Hanryu Holdings Inc

Overview

Hanryu Holdings, Inc., a Delaware corporation (“Hanryu Holdings”), along with our wholly owned operating subsidiaries, Hanryu Bank Co., Ltd. (“HBC”), FNS Co., Ltd. (“FNS”), and Marine Island Co., Ltd. (“Marine Island”), incorporated under the laws of the Republic of Korea (collectively, the “Company”, “we”, “us”, or “our”), is the creator of the engaging and innovative social media platform, “FANTOO”. FANTOO connects users around the world that share similar interests by providing distinctive service offerings, technologies, applications, and websites. Through FANTOO, we provide a global multi-media platform for our users to interact with other like-minded users, to share their appreciation of various types of entertainment and cultures, create their own content, enjoy other users’ content, engage in commerce, and experience a “fandom” community we believe is unlike any other.

FANTOO leverages the growing groups of fans with similar interests, known as “fandoms,” in order to tap into the “Fandom Economy” and monetize the growing fandom community. Through fandoms, fans have expanded the scope of their spending on their interests in a variety of ways, including purchasing advertisements, manufacturing and/or purchasing merchandise, and enthusiastic social media promotion. With the rise of social media platforms, fans are no longer passive consumers of content, but are actively sharing ideas and acting as producers and content creators. Furthermore, fandom is now easier to access than ever due to connectivity through social media platforms provided by mobile devices and applications. We believe these characteristics of fandoms have opened up the possibility for FANTOO to make an impact in this market, both for the Company and FANTOO’s users.

While the majority of our current users are enthusiasts of Korean culture (“K-Culture”), also known as the “Korean Wave,” or “Hanryu,” we do anticipate expanding into additional entertainment genres as the FANTOO platform grows. The growing popularity of the Korean Wave has historically been driven by social networking services and online video sharing platforms. Through these channels, the dispersion and exportation of Korean arts, music and entertainment has grown rapidly from a regional influence, into a global appreciation of K-Culture. The expansion of the Korean Wave into a global phenomenon provides a significant opportunity to unite fans across the globe within the FANTOO platform. Through FANTOO, we aim to become a leading global platform, connecting fans across the globe, allowing fans to consume, create, and be rewarded for their activity related to their “fandom” within the FANTOO platform.

We believe an opportunity exists for FANTOO to become an industry leader in fandom platforms and content creation by exploiting the current market sentiment that we believe treats fandoms and fans only as a group of passive consumers, despite the fans’ contributions. Other platforms and social networks often fail to meet the needs of their users, as such platforms offer limited products and services. We believe that this failure to meet user needs causes other platform’s users to look elsewhere for products and services that reflect their interests. Furthermore, other platforms and applications either do not provide rewards for user contributions, or do not provide rewards to users simply for being active within the application or platform. FANTOO is an all-in-one platform that fills this void. Through its well-designed ecosystem, FANTOO not only supports fans’ interests in entertainment and entertainers, but also provides in-platform economic rewards in return for users’ contributions. These in-platform rewards, called FP can then be accumulated and used to pay FANTOO or other users for goods and services within the FANTOO platform. We believe the services and offerings within the FANTOO Platform will result a growing “Fandom Economy” that benefits both our Company and fans across the globe.

In July 31, 2023, the Company consummated its initial public offering (the “IPO”) of 877,328 shares of its class A common stock at a public offering price of $10.00 per share, generating gross proceeds of $8,773,280. Net proceeds from the IPO were approximately $7,708,016 after deducting underwriting discounts and commissions and other offering expenses of approximately $1,065,264.

The Company granted the underwriters a 45-day option to purchase up to 131,599 additional shares (equal to 15% of the shares of class A common stock sold in the IPO) to cover over-allotments, if any, which the underwriters did not exercise. In addition, the Company issued to the representative of the underwriters warrants to purchase a number of shares of class A common stock equal to 5.0% of the aggregate number of shares of Class A common stock sold in the IPO (including shares of Class A common stock sold upon exercise of the over-allotment option). The representative’s warrants will be exercisable at any time and from time to time, in whole or in part, during the four-and-½-year period commencing six months from the date of commencement of the sales of the shares of Class A common stock in connection with the IPO, at an initial exercise price per share of $12.5 (equal to 125% of the initial public offering price per share of class A common stock). No representative’s warrants have been exercised.

