SUMMARY OF KEY MATTERS DISCUSSED AT THE TWENTY-SECOND ANNUAL GENERAL MEETING HELD ON 22 NOVEMBER 2019

SUMMARY OF KEY MATTERS DISCUSSED AT THE TWENTY-SECOND ANNUAL GENERAL MEETING OF THE COMPANY HELD AT GREENS 1, GOLF WING, TROPICANA GOLF & COUNTRY RESORT, JALAN KELAB TROPICANA, 47410 PETALING JAYA, SELANGOR DARUL EHSAN, ON FRIDAY, 22 NOVEMBER 2019 AT 11.00 A.M.

There were no other matters raised by the shareholders at the Twenty-Second Annual General Meeting, save for the following:-

Questions and Answers arising from the letter from the Minority Shareholder Watch Group

Strategy & Financial Matters

Question:
Trade Receivables as at 31 May 2019 amount to RM18.3 million. Of these, outstanding balances which exceeded the credit term amounting to approximately RM15.5 million is considered to be a major credit risk and has been highlighted as a Key Audit matter by the external auditor [page 48 of the Annual Report 2019 (“AR2019”)].

To-date, how much of the RM15.5 million of trade receivables have been collected?

Response:
Official information will be available in the next financial release. Though there maybe delay because the AR are largely Governmental funded projects, there is no bad debt historically. To date, over million has been received.

Question:
The Group’s revenue from contracts with customers for equipment have decreased significantly to approximately RM16.2 million (2018: RM47.1 million) (Note 5, page 87 of AR 2019).
    
(a)    What was the reason for the significant decrease in revenue from contracts with customers for Equipment? 
    
(b)    What are the measures taken to address the declining trend of the Group’s revenue, going forward?

Response:
(a)    The reason for significant decrease in revenue is because there is delay Government funded projects and hence, a decrease of the contracts from couple of major customers.
    
(b)    The Company is expanding to widen its customer base to reduce the reliance on few major customers.

Question:
Revenue based on geographical location of customers from Singapore and Russia has decreased (Note 25(b), page 16 of AR 2019).

Revenue from customers in:  2019 2018
Singapore RM11 million RM15.1 million
Russia RM16.2 million RM33 million
 

(a)    What are the reasons for the decrease in revenue from Singapore and Russia?

(b)    What is the outlook and Prospects in terms of revenue contribution by customers from Singapore and Russia, going forward?

Response:
(a)    Delay in Government funded projects
    
(b)    We do not forecast revenue to the public historically and when we do, we would have to announce through the co-sec to Bursa. In general. Digital health is a growing business and the market adoption has been positive and expected to continue to grow

Question:
Revenue from one major customer represented approximately RM13.4million (2018: RM32.7million) which is 46.4% of the Group’s total revenue (Note 28 (iii) page 120 of AR2019).

How does the Board/ Audit Committee manage the risk of dependency on one major customer?

Response:
The Company is investing to expand the customer base to reduce the reliance on few major customers, complimented by a more structured marketing plan.

Question:
Who is your closest competitor? How does the Company differentiate itself from its competitors?

Response:
Currently, we do not see any “closest competitor” as imedic has robust EMR based on Blockchain, over 20+ wireless medical connected to the APP using IoT Technology and Artificial Intelligence technologies to automate some of the work of the doctors. Additionally, we have developed and released imedic Digital Pharma to one of the major pharmaceutical companies in the world. We are also developing imedic Digital Insurance for the insurance community. With all these development, imedic is the only platform that offers a complete solution for digital health from consultation to prescription and payment or reimbursement from the medical insurance.

Question:
We note the explanation provided by the Company in the Corporate Governance Report that the Chairman of the Board is headed by the Managing Director, Mr. Eg Kah Yee until a suitable candidate is found. We also note that the Chairman and the Managing Director position had been held by Mr. Eg Kah Yee since year 2001.

What are the challenges that the Company is facing in separating the position of Chairman and managing Directors that are held by different individuals or for appointing an Independent Chairman? 

Response:
We had an Executive Director responsible for running the Company for a few years in the past and it was a failure. Mere splitting of Chairman and MD positions did not prove to be useful.

Question:
Mr. Eg Kah Yee, the Executive Chairman/Managing Director of UCrest is also the Executive Chairman/ Chief Executive Officer of Key ASIC Berhad.

As the Executive Chairman/Managing Director of the Company, Mr Eg Kah Yee is expected to devote his full-time commitment to UCrest as he is drawing salary, bonus and other benefits under the contract of service with the Company.

