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COMPANY NO.

420056 K

PALETTE MULTIMEDIA BERHAD(Incorporated in Malaysia)

FINANCIAL STATEMENTS

FOR

THE YEAR ENDED DECEMBER 31, 2007

CHENG & CO.CHARTERED ACCOUNTANTS

AF - 0886

COMPANY NO.

420056 K


FINANCIAL STATEMENTS

FOR

THE YEAR ENDED DECEMBER 31, 2007

CONTENTS

Page No.

Corporate information 1

Directors' report 2 - 9

Balance sheet 10

Income statement 11

Statement of changes in equity 12 - 13

Cash flow statement 14 - 15

Notes to the financial statements 16 - 40

Statement by directors 41

Statutory declaration 41

Report of the auditors 42

COMPANY NO.

420056 K


CORPORATE INFORMATION

DIRECTORS :-

Eg Kah Yee Sukhdev Singh A/L Banta Singh

Eg Kaa Chee Thong Kooi Pin

Abdul Razak Bin Dato' Haji Ipap

COMPANY SECRETARY :-

Ng Yen Hoong ( F ) ( LS 008016 )

Loo Choon Keow ( F ) ( MAICSA No. 7039252 )

REGISTERED OFFICE :-

Level 14, Uptown 1,No. 1, Jalan SS 21/ 58,Damansara Uptown,47400 Petaling Jaya,Selangor Darul Ehsan.

BUSINESS ADDRESS :-

6 Floor, Unit 4,8, First Avenue,Bandar Utama,47800 Petaling Jaya,Selangor Darul Ehsan.

AUDITORS :-

MESSRS. CHENG & CO.Firm No : AF - 0886No. 18 - 2, Jalan 2/114,Kuchai Business Centre,Off Jalan Klang Lama,58200 Kuala Lumpur.

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DIRECTORS' REPORTmade pursuant to Section 169 of the

Companies Act, 1965

The directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended December 31, 2007.

PRINCIPAL ACTIVITYThe Company is principally involved in investment holding and design, development and marketing of information technology related products and services. The principal activities of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

RESULTS GROUP COMPANY

RM RM

Profit for the year :-Attributable to equity holders of the Company 436,680 1,516,878

Attributable to minority interests 739 -

437,419 1,516,878

DIVIDENDNo dividend was paid or declared during the financial year and the directors do not recommend any dividend to be paid for the financial year.

RESERVES AND PROVISIONSThere was no material transfers to or from reserves or provisions during the financial year except as disclosed in the financial statements.

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ISSUE OF SHARES AND DEBENTURESDuring the financial year, the authorised share capital of the Company of RM 50,000,000 comprising200,000,000 ordinary shares of RM 0.25 each was subdivided into ordinary shares of RM 0.10 each.

In addition, the issued and paid - up share capital of the Company was increased from RM 26,400,000comprising 105,600,000 ordinary shares of RM 0.25 each to RM 29,052,650 comprising 290,526,500ordinary shares of RM 0.10 each by way of :-

( i ) the issue of 46,000 new ordinary shares of RM 0.25 each of the Company pursuant to the exercise of options granted under the Employees' Share Option Scheme ( "ESOS" ) atthe option price of RM 0.25 per share for cash ;

( ii ) the issue of 9,082,000 new ordinary shares of RM 0.25 each of the Company pursuant to a private placement on July 2, 2007, at the issue price of RM 0.265 per share in cashfor working capital purposes ;

( iii ) the subdivision of the issued and paid - up share capital of 114,728,000 ordinary sharesof RM 0.25 each into 286,820,000 ordinary shares of RM 0.10 each on the basis of 2 1/2new ordinary shares of RM 0.10 each for every 1 existing ordinary share of RM 0.25 each ;and

All shares issued during the year rank pari passu in all respects with the existing sharesof the Company at the time of the issues.

( iv ) the issue of 3,706,500 new ordinary shares of RM 0.10 each of the Company pursuant to a private placement on July 11, 2007, at the issue price of RM 0.11 per share for cashfor the purpose of working capital.

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EMPLOYEE SHARE OPTION SCHEMEThe Company implemented an ESOS on April 7, 2004 for a period of 10 years. The ESOS isgoverned by the by - laws which were approved by the shareholders.

Details of ESOS are set out in Note 14 to the financial statements.

The name of the option holders and the number of options granted to them during the year, are set out below :-

2007 No. of options over the ordinary shares of RM 0.25each in the Company

Balance prior

At to adjustment

Name of Option holders 1.1.2007 Granted Exercised for share split*

Hee Tai Wui 200,000 - - 200,000

Liew Wai Han 100,000 - - 100,000

Mohd Zambri Bin Ismail 30,000 - - 30,000

Norhasshila A. Rahim 50,000 - - 50,000

Rahimi Binti Burhanudin 40,000 - - 40,000

Ng Geok Lui 1,500,000 - - 1,500,000

See Lee Ming 1,400,000 - - 1,400,000

Lee Man Soon 500,000 - - 500,000

Sukhdev Singh A / L Banta Singh 1,000,000 - - 1,000,000

Eg Kah Yee 2,430,000 - - 2,430,000

Eg Kaa Chee 200,000 - - 200,000

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EMPLOYEE SHARE OPTION SCHEME ( CONT'D )

No. of options over the ordinary shares of RM 0.10each in the Company

Balance after

Name of Option holders adjustment

for share At

split * Granted Exercised 31.12.2007

Hee Tai Wui 500,000 - - 500,000

Liew Wai Han 250,000 - - 250,000

Mohd Zambri Bin Ismail 75,000 - - 75,000

Norhasshila A. Rahim 125,000 - - 125,000

Rahimi Binti Burhanudin 100,000 - - 100,000

Ng Geok Lui 3,750,000 - - 3,750,000

See Lee Ming 3,500,000 - - 3,500,000

Lee Man Soon 1,250,000 - - 1,250,000

Sukhdev Singh A / L Banta Singh 2,500,000 - - 2,500,000

Eg Kah Yee 6,075,000 - - 6,075,000

Eg Kaa Chee 500,000 - - 500,000

* Share split of 2 1/2 new ordinary shares of RM 0.10 for every 1 existing ordinary shares of RM 0.25 each.