On August 1, 2023, the Company’s stock began trading on the Nasdaq Capital Market under the symbol “HRYU”

On December 28, 2023, HBC sold owned whole shares of Hanryu Times, Fantoo Entertainment, and K-Commerce,

FANTOO

FANTOO has become a globally recognized platform for providing an amazing and active community among people that have an interest in K-POP and modern Korean culture. The multifaceted nature of the Company’s operations has solidified the business’ reputation as one of the preeminent platforms for fandom. FANTOO’s users are able to seamlessly interact with each other to discuss exciting K-POP topics.

FANTOO allows fans to interact within their fandoms and discuss these interests, create and share content, and interact through a number of channels, including (i) secure, direct messaging, (ii) open social pages, and (iii) virtual spaces (“FANTOO Clubs” or “Clubs”). FANTOO Clubs concentrate on a specific topic, allowing moderators to control the Club functions, and the Club members to aggregate their FP rewards. Integrated within each FANTOO Club is a “Club Vault,” a service provided by FANTOO that allows the individual members of a Club to donate their personal FP to an account held by the Club. The Club Vault allows the Club’s members to aggregate their FP and increase their purchasing power. This increase in purchasing power allows the Club’s individual users to more rapidly accumulate FP and pool their rewards with other users, in order to purchase services such as fan events or the ability to live stream a concert from their favorite band. Decisions regarding the use of the accumulated FP within the Club Vault are determined by a vote of the Club members.

Our users are the core of our business. We provide our users with customized experiences, including unique interactions within the FANTOO community. FANTOO algorithms curate individual user experiences, recommending content, clubs to join, users to connect with, and enabling users to subscribe to keywords and access automatic content geared toward their interests. Through these services, FANTOO provides the fandom community a way to stay connected and up to date with their fandom communities.

FANTOO further offers each user the ability to freely create, upload, and monetize their own content by earning in-platform rewards of FP. FANTOO removes language barriers, providing live chat ability between users worldwide, and global access to platform content, as the FANTOO platform supports automatic, real-time translation services for 17 languages. FANTOO also offers a fast, secure, and easy-to-use commerce and user-to-user transaction system. These unique features will allow FANTOO to generate user loyalty, maintain user interest in the platform, and attract new users.

For growth, we intend to develop short content (two minutes) that will focus on interesting pop music and cultural topics. These videos will be distributed through FANTOO while concurrently being shown on third party social media platforms and video sharing websites. This new aspect of growth is important for a few reasons. First, it will further enhance the strength of the FANTOO community by fostering a greater degree of engagement. Second, it will allow for greater visibility for K-POP on a global basis. Management will continue to expand this aspect operations through the life of the business.

THE FANTOO ECOSYSTEM

We designed FANTOO as an ecosystem that is easy for users to adapt and use all features throughout the platform, and for us to develop and roll-out new technologies and functionality. FANTOO’s launch included a rollout of our messenger, community and club technologies, along with our reward system for users, as described below. Since FANTOO’s launch in May 2021, the FANTOO platform has attracted more than 26.6 million users, as of December 31, 2023, from the regions in the chart below:

The main age groups that compose our use base are the 20-29-year age group, and 30-39-year age group, as set forth in the chart below:

The combined age groups of 20-39 years have the highest purchasing power among commercial and entertainment industries, and accounts for more than 80% of all FANTOO users, with a median age of 27 years old. FANTOO is available to individuals 12 years and older and has an age restriction set that will not allow users under the age of 12 to sign up.

User Reward System

The reward system is the basis of FANTOO ecosystem. Users earn FP based on: (i) the level of each user’s activity within the FANTOO platform; and (ii) the revenue we derive from FANTOO’s advertising sales. At midnight of each day, all advertising revenue for that day is accumulated, and 50% of that day’s total net advertising profits are distributed as FP to users, based upon their level of contribution within the FANTOO platform. From the 50% of profits that are distributed to users as FP, approximately 30% of the distribution of rewards will go to users who are content creators, and the remaining 20% will be issued to general users who participate on the platform. For the purposes of calculating advertising profits allocated for user rewards, the amount of FP issued will be exchanged at a ratio of one FP for every 100 Korean Won. For the avoidance of doubt, the issuance of FP from advertising revenue is limited to advertising revenue generated within the FANTOO platform, and the Company may earn revenue from advertising outside of the FANTOO platform that would not result in the issuance of FP.

