Business Overview

4.1 BACKGROUND 4.1.1 Incorporation and Commencement of Business K·One Tech was incorporated in Malaysia under the Companies Act, 1965 on 20 February 2001 as a private limited company, under the name of K-One Technology Sdn Bhd. Subsequently. on 29 October 2003. it was converted to a public company and assumed its present name. It commenced operations since 2001. As at 7 November 2005 (being the latest practicable date prior to the printing of this Prospectus), K-One Tech has nine (9) full­time employees.
4.1.2 Share Capital And Changes In Share Capital The present authorised share capital is RM10,OOO,OOO comprising 100,000,000 ordinary shares of RMO.l0 each. The issued and paid up share capital of the Company is RM2,835,OOO comprising 28,350,000 ordinary shares of RMO.10 each. Details of the changes in the issued and paid-up share capital of the Company since its incorporation are as follows; No. Of  Ordinary  Total Issued  Date 01  Shares  Par  And Paid-up  Allotment  Allotted  Value  Consideration  Share Capital  (RM)  (RM)  20.02.200t  3  1.00  Subscribers’ shares  3  28.12.2001  99,997  1.00  Cash  100,000  29.07.2002  270,000  1.00  Cash  370,000  11.04.2005  598,000  1.00  Bonus issue I  968,000  24.05.2005  1,262,000  1.00  Rights issue  2,250,000  30.05.2005  22,500,000  0.10  Share splil  2,250,000  10.10.2005  5.850,000  0.10  Bonus issue II  2,835,000  To be issued  9,450,000  0.10  Public Issue  3.780,000  pursuant 10 the  Listing of K-One  Tech

4.1.3 listing Scheme In conjunction with and as an integral part of the listing and quotation for the entire issued and paid-up share capital of K-One Tech on the MESDAQ Market of the Bursa Securities, the Company undertook a listing scheme which involved the following: ­(i) Bonus Issue I K·One Tech has undertaken a bonus issue of 596,000 new ordinary shares of RM1.oo each to the existing shareholders of K-One Tech on the basis of apprOXimately 162 new ordinary shares of RM1.00 each for every 100 existing ordinary shares of RM1.00 each held in K-One Tech. All the bonus issue shares rank pari passu in all respects with the then existing ordinary shares of K·One Tech. The Bonus Issue I was completed on 11 April 2005.

4. INFORMATION ON THE GROUP (Cont’d) (ii) Rights Issue Following the Bonus Issue I, K..()ne Tech has undertaken a renounceable rights issue of 1,282,000 new ordinary shares of RM1.oo each to the existing shareholders of K..()ne Tech on the basis of approximately 132 new ordinary shares of RM1,00 each for every 100 existing ordinary shares of RM1.oo each held in K-One Tech. The following directors/shareholders renounced a portion of their entitlements to the other shareholders of K-One Tech:-Renounciation of Rights Shares by Directors/Shareholders By: Ir, Lim Beng Fook, Edwin Lim Soon Seng, Martin Bjorn Braten  Rights Shares 207,568 165,000 165,000  537,568  Rights  To:  Shares  Goh Sai Keong, Gary  107,514  Chau Guan Fock  107,514  Char Tze Hiang  107,514  Prem Kamal bin Radzi Raju  107,513  Goo Kok Khian  107.513  537.568
All the rights issue shares rank pari passu in all respects with the lhen existing ordinary shares of K-One Tech. The Rights Issue was completed on 24 May 2005. (iii) Subscription of Shares in EMB Tech Pursuant to the Subscription Agreement dated 1 December 2003, K-One Tech subscribed for 499,998 new ordinary shares of RM1.00 each in EMB Tech for RM499,998 cash. Simultaneously, K..()ne Tech acquired two (2) ordinary shares of RM1.00 each in EMB Tech from the existing shareholders of EMB Tech for purchase consideration of RM2.00, With the completion foregoing Subscription and acquisition, EMB Tech became a wholly-owned subsidiary company of K..()ne Tech. The Subscription was completed on 27 May 2005. Prior to the foregoing Subscription and acquisition and pursuant to a Share Sale Agreement dated 1 December 2003 between Bjom Braten, Ir. Lim Beng Fook, Edwin and lim Soon Seng, Martin and EMS Tech, K­One Ind became the wholly owned subsidiary of EMB Tech. (iv) Share split Upon completion of the Bonus Issue I, Rights Issue and Subscription, the existing par value of RM1.00 per ordinary share of K-One Tech has been subdivided into ten (10) ordinary shares of RMO.l0 each. Consequently, the number of issued and paid-up share capital of K-One Tech has been increased from 2,250,000 ordinary shares of RM1.00 each 10 22,500,000 ordinary shares of RMO,10 each. The Share Split was completed on 30 May 2005, 37 4. INFORMATION ON THE GROUP (Cont’d) (v) Bonus Issue II K-One Tech has undertaken a bonus issue of 5,850,000 new Shares to the existing shareholders of K-One Tech on the basis of approximately 26 new Shares for every 100 existing Shares held in K­One Tech. All the bonus issue shares rank pari passu in all respects with the then existing ordinary shares of K-One Tech. The Bonus Issue II was completed on 10 October 2005. (vi) Public Issue The Public Issue of 9,450,000 new Shares at an issue price of RM0.75 are payable in full on application upon such terms and conditions as set out in this Prospectus and will be allocated and allotted in the following manner: ­(a) Malaysian Public
2,500,000 Public Issue Shares will be made available for application by Malaysian citizens, companies, societies, co­operatives and institutions, of which at least 30% is to be set aside strictly for Bumiputera individuals, companies, societies, co-operatives and institutions.
(b) Eligible Directors, Employees and Business Associates of the Group

750,000 Public Issue Shares will be reserved for eligible Directors, employees and business associates (which include suppliers, sales agents and customers) of the Group. The shares have been allocated to five (5) eligible Directors, thirty-three (33) eligible employees and two (2) eligible business associates of the Group. Allocation to the Directors and employees are based on the following criteria as approved by the Company’s Board of Directors: ­(a) At least eighteen (18) years old;
(b) Job position; and
(c) Length of service.

