[Funding] Koizu Raises Capital Again in 6 Months...Urgent Need to Improve Financial Soundness

Issuing 0.57 New Shares per 1 Old Share in Guju... Raising 17.7 Billion Won
Plan to Improve Financial Soundness Indicators by Expanding Capital

[Asia Economy Reporter Hyungsoo Park] Koiz has launched another capital increase just six months after raising funds through a paid-in capital increase in the first half of this year. While sales in its core LCD business division are declining, fixed costs and financial expenses are increasing, worsening its financial soundness. The production of aluminum oxide (Al2O3), a new business being pursued, requires more operating funds than initially planned due to rising raw material prices.

According to the Financial Supervisory Service's electronic disclosure system on the 20th, Koiz is proceeding with a paid-in capital increase through a rights offering followed by a general public offering of unsubscribed shares, issuing 0.568 new shares per existing share. It will issue 11 million new shares at 1,610 KRW per share, raising 17.7 billion KRW. The raised funds will be used as operating capital for facility investment for new factory construction, debt repayment funds for loan repayment, and raw material purchase costs.

Previously, Koiz raised funds through a paid-in capital increase worth 8.5 billion KRW in June. The company explained that it is raising funds again to expand capital and improve financial soundness indicators.

Last year, it recorded a continuing business loss before corporate tax exceeding 50% of its equity capital. If the continuing business loss before corporate tax exceeds 50% of equity capital this year or next year, it may be designated as a management item. In the first half of this year, it recorded a continuing business loss before corporate tax of 3.6 billion KRW. This corresponds to 39.5% of its equity capital of 9.2 billion KRW. Koiz expressed concern that if the net loss for the second half of this year exceeds 4.2 billion KRW, it may meet the criteria for inclusion in management items due to capital erosion. The company plans to alleviate concerns about capital erosion by expanding capital through the paid-in capital increase and improving its financial structure.

The external auditor, Samil Accounting Corporation, emphasized significant uncertainties related to the going concern in its review report for the first half of this year. As of the end of last year, current liabilities exceeded current assets, raising doubts about the company's ability to continue as a going concern. Koiz's sales sharply declined due to continued sluggish orders from major customers. Last year's sales decreased by 56.2% compared to the previous year, and sales in the first half of this year fell by 44.6%. Operating losses and net losses have continued since 2020. As of the first half of this year, the consolidated debt ratio was 234.04%, and the loan dependency ratio was 51.96%.

Along with improving its financial structure through the paid-in capital increase, Koiz is also pursuing business diversification. It plans to mass-produce aluminum oxide (Al2O3), which is used in nickel-cobalt-aluminum (NCA) cathode active materials for secondary batteries. It has only completed coin cell evaluation approval from customers, and product evaluation following mass production after actual facility investment has not yet been completed. Investments are expected to continue until the new business yields concrete results. Among the funds raised through the capital increase, 10.5 billion KRW will be used for aluminum oxide facility investment. The company is investing to establish an annual production capacity of 10 tons and plans to build facilities capable of producing 100 tons annually by next year.

Major shareholder and CEO Jae-hyung Cho holds 26.02% (5,104,378 shares) of Koiz's shares. He will acquire 30% of the allocated new shares, amounting to 870,000 shares. After the paid-in capital increase, his shareholding ratio may decrease to 19.51%. Eugene Investment & Securities, the lead manager of the capital increase, has agreed to underwrite the final unsubscribed shares. The underwriting fee is 18.0% of the subscription amount.