile applications. All the Company s research and development of new software and mobile applications for third parties are undertaken via MTB Securenet and Juz Tech. The Disposals are undertaken by mtouche Group to dispose of its non-core and loss-making subsidiaries. Based on the unaudited financial statements for the twelve (12)-month FPE 31 December 2016, MTB Securenet recorded net loss of approximately RM1.35 million for the said financial period and NA of RM0.58 million as at 31 December 2016. Meanwhile, Juz Tech recorded net loss of approximately RM9,489 for the same period and NL of RM0.028 million as at 31 December 2016. The Group has stopped carrying out operations in the research and development of new software and mobile applications since May 2016, choosing instead to focus on its core business in the provision of mobile contents and mobile value-added services. The management is of the view that the research and development of new software and mobile applications is not expected to yield significant returns in the near future. As such, the Company had decided to allocate its resources towards strengthening its core business in the provision of mobile content and other mobile value-added services. The provision of mobile content is less demanding compared to the research and development of new software and mobile applications, as the Company develops mobile content in accordance with clients specifications and hence does not have to bear the research and development costs. Hence, after considering the dismal prospects of MTB Securenet and Juz Tech going forward, the Board is of the view that it is in the Company s best interest to focus on its key expertise and core business of providing mobile content and other mobile valueadded services. In view of the above, the Board is of the view that the Disposals are in the best interests of the Company. 5
5. RISK FACTOR As at 31 December 2016, the total amount owing by MTB Securenet and Juz Tech to mtouche and MTB Entities is RM4,178,523.90. Pursuant to the SSA, the Purchasers have undertaken to repay and ensure repayment in full of the Amount Owing in the manner as set out in Section 2.4.2 of this announcement. There can be no assurance that the Amount Owing will be settled within the timeframe stipulated under the SSA. In the event of delay or non-settlement of the Amount Owing, the Company shall be entitled to enforce its remedies available under the SSA, including initiating court proceedings to recover the Amount Owing. 6. EFFECTS OF THE DISPOSALS 6.1 Share capital and substantial shareholders shareholdings The Disposals will not have any effect on the issued share capital as well as substantial shareholders shareholdings in mtouche as they do not involve the issuance of new ordinary shares in mtouche ( mtouche Shares or Shares ). 6.2 NA and gearing The pro forma effects of the Disposals on the NA and gearing of the Company based on the audited consolidated statement of financial position of the Company as at 31 December 2015 are as set out below:- Group level (I) (II) Audited as at After subsequent After (I) and the 31 December 2015 events (2) Disposals (3) (RM 000) (RM 000) (RM 000) Share capital 23,154 12,735 12,735 Share premium 4,864 1,437 1,437 Reserves (1) (21,298) (3,352) (3,824) Shareholders fund / NA 6,720 10,820 10,348 Non-controlling interests (1,031) (1,031) (1,031) Total equity 5,689 9,789 9,317 No. of mtouche Shares in issue, excluding treasury shares ( 000) NA per mtouche Share (RM) Total borrowings (RM 000) 215,471 254,695 254,695 0.03 0.04 0.04 - - - Gearing ratio (times) - - - Notes:- (1) Reserves include treasury shares, warrant reserve, capital redemption reserve, foreign currency translation reserve, other capital reserves and accumulated losses. (2) Adjusted for the following:- disposal of 16,070,600 treasury shares for a total consideration of RM1,784,750 from 2 March 2016 to 24 March 2016; private placement of 23,154,000 Shares issued at RM0.10 each to independent third party investor(s) which was completed on 7 September 2016; and (iii) the cancellation of RM0.05 from the par value of every existing mtouche Share pursuant to Section 64 of the Companies Act, 1965. 6
(3) Includes loss from Disposals of RM372,325 and estimated expenses in relation to the Disposals of RM100,000. 6.3 Earnings and earnings per Share ( EPS ) MTB Securenet and Juz Tech incurred an unaudited aggregate loss after tax of RM1,356,905 for the twelve (12)-month FPE 31 December 2016. The financial results of MTB Securenet and Juz Tech will no longer impact the future consolidated earnings of the Company following the completion of the Disposals. The Disposals will result in a one-off loss on disposal estimated to be approximately RM372,325 for the Group, based on:- the unaudited NA of MTB Securenet of RM580,790.10 as at 31 December 2016 and the disposal consideration of RM180,000.00 for MTB Securenet; and the unaudited NL of Juz Tech of RM28,464.50 as at 31 December 2016 and the disposal consideration of RM1.00 for Juz Tech. For illustrative purposes, assuming the Disposals had been completed on 1 January 2015, being the beginning of the FYE 31 December 2015, the pro forma effect of the Disposals on the Company s earnings and EPS would be as follows:- Audited as at 31 December 2015 RM 000 After the Disposals RM 000 Net loss attributable to the owners of the Company Less: Pro forma loss on the disposal of the Sale Shares Less: Estimated expenses in relation to the Disposals Pro forma net loss attributable to the owners of the Company Number of mtouche Shares in issue, excluding treasury shares ( 000) (1,151) (1,151) - (372) - (100) (1,151) (1,623) 215,471 215,471 Loss per Share (sen) (0.53) (0.75) 7. APPROVALS REQUIRED AND INTER-CONDITIONALITY The Disposals are not subject to any approvals being obtained and are not conditional upon any other proposals undertaken or to be undertaken by the Group. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the directors of the Company or major shareholders of mtouche and/or persons connected to them have any interest, direct and/or indirect, in the Disposals. 7
9. DIRECTORS' STATEMENT The Board, having considered all aspects of the Disposals (including but not limited to the salient terms of the SSA, the rationale and financial effects of the Disposals) and after careful deliberation, is of the opinion that the Disposals are in the best interests of the Company. 10. HIGHEST PERCENTAGE RATIO The highest percentage ratio applicable to the Disposals pursuant to Rule 10.02(g) of the ACE Market Listing Requirements of Bursa Securities is 41.15%, calculated based on the total assets of the subject matter of the transaction compared with the total assets of the Group based on the latest audited financial statements of the Group as at 31 December 2015. 11. ADVISER Mercury Securities has been appointed by the Company to act as the Principal Adviser in relation to the Disposals. 12. DOCUMENT FOR INSPECTION A copy of the SSA will be made available for inspection at the registered office of the Company at 10 th Floor, Menara Hap Seng, No. 1 & 3, Jalan P. Ramlee, 50250 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 31 March 2017. 8