'Lemon', which gained popularity with masks, raises 20 billion KRW in paid-in capital due to deteriorating financial structure

After Shareholders' Allocation, General Public Offering of Unsubscribed Shares
Capital Erosion Resolved... Used as Operating Funds for Raw Material Purchases and More

Lemon, famous for its 'Air Queen' masks, is conducting a paid-in capital increase worth 20 billion KRW. As sales in its core business decline, its financial performance continues to deteriorate, worsening its financial structure. Through this capital increase, the company plans to improve its financial structure and use most of the raised funds as operating capital for raw material purchases.

According to the Financial Supervisory Service's electronic disclosure system on the 25th, Lemon will raise a total of 19.65 billion KRW through a rights offering followed by a general public offering of forfeited shares. The subscription price is 3,930 KRW, issuing a total of 5 million shares. Of this, 13 billion KRW will be used as operating funds, and 3 billion KRW will be used to repay borrowings.

Lemon was specially listed on KOSDAQ as a technology growth company in 2020. It mainly operates in the electromagnetic interference (EMI) business sector related to electromagnetic shielding and the nanomaterials business sector focusing on nano membrane fiber products.

The timing of Lemon's KOSDAQ listing coincided with the outbreak of COVID-19. Thanks to this, the nanomaterials business sector, which is mainly used in masks, beauty mask packs, and outdoor products, experienced rapid growth. In 2020, out of total sales of 80.147 billion KRW, 64.838 billion KRW, accounting for 80.9%, came from nanomaterials.

However, from 2021, demand decreased due to oversupply caused by an increase in competitors in the mask market and the easing of COVID-19 restrictions. As a result, nanomaterials sales were 26.388 billion KRW in 2021 and 34.486 billion KRW last year. In the first quarter of this year, sales plummeted by 91.5% to 1.18 billion KRW compared to 13.97 billion KRW in the same period last year.

As the core nanomaterials sales declined and losses continued, the financial structure also worsened. The debt ratio, which was 64% in 2020, rose to 162% in the first quarter of this year. In particular, due to the reflection of impairment losses on tangible assets, the capital erosion ratio reached 54.52% in the first quarter of this year.

The company explained in its securities registration statement, "If capital expansion and performance improvement are not achieved, it may be designated as an investment caution item based on the semi-annual report this year," adding, "The possibility of being designated as a management item or delisted by the end of this year cannot be ruled out."

Lemon plans to secure capital and find a breakthrough for its business through this capital increase. First, 3.1 billion KRW will be used to repay short-term borrowings from IBK Industrial Bank of Korea maturing in July next year. Through this, the company aims to improve its debt ratio and reduce interest expenses. More than 16.1 billion KRW will also be invested as operating funds for raw material purchases, research and development (R&D) labor costs, and health & beauty (H&B) advertising.

Recently, restrictions on perfluorinated compounds have been implemented worldwide. Perfluorinated compounds are organic chemicals composed of carbon and fluorine. They are widely used across industries due to their heat resistance and water- and oil-repellent properties. However, they have been criticized for their harmfulness as they do not easily decompose and accumulate in the human body and environment.

Lemon has already succeeded in developing a non-fluorine-based outdoor nano fiber membrane. Currently, it has obtained official certification reports from external accredited institutions and is actively conducting sales activities for eco-friendly non-fluorine-based nano fiber membranes. The company plans to expand related sales through raw material purchases.