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BAD AND DOUBTFUL DEBTSBefore the financial statements 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 baddebts and the making of allowance for doubtful debts, and satisfied themselves that all known baddebts had been written off and that adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances that would further requirethe writing off of bad debts, or additional allowance for doubtful debts in the financial statements of the Group and of the Company.

VALUATION METHODSAt the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

CURRENT ASSETSBefore the financial statements of the Group and of the Company were made out, the directors tookreasonable steps to ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including their value as shown in the accounting records of the Group and the of the Company have been written down to an amount which they might beexpected so to realise.

At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and of the Companymisleading.

CONTINGENT AND OTHER LIABILITIESAt the date of this report, there does not exist :-

( i ) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person, or

( ii ) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

No contingent liability or other liability of the Group and of the Company has become enforceable, or is likely to become enforceable within the period of twelve (12) months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of theGroup and of the Company to meet its obligations as and when they fall due.

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CHANGE OF CIRCUMSTANCESAt the date of this report, the directors are not aware of any circumstances, not otherwise dealt within this report or the financial statements of the Group and of the Company, which would render any amounts stated in the financial statements misleading.

ITEM OF AN UNUSUAL NATUREThe results of the operations of the Group and of the Company during the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a materialand unusual nature.

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, in the opinion of the directors,to affect substantially the results of the operations of the Group and of the Company for the financial year.

DIRECTORSThe directors who served since the date of the last report are as follows :-

Eg Kah YeeEg Kaa CheeAbdul Razak Bin Dato' Haji IpapSukhdev Singh A/L Banta Singh Thong Kooi Pin

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DIRECTORS' INTERESTSAccording to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares in the Company or its related corporations during the financial yearare as follows :-

Number of ordinary shares of RM 0.10 each in Palette Multimedia Berhad

At At

1.1.2007 Bought Sold 31.12.2007

Eg Kah Yee - Direct interest 121,587,302 * 3,371,750 * 52,746,750 * 72,212,302

- Indirect interest ( 1 ) 1,917,947 * - - 1,917,947

Eg Kaa Chee - Direct interest 1,193,502 * - - 1,193,502

- Indirect interest ( 2 ) 121,587,302 * 3,371,750 * 52,746,750 * 72,212,302

* Adjusted to reflect the effect the share split on the basis of two and a half ( 2 1/2 ) new ordinaryshares of RM 0.10 each for every one ( 1 ) ordinary shares of RM 0.25 each.

( 1 ) Deemed interest through his substantial shareholding in Digital Season Sdn. Bhd. and by virtue of his brother Eg Kaa Chee's shareholding.

( 2 ) Deemed interest through his brother, Eg Kah Yee's shareholding.

By virtue of their interests in the Company, Eg Kah Yee and Eg Kaa Chee are deemed to have interests in shares in the subsidiaries to the extent of the Company interest, in accordance withSection 6A of the Companies Act, 1965.

None of the other directors holding office at the end financial year had any interest in shares in the Company or its related corporations during the financial year.

DIRECTORS' BENEFITSSince the end of the previous financial year, no director has received or become entitled to receive any benefit ( other than a benefits included in the aggregate amount of emoluments received or due and by directors as shown in the financial statements, or the fixed salary of a full - time employeeof the Company ) by reason of a contract made by the Company or a related corporation with thedirector or with a firm of which the director is a member, or with a company in which the directorhas a substantial financial interest except for any benefits which may be deemed to arisen fromtransactions entered into the ordinary course of business with companies in which certain directorshave subtantial financial interests as disclosed in Note 24 to the financial statements.

Neither during, nor at the end of the financial year, was the Group or the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisitionof shares in or debentures of the Company or any other body corporate apart from the Employees Shares Option Scheme ( "ESOS" ).

SIGNIFICANT EVENTSThe significant events involving the Group and the Company during the financial year are disclosed in Note 27 to the financial statements.

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BALANCE SHEETAS AT DECEMBER 31, 2007

GROUP COMPANY

NOTE 2007 2006 2007 2006

RM RM RM RM

NON - CURRENT ASSETS

Property, plant and equipment 5 228,032 178,645 213,724 129,003

Investment in subsidiaries 6 - - 2,561,387 2,561,387

Intangible assets 7 20,438,879 20,032,080 19,634,127 19,446,712

Guarantee deposits 7,060 7,840 - -

Receivables 8 12,931,935 12,944,815 12,931,935 12,944,815

CURRENT ASSETSInventories 9 2,555,121 3,115,429 984,411 1,023,971

Trade and other receivables 10 20,449,727 11,371,580 28,811,712 19,038,899

Fixed deposit with licensed banks 11 2,221,173 1,182,947 2,221,173 1,182,947

Cash and bank balances 15,851 54,271 10,689 565

25,241,872 15,724,227 32,027,985 21,246,382

LESS : CURRENT LIABILITIESTrade and other payables 12 25,219,455 16,129,361 25,918,724 16,818,877

Short term borrowings 13 1,505,235 3,847,336 1,497,156 3,847,336

Provision for taxation 1,171 1,300 - -

26,725,861 19,977,997 27,415,880 20,666,213

NET CURRENT ( LIABILITIES ) / ASSETS (1,483,989) (4,253,770) 4,612,105 580,169

32,121,917 28,909,610 39,953,278 35,662,086

Financed by:

Share capital 14 29,052,650 26,400,000 29,052,650 26,400,000

Share premium 15 4,296,261 4,122,965 4,296,261 4,122,965

Reserves 15 24,659 8,868 13,136 -

Accumulated losses / retained profits 15 (1,368,937) (1,805,617) 6,493,070 4,976,192

32,004,633 28,726,216 39,855,117 35,499,157

Minority shareholders' interest 16 19,123 20,465 - -

Total Equity 32,023,756 28,746,681 39,855,117 35,499,157

Long term and deferred taxationLong term borowings 17 98,161 162,929 98,161 162,929

32,121,917 28,909,610 39,953,278 35,662,086

See the accompanying notes to the financial statements.

