[At the Crossroads of Listed Companies] Asta② Suspicious Transactions with Affiliates... Company Faces Massive Losses

Full Impairment of 8.4 Billion KRW in Intangible Assets Immediately After Acquisition
Northquest's Financial Structure Improves... Who Benefited?

(Left) Jo Eung-jun, Chairman of Asta, (Right) Go Chung-gon, Former CEO of Asta.

Astaa, a KOSDAQ-listed company, was caught engaging in a suspicious transaction when it sold its subsidiary Northquest to an affiliated company. It sold 59% of Northquest's shares for 18 million KRW and then repurchased intangible assets held by Northquest for 8.4 billion KRW. Moreover, immediately after acquiring the intangible assets, Astaa recorded a full impairment loss of 8.4 billion KRW, resulting in a significant loss for the company.

According to the Financial Supervisory Service's electronic disclosure system on the 24th, Astaa sold 59.71% of its subsidiary Northquest's shares to a company called Intellect Galore Inc. in October 2020. The sale price was 18 million KRW, valuing Northquest's entire enterprise at approximately 30.2 million KRW.

Northquest is a company that develops clinical databases and artificial intelligence (AI) analysis software used in disease diagnosis systems based on Astaa's MALDI-TOF technology.

Astaa had steadily invested in Northquest since 2016, with cumulative investments amounting to about 13 billion KRW. Additionally, it provided loans worth several billion KRW and payment guarantees. However, Northquest recorded large-scale losses every year, and Astaa wrote off almost all of its investments as losses.

Notably, in 2019, just before the sale, a company called Loft Management purchased 600,000 shares of Northquest for 3.2 billion KRW, valuing Northquest at 56.2 billion KRW. Yet, within a year, the company’s value was drastically reduced to 30.2 million KRW. Loft Management is an affiliated company led by former Astaa director Jang Heon-cheol.

What is peculiar is that after selling Northquest, Astaa purchased intangible assets worth 8.4 billion KRW from Northquest. The company stated that the contract involved acquiring cancer diagnosis-related databases and microorganisms held by Northquest. This means Astaa bought intangible assets worth 8.4 billion KRW from a company it had valued at only 30.2 million KRW during the sale.

At this time, Astaa paid about 4 billion KRW in cash to Northquest for the intangible assets and waived loans amounting to 4.4 billion KRW that it had previously extended. As a result, Northquest's debts were forgiven, and it secured a large amount of cash.

As of the end of 2020, Northquest's financial status showed total assets of 11.3 billion KRW, liabilities of 11 billion KRW, and equity of 300 million KRW. However, after transferring the intangible assets to Astaa in 2021, its financial structure greatly improved to total assets of 14.5 billion KRW, equity of 8.2 billion KRW, and liabilities of 6.3 billion KRW. By 2023, it had become a more solid company with total assets of 19.1 billion KRW, total liabilities of 6.7 billion KRW, and total equity of 12.4 billion KRW.

On the other hand, Astaa suffered a massive loss due to the 8.4 billion KRW intangible assets. Astaa immediately impaired all the intangible assets purchased from Northquest, resulting in the loss of half of its total assets in 2020.

The company explained, "Due to delays in certification from the China Food and Drug Administration (CFDA), the audit firm instructed us to impair the intangible assets, but certification was obtained shortly after the audit report was issued, clarifying the related matters." However, despite this clarification, Astaa did not reverse the impairment to recognize it as income or reclassify it as intangible assets. The current accounting staff at Astaa does not know the reason and said they would review it with the audit firm.

Ultimately, Intellect Galore, which acquired 59% of Northquest's shares from Astaa in this transaction, effectively obtained a company with net assets worth 12.4 billion KRW almost for free. Meanwhile, Astaa incurred losses amounting to hundreds of billions of KRW, including investments, loans, and impairment of intangible assets.

The CEO of Intellect Galore is former Astaa CEO Ko Chung-gon. Ko is also the CEO of Aquidas, a corporation to which Astaa's loans were extended. Ko and Astaa chairman Cho Eung-jun jointly developed a "high-performance infectious disease diagnostic platform" and even registered a patent under Intellect Galore's name in 2021, demonstrating their close relationship.

Regarding this, an Astaa representative stated, "By selling Northquest, Astaa was relieved from debt pressure and safely secured intangible assets such as software results. The reason CEO Cho Eung-jun provided stock collateral for Northquest's subsidiary Northdata is that Intellect Galore had no intention of acquiring Northquest shares unless CEO Cho provided collateral at that time."

They added, "Intellect Galore is a company whose liabilities exceed its assets, and CEO Cho Eung-jun has no shares, is not the CEO, nor an inside director of Intellect Galore."