IRIS CORPORATION BERHAD

(Company No. 302232 – X)

(Incorporated in Malaysia)

Interim Financial Report

for the Fourth quarter ended
31st March 2018

Contents: - Page

Condensed Consolidated Statement of Comprehensive Income 2-3

Condensed Consolidated Statement of Financial Position 4-5

Condensed Consolidated Statement of Changes in Equity 6-7

Condensed Consolidated Statement of Cash Flows 8-9

Notes to the Interim Financial Report 10-26

IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Comprehensive Income

For the Fourth quarter ended 31st March 2018
Individual Cumulative
3 months ended 12 months ended
31st 31st 31st 31st
March March March March
2018 2017 2018 2017
RM’000 RM’000 RM’000 RM’000

Continuing operations
Revenue 58,711 134,536 340,239 437,675
Cost of sales (50,602) (144,018) (312,847) (412,201)
Depreciation and amortisation (10,485) (1,999) (14,841) (9,283)

Gross (loss)/profit (2,376) (11,481) 12,551 16,191

Other income 31,881 5,823 44,072 31,106

Administrative, operating and other expenses (97,263) (275,480) (176,054) (324,645)
Depreciation and amortisation (1,293) (1,303) (5,379) (5,915)
Finance costs (1,451) (3,986) (8,750) (16,887)
Share of profits/(losses) of associates 706 (144) 2,529 (6,675)

Loss before taxation (69,796) (286,571) (131,031) (306,825)

Tax expense 10,728 (1,851) 10,747 (7,650)
Loss from continuing operations (59,068) (288,422) (120,284) (314,475)

Discontinued operations
Loss from discontinued operations,
net of tax (10,814) (5,083) (11,373) (9,207)

Loss for the period (69,882) (293,505) (131,657) (323,682)

Other comprehensive income/(loss),

net of tax
Foreign currency translation for foreign
operations 2,414 (3,296) (2,478) 5,550
Share of equity accounted reserve - - - (553)
Reclassification of equity accounted reserve to
profit or loss on disposal of associated company - - - 10,482

2,414 (3,296) (2,478) 15,479

Total comprehensive loss

for the period (67,468) (296,801) (134,135) (308,203)

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Comprehensive Income

For the Fourth quarter ended 31st March 2018
(continued)
Individual Cumulative
3 months ended 12 months ended
31st March 31st March 31st March 31st March
2018 2017 2018 2017
RM’000 RM’000 RM’000 RM’000

Loss attributable to:

Owners of the Company (66,771) (265,109) (121,753) (292,140)
Non-controlling interests (3,111) (28,396) (9,904) (31,542)
Loss for the period (69,882) (293,505) (131,657) (323,682)

Total comprehensive loss

attributable to:
Owners of the Company (64,745) (267,031) (123,820) (278,359)
Non-controlling interests (2,723) (29,770) (10,315) (29,844)
Total comprehensive loss for the
period (67,468) (296,801) (134,135) (308,203)

Loss per share attributable to

owners of the Company:
Basic (Sen)
- continuing operations (2.32) (11.57) (4.58) (12.59)
- discontinued operations (0.45) (0.23) (0.47) (0.41)
(2.77) (11.80) (5.05) (13.00)

Diluted (Sen)
- continuing operations (2.32) (11.57) (4.58) (12.59)
- discontinued operations (0.45) (0.23) (0.47) (0.41)
(2.77) (11.80) (5.05) (13.00)

The Condensed Consolidated Statement of Comprehensive Income should be read in conjunction

with the audited financial statements of the Group for the financial year ended 31st March 2017
and the accompanying explanatory notes attached to the interim financial report.

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Financial Position

As at 31st March 2018
31st March 2018 31st March 2017
RM’000 RM’000

ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 97,681 115,282
Development costs 15 16
Goodwill on consolidation 128,268 128,268
Other intangible assets 28,095 35,436
Operating financial assets 11,557 9,354
Investment in associates 11,770 6,597
Available-for-sale financial assets 216 406
Deferred tax assets 1 21
277,603 295,380
CURRENT ASSETS
Inventories 25,368 72,481
Operating financial assets 3,626 2,750
Trade receivables 133,428 204,578
Other receivables, deposits &
prepayments 54,645 55,263
Amount owing by associates 284 290
Amount owing by related parties 3,143 11,036
Amount owing by contract customers 9,375 52,368
Tax recoverables 9,624 7,715
Short-term deposits placed 11,044 11,538
Cash and bank balances 25,376 43,341
275,913 461,360
Assets of a disposal group classified as
held for sale - 10,940
275,913 472,300

TOTAL ASSETS 553,516 767,680

EQUITY AND LIABILITIES

EQUITY
Share capital 480,276 448,816
Foreign exchange translation reserve 5,255 7,322
Revaluation reserve 36,075 37,129
Accumulated losses (325,808) (205,109)
Total equity attributable to owners of
the Company 195,798 288,158
Non-controlling interests (42,263) (31,659)
TOTAL EQUITY 153,535 256,499

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Financial Position

As at 31st March 2018
(continued)

31st March 2018 31st March 2017

RM’000 RM’000

NON-CURRENT LIABILITIES
Term loans 59,535 88,785
Hire purchase and lease payables 410 906
Deferred tax liabilities - 14,940
59,945 104,631