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INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2007

NOTE GROUP COMPANY

2007 2006 2007 2006

RM RM RM RM

Revenue 18 7,631,249 17,922,037 7,493,951 17,478,982

Cost of Sales (4,952,909) (13,883,597) (4,418,373) (13,510,506)

Gross profit 2,678,340 4,038,440 3,075,578 3,968,476

Other operating income 47,737 36,782 42,593 26,672

Selling and distribution expenses (224,479) (97,487) (152,995) (47,846)

Administrative and general expenses (1,974,095) (2,086,580) (1,358,214) (1,069,979)

Profit from operations 19 527,503 1,891,155 1,606,962 2,877,323

Finance costs 20 (90,084) (168,181) (90,084) (168,181)

Profit before taxation 437,419 1,722,974 1,516,878 2,709,142

Taxation 21 - - - -

Net profit for the financial year 437,419 1,722,974 1,516,878 2,709,142

Profit attributable to :-

Equity holders of the parent company 436,680 1,724,703 1,516,878 2,709,142

Minority interest 739 (1,729) - -

437,419 1,722,974 1,516,878 2,709,142

Earning per share ( sen ) - basic 22 0.16 0.65 - -

- par value of 10 sen per share

- diluted 22 N / A N / A - -

- par value of 10 sen per share


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PALETTE MULTIMEDIA BERHAD

(Incorporated in Malaysia)

STATEMENT CHANGES IN EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2007

GROUP ACCUMULATED

LOSSES /

SHARE SHARE RETAINED MINORITY TOTAL

CAPITAL PREMIUM RESERVES PROFITS TOTAL INTEREST EQUITY

RM RM RM RM RM RM RM

Balance at January 1, 2006 26,400,000 4,122,965 (144,309) (3,530,320) 26,848,336 21,807 26,870,143

Foreign exchange reserves - - 153,177 - 153,177 387 153,564

Net profit for the financial year - - - 1,724,703 1,724,703 (1,729) 1,722,974

Balance at December 31, 2006 26,400,000 4,122,965 8,868 (1,805,617) 28,726,216 20,465 28,746,681

Issue of shares 2,641,150 173,296 - - 2,814,446 - 2,814,446

Employees's Share Options Scheme :-- Share issued 11,500 - - - 11,500 - 11,500

- Options granted - - 13,136 - 13,136 - 13,136

Foreign exchange difference - - 2,655 - 2,655 (2,081) 574

Net profit for the financial year - - - 436,680 436,680 739 437,419

Balance at December 31, 2007 29,052,650 4,296,261 24,659 (1,368,937) 32,004,633 19,123 32,023,756

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STATEMENT CHANGES IN EQUITY


COMPANY ACCUMULATED

LOSSES / TOTAL

SHARE SHARE RETAINED RM MINORITY TOTAL

CAPITAL PREMIUM RESERVES PROFITS INTEREST EQUITY

RM RM RM RM RM RM

Balance at January 1, 2006 26,400,000 4,122,965 - 2,267,050 32,790,015 - 32,790,015

Net loss for the

financial year - - - 2,709,142 2,709,142 - 2,709,142

Balance at December 31,

2006 26,400,000 4,122,965 - 4,976,192 35,499,157 - 35,499,157

Issue of shares 2,641,150 173,296 - - 2,814,446 - 2,814,446

Employees's Share

Options Scheme :-

- Share issued 11,500 - - - 11,500 - 11,500

- Options granted - - 13,136 - 13,136 - 13,136

Net profit for the

financial year - - - 1,516,878 1,516,878 - 1,516,878

Balance at December 31,

2007 29,052,650 4,296,261 13,136 6,493,070 39,855,117 - 39,855,117

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CASH FLOW STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2007

GROUP COMPANY

2007 2006 2007 2006

RM RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 437,419 1,722,974 1,516,878 2,709,142

Adjustments for :

Amortisation 75,050 75,050 75,050 75,050

Depreciation of property, plant and equipment 90,529 237,876 55,906 73,581

Gain on disposal of property, plant and equipment (4,154) - - -

Interest income (42,590) (26,672) (42,590) (26,672)

Interest expense 90,084 168,181 90,084 168,181

Share - based compensation 13,136 - 13,136 -

Unrealised gain on foreign exchange 1,225 153,448 - -

Operating profit before working capital changes 660,699 2,330,857 1,708,464 2,999,282

Decrease in inventories 560,308 722,145 39,560 385,371

Increase in trade and other receivables (9,065,267) (2,401,179) (9,759,933) (2,965,274)

Increase in trade and other payables 9,090,094 257,697 9,099,847 274,819

Cash generated from operations 1,245,834 909,520 1,087,938 694,198

Interest paid (90,084) (168,181) (90,084) (168,181)

Development cost paid (480,834) (505,675) (262,465) (308,431)

Net cash generated from operating activities 674,916 235,664 735,389 217,586


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CASH FLOW STATEMENT ( CONT'D )FOR THE YEAR ENDED DECEMBER 31, 2007

GROUP COMPANY

NOTE 2007 2006 2007 2006

RM RM RM RM

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment (141,277) (6,148) (140,627) (6,148)

Proceed from disposal of property, plant and equipment 4,500 - - -

Interest income received 42,590 26,672 42,590 26,672

Net cash generated from / ( used in ) investing activities (94,187) 20,524 (98,037) 20,524

CASH FLOWS FROM FINANCING ACTIVITIESRepayment of term loans (59,832) (54,342) (59,832) (54,341)

Net proceeds from issue of share capital 2,825,946 - 2,825,946 -

Net cash generated from / ( used in ) financing activities 2,766,114 (54,342) 2,766,114 (54,341)

Net increase in cash and cash equivalents 3,346,843 201,846 3,403,466 183,769

Cash and cash equivalents at beginning of financial year (2,553,661) (2,755,507) (2,607,367) (2,791,136)

Cash and cash equivalents at end of financial year 23 793,182 (2,553,661) 796,099 (2,607,367)


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NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2007

1. GENERAL INFORMATION

( i ) The Company is principally involved in investment holding, design, developmentand marketing of information technology related products and services. The principalactivities of the subsidiaries are set out in Note 6 to the financial statements. There have been no significant changes in the nature of these activities during the financial year.

