becoming the industry-leading corporation fostering champions that dream big

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Becoming the industry-leading corporationFostering champions that dream big

Venture Business – 32461

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Table of Contents

1. Company Information 1) Corporate Vision 2) Introduction 3) Company History

2. Business Structure 1) Business Units 2) Corporate Structure and Vision 3) Business and Income Structure

3. Leading Products and Technology 1) Features of the Technology 2) The K2NET Difference 3) Leading Products

4. Environmental Analysis 1) Market Analysis 2) 3C Analysis

5. Business Strategy 1) Basic Strategy 2) Sales Strategy 3) R&D Strategy 4) Mass Production and Sales Channels Strategy

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Vision

Philosophy

1. Rational Thinking 2. Challenge-seeking Mindset 3. Proactive Behavior

Becoming the industry-leading corporation Fostering champions that dream big

Company’s View

Proactive

Optimistic

Mutual

WIN-WIN

Communi-

cation

Leading

Customer’s needs

Creativity

Vision

Trust

Customer/Competitor’s View

1. COMPANY INFORMATION 1) Corporate Vision

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2) Introduction 1. COMPANY INFORMATION

We, at K2NET Inc., provide credit card authorization systems and financial transaction systems using wired and wireless networks and specialize in electronic payment transactions, and we are rapidly growing in the credit card VAN business with our proactive and energetic marketing scheme.

The credit card terminals using our own patented technology are much more convenient be-

cause conventional electronic transactions are dramatically faster, and this is consistent with

our "customer-first" philosophy. As we have grown over the years through discipline and experimentation along with our

custo-mers, we promise to become the leaders in the industry amid the increasing competition with a range of products that consider customer satisfaction above all else.

Company name: K2NET Inc.Business field: Manufacturer and distributor of wireless credit card terminals Branches: 360 exclusive distributors in operation nationwidePhone: 82-2-2693-8400Fax: 82-2-2695-4141Address: K2NET Building, 503-25 Shinwol-dong Yangcheon-gu SeoulHomepage: http://www.k2net.co.kr

http://www.k2net.co.kr/

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3) Company History 1. COMPANY INFORMATION

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1. COMPANY INFORMATION 3) Company History

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1. COMPANY INFORMATION 3) Company History

2009

January Wireless terminal with internal IC card reader developed

February EMV Level 1 certified

March Signature pad with IC card reader developed

March Contract with AD CENTER signed for POS development

April EMV Level 2 certified

April Relocation of headquarters (Shinwol-dong Yangcheon-gu)

September Wireless IC card and signature pad patents acquired

october K2-POS developed and manufactured

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K2NET(Venture

Company)

Portable Card Payment Terminals

POS SystemsWireless Card

Payment Terminals

Wired Card Payment Terminals

Wireless Signature Pads

Wireless Modems

Main Business Units: Production and Sales of Card Payment-related terminals; maintenanceFeatures of the Business: Increasing the speed of transactions (under 3 seconds for IC card payments) and providing highly efficient service based on a “win-win” strategy.Patented Products: High speed approval made possible through partnership with LG Telecom- 1. Wireless portable terminals 2. Wireless countertop terminals 3. POS with wireless data communication

2. Corporate Structure 1) Business Units

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CEO

Technology

Director

Marketing Managing

StrategicPlanning Sales 1 Sales 2

Administrative

Support

Data Processin

g

Bookkeeping

Research Center

2) Corporate Structure and Vision 2. Corporate Structure

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Management Vision

Strong Leadership Clear Action Structure Strengthening Core

Competencies

- CEO’s clear vision- Positive, Proactive, Leading-“Customer first”, mutual win-win, communication

- Goal management system- Evaluation and compensation system-Transparency of HR management-Active communication

- R&D Focus- STP Strategy Marketing-Honest financial/ accounting procedures-Strategic Planning