CURRENT LIABILITIES
Trade payables 129,470 113,698
Other payables and accruals 158,345 191,091
Short-term loans and borrowings 44,250 90,056
Hire purchase and lease payables 326 1,848
Tax payables 2,166 4,637
334,557 401,330
Liabilities of a disposal group classified
as held for sales 5,479 5,220
340,036 406,550

TOTAL LIABILITIES 399,981 511,181

TOTAL EQUITY AND LIABILITIES 553,516 767,680

Net assets per ordinary share

attributable to owners of the Company
(sen) 7.92 12.82

The Condensed Consolidated Statement of Financial Position should be read in conjunction with
the audited financial statements of the Group for the financial year ended 31st March 2017 and the
accompanying explanatory notes attached to the interim financial report.

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Changes in Equity

For the Fourth quarter ended 31st March 2018

Non-Distributable Distributable
Foreign Attributable
Ordinary Exchange Fair to the owners Non-
Share Share Warrants Translation Value Revaluation Retained of the controlling Total
Capital Premium Reserve Reserve Reserve Reserve Earnings Company Interests Equity
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1st April 2016 311,561 105,068 8,773 3,470 (9,929) 38,184 92,902 550,029 (12,185) 537,844
Transactions with owners
Issuance of new shares 7,500 1,432 - - - - - 8,932 - 8,932
Warrants exercised 18,017 5,238 (5,238) - - - - 18,017 - 18,017
Transfer of unexercised warrant reserve - - (3,535) - - - 3,535 - - -
Effect of change in equity interest
in subsidiaries - - - - - - (10,461) (10,461) 10,370 (91)
Effect of adoption of Companies Act
2016 111,738 (111,738) - - - - - - - -

Total transactions with owners 137,255 (105,068) (8,773) - - - (6,926) 16,488 10,370 26,858
Total comprehensive income/(loss) for
the financial period
Loss after taxation for the financial
period - - - - - - (292,140) (292,140) (31,542) (323,682)
Other comprehensive income for the
financial period, net of tax
- foreign currency translation - - - 3,852 - - - 3,852 1,698 5,550
- share of equity accounted reserves - - - - (553) - - (553) - (553)
- reclassification of equity accounted
reserve to profit or loss upon
disposal of associated company - - - - 10,482 - - 10,482 - 10,482

Total comprehensive income/(loss) - - - 3,852 9,929 - (292,140) (278,359) (29,844) (308,203)

Realisation on revaluation reserve - - - - - (1,055) 1,055 - - -

At 31st March 2017 448,816 - - 7,322 - 37,129 (205,109) 288,158 (31,659) 256,499

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Statement of Changes in Equity

For the Fourth quarter ended 31st March 2018
(continued)

Non-Distributable Distributable
Foreign Retained Attributable
Ordinary Exchange Earnings / to the owners Non-
Share Translation Revaluation (Accumulated of the controlling Total
Capital Reserve Reserve Losses) Company Interests Equity
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1st April 2017 448,816 7,322 37,129 (205,109) 288,158 (31,659) 256,499
Transactions with owners
Issuance of new shares 31,460 - - - 31,460 - 31,460
Disposal of subsidiaries - - - - - (289) (289)

Total transactions with owners 31,460 - - - 31,460 (289) 31,171

Total comprehensive loss for the financial

period
Loss after taxation for the financial
period - - - (121,753) (121,753) (9,904) (131,657)
Other comprehensive income for the
financial period, net of tax
- foreign currency translation - (2,067) - - (2,067) (411) (2,478)

Total comprehensive loss - (2,067) - (121,753) (123,820) (10,315) (134,135)

Realisation on revaluation reserve - - (1,054) 1,054 - - -

At 31st March 2018 480,276 5,255 36,075 (325,808) 195,798 (42,263) 153,535

The Condensed Consolidated Statement of Changes in Equity should be read in conjunction with the audited financial statements of the
Group for the financial year ended 31st March 2017 and the accompanying explanatory notes attached to the interim financial report.
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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Cash Flow Statement

For the Fourth quarter ended 31st March 2018

Cumulative Cumulative
31st March 31st March
2018 2017
RM’000 RM’000

CASH FLOW FROM OPERATING ACTIVITIES

Loss before taxation

- continuing operations (131,031) (306,825)
- discontinued operations (11,373) (9,207)
(142,404) (316,032)
Adjustments for:
Non-Cash Items 91,234 241,871
Interest income (362) (623)
Finance costs 8,750 16,887
OPERATING LOSS BEFORE WORKING
CAPITAL CHANGES (42,782) (57,897)

Changes in working capital:

Net changes in current assets 68,237 94,205
Net changes in current liabilities 17,891 45,656
NET CASH GENERATED FROM OPERATIONS 43,346 81,964

Interest received 362 623

Interest paid (8,750) (16,887)
Tax paid (3,920) (11,398)
NET CASH FROM OPERATING
ACTIVITIES 31,038 54,302

