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MLABS SYSTEMS BERHAD (653227-V) ANNUAL REPORT 20141

Corporate Information

Corporate Structure

Profile of Directors

Management’s Discussion

Statement on Corporate Governance

Audit Committee Report

Statement on Risk Management & Internal Control

Additional Disclosure Requirements

Director’s Report

Statement by Directors

Statutory Declaration

Independent Auditors’ Report to the Members of Mlabs Systems Berhad

Statements of Financial Position

Statements of Comprehensive Income

Statements of Changes In Equity

Statements of Cash Flow

Notes to the Financial Statements

Supplementary Information on the Disclosure of Realised and Unrealised Profit

or Loss

Analysis of Shareholdings / Warrant Holdings

Notice of Eleventh Annual General Meeting

Proxy Form

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Content

Annual Report

2014


CORPORATE INFORMATION

BOARD OF DIRECTORSGeneral Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) (Chairman)Independent Non-Executive Director/Chairman

Major Ismail Bin Ahmad (Rtd)Executive Director

Ong Tee KeinExecutive Director

Professor Dr. Sureswaran RamadassNon-Independent Non-Executive Director

Yee Yit YangIndependent Non-Executive Director

AUDIT COMMITTEEGeneral Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) (Chairman)Independent Non-Executive Director/Chairman

Professor Dr. Sureswaran Ramadass (Member)Non-Independent Non-Executive Director

Yee Yit Yang (Member)Independent Non-Executive Director

NOMINATING COMMITTEEGeneral Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) (Chairman)Independent Non-Executive Director/Chairman

Professor Dr. Sureswaran Ramadass (Member)Non-Independent Non-Executive Director

Yee Yit Yang (Member)Independent Non-Executive Director

REMUNERATION COMMITTEEProfessor Dr. Sureswaran Ramadass (Chairman) Non-Independent Non-Executive Director

General Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) (Member)Independent Non-Executive Director/Chairman

Ong Tee Kein (Member)Executive Director

SECRETARIESMs Seow Fei San (MAICSA 7009732)Ms Loh Lai Ling (MAICSA 7015412)

REGISTRARTricor Investor Services Sdn. Bhd. (629261-T)Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur Tel: 03-2264 3883Fax: 03-2282 1886

PRINCIPAL PLACE OF BUSINESSLot 10.3, 10th Floor, Menara Lien HoeNo. 8, Persiaran TropicanaTropicana Golf & Country Resort47410 Petaling JayaSelangor Darul EhsanTel: 03-7887 2896 Fax: 03-7887 1896 Email: [email protected]: www.mlabs.com

INTERNAL AUDITORSLNB Business Advisory Services Sdn. Bhd. (MIA 0905)UOA11,21 Jalan Pinang#22~5, 50450 Kuala Lumpur Tel : 03-6140 8890HP : 0198513334Email : [email protected]

REGISTERED OFFICE802, 8th Floor, Block CKelana Square, 17 Jalan SS7/2647301 Petaling JayaSelangor Darul EhsanTel: 03-7803 1126Fax: 03-7806 1387

AUDITORSUHY (AF 1411)Suite 11.05, Level 11The Gardens South TowerMid Valley City,Lingkaran Syed Putra59200 Kuala LumpurTel: 03-2279 3088Fax: 03-2279 3099

PRINCIPAL BANKERSCIMB Bank BerhadMalayan Banking BerhadPublic Bank Berhad

STOCK EXCHANGE LISTINGACE Market Bursa Malaysia Securities Berhad

STOCK NAME : MLABSTOCK CODE : 0085


MLABS SYSTEMS BERHAD

100%

51%

100%

MULTIMEDIA RESEARCH LAB SDN BHD NEXT GEN BIOSCIENCES SDN BHD

PACIFICA DIRECT SDN BHD

CORPORATE STRUCTURE


DIRECTORS’ PROFILE

General Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd)Malaysian, age 67Independent & Non Executive Director / Chairman

General Tan Sri Dato’ Sri Hj. Suleiman was appointed to the Board on 14 October 2009. He is a Chairman of Audit Committee and also a member of Nominating Committee and Remuneration Committee. He is a graduate of Royal New Zealand Air Force Command and Staff College and holds post graduate Diploma in Business Administration. He obtained his Master Degree in Operational Research and Systems Analysis from University of Aston in Birmingham, United Kingdom.

General Tan Sri Dato’ Sri Hj. Suleiman joined the Federation Military College in January 1965, and was commissioned into the Royal Malaysia Air Force on 5 August 1965. He did his basic flying training at the RMAF Flying Training School in Alor Setar, graduating in August 1966. He then went on to fly the Alouette III helicopters and in 1968, qualified as a helicopter instructor after completing an instructor’s course in United Kingdom.

He has a vast experience as a pilot having flown helicopters, fixed wing transport and fighter aircrafts. He had served as a Squadron Commander of the Sikorsky S-61 Helicopter Squadron and the Dart Herald Transport Squadron. He also flew the C-130H Hercules, the Aermacchi MB-339, the F-5E and the CN-235-220.

Throughout his career, General Tan Sri Dato’ Sri Hj. Suleiman has been assigned to several staff and operational appointments, and of importance was his appointment as the Director of Armed Forces Development Plans in the Malaysia Armed Forces Headquarters. In 1989, he was appointed the Base Commander of RMAF Base, Butterworth, a fighter Operational Air Base. Later, he was assigned as the Commander of the RMAF Air Training Command. He was then promoted to Brigadier General RMAF and took over command of No. 1 Air Division, an Air Defence (and Fighter) Command. He later moved to the post of Brigadier General Staff (Operations) at the Force Headquarters in Kuala Lumpur. On his promotion to Major General RMAF in June 1994, he was appointed as the Chief of Staff Operations and later on, was assigned as the Chief of Staff Policy and Plans. In August 1996, he assumed the post of the Deputy Chief of Air Force, and was upgraded to the rank of Lieutenant General RMAF on the same post, in June 2000.

General Tan Sri Dato’ Sri Hj. Suleiman was promoted to the rank of General RMAF and assumed the appointment of the Chief of the Royal Malaysian Air Force on 11 June 2001. He retired on 4 June 2003 at the age of 56.

Since his retirement, he has been on the Board of Director of several companies, amongst them are Malaysian Alliance Assurance Group Berhad, Mycron Steel Berhad and Ericsson (M) Berhad. He does not have any family relationship with any director and/or substantial shareholder(s), nor has he any conflict of interest with the Company. He has no convictions for any offences within the past 10 years.

Major Ismail Bin Ahmad (Rtd)Malaysian, age 66Executive Director

Major Ismail Bin Ahmad (Rtd) was appointed to the Board on 14 October 2009. Major Ismail Bin Ahmad (Rtd) holds a degree in Master in Management, LLB Hons from University of Wolverhampton, United Kingdom, Master of Laws from University of London and Certificate in Legal Practice. Major Ismail Bin Ahmad (Rtd) served in the Malaysian Army for 17 years and attended courses both local and overseas. In 1983, he joined Perwira Niaga Malaysia (Pernama), a wholly-owned subsidiary of LTAT, a wholesale and international trading company. His last position in Pernama was Deputy General Manager before he left in 1999. He was the CEO of Odasaja Sdn. Bhd. in its formative year and later became the Group Executive Director of the same. He is now attached with several private companies mainly involved in the development and construction industry. He is currently Director of Scan Associates Berhad and Advance Information Marketing Berhad. He does not have any family relationship with any director and/or substantial shareholder(s), nor has he any conflict of interest with the Company. He has no convictions for any offences within the past 10 years.


DIRECTORS’ PROFILE

Professor Dr. Sureswaran RamadassMalaysian, age 49Non-Independent Non-Executive Director

Professor was the Company’s Head of Research and Development (“R&D”). He is the Chairman of the Remuneration Committee and also a member of the Audit Committee and Nominating Committee of the Company. He obtained his Bachelor in Computer Engineering and Masters in Electrical and Computer Engineering from the University of Miami (Magna Cum Laude), USA in 1990. He also holds a doctorate from USM. He started off his career in 1990 as a senior member of the technical staff of the research team of MODCOMP, Inc., a Florida-based research company focused on the R&D of real-time systems. He has worked with numerous customers to benchmark their needs, including National Aeronautics and Space Administration engineers. He left in 1991 and joined ICON Business System, Inc. (Florida) as Senior Consultant. He was subsequently promoted to Vice President Engineering and was responsible in overseeing the entire engineering and R&D divisions of ICON Business Systems, Inc. (Florida). Professor is currently Chairman of Asia Pacific Advanced Networks (APAN). He is also a Visiting Professor at the International University of Malaya Wales (IUMW) and Chairman of the Board and Executive Director of NLTVC Sdn Bhd. (NLTVC is a next generation communications R&D company). Prior to this, he was the founding Director and Professor at the National Advanced IPv6 Centre of Excellence (NAV6), Universiti Sains Malaysia (USM). Some of his recognitions include being awarded Fellowship Award by the Wireless World Research Forum steering board member in April 2010. He was also awarded the National Academic Leader for Innovation and Commercialization in 2008 & 2009 by the Minister of Higher Education and Malaysia Innovation Award by the Prime Minister in 2007 and again in 2009. During his tenure at USM, he was a research partner/consultant to many companies in Malaysia including Telekom Malaysia Berhad, NCR Corporation, IBM Inc., MIMOS Berhad, Cabletron Systems Sdn Bhd and Compquest Sdn Bhd. He also holds numerous positions in global organizations including A13 project, which is a research-based project sponsored by the Japanese Government. He was also a nominated candidate for the position of Director of the Internet Corporation for Assigned Names and Numbers in 2000 (ICANN). He was also the Head of APAN for Malaysia. He is one of the four steering committee members and the IPv6 Domain Head for Malaysian Research and Education Network (MYREN) and was the Chairman of the Asia Pacific IPv6 Task Force (APV6TF). Over the years, he has published over two hundred (200) national and international level research papers as well as written chapters and provided writing materials for a few books in the area of multimedia conferencing. He does not have any family relationship with any director and/or substantial shareholder(s), nor has he any conflict of interest with the Company. He has no convictions for any offences within the past 10 years.

Ong Tee KeinMalaysian, age 58Executive Director

Mr. Ong Tee Kein was appointed to the Board on 13 January 2010 as an Independent Non-Executive Director and was redesignated as Executive Director of the Company on 15 April 2010. He is also a member of the Remuneration Committee. He has several years of experience in industry and consultancy practice. He is a member of the Malaysian Institute of Accountants, Associate of The Institute of Chartered Secretaries and Administrators and holds a Master Degree in Business Administration. He is a director in Sanichi Technology Berhad, Biosis Group Berhad and DGB Asia Berhad. He is also a director of several private limited companies. He is not related to any other director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences within the past 10 years.

Yee Yit YangMalaysian, age 47Independent Non-Executive Director

Mr. Yee Yit Yang was appointed to the Board on 12 July 2010 as Independent Non-Executive Director. He is a member of the Audit Committee and Nominating Committee. He began his career with an international accounting firm and then moved on to an investment bank in which he was involved with various corporate restructuring exercises. Currently, he is attached with a private consultancy firm. He holds a Bachelor of Economics and is a member of the Malaysian Institute of Accountants. He is an Independent Non-Executive Director of EKA Noodles Berhad, Key Alliance Group Berhad and Oriented Media Group Berhad. He is not related to any other director and/or substantial shareholder of the Company and has no conflict of interest with the Company. He has not been convicted of any offences within the past 10 years.


MANAGEMENT’S DISCUSSION

IntroductionFor the year under review, our videoconferencing business operated in a competitive and challenging market. We are also in the process of further upgrading our videoconferencing products with new features and are targeting new market segments in the education, organisational, defense and corporate sectors. As mobile and broadband access is now an important aspect within the domain of next generation communications, we need to continually reassess, reengineer and reposition our products to be on par, if not, better, than those existing in the market today.

Financial ResultsFor the year ended 31 December 2014, the Group recorded revenue of RM1.988 million. The revenue for the year under review represents an increase of 74.50% compared to revenue of RM1.139 million in 2013. The Group registered a higher gross profit of RM0.35 million compared to RM0.34 million in 2013. The higher gross profit margin is attributed to the reduction in our cost of sales. However, the Group incurred a Loss before Taxation of RM1.088 million compared to the previous year’s Loss before Taxation of RM0.65 million. The increase in the Loss before Taxation was mainly due to increase of human resources expenses and depreciation expenses.

In April 2014, the Group announced a Private Placement exercise with the view to increase its working capital. The proceeds from the Private Placement approved by the regulatory authorities in October 2014 will provide the Group with additional working capital to fund its research and marketing activities in regards to developing and marketing Android based next generation mobile conferencing solutions, which will run over mobile networks like 3G, 4G and LTE. The Group aims to be slightly ahead of other players with similar technologies, like Skype and Viber. With this exciting new plans and other initiatives, the Group expects to increase revenue and to improve the financial performance of the Group.

In September 2014, the Group announced an acquisition of 51% equity in Pacifica Direct Sdn Bhd with view to increase the revenue and to improve the financial performance of the Group in the future. Pacifica Direct Sdn Bhd is mainly in the business of kitchen utilities sold through an online portal (pacifica2u.com).

ProspectsWhilst the videoconferencing business in Malaysia has strong prospects, its’ growth is dependent on broadband availability and market acceptance. The Group has taken a number of initiatives to initiate the development of complimentary applications to enhance the marketability of our videoconferencing products by exploiting the growing trend of video and audio conferencing over mobile technologies, including 4G, LTE and Cloud technologies. At the same time the Group will enlarge its current businesses by undertaking businesses that are related and complementary to our core business. The Board is mindful that the continuing losses are not sustainable and towards this end, while the Group wishes to embark on the exciting growing area of mobile conferencing, the Group will also be on the look-out for new businesses that can provide strong revenues and profit growth. As our Group has no borrowings and enjoys a certain degree of liquidity, we would be able to take on business opportunities as and when they arise.

