Notice to Recipients · Web view2005.01: ODM development of mPack PMP for PQI 1.3 Contact...

Information Memorandum

Feb. 10, 2006

Strictly Confidential 1



Innoplus Co. Ltd.

● Retains design capabilities for core motion picture processing chips / SoC

● Diversification of revenue streams using versatile core technologies

● Most capable and highly experienced R&D workforce

● Numerous proprietary patents & IP’s

● Competitive high-performance products with attractive functions


Daedeok Innopolis is the largest innovative cluster in Korea and one of the top tier clusters in the world.


Notice to Recipients

Pharos Capital Limited has been retained by Innoplus Co. Ltd. (“Company”) to act as its exclusive

financial advisor (“Advisor”) in connection with the capital-raising of the Company.

The information contained herein has been prepared to assist interested parties in making their own

evaluation of the Company and does not purport to be all-inclusive or to contain all of the information that

a prospective investor may desire. While the textual information contained herein is believed to be

accurate, the Advisor has not independently verified any of the information contained herein in connection

with the Summary, and no representation or warranty is made by either the Advisor or Company as to the

accuracy, reliability or completeness of this Summary. In all cases, prospective parties should conduct their

own investigation and analysis of the Company and the data set forth in this Summary.

By accepting this Summary, the recipient acknowledges and agrees that all information contained herein is

of a confidential nature, that the recipient will treat it in a confidential manner and that recipient will not,

directly or indirectly, disclose or permit its agents or affiliates to disclose any of such information except in

accordance with a signed confidentiality agreement which accompanies or preceded this Summary. Without

limiting the generality of the foregoing, the recipient will not reproduce this Summary, in whole or in part,

and will use this Summary solely for purposes of evaluation the recipient’s interest in the capital raising.

Any proposed actions by the recipient will be made in the written proposal.

All communication or inquiries relating to this Summary or its subject matter can be addressed to either the

representative of the Advisor or the representative of the Company listed in the contact information (see

page 6).



Contents

Page

Notice to recipients ------------------------------------------------------------------------------------ 1

1. Executive Summary

1.1 Company at-a-glance ----------------------------------------------------------------------------3

1.2 Innoplus’ Competitive Edges -------------------------------------------------------------- 4

1.3 Facts & Milestones --------------------------------------------------------------------------------- 6

1.4 Contact Information ---------------------------------------------------------------------------- 7

2. Company overview

2.1 Business Model ---------------------------------------------------------------------------------- 8

2.2 Market Opportunity -------------------------------------------------------------------------------11

2.3 Management & Workforce ------------------------------------------------------------------- 14

2.4 Technology Details ---------------------------------------------------------------------------- 15

2.5 Intellectual Property-------------------------------------------------------------------------- 17

2.6 Investment & Ownership --------------------------------------------------------------------- 18

2.7 Offering & Use of Proceeds ---------------------------------------------------------------- 18

2.8 IPO Outlook ------------------------------------------------------------------------------------ 19

3. Financial Forecast

3.1 Financial Forecast ----------------------------------------------------------------------------- 19



1. Executive Summary

1.1 Company at-a-glance

Established by 6 former researchers from KT (Korea Telecom) in 2000, Innoplus is a provider of

core digital motion picture processor chips and their applications such as PMP (Portable Media

Player), DMB receiver units, Navigation units etc. The original 6 founding members at the time

of the company’s establishment were experts in chip design and SoC (System-on-Chip) for

motion picture and still digital picture applications with over 6~7 years of experience in the field

in 2000 (which means that they currently have over 11 ~ 12 years of experiences now).

Expanding upon their technological experiences and know-how, the members of Innoplus has

maintained the company’s core technology, that is, the designing capabilities of motion picture

and digital still picture processing chips as well as the capability to apply these core chip

products to portable devices such as PMP’s. In its early stages of business, the company began

the production of digital still picture processing chips and used them to manufacture Phototainer

products. Phototainers are mobile devices that can store digital images and motion pictures, and

display them through its on-board LCD screen. The company had recorded around KRW 12

Billion in sales through this product before closing this business and moving on to motion

picture processing chip designs and PMP productions. It can be said that Innoplus was a first

mover in early mobile media devices that set the stage for their entrance into the PMP market,

since the Phototainer can be seen as a very early version of the PMP.