CASH FLOW FROM INVESTING ACTIVITIES

Acquisition investments in subsidiaries - (91)
Acquisition investments in an associated company - (8,823)
Acquisition of financial operating assets (3,623) (12,816)
Dividend received - 150
Purchase of plant and equipment (316) (2,377)
Proceeds from disposal of plant and equipment - 1,553
Proceeds from disposal of shares of an associate - 30,869
Proceeds from disposal of subsidiaries, net of cash (51) -
Net distribution from an associate in liquidation - 11
NET CASH (FOR)/FROM INVESTING ACTIVITIES (3,990) 8,476

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IRIS CORPORATION BERHAD (302232-X)

Condensed Consolidated Cash Flow Statement

For the Fourth quarter ended 31st March 2018
(continued)
Cumulative Cumulative
31st March 31st March
2018 2017
RM’000 RM’000

CASH FLOW FROM FINANCING ACTIVITIES

Net proceeds from issuance of ordinary shares 31,461 26,949
Net repayment of hire purchase and lease payables (1,770) (2,590)
Net repayment of bankers’ acceptances and revolving credit (17,661) (17,032)
Net repayment of trade loans (19,399) (33,514)
Repayment of term loans (38,138) (42,836)
Withdrawal of pledged deposits 57 14,416
NET CASH FOR FINANCING ACTIVITIES (45,450) (54,607)

Net changes in cash and cash equivalents (18,402) 8,171

Effect of exchange rate changes on cash and cash equivalent - (905)
Cash and cash equivalents at beginning of the period 44,584 37,318
CASH AND CASH EQUIVALENTS AT END OF THE
PERIOD 26,182 44,584

Cash and cash equivalents at end of the period comprise the following balance sheet amounts:

Cash and bank balances 25,376 43,341

Short-term deposits placed 11,044 11,538
36,420 54,879
Less: Short-term deposits pledged to licensed banks (10,238) (10,295)
26,182 44,584

The Condensed Consolidated Cash Flow Statement should be read in conjunction with the audited
financial statements of the Group for the financial year ended 31st March 2017 and the accompanying
explanatory notes attached to the interim financial report.

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IRIS CORPORATION BERHAD (302232-X)

Notes to the Interim Financial Report

For the Fourth quarter ended 31st March 2018

1. Basis of preparation

This interim financial report is based on the unaudited financial statements for the quarter ended
31st March 2018 and has been prepared in compliance with Malaysian Financial Reporting
Standards (“MFRS”) 134: Interim Financial Reporting issued by the Malaysian Accounting
Standards Board ("MASB") and Rule 9.22 of the ACE Market Listing Requirements (“AMLR”)
of Bursa Malaysia Securities Berhad (“Bursa Securities”).

This interim financial report should be read in conjunction with the audited financial statements
of the Group for the financial year ended 31st March 2017.

2. Changes in Accounting Policies

The accounting policies adopted for this interim financial statements are consistent with those
adopted for the annual audited financial statements for the financial year ended 31st March 2017
except for adoption of the following new MFRSs and amendments, which is in effective for
financial periods beginning on or after 1st January 2017:

Amendments to MFRS 107 - Disclosure Initiative

Amendments to MFRS 112 - Recognition of Deferred Tax Assets for Unrealised Losses
Amendments to MFRSs Classified as "Annual Improvements to MFRSs 2014 - 2016 Cycle":
- Amendments to MFRS 12, Disclosure of Interests in Other Entities

The adoption of the above amendments/improvements to MFRSs did not have any significant
effect on the financial statements of the Group, and did not result in significant changes to the
Group’s existing accounting policies.

3. Audit report of preceding annual financial statement

The auditors’ report on the financial statements for the preceding financial year ended 31st
March 2017 was qualified due to the use of unaudited management accounts for five (5)
subsidiary companies for the purpose of consolidation rendering the auditors being unable to
determine adjustments, if any, that may have been necessary in respect of the consolidated
financial statements. The details of the qualification had been announced on 31st July 2017.

As at reporting date of the quarter ended 31st March 2018, the audit of management accounts of
these subsidiary companies have been finalised and completed.

4. Seasonal or cyclical factors

The business of the Group was not affected by any significant seasonal or cyclical factors in the
Fourth quarter.

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IRIS CORPORATION BERHAD (302232-X)

5. Segment information

The Group’s operating segments information for the interim financial report to 31st March 2018 was as follows:-

Discontinued
Continuing operations operations

Sustainable Development Division

Property Environment & Property

Trusted development & Food & Agro Renewable Total development
Identification construction Technology Energy Education continuing & construction
Division sub-division sub-division sub-division Division Elimination operations sub-division Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Revenue from external
customers 327,346 5,425 2,070 - 5,398 - 340,239 - 340,239
Inter-segment revenue - - - - 413 (413) - - -
Total Revenue 327,346 5,425 2,070 - 5,811 (413) 340,239 - 340,239

Segment results (Note A) (40,100) (24,811) (46,234) (543) (2,833) - (114,521) (11,373) (125,894)

Unallocated corporate expenses (19,039) - (19,039)

Operating loss (133,560) (11,373) (144,933)
Share of profit of associates 2,529 - 2,529
Loss before taxation (131,031) (11,373) (142,404)
Income tax expense 10,747 - 10,747
Loss after taxation (120,284) (11,373) (131,657)

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IRIS CORPORATION BERHAD (302232-X)

5. Segment information (cont’d)

Note A: The following are exceptional items included in Segment results:

