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Becoming the industry-leading corporation Fostering champions that dream big

Discover the growth journey and corporate vision of K2NET Inc., a manufacturer of wireless credit card terminals, as they strive to become the industry leader through innovative technology and customer-focused strategies.

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Becoming the industry-leading corporation Fostering champions that dream big

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  1. Venture Business – 32461 Becoming the industry-leading corporation Fostering champions that dream big

  2. 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

  3. 1. COMPANY INFORMATION 1) Corporate Vision Vision Company’s View Becoming the industry-leading corporation Fostering champions that dream big Vision Proactive Optimistic Leading Customer’s needs Philosophy Creativity 1. Rational Thinking 2. Challenge-seeking Mindset 3. Proactive Behavior Mutual WIN-WIN Communi- cation Trust Customer/Competitor’s View

  4. 1. COMPANY INFORMATION 2) Introduction 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 nationwide • Phone: 82-2-2693-8400 • Fax: 82-2-2695-4141 • Address: K2NET Building, 503-25 Shinwol-dong Yangcheon-gu Seoul • Homepage: http://www.k2net.co.kr

  5. 1. COMPANY INFORMATION 3) Company History

  6. 1. COMPANY INFORMATION 3) Company History

  7. 1. COMPANY INFORMATION 3) Company History

  8. 1. COMPANY INFORMATION 3) Company History

  9. 1. COMPANY INFORMATION 3) Company History

  10. 1. COMPANY INFORMATION 3) Company History

  11. 2. Corporate Structure 1) Business Units Wireless Modems Portable Card Payment Terminals K2NET (Venture Company) Wireless Card Payment Terminals POS Systems Wired Card Payment Terminals Wireless Signature Pads • Main Business Units: Production and Sales of Card Payment-related terminals; maintenance • Features of the Business: Increasing the speed of transactions (under 3 seconds for IC card pay- • ments) 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

  12. 2. Corporate Structure 2) Corporate Structure and Vision CEO Technology Director Research Center Marketing Managing Strategic Planning Sales 1 Sales 2 Administrative Support Data Processing Bookkeeping

  13. 2. Corporate Structure 2) Corporate Structure and Vision Management Vision Strong Leadership Clear Action Structure Strengthening Core Competencies - 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 • -CEO’s clear vision • - Positive, Proactive, Leading • “Customer first”, mutual • win-win, communication Management system to maximize customer oriented service

  14. 2. Corporate Structure 3) Business and Income Structure Achieving a mutual win-win scenario by building trust-based relation-ships and thus maximizing the income of retailers and dealers • Income Structure Verification fees Retailer fees Credit Card companies Card verification request Maintenance fees Installation Maintenance fees Van companies Authorized dealers Retailers Maintenance fees Provide Terminals LG Telecom Payment of initial installation fees Card verification network Card verification

  15. 2. Corporate Structure 3) Business and Income Structure The leader in the telecommunication industry that pursues mutual win-win scenarios with customers • 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

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

  17. 3. Leading Products and Technology 1) Features of the Technology • Outline of our technology (Patent: 10-0852216) Terminal Cards Wireless Communication Station (such as LG Telecom) • 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. Telecommunucation Company server Modem VANServer

  18. Introduction Growth Maturity Decline 3. Leading Products and Technology 1) Features of the Technology • Life cycle of our technology • 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. • 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.

  19. 3. Leading Products and Technology 2) The K2NET Diffrence • The difference with our technology 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 conven- tional magnetic card terminals upgraded with an internal electronic signature feature that supports administrative procedures, such as that for lost receipts. 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.

  20. 3. Leading Products and Technology 2) The K2NET Diffrence • Comparative Analysis of Services • 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 solu- tions; printing funct- ion 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.

  21. K2 – F1 Features: 3. Leading Products and Technology 3) Leading Products • Li-ion battery, allowing for longer operation • High-speed LTE wireless data transmitting/ receiving • Fast thermal printer built-in • PCS phone capabilities • Connection fees lower than wired terminal fees

  22. K2-SMART Features: 3. Leading Products and Technology 3) Leading Products • High speed(LAN) 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

  23. K2-POS System 3. Leading Products and Technology 3) Leading Products • 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 thr- ough a wireless network (patent pending); new sales networks in the POS market via low connection fees and K2 marketing

  24. 4. Environmental Analysis 1) Market Analysis • The Scale of the Electronic Transactions Market Electronic Transactions Market Scale : 1billion KRW • Number of credit cards issued: 83 million cards(Source: The Credit Finance Association) 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.

