Hanryu Holdings Inc
For the period ended Jun 30, 2024. Filed Oct 15, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Oct 15, 2024
GITS$1.55+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-09-30.
0001213900-24-083272
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-10-15.
0001213900-24-087506
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 81 current paragraphs.
37 unchanged; 29 reworded; 14 added; 28 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Going Concern
Current report
We have experienced recurring losses from operations and have a stockholders’ equity and working capital of $10,566,638 and $8,199,643 as of June 30, 2024, respectively, and $13,068,465 and $10,140,579 as of December 31, 2023, respectively. Also, we have 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 our ability to continue as a going concern for twelve (12) months after the issuance date of our financial statements included in this Form 10-Q.
Current report
Our future operations are dependent upon multiple factors, including (i) the success of our FANTOO platform business; (ii) competition from existing and future services from other companies; and (iii) securing new sources of capital to fund operations and develop markets. We will maintain an ongoing effort to improve and innovate FANTOO platform business to generate funds for our operations. . For instance, we recently opened FANTOO House, in Seoul, a complex entertainment space for content video production, studio, music broadcasting, and rental (lease). At FANTOO platform, we plan to launch (i) Epic branded ecommerce platform expected to generate additional income, and (ii) dedicated video production operations designed to create short episodic content that focuses on K-POP fandom. In addition, we maintain an ongoing effort to raise funds for our operations from current investors and new sources of capital through the issuance of additional common stock and/or short-term notes. However, there can be no assurance as to the outcome of these factors or that future funding efforts will generate sufficient capital to maintain our operations. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
Current report
Financial Overview
Current report
Revenues
Current report
Cost of revenue for six months ended June 30, 2024 and 2023 was $0, and $69,145, respectively. The substantial decrease in cost of revenue is principally due to the substantial decrease in revenue reported during the six-month period ending June 30, 2024, compared to the corresponding period in 2023.
Current report
Liquidity and Capital Resources
Current report
We expect to continue to incur substantial expenditures in the foreseeable future for the development of our technologies and platform infrastructure. We will require additional financing to further develop and market our platform business, and otherwise execute our business plan. Our current financial condition raises substantial doubt about our ability to continue as a going concern. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies.
Current report
We may seek to raise capital through equity offerings or debt financings, which may include collaboration agreements, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our consolidated financial condition and our ability to pursue our business strategies.
Current report
As of June 30, 2024, there have been no material changes to our contractual obligations and other commitments compared to those disclosed on Form 10-K.
Current report
This discussion and analysis of financial condition and results of operation is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For further information on our significant accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on July 16, 2024.
Current report
We have determined that all other issued, but not yet effective accounting pronouncements are inapplicable or insignificant to us and once adopted are not expected to have a material impact on our financial position. Refer to Note 2,*Significant Accounting Policies,*for detailed disclosures regarding the recent accounting pronouncement.
Current report
Other Information
Current report
JOBS Act Accounting Election
Removed paragraphs (28)
Previous report
Cost of revenue for three months ended March 31, 2024 and 2023 was $0, respectively since there are no direct cost of revenues related the revenues.
Previous report
Liquidity and Going Concern
Previous report
We have no contractual obligations as of March 31, 2024.
Previous report
On September 14, 2022, the Company entered into a one-year lease agreement which expired on September 14, 2023. And the Company expand its lease term to September 14, 2024. Upon entering into the lease, the Company paid a deposit, which is recorded as Other Assets in the consolidated balance sheet in the amount of $111,375 as of March 31, 2024, and $116,333 as of December 31, 2023.
Previous report
The Company has a lease agreement for a vehicle which was initially made on September 16, 2021, and matures on September 21, 2025. The deposit paid on the beginning date of the lease agreement is recorded as other asset in the consolidated balance sheet in the amount of $116,279 as of December 31, 2022. On December 28, 2023, the Company terminated the lease agreement earlier than the original contract, and the deposit amount of $64,725 was returned to the Company and the remaining of $51,554 was paid as the penalties.
Previous report
Expenses related to these leases totaled approximately $24,088 and $24,695 for the three month ended March 31, 2024 and March 31, 2023.
Previous report
Off-Balance Sheet Arrangements
Previous report
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our financial statements included elsewhere in this prospectus. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Previous report
Quantitative and Qualitative Disclosures about Market Risk
Previous report
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency and credit.