AppreciationOn behalf of the Board, I would like to take this opportunity to thank all our valued shareholders, business associates and our employees for their continuous support. In the coming year we expect to face new challenges and opportunities and I am confident our Group will continue to enjoy support from our stakeholders. Last but not least I thank my fellow directors for their guided wisdom and contribution to our Company.

For and on behalf of the Board

General Tan Sri Dato Sri Hj. Suleiman Bin Mahmud RMAF (Rtd)Chairman


STATEMENT ON CORPORATE GOVERNANCE

The Board of Directors (“Board”) of Mlabs Systems Berhad (“Company”) is committed to ensure that the highest standard of corporate governance is practised throughout the Group as a fundamental objective of discharging its responsibilities to protect and enhance the interest of all stakeholders and financial performance of the Company. The Board is working towards ensuring full compliance with principles and best practices of Malaysian Code on Corporate Governance 2012 (“Code”). The Board is pleased to report to shareholders the manner in which the principles of corporate governance contained in the Code are applied and the extent of compliance thereof during the financial year under review.

BOARD OF DIRECTORSBoard Charter and Code of Conduct and EthicsThe Board has formally adopted a Board Charter, which provides guidance to the Board in the fulfilment of its roles, duties and responsibilities which are in line with the principles of good corporate governance. The Board Charter provides guidance for Directors and Management on the responsibilities of the Boards its Committees and requirements of Directors and it is subject to periodical review to ensure consistency with the Board’s strategic intent as well as relevant standards of corporate governance. The Board is also committed to conducting business in accordance with the highest standards of business ethics and complying with applicable laws, rules and regulations. The Code of Conduct and Ethics provide guidance for Directors regarding ethical and behavioural considerations and/or actions as they address their duties and obligations during their appointment. The Board Charter and Code of Conduct and Ethics are made available for reference in the Company’s website www.mlabs.com.

Composition of the BoardAs at the date of this statement, the Board has five (5) members comprising two (2) Executive Directors, two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. The composition of the Board complies with Bursa Securities ACE Market Listing Requirements for which requires that independent non-executive directors make up at least 2 members or 1/3 of the membership of the Board. The present size and composition of the Board is optimum and well balanced. As presently constituted, the Board has the stability, continuity and commitment as well as capacity to discharge its responsibilities effectively. The Board has established clear functions reserved for the Board and those delegated to the management. The Board deliberates business plan and approves the performance targets and the goals of the business to be met by the Company and subsidiary companies. The positions of Chairman and the Executive Directors are held by different individuals, and the Chairman is an Independent Director. There is a division of responsibility between the Chairman who is leading the Board in the oversight of management and Executive Directors, who responsible for managing the overall business and day to day operations of the Company to ensure that there is a balance of power and authority, promotion of accountability and facilitation of division of responsibilities between them. The key duties and responsibilities of the Chairman are to provide leadership to the Board, chairing the meetings of the Board and shareholders, ensuring that the Board fully discharges its responsibilities and acting as liaison person between the Board and the management. None of the Independent Directors has served the Company exceeding a cumulative terms of nine (9) years.

Board Meeting and Supply of Information to the BoardAll Directors are provided with agenda and set of Board papers issued prior to Board meetings to ensure that the directors can appreciate the issues to be obtained further explanations, where necessary and to make an informed decision. Senior management is invited to attend these meetings to explain and clarify matters being tabled. In addition, all Directors have access to the advice and services of the Company Secretary who is a qualified professional with the required experience to advise the Board. When necessary, Directors may also obtain independent professional advice at the Company’s expense in furtherance of their duties. During the financial year, the Board met on five (5) occasions where it deliberated upon and considered a variety of matters mainly to review the Group’s operations and the quarterly and annual financial statements.

1.1

1.2

1.3

1.



The details of the attendance by individual Director during the financial year are as follows:-

Name of Directors

General Tan Sri Dato’ Sri Hj. Suleiman Bin MahmudRMAF (Rtd)Major Ismail Bin Ahmad (Rtd)Ong Tee KeinProfessor Dr. Sureswaran RamadassYee Yit Yang

Total Meetings Attended

5/55/55/55/54/5

Appointment and Re-election of DirectorsIn accordance with the Company’s Articles of Association, one-third (1/3) of the Directors are subject to retirement by rotation, if their number is not a multiple of three (3), the number nearest to one-third (1/3) with minimum of one (1) shall retire from office. The Directors to retire at each year are the Directors who have been longest in office since their appointment or re-election and all Directors shall retire at least once in every three (3) years. A retiring Director is eligible for re-election. The election of each Director is voted on separately. Any person appointed by the Board either to fill a casual vacancy or as an addition to the existing Directors, shall hold office only until the next Annual General Meeting and shall be eligible for re-election.

Directors’ TrainingThe Directors are encouraged to attend relevant seminars and courses to keep themselves updated on the various issues facing the changing business environment, regulatory and corporate governance developments to enhance their professionalism and knowledge to effectively discharge their duties and obligations. During the financial year, the Directors have attended the following conference/seminars/training:-

General Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd)

Major Ismail Bin Ahmad (Rtd)

Professor Dr. Sureswaran Ramadass

Ong Tee Kein

Yee Yit Yang

Directors

MSWG’s Appreciation & Application of Asean Corporate Governance ScorecardCyber Security AwarenessGlobal Economic Review Common Breaches of the Listing Requirements with Case Studies

Understanding Awareness of GSTCommon Breaches of the Listing Requirements with Case Studies

Asia Pacific Advanced Network 37th Meeting (APAN 37)4th Edition V6 World Congress 2014IPv6 Programmer WorkshopAPEC Tel Workshop & 9th IAC ForumRecruitment Seminar & Professional Talk (Vietnam Centrepoint, Education @ Media Group)35th APAN Meeting5th GAST Travelling Conference “IT Security”4th International Platform on Integrating Arab e-infrastructure in a Global Environment, e-AGE 201415th Annual Asia Utility Week 20147th MYREN National ConferenceECHONET Seminar 20142014 IEEE Student Conference on Research & Development (SCOReD)

Common Breaches of the Listing Requirements with Case Studies

Shares with No Par Value, Share Buybacks and Redeemable Preference Share – Proposed Companies Bill 2013Listing in London WorkshopCommon Breaches of the Listing Requirements with Case Studies

Name of Conference/Seminar/Programme Attended

-

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-

-

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The Board is also regularly updated by the Company Secretary on the latest updates and major amendments made to the Listing Requirements of Bursa Malaysia Securities Berhad, Companies Act, 1965 and other regulatory requirements relating to the discharge of the Directors’ duties and responsibilities.

1.4

1.5



Committee of Directors1.6

Audit CommitteeThe role of the Audit Committee is to support the Board in overseeing the processes for production of the financial data, reviewing the financial reports and the internal controls of the Company. The composition and terms of reference of the Audit Committee together with its report are presented on pages 13 -14 of the Annual Report.

Nominating CommitteeThe Nominating Committee (“NC”) was established on 8 November 2005 to ensure that the Board has an appropriate balance, size and the required mix of skills, experience and core competencies to govern the organization towards achieving its intended goals and objectives. The NC shall propose new candidates for the Board and assess Directors on an on-going basis. The NC consists of the following members:-

The nomination process of Board members are as follows:-

Appointment of New DirectorsThe Board nomination process is to facilitate and provide a guide for the NC to identify, evaluate, select and recommend to the Board the candidate to be appointed as a director of the Company. The Board does not set specific criteria for the assessment and selection of director candidate. However, the consideration would be taken on the need to meet the regulatory requirement such as Companies Act, 1965 and ACE Market Listing Requirements, the achievement in the candidate personal career, integrity, wisdom, independence of the candidate, ability to make independent and analytical inquiries, ability to work as team to support the Board, possession of the required skill, qualification and expertise that would add value to the Board, understanding of the business environment and the willingness to devote adequate time and commitment to attend to the duties/functions of the Board to select the suitable candidate.

The NC is responsible to recommend identified candidate to the Board to fill vacancy arises from resignation, retirement or any other reasons or if there is a need to appoint additional director with the required skill or profession to the Board in order to close the competency gap in the Board identified by the NC. The potential candidate may be proposed by existing director, senior management staff, shareholders or third party referrals. Upon receipt of the proposal, the NC is responsible to conduct an assessment and evaluation on the proposed candidate. The assessment/evaluation process may include, at the NC’s discretion, reviewing the candidate’s resume, curriculum vitae and other biographical information, confirming the candidate’s qualifications and conducting legal and other background searches as well as formal or informal interview at the NC’s discretion. The NC would also assess the candidate’s integrity, wisdom, independence, ability to make independent and analytical inquiries, ability to work as a team to support the Board, understanding of the business environment and the willingness to devote adequate time and commitment to attend to the duties/functions of the Board. Upon completion of the assessment and evaluation of the proposed candidate, the NC would make its recommendation to the Board. Based on the recommendation of the NC, the Board would evaluate and decide on the appointment of the proposed candidate. The Chairman of the Board would then make an invitation or offer to the proposed/potential candidate to join the Board as a director. With the acceptance of the offer/invitation, the candidate would be appointed as director of the Company.

(i)

(ii)

Chairman :

Member :

General Tan Sri Dato’ Sri Hj. Suleiman Bin MahmudRMAF (Rtd)(Independent Non-Executive Director)

Professor Dr. Sureswaran Ramadass(Non-Independent Non-Executive Director)

Yee Yit Yang(Independent Non-Executive Director)



Annual Assessment of Existing DirectorsThe director who is subject to re-election and/or re-appointment at next Annual General Meeting shall be assessed by the NC before recommendation is made to the Board and shareholders for the re-election and/or re-appointment. Appropriate assessment and recommendation by the NC would be based on the yearly assessment conducted.

Assessment on Independence of DirectorsCriteria have been set to assess the independence of candidate for directors and existing directors based on the guidelines set out in the Listing Requirements. On an annual basis, the Directors are required to confirm their independence by completing the independence checklist.

Diversity Policy A diversity policy has been established by the Board. The Board endeavours to have at least one woman participates on the Board at all times. The Board also endeavours to have diversity of the Board as well as its workforce in terms of experience, qualification, ethnicity and age.

During selection process, any list of proposed candidates to the Board shall consist of women candidates, wherever reasonably possible. The NC is responsible in ensuring that diversity objectives are adopted in board recruitment, board performance evaluation and succession planning processes.

The summary of the activities of the NC during the financial year is as follows:-

• Review the mix of skill and experience and other qualities of the Board. • Assess the effectiveness of the Board as a whole, the Board committees and the Directors. • Discuss the Company’s Directors’ retirement by rotation.

Remuneration CommitteeThe Remuneration Committee (“RC”) was established on 8 November 2005 to determine and agree with the Board the framework or board policy for the remuneration, in all forms, of the executive directors and/or any other persons as the RC is designated to consider by the Board and getting professional advice as and when necessary, determine and recommend to the Board any performance related pay schemes for the executive directors and/or any other persons as RC is designated to consider by the Board and to determine the policy for and scope of service agreements for the executive and non-executive directors, termination payment and compensation commitments. The RC consists mainly of Non-Executive and the members are as follows:-

Details of Directors’ remuneration for the financial year ended 31 December 2014 are as follows:-

CategoryExecutiveNon-ExecutiveTotal:

Fee RM72,00048,000

120,000

Salaries RM000

Benefits-in-kindRM

000

AllowancesRM

000

TotalRM

72,00048,000

120,000

(iii)

Chairman :

Member :

Professor Dr. Sureswaran Ramadass(Non-Independent Non-Executive Director)

General Tan Sri Dato’ Sri Hj. Suleiman Bin MahmudRMAF (Rtd)(Independent Non-Executive Director)

Mr. Ong Tee Kein(Executive Director)



RangeBelow RM50,000RM50,001-RM100,000

Executive20

Non-Executive30

The Directors’ remuneration within the following bands is as below:

Remuneration of Executive Directors The remuneration of the Executive Directors shall be reviewed and proposed by the RC for their consideration and recommendation to the Board for approval.

Annual BonusThe Executive Directors shall be entitled to participate in the Company’s annual cash bonus. The amount of bonus shall be proposed by the RC for their consideration and recommendation to the Board for approval.

Other benefitsExecutive Directors shall also be entitled to other benefits provided to employee of the Company and other additional benefits if so proposed by the RC for their consideration and recommendation to the Board for approval.

Remuneration for Non-Executive DirectorsThe remuneration of non-executive directors, which made up of Director fee, meeting allowance and other benefits, if any, is determined by the Board.

The Director fee shall be approved by shareholders. The Directors may be remunerated by a fixed sum (for non executive director) or by a percentage of profits (for executive directors) or otherwise as may be determined by the Board for the performance of extra services or to make any special exertions in going or residing away from his usual place of business or residence for any purpose of the Company or giving special attention to the business of the Company. Such remuneration may be either in addition to or in substitution for his or their share in the remuneration from time to time provided for the directors. Such remuneration would be proposed by the RC for their review, consideration and recommendation to the Board for decision.

Corporate DisclosureTo ensure timely and high quality disclosure, the Company has implemented a corporate disclosure policy to ensure accurate, clear, timely and complete disclosure of material information necessary for informed investing and take reasonable steps to ensure that all who invest in the Company’s securities enjoy equal access to such information to avoid an individual or selective disclosure.

(iv)

SHAREHOLDERS

Relationship with Shareholders and InvestorsThe Board recognizes the value of good investor relation and the importance of disseminating information in a fair and equitable manner, the participation of shareholders and investors, both individual and institutional, at Annual General Meeting is encouraged. Such information is disseminated via the Company’s annual reports, quarterly financial results and various prescribed announcements made to Bursa Securities from time to time in the Bursa Securities’ website at www.bursamalaysia.com. The Group also maintains a website at www.mlabs.com which provides information, qualitative and quantitative, on the Group’s operations and corporate developments. Any enquiry regarding the Company and its group of companies may be conveyed to the following personnel:-

Mr. Ong Tee Kein / Major Ismail Bin Ahmad (Rtd)(Executive Director / Executive Director)Telephone number : 03-7887 2896Fax number : 03-7887 1896Email : [email protected]

The Company has implemented a shareholder communication policy to ensure effective communication with its shareholders and other stakeholders. Communication between the Company and its shareholders are done in the following manner:-

2.1

2.



