Annual Report for Fiscal Year Ending June 30, 2026 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report. This discussion may contain forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements because of various factors, including those set forth under Item 3 "Key Information-3.D. Risk Factors" or in other parts of this Annual Report. See also "Forward-Looking Statements."

5.A. Operating Results

Overview

We are a provider of complete solutions to our clients for the integration of IoT systems and devices from designing to project deployment and our mission is to become a leading player in the IoT landscape in the ASEAN region. We offer a wide range of IoT systems as well as providing customers a substantial range of services such as system integration and system support service. We deliver holistic solutions with full turnkey deployment from designing, installation, testing, and commissioning of various IoT systems and devices as well as integration of automated systems, including installation of wire and wireless and mechatronic works.

Recent new technology trends such as artificial intelligence, cloud computing, 5G, robotic process automation, IoT and hyper-connectivity continue to transform businesses and drive companies to seek digital changes to meet evolving demands of customers.

For the fiscal year ended June 30, 2026, we reorganized our operations within the IoT segment into three (3) product categories.

●

IoT AI Server. We provide IoT AI servers and related solutions that provide a centralized, intelligent platform designed to process, analyze, and manage large-scale IoT data with embedded AI capabilities. These IoT AI servers enable organizations to automate operations, enhance decision-making, and achieve real-time visibility across their business ecosystem.

●

IoT AI Power Charger. We provide AI-enabled smart power bank charging products comprising intelligent charging stations, cloud-based management platforms, and mobile application integration. Leveraging IoT connectivity and AI-driven technologies, the products facilitate real-time device monitoring, asset tracking, battery health management, predictive maintenance, user authentication, automated billing, and operational analytics.

●

IoT Drone. We provide IoT drones that integrate drone technologies, connected hardware, and embedded software to enhance operational efficiency, productivity, automation, and data-driven decision-making. These products facilitate aerial surveying, crop health monitoring, pest detection, automated spraying, precision mapping, environmental monitoring, and real-time data collection across agricultural and other field operations.

Principal Factors Affecting Our Financial Performance

Our business, results of operations and financial condition are affected by general factors driving Malaysia's economy, the IoT industry, and the markets where our customers operate such as property development, agriculture and logistics sectors. These factors include urbanization rate, levels of per capita disposable income, levels of consumer spending, rate of internet and mobile penetration, development of technologies such as 5G and cloud computing, domestic and international supply chain stability, overall enterprise spending, and other general economic conditions in Malaysia that affect consumption and business activities in general.

Our business results are directly affected by the following factors:

Our ability to secure IoT customer orders. The success of our IoT products is dependent on our ability to secure customer purchase orders and supply contracts for our products. We engage in the supply and distribution of IoT related products across various industries. We believe there are significant untapped opportunities to win new large enterprises across different industries in Malaysia and the ASEAN region. In addition to large enterprises, we also seek to work with smaller, fast-growing companies that require a different set of services that allow us to test new offerings and develop new capabilities.

Our customers' financial condition and ability to make payments. Our customers' financial condition and their ability to make payments may impact our operations. As our customers generally purchase our products on credit, and, as a result, our results of operations and financial condition may be adversely affected if our customers experience financial difficulties. To mitigate the credit risk, we require our customers to enter contracts based on a cash-on-delivery basis. As of June 30, 2026, there are no outstanding payments from our customers. We manage credit risk related to our customers by performing periodic evaluations of credit worthiness and applying other credit risk monitoring procedures.

Our ability to deliver contracts on schedule. All of our contracts have agreed milestones and delivery terms. Our ability to meet agreed milestones and delivery terms depends on our ability to manage product sourcing and supply chain. We source hardware and software products for our contracts from Malaysian suppliers. Proximity to origin enables us to develop stronger relationships with local suppliers and contractors, which gives us access to a stable supply of products and services. In addition, we lay out specific and measurable metrics in advance and remain focused and disciplined through the life of the contracts which enable us to promptly identify any underlying issues and resolve them proactively.