Fantoo Point (“FP”)

FP is a measurement of reward points within the FANTOO platform. Accruing FP allows users to redeem FP for a wide variety of products and services within FANTOO, including content from other users and artists available on FANTOO, K-Culture merchandise, and more. FP will be stored and quantified as rewards point within the FANTOO platform under the in-platform reward system structure that consists of (i) the Company’s FP reserve account, (ii) the Company’s active account for collected advertising revenue which was converted into FP and ready to distribute to users based on user contributions to the FANTOO platform, (iii) the Company’s recycled FP account, which stores FP after being spent by users to make purchases within the application, and (iv) each user’s individual account stores. The value of FP is set at a fixed ratio of 1:100 FP to Korean Won. The Company does not intend to repurchase FP from users now or in the future. FP does not expire, and FP that is not redeemed by a user will accumulate in such user’s account unless and until such user deactivates their account, at which time such FP will be forfeited and moved to the Company’s reserve account for redistribution.

FP Storage and Security

FP are stored and managed through a database that is separate and apart from other databases used to store and manage other FANTOO app data. The separate FP database is operated to ensure maximum data confidentiality by minimizing access to the database and limiting the number of individuals who are able to access such database. Access to the database is limited to permitted IP bands, and the backup function of the cloud service used to store data can be restored within a few hours in the event of a disaster recovery event such as a server failure.

User-to-User Interactions

We developed FANTOO to include numerous opportunities for our users to engage with the platform, including clubs, community forums, chat functions, and functionality to create user-generated content, each of which are intended to build the FANTOO brand and deepen the loyalty of our users.

FANTOO Clubs

FANTOO Clubs are user-created based upon areas of interest in order to link users across the globe and create friendships. Users have the ability to create clubs based upon topics of their own choosing, such as favorite artists, television series, movies, video games, sports, and more. A club can be customized by its moderator according to various policies and preferences to cultivate a close group of users based upon a shared culture. Integrated within each FANTOO Club is a “Club Vault,” a service provided by FANTOO that allows the individual members of a Club to donate their personal FP to an account held by the Club. The Club uVault allows the Club’s members to aggregate their FP and increase their purchasing power. This increase in purchasing power allows the Club’s users to more rapidly accumulate FP and pool their rewards, in order to purchase services such as fan events or the ability to live stream a concert from their favorite band. Decisions regarding the use of accumulated FP within the Club Vault are determined by a vote of the Club members.

FANTOO Communities

FANTOO communities are open forums where user-generated content is socially promoted and curated by FANTOO users. Once user requests for a community based around a certain topic exceed a pre-determined threshold, the FANTOO platform will create such a community based upon the users submitting the requests.

FANTOO Chats

Real-time multilingual translation capability, currently offered in 17 languages, allows both private messages and open chats via the FANTOO chats function without language barriers. Messages and chats are protected utilizing end-to-end encryption to prevent leakage of personal information. End-to-end encryption is a system of secured communication to prevent third parties from accessing chat messages, increasing the level of security.

Content

User-Created Content. Core to our business is moving into a user-based content creation model that allows users varying ways to create and sell fandom content to other FANTOO users, including the content types described below:

Company-Created Content. FANTOO original content. The Company also creates and distributes its own content. Content is distributed within the FANTOO platform both for free and for sale for premium content. The Company currently has 25 key employees broken up into a number of content-creating teams that cast entertainers for creating original video content, primarily uploaded on FANTOO TV within the FANTOO platform. As the business grows, the Company intends to hire more employees and produce high-quality content that engages the users into the FANTOO platform. In addition to the content types similar to the categories listed above for user-generated content, FANTOO original content also includes:

Third Party Content. Third party content includes content from trusted third-party media companies. Third party content can be uploaded to FANTOO pursuant to certain agreements between the Company and third-party providers. These articles and videos are provided in real time, with automatic translation support in 17 languages.