General MeetingThe Annual General Meeting represents the principal forum for dialogue and interaction with all the shareholders of the Company. The Company values feedback from its shareholders and encourages them to actively participate in discussion and deliberations. During the annual and other general meetings, shareholders have direct access to Board members who are on hand to answer their questions, either on specific resolutions or on the Company generally. The Chairman ensures that a reasonable time is provided to the shareholders for discussion at the meeting before each resolution is proposed.

The Board takes note of the recommendation by the Code on the adoption of electronic voting and encourage poll voting to facilitate greater shareholders’ participation. The shareholders are informed of their rights to demand a poll vote prior to the commencement of general meeting and the Board will ensure that any vote of shareholders taken at the general meeting on the resolution approving related party transactions is taken on a poll. Shareholders’ rights relating to general meeting is also published on the Company’s website. Announcement will also be made on the detailed results showing the number of votes cast for and against each resolution.

Financial ReportingThe Board has a general responsibility for taking the necessary steps to safeguard and enhance the value of shareholders in the Company. The Company, through the accounts, maintains an appropriate and transparent relationship with the external auditors.

Risk Management and Internal ControlThe Board recognizes the importance of a sound system of internal control for the Group including risk assessment and acknowledges its ultimate responsibilities in maintaining the same. The Group has a system of risk management and internal control and the overview of the state of the Group’s risk management and internal control is spelt out in the Statement on Risk Management and Internal Control on page 15 of this Annual Report 2014.

Relationship with the AuditorsThe Company has established a formal and transparent arrangement for maintaining appropriate relationships with the Group’s auditors, both external and internal. The Audit Committee seeks regular assurance on the effectiveness of the internal control systems through independent appraisal by the auditors. Liaison and unrestricted communication exists between the Audit Committee and the external auditors. The Company has put in place the policies and procedures to assess the sustainability and independence of external auditors. The Board, with the recommendations by the Audit Committee, will ensure that all quarterly announcements and annual reports present a balanced and understandable assessment of the Group’s financial position and prospect. The Board is also required by the Companies Act, 1965 to prepare financial statements that give a true and fair view of the state of affairs, including the cash flows and results of the Group and of the Company for the financial year. A statement by the Board of its responsibilities for preparing the financial statements is set out on page 22 of this Annual Report 2014.

2.2

3.1

3.2

3.3

ACCOUNTABILITY AND AUDIT3.

SUSTAINABILITY POLICY

COMPLIANCE WITH THE CODE

The Board is committed to operate its business in accordance with environmental, social and economic responsibility. These include working within the law in order to be innovative and demonstrate initiative to meet the requirements of various stakeholders. The Company strives to achieve sustainable long term balance between meeting its business goals and preserving the environment, its commitments with respect to sustainability are in the core areas of workplace, marketplace, community and environment. The strategies to promote sustainability and its implementation can be found at the Company’s website at www.mlabs.com.

The Board strives to ensure that the Company complies with the principles and best practices of the Code. The Board will endeavor to improve and enhance the procedures from time to time.

4.

5.


AUDIT COMMITTEE REPORT

The purpose of the setting up of the Audit Committee is to assist the Board in discharging its duties to identify principal risks, ensuring the implementation of appropriate systems of internal controls to manage such risks, and that such systems are working effectively to safeguard shareholders’ investment and the long term viability of the Group.

MembershipThe members of the Audit Committee are:

Audit Committee MeetingsFor the financial year ended 31 December 2014, five (5) Audit Committee meetings were held. The meeting attendance of each member during the financial year is set out below:-

Summary of Activities of the CommitteeThe activities carried out by the Committee during the financial year ended 31 December 2014 in discharge of its duties and responsibilities were as follows:-

Composition of the Audit CommitteeThe Audit Committee shall be appointed by the directors from amongst themselves and its number shall not be less than three (3) members and all members must be non-executive directors, with a majority of whom shall be independent non-executive directors. The Chairman of the Audit Committee shall be an independent director. Meeting & Minutes The Audit Committee shall meet at least four times a year subject to quorum of two independent members or more frequently as circumstances required or upon the request of the external auditors when the need arises. The Audit Committee chairman shall report each meeting to the Board and the Audit Committee shall be assisted by the Company Secretary and minutes of each meeting shall be distributed to each member of the Audit Committee and the Board.

Authority of Audit CommitteeThe Audit Committee is authorized by the Directors to investigate any activity within its terms of reference and shall have the resources required to perform its duties and also empowered to obtain any independent professional advice when the need arises. The Audit Committee has full and unrestricted access to all information and documents relevant to its activities as well as to the internal and external auditors and employees of the Group.

Reviewed with the internal auditors the Internal Audit Planning scope and plan, and their findings and the management’s response and actions taken.

Reviewed the External Audit Plan for the Company and the Group with the external auditors to ensure the audit scope and activities is adequately covered.

Reviewed quarterly and annual financial reports for the Company and the Group prior to submission to the Board for consideration and approval.

Reviewed and approved the proposed final audit fees for the external auditors and internal auditors in respect of their audit of the Company and the Group.

Considered the re-appointment of the external auditors and renewal of internal audit engagement.

Met with the external auditors to discuss various issues on the Company, excluding the attendance of the executive members of the committee.

Reviewed the Statement on Risk Management and Internal Control prior to submission to the Board for consideration and approval for insertion into the Annual Report 2014.

a.

b.

c.

d.

e.

f.

g.

TERMS OF REFERENCE

Chairman : General Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) Members : Professor Dr. Sureswaran Ramadass : Yee Yit Yang

Committee MembersGeneral Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd) Professor Dr. Sureswaran RamadassYee Yit Yang

No. of Meetings Attended5/55/54/5


AUDIT COMMITTEE REPORT

Duties and Responsibilities of Audit CommitteeThe duties and responsibilities of the Audit Committee are as follows:

Internal Audit FunctionIn discharging its function, the Audit Committee is supported by an internal audit function whose primary responsibility is to evaluate and report on the adequacy and effectiveness of the overall system of internal control of the Group. The internal audit function of the Group has been outsourced to Messrs LNB Business Advisory Services Sdn. Bhd., who reports directly to the Audit Committee. The firm has conducted ongoing review of the adequacy and effectiveness of the system of internal controls. Some internal control weaknesses were identified during the financial year under review, all of which have been or are being addressed by the manage-ment. None of these weaknesses has resulted in any material loss that would require disclosure in the Group’s financial statements. The Group incurred RM 8,450.00 of internal audit fees during the financial year ended 31 December 2014.

To review:-

To review quarterly report and year end financial statements before submission to the Board for approval. To review any related party transaction and potential conflict of interest situation that may arise within the Company and the Group. To report promptly to the Bursa Malaysia Securities Berhad on any matter reported by it to the Board which has not been satisfac-torily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia. To meet with the external auditors, the internal auditors or both, without executive board members present at least twice a year.

1.

2.

3.

4.

5.

a. External Audit

b. Internal Audit

•

•

•

••

•

the appointment of the external auditors, the audit fee and any question of resignation or dismissal and reason (supported by grounds) for dismissal of the Company’s external auditors;the adequacy of external auditors audit plans and arrangements, with particular emphasis on the scope and nature of audit and the internal control system; andthe external auditor’s audit reports.

nomination and any letter of resignation of the internal auditors;the adequacy of the scope, functions, competency and resources of the internal audit function and that it has the necessary authority to carry out its work; andthe internal audit programme, processes, the results of the internal audit programme, processes and/or investigation undertaken and whether or not appropriate remedial actions are taken by Management on the recommendations of the internal audit function.


STATEMENT ON RISK MANAGEMENT &INTERNAL CONTROLThe Board of directors is overall responsible for maintaining a sound risk management framework and internal control system to safeguard shareholders’ investments and the Group’s assets. In accordance with Rule 15.26(b) of the ACE Market Listing Requirements of Bursa Malaysia Securities Berhad and guided by the Statement on Risk management and Internal Control, the Board of Directors (“Board”) is pleased to provide a statement on the risk management and internal control of the Group prepared in this annual report.

BOARD RESPONSIBILITY The Board is responsible to determine the Company’s level of risk tolerance and in conjunction with management, to actively identify, assess and monitor key business risks and to review the effectiveness, adequacy and integrity of the Group’s risk management framework and internal control system. The board acknowledges that due to the limitations that are inherent in any system of internal controls, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss as it is designed to manage rather than eliminate the risk of failure to achieve the Group’s business objectives.

RISK MANAGEMENT AND INTERNAL CONTROLThe Board is aware that a sound system of internal control should be embedded in the operations of the Group and form part of Group’s culture to achieve its business objectives. The Board has formalised and adopted the risk management framework and risk management policies and procedures with the purpose of providing guidance on systematic approach to assess and manage risk. The respective directors of the subsidiary companies and key operational management staff are responsible for managing the risks of their departments and periodical management meetings are held to address significant issues to ensure such risks .These significant risks are closely monitored and appropriately addressed and highlighted to the Board on an exception basis. This is an on-going process to identify, evaluate and manage significant risks that affect the Group’s business objectives.

INTERNAL AUDIT FUNCTIONThe Group has appointed an independent professional consulting firm to undertake its internal audit functions to provide adequacy, effective internal control systems of the group.

The internal auditors assists the Audit Committee (‘AC’) in discharging its duties and responsibilities with respect to the adequacy and integrity of the systems of internal control within the Group. The internal auditors report independently and directly to the AC in respect of the internal audit function. The AC together with the internal auditors agree on the audit scope and plan. All audit findings arising there from are reported to the AC on a half-yearly basis. The internal auditor is allowed complete and unrestricted access to all documents and records of the Group deemed necessary in the performance of its function and control processes.

Internal audit function adopts a risk-based auditing approach by focusing on reviewing identified high risk areas for compliance with control policies and procedures. Internal auditors identify business risk which have not been appropriately addressed and also evaluate the adequacy, effectiveness and integrity of controls.

All reports and findings arising from these reviews and recommendations are discussed primarily with the respective process custodians prior to a formal report being presented to the AC including material losses, contingency or uncertainties that would required separate disclosure. These recommendations would strengthen the internal control systems and policies. A number of internal control weaknesses have been brought out by the internal auditors and all of which have been addressed.

During the year, the Board has been presented reports by AC who confirms together with Executive Directors that the Group’s risk management and internal control systems are operating adequately and effectively in all material aspects throughout the financial year and up to the date of approval of the Annual Report.

REVIEW OF THE STATEMENT BY EXTERNAL AUDITORSAs required by Rule 15.23 of the Bursa Malaysia Securities Bhd ACE Market Listing Requirements, the external auditors have reviewed the Statement on Risk Management and Internal Control for inclusion in the Annual Report of the Group for financial year ended 31 December 2014.

The external auditors have reported to the Board that nothing has come to their attention that causes them to believe the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls within the group.

This Statement on Risk Management and Internal Control is made in accordance a resolution of the Board dated 17 April 2015.


ADDITIONAL DISCLOSURE REQUIREMENTS

Utilisation of ProceedsRights Issue proceeds amounted to RM5,147,850 was raised by the Company in year 2010. The utilization of the proceeds derived from the Rights Issue during the financial year is as follows:-

Private Placement proceeds amounted to RM1,543,500 was raised by the Company in year 2012.

The utilization of the proceeds derived from the Private Placement during the financial year is as follows:-

Private Placement proceeds amounted to RM1,698,790, was raised by the Company in year 2014.

The utilization of the proceeds derived from the Private Placement during the financial year is as follows:-

1.

Sales and MarketingExpenditure

Purchase of raw material,components andaccessories

Expansion in humanresources

Expenses for the ProposedRights Issue

Total

Development of mobile application

Working capital

* Estimated expenses in relation to the proposed private placement

Total

Working capital

* Estimated expenses in relation to the proposed private placement

Total

1,500,000

2,500,000

747,850

400,000

5,147,850

1,300,000

298,000

100,000

1,698,790

1,454,000

90,000

1,543,500

1,049,000

2,500,000

463,000

394,000

4,460,000

946,000

-

40,000

986,000

579,000

24,000

603,000

451,000

-

285,000

6,000

742,000

354,000

298,000

60,000

950,000

941,000

-

941,000

Proposed Utilisation(RM)



Utilisation up to 31December 2014

(RM)


(RM)


(RM)

Balance(RM)

Balance(RM)

Balance(RM)


ADDITIONAL DISCLOSURE REQUIREMENTS

Sanctions and/or PenaltiesThere were no sanctions and/or penalties imposed on the Company or its subsidiaries, Directors or management by the relevant regulatory bodies.

Non-Audit FeesThere was no non-audit fees paid to the external auditors for the financial year.

Material ContractsDuring the financial year, there was no material contract entered into by the Company or its subsidiary involving interest of Directors and major shareholders of the Company that have not been reflected in the financial statements.

Corporate Social Responsibility StatementThe Group is driven by the belief that in pursuit of any business objective, it needs to strike a balance between profitability and contribution to the social and environmental responsibilities. With such belief, the Group is committed and uses its best endeavor, ongoing basis to integrate CSR practices into its day to day business operations i.e. contributions to charitable bodies and university.

2.

3.

4.

5.


DIRECTORS’ REPORT

The Directors hereby present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2014.

Principal ActivitiesThe principal activity of the Company is that of investment holding.

The principal activities of its subsidiaries are disclosed in Note 5 to the financial statements.

There have been no significant changes in the nature of these activities during the financial year.

Financial Results

DividendThere were no dividends proposed, declared or paid by the Company since the end of the previous financial year. The Board of Directors does not recommend any dividend in respect of the current financial year.