In addition, other significant factors affecting our performance and results of our operations include:

●

The global macroeconomy;

●

Wage rates and operating costs in Malaysia;

●

Changes in foreign exchange rates, particularly fluctuations in exchange rate between the U.S. dollar and the Ringgit Malaysia;

●

Our ability to retain existing clients, as well as to increase our revenue from existing clients;

●

Our ability to provide favorable pricing;

●

Our ability to expand and deepen the quality, range and diversity of our portfolio of product offerings while maintaining high-quality standards;

●

Our ability to maintain and strengthen a strong brand and corporate reputation;

●

Our ability to continuously innovate, and continuously remain at the forefront of emerging technologies and related market trends; and

●

Our ability to identify, integrate and effectively manage future acquisitions.

Our Reportable Segments

An operating segment is defined as a component of an entity for which discrete financial information is available and whose operating results are regularly reviewed by our management. We report our results of operations in two reportable segments dedicated to (i) the provision of hardware and software of Internet of Things solutions and (ii) investment holding. Our management makes decisions about allocating resources and assessing performance based on reportable segments separately. We provide breakdowns by product categories for certain components of our operating results as appropriate.

Key Components of Results of Operations

Revenue

Our revenue mainly consists of sales of (i) IoT AI servers, (ii) IoT AI power chargers, and (iii) IoT drones for the fiscal year ended June 30, 2026. Revenue from sale of goods is recognized at a point in time when the Group satisfies a performance obligation by transferring a promised good (i.e., an asset) to a customer. An asset is transferred as and when a customer obtains control of that asset which coincides with the delivery of goods and acceptance by the customer. There is no material right of return and warranty provided to the customers on the sale of goods and there is no significant financing component in the revenue arising from sale of goods as the sales are made on normal credit terms.

We engage in the distribution and supply of IoT AI servers, IoT AI power chargers and IoT drones across various industries. The majority of the sales of goods contracts relate to the sale of IoT AI servers.

Cost of Revenue

Cost of Sales of Goods

Cost of sales of goods mainly consists of cost of products purchased from third party suppliers.

Total Expenses

Total expenses consist of depreciation expenses, personnel expenses, general administrative expenses, other operating expenses and interest expense of lease liabilities.

Other Income

Other income mainly consists of bank interest income.

Tax Expenses

Malaysian income tax is calculated at the statutory tax rate of 24% regarding the estimated taxable profit for the fiscal years.

Results of Operations

Year Ended June 30, 2026 Compared to Year Ended June 30, 2025

		For the years ended June 30,																Change
		2025 (in thousands)								2026 (in thousands)								Amount (in thousands)				Amount (in thousands)				%
		RM				USD				RM				USD				RM				USD
Revenue			197,320			$	46,814				235,368			$	57,688				38,048			$	10,874				19
Cost of sales			(205,466	)			(48,746	)			(244,798	)			(59,999	)			(39,332	)			(11,253	)			19
Gross loss			(8,146	)			(1,932	)			(9,430	)			(2,311	)			(1,284	)			(379	)			16
Total expenses			(65,063	)			(15,436	)			(81,702	)			(20,024	)			(16,639	)			(4,588	)			26
Other income			1,105				262				859				210				(246	)			(52	)			(22	)
Loss before tax			(72,104	)			(17,106	)			(90,273	)			(22,125	)			(18,169	)			(5,019	)			25
Tax credit			735				174				6,436				1,577				5,701				1,403				776
Loss for the financial year			(71,369	)			(16,932	)			(83,837	)			(20,548	)			(12,468	)			(3,616	)			17
Item that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operation			(2,441	)			(579	)			(2,956	)			(725	)			(515	)			(146	)			21
Total comprehensive loss for the year			(73,810	)		$	(17,511	)			(86,793	)		$	(21,273	)			(12,983	)		$	(3,762	)			18

Revenue. For the year ended June 30, 2026, the revenue increased by RM38.0 million ($10.9 million), or 19%, to RM235.4 million ($57.7 million), when compared with RM197.3 million ($46.8 million) for the year ended June 30, 2025, primarily due to the sales of IoT AI servers, IoT AI power chargers and IoT drones.

The following table sets forth the breakdown of our revenue by product categories.

		For the years ended June 30,
		2025 (in thousands)								2026 (in thousands)
		RM				USD				RM				USD
IoT AI Infrastructure			-			$	-				232,368			$	56,953
IoT Autonomous Systems and Drones			3,000				712				3,000				735
IoT Devices and Smart Solutions			153,320				36,375				-				-
IoT AI Software and Data Solutions			41,000				9,727				-				-
Total			197,320			$	46,814				235,368			$	57,688

Revenue from IoT AI Infrastructure was RM232.4 million ($57.0 million) for the year ended June 30, 2026, mainly derived from the sales of IoT AI servers and IoT AI power chargers.