Previous report
Foreign Currency Risk
Previous report
We have accounts on our foreign subsidiaries’ ledgers, which are maintained in the respective subsidiary’s local currency and translated into USD for reporting of our condensed consolidated financial statements. As a result, we are exposed to fluctuations in the exchange rates of various currencies against the USD and other currencies, including KRW.
Previous report
Transactional
Previous report
We generate the majority of our revenue from customers within Korea. Typically, we aim to align costs with revenue denominated in the same currency, but we are not always able to do so. As a result of the geographic spread of our operations and due to our reliance on certain products and services priced in currencies other than KRW, our business, results of operations, and financial condition have been and will continue to be impacted by the volatility of the KRW against foreign currencies.
Previous report
Translational
Previous report
Our functional currency and reporting currency is the USD. The local and functional currency for our Korean subsidiaries, Hanryu Bank, FSN, and Marine Island, which are our primary operating subsidiaries, is the KRW. Assets and liabilities of each subsidiary are translated into USD at the exchange rate in effect at the end of each period. Revenue and expenses for these subsidiaries are translated into USD using average rates that approximate those in effect during the period. Consequently, increases or decreases in the value of the USD affect the value of these items with respect to the non-USD-denominated businesses in the condensed consolidated financial statements, even if their value has not changed in their original currency. For example, a stronger USD will reduce the reported results of operations of non-USD-denominated businesses and conversely a weaker USD will increase the reported results of operations of non-USD-denominated businesses. An assumed hypothetical 10% adverse change in average exchange rates used to translate foreign currencies to USD would have resulted in a decline in total net revenues of $72,197 and a change in net loss of $744,726 for the year ended December 31, 2023. An assumed hypothetical 10% adverse change in average exchange rates used to translate foreign currencies to USD would have resulted in a decline in total net revenues of $21 and a change in net loss of $256,660 for the three months ended March 31, 2024.
Previous report
At this time, we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency risk. It is difficult to predict the impact hedging activities would have on our results of operations.
Previous report
Credit Risk
Previous report
Our cash and cash equivalents, deposits, and loans with banks and financial institutions are potentially subject to concentration of credit risk. We place cash and cash equivalents with financial institutions that management believes are of high credit quality. The degree of credit risk will vary based on many factors including the duration of the transaction and the contractual terms of the agreement. As appropriate, management evaluates and approves credit standards and oversees the credit risk management function related to investments.
Previous report
The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to the Company’s deferred tax assets.
Previous report
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09,Income Taxes (Topic 740) Improvements to Income Tax Disclosures.* *ASU 2023-09 will improve the transparency and decision usefulness of income tax disclosures to better assess how operations and related tax risks affect tax rates and future cash flows on an interim and annual basis. It will be effective for us on May 1, 2025, with the option to early adopt at any time prior to the effective date and will require adoption on a retrospective basis. We are currently evaluating the impacts of the standard on our financial statements and disclosures.
Previous report
In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.* *ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an interim and annual basis. It will be effective for our annual period beginning May 1, 2024, and interim periods beginning May 1, 2025, with the option to early adopt at any time prior to the effective date and will require adoption on a retrospective basis. We are currently evaluating the impacts of the standard on our financial statements and disclosures.
Previous report
In August 2020, the FASB issued ASU No. 2020-06,Debt—* Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging*—* Contracts in Entity*’s Own Equity (Subtopic 815-40) Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 changes how entities account for convertible instruments and contracts in an entity’s own equity and simplifies the accounting for convertible instruments by removing certain separation models for convertible instruments. ASU 2020-06 also modifies the guidance on diluted earnings per share calculations. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.
Previous report
In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, which amended the effective date of the various topics. As the Company is a smaller reporting company, the provisions of ASU 2016-13 and the related amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 (quarter ending September 30, 2023 for the Company). Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.
Previous report
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance.
Previous report
Contingencies
Previous report
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Previous report
Relaxed Ongoing Reporting Requirements
Reworded paragraphs (29)
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included on Form 10-K for the year ending December 31, 2023. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” on Form 10-K/A for the year ending December 31, 2023.
Current wording
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ending December 31, 2023. As discussed in the section titled “Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ending December 31, 2023.
Previous wording
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”)a, and majority owned subsidiary, K-Commerce Co., Ltd. (“K-Commerce”), all 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 unlike any other.
Current wording
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”), all 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 unlike any other.