Reserves and ProvisionsThere were no material transfers to or from reserves or provisions during the financial year other than those as disclosed in the financial statements.

Issues of Shares and DebenturesThe Company issued 16,987,900 new ordinary shares of RM0.10 each at RM1,698,790 through private placement for a total cash consideration of RM1,698,790 for working capital purpose. The new ordinary shares issued ranked pari passu in all respects with the existing ordinary shares of the Company.

Options Granted Over Unissued SharesNo options were granted to any person to take up unissued shares of the Company during the financial year.

Warrants 2010/2020The Warrants 2010/2020 were constituted under the Deed Poll dated 26 April 2010. As at 31 December 2014, the total numbers of Warrants that remain unexercised were 77,217,750 (2013: 77,217,750).

DirectorsThe Directors in office since the date of the last report are: General Tan Sri Dato’ Sri Hj. Suleiman bin Mahmud RMAF (Rtd)Major Ismail bin Ahmad (Rtd)Professor Dr. Sureswaran RamadassOng Tee KeinYee Yit Yang

GroupRM

(1,187,304)(8,152)

(1,195,456)

Net loss for the financial year, Attributable to: Owners of the Parent Non-controlling interests

CompanyRM

(476,482)-

(476,482)


DIRECTORS’ REPORT

Directors’ InterestsThe interests and deemed interests in the shares and warrants of the Company and of its related corporations (other than wholly-owned subsidiary companies) of those who were Directors at financial year end (including their spouses or children) according to the Register of Directors’ Shareholdings are as follows:

Before the statements of financial position and statements of profit or loss and other comprehensive income of the Group and of the Company were made out, the Directors took reasonable steps:

to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and had satisfied themselves that all known bad debts had been written off and no allowance for doubtful debts was required; and

to ensure that any current assets which were unlikely to realise in their values as shown in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(a)

(i)

(ii)

At1.1.2014

565,132

38,299

At1.1.2014

100

Acquired

-

-

Acquired

-

Disposed

-

-

Disposed

-

At31.12.2014

565,132

38,299

At31.12.2014

100

Interest in the CompanyDirect interestProfessor Dr. Sureswaran Ramadass

Indirect interestProfessor Dr. Sureswaran Ramadass#

Indirect interestProfessor Dr. Sureswaran Ramadass#

Note:# Deemed interest by virtue of shares held by spouse.

By virtue of his interests in the shares of the Company, Professor Dr. Sureswaran Ramadass is also deemend interested in the shares of all the subsidiaries during the financial year to the extent the Company has an interest under Section 6A of the Companies Act, 1965. None of the other Directors in office at the end of the financial year had any interest in the ordinary shares of the Company or its related corporations during the financial year.

Directors’ Benefits Since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest. Neither during nor at the end of the financial year, was the Company a party to any arrangement whose object of which was to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of Company or any other body corporate.

Other Statutory Information

Number of ordinary shares of RM0.10 each

Number of warrants 2010/2020


DIRECTORS’ REPORT

At the date of this report, the Directors are not aware of any circumstances :

At the date of this report, there does not exist:

In the opinion of the Directors:

which would render it necessary to write off any bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or

not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading; or

which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liability of any other person; or

any contingent liability of the Group or of the Company which has arisen since the end of the financial year other than those arising ijn the normal course of business of the Group and the Company.

no contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company as and when they fall due;

the results of operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the current financial year in which this report is made.

(b)

(c)

(d)

(i)

(ii)

(iii)

(v)

(i)

(ii)

(i)

(ii)

(iii)

AuditorsThe Auditors, Messrs UHY, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 17 April 2015.

ONG TEE KEIN MAJOR ISMAIL BIN AHMAD (RTD)


ONG TEE KEIN MAJOR ISMAIL BIN AHMAD (RTD)

STATEMENT BY DIRECTORSPursuant to Section 169(15) of the Companies Act, 1965

We, the undersigned, being two of the Directors of the Company, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 25 to 58 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2014 and of their financial performance and cash flows for the financial year then ended. The supplementary information set out in Note 31 to the financial statements on page 59 have been compiled in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad. Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 17 April 2015.


ONG TEE KEIN

STATUTORY DECLARATIONPursuant to Section 169(16) of the Companies Act, 1965

I, ONG TEE KEIN, being the Director primarily responsible for the financial management of MLABS SYSTEMS BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 25 to 59 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by the abovenamed at Petaling Jaya in the Selangor Darul Ehsan on 17 April 2015

Before me,

COMMISSIONER FOR OATHSNG SAY HUNGB185

))))


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MLABS SYSTEMS BERHAD

Report on the Financial StatementsWe have audited the financial statements of Mlabs Systems Berhad, which comprise the statements of financial position as at 31 December 2014 of the Group and of the Company, and the statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 25 to 58.

Directors’ Responsibility for the Financial StatementsThe Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2014 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the followings:

In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have act as auditors have been properly kept in accordance with the provisions of the Act.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

(a)

(b)

(c)


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MLABS SYSTEMS BERHAD

UHYFirm Number: AF 1411Chartered Accountants

CHAN JEE PENGApproved Number:

3068/08/16 (J)Chartered Accountant

Kuala Lumpur17 April 2015

Other Reporting ResponsibilitiesThe supplementary information set out in Note 31 on pages 59 is solely disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysia Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Other MatterThis report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2014

ASSETSNon-Current AssetsProperty,Plant and equipmentInvestment in SubsidiariesOther investmentIntangible assets

Current AssetsInventoriesTrade receivablesOther receivablesAmounts owing by subsidiary companiesCash and bank balances

Total Assets

EQUITY AND LIABILITIES EquityShare capitalShare premiumFair value adjustment reserveAccumulated lossesEquity attributable to the owners of the parentNon-controlling interestTotal equity

Non-Current LiabilityHire purchase payable

Current LiabilitiesTrade payablesOther payablesAmounts owing to DirectorsHire purchase payableTax payables

Total LiabilitiesTotal Equity and Liabilities

2014RM

870,313-

1,259,152 1,349,683 3,479,148

180,0001,560,928

590,410

- 448,514

2,779,8526,259,000

18,686,6909,389,978

81,599(22,485,300)

5,672,96784,387

5,757,354

47,028

175,319232,893

6,09132,699

7,616454,618501,646

6,259,000

Group Company

2014RM

-200,000

- 1,076,000 1,276,000

---

2,472,177239,800

2,711,9773,987,977

18,686,6909,346,633

-(24,139,288)

3,894,035-

3,894,035

-

-93,651

--

29193,942 93,942

3,987,977

2013RM

865,112- --

865,112

-1,067,741

364,677

-3,347,2094,779,6275,644,739

16,987,9009,389,978

-(21,297,996)

5,079,882-

5,079,882

79,510

173,510206,184

72,00032,699

737485,130564,857

5,644,739

2013RM

- ---

---

2,752,57711,092

2,763,6692,763,669

16,987,9009,346,633

-(23,662,806)

2,671,727-

2,671,727

-

-91,651

--

29191,94291,942

2,763,669

Note

4567

89

10

11

121314

15

16171815

The accompanying notes form an integral part of the financial statements.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

RevenueCost of salesGross profitOther incomeSelling and distribution expensesAdministrative expensesOther expensesFinance costsLoss before taxTaxationNet loss for the financial year

Other comrehensive incomeItems that are or may be reclassified subsequently to profit or loss

Available-for-sale financial assets-current year gains

Total comprehensive income for the financial year

Net loss for the financial year, attributable to:Owners of the parentNon-controlling interests

Total comprehensive income for the financial year, attributable to:Owners of the parent (sen):Basic

Diluted

2014 RM

1,988,466(1,874,435)

114,03184,335

(47,550)(1,020,982)

(313,694)(4,717)

(1,188,577)(6,879)

(1,195,456)

81,599

(1,113,857)

(1,187,304)(8,152)

(1,195,456)

23(a) (0.69)

23(b) N/A

Group Company

2014RM

---

50,000-

(526,482)--

(476,482)-

(476,482)

-

(476,482)

(476,482)-

(476,482)

2013RM

1,139,233(911,666)

227,567183,611(22,574)

(869,145)(162,701)

(6,908)(650,150)

-(650,150)

-

(650,150)

(650,150)-

(650,150)

(0.38)

N/A

2013RM

- ----

(378,182)--

(378,182)-

(378,182)

-

(378,182)

(378,182)-

(378,182)

Note

19

202122



STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

The

acc

ompa

nyin

g no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

Fai

r va

lue

Sh

are

Sh

are

adju

stm

ent

Acc

um

ula

ted

T

ota

l N

on

-co

ntr

olli

ng

Cap

ital

Pre

miu

m r

eser

veL

oss

esE

qu

ity

inte

rest

sT

ota

l G

rou

pR

MR

MR

MR

MR

MR

MR

M

At 1

Jan

uary

201

416

,987

,900

9,

389,

978

-(2

1,29

7,99

6)5,

079,

882

-5,

079,

882

Net

loss

for

the

finan

cial

yea

r-

--

(1,1

87,3

04)

(1,1

87,3

04)

(8,1

52)

(1,1

95,4

56)

Oth

er c

ompr

ehen

sive

inco

me

for

the

finan

cial

yea

r-

-81

,599

-81

,599

-81

,599

Tot

al c

ompr

ehen

sive

inco

me

16,9

87,9

009,

389,

978

81

,599

(22,

485,

300)

3,97

4,17

7(8

,152

)3,

966,

025

Tra

nsac

tions

with

ow

ners

:

Priv

ate

shar

e pl

acem

ent

1,69

8,79

0-

--

1,69

8,79

0-

1,69

8,79

0

Acq

uisi

tion

of s

ubsi

diar

y-

--

--

92,5

3992

,539

1,69

8,79

0-

-

-1,

698,

790

92,5

39

1

,791

,329

At 3

1 D

ecem

ber

2014

18,6

86,6

90

9,38

9,97

881

,599

(22,

485,

300)

5,67

2,96

784

,387

5,75

7,35

4

Att

rib

uta

ble

to

Ow

ner

s o

f th

e P

aren

t

No

n-

Dis

trib

uta

ble

At 1

Jan

uary

201

316

,987

,900

9,

389,

978

-(2

0,64

7,84

6)

5,73

0,03

2

-

5,73

0,03

2

Net

loss

for

the

finan

cial

yea

r,

re

pres

entin

g to

tal

co

mpr

ehen

sive

inco

me

for

the

fin

anci

al y

ear

-

--

(650

,150

)(6

50,1

50)

-(6

50,1

50)

At 3

1 D

ecem

ber

2013

16,9

87,9

00

9,38

9,97

8-

(21,

297,

996)

5,

079,

882

-5,

079,

882


STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014 (CONT’D)

The

acc

ompa

nyin

g no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

Sh

are

Sh

are

Acc

um

ula

ted

T

ota

l C

apit

alP

rem

ium

Lo

sses

Eq

uit

yR

MR

MR

MR

MC

om

pan

y

At 1

Jan

uary

201

416

,987

,900

33

6,6

43,

9

(23,

662,

806)

2,67

1,72

7

Tra

nsac

tions

with

ow

ners

:

Priv

ate

shar

e pl

acem

ent

1,69

8,79

0-

-

1,69

8,79

0

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

-raey laic

nanif e

ht rof e

moc

ni evis

neher

pm

oc -

(476

,482

)(4

76,4

82)

At 3

1 D

ecem

ber

2014

18,6

86,6

909,

346,

633

(24,

139,

288)

3,89

4,03

5

--

-

At 1

Jan

uary

201

316

,987

,900

9,34

6,63

3(2

3,28

4,62

4)3,

049,

909

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

com

preh

ensi

ve in

com

e fo

r th

e fin

anci

al y

ear

--

(378

,182

)(3

78,1

82)

At 3

1 D

ecem

ber

2013

16,9

87,9

009,

346,

633

(23,

662,

806)

2,67

1,72

7

Att

rib

uta

ble

to

Ow

ner

s o

f th

e P

aren

t

No

n-

Dis

trib

uta

ble

The

acc

ompa

nyin

g no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

Sh

are

Sh

are

Acc

um

ula

ted

T

ota

l C

apit

alP

rem

ium

Lo

sses

Eq

uit

yR

MR

MR

MR

MC

om

pan

y

At 1

Jan

uary

201

416

,987

,900

33

6,6

43,

9

(23,

662,

806)

2,67

1,72

7

Tra

nsac

tions

with

ow

ners

:

Priv

ate

shar

e pl

acem

ent

1,69

8,79

0-

-

1,69

8,79

0

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

-raey laic

nanif e

ht rof e

moc

ni evis

neher

pm

oc -

(476

,482

)(4

76,4

82)

At 3

1 D

ecem

ber

2014

18,6

86,6

909,

346,

633

(24,

139,

288)

3,89

4,03

5

--

-

At 1

Jan

uary

201

316

,987

,900

9,34

6,63

3(2

3,28

4,62

4)3,

049,

909

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

com

preh

ensi

ve in

com

e fo

r th

e fin

anci

al y

ear

--

(378

,182

)(3

78,1

82)

At 3

1 D

ecem

ber

2013

16,9

87,9

009,

346,

633

(23,

662,

806)

2,67

1,72

7

Att

rib

uta

ble

to

Ow

ner

s o

f th

e P

aren

t

No

n-

Dis

trib

uta

ble

The

acc

ompa

nyin

g no

tes

form

an

inte

gral

par

t of t

he fi

nanc

ial s

tate

men

ts.