2. Corporate Structure 2) Corporate Structure and Vision

• Income Structure

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Maintenancefees

Installation

Maintenancefees

Maintenancefees

Provide Terminals

Van companies

LG Telecom

Authorized dealers Retailers

Credit Card companies

Retailer feesVerification fees

Card verification request

Payment of initial installation fees

Card verification network

Card verification

Achieving a mutual win-win scenario by building trust-based relation-ships Achieving a mutual win-win scenario by building trust-based relation-ships and thus maximizing the income of retailers and dealersand thus maximizing the income of retailers and dealers

2. Corporate Structure 3) Business and Income Structure

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1. Absolute customer-focused decision making - Win-win solutions for customers via approx. 360 dealers, solidly built on over 10

years of mutual trust

2. Intimate connection with the networks of major companies -Nationwide wireless networks and communication systems of such companies as LG

Telecom

3. Private server and system provided -Manufacturing of custom payment solutions with features compatible not only with

VAN companies but also card systems and comprehensive customer support after sales

4. Highly efficient production system -Providing solutions that are revolutionary in delivery time, quality, cost, and service

through the company’s own production setup

The leader in the telecommunication industry that pursues The leader in the telecommunication industry that pursues mutual win-win scenarios with customersmutual win-win scenarios with customers

2. Corporate Structure 3) Business and Income Structure

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Advantages of our Technology and Product Line (K2’s main product line)

Mobile Processing Solutions using mobile

frequencies made possible through partnership with LGT

Groundbreaking authorization processing time (2-3 seconds) Patent: 10-0852216 Patent: 10-0915891

Competitive communication

costs (9,000 KWR/mo)

3. Leading Products and Technology 1) Features of the Technology

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Terminal

Modem Telecommunucation

Company server

VAN Server

Wireless Communication Station

(such as LG Telecom)

Cards

- Due to a processing time of approx. 18-20 seconds when a conventional IC card terminal is used, practical application of IC card terminals was limited; however, our solution provides products and services that overcome such issues with transactions using mobile phone networks, greatly reducing the processing time to 2 to 3 seconds.

Outline of our technology (Patent: 10-0852216)

3. Leading Products and Technology 1) Features of the Technology

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IntroductionIntroduction GrowthGrowth MaturityMaturity Decline Decline

A. Although the current market penetration rate of magnetic and IC cards is at a staggering 80%,

such figures for IC card reading terminals are only at 10%; fur-thermore, payment methods for RFID cards are currently unavailable, placing our technology in the introductory phase of the life cycle.

A. The financial services commission is currently looking into the full-scale dist-ribution of IC card terminals, which have an unreasonably low distribution rate relative to the distribution of IC cards. The figure for market penetration for IC card terminals for the end of last year was at merely 9.7%, and this is spawning arguments of the ineffectiveness of IC cards.

3. Leading Products and Technology

1) Features of the Technology

Life cycle of our technology

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A. IC card authorizations were made possible by connecting conventional card terminals to our own solution that uses RS-232 ports. In addition, signature data can be stored in servers as conventional magnetic card terminals upgraded with an internal electronic signature feature that supports administrative procedures, such as that for lost receipts.

B. Processing authorizations with conventional systems using telephone lines can take about 12-15 seconds; our system, however, includes a wireless modem and can compl-ete an authorization process in 2 to 3 seconds, which is even faster than other wireless telecommunication devices.

The difference with our technology

3. Leading Products and Technology 2) The K2NET Diffrence

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K2NET System Checkline System PSDN System

Communication Network

Mobile phone network

ADSL Internet PSDN network

Cost 9,000 KRW/mo 23,100 KRW/mo10,000 KRW/mo

plus 40 KRW/transaction

Transaction processing time

1.5 ~ 2.5 Seconds 2~3 Seconds 10~15 Seconds

IC CARD processing YES YES YES

Electronic signature feature

YES YES YES

Transmission time 2 ~ 3 Seconds 2~3 Seconds 8~12 Seconds

RF card feature YES YES NO-K2NET has the expertise to produce multifunctional wireless card readers that can process magnetic, IC, RFID cards. Other advantages of our system include: use of wireless networks that have fewer usage limitations, as opposed to conventional PSDN or internet, allowing for transaction authorizations that are 8 to 12 seconds faster that other solutions; printing function for tax receipts for cash transactions; connection fees lower than our competitors by 5,000 to 40,000 KRW; point card (customer loyalty card) features; wired/wireless dual mode; electronic signature feature; chauffer service paging; anti-paper jam features; calculator function; mobile payment features.

