Attached files
file | filename |
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EX-10.1 - SHARE EXCHANGE AGREEMENT - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1001.htm |
EX-10.13 - LOAN AGREEMENT - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1013.htm |
EX-10.10 - KTNETWORKS - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1010.htm |
EX-10.12 - LOAN AGREEMENT - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1012.htm |
EX-23.1 - CONSENT - Clavis Technologies International Co., Ltd. | clavis_s1a-ex2301.htm |
EX-10.14 - OFFICE LEASE - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1014.htm |
EX-10.11 - KOREA PALLET POOL CO - Clavis Technologies International Co., Ltd. | clavis_s1a-ex1011.htm |
As
filed with the Securities and Exchange Commission on May
6 , 2010
Registration
No. 333- 164589
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT NO. 1
TO
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
(Exact
name of registrant as specified in its charter)
Nevada
|
7379
|
27-1505309
|
(State
or other jurisdiction of
|
(Primary
SIC Number)
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
#1564-1,
Seojin Bldg., 3rd
Floor
Seocho3-Dong
Seocho-Gu,
Seoul, Korea 137-874
(011)
82-2-3471-9340
(Address,
including zip code, and telephone number, including area code, of principal
executive offices)
Resident
Agency Incorporated
377
S. Nevada Street
Carson
City, Nevada 89703
(775)
882-7549
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
With
a copy to:
Richard
C. Fox, Esq.
Fox
Law Offices, P.A.
c/o
131 Court Street, # 11
Exeter,
NH 03833
(603)
778-9910
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated filer o (Do not check if a smaller reporting company)
|
Smaller reporting company x
|
CALCULATION
OF REGISTRATION FEE
Title of Class of Securities to be Registered
|
Amount to be
Registered (1)
|
Proposed
Maximum
Aggregate
Price Per Share
|
Proposed
Maximum
Aggregate
Offering Price
|
Amount of
Registration Fee
|
||||||||||
Common
Stock, $.001 per share (2)
|
17,375,200
|
$
|
$0.00533
|
(3)
|
$
|
92,609.92
|
$ 6.77 | |||||||
Total
|
17,375,200
|
$
|
92,609.92
|
$ 6.77 (4) |
(1) In
the event of a stock split, stock dividend or similar transaction involving our
common stock, the number of shares registered shall automatically be increased
to cover the additional shares of common stock issuable pursuant to
Rule 416 under the Securities Act of 1933, as amended.
(2) Represents
shares of common stock currently outstanding to be sold by the selling security
holders.
(3) The
offering price has been estimated solely for the purpose of computing the amount
of the registration fee in accordance with Rule 457(o). Our common stock is not
currently trading on any national exchange. Therefore, in
accordance with Rule 457, the offering price of $0.00533 was determined by the
price shares of common stock that we sold in a Regulation S offering that was
entered into between September 2009 and January 2010. The price of $0.00533
is a fixed price at which the selling security holders may sell their shares
until our common stock is quoted on the OTC Bulletin Board at which time the
shares may be sold at prevailing market prices or privately negotiated
prices.
(4) Fee previously paid.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
The information in this prospectus is not complete and may be
changed. The selling stockholders named in this prospectus may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and the selling stockholders are not soliciting offers
to buy these securities in any state where the offer or sale is not
permitted.
Subject To Completion, Dated May 6 ,
2010
|
|
PROSPECTUS
|
Clavis
Technologies International Co., Ltd.
17,375,200
shares of Common Stock
This
prospectus covers the offer and sale of up to 17,375,200 shares of our common
stock from time to time by the selling security holders named in this
prospectus. The shares of common stock covered by this prospectus are
shares that are held, beneficially and of record, by the selling security
holders. We are not offering any shares of common
stock. The selling security holders will receive all of the net
proceeds from sales of the common stock covered by this prospectus.
Our
common stock is presently not traded on any national market or securities
exchange or in the over-the-counter market. The sales price to the
public of the shares of our common stock offered by the selling security holders
under this prospectus is fixed at $0.00533 per share until such time as our
common stock is quoted on the Over-The-Counter (OTC) Bulletin Board. Although we
intend to request a registered broker-dealer to apply with the Financial
Industry Regulatory Authority to have our common stock eligible for quotation on
the OTC Bulletin Board, public trading of our common stock may never materialize
or, even if materialized, trading may not be sustained. If our common stock is
quoted on the OTC Bulletin Board, then the sale price to the public will vary
according to prevailing market prices or privately negotiated prices by the
selling security holders. To the best of our knowledge, none of the
selling security holders are broker-dealers, underwriters or affiliates
thereof.
As of
May 4 , 2010, we had 62,375,200 shares of common
stock issued and outstanding.
INVESTING
IN OUR SECURITIES IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK AND SHOULD
BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. PLEASE REFER TO “RISK FACTORS” BEGINNING ON PAGE
6 .
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Our
offices are located at #1564-1, Seojin Bldg., 3rd Fl., Seocho3-Dong, Seocho-Gu,
Seoul, Korea 137-874. Our telephone number is (011)
82-2-3471-9340. Our website can be found at
www.clavistech.com.
The date
of the prospectus is , 2010.
TABLE
OF CONTENTS
About
This Prospectus
|
3
|
Prospectus
Summary
|
4
|
Special
Note Regarding Forward-Looking Statements
|
5
|
Risk
Factors
|
6
|
Use
of Proceeds
|
12
|
Determination of Offering Price
|
12
|
Selling
Security Holders
|
12
|
Plan
of Distribution
|
16
|
Description
of Securities
|
18
|
Interest
of Named Experts and Counsel
|
18
|
Description
of Business
|
19
|
Description
of Property
|
38
|
Legal
Proceedings
|
38
|
Market
for Common Equity and Related Stockholder Matters
|
38
|
Where
You Can Find More Information
|
39
|
Index
Financial Statements
|
40
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
40
|
Quantitative
and Qualitative Disclosure About Market Risk
|
52
|
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
52
|
Directors,
Executive Officers, Promoters and Control Persons
|
52
|
Executive
Compensation
|
54
|
Security
Ownership of Certain Beneficial Owners and Management
|
56
|
Certain
Relationships and Related Transactions
|
57
|
Experts
|
57
|
Disclosure
of Commission Position of Indemnification for Securities Act
Liabilities
|
57
|
ii
ABOUT
THIS PROSPECTUS
Unless
the context otherwise requires, all references to “Clavis Technologies
International,” “Clavis Nevada,” “we,” “us,” “our,” “our company,” or “the
Company” in this prospectus refer to Clavis Technologies International Co.,
Ltd., a Nevada corporation, and its sole subsidiary, Clavis Technologies Co.,
Ltd., a corporation organized under the laws of the Republic of Korea, for the
applicable periods, considered as a single enterprise.
All
references to “Clavis Korea”, “Clavis Technologies” or “our subsidiary,” refer
to Clavis Technologies Co., Ltd., a corporation organized under the laws of the
Republic of Korea.
You
should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. For further information,
please see the section of this prospectus entitled “Where You Can Find More
Information.” The selling security holders are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted.
You
should not assume that the information appearing in this prospectus is accurate
as of any date other than the date on the front cover of this prospectus,
regardless of the time of delivery of this prospectus or any sale of a
security. Our business, financial condition, results of operations
and prospects may have changed since those dates.
3
PROSPECTUS
SUMMARY
This
summary highlights important features of this offering and the information
included in this prospectus. This summary does not contain all of the
information that you should consider before investing in our
securities. You should read this prospectus carefully as it contains
important information you should consider when making your investment
decision. See “Risk Factors” on page 6.
About
Clavis Technologies International Co., Ltd.
On
December 1, 2009, we acquired all of the outstanding shares of common stock of
entered into a with Clavis Technologies Co., Ltd., a corporation organized under
the laws of the Republic of Korea (“Clavis Korea”) ,
in an exchange of shares of the Registrant’s common stock for all of the issued
and outstanding shares of Clavis Korea under Section 368(a)(1)(B) of the
Internal Revenue Code (the “Share Exchange”). We are a Nevada
corporation with headquarters at 377 S Nevada Street, Carson City, Nevada
89703. We are a holding company and we have no
operations or assets other than our ownership of all of the outstanding shares
of capital stock of Clavis Technologies Co., Ltd.
Clavis
Technologies, Co. Ltd. was incorporated under the laws of Republic of Korea on
January 28, 2003. Clavis is located in Seoul, Korea, and has been engaged in the
development of EPCglobal Network software. Clavis provides ubiquitous computing
solutions using its proprietary Radio Frequency Identification (“RFID”)
middleware which is based on the Electronic Product Code Network and mobile
financial solutions. RFID middleware is software
and hardware used to manage RFID data and route it between an RFID reader (a
portable memory device such as an RFID tag, label or printed circuit board) and
a host computer (such as enterprise network systems.) RFID middleware
manages the collection of data from devices from different devices, which might
be distributed over a wide geographic area, and routes the data to a central
computer system. RFID middleware will also manage the RFID reader
device, converting data from electronic product code to business data formats
(e.g., ERP, WMS, Legacy systems, etc.). RFID middleware also
filters, distributes and manages data content.
Clavis Technologies enables its clients to tap into the wealth of
data captured by networked devices such as RFID readers or handheld devices to
extend the quality of valuable information to any device where companies or
their customers need. Historically, Clavis Technologies has
concentrated on the RFID business as a provider that sold only RFID middleware.
As the RFID market has experienced significant growth recently, Clavis
Technologies has launched its framework-based product packages, which has been
developed since 2003, including added-value RFID applications that can be
customized for a broad range of industries.
We currently offer RFID integrated solutions for customizing RFID
data into enterprise applications by progressively collecting and managing RFID
data stream. Clavis Technologies RFID Framework is a proprietary framework from
Clavis Technologies that integrates and manages a whole system, and complies
with EPCglobal standards. These solutions involve both hardware and
software. Our URISpagent is a hardware device interface software
system. It controls RFID Readers and sensors, collects tag and sensory
information to build RFID data set and then reports a list of formatted RFID
messages to data consuming servers. We offer URISware, which is an
ALE (Application Level Event)-compliant RFID middleware software
solution. URISware transforms RFID data into user readable
information which are then translated, filtered, and grouped by data
patterns. Our URISors is an object name service software
solution, which points an Electronic Product Code (EPC) querier to network
addresses where information on the EPC is stored. Lastly, we also offer URISwis,
which is an information service solution consisting of EPC information server
and an interface for accessing EPC-related information.
Principal
Executive Offices
Our
principal executive offices are located at #1564-1, Seojin Bldg., 3rd Fl.,
Seocho3-Dong, Seocho-Gu, Seoul, Korea 137-874. Our telephone number
is (011) 82-2-3471-9340 and our fax number is
(011) 82-2-3471-9337. Our website address is www.clavistech.com. The
information on our website is not incorporated by reference into this prospectus
and should not be relied upon with respect to this offering.
Recent Developments
In March 2010, we borrowed $44,250 from Hyun Sook Choi, a
shareholder of the Company , at annual
interest rate of 12% interest. This loan will mature in September
2011.
In April 2010, we renewed a borrowing of $86,420 from an
unrelated party at annual interest of 20.4% and with maturity in November
2010. As of December 31, 2009, the borrowing had an interest at an
annual rate of 14% and was overdue.
4
The
Offering
Shares
of common stock being registered
|
17,375,200
shares of our common stock offered by selling security
holders
|
Total
shares of common stock outstanding as of the date of this
prospectus
|
62,375,200
|
Total
proceeds raised by us from the disposition of the common stock by the
selling security holders or their transferees
|
We
will not receive any proceeds from the sale of shares by the selling
security holders
|
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus includes forward-looking statements. All statements other than
statements of historical facts contained in this prospectus, including
statements regarding our future results of operations and financial position,
business strategy and plans and objectives of management for future operations,
the development of the market for our products and the acceptance of our
products in these markets, are forward-looking statements. The words “believe,”
“may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and
similar expressions are intended to identify forward-looking statements. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial needs. These
forward-looking statements are subject to a number of risks, uncertainties and
assumptions, including those described in “Risk Factors.” In light of these
risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this prospectus may not occur, and actual results
could differ materially and adversely from those anticipated or implied in the
forward-looking statements.
This
prospectus contains industry data and other statistical information regarding
the RFID industry that we obtained from independent publications, government
publications, press releases, reports by market research firms or other
published independent sources. Although we believe these sources are reliable,
we have not independently verified their data.
5
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information before
deciding to invest in our common stock. The risks described below are not the
only ones facing our company. Additional risks not presently known to us or that
we currently consider immaterial may also adversely affect our business. We have
attempted to identify below the major factors that could cause differences
between actual and planned or expected results, but we cannot assure you that we
have identified all of those factors.
If any of
the following risks actually happen, our business, financial condition and
operating results could be materially adversely affected. In this case, the
trading price of our common stock could decline, and you could lose all or part
of your investment.
Risks
Related to Our Company
We
have a history of losses, and we expect to incur additional losses in the
future. We cannot be certain that we will achieve or sustain
profitability.
We have
never been profitable. We have experienced operating losses in the past, and we
expect to continue to incur additional operating losses in the future. We
incurred a net loss (not including any loss or gain from
currency translation) of $ 282,829 , $367,830 and $554,814
for the years ended December 31, 2009, 2008 and
2007, respectively. As of Dec ember 3 1 , 2009, we had an accumulated deficit of $ 2,720,951 . For the year ending
December 31, 2010, we will need approximately $1,451,000 in cash to continue our
operations as currently planned. As December 31, 2009, we had
$ 17,401 of available
cash. We have
also received a going concern opinion from our independent registered accounting
firm in its audit report for our fiscal year ended December 31, 2009. We
expect to be able to meet such cash needs with (i) cash generated from our
operations and (ii) capital raised from the private sale of equity, debt and/or
convertible securities. Our ability to achieve or sustain
profitability is based on a number of factors, many of which are out of our
control, including the increase in the use of RFID products by companies
generally, and the demand for our RFID products, in particular. We may never be able to generate sufficient revenues
or sell a sufficient volume of our software or middleware products to achieve or
sustain profitability on a quarterly or annual basis. We continue to have significant operating expenses,
and we expect to continue to incur considerable product development and
administrative expenses as we attempt to grow our business. We also expect to continue to incur significant
expenditures in our sales and marketing efforts. This continued
spending will have an adverse impact on our operating results if our revenues do
not grow sufficiently to cover the expenditures. Consequently, we will need to supplement cash generated by our
operations with capital raised from the sale of debt, equity and/or convertible
securities. If we fail to manage our cost structure and/or raise adequate capital , we may not achieve or
sustain profitability. If we are unable to raise
sufficient capital or our business does not grow because the use of RFID
by companies generally, and our RFID products in particular, do not materialize,
we may not achieve or sustain profitability.
We
rely on a few customers for a significant portion of our sales. If we were to
lose any one of our major customers, our sales and our operating results would
be adversely affected and our stock price would be negatively
affected.
In 2008,
Asiana IDT and KTNetworks accounted for approximately 70 % of our annual sales and in 2009, Korea Pallet Pool
Co , The Korean Ministry of Unification and
KTNetworks accounted for approximately 66 % of our
annual sales. KTNetworks accounted for approximately 30% and 21% of
our sales in 2008 and 2009, respectively. In 2010 we expect a
substantial portion of our sales to be from two different
customers. While we do not rely on any one repeat customer for a
substantial portion of our sales (not withstanding KTNetworks), we are dependent
on a few big customers for most of our sales. With the global
recession affecting capital spending by businesses, if we are unable to continue
to get additional or repeat business from a few big customers, our sales would
be significantly lower, which would have a negative effect on our stock
price.
Fluctuations
in the valuation of the Korean won could impact costs and/or revenues we
disclose in U.S. dollars, and could result in foreign currency
losses.
We are
exposed to a variety of market risks, including the effects of changes in
currency exchange rates and interest rates. See Part 7A. Quantitative and
Qualitative Disclosures About Market Risk.
Our
operating subsidiary, Clavis Korea, conducts its business in the Koran Won, its
functional currency. For SEC reporting purposes, Clavis Korea’s
financial information must be translated into U.S. Dollars. Any major
changes in the currency exchange rate between the Korean Won and the U.S. Dollar
may have a significant impact on the results of our operations. In
addition, the valuation of current assets and liabilities that are denominated
in a currency other than U.S. Dollars (such as the assets and liabilities of
Clavis Korea, which are in the Korean Won) can result in currency exchange gains
and losses. We cannot predict the effect of exchange rate fluctuations upon
future quarterly and annual operating results. The effect of currency exchange
rate changes may increase or decrease our costs and/or revenues in any given
quarter, and it may experience currency losses in the future. To date, we have
not adopted a hedging program to protect us from risks associated with foreign
currency fluctuations.
6
The markets we serve are highly
competitive and we may be unable to compete effectively if we are unable to
provide and market innovative and cost-effective products at competitive
prices.
We face
competition from large, multinational companies and other regional companies.
Some of these companies may have substantially greater financial and other
resources than we do. We compete primarily on the basis of efficient
installation capability and the effectiveness of our products to help our
customers manage RFID data. It is possible that our competitors will
be able to offer additional products, services, lower prices, or other
incentives that we cannot offer or that will make our products less
profitable. It is also possible that our competitors will offer
incentive programs or will market and advertise their products in a way that
will impact customers’ preferences, and we may not be able to compete
effectively.
We may be
unable to anticipate the timing and scale of our competitors’ activities and
initiatives, or we may be unable to successfully counteract them, which could
harm our business. In addition, the cost of responding to our competitors’
activities may affect our financial performance for any given reporting
period. Our ability to compete also depends on our ability to attract
and retain key talent, and develop innovative and cost-effective products. A
failure to compete effectively could adversely affect our growth and
profitability.
We
will incur increased costs as a result of being a publicly listed company, which
may negative affect our results of operations because of the added expense and
additional demands on our management.
The
Sarbanes-Oxley Act of 2002, as well as rules promulgated by the SEC requires us
to adopt corporate governance practices applicable to U.S. public companies.
These rules and regulations will increase our legal and financial compliance
costs and make certain compliance and reporting activities more time-consuming.
We also expect it to be more difficult and more expensive for us to obtain and
maintain director and officer liability insurance, which may cause us to accept
reduced policy limits and reduced coverage or to incur substantially higher
costs to obtain the same or similar coverage. As a result, it may be more
difficult for us to attract and retain qualified persons to serve on our board
of directors or as executive officers. We cannot predict or estimate the amount
of additional costs we may incur, but these additional costs and demands on
management time and attention may harm our business and results of
operations.
Our
officers have no experience in managing a public company, which increases the
risk that we will be unable to establish and maintain all disclosure controls
and procedures and internal controls over financial reporting and meet the
public reporting and the financial requirements for our business.
We are
highly dependent on our officers to develop and operate and manage our business.
Although our officers have substantial business experience, they have no
experience in managing a public company. They have no experience in establishing
and maintaining disclosure controls and procedures in compliance with the
securities laws, including the requirements mandated by the Sarbanes-Oxley Act
of 2002 which we will be required to comply with upon the
effectiveness of the registration statement in which this prospectus is
contained . This lack of experience with regard to public
company disclosure controls and procedures may result in our Securities Act
filings or our periodic reports not containing all of the information required
to be contained therein. We would be required to disclose in our
periodic reports any deficiencies in our disclosure controls and procedures,
such as the lack of experience in management in establishing and maintaining
disclosure controls and procedures. Such assessments by our
management may cause negative perception by investors of our common stock and
result in a decrease in the price and/or liquidity of our
stock. Additionally, to remedy such a deficiency, such as hiring and
training of personnel and implementation of multiple-party-review of our
filings, would result in significant increase in our operating expenses and
could result in lower earnings. The standards that must be met for
management to assess the internal control over financial reporting as effective
require significant documentation, testing and possible remediation to meet the
detailed standards. We may encounter problems or delays in completing
activities necessary to make an assessment of our internal control over
financial reporting. In addition, the attestation process by our independent
registered public accounting firm is new to us and we may encounter problems or
delays in completing the implementation of any requested improvements and
receiving an attestation of our assessment by our independent registered public
accounting firm. If we cannot assess our internal control over
financial reporting as effective, or our independent registered public
accounting firm is unable to provide an unqualified attestation report on such
assessment, investor confidence and share value may be negatively
impacted.
Increased
tensions with North Korea could adversely affect our operations and the price of
our common stock.
Our
operating subsidiary is based in Seoul, Korea. Relations between
Korea and North Korea have been tense over most of Korea’s history and the
Demilitarized Zone between the two countries is the most fortified border in the
world. Currently, the U.S. maintains approximately 28,500 troops in
the Republic of Korea. The level of tension between Korea and North
Korea has fluctuated and may increase or change abruptly over the years, as a
result of military skirmishes, North Korea’s military build and nuclear facility
program, sanctions imposed by the United States, military exercises by each
Korea and North Korea and missile tests and nuclear tests by North
Korea. We cannot assure you that recent events will not lead to an
escalation of tension with North Korea. Any further increase in geopolitical
tensions, resulting from testing of long-range nuclear missiles, continuing
nuclear programs by North Korea, transition of power in leadership in North
Korea, a break-down in existing contacts or an outbreak in military hostilities
could adversely affect our business, prospects, financial condition and results
of operations and could lead to a decline in the market value of our common
stock.
7
Our operations
and management are located outside of the United States and, therefore, it may
be difficult for an investor to enforce a U.S. judgment against our officers,
directors and/or assets or to assert US securities law claims or state corporate
law claims in the Republic of Korea.
We are a holding company with no operations or assets other than
our ownership of Clavis Technologies, Co., Ltd, a company incorporated in the
Republic of Korea (“Clavis Korea”). Our officers and directors and
our Korean accountants and attorneys are nonresidents of the United States, and
all of Clavis Korea’s assets and the assets of these persons are located outside
the United States. Therefore, it may be difficult to enforce a
judgment obtained in the United States, against us, Clavis Korea or any of our
or Clavis Korea’s officers or directors, in the U.S. or Korean courts based on
the civil liability provisions of the U.S. Federal securities laws or Nevada
corporate law. Additionally, it may be difficult for you to enforce
civil liabilities under U.S. Federal securities laws or Nevada corporate law in
original actions instituted in the Republic of Korea.
We
may need to raise additional capital, which may not be available on favorable
terms, if at all, which would adversely affect our ability to operate our
business.
The
recent financial and credit crisis has reduced credit availability and liquidity
for many companies. We believe, however, that the strength of our core business,
cash position, access to credit markets, and our ability to generate positive
cash flow will sustain us through the next 12 months. We are working
to reduce our liquidity risk by accelerating efforts to improve working capital
while reducing expenses in areas that will not adversely impact the future
potential of our business. As of September 30, 2009, our cash and cash
equivalents were $579,628 as compared to $865,902 as of December 31,
2008. Cash and cash equivalents decreased in 2009
primarily due to the expenditures of advance payments on
contracts. If we need to raise additional funds due to unforeseen
circumstances or material expenditures or if our operating losses are greater
than expected, we cannot be certain that we will be able to obtain additional
financing on favorable terms, if at all, and any additional financings could
result in additional dilution to our existing stockholders. If we
need additional capital and cannot raise it on acceptable terms, we may not be
able to meet our business objectives, our stock price may fall and you may lose
some or all of your investment.
We
depend on key personnel to manage our business effectively, and if we are unable
to hire, retain or motivate qualified personnel, our ability to design,
manufacture and sell our products could be harmed.
Our
future success depends, in part, on certain key employees, including key
technical personnel, and on our ability to attract and retain highly skilled
personnel. In particular, we are heavily
dependent on our Chief Executive Officer, Mr. Hwan Sup Lee, who brings in most
of our business, our Chief Marketing Officer, Ms. Ki Young You, who is
instrumental in coordinating our operations with our U.S. lawyers and
accountants as well as organizing our marketing efforts, and our Chief Financial
Officer, Mrs. So Lim Lee (no relation to Hwan Sup Lee), who addresses all of our
accounting and finance issues. The loss of the services of any
of our key personnel, the inability to attract or retain qualified personnel, or
delays in hiring required personnel, particularly finance, engineering, sales or
marketing personnel, may seriously harm our business, financial condition and
results of operations. Our key employees may terminate their
employment at any time. We do not have key person life insurance policies
covering any of our key employees. Our ability to
continue to attract and retain highly skilled personnel will be a critical
factor in determining whether we will be successful in the future. Competition
for highly skilled personnel is frequently intense, especially in Korea. We may
not be successful in attracting, assimilating or retaining qualified personnel
to fulfill our current or future needs.
Adverse
developments in Korea may adversely affect our financial condition and our
results of operations.
Our
financial condition and results of operations are subject to political,
economic, legal and regulatory risks specific to Korea, where most of our assets
are located and where we generate most of our income.
Developments
that could hurt Korea’s economy in the future include:
●
|
financial
and other problems of chaebols (Korean
conglomerates) or their suppliers and their potential adverse impact on
the Korean economy;
|
●
|
a
slowdown in consumer spending, a rising level of household debt and the
resulting slowdown in the Korean overall
economy;
|
●
|
adverse
changes or volatility in foreign currency reserve levels, exchange rates
(including depreciation of U.S. dollar or Korean
Won ), interest rates and stock
markets;
|
●
|
adverse
developments in the economies in other markets, including countries that
are important export markets for Korea, such as the United States, Japan
and China, or in emerging economies in Asia or elsewhere that could result
in a loss of confidence in the Korean
economy;
|
●
|
social
and labor unrest;
|
8
●
|
a
decrease in tax revenues and a substantial increase in the Government’s
expenditures for unemployment compensation and other social programs that,
together, would lead to an increased government budget
deficit;
|
●
|
deterioration
in economic or diplomatic relations between Korea and its trading partners
or allies, including deterioration resulting from trade disputes or
disagreements in foreign policy;
and/or
|
●
|
political
uncertainty or increasing strife among or within political parties in
Korea.
|
Additionally,
events related to terrorist attacks, developments in the Middle East, higher oil
and other commodity prices and the outbreak of endemics such as SARS or the H5N1
avian flu in Asia or the H1N1 swine flu in Mexico and other parts of the world
have increased and may continue to increase the uncertainty of global economic
prospects in general and the Korean economy in particular. Any further
deterioration of the Korean economy could further lower demand for by companies
in Korea for our RFID software products, which would in turn negatively impact
our financial condition and results of operations.