( ii ) The registered office of the Company is located at Level 14, Uptown 1, No. 1, Jalan SS 21/58, Damansara Uptown, 47400 Petaling Jaya, Selangor Darul Ehsan.

( iii ) The principal place of business of the Company is located at 6 Floor, Unit 4,8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan.

( iv ) The number of employees of the Group and of the Company as at December 31,2007 were 21 and 8 ( 2006 : 25 and 8 ).

( v ) The financial statements were authorised for issue by the Board of Directors inaccordance with a resolution of the Directors on April 22, 2008.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been prepared in accordance with applicable approved Financial Reporting Standards in Malaysia and the provision of the Companies Act 1965.

3. SIGNIFICANT ACCOUNTING POLICIES

( a ) The financial statements of the Group and of the Company have been prepared under the historical cost convention except as disclosed in this summary of

significant accounting policies.

( b ) The preparation of financial statements in conformity with the applicable ApprovedFinancial Reporting Standards in Malaysia and the provision of the Companies Act 1965 requires the directors to use certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during thereported period. It also requires directors to exercise their judgement in theprocess of applying the Group's accounting policies. Although these estimatesand judgement are based on the directors' best knowledge of current events andactions, actual results may differ.

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3. SIGNIFICANT ACCOUNTING POLICIES ( CONT'D )

( c ) Basis of consolidation

Subsidiaries are those corporations, partnerships or other entities ( including specialpurpose entities ) in which the Group has power to exercise control over the financialand operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable orconvertible are considered when assessing whether the Group controls anotherentity.

Subsidiaries are consolidated using the purchase method of accounting.

Under the purchase method of accounting, subsidiaries are fully consolidated fromthe date on which control is transferred to the Group and are de - consolidated fromthe date that control ceases. The cost of an acquisition is measured as fair valueof the assets given, equity instruments issued and liabilities incurred or assumedat the date of exchange, plus costs directly attributable to the acquisition.

Minority interest represent that portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent. It is measured at the minorities' share of thefair value of the subsidiaries' identifiable assets and liabilities at the acquisitiondate and the minorities' share of changes in the subsidiaries's equity since that date.

Intragroup transactions, balances and unrealised gains on transactions betweenGroup companies are eliminated, Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies ofsubsidiaries have been changed where neccessary to ensure consistency with thepolicies adopted by the Group.

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( d ) Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost less accumulated depreciation and less any impairment losses.

The straight line method is used to write off the cost of the following assets overthe term of its estimated useful lives at the following principal annual rates :-

Rate (%)

Office equipment 20

Furniture and fittings 20

Computer equipment and software 20

Renovation 20

( e ) Impairment of assetsThe carrying amount of the Group's assets, other than assets arising from inventories and financial assets ( other than investments in subsidiaries and associates ) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverableamount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or the cash - generating unit to which it belongs exceeds itsrecoverable amount. Impairment losses are recognised in the income statement.

The recoverable amount is the greater of the asset's net selling price and its value in use. In assesing value in use, estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risk specific to the asset. For an assets that does not generate largely independent cash inflows, the recoverableamount is determined for the cash-generating unit to which the asset belongs.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset's carrying amountdoes not exceed the carrying amount that would have determined, net of depreciationor amortisation, if no impairment loss has been recognised. The reversed is recognised in the income statement.

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( f ) Investments in subsidiariesInvestments in subsidiaries are held on a long term basis and are stated at cost.Provision for any permanent diminution in value is only made if the directors are of the opinion that the diminution is permanent.

( g ) Research and development costResearch and development costs are expensed in the period in which they are incurred. Costs incurred on development projects ( relating to the design and testing of new or improved products ) are recognised as intangible assets to theextent that such expenditure is expected to generate future economic benefits.Other development expenditure is recognised as an expense when incurred.

Development costs that have been capitalised are amortised from the commencementof the commercial production of the product or process is available for sale oruse to which they relate on the straight line basis over a period of 20 years of their expected benefits.

( h ) Treatment of Intellectual Property (IP) and Licence RightIP and Licence Right have been capitalised as permanent items as they have indefinite life pursuant to the agreement for continuous technical upgrading support from the vendor. Therefore, the IP and Licence Right have not been amortised.

( i ) InventoriesInventories include computer equipment and software products purchased for resale.Inventories are valued at the lower of cost and net realisable value. Cost is determined on the first - in - first - out method and comprises the original purchaseprice plus cost incurred in bringing the inventories to their present location.

( j ) Trade and other receivablesTrade and other receivables are stated at cost less allowance for doubtful debts.

( k ) Revenue recognitionRevenue from the sale of goods is recognised when significant risk and rewards of ownership are transferred to the buyer ( generally on delivery, satisfactory installation and acceptance ) and if any on performance of services.

Other operating income mainly consist of interest income, trade interest income and research and development income.

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( l ) Funtional and presentation currencyThe separate financial statements of each entity in the Group are measured using the functional currency which is the currency of the primary economic environmentin which the entity operates. The consolidated financial statements are presentedin Ringgit Malaysia ( "RM" ), which is also the Company's functional currency.

( i ) Foreign currency transactionTransactions in foreign currencies are translated to Ringgit Malaysia at rates ofexchange ruling at the date of the transactions. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated to Ringgit Malaysia at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

( ii ) Financial statements of foreign operationsThe assets and liabilities of foreign operations are translated in Ringgit Malaysia at exchange rates ruling at the balance sheet date. The revenues and expensesof foreign operations are translated to Ringgit Malaysia at average rates. Foreignexchange differences arising on translation are included in the foreign exchangereserve in shareholders' equity.