Previous wording
Due to the surge in popularity of Korean culture (“K-Culture”), we believe that we have great potential to continue growing our user base, while maintaining a high percentage of Monthly Active Users (“MAUs”). According to the Korea Foundation and Korean Ministry of Foreign Affairs, in 2021, Korean culture had 156.6 million fans in 116 countries, and generated approximately $21.5 billion in global revenue in 2019. Furthermore, K-Culture was ranked as the seventh most influential global culture in 2021, and contributed over $10 billion in exports in 2020, as reported by the Korean Foundation for International Cultural Exchange. The global purchasing power of K-Culure was at $124.3 billion in 2020, based on the 2021 report by the Organization for Economic Co-operation and Development.
Current wording
Due to the surge in popularity ofK-Culture, we believe that we have great potential to continue growing our user base, while maintaining a high percentage of Monthly Active Users (“MAUs”). According to the Korea Foundation and Korean Ministry of Foreign Affairs, in 2021, Korean culture had 156.6 million fans in 116 countries, and generated approximately $21.5 billion in global revenue in 2019. Furthermore, K-Culture was ranked as the seventh most influential global culture in 2021, and contributed over $10 billion in exports in 2020, as reported by the Korean Foundation for International Cultural Exchange. The global purchasing power of K-Culure was at $124.3 billion in 2020, based on the 2021 report by the Organization for Economic Co-operation and Development.
Previous wording
We anticipate that our primary source of revenue will be generated from FANTOO platform operations. Additionally, we have generated limited revenue from the Company’s other subsidiaries’ operations, such as revenue from marketing services, retail sales, and content sales. We started generating revenue from FANTOO business, and we anticipate earning more steady revenue from the Company’s other businesses by 2024.
Current wording
We anticipate that our primary source of revenue will be generated from FANTOO platform operations. Additionally, we have generated limited revenue from the Company’s other subsidiaries’ operations, such as revenue from marketing services, retail sales, and content sales. We started generating revenue from FANTOO business, and we anticipate earning more steady revenue from the Company’s other businesses by the end of 2024.
Previous wording
(i) Direct Sales We started generating direct sales revenue through: (i) original content sales, such as FANTOO produced web series that can be purchased by users on our platform or licensed to distributors; (ii) e-commerce goods through FANTOO’s Fanshop, which sells items such as the latest fandom goods and upcoming concert tickets; and (iii) advertising sales, including banner placements, splash advertising, pop-up advertisements within the platform, in-platform promotions, and branded content productions. For advertising sales, we act as an agent in arranging third-party promotions to our users. Our business model provides for the distribution of a percentage of our advertising revenue to FANTOO users in the form of FP as incentives for certain activities within the FANTOO platform. Users can then spend FP within the FANTOO platform to purchase goods and/or services, either directly from us or from other users.
Current wording
(i) Direct Sales. From 2023, we began generating direct sales revenue through: (i) original content sales, such as FANTOO produced web series that can be purchased by users on our platform or licensed to distributors; (ii) e-commerce goods through FANTOO’s Fanshop, which sells items such as the latest fandom goods and upcoming concert tickets; and (iii) advertising sales, including banner placements, splash advertising, pop-up advertisements within the platform, in-platform promotions, and branded content productions. For advertising sales, we act as an agent in arranging third-party promotions to our users. Our business model provides for the distribution of a percentage of our advertising revenue to FANTOO users in the form of FP as incentives for certain activities within the FANTOO platform. Users can then spend FP within the FANTOO platform to purchase goods and/or services, either directly from us or from other users.
Previous wording
Revenue from Retail Sales Revenue from retail sales which offers a wide variety of products for purchase. Although we have generated limited revenue from such services in the past, we anticipate earning more steady revenue from this business model by 2024.
Current wording
Revenue from Retail Sales. Revenue from retail sales include a wide variety of products for purchase. Although we have generated limited revenue from such services in the past, we anticipate earning more steady revenue from this business model in 2024.
Previous wording
Revenue from Marketing Services Revenue from marketing services provided by the Company’s other subsidiaries such as Hanryu Bank, which will include activities such as creating and distributing flyers, hosting events and giveaways, producing advertisement videos, and more. Although we have generated limited revenue from such services in the past, we anticipate earning more steady revenue from this business model by 2024.