9
Risks
Related to Our Industry
Our industry has standards that are widely used and are
administered by EPCglobal. Changes in industry standards or our failure to get certified for such industry standards
could adversely affect our ability to sell our products and impair our
operating results.
In order
to encourage widespread market adoption of RFID technology, industry standards
have been developed by EPCGlobal, a joint venture between GS1 (formerly known as EAN International)
and GS1US (formerly known as Uniform Code Council, Inc.). GS1 is an
international not-for-profit association dedicated to the development and
implementation of global standards for supply and demand
chains. GS1US is the U.S. member of GS1. According to
Wikipedia, the GS1 System of standards, including EPCglobal Gen 2, is the most
widely-used supply-chain standards system in the world. On its web
site, GS1 states that its global system is used by over one million companies doing business across 145
countries. Consequently, we have designed our
products to comply with these standards. Changes in industry standards, or the development of
new industry standards, may make our products obsolete or negate the
improvements we have made in our products. For example, we are
currently focusing a majority of our product development and our sales and
marketing efforts on products that comply with the EPCglobal Gen 2
standard , because almost all of
our customers request it . If EPCglobal
changes its standards or if a new industry standard is developed by a third
party, and we do not change from the EPCglobal Gen 2, we may not be
able to sell our products and our revenue would decline. Our ability
to compete effectively may depend on our ability to adapt our products to
support relevant industry standards. We may be required to invest
significant effort and to incur significant expense to re-engineer our products
and services to address new or changed standards.
If our products and/or services do not meet
relevant industry standards, including compliance with any qualification or
certification processes, or if we are delayed in obtaining such certification,
we could miss sales opportunities and our revenue would decline, adversely
affecting our operating results, financial conditions, business and
prospects. In 2006,
EPCglobal made certification a requirement to member companies. We
expect to apply for such certification in early 2011. If we fail to
get certified, our ability to get additional business may be affected, which
would have an adverse effect on the growth of our revenue and
profits.
Widespread
market acceptance of RFID products in the application areas that we target has
been slow to develop. If the market for RFID products does not continue to
develop, or develops more slowly than we expect, our business may be
harmed.
The
market for radio frequency identification, or RFID, products in the application
areas that we target is relatively new and, to a large extent, unproven, and it
is uncertain whether RFID products for these applications will achieve and
sustain high levels of demand and market acceptance. To date, the adoption rate
for RFID technology has been slower than anticipated or forecasted by industry
sources. Although RFID holds great potential for companies, such as
making manufacturer’s supply chain management more efficient, the hefty cost of
implementing the technology -- software, customized RFID tags and RFID
readers/scanners -- has slowed its rate of adoption by manufacturers and
retailers, particularly in the current shaky economic climate. The
development of the markets for our RFID products and services will be dependent
upon other businesses and governmental agencies, both in Korea and else where in
Asia, implementing programs and initiatives to deploy RFID systems in their
supply chains and other settings. Any delay, slowdown or failure by
organizations to implement RFID systems throughout their supply chains, or to
adopt them more slowly than we currently anticipate, could materially and
adversely affect our business, operating results, financial condition and
prospects.
If
unauthorized access is obtained to customer RFID systems or data, including
through breach of security measures or unauthorized encoding of RFID tags,
customers may curtail or stop their use of RFID products and, as a result, would
not need our products, which would harm our business, operating results and
financial condition.
RFID tags
may be scanned and read by readers within a certain range. Unauthorized readers
may access a company’s proprietary information, even if security measures such
as shielding devices and encryption are used. For example, criminals seeking to
divert or steal certain pharmaceutical products could seek to identify them as
they pass through the supply chain by looking for cases with EPCs corresponding
to those products. In addition, it has been shown that it is possible to encode
RFID tags so that they may provide unauthorized access to or cause improper
changes in the systems or databases that scan those tags. Security breaches
could expose us to litigation and possible liability. If our customers’ security
measures are breached as a result of third-party action, employee error,
criminal acts by an employee, malfeasance or otherwise, and, as a result,
someone obtains unauthorized access to customer data, our reputation could be
damaged, our business and prospects may suffer and we could incur significant
liability.
Risks
Related to Our Stock
We
could issue additional common stock, which might dilute the book value of our
common stock.
Our board
of directors has authority, without action or vote of our stockholders, to issue
all or a part of our authorized but unissued shares. Such stock issuances could
be made at a price that reflects a discount or a premium from the then-current
trading price of our common stock. In addition, in order to raise capital, we
may need to issue securities that are convertible into or exchangeable for a
significant amount of our common stock. These issuances would dilute
your percentage ownership interest, which would have the effect of reducing your
influence on matters on which our stockholders vote, and might dilute the book
value of our common stock. You may incur additional dilution if holders of stock
options, whether currently outstanding or subsequently granted, exercise their
options, or if warrant holders exercise their warrants to purchase shares of our
common stock.
10
Our
board of directors has the power to designate a series of preferred stock
without shareholder approval that could contain conversion or voting rights that
adversely affect the voting power of holders of our common stock and may have an
adverse effect on our stock price.
Our
Certificate of Incorporation provide for the authorization of 10,000,000 shares
of “blank check” preferred stock. Pursuant to our Certificate of
Incorporation, our Board of Directors is authorized to issue such “blank check”
preferred stock with rights that are superior to the rights of stockholders of
our common stock, at a purchase price then approved by our Board of Directors,
which purchase price may be substantially lower than the market price of shares
of our common stock, without stockholder approval. Though we currently do
not have any plans to issue any such preferred stock, such issuance could give
the holders of such preferred stock voting control of the Company which would
have a negative effect on the voting power of the holders of our common stock
and may cause our stock price to decline.
Our
common stock is considered “a penny stock” and, as a result, it may be difficult
to trade a significant number of shares of our common stock.
The
Securities and Exchange Commission (“SEC”) has adopted regulations that
generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share, subject to specific
exemptions. Our common stock is presently not traded on any
national market or securities exchange or in the over-the-counter
market. The sales price to the public of the shares of our common
stock offered by the selling security holders under this prospectus is fixed at
$0.00533 per share until such time as our common stock is quoted on the
Over-The-Counter (OTC) Bulletin Board. Once our common stock becomes
eligible for quotation in the OTC bulletin board, we expect that the market
price for shares of our common stock to be less than $5.00 per
share. Consequently, it is likely that the market price for our
common stock will remain less than $5.00 per share for the foreseeable future
and therefore may be a “penny stock” according to SEC rules. This designation
requires any broker or dealer selling these securities to disclose certain
information concerning the transaction, obtain a written agreement from the
purchaser and determine that the purchaser is reasonably suitable to purchase
the securities. These rules may restrict the ability of brokers or dealers
to sell our common stock and may affect the ability of investors hereunder to
sell their shares. In addition, when, as we expect, our common stock is traded
on the OTC Bulletin Board, investors may find it difficult to obtain accurate
quotations of the stock and may experience a lack of buyers to purchase such
stock or a lack of market makers to support the stock price.
There
is currently no public market for our shares and if such a market materializes,
our stockholders may still not be able to resell their shares at or above the
price at which they purchased their shares.
There is
currently no established public trading market for our securities and an active
trading market in our securities may not develop or, if developed, may not be
sustained. We intend to apply for admission to quotation of our securities on
the OTC Bulletin Board after this prospectus is declared effective by the
SEC. If for any reason our common stock is not quoted on the OTC
Bulletin Board or a public trading market does not otherwise develop, purchasers
of the shares may have difficulty selling their common stock should they desire
to do so. No market makers have committed to becoming market makers
for our common stock and none may do so.
State
securities laws may limit secondary trading, which may restrict the states in
which and conditions under which you can sell the shares offered by this
prospectus.
Secondary
trading in common stock sold in this offering will not be possible in any state
until the common stock is qualified for sale under the applicable securities
laws of the state or there is confirmation that an exemption, such as listing in
certain recognized securities manuals, is available for secondary trading in the
state. If we fail to register or qualify, or to obtain or verify an
exemption for the secondary trading of, the common stock in any particular
state, the common stock could not be offered or sold to, or purchased by, a
resident of that state. In the event that a significant number of states refuse
to permit secondary trading in our common stock, the liquidity for the common
stock could be significantly impacted thus causing you to realize a loss on your
investment.
We
do not intend to pay dividends for the foreseeable future.
We have
never declared or paid any cash dividends on our common stock and do not intend
to pay any cash dividends in the foreseeable future. We anticipate
that we will retain all of our future earnings for use in the development of our
business and for general corporate purposes. Any determination to pay dividends
in the future will be at the discretion of our board of directors. Accordingly,
investors must rely on sales of their common stock after price appreciation,
which may never occur, as the only way to realize any future gains on their
investments.
11
USE
OF PROCEEDS
We will
not receive any proceeds from the sale of the shares by the selling
stockholders.
DETERMINATION OF OFFERING PRICE
Our common stock is presently not traded on any national market
or securities exchange or in the over-the-counter market. As there is no existing public market for our securities, the
shares offered for resale hereunder by the selling security holders must
initially be offered at a fixed price.
The sales price to the public of the shares of our common stock
offered by the selling security holders under this prospectus is fixed at
$0.00533 per share until such time as our common stock is quoted on the
Over-The-Counter (OTC) Bulletin Board and a public market exists for our common
stock). This fixed sales price was determined by using the most
recent price paid in cash that we received for our stock, which was the price in
our Regulation S offering to the selling security holders as described below in
the “Selling Security Holders” section.
SELLING
SECURITY HOLDERS
In
September 2009, we sold 15,000,000 shares of our common stock to five purchasers
in a transaction exempt from registration pursuant to Regulation S promulgated
by the SEC pursuant to the Securities Act of 1933, as amended (the “Securities
Act”). The purchase price per share in this Regulation S offering was
$0.00533 and all of the purchasers were non-U.S. persons as defined in
Regulation S.
In
December 2009 and January 2010, we sold an aggregate of 2,375,200 shares of our
common stock to 27 purchasers in a transaction exempt from registration pursuant
to Regulation S promulgated by the SEC pursuant to the Securities
Act. The purchase price per share in this Regulation S offering was
$0.00533 and all of the purchasers were non-U.S. persons as defined in
Regulation S.
This
prospectus covers the sale by the selling stockholders from time to time of
17,375,200 shares of our common stock sold by us in these Regulation S
offerings.
The term
" selling security holder" includes (i) each person and entity that is
identified in the table below (as such table may be amended from time to time by
means of an amendment to the registration statement of which this prospectus
forms a part) and (ii) any transferee, donee, pledgee or other successor of any
person or entity named in the table that acquires any of the shares of common
stock covered by this prospectus in a transaction exempt from the registration
requirements of the Securities Act of 1933 and that is identified in a
supplement or amendment to this prospectus.
We have
listed below:
|
●
|
the
name of each selling security
holder;
|
|
●
|
the
number of shares of common stock beneficially owned by each selling
security holder as of the date of this
prospectus;
|
|
●
|
the
maximum number of shares of common stock being offered by each of the
selling security holders in this offering;
and
|
|
●
|
the
number of shares of common stock to be owned by each selling security
holder after this offering (assuming sale of such maximum number of
shares) and the percentage of the class which such number constitutes (if
one percent or more).
|
None of
the selling security holders are a registered broker-dealer or an affiliate of a
registered broker-dealer.
During
the last three years, no selling security holder has been an officer, director
or affiliate of our company, nor has any selling security holder had any
material relationship with our company or any of our affiliates during that
period. Each selling security holder represented at the closing of
the private placement that it was acquiring the shares of our common stock for
its own account and not on behalf of any U.S. person, and the resale of such
shares has not been pre-arranged with a purchaser in the United
States.
The
shares of common stock being offered hereby are being registered to permit
public secondary trading, and the selling security holders are under no
obligation to sell all or any portion of their shares included in this
prospectus. The information contained in the following table is
derived from information provided to us by the selling security holders, our
books and records, as well as from our transfer agent.
12
Unless
otherwise indicated, each person has sole investment and voting power with
respect to the shares indicated. For purposes of this table, a selling security
holder is deemed to have “beneficial ownership” of any shares as of a given date
which such person has the right to acquire within 60 days after such
date.
For
purposes of this table, we have assumed that, after completion of the offering,
none of the shares covered by this prospectus will be held by the selling
security holders.
Name
and Address
of
Selling Stockholder
|
Common
Stock Beneficially
Owned
Prior
to the
Offering
|
Common Stock
Offered
Pursuant to
this Prospectus 1
|
Common Stock
Owned
Upon
Completion
of
this Offering
|
Percentage of
Common
Stock
Owned
Upon
Completion
of
this
Offering
|
||
Mandarin
Global Equity (1)
Kings
Court, 3rd Floor
Bay
Street
Nassau
New
Providence, Bahamas
|
3,000,000
|
3,000,000
|
0
|
*
|
||
Blue
Shade Inc. (2)
P.O.
Box 14
Clarkes
Estate
Cades
Bay
Nevis,
West Indies
|
3,000,000
|
3,000,000
|
0
|
*
|
||
Stoneland
Limited (3)
P.O.
Box 14
Clarkes
Estate
Cades
Bay
Nevis,
West Indies
|
3,000,000
|
3,000,000
|
0
|
*
|
||
Hampton
Bay Holdings Inc. (4)
Kings
Court, 3rd Floor
Bay
Street
Nassau
New
Providence, Bahamas
|
3,000,000
|
3,000,000
|
0
|
*
|
||
Belvedere
Holdings Corp. (5)
Kings
Court, 3rd Floor
Bay
Street
Nassau
New
Providence, Bahamas
|
3,000,000
|
3,000,000
|
0
|
*
|
||
Kashim
Ltd. (6)
31
Don House
Gibraltar
|
100,000
|
100,000
|
0
|
*
|
||
Glenstar
Enterprises Ltd. (7)
Clarkes
Estate
Charlestown
Nevis,
West Indies
|
100,000
|
100,000
|
0
|
*
|
||
Cyrus
Capital Corp. (8)
3rd Floor
Kings
Court
Nassau,
Bahamas
|
100,000
|
100,000
|
0
|
*
|
||
Shires
Ltd. (9)
15
Leeward Highway
Providenciales,
Turks and Caicos
|
100,000
|
100,000
|
0
|
*
|
||
Irwin
Rapoport
7415
Sherbrooke Street West
Montreal,
Quebec H4B 152
Canada
|
100,000
|
100,000
|
0
|
*
|
||
Mary
Ciappara
Fl.
4, 38 Salina Court
T.
Ashby Street
Marsacala,
Malta
|
100,000
|
100,000
|
0
|
*
|
13
Name
and Address
of
Selling Stockholder
|
Common
Stock Beneficially
Owned
Prior
to the
Offering
|
Common Stock
Offered
Pursuant to
this Prospectus 1
|
Common Stock
Owned
Upon
Completion
of
this Offering
|
Percentage of
Common
Stock
Owned
Upon
Completion
of
this
Offering
|
||
Peggy
Zammit
130
Bloor St. W
Suite
601
Toronto,
Ontario M55 1N5
|
100,000
|
100,000
|
0
|
*
|
||
Paul
Zammit
130
Bloor St. W
Suite
601
Toronto,
Ontario M55 1N5
|
100,000
|
100,000
|
0
|
*
|
||
Shari
McMaster
130
Bloor St. W
Suite
601
Toronto,
Ontario M55 1N5
|
18,800
|
18,800
|
0
|
*
|
||
Elisa
Maguolo
15
Weisman Street
Kefar
Saba, Israel
|
100,000
|
100,000
|
0
|
*
|
||
Avraham
Einhoren
c/o
Electro Tech Ltd.
2
Bloor Street West, Suite 735
Toronto,
Ontario M4W 3R1
Canada
|
100,000
|
100,000
|
0
|
*
|
||
Nama
Einhoren
34
Bavli Street
Tel
Aviv, Israel
|
100,000
|
100,000
|
0
|
*
|
||
Brian
Rapoport
5009
Clanranald, #30
Montreal,
Quebec H3X 253
Canada
|
18,800
|
18,800
|
0
|
*
|
||
Felicia
Cohen5009
Clanranald,
#30
Montreal,
Quebec H3X 253
Canada
|
18,800
|
18,800
|
0
|
*
|
||
Nahid
Shaygan
85
Skymark Drive, #2203
Toronto,
Ontario M24 3P2
Canada
|
100,000
|
100,000
|
0
|
*
|
||
Mohammad
Shaygan
21
– Camino Real
Calle
Winston Churchill
Patilla
Panama
City, Panama
|
100,000
|
100,000
|
0
|
*
|
||
Reza
Shaygan
85
Skymark Drive, #2203
Toronto,
Ontario M24 3P2
Canada
|
100,000
|
100,000
|
0
|
*
|
||
Felisa
Londono Esguerra
Edificio
Monaco, # 9-B
Calle
56
Ave.
Abel Bravo
Panama
City, Panama
|
100,000
|
100,000
|
0
|
*
|
||
Ludovina
C. De Dominguez
Calle
Emilio Castro, #14
Las
Tablas, Panama
|
100,000
|
100,000
|
0
|
*
|
14
Name
and Address
of
Selling Stockholder
|
Common
Stock Beneficially
Owned
Prior
to the
Offering
|
Common Stock
Offered
Pursuant to
this Prospectus 1
|
Common Stock
Owned
Upon
Completion
of
this Offering
|
Percentage of
Common
Stock
Owned
Upon
Completion
of
this
Offering
|
||
Gary
Dominguez
Calle
Emilio Castro, #14
Las
Tablas, Panama
|
100,000
|
100,000
|
0
|
*
|
||
Jacob
Dominguez
Edificio
Monaco, # 9-B
Calle
56
Ave.
Abel Bravo
Panama
City, Panama
|
100,000
|
100,000
|
0
|
*
|
||
Farhad
Amirkhani
1762
Seven Oaks Drive
Mississauga,
Ontario L5K 2N3
Canada
|
100,000
|
100,000
|
0
|
*
|
||
Irwin
Rapoport
5009
Clanranald, #30
Montreal,
Quebec H3X 253
Canada
|
18,800
|
18,800
|
0
|
*
|
||
Ji
Hye Lee
Kkachi
Maeul 1-danji Sunkyoung
Apt
109-2103
Gumi-dong
Bundang-gu
Seongnam-si
Gyeonggi-do 463-743 Korea
|
100,000
|
100,000
|
0
|
*
|
||
Hyun
Ki Kim
Kkachi
Maeul 1-danji Sunkyoung
Apt
109-2103
Gumi-dong
Bundang-gu
Seongnam-si
Gyeonggi-do 463-743 Korea
|
100,000
|
100,000
|
0
|
*
|
||
Jung
Suk Lee
101-110
Woosung Apt. 108-2203
Haengun-dong
Gwankak-gu
Seoul 151-775
Korea
|
100,000
|
100,000
|
0
|
*
|
||
Han
Sang Seo
Sosajukong
Apt 107-1001
Sosa-gu
Bucheo-si
Gyeonggi-do 422-230
Korea
|
100,000
|
100,000
|
0
|
*
|
||
Jae
Tack Han
401
ho
155-15,
Seokchon-dong
Songpa-gu
Seoul
138-843
Korea
|
100,000
|
100,000
|
0
|
*
|
||
TOTAL
|
17,375,200
|
* Amount
less than one percent.
Percentage
calculations are based on 62,375,200 shares of our common stock issued and
outstanding as of April 28, 2010.
______________________
(1)
|
Mehmet
Birol Ensari, the owner of Mandarin Global Equity, has the power to vote
and dispose of the Company’s securities held by Mandarin Global
Equity.
|
(2)
|
Wilfred
Gatambia Kamau, the owner of Blue Shade Inc., has the power to vote and
dispose of the Company’s securities held by Blue
Shade.
|
(3)
|
Yaroslava
Gryshyna, the owner of Stoneland Limited, has the power to vote and
dispose of the Company’s securities held by Stoneland
Limited.
|
(4)
|
Aysan
Celik, the owner of Hampton Bay Holdings Inc., has the power to vote and
dispose of the Company’s securities held by Hampton Bay
Holdings.
|
(5)
|
Nadiya
Shcherbyna, the owner of Belvedere Holdings Corp., has the power to vote
and dispose of the Company’s securities held by Belvedere
Holdings.
|
(6)
|
Mae
Robins, an officer of Kashim Ltd., has the power to vote and dispose of
the Company’s securities held by
Kashim.
|
(7)
|
Michael
Dwen, an officer of Glenstar Enterprises Ltd., has the power to vote and
dispose of the Company’s securities held by Glenstar
Enterprises.
|
(8)
|
Abbygail
Gibson, an officer of Cyrus Capital Corp., has the power to vote and
dispose of the Company’s securities held by Cyrus
Capital.
|
(9)
|
Ms.
Kofi Bain, an officer of Shires Ltd., has the power to vote and
dispose of the Company’s securities held by
Shires.
|
15
PLAN
OF DISTRIBUTION
As of the
date of this prospectus, there is no market for our securities. After
the date of this prospectus, we expect to have an application filed with the
Financial Industry Regulatory Authority for our common stock to be eligible for
trading on the OTC Bulletin Board. Until our common stock becomes
eligible for trading on the OTC Bulletin Board, the selling security holders
will be offering our shares of common stock at a fixed price of $0.00533 per
share of common stock. After our common stock becomes eligible for
trading on the OTC Bulletin Board, the selling security holders may, from time
to time, sell all or a portion of the shares of common stock on OTC Bulletin
Board or any market upon which the shares of common stock may be listed or
quoted currently the National Association of Securities Dealers OTC Bulletin
Board in the United States, in privately negotiated transactions or otherwise.
After our common stock becomes eligible for trading on the OTC Bulletin Board,
such sales may be at fixed prices prevailing at the time of sale, at prices
related to the market prices or at negotiated prices.
After our
common stock becomes eligible for trading on the OTC Bulletin Board, the shares
of common stock being offered for resale by this prospectus may be sold by the
selling security holders by one or more of the following methods, without
limitation:
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ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
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block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
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purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
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an
exchange distribution in accordance with the rules of the applicable
exchange;
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privately
negotiated transactions;
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settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
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broker-dealers
may agree with the selling security holders to sell a specified number of
shares at a stipulated price per
share;
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through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
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a
combination of any of these methods of sale;
or
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any
other method permitted pursuant to applicable
law.
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The
selling security holders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling security holders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling security holders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, but,
except as set forth in a supplement to this prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance with
FINRA/NASD Rule 2440 in the FINRA Manual; and in the case of a principal
transaction a markup or markdown in compliance with FINRA/NASD
IM-2440. Before our common stock becomes eligible for trading
on the OTC Bulletin Board, broker-dealers may agree with a selling security
holder to sell a specified number of the shares of common stock at a price per
share of $0.00533. After our common stock becomes eligible for
trading on the OTC Bulletin Board, broker-dealers may agree with a selling
security holder to sell a specified number of the shares of common stock at a
stipulated price per share.
16
In
connection with the sale of shares, the selling security holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the shares in the course of hedging the
positions they assume. The selling security holders may also sell shares short
and deliver these shares to close out their short positions, or loan or pledge
shares to broker-dealers that in turn may sell these shares. The selling
security holders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to that broker-dealer or other
financial institution of shares offered by this prospectus, which shares that
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect that
transaction).
We will
be paying certain fees and expenses incurred by us incident to the registration
of the shares.
We will
keep this prospectus effective until the earlier of (i) the date on which
the shares may be resold by the selling security holders without registration
and without regard to any volume limitations by reason of Rule 144 under the
Securities Act or any other rule of similar effect or (ii) all of the
shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The shares will be sold only
through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), any person engaged in the distribution of the
shares may not simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the selling
security holders will be subject to applicable provisions of the Exchange Act
and the rules and regulations there under, including Regulation M, which may
limit the timing of purchases and sales of the shares by the selling security
holders or any other person. We will make copies of this prospectus available to
the selling security holders and have informed them of the need to deliver a
copy of this prospectus to each purchaser at or prior to the time of the sale
(including by compliance with Rule 172 under the Securities Act).
Blue
Sky Restrictions on Resale
When a
selling security holder wants to sell shares of common stock under this
registration statement, the selling security holders will also need to comply
with state securities laws, also known as "Blue Sky laws," with regard to
secondary sales. All states offer a variety of exemption from
registration for secondary sales. Many states, for example, have an exemption
for secondary trading of securities registered under Section 12(g) of the
Securities Exchange Act of 1934 or for securities of issuers that publish
continuous disclosure of financial and non-financial information in a recognized
securities manual, such as Standard & Poor's. The broker for a selling
security holder will be able to advise a selling security holder which states
our shares of common stock is exempt from registration with that state for
secondary sales.
Any
person who purchases shares of common stock from a selling security holder under
this registration statement who then wants to sell such shares will also have to
comply with Blue Sky laws regarding secondary sales. When the
registration statement becomes effective, and a selling security holder
indicates in which state(s) he desires to sell his shares, we will be able to
identify whether it will need to register or will rely on an exemption there
from.
Penny
Stock Regulations
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:
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That
a broker or dealer approve a person’s account for transactions in penny
stocks; and
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That
the broker or dealer receives from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
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In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:
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Obtain
financial information and investment experience objectives of the person;
and
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Make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
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17
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Securities and Exchange Commission
relating to the penny stock market, which, in highlight form:
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Sets
forth the basis on which the broker or dealer made the suitability
determination; and
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Specifies
that the broker or dealer received a signed, written
agreement.
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Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
DESCRIPTION
OF SECURITIES
We are
currently authorized to issue 10,000,000 shares of preferred stock having a par
value of $.001 per share and 100,000,000 shares of common stock, having a par
value of $0.001 per share. As of the date of this prospectus, we had
62,375,200 shares of common stock issued and outstanding and no shares of
preferred stock issued and outstanding.
Common
Stock
We are
authorized to issue 100,000,000 shares of common stock, $0.001 par value per
share, of which 62,375,200 shares were issued and outstanding as of January 28,
2010. The holders of outstanding common stock are entitled to receive
dividends out of assets legally available therefore at such times and in such
amounts as our Board may from time to time determine. We have no
present intention of paying dividends on our common stock. Upon liquidation,
dissolution or winding up of the Company, and subject to the priority of any
outstanding preferred stock, the assets legally available for distribution to
stockholders are distributable ratably among the holders of the common stock at
the time outstanding. No holder of shares of common stock has a
preemptive right to subscribe to future issuances of securities by the
Company. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock. Holders of common stock
are entitled to cast one vote for each share held of record on all matters
presented to stockholders.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had, or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
The
consolidated financial statements of Clavis Technologies International Co., Ltd.
and subsidiaries as of December 31, 200 9 and
200 8 and for each of the years then ended has been
included herein and in the Registration Statement in reliance upon the report of
Kim & Lee Corporation, CPAs, an independent registered public accounting
firm, appearing elsewhere herein, and upon the authority of said firm as experts
in accounting and auditing.