Revenue from IoT Autonomous Systems and Drones was RM3.0 million ($0.7 million) for the year ended June 30, 2026, which remained consistent with RM3.0 million ($0.7 million) for the year ended June 30, 2025. The sales are mainly derived from the sale of IoT drones.

Revenue from IoT Devices and Smart Solutions decreased from RM153.3 million ($36.4 million) for the year ended June 30, 2025 to RM nil for the year ended June 30, 2026. Revenue in 2025 was mainly derived from sales of IoT Vending Machine and IoT Device Set products.

Revenue from IoT AI Software and Data Solutions decreased from RM41.0 million ($9.7 million) for the year ended June 30, 2025 to RM nil for the year ended June 30, 2026. Revenue in 2025 was mainly derived from sales of IoT Wifi Optimisation and IoT AI Data Analysis.

Cost of revenue. For the year ended June 30, 2026, the cost of revenue increased by RM39.3 million ($11.3 million), or 19%, to RM244.8 million ($60.0 million), when compared with RM205.5 million ($48.7 million) for the year ended June 30, 2025, which was in line with the increase in revenue.

		For the years ended June 30,
		2025 (in thousands)								2026 (in thousands)
		RM				USD				RM				USD
IoT AI Infrastructure			-			$	-				229,451			$	56,238
IoT Autonomous Systems and Drones			18,645				4,423				15,347				3,761
IoT Devices and Smart Solutions			147,821				35,070				-				-
IoT AI Software and Data Solutions			39,000				9,253				-				-
Total			205,466			$	48,746				244,798			$	59,999

Other income. For the year ended June 30, 2026, the other income decreased by RM0.2 million ($0.1 million), or 22%, to RM0.9 million ($0.2 million), when compared with RM1.1 million ($0.3 million) for the year ended June 30, 2025, mainly due to the decrease of interest income received during the financial year.

		For the years ended June 30,
		2025 (in thousands)								2026 (in thousands)
		RM				USD				RM				USD
Interest			957			$	227				785			$	192
Others			148				35				74				18
Total			1,105			$	262				859			$	210

Total expenses. For the year ended June 30, 2026, the total expenses increased by RM16.6 million ($4.6 million), or 26%, to RM81.7 million ($20.0 million), when compared with RM65.1 million ($15.4 million) for the year ended June 30, 2025, mainly due to the higher impairment losses, partly offset by lower depreciation.

		For the years ended June 30,
		2025 (in thousands)								2026 (in thousands)
		RM				USD				RM				USD
Depreciation			28,433			$	6,746				26,390			$	6,468
Amortization			3,186				756				3,186				781
Personnel			3,167				751				2,572				630
General administrative			3,231				766				1,699				416
Other operating expenses			301				71				5				1
Impairment losses			26,741				6,344				47,841				11,726
Finance cost			4				1				9				2
Total			65,063			$	15,435				81,702			$	20,024

Tax credit. For the year ended June 30, 2026, there was income tax recovery of RM6.4 million ($1.6 million) as compared to income tax recovery of RM0.7 million ($0.2 million) for the year ended June 30, 2025.

Loss for the year. For the year ended June 30, 2026, the loss is RM83.8 million ($20.5 million) compared with the loss of RM71.4 million ($16.9 million) for the year ended June 30, 2025. The increase of loss for the year ended June 30, 2026, was due to increase in the operating expenses during the financial year.