Discontinued
Continuing operations operations

Sustainable Development Division

Property Environment & Property

Trusted development & Food & Agro Renewable Total development
Identification construction Technology Energy Education continuing & construction
Division sub-division sub-division sub-division Division Elimination operations sub-division Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Operating results 58,980 (14,887) (15,322) - (1,379) - 27,392 (12) 27,380
Add/(Less):
- Depreciation and amortisation (16,362) (1,524) (1,954) - (380) - (20,220) (75) (20,295)
- Interest income 324 - 37 - 1 - 362 - 362
- Other income 34,744 1,418 922 813 5,813 - 43,710 - 43,710
- Finance costs (8,741) - (1) - (8) - (8,750) - (8,750)
- Forex exchange losses (22,437) - - - - - (22,437) - (22,437)
- Allowance for impairment
loss on plant and equipment - (1,947) (3,733) - - - (5,680) - (5,680)
- Allowance for impairment
loss on other assets (3,693) (1) - - - - (3,694) (10,814) (14,508)
- Allowance for impairment
loss on amount owing from
contract customers (23,723) - - - - - (23,723) - (23,723)
- Allowance for impairment
loss on trade receivables (8,546) (507) (411) - - - (9,464) - (9,464)
- Administrative, operating
and other expenses (50,646) (7,363) (25,772) (1,356) (6,880) - (92,017) (472) (92,489)
(99,080) (9,924) (30,912) (543) (1,454) - (141,913) (11,361) (153,274)

Segment results (40,100) (24,811) (46,234) (543) (2,833) - (114,521) (11,373) (125,894)

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IRIS CORPORATION BERHAD (302232-X)

6. Capital Commitments
As at
31st March
2018
RM’000
Authorised and contracted for:-
Purchase of plant and equipment 5,496

7. Debt and equity securities

There were no issuances, cancellations, repurchases, resale and repayments of debts and equity
securities for this quarter.

8. Changes in the composition of the Group

There were no changes in the composition of the Group for this quarter except for the
following:

Disposal of entire equity interests of Educational Division’s subsidiaries

The Company had on 3rd May 2018 entered into a Shares Sale Agreement (“SSA”) on the
disposal of entire equity interests of four (4) subsidiaries, which are (1) Seri Stamford College
Sdn Bhd, (2) Stamford College (Malacca) Sdn Bhd, (3) Platinum Encoded Sdn Bhd and (4)
Formula IRIS Racing Sdn Bhd (“collectively known as “Stamford Group”) to Regal Rotary
Sdn Bhd (‘the Buyer”) for a total cash consideration RM100,003. In accordance with the SSA,
the effective disposal date is on 31st March 2018.

The gain on disposal of Stamford Group is as per below:

Descriptions RM

Sales consideration 100,003.00

Add: Share of net liabilities of Stamford Group 33,339,138.00

Less: Waiver of Shareholders’ Net advances (28,059,748.76)
Gain on disposal of equity interests of Stamford Group 5,379,392.24

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IRIS CORPORATION BERHAD (302232-X)

9. Material changes in estimates

There were no changes in estimates of amounts reported in prior financial years, which have a
material effect in the current financial period.

10. Material events subsequent to the end of the interim period

There were no material events subsequent to the end of this quarter.

11. Items of an unusual nature

There were no items of unusual nature, which affects assets, liabilities, equity, net income or
cash flows in the Fourth quarter.

12. Valuations of property, plant and equipment

There were no valuations made on property, plant and equipment for this quarter.

13. Changes in contingent liabilities and contingent assets

Contingent Liabilities
There are no contingent liabilities incurred or known to be incurred by the Company and/or the
Group as at 31st March 2018, except as disclosed below:
i) A wholly-owned subsidiary with its joint venture partner in Turkey (“both parties are
henceforth known as “JVCO”) is defending an action brought by Security General
Directorate of Ministry of Interior or Emniyet Genel Mudrlugu (“EGM”) in Turkey. If
defence against the action is finally unsuccessful, then the estimated potential liability to the
JVCO is limited to the total sum of RM9,093,982 which the Group will be liable for 75% of
the amount with interest. Detailed information of this litigation case is disclosed in Note 25
of this report.

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IRIS CORPORATION BERHAD (302232-X)

14. Taxation
Individual Cumulative
3 months ended 12 months ended
31st March 31st March 31st March 31st March
2018 2017 2018 2017
Continuing operations RM’000 RM’000 RM’000 RM’000
Income tax
- Current financial year (2,670) (1,226) (2,670) (4,468)
- Under/(over) provision in prior
years (1,542) (495) (1,523) (3,052)
(4,212) (1,721) (4,193) (7,520)
Deferred tax
- Current financial year 14,940 (130) 14,940 (130)
10,728 (1,851) 10,747 (7,650)

The Group’s effective tax rate is lower than the statutory tax rate of 24% mainly due to
anticipated unutilised tax losses and capital allowance to be utilised for this quarter.