Certain
legal matters in connection with this offering and Registration Statement are
being passed upon by Fox Law Offices, P.A., Exeter, New Hampshire.
18
DESCRIPTION
OF BUSINESS
Overview
Clavis
Technologies International Co., Ltd., a Nevada corporation ("the Company"), was
incorporated in Nevada on September 10, 2009. On December 1, 2009,
the Company entered into a definitive Share Exchange Agreement with Clavis
Technologies Co., Ltd., a Korean corporation (“Clavis Technologies” or “Clavis
Korea”), and the shareholders of Clavis Korea. Pursuant to the
agreement, the Company acquired 100% of the issued and outstanding capital stock
of Clavis Korea in exchange for 45,000,000 shares of the Company’s common stock,
representing approximately 75% of the issued and outstanding stock of the
Company. Clavis Korea was incorporated under the laws of Republic of
Korea on January 28, 2003. Clavis Korea is located in Seoul, Korea, and has been
engaged in the development of global Electronic Product Code (EPC) network
software. The Company’s goal is to be a global player in ubiquitous computing
solutions using its proprietary Radio Frequency Identification (“RFID”)
middleware which is based on the Electronic Product Code Network and mobile
financial solutions.
Clavis
Technologies has been providing RFID-enabled solutions, including business
processes, based on the EPCglobal standard s to various industrial markets as a vendor of RFID
technology since 2003. EPCGlobal is a joint venture between GS1 (formerly known as EAN International)
and GS1US (formerly known as Uniform Code Council, Inc.). GS1 is an
international not-for-profit association dedicated to the development and
implementation of global standards for supply and demand
chains. GS1US is the U.S. member of GS1. According to
Wikipedia, the GS1 System of standards, including EPCglobal Gen 2, is the most
widely-used supply-chain standards system in the world. On its web
site, GS1 states that its global system is used by over one million companies doing business across 145
countries .
As Clavis
Technologies combines its products, expertise, partnerships and integration
capability into solutions for a wide range of device computing applications,
Clavis Technologies enables its clients to tap into the wealth of data captured
by networked devices such as RFID readers or handheld devices to extend the
quality of valuable information to any device where companies or their customers
need.
Historically,
Clavis Technologies has concentrated on the RFID business as a provider that
sold only RFID middleware. As the RFID market has experienced significant growth
recently, Clavis Technologies has launched its framework-based product packages,
which has been developed since 2003, including added-value RFID applications
that can be customized for a broad range of industries.
Currently,
our results are heavily dependent upon sales to the retail and business to
business markets. Our customers are dependent upon retail sales, which are
susceptible to economic cycles and seasonal fluctuations. Furthermore, as
approximately two-thirds of our revenues and operations are located outside the
U.S., fluctuations in foreign currency exchange rates have a significant impact
on reported results. Our primary geographic markets are the
Republic of Korea, where almost all of our revenue has been earned, and
Thailand, where we have not yet earned any revenue but we are actively seeking
business in this country. For the year
ended Dec ember 3 1 , the three largest customers
accounted for 66% of sales and for the year ended December 31, 2008, the
two largest customers accounted for 7 0 % of
sales. In 2008 Asiana IDT, Inc. ( 42.19 %)
and KTNetworks ( 27.63 %) accounted for approximately
7 0 % of sales. In 2009 Korea Pallet Pool
Co., Ltd. ( 35.28 %), The
Korean Ministry of
Unification (15.2%) and KTNetworks ( 15.44 %)
accounted for approximately 66 % of
sales.
We
believe that some markets we serve are slowing as a result of the global
recession. In response to the current global market conditions, we are moving
forward with initiatives to reduce costs and improve working capital to mitigate
the effects of the economy on our business. We believe that the strength of our
core business and our ability to generate positive cash flow will sustain Clavis
Technologies International through this challenging period.
Our
business plan is to generate sustained revenue growth through selected
investments in product development and marketing. We intend to offset the cost
of these investments through product cost and operating expense reductions.
Revenue growth may also be generated by acquisitions of other companies that we
may identify to expand our product offerings and/or customer base. We
currently do not have any acquisitions targeted during 2010.
What
is RFID
Radio
frequency identification (RFID) is hardly a new technology. The
concept was first developed over 50 years ago as a method of identifying
friendly aircraft during World War Ⅱ. In
the past ten years, however, the technology has received great attention due to
a confluence of events, including technology advancement, heightened security
concerns and a greater emphasis on cost control.
In
general terms, RFID is a means of identifying a person or object using a radio
frequency transmission. In fact, the word transponder is a combination of
transmit and respond. In basic terms, a transponder will identify itself when it
detects a signal from a compatible device, known as a reader or interrogator, in
an RFID system.
In a
typical RFID system, transponders, often called tags, are attached to objects.
Each tag carries with its information: a serial number, model number, color,
place of assembly or any other imaginable data. When these tags pass through a
field generated by a compatible reader, they transmit this information back to
the reader, thereby identifying the object.
19
Tag
technology generally dictates the operating parameters of an RFID system.
Operating frequencies and tag power source are two of the many factors
influencing performance. Some systems can only read tags one-by-one as they pass
a reader on a conveyor belt, while others can identify 50 tags as a forklift
exits a loading dock door. No single combination is best suited for all
applications, despite some manufacturers’ contentions.
Critical
performance variables in an RFID system involve the range at which communication
can be maintained, the size of the information space contained on the tag, the
rate at which the communication with the tag can take place, the physical size
of the tag, the ability of the system to "simultaneously" communication with
multiple tags, and the robustness of the communication with respect to
interference due to material in the path between the reader and the
tag. Several factors determine the level of performance that can be
achieved in these variables. The factors include the legal/regulatory emission
levels allowed in the country of use, whether or not a battery is included in
the tag to assist its communication back to the reader, and the frequency of the
RF carrier used to transport the information between the tag and the
reader.
In the
near future, a majority of items will have RFID tags that identify each
individual unit, case or pallet. Add to this capacity the ability, through
wireless, to track tagged items in real-time and what emerges is a smart network
of connected items each item tagged, tracked, and connected.
RFID
employs Radio Frequency Communications to exchange data between a portable
memory device and a host computer or PLC. An RFID system typically
consists of a "Tag/Label/P rinted C ircuit B oard (PCB) " containing
data storage, an Antenna to communicate with the Tag, and a Controller to manage
the communication between the Antenna and the PC or PLC; the terms Reader or
Reader/Writer are used when the Antenna and Controller are combined in a single
housing.
The
Tag/Label/PCB is commonly attached to a product carrier, tote or even the
product itself, providing a remote database that travels with the
product.
What
is the Difference between Auto-ID and RFID
Automatic
identification, or Auto ID for short, is the broad term given to technologies
that are used to help machines identify objects. There are a host of
technologies that fall under the Auto-ID umbrella, including bar codes, smart
cards, voice recognition and similar technologies. Radio frequency
identification (RFID) is one type of Auto-ID technology. It uses radio waves to
automatically identify individual items.
What
is the significant advantage of RFID systems?
The
significant advantage of all types of RFID systems is the non-contact,
non-line-of-sight nature of the technology. Tags can be read through a variety
of substances such as snow, fog, ice, paint, crusted grime, and other visually
and environmentally challenging conditions where barcodes or other optically
read technologies would be useless. RFID tags can also be read in
challenging circumstances at remarkable speeds, in most cases responding in less
than 100 milliseconds. The read/write capability of an active RFID system is
also a significant advantage in interactive applications such as work-in-process
or maintenance tracking. Though it is a costlier technology (compared with
barcode), RFID has become indispensable for a wide range of automated data
collection and identification applications that would not be possible
otherwise.
20
Primary
Components of an RFID system
RFID
systems are comprised of three main components:
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Tags/Labels/PCBs;
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Antennas;
and
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Controllers
(transceiver with decoder)
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[A
simple Read/Write RFID system]
Tag/Label/PCB
An RFID
Tag/Label/PCB contains a coil, a programmed silicon chip and in Active
Read/Write systems, a battery.
Tags
Tags come
in a variety of sizes, memory capacities, temperature survivability and ranges.
Tags can be small enough to inject into animals or large enough to cover an
entire desktop. Nearly all tags are encapsulated for durability against shock,
chemicals, moisture and dirt. While tags are immune to most environmental
factors, their Read/Write ranges may be affected by close proximity to metal and
electromagnetic radiation.
Tags can
be powered by an internal battery (often called an "Active Tag") or by inductive
coupling ("Passive Tag"). Passive Tags have zero maintenance requirements and
virtually an unlimited life span. The life span of an Active Tag can be limited
by the battery life, although some Tags offer replaceable batteries or extremely
large capacity batteries.
Labels
Labels
have printed, punched, etched or deposited RF coils on a paper/polyester
substrate with a memory chip. Although less resistant to environmental
conditions than the encapsulated tags, the labels provide distinct, low-cost
benefits in open-loop (or disposable) applications. If the label is
involved in an open-loop system, it is affixed onto the product itself and is
shipped throughout the complete supply chain. The reference to disposability in
this application is the fact that when the item is eventually purchased by the
consumer (e.g. a PC), it is taken out of the supply chain loop. This
is in contrast to reusable Tag applications such as pallet tracking in which the
Tag will remain in the supply chain indefinitely. The low cost makes Labels
extremely attractive for high-volume applications.
PCBs (Printed Circuit
Boards)
PCBs (Printed Circuit Boards)
are meant to be embedded into a product or carrier. Although
impervious to high temperatures, such as is found in plastic pallet
manufacturing, the PCB requires some encapsulation if it is to have direct
contact with outside environmental conditions (e.g. rain, excessive moisture,
etc.). The benefits of RFID PCBs are the low cost and the ability to
endure environments in which Labels would not survive. Plastic pallet
manufacturing provides a good example of applying an RFID PCB. The PCB is placed
inside the plastic pallet prior to the ultrasonically welding phase of the
plastic pallet manufacturing cycle. The PCB converts the pallet to a "Smart
Pallet," and data can be read and written to the pallet throughout the complete
supply chain.
Antennas
An
antenna is a device that uses radio waves to read and write data to the
Tags/Labels/PCBs. Some systems use separate antennas and controllers,
while other systems integrate the antenna and controller into a single reader or
reader/writer. Antennas can be found in all shapes and sizes, including antennas
which can fit into very tight spaces and larger antennas for greater read/write
ranges. In addition, the antennas provide unique solution features.
One such example is the submersible antennas used for media disc drive
applications. The antenna is mounted under de-ionized water to read/write data
to the tags while submerged. Other examples include antennas that offer portals
around conveyors or even dock doors. These portals (also called tunnels and
gates) read or write to Tags/Labels/PCBs as they pass through.
21
Controllers
The
controller manages the communication interface between an antenna and a PC, PLC,
Server or Network Interface Module. The host system interfaces with
the controller and directs the interrogation of the tag via parallel, serial or
bus communications. RFID controllers can also be programmed to
perform process control directly from the data in the tag
memory. Some controllers even feature direct I/O points that can be
activated by the controller, making it possible to lessen the work load of the
host system.
Types
of RFID
Our software products can be adopted for use with any type of
RFID tag system Read Only, Read/Write (Reusable) and/or Read/Write (Disposable),
as described below. Consequently, the type of RFID is not a barrier
to use of our RFID software products.
Read-Only
In its
simplest form (read-only), RFID is used as a direct replacement for barcode
technology. The advantages it offers include 100% read accuracy, the ability to
survive demanding environments and the elimination of line-of-sight
requirements.
Read
accuracy is often a critical factor in choosing RFID. With fixed
position barcode readers, achieving a first-pass read accuracy of 95% to 98% is
quite respectable. Depending on environmental conditions and maintenance,
barcode read rates often decline to less than 90% over time. In most
environments, RFID can achieve 99.5% to 100% first-pass read
rates. Further, with no moving parts or optical components,
maintenance is not an issue.
The
demands of industrial environments also favor RFID. Some environments require
data collection systems to operate while immersed in fluids, chemicals, dirt and
heat. Examples include applications where tags and antennas transfer data while
completely submerged in water, or even cases where tags pass through paint ovens
at 240°C.
The value
of RFID is further realized when considering line-of-sight requirements. With
RFID, the tag does not have to be visible to the face of the reader. With the
ability to penetrate most non-metallic materials (assuming the proper frequency
is used), RFID tags can be embedded in totes, containers or even products.
Moreover, these containers and products can be sealed in over-pack materials
without any adverse effects on the data capture results.
Read/Write
(Reusable)
In a more
advanced system (read/write), RFID can be used as a dynamic electronic manifest,
allowing users to reduce traffic on networks, link remote production stations
and to backup host PCs or PLCs. As an example of this electronic
manifest, in automotive engine manufacturing, the tag is attached to an engine
carrier. Routing and build instructions are written to the tag. As the engine
and carrier approach the first station, the tag is interrogated by a
reader/writer to determine whether or not the engine should be at the station.
If affirmative, the build information is read off the tag and transferred to the
local processor, there decisions are made on how to instruct the automated
equipment. After the operations are performed, key quality data and/or
production results are stored on the tag. This allows users to later investigate
any quality issues across varying lots. In the case where the operation is
unsuccessful, this failure is also written to the tag. Then, prior to reaching
the next station, the engine is removed from the line and transferred to a
remote rework station. At the rework station, the tag is read to determine how
the engine must be repaired.
In the
electronic industry, several companies are taking the electronic manifests even
further, enabling production operations to continue even if the central server
or host fails. Since a tag can combine with a local processor at a given station
to communicate all build instructions to that station, operations can be
conducted without any dependency on the network.
Read/Write
(Disposable)
In an
even more advanced state, disposable labels are applied to products during
manufacturing and utilized throughout the entire supply chain (from
manufacturing through retail and out to the customers). In essence, the RFID
labels are used to create "smart products" that can communicate with their
surroundings.
Applying
RFID labels directly to television sets illustrates the value of creating "smart
products." During production, RFID labels are applied to the inside of the
televisions' housings. After utilizing the labels during production (as
explained above), the labels accompany the "smart products" into the
warehouse. In the warehouse, the labels are used for either locating
given model or routing different models to intended storage
locations. Further, with the ability of reader/writers to communicate
with multiple labels in the same field, all televisions can be read or written
to as they exit the warehouse, regardless of whether the televisions are stacked
on pallets or transported separately. This enables users to write
destination information to the "smart products" and to record what has been
shipped, providing the trigger for electronic billing. Upon reaching
the retail warehouse, the "smart products" are read upon entering the building,
providing instant receipt into inventory and automatic payment clearance for
suppliers. The "smart products" are then tracked into the retail
outlet where the label is used for anti-theft and real-time
inventory. Finally, as the televisions leave the outlet, key customer
and product configuration information is written to the RFID labels. If a
customer returns a given television set to the Service Center (or affiliated
Service Center), the product's complete record is pulled up on a computer
monitor prior to the customer reaching the service counter, bringing service to
a new level.
22
The
example reveals how "smart products" not only save money throughout the supply
chain, but also add value for the customer. This value-added feature is being
used by manufacturers (and retailers) to distinguish their products against
competitive offerings, enabling the manufacturers to increase sales and/or
margins.
EPC
Network (Auto-ID)
The
concept of EPC Network comes from Auto-ID and these words are used
interchangeably.
Automatic
identification, or Auto-ID for short, is the broad term given to a host of
technologies that are used to help machines identify objects. Auto
identification is often coupled with automatic data capture. That is, companies
want to identify items, capture information about them and somehow get the data
into a computer without having employees type it in.
The aim
of most Auto-ID systems is to increase efficiency, reduce data entry errors, and
free up staff to perform more value-added functions. There are a host of
technologies that fall under the Auto-ID umbrella. These include bar codes,
smart cards, voice recognition, some biometric technologies (retinal scans, for
instance), optical character recognition, radio frequency identification (RFID)
and others.
23
The EPC
Network (Auto-ID) is comprised of five fundamental elements:
EPC- The Electronic Product Code
(EPC) is the next generation of product identification. Like the U.P.C.
(Universal Product Code) or bar code, the EPC is divided into numbers that
identify the manufacturer, product, version and serial number. But, the EPC uses
an extra set of digits to identify unique items. The EPC is the only information
stored on the EPC tag. This keeps the cost of the tag down and provides
flexibility, since an infinite amount of dynamic data can be associated with the
serial number in the database.
EPC
Tags and Readers
- The EPC Network is an RFID-based system that uses radio frequency to
communicate between readers and tags. The EPC (a number for uniquely identifying
an item) is stored on a special tag. These tags will be applied during the
manufacturing process. In turn, using radio waves, the tags will “communicate”
their EPCs to readers, which will then pass the information along to a computer
or local application system.
Object
Name Service (ONS) -
The vision of an open, global network for tracking goods requires some
special network architecture. Since only the EPC is stored on the tag, computers
need some way of matching the EPC to information about the associated item.
That’s the role of the Object Name Service (ONS), an automated networking
service similar to the Domain Name Service (DNS) that points computers to sites
on the World Wide Web.
Physical
Markup Language (PML) -
The Physical Markup Language (PML) is a new standard “language” for
describing physical objects. When finalized, it will be based on the widely
accepted extensible Markup Language (XML). Together with the EPC and ONS, PML
completes the fundamental components needed to automatically link information
with physical products. The EPC identifies the product; the PML describes the
product; and the ONS links them together. Standardizing these components will
provide “universal connectivity” between objects in the physical
world.
ALE
(Application Level Events) - ALE is software
technology designed to manage and move information in a way that does not
overload existing corporate and public networks. ALE uses a distributed
architecture, meaning it runs on different computers distributed through an
organization, rather than from one central computer. ALEs are organized in a
hierarchy and act as the nervous system of the new EPC Network, managing the
flow of information.
With this
new EPC network, computers will be able to “see” physical objects, allowing
manufacturers to be able to track and trace items automatically throughout the
supply chain. This technology will revolutionize the way companies manufacture,
sell and buy products.
RFID
Market
Background
In recent
years, the most RFID markets have experienced considerable growth in the size of
orders experienced by companies in this market segment. For example,
there was a 900 million China ID card commitment delivered in 2008, which is
more than ten times anything that came before. In 2007, UPM Raflatac
landed an order to supply 30 million RFID tickets a months to Moscow transport
system. In August 2006, Confidex secured an order in China for 125
million smart tickets. Prior to that order, the largest single orders
worldwide for such tickets were 50 million and 20 million units in 2005 and
2004, respectively. In March 2006, Savi Technology won a $25 million order from
the US Military for RFID systems; the previous largest order for military RFID
systems was $111 million. In August 2006, RF Code secured an order from SYMX in
the U.S. for $30 million real-time monitoring software (“RTLS”), which was much
larger than any previous orders for RTLS.
We expect
the usage of RFID to migrate to East Asia as the dominant manufacturing
territory. As the manufacture of RFID hardware and software moves to
East Asia, it is expect that the execution of services such as system
integration will move there as well. China already has 85% of the
world’s manufacturing capacity, for products of all sorts and it will tag
exports to Western requirements. China is already executing the largest RFID
order by value (over one billion national identification cards for adults equal
to six billion dollars (including systems)). China has a policy of
making its own requirements throughout the RFID value chain as soon as
possible. RFID is leapfrogging technologies such as magnetic stripes
and barcodes.
RFID
Market size
In 2009
the value of the entire RFID market was expected to be $5.56 billion, up from
$5.25 billion in 2008. This includes tags,
readers and software/services for RFID cards, labels, fobs and all other form
factors. By far the biggest segment of this is RFID cards, and $2.57 billion of
the total $5.56 billion being spent on all other forms of RFID - from RFID
labels to active tags. In
the Korean and Thai markets, we are still a small player, in terms of size and
revenue. However, we have been in the RFID software industry since
2003. We also offer a total solution to our customers, including RFID
at competitive prices as we expect to earn little profit from hardware sales;
our focus is on profit margins from sales of our software and our expertise in
integrating our software with RFID systems. As a smaller company with
seven years experience in the RFID middleware industry, we are able to respond
quickly and flexibly to the needs of our customers. In addition,
because we have a seven year history of projects in the RFID industry in our
current target markets of Korea and Thailand, we believe that we have a stable
but growing competitive position as we use our experience in these markets as a
marketing tool to attract new business. In addition, we expect that
we the Korean Intellectual Property Office issues a patent for our patent
application we filed with Cheju Halla College, we expect to be able to use such
patent to develop additional business regarding product
authentication.
24
$
Billions
Source:
RFID Forecasts 2007-2017, IDTechEx, 2007
The
tagging of pallets and cases as demanded by retailers (mostly in the U.S.) will
use approximately 225 million RFID labels in 2009. RFID in the form
of tickets used for transit will require 350 million RFID tags in 2009. The
tagging of animals (such as pigs and sheep) is now substantial as it becomes a
legal requirement in many more territories, with 105 million RFID tags being
used for this sector in 2009. In total, 2.35 billion tags will be sold in 2009
versus 1.97 billion in 2008.
As a
summary from the latest research by IDTechEx, by 2017, the market value will be
over five times the size of the market compared to 2007, but the number of tags
supplied will be over 350 times that of 2007, driven by the development of lower
cost tags and installed infrastructure which will enable high volumes of
articles to be tagged.
Source:
RFID Forecasts 2007-2017, IDTechEx, 2007
25
Opportunities
in the RFID Market
We expect
the future emphasis for RFID products to shift towards process based
solutions. End user processes are highly diverse and require RFID
systems to integrate with their existing AIDC infrastructure. Such
process-centric solutions need to have high levels of flexibility incorporated
into the design to ensure that customized requirements are taken care
of. Even within manufacturing sectors, there is a higher focus
towards monitoring work-in-progress (WIP). High process efficiency
levels have a direct impact on the overall productivity and profitability of the
enterprise. Whatever be the vertical / application market
opportunity, end-users are likely to exhibit faster adoption rates when there is
a clear convergence of RFID technology and existing business processes in
place.
Source:
RFID Opportunities in 2008 , Frost & Sullivan,
2007
The
pharmaceutical industry is expected to emerge as an important vertical industry
for RFID in the next 12 months. The regulatory environment requiring compliance
with various state e-pedigree laws is among the biggest drivers for the vertical
market. Large distributors are leading the way in terms of deployment and
utilizing RFID data to drive their internal processes forward. Early
adopters and pharmaceutical manufacturers are continuing their RFID projects and
this is likely to further increase traction within the vertical
market.
Healthcare
distribution chains are another area of opportunity. Innovative uses of the
technology include hospitals deploying RFID-enabled refrigerators for
consignment of high value drugs that are extremely sensitive to temperature
changes. The appliances enable constant monitoring of the drug’s quality.
Combining RFID / RTLS systems with existing Wi-Fi networks and hospital
infrastructure systems is also expected to continue adoption rates in
2010. Patient tracking applications are likely to present a good
opportunity for products that integrate both RFID and barcodes (2D
technology).
26
The
retail supply chain will continue to incite interest and large suppliers are
expected to see most of the deployments in the short term. RFID
vendors are likely to witness greater success by targeting suppliers who work
with mandated retailers or retailers that have adopted the technology at the
store level. Tagging at the manufacturing / supplier facility alone will not
result in true value since the downstream benefit is not there when retailers
have not invested in RFID. High value categories such as apparel, footwear and
media are likely to have higher adoption rates of RFID technology. The
opportunity in the vertical lies in delivering RFID solutions that can be
integrated and scaled up with the existing retail network in place.
In-store
and point-of scale (POS) applications are emerging as key areas of interest for
RFID deployments. Retailers are evaluating RFID applications that enhance the
overall shopping experience for the customer. The momentum is particularly
strong in Europe and Asia where there is a higher emphasis on item level
tagging. By tagging individual items at the store level, RFID-enabled mirrors
and electronic displays enable the customer to view, select, and locate related
/ different items within the store.
Aerospace
is also a significant market to watch out for in the next few months. The
decision by Airbus to implement RFID systems based on its earlier pilot program
is a positive driver for the overall adoption within the vertical
market. Airport baggage handling applications are another
volume-driven RFID opportunity that is expected to witness pilot programs and
deployments next year. Recent projects in Milan, Argentina, UK,
Australia and Thailand reflect the technology’s gaining popularity outside North
America.
The
strong need for track and trace capabilities in chemical and petroleum
industries is expected to increase the demand for RFID within these markets.
Most petroleum products need to be certified according to the American Petroleum
Institute which requires manufacturers to provide a documented history of the
product. Efforts by the Chemical Industry Data Exchange (CIDX) in
aligning itself closely with EPCglobal are expected to support chemical
companies in furthering their RFID deployments.
Our
Products
Our software products can be adopted for use with any type of
RFID tag system Read Only, Read/Write (Reusable) and/or Read/Write (Disposable),
as described below. Consequently, the type of RFID is not a barrier
to use of our RFID software products.
Our software product development is done by
employees. We have not used any consultants or otherwise outsource
our software product development to third parties. We spent a limited
amount on research and development in 2009, which was primarily on salaries for
our software development employees, and because we expended large amounts on
research and development spent in 2007 and 2008. We expect to
increase our research and development in 2010.
For the year ended December 31, 2009, approximately $124,365, or
22% of total sales, was attributable to sales of our URISware; approximately
$89,639, or 16% of total sales, was from the sales of RFID hardware;
approximately $46,199, or 8% of our total sales, was attributable to sales of
URISwis; approximately $23,989, or 4% of total sales, was attributable to sales
of our URIS RTLS Solution; and approximately $18,480, or 3% of total sales, was
attributable to sales of URISpagent. URISors accounted for only 1% of
total sales, or approximately $5,810. These amounts do not include
the revenue attributable to the integration of the software products into the
client’s systems. A description of these and other products is set
forth below.