The closing rate used in the translation of foreign currency monetary assets and liabilities and the financial statements of foreign operations are as follows :-

2007 2006

RM RM

Foreign currency :1000 Indonesia Rupiah 0.353 0.392

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( m ) Income taxThe tax expense in the income statement represents the aggregate amounts ofcurrent tax and deferred tax included in the determination of net profit or loss forthe year.

On the balance sheet date deferred tax liability is recognised for taxable temporarydifferences while a deferred tax asset is only recognised for deductible temporarydifferences, unutilised tax losses and unutilised tax credits to the extent that it isprobable that taxable profit will be available in future against which the deductibletemporary differences, tax losses and tax credits can be utilised. No deferred taxis recognised for temporary differences arising from :

( i ) goodwill for which amortization is not deductible for tax purposes, or( ii ) negative goodwill which is treated as deferred income, or( iii ) the initial recognition of an asset or liability which is not a business

combination and at the time of the transaction, affects neither accountingprofit nor taxable profit.

Deferred tax assets and liabilities are measured based on tax consequencesthat would follow from the manner in which the asset or liability is expected tobe recovered or settled, and based on the tax rates enacted at the balance sheetdate that are expected to apply to the period when the asset is realised or whenthe liability settled.

Current tax and deferred tax are charged or credited directly to equity if the taxrelates to items that are credited or charged, whether in the same or a differentperiod, directly to equity.

( n ) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, bank balances, demand deposits, bank overdrafts and short term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subjects to an insignificant risk of changes in value.

( o ) Financing costsAll interest and other costs incurred in connection with borrowings are expensedas incurred.

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( p ) Employee benefits

( i ) Short term employee benefitsWages, salaries, paid annual leave and sick leave, bonuses, and non - monetarybenefits are accrued in the period in which the associated services are renderedby employees of the Group.

( ii ) Post - employment benefitsThe Group has post - employment benefits schemes in accordance with localconditions and practices in the countries in which it operates. This benefit plan isdefined contribution plans.

( iii ) Defined contribution plansThe Group contributions to defined contribution plans are charged to the incomestatement in the period to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

( iv ) Share - based compensationThe Group operates an equity - settled, share - based compensation plan for theemployees of the Group. The fair value of the employee services received inexchange for the grant of the share options is recognised as an expense in theincome statement over the vesting periods of the grant with a corresponding increase in equity.

The total amount to be expensed over the vesting period is determined by referenceto the fair value of the share options granted, excluding the impact of any non - marketvesting conditions ( for example, profitability and sales growth targets ). Non - marketvesting conditions are included in assumptions about the number of options thatare expected to vest. At each balance sheet date, the Group revises its estimatesof the number of share options that are expected to vest. It recognises the impactof the revision of orginal estimates, if any, in the income statement, with acorresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are creditedto share capital ( nomimal value ) and share premium when the options are exercised.

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4. CHANGE IN ACCOUNTING POLICIES AND EFFECTS ARISING FROM ADOPTION OF REVISED FRS

( a ) Standards, amendments to published standards and interpretations that areeffective

On January 1, 2007, the Group and the Company adopted the following applicableFRS mandatory for the financial year beginning January 1, 2007 :

- FRS 124 Related Party Disclosures

The adoption of FRS 124 has no material impact on the financial statementsof the Group and the Company. Certain comparative figures have been restatedor reclassified to comply with additional disclosure requirements.

( b ) Standards that are not yet effective and have not been early adopted

The Company have considered all published standards not yet effective.

The new accounting standards that are relevant and mandatory for the Group'sand the Company's financial periods beginning on or after January 1, 2008 or later periods, but which the Group and the Company have not early adopted, areas follows :-

- FRS 107 Cash flows statements- FRS 112 Income taxes- FRS 118 Revenue- FRS 134 Interim financial reporting- FRS 137 Provisions, contingent liabilities and contingent assets- FRS 139 Financial instruments ; Recognition and Measurement

( Effective date yet to be determined by MASB )

With the exception of FRS 139, the amendments to published standards arenot expected to have a material impact on the financial statements.

The Group and the Company have relied on the transitional provisions of FRS 139not to disclose the possible impact that the application of FRS 139 will have on the Group's and the Company's financial statements in the period of initial application.

23

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5. PROPERTY, PLANT AND EQUIPMENT

Computer

equipment Furniture Office

and software and fittings equipment Renovation Total

RM RM RM RM RM

Group

Net book valueAt January 1, 2007 39,005 17 23,559 116,064 178,645

Additions 6,000 700 4,980 129,597 141,277

Depreciation charge (29,242) (23) (11,823) (49,441) (90,529)

Capitalised to development cost (1,015) - - - (1,015)

Disposal - (4) (339) (3) (346)

At December 31, 2007 14,748 690 16,377 196,217 228,032

At December 31, 2007Cost 1,621,490 98,238 199,494 652,422 2,571,644

Accumulated depreciation (1,606,742) (97,548) (183,117) (456,205) (2,343,612)

Net book value 14,748 690 16,377 196,217 228,032

At December 31, 2006Cost 1,615,489 98,403 209,190 525,775 2,448,857

Accumulated depreciation (1,576,484) (98,386) (185,631) (409,711) (2,270,212)

Net book value 39,005 17 23,559 116,064 178,645

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NOTES TO THE FINANCIAL STATEMENTS


5. PROPERTY, PLANT AND EQUIPMENT ( CONT'D )

Computer

equipment Furniture Office

and software and fittings equipment Renovation Total

RM RM RM RM RM

Company

Net book value

At January 1, 2007 6,607 7 15,983 106,406 129,003

Additions 6,000 700 4,330 129,597 140,627

Depreciation charge (3,235) (23) (6,904) (45,744) (55,906)

At December 31, 2007 9,372 684 13,409 190,259 213,724

At December 31, 2007

Cost 841,530 95,338 177,908 580,134 1,694,910

Accumulated depreciation (832,158) (94,654) (164,499) (389,875) (1,481,186)

Net book value 9,372 684 13,409 190,259 213,724

At December 31, 2006

Cost 835,530 94,638 173,577 450,536 1,554,281

Accumulated depreciation (828,923) (94,631) (157,594) (344,130) (1,425,278)

Net book value 6,607 7 15,983 106,406 129,003

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6. INVESTMENT IN SUBSIDIARIES COMPANY

2007 2006

RM RM

Unquoted shares, at cost 2,561,387 2,561,387

2,561,387 2,561,387

Details of the subsidiary companies are as follows :-

Name of Company Country of Group's effective PrincipalIncorporation interest activities

2007 2006Development

Palette System Malaysia 100 % 100 % and marketing Sdn. Bhd. IT product.