Year Ended June 30, 2025 Compared to Year Ended June 30, 2024

		For the years ended June 30,																Change
		2024 (in thousands)								2025 (in thousands)								Amount (in thousands)				Amount (in thousands)				%
		RM				USD				RM				USD				RM				USD
Revenue			58,187			$	12,323				197,320			$	46,814				139,133			$	34,491				239
Cost of sales			(78,522	)			(16,629	)			(205,466	)			(48,746	)			(126,944	)			(32,117	)			162
Gross loss			(20,335	)			(4,306	)			(8,146	)			(1,932	)			12,189				2,374				(60	)
Total expenses			(46,782	)			(9,907	)			(65,063	)			(15,436	)			(18,281	)			(5,529	)			39
Other income			1,608				341				1,105				262				(503	)			(79	)			(31	)
Loss before tax			(65,509	)			(13,872	)			(72,104	)			(17,106	)			(6,595	)			(3,234	)			10
Tax credit			10,821				2,292				735				174				(10,086	)			(2,118	)			(93	)
Loss for the financial year			(54,688	)			(11,580	)			(71,369	)			(16,932	)			(16,681	)			(5,352	)			31
Item that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operation			278				59				(2,441	)			(579	)			(2,719	)			(638	)			(978	)
Total comprehensive loss for the year			(54,410	)		$	(11,521	)			(73,810	)		$	(17,511	)			(19,400	)		$	(5,990	)			36

Revenue. For the year ended June 30, 2025, the revenue increased by RM139.1 million ($34.5 million), or 239%, to RM197.3 million ($46.8 million), when compared with RM58.2 million ($12.3 million) for the year ended June 30, 2024, primarily due to the sales of IoT vending machine and IoT network hardware.

The following table sets forth the breakdown of our revenue by product categories.

		For the years ended June 30,
		2024 (in thousands)								2025 (in thousands)
		RM				USD				RM				USD
IoT Autonomous Systems and Drones			52,000			$	11,012				3,000			$	712
IoT Devices and Smart Solutions			470				100				153,320				36,375
IoT AI Software and Data Solutions			5,717				1,211				41,000				9,727
Total			58,187			$	12,323				197,320			$	46,814

Revenue from IoT Autonomous Systems and Drones was RM3.0 million ($0.7 million) for the year ended June 30, 2025, as compared to RM52.0 million ($11.0 million) for the year ended June 30, 2024, a decrease of RM49.0 million ($10.3 million). The decrease was primarily attributed to decrease in project management fee income.

Revenue from IoT Devices and Smart Solutions was RM153.3 million ($36.4 million) for the year ended June 30, 2025, compared to RM0.5 million ($0.1 million) for the year ended June 30, 2024, an increase of RM152.9 million ($36.3 million). The increase was primarily due to the increase in sales of IoT Vending Machine and IoT Device Set products.

Revenue from IoT AI Software and Data Solutions was RM41.0 million ($9.7 million) for the year ended June 30, 2025, compared to RM5.7 million ($1.2 million) for the year ended June 30, 2024, an increase of RM35.3 million ($8.5 million). The increase was primarily due to the increase in sales of IoT AI WiFi Optimization and IoT AI Data Analysis products.

Cost of revenue. For the year ended June 30, 2025, the cost of revenue increased by RM126.9 million ($32.1 million), or 162%, to RM205.5 million ($48.7 million), when compared with RM78.5 million ($16.6 million) for the year ended June 30, 2024, which was in line with the increase in revenue.

		For the years ended June 30,
		2024 (in thousands)								2025 (in thousands)
		RM				USD				RM				USD
IoT Autonomous Systems and Drones			73,690			$	15,605				18,645			$	4,423
IoT Devices and Smart Solutions			300				64				147,821				35,070
IoT AI Software and Data Solutions			4,532				960				39,000				9,253
Total			78,522			$	16,629				205,466			$	48,746

Other income. For the year ended June 30, 2025, the other income decreased by RM0.5 million ($0.1 million), or 31%, to RM1.1 million ($0.3 million), when compared with RM1.6 million ($0.3 million) for the year ended June 30, 2024, mainly due to the decrease of interest income received during the financial year.

		For the years ended June 30,
		2024 (in thousands)								2025 (in thousands)
		RM				USD				RM				USD
Interest			1,608			$	341				957			$	227
Others			-				-				148				35
Total			1,608			$	341				1,105			$	262

Total expenses. For the year ended June 30, 2025, the total expenses increased to RM65.1 million ($15.4 million) from RM46.8 million ($9.9 million) for the year ended June 30, 2024, an increase of RM18.3 million ($5.5 million) or 39%. It was mainly due to the increase in impairment losses of goodwill, intangible assets and plant and equipment during the year.