URIS
Network Group - Total system of EPCglobal Network
Clavis
Technologies URIS Network Group is a RFID integrated solution for customizing
RFID data into enterprise applications by progressively collecting and managing
RFID data stream. Clavis Technologies RFID Framework is a proprietary framework
from Clavis Technologies that integrates and manages a whole system, and
complies with EPCglobal standards. Therefore, because URIS Network Group is
built upon the Clavis Technologies RFID framework, it ensures performance
enhancement and system monitoring, diagnosis, and recovery.
27
URISware
URISware
is ALE (Application Level Event)-compliant RFID Middleware software
solution. It transforms RFID data into user readable information
which are then translated, filtered, and grouped by data patterns. Finally,
URISware combines
refined data sets and broadcasts them upon entry of corresponding reporting and
event triggering conditions.
28
The
architecture of URISware
The
advantages of our URISware are:
Stability
|
●
|
Uses
Clavis Technologies own URIS Framework to realize the optimized RFID
middleware
|
●
|
Reliable
stability by using lightweight system that minimizes use of
resource
|
|
●
|
Maximizes
convenience of operators and administers and system stability by
auto-monitoring, diagnosis and recovery
|
|
●
|
Transaction
circumstance for multi-tier under the distributed system
structure
|
|
●
|
Efficiently
manage the process by PTM (Process Transaction
Manager)
|
|
Compatibility
|
●
|
Supports
varied codes (64bit/96bit/128bit etc.)
|
●
|
Provides
interfaces to connect with varied solutions (ERP, WMS, Legacy system
etc.)
|
|
●
|
Provides
varied communications protocols (TCP/IP, HTTP, TCP, SMTP
etc.)
|
|
Scalability
|
●
|
Supports
integration of EPC Global Architecture-based products and URIS products by
Plug-in
|
●
|
Applies
user-defined business models
|
|
Standards
|
●
|
EPCglobal
Network ALE Specifications
|
Compliance
|
●
|
EPCglobal
TDS(Tag Data Standard) Specifications
|
●
|
EPCglobal
TDT(Tag Data Translation) Specifications
|
|
●
|
ISO
and Mobile RFID Specifications
|
URIS
Network Group has gradually specialized in these industries.
Logistics, Manufacturing,
and Retail
We
developed a single window-based integrated solution to track moving quantities
of products globally and to provide Discovery Services, tracking products’
histories per each domain in logistics, manufacturing, and retail industry that
should be tied to show whole flow of Supply Chain Management (SCM).
Aerospace
We have
focused on Ultra High Frequency (UHF) RFID system to handle passengers’ baggage
accurately and promptly as well as provide passengers with convenient services
such as a carousel indicator system, showing a passenger’s seat
number, when his or her baggage arrives on a carousel and specialized
EPCIS, showing the tracking information of baggage in real time for
aviation.
Casino
Unlike
prior RFID-based casino solutions which focused on HF RFID, we have developed
the UHF RFID casino solution to apply various applications without considering a
read rage in RFID system. In additions, we have developed RFID-based casino
hardware with Alien Technology Asia (ATA) to operate with our UHF RFID casino
solution. This system will change manual works (e.g. reports of rolling game,
betting management) into automated works.
29
Education
We have
provided efficient turnkey RFID solutions, including other technologies that
universities and institutes require, to build u-Lab or u-practical room with
real demo programs that are based on our various implementation
cases.
Asset Management (For All
Industries)
We have
developed RFID-based asset management solutions which are integrated with R3 and
ERP of SAP to be implemented system wide. This solution can accept
barcode system simultaneously so companies can use this system with
flexibility.
URISpagent
URISpagent
is a hardware device interface software system. It controls RFID Readers and
sensors, collects tag and sensory information to build RFID data set and then
reports a list of formatted RFID message to data consuming servers.
The
architecture of URISpagent
The
advantages of our URISpagent are:
Stability
|
●
|
Uses
Clavis Technologies own URIS Framework to realize the optimized
RFID system
|
●
|
Reliable
stability by using lightweight system that minimizes use of
resource
|
|
●
|
Maximizes
convenience of operators and administers and system stability by
auto-monitoring, diagnosis and recovery
|
|
●
|
Transaction
circumstance for multi-tier under the distributed system
structure
|
|
●
|
Efficiently
manages the process by PTM (Process Transaction
Manager)
|
|
Compatibility
|
●
|
Supports
varied vendors’ RFID devices (Alien, Symbol, LS Industrial Systems
etc.)
|
●
|
Supports
varied codes (64bit/96bit/128bit etc.)
|
|
●
|
Provides
varied communications protocols (TCP/IP, HTTP, TCP
etc.)
|
|
Scalability
|
●
|
Supports
integration of EPC Global Architecture-based products and URIS products by
Plug-in
|
●
|
Applies
user-defined business models
|
|
Standards
|
●
|
EPCglobal
Network ALE Specifications
|
Compliance
|
●
|
EPCglobal
TDS (Tag Data Standard) Specifications
|
●
|
EPCglobal
TDT (Tag Data Translation) Specifications
|
|
●
|
ISO
and Mobile RFID Specifications
|
30
URISors
URISors
is an object name service software solution. It points an Electronic Product
Code (EPC) querier to network addresses where information on the EPC is stored.
Also it defines and manages corresponding EPC information of RFID tags to
support the automated networking service.
The
architecture of URISors
The
advantages of our URISors are:
Stability
|
●
|
Uses
Clavis Technologies own URIS Framework to realize the optimized RFID ONS
(Object Name Service)
|
●
|
Reliable
stability by using lightweight system that minimizes use of
resource
|
|
●
|
Maximizes
convenience of operators and administers and system stability by
auto-monitoring, diagnosis and recovery
|
|
●
|
Transaction
circumstance for multi-tier under the distributed system
structure
|
|
●
|
Efficiently
manages the process by PTM (Process Transaction
Manager)
|
|
Compatibility
|
●
|
Supports
varied codes (EPC, ISO, UCODE, GS, IATA, mobile code
etc.)
|
●
|
Provides
varied communications protocols (HTTP, TCP, UDP etc.)
|
|
Scalability
|
●
|
Supports
integration of EPC Global Architecture-based products and URIS products by
Plug-in
|
●
|
Applies
user-defined business models
|
|
Standards
|
●
|
EPCglobal
Network ONS
|
Compliance
|
●
|
EPCglobal
TDS (Tag Data Standard) Specifications
|
●
|
NIDA
(National Internet Development Agency of Korea)
ODS
|
URISwis
URISwis
is an information service solution. It consists of EPC information server and an
interface for accessing EPC-related information. The information server contains
EPC-related information and business data such as date of manufacture, date of
expiration, and price. The interface is EPCIS-compliant and consists of a Query
and Capture Interface to extract and provide EPC and business
information.
31
The
architecture of URISwis
The
advantages of our URISwis are:
Stability
|
●
|
RFID
EPCIS uses Clavis Technologies own URIS Framework to realize the optimized
RFID system
|
●
|
Reliable
stability by using lightweight system that minimizes use of
resource
|
|
●
|
Maximizes
convenience of operators and administers by the web-based management
console
|
|
Compatibility
|
●
|
Has
independent Capture/Query Interface for any kinds of
languages
|
●
|
Provides
Web Service interfaces to connect with varied solutions (ERP, WMS, Legacy
system etc.)
|
|
●
|
Provides
varied communications protocols (HTTP, SOAP etc.)
|
|
Scalability
|
●
|
Supports
expansion attributes for event types
|
●
|
Supports
Capture Interfaces of standards and user-defined master
data
|
|
●
|
Queries
event and master data by varied parameters
|
|
Standards
|
●
|
EPCglobal
Network EPCIS Specifications
|
Compliance
|
●
|
HTTP
POST for the Capture Interface
|
●
|
SOAP
standard for the web service
binding
|
URIS
RTLS Solution
URIS RTLS
Solution is real-time monitoring software that tracks a location and condition
of each active RFID tag, alerts based on non-approval situations, backs up data
of tracking histories of active RFID tags, and records other movements or
changes after office hours. We have focused our URIS RTLS solutions
on hospitals’ services such as patient monitoring systems and company security
systems for visitor tracking systems that restrict access to facilities and
information.
URIS
Mobile RFID Platform
Clavis
Technologies’ URIS Mobile RFID Platform is a mobile RFID integration software
solution to accommodate a various kind of code systems such as EPC and
mCode. A RFID-Equipped cell phone reads and transforms a RFID tag code by
its corresponding coding scheme. Our URIS platform consists of Service
Gateway, ODS Resolver, History Manager and Tag Manager. We have developed
our URIS Mobile RFID platform to provide the mobile search services by mobile
phone attached a RFID Reader that can catch up data around users to search
information in real time. We will l also provide Mobile RFID Gateway
to integrate with the mobile internet easily and rapidly.
32
The
architecture of URIS Mobile RFID Platform
URIS
Service Gateway
Service
gateway detects and translates code information from tags as well as
authenticates who is user. There are three components, (1) Event Detection,
which detects information, such as EPC, mCode, micro-mCode, and mini-mCode, from
terminals, (2) Code Translator, which translates code information (EPC, mCode,
micro-mCode, and mini-mCode) into URN/FQDN form and (3) User Authentication,
which checks the user authentication based on user information which
came from terminals.
URIS
ODS Resolver
ODS
Resolver searches for location of server which has object/service information
related with Tag code. It has DNS Controller which can provide URL
list of object/service information which is equivalent to RFID tag codes in DNS
and directory service that manages object/service /URL information.
URIS
History Manager
History
Manager manages code/history information recorded in RFID tags and generates
serial numbers. There are 4 components: (1) Event Processor for
receiving/ recording/ inquiring issued/ sensed events which came from Tag
Manager and terminals, (2) Serial Generator that generates and manages serial
numbers, (3) Object Information for collecting/ saving/ inquiring
information of RFID tag codes, and (4) Tracking Information
for providing history information service to see integrated history
information which is distributed.
URIS
Tag Manager
Each code
system (EPC, mCode, micro-mCode and mini-mCode) is managed by Tag Manager
(registration, issuing, and disusing). Tag Manager has a Code
Generator that generates code which is compatible with each code system (EPC,
mCode, micro-mCode and mini-mCode), Tag Register (which can generate and disuse
codes as well as manages the code system), and Tag Printing that prints managed
codes with a tag printer.
u-Financial
Solutions
Our
u-Financial Solution has focused on u-Financial Portal system that provides
m-Banking and m-Stock by mobile phone, PDA and other portable devices in retail
market. In the business to business market, we have developed
u-Voucher, authenticated by RFID or 2D barcode that can be used to provide
payment services of public institutions.
m-Banking
Solution
Clavis
Technologies released the m-banking solution based on two different platforms,
each providing the same services – such as inquiring view of accounts, accounts
transaction history, view of checks and exchange rates; transferring service;
credit card service; and other typical banking services.
33
The
system overview of m-Banking Solution
m-Stock
Solution
Clavis
Technologies released the m-stock solution based on WIPI (Wireless Internet
Platform For Interoperability), the Korean Wireless Internet Standard, providing
such services as Quotes, Pre-Order, ECN (Electronic Communication Network) and
Account services.
Product
Upgrades and Diversification
URIS
Network Group
Following the Latest Updated
World Specification
The first
version of URIS is made by C# and based on .NET. Clavis Technologies
has prepared the new version URIS based on JAVA to support UNIX and Linux
platforms to provide extensible services for all kind commercialized operation
systems and platforms. Clavis Technologies plans to upgrade the URIS core
transaction engine supporting EPC Network specification Version 1.1 to be the
global RFID solution. We will perform this
update annually during the third and fourth quarters.
Expanding Enterprise
Application Interfaces
Clavis
Technologies expects to upgrade the business logics of URIS Network Group for
each step of the enterprise RFID section supporting applications of industries
of Government, Aerospace, CPG, Heath Care, Logistics, Manufacturing, and Retail
based on customers’ needs as well as Clavis Technologies’ knowledge
accumulated since 2003. Considering
various Database Management System (DBMS) and backend systems, these interfaces
will be modulized to integrate easily and rapidly with minimizing errors. If we are able to secure a partnership with SAP
Korea, we expect to perform this upgrade during the last two quarters of 2010
and the first two quarters of 2011.
Enhancing Voluminous
Transaction Capability
Because
of the voluminous transactions that we expect will be appearing in the specific
industrial area (i.e., distribution, logistics, etc.) in near future, Clavis
Technologies has enhanced the transaction capability to develop an advanced RFID
application platform to deploy in any industry stably and
immediately.
URIS
RTLS Solution
Handling an extensive scale
of Active RFID tags’ data
Based on
customers’ requirement, Clavis Technologies expects to upgrade the data
processing to provide data storage of a large scale
of active RFID tags’ data as well as various monitoring and reporting functions
especially in small areas or limited areas where consumer security is a high
priority. Such updates will be made each year
and are dependent on the requirements of any given projects in such
year.
Ultra-Wideband (UWB)
Application
Clavis
Technologies will gradually focus on this application as UWB becomes more widely
used. UWB allows for high data throughput with low power consumption for
distances of less than 10 meters, or about 30 feet, which is very applicable to
the digital home requirements. We expect to have
a UWB application by the middle of 2011 for anticipated project at Korean
steelmaker.
34
URIS
Mobile RFID Platform
Developing the Mobile RFID
Middleware
Clavis
Technologies expects to develop the new version RFID middleware that can be
embedded in mobile or PDA, as a personal device (as opposed
to PDAs and hand-held devices used for industrial purposes) , that can
provide people with the unique and individual RFID services comparing with
enterprise services in near future. We expect to
develop this mobile middleware by the end of the third quarter of 2011, and
provided we finalize our partnership with Innoace (a Korean mobile solutions
provider).
u-Financial
Solution
Developing the m-Payment
Platform
Clavis
Technologies expects to develop various m-Payment platforms (i.e.,
Transportation card, Credit card, Debit card, Point card, Cashback Credit card,
e-Purse, Micro-payment etc.) to provide unlimited payment ways by a mobile
handset. We expect to develop this mobile
payment platform the end of the second quarter of 2011, and provided we finalize
our partnership with Innoace (a Korean mobile solutions
provider).
Developing u-Voucher
Solution
Clavis
Technologies expects to develop u-voucher solution based on 2D bar codes by
mobile internet and RFID tags by mobile RFID system to provide fast and easy
payment service to users. The Korean Ministry of
Health and Welfare wants a u-Voucher system developed. During 2010,
we will be a consultant to the Ministry of Health on the
u-Voucher. Based on the results of our consultancy, we may develop
this solution. If we develop the u-Voucher solution, we expect to
complete such development by the end of the second quarter of
2011.
Developing the m-Financial
Portal Service Platform
Clavis
Technologies will upgrade m-banking solution depending on mobile system
applications that banks plan to deploy in their works firstly and then develop
the m-Financial portal service platform, especially enhanced for m-Payment ways,
integrated Clavis Technologies m-banking service platforms with other
companies’’ m-stock service platforms. We expect
to develop this platform by the end of 2012.
Strategic
Relationships
EPCglobal
The
EPCglobal consortium develops industry standards for the use of RFID technology
in supply chains. EPCglobal is the organization entrusted by industry to
establish and support the EPCglobal Network™. The EPCglobal
consortium also is involved in the development of EPCglobal Standards via
EPCglobal’s Action & Working Groups and the EPCglobal Certification and
Accreditation Program testing. We joined EPCglobal’s Action &
Working Groups in 2004 as a solution subscriber
in which we participate in various action groups
that address standard specifications, business issues, software issues and other
matters .
ETRI
(Electronics and Telecommunications Research Institute)
Established
in 1976, ETRI is a non-profit government-funded research organization that has
been at the forefront of technological excellence for more than 25 years. It has
relationship with us for core technology of RFID Middleware. We have had a couple of development projects with
ETRI in regard to RFID Reader Emulators. We enjoy a strong
professional relationship with this research center through personal
relationships with some of the researchers. We do not have a formal
agreement that governs our relationship with ETRI.
IBM
Korea
We
developed SCM based on Auto-ID System for Sales of IBM Korea in
Korea. Our RFID middleware is customized for IBM platforms such as
DB2 and Websphere, In 2004, we commenced a two
year contractual partnership with IBM Korea in which we analyzed IBM RFID
software for IBM as well as prepare seminar materials to introduce IBM RFID
solutions. Although our contractual partnership ceased in 2006, we
still maintain personal relationships with IBM Korea’s staff from which we
exchange advice and analysis on RFID business issues.
RFID
Systems and Mobile RFID System
We have
provided RFID middleware and hardware and consulting on RFID systems with many
major Korean corporations. We are also developing with Korea’s major
telecommunication companies, SK Telecom and KTF, new mobile Internet
business. In addition, we have completed
projects with major Korean financial institutions towards developing mobile banking
capabilities.
Our Intellectual Property
Because our RFID middleware is based on the open standards by
EPCglobal, we do not maintain any copyright protection for our RFID
middleware. However, in the future, we expect to submit patents for
unique applications of our RFID middleware. For example, in September
2008, we and Cheju Halla College (located in Jeju-si, Korea) submitted a patent
application with the Korean Intellectual Property Office entitled “Method and
System for providing Genuine Authentication Service Using Radio Frequency
Identification.” This patent application is based on using RFID
technology deployed to determine if a product is authentic or
counterfeit. For example, in Cheju, black pork is a well-known local
product and very expensive. However, some businesses sell fake black
pork. Our system can be used to check whether the black pork being
sold is fake or authentic.
35
Legal and Regulatory Requirements
In general, we do not have to comply with any special legal or
regulatory requirements to conduct our business. In Korea, in order
to bid on government projects, we have to register with the Korean Public
Procurement Service. If we seek government projects in our countries,
we expect would have to register with a government agency to submit a bid on any
such government project. In addition, in early 2011, we expect to
submit an application for certification by EPCglobal. While this
certification is not a requirement to conduct business, it will make it easier
for us to conduct our business because it will be a comfort to potential
customers that our products comply with the EPCglobal Gen 2
standard. We do not expect to incur any material costs with respect
to the EPCglobal certification nor with our registration to bid on Korean
government contracts.
Suppliers
While we develop our own software, we have four main hardware
suppliers: Alien Technology (a provider of RFID hardware
manufacturer), NextID (a reseller of AeroScout Wi-Fi
based Active RFID products), Onnuri Electronics (a
reseller of ATID Company hardware for mobile RFID) and LG Industrial System (a
Korean manufacturer of RFID equipment). We are not dependent on any
one supplier for our RFID hardware, and we could replace any such supplier in a
reasonably quick time frame.
Competitors
Some of
our main competitors are Reva Systems, GlobeRanger, OATSystems and
RedPrairie. Some of these competitors have substantially greater
financial and personnel resources than we do.
Reva
systems
Reva
Systems develops radio-frequency identification (RFID) network infrastructure
products that enable customers to rapidly deploy scalable solutions in any
environment. Reva's standards-based Tag Acquisition Processor (TAP)
appliances facilitate improved system performance, manageability and security
while significantly lessening implementation time and
complexity. Reva products are delivered by a global network of
partners and deployed worldwide across a range of innovative applications
spanning industries such as Aerospace, Contract Manufacturing, Discrete
Manufacturing, Consumer Packaged Goods, Retail, Consumer Electronics, Logistics,
and Healthcare/Life Sciences. Reva was founded in 2004, and is
headquartered in Chelmsford, Mass.
36
GlobeRanger
GlobeRanger
is a provider of RFID and mobility software solutions. GlobeRanger
owns an innovative platform, iMotion, which provides the critical software
infrastructure that transforms real-time data, from the edge of the enterprise,
into actionable information. iMotion serves as the foundation for GlobeRanger
and its partners to rapidly develop, deploy, and manage RFID and mobile
applications. Founded in 1999, GlobeRanger is headquartered in
Richardson, Texas.
OATSystems
OATSystems,
Inc. founded in 2001, is the developer of deployed standards-based RFID
solutions. OATSystems has worked closely with MIT's Auto-ID Center, to develop
many of the key standards and technologies that make commercial deployments of
RFID possible. OATSystems' Senseware - the company's flagship product - provides
a complete and powerful standards-based RFID solution for companies in the
retail, CPG, manufacturing, pharmaceutical, and logistics markets. Checkpoint
Systems, Inc. (NYSE: CKP), a leading manufacturer and marketer of
identification, tracking, security and merchandising solutions for the retail
industry and its supply chain, acquired OATSystems in June 2009, and OATSystems
is operating as a division of Checkpoint.
RedPrairie
RedPrairie,
founded in 2003, developed RFID-enabled suite of supply chain execution
solutions and applications for international trade logistics, mobile resource
management, supply chain security and inventory optimization to address the
broader needs for global supply chain management and security. RFID technology
is an integral part of RedPrairie’s supply chain suite. RedPrairie
has also created RFID Igniter™ and RFID Accelerator™. These applications can be
easily integrated (“bolted on”) with any ERP or distribution
system.
Marketing
To market
our products and services, we plan to leverage our relationships with RFID
organizations, primarily EPCglobal, as well as our prior customers and major
RFID hardware vendors. We have a good working relationship with
a number of Korean companies, such as LG Electronics and SK Telecom, from which
we hope to leverage additional business both within Korea and in Southeast
Asia.
We expect
to sell our products and services through three channels:
1.
|
Direct
to end user through our own sales
force;
|
2.
|
Through
a third party that will purchase our products on an ad hoc basis;
and/or
|
3.
|
In
conjunction with our number of strategic
partners.
|
Our
objective is to generate approximately 30% of our sales from direct selling
efforts and approximately 70% of sales to be generated through third parties
(such as existing and prior customers as well as vendors and strategic
partners).
Our
Research and Development
URIS
Network Group
As a main
product in our company, we have prepared URIS Network Group to specialize in the
EPC Interface based on global standards to apply them to real industrial fields
more efficiently and to get the certification from EPCglobal. In
additions, we plan to provide URIS duplex Monitoring System (MTS) that monitors
RFID hardware and EPCglobal Network servers as well as notices the system
administrator to check up when an error is happened.
URIS
RTLS Solution
We plan
to develop a RTLS Data Hub system that can accept both technologies, Active RFID
and UWB, to process the collected data from various RTLS hardware
simultaneously. The user interface of the monitoring system program will be
improved by using Flex and Flash to improve the legibility of the user data.
Such technology show efficient results when large-scale tags are used in a
specific space.
Mobile
RFID Platform
We are
interested in mobile RFID client software that can be embedded in a mobile phone
to process RFID tags data with integrating a mobile software platform. This is a
critical technology of Mobile RFID system and takes part as a significant
mechanism. We plan to engraft the integrated technology between EPCIS and
Discovery Service to realize mobile search services integrated with RFID tags
and objects’ information.
37
u-Financial
Solution
The
technological development strategy of u-Financial Solution accepts a mobile
payment mechanism using the biological information of the user in order to
promote the security of the original u-Financial Portal. We plan to accept a
mobile payment technology that allows financial payment less than US$30 using
credit card information inserted in a portable device’s chip and contains
biological identification mechanisms (e.g., fingerprint or iris) to strengthen
the security level.
Employees
As of
December 31, 2009, we had 14 full-time employees, three of whom are
involved primarily in financial management and administration of our
company.
DESCRIPTION
OF PROPERTY
We lease
approximately 2,665 square feet for our executive offices located at #1564-1,
Seojin Bldg., 3rd Fl., Seocho3-Dong, Seocho-Gu, Seoul, Korea 137-874. We have
extended our lease until January 30, 2010. We expect to renew this
lease prior to or soon after the end of such lease term. Our monthly
rent is approximately $4,000. We believe this space is suitable for
our present operations and adequate for foreseeable expansion of our
business.
LEGAL
PROCEEDINGS
We are
not currently a party in any legal proceedings.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Admission
to Quotation on the OTC Bulletin Board
We intend
to have our common stock be quoted on the OTC Bulletin Board. If our securities
are not quoted on the OTC Bulletin Board, a security holder may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of our securities. The OTC Bulletin Board differs from national and regional
stock exchanges in that it:
(1) is
not situated in a single location but operates through communication of bids,
offers and confirmations between broker-dealers, and
(2)
securities admitted to quotation are offered by one or more Broker-dealers
rather than the "specialist" common to stock exchanges.
To
qualify for quotation on the OTC Bulletin Board, an equity security must have
one registered broker-dealer, known as the market maker, willing to list bid or
sale quotations and to sponsor the company listing. We expect to have an
agreement with Pennaluna & Company, Inc., a registered broker-dealer, as the
market maker, willing to list bid or sale quotations and to sponsor the Company
listing. If it meets the qualifications for trading securities on the OTC
Bulletin Board our securities will trade on the OTC Bulletin Board until a
future time, if at all, that we apply and qualify for admission to quotation on
the NASDAQ Global Market. We may not now and it may never qualify for
quotation on the OTC Bulletin Board or be accepted for listing of our securities
on the NASDAQ Global Market.
Our
Transfer Agent
We have
appointed Olde Monmouth Stock Transfer Company, with offices at 200 Memorial
Parkway, Atlantic Highlands, New Jersey 07716, phone number 732-872-2727, as
transfer agent for our shares of common stock. The transfer agent is responsible
for all record-keeping and administrative functions in connection with our
shares of common stock.
Dividend
Policy
We have
never declared or paid any cash dividends on our shares of common stock nor do
we anticipate paying any in the foreseeable future. Furthermore, we expect to
retain any future earnings to finance our operations and expansion. The payment
of cash dividends in the future will be at the discretion of our Board of
Directors and will depend upon our earnings levels, capital requirements, any
restrictive loan covenants and other factors the Board considers
relevant.
38
Holders
of Common Stock
As of
January 28, 2010, the shareholders' list of our shares of common stock showed 64
registered shareholders and 62,375,200 shares issued and
outstanding.
Securities
authorized for issuance under equity compensation plans
We
currently do not have any equity compensation plans.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the shares of common stock to be sold in this
offering. This prospectus, which constitutes part of the registration statement,
does not include all of the information contained in the registration statement
and the exhibits, schedules and amendments to the registration
statement.
Some
items are omitted in accordance with the rules and regulations of the
SEC. For further information with respect to us and our common stock,
we refer you to the registration statement and to the exhibits and schedules to
the registration statement filed as part of the registration
statement. Statements contained in this prospectus about the contents
of any contract or any other document filed as an exhibit are not necessarily
complete and, and in each instance, we refer you to the copy of the contract or
other documents filed as an exhibit to the registration
statement. Each of these statements is qualified in all respects by
this reference.
