Overview

Hanryu Holdings, Inc. is the creator of the social media platform “FANTOO”, which connects users around the world who share similar interests in Korean culture (“K-Culture”). The company aims to become a leading global platform for fans passionate about the Korean Wave, with plans to eventually expand into other areas of fandom.

Going Concern

Hanryu Holdings has experienced recurring losses from operations and has a stockholders’ equity and working capital of $10,566,638 and $8,199,643 as of June 30, 2024, respectively. The company has incurred operating losses of $1,738,599 and $5,592,847 for the six months ended June 30, 2024 and June 30, 2023, respectively. These uncertainties raise substantial doubt about the company’s ability to continue as a going concern for twelve (12) months after the issuance date of the financial statements.

The company’s future operations are dependent on the success of the FANTOO platform, competition from other services, and securing new sources of capital to fund operations and develop markets. The company plans to improve and innovate the FANTOO platform, launch new revenue streams, and maintain ongoing efforts to raise funds from current investors and new sources of capital.

Business Model and Growth Strategies

Hanryu Holdings focuses on providing user-centric services to address the needs of fans within the FANTOO platform. The platform offers features such as news, popular culture, discussions, live shows, and fan creativity, with real-time translation services to enable global communication. The company plans to generate revenue from direct sales (e.g., advertising, content, and commerce) and commissions from user-to-user transactions (e.g., emojis, online stickers, web novels, webtoons).

The company believes it has great potential to continue growing its user base due to the surge in popularity of K-Culture, which had 156.6 million fans in 116 countries and generated approximately $21.5 billion in global revenue in 2019.

Financial Overview

Components of Results of Operations

Revenue:

• Primary source is FANTOO platform operations, including direct sales (e.g., content, e-commerce, advertising) and commissions from user-to-user transactions.
• Additional revenue from marketing services, retail sales, and news agency content sales.

Cost of Revenue:

• Consists primarily of service costs, hosting costs, and production costs for original FANTOO content.

Operating Expenses:

• Marketing and advertising expense: Compensation, commission, and marketing-related costs.
• Research and development expense: Costs to maintain and develop the FANTOO platform.
• General and administrative expense: Personnel-related costs, equipment, facilities, professional fees, and other corporate expenses.

Results of Operations

Revenues for the six months ended June 30, 2024 were $198, compared to $265,769 for the same period in 2023, a decrease of 100%. This was due to a decrease in advertising and content sales through the FANTOO platform and other subsidiaries.

Cost of revenue decreased from $69,145 in the six months ended June 30, 2023 to $0 in the same period in 2024, in line with the decrease in revenue.

Operating expenses decreased significantly, with marketing and advertising expense decreasing from $832,755 to $3,446, research and development expense decreasing from $231,743 to $0, and general and administrative expense decreasing from $4,724,973 to $1,735,311. These decreases were primarily due to the restructuring of the FANTOO platform and strategic decisions by management.

Other income (expense) increased from ($18,071) to $129,588, mainly due to $173,086 in interest income.

Liquidity and Capital Resources

Hanryu Holdings has a history of operating losses and negative cash flow from operations. As of June 30, 2024, the company had cash and cash equivalents of approximately $946, and there is substantial doubt about its ability to continue as a going concern for a period of one year after the date the financial statements were issued.

The company will require additional financing to further develop and market its platform business and execute its business plan. It plans to seek capital through equity offerings, debt financings, or other arrangements, but there is no assurance that such financing can be obtained.

In July 2023, the company completed an IPO, generating net proceeds of approximately $7.7 million. However, these proceeds are not expected to be sufficient to enable the company to continue its operations as planned.

Summary of Cash Flows

• Net cash used in operating activities was $490,256 for the six months ended June 30, 2024, primarily due to the net loss of $1,608,971.
• Net cash used in investing activities was $5,120,370, mainly for a decrease in short-term loan receivables.
• Net cash provided by financing activities was $426,684, consisting of a net increase in short-term loan payables.

Contractual Obligations and Critical Accounting Policies

There have been no material changes to the company’s contractual obligations and other commitments compared to those disclosed in the Form 10-K.

The company’s critical accounting policies and estimates include those related to revenue recognition, cost of revenue, operating expenses, and the assessment of the company’s ability to continue as a going concern.