FANTOO Fanshop

The FANTOO Fanshop is the e-commerce service provided through the FANTOO platform to its users. Through the Fanshop, users can purchase various items directly from FANTOO, such as gifts for artists, pre-paid cards, concert tickets, and other fandom goods using FP or cash. To the extent that items are purchased by the Company to sell within the FANTOO Fanshop, the Company uses cash to purchase the products and then lists the items in the Fanshop. The Fanshop will also offer a video commerce service, intended to be an online version of traditional home shopping networks on cable television. For example, users can purchase items relating to their favorite K-pop artist, such as the artist’s latest album, at the same time such user is streaming the artist’s live event.

Within the Fanshop, FANTOO users can also participate in user-to-user transactions, such as selling or purchasing the following:

For both user-to-user transactions and transactions with the Company, payment can be made either by credit card through a secure, third-party payment system built into the FANTOO platform, or by settling the total with the use of FP. Sales settled in FP will be charged a transaction fee based upon the specific item sold, ranging between 7% to 15% of the sale price. For user-to-user transactions, the selling user receives the proceeds upon the purchaser’s confirmation of receipt of the good sold.

If the item sold in the user-to-user transaction requires shipping, the Company intends on partnering with providers such as Qxpress to provide shipping services for which the fee will be bundled into the total transaction cost. Alternatively, users can ship the item directly using another third-party shipping service.

Also, Hanryu Holdings set up international logistic service for FANTOO with partners. The operations of the Epic eCommerce platform will catapult the income of Hanryu Holdings. This is state -of-the-art eCommerce marketplace will allow for substantial revenues to be produced by facilitating sales among companies that want to provide their inventories to the FANTOO user base. The platform will provide a complete end-to-end sales and logistics solution for enrolled users.

This new Business unit will integrate a full ordering management system (OMS), cross border shipping management tools, and seller shipping tools, It will fine an immense audience, on a global basis, among companies and independent entre preneurs that are seeking to target younger demographics with their products. The benefits of using this system include:

The key markets that Management will target for Epic’s operations include:

OUR OPPORTUNITY

With the global explosion of the Korean Wave, K-Culture has become widely influential throughout the world, creating a significant and sustainable industry in which the Company operates. According to a study by the Korea Foundation and the Korean Ministry of Foreign Affairs (“KMFA”) regarding the growing economic effects of the K-Culture industry, K-Culture generated approximately $21.5 billion in global revenue in 2019, prior to the occurrence of the COVID-19 pandemic. This study further found that K-Culture influence was ranked No. 7 worldwide in 2021, and that the number of K-Culture fans increased from approximately 35.6 million in 2015 to 156.6 million in 2021. The chart below sets forth the location and approximate growth and numbers of K-Culture fans globally.

Currently, China has the largest number of K-Culture fans with 86.32 million, followed by the United States with 16.69 million K-Culture fans. Due to regulatory concerns regarding data protection and privacy within China, the Company will not expand its business into China in order to protect the privacy of the Company’s users. For the avoidance of any doubt, the Company does not have customers in, does not otherwise provide products or services in, and restricts user access to individuals in China (including Hong Kong and Macau).See “Risk Factors — Our decision not to provide products and services and to restrict user access in China (including Hong Kong and Macau) will limit our total addressable market and may limit our ability to grow our business” for additional information. Following China and the United States in K-Culture fans are: Thailand with 14.8 million fans, Russia with 5.69 million fans, Vietnam with 4.12 million fans, Argentina with 2.9 million fans, Canada with 1.96 million fans, India with 1.35 million fans, Chile with 1.12 million fans, Turkey with 0.98 million fans, Jordan with 0.98 million fans, Australia with 0.93 million fans, Italy with 0.75 million fans, France with 0.57 million fans, Egypt with 0.55 million fans, Japan with 0.34 million fans, Saudi Arabia with 0.30 million fans, and other countries spread throughout the globe with a total of 16.2 million fans.