Sh

are

Sh

are

Acc

um

ula

ted

T

ota

l C

apit

alP

rem

ium

Lo

sses

Eq

uit

yR

MR

MR

MR

MC

om

pan

y

At 1

Jan

uary

201

416

,987

,900

33

6,6

43,

9

(23,

662,

806)

2,67

1,72

7

Tra

nsac

tions

with

ow

ners

:

Priv

ate

shar

e pl

acem

ent

1,69

8,79

0-

-

1,69

8,79

0

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

-raey laic

nanif e

ht rof e

moc

ni evis

neher

pm

oc -

(476

,482

)(4

76,4

82)

At 3

1 D

ecem

ber

2014

18,6

86,6

909,

346,

633

(24,

139,

288)

3,89

4,03

5

--

-

At 1

Jan

uary

201

316

,987

,900

9,34

6,63

3(2

3,28

4,62

4)3,

049,

909

Net

loss

for

the

finan

cial

yea

r, r

epre

sent

ing

tota

l

com

preh

ensi

ve in

com

e fo

r th

e fin

anci

al y

ear

--

(378

,182

)(3

78,1

82)

At 3

1 D

ecem

ber

2013

16,9

87,9

009,

346,

633

(23,

662,

806)

2,67

1,72

7

Att

rib

uta

ble

to

Ow

ner

s o

f th

e P

aren

t

No

n-

Dis

trib

uta

ble


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

Cash Flows From Operating ActivitiesLoss before tax

Adjustments for: Amortisation of intangible assets Bad debts written off - Trade receivables - Other receivableDepreciation of property, Plant and equipmentImpairment loss on: - Trade receivablesInterest expenseInterest incomeInventories written offLoss on disposal of property, plant and equipmentOperating loss before working capital changesChanges in working capital: Inventories Trade receivables Othes receivables Trade payables Others payables Directors Subsidiaries

Cash (used in)/generated from operations

Interest paid Interest received

Net cash (used in)/from operating activities

Cash Flows From Investing ActivitiesPurchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Addition to other investment Addition to intangible assets Acquisition of investment in subsidiary companyNet cash used in investing activities

2014RM

(1,188,577)

20,000

--

215,105

147,3464,717

--

-

(801,409)

(180,000)(640,533)(225,733)

1,80926,588

(71,200)-

(1,089,069)

(1,890,478)

(4,717)-

(4,717)

(1,895,195)

(220,306)

-(1,177,553)(1,076,000)

(195,732)

(2,669,591)

Group Company

2014RM

(476,482)

-

--

-

----

-

(476,482)

----

2,000-

280,400282,400

(194,082)

---

(194,082)

-

--

(1,076,000)

(200,000)

(1,276,000)

2013RM

(650,150)

-

8,75740,000

135,099

-6,908

(112,611)11,967

8,455

(551,575)

-(272,717)

786,672-

178,426(28,000)

-664,381

112,806

(6,908)112,611105,703

218,509

(616,666)

37,015--

-

(579,651)

2013RM

(378,182)

-

--

-

----

-

(378,182)

--

1,000,000-

78,651-

(1,001,240)77,411

(300,771)

---

(300,771)

-

---

-

-


Note

4(a)


STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014 (CONT’D)

Cash Flows From Financing ActivitiesProceeds from issuance of ordinary sharesRepayment of hire purchase payablesNet cash (used in)/from financing activities

Net (decrease)/increase in cash and cash equivalentsCash and cash equivalents at beginning of the financial yearCash and cash equivalents at end of the financial year

Cash and cash equivalents atend of the financial yearcomprises:Cash and bank balances

2014RM

1,698,790

(32,699)

1,666,091

(2,898,695)

3,347,209

448,514

448,514

Group Company

2014RM

1,698,790

-

1,698,790

228,708

11,092

239,800

239,800

2013RM

-

(30,508)

(30,508)

(391,650)

3,738,859

3,347,209

3,347,209

2013RM

-

-

-

(300,771)

311,863

11,092

11,092


NOTES TO THE FINANCIAL STATEMENTS

Corporate InformationThe Company is a public limited liability company, incorporated in Malaysia under the Companies Act, 1965 and domiciled in Malaysia and is listed on the ACE Market of Bursa Malaysia Securities Berhad. The principal place of business of the Company is located at Lot 10.3, 10th Floor, Menara Lien Hoe, 8, Persiaran Tropicana, Tropicana Golf & Country Resort, 47410 Petaling Jaya, Selangor Darul Ehsan. The registered office of the Company is located at 802, Level 8, Block C Kelana Square, 17, Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan. The principal activity of the Company is that of investment holding. The principal activities of its subsidiaries are disclosed in Note 5. There have been no significant changes in the nature of these activities of the Company and its subsidiaries during the financial year.

Statement of Compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act 1965 in Malaysia. The financial statements of the Group and of the Company have been prepared under the historical cost convention, unless otherwise indicated in the significant accounting policies.

Adoption of new and amended standards and IC Interpretation

During the financial year, the Group and the Company have adopted the following amendments to MFRSs and IC Interpretation issued by the Malaysian Accounting Standards Board (“MASB”) that are mandatory for current financial year:

Adoption of above amendments to MFRSs and IC Interpretation did not have any significant impact on the financial statements of the Group and of the Company. Standards issued but not yet effective The Group and the Company have not applied the following new MFRSs and amendments to MFRSs that have been issued by the MASB but are not yet effective for the Group and of the Company:

Effective dates forfinancial periodsbeginning on or

after

Amendments to MFRS 119

Annual Improvements to MFRSs 2010 – 2012 CycleAnnual Improvements to MFRSs 2011 – 2013 CycleMFRS 14

Amendments to MFRS 11

Amendments to MFRS 116 and MFRS 138

Defined Benefits Plans:Employee Contributions

Regulatory DeferralAccountsAccounting forAcquisitions of Interestsin Joint OperationsClarification of AcceptableMethods of Depreciationand Amortisation

1 July 2014

1 July 20141 July 2014

1 January 2016

1 January 2016

1 January 2016

Amendments to MFRS 10, MFRS 12 and MFRS 127Amendments to MFRS 132Amendments to MFRS 136Amendments to MFRS 139IC Interpretation 21

Investment EntitiesOffsetting Financial Assets and Financial LiabilitiesRecoverable Amount Disclosures for Non-Financial AssetsNovation of Derivatives and Continuation of Hedge AccountingLevies

(a)

1.

2. Basis of Preparation



The Group and the Company intend to adopt the above MFRSs when they become effective.

The effects of the adoption of applicable MFRSs and amendments to MFRSs above are summarised below:

MFRS 9 Financial Instruments (IFRS 9 issued by IASB in July 2014)

MFRS 9 (IFRS 9 issued by IASB in July 2014) replaces earlier versions of MFRS 9 and introduces a package of improvements which includes a classification and measurement model, a single forward looking ‘expected loss’ impairment model and a substantially reformed approach to hedge accounting. MFRS 9 when effective will replace MFRS 139 Financial Instruments: Recognition and Measurement.

MFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income and fair value through profit or loss.

The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in MFRS 139. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. MFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under MFRS 139.

The adoption of MFRS 9 will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 9.

MFRS 15 Revenue from Contracts with Customers

MFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces MFRS 118 Revenue, MFRS 111 Construction Contracts and related IC Interpretations. The Group is in the process of assessing the impact of this Standard.

Effective dates forfinancial periodsbeginning on or

after

Amendments to MFRS 116 and MFRS 141Amendments to MFRS 127

Amendments to MFRS 10 and MFRS 128

Annual Improvements to MFRSs 2012–2014 CycleAmendments to MFRS 10,MFRS 12 and MFRS 128MFRS 15

MFRS 9

Agriculture: Bearer Plants

Equity Method in Separate Financial StatementsSale or Contribution ofAssets between an Investorand its Associate or Joint Venture

Investment Entities: Applying the Consolidation ExceptionRevenue from Contracts withCustomersFinancial Instruments (IFRS 9 issued by IASB in July 2014)

1 January 2016

1 January 2016

1 January 2016

1 January 20161 January 2016

1 January 2017

1 January 2018

2. Basis of PreparationStatement of Compliance (Cont’d)

Standards issued but not yet effective (Cont’d)

(a)


(i) Subsidiary companies

Subsidiary companies are those companies in which the Group has long term equity interest and has the power, directly or indirectly, to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanying a shareholding of more than one half of the voting rights. Investments in subsidiary companies are stated at cost less any impairment losses in the Company’s statement of financial position, unless the investment is held for sale or distribution. The cost of investments includes transaction costs. Upon the disposal of investment in a subsidiary, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.


Functional and presentation currency

The financial statements are presented in Ringgit Malaysia (“RM”) which is the Group’s and Company’s functional currency.

Significant accounting estimates judgments, and assumptions.

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies and reported amounts of assets, liabilities, income and expenses, and disclosures made. Estimates and underlying assumptions are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.

The key assumptions concerning the future and other key sources of estimation or uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below:

Useful lives of property, plant and equipmentManagement estimates the useful lives of the property, plant and equipment to be within 4 to 10 years and reviews the useful lives of depreciable assets at end of each reporting period. At 31 December 2014, management assesses that the useful lives represent the expected utilisation of the assets to the Group. Actual results, however, may vary due to change in the business plan and strategies, expected level of usage and technological developments, which resulting the adjustment to the Group’s assets. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.

Impairment of loans and receivablesThe Group assesses at end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience of assets with similar credit risk characteristics.

(b)

(c)

Significant Accounting Policies3.Basis of consolidation

The consolidated financial statements include the financial statements of The Group and the Company and all its subsidiaries, which have been prepared in accordance with the Group’s accounting policies and are all drawn up to the same reporting period.

(a)

2. Basis of Preparation (Cont’d)



Significant Accounting Policies (Cont’d)Basis of consolidation (Cont’d)

Foreign currency transactions and balances

Transactions in foreign currency are recorded in the functional currency of the respective Group entities using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date on which the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the rate at the date of transaction. Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(ii) Consolidation

Subsidiary companies are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Changes in the Group and the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

The acquisition method of accounting is used to account for the purchase of subsidiary companies. The consideration transferred for acquisition of a subsidiary is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, as well as any contingent consideration given. Acquisition related costs are expensed off in the profit or loss as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition. In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss. If the Group loses control of a subsidiary, the assets and liabilities of the subsidiary, including any goodwill, and non-controlling interests are derecognised at their carrying value on the date that control is lost. Any remaining investment in the entity is recognised at fair value. The difference between the fair value of consideration received and the amounts derecognised and the remaining fair value of the investment is recognised as a gain or loss on disposal in the consolidated statement of profit or loss and other comprehensive income.

(a)

(b)

3.


Significant Accounting Policies (Cont’d)3.


Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 3(l).

(i) Recognition and measurement

Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the asset to working condition for its intended use, cost of replacing component parts of the assets, and the present value of the expected cost for the decommissioning of the assets after their use. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. All other repair and maintenance costs are recognised in profit or loss as incurred. The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the statement of profit or loss and other comprehensive income as incurred.

(iii) Depreciation

Depreciation is recognised in the profit or loss on straight line basis to write off the cost of each asset to its residual value over its estimated useful life. Property, plant and equipment are depreciated based on the estimated useful lives of the assets as follows:

Renovation 4 yearsMotor vehicles 5 yearsFurniture, fittings and office equipment 10 yearsComputers 5 - 10 years

The residual values, useful lives and depreciation method are reviewed at each financial period end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the property, plant and equipment.

(c)



Intangible assets

(i) Internally-generated intangible assets - research and development costs

Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

• the technical feasibility of completing the intangible asset so that the asset will be available for use or sale;• its intention to complete and its ability and intention to use or sell the asset;• how the asset will generate future economic benefits;• the availability of resources to complete; and the ability to measure reliably the expenditure during development.

The amount initially recognised for internally–generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure in recognised in profit or loss in the period in which it is incurred.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful lives and amortisation methods are reviewed at the end of each reporting date, with the effect of any changes in estimate being accounted for on a prospective basis.

(ii) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful lives and amortisation methods are reviewed at the end of each reporting date, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

(iii) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair values at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

(iv) Derecognition of intangible assets

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

See accounting policy Note 3(l) on impairment of non-financial assets for intangible assets.

Financial assets

Financial assets are recognised on the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument When financial assets are recognised initially, they are measured at fair value, plus in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract. Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately in profit or loss. The Group and the Company classify their financial assets depends on the purpose for which it was acquired at initial recognition as loan and receivables.

(d)

(e)



Loans and receivables

LLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the end of the reporting period which are presented as non-current assets. After initial recognition, financial assets categorised as loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the assets within 12 months after the end of the reporting period.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends from an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established. Investment in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment loss. Regular way purchase or sale of financial assets Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset. Derecognition of financial assets Financial assets are derecognised when the contractual rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, the difference between the carrying amount and the sum of consideration received and any cumulative gains or loss that had been recognised in equity is recognised in the profit or loss.

Financial liabilities

Financial liabilities are recognised on the statements of financial position when, and only when the Group and the Company become a party to the contractual provisions of the financial instrument. All financial liabilities are initially recognised at fair value plus transaction cost and subsequently carried at amortised cost using the effective interest method, other than those categorised as fair value through profit or loss. Changes in the carrying value of these liabilities are recognised in the profit or loss. The Group and the Company classify their financial liability at initial recognition, into the following category: Other liabilities measured at amortised cost Other financial liabilities are non-derivatives financial liabilities. The Group’s and the Company’s other financial liabilities comprise trade and other payables and borrowings. Other financial liabilities are classified as current liabilities; except for maturities more than 12 months after the end of the reporting period, in which case they are classified as non-current liabilities. Other liabilities are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the profit or loss when the liabilities are derecognised as well as through the effective interest rate method amortisation process.

(f)


Significant Accounting Policies (Cont’d)3.Financial assets (Cont’d)(e)



Derecognition of financial liabilities A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Offsetting of Financial Instruments A financial asset and financial liability are offset and the net amount reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Inventories

Inventories are valued at the lower of cost and net realisable value after adequate allowance has been made for all deteriorated, damaged, obsolete or slow-moving inventories.

Cost is determined using the first in, first out method. The cost of raw materials comprises the original cost of purchase plus the cost of bringing the inventories to its present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and bank balances that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. For the purpose of statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits, if any.

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or asset or the arrangement conveys a right to use the asset, even if that right is not explicitly specific in an arrangement.