After closing down its Phototainer business, Innoplus’ current main business focus for 2006 is

the PMP market. Innoplus plans to release new multi-functional PMP products that include

DMB reception, navigation function, WIFI, electronic album functions etc. in addition to its

existing PMP products that have already been launched. Also, recognizing Innoplus’s

technological capabilities, PQI (Taiwan) has entered into a partnership with Innoplus, where

Innoplus provides PQI with ODM (PMP) products. Because Innoplus retains the core chip

design technologies, the company is able to expand their business area into different applications

such as web cameras, digital surveillance systems, PC cameras, Digital TV’s, or any other

products that can play video/audio contents.



Vision

With their expertise in digital motion picture/still picture processing chips, software and

solutions, Innoplus is targeting to become the worldwide leading total solution provider for the

digital multimedia market.

1.2 Competitive Edges

■ Company Differentiated from Mere Assemblers by Retaining Core Technologies

There are currently many PMP providers in the market, but unlike most of them, who are mere

device assemblers, Innoplus is highly differentiated from the rest of the pack in that they retain

end-to-end solutions and technologies for PMP productions. Many companies simply purchase

the necessary components and assemble the PMP products. For them, the assembly is the only

value-add that they can provide. However, Innoplus retains the core technologies that determine

the functions as well as the performances of the final product. These technologies include chip

design technologies for audio/visual signal processing and hardware/software integration

technology. More specifically, the engineers at Innoplus have expertise in SoC chip design

(including interfacing logic with ARM), digital image/motion picture encoding chip design, low-

power IC design, etc. Also, Innoplus is experienced in software programming and porting for

various platforms such as Linux, WinCE, etc. Thus, Innoplus’ products can have more attractive

functions, higher multimedia compatibility, etc.

■ Most Capable R&D Workforce: Pioneers in the Portable Device Industry

Innoplus had been established by experienced research members from KT with more than 10

years of experience in the related multimedia processing technologies. Before the establishment

of the company and even before the mobile multimedia device markets existed, these

researchers had been working on video encoder/decoders, time division multiplexers, audio

encoder/decoder chip designs, etc. which has served as a basis for Innoplus’ core technologies.

Thus, it can be said that Innoplus as well as its R&D workforce are pioneers in the portable

multimedia device industry. Most of these R&D members have many years of work experiences

in big-name companies and/or research institutes such as LG Electronics, KT Research Center,

Samsung Electronics, Hyundai Electronics, etc. As pioneers in the industry, Innoplus had

successfully developed and commercialized the Phototainer product, which is a very early

version of the current PMP.



■ Versatility of Proprietary Technologies Allow Diversification of Business

Although Innoplus’ main business focus is currently on PMP products, the company does not

plan to rely on PMP sales as their only major revenue source. Because the company retains the

core technologies, that is, chip designs and system designs for multimedia processing, Innoplus

is able to enter other application markets that require their technologies and solutions for

image/motion picture display, audio systems, and any other applications that require processing

of multimedia data. For example, Innoplus has already developed the MVC201 video codec

chip that can be used for web cameras, digital surveillance systems, digital TV’s etc. for

video/audio signal processing. Like the MVC201 product, Innoplus is able to easily expand into

the vast multimedia device market by providing chips, software solutions, components, SoC

design, etc. Besides the MVC201, the company also has experiences in the development and

mass production of digital surveillance camera chips, JPEG decoder chips (applied in the

Phototainer product), etc.

■ Numerous Proprietary Patents & IP’s

There are many technologies that are required in manufacturing mobile multimedia devices,

especially in designing multimedia processor chips. During their years at KT, the founding

members of Innoplus had registered over 200 patents related to multimedia processing

technology as well as the chip design technologies. With the establishment of Innoplus, the

founding members were able to transfer 82 of the patents to the company from KT that were

crucial in starting their business such as MPEG audio decoding filters, method of buffer control

for motion picture video encoding, etc. On top of that, the company has also developed new

IP’s to accommodate their business. The ownership of numerous IP’s and patents for

multimedia processing, chip design, etc. is a great advantage over the competition.