Current wording
Revenue from Marketing Services. Revenue from marketing services provided by the Company’s other subsidiaries such as Hanryu Bank, which will include activities such as creating and distributing flyers, hosting events and giveaways, producing advertisement videos, and more. Although we have generated limited revenue from such services in the past, we anticipate earning more steady revenue from this business model by the end of 2024.
Previous wording
Revenue from News Agency Revenue from news agency content sales, which provides news articles and original content to other third-party media outlets. Although we have generated a de minimis amount of revenue from such services in the past, we anticipate earning more steady revenue from this business model by 2024.
Current wording
Revenue from News Agency. Revenue from news agency content sales, which provides news articles and original content to other third-party media outlets. Although we have generated a de minimis amount of revenue from such services in the past, we anticipate earning more steady revenue from this business model by the end of 2024.
Previous wording
As we continue to diversify our product and service offerings, we anticipate additional revenue streams, including
Current wording
As we continue to diversify our product and service offerings, we anticipate additional revenue streams, including the following:
Previous wording
Revenue from Entertainment Agency Our entertainment agency business will assist influencers in growing their influence base both within and outside of the FANTOO platform. As each influencer’s status grows, we expect to monetize their influencer status through entering into advertisement agreements or performance-based contracts. We anticipate earning revenue from this business model by 2024.
Current wording
Revenue from Entertainment Agency. Our entertainment agency business is expected to assist influencers in growing their influence base both within and outside of the FANTOO platform. As each influencer’s status grows, we expect to monetize their influencer status through entering into advertisement agreements or performance-based contracts. We anticipate earning revenue from this business model by the end of 2024.
Previous wording
While we anticipate generating revenue from sales of our entertainment agency business by the end of the year ended December 31, 2024, no assurances can be given that we will successfully launch such affiliated businesses, and if so, whether such businesses will be successful.
Current wording
While we anticipate generating revenue from sales of our entertainment agency business by the end of 2024, no assurances can be given that we will successfully launch such affiliated businesses, and if so, whether such businesses will be successful.
Previous wording
Three months Ended March 31, 2024 Compared to three months ended March 31, 2023
Current wording
Three and Six months Ended June 30, 2024 Compared to three and six months ended June 30, 2023
Previous wording
The following table sets forth a summary of our statements of operations for the three months ended March 31,2024 and 2023:
Current wording
The following table sets forth a summary of our statements of operations for the six months ended June 30, 2024 and 2023:
Previous wording
We have generated revenue from the FANTOO platform, and we have started to generate contents sales through FNS and other platforms, including third party news agencies and YouTube. While the FANTOO platform itself has not yet generated revenue enough, we began implementing our business plan and commenced distributing content to build up and raise brand awareness. Revenue for the three months ended March 31, 2024 was $185, as compared to revenue of $223 for the three months ended March 31, 2023. This decrease of $38 was due to $38 in advertising and content sales through FANTOO platform and FNS.
Current wording
We have generated revenue from the FANTOO platform, and we have started to generate contents sales through FNS and other platforms, including third party news agencies and YouTube. While the FANTOO platform itself has not yet generated the meaningful revenue, we began implementing our business plan and commenced distributing content to build and raise brand awareness. Revenue for the six months ended June 30, 2024 was $198t, as compared to revenue of $265,546 for the six months ended June 30, 2023. This decrease of $265,533 was due to $193,717 in advertising and content sales through FANTOO platform and FNS and $71,816 in product sales thorough Hanryu Bank and FNS in the period ended June 30, 2023 compared to no such sales in the corresponding period in 2024. The substantial decrease in revenue is principally attributable by the restructuring of the FANTOO platform and the strategic decision of the management.
Previous wording
Marketing and advertising expense for the three months ended March 31, 2024 was $3,500, as compared to $289,973 for the three months ended March 31, 2023. The decrease is due to the restructuring of the FANTOO platform and the strategic decision of the management to improve FANTOO platform to efficiently reach the targeted users.
Current wording
Marketing and advertising expense for the six months ended June 30, 2024 was $3,446, as compared to $832,755 for the six months ended June 30, 2023. The decrease is due to the restructuring of the FANTOO platform and the strategic decision of the management to improve FANTOO platform to efficiently reach the targeted users.
Previous wording
Research and development expense for the three months ended March 31, 2024 was $0, as compared to $71,732 for the three months ended March 31, 2023. The decrease in research and development expense is primarily due to the restructuring of the FANTOO platform and the strategic decision of the management.