15. Related Party Transactions

The significant transactions with related parties of the Group for the cumulative 12 months
period ended 31st March 2018 were as follows:

RM’000
Major shareholder of the Company
The Federal Land Development Authority (“FELDA”)
- Sales of construction of sustainable development project
and services 1,116

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IRIS CORPORATION BERHAD (302232-X)

Additional information required by the AMLR

16.1 Review of Performance

Continuing operations

For the three (3) months financial period ended 31st March 2018, the Group recorded a revenue
of RM58.7 million, representing a decrease of 56.4% from RM134.5 million recorded in the
previous comparable quarter ended 31st March 2017. The Group also recorded a loss before
taxation of RM69.8 million this quarter, which is RM216.8 million lower as compared to loss
before taxation of RM286.6 million recorded in the previous comparable quarter ended 31st
March 2017.

The loss before taxation of RM69.8 million this quarter was mainly due to lower sales
recorded, the losses from the foreign exchange resulted from the strengthening of RM against
USD and EURO and the charge out and recognition of projects related expenditure in relation
to the completed projects.

The performance of the respective business segments for this 3-month financial quarter ended
31st March 2018 as compared to the previous comparable quarter is analysed as follows:-

Trusted Identification Division

Trusted Identification recorded a lower revenue of RM57.7 million in the current financial
quarter ended 31st March 2018 from RM125.6 million in the previous comparable quarter,
representing a decrease of 54.1%. The decrease was mainly attributed to lower delivery of
Senegal eID cards and the banking cards in the current reporting quarter.

Sustainable Development Division

The revenue of Sustainable Development for this quarter is not significant to the Group due to
the completion of most of its Rimbunan Kaseh and Sentuhan Kasih projects.

Education Division

The contribution for Education Division is not significant to the Group this quarter.

Discontinued operations

IRIS Land (PNG) Ltd (“ILPNG), a wholly-owned subsidiary of the Company that incorporated
in Papua New Guinea, has discontinued its business operations since January 2017. The Group
has fully impaired the assets of ILPNG amounting to RM10.8 million in this quarter.

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IRIS CORPORATION BERHAD (302232-X)

16.2 Comparison with Preceding Quarter

Continuing operations

For the current financial quarter which ended on 31st March 2018, the Group recorded revenue
of RM58.7 million, representing a decrease of RM7.9 million, or 11.9% from RM66.6 million
recorded in the preceding quarter ended 31st December 2017.

The Group reported a loss before tax of RM69.8 million, which is RM21.7 million or 45.1%
higher as compared to loss before taxation of RM48.1 million recorded in the preceding
quarter.

17. Prospects

The current business environment for financial year 2019 is expected to remain challenging for
the Group.

For financial year 2019, the Group will strengthen its Trusted Identification division business
and will also embark on costs optimisation exercises to ensure the Group remains competitive
in the challenging business environment.

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IRIS CORPORATION BERHAD (302232-X)

18. Variance between actual results and forecasted profit and shortfall in profit guarantee

The Group has not provided any profit forecast or profit guarantee in a public document.

19. Unquoted Securities and/or Properties

There were no purchases or disposals of unquoted securities and/or properties for the current
quarter and financial period to date.

20. Quoted Securities

There were no purchases or disposals of quoted securities for the current quarter and financial
period to date.

21. Available-for-sale financial assets

Available-for-sale financial assets represent investment and deposits paid in respect of:

At 31st March
2018
RM’000
Investment in an unquoted shares in Malaysia 7,500
Investment in an unquoted shares in Singapore 2,378
Investment in an unquoted shares in Hong Kong 981
Investment in an unquoted shares in Republic of Palau 7,055
Golf Club Membership 406
(Less): Allowance for diminution in value (18,104)
216

22. Status of Corporate Proposals and Utilisation of Proceeds

There were no corporate proposals announced but not completed as at 21st May 2018, being the
latest practicable date which is not earlier than seven (7) days from the date of issue of this
quarterly report except as disclosed below:

A) Private Placement (2013)

On 13th September 2013, the Company served a Circular to shareholders in relation to a
proposed private placement of up to 394,098,381 new ordinary shares of IRIS Corporation
Berhad (“ICB”) to be issued to Federal Land Development Authority (“FELDA”) or its wholly-
owned subsidiary at an issue price of RM0.28 (“Private Placement”) and subsequently on 30 th
September 2013, the Private Placement was approved by the shareholders of the Company.

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IRIS CORPORATION BERHAD (302232-X)

22. Status of Corporate Proposals and Utilisation of Proceeds (cont’d)

On 6th November 2013, the Private Placement funds amounting to RM110,347,547 has been
raised by issuing of 394,098,381 new ordinary shares of ICB at an issue price of RM0.28 each
to Felda Investment Corporation Sdn Bhd, a wholly-owned subsidiary of Federal Land
Development Authority (“FELDA”).
The details of the utilisation of the proceeds from the Private Placement up to 21st May 2018
are as follows:
Balance Intended
Proposed Actual to be Timeframe
utilisation utilisation utilised for
Description (RM'000) (RM'000) (RM'000) Utilisation
Partial repayment of short term Within 12
30,000 (30,000) - months
borrowings
Within 12
Capital expenditure of ICB Group 25,000 (11,477) 13,523 months
Within 12
Working capital of ICB Group 47,000 (47,000) - months
Estimated expenses in relation to Within
8,348 (8,348) -
the Proposed Private Placement 6 months
Total 110,348 (96,825) 13,523

The Board noted that the balance of RM13,523,000 had been utilized for working capital.

