Mediagen Refuses to Submit Audit Documents to Identify Fund Outflow

Annual Deficits After Listing... Request for Submission of Fund Outflow Details
"Questioning Auditor's Objectivity and Fairness"

Mediazen, a KOSDAQ-listed company, has been confirmed to be refusing to submit materials requested by its auditor. The newly appointed auditor, selected through a shareholder proposal this year, has been continuously requesting materials from the company to clarify the reasons for its deficits, but the company has not submitted the materials, citing concerns over the auditor's impartiality.

According to the financial investment industry on the 18th, Park Chang-gyu, the auditor of Mediazen, requested the company to submit materials for an internal audit in April. Auditor Park was newly appointed through a shareholder proposal at Mediazen's regular shareholders' meeting at the end of March.

Mediazen is a company possessing core technologies in voice recognition and voice synthesis, focusing on developing related software as its main business. It was transferred from KONEX to the KOSDAQ market through a technology special listing in 2019. Since listing, the company has recorded operating losses every year, with sales of 12.8 billion KRW and an operating loss of 5.3 billion KRW last year. The operating loss expanded by 165% compared to the previous year.

In response, shareholders demanded an explanation from the company regarding the increasing scale of deficits at this year's regular shareholders' meeting and also newly appointed an auditor through a shareholder proposal.

The newly appointed auditor, Park Chang-gyu, requested Mediazen to submit accounting and legal-related materials in April. Specifically, these included ▲allowance for doubtful accounts on loans to related parties ▲investments in affiliated company Metasound and overseas subsidiaries ▲executive salaries unrelated to poor performance ▲expenses unrelated to business operations, among others.

According to the auditor, Mediazen currently has about 1.3 billion KRW in loans extended to special related parties such as executives and employees, of which 560 million KRW has been set aside as an allowance for doubtful accounts. An allowance for doubtful accounts is an accounting classification for money that is unlikely to be collected. The auditor requested materials regarding the recognition of bad debt expenses, the past relationship between the relevant employees and the CEO, and measures taken to recover the receivables.

Additionally, Mediazen invested 100 million KRW in a corporation called "Metasound" in 2022 for management participation purposes but recognized an equity method loss of 81 million KRW at the end of last year. Notably, former CEO Ko Hun serves as an inside director at this company. The company also plans to invest 500 million KRW in overseas offices by this year. Accordingly, the auditor requested materials on whether the investment in Metasound went through the board of directors and investment review committee, the supervisory regulations of the overseas investment corporation, and profit and loss management regulations existing internally.

Furthermore, the auditor requested supporting materials regarding why Mediazen's inside directors receive very high salaries per person compared to peers in the same industry despite the company incurring operating losses every year since its KOSDAQ listing in 2019. The auditor also pointed out the need to verify whether the nature of the increased cost of sales and selling and administrative expenses is related to business operations.

In response, Song Min-gyu, CEO of Mediazen, stated, "The company's audit regulations are divided into routine, regular, and special audits, and this audit is a special audit requested by the largest shareholder." He added, "According to legal review, the specification of the audit target, which is a requirement for a special audit, has not been met, so we are raising objections regarding the objectivity and fairness of the audit."

This content was produced with the assistance of AI translation services.