Details of the Directors’ pink form allocation are as follows: ­Name of Directors  Deslanatlon  Pink Form Allocation  lr. Lim Beng Fook, Edwin Urn Soon Seng, Martin Sjam Braten Loi Kim Fah Goh Chong Chuang  Executive Chairman Chief E)(9Cutive Officer I Executive Director Vice President of Business Devek>pmentl Executive Director Independent Non-Executive Director Independent Non·Executive Director  100.000 80,000 30.000 30,000 50,000  Total  290,000
4. INFORMATION ON THE GROUP (Cont’d) (c) Private Placement 6,200,000 Public Issue Shares are reserved for private placement to selected investors, which have been identified. In summary, the Public Issue Shares will be allocated and allotted in the following manner: ­Public Issue  Total  Shares  Public Issue  Shares  Malaysian Public  2,500,000  26.5  Eligible Directors, employees and business  750,000  7.9  associates of the Group  Private Placement  6,200,000  65.6  Total  9,450,000  100.0
All the Public Issue Shares available for application by the Malaysian Public and eligible Directors, employees and business associates of the Group have been fully underwritten. The Public Issue Shares available for application by selected investors are not underwritten. The Placement Agent has received irrevocable undertakings from the selected investors to take up the Public Issue Shares available for application under the private placement. Any Public Issue Shares which are not taken up by eligible Directors and employees of the Group and/or business associates of the Group will be made available for application by the Malaysian public and/or selected investors via private placement. Any Public Issue Shares by the Malaysian Public which are not taken up will be made available to selected investors via private placement if the private placement is oversubscribed and vice versa. Any further Public Issue Shares not subscribed for will be made available for subscription by the underwriters in the proportion specified in the Underwriting Agreement dated 26 October 2005. (vi) ESOS K-One Tech had on 24 January 2005 obtained the approval of the Bursa Securities to establish an ESOS which will allow the Company to grant options to Executive Directors and eligible employees of the Group to subscribe for new Shares up to a maximum of 10% of the Company’s issued and paid-up share capital at any point in time within the duration of the ESOS. According to the Listing Requirements on ESOS, the effective date for the implementation of the scheme shall be the date of full compliance with all relevant requirements of Bursa Securities including the following:­(a) submission of the final copy of the Bye-Laws of the scheme to the Bursa Securities;
(b) receipt of approval-in-principal for the issuance and listing of the shares to be issued under the scheme from the Bursa Securities;
(c) procurement of shareholders’ approval for the scheme;
(d) receipt of approval of any other relevant authorities, where applicable; and
(e) fulfilment of all conditions attached to the above approvals, if any.

39 4. INFORMATION ON THE GROUP (Cant’d) AmMerchant Bank must submit a confirmation to the Bursa Securities of full compliance above stating the effective date of implementation together with a certified true copy of the relevant resolution passed by shareholders in general meeting. The submission of the confirmation must be made no later than 5 market days after the effective date of implementation. Prior to the listing of the Company on the MESDAQ Market, the Directors of the Company propose to grant up to 1,500,000 Options to the Executive Directors and eligible employees of the Group (“Initial Grant”). The exercise price of the Options which are the subject matter of the Initial Grant is the Issue Price of the Shares. In addition to the Initial Grant, the Option Committee of the Company shall, within the duration of the ESOS, make offers to grant Options to the executive directors and eligible employees of the Group in accordance with the ESOS Bye-Laws duly approved by the shareholders of the Company. Each such Option which is not part 01 the Initial Grant shall be exercisable at a price which is the weighted average market price of the Company’s Shares for the five (5) market days immediately preceding the date on which the Option is granted less, if the Directors of the Company shall decide at their discretion from time to time. a discount of not more than 10%. The ESOS shall be in force for a duration of 5 years. However, the ESOS may be extended for up to 5 years at the discretion of the Board of Directors upon the recommendation of the Option Committee. The new Shares to be issued upon the exercise of the Options will, upon allotment and issue, rank pari passu in all respects with the existing issued and paid-up Shares 01 the Company, except that the new Shares will not be entitled to any dividends, rights, allotments or other distributions. the entitlement date of which is prior to the date of allotment of the said Shares. The new Shares will be subject to all the provisions 01 the Articles of Association of the Company. The Bye-Laws of the ESOS are set out in Section 12 01 this Prospectus. 4.2 BUSINESS OVERVIEW 4.2.1 Group Structure An overview of the Group’s structure is set out below: ­
4. INFORMATION ON THE GROUP (Cont’d) Details of the subsidiary companies of the Company are summarised below: ­Name of  Date and Place of  Iss\led and  Effective  Principal Activities  Company  Incorporation  Paid-up  Equity  Capital  Interest  (RM)  (%)  EMBTech  1.12.2003  500.000  100  Investment  hOlding.  Currently  Malaysia  dormant.  Subsidiary of EMB Tech  K·One Ind  27.07.2001  500.000  100  0&0 of manufacturing process!  Malaysia  tools  and  manufacturing  of  electronic end products and sub­ systems.

4.2.2 Types of Products andlor Services The K-One Group’s business can be segregated into two (2) distinctly different but yet complementary activities i.e. D&D on the one hand and manufacturing on the other. The 0&0 process can be as short as one month for a very basic design to as long as twenty-four (24) months tor a very complicated design. The current trend of the market is to shorten the time to design to as short as possible. This poses a major challenge to the design team. Furthermore, the expectations of the consumers are increasingly sophisticated and demanding in terms of cost, function and innovativeness. Nonetheless, it is a lucrative market with mega potential globally. In the O&D process, K·One Tech is always proactive in conceptualizing new ideas which are applicable to the Multimedia and automotive markets. These concepts are usually developed into schematic drawings or three dimensional designs which are then proposed to global OEMs for adoption. it may also happen that global OEMs or customers have some inkling of an idea of a product which they want to entrust K-One Tech to conceptualize further for product development. The D&O process is currently carried out by an in-house team comprising of nine (9) industrial. mechanical, firmware, embedded software and project engineers. This technical team has also worked in collaboration on various projects for the European market with Lundinova AS based in Sweden, a design specialist of communication products. Whenever there is an overflow of project commitments to customers by K-One Tech it will work with local design houses which focuses in only industrial design or embedded software design. Although the design team is relatively small. it has the required core competencies and jnnovativeness in scoring successes in the international arena by winning design jobs from major OEMs such as Sony Ericsson based in Sweden. Some of K-One Tech’s notable past design achievements include designing from scratch to finally manufacturing the various mobile phone holders for Sony Ericsson, gameboard for Sony Ericsson, speaker microphone for StoneMountain. emergency mobile phone battery for CeliJump and scanner pen for C Tech. K-One Tech was also involved in co­designing the Bluetooth scanner pen with C Tech. 4. INFORMATION ON THE GROUP (Cont’d) Following design, development and prototyping, customers who are ready to launch the product usually choose to work with the K-One Group to industrialize and manufacture the product. It is convenient to entrust the K­One Group to industrialize and manufacture the product as the design of the product is undertaken by K-One Tech. The K-One Group is able to transform the product seamlessly into an end product and finally distributing it to the customers. K-One Group’s modus operandi in manufacturing is such that it concentrates in producing the full system or sub-system manufacturing in-house while outsourcing the secondary processes which includes PCB assembly, precision engineering plastic moulding and mould making. This enables the K-One Group to focus in what it does best and outsource the rest principle. It also helps the K-One Group to minimize capital investment in bUying Surface Mount Technology (“SMT”) lines used for PCB assembly, precision moulding machines, precision stamping machines, wire-cut machines, machining centres, etc.. By minimizing capital investment, the K-One Group is able to keep overheads low and be competitive to fight challenges from low cost producing countries.
4.2.3 Technology Used The K-One Group’s strength lies in its ability to design and develop innovative products leveraged on its competencies in: ­Industrial & Mechanical Design Embedded Software & Firmware Design Industrial & Mechanical Design Working with state of the art Unigraphics software, K-One Tech’s industrial designers think, conceptualize and design in three (3) dimensions. Industrial design with three-dimension CAD models are handed off to the mechanical engineers for final development, detail design and analysis. Frequent design reviews and extensive use of FEA and prototyping minimize risk and facilitate expedited tooling development. K-One Tech’s engineers continuously push the envelope by exploring new processes, technologies and materials to ensure its customer’s competitive advantage. Embedded Software & Firmware Design Embedded Software & Firmware are the software which run the hardware in the product. It is the software inside the chipset that enables it to function as required. Programming is in low level machine language such as binary code. K-One Tech has engineers capable of designing such firmware for different product applications. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 4. INFORMATION ON THE GROUP (Cont’d) Software & Hardware Tools K-One Tech is currently equipped with several CAD/CAM workstations. To perform the industrial, mechanical, electronics and embedded software design functions, K-One Tech has available the following engineering software packages: ­Industrial DesignlMechanical  Function  Software  Unigraphics (UG)  20/30 design  Adobe Acrobat  Graphics design  Electronics Software  CAOSTAR  Schematic, PCB layout, electromagnetic  interlerence simulation  Visual Studio  Computer application programming  Lab View  Test software programming  Keil Software  Microcontroller programming