You may
read and copy the registration statement of which this prospectus is a part at
the SEC’s public reference room, which is located at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. You can request
copies of the registration statement by writing to the SEC and paying a fee for
the copying cost. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the SEC’s public reference
room. In addition, the SEC maintains an Internet website, located at
www.sec.gov, which contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC. You may
access the registration statement of which this prospectus is a part at the
SEC’s Internet website.
Upon the
effectiveness of the registration statement of which this prospectus is a part,
we will become subject to the full informational and periodic reporting
requirements of the Exchange Act. We will fulfill our obligations
with respect to such requirements by filing periodic reports and other
information with the SEC. We intend to furnish our stockholders with
annual reports containing consolidated financial statements certified by an
independent registered public accounting firm. We also maintain a website at
www.clavistech.com. Our website is not a part of this prospectus.
39
CONSOLIDATED FINANCIAL STATEMENTS
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
TABLE
OF CONTENTS
Page
|
|
1. Report
of Independent Registered Public Accounting Firm
|
F-1
|
2. Consolidated Balance Sheets as of December 31,
200 9 and 200 8
|
F-2
|
3. Consolidated Statements of Operations for the years
ended December 31, 200 9 and 200 8
|
F-3
|
4. Consolidated Statements of Stockholders’
Deficit and Other Comprehensive Loss for the years ended December 31,
200 9 and 200 8
|
F-4
|
5. Consolidated Statements of Cash Flows for the years
ended December 31, 200 9 and 200 8
|
F-5
|
6. Notes
to Consolidated Financial Statements
|
F-6
|
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Clavis
Technologies International Co., Ltd.
We have
audited the accompanying consolidated balance sheets of Clavis Technologies
International Co., Ltd. (a Nevada corporation ) and
subsidiaries (collectively , the "Company") as of December 31, 200 9 and 200 8 , and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the years ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes
of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 200 9 and 200 8 , and
the results of its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring
losses and has a working capital deficit which raises substantial doubt
about its ability to continue as a going concern. Management’s plan in regard to
these matters is also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Kim
and Lee Corporation, CPAs
Los
Angeles, California
April 15 , 20 1 0
F-2
CLAVIS TECHNOLOGIES INTERNATIONAL
CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER
31, 200 9 AND 200 8
ASSETS
|
||||||||
200 9
|
200 8
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
17,401
|
$
|
1 9 , 3 0 9
|
||||
Accounts
receivable
|
10
|
784
|
||||||
Inventory
|
-
|
11,945
|
||||||
Prepaid
expenses and other assets
|
44, 189
|
6 2 7
|
||||||
Total
Current Assets
|
61,600
|
32,665
|
||||||
PROPERTY
AND EQUIPMENT, net
|
8,789
|
22,488
|
||||||
SECURITY DEPOSIT
|
43,296
|
39,620
|
||||||
RESTRICTED CASH
|
420,001
|
846,593
|
||||||
TOTAL
ASSETS
|
$
|
533,686
|
$
|
941,366
|
||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
200 9
|
200 8
|
|||||||
CURRENT
LIABILITIES
|
||||||||
Short-term borrowings
|
$
|
574,693
|
$
|
434,628
|
||||
Accounts
payable
|
293,106
|
353,307
|
||||||
Advance
from stockholders
|
84,865
|
228,673
|
||||||
Advance
payments on contracts
|
361,927
|
844,685
|
||||||
Accrued
severance benefit
|
140,301
|
87,791
|
||||||
Other
current liabilities
|
57,676
|
42,492
|
||||||
Total
Current Liabilities
|
1, 5 1 2 ,56 8
|
1 , 9 9 1 , 576
|
||||||
COMMITMENTS (Note 13)
|
||||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Preferred stock
|
||||||||
10,000,000 shares authorized; no shares issued and
outstanding
|
||||||||
at December 31, 2009 and 2008,
respectively
|
-
|
-
|
||||||
Common
stock :
|
||||||||
At December 31, 2009: $0.001 par value,
100 ,000,000
shares
authorized; 61,356,400 shares issued and
outstanding ;
At December 31, 2008: ₩ 5,000 par value (functional currency);
2,000,0000 shares authorized; 201,000 shares issued and
outstanding
|
6 1, 356
|
1,027,441
|
||||||
Additional
paid-in capital
|
1 ,550 , 31 7
|
133,702
|
||||||
Accumulated
other comprehensive income
|
130 , 39 6
|
226,769
|
||||||
Accumulated
deficit
|
(2, 720 , 95 1
|
)
|
(2, 438 , 12 2
|
)
|
||||
Total
Stockholders' Deficit
|
( 978,882
|
)
|
( 1,050,210
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
533,686
|
$
|
94 1,3 66
|
See notes
to consolidated financial statements.
F-3
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 200 9 AND 200 8
2009
|
200 8
|
|||||||
REVENUES
|
||||||||
Hardware
|
$
|
183,582
|
$
|
258,129
|
||||
Software
and service
|
374,812,
|
424,551
|
||||||
558,3 94
|
682,680
|
|||||||
COST
OF SALES
|
||||||||
Hardware
|
67,447
|
215,982
|
||||||
Software
and service
|
359,784
|
400,397
|
||||||
427,231
|
616,379
|
|||||||
GROSS
PROFIT
|
131,163
|
66,301
|
||||||
EXPENSES
|
||||||||
Professional
fees
|
212,663
|
67,700
|
||||||
Office
and general
|
57,042
|
58,931
|
||||||
Salaries
and employee benefits
|
107,747
|
184,859
|
||||||
Depreciation
|
4,390
|
7,698
|
||||||
3 8 1,8 42
|
319,188
|
|||||||
LOSS
FROM OPERATIONS
|
(25 0 , 6 7 9
|
)
|
(2 52 , 887
|
)
|
||||
OTHER
INCOME (EXPENSES) :
|
||||||||
Interest
expense, net
|
( 4 0, 527
|
)
|
( 10 3, 0 6 8
|
)
|
||||
Inventory write -down
|
(11,87 9
|
)
|
-
|
|||||
Other income (expense), net
|
20,256
|
(11,875
|
)
|
|||||
( 32,150
|
)
|
(1 14 , 943
|
)
|
|||||
LOSS
BEFORE INCOME TAX
PROVISION
|
( 282,829
|
)
|
( 367,830
|
)
|
||||
I ncome tax
provision
|
-
|
-
|
||||||
NET
LOSS
|
$
|
( 282,829
|
)
|
$
|
( 367,830
|
)
|
||
)
|
||||||||
LOSS
PER SHARE – basic and
diluted
|
$
|
( 0.01
|
)
|
$
|
( 1 .8 3
|
)
|
||
WEIGHTED
AVERAGE NUMBER OF
|
||||||||
COMMON
STOCKS OUTSTANDING – basic and
diluted
|
35,260,103
|
201,000
|
See notes
to consolidated financial statements.
F-4
CONSOLIDTED STATEMENT OF STOCKHOLDERS' DEFICIT AND
ACCUMULATED OTHER COMPREHENSIVE LOSS
|
|||||||||||||||||||||||||||||||||||||||
FOR THE YEARS ENDED DECEMBER 31, 2009 AND
2008
|
Accumulated
|
||||||||||||||||||||||||||||
Total
|
Other
|
Additional
|
||||||||||||||||||||||||||
Stockholders'
|
Comprehensive
|
Accumulated
|
Comprehensive
|
Preferred
|
Common
|
Paid-in
|
||||||||||||||||||||||
Deficit
|
Income (Loss)
|
Deficit
|
Income (Loss)
|
Stock
|
Stock
|
Capital
|
||||||||||||||||||||||
Balance, January 1, 2008
|
$ | (992,296 | ) | $ | - | $ | (2,070,292 | ) | $ | (83,147 | ) | $ | - | $ | 1,027,441 | $ | 133,702 | |||||||||||
Comprehensive loss:
|
||||||||||||||||||||||||||||
Net loss
|
(367,830 | ) | (367,830 | ) | (367,830 | ) | - | - | - | - | ||||||||||||||||||
Other comprehensive
|
||||||||||||||||||||||||||||
income, net of
tax:
|
||||||||||||||||||||||||||||
Foreign currency
translation
adjustment
|
309,916 | 309,916 | - | 309,916 | - | - | - | |||||||||||||||||||||
Comprehensive loss
|
(57,914 | ) | $ | (57,914 | ) | |||||||||||||||||||||||
Balance, December 31, 2008
|
(1,050,210 | ) | $ | - | (2,438,122 | ) | 226,769 | - | 1,027,441 | 133,702 | ||||||||||||||||||
Acquisition of subsidiary
|
- | - | - | - | - | (1,166,151 | ) | 1,166,151 | ||||||||||||||||||||
Issuance of common stocks
|
450,530 | - | - | - | - | 200,066 | 250,464 | |||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net loss
|
(282,829 | ) | (282,829 | ) | (282,829 | ) | - | - | - | - | ||||||||||||||||||
Other comprehensive
|
||||||||||||||||||||||||||||
loss, net of tax:
|
||||||||||||||||||||||||||||
Foreign currency
translation
adjustment
|
(96,373 | ) | (96,373 | ) | - | (96,373 | ) | - | - | - | ||||||||||||||||||
Comprehensive loss
|
(379,202 | ) | $ | (379,202 | ) | |||||||||||||||||||||||
Balance, December 31, 2009
|
$ | (978,882 | ) | $ | (2,720,951 | ) | $ | 130,396 | $ | - | $ | 61,356 | $ | 1,550,317 | ||||||||||||||
- | - | - | - | - | - |
See notes
to consolidated financial statements.
F-5
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 200 9 AND 200 8
200 9
|
200 8
|
|||||||
CASH
FLOWS FROM OPERATIONG ACTIVITIES:
|
||||||||
Net
loss
|
$
|
( 282,829
|
)
|
$
|
( 367,830
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||
Depreciation and amortization
|
14,980
|
20,907
|
||||||
Inventory write-off
|
11,879
|
-
|
||||||
Change
in assets and liabilities (net of acquisition):
|
||||||||
Accounts
receivable
|
771
|
-
|
||||||
Inventory
|
-
|
25, 0 9 2
|
||||||
Prepaid
expenses and other assets
|
( 4 3 , 554 )
|
24 ,3 68
|
||||||
Restricted cash
|
458,955
|
(98,937
|
)
|
|||||
Accounts
payable
|
( 84,092
|
)
|
( 76,109
|
)
|
||||
Advance payments on contracts
|
(510,013
|
)
|
120,451
|
|||||
Accrued
liabilities and other liabilities
|
10,381
|
9.392
|
||||||
Accrued
severance payable
|
40 , 62 8
|
( 3 8 ,8 92
|
)
|
|||||
Net
Cash Used in Operating Activities
|
(3 82 , 894
|
)
|
( 381 , 558
|
)
|
||||
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
||||||||
Acquisition of property
and equipment
|
(579
|
)
|
-
|
|||||
Net
Cash Used in Investing Activities
|
(579
|
)
|
-
|
|||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceed
from short-term
borrowings
|
1 6 2 ,2 95
|
7 7 9 , 89 9
|
||||||
Payment on short-term
borrowings
|
( 71,31 5
|
)
|
(4 98 ,2 07
|
)
|
||||
Advances
from stockholders
|
86,3 2 5
|
22 0, 2 6 8
|
||||||
Repayment
to stockholders
|
(2 36 , 3 5 6
|
)
|
( 27,752
|
)
|
||||
Proceed
from issuance of common stock, net
|
450,530
|
-
|
||||||
Net
Cash Provided by Financing Activities
|
391,479
|
474,208
|
||||||
NET
INCREASE IN CASH AND CASH EQUIVALENT
|
8,006
|
92,650
|
||||||
EFFECT
OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
|
( 9 , 91 4
|
)
|
(99,825
|
)
|
||||
CASH
AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
1 9 , 3 0 9
|
26 , 484
|
||||||
CASH
AND CASH EQUIVALENTS AT END OF YEAR
|
$
|
17 , 401
|
$
|
1 9 , 3 0 9
|
||||
SUPPLEMENTAL
CASH FLOW INFORMATION
|
||||||||
Cash
Payments For:
|
||||||||
Interest
|
$
|
45 , 015
|
$
|
10 8, 332
|
See notes
to consolidated financial statements.
F-6
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
Note
1 – Nature of Business
(a) Description
of Business
Clavis
Technologies International Co., Ltd. (“Clavis” or the “Company") incorporated in
the state of Nevada on September 10, 2009, primarily owns and manages its
subsidiary which has been engaged in the business of developing global
Electronic Product Code (EPC) network software. The Company’s goal is
to expand its business to be a global player in
ubiquitous computing solutions using its proprietary Radio Frequency
Identification (“RFID”) middleware, which is based on the EPC network and mobile
financial solutions.
On
December 1, 2009, the Company entered into a definitive Share Exchange Agreement
with Clavis Technologies Co., Ltd., a Korean corporation (“Clavis Korea”),
formerly known as Allixon Co., Ltd. Pursuant to the agreement, the
Company acquired 100% of the issued and outstanding capital stock of Clavis
Korea in exchange for 45,000,000 shares (approximately 75%) of the Company’s
common stock. This transaction resulted in
a reverse-takeover by Clavis Korea enabling
Clavis Korea’s shareholders to acquire the control
of the Company.
Upon
completion of the share exchange, the business operations of Clavis Korea
constituted virtually all of the business operations
of the Company. Clavis Korea, located in Seoul Korea, was
incorporated under the laws of the Republic of Korea
in January 2003 and provid es RFID-enabled solutions,
including business processes, based on the world standard to various industrial
markets as a pioneer vendor of RFID.
(b)
Going Concern
The
Company’s financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The Company has experienced recurring losses
over the past years which have resulted in an
accumulated deficit of approximately $2, 721,000 and a working capital deficit of approximately
$1, 451,000 a t December 31, 200 9 .
The
Company’s ability to continue as a going concern is contingent upon its ability
to secure additional financing, increase sales of its product and attain
profitable operations. It is the intent of management to continue to raise additional
funds to sustain operations and to pursue acquisitions of operating companies in
order to generate future profits for the Company. Although the
Company plans to pursue additional equity financing, there can be no assurance
that the Company will be able to secure financing when needed or obtain such on
terms satisfactory to the Company, if at all.
The
accompanying financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result from the outcome of this
uncertainty.
F-7
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
Note
2 – Significant Accounting Policies
The
following summary of significant accounting polices of the Company is presented
to assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, who is
responsible for their integrity and objectivity. These accounting
policies conform to the accounting principles generally accepted in the United
States of America, and have been consistently applied in the preparation of the
financial statements.
(a)
Basis of Presentation
The
consolidated financial statements include the accounts of Clavis Technologies
International Co., Ltd. and its wholly owned subsidiar y . Intercompany transactions and balances have been
eliminated in consolidation. These financial statements have been
prepared with the assumption that the Company will be able to realize its assets
and discharge its liabilities in the normal course of business.
(b)
U se of Estimates
Preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
related notes to financial statements. These estimates are based on
management's best knowledge of current events and actions the Company may
undertake in the future. Actual results may ultimately differ from estimates,
although management does not believe such changes will materially affect the
financial statements in any individual year.
(c) Operation in Foreign Country
Substantially, all of the Company’s operations are carried out in
the Republic of Korea. The Company’s operations are subject to various
political, economic, and other risks and uncertainties inherent in the country
in which the Company operates. Among other risks, the Company’s operations are
subject to the risks of political conditions and governmental
regulations.
(d) Foreign Currency Translation
Where the
functional currency of the Company's foreign subsidiaries is the local currency,
all assets and liabilities are translated into U.S. dollars, in accordance with
A S C 830 , using the
exchange rate on the balance sheet date, and revenues and expenses are
translated at average rates prevailing during the period. Accounts
and transactions denominated in foreign currencies have been re-measured into
functional currencies before translated into U.S. dollars. Foreign
currency transaction gains and losses are included as a component of other
income and expense. Gains and losses from foreign currency
translation are included as a separate component of comprehensive
income.
In
accordance with A S C 230 ,
cash flows from the Company's foreign subsidiaries are calculated based upon the
local currencies. As a result, amounts related to assets and liabilities
reported on the statements of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheets.
Since the
subsidiary's financial statements must be translated into U.S. Dollars, major
changes in the currency exchange rate between the foreign denominations and U.S.
Dollars may have a significant impact on the operations of the Company.
Although the Company does not anticipate the currency exchange rate to be
significantly different over the next twelve months, no such assurances can be
given.
F-8
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
( e ) Cash and Cash Equivalents
Cash
includes currency, checks issued by others, other currency equivalents, current
deposits and passbook deposits held by financial institutions. For financial statement purposes, we consider all
highly liquid debt instruments with insignificant interest rate risk and
maturity of three months or less when purchased to be cash
equivalent. Cash equivalents consist primarily of cash deposits in
money market funds that are available for withdrawal without
restriction.
( f ) Accounts Receivable
Trade
accounts receivable are presented at face value less allowance for doubtful
accounts. The allowance for doubtful accounts is the Company’s best
estimate of probable credit losses in the existing accounts receivable. The
Company determines the allowance based on Company’s historical experience and
review of specifically identified accounts and aging data. The
Company reviews its allowance for doubtful accounts
periodically. Account balances are charged off against the allowance
after all means of collection have been exhausted and the potential for recovery
is considered remote.
( g ) Inventory
Inventories
are stated at lower of cost or market. Cost is computed on a first
in, first out basis for raw materials and supplies. Work-in-process,
manufactured finished goods and merchandise goods are stated at the lower of
cost or market .
( h ) Property and Equipment
Property
and equipment, including renewals and betterments, are stated at cost.
Cost of renewals and betterment that extend the economic useful lives of the
related assets are capitalized. Expenditures for ordinary repairs and
maintenance are charged to expense as incurred. Gain or loss on sale or
disposition of assets is included in the statement of operations.
Depreciation
is provided using the straight-line method over the following estimated useful
lives of the assets.
Equipment
|
5
– 7 years
|
Furniture
and fixture
|
5
– 7 years
|
Computer
software
|
3 - 5 years
|
Automobile
|
5 years
|
(i) Impairment of Long-lived Assets
In accordance with ASC Subtopic 360-10, long-lived assets, such as property and equipment, and purchased intangible assets are subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.
F-9
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
For the years ended December 31,
2009 and 2008 , no events or circumstances
occurred for which an evaluation of the recoverability of long-lived assets was
required. There can be no assurance however, that
market conditions will not change or demand for the Company’s products and
services will continue, which could result in impairment of long-lived assets in
the future.
( j ) Research and Development
Research
and development costs are expensed as incurred. Research and development expense
consist primarily of salaries and related personnel costs and subcontract
fees.
( k ) Revenue Recognition
Revenue
is derived from sale of hardware and software and provision
of services. Services consist of research,
development, maintenance, and technical support.
Revenue
from the sale of computer hardware is recognized when goods have been shipped to a
customer , title has passed to the customer,
persuasive evidence of an arrangement exists, performance has occurred, all
customer-specified test criteria have been met and collectability is reasonably
assured. The company has no significant obligations after product shipment other
than its standard manufacturing warranty. The Company records a provision for
future warranty costs based on management’s best estimate of probable claims
under its product warranties. The provision is based on the terms of the
warranty which vary by customer, product, and historical experience. The Company
regularly evaluates this provision.
Software
sales are recognized when installation is complete or other customer-specified
post-shipment obligations have been satisfied and collectability is reasonably
assured. For those software sales not requiring installation or if installation
costs are insignificant, the Company recognizes revenue upon
shipment.
Revenues
relating to customer service and technical support are recognized as the
services are rendered ratably over the period of the related contract and when
collectability is reasonably assured.
(l) Fair Value
Measurements
On January 1, 2008, the Company adopted the provisions of FASB
Statement No. 157 included in ASC Topic 820, for fair value measurements of
financial assets and financial liabilities and for fair value measurements of
nonfinancial items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. Statement 157 defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date. ASC Topic 820 (Statement 157) also establishes a framework for
measuring fair value and expands disclosures about fair value
measurements.
On January 1, 2009, the Company adopted the provisions of ASC
Topic 820 (Statement 157) to fair value measurements of nonfinancial assets and
nonfinancial liabilities that are recognized or disclosed at fair value in the
financial statements on a nonrecurring basis.
( m ) Financial Instruments
Unless
otherwise noted, it is management’s opinion that the Company is not exposed to
significant interest, currency or credit risks arising from the financial
instruments. The fair value of the financial instruments approximates their
carrying values, unless otherwise noted.
Concentration of Credit
Risk
The
Company provides credit to its customers in the normal course of
operations. It carries out, on a continuing basis, credit checks of
its customers, and maintains allowance for credit losses contingent upon
management’s forecasts. Concentration of credit risk arises when a group of
customers having similar characteristics such that their ability to meet their
obligations is expected to be affected similarly by changes in economic
conditions.
F-10
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
( n ) Income Tax
The
Company accounts for income taxes pursuant to ASC
740 . The
calculation of the Company's tax provision involves the application of complex
tax rules and regulations within multiple jurisdictions throughout the
world. The Company's tax liabilities include estimates for all
income-related taxes that the Company believes are probable and that can be
reasonably estimated. To the extent that the Company’s estimates are
understated, additional charges to the provision for income taxes would be
recorded in the period in which the Company determines such
understatement. If the Company's income tax estimates are overstated,
income tax benefits will be recognized when realized.
Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment. FIN 48 prescribes a
recognition threshold and measurement attributes for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return.
( o ) Earnings (Loss) per
Share
A S C 260 requires disclosure on
the financial statements of basic and diluted earnings per
share. Basic earning s (loss) per share is
computed by dividing the net earning s (loss) by the
weighted average number of shares of common stock outstanding during the
year. Diluted earning s (loss) per share
is determined using the weighted average number of common shares outstanding
during the year, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options and warrants.
F-11
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
( p ) Other Comprehensive Income
(Loss)
The
Company records its other comprehensive income under A S C 220 . The standards are applicable in
reporting and presentation of comprehensive income (loss) and its components. The Company’s other
comprehensive income represents foreign currency translation
adjustment.
( q ) Recent Accounting
Pronouncements
In June 2009, the FASB issued guidance that amends the
consolidated rules related to variable interest entities. The
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity’s purpose and design and a company’s ability
to direct the activities of the entity that most significantly impact the
entity’s economic performance. This guidance requires ongoing
reassessments of whether an enterprise is the primary beneficiary of the
variable interest entity. This guidance is
effective for fiscal years beginning after November 15, 200 9 . The adoption of this guidance is not expected to have a
significant impact on the Company’s results of operations or financial
position.
In
October 200 9 , the FASB issued guidance on multiple-deliverable arrangements to address how to
separate deliverables and how to measure and allocate arrangement
consideration. This guidance requires vendors to develop the best
estimate of selling price for each deliverable and allocate the arrangement
consideration using this selling price. This guidance also expands the
disclosure requirements to include both quantitative and qualitative
information. This guidance is effective for fiscal years beginning after June
15, 2010. The Company is currently evaluating the impact of the
adoption of this guidance on its results of operations and financial
position .
F-12
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
In October 2009, the FASB issued guidance that clarifies the
tangible products containing software components and non-software components that function together to deliver a
product’s essential functionality will be considered non-software deliverables
and will be scoped out of the software revenue recognition
guidance. This guidance is effective for the fiscal years beginning
after June 15, 2010. The Company is currently evaluating the impact
of the adoption of this guidance on its results of operations and financial
position.
In January 2010, the FASB issued guidance that expands the
interim and annual disclosure requirements of fair value measurements, including
the information about movement of assets between level 1 and 2 of the three-tier
fair value hierarchy established under its fair value measurement guidance. This
guidance also requires separate disclosure for each of purchases, sales,
issuance, and settlements in the reconciliation for fair value measurements
using significant unobservable inputs, level 3. Except for the detailed
disclosure in the level 3 reconciliation, which is effective for the fiscal
years beginning after December 15, 2010, all the other disclosures under this
guidance are effective for the fiscal years beginning after December 15,
2009. The Company is currently evaluating the impact of the adoption
of this guidance on its results of operations and financial
position.
F-13
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
Note
3 – Accounts Receivable
Accounts
receivable are stated net of an allowance for doubtful accounts. The allowances
for doubtful accounts were $ 1, 9 27 and $ 983 at December 31,
200 9 and 200 8 ,
respectively.
Note
4 – Property and Equipment
Property
and equipment consists of the following at December 31:
200 9
|
200 8
|
|||||||
Equipment
|
$
|
97,186
|
$
|
89,111
|
||||
Computer
software
|
2,759
|
26,247
|
||||||
Furniture
and fixture
|
9,428
|
8,645
|
||||||
Automobile
|
691
|
-
|
||||||
110,064
|
124,003
|
|||||||
Accumulated
depreciation
|
(101, 27 5
|
)
|
(101,515
|
)
|
||||
Net
property and equipment
|
$
|
8,789
|
$
|
22,488
|
Depreciation
expenses for the years ended December 31, 200 9 and
200 8 were $14,980 and
$20,907, respectively.
Note 5 - Fair Value Measurements
The following table presents the carrying amounts and estimated
fair values of the Company’s financial instruments at December 31, 2009 and
2008 .
2009
|
2008
|
|||||||||||||||
Carrying
amount
|
Fair value
|
Carrying
amount
|
Fair value
|
|||||||||||||
Financial assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 17,401 | $ | 17,401 | $ | 19,309 | $ | 19,309 | ||||||||
Accounts receivable
|
10 | 10 | 784 | 784 | ||||||||||||
Financial liabilities:
|
||||||||||||||||
Accounts payable
|
$ | 293,106 | $ | 293,106 | $ | 353,307 | $ | 353,307 | ||||||||
Accrued severance benefit
|
140,301 | 140,301 | 87,791 | 87,791 | ||||||||||||
Short-term borrowings
|
574,693 | 574,693 | 434,628 | 434,628 | ||||||||||||
The fair values of the financial instruments shown in the above
table as of December 31, 2009 and 2008 represent the amounts that would be
received to sell those assets or that would be paid to transfer those
liabilities in an orderly transaction between market participants at that
date. Those fair value measurements maximize the use of observable
inputs. However, in situations where there is little, if any, market activity
for the asset or liability at the measurement date, the fair value measurement
reflects the Company’s own judgments about the assumptions that market
participants would use in pricing the asset or liability. Those judgments are
developed by the Company based on the best information available in the
circumstances, including expected cash flows and appropriately risk-adjusted
discount rates, available observable and unobservable
inputs.