  25. 4. Environmental Analysis 1) Market Analysis • The Scale of the Electronic Transactions Market (Scale: 1 billion KRW) • 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.

  26. 4. Environmental Analysis 1) Market Analysis • Card/Terminal Issuance Trends • Cards • Terminals • Cards Mix Magnetic and IC Magnetic Scale : 10thousand 2010 2009 The distribution rate of terminals that allow IC card payments at retail stores is at merely 10%. 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). 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.

  27. Customers’ demand Customer: Definition Secure IC card terminals that can process large amounts of data LG Telecom 18~20 Secs Drastic reduction in payment time Authorized Dealers K 2 N E T I n c. 2~3 Secs Merchants Conventional methods Our technology 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 4. Environmental Analysis 2) 3C Analysis 3C Analysis (Customers)

  28. Current Situation Alternative 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 Em-x Inc 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 A-x Inc Manufacturing of wired/wireless card terminals Stay in the competition with the company’s advanced technology Kwang-x Telecommunications Manufacturing of card terminals and signature pads Stay in the competition with the company’s advanced technology 4. Environmental Analysis 2) 3C Analysis 3C Analysis (Competitor) • 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.

  29. Current Situation Alternative solutions and Plans Sales Management Sales through partnership with LG Telecom and VAN companies Increase the company’s influence within the partner relationship with LG Telecom Production Management Outsourced production Establishing own factory and securing own manufacturing capabilities Technology Development R&D of IC card terminals with technology that reduced the processing time for payment authorizations Commercialization of CDMA technology IC card terminals 4. Environmental Analysis 2) 3C Analysis 3C Analysis (Cpmpany) • 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

  30. 4. Environmental Analysis 2) 3C Analysis 3C Analysis (Cpmpany)

  31. 5. Business Strategy 1) Basic Strategy Leading company in payment systems that pursues the highest speed and quality worldwide Customer first Mutual 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

  32. 5. Business Strategy 2) Sales Strategy • Target Sales 2009 2010 2011 2012 2013 Scale: 100 mil KRW Scale: 100 mil KRW

  33. 5. Business Strategy 2) Sales Strategy • Sales Strategies: phase by phase Phase 2 Phase 3 Phase 1 Phase 4 Complete development of new technology Affiliation with KT/LGT Establish mass producing body Increase market share; export strategies ▶ 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

  34. 5. Business Strategy 2) Sales Strategy • Sales Strategies: phase by phase Phase 1 Phase 2 Phase 3 Phase 4 Complete development of new technology Affiliation with KT/LGT Establish mass producing body Increase market share; export strategies ▶ 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

  35. 5. Business Strategy 2) Sales Strategy • Sales Strategies: phase by phase Phase 2 Phase 3 Phase 1 Phase 4 Establish mass producing body Complete development of new technology Affiliation with KT/LGT Increase market share; export strategies ▶ 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

  36. 5. Business Strategy 2) Sales Strategy • Sales Strategies: phase by phase Phase 2 Phase 3 Phase 1 Phase 4 Increase market share; export strategies Complete development of new technology Affiliation with KT/LGT Establish mass producing body ▶ 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

  37. 5. Business Strategy 3) R&D Strategy • R&D Strategy: phase by phase Phase1 Phase2 • ▶ 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 • ▶ 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 Phase3 • 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.

  38. 5. Business Strategy 4) Mass Production and Sales Channels Strategy • 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) • Active PR and sales of solutions through the authorized dealers (approx. 360 locations) nationwide • Promotions (free-of-charge distribution of terminals) • PR through product demos • 2nd stage: Locating sales networks overseas • Entry into markets overseas that were impossible with conventional magnetic terminals • Select as phase 1 target the Southeast Asian market, which has a distribution rate of 30% • Select as phase 2 target the China market, which has a continued increase in the distribution

  39. Thank you! Telephone82-2-2693-8400 FAX 82-2-2695-4141 Homepage http://www.k2net.co.kr

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