Comparative Analysis of Services

3. Leading Products and Technology 2) The K2NET Diffrence

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• Mobile Sign Phone

• Features:

• Li-ion battery, allowing for longer operation• High-speed 64bps wireless data transmitting/ receiving• Fast thermal printer built-in• PCS phone capabilities• Connection fees lower than wired terminal

fees

3. Leading Products and Technology 3) Leading Products

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• Any Check-1,2 • Features:

• High speed verification data service (6 to 8 seconds faster than competitors)• Printing tax receipts for cash payments• Savings on connection fees (free, as opposed to wired counterparts)• Credit card service transfer• Point card(Customer loyalty service) features• Dual wired/wireless mode• Automatic alignment of sales receipts • Program downloading feature• Wireless private line used• IC card features• Viewing of deposit details for card companies


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• Any Check-3 • Features:

• Anti-paper jam features• Automatic alignment of sales receipts • Built-in PIN pad • Program downloading feature• Free Volt power feature• Signature pad integrated terminal• Sales receipts and customer information printing feature• IC card feature• Portable when equipped with batteries• Thermal printing (use of thermal paper)• Tax receipt function for cash transactions• Deposit details printing feature• Chauffer service paging


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• POS System• Features:

• Viewing and printing of various details

of sales/purchase• Application of point system by

storing of customer information; customer management

• Internet access and card verification through a wireless network (patent pending); new sales networks in the POS market via low connection fees and K2 marketing


POS System(Supermarket)

Cash Register

Sauna/ Public Bath POS

POS for produce with scale

POS System(Restaurants)

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Electronic Transactions MarketElectronic Transactions Market

# of VANcompanie

s

# of (card) merchants

# of terminals in distribution

# of private

contractors

Volume of VAN fees

18Approx. 3.65 mil

Approx. 5 mil

Approx. 5000

Approx. 400 bil

In regions such as Europe, the Americas, and Southeast Asia, the need for IC cards has been emphasized for their superior security and they are widely used; domestically, RF format IC cards have been mainstream.

Domestically, due to the enforcement of IC distribution policies, the rate for IC cards is at 80%; however, the rate for IC card terminals is at just 10%, making the use of IC cards difficult.

Number of credit cards issued: 83 million cards(Source: The Credit Finance

Association)

CategoryCurrent Market Volume(2009)

Estimated Market

Volume(2010)

Global Market 22,500 25,000

Korean Market 1,500 1,700

The Scale of the Electronic Transactions Market

4. Environmental Analysis 1) Market Analysis

Scale : 1billion KRW

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(Scale: 1 billion KRW)

CategoryCurrent Market

Volume(2009)

Anticipated market volume (2010)

Global Market 5,000 6,000

Korean Market 500 600

* Source: Digital Daily/Samsung Economic Research Institute(SERI): IC Card/IC Card Terminals- According to Digital Daily/SERI, the global market has been estimated at 500 billion KRW for 2009, and it has been found that Korea’s market accounts for 10%.

-As the concern for security is increasing worldwide, the use of security-enhanced cards such as IC or RF cards is anticipated to increase, and thus a sharp spike in the sales of appropriate card terminals is expected accordingly.


The Scale of the Electronic Transactions Market

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Credit card companies are adding IC features to the cards they are issuing but many retail stores are using terminals that can only read the magnetic stripe, thus limiting the full potential of IC cards.

Scale : 10thousand

The volume of IC cards issued totalling at 56.28 million shows a 43.6% increase relative to last year’s figure (39.18 million cards).

The distribution rate of terminals that allow IC card payments at retail stores is at merely 10%.


Card/Terminal Issuance Trends

Cards Cards Terminals

2009 2010Mix Magnetic and IC Magnetic

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KK22NNEETT

IInnc.c.

