[At a Crossroads] Human Technology① Agos Raises Capital from Shareholders... Effectively a Contribution in Kind

Structure Involving Receiving Agos Shares and Issuing New Human Technology Shares
"Capital Increase Is for Operating Funds... No Court Approval Required"

KOSDAQ-listed company Human Technology has effectively acquired the unlisted company Agos through a method resembling a capital contribution in kind.

According to the Financial Supervisory Service's electronic disclosure system on the 28th, Human Technology announced on the 10th that it would acquire 100% of the shares of anti-drone company Agos for 23 billion KRW. Human Technology purchased the shares held by Agos CEO Moon Seong-won and five others. The full payment was made the day before.

Subsequently, on the 19th, Human Technology decided on a third-party allotment paid-in capital increase worth 11.7 billion KRW. The recipients of the issuance are Moon, the existing Agos shareholders, and five others. Moon and the others participate in the paid-in capital increase using the proceeds from selling their Agos shares to Human Technology. The payment date is set for March 5.

From Human Technology’s perspective, 11.7 billion KRW of the money spent acquiring Agos shares will flow back into the company through the paid-in capital increase. The existing Agos shareholders, including CEO Moon, will receive part of the proceeds from the share sale in the form of Human Technology shares. This can be regarded as a de facto capital contribution in kind.

When a listed company acquires an unlisted company by issuing new shares, court approval is sometimes required. However, Human Technology appears to have circumvented this by adjusting the timing of the Agos acquisition and capital increase and by disclosing the purpose of the capital increase as "operating funds" rather than "acquisition of other companies."

A Human Technology official stated, “The funds for acquiring Agos will be prepared through the company’s existing funds and collected receivables, and the funds raised through the paid-in capital increase will be used as operating funds. Court approval is only necessary when proceeding via capital contribution in kind, so this acquisition of Agos shares and the paid-in capital increase do not fall under the court’s jurisdiction.”

However, there are several indications that the paid-in capital increase funds were used for acquiring Agos shares.

First, Human Technology disclosed that out of the 11.7 billion KRW raised through the paid-in capital increase, 2 billion KRW will be repaid to CEO Kim Jong-su. On the 24th, Human Technology borrowed 2 billion KRW from CEO Kim to pay for the Agos share acquisition. Repaying this loan with the capital increase funds effectively means that the capital increase funds were used for acquiring Agos shares.

Additionally, as of the end of the third quarter last year, Human Technology held approximately 21.9 billion KRW in cash and short-term financial instruments and 4.6 billion KRW in accounts receivable and other receivables. If the company acquires Agos shares solely using its existing funds and receivables as explained, Human Technology’s operating funds would be depleted. Ultimately, raising operating funds through the paid-in capital increase is akin to robbing Peter to pay Paul.

Regarding this, a Human Technology official said, “Due to some delays in receivables collection recently, we partially changed the purpose of the capital increase to facilitate a smooth acquisition of Agos. Except for the 2 billion KRW debt repayment to CEO Kim Jong-su, the remaining funds for acquiring Agos will be covered using the company’s existing funds.”