■ Competitive High-Performance Products with Many Attractive Functions

As in the mobile phone market, the PMP market is also moving towards, high-end and multi-

functional products. To meet the market demands in terms of product specifications, the product

must have various functions such as decoding function for a wide range of video format

(MPEG1,2,4, DivX3,4,5, Xvid, WMV, etc.), audio/image decoding, radio reception, TV tuner,

TV input/output, text viewer, etc. Currently, the Innoplus’ PMP product, I-WITH, support these

various functions, provides one of the highest system stability and display quality. Additionally,

the company will release their next PMP model that integrates DMB reception and

GPS/Navigation functions. Innoplus has the definite advantage over others when integrating



multiple functions into a single multimedia system since they have the expertise in porting the

necessary software/firmware, hardware-software interface technology, multiple file format

decoding technology, etc.

1.2 Facts & Milestones

■ Facts

Facts

CEO Young-Tae Han

Foundation 2000

Address A-1007 SK Twin Tower 345-9, Gasan-Dong, Kumchun-ku, Seoul

Paid In Capital KRW 665 Million

No. of Employees 32

Products Multimedia chips, PMP

Independent Auditors Jewon Accounting Corporation

Target Market China, Taiwan, HK, UK, US, Korea

■ Milestones

2000.06: Established in Daejeon, South Korea

2000.08: R&D center established

2000.11: TBI Company with approval of the Ministry of Commerce, Industry and Energy

2002.08: Mass production of JPD101, the JPEG decoder chip

2003.03: Mass production of Phototainer

2003.03: The prestigious DIMA innovative Digital Product Award

2003.07: Mass production of MVC201, video codec chip for DVRMVC201

2003.08: The Hot1 Award

2004.11: Co-development of JPX101, the high resolution DVR-specific chip

2005.01: ODM development of mPack PMP for PQI



1.3 Contact Information

Pharos Capital Limited

Mr. D.I. Cho

Associate Director

Tel. +82-2-540-6501

Email. [email protected]

Innoplus Mr. Young-Tae Han

CEO / President

Tel. +82-2-866-4676

Email. alla @ innoplus.com


mailto:[email protected]

mailto:[email protected]


2. Company Overview

Innoplus’ main business can be divided into two categories, the motion picture chip and the

portable multimedia device businesses. Already retaining experiences in chip design and

productions as well as its applications in portable multimedia devices, the company plans to

further develop and produce new multimedia chips, targeting other multimedia device

manufacturers. As for the portable multimedia device business, Innoplus develops and provides

portable applications such as PMP’s and digital albums. In this business, the design of the

products is done in-house and the productions are outsourced. This business will be the first

cash cow of the company while they prepare to fully launch the chip business with the aim to

become a worldwide leading provider of multimedia total solutions.

2.1 Business Model

■ Portable Multimedia Device Business

With their first PMP product launched, Innoplus is getting ready to launch their next PMP

product that has been designed to reflect the trend of digital convergence. Besides the movie,

music playing, radio reception, data storage, still picture display, text display functions etc.

additional higher-end functions are being demanded by consumers today. Especially with the

DMB services, the demands for DMB reception capabilities are on the rise. Accordingly,

Innoplus’ next PMP products will not only include DMB reception functions but also

GPS/Navigation, Wireless Internet functions, etc. As for the Wireless Internet function,

Innoplus is currently negotiating with SK Telecom and KT to provide them with Innoplus’

newly developed electronic albums and WIFI PMP’s. SKT and KT are planning to use the

WIFI PMP’s education-related applications. The company is confident that they will be able to

provide their products to SKT and KT, once this strategic partnership is made, Innoplus will

further expand their market share using the contents provided SKT and KT.

Planned Product Lineup

Product Type

PMP 801 PMP, Low consumer price

PMP 401 PMP + NAVIGATION

Electronic Album Electronic Album + LAN/WLL/PSTN, will be supplied to SKT & KT



PMP 803 PMP, Slim design, low consumer price

DMB PMP PMP + DMB+ NAVIGATION

WIFI PMP PMP + Wireless Internet + NAVIGATION, for education applications by KT

WiBro PMP PMP + Wireless Internet + NAVIGATION

For sales and distributions, Innoplus is currently using independent distributors and sales

channels for domestic and overseas markets.