KK22NNEETT

IInnc.c.

LG TelecomLG Telecom

MerchantsMerchants

Authorized Dealers

Authorized Dealers

Customer: Definition Customers’ demand

18~20 Secs

2~3 Secs

Conventional methods

Our technology

Drastic reduction in payment time

Secure IC card terminals that can process large amounts of data

Distribution of IC card terminals which have such low rates compared to the volume of IC cards, and; IC card terminals with improved processing speed

3C Analysis (Customers)

4. Environmental Analysis 2) 3C Analysis

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Current SituationCurrent SituationCurrent SituationCurrent Situation

Em-x IncEm-x Inc

A-x IncA-x IncA-x IncA-x Inc

Alternative solutions and PlansAlternative solutions and PlansAlternative solutions and PlansAlternative solutions and Plans

Mobile payment authorization system for places without a countertop credit payment terminals;

using the salesperson’s mobile phone, customers can make payments with their credit cards

Mobile payment authorization system for places without a countertop credit payment terminals;

using the salesperson’s mobile phone, customers can make payments with their credit cards

Manufacturing of wired/wireless card terminalsManufacturing of wired/wireless card terminals

Maintain technical superiority and advance by defending itself against imitation/replication of its own technology that can result from emergence

into the IC card terminal market

Maintain technical superiority and advance by defending itself against imitation/replication of its own technology that can result from emergence

into the IC card terminal market

Kwang-x Kwang-x TelecommunicationsTelecommunications

Kwang-x Kwang-x TelecommunicationsTelecommunications

Manufacturing of card terminals andsignature pads

Manufacturing of card terminals andsignature pads

Stay in the competition with the company’s advanced technology




• Achieving market competitiveness through the company’s superior technology that dramatically improves IC card authorization speed in this credit card terminals market• Leading market share in the field of IC, RF card payment systems• Blocking off competition through market penetration after the selection of the company’s field by grounding the company with patent rights.

• Achieving market competitiveness through the company’s superior technology that dramatically improves IC card authorization speed in this credit card terminals market• Leading market share in the field of IC, RF card payment systems• Blocking off competition through market penetration after the selection of the company’s field by grounding the company with patent rights.


3C Analysis (Competitor)

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• Sales management by increasing influence in the relationship with LG Telecom and efficient management of VAN companies•Expand manufacturing capabilities by building the company’s own production system (potential for improvement in quality, delivery time, cost, and service)•High speed transmission through CDMA mobile network control methods and IC card accommodation•Contribute in boosting exports with the world’s fastest wireless network technology and in boosting sales in the domestic market

• Sales management by increasing influence in the relationship with LG Telecom and efficient management of VAN companies•Expand manufacturing capabilities by building the company’s own production system (potential for improvement in quality, delivery time, cost, and service)•High speed transmission through CDMA mobile network control methods and IC card accommodation•Contribute in boosting exports with the world’s fastest wireless network technology and in boosting sales in the domestic market

Current SituationCurrent SituationCurrent SituationCurrent Situation

Sales ManagementSales ManagementSales ManagementSales Management

Production Production ManagementManagement

Production Production ManagementManagement

Alternative solutions and PlansAlternative solutions and PlansAlternative solutions and PlansAlternative solutions and Plans

Sales through partnership with LG Telecom and VAN companies

Sales through partnership with LG Telecom and VAN companies

Increase the company’s influence within the partner relationship with LG Telecom

Increase the company’s influence within the partner relationship with LG Telecom

Outsourced productionOutsourced production Establishing own factory and securing ownmanufacturing capabilities

Establishing own factory and securing ownmanufacturing capabilities

Technology Technology DevelopmentDevelopment

Technology Technology DevelopmentDevelopment

R&D of IC card terminals with technology that reduced the processing time for

payment authorizations

R&D of IC card terminals with technology that reduced the processing time for

payment authorizationsCommercialization of CDMA technology

IC card terminals

Commercialization of CDMA technology IC card terminals


3C Analysis (Cpmpany)