Finance Lease Leases in terms of which the Group or the Company assumes substantially all the risks and rewards of ownership are classified as finance lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the profit or loss. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Operating Lease Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified as operating leases and are not recognised on the statement of financial position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

(i)

(ii)

(g)

(h)

(i)

Significant Accounting Policies (Cont’d)3.Financial liabilities (Cont’d)(f)



Income taxes

Tax expense in profit or loss comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the liability method for all temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the temporary differences arising from the initial recognition of goodwill, the initial recognition of assets and liabilities in a transaction which is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, at the end of the reporting period. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Unutilised reinvestment allowance and investment tax allowance, being tax incentives that is not a tax base of an asset, is recognised as a deferred tax asset to the extent that it is probable that the future taxable profits will be available against the unutilised tax incentive can be utilised.

Share capital

An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the nominal value of shares issued. Ordinary shares are classified as equity. Dividends on ordinary shares are accounted for in equity as appropriation of retained earnings and recognised as a liability in the period in which they are declared.

Impairment of Assets

(j)

(k)

(l)

Non-financial assets

The carrying amounts of non-financial assets (except for inventories, amount due from contract customers, deferred tax assets, assets arising from employee benefits, investment property measured at fair value and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives, or that are not yet available for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject to operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is the greater of its value-in-use and its fair value less costs of disposal. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

(i)



Non-financial assets (Cont’d)

An impairment loss is recognised if the carrying amount of an asset or cash-generating unit exceeds its estimated recoverable amount. Impairment loss is recognised in profit or loss, unless the asset is carried at a revalued amount, in which such impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (group of cash-generating units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for asset in prior years. Such reversal is recognised in the profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Financial assets

All financial assets, other than those categorised as fair value through profit or loss, investments in subsidiary companies, associates and joint ventures, are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivable and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with defaults on receivables. If any such evidence exists, the amount of impairment loss is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of impairment loss is recognised in profit or loss. Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised in profit or loss, the impairment loss is reversed, to the extent that the carrying amount of the asset does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of reversal is recognised in profit or loss.

Available-for-sale financial assets Significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. A significant or prolonged decline in the fair value of investments in equity instruments below its cost is also an objective evidence of impairment.If an available-for-sale financial asset is impaired, the amount of impairment loss is recognised in profit or loss and is measured as the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously. When a decline in the fair value of an available-for-sale financial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive incime is reclassified from equity to profit or loss. Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value of equity instrument, if any, subsequent to impairment loss is recognised other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.

(ii)

(i)


Significant Accounting Policies (Cont’d)3.Impairment of Assets (Cont’d)(l)



Revenue

Employee benefits

Contingencies

Where it is not probable that an inflow or an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the asset or the obligation is disclosed as a contingent asset or contingent liability, unless the probability of inflow or outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent assets or contingent liabilities unless the probability of inflow or outflow of economic benefits is remote.

Segments reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-makers are responsible for allocating resources and assessing performance of the operating segments and make overall strategic decisions. The Group’s operating segments are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Sale of goods

Revenue is measured at the fair value of consideration received or receivable, net of returns and allowances, trade discount and volume rebates. Revenue from sale of goods is recognised when the transfer of significant risk and rewards of ownership of the goods to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

Rendering of services

Revenue from services rendered is recognised in the profit or loss based on the value of services performed and invoiced to customers during the period.

Rental income

Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

Interest Income

Interest income is recognised on accruals basis using the effective interest method.

Short term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick and medical leave are recognised when the absences occur. The expected cost of accumulating compensated absences is measured as additional amount expected to be paid as a result of the unused entitlement that has accumulated at the end of the reporting period.

Defined contribution plans

As required by law, companies in Malaysia contributions to the state pension scheme, the Employee Provident Fund (“EPF”). Such contributions are recognised as an expense in the profit or loss as incurred. Once the contributions have been paid, the Group and the Company have no further payment obligations.

(i)

(ii)

(iii)

(iv)

(i)

(ii)

(m)

(n)

(o)

(p)




Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as port of the cost of those assets. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(q)



Assets held under hire purchase arrangements

Included in the property, plant and equipment of the Group are motor vehicles acquired under hire purchase arrangements with carrying amount of RM13,683 (2013: RM67,912).


Group2014

At costAt 1 January 2014AdditionsAt 31 December 2014

Accumulated depreciationAt 1 January 2014Charge for the financial yearAt 31 December 2014

Net carrying amountAt 31 December 2014

Group2013At costAt 1 January 2013AdditionsDisposalWritten offAt 31 December 2013

Accumulated depreciationAt 1 January 2013Charge for the financial yearDisposalWritten offAt 31 December 2013


RenovationRM

175,761209,500385,261

11,74937,48949,238

336,023

387,356165,390

-(376,985)

175,761

387,3561,378

-(376,985)

11,749

164,012

Furniture,fittings and

officeequipments

RM

448,8917,787

456,678

238,84532,469

271,314

185,364

428,70671,364

(51,179)-

448,891

217,08030,869(9,104)

-238,845

210,046

Motor vehiclesRM

646,259-

646,259

240,745129,252369,997

276,262

271,145375,114

--

646,259

149,00491,741

--

240,745

405,514

ComputersRM

739,3533,019

742,372

653,81315,895

669,708

72,664

738,9954,798

(4,440)-

739,353

643,74711,111

(1,045)-

653,813

85,540

TotalRM

2,010,264220,306

2,230,570

1,145,152215,105

1,360,257

870,313

1,826,202616,666(55,619)

(376,985)2,010,264

1,397,187135,099(10,149)

(376,985)1,145,152

865,112

Property, Plant and Equipment4.



Investments in Subsidiary Companies5.

2014RM

7,800,623(7,600,623)

200,000

2014RM190,000

4,268(5,291)

(121)188,856

Unquoted shares, at cost In MalaysiaLess: Accumulated impairment losses

Intangible assetsCash and bank balancesAmount due to directorsTax payableTotal identified assets and liabilities

Details of the subsidiary companies are as follows:

Acquisition of subsidiary company During the financial year, the Company acquired 102,000 ordinary shares of RM1.00 each which represents 51% equity interest in Pacifica Direct Sdn. Bhd. for total cash consideration of RM200,000.

Acquisition of subsidiary company Fair value of identifiable assets acquired and liabilities assumed:

2013RM

7,600,623(7,600,623)

-

2013RM

-----

Company

Group

Name of company

Direct holding:

Multimedia Research LabSdn. Bhd.

Next Gen BiosciencesSdn. Bhd.

Pacifica Direct Sdn. Bhd.

2014%

100

100

51

2013%

100

100

-

Country ofincorporation

Malaysia

Malaysia

Malaysia

Effectiveinterest Principal activities

Business of research and Lab Sdn. Bhd. development in multimedia video conferencing system as well as assembling and trading of multimedia video conferencing systems and equipment

Dormant

Trading of kitchen equipmentand appliances, and winecellar equipment.


Investments in Subsidiary Companies (Cont’d)5.


2014RM200,000

(4,268)

195,732

2014RM200,000

92,539

(188,556)103,683

2014RM

1,259,152

Purchase consideration satisfied by cashLess: Cash and cash equivalents of subsidiary companies acquiredNet cash inflow from the acquisition of a subsidiary company

Fair value of consideration transferredNon-controlling interests, based on their proportionate interest in the recognised amounts of the assets and liabilities of the acquireeFair value of identifiable assets acquired and liabilities assumed Goodwill

Quoted Investments in Malaysia, at fair value- unit trust funds

Net cash outflow arising from acquisition of subsidiary company:

Net cash outflow arising from acquisition of subsidiary company:

2013RM

-

-

-

2013RM

-

-

--

2013RM

-

Group

Group

Other investment6.



Intangible Assets

Group2014

At costAt 1 January 2014Acquisition of subsidiaryAddition during the yearAt 31 December 2014

Accumulated amortisationAt 1 January 2014Acquisition of subsidiaryCharge for the financial yearAt 31 December 2014

Accumulated impairmentAt 1 January 2014Charge for the financial yearAt 31 December 2014


Group 2013

At costAt 1 January/31 December 2013

Accumulated amortisationAt 1 January/31 December 2013

Accumulated impairmentAt 1 January /31 December 2013


GoodwillRM

--

103,683103,683

----

---

103,683

-

-

-

-

Intellectualproperty

RM

8,835,510--

8,835,510

7,748,346--

7,748,346

--

1,087,164

-

8,835,510

7,748,346

1,087,164

-

Developmentexpenditure

RM

4,207,299-

1,076,0005,283,299

3,054,766--

3,054,766

--

1,152,533

1,076,000

4,207,299

3,054,766

1,152,533

-

Computer software

RM

2,639,411--

2,639,411

2,639,411--

2,639,411

---

-

2,639,411

2,639,411

-

-

Web sitecostRM

-200,000

-200,000

-10,00020,00030,000

---

170,000

-

-

-

-

TotalRM

15,682,220200,000

1,179,68317,061,903

13,442,52310,00020,000

13,472,523

--

2,239,697

1,349,683

15,682,220

13,442,523

2,239,697

-

7.



Development expenditure

Development expenditure principally comprises internally generated expenditure on development costs on major projects where it is reasonably anticipated that the costs will be recovered through future commercial activity. Intellectual property Intellectual property principally comprises purchase consideration for the ownership of multimedia conferencing system and its related intellectual property rights where it is reasonably anticipated that the costs will be recovered through future commercial activity. Amortisation charge The amortisation charge for development expenditure and intellectual property is recognised in cost of sales. The amortisation charge for computer software is recognised in administrative expenses.

The Group’s normal trade credit terms range from 30 to 180 days (2013: 30 to 180 days). Other credit terms are assessed and approved on a case by case basis. Related party refers to a company of which a Director of the Subsidiary has financial interest Movements in impairment loss are as follows:

(a)

(b)

(c)

Intangible Assets (Cont’d)

Inventories

Trade Receivables

7.

8.

9.

2014RM

180,000

-

2014RM

1,708,2746,049,4727,757,746

(6,196,818)1,560,928

2014RM

6,049,472147,346

6,196,818

At costFinished goods

Recognised in profit or loss:Inventories written off

Trade receivables- Third parties- Related party

Less: Accumulated impairment losses

At 1 JanuaryImpairment during the yearAt 31 December

2013RM

-

11,967

2013RM

1,067,7416,049,4727,117,213

(6,049,472)1,067,741

2013RM

6,049,472-

6,049,472

Group

Group

Group



Analysis of the trade receivables ageing as at the end of the financial year is as follows:

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in financial difficulties, have defaulted on payments and/or dispute billings. These receivables are not secured by any collateral or credit enhancements and under legal case. Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

Amounts owing by Subsidiary Companies represent unsecured interest free advances and are repayable on demand.

Movements in impairment losses are as follows:

Other Receivables

Amounts Owing by Subsidiary Companies

10.

11.

2014RM

1,527,333

-33,595

1,560,928 6,196,818 7,757,746

2014RM

15,216,603 (12,744,426)

2,472,177

Neither past due nor impairPast due but not impaired: 31 to 60 days More than 60 days

Impaired

Amounts owing by subsidiary companiesLess: Accumulated impairment losses

2013RM534,000

-533,741

1,067,7416,049,4727,117,213

2013RM

15,497,003(12,744,426)

2,752,577

Group

Company

Other receivablesDepositPrepayments

Less: Accumulated impairment losses

At 1 JanuaryWritten offAt 31 December

2014RM

532,05663,41414,208

609,678

(19,268)590,410

2014RM

19,268-

19,268

Group

Group

Company

Company

2014RM

----

--

2014RM

---

2013RM

297,20569,41417,326

383,945

(19,268)364,677

2013RM

1,519,268(1,500,000)

19,268

2013RM

----

--

2013RM

1,500,000(1,500,000)

-

Trade Receivables (Cont’d)9.



The Company issued 16,987,900 new ordinary shares of RM0.10 each at RM1,698,790 through private placement for a total cash consideration of RM1,698,790 for working capital purpose. The new ordinary shares issued ranked pari passu in all respect with the existing ordinary shares of the Company. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets. Free Detachable Warrants On 26 April 2010, the Company issued renounceable rights issue of 51,478,500 new ordinary shares together with 77,217,750 free detachable new warrants on the basis of two (2) rights shares together with three (3) warrants for every four (4) existing shares of the Company. This exercise price is subject to adjustment in accordance with the basis set out in the deed poll. The warrants may be exercised at any time commencing on the date of issue of warrants on 26 April 2010 but not later than 26 April 2020. Any warrants which have not been exercised at date of maturity will lapse and cease to be valid for any purpose. The warrant holders will not have any voting rights in any general meeting of the Company unless the warrants are exercised into new ordinary shares and registered prior to the date of the general meeting of the Company. As at 31 December 2014, the total numbers of warrant that remain unexercised were 77,217,750 (2013: 77,217,750).

This is a non-distributable reserve which arose from the issue of the Company’s shares at a premium net of share listing expenses.

Fair value adjustment reserve represents the cumulative net change in the fair value of available-for-sale financial assets until they are derecognised or impaired.

Share Capital

Share premium

Fair value adjustments reserve

12.

13.

14.

Ordinary shares of RM0.10 each: Authorised At 1 January/ 31 December

Issued and fully paid At 1 January Issuance of shares during the financial year At 31 December

2014Unit

500,000,000

169,879,000

16,987,900 186,866,900

Group and Company

Number of shares Amount

2014Unit

500,000,000

16,987,900

1,698,790 18,686,690

2013Unit

500,000,000

169,879,000

- 169,879,000

2013Unit

500,000,000

16,987,900

-16,987,900



The hire purchase liabilities bear interest at rate of 2.72% (2013: 2.72%) per annum.

The normal trade credit terms granted to the Group range from 30 to 60 days (2013: 30 to 60 days). Other credit terms are assessed and approved on a case by case basis. Related party refers to a company of which a Director of the Subsidiary has financial interest.