The Company uses the following methods and assumptions in
estimating the fair value disclosures for financial
instruments:
Cash
equivalents
The carrying amount reported in the balance sheets of cash
equivalents approximate fair value because of the relatively short time to
maturity.
F-14
Accounts
receivable
The carrying amount reported in the balance sheets for accounts
receivable approximate fair value because of relatively short collection
terms.
Accounts payable and accrued
severance benefit
The carrying amount reported in the balance sheets for accounts
payable and accrued severance benefit approximate fair value because of
relatively short payment terms.
Short-term
borrowings
The fair value of the Company’s short-term borrowings is measured
using quoted offer-side prices when quoted market prices are
available. If quoted market prices are not available, the fair value
is determined by discounting the future cash flows of each instrument at rates
that reflect rates currently observed in publicly traded debt markets for debt
of similar terms to companies with comparable credit risk.
Note
6 – Short-term
Borrowings
The
Company has an operating line of credit of $ 4 3,000,
with interest at the lender’s prime ( 5.96% and 7.02%
as of December 31, 200 9 and 200 8 , respectively) plus 2.53%. This credit line matures on
June 25, 2010 and is guaranteed by the Korea Credit Guarantee Fund. Amount s outstanding as of December 31, 200 9 and 200 8 w ere $34,568 and $31,696,
respectively.
The
Company has bank loans of $ 350,001 and $ 323,693 in 2008, as of
December 31, 2009 and 2009, respectively, pledg ed
by cash deposits in bank. The interest rate
ranges at the lender’s prime ( 2.79 % and 2.85% as of December 31, 2009 and
2008 , respectively ) plus from 3 . 4 8% to 4.02% . These notes mature between December 2010 and April
2011 .
T he Company obtained a
borrowing from an unrelated party at 14.0% interest and with a maturity on May 14, 2009. As
of December 31, 2009 and 2008, the past due balance
was $86,240 and $79,239 ,
respectively .
The Company borrowed $103,704 from unrelated parties. The
borrowings bear interest at 12.0% and mature in October
2010.
F-15
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
Note
7 – Related Party
Transactions
The Company advances the working capital
from the Company’s directors and stockholders . The advances were on demand and outstanding in the
amount of $84,865 and
$228,673 at December 31, 2009 and 2008 ,
respectively.
Note
8 – Advance Payments on Contracts
T he Company secured Industry
Development Contracts (the “Contracts”) from Korea
Global ID Corporation (“KGIC”), a corporation controlled by the Korean
government . These contracts aim to
develop wireless recognition software and middleware technology.
Under the terms of the Contracts, the Company received
fund s from KGIC and accounts
the funds as advances for future research and development.
To provide sufficient funds for the contract performance, the
Company has additionally reserved cash. At December
31, 2009 and 2008 , such cash reserves amounted to
$420,001 and
$846,593 , respectively.
These cash reserves are accounted for as restricted cash.
As a part of the contract performance, the Company is obligated
to incur labor and other expenses in the following approximate amounts over the course of the contract
periods:
Labor
|
Other
|
Total
|
||||||||||
Year ended November 30, 2005
|
$ | 165,000 | $ | 66,000 | $ | 231,000 | ||||||
Year ended November 30, 2006
|
$ | 148,000 | $ | 111,000 | $ | 259,000 | ||||||
Year ended November 30, 2007
|
$ | 160,000 | $ | 160,000 | $ | 320,000 | ||||||
Year ended November 30, 2008
|
$ | 203,000 | $ | 120,000 | $ | 323,000 | ||||||
Year ended November 30, 2009
|
$ | 203,000 | $ | 120,000 | $ | 323,000 |
The
Company is permitted to defer unused funds to future periods . However, upon
completion of the Contracts, the Company is required to (1) submit a final
report to KGIC, (2) return 20% of the total funds received back to KGIC and (3)
return unused portion of the fund s within two months
upon the expiration of the Contracts.
The
Company cumulative advances received from 2004 through 2009 aggregated approximately
$3,131,000 . The unused funds and returns due to
KGIC as of December 31, 200 9 and 200 8 were as follows:
2009
|
2008
|
|||||||
Unspent funds
|
$ | 13,106 | $ | 465,154 | ||||
Returns due to KGIC
|
348,821 | 379,531 | ||||||
Total
|
$ | 361,927 | $ | 844,685 |
F-16
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
Note
9 - Accrued Severance Benefit
Employees and directors with one year or more of service are
entitled to receive a lump-sum payment upon termination of their employment
based on their length of service and rate of pay at the time of
termination. Accrued severance benefits represent the amount which
would be payable assuming all eligible employees and directors are to terminate
their employment as of the balance sheet date. The accrued severance benefits at
December 31, 2009 and
2008 , were $140,301 and $87,791 ,
respectively.
Note 10 - Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are as
follows for the years ended December 31,
2009 and 2008 ,
respectively:
2009
|
2008
|
|||||||
Net loss
|
$ | (282,829 | ) | $ | (367,830 | ) | ||
Other comprehensive loss, net of
tax:
|
||||||||
Foreign currency translation
adjustments
|
(96,373 | ) | 309,916 | |||||
Total comprehensive loss
|
$ | (379,202 | ) | $ | (57,914 | ) |
The
following reconciles the numerators and denominators of the basic and diluted
per share computation for the years ended December 31:
200 9
|
200 8
|
|||||||
Numerator
for basic and diluted loss per share:
|
||||||||
Net
loss
|
$
|
( 282,829
|
)
|
$
|
(367,830
|
)
|
||
Denominator:
|
||||||||
Basic
and diluted weighted average shares outstanding
|
35,260,103
|
201,000
|
||||||
Basic
and diluted loss per share
|
$
|
( 0.01
|
)
|
$
|
(1.83
|
)
|
Note
12 – Income Taxes
The Company adopted the provisions of FIN No. 48 on January 1,
2008, and there was no material effect on the financial statements at the date
of adoption. There was no cumulative effect related to adopting FIN No.
48.
Corporate income tax rates applicable to the Korean subsidiaries
in 2009 and 2008 were 16.5% of the first 100 million Korean Won ($78,800) of
taxable income and 29.7% on the excess. For the United States
operations, the corporate tax rates range from 10% to 34%. The Company provided
a valuation allowance equal to the deferred tax amounts resulting from the tax
losses in the United States, as it is not likely that they will be
realized. Tax losses from the Korean subsidiaries can be carried
forward for five years to offset future taxable income. The U.S. tax
losses can be carried forward for 20 years to offset future taxable income. The
Company has accumulated about $1,818,000 and $35,000 of taxable losses in its
Korea and US operations, respectively. The utilization of the Korean
losses expires in years 2009 to 2013 and the US losses in years
2029.
There is no current and deferred income tax provision in Korea
and US operations for the years ended December 31,
2009 and 2008 .
US federal income taxes have not been provided for the
undistributed earnings of the Company’s foreign subsidiaries. It is the
Company’s intention that such undistributed earnings be permanently reinvested
offshore.
F-17
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 200 9 AND 200 8
The Company has deferred income tax assets as follows as of
December 31, 2009 and
2008 ,
respectively :
2009
|
2008
|
|||||||
Deferred income tax assets:
|
||||||||
Net operating loss
carryforwards
|
$ | 12,000 | $ | - | ||||
12,000 | - | |||||||
Valuation
allowance
|
(12,000 | ) | - | |||||
$ | - | $ | - |
M anagement determined that it is more likely than not that
the deferred tax asset s will not be realized through
the reduction of future income tax payments, and
accordingly , a full valuation allowance has been recorded for the deferred income tax assets.
Note
1 3 – Commitments
The
Company is committed to lease obligations for its offices expiring January 30,
201 1 . Rental expenses incurred for the year s ended December 31, 200 9 and
200 8 was approximately $ 47,000
and $ 51,000, respectively.
Future
minimum annual payments under the lease are as follows for the years ended
December 31:
20 1 0
|
$ | 43,862 | ||
201 1
|
$ | 3,625 |
Note 14 - Capital
During August and September 2009,
Clavis Korea raised an additional capital of $ 363,296 by issuing 44,800 common shares of
Clavis Korea during August to October 2009..
During September to December 2009, the Company raised additional
capital of $87,234 by issuing 16,356,400 common shares of the
Company.
As disclosed in Note 1, the Company issued 45,000,000 common
shares to acquire 100% of the issued and outstanding common shares of Clavis
Korea.
Note 15 - Concentration in Sales
Three largest customers accounted for about 66% ($368,000) of
total sales for the year ended December 31,
2009 , while two major customers accounted about 70%
($477,000) for the year ended December 31, 2008.
Note
1 6 – Subsequent Events
(a) Stock Issuances
In January 2010, the Company raised the capital of $7,233 by
issuing 1,018,800 common shares.
(b)
Related Party Notes Payable
In March 2010, the Company obtained a borrowing $44,250 from a
related party at 12% interest and with maturity in September
2011.
F-18
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESU L TS OF OPER A TIONS
You should read the following discussion in conjunction with our
Consolidated Financial Statements and the related “Notes to Consolidated
Financial Statements”, included in this prospectus. This discussion contains
forward-looking statements, particularly statements regarding our outlook for
fiscal 2010, our gross margins, anticipated revenues by geographic area,
operating expenses and capital expenditures, cash flow and liquidity measures,
and our expectations regarding tax matters and the effects of exchange
rates. Our actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
risks and uncertainties, including the risk factors set forth in this discussion
and in Item 1 — Risk Factors, and elsewhere in this prospectus.
Generally, the words “may,” “will,” “could,” “would,” “anticipate,” “expect,”
“intend,” “believe,” “seek,” “estimate,” “plan,” “view,” “continue,” the plural
of such terms, the negatives of such terms, or other comparable terminology and
similar expressions identify forward-looking statements. The
information included in this prospectus is provided as of the filing date with
the Securities and Exchange Commission and future events or circumstances could
differ significantly from the forward-looking statements included herein.
Accordingly, we caution readers not to place undue reliance on such
statements. We assume no obligation to update any forward-looking
statements in this prospectus.
The
following section highlights significant factors impacting the consolidated
operations and financial condition of the Company and its
subsidiaries.
Overview
Clavis
Technologies International Co., Ltd., a Nevada corporation ("the Company"), was
incorporated in Nevada on September 10, 2009. On December 1, 2009,
the Company entered into a definitive Share Exchange Agreement with Clavis
Technologies Co., Ltd., a Korean corporation (“Clavis Technologies” or “Clavis
Korea”), and the shareholders of Clavis Korea. Pursuant to the
agreement, the Company acquired 100% of the issued and outstanding capital stock
of Clavis Korea in exchange for 45,000,000 shares of the Company’s common stock,
representing approximately 75% of the issued and outstanding stock of the
Company. Clavis Korea was incorporated under the laws of Republic of
Korea on January 28, 2003. Clavis Korea is located in Seoul, Korea, and has been
engaged in the development of global Electronic Product Code (EPC) network
software. The Company’s goal is to be a global player in ubiquitous computing
solutions using its proprietary Radio Frequency Identification (“RFID”)
middleware which is based on the Electronic Product Code Network and mobile
financial solutions.
Clavis
Technologies has been providing RFID-enabled solutions, including business
processes, based on the EPCglobal standard s to various industrial markets as a vendor of RFID
technology since 2003. As Clavis Technologies combines its products, expertise,
partnerships and integration capability into solutions for a wide range of
device computing applications, Clavis Technologies enables its clients to tap
into the wealth of data captured by networked devices such as RFID readers or
handheld devices to extend the quality of valuable information to any device
where companies or their customers need.
Historically,
Clavis Technologies has concentrated on the RFID business as a provider that
sold only RFID middleware. As the RFID market has experienced significant growth
recently, Clavis Technologies has launched its framework-based product packages,
which has been developed since 2003, including added-value RFID applications
that can be customized for a broad range of industries.
Currently, our results are heavily dependent upon sales to the
retail, financial and business to business markets. Our customers are dependent
upon retail sales, which are susceptible to economic cycles and seasonal
fluctuations. Furthermore, as approximately two-thirds of our revenues and
operations are located outside the U.S., fluctuations in foreign currency
exchange rates have a significant impact on reported results. For the
year ended December 31, the three largest customers accounted for 66% of sales
and for the year ended December 31, 2008, the two largest customers accounted
for 70% of sales. In 2008 Asiana IDT, Inc. (42.19 %) and KTNetworks (27.63 %) accounted
for approximately 70% of sales. In 2009 Korea Pallet Pool Co., Ltd.
(35.28%), The Korean Ministry of
Unification (15.2%) and KTNetworks (15.44%)
accounted for approximately 66% of sales.
Partnerships with clients like KT Networks and Korea Pallet Pool
have been mainstays of our business. In the past year KT Networks has
been asked to diversify their partner base. While they continue to do
this in small projects they have indicated that their trusted partnership with
Clavis is a strong one and they plan to continue that relationship for the long
term. However as an effort to support the community Clavis is working
with some smaller firms to partner and support them on projects, thus allowing
them to increase their opportunities with the larger firms like KT
Networks. In recent years Korea Pallet Pool has had financial issues
related to a tragic accident and subsequent legal proceedings that have reduced
their business outlook. While we maintain them as a customer we
realize that new projects from them may be limited in
scope. Therefore management is taking a conservative outlook on
future projects with this steady and loyal customer.
Our business plan is to generate sustained revenue growth through
selected investments in product development and marketing to include expansion
of our business operations outside of software into the
hardware. Revenue growth may also be generated by acquisitions of
other companies that we may identify to expand our product offerings and/or
customer base. We currently do not have any acquisitions targeted
during 2010. However we have significant increases in business
opportunities and partnerships for the year and the next several year
projections. The launch of out framework-based product
packages, which we have been developing and improving since 2003 will include
added-value RFID applications that reach into multiple industries and will
provide significant opportunities for the future
partnerships.
40
Continued expansion of our partner base will help to enhance the
opportunities for our software and hardware products. Some of our
current partners and opportunities include, but are not limited
to:
EPCglobal is the organization entrusted by industry leaders to
establish and support the EPCglobal Network™ and provides the following
services; Participation in development of EPCglobal Standards via EPCglobal’s
Action & Working Groups, Access to the results of the EPCglobal
Certification and Accreditation Program testing, and Links with other
subscribers to create pilots and test cases. Clavis Technologies
joined in 2004 as a solution subscriber.
Alien Technology’s patented Fluidic Self Assembly (FSA)
technology and related proprietary manufacturing processes for RFID tags and
RFID readers are designed to enable the manufacture of high volume, low cost
RFID tags. Alien also includes special RFID Academy related training
and professional services.
ETRI (Electronics and Telecommunications Research Institute)
Established in 1976, ETRI is a non-profit government-funded research
organization that has been at the forefront of technological excellence for more
than 25 years. ETRI has relationship with Clavis Technologies for
core technology of RFID middleware.
IBM Korea Clavis Technologies developed SCM based on Auto-ID
System for Sales of IBM Korea in Korea. Clavis Technologies’ RFID
middleware is customized for IBM platforms such as DB2 and
Websphere.
Business Development in RFID Systems. Clavis
Technologies has developed relationships with a number of companies to provide
RFID middleware and hardware and consulting on their RFID
systems. These companies include worldwide recognized name brands as
well as established firms in the Korean sector. We feel confident
that relationships with these firms places Clavis on a very positive footing in
the market.
Mobile Financial System. We have completed projects
with major Korean financial institutions towards developing mobile banking
capabilities, which we anticipate could help facilitate new and continued
product development and sales opportunities.
The Opportunity
The future emphasis for RFID is expected to shift towards process
based solutions. Developing broad based products for individual
applications is not the best way to move forward. End user processes are highly
diverse and require RFID systems to integrate with their existing AIDC
infrastructure. Such process centric solutions need to have high
levels of flexibility incorporated into the design to ensure that customized
requirements are taken care of. Even within manufacturing sectors, there is a
higher focus towards monitoring work-in-progress (WIP). High process efficiency
levels have a direct impact on the overall productivity and profitability of the
enterprise.
Pharmaceutical companies are expected to emerge as a key vertical
market for RFID in the next 12 months. The regulatory environment
requiring compliance with various state e-pedigree laws is among the biggest
drivers for this vertical market. Large distributors are leading the
way in terms of deployment and utilizing RFID data to drive their internal
processes forward. Early adopters and pharmaceutical manufacturers,
such as GSK, Pfizer and Purdue Pharma, are continuing their RFID projects and
this is likely to further increase traction within the vertical
market.
Healthcare distribution chains are another area of
opportunity. Innovative uses of the technology include hospitals
deploying RFID enabled refrigerators for consignment of high value drugs that
are extremely sensitive to temperature changes. The appliances enable constant
monitoring of the drug’s quality. Combining RFID / RTLS systems with
existing Wi-Fi networks and hospital infrastructure systems is also expected to
continue adoption rates in 2008. Patient tracking applications are
likely to present a good opportunity for products that integrate both, RFID and
barcodes (2D technology).
The retail supply chain will continue to incite interest and
large suppliers are expected to see most of the deployments in the short
term. RFID vendors are likely to witness greater success by targeting
suppliers who work with mandated retailers or retailers that have adopted the
technology at the store level. Tagging at the manufacturing / supplier facility
alone will not result in true value since the downstream benefit is not there
when retailers have not invested in RFID. High value categories such as apparel,
footwear, and media are likely to have higher adoption. The
opportunity in the vertical lies in delivering RFID solutions that can be
integrated and scaled up with the existing retail network in
place.
In-store and point-of scale (POS) applications are emerging as
key areas of interest for RFID deployments. Retailers are evaluating
RFID applications that enhance the overall shopping experience for the customer.
The momentum is particularly strong in Europe and Asia where there is a higher
emphasis on item level tagging. By tagging individual items at the store level,
RFID-enabled mirrors and electronic displays enable the customer to view,
select, and locate related / different items within the
store.
Aerospace is also a significant market to watch out for during
2010. The decision by Airbus to implement RFID systems based on its
earlier pilot program is a positive driver for the overall adoption within the
vertical. Airport baggage handling applications are another volume-driven RFID
opportunity that is expected to witness pilots and deployments next year. Recent
projects in Milan, Argentina, UK, Australia and Thailand reflect the
technology’s gaining popularity outside North America.
41
The strong need for track and trace capabilities in chemical and
petroleum industries is expected to increase the demand for RFID within these
markets. Most petroleum products need to be certified according to the American
Petroleum Institute which requires manufacturers to provide a documented history
of the product. Efforts by the Chemical Industry Data Exchange (CIDX) in
aligning itself closely with EPCglobal are expected to support chemical
companies in furthering their RFID deployments.
Whatever the vertical / application market opportunity may be,
end-users are likely to exhibit faster adoption rates when there is a clear
convergence of RFID technology and existing business processes in
place.
Some of our key market opportunities will likely
include:
RFID-based Asset
Management for Traffic Lights. Our
Target customers include Seoul’s Metropolitan government and 200 local
autonomous entities. With our partner KT Networks we continue high
level communications and trail reviews of projects with the sales cycle of this
project expected to close in the next several reporting periods. We
will coordinate this through another partner who will become the direct sales
and support team for the products throughout the project life
cycle. Estimated revenues are above 2 million US
Dollars.
RFID-based
Chemical Management System for Chemical Laboratory
Safety. Our target customers
include 100 universities and colleges and 500 public chemical laboratories and
private companies. With government sponsored regulatory requirements
set to be put in place in the near future this will become a government
mandate. These institutions and our staff have been preparing for a
number of years to fulfill this need and expect results in this year , with at
least 5 confirmed deals ready for delivery, and additional transactions in near
future. Expectations of revenue will be approximately 300,000 US
Dollar per university and 80,000 US Dollars per transaction at private
labs.
Mobile Internet
System. Our target customers include Korean
telecom companies like SKT, KTF and LGT. Several of these clients
have requested partnership development deals with Clavis and we are currently
working on product to include client/server based systems that interact with
smart phones and other portable devises. Other clients are also
coming on as distribution partners that will provide our services to third
parties. Projects in this category are estimated at about 600,000 US
Dollars for the near future sales cycle.
Expected Increases in Expenses
As a result of our becoming a public company and executing on our
business plan to grow our business, which are discussed through out this
prospectus, we expect to experience an increase in our operating expenses,
primarily in our sales, general and administrative expenses.
While we currently have a range of products that we offer to our
customers, as discussed elsewhere in this prospectus, we will be upgrading our
existing products as well as developing new products to target new market
opportunities (as discussed in the preceding two sections). We will,
consequently, hire additional software developers to perform the product
creating and product upgrade services. In addition to salaries, we
expect to incur approximately $50,000 in additional expenses in connection with
such product development and upgrade activities (such as purchasing more
computers and software development products for the additional software
developers we expect to hire).
To assist us in increasing our sales, we expect our sales and
marketing expenses to increase as a result of making more PR materials (e.g.,
brochures for company and products), advertizing on the Web sites (e.g. banner
ad), preparing seminars and participating exhibitions or events. We
expect this to add at least $20,000 - $30,000 per year to our sales, general and
administrative expenses. Such amount would be in addition to hiring
sales and marketing personnel.
When we become a public company, we will incur significantly
greater expenses for professional fees, primarily account and legal expenses
related to the preparation and filing of our periodic reports and any
registration statements we may file. We expect our audit cost will be
approximately $75,000 per year, primarily in regard to the review of our
quarterly reports on Form 10-Q and the audit of annual financial
statements. We also expect to incur approximately $60,000 per year
for investor relations services and approximately $80,000 in legal fees,
primarily for the preparation of our SEC filings and documents for capital
raising activities.
Critical
Accounting Policies and Estimates
Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles (GAAP) in the United
States of America. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and the related disclosure of contingent
assets and liabilities.
In Note 2
to the Company’s annual consolidated financial statements, the Company describes
the significant accounting policies used in the preparation of those
consolidated financial statements. Certain of these significant accounting
policies are considered to be critical accounting policies. A critical
accounting policy is defined as one that is both material to the presentation of
our consolidated financial statements and requires management to make difficult,
subjective or complex judgments that could have a material effect on our
financial condition or results of operations.
42
Specifically,
these policies have the following attributes: (1) we are required to make
assumptions about matters that are highly uncertain at the time of the estimate;
and (2) different estimates we could reasonably have used, or changes in the
estimate that are reasonably likely to occur, would have a material effect on
our financial condition or results of operations. Estimates and assumptions
about future events and their effects cannot be determined with certainty. On an
on-going basis, we evaluate our estimates on historical experience and on
various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. These changes
have historically been minor and have been included in the consolidated
financial statements as soon as they became known. Senior management reviews the
development and selection of our accounting policies and estimates with the
Audit Committee. The critical accounting policies have been consistently applied
throughout the accompanying financial statements.
We
believe the following accounting policies are critical to the preparation of our
consolidated financial statements:
Revenue
Recognition. Revenue is derived from sales of hardware and software and
provisions of services. Services consist of research, development, maintenance,
and technical support.
Revenue from the sale of computer hardware is recognized when
goods have been shipped to customer, title has passed to the customer,
persuasive evidence of an arrangement exists, performance has occurred, all
customer-specified test criteria have been met and collectability is reasonably
assured. The company has no significant obligations after product shipment other
than its standard manufacturing warranty. The Company records a provision for
future warranty costs based on management’s best estimate of probable claims
under its product warranties. The provision is based on the terms of the
warranty which vary by customer, product, and historical experience. The Company
regularly evaluates this provision.
Software sales are recognized when installation is complete or
other customer-specified post-shipment obligations have been satisfied and
collectability is reasonably assured. For those software sales not requiring
installation or if installation costs are insignificant, the Company recognizes
revenue upon shipment.
Revenues relating to customer service and technical support are
recognized as the services are rendered ratably over the period of the related
contract and when collectability is reasonably assured.
We
believe the following judgments and estimates have a significant effect on our
consolidated financial statements:
Allowance for
Doubtful Accounts. We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make required
payments. These allowances are based on specific facts and circumstances
surrounding individual customers as well as our historical experience. The
adequacy of the reserves for doubtful accounts is continually assessed by
periodically evaluating each customer’s receivable balance, considering our
customers’ financial condition and credit history, and considering current
economic conditions. Historically, our reserves have been adequate to cover all
losses associated with doubtful accounts. If the financial condition of our
customers were to deteriorate, impairing their ability to make payments,
additional allowances may be required. If economic or political conditions were
to change in the countries where we do business, it could have a significant
impact on the results of operations, and our ability to realize the full value
of our accounts receivable. Furthermore, we are dependent on customers in the
retail markets. Economic difficulties experienced in those markets could have a
significant impact on our results of operations and our ability to realize the
full value of our accounts receivables. Accounts receivable are
stated net of an allowance for doubtful accounts. The allowances for doubtful
accounts were $ 1,927 and $ 983 at December 31,
200 9 and 200 8 ,
respectively.
Inventory
Valuation. Inventories are stated at lower of cost or
market. Cost is computed on a first in, first out basis for raw
materials and supplies. Work-in-process, manufactured finished goods
and merchandise goods are stated at the lower of cost or market. We
write down our inventory for estimated obsolescence or unmarketable items equal
to the difference between the cost of the inventory (as set
forth above) and the estimated net realizable value based upon
assumptions of future demand and market conditions. If actual market conditions
are less favorable than those projected by management, additional inventory
write-downs may be required. In 200 9 our
inventory markdown was $ 11,879 compared to $-0- in
200 8 .
Impairment of Long-lived
Assets. In accordance with ASC Subtopic 360-10,
o ur long-lived assets ,
such as property and equipment, and purchased
intangible assets subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Assets to be disposed
of are separately presented in the balance sheet and reported at the lower of
the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposal group
classified as held for sale are presented separately in the appropriate asset
and liability sections of the balance sheet .
43
For the years ended December 31, 2009 and 2008, no events or
circumstances occurred for which an evaluation of the recoverability of
long-lived assets was required. There can be no assurance however,
that market conditions will not change or demand for the Company’s products and
services will continue, which could result in impairment of long-lived assets in
the future.