PMP Sales & Marketing Channels / Status

Company Description Progress / Remarks

Domestic Mirae Sound

Systems

Direct sales to largest

department stores in Korea

Distribution to department stores across the

nation

Sample

ONLINE

Electronics

Distributors

Distributor for retail discount

stores

Currently distributing 1,000 units

Final stages in signing exclusive sales rights

Soft Vision On-line shopping mall Currently distributing 1,000 units

Final stages in signing exclusive sales rights

Joyoung,

Choongyoung

Digital, etc.

Distributor for retail stores in

Yongsan, Technomart, etc.

Currently distributing 2,100 units

Stable business transactions.

KT Telephone service provider Supplied 50 electronic album samples, testing in

progress

Development of educational WIFI PMP

SK Telecom #1 mobile communication

service provider

Preparing to deliver electronic albums

Expects to supply 30~50 thousand units in 2006

Overseas JNC Hong Kong distributor Delivered 550 units in Dec. 2005

Sales from HK and China

PQI Taiwan semiconductor

company

PMP ODM, delivered 40 thousand units in 2005

ODM contract continues throughout 2006

IMAX Distributor & manufactuer

located in Beijing, China

(Hyundai automotive parts)

Delivered 50 units as samples in Dec.

2005

Delivered additional 150 units in Dec. 2005



INTRO2020 UK agent KRW 2 Billion in sales up to 2005 with

Phototainer product

Provided PMP samples

SMARTDISK US agent KRW 8 Billion in sales up to 2005 with

Phototainer product

Proved PMP samples, market testing in progress

<Figure 1> Innoplus PMP Product (I-WITH)

■ ASIC / SoC Chip Business

With their expertise in chip design and SoC, Innoplus has been successful in the production of multimedia

processing chips. Innoplus’ current chips that are being provided to third parties are the multimedia chip

(MVC) and the high-resolution DVR chip. The MVC chips provide 15:1 ~ 100:1 compression for motion

pictures and are used in such applications as web camera, surveillance systems, PC camera, digital TV’s.

Previously, the company had developed chips for use in the Phototainer product as well as similar

electronic albums. In addition, having been acknowledged for their superior chip designing technologies

the company is currently developing multimedia chips for Telechips and ALogics.

<Figure 2> Innoplus Multimedia Chip


http://www.anyac.com/mall.php?cat=002010001&query=view&no=5239


CIRUSEP7321

(ARM 720T)

SDRAM(128Mb)

SDCON 모듈

clockprocayncproc

intruptproc

directmem

paraset

blockmove

dataproc

graphic

VLD

IDCT

Recon rd wr

rgbconv

scalefilter

dramread

yuvconv

8:9conv

ccir656output

버퍼

버퍼

fifo

CIRUSCS4954

JPD칩

Host_ IF 모듈

Scaler 모듈

J P_Dec 모듈Vid_Out 모듈

fifo

Audio 모듈

control

AudioA/D

Conv

■ Revenue Estimation of Major Products

Units: KRW Thousand

Category Product 2006 2007 2008

Multimedia Chips MVC 2,210,000 10,490,000 20,050,000

JPD 2,000,000 10,000,000 18,000,000

New Product 1,000,000

Portable

Multimedia

Devices

Electronic Album 7,500,000 30,000,000 36,000,000

PMP 8,400,000 25,000,000 30,000,000

DMB PMP 14,000,000 30,000,000 50,400,000

WIFI PMP 8,250,000 45,000,000 67,500,000

Total 40,360,000 140,490,000 203,950,000

*Notes: 10% annual decrease in ASP has been applied

2.3 Market Opportunities

Innoplus plans to focus their business in the PMP market which are showing explosive growth

rate in 2006 compared to the previous year. As the domestic market size is expected to grow

from 70 thousand units in 2005 to 270 thousand units in 2006, over 20 companies are entering

the PMP market. It is expected that PMP products will become more multi-functional as the

mobile phone market trend has shown. PMP manufacturers are currently designing products

that include DMB reception, GPS/Navigation, Wireless Internet, etc. and this trend is favorable

to Innoplus since the company is able to quickly integrate the desired functions with their core

technologies in chip design and software-hardware interfaces. The domestic market was formed

in early 2005 and the price of each unit was around KRW 400 ~ 500 thousand in 2005, but this



had dropped to around KRW 300 thousand in 2006. PMP products are considered to be the next

generation of MP3 players, and thus it is expected that PMP’s will encroach upon the MP3

player market.