The continued and multifaceted spread of K-Culture is exemplified by the approximately 100 million people that practice the Korean traditional martial arts of Taekwondo. According to a study by the Korean Foundation for International Cultural Exchange (“KOFICE”), K-Culture contributed over $10.0 billion in Korean exports in 2020, representing an increase of 8.8% over 2019, even with the damaging economic effects of the COVID-19 pandemic. The global purchasing power of K-Culture was at $124.3 billion in 2020, based on the 2021 report by Korea Creative Content Agency (“KOCCA”)

Further propelling K-Culture is the significant number of the global population using mobile phones with access to social media platforms. The consistent and ongoing growth of mobile users globally provides an ever-increasing potential user-base for the FANTOO platform. More than two-thirds of the world’s population uses a mobile phone today, with an increase in mobile phone users of 4 million over the past 12 months. Studies by the KMFA and KOFICE show that online and mobile platforms were the most common channels for global fans to access K-Culture content. As such, FANTOO is positioned to capture the opportunity of a market that is both increasing in the number of users and the amount of content each user consumes.

With the ongoing COVID-19 pandemic and associated restrictions on travel and attendance at live performances, the FANTOO platform can provide fandom users access to virtual concerts, for which attendees must pay admission to “attend” by viewing online. Among the virtual concerts held across a number of platforms, BTS’s first online concert, entitled Bang Con: The Live, received 756,000 views from over 107 countries, which according to the Guinness Book of World Records, set a new world-record for the most live-stream attendees at a virtual music concert on a custom social media platform. According to Grand View Research, these remarkable achievements led to the rapid expansion of the global virtual events market, resulting in a global market value of approximately $94.0 billion in 2020, with the market value of the global virtual events expected to reach approximately $504.8 billion by 2028. We believe our strong partnerships with the largest associations within the Korean entertainment industry will increase our visibility and market share within the virtual events market, providing even more value to users of FANTOO.

OUR VALUE

We focus on providing user-centric services to provide a single platform that can address and satisfy the interests of fans within FANTOO. FANTOO will enrich users fandom experience by providing an all-in-one platform for fandom content, including news, popular culture, discussions, live shows, and fan creativity. FANTOO is currently available in 17 languages, with real-time translation services. These real time translation services enable our users to communicate with each other across the globe without language barriers. For languages that are not available for real-time translation, FANTOO provides a solution through the use of translation matching services among users. Through the translation matching services, FANTOO ensures that content is accurately translated and available to a greater number of global fans in their own languages. In addition, FANTOO further allows users to freely create and monetize their own content, enabling fast and secure user-to-user sales.

Within FANTOO, our reward system ensures users are rewarded with FP for staying active and creative within the platform, as well as attracting new users. The more FP a user earns, the more purchasing power the user has within the FANTOO platform, allowing users to purchase goods and/or services within the FANTOO platform either directly from us or from other users.

OUR STRENGTHS

We differentiate ourselves from competing social networks through the power of a fully-integrated platform and established partnerships with leaders in the entertainment industry within South Korea. Our platform and partnerships enable our users to create clubs, communities, and gather over similar fandoms, all while monetizing their content and contributing to the FANTOO platform experience. Our core strengths include the following:

OUR GROWTH STRATEGY

Our core strategy is to pursue initiatives that promote the viral growth of our user base, and in doing so, drive advertising revenue, user-generated revenue, and create other revenue streams. Our focus on user acquisition and retention provides the primary lens to view our plans for community growth, engagement, and long-term brand equity.

Our growth strategy, based on the current services offered on FANTOO and scheduled future services, is illustrated as follows:

OUR MARKETING STRATEGY

We intend to market our platform to users through media ads, promotions, campaigns, referrals, and other similar initiatives. Currently, we focus on our core target in K-Culture, and specifically, the K-pop fandom. We intend to achieve user growth by utilizing the following strategies:

TECHNOLOGY

FANTOO was designed and developed to connect fans across the globe. As a result, we have been developing and acquiring cutting edge technologies in order to deliver a smooth experience, regardless of location. These technologies include:

Infrastructure

Through a wholly owned subsidiary, we currently lease property located on the central bank of the Han River in the Seoul Marina, the largest Korean Wave culture center in Korea. With large outdoor stages, sculpture gardens, and broadcast studios, Seoul Marina is not only used as FANTOO’s headquarters, but is also used by FANTOO to host FANTOO concerts and other user events.