4. INFORMATION ON THE GROUP (Cont’d) 4.2.4 Approvals, Major Licences and Permits Obtained The details of approvals, major licences and permits obtained by the Group as at 7 November 2005 (the latest practicable date prior to the printing of the Prospectus) are as follows: ­Authority! Registration Number  Date 0’Licence  Validity of Licence  Nature 0′ Licence I Registration  Major conditIons  Status of compliance  • K-Qnelnd  31.10.2003  1.08. 2003 to  Pioneer Status  •  At least 60% of the shares In the company must be bought and  Complied  MITI 118013832910664/001/ACI  31.07.2008  owned by Malaysian citizens  •  Value add amount for the company’s product must be at least 15%  (~ Va’ue add” defined as gross sales /955 taw material costs)  • K·Onalnd Royal Malaysian Customs I K.13·No 8126  03.08.2005  1.08.2005 to 31.07.2007  Warehouse Licence tor Car Battery Charger, Microphone Speaker & Headset. Telecommunication and Computer accessories.  • • • •  Dutiable goods must be kept in separate warehouse 100% ot the manufactured goods ate to be exported Machines directly used in manufacturing must be new and in unused condition. Licence Holder is requIred to execute a bond ot AMSO,OOO to guarantee 100 payment of duly !tax on raw materials and components kept at and moved from the licensed warehouse.  Complied  • K·One Ind Royal Malaysian Customs I K.14·No 8870  03.08.2005  1.08.2005 to 31.07.2007  Manufacturing Warehouse Licence tor Car Banery Charger. Microphone Speaker & Headset, Telecommunication and Computer accessories.  • • • •  Dutiable goods must be kept in separate warehouse 100’% of the manufactured goods are to be exported Machines directly used In manufacturing must be new and in unused condition. Licence Holder is required to execute a bond of RM50,OOO to guarantee the payment of duty I tax on raw materials and components kept at and moved from the licensed warehouse.  Complied  • K-OneTech MOC  11.09.2002  Up to 10 years trom 11.09.2002″  MSC Status  •  K·One Tech must locate its headquarters and the implemen1atlon and operation of the MSC-qualUying aclivlties in Cyberjaya within 6 months from the date otthe letter dated 11 September 2002.  Complied  •  It must ensure that at all times at least 15% of the total number of employees (excluding support staff) shall be ‘1<no”edge workers”)
ICompany No: 539757-K I 4. INFORMATION ON THE GROUP (Cont’d) AUlhorityl R_gistration Number  Date of Licence  Validily of Licence  Nature 01 licence I Registration  Major conditions  Status of compliance  • K·Onalnd  30.07.2002  Nil  To Manufactuf9  •  No effluent from manufacturing or production;  Conditions  Jabatan Alam Sekitar Negeri  “Electronic End  •  The management and handling of scheduled waste material must be in  of the  Perak, Kementerian Sains.  Producls” al No. 30-32,  accordance with Peraturan-peraturan Kualiti Alam Sekeliling {Buangan  licences. of  Teknologi dan Alam Sekitar I  Persiaran Rishah 9,  Terjadual) 1989-P.U (A) 139:  which K-One  B) A38131 010001000 Jld.3 (14)  Kawasan Perinduslrian 8i1ibin,lpoh  • • • • •  Written consant must first be obtained trom the Department before any installation of fuel consuming equipment such as power generators and others; Air pollution prevention equipment such as “dust collector” and others must be Installed at the process area where air pollution is created. Any release from that araa must be in accordance with the standards fixed under the Peraturan·Peraturan Kualiti Alam Sekeliting (Udara Bersih); 1978; A good management of wasted material has to be available on the project site and the disposal of these materials must be disposed at a disposal site, which has been approved by the local Town Council; The noise leval around the premise perimeters must be contained at all times and must not exceed 65 Dba leq in the momings (7.00 am -7.00 pm) and 55Dba Leq al nights (7.00 am -7.00 pm): and Always adhere to good housekeeping.  lnd has baen complied (where relevant)
Upon Ihe expiry of the first 5 years, MDC will review K-One Tech and upon approval by MDC, a further 5 years may be granted. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE GROUP (Cont’d) 4.2.5 Brand Names, Patents, Trade Marks, Licences, Technical Assistance Agreements, Franchises And Other Intellectual Property Rights For D&D projects authorized and paid for by the customer, the result of the design process usually belongs to the customer. This would include the IP rights inherent in the design. However, K-One Tech will own the IP rights for design outputs which are initiatives from K-One Tech. In such event, K-One Tech would take every step necessary to protect its IP through patents. The K-One Group is confident of developing cutting edge technologies and innovative products in·house or in collaboration with local universities or foreign research centres in the next five (5) years. It plans to build up its patent bank to commensurate with the efforts, money and other resources put in. The Group is in the process of registering “K-One” as a trademark and as at 7 November 2005 (being the latest practicable date prior to the printing of this Prospectus), it is pending pUblication in the Government gazelle. It has not filed any own product design patent as yet as it has so far been designing products for third parties and all rights to the design are sold to such third parties. 4.2.6 Dependency On Patents, Licences, Industrial, Commercial Or Financial Contracts Licences/permits as disclosed in Section 4.2.4 are required for the business and operations of the Group. The K-One Group also does not rely on one industry for its business. The majority of the K-One Group’s revenue was contributed from the multimedia industry with a minority share of less than 5% being contributed by the automotive industry. It is however envisaged that over the next five (5) years, the K-One Group will conscientiously grow the automotive business to represent up to 15% of the total revenue. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4.2.7 Operating or Trading Mechanism The K-One Group is an integrated one-stop technology provider; from concept to design to industrialization to manufacturing and supply of high and mid-end electronic end products for the Multimedia and automotive industries_