23. Group Borrowings and Debt Securities

The Group’s bank borrowings (exclude hire purchase and finance lease) from financial
institutions at the end of the current quarter were:
Short Term Long Term Total
RM’000 RM’000 RM’000
Secured 44,250 59,535 103,785
Unsecured - - -
44,250 59,535 103,785

All of the above borrowings are denominated in Ringgit Malaysia.

24. Off Balance Sheet Financial Instruments

There were no financial instruments with off balance sheet risk as at 21st May 2018 being the
latest practicable date which is not earlier than seven (7) days from date of issue of this
quarterly report.

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IRIS CORPORATION BERHAD (302232-X)

25. Material Litigation

Save for the material litigations as disclosed below, there are no other material litigations
involving the Group as at 21st May 2018:

(i) IRIS Corporation Berhad (“ICB”) v. The Government of the United States

The lawsuit was commenced on February 24, 2015. The gravamen of the lawsuit is a claim for
patent infringement of IRIS’ U.S. Patent No. 6,111,506, “Method of Making an Improved
Security Identification Document Including Contactless Communication Insert Unit”. It is
alleged that U.S. electronic passports manufactured for the U.S. Government, as well as use of
foreign and U.S. Passports by the U.S. Government and by entities acting on behalf of the U.S.
Government constitute infringements of that aforementioned IRIS patent, for which
infringements IRIS is claiming just compensation.

The Government has filed their answer, and the litigation is in the discovery phase. In February
2016 the Government filed a petition with the United States Patent and Appeals Board, (the
PTAB), to have the aforementioned IRIS patent declared invalid. While the PTAB proceedings
are pending, the litigation in the United States Court of Federal Claims is on hold. At the time
the litigation was put on hold, we were still in the discovery phase. As of this date, the PTAB
proceedings are pending, and therefore it is too early to give an opinion as to the likelihood of
success and/or as the quantity of compensation if IRIS is successful. Until a decision is
rendered by the PTAB on the patent validity issues, it is also impossible to know how long the
litigation will last. If IRIS is successful in defeating the validity challenge to any of the claims
in issue before the PTAB, the Government will probably appeal, and if IRIS is not successful in
defending validity of any of the patent claims, IRIS will have the right to appeal. During the
PTAB process and appeals (if any), the Court of Federal Claims litigation remains stayed. With
that in mind it is impossible to estimate future costs and disbursements, although there will be
no further billing for legal services prior to the PTAB decision and the filing of a notice of
appeal by either party thereafter. Any appeals will be heard by the United States Court of
Appeals for the Federal Circuit in Washington.

The U.S. Department of Justice’s (DOJ) petition with the US Patent Trial and Appeal Board
was dismissed on grounds that the DOJ’s petition was time barred. Under the America Invents
Act, a petitioner must file a request for review within one year of being sued for infringement.
With the dismissal of the petition, the trial for the infringement of Iris’ e-passport patent against
the US Government will go on.

Appeal filed by DOJ on 17th August 2017 requesting for rehearing to the Patent Trial and
Appeal Board (PTAB) against the dismissal of their Petition earlier was dismissed by PTAB on
22nd January 2018. As such, main proceedings which is the infringement proceeding itself will
commence soon.

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IRIS CORPORATION BERHAD (302232-X)

25. Material Litigation (cont’d)

(ii) (1) IRIS Technologies (M) Sdn Bhd, (2) Kunt Electronic Sanayii ve Ticaret A.S (both
parties are henceforth known as “JVCO”) vs Security General Directorate of Ministry of
Interior or Emniyet Genel Mudurlugu (Turkey)

The Company received the update on the court proceedings of the consolidated Ankara 12th
Civil Court of First Instance (2009/343) and 23rd Civil Court of First Instance Ankara
(2010/347) and several merged cases relating thereto from its solicitors in Turkey.

The Company was informed that a decision was declared on 16th September 2014 and was duly
served on the JVCO on 28th January 2015. The Company makes this announcement as soon as
the facts and figures in the Judgment which is in the Turkish language is accurately verified and
endorsed by its solicitors.

The Judgment declared the following:-

1. The JVCO’s claim for unlawful termination by EGM and payment for the balance
amount of (Turkish Lira) TL6.195.000 (equivalent to RM9,014,221) due to the JVCO for
works completed was rejected.
2. EGM’s claim for the refund of monies paid to the JVCO for the completion of Phase 1
(delivery of hardware and equipment) of the Project to the amount of TL6.195.000
(equivalent to RM9,014,221) was allowed and declared that the JVCO had to return the
said amount to EGM with interest.
3. The JVCO to pay TL5.053,84 (equivalent to RM7,354) as compensation for loss suffered
by EGM ; and
4. EGM’s claim of TL49.761,53 (equivalent to RM72,407) as expenses arising from
their performance of the contract and loss due to the termination was allowed and
the JVCO was ordered to pay the said amount as compensation.

The judgment is pending enforcement against the JVCO.

