[At a Crossroads: Sangjangsa]③ Suspicion of Inflated Equipment Value from 7.4 Billion to 19.1 Billion Won

Facility Acquisition Increases Value by 158% in 7 Months
Zaigle States "Value Reassessed Through Consultation with US Investment Firm"

Jinhee Lee, CEO of Zaigle.

Zaigle, a KOSDAQ-listed company, revalued the facilities it acquired in December last year for 7.4 billion KRW to 19.1 billion KRW and used them for a capital contribution in kind. Since it has not yet disclosed an external appraisal report, there is growing curiosity about how the value of the facilities increased by more than two and a half times in just about seven months.

According to the Financial Supervisory Service's electronic disclosure, Zaigle announced on the 27th that it would acquire a 30% stake in ZAICELL JV LLC, a US-based joint venture. Zaicell is a joint venture between Zaigle and XT SPAC FUND LLC., which agreed to a paid-in capital increase of 30 billion KRW for Zaigle. XT Fund disclosed that it holds a 40% stake in Zaicell. Zaigle stated that it plans to manufacture LFP (Lithium Iron Phosphate) batteries in the US through Zaicell. Zaigle is a company that manufactures electric grills and cooking appliances.

The amount Zaigle invested in Zaicell this time is 15 million USD (approximately 19.1 billion KRW), which is close to half of Zaigle's total equity capital. The reason it can invest such a large amount is because it is a capital contribution in kind, not cash.

Zaigle transferred the secondary battery manufacturing facilities it owned to Zaicell through this capital contribution in kind. These facilities are located in Pyeongtaek, Gyeonggi Province, and were acquired from CM Partner in December last year. Zaigle acquired these facilities for 7.4 billion KRW at that time, specifically 5.4 billion KRW for land, 1.3 billion KRW for buildings, and 700 million KRW for machinery and equipment. Moreover, Zaigle financed 6.3 billion KRW of this amount through a loan from IBK (Industrial Bank of Korea). In reality, only 1.1 billion KRW in cash was invested to acquire the facilities. Zaigle revalued the factory it purchased to 19.1 billion KRW, a 158% increase, in about seven months.

A Zaigle representative said, "At the time of acquisition from CM Partner, it was difficult to accurately appraise the value, so the amount was calculated by mutual agreement between the two companies based on technology, know-how, and facilities," adding, "Later, during consultations with the US investment partner, the value of the facilities and technology was reappraised higher than the Korean purchase price, leading to the capital contribution in kind."

The institution responsible for the valuation of Zaigle's facilities is RRBB ACCOUNTANTS+ADVISORS, an accounting firm located in Franklin Township, New Jersey, USA. The firm responsible for the valuation related to Zaicell's equity acquisition in Korea is Lee Jung Accounting Firm.

Although Zaigle is required to disclose the appraisal opinion it obtained this time, it has not yet done so. The company stated that it plans to make a corrected disclosure after receiving the opinion. If the external audit does not recognize the valuation for this capital contribution, there is a possibility that Zaigle could incur significant losses.

Meanwhile, XT ESS FUND, which was supposed to pay the 30 billion KRW capital increase by the 27th when Zaigle made the capital contribution in kind to Zaicell, has postponed the payment deadline again to September 25. This marks the third delay in payment.

A Zaigle representative said, "This action was taken at the request of the investor to postpone the capital increase after Zaigle acquired the Zaicell stake," adding, "Because the number of fund investors is increasing, a period is needed to adjust the shareholder composition." He also added, "We have received and are holding a balance certificate exceeding 100 million USD from XT SPAC FUND in official documents."