Current wording
Research and development expense for the six months ended June 30, 2024 was $0, as compared to $231,743 for the six months ended June 30, 2023. The decrease in research and development expense is primarily due to the restructuring of the FANTOO platform and the strategic decision of the management.
Previous wording
General and administrative expense for the three months ended March 31, 2024 decreased $1,350,789 or 55%, as compared to the three months ended March 31, 2023. The decrease was primarily due to a decrease in commissions and consulting costs of $591,944, a decrease in labor related costs of $495,424, and a decrease in travel expense of $372,287. The substantial decrease in general and administrative expense is principally attributable to the decrease in consulting costs, labor related costs and Travel expense by the restructuring of the FANTOO platform and the strategic decision of the management.
Current wording
General and administrative expense for the six months ended June 30, 2024 was $1,735,311 as compared to $4,724,973 for the six months ended June 30, 2023. The decrease of $2,989,662 was primarily due to a decrease in commissions and consulting costs of $853,773, a decrease in labor related costs of $1,274,566, and a decrease in travel expense of $679,686. The substantial decrease in general and administrative expense is principally attributable to the decrease in consulting costs, labor related costs and travel expense by the restructuring of the FANTOO platform and the strategic decision of the management.
Previous wording
Other income (expense) for the three months ended March 31, 2024 was $50,930 an increase of $67,732, or 403%, as compared to the three months ended March 31, 2023, which was primarily driven by $76,313 of the interest income.
Current wording
Other income (expense) for the six months ended June 30, 2024 was $129,588 an increase of $147,659 as compared to the six months ended June 30, 2023, which was primarily driven by $173,086 of the interest income.
Previous wording
We have a history of operating losses and negative cash flow in operating activities. We have incurred recurring net losses, including net losses from operations before income taxes of $1,047,071 and $2,823,259 for the three months ended March 31, 2024 and 2023, respectively. We used $402,054 and $3,958,869of cash for operating activities for the three months ended March 31, 2024 and 2023, respectively.
Current wording
We have a history of operating losses and negative cash flow in operating activities. We have incurred recurring net losses, including net losses from operations before income taxes of $1,608,971 and $6,059,252 for the six months ended June 30, 2024 and 2023, respectively. We used $490,256 and $13,683,164 of cash for operating activities for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Our cash needs will depend on numerous factors, including our revenues, completion of our product development activities, customer and market acceptance of our product, and our ability to reduce and control costs. We expect to devote substantial capital resources to, among other things, fund operations and continue development plans.
Current wording
As of June 30, 2024, we had cash and cash equivalents of approximately $946. Based on our available cash resources and current operating plan, there is substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that its financial statements for the six months ended June 30, 2024 are issued. The Company’s existing capital resources, including the net proceeds from its IPO will not be sufficient to enable it to continue its operation as planned. The Company will need to raise substantial additional funds in the future in order to continue its operations. Our cash needs will depend on numerous factors, including our revenues, completion of our product development activities, customer and market acceptance of our platform, and our ability to reduce and control costs.
Previous wording
In July 2023, we consummated our IPO of 877,328 shares of its 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 $7.7 million after deducting underwriting discounts and commissions and other offering expenses of approximately $1.1 million.
Current wording
In July 2023, we consummated our IPO of 877,328 shares of its common stock at a public offering price of $10.00 pper share, generating gross proceeds of $8,773,280. Net proceeds from the IPO were approximately $7.7 million after deducting underwriting discounts and commissions and other offering expenses of approximately $1.1 million.
Previous wording
To support our existing and planned business model, we need to raise additional capital to fund our future operations. We have not experienced any difficulty in raising funds through loans and have not experienced any liquidity problems in settling payables in the normal course of business and repaying loans when they fall due. Successful renewal of our loans, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which we operate may negatively impact our results of operations and cash flows. Additional debt financing is anticipated to fund our operations in the near future. However, there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance that any of this financing can be obtained or that we can continue as a going concern.
Current wording
To support our existing and planned business model, we need to raise additional capital to fund our future operations. We have not experienced any difficulty in raising funds through loans and have not experienced any liquidity problems in settling payables in the normal course of business and repaying loans when they fall due. Successful renewal of our loans, however, is subject to numerous risks and uncertainties. In addition, the increasingly competitive industry conditions under which we operate may negatively impact our results of operations and cash flows. Additional debt financing is anticipated to fund our operations in the near future. However, there are no current agreements or understandings with regard to the form, time or amount of such financing and there is no assurance that any of this financing can be obtained if at all. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.