Competition

Our competitors include:

While many of these platforms have achieved success in growing users and have greater financial resources than the Company, we believe the FANTOO platform is the only all-in-one global fandom platform that also offers a unique user reward system that incentivizes users to participate and engage within the platform. These features were developed to position FANTOO to successfully complete with the more established platforms and facilitate an active fandom experience.

Partnerships

On April 19, 2021, HBC entered into a memorandum of understanding with the Federation of Artistic & Cultural Organization of Korea (“FACO”) (the “MOU”). Pursuant to the MOU, we were granted certain collaborative rights in which we can promote cultural events, while participating and taking advantage of FACO’s infrastructure and network to develop and export South Korea’s popular culture around the globe.

FACO was established as a non-profit business in 1961, organized for the purpose of contributing to the development of Korean art and culture, promoting the international exchange of Korean art and culture, and ensuring the well-being of affiliated artists. FACO’s membership currently consists of over 1.3 million artists from 10 different member associations, spread across 167 branches globally, including two branches in the United States and one in Japan.

We have strategically developed this partnership with FACO due to their substantial contribution to the Korean entertainment and pop-culture industry. The partnership benefits FANTOO users through the synergy between these organizations and the FANTOO platform, such as content creation, hosting K-pop concerts, and much more.

On September 10, 2021, we entered into a partnership with the “Metaverse Alliance,” an initiative led by South Korea’s Ministry of Science and Information and Communication Technology (“MSIT”) (the “MSIT Partnership”), which is intended to facilitate our development of innovative technologies and advancements within the metaverse. The MSIT built the Metaverse Alliance to coordinate and facilitate the development of virtual and augmented reality platforms. Approximately 643 firms have joined MSIT to date, including Samsung, Hyundai Motors and Naver.

We currently registered copyrights of characters as follow:

Intellectual Property

We currently do not have any intellectual property or patents registered with the Korean Intellectual Property Office and/or the Korea Copyright Commission; however, we have applied to register the following trademarks:

We also own the following domain names for which we plan on renewing on, or prior to, the applicable expiration dates:

We intend to continue to expand our brand names, trademarks and designs worldwide as our business grows, and develop intellectual property that increases the value of our technologies and the FANTOO platform.

Employees and Labor Relations

We currently have 49 full-time and 3 full-time equivalent employees. Additionally, we occasionally enter into agreements with contractors, on an as-needed basis, to perform certain services, including contract workers. We believe that we maintain a good working relationship with our employees, and we have not experienced any labor disputes. None of our employees are represented by labor unions.

Seasonality

We do not expect to experience any significant seasonality trends. However, seasonality trends may occur in the future.

Governmental Regulation

We are subject to a number of national, state/region, and local laws and regulations in the U.S. and Korea. These laws and regulations involve matters that are central to our business, including our interactions with users, suppliers, and merchants. These laws and regulations involve fair trade, competition, labor and employment, privacy, data protection, intellectual property, consumer protection, import and export regulations, and other subjects. Many of the laws and regulations to which we are subject are evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate. Laws and regulations in each jurisdiction where we do business continue to develop and evolve rapidly. As a result, it is possible that we may not be, or may not have been, compliant with each such applicable law or regulation.

Due to the extensive business we conduct in Korea, below are examples of Korean laws and regulations that govern our business, which include but are not limited to:

Copyright Act

Korea’s Copyright Act provides protections for various types of creative works, including certain copyrightable “computer programs” and “databases.” The Copyright Act provides the creator of such works with rights to the economic benefits flowing from their creation and control over the works’ use and dissemination. The infringement of copyrights protected under the Copyright Act are subject to civil claims as well as criminal penalties.

The Copyright Act implements the Korea U.S. Free Trade Agreement, by recognizing temporary storage as copying, introducing a system for fair use of copyrighted materials, and concept of statutory damages for copyright violations and adding conditions for online-service providers to be exempted from infringement liability and types of prohibited acts of infringement on the rights of copyright holders.