Income
Taxes. In determining income for financial statement purposes, we must
make certain estimates and judgments. These estimates and judgments affect the
calculation of certain tax liabilities and the determination of recoverability
of certain of the deferred tax assets, which arise from temporary differences
between tax and financial statement recognition of revenue and expense. We
record a valuation allowance to reduce our deferred tax assets to the amount
that it is more likely than not to be realized. In assessing the realizability
of deferred tax assets, we consider future taxable income by tax jurisdictions
and tax planning strategies. If we were to determine that we would be able to
realize deferred tax assets in the future in excess of the net recorded amount,
an adjustment to the valuation allowance would increase income in the period
such determination was made. Likewise, should we determine that we would not be
able to realize all or part of our net deferred tax assets in the future, an
adjustment to the valuation allowance would decrease income in the period such
determination was made. (See Note 12 of the annual
Consolidated Financial Statements.)
Changes
in tax laws and rates could also affect recorded deferred tax assets and
liabilities in the future. We are not aware of any such changes that would have
a material effect on our results of operations, cash flows or financial
position.
In
addition, the Company accounts for income taxes pursuant to
the ASC 740. T he calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations in a multitude of
jurisdictions across our global operations. We record tax liabilities for the
anticipated settlement of tax audit issues in the U.S. and other tax
jurisdictions based on our estimate of whether, and the extent to which,
additional taxes will be due. Our income tax expense includes amounts intended
to satisfy income tax assessments that result from these audit issues in
accordance with Financial Accounting Standards Board (FASB) Interpretation No.
48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109” (FIN 48). Determining the income tax expense for these
potential assessments and recording the related assets and liabilities requires
management judgments and estimates. Due to the complexity of some of these
uncertainties, the ultimate resolution may result in a payment that is different
from our estimate of tax liabilities. If payment of these amounts ultimately
proves to be greater or less than the recorded amounts, the change of the
liabilities would result in tax expense or benefit being recognized in that
period. We evaluate our uncertain tax positions in accordance with FIN 48. We
believe that our reserve for uncertain tax positions, including related
interest, is adequate.
Pension
Plans. We do not have unfunded pension plans either inside or outside the
U.S.
44
Liquidity
and Capital Resources
Our
liquidity needs have related to, and are expected to continue to relate to,
acquisitions, capital investments, product development costs, potential future
restructuring related to the rationalization of the business, and working
capital requirements. We have met our liquidity needs over the last four years
primarily through cash generated from sale of equity capital, our operations and
advances from our stockholders. Based on an analysis of liquidity utilizing
conservative assumptions for 20 1 0, we believe that
cash provided from operating activities and funding available under our current
credit agreements should be adequate to service debt and working capital needs,
meet our capital investment requirements, other potential restructuring
requirements, and product development requirements.
The
recent financial and credit crisis has reduced credit availability and liquidity
for many companies ; however, we
continue to have good relations with current and past funding sources.
Additionally we have new funding sources that have not contracted with the
company but have expressed interest in future funding
needs. Management has taken steps to secure additional funding if
needed in the US public markets. These steps may include but are not
limited to equity stakes from private or public sources that will not
significantly dilute the share value of current shareholders. We
anticipate a possible partnership combined with an investment in our company by
a publicly traded firm in Korea whereas they will purchase shares in our company
for a value of several million dollars. Another of our partners has
also requested review of a possible equity investment in the company for a one
time commitment of about a half million dollars in the later part of the
year. We also maintain strong connections with Angel investors who
have requested and are reviewing possible investments in the firm within this
calendar year We believe, however, that the strength of our core
business, cash position, access to credit markets, and our ability to generate
positive cash flow will sustain us through this challenging period. We are
working to reduce our liquidity risk by accelerating efforts to improve working
capital while reducing expenses in areas that will not adversely impact the
future potential of our business. As of Dec ember
3 1 , 2009, our cash and cash equivalents were $ 17,401 as compared to $ 19,309
as of December 31, 2008. Cash and cash equivalents
decreased in 2009 primarily due to the expenditures of advance payments on
contracts and amounts set aside as restricted cash
t o provide sufficient funds for our performance of
obligations under our contracts with Korea Global ID Corporation a corporation controlled by the Korean government,, which
contracts aim to develop wireless recognition software and middleware
technology.
During
200 9 , we did not execute any stock repurchases.
Prior to 200 9 , no shares were repurchased under any
repurchase plan. As of December 31, 200 9 , 2,000,000
shares remain available for sale under the current treasury program. Common stock obtained by the Company through any
repurchase program will be re-added to our treasury stock holdings.
We
continue to reinvest in the Company through our investment in our
technology , product upgrades, diversification of product
lines and process improvement. Most R&D expenses consist mainly of
salaries, related personnel costs and subcontract fees. In 200 9 , our investment in research and development was limited
and we did not apply any new funds to that area which was
the same as was done in 2008 . These amounts are reflected in the cash
generated from operations, as we expense our research and development as it is
incurred. In 20 1 0, we anticipate spending very
limited amount of research and development as our core
research projects are winding down and completed and
are market ready. This range of products is currently being marketed
to our customers; however we do have a number of newer products in the first
stages of product conceptualization. Upon further review and
confirmation of potential marketability we will revise funding needs on R&D
for these projects and should be considered as our “selected investments in
R&D” as mentioned in other sections .
Specific Product Upgrades and Diversification include but are not
limited to:
URIS Network Group Following the Latest Updated World
Specification The first version of URIS is made by C# and based on .NET and
Clavis Technologies has prepared new versions of our URIS based on JAVA to
support UNIX and Linux platforms to provide extensible services for all kind
commercialized operation systems and platforms. Clavis Technologies plans
upgrade the URIS core transaction engine supporting EPC Network specification
Version 1.1 to be the global RFID solution.
Expanding Enterprise Application Interfaces Clavis
Technologies will upgrade the business logics of
URIS Network Group for each step of the enterprise
RFID section supporting applications of industries of Government, Aerospace,
CPG, Heath Care, Logistics, Manufacturing, and Retail based on customers’ needs
as well as Clavis Technologies’ accumulated knowledgebase since 2003.
Considering various Database Management System (DBMS) and backend systems, these
interfaces will be modulized to integrate easily and rapidly while minimizing
errors.
Enhancing Voluminous Transaction Capability Considering the
voluminous transactions that specific industrial area (i.e., distribution,
logistics) will continue to expand their need of in near future, Clavis
Technologies has enhanced the transaction capability to develop an advanced RFID
application platform to rapidly and stably deploy in any
industry.
45
URIS RTLS Solution Handling an extensive scale of Active RFID
tags’ data Based on customers’ requirement, Clavis Technologies will
upgrade the data processing to provide data storage of a big scale of active
RFID tags’ data as well as various monitoring and reporting functions especially
in small areas or limited areas where customers concern security
seriously.
Ultra-Wideband (UWB) Application Clavis Technologies will
gradually focus on this application as UWB is considered by many to be the next
"big thing" in the wireless space. It allows for high data throughput with low
power consumption for distances of less than 10 meters, or about 30 feet, which
is very applicable to the digital home requirements.
URIS Mobile RFID Platform Developing Mobile RFID
Middleware Clavis Technologies will develop the new version RFID
middleware that can be embedded in mobile phones or PDAs, personal device, which
can provide people with the unique and individual RFID services comparable with
enterprise services in the near future.
u-Financial Solution Developing the m-Payment
Platform Clavis Technologies will develop various m-Payment platforms
(i.e., Transportation card, Credit card, Debit card, Point card, Cashback Credit
card, e-Purse, Micro-payment etc.) to provide unlimited payment via mobile
handsets.
Developing u-Voucher Solution Clavis Technologies will
develop our u-voucher solution based on 2D bar codes by mobile internet and RFID
tags via mobile phone’s RFID systems to provide fast and easy payment service to
users.
Developing the m-Financial Portal Service
Platform Clavis Technologies will upgrade m-banking solutions
depending on mobile system applications that banks plan to deploy in their
operations and then develop the m-Financial portal service platform, especially
enhanced for m-Payment processes, integrating Clavis Technologies m-banking
service platforms with other companies’ m-stock service
platforms.
No
significant cash flow activities incurred in the property and equipment during
200 9 . Likewise, we anticipate very
minimal capital expenditure in 2009 other than maintaining normal wear and tear
of the existing equipment.
We have
never paid a cash dividend. We do not anticipate paying any cash dividends in
the near future.
As we
continue to implement our strategic plan in a volatile global economic
environment, our focus will remain on operating our business in a manner that
addresses the reality of the current economic marketplace without sacrificing
the capability to effectively execute our strategy when economic conditions and
the retail environment stabilize. Based upon an analysis of liquidity using our
current forecast, management believes that our anticipated cash needs can be
funded from cash and cash equivalents on hand, the availability of cash under
borrowing arrangements with related parties , and
cash generated from future operations for the 20 1 0
fiscal year.
Off-Balance
Sheet Arrangements
We do not
utilize material off-balance sheet arrangements apart from operating leases that
have, or are reasonably likely to have, a current or future effect on our
financial condition, changes in financial condition, revenue or expenses,
results of operations, liquidity, capital expenditures or capital resources. We
use operating leases as an alternative to purchasing certain property, plant,
and equipment. Our future rental commitment under all non-cancelable operating
leases was $60,556 as of December 31, 2008. The scheduled timing of these rental
commitments is detailed in our “Contractual Obligations” section. As
of September 30, 2009, our future rental commitment under all non-cancelable
operating leases were $18,657 as compared to $60,556 as of December 31,
2008.
Contractual
Obligations
Our
contractual obligations and commercial commitments at December 31, 200 9 are summarized below:
Contractual
Obligation
|
Due
in less
|
Due
in
|
Due
in
|
Due
after
|
||||||||||||||
(dollar
amounts in thousands)
|
Total
|
than
1 year
|
1-3
years
|
3-5
years
|
5
years
|
|||||||||||||
Long-term
debt (1)
|
$
|
$
|
$
|
$
|
$
|
|||||||||||||
Capital
leases (2)
|
||||||||||||||||||
Operating
leases
|
47,487
|
43,862
|
3 , 625
|
-
|
-
|
|||||||||||||
Pension
obligations (3)
|
||||||||||||||||||
Acquisition
obligation (4)
|
||||||||||||||||||
Inventory
purchase commitments (5)
|
||||||||||||||||||
Total
contractual cash obligations
|
$
|
47,487
|
$
|
43,862
|
$
|
3,625
|
$
|
-
|
$
|
-
|
The table
above excludes our gross liability for uncertain tax positions, including
accrued interest and penalties since we cannot predict with reasonable
reliability the timing of cash settlements to the respective taxing
authorities.
46
Severance
Payable
We
maintain an accrued severance benefit payable account and the outstanding
severance payable at December 31, 2009 and 2008 were
$ 140,301 and $ 87,791, respectively.
Foreign
Currency Translation
Where the
functional currency of the Company's foreign subsidiaries is the local currency,
all assets and liabilities are translated into U.S. dollars, in accordance with
A S C 830 , using the
exchange rate on the balance sheet date, and revenues and expenses are
translated at average rates prevailing during the period. Accounts and
transactions denominated in foreign currencies have been re-measured into
functional currencies before translated into U.S. dollars. Foreign currency
transaction gains and losses are included as a component of other income and
expense. Gains and losses from foreign currency translation are included as a
separate component of comprehensive income. In accordance with A S C 230 , cash flows from the
Company's foreign subsidiaries are calculated based upon the local currencies.
As a result, amounts related to assets and liabilities reported on the
statements of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheets. Since the subsidiary's financial
statements must be translated into U.S. Dollars, major changes in the currency
exchange rate between the foreign denominations and U.S. Dollars may have a
significant impact on the operations of the Company. Although the Company does
not anticipate the currency exchange rate to be significantly different over the
next twelve months, no such assurances can be given.
Overview of Results of Operations
Revenues
We are a designer, developer and manufacturer of a wide range of
RFID middleware software products which operate with a broad range of tags,
readers and antennas for security and smart card integrated circuits, and a
diverse range of advanced logic, mixed-signal, radio frequency devices and
enterprise software. Leveraging our broad portfolio, we are able to
provide our customers with complete system solutions. Our solutions target a
wide range of applications in the industrial, consumer electronics, automotive,
wireless, communications, computing, storage, security, military and aerospace
markets, and are used in products such as mobile handsets, automotive
electronics, global positioning systems (GPS) and batteries. We
design, develop, manufacture and sell our software
products.
Our unit
volume is driven by product offerings, number of direct sales personnel,
recurring sales and, to some extent, pricing. Our base of installed systems
provides a source of recurring revenues from the sale of disposable tags,
labels, and service revenues.
Our
customers are somewhat dependent on business to business and governmental sales,
which are seasonal, subject to significant fluctuations, and difficult to
predict. In addition, current economic trends have particularly
strongly affected our customers, and consequently our net revenues may be
impacted. Such seasonality and fluctuations impact our sales. Historically, we
have experienced lower sales in the first half of each year.
Our operating segments consist of the following: (1) UHF
RFID microcontroller tags; (2) UHF RFID readers; (3) radio frequency
RFID antenna and (4) application specific middleware and software for
varied product lines. For simplicity sake the segments are broken
into the hardware and software sectors.
Revenues decreased to $558,394 for the year ended
December 31, 2009 from $682,680 for the year ended December 31, 2008,
a decrease of $124,286, or 18.2%. This decrease was a result of
global economic weakness affecting all electronic markets in
2009. Lower levels of inventory carried by our distribution partners
also contributed to reduced shipments levels compared to prior
periods. All of our business products were impacted by reduced demand
in the year ended December 31, 2009, compared to December 31, 2008,
with our hardware unit impacted the most and our software business impacted the
least. Larger projects for the year were curtailed by economic
environment causing a reduction in net revenues. However, some
smaller projects were successfully completed that added to the bottom line of
the company and continued to expand our offerings and industry credibility by
creating needed products and partnerships with our customers and potential
industry partners.
Gross Profit
Gross profit increased to $131,163 for the year ended December
31, 2009 compared to $66,301 for the year December 31, 2008, an increase of
97.83%. Gross profit for 2009 improved because we had higher margins
on hardware sales which, in prior periods we charged lower, competitive prices
and, therefore, had lower margins on such hardware sales. Thus, our
gross margins had been unfavorably impacted by such competitive pricing
pressures. We expect gross margin levels, and thus gross profits to continue to
improve in 2010 from increased factory loading, as well as a more favorable mix
of higher margin products included in our net
revenues.
We develop process technologies to ensure our products provide
the maximum possible performance. In the year ended December 31, 2009, we
manufactured a larger proportion of our products in our own fabrication
facilities. This should also impact our gross profits. Our
cost of revenues includes the costs of fabrication, assembly and test
operations, changes in inventory reserves, royalty expense and freight costs.
Our gross margin as a percentage of net revenues fluctuates depending on product
mix, manufacturing yields, utilization of manufacturing capacity, and average
selling prices, among other factors.
47
Analysis
of Statement of Operations
The
following table presents for the periods indicated certain items in the
consolidated statement of operations as a percentage of total revenues and the
percentage change in dollar amounts of such items compared to the indicated
prior period:
200 9
|
200 8
|
200 9 vs 200 8
%
Change
|
||||||||||
REVENUES
|
||||||||||||
Hardware
|
$
|
183,582
|
$
|
25 8, 12 9
|
( 2 8. 88
|
)
|
||||||
Software
and service
|
374,812
|
424 , 5 5 1
|
( 11.72
|
)
|
||||||||
558,394
|
68 2, 68 0
|
( 18.21
|
)
|
|||||||||
COST
OF SALES
|
||||||||||||
Hardware
|
67,447
|
215,982
|
( 68.7 7
|
)
|
||||||||
Software
and service
|
359,784
|
400,397
|
( 10.14
|
)
|
||||||||
427,231
|
616,379
|
3 0 . 69
|
||||||||||
GROSS
PROFIT
|
131,163
|
66,301
|
97.83
|
|||||||||
EXPENSES
|
||||||||||||
Professional
fees
|
212,663
|
67,700
|
214.13
|
|||||||||
Office
and general
|
57,042
|
58,931
|
( 3.21
|
)
|
||||||||
Salaries
and employee benefits
|
107,747
|
184,859
|
( 4 1. 71
|
)
|
||||||||
Depreciation
|
4,390
|
7,698
|
( 42.97
|
)
|
||||||||
Total
Expenses
|
381,842
|
319,188
|
1 9. 63
|
|||||||||
LOSS
FROM OPERATIONS
|
( 250,679
|
)
|
( 252,887
|
)
|
( 0.87
|
)
|
||||||
OTHER
INCOME (EXPENSES)
|
||||||||||||
Interest
expense, net
|
( 40,527
|
)
|
( 103,068
|
)
|
( 6 0 . 68
|
)
|
||||||
Inventory write-down
|
(11,879
|
)
|
-
|
118.79
|
||||||||
Other income (expense)
|
20,256
|
(11,875
|
)
|
2 70 . 58
|
||||||||
( 32,150
|
)
|
( 114,943
|
)
|
( 7 2. 03
|
)
|
|||||||
LOSS
BEFORE INCOME TAX
PROVISION
|
( 282,829
|
)
|
( 367,830
|
)
|
( 2 3. 11
|
)
|
||||||
Income Tax Provision
|
-
|
-
|
||||||||||
NET
LOSS
|
$
|
( 282,829
|
)
|
$
|
( 367,830
|
)
|
( 23.11
|
)
|
||||
LOSS
PER SHARE – basic and
diluted
|
$
|
( 0.01
|
)
|
$
|
( 1 .8 3
|
)
|
( 99.56
|
)
|
||||
WEIGHTED
AVERAGE NUMBER OF
COMMON
STOCKS OUTSTANDING – basic and
diluted
|
35,260,103
|
201,000
|
N/A
|
|||||||||
N/A —
Comparative percentages are not meaningful.
48
Net
Loss /Comprehensive Loss
During
200 9 , net loss decreased by $186,984, or 2 3. 11 %, from $ 367,830 to $ 282,829 . After adjusting for gains and losses resulting from
foreign currency translation (Korean Won into U.S. dollars), we had a total
comprehensive loss of $379,202 for the year ended December 31, 2009, an increase
loss of $321,288, or 554.77%, from a total comprehensive loss of $57,914 for the
year ended December 31, 2008. The large increase in total
comprehensive loss was primarily attributable to (i) losses from foreign
currency translations in 2009 of $96,373 compared to gains of $309,916 from
foreign currency translations in 2008 and (ii) lower interest expense and other
expense.
Dollar
Amount
|
Percentage
|
|||||||||||||||
Change
|
Change
|
|||||||||||||||
December
31,
|
December
31,
|
Fiscal
200 9
|
Fiscal
200 9
|
|||||||||||||
200 9
|
200 8
|
vs.
|
vs.
|
|||||||||||||
Year
ended
|
(Fiscal
200 9 )
|
(Fiscal
200 8 )
|
Fiscal
200 8
|
Fiscal
200 8
|
||||||||||||
Comprehensive
Loss
|
$
|
( 3 79 ,202 )
|
$
|
(5 7 , 9 1 4 )
|
$
|
321,288
|
( 554.77 )
|
%
|
Gross
Profit
During
2008, gross profit increased by $ 64 , 862 , or 97.83 %, from $ 66,301 to $ 131,163 . Gross profit, as a percentage of revenues,
increased from 9.71 % to 23.4 9%. The increase in gross profit
is attributable to wider margins in hardware sales as we faced less pricing
pressure for hardware in 2009 versus 2008.
Selling,
General, and Administrative Expenses
Selling,
general, and administrative (SG&A) expenses in creased $ 62,654 , or 19.63 %, during 200 9 . The in crease is due to (i) increased legal and accounting fees related to our
filing of the registration statement and conducting an offering under Regulation
S, which expenses increased by $144, 963, from
$67,700 to $212,663. The increase in professional fees was offset set
by slightly lower office and general expenses, a decrease of $77,112 in salaries
and employee benefits and lower depreciation
expense.
49
Litigation
Settlement
Litigation
Settlement expenses were not incurred in the business operations. We
do not anticipate any additional charges related to issues.
Interest
Income and Interest Expense
Net
interest expenses for 200 9 de creased by $6 2 , 541 from the comparable period in 200 8 . The de crease in interest
expense was due to a de crease in notes payable and lower
interest rates for such notes ..
Other
Income ( Expense ),
net
Other
income ( expense ), net
was a gain of $ 20,256
for 200 9 compared to a net loss of $ 11 , 875 for 200 8 . The increase in
other gains for 200 9 was
due primarily to an increase in
interest income and a decrease in miscellaneous expenses. .
Income
Taxes
The
Company accounts for income taxes pursuant to ASC
740 .
The
calculation of the Company's tax provision involves the application of complex
tax rules and regulations within multiple jurisdictions throughout the world.
The Company's tax liabilities include estimates for all income-related taxes
that the Company believes are probable and that can be reasonably estimated. To
the extent that the Company’s estimates are understated, additional charges to
the provision for income taxes would be recorded in the period in which the
Company determines such understatement. If the Company's income tax estimates
are overstated, income tax benefits will be recognized when
realized.
Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment. FIN 48 prescribes a recognition
threshold and measurement attributes for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.
50
There is no current and deferred income tax provision in Korea
and US operations for the year s ended
Dec ember 3 1 , 2009 and
2008 .
The
Company has deferred income tax assets as follows as of Dec ember 3 1 , 2009 and December
31, 2008:
Dec ember 3 1 ,
2009
|
December
31, 2008
|
|||||||
Deferred
income tax assets
|
||||||||
Net operating loss
carryforwards
|
$
|
12,000
|
||||||
12,000
|
||||||||
Valuation
allowance
|
(12,000)
|
|||||||
$
|
-
|
$
|
-
|
M anagement determined that it is more likely than not that
the deferred tax asset s will not be realized through
the reduction of future income tax payments, accordingly a full valuation allowance has been recorded for deferred
income tax assets.
Other
Matters
Recently
Adopted Accounting Standards
In June 2009, the FASB issued guidance that amends the
consolidated rules related to variable interest entities. The
determination of whether a company is required to consolidate an entity is based
on, among other things, an entity’s purpose and design and a company’s ability
to direct the activities of the entity that most significantly impact the
entity’s economic performance. This guidance requires ongoing
reassessments of whether an enterprise is the primary beneficiary of the
variable interest entity. This guidance is effective for fiscal years
beginning after November 15, 2009. The adoption of this guidance is
not expected to have a significant impact on the Company’s results of operations
or financial position.
In October 2009, the FASB issued guidance on multiple-deliverable
arrangements to address how to separate deliverables and how to measure and
allocate arrangement consideration. This guidance requires vendors to
develop the best estimate of selling price for each deliverable and allocate the
arrangement consideration using this selling price. This guidance also expands
the disclosure requirements to include both quantitative and qualitative
information. This guidance is effective for fiscal years beginning after June
15, 2010. The Company is currently evaluating the impact of the
adoption of this guidance on its results of operations and financial
position.
In October 2009, the FASB issued guidance that clarifies the
tangible products containing software components and non-software components
that function together to deliver a product’s essential functionality will be
considered non-software deliverables and will be scoped out of the software
revenue recognition guidance. This guidance is effective for the
fiscal years beginning after June 15, 2010. The Company is currently
evaluating the impact of the adoption of this guidance on its results of
operations and financial position.
In January 2010, the FASB issued guidance that expands the
interim and annual disclosure requirements of fair value measurements, including
the information about movement of assets between level 1 and 2 of the three-tier
fair value hierarchy established under its fair value measurement guidance. This
guidance also requires separate disclosure for each of purchases, sales,
issuance, and settlements in the reconciliation for fair value measurements
using significant unobservable inputs, level 3. Except for the detailed
disclosure in the level 3 reconciliation, which is effective for the fiscal
years beginning after December 15, 2010, all the other disclosures under this
guidance are effective for the fiscal years beginning after December 15,
2009. The Company is currently evaluating the impact of the adoption
of this guidance on its results of operations and financial
position.
51
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market
Risk Factors
Fluctuations
in interest and foreign currency exchange rates affect our financial position
and results of operations. We have not entered into forward exchange contracts
denominated in foreign currency to reduce the risks of currency fluctuations on
short-term inter-company receivables and payables. We have historically not used
financial instruments to minimize our exposure to currency fluctuations on our
net investments in and cash flows derived from our foreign
subsidiaries.
Where the
functional currency of the Company's foreign subsidiaries is the local currency,
all assets and liabilities are translated into U.S. dollars, in accordance
with ASC 830 , using the exchange rate on the balance
sheet date, and revenues and expenses are translated at average rates prevailing
during the period. Accounts and transactions denominated in foreign currencies
have been re-measured into functional currencies before translated into U.S.
dollars. Foreign currency transaction gains and losses are included as a
component of other income and expense. Gains and losses from foreign currency
translation are included as a separate component of comprehensive income. In
accordance with ASC 230 , cash flows from the
Company's foreign subsidiaries are calculated based upon the local currencies.
As a result, amounts related to assets and liabilities reported on the
statements of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheets. Since the subsidiary's financial
statements must be translated into U.S. Dollars, major changes in the currency
exchange rate between the foreign denominations and U.S. Dollars may have a
significant impact on the operations of the Company. Although the Company does
not anticipate the currency exchange rate to be significantly different over the
next twelve months, no such assurances can be given.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our
executive officers and directors and their ages as of January __, 2010 are as
follows:
Name
|
|
Age
|
|
Position
|
Hwan
Sup Lee
|
|
39
|
|
Chief
Executive Officer, President and Director
|
So
Lim Lee
|
|
34
|
|
Chief
Financial Officer and Director
|
Ki Y oung
You
|
35
|
Chief
Marketing Officer, Secretary and
Director
|
Mr. Hwan Sup Lee has been the
Chief Executive Officer, President and sole director of the Company since its
incorporation on September 10, 2009. Mr. Lee has served as the Chief
Executive Officer and Chief Technical Officer of our subsidiary, Clavis
Technologies Co., Ltd., since January 2003. From May 2001 to June
2002, he served as the Chief Technical Officer of Witnet International, a
software development company. From 1995 to 1991, Mr. Lee was an
Application Developer and Manager at Daesang Information Technology,
an IT services firm based in Seoul, Korea. Mr. Lee has no family
relationship to Ms. So Lim Lee.