Amounts owing to Directors represent unsecured, interest free advances and are repayable on demand.

Revenue represents the invoiced value of goods sold and services rendered less discountand returns.

Hire Purchase Payable

Trade Payables

Other Payables

Amounts Owing to Directors

Revenue

15.

16.

17.

18.

19.

2014RM

37,41646,74684,162(4,435)79,727

32,69947,02879,727

32,69947,02879,727

2014RM

12,400162,919175,319

Minimum hire purchase payments Payable within one year Payable between one to five years

Less : Future finance charges Present value of hire purchase liabilities

Present value of hire purchase liabilities Repayable within one year Payable between one to five years

Analysed as: Repayable within twelve months Repayable after twelve months

Trade payables- Third parties- Related party

2013RM

37,41684,162

121,578(9,152)

112,426

32,69979,727

112,426

32,69979,727

112,426

2013RM

161,11012,400

173,510

Group

Group

Other payablesAccruals

2014RM

39,279193,614232,893

Group Company

2014RM

36,74156,91093,651

2013RM

39,279166,906206,184

2013RM

36,74154,91091,651



Finance Costs

Loss Before Tax

Taxation

20.

21.

22.

2014RM

4,717Interest expense on: Hire purchase

2013RM

6,908

Group

Loss before tax is derived after charging/(crediting):

Auditors’ remunerationBad debts written off: - Trade receivables - Other receivableDepreciation of property, plant and equipmentAmortisation of intangible assetsDirectors’ feesImpairment on: - Trade receivablesInventories written offLoss on disposal of property, plant and equipmentRental of premisesRental of equipmentInterest income

Tax expense recognised in profit or lossIncome tax expense for the yearOverprovision in prior year

No provision for taxation for the financial year was made as the Company did not generate any taxable income. Malaysian income tax is calculated at the statutory tax rate of 25% (2013: 25%) of the estimated assessable profits for the financial year.

2014RM

37,000

--

215,10520,000

120,000

147,346-

-3,300

144,922-

2014RM

7,325(446)6,879

Group

Group

Company

Company

2014RM

17,000

--

--

48,000

--

----

2014RM

---

2013RM

26,000

8,75740,000

135,099-

120,000

-11,967

8,45550,630

1,260(112,611)

2013RM

---

2013RM

13,000

--

--

48,000

--

----

2013RM

---



2014RM

(1,187,304)

173,230,038

(0.69)

2014RM

(1,187,304)

173,230,038

*173,230,038

N/A

Net loss for the financial year attributable toowners of parent (RM)

Weighted average number of ordinary shares (unit)

Basic loss per ordinary shares (in sen)

Net loss for the financial year attributable to owners of parent

Weighted average number of ordinary shares

Adjusted for:Warrants

Basic loss per ordinary shares (in sen)

2013RM

(1,187,304)

169,879,000

(0.38)

2013RM

(650,150)

169,879,000

*169,879,000

N/A

Group

Group

Loss before tax

Tax at Malaysian statutory tax rate of 25% (2013: 25%)Expenses not deductible for tax purposesIncome not subject to taDeferred tax assets not recognisedOver provision of taxation in respect of prior yearsTax expense for the financial year

A reconciliation of income tax expenses applicable to loss before tax at the statutory tax rate to income tax expenses at the effective income tax of the Group and the Company are as follows:

The Group has unutilised capital allowance and unused tax losses amounting to approximately RM325,000 and RM3,200,000 (2013: RM153,000 and RM2,968,900) respectively available for carry forward to set-off against future taxable profits.

2014RM

(1,188,577)

(297,144)

225,169-

79,300

(446)

6,879

Group Company

2014RM

(476,482)

(119,100)

119,100-

-

-

-

2013RM

(650,150)

(162,500)

128,500(45,900)

79,900

-

-

2013RM

13,000

(94,500)

94,500-

-

-

-

Loss Per Share23.Basic loss per share The basic loss per share are calculated based on the consolidated loss for the financial year attributable to the owners of the parent and the weighted average number of ordinary shares in issue during the financial year as follows:

Diluted loss per shares Diluted loss per share has been calculated based on the adjusted consolidated loss for the financial year attributable to the owners of the parents and the weighted average number of ordinary shares issued and issuable during the financial year as follows:

* The number of shares under Warrants was not taken into account in the computation of diluted loss per share because the effect on the basic loss per share is antidilutive.

(a)

(b)

Taxation (Cont’d)22.



Deferred Taxation

Employee Benefits Expenses

Related Party Disclosuress

24.

25.

26.

Deferred tax asset/(liability) presented after offsetting:

Deferred tax assets have not been recognised in respect of the following timing differences:

Deferred tax assets have not been recognised in respect of these items as they may not have sufficient taxable profits to be used to offset or they have arisen in a subsidiary company that has a recent history of losses.

Included in the employee benefits expenses above are contributions made to EPF under a defined contribution plan for the Group amounting to RM18,839 (2013: RM26,519).

2014RM

46,728(46,728)

-

2014RM

325,0003,200,0003,525,000

2014RM

78,174

2014RM

120,000

Differences between the carrying amount of property, plant and equipment and their tax baseUnabsorbed capital allowances

Unabsorbed capital allowancesUnutilised tax losses

Employee benefits expenses (excluding Directors)

Short-term employee benefits- Salaries and other emoluments

2013RM

37,657(37,657)

-

2013RM

153,0002,968,9003,121,900

2013RM

168,848

2013RM

120,000

Group

Group

Group

Group

Identifying related parties For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group and certain members of senior management and chief executive officers of major subsidiary companies of the Group.

The Group has related party relationships with its subsidiary companies, companies where a Director of the Subsidiary has financial interest and key management personnel.

Compensation of key management personnel

(a)

(b)



Segmental Information27.For management purposes, the Group is organised into business units based on their products and services, and has three reportable segments as follows:

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the consolidated financial statements. Transactions between segments are carried out on agreed terms between both parties. The effects of such inter-segment transactions are eliminated on consolidation.

Geographic information No disclosure on geographical segment information as the Group operates predominantly in Malaysia.

Investment holding

Research and development, and assembling

Trading

Investment holding

Research and development, assembling andtrading of multimedia video conferencingsystem

Trading of kitchen equipment and relatedproducts

Group2014

RevenueSalesInter-segment salesTotal revenue

ResultsFinance costDepreciation andamortisationOther non-cash itemsSegment profit / (loss)

Segment assetsIncluded in the measurementof segment assets are:Capital expenditure

LiabilitiesSegment liabilities

Other non-cash itemsImpairment on tradereceivables

Multimediavideo

conferencingRM

1,471,064-

1,471,064

4,717

215,105147,316

(702,784)

4,206,154

1,397,859

15,116,136

147,316

Investmentholding

RM

---

-

--

(476,482)

3,987,977

1,276,000

93,942

-

Trading ofKitchen

equipment RM

517,402-

517,402

-

20,000-

(9,311)

1,292,393

-

1,120,173

-

EliminationsRM

---

-

---

3,227,524

(200,000)

(15,828,605)

-

TotalRM

1,988,466-

1,988,466

4,717

235,105147,316

(1,188,577)

6,259,000

2,473,859

501,646

147,316



Financial Instruments28.Classification of financial instruments Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The principal accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expense, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instruments to which they are assigned, and therefore by the measurement basis:

(a)

Group2014Financial AssetsTrade receivablesOther receivablesCash and bank balancesTotal financial assets

Financial LiabilitiesTrade payablesOther payablesAmount owing to DirectorsHire purchase payableTotal financial liabilities

2013Financial AssetsTrade receivablesOther receivablesCash and bank balancesTotal financial assets

Financial LiabilitiesTrade payablesOther payablesAmounts owing to DirectorsHire purchase payableTotal financial liabilities

Company2014Financial AssetsCash and bank balancesAmounts owing by subsidiaries Total financial assets

Financial LiabilityOther payables

2013Financial AssetsCash and bank balances Amounts owing by subsidiariesTotal financial assets

Financial LiabilityOther payables

Loans andreceivables

RM

1 ,560,9285 90,410448,514

2,599,852

-----

1,067,741364,677

3,347,2094,779,627

-----

239,8002,472,1772,711,977

-

11,0922,725,5772,763,669

-

TotalRM

1,560,928590,410448,514

2,599,852

175,319232,893

6,09132,699

447,002

1,067,741364,677

3,347,2094,779,627

173,510206,184

72,000112,426564,120

239,8002,472,1772,711,977

93,651

11,0922,725,5772,763,669

91,651

Otherfinancial

liabilities atamortised cost

RM

----

175,319232,893

6,09132,699

447,002

----

173,510206,184

72,000112,426564,120

---

93,651

---

91,651



Financial risk management objectives and policies The Group’s and the Company’s financial risk management policy is to ensure that adequate financial resources are available for the development of the Group’s and the Company’s operations whilst managing its financial risks, including interest rate risk, credit risk, liquidity risk and cash flows risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group’s and the Company’s policy is not to engage in speculative transactions. The following sections provide details regarding the Group’s and the Company’s exposure to the abovementioned financial risks and the objectives, policies and processes for the management of these risks.

Credit risk Financial assets that are primarily exposed to credit risks are receivables, inter-company balances and cash and bank balances.

Credit risk is the risk of a financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s exposure to credit risk arises principally from the inability of its customers to make payments when due. The Company’s exposure to credit risk arises principally from loans and advances to subsidiary companies. The Group has adopted a policy of only dealing with creditworthy counterparties. Management has a credit policy in place to control credit risk by dealing with creditworthy counterparties and deposit with banks and financial institutions with good credit rating. The exposure to credit risk is monitored on an ongoing basis and action will be taken for long outstanding debts. The Company only provided loans and advances to wholly-owned subsidiaries and the results of the subsidiaries are monitored regularly. The carrying amounts of the financial assets recorded on the statements of financial position at the end of the financial year represents the Group’s and the Company’s maximum exposure to credit risk.

Liquidity risk

Liquidity risk refers to the risk that the Group or the Company will encounter difficulty in meeting its financial obligations as they fall. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s funding requirements and liquidity risk is managed with the objective of meeting business obligations on a timely basis. The Group and the Company finance their liquidity through internally generated cash flows and minimises liquidity risk by keeping committed credit lines available.

(b)

(i)

(ii)

Financial Instruments (Cont’d)28.



Financial Instruments (Cont’d)28.

Liquidity risk (Cont’d)

The following table analyses the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay.

Fair value of financial instruments Financial instrument at fair value As the financial assets and liabilities of the Group and the Company are not carried at fair value by any valuation method, the fair value hierarchy analysis is not presented. Financial instrument other than those carried at fair value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximate fair value The carrying amounts of short term receivables and payables, cash and cash equivalents and short term borrowings approximately their fair value due to the relatively short term nature of their financial instruments and insignificant impact of discounting. Financial instruments that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value The carrying amount of the financial liability of the Group at the reporting date reasonably approximately its fair values except as follows:

The Company’s financial liabilities at the reporting date mature within a year or repayable on demand.

(ii)

(c)

Group2014Trade payablesOther payablesAmounts owing to DirectorsHire purchase payablesTotal undiscounted financial liabilities

2013Trade payablesOther payablesAmounts owing to DirectorsHire purchase payablesTotal undiscounted financial liabilities

On demandor within 1

yearRM175,319232,893

6,09137,416

451,719

173,510206,184

72,00037,416

489,110

2 - 3 years RM

---

9,330

9,330

---

37,416

37,416

1 - 2 yearsRM

---

37,416

37,416

---

37,416

37,416

3 - 2 yearsRM

----

-

---

9,330

9,330

Totalcontractualcash flows

RM175,319232,893

6,09184,162

498,465

173,510206,184

72,000121,578

573,272

Totalcarryingamount

RM175,319232,893

6,09179,727

494,030

173,510206,184

72,000112,426

564,120

Interest rate risks he Group’s exposures to interest rate risk is minimal.

(iii)

Financial liabilityHire purchase payables

Carrying amountRM

47,028

2014

Group

2013

Carrying amountRM

79,727

Fair valueRM

43,899

Fair valueRM

76,215

Financial risk management objectives and policies (Cont’d)(b)



Capital Management

Date of Authorisation for Issue

29.

30.

The Group’s management manages its capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going concern and maintains an optimal capital structure, so as to maximise shareholders value. The management reviews the capital structure by considering the cost of capital and the risks associated with the capital. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. Total capital managed at Group level, which comprises shareholders’ funds and cash and cash equivalents. The gearing ratios are as follows:

The financial statements of the Group and of the Company for the financial year ended 31 December 2014 were authorised for issue in accordance with a resolution of the Board of Directors on 17 April 2015.

*Gearing ratio not applicable to the Group and to the Company as the cash and cash equivalents as at 31 December 2014 and 31 December 2013 are sufficient to cover the entire borrowing obligation. There were no changes in the Group’s approach to capital management during the financial year.

Total bank borrowings Less: Cash and cash equivalentsNet debt

Shareholders’ equity

Debt-to-equity ratio (%)

2014RM

79,727(448,514)(368,787)

5,672,967

*

Group Company

2014RM

-(239,800)(239,800)

3,894,035

*

2013RM

112,426(3,347,209)(3,234,783)

5,079,882

*

2013RM

-(11,092)(11,092)

2,671,727

*


The following analysis of realised and unrealised accumulated losses of the Group and of the Company at the reporting date is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad and prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

The disclosure of realised and unrealised losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Securities and should not be applied for any other purposes.