Please explain how Mr Eg Kah Yee manages his time commitment to the Company vis-a-vis his position of Executive Chairman/ Chief Executive Officer of Key ASIC Berhad given that both are executive positions that require full-time commitment.

Response:
Similarly, Key ASIC Berhad was managed by CEO for several years in the past and it was also a failure. There is strong synergy between the two companies. Mr Eg is not only very experienced in the areas of semiconductor and digital health, he is also a very hardworking person and he manages his time well an efficiently. The Company has returned to profitability after he assumed the CEO position.

Questions from the Shareholders present at the meeting

Question:
The enquiry from MSWG referred to under item 3(b) was related to outlook and prospects in terms of revenue contribution by customers from Singapore and Russia instead of forecast revenue from these customers. Please explain.

Response:
Generally, digital healthcare business is a fast-growing business. However, the adoption would depend on the regulations of the respective countries as business in healthcare is highly regulated. Other than Russia and Singapore, Management had also ventured into the United States of America (“USA”) and China. The adoption rate in Russia was quicker than the other countries because Russia had passed a law on the use of digital healthcare two years ago. In the last financial year, Management had also expanded the technology to include collaboration with pharmaceutical companies in the imedic platform. With the development of a new technology, namely “Patient Assistance Program”, pharmaceutical companies could manage their customers and remind them to take their medicine regularly. The Company had collaborated with a pharmaceutical company in Malaysia and is looking to expand the collaboration with pharmaceutical companies in Singapore, Taiwan, Vietnam, China and India.

The next phase would be on the payment for healthcare. There are plans to collaborate with third party administrators that assist insurance companies in administering claims. A new module under the imedic would be developed for this purpose and would be launched first in USA. The Company had been invited by the insurance companies in the USA to submit bids. Management is hopeful that this new collaboration could generate revenue for the Group.

Question:
The aging of trade receivables as stated under page 99 of the Annual Report, are they were collectable?

Response:
Healthcare being a regulated business, is generally funded by the government of the various countries. The business partners in Russia are government-linked companies. The delay in payment is mainly due to the structural change in the flow of government funds and the USA’s sanctions against Russia. Based on historical trends, payment from government deals will be collected despite delays.

Question:
The Key Audit Matters stated that the carrying amount of the intellectual property rights and software represented 56.8% of total assets as at 31 May 2019. Are patents registered for the intellectual property rights and software?

Response:
There is no guaranteed protection even if patents are registered for the intellectual property rights and software. In case of infringement, the issue will need to be settled in court. The main reason for registration of copyrights/patents is to ensure that an entity could continue its business operations using the intellectual property rights and software it has developed without being sued for infringement. Addressing the huge amount of intangible assets recorded, it is noted that continuous development of the intellectual property would lead to increase in its value.

Question and comments:
The Board consisted of a majority of Independent Non-Executive Directors (“INED”). Are there any succession plans to increase the number of executive directors? A strong management team should include a financial controller/chief financial officer and the Chairman of the board should be an INED.

Response:
In the corporate world, the lack of INEDs is an issue. The role of an INED is not solely for corporate governance and check and balance. The INEDs could contribute ideas to the company based on their experiences and expertise. In view of the evolving technology and UCrest’s unique business model, Prof. Low had agreed to join the board of UCrest to support the Group. Dato’ Dr Fikri, who is a heart surgeon, contributes through his years of experience and expertise in the medical aspect. Mr Eg Kaa Chee, a lawyer by profession, provides legal advice to the Board. Meanwhile, Mr Thong Kooi Pin is an accountant. All Board members contribute greatly to the business of the Group and not only play the check-and-balance role. The Board’s composition had changed with the shift of the business direction from telecommunication networking to digital health. Digital health business is heavily regulated and with the various entry barriers, gestation period and the evolving technology, the contribution from Board members with various experiences is necessary for the growth of the Group.

Question:
What is the unrealised “other income” as recorded on page 53 of the Annual Report?

Response:
The bulk of the business of the Group is conducted overseas and the receivables and payables would be held in United States Dollars (“USD”). These receivables and payables would be translated at the year-end to the Malaysian Ringgit (“RM”). For the financial year ended 31 May 2019, the unrealised foreign exchange gain was due to the depreciation of the RM against the USD.

Comment:
The Annual Report should also include financial highlights of the Group

Response:
The Board took note of the comment and would look into the recommendation.