		For the years ended June 30,
		2024 (in thousands)								2025 (in thousands)
		RM				USD				RM				USD
Depreciation			28,435			$	6,022				28,433			$	6,746
Amortization			3,186				675				3,186				756
Personnel			4,555				965				3,167				751
General administrative			10,245				2,169				3,231				766
Other operating expenses			351				74				301				71
Impairment losses			-				-				26,741				6,344
Finance cost			10				2				4				1
Total			46,782			$	9,907				65,063			$	15,435

Income tax. For the year ended June 30, 2025, there was income tax recovery of RM0.7 million ($0.2 million) as compared to income tax recovery of RM10.8 million ($2.3 million) for the year ended June 30, 2024. The decrease in tax recovery was mainly due to under-provision of deferred tax expense in the prior year, as well as the utilization of capital allowance and unabsorbed business losses carried forward from prior years.

Loss for the year. For the year ended June 30, 2025, the loss is RM71.4 million ($16.9 million) compared with the loss of RM54.7 million ($11.6 million) for the year ended June 30, 2024. The loss for the year ended June 30, 2025, was due to a significant increase in the operating expenses during the financial year.

5.B. Liquidity and Capital Resources

As of June 30, 2026, we had cash and bank balances of RM31.2 million ($7.7 million). To date, we have financed our operations primarily through net cash flow from operations, loans and shares issued for cash.

The following table sets forth a summary of our cash flows for the years ended:

		Years Ended June 30,
		2024 (in thousands)								2025 (in thousands)								2026 (in thousands)
		RM				USD				RM				USD				RM				USD
Net cash provided by/(used in) operating activities			55,087			$	11,666				785			$	186				(1,429	)		$	(350	)
Net cash (used in)/provided by investing activities			(28,655	)			(6,068	)			1,063				252				784				192
Net cash used in financing activities			(49,533	)			(10,490	)			(132	)			(31	)			(132	)			(32	)
Effect of currency translation			278				59				(2,441	)			(579	)			(641	)			(157	)
Net (decrease)/increase in cash and cash equivalent			(23,101	)		$	(4,892	)			1,716			$	407				(777	)		$	(190	)

Operating Activities

Operating activities used RM1.4 million ($0.4 million) in cash for the year ended June 30, 2026, compared with cash generated of RM0.8 million ($0.2 million) in cash for the year ended June 30, 2025. The increase in cash used in operating activities was primarily attributable to increase other receivables, deposits and prepayments of RM41.3 million and decreases in trade payables of RM9.2 million during the year ended June 30, 2026, partially offset by a decrease in trade receivables of RM41.8 million and an increase in contract liabilities of RM8.6 million.

Operating activities generated RM0.8 million ($0.2 million) in cash for the year ended June 30, 2025, compared to RM55.1 million ($11.7 million) in cash for the year ended June 30, 2024. The decrease in cash provided from operating activities for the year ended June 30, 2025, is due to increase in credit sales in receivables for the year ended June 30, 2025, when compared to the year ended June 30, 2024.

Investing Activities

The cash generated from investing activities for the year ended June 30, 2026, was RM0.8 million ($0.2 million), which is a decrease of 26%, compared to cash provided in investing activities of RM1.1 million ($0.3 million) in the year ended June 30, 2025. The decrease was primarily attributable lower interest received during the year ended June 30, 2026, compared to the prior year.

The cash generated from investing activities for the year ended June 30, 2025, was RM1.1 million ($0.3 million), which is an increase of 104%, compared to cash used in investing activities of RM28.7 million ($6.1 million) in the year ended June 30, 2024. The increase is primarily attributable to the absence of the RM30.0 million acquisition of property, plant and equipment incurred in the prior year, partially offset by lower interest received.

Financing Activities

Cash flows used in financing activities for the year ended June 30, 2026, was RM0.1 million ($0.03 million) compared to cash flows used in financing activities for the year ended June 30, 2025, which is RM0.1 million ($0.03 million).

Cash flows used in financing activities for the year ended June 30, 2025, was RM0.1 million ($0.03 million) compared to cash flows used in financing activities for the year ended June 30, 2024, which is RM49.5 million ($10.5 million).

We believe that available cash and bank balances, and the current asset, such as accounts receivable, should enable the Company to meet anticipated cash needs for at least the next 12 months.

We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Holding Company Structure

ARB IOT Group is a holding company with no material operations of its own. We conduct our operations primarily through our subsidiaries. As a result, our ability to pay dividends depends upon dividends paid by our subsidiaries. If our existing subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

5.C. Research and Development, Patents and Licenses, etc.

