[Masked Listed Company] J-Way Records 600 Million in Mask Sales with 2.4 Billion in Inventory

Entered the Mask Business Despite Annual Losses, but Results Remain Minimal
Five Consecutive Years of Deficits and Over 20 Penalty Points... Substantial Review of Listing Eligibility Underway

[Asia Economy Reporter Yoo Hyun-seok] J-Way's mask business, launched last year to escape from deteriorating performance, has been identified as sluggish. While mask-related sales amounted to only 600 million KRW, inventory exceeded 2 billion KRW. The core business itself is also sluggish. The company has recorded losses for five consecutive years and is facing a delisting risk, including undergoing a substantial review of listing eligibility due to accumulated penalty points.

When J-Way started the mask business last year, the company was at a crossroads. J-Way's main business includes supplying digital cinema content, system maintenance, and VOD services. It purchases content such as movies, TV reruns, and comics, providing them to consumer markets like motels, DVD viewing rooms, and digital small theaters, and collects service fees.

However, the performance deterioration continued. Although operating profit was 800 million KRW in 2015, it turned to a loss the following year. The company recorded losses for four consecutive years until 2019 and was designated as a management item last year. Additionally, in the third quarter of last year, on an individual basis, sales were 3.7 billion KRW with an operating loss of 2 billion KRW, marking five consecutive years of losses. For KOSDAQ-listed companies, recording operating losses on an individual basis for five consecutive years triggers a substantial review of listing eligibility. Furthermore, accumulated deficit reached 29.9 billion KRW.

J-Way entered the mask business as a card to reverse its performance. In July last year, it newly established a mask manufacturing plant in Seobuk-gu, Cheonan-si, Chungnam Province. As of the third quarter of last year, a total of 10 mask production facilities were built. In September of the same year, the company completed registration with the U.S. Food and Drug Administration (FDA), obtained International Organization for Standardization (ISO) certification, and conducted skin sensitivity tests. In the same month, it received manufacturing and sales approval for KF94 masks from the Ministry of Food and Drug Safety and started the business in October, the following month. The facility is reported to have an annual production capacity of 200 million masks.

The mask business did not show results as expected. Inventory was four times the actual sales revenue. On the 3rd, J-Way decided to split the company. After the split, the surviving company is J-Way, and the newly established company is J-Way Mask. J-Way Mask, the established company, has capital of 100 million KRW and total assets of 6.4 billion KRW. Reviewing the assets inherited by J-Way Mask after the split, mask-related facilities and machinery amounted to 2.5 billion KRW.

The corporate split revealed the mask business performance externally. Sales generated last year amounted to only 600 million KRW. In addition, product inventory assets reached 2.4 billion KRW. Furthermore, semi-finished goods were valued at 668.09 million KRW, raw materials at 489.41 million KRW, and auxiliary materials at 126.99 million KRW, totaling inventory assets of 3.5 billion KRW.

Expectations that masks would be a savior were dashed, and external negative factors also overlapped. On the 3rd, J-Way was designated as an unfaithful disclosure corporation due to reversing disclosures such as the withdrawal of a capital increase decision. As a result, accumulated penalty points reached 20.5 over one year. If penalty points exceed 15, the company may be subject to a listing eligibility review.

With the new business not growing as expected, J-Way itself is in a precarious situation. On the 16th, through a disclosure of internal settlement period management item designation or delisting cause occurrence, it announced that last year's individual sales were 5.3 billion KRW and operating loss was 4.8 billion KRW. Sales increased by 12.1% compared to the previous year, but losses widened. This marks five consecutive years of losses and adds another reason for a substantial review of listing eligibility.