PT Palette Multimedia* Indonesia 99 % 99 % Selling hardwareand IT consulting

*Audited by another firm of auditors

7. INTANGIBLE ASSETS IntellectualProperty and DevelopmentLicense Right cost Total

RM RM RM

GroupCost at 1.1.2007 17,000,000 3,332,280 20,332,280

Additions during the year - 480,834 480,834

Reclassification - 1,015 1,015

Cost as at 31.12.2007 17,000,000 3,814,129 20,814,129

Less : Cumulative amortisationAt 1.1.2007 - (300,200) (300,200)

Charge for the year - (75,050) (75,050)

At 31.12.2007 - (375,250) (375,250)

Balance at 31.12.2007 17,000,000 3,438,879 20,438,879

Balance at 31.12.2006 17,000,000 3,032,080 20,032,080

Amortisation at 31.12.2006 - 75,050 75,050

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7. INTANGIBLE ASSETS ( CONT'D ) IntellectualProperty and DevelopmentLicense Right cost Total

RM RM RM

CompanyCost at 1.1.2007 17,000,000 2,746,912 19,746,912

Additions during the year - 262,465 262,465

Cost at 31.12.2007 17,000,000 3,009,377 20,009,377

Less : Cumulative amortisationAt 1.1.2007 - (300,200) (300,200)

Charge for the year - (75,050) (75,050)

At 31.12.2007 - (375,250) (375,250)

Balance at 31.12.2007 17,000,000 2,634,127 19,634,127

Balance at 31.12.2006 17,000,000 2,446,712 19,446,712

Amortisation at 31.12.2006 - 75,050 75,050

8. RECEIVABLES Group Company2007 2006 2007 2006

RM RM RM RM

Non - current assetsCash at bank 12,931,935 12,944,815 12,931,935 12,944,815

This amount held by the Company is not available for use by the Group [ Refer Note 27 ( i ) ].

9. INVENTORIES Group Company2007 2006 2007 2006

RM RM RM RM

At costs :Hardware 2,542,402 3,101,700 977,327 1,016,887

Software 12,719 13,729 7,084 7,084

2,555,121 3,115,429 984,411 1,023,971

During the financial year, the Group had written off RM 439,295 of inventories which arerecognised as an expense in the income statement.

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10. TRADE AND OTHER RECEIVABLES Group Company2007 2006 2007 2006

RM RM RM RM

Trade receivables 19,090,975 10,220,140 16,047,518 6,980,772

Other receivables 154,275 179,962 154,275 167,376

Deposits 1,199,077 968,198 1,189,691 968,198

Prepayments 5,400 3,280 - -

Amount due from subsidiaries - - 11,420,228 10,922,553

20,449,727 11,371,580 28,811,712 19,038,899

The amount due from subsidiaries, principally trade transactions which is unsecured, non - interest bearing and have no fixed terms of repayment.

11. FIXED DEPOSIT WITH LICENSED BANKSIncluded in fixed deposit of the Group and of the Company are amounts in total of RM 1,000,000.00 ( 2006 : RM1,000,000 ) pledged to the licensed bank for banking facilitiesextended to the Group and the Company.

12. TRADE AND OTHER PAYABLES Group Company2007 2006 2007 2006

RM RM RM RM

Trade payables 24,881,840 15,762,809 23,649,814 14,523,340

Accrued expenses 323,142 352,079 269,660 296,287

Amount due to subsidiaries - - 1,984,777 1,984,777

Amount due to directors 14,473 14,473 14,473 14,473

25,219,455 16,129,361 25,918,724 16,818,877

The amount due to subsidiaries principally trade transactions which are unsecured, and have no fixed terms of repayment.

The amount due to directors are unsecured, interest free and have no fixed terms of repayment.

The trade payables above include an amount of RM 11,087,183.25 which is involved indispute as per Note 27 ( i ).

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13. SHORT TERM BORROWINGS Group Company2007 2006 2007 2006

RM RM RM RM

Current :Bank overdraft ( secured ) 852,842 1,404,879 844,763 1,404,879

Bankers' acceptance 591,000 2,386,000 591,000 2,386,000

Current portion of :Long term loan ( Note 17 ) 61,393 56,457 61,393 56,457

1,505,235 3,847,336 1,497,156 3,847,336

The bankers' acceptance facilities are secured by way of personal guarentee by the Company directors. The bank overdraft of the Group and of the Company are secured byway of fixed deposits pledged to the licensed banks.

14. SHARE CAPITAL Group and Company

No. of Par value Value

shares RM RM

Authorised :Balance at December 31, 2006 200,000,000 0.25 50,000,000

Share split and balance at December 31, 2007 500,000,000 0.10 50,000,000

Issued and fully paid - up :Balance at December 31, 2006 105,600,000 0.25 26,400,000

Issued during the year :-- Exercise of share options 46,000 0.25 11,500

- Private placement 9,082,000 0.25 2,270,500

Balance before share split 114,728,000 0.25 28,682,000

Balance after share split 286,820,000 0.10 28,682,000

Issued during the year :-- Private placement 3,706,500 0.10 370,650

Balance at December 31, 2007 290,526,500 0.10 29,052,650

The ordinary share of RM 0.25 each were sub - dividend into RM 0.10 per ordinary share during the financial year.

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14. SHARE CAPITAL ( CONT'D )

Employee Share Option SchemeThe Company implemented an Employee Share Option Scheme ( "ESOS" ) which came into effect on April 7, 2004 for a period of ten years. The ESOS is governed by the by - lawswhich were approved by the shareholders.