■ The PMP Market Size

The worldwide market size for PMP’s had been 770 thousand units in 2005, and this is expected

to grow to reach 2.3 million units in 2006. Currency wise, the market size is US$ 280 million

and US$ 700 million for 2005 and 2006, respectively. The market is expected to show growth

rates of around 130% per annum up to 2008.

<Figure 3> Worldwide PMP Market Size

Units: 1,000 Units, US$ Million

48122.2

277.9

720.9

1067.7

1574.3

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2003 2004 2005 2006 2007 20080

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Units

US$

2,332.6771.5

300.2

3,735.4

6,418.7

* Source: Korea Electronics Technology Institute (2004)

<Figure 4> Domestic PMP Market Size

Units: 1,000 Units, US$ Million



* Source: Korea Electronics Technology Institute (2004)

■ Competition

Realizing that the PMP market will show high growth rate over the years, many companies have

entered the market, including large corporations such as Samsung and LG. Also, existing MP3

player manufacturers have begun the productions of PMP’s such as Reigncom and Cowon.

What differentiates Innoplus from the rest of the players is that the company retains the core

technologies for that enable them to readily produce market-oriented products.

<Table 1> Technical Strengths of Innoplus (Comparison)

Category Reigncom / Cowon Innoplus Remarks

Core motion picture

technology (chips)

None Yes These competitors had started as audio device

companies

Network interface

technology

Low High Innoplus’ developers have experiences from

communication tech. companies

Portable device design

capabilities

Mid High Innoplus has mass produced 5 different models since

2002

Motion picture driver SW

design technologies

Low High Innoplus’ products supports all types of file formats



<Table 2> Comparison to Major Players in the Market

CategoryLarge Conglomerates

(Samsung, LG)Reigncom, Cowon Digital Cube Innoplus

Brand High Mid-low High Mid-low

Technology Mid-low Mid-low Mid High

Design capabilities High Mid-High Mid-High Mid

Capital High Mid Mid-low Low

Marketing capabilities High Mid-High Mid-High Low

2.4 Management & Workforces

Young-Tae Han, President and CEO

Specialties Organization Remarks

-Management &

Administration

-Multimedia chip design

Innoplus -CEO

Information & Communications

Research Center at PosTech-Researcher for 2 years

KT Research Center -Researcher for 8 years

PosTech

MA-Electronic engineering

Keun-Seok Sul, CTO


-Electronic Devices

Innoplus -CTO

KT Research Center -Researcher of 7 years

Seoul National Univ.

MA-Computer science



Gui-Jin, Lee, CFO


-Administration Innoplus -CFO

Korea First Bank -11 years

Konkuk Univ.

BA-Business management

Kyun-Seok Yang, Researcher In-Charge


-Electronic Devices

-Chip design

Innoplus -Researcher in-charge

Hyundai Electronics -Researcher for 10 years

Hanyang Univ.

MA-Electronic engineering

Yong Kim, Senior Researcher


-Electronic Devices

-Chip Design

Innoplus -Researcher in-charge

Research Center at

PosTech-Researcher for 3 years

Postech

Ph.D.-Electronic engineering

2.5 Technology Details

With exceptionally strong backgrounds in chip design for multimedia applications and

embedded software engineering, the engineers at Innoplus retains end-to-end solutions for all

PMP components, including IP’s and patents for chip design. The company has been able to

provide these chips to third parties and also has applied them to their own products such as the

Phototainer.

■ Audio/Visual Signal Processing Chip Design



The MVC chip can be applied to many devices that require motion picture processing such as

digital surveillance systems, digital cameras, digital TV’s etc. The chip design capabilities of

the company have been well acknowledged in the industry and the company is creating revenues

from not only chip sales but also technology services for new chip development.