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3C Analysis (Cpmpany)

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Leading company in payment systems that pursues the highest speed and quality

worldwide

Customer firstMutual win-

win

Distinction in technology (ultra high

speed)

High Quality

Putting customers above all else; providing services for 200% customer satisfaction

Managing an all-integrated payment system worldwide by taking leadership in the card payment system technologies

Seeking to become a global company that pursues the best quality (delivery time, cost, quality, service)

Pushing to have the company KOSDAQ listed within the next three years

5. Business Strategy 1) Basic Strategy

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　 2009 2010 2011 2012 2013Total Sales

100 200 250 300 350

Scale: 100 mil KRW

Target Sales

5. Business Strategy 2) Sales Strategy

2009 2010 2011 2012 2013

Scale: 100 mil KRW

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Increase market share; export strategies

Establish mass producing body

Affiliation with KT/LGTComplete

development of new technology

Phase 2 Phase 3 Phase 4

▶ Development of technology that allows for mobile transaction processing by using mobile phone frequencies from such companies as KT/LGT; and that radically reduces both authorization processing time and connection fees compared to wired payment systems

Phase 1

Sales Strategies: phase by phase


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Complete development of new technology

Affiliation with KT/LGT

Phase 2 Phase 3 Phase 4Phase 1

▶ Partnered up with LG Telecom in 2000; subsequently through the affiliation of the business model with our partner, commercialized the company’s technology by making use of the mobile network station







▶ Increase patents related to card payment systems and utility model/patent on other surrounding technologies▶ Obtain price and quality competitiveness via structuring of an optimized production management system that can control all the manufacturing procedures▶ Securing company’s own manufacturing plant within this year with a 30-billion KRW investment and initiating preparation for production

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Complete development of new technology


Affiliation with KT/LGT

Increase market share; export

strategies


▶ Establish new territory and replace the existing technology in the market with our technology which is a first worldwide ▶ Emerge in the global market of the never-before-tapped field of financial transaction systems using RFID with the shortest development time; create a blue ocean and play the leading role in the market

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Affiliation with KT/LGTComplete

development of new technology

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▶ Development of RFID Terminal

• Development of a terminal that can read from a distance of over 27 cm• Minimization of errors; enhancement of internal chip read rate

Phase1▶ Portable Payment Terminal

• Development of portable transaction terminal using the mobile network of a telecommunications company• Built-in financial transaction connectivity feature in a compact terminal• Portable payment terminal with cash-transfer connectivity between family members

Phase2

• Development of a system and devices that permit all transactions using a single terminal through the signing of agreements between telecommunication companies and financial institutions nationwide, and thus allowing “One Stop” payment solutions• Development of a multifunctional transaction terminal with all the card and cash features that can process financial transactions by making personal terminals compatible with bank terminals, and is conveniently portable and can process ID verification.

Phase3

R&D Strategy: phase by phase

5. Business Strategy 3) R&D Strategy

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Plans for mass production

2010: Establish equipment and production basis 2011: Support equipment needs that occur as the production rate increases and

establish efficient production procedures 2012: Set up a flawless production management system that involves strengthening of

quality standards, enhancing quality, etc.

Plans for acquiring sales channels 1st stage: Sales plans focusing on domestic sales (100% utilization of existing sales

networks)① Active PR and sales of solutions through the authorized dealers (approx. 360 locations)

nationwide② Promotions (free-of-charge distribution of terminals)③ PR through product demos

2nd stage: Locating sales networks overseas① Entry into markets overseas that were impossible with conventional magnetic terminals② Select as phase 1 target the Southeast Asian market, which has a distribution rate of

30%③ Select as phase 2 target the China market, which has a continued increase in the

distribution

5. Business Strategy 4) Mass Production and Sales Channels Strategy

Telephone 82-2-2693-8400FAX 82-2-2695-4141

Homepage http://www.k2net.co.kr

Thank you!

becoming the industry-leading corporation fostering champions that dream big

Documents

company information

business strategy

business structure

credit card van business

business field

corporate vision

corporate structure

main business units