[At the Crossroads of Listed Companies] Ateam③ Sudden 5 Billion Won Loss Reflected... Suspicions of 'Revenue Inflation' Before Listing

Sharp Decline in Sales of Vietnamese Subsidiary After IPO
Large-Scale Bad Debt Provision Temporarily Reflected

Hantaeksoo, CEO of A-TOM.

ATUM, a KOSDAQ-listed company, suddenly reflected a bad debt allowance of 5 billion KRW in its financial results at the end of last year. The accounts receivable from its Vietnam subsidiary were classified as 'uncollectible.' Since the Vietnam subsidiary's sales sharply declined after the listing, there are suspicions that sales were inflated before the listing.

According to the Financial Supervisory Service's electronic disclosure system on the 25th, ATUM recorded a bad debt allowance of 5.4 billion KRW for accounts receivable and notes receivable in its financial statements for the last fiscal year (July 2023 to June 2024). This represents an increase of over 1,066% compared to 400 million KRW the previous year. A bad debt allowance is an accounting method where potential uncollectible debts are estimated and expensed in advance.

ATUM suddenly recognized the bad debt allowance at the end of the year. Until the end of Q3 last year, ATUM's bad debt allowance was 700 million KRW. As a result, ATUM's deficit sharply increased at year-end. Up to Q3 last year, ATUM recorded an operating loss of 3.3 billion KRW on a separate cumulative basis. However, the cumulative operating loss through Q4 expanded to 7.9 billion KRW, more than doubling in just one quarter. This was because the large bad debt allowance was reflected as bad debt expense under selling and administrative expenses all at once in Q4.

The majority of ATUM's large bad debt allowance originated from its Vietnam subsidiary, ATUM VINA CO., LTD. As of the end of last year, ATUM set a bad debt allowance of 2.7 billion KRW for accounts receivable and 2.6 billion KRW for notes receivable from the Vietnam subsidiary.

The Vietnam subsidiary serves as ATUM's production base. ATUM manufactures transformers at its headquarters in Ansan, Gyeonggi Province, and at the Vietnam subsidiary. For TA (transformers for portable electronic device chargers), the secondary molding coil is produced at the Ansan plant, while the finished transformers are mass-produced at the Vietnam subsidiary. The accumulation of bad debt allowance means that ATUM sold goods on credit to the Vietnam subsidiary and recorded accounts receivable, but it is now difficult to collect the cash.

The Vietnam subsidiary's performance declined immediately after ATUM's KOSDAQ listing. Last year, the Vietnam subsidiary's sales were 10.7 billion KRW, down 45% from the previous year. Previously, the Vietnam subsidiary's sales showed annual growth with 15.8 billion KRW in 2021, 16.6 billion KRW in 2022, and 19.5 billion KRW in 2023.

Sales from ATUM to the Vietnam subsidiary also sharply decreased. As of the end of last year, ATUM sold 2.2 billion KRW worth of goods to the Vietnam subsidiary, a drop of over 71% from 7.8 billion KRW the previous year.

Regarding this, an ATUM representative stated, "Sales declined as the Vietnam subsidiary's production line shifted from TA and TV to electric vehicle lines, and due to cost burdens related to relocating the new factory, we conservatively assessed the collectability of accounts receivable. This is not an artificial sales adjustment or loss confirmation."

However, at the time of listing, ATUM disclosed in its securities registration statement that "The Vietnam subsidiary plans to produce electric vehicle-related products, and since there is currently excess production capacity, there is no need to expand the factory. Existing infrastructure can be utilized, so manufacturing costs will not increase proportionally with production volume."