See "Item 4. Information on the Company-B. Business Overview."

5.D. Trend Information

Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demand, commitments or events that are reasonably likely to have a material effect on our net revenues and income from operations, profitability, liquidity, capital resources, or would cause reported financial information not to be indicative of future operation results or financial condition.

5.E. Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about the application of our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. The following descriptions of significant accounting judgments, and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this Annual Report. When reviewing our financial statements, you should consider (i) our selection of significant accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies, and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Intangible Asset and Goodwill

Supply/Service Agreements

Supply, Service and the Reseller and Drone Service Agreements ("Supply/Service Agreements") were acquired in prior business combinations and are carried at cost less accumulated amortization and accumulated impairment losses.

During the fiscal year ended June 30, 2026, management reassessed the recoverability of the IoT Drone CGU, comprising Supply/Service Agreements, due to continued underperformance of the related business activities and lower-than-expected future cash flow projections. Based on the impairment assessment performed, the recoverable amount of the IoT Drone CGU was determined to be RM nil. Accordingly, an impairment loss of RM15,666,760 was recognized in the consolidated statement of operations and comprehensive loss for the fiscal year ended June 30, 2026.

No impairment loss was recognized in respect of the Supply/Service Agreements during the fiscal years ended June 30, 2025 and 2024.

Computer Systems

Computer systems comprise source codes recognized in a business combination at the acquisition date and source codes purchased from third parties, which were held for use in the production or supply of goods or services to customers. The source codes are initially measured at cost. After initial recognition, source codes are measured at cost less accumulated amortization and accumulated impairment losses.

During the fiscal year ended June 30, 2026, amortization of RM12,446,274 was recognized, resulting in the remaining carrying amount of the computer system being fully amortized as of June 30, 2026. No impairment loss was recognized in respect of the computer system during the fiscal year ended June 30, 2026.

During the fiscal year ended June 30, 2025, management performed an impairment assessment of the computer system due to the underperformance of the related business activities and changes in expected future economic benefits. Based on the assessment, an impairment loss of RM8,044,989 was recognized. In addition, certain computer system assets with a carrying amount of RM290,004 were written off following management's review of the Group's technology assets.

No impairment loss was recognized in respect of the computer system during the fiscal year ended June 30, 2024.

Goodwill

Goodwill acquired in a business combination is allocated to the CGUs that are expected to benefit from the synergies of the combination and is measured at cost less accumulated impairment losses. Impairment losses recognized on goodwill are not reversed in subsequent periods.

As of June 30, 2026, the Group's goodwill was in relation to the IoT AI Power Charger CGU within the Group's IoT operating segment.

During the fiscal year ended June 30, 2026, management reassessed the recoverability of the IoT AI Power Charger CGU due to continued operating losses, lower-than-expected operating performance and revised future cash flow projections. Based on the impairment assessment performed, the recoverable amount of the CGU was determined to be RM8,098,393, which was lower than its carrying amount. Accordingly, an impairment loss of RM22,150,110 was recognized in respect of goodwill during the fiscal year ended June 30, 2026, resulting in the goodwill being fully impaired as of June 30, 2026.

During the fiscal year ended June 30, 2025, the Group's goodwill was in relation to the IoT AI Power Charger CGU and IoT AI Server CGU. The management performed an impairment assessment of both CGUs. Based on the impairment assessment performed, the recoverable amounts of the CGUs were determined to be RM108,518,721, which were lower than their carrying amounts. Accordingly, an impairment loss of RM7,734,427 was recognized in respect of goodwill.

No impairment loss in respect of goodwill was recognized during the fiscal year ended June 30, 2024.

The recoverable amounts of the four CGUs identified have been determined based on VIU calculations. The VIU is calculated using the pre-tax cash flow projections based on financial budgets approved by management covering a five-year period followed by a long-term growth rate of 2.1% (2025: 2.2%). VIU was determined by discounting the future cash flow generated from the business operation of the CGUs.

The key assumptions used in the VIU calculations include revenue growth rates, expense growth rates, pre-tax discount rates and profit margins. Revenue growth rates are based on market and industry expectations, expense growth rates reflect projected annual increases of approximately 2.0% (2025: 3.0%), pre-tax discount rate of 11.28% (2025: 11.34% to 13.20%), and profit margins are based on historical performance and management's expectations.