4.2.8 Estimated Market Coverage, Position and Share The Group has not conducted any research or any study into its estimated market coverage, position and share domestically or globally. Globally, there are many players which carry out similar business activities to the Group. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4.2.9 Significant New or Proposed Products/Services The K-One Group will initially be focused in designing and developing Multimedia and automotive products/sub-systems. Communication Accessories/Products In the communication front, K·One Tech started design at the accessory level which can be classified into three (3) categories: ­• Mechatronic Products
• Imaging Products
• Entertainment Products

(i) Mechatronic Products These are the basic mobile phone accessories such as: • • Charger
• Hands-Free
• Mobile Phone Holder

The K-One Group’s plan is to enhance these basic mobile phone accessories with Bluetooth as relevant and appropriate in moving forward. So far, the K-One Group has been successful in designing and manufacturing various models of mobile phone holder for Sony Ericsson. With this experience and achievement, the K-One Group stands a good chance to design and manufacture mobile phone holders for other major mobile phone manufacturers. Business development activities are on-going towards this direction. (ii) Imaging Products These involve the D&D of miniature cameras for incorporation or allachment to the mobile phone. It is expected to pose strong growth once 3G is launched on a wide scale globally. The K-One Group working with Anoto have co-designed the optical module which functions as a miniature camera. It is mounted at the tip of a digital pen. Production commenced in 4’h Quarter 2004 for supply to several major OEMs which includes Logitech, Hitachi Maxell Ltd and Primax Electronics Ltd (Nokia). This success would pave the way for the K-One Group to establish a working relationship with these OEMs in designing and manufacturing miniature cameras for incorporation into the mobile phone in the future. It would also make it that much easier to prove the K-One Group’s capabilities on miniature camera technology with Sony Ericsson. (iii) Entertainment Products The trend is not to use the mobile phone just for voice communication. It is becoming a device used for data, video and entertainment activities. K-One Tech has successfully designed and developed the game board for attachment to the Sony Ericsson mobile phone. It is planning to design variations of the game board for several other major mobile phone manufacturers. Business development activities are in progress to break through these major mobile phone manufacturers. 4. INFORMATION ON THE GROUP (Cont’d) In the initial years, the K-One Group’s strategy would be focused in designing and developing accessories for OEMs and ODMs respectively. Beyond this and commencing in early 2006, the K-One Group plans to launch its own brand of products/accessories. Subsequently, the product road map is to move forward to encompass the D&D of the Bluetooth PDA-Smart Phone for global OEMs, after going through the learning process of designing communication accessories for OEMs and under the K-One brand. Computer & Consumer AccessoriesIProducts K-One Tech intends to design and develop innovative Bluetooth enabled scanner pen, mouse and other computer cum consumer accessories. Past collaboration with C Tech has enabled K-One Tech to develop in-depth competencies in this area. Similarly, K-One Tech plans to design, develop, manufacture and market its own brand of computer cum consumer accessories commencing 2006. This is part of the K-One Group’s plan to take control of its own destiny and rely less on third parties’ businesses.
Automotive AccessoriesIProducts In the automotive products/sub·systems sector, the K-One Group’s locus is two-fold: ­(i) Designing, developing and manufacturing innovative automotive products/sub-systems which can be supplied through a distribution network to the consumer or direct to the global car manufacturers. Typical accessories which fall into this category include the emergency portable car battery charger, car battery voltage meter and car alarm system. So far, the K-One Group has successfully designed and manufactured the emergency portable car battery charger lor marketing in Europe.
(ii) Designing, developing and manulacturing sub-systems for Tier 1 automotive products/sub-systems suppliers. These Tier 1 automotive products/sub-systems suppliers would incorporate sub-systems designed and manufactured by the K-One Group into their modules for supply to global car manufacturers. In 2003. the K-One Group managed to break through a Tier 1 automotive system integrator by developing and manufacturing relays for supply to the preceding. This has opened the door for a working relationship in developing and manufacturing more sophisticated sub-systems. One of the aims for K-One Tech is to design, develop and manufacture Multimedia and on-board navigation equipment for the motor vehicle.

These preceding products are similar in nature or built on similar technology platform to those which the K-One Group will be heavily involved in designing and manufacturing in the Multimedia industry. Hence. K-One Tech shall be using the same technology platform to design and develop products for both its Multimedia and automotive industries. 4. INFORMATION ON THE GROUP (Cont’d) 4.2.10
4.2.11 4.2.12 4.2.13 Principal Markets for Products The K-One Group focuses and will continue to focus full attention in the overseas markets, particularly Europe, US and North Asia. US presents the biggest market potential, followed closely by Europe and last but not least, North Asia. It has a past record of being 100% export oriented. However, this does not preclude it from being interested in business opportunities available in the local or neighbouring markets. Although US is a very large market for both design and manufacturing services, it is a mature market with intense competition, especially at the Tier 1 customer level. Europe is more lucrative as it is still largely untapped, particUlarly at the Tier 2 customer level. In North Asian countries such as Japan, South Korea and China, opportunities with different flavors do exist. Japan and South Korea both have opportunities for the K-One Group in manufacturing services whilst China is a growing market with a high absorption rate for trendy and innovative ideas. Types, Sources and Availability of Raw Materialsllnputs The D&D process does not require any raw materials. It requires a combination of technical personnel, competent in both hardware and software engineering who can work together to transform concepts into working prototypes. To date, the Group has not encountered major difficulties in hiring new technical staff to meet its expansion needs. The raw material or semi-finished sub-system required for final manufacturing of the Multimedia and automotive products are mainly sourced locally. The K­One Group has signed strategic manufacturing partnerships with two (2) local manufacturers for the supply of precision engineering parts, moulds and PCB assemblies. Quality Control Procedures The Group has a policy of producing high quality products. The goods produced by the Group are subjected to a series of tests during the manufacturing process where the products will be sampled on a random basis for inspection. Furthermore, K-One Ind, the manufacturing arm of the Group, was granted ISO 9001 certification in 2003. ISO 9001 contains a large number of “checkpoints” that K-One Ind must satisfy from a quality stand­point. With such quality control being exercised in every step 01 the manufacturing process, the Group ensures that only those products which meet the stringent requirement leave the factory. R& D Continuous R&D investment is crucial to the Group’s future success in view of the fast changing pace of the IT technologies and ever demanding business requirements due to increase in business competition. Therefore, the Group will continue to invest significant resources in product development in order to take advantage 01 emerging technologies and to further develop the functionality and performance of its software applications. The Group’s R&D activities are housed in both its Cyberjaya and Mont’ Kiara centres. The Cyberjaya centre focuses in software and electronics design/development whilst the Mont’ Kiara centre is involved in industrial and mechanical hardware design/development. 50