(iii) IRIS Corporation Berhad vs Tan Chin Hwang (High Court of Pulau Pinang Saman
Pemula No: 24FC-230-04/2015)

ICB entered into an Equipment Lease Agreement (“Agreement”) with IQPR Sdn, Bhd (“the
Defendant”) on 3rd May 2011 where a security was given by Mr Tan Chin Hwang to ICB in
respect of this Agreement. The Security in question was a charge registered on a piece of land
known as GRN 56247 Lot 3635, Bandar Tanjong Bungah, Daerah Timur Laut, Negeri Pulau
Pinang (“the Security”) The Charge over the Security was registered on 10th June 2011 and no
other charges exist on the said Security. Due to the Defendant committing several defaults in
its obligations under the Agreement, ICB had sent out letters of demand and intent dated 13th
December 2013 and 6th March 2014 stating its intent to enforce its rights over the Security in
view of the Defendant’s continued breaches. By the same letter ICB terminated the Agreement.

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IRIS CORPORATION BERHAD (302232-X)

25. Material Litigation (cont’d)

ICB via its solicitors had on 28th January 2015 issued a letter enclosing the Form 16D Notice
under the National Land Act and the Certificate of Indebtedness on the Defendant which was
duly acknowledged receipt by the Defendant personally on 31st January 2015. On 2nd April
ICB’s solicitors filed an Originating Motion pursuant to Seksyen 256 and 257 of the National
Land Code 1965 and Orders 31 and 83 of Court Rules 2012. (Enclosure 1) The case was fixed
for case management on 11th May 2015 and on this date the Defendant’s lawyers attended court
and requested for additional time to see further instructions from their client in respect of the
suit. The case was fixed for further case management on 19th August 2015.

The Defendant had made an application for Stay and Reference to Arbitration (Encl 8). Hence
there were 2 proceedings before the High Court, namely the Plaintiff’s foreclosure proceedings
(Enclosure 1) and the Defendant’s application to obtain a stay of Enclosure 1 and to refer the
proceedings to arbitration (Enclosure 8). The cases were adjourned several times for case
management pending parties filing of their respective written submissions until the matter was
fixed for hearing both Enclosures 1 and 8 on 21st January 2016. The High Court then dismissed
the Defendant’s application in Enclosure 8 and had granted Order in Terms in respect of the
Plaintiff’s originating summons for foreclosure in Enclosure 1. ICB has obtained the Order for
Sale on the Security from the High Court of Penang. The Auction was scheduled to be on 23rd
August 2016 at the Court premises.

However, on 18th August 2016, the Defendant obtained a stay for the Auction, challenging the
Valuation Report obtained by the Plaintiff. The Court fixed 13th March 2017 for hearing to fix
the auction price. The first auction was scheduled to take place on 17th May 2017. As there
were no bidders, the relevant applications have been made to reduce 10% of the reserve price.
The Court has set 7th September 2017 for second auction with 10% reduction in the reserved
price of the Security.

At the latest auction date fixed on 6th June 2018, where the reserve price was fixed at
RM3,888,000,00 and the auctioneer appointed is Eng Sitt Tatt of M/S Landmarks Auctioneers
Sdn Bhd.

(iv) Saudi Arabia Quad Communication & Security Solutions v IRIS Corporation Berhad

The Plaintiff filed its claim against the Defendant for the alleged non-payment of goods and
service rendered arose from an agreement and contractual relationship to implement a project
with the Ministry of Interiors, Department of Passports and Immigration, People’s Republic of
Bangladesh for the Enrolment of Bangladeshi Citizens in Kingdom of Saudi Arabia for
Machine Readable Passports (MRP) (the “Project”) for the amount of USD3,477,522.

The next hearing date is fixed on 28th May 2018 and the court will make a primary judgment on
this matter.

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IRIS CORPORATION BERHAD (302232-X)

25. Material Litigation (cont’d)

(v) In the High Court of Malaya at Kuala Lumpur Suit No. WA-22NCVC-126-03/2017;
Roxwell Group Sdn Bhd (755819-U) against (1) IRIS Corporation Berhad (302232-X)
(“ICB”), (2) Tan Say Jim (“D2”), (3) Su Thai Ping (“D3”), (4) Hamdan Bin Mohd Hassan
(“D4”) & (5) Sylla Ibrahima Sory (“D5”)

The Plaintiff and D1 entered into a Cooperation Agreement (“Agreement”) on 17th November
2011 and among the salient terms of the Agreement was for the Plaintiff to identify for ICB for
potential projects in the Republic of Guinea and Guinea Bissau (“Territory”) for a period of
three (3) years from the date of the Agreement. In consideration of any and all services in
respect of the Agreement involving the sale of plant, equipment, machinery or asset arranged
by the Plaintiff, ICB agreed to pay the Plaintiff a commission of 15% on the value or price of
the plant, equipment, machinery or asset sold.

The Plaintiff is claiming for an alleged commission payment in the amount of

RM169,480,350.00 (together with interest deemed appropriate by the court) under the
Agreement calculated based on the formula of 15% on the reported value of the BOT Passport
Contract awarded by the Government of the Republic of Guinea to ICB in 2013 (“Project”).
The Plaintiff is also alleging that ICB has colluded with D2, D3, D4 and D5 to deprive of its
contractual rights under the Agreement.

It is relevant to note that the Project does not involve the sale of plant and equipment and no
deposit was received from the Republic of Guinea. There was also no commission payment
agreed between the Plaintiff and ICB as to the securement of the Project. ICB denies it has
breached the Agreement and wishes to reiterate that the Plaintiff had never in any way
facilitated to secure any contract whatsoever in favour of ICB within the two years from the
execution of the Agreement. By virtue of clause 7.1 of the Agreement, the same in effect
became redundant and was never pursued.