Share options are granted to directors and to selected employees. the exercise price underthe ESOS is the average of the mean market quotation of the shares of the Companyas quoted in the Daily Official List issued by the Bursa Malaysia Securities Berhad forthe five market days preceding the offer date, or the par value of the shares of the Companyof RM 0.25, whichever is the higher.

Options are conditional on the employee completing one year's service ( the vesting period ).The options are exercisable starting one year from the grant date and have a contractualterm of ten years. The Group has no legal or constructive obligation to repurchase orsettle the options in cash.

The persons whom the options have been granted have no right to participate by virtueof the options in any share issue of any other company.

Movements in the number of share options outstanding and their related weighted averageexercise prices are as follows :-

Year ended 31.12.2007 Year ended 31.12.2006Average exercise price Options Average exercise price Options

RM / share RM / share

At begining of year - 8,210,000 Granted 0.25 8,210,000

Exercised 0.25 (46,000)

Balance prior to adjustment for share split 0.25 8,164,000 0.25 8,210,000

Balance after adjustmentfor share split 0.10 20,410,000

Lapsed 0.10 (1,785,000)

At end of year 0.10 18,625,000

The options outstanding at year end has exercise prices of RM 0.10.

Options granted during the period will expire on April 5, 2014.

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15. SHARE PREMIUM AND RESERVES Group / Company

2007 2006

RM RM

( a ) Share premiumBalance as January 1, 4,122,965 4,122,965

Premium of RM 0.015 per share arising on issue of 9,082,000 new ordinary shares 136,230 -

Premium of RM 0.01 per share arising on issue of 3,706,500 new ordinary shares 37,066 -

Balance as December 31, 4,296,261 4,122,965

( b ) ESOS reserves Group Company

2007 2006 2007 2006

RM RM RM RM

Options granted 13,136 - 13,136 -

Group Company2007 2006 2007 2006

RM RM RM RM

( c ) Foreign exchange reservesAt January 1 8,868 (144,309) - -

Currency translation difference 2,655 153,177 - -

At December 31 11,523 8,868 - -

( d ) Accumulated losses / Retained profits (1,368,937) (1,805,617) 6,493,070 4,976,192

Movements in retained profits are disclosed in the statement of changes in equity.

16. MINORITY SHAREHOLDERS' INTERESTThis consist of the minority shareholders' proportion of share capital and reserve of subsidiaries.

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17. LONG TERM BORROWINGS GROUP / COMPANY

2007 2006

RM RM

Current :Term loan ( Note 13 ) 61,393 56,457

Non - current :Long term loan 98,161 162,929

159,554 219,386

The term loan bear interest at 8.30% to 10.05% per annum and are secured as follows :-

( a ) By way of third party, second and third loan agreement of RM 500,000 each andexisting Deed of Assignment over the landed properties.

( b ) To additionally guaranteed by the Company directors. ( c ) To be corporate guaranteed by Palette Corporation Sdn. Bhd.

The loan is repayable as follows :-GROUP / COMPANY

2007 2006

RM RM

Current 61,393 56,457

Within two years 98,161 127,271

Within two and five years - 35,658

159,554 219,386

18. REVENUE Group Company2007 2006 2007 2006

RM RM RM RM

Sale of goods 7,631,249 17,922,037 7,493,951 17,478,982

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19. PROFIT FROM OPERATIONS Group Company2007 2006 2007 2006

RM RM RM RM

The following items have been charged / ( credited ) in arriving at profit from operations :-

Audit fee 14,000 14,000 8,000 8,000

Amortisation of development cost 75,050 75,050 75,050 75,050

Director's remuneration 163,248 123,804 133,248 93,804

Depreciation of property, plant and equipment 90,529 237,876 55,906 73,581

Interest expenses 90,084 168,181 90,084 168,181

Inventories written off 439,295 - - -

Rental expenses 114,848 159,553 104,445 111,253

Gain on disposal of property, plant and equipment (4,154) - - -

Net on exchange loss - Realised 254,266 182,326 254,266 15,065

Interest income (42,590) (26,672) (42,590) (26,672)

( a ) Directors' remuneration:Fees 16,210 18,016 16,210 18,016

Salary 147,038 105,788 117,038 75,788

163,248 123,804 133,248 93,804

The details of emoluments for the directors of the Group and of the Company received / receivable for the financial year by category and in bands of RM 50,000 are as follows:-

Group Company2007 2006 2007 2006

RM RM RM RM

Non - executive directorsBelow RM 50,000 4 4 4 4

Executive directorBelow RM 50,000 - - 1 1

RM 50,000 - RM 100,000 1 1 - -

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20. FINANCE COSTS Group Company2007 2006 2007 2006

RM RM RM RM

Bankers' acceptance interest 75,360 147,966 75,360 147,966

Term loan interest 14,724 20,215 14,724 20,215

90,084 168,181 90,084 168,181

21. TAXATION Group Company2007 2006 2007 2006

RM RM RM RM

Tax charge for the financial yearCurrent year's provision - - - -

- - - -

The effective tax rate of the Group is lower than that of the statutory tax rate mainly due to the non provision of income tax by a subsidiary which has unabsorbed businesslosses carried forward during the financial year and the Company which has been grantedan income tax free period of up to five years as a result of it being awarded the MultimediaSuper Corridor ( "MSC" ) status on October 6, 2000. The extension of Pioneer Status forthe Company has been approved by authorities concerned for another five year periodfrom the date of expiry of the first five year period ( September 30, 2005 ) in accordancewith the Bill of Guarantees provided to all MSC Malaysia Status companies.

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22. EARNINGS PER SHARE Group2007 2006

Earnings per ordinary share of RM 0.10 each is calculated as follows :-

Basic :-

Net profit for the year attributable to equity holders of the parent company 431,419 1,722,974

Basic earnings per share 0.16 sen 0.65 sen

Weighted average number of sharesIssued ordinary shares at January 1, 264,000,000 264,000,000 *

Effect of private placement 13,205,750 -

Effect of ESOS 95,833 -

277,301,583 264,000,000 *

* Adjusted to reflect the effect of the share split.