Previous wording
The following table summarizes changes in cash for the three months ended March 31, 2024 and 2023:
Current wording
The following table summarizes changes in cash for the six months ended June 30, 2024 and 2023:
Previous wording
Net cash used in operating activities for the three months ended March 31, 2024 was $402,054, which primarily reflected our net loss of $1,047,071, net of adjustments to reconcile net loss to net cash provided by operating activities of $646,017 which included a depreciation charge of $59,620. Changes in working capital primarily reflected increases in receivables and the settlement of payables in the ordinary course. Net cash used in operating activities for the three months ended March 31, 2023 was $3,958,869 which primarily reflected our net loss of $2,823,259, net of adjustments to reconcile net loss to net cash provided by operating activities of $1,135,619, which included a depreciation charge of $62,363. Changes in working capital primarily reflected increases in receivables and the settlement of payables in the ordinary course.
Current wording
Net cash used in operating activities for the six months ended June 30, 2024 was $490,256, which primarily reflected our net loss of $1,608,971, net of adjustments to reconcile net loss to net cash provided by operating activities of $1,118,715 which included a depreciation charge of $113,334. Changes in working capital primarily reflected increases in receivables and the settlement of payables in the ordinary course. Net cash used in operating activities for the six months ended June 30, 2023 was $5,899,791 which primarily reflected our net loss of $5,610,918, net of adjustments to reconcile net loss to net cash provided by operating activities of $288,873, which included a depreciation charge of $146,763. Changes in working capital primarily reflected increases in receivables and the settlement of payables in the ordinary course.
Previous wording
Our net cash provided in investing activities was $5,288,926 for the three months ended March 31, 2024, representing a decrease of $5,942,216, or 909.58%, as compared to $653,290 of cash used in investing activities for the three months ended March 31, 2023. This decrease was driven by a $5,430,389 decrease in payment for the short term loan receivables.
Current wording
Our net cash used in by investing activities was $5,120,370 for the six months ended June 30, 2024, representing a decrease of $5,495,573, as compared to $375,203 of cash provided by investing activities for the six months ended June 30, 2023. This decrease was driven by a $5,345,684 decrease in payment for the short term loan receivables.
Previous wording
Our net cash provided by financing activities was $432,835 for the three months ended March 31, 2024, consisting of a $432,835 net increase of proceeds from short-term loan payables. Our net cash provided by financing activities was $3,630,331 for the three months ended March 31, 2023, consisting of a $71,151 net decrease in cash payment of short-term loan receivables from related parties, a $1,428,543 increase in cash proceeds from exercising warrants, a $2,400,000 increase in cash proceeds from issuance of common stock.
Current wording
Our net cash provided by financing activities was $426,684 for the six months ended June 30, 2024, consisting of a $440,904 net increase of proceeds from short-term loan payables. Our net cash provided by financing activities was $15,827,546 for the six months ended June 30, 2023, consisting of a $763,505 net decrease in cash payment of short-term loan receivables from related parties, a $5,743,209 increase in cash proceeds from exercising warrants, a $10,000,000 increase in cash proceeds from issuance of common stock.
Previous wording
As of March 31, 2024, the remaining outstanding principal amount of bonds with warrants was approximately $3,341,253. There was no issuance of bonds with warrants for the three months ended March 31, 2024. A $148,742 decrease in bonds with warrants compared to the balance of $3,489,995 as of December 31,2023 was due to currency translation adjustment.
Current wording
As of June 30, 2024, the remaining outstanding principal amount of bonds with warrants was approximately $3,239,274. There was no issuance of bonds with warrants for the six months ended June 30, 2024. A $250,721 decrease in bonds with warrants compared to the balance of $3,489,995 as of December 31, 2023 was due to currency translation adjustment.
Previous wording
We expect to become a public reporting company under the Exchange Act, and will be required to publicly report on an ongoing basis. We expect to elect to report as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:
Current wording
We are an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:
Previous wording
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an “emerging growth company” for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.
Current wording
We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an emerging growth company until the earliest of (1) December 31, 2028 (the last day of the fiscal year following the fifth anniversary of the closing of our IPO), (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.