In addition to the above claims, the Plaintiff also alleges that ICB interfered with the
contractual relations between the Plaintiff and it’s employee, Sylla (who is also the 5th
defendant) by recruiting Sylla to assist ICB directly in dealing with the Government of the
Republic of Guinea. The Plaintiff does not make a specific claim for damages for this
allegation which arises out of the same facts as the Conspiracy Claim.

The Plaintiff via its solicitors served ICB a letter of demand in relation to the alleged
commission payable for the securement of the Project in 21st July 2014 which was categorically
denied and refuted by ICB’s solicitors via letter dated 19th September 2014. ICB therefore
deems the Plaintiff’s action as nothing but retaliatory in nature.

ICB appointed Messrs Raslan Loong to act on behalf and the memorandum of appearance was
filed on 28th March 2017. ICB has filed in its defence and an application for security for cost
which will be heard on 18th September 2017.

On 18th September 2017, the Court allowed ICB’s application for security for costs where the
Plaintiff was ordered to deposit the sum of RM25,000.00 into court as security for costs.
Currently, the parties are in the midst of exchanging documents.

23
IRIS CORPORATION BERHAD (302232-X)

25. Material Litigation (cont’d)

The Court also dismissed the applications by the 2nd to 4th Defendants’ to strike out the
Plaintiff’s claim. The claim by the Plaintiff against all four Defendants will now proceed to
trial.

Both parties have filed Bundle of Pleadings, Issues to be triad, Plaintiff and Defendants’
Summary of Case, Common Bundle of Documents and List of Witnesses. The matter is now
fixed for Case Management on 9th July 2018 and full trial fixed on 16th October 2018 to 19th
October 2018.

26. Realised and Unrealised Accumulated Losses

Breakdown of accumulated losses of the Group is as follows:

As at As at
31st
March 31st
March
2018 2017
RM’000 RM’000
Total accumulated losses:
i) The Company and its subsidiaries
- Realised losses (374,206) (260,866)
- Unrealised losses (12,685) (5,326)
(386,891) (266,192)
ii) Associates
- Realised losses (2,053) (7,226)
(2,053) (7,226)
(388,944) (273,418)
iii) Group consolidated adjustments 63,136 68,309
Total accumulated losses
of the Group (325,808) (205,109)

27. Dividend

The Company did not pay any dividend in the current financial quarter.

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IRIS CORPORATION BERHAD (302232-X)

28. Loss Per Ordinary Share

Individual Cumulative
3 months ended 12 months ended
31st March 31st March 31st March 31st March
2018 2017 2018 2017

(a) Basic loss per ordinary share

Loss attributable to owners of the Company
for the period (RM’000)
- continuing operations (55,957) (260,026) (110,380) (282,933)
- discontinued operations (10,814) (5,083) (11,373) (9,207)
(66,771) (265,109) (121,753) (292,140)
Weighted average number of ordinary
shares (’000) at end of period 2,412,183 2,247,184 2,412,183 2,247,184

Basic loss per ordinary share (Sen)

- continuing operations (2.32) (11.57) (4.58) (12.59)
- discontinued operations (0.45) (0.23) (0.47) (0.41)
(2.77) (11.80) (5.05) (13.00)

(b) Diluted loss per ordinary share

Loss attributable to owners of the Company
for the period (RM’000)
- continuing operations (55,957) (260,026) (110,380) (282,933)
- discontinued operations (10,814) (5,083) (11,373) (9,207)
(66,771) (265,109) (121,753) (292,140)
Weighted average number of ordinary
shares for the purpose of diluted earnings
per share (’000) at end of period 2,412,183 2,247,184 2,412,183 2,247,184

Diluted loss per ordinary share (Sen)

- continuing operations (2.32) (11.57) (4.58) (12.59)
- discontinued operations (0.45) (0.23) (0.47) (0.41)
(2.77) (11.80) (5.05) (13.00)

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IRIS CORPORATION BERHAD (302232-X)

29. Loss before taxation

Individual Cumulative
3 months 12 months
ended ended
31st 31st
March March
2018 2018
RM’000 RM’000
Loss before taxation is arrived at after
charging/(crediting):

Continuing operations
- Allowance for impairment loss on plant and equipment 1,950 5,680
- Allowance for impairment loss on amount due from
contract customers - 23,723
- Allowance for impairment loss on investment in an
associate 713 713
- Allowance for impairment loss on trade receivables 5,064 9,464
- Allowance for impairment loss on other receivables 2,981 2,981
- Allowance for slow moving and obsolete inventories 7,457 7,968
- Amortisation of concession assets, intangible assets and
depreciation of property, plant and equipment 11,778 20,220
- Net foreign exchange (gain)/losses (2,191) 7,472

Discontinued operations
- Allowance for impairment loss on assets of a disposal
group classified as held for sale 10,814 10,814
- Depreciation of property, plant and equipment 75 75

30. Comparative figures

Certain comparative figures as shown in the condensed consolidated statement of financial

position and statement of comprehensive income have been reclassified in order to conform
with the current financial period’s presentation.

31. Authorisation for Issue

This interim financial report was authorised for issuance by the Board of Directors on 28th May
2018.

26