Total accumulated losses of theCompany and its subsidiaries- realisedLess : ConsolidationadjustmentsTotal accumulated losses

2014RM

(42,849,645)

20,364,345(22,485,300)

Group Company

2014RM

(24,139,288)

-(24,139,288)

2013RM

(41,643,045)

20,345,049(21,297,996)

2013RM

(23,662,806)

-(23,662,806)

SUPPLEMENTARY INFORMATION ON THE DISCLOSURE OF REALISED AND UNREALISED PROFITS OR LOSSES


ANALYSIS OF SHAREHOLDINGS /WARRANT HOLDINGSANALYSIS OF SHAREHOLDINGS AS AT 1 APRIL 2015

DISTRIBUTION OF SHAREHOLDINGS

Authorised capital : Issued & Paid-up capital : Voting rights :

Size of Holdings

Less than 100100 - 1,0001,001 - 10,00010,001 - 100,000100,001 to 8,493,9498,493,950 and above (5% of issued shares)

Total

No. of Holders

37274334394158

3

1,200

Total Holdings

1,686219,327

1,866,57618,419,515

111,595,69854,764,098

186,866,900

% of Holdings

0.000.121.009.86

59.7229.30

100

RM50,000,000 divided into 500,000,000 ordinary shares of RM0.10 each186,866,900 ordinary shares of RM0.10 eachOne vote for one ordinary share

No Name of Shareholder No. of Shares % of Shares

1UOBM Nominees (Asing) Sdn. Bhd.Exempt an for Sanston Financial Group Limited

22,644,800 12.12

2Cartaban Nominees (Asing) Sdn. Bhd.Exempt an for KGI Asia Ltd

22,119,298 11.84

3M & A Nominee (Asing) Sdn. Bhd.Sanston Financial Group Limited for Ace Solution Investments Limited

10,000,000 5.35

4Kenanga Nominees (Asing) Sdn. Bhd.Exempt an for AG Stockbroking Ltd

7,551,300 4.04

5Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Quek Yong Wah

7,408,200 3.96

6 Sarawak Information Systems Sdn. Bhd. 6,750,097 3.61

7 Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Lai Yee Ling

6,000,000 3.21

8 Ang Chin Seng 3,600,000 1.93

9Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Piong Yon Wee

3,000,000 1.61

10Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Quek Soon Tiang

2,995,800 1.60

11 USAINS Holding Sdn. Bhd. 2,931,154 1.57

12 Toh Bee Hiang 2,906,000 1.56

13Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Wee Kok Chuan

2,600,000 1.39

14Kenanga Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Cheng Khar Tiang

2,500,000 1.34

THIRTY LARGEST SHAREHOLDERS


ANALYSIS OF SHAREHOLDINGS /WARRANT HOLDINGS

No Name of Shareholder No. of Shares % of Shares

15Malacca Equity Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Pang Kia Fatt

2,500,000 1.34

16Maybank Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Lee Soon Long

2,350,000 1.26

17 Chiang Siew Eng @ Le Yu Ak Ee 2,295,700 1.23

18DB (Malaysia) Nominee (Asing) Sdn. Bhd.Exempt an for Nomura PB Nominees Ltd

2,225,100 1.19

19Kenanga Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Mohd Dom Bin Ahmad

1,900,000 1.02

20 Lai Thiam Poh 1,740,000 0.93

21 Kong Chee Seng 1,350,000 0.72

22 Serira Sdn. Bhd. 1,315,200 0.70

23Public Invest Nominees (Tempatan) Sdn. Bhd.Exempt an for Phillip Securities Pte Ltd (Clients)

1,302,500 0.70

24 Ng Kah Yoke 1,204,600 0.64

25 Wee Soon Lian 1,201,000 0.64

26 Ng Chee Kin 1,090,100 0.58

27 Ung Kah Kuok 1,043,000 0.56

28JF Apex Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Pang Poh Chen (STA 1)

1,000,000 0.54

29JF Apex Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Lee Chen Ping (STA 1)

1,000,000 0.54

30Kenanga Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Fatherland Enterprise Sdn. Bhd.

1,000,000 0.54

Total 127,523,849 68.26


Name Direct Interest % Indirect Interest %

Ace Solution Investments Limited 10,000,000 5.35 - -

Benjamin Lim Keong Hoe - - 10,000,000* 5.35



General Dato’ Sri Hj. Suleiman bin Mahmud RMAF (Rtd)

- - - -

Major Ismail Bin Ahmad (Rtd) - - - -

Professor Dr. Sureswaran Rama-dass

565,132 0.30 38,299* 0.02

Ong Tee Kein - - - -

Yee Yit Yang - - - -

DIRECTORS’ SHAREHOLDINGS

SUBSTANTIAL SHAREHOLDERSORDINARY SHARES

ORDINARY SHARES

Note: * Deemed interest by virtue of Section 6A of the Companies Act, 1965

Note: * Deemed interest through shares held directly by spouse

No. of Shares

No. of Shares


ANALYSIS OF SHAREHOLDINGS /WARRANT HOLDINGSANALYSIS OF WARRANT HOLDINGS – WARRANT B AS AT 1 APRIL 2015

DISTRIBUTION OF WARRANT HOLDINGS

No. of warrants issued : Voting rights :

Size of Holdings

Less than 100100 - 1,0001,001 - 10,00010,001 - 100,000100,001 to 3,860,886 3,860,887 and above (5% of issued warrants)

Total

No. of Holders

873196

19296

2

504

Total Holdings

4,18014,199

465,2969,785,575

42,026,90024,921,600

77,217,750

% of Holdings

0.010.020.60

12.6754.4332.27

100

77,217,750One vote for one each New Share which such holder would be entitled at a Subscription Price of RM0.10 on the exercise in full of the Subscription Rights represented by such Warrant Holders.

No Name of Warrant Holder No. of Warrant % of Shares

1Cartaban Nominees (Asing) Sdn. Bhd.Exempt an for KGI Asia Ltd

17,961,200 23.26

2JF Apex Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Wong Seng Huat (STA 1)

6,960,400 9.01

3Maybank Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Lee Soon Long

3,850,000 4.99

4Maybank Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Ng Chee Kin

3,150,000 4.08

5M & A Nominee (Asing) Sdn. Bhd. Sanston Financial Group Limited for Avestra Asset Management Limited

2,643,400 3.42

6Public Invest Nominees (Tempatan) Sdn. Bhd. Exempt an for Phillip Securities Pte Ltd (Clients)

1,800,000 2.33

7 Lim Han Kong 1,519,500 1.97

8 Chee Horng Kai 1,450,000 1.88

9 Quek Soon Tiang 1,410,400 1.83

10 Ng Kah Yoke 1,086,000 1.41

11 Wong Kum Fatt 1,050,000 1.36

12 Kik Ah Kheok 1,000,000 1.30

13 Liew Swee Min 846,500 1.10

14 Ong Kian Huat 830,000 1.07

THIRTY LARGEST WARRANT HOLDINGS



Professor Dr. Sureswaran Ramadass - - 100* 0.00


No Name of Warrant Holder No. of Warrant % of Shares

15 Teoh Cha Boo 800,000 1.04

16 Pek Eng Lam 791,900 1.03

17 Choo Ah Ying 719,100 0.93

18 Tai Yok Yen 650,000 0.84

19Maybank Nominees (Tempatan) Sdn. Bhd.Cheng Siew Fong

623,900 0.81

20Kenanga Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for George Toh Kin Siang

616,000 0.80

21HLIB Nominees (Tempatan) Sdn. Bhd. Hong Leong Bank Bhd for Chooi Giap Kee

600,000 0.78

22 Teo Yau Kwang @ David 530,000 0.69

23JF Apex Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Lim Soi Moi (STA 1)

500,000 0.65

24 Koh Hock Lye 500,000 0.65

25 Ng Kim Wah 500,000 0.65

26 Wan Sim Yee 500,000 0.65

27 Wee Kok Chuan 450,000 0.58

28 Lee Soon Long 425,000 0.55

29Maybank Nominees (Tempatan) Sdn. Bhd.Pledged Securities Account for Tee Jie Yow

400,000 0.52

30 Lee Siat Lian 300,000 0.39

Total 54,463,300 70.57

DIRECTORS’ WARRANT HOLDINGS(As per register of directors’ warrant holdings)

WARRANT B

No. of Shares

Note: * Deemed interest through warrants held directly by spouse


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Eleventh Annual General Meeting of the Company will be held at Confer-ence Room Arcadia 1 , Level 3, Armada Hotel Petaling Jaya, Lot 6, Lorong Utara C, Section 52, 46200 Petaling Jaya, Selangor Darul Ehsan on Monday, 25 May 2015 at 10.00 a.m. to transact the following businesses: -

AGENDA

To receive the Audited Financial Statements for the financial year ended 31 December 2014 and the Reports of Directors and Auditors thereon.

To re-elect the following directors who retire pursuant to Article 132 of the Company’s Articles of Associa-tion:-

2.1 General Tan Sri Dato’ Sri Hj. Suleiman Bin Mahmud RMAF (Rtd)2.2 Professor Dr. Sureswaran Ramadass

To re-appoint Messrs UHY as Auditors of the Company and authorise the Directors to determine their remuneration.

Authority to Issue Shares

As Special Business to consider and if thought fit, to pass the following Ordinary Resolution, with or without modifications: -

“THAT subject always to the Companies Act, 1965 (“Act”) and the approvals of the relevant governmental and/or regulatory authorities, the Directors be and are hereby authorised pursuant to Section 132D of the Act to issue shares in the Company at any time until the conclusion of the next Annual General Meeting upon such terms and conditions and for such purposes that the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed 10% of the issued share capital of the Company for the time being.”

To transact any other business of which due notice shall have been received.

BY ORDER OF THE BOARD

SEOW FEI SAN LOH LAI LING Secretaries

Petaling JayaDate: 28 April 2015

Ordinary Resolution 1Ordinary Resolution 2

Ordinary Resolution 3


1.

2.

3.

4.

5.


NOTICE OF ANNUAL GENERAL MEETING

NOTES :1.

2.

3.

4.

5.

6.

7.

Only depositors whose names appear in the Record of Depositors as at 19 May 2015 shall be regarded as members and entitled to attend, speak and vote at the Annual General Meeting. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company and a member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A proxy appointed to attend and vote at a meeting of a company shall be entitled to vote on any question at any general meeting and have the same rights as the member to speak at the meeting. A member shall be entitled to appoint more than two (2) proxies to attend and vote at the Annual General Meeting. Where a member appoints more than two (2) proxies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy. Where a Member is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary share in the Company for multiple beneficial owners in one (1) securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds. The instrument appointing a proxy and the power of attorney or other authority (if any), which it is signed or a notarially certified copy thereof, must be deposited at the Registered Office of the Company at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan not less than forty eight (48) hours before the time for holding the Annual General Meeting or any adjournment thereof. Explanatory Notes on Special Business:

Ordinary Resolution 4 : Authority to Issue Shares

At last year’s Annual General Meeting, mandate was given to Directors to issue and allot at no more than 10% of the issued share capital of the Company. As at the date of this Notice, 16,987,900 new ordinary shares of RM0.10 each at an issue price of RM0.10 per ordinary share were issued via private placement and subsequently listed on the ACE Market of Bursa Malaysia Securities Berhad on 21 October 2014. The total proceeds of RM1,698,790 have been fully utilised according to the announcement made by the Company on 10 April 2014. That authority granted will expire at the conclusion of the forthcoming Eleventh AGM. As such, the Board would like to seek for a new mandate. The proposed Ordinary Resolution 4, if passed, will empower the Directors of the Company to issue and allot not more than 10% of the issued share capital of the Company subject to the approvals of all the relevant governmental and/or other regulatory bodies and for such purposes as the Directors consider would be in the interest of the Company. The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. This authorisation will, unless revoked or varied by the Company in a general meeting, expire at the next Annual General Meeting of the Company.


Only depositors whose names appear in the Record of Depositors as at 19 May 2015 shall be regarded as members and entitled to attend, speak and vote at the Annual General Meeting. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the Company and a member may appoint any persons to be his proxy. The provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. A proxy appointed to attend and vote at a meeting of a company shall be entitled to vote on any question at any general meeting and have the same rights as the member to speak at the meeting. A member shall be entitled to appoint more than two (2) proxies to attend and vote at the Annual General Meeting. Where a member appoints more than two (2) prox-ies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy. Where a Member is an authorised nominee as defined under the Central Depositories Act, it may appoint at least one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account. Where a member of the Company is an Exempt Authorised Nominee which holds ordinary share in the Company for multiple beneficial owners in one (1) securities account (omnibus account), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account it holds. The instrument appointing a proxy and the power of attorney or other authority (if any), which it is signed or a notarially certified copy thereof, must be deposited at the Registered Office of the Company at 802, 8th Floor, Block C, Kelana Square, 17 Jalan SS7/26, 47301 Petaling Jaya, Selangor Darul Ehsan not less than forty eight (48) hours before the time for holding the Annual General Meeting or any adjournment thereof.

Notes:-

1.

2.

3.

4.

5.

6.

as my/our proxy to vote for me/us on my/our behalf at the Eleventh Annual General Meeting of the Company to be held at Conference Room Arcadia 1, Level 3, Armada Hotel Petaling Jaya, Lot 6, Lorong Utara C, Section 52, 46200 Petaling Jaya, Selangor Darul Ehsan on Monday, 25 May 2015 at 10.00 a.m. and at any adjournment thereof. The proxy is to vote on the Resolutions set out in the Notice of the Meeting in the manner as indicated below:





FOR AGAINST

(Please indicate with an “X” in the appropriate places. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his discretion, as he will on any other matter arising at the Meeting) Dated:

PROXY FORM

MLABS SYSTEMS BERHAD (653227-V)(Incorporated in Malaysia)

No. of ordinary shares held

CDS ACCOUNT NO.______________________________Signature/Common Seal of Shareholder(s)

I/We NRIC/Co. No.

of

being a member/members of MLABS SYSTEMS BERHAD hereby appoint

NRIC. No.

of

or failing him/her , NRIC No.

of

(Please Use Block Capital)

(Full Name)

(Full Name)

(Full Address)

(Full Address)

(Full Address)


STAMP

Please fold here

The Company SecretaryMLAB SYSTEMS BERHAD (Company No.653227-V)

802, 8th Floor, Block CKelana Square, 17 Jalan SS7/2647301 Petaling JayaSelangor Darul Ehsan

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