<Table 3> Chip Products & Specifications

Category Specifications Applications

MVC

Multimedia processing chip

Provides 15:1-100:1 compression ratios for digital

images

- JPEG, MPEG-1/MPEG-2

- XGA, SVGA, VGA

- Full D-1(720x480), 320x240

- 4 ch (XGA) – 32 ch (QCIF)

- 128 pin TQFP

PC camera

Digital camera

Surveillance system

Digital TV

High-resolution DVR chip

JPEG CODEC

Full Duplex JPEG CODEC

- NTSC/PAL

- 67.5MHz

- Memory: 64M, 128M 3개

- 220 pin

- 2000mw

- 304 BGA

DVR

Phototainer Chip

JPD 101

Applied in Innoplus’ Phototainer product

- NTSC/PAL

- External: 27MHz, Internal: 54MHz

- 128M

- Module-level clock controal

- 3.3V, 250K

- 127 pin

- 1200mW

- 184 QFP(20x20x1.4mm)

Digital photo/movie

storage and playback

Phototainer chip

JPD 201

Upgraded version of JPD 101 chip

- 128M for JPGDEC

Electronic Album



- 256M for ARM

- 900mw

<Figure 3> Block Diagram of Innoplus’ IMP1000 Chip (New Multimedia Chip)

2.7 Intellectual Properties

■ Intellectual Properties

The company retains a total of 87 patents and IP’s of which 82 of them were transferred from

KT.

Item Contents Status

Patent General-purpose memory card adapter & method for interface Registered

Trademark Phototainer Registered

Trademark Innoplus Registered

Utility Model Battery combining structure for electronic devices Registered

Design Portable video/audio storage system Registered

Patent Composite filter for MPEG audio decoder Registered



2.8 Investments and Ownership

■ Shareholder Breakdown

Shareholder Name Investment Amount No. of Shares Ownership

Young-Tae Han (CEO) 224,220,500 448,441 33.7%

KDB 120,000,000 240,000 18.0%

PQI (Taiwan) 79,824,000 159,648 12.0%

Dream Venture 28,571,500 57,143 4.3%

Keun-Seok Sul 20,000,000 40,000 3.0%

Kil-Hwan Kim 18,692,000 37,384 2.8%

Young-Chul Han 12,000,000 24,000 1.8%

Jong-Sung Yoon 12,000,000 24,000 1.8%

KTB Mobile 6,766,000 13,532 1.0%

Others (individuals) 143,125,000 286,250 21.5%

Total 665,199,000 1,330,398 100%

2.9 Offering and Use of Proceeds

■ Offering

Type of Financing Instrument Equity or Bond

Value of Offering shares US$ 10,000,000

Price Negotiation

Terms of Offering The offering commences on Feb. 10, 2006 and continues until

August, 2006 unless otherwise extended by the Company.

Withdrawal of

Offering

The Company may withdraw or cancel this Offering at any time

without notice, and may reject offers for shares for any reason.

■ Use of Proceeds

The principal purposes of this offering are to raise the expenses for marketing, developing various new

products and working capital, extend the overseas channels that can be helpful to marketing and increase



Innoplus’ visibility in the overseas financial marketplace. The company intends to use the proceeds from

this offering as follows:

i. approximately US$ 4 million for product productions

ii. approximately US$ 3 million for advertising/marketing

iii. approximately US$ 3 million for product & chip development

2. 10 Exit Strategy

■ IPO Outlook

Innoplus is expected to be able to carry out Initial Public Offering at latest by the end of 2007 in the

Korean stock exchange (KOSDAQ) or NASDAQ after it meet the criteria for IPO in 2006. At that time

venture capitalists and investors will be able to realize a great deal of value from their investment.

3. Valuation

3.1 Financial Forecast Units: KRW 1,000

(KRW: Million) 2006 2007 2008

Sales 40,360,000 140,490,000 203,950,000

Gross Profit 11,498,800 41,484,200 61,821,000

Operating Profit 5,374,273 24,637,115 37,263,113

Net Profit 3,718,997 17,048,883 25,786,074

Total Assets 23,219,838 99,561,269 134,256,314

Total Liabilities 9,910,140 37,702,687 56,611,658

Total Equity 23,219,838 99,561,269 134,256,314


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