4. INFORMATION ON THE_GROUP (Conl’d) __ ii) Policy on R 8< D The main objectives of R&D are to enhance features of existing applications/products, develop new applications/products, as well as continuous improvement in the quality, perlorrnance and services of the Group’s application capabilities. (Ii) R&D Facilities and Personnel Currently, K-Qne Tech’s R&D team comprises a design and engineering Director who is supported by a group of eight (8) industrial design, mechanical, electronics, embedded software and firmware engineers. The Group plans to recruit additional professionals in the near future to speed up software, hardware and product design and development efforts. K~One Tech’s R&D facilities include CAD/CAM workstations, basic RF testing equipment, Direct Current {DC) power supply equipment, battery analyzer, in-house designed test fixtures for conducting analogue tests and digital multimoters. These hardware are complemented by various types of software such as Unigraphics, Adobe Aorobat. CADSTAR and labvle\’J, each llsed for a different purpose as descnbed in Section 4.2.3. (iii) Status of R 8< D In the pipeline, K-One Tech is developing the multi·functional Ie (integrated circuit) chip targeting the Multimedia industry, the smart remote utility meter and plans to develop various Bluetooth enabled devices tor some European clients. (Iv) Achievements in R&D So far, the K-0ne Group has made significant progress in designing and developing innovative mobile phone holders, gameboard, speaker microphone, scanner pen, emergency mobile phone battery and portable car battery charger for overseas customers. Thesa design innovations have all been pro1otyped and manufactured for these customers tor sale in the intematiunal markets. (v) Future Plans and Timellne ror Implementation As part of the Group’s ongoing efforts to maintain technological advantage over its competitors the Group has allocated RM1.5 million of the proceeds raised for the upgrading of its hardware and software over the next twenty-four (24) months. The allocation will cover upgrading of Bluetooth 1esting equipment, compU1er hardware and software and related overheads, With these upgrades, K~One Tech would be in a better position to develop Bluetooth enabled proc!ucts for the communication and computer industries.
4. INFORMATION ON THE GR()UP (Cont’d) {vi} R&D expenditure The amount spent on R&D activities for the last three financial years are as foljows:~
4.2,14 Interruptions in Business for the Past Twelve (12) Mon1hs The Group has not experienced any business interruption occurring within and outside the Group that may significanUy impair the Group’s bvsiness performance during the past twelve (12) months. 4.2.15 Employees The Group has a flat organisational structure that enables all levels of employees to be actively involved in the projects undertaken. This will facilitate the Group in meeting the dynamic needs of the industry. As of 7 November 2005 (being the latest practicable date prior to the printing of this Prospectus), the Group has forty-three (43) full-time employees in the following cat€tgories:­Category  No. of  Average Length of  Employees  Sen’loe  (Years)  Managerial and professional  8  3  Technical and supervisory  25  2  Clerical and related occupa1iOnS  10  2  Total  43
In addition to the above, the entire production workforce currently averages fifty (50) staff whom are Ouisoufced so as to give K-One Ind the flexibility 10 reduce or increase production staff strength to meet the cyclical nature of the business wfthout having to pay fixed labour costs throughout the year. This is the K-One Group’s strategy of minimizing direct labour cosfs to stay competitive. The Group recognises the importance of its employees and updates them on the jatest developments in the industry as well as increases their skill and knowledge by sending them t-o various .courses throughout the year as and when the need arises. 4. INFORMATION ON THE GR:::O”‘U::.P..t(Con=::./””d)’-_ Details of the Group’s training and development programs for its employees are as tollows;~ Seminar! TraiOfrlQ ..­ Attendees O.te
Unigraphics (UG)  Industnal!Mechanical ! 2001,2003.2004,2005  Software Training  Engineers  Cadstar SofuNare Trairring Bluetooth Tochnology  i EleclromcslSoftware IEngin:eers Electronics/Software 2004  Training  Engloeers  Enterprise Resource  FlnanoolMaterials  Planning Seminar  Executives  ISO 9001 Training  Dept, Managers/Quality 2003  Assurance Englneer  I Supervisory Training  ManagerslSupervisors 2002.2004