52
Ms. So Lim Lee has been the
Chief Financial Officer of the Company since its incorporation on September 10,
2009 and she has been a director since January 22, 2010. Ms. So Lim
Lee has also served as the Chief Financial Officer of our subsidiary, Clavis
Technologies Co., Ltd., since September 2008. From February 2005 to
August 2008, she was the General Manager of the Finance Department at Multi-Q
Inc., a logistics company in Seoul, Korea. From March 2004 to January
2005, Ms. Lee served as the Manager of the Finance Department at Promotive
Corp., a Korean distributor. From July 2002 to February 2004, she was
the Assistant Manager of the Finance Department at JAVA Feel, an online game
company. From August 2000 to July 2002 Ms. Lee was Assistant Manager
of the Finance Department at SAPI, a private institute in Seoul
Korea. Ms. Lee has no family relationship to Mr. Hwan Sup
Lee.
Ms. Ki Y oung You has served as our
Chief Marketing Officer and Secretary since our incorporation on September 10,
2009 and she has been a director since January 22, 2010. She also has
served as the Chief Marketing Officer of our subsidiary, Clavis Technologies
Co., Ltd., since January 2003. From July 2001 to August 2002,
she was the General Manager of the Marketing Department at JAVA Feel, an online
gaming company. From August 2000 to July 2001, Ms. Lee was a research
assistant at the Consumer Policy Research Bureau of the Korean Consumer
Agency. From August 1999 to August 2000, she was a Professors and
Department Assistant at the Department of Consumer Economics at Sookmyung
Women’s University. From October 1998 to October 1999,
Ms. Lee worked in the Marketing Department at Lasse Ltd., a cosmetics
company.
Board
of directors committees and other information
During
our fiscal year ended December 31, 2009, our Board consisted of a sole director,
Mr. Hwan Sup Lee. In accordance with Nevada corporate law, our
business and affairs are managed under the direction of the
Board. Our By laws provide that if we have more than three
shareholders our board must have at least three members. We are
currently seeking candidates to fill the two vacancies on our Board and we
expect to fill such vacancies as promptly as possible.
The
Company's Board consisted of a sole director during the fiscal year ended
December 31, 2009 and, therefore, no Board meetings were held and all
resolutions were adopted by unanimous written consent.
Policy
Regarding Director Attendance At Annual Meetings
The
Company does not have a formal policy regarding the Board attendance at annual
meetings. During fiscal 2010, we shall adopt such a
policy.
Stockholder
Communications With the Board
The Board
currently does not have a formal process for stockholders to send communications
to the Board. Nevertheless, the Board desires that the views of shareholders are
heard by the Board and that appropriate responses are provided to shareholders
on a timely basis. The Board does not recommend that formal communication
procedures be adopted at this time because it believes that informal
communications are sufficient to communicate questions, comments and
observations that could be useful to the Board. However, shareholders wishing to
normally communicate with the Board may send communications directly to: c/o
Clavis Technologies Co., Ltd., 1564-1, Seojin Bldg., 3rd Floor, Seocho3-Dong,
Seocho-Gu, Seoul, Korea 137-874, Attention: Corporate
Secretary.
Code
of Ethics
We have
not adopted a code of ethics that applies to all of our directors, officers
(including our chief executive officer and chief financial officer, and any
person performing similar functions) and employees. We expect to
adopt such Code of Ethics during fiscal 2010.
Section
16(a) beneficial reporting compliance
Upon the
effectiveness of the registration statement in which this prospectus is
contained, our executive officers, directors and shareholders beneficially
owning more than 10% of our common stock will be required under the Exchange Act
to file reports of beneficial ownership of our common stock with the Securities
and Exchange Commission. Copies of those reports must also be
furnished to us. During the preceding twelve months, none of our
executive officers, directors and shareholders beneficially owning more than 10%
of our common stock were required to file such reports of beneficial ownership
under the Exchange Act.
53
Committees
Since the
Company's Board consists of a sole director, the board did not establish any
committees, including, but not limited to a separately-designated standing audit
committee. Currently, the Company’s Board of Directors acts as the audit
committee. We do not have a director that qualifies as an “audit
committee financial expert” within the applicable definition of the Securities
and Exchange Commission.
Until we
fill the vacancies on our Board, the functions of an audit committee,
compensation committee and a nominating and governance committee shall be
performed by the sole director
Board
of Directors:
None of
the directors, executive officers and key employees shares any familial
relationship.
Independence
of Directors
Our sole
director is our Chief Executive Officer and, therefore, does not qualify as an
independent director under Rule 10A-3 of the Securities Exchange Act of 1934 and
as defined in NASD Marketplace Rule 4200(15).
EXECUTIVE
COMPENSATION
The
following information summarizes the compensation paid to our Named Executive
Officers for the fiscal years ended December 31, 200 9 and 200 8 .
SUMMARY
COMPENSATION TABLE
Name
and Principal Position
|
Year
|
Salary
($)
(1)
|
Bonus
($)
|
Option
Awards
($) (1)
|
All
Other
Compensation
($)
|
Total
($)
|
||||||||||||||||
Hwan
Sup Lee
|
200 9
|
53,629
|
--
|
--
|
--
|
53,629
|
||||||||||||||||
Chief
Executive Officer and President
|
200 8
|
53,629
|
--
|
--
|
--
|
53,629
|
||||||||||||||||
So
Lim Lee
|
200 9
|
25,818
|
--
|
--
|
--
|
25,818
|
||||||||||||||||
Chief
Financial Officer
|
200 8
|
25,818
|
--
|
--
|
--
|
25,818
|
||||||||||||||||
Ki Y oung
You
|
200 9
|
41,306
|
--
|
--
|
--
|
41,306
|
||||||||||||||||
Chief
Marketing Officer and Secretary
|
200 8
|
41,306
|
--
|
--
|
--
|
41,306
|
(1) Based
on the currency exchange rate between Korean Won and the U.S. Dollar as of
January 27, 2010 (US$1 = 1,161.97 Korean Won).
54
Material
Terms of Employment Contracts of Named Executive Officers
Hwan
Sup Lee, Chief Executive Officer and President
Our
subsidiary, Clavis Korea, entered into an employment agreement with Hwan Sup
Lee, our Chief Executive Officer and President, on June 25,
2009. Under this employment agreement, Mr. Lee will be the Chief
Executive Officer of Clavis Korea. This employment agreement
continues until terminated by either party. Under his employment
agreement Mr. Lee receives an annual salary of approximately $53,629 (60,000,000
Won) and he is entitled to ten days of vacation per year. If Mr. Lee
cannot perform his duties due to illness or incapacity for a period of eight (8)
weeks, then Mr. Lee’s compensation will be reduced by 15%. His
compensation will be adjusted to his regular salary upon his return to
work. If Mr. Lee is absent from work for any reason for a continuous
period of more than one week, Clavis Korea then has the option of terminating
his employment immediately. Clavis Korea may terminate Mr. Lee’s
employment, with or without cause, upon 30 days prior notice (except as provided
in the prior sentence regarding disability or illness). Such 30 day
notice is also required if Mr. Lee’s employment is terminated in connection with
a sale or liquidation of Clavis Korea or its entry into bankruptcy
proceedings. Mr. Lee is not entitled to any severance payment in the
event of a sale or change of control of Clavis Korea. Mr. Lee may
terminate his employment with Clavis Korea upon 30 days prior
notice. Mr. Lee is subject to a confidentiality clause that prohibits
him from disclosing any of Clavis Korea’s confidential or proprietary
information during and after the term of his employment
agreement. Mr. Lee is also subject to a two (2) year non-compete
after the termination of his employment with Clavis Korea.
So
Lim Lee, Chief Financial Officer
Our
subsidiary, Clavis Korea, entered into an employment agreement with So Lim Lee,
our Chief Financial Officer, on June 25, 2009. Under this employment
agreement, Ms. Lee will be the Chief Financial Officer of Clavis
Korea. This employment agreement continues until terminated by either
party. Under her employment agreement Ms. Lee receives an annual
salary of approximately $ 25,818 (2 2 , 22 0,000 Won) and she is
entitled to ten days of vacation per year. If Ms. Lee cannot perform
her duties due to illness or incapacity for a period of eight (8) weeks, then
Ms. Lee’s compensation will be reduced by 15%. Her compensation will
be adjusted to her regular salary upon her return to work. If Ms. Lee
is absent from work for any reason for a continuous period of more than one
week, Clavis Korea then has the option of terminating her employment
immediately. Clavis Korea may terminate Ms. Lee’s employment, with or
without cause, upon 30 days prior notice (except as provided in the prior
sentence regarding disability or illness). Such 30 day notice is also
required if Ms. Lee’s employment is terminated in connection with a sale or
liquidation of Clavis Korea or its entry into bankruptcy
proceedings. Ms. Lee is not entitled to any severance payment in the
event of a sale or change of control of Clavis Korea. Ms. Lee may
terminate her employment with Clavis Korea upon 30 days prior
notice. Ms. Lee is subject to a confidentiality clause that prohibits
her from disclosing any of Clavis Korea’s confidential or proprietary
information during and after the term of her employment
agreement. Ms. Lee is also subject to a two (2) year non-compete
after the termination of her employment with Clavis Korea.
Ki Y oung You, Chief
Marketing Officer and Secretary
Our
subsidiary, Clavis Korea, entered into an employment agreement with Ki Y oung You, our Chief
Marketing Officer and Secretary, on June 25, 2009. Under this
employment agreement, Ms. You will be the Chief Marketing Officer of Clavis
Korea. This employment agreement continues until terminated by either
party. Under her employment agreement, Ms. You receives an annual
salary of approximately $41,306 (48,000,000 Won) and she is entitled to ten days
of vacation per year. If Ms. You cannot perform her duties due to
illness or incapacity for a period of eight (8) weeks, then Ms. You’s
compensation will be reduced by 15%. Her compensation will be
adjusted to her regular salary upon her return to work. If Ms. You is
absent from work for any reason for a continuous period of more than one week,
Clavis Korea then has the option of terminating her employment
immediately. Clavis Korea may terminate Ms. You’s employment, with or
without cause, upon 30 days prior notice (except as provided in the prior
sentence regarding disability or illness). Such 30 day notice is also
required if Ms. You’s employment is terminated in connection with a sale or
liquidation of Clavis Korea or its entry into bankruptcy
proceedings. Ms. You is not entitled to any severance payment in the
event of a sale or change of control of Clavis Korea. Ms. You may
terminate her employment with Clavis Korea upon 30 days prior
notice. Ms. You is subject to a confidentiality clause that prohibits
her from disclosing any of Clavis Korea’s confidential or proprietary
information during and after the term of her employment
agreement. Ms. You is also subject to a two (2) year non-compete
after the termination of her employment with Clavis Korea.
Outstanding
Equity Awards at Year End
We
currently do not have any equity compensation plans. We have not made
any equity awards to any of our officers or directors. We do not have
any outstanding options or other forms of equity compensation.
Director
Compensation
We
currently do not pay any compensation to our sole director for his service on
the Board. If we add any independent directors
to our Board, we may in the future determine to pay our directors' fees,
grant them equity compensation and/or reimburse our directors for expenses
related to their activities.
55
Equity
Compensation Plan Information
We
currently do not have any equity compensation plans. We have not made
any equity awards to any of our officers or directors. We do not have
any outstanding options or other forms of equity compensation.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of April 28, 2010,
certain information concerning the beneficial ownership of our common stock, by
(i) each person known by us to own beneficially five per cent (5%) or
more of the outstanding shares of each class, (ii) each of our directors
and executive officers, and (iii) all of our executive officers and
directors as a group.
The
number of shares beneficially owned by each 5% stockholder, director or
executive officer is determined under the rules of the Securities and Exchange
Commission, or SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and also any shares that the individual
or entity has the right to acquire within 60 days after April 28, 2010 through the exercise of any stock option,
warrant or other right, or the conversion of any security. Unless
otherwise indicated, each person or entity has sole voting and investment power
(or shares such power with his or her spouse) with respect to the shares set
forth in the following table. The inclusion in the table below of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of those shares.
Name
and Address(1)
|
Shares
of
Common
Stock
Beneficially
Owned
|
Percent of
Common
Stock (2)
|
||||||||||||||
Directors
and Executive Officers
|
||||||||||||||||
Hwan
Sup Lee
|
10,700,000
|
17.20
|
%
|
|||||||||||||
So
Lim Lee
|
200,000
|
*
|
||||||||||||||
Ki Y oung
You
|
2,000,000
|
(3)
|
3.2
|
%
|
||||||||||||
Beneficial
Owners
|
||||||||||||||||
Eung
San Kim
|
7,700,000
|
12.3
|
%
|
|||||||||||||
Suk
Ho Seo
|
5,000,000
|
(4)
|
8.0
|
|||||||||||||
Tai
Jong Jeoung
|
4,000,000
|
(5)
|
6.4
|
|||||||||||||
All
executive officers and directors as a group
(3 persons)
|
12,900,000
|
20.7
|
%
|
*
|
Less
than 1%.
|
|
(1)
|
Except
as otherwise indicated in the table, the address for each named person is
c/o Clavis Technologies Co., Ltd., #1564-1, Seojin Bldg., 3rd Floor, Seocho3-Dong,
Seocho-Gu, Seoul, Korea 137-874.
|
|
(2)
|
For
each named person and group included in this table, percentage ownership
of our common stock is calculated by dividing the number of shares of our
common stock beneficially owned by such person or group by the sum of
(i) 62,375,200 shares of our common stock outstanding as of April 28, 2010 and (ii) the number of shares
of our common stock that such person has the right to acquire within 60
days after April 28, 2010.
|
|
(3)
|
Includes
1,500,000 shares held by Ms. You’s husband.
|
|
(4)
|
Includes
400,000 shares held by Mr. Seo’s children and 1,600,000 shares held by Mr.
Seo’s wife.
|
|
(5)
|
Includes
1,200,000 shares held by Mr. Jeoung’s
wife.
|
56
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We have
received advances from our directors and stockholders . T heses advance were from
Mr. Hwan Sup Lee, our President and one of our shareholders, and Mr. Hyeong Sang
Bae, one of our shareholders, and Ms. Ki Young You, our Chief Marketing Officer
and one of our shareholders. The advances
were on demand and outstanding in the amount of $ 84,865 and $228,673 as of December 31 , 2009 and December 31, 2008,
respectively. In
addition, we made advances to Mr. Eung Sang Kim, one of our shareholders, and
the balances amounted to $12,071 and $8,276 as of December 31, 2009 and 2008,
respectively. The advances were on demand and the net outstanding balances were
$84,865 and $228,673 as of December 31, 2009 and 2008,
respectively.
In March 2010, the Company borrowed $44,250 from Hyun Sook Choi,
a shareholder of the Company. Such loan bears interest at 12% per
annum and matures in September 2011.
EXPERTS
The
financial statements included in this prospectus for the year ended December 31,
2008 have been so included in reliance on the report of Kim and Lee Corporation,
CPAs, an independent registered public accounting firm, given on the authority
of said firm as experts in auditing and accounting.
DISCLOSURE
OF COMMISSION POSITION ON
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The
Nevada Private Corporations Law generally provides that a corporation is
empowered to indemnify any person who is made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation or is or was serving,
at the request of the corporation, in any of such capacities of another
corporation or other enterprise, if such director, officer, employee or agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Under Nevada law, a director or officer may not be indemnified
where his act or failure to act constitutes a breach of his or her fiduciary
duty and such breach involved intentional misconduct, fraud, or a knowing
violation of law. This statute describes in detail the right of corporations
such as our Company to indemnify any such person.
Our
Articles of Incorporation and our By laws provide generally for mandatory
indemnification of our directors and officers to the fullest extent permitted
under the Nevada Private Corporations Law if they have been successful in the
defense of any claim asserted against them, and permissive indemnification for
any claim asserted against them if it appears they acted in good faith and in a
manner not opposed to the best interests of the Company. We are also permitted
to indemnify all other persons whom we requested to act on behalf of the Company
in the same manner. Our Articles of Incorporation permit us to advance expenses
on behalf of any person, including officers and directors, with regard to any
action or proceeding, provided that we receive an undertaking to repay all such
advances if it is determined that such person was not entitled to be indemnified
by us.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
If a
claim for indemnification against such liabilities (other than the payment by us
of expenses incurred or paid by a director, officer or controlling person of our
company in the successful defense of any action, suit or proceeding) is asserted
by any of our directors, officers or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of that issue.
57
Clavis Technologies International Co., Ltd.
17,375,200 shares of Common Stock
________ ___, 2010
Dealer Prospectus Delivery Obligation
Until
_____, 2010, a ll dealers that effect
transactions in these securities, whether or not participating in this offering,
may be required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscriptions.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
|
Other
Expenses of Issuance and
Distribution.
|
The
following table sets forth the expenses payable by us in connection with this
offering of securities described in this registration statement. All amounts
shown are estimates. The Registrant will bear all expenses shown
below.
Accounting
fees and expenses
|
$
|
60,000
|
||
Legal
fees and expenses
|
$
|
22,000
|
*
|
|
Printing
and engraving expenses
|
$
|
2,000
|
*
|
|
Other
|
$
|
500
|
*
|
|
Total
|
$
|
84,000
|
*
|
*Estimate
Item 14.
|
Indemnification
of Directors and Officers.
|
The
registrant’s By-laws, as amended to date, provide for indemnification of
officers and directors to the fullest extent permitted by Section 7502 of
Chapter 78 of the Nevada Revised Statutes (“NRS”) (as from time to time
amended), provided such officer or director acts in good faith and in a manner
which such person reasonably believes to be in or not opposed to the best
interests of the registrant, and with respect to any criminal matter, had no
reasonable cause to believe such person’s conduct was unlawful.
NRS
78.7502 states:
“1. A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys’ fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he:
|
(a)
|
Is
not liable pursuant to NRS 78.138;
or
|
|
(b)
|
Acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
|
The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person is liable
pursuant to NRS 78.138 or did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, or that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys’ fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if
he:
|
(a)
|
Is
not liable pursuant to NRS 78.138;
or
|
|
(b)
|
Acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the
corporation.
|
Indemnification
may not be made for any claim, issue or matter as to which such a person has
been adjudged by a court of competent jurisdiction, after exhaustion of all
appeals therefrom, to be liable to the corporation or for amounts paid in
settlement to the corporation, unless and only to the extent that the court in
which the action or suit was brought or other court of competent jurisdiction
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
II-1
3. To the
extent that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with the defense.”
The
registrant’s By-laws also provide that to the fullest extent permitted by NRS
78.751 (as from time to time amended), the registrant shall pay the expenses of
officers and directors of the Corporation incurred in defending a civil or
criminal action, suit or proceeding, as they are incurred and in advance of the
final disposition of such matter, upon receipt of an undertaking in form and
substance acceptable to the board of directors for the repayment of such
advances if it is ultimately determined by a court of competent jurisdiction
that the officer or director is not entitled to be indemnified.
NRS
78.751 states:
“1. Any
discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court
or advanced pursuant to subsection 2, may be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
|
(a)
|
By
the stockholders;
|
|
(b)
|
By
the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or
proceeding;
|
|
(c)
|
If
a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel
in a written opinion; or
|
|
(d)
|
If
a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
|
2. The
articles of incorporation, the bylaws or an agreement made by the corporation
may provide that the expenses of officers and directors incurred in defending a
civil or criminal action, suit or proceeding must be paid by the corporation as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
3. The
indemnification pursuant to NRS 78.7502 and advancement of expenses authorized
in or ordered by a court pursuant to this section:
|
(a)
|
Does
not exclude any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the articles of
incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to NRS 78.7502 or
for the advancement of expenses made pursuant to subsection 2, may not be
made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and was material to the cause of
action.
|
|
(b)
|
Continues
for a person who has ceased to be a director, officer, employee or agent
and inures to the benefit of the heirs, executors and administrators of
such a person.”
|
In
addition, the registrant maintains directors’ and officers’ liability insurance
which insures against liabilities that its directors and officers may incur in
such capacities.
Reference
is made to “Undertakings,” below, for the registrant’s undertakings in this
registration statement with respect to indemnification of liabilities arising
under the Securities Act of 1933, as amended (the “Securities
Act”).
Item 15.
|
Recent
Sales of Unregistered Securities.
|
The
following information relates to all securities issued or sold by the Registrant
within the past three years and not registered under the Securities Act. Each of
the transactions described below was conducted in reliance upon the exemptions
from registration provided in Regulation S promulgated under the Securities Act.
There were no underwriters employed in connection with any of the transactions
set forth in this Item 15.
On
September 14, 2009 we issued, we sold 15,000,000 shares of our common stock to
five (5) non-U.S. persons for an aggregate purchase price of
$80,000. This transaction was exempt from the registration provisions
of the Securities Act pursuant to Regulation S as an offshore transaction with
non-U.S. persons (as such term is defined in Rule 902 of Regulation
S).
II-2
On
December 1, 2009, we entered into a definitive Share Exchange Agreement with
Clavis Technologies Co., Ltd., a Korean corporation (“Clavis Korea”) and the
shareholders of Clavis Korea. Pursuant to the agreement, we acquired
100% of the issued and outstanding capital stock of Clavis Korea in exchange for
45,000,000 shares (approximately 75%) of our common stock. This
transaction was a reverse-takeover by Clavis Korea whereby Clavis Korea’s
shareholders acquired the control of us. This transaction was exempt
from the registration provisions of the Securities Act pursuant to Regulation S
as an offshore transaction with non-U.S. persons (as such term is defined in
Rule 901 of Regulation S)
In
December 2009 and January 2010, we sold 2 ,375,200
shares of our common stock to 27 purchasers for an aggregate purchase price of
$1 2,667.13 . This transaction was exempt
from the registration provisions of the Securities Act pursuant to Regulation S
as an offshore transaction with non-U.S. persons (as such term is defined in
Rule 902 of Regulation S).
Item 16. Exhibits.
The
following exhibits are filed herewith or incorporated by reference
herein:
Exhibit
Number
|
Description
|
3.1
|
Articles
of Incorporation .#
|
3.2
|
By-laws .#
|
5.1
|
Opinion
of Fox Law Offices, P.A. (including the consent of such firm) regarding
the legality of the securities being offered. #
|
10.1
|
Share
Exchange Agreement, dated as of December 1, 2009, by and among Clavis
Technologies International Co., Ltd., Clavis Technologies Co., Ltd.
(“Clavis Korea”) and the shareholders of Clavis Korea. (filed herewith)
|
10.2
|
Employment
Agreement, dated as of June 25, 2009, by and between Clavis Korea and Hwan
Sup Lee .#
|
10.3
|
Employment
Agreement, dated as of June 25, 2009, by and between Clavis Korea and So
Lim Lee .#
|
10.4
|
Employment
Agreement, dated as of June 25, 2009, by and between Clavis Korea and
Ki Y oung
You .#
|
10.5*
|
Loan
Agreement, dated November 14, 2008, by and between Seong Hun Han and
Clavis Korea .#
|
10.6*
|
Agreement
with Woori Bank, dated April 22, 2009 .#
|
10.7
|
Authorization
Letter, dated April 1, 2009, from Alien Technology Asia .#
|
10.8*
|
Office
Lease, dated January 17, 2005, by and between Clavis Korea and Jin Su
Seo .#
|
10.9*
|
Industrial
Development Agreement, dated December 1, 2007, by and between Clavis Korea
and Korea Global ID Corporation .#
|
10.10*
|
KTNetworks Contract (filed
herewith).
|
10.11*
|
Korea Pallet Pool Co. Contract (filed
herewith).
|
10.12*
|
Loan Agreement, dated March 31, 2010, by and between
Hyun Sook Choi and
Clavis Korea (filed herewith).
|
10.13*
|
Loan Agreement, dated April 16, 2010, by and between Seong
Hun Han and Clavis Korea (filed herewith).
|
10.14*
|
Office Lease, dated January 30, 2010, by and between Clavis
Korea and Jin Su Seo (filed herewith).
|
23.1
|
Consent
of Kim & Lee, an independent registered public accounting firm (filed herewith) .
|
23.3
|
Consent
of Fox Law Offices, P.A. (included as part of Exhibit 5.1 hereto). #
|
24
|
Powers
of Attorney (included on signature page). #
|
______________________
*Summary
in English of material terms of agreement which is in Korean.
# Filed as an exhibit to the registration statement filed on
January 29, 2010.
Item 17.
|
Undertakings.
|
Insofar
as indemnification by the registrant for liabilities arising under the
Securities Act, may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions referenced in Item 14 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act, and will be governed by the final
adjudication of such issue.
II-3
The
undersigned registrant hereby undertakes that:
1. To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement;
2. That,
for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and this offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
3. To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of this
offering;
4. That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness; provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use; and
5. That,
for the purpose of determining liability of the registrant under the Securities
Act to any purchaser in the initial distribution of the securities, the
undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) any
preliminary prospectus or prospectus of an undersigned registrant relating to
this offering required to be filed pursuant to Rule 424;
(ii) any
free writing prospectus relating to this offering prepared by, or on behalf of,
the undersigned registrant or used or referred to by the undersigned
registrant;
(iii) the
portion of any other free writing prospectus relating to this offering
containing material information about an undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv) any
other communication that is an offer in this offering made by the undersigned
registrant to the purchaser.
6. The
undersigned registrant hereby undertakes to file, during any period in which
offers or sales are being made, a supplement to the prospectus included in this
Registration Statement which sets forth, with respect to a particular offering,
the specific number of shares of common stock to be sold, the name of the
holder, the sales price, the name of any participating broker, dealer,
underwriter or agent, any applicable commission or discount and any other
material information with respect to the plan of distribution not previously
disclosed.
II-4
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
has duly caused this Amendment No. 1 on Form S-1 to the Registration Statement
on Form S-3 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seoul, Republic of Korea on May
5 , 2010.
CLAVIS
TECHNOLOGIES INTERNATIONAL CO., LTD.
|
|||
By:
|
/s/ * HWAN SUP LEE
|
||
Name:
Hwan Sup Lee
|
|||
Title:
Chief Executive Officer and President
|
|||
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
stated.
Signature
|
Title
|
Date
|
||
/S/
* HWAN SUP LEE
Hwan
Sup Lee
|
Chief
Executive Officer, President and Director
(Principal
Executive Officer)
|
May 5 , 2010
|
||
/S/
* SO LIM LEE
So
Lim Lee
|
Chief
Financial Officer and Director
(Principal
Financial and Accounting Officer)
|
May 5 , 2010
|
||
/S/
KI YOUNG YOU
Ki Y oung
You
|
Director
|
May 5 , 2010
|
*By: /s/ / Ki
Young You May 5,
2010
Attorney-in-Fact
II-5