23. CASH AND EQUIVALENTSFor the purpose of the cash flow statements, cash and cash equivalent comprise the followings :-

Group Company2007 2006 2007 2006

RM RM RM RM

Fixed deposit with licensed banks 2,221,173 1,182,947 2,221,173 1,182,947

Cash at bank 10,689 48,772 10,689 565

Cash on hand 5,162 5,499 - -

Deposits, cash and bank balances 2,237,024 1,237,218 2,231,862 1,183,512

Bank overdrafts (852,842) (1,404,879) (844,763) (1,404,879)

Bankers' acceptance (591,000) (2,386,000) (591,000) (2,386,000)

793,182 (2,553,661) 796,099 (2,607,367)

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24. RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control the other party or exercises significant influence over the other party in making financial and operating decisions.

Some of the Company's transactions and arrangements are with related parties and theeffect of these on the basis determined between the parties are reflected in the financialstatements. The balances are without fixed repayment terms and interest unless statedotherwise.

Significant transaction with related parties are as follows :-

2007 2006

Subsidiary Company RM RM

Palette System Sdn. Bhd.Sale of goods 1,216 175,327

Purchases of goods 12,116 32,672

Significant outstanding balances at the balance sheet date, arising from :Sale and purchases of goods and services and advances 11,420,228 10,922,553

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24. RELATED PARTY TRANSACTIONS ( CONT'D ) 2007 2006

RM RM

PT Palette MultimediaSignificant outstanding balances at the balance sheet date, arising from :Sale and purchases of goods (1,984,777) (1,984,777)

DirectorPalette Computer Sdn. Bhd.in which Abdul Razak Bin Dato' Haji Ipap( Director of the Company ), is a directorSale of goods 195,857 475,236

Purchases of goods 10,500 -

Significant outstanding balances at the balance sheet date, arising from :Sale and purchases of goods (51,041) 192,060

DirectorPalette Internet Sdn. Bhd.in which Eg Kah Yee, and Eg Kaa Chee ( Director of the Company ),is a directorSale of goods and services - -

Significant outstanding balances at the balance sheet date, arising from :Sale of goods and services 2,182 2,182

DirectorKey ASIC Berhadin which Eg Kah Yee ( Director of the Company ),is a directorSale of goods and services - 15,000

Significant outstanding balances at the balance sheet date, arising from :Sale of goods and services and advances 1,529 2,029

The above transactions have been entered into in the normal course of business and have been established under mutually agreed term arranged with the related parties.

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25. FINANCIAL INSTRUMENTS

( a ) Financial risk management objectives and policiesThe Group financial risk management policy seeks to ensure that adequatefinancial resources are available for the development of the Group's businesseswhilst managing its market, credit, liquidity and cash flow and currency risk.

( b ) Market riskThe Group has in place policies to manage its competitive risks from its competitorsin providing better services. Hence the Group regularly takes part in variousresearch to develop better and more attractive packages or products.

( c ) Credit riskThe Group has a credit policy in place and the exposure to credit risk is monitoredon a going basis.

( d ) Liquidity and cash flow riskPrudent liquidity management requires the Group to minimise the mismatch of financial assets and liabilities and to maintain sufficient funds for contingent funding requirement of working capital. Due to the dynamic nature of business, the Group reviews its cash flow position regularly to manage its exposure to fluctuations in future cash flows associated with its monetary financial instruments.

( e ) Currency riskThe Group is exposed to currency risk as a result of the foreign currency transactionsentered into by a subsidiary other than its functional currency. The Group policy is to minimise the exposure of overseas operating subsidiary to transaction riskby matching local currency income against local currency costs.

( f ) Fair ValuesThe carrying amounts of the financial assets and liabilities of the Group and the Company, approximate their fair value due to the relatively short term maturitiesof these balances.

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26. SEGMENTAL INFORMATION

Segment information is presented in report of the Group's geographical segment. Inter - segmentpricing is determined based on negotiated terms.

Revenue Profit before tax

2007 2006 2007 2006

RM RM RM RM

Major segment by country

- Revenue from external customer Malaysia 7,631,249 17,922,037 442,733 1,895,872

Indonesia - - (5,314) (172,898)

- Inter segment Malaysia 13,332 207,999 - -

7,644,581 18,130,036 437,419 1,722,974

Eliminations (13,332) (207,999) - -

7,631,249 17,922,037 437,419 1,722,974

No segment information provided on an industry basis as the Group and the Company is principally engaged in development and marketing of information technology related products and services.

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27. SIGNIFICANT EVENTS

( i ) On May 14, 2004 the Company filed a legal suit at the High Court of Kuala Lumpur for defects of goods valued at RM 3.6 million against a supplier of the Company, which is a public listed company in Taiwan, specialising in manufacturingcomputer and multimedia related products. A sum of RM 12,944,815.39 which isinvolved in this dispute has been reflected in the Company's receivables in non -current assets.

( ii ) On July 2, 2007, the Company via a private placement, issued 9,082,000new ordinary shares of RM 0.25 each at an issue price of RM 0.265 per share in cash for working capital purposes.

( iii ) On July 4, 2007, the issued and paid up share capital of the Company of 114,728,000 ordinary shares of RM 0.25 each was sub-divided into 286,820,000 ordinary shares of RM 0.10 each on the basis of 2 1/2 new ordinary shares of RM 0.10 each for every 1 ordinary share of RM 0.25 each.

( iv ) On July 11, 2007, the Company via a private placement, issued 3,706,500new ordinary shares of RM 0.10 each at an issue price of RM 0.11 per share.

( v ) On August 30, 2007 the Company entered into a Memorandum of Understanding with a third party to provide high bandwith internet access service for wired andwireless networks within a township area and a building in Petaling Jaya.

28. COMPARATIVE FIGURESCertain comparative figures have been re - classified to conform with the current financialyear's presentation.

40

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