Employees of the Group do not befoog to any labour unions and the employees enjoy cordial relationships with the management There have not been any industrial disputes in the past between the employees and the management The Group has comprehensive pmO$ for growth and With the higher profile achieved through the llsting exercise, the ability of the Group to attract qualified knowfedge WOikers in the future will be enhanced, In order 10 mainlain its skilled workforce and other workers, the Group will be impiemenUng the ESOS in conjunction with ils lisUng on the MESDAQ Market. 4.2.1$ Key Achi.””IMlltSIMII_Award. ISO 9001 In September 2003, K-One Tech was awarded with ISO 9001 certification by Lloyd’s Register Quality Assurance for, inter alia, the 0&0 of electronic products and accessories for communication, computer, consumer and automotive applications. whilst K·One Ind was awarded on the same date with the same certilication for the manufacture of the same products and applications. Sony Green Partner K-One l(ld was granted the status of “Green Partner” by Sony pursuant 10 Sony’s Green Partner Environmental Quality Approval Program. This was after audit. certification and gjgning of the Green Partner Quality Approval Agreement between Sony Corporation of Japan and KwOne rnd on 10 October 2005. The program is part of sony’s environmental activities to enhance and maintain environmental safety and quality of all components and materials used in Sony products sold or distributed worldWide, —-===:-::-::4. II>1FORMA!ION ON THE GROUP__(,.C=on=t’d,,~ _ Merit Award “‘Best of Start~Up Companies” In September 2003, K-One Tech received the Merit Award for the “Best of Start-Up Companies” category in the MSC-APICTA Awards 2003. APICTA is the-acronym for Asia Pacific lniormation Communication Technology Awards, The Awards is organised through the Asia Pacific IT Awards {APITA) Foundation. MDe initiated the Asia Pacific MSC IT&T Awards (“APMITTA”) in Malaysia in year 1999 to stimulate, recognize and showcase innovation, creativity and excellence in the ICT industry in Malaysia, especially within the MSC. This Award was SUbsequently renamed the MSC-Asia Pacific ICT Awards (MSC-APICTAj in 2002_ Industry Excellence Awards In 2004, K·One Tech’s accolades include the Golden Bull Award 2004, Enterprise 50 Award 2004 and the SMI (leT Adoption Category) Award 2004, K-One 100 was accorded the Golden Bull Award 2005 and Enterprise 50 Award 2005, Each of these awards recognizes 8Mls which have demonstrated outstanding achievements in overall business growth and management excellence, Awan:i””————,—–ar=g::.::nT.iz::.:::’——, I-GoungtNanyall\l=o”’de:::,”’Bc;””A”w::.::”‘=2″004″‘&””20″O;;;5-‘—f—‘E””””;;;:;-;;&’y7.::Enlerplise 50 Avrord 2004 &2005 Delollle/SMIDEC SMI (ieT Adot’ltion Cateaorvl Award 2004 Howarth ISMi Association of Malavsia Asia Pacific Technology Fast 500 Award K..()ne Tech was ranked 134 amongst the 500 fastest growing leT companies in Asia Pacific In the Asia Pacific Technology Fast 500 Award 2004 organized by Deloitte International. The award was presented to K·One Tech in December 2004 at a ceremony organized by DeloiUe in Hong Kong. 4.2.17 Modes of Marketing! Distributionls&le& The K-0ne Group currently exports 100% of its D&D and manufacturing services overseas to Europe, US and North Asia. The China market cannot be ignored in view of its large consumer base, However, the marketing focus In China would be geared towards D&D services rather than manufacturing. In Europe and US, marketing emphasis shall be on Tier 2 customers and others as they pose better margins and provide less intense competition. The K-One Group would still continue to expand its global OEM customer base whk;h includes Sony Ericsson as they do serve as good relerence customers to bring the Tier 2 customers and others on board. at is in the K-One Group’s plan to expand its network of own sales offices and appoint additiOnal sales representative offices and design houses as strategic partners in the geographical regions of Europe, US and North Asia. This dual marketing approach has proven to be effective in growing sales revenue with minimal capital expenditure and expense, In regards to the Group’s $elf~owned sales offices, they would be staffed by locals of the location of the sales office. local staff can better deliver sales resutts in the shortest possible time frame as he or she is familiar with the terrain, custom and culture of the customers in the locality. The sales representative offices are motivated to deliver resutts by a mutua.lIy agreeable commission scheme based on success. 4, INFORMATION ON THE GROUP (Con,::”c:d:L? _ The customers are referred to the K-Cne Group for technical support and quotation. Upon signing up, they belong to tM K-One Group with the sales representative office providing the necessary follow up sales call and liaison fO( any other matters. The K·One Group provides warehousing and logistics services to its customers to complete the supply chain. Shipments can be made by air or ship depending on the requirements of the customers, As K-Qne lnd has a Licensed Manufacturing Warehouse (“LMW”) licence, goods shipped out of the warehouse designated for export are dUty free. Goods are usually despatched oot of the country via too Kuala lumpur International Airport or Port Klang.
4.2.18 Location of BusineB$ The corporate office and design/development centre (mecl’1aniCaVindustrial design) afe located at: 8-13-01, Block B. Plaza Mont’ Kiara 2 Jalan Kiars, Mont’ Klara 50480 Kuala Lumpur
The corporate offICe and D&D centre (mechanical/industrial design) is approximately 2,258 square feet. It is a rented premises with tenancy agreements expiring May 2007. The D&D centre (software and eleotronics) is located at: Merak, 1st Floor Cybervlew Garden Villa & Office Compl&x Perslaran Multimedia 63000 Cyberjaya The aoove premise is approximately 400 sq.ft. with the tenancy agreement expiring in September 2006. The factories operated by K-One Ind are located at (A) 30 & 32. Persiaran Rishah 9 Kawasan Perlndustrian Silibin 30100lpoh
(8) 68, Lengkok Rishah 2 Kawasan Perindustrian 8i1ib!n 30100 lpoh