Youth Protection Act

The purpose of Youth Protection Act is to ensure juveniles grow up into persons of sound character by regulating the distribution of media products, drugs, etc. harmful to juveniles and juveniles’ access to harmful business establishments and by protecting and relieving juveniles from harmful environments. The term “media product harmful to juveniles” means any of the media products such as phonorecords, video products or other media products defined in the Music Industry Promotion Act and the Promotion of the Motion Pictures and Videos Products Acts, specified by Presidential Decree as likely to be harmful to the mental or physical health of juveniles. The Commission on Youth Protection shall examine each media product to find whether it is harmful to juveniles and shall determine the media product as harmful to juveniles. If the Commission on Youth Protection or an examining authority finds, as a result of the examination of a media product, that the distribution of content of the media product is prohibited by the Criminal Act or any other statute, it shall request relevant authorities, without delay, to impose criminal punishment or make an administrative disposition;provided, that if an examining authority has a different procedure prescribed by a relevant statute, the procedure shall apply to such cases.

Content Industry Promotion Act

The Content Industry Promotion Act prescribes matters necessary for promoting content industry, thereby contributing to the improvement of the lives of citizens and to the sound development of national economy through the establishment of foundation for the content industry and the reinforcement of its competitiveness. The term “content” means data or information expressed in sign, text, graphic, color, voice, sound, image, video, etc. (including compounds thereof); The term “content industry” means any industry related to the production, distribution, use, etc. of contents creating economic added value or services providing such contents (including compounds thereof).

In order to protect users when contents are transacted, a content business operator shall prepare terms of service including the details of refund of excessively or erroneously paid amount, right to withdraw the subscription of contents or to cancel a contract for the use of contents, compensation for users’ damage occurring from defects in contents, etc., as prescribed by Presidential Decree, and notify users thereof.

Personal Information Protection Act

The Personal Information Protection Act and related legislation, regulations, and orders (“PIPA”) governs the collection, use, dissemination, storage, and destruction of personal information. PIPA specifies the circumstances under which consent must be obtained to collect, use, or disseminate a person’s personal information. PIPA places limits on the circumstances in which personal information can be required and on the collection of some types of personal information (such as identifiers granted by law for identification purposes). PIPA grants an individual right to request perusal, correction, or deletion of one’s own personal information, and specifies the methods to exercise such rights. Additionally, PIPA establishes requirements for information destruction, such as a requirement that personal information should be destroyed if it is no longer necessary to achieve the purpose for which it was collected.

Under PIPA, in the event a leak of personal information is discovered, the processor of personal information is required to promptly notify the affected person(s). PIPA requires notification to the authorities and other measures in certain circumstances.

PIPA imposes monetary remedies, penalties, and statutory damages for violations of its restrictions. Class-action relief for the leakage of personal data is available in certain circumstances, and some conduct, such as collection of personal information without consent, can be subject to criminal punishment.

The Monopoly Regulation and Fair Trade Act

In Korea, the Korean Fair Trade Commission (“KFTC”) designates an affiliated group of companies whose total assets of the preceding fiscal year exceeding 5.0 trillion or more Korean Won as a business group subject to disclosure (Article 14 of the Monopoly Regulation and Fair Trade Act, and Article 21 of the Enforcement Decree of the Act). If a group of companies are designated a business group subject to disclosure, the companies will become subject to, among others, the following obligations under the Monopoly Regulation and Fair Trade Act:

Cost of Compliance with Environmental Laws

We have not incurred any costs associated with compliance with environmental regulations, nor do we anticipate any future costs associated with environmental compliance; however, no assurances can be given that we will not incur such costs in the future.

Facilities

Marine Island Co., Ltd. (“Marine Island”), a wholly owned subsidiary of the Company, leases approximately 19,200 square feet of office space at the Seoul Marina, located at 160 Yeouiseo-ro, Yeungdeungpo-gu, Seoul, Korea (the “Marina”), for a monthly payment of approximately $20,000. Marine Island subleases the Marina to HBC’s wholly owned subsidiaries FNS at no cost.

We anticipate no difficulty in extending the leases of our facilities or obtaining comparable facilities in suitable locations, as needed, and we consider our facilities to be adequate for our current needs.

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the outcome of these matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company. For the year ended December 31, 2023, the Company two suspended legal cases as follows, and as of July 15, 2024, the result of the two cases are not certain.