The above manufacturing facilities have a built~up floor space of approximately 15.120 sq,tt. and 9,900 sq_ ft respectively. Both are rented premises with the tenancy agreements expiring in July 2007 and September 2007 respectively. The manufacturing facilities are currently involved in the final manufacturing, tesling, verification and suppty chain managel1’lt:mt of mobile phone accessories. computers peripherals and automotive products/sub-systems, CUl1ootly, the business development office responsible for marketing activities in Europe is located at: Jegerasen 3a N·1362 Hosie Oslo. Norway -:”””‘==;===”=~::-;c;;———­..;;4,,—-,,INFORMATION ON THE GROUP iConl’d}
The above is also ~ponsfble for managing the sales representative offices appointed by the K.Qne Group. currently located in London (United Kingd<Jm), _ (sweden), Ltmd (sweden) and Amsterdam (Netherlands), These sales representatlve offices work closely v.Jil:h the business development office in Norway and the Kuala lumpur based corporate office and 0&0 centres which provide lhe pertinent_leal SUflPI”t in winrjng design and manufaetunng contracts, 4.2,19 ProductionlOperating Capaeilles and 0u1put K-Qne Ind’s manufacturing facilities usually runs on 1 or 2 shifts in the first half of the year and normally escalates to 2 or 3 shifts in the second half of the year to cater for increased demand during the year end festive season. Each shift runs ‘for 8 hOUfS, The manufacturing facilities have three main ffrial assembly lines which are configured and be easily reconfigured to prod~, test and package any product me, II has been capable of .-Jng pro<:Iuction requirem_ of its ellents by iWopting ttlis ffOl<ilJIe final assembly fine method, Further. With this fl.,ble final assembly Une method, there will be no constraint to the production capacities of K­One Ind The pro<:Iuction OUIput of K.Qne 100 for the financial year ended 31 December 2004 is 855,000 unlls, 4,3 SUIlSIOIARIES 4,3.1 EMB Tech EMB Tech was incorporated i’l Malaysia on 1 December 2003 under the Act as a private limited Company. EMS Tech is currently dormant but wiU be involved in investment hoicUng, EMB Tech’s Present alJthorlsOO share capital ts RM500,QOO comprising 500,000 sharES of RM1,OO each, The present issued and paid-up cap«al of EMB Tech is RM5oo,ooo comprising 500,000 shares of RMi JX) each. EMS Tech has a vktoIly-oo,’ned subsfdiary company, K-One Inc! and does not have any associated corporations. The changes in the issued and paid-up shate capital of EMS Te<:h since its incorporation are as foIIQlM.;;.;­tJateof allotment  No,oI sha…- Parvalue  Consideraflon  Cumulative Issued and Paid-up _ C1lpila1  AM  AM  01.12.2003  2  1,00  Subscriber’ shares  2  27.05.2005  499998  1.00  Cash  500,000
4.3.2 K.Qnelnd K-One 100 was incorporated in Malaysia on 27 July 2001 under the Act as a private llmited company, K..Qne lnd is principally engaged 1n the design and development of manufacturing processltools and manufacturing of electronic end products and sub· systems. K·One Ind’s present authorised share oapital is RM500,OOO comprisrng 500,000 shares of RM1.00 each, The present issued and paid-up capital o-f K·One Ind is RMsoo,OOO comprising 500,000 shares of RMi ,00 each. K-One lnd does not have any subsidiary or associated companies. As at 7 November 2005 (being the latesl praclicable dale prior to the printing of this Prospactus), K-One lnd has thjrty-four (34) full~tjme employees and employs on average fifty (50) produotion staff on a contraot basis, 56 4. INFORMATION ON THE GROUP (Conl’d) The changes in the issued and pajd~up share capital of K~One lod since its incorporation are as follows:­Date 01  No. of shares  Cumulative Issued and  allotment  allotted  Par value  Consideratkm  Paid-up Share Capital  RM  RM  ~  27.07.2001  3  1.00  Cash  3  7.10.2002  99.997  1.00  Cash  1-00,000  23.12.2002  100,000  1.00  Cash  200,000  24.02.2003  300,000  1,00  Cash  500,000
4.4 INDUSTRY OVERVIEW 4.4.1 Overview of the Malaysian Economy The Malaysian economy remains resilient despite moderation in the growth of glObal economy amidst high oil prices and less accommodative monetary policy, particularly in the United States (US). The nation continues to sustain Its gro1Nth momentum, with strong domestic demand providing the impetus for the expansion in domestic economic activities. Economic fundamentals have further strengtMned while domestic d~mand continued to be resilient amidst firm consumer spending as well as continued uptrend in private investment activities. These factors, coupled with pro­active measures by the Government to promote economic activities provided the enabling environment for the Malaysian economy to exPand favourably, albeit at a lower rate of 4.9% in the fiist half of 2005, compared with 8.1% during the same period of 2(){)4, Despite sharp increases in oil prices, tl1e Malaysian economy is expected to register 5.1% growth in the second haft 01 the year, with growth for the year averaging 5%, This projection is premised on a growth of 4.8% in the Leading Index for January-June 2:005 which indicates continued expansion in the second harf of 2005. Growth is expected to be broad based with major sectors recording positive growth. backed by recovery in global electronics demand. The continuing build-up in international reserves arising from larger current account surplus and inflows of foreign capital has also strengthened domestic macroeconomic fundamentals. The expansion in the economy is reflected by positive growth in all sectors, except construction. The main drivers of growth are the services, manufacturing and the primary commodity sectors, Strong domestic consumption is expected to drive the selVices sector, especially in wholesale and retail trade. hotels and restaurants; transport; storage, and communication; and financial services sub-sedors, The recovery of global electronics dt;’lmand will accelerate manufacturing exports, resulting in a stronger momentum in manufacturing production in the second half of the year. Meanwhile, stable commodity prices will held sustain the growth momentum of the agriculture sector. Growth in private consumption remains firm, arising from higher household income. Priva.te investment is expected to further strengthen reinforced by continued accommodative and more flexible monetary policy as well as higher intlow 01 foreign direct investment (FDI). In tandem with the expansion in economic activities. national income as measured by Gross National Product (GNP), is estimated to increase by 9.1% to AM483,546 million (2004:14.1%; AM425,060 million), with per capita income rising by 6.8% to reach RM17,741 (2004:11.7%; RM16,616). Based on purchasing power parity (PPP), per capita income is expected to increase by 7.2% 10 USDl 0.323 (2004;7.4%; USD9,630). {Source: Economic Report 2005/2(06) 4, INFORMATION ON THE GROUP (Cont’d) 4.4.2 Overview, Performance and Future Growth of the Global Electronics Industry Overall output of export-oriented industries moderated by 0.1 % during the first seven months of 2005. The moderation was due to the global down cycle for electronics and electrical products (E&E) products, in particular semiconductors, since the last quarter of 2004. Consequently, manufacturers made adjustments to their production and inventories. Despite the downcycle, semiconductors’ contribution to the manufacturing sector remained high at 34.4%. Capacity utilisation of the industry, which is usually higher than the average of the manufacturing sector, also remained high at above 85% as manufactures in the industry anticipated stronger demand in the second half of 2005. Vibrant design and development (D&D) activities in the electronic and leT industries, particularly software and systems development as well as high­tech knowledge-based manufacturing processes also contributed to the rebound of the E&E sub-sector. These industries are also expected to benefit from dynamic changes in consumer electronics, brought about by changes in technologies, innovation and new products in the market. In addition, the E&E industry also attracted new entrants such as electronic manufacturing service (EMS) companies. Some of these EMS companies, which are original design manufacturers (ODM), have developed into contract manufacturers for established companies, manufacturing products at more competitive prices under their own or the latter’s brand. Export of E&E is expected to improve in 2005 as worldwide sales of semiconductors staged a turnaround and recorded a 5.8% increase during the first seven month of the year. In line with the book ratio of the North American semiconductor industry, which trended upwards in anticipation of a pick-up in demand for ICT-related products, the Semiconductor Industry Association of the US forecasted a sales growth of 6% for the global semiconductor industry (2004:28%). Hence, demand for Malaysia’s E&E exports is also anticipated to improve for the rest of the year. The key drivers of E&E growth will be personal computers and optoelectronic, products (high­end mobile phones and cameras, LCD and plasma digital televisions). (Source: Economic Report 200512006) 4.4.3 Players and Competition In the domestic market, there are a number of design houses or electronic manufacturing service providers. These design houses are fragmented and generally do not provide full D&D services. The tendency is for them to specialise in one or two specific areas, for example, industrial design, mechanical design, electronics or software. Internationally, there are several large competitors which are able to offer both D&D services and EMS and hence are competitors of the K-One Group. According to the management of K-One Group, these include Flextronics International Ltd, Solectron Corporation, Celestica Inc., Sanmania-SCI Corporation, Jabil Circuit Inc. and Elcoteq Network Corporation. 4. INFORMATION ON THE GROUP (Cont’d) 4.4.4 Laws and Regulations The K-Qne Group has to take cognisance in designing and/or manufacture electronic end products which meet the specifications of Its global OEM and emerging high-tech customers. mainly locat€d In Europe and US, These specifications normally require compliance to environmental and safety regulations manda.ted in Europe and US respectively. The products designed by the Group are required to undergo stringent environmental and safety tests before they are approved by its customers, Typical environmental tests Include test for the presence of cadmium or lead In the materials used which are classified as banned materials in the prOductiOn of electronic end products In Europe. 4.4.5 Demand and Supply Conditions The demand for the K..Qne Group’s D&O and/Qr manufacturing services are increasing as it continues to design innovative electronic end produc1s for the multimedia and automotive industries. thus enhancing its standing as a cut1ing edge technology Group which provides quality, innovative and CQst competitive solutions. More and more global OEMs and emerging technology companies in Europe, US and Japan are outsourcing their D&D services on top of manufactUring as they prefer to focus in brand and marketing development. In such event, the K·One Group is in good stead to tap the growing global demand for D&O andlmanufacturing services. On the other hand, there is a lack of companies capable of providing the fuU spectrum of 0&0 servkas in Malaysia. Inlemationally, there are major multinationals competing in this arena but demand still outslrip supply, in the K-Qne Group’s opinion. 4.4.6 Substitute Products/Services The core activities of the K..Qne Group has been to design, develop and manufacture high-end electronic end products far major OEMs and emerging technology companies. These products are usually unique in nature, as for eg, the scanner pen and of high quality. It is a challenge 10 substitute such products by way of developing a ~me too” product as they are normally protected by patents, It would also be a challenge to design, manutacture and market a substltute product with the same high Quality and cosl competitiveness. 4.4.7 Prospects and Outlook of the Industry The manufacturing sector is expected to grow at a higher rate following the strengthening of global electronics demand and the continuing strong pace of domestic economic activities, Following recovery in global electronic demand in the second half of 2005, growth of the manufacturing sector is anticipated to grow by 4.~k. (2005: 4.8%). The landscape at the manufacturing sector is expected to change in tandem with new developments and the shift towards technology·driven manufacturing processes with more R&D activities. New developments include advanced technologies such as nano1echnology. biotechnology and advanced manufacturing practices, whIch encompass high knowledge­content processing technologies. These developments are expected to contribute positively to growth 01 the manufacturing sector. (Source.’ economic repot12005l2006j -:–====-:=:=-=-=–:-::–,;-:;-_…~._——­4. INFORMATION ON THE. G,..R”‘O,..U,..Pc.I”‘C::o::nt:.:’d::!J _ 4,5 MAJOR CUSTOMERS The Group’s top ten (10) major customers based on the 6 months financial period ended 30 June 2005 are as follows: …_-­ Customers  Level of sales  Length 01  @3O.6.2005 1%1  r~ion:~iPYea…  Iris CorOO.’5ltion Bhd  42  1  Camf!l FARR and Camfil Riverdale  25  2  —- AnotoAB  7  S  Sony Ericsson I Flextronics International  6  5  KFT  ….­ loal1ech Suchou ltd  4  3  SVI Public Comoanv  3  3  Axis Communication Primax Industri~!? HK) Ltd ….._…­ 2 2  5 1  ,  Farallon Medical, Inc Smartea Wireless AB  1 2  1 2  , :=J
AU along, the K..()ne Group does not rely solely on one major customer for business, The risk 011051ng anyone of the major customers stated in the table above would be minimal as the K-one Group continues to expand its marketing network overseas to sign up more new customers. As shown in the table above, the majority of the K-One Group’s revenue was contributed from the multimedia industry with a minority share of less than 5% being contributed by the automotive industry. It is however envisaged that over the next five (5) years, the K-Dne Group wH! conscientiously grow the automotive business 10 represent up to 15% of the total revenue. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK
4. INFORMATION ON THE GROUP (Cont’d) 4.6 MAJOR SUPPLIERS The Group’s top ten (10) major suppliers for the 6 months financial period ended 30 June 2005 are as follows:­
Suppliers lev~o’ purchases @ 3D.6.2005 1%\ _. ___flustar TechnologY!Et~sourcesSdn Bhd~ ___ 35 Anoto AS
19 .Panaloina Transoort Sdn Bhd 9 Multl·Fineline Electronics, Inc 9• • Zeito Plastics CQmOOnents Sdn Bhd 5
Van Jin M} Sdn Bhd 5 5Fjextronic~..Technology Sdn Bhg.. T 0 Electronics H.K. Limited 4 ….. CPI KL) Sdo-Bhd
4 AU Vision Technology Sdn Bhd 4 i … Length 01 relationship (Vears) -3 4 1 2 3 3 1 4 1 3 As indicated above, the K-Qne Group is not dependent on any single supplier. 4.7 FUTURE PLANS. STRATEGIES AND PROSPECTS The K-One Group plans to move forward from D&D of end products to finally research, design and development at Integrated Circuit (“IC~) Technology. This gradual progress from product development of mechanical products initially. moving 10rward to product design whkh incorporates design of firmware and software in 2003 (on top of mechanical design) is a lirst step for K-0ne Tech to be involved in Ie design. As future products become more sophisticated with grealer demands on feat1Jres and fut”lCtions from custbt’TlE:!t’$, the technical tearn in K~One Tech will have to move into the realm of research, in either hardware or software breakthroughs. As K-Dne Tech moves forward to embark on research, it is expected to have serious collaboration with the local technical universities, In this manner, there would be a pooling of facilities and resources. The K~One Group plans to spend a sUbstantial portion of 1he funds raised through the Public Issue exercise to upgrade its current basic 0&0 Centre with the tull range of Bluetooth testing and verification equipment Only with the preceding residing in~ house as a showcase would potential customers feel confident to give the K..()ne Group the more sophisticated 8!uetooth projects. Having the right personnel with Bluetooth/RF skill W.$ is only one side of the story, it noods hardware Le. testing toots to complete the whole picture. Thus, it is crucial for K~One Tech t-o invest in Bluetooth testing equipment to bid for such projects successfully.

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