Hanryu (US:HRYU)2023-11-17 21:01User Growth and Market Opportunity - FANTOO platform has exceeded 27 million users since its launch in May 2021, primarily driven by the popularity of K-Culture[227]. - The global purchasing power of K-Culture was estimated at $124.3 billion in 2020, indicating a substantial market opportunity for FANTOO[234]. Financial Performance - Revenue for the nine months ended September 30, 2023, was $1,347,975, representing a 49% increase from $904,040 in the same period of 2022[247]. - Net loss for the nine months ended September 30, 2023, was $9,163,826, an increase of 82% from a net loss of $5,038,818 in 2022[247]. - The gross profit margin decreased to 38% for the nine months ended September 30, 2023, down from 49% in 2022[248]. - Other income decreased by $66,231 or 27% to $176,906 for the nine months ended September 30, 2023, primarily due to a prior gain on extinguishment of debt recognized in 2022[255]. Expenses and Cost Management - Cost of revenue increased by 80% to $832,915 for the nine months ended September 30, 2023, compared to $463,586 in 2022[249]. - Marketing and advertising expenses surged by 533% to $1,914,786 for the nine months ended September 30, 2023, up from $302,688 in 2022[247]. - General and administrative expenses increased by $2,479,654 or 48% to $7,646,654 for the nine months ended September 30, 2023, mainly due to higher commissions and consulting costs[253]. - Research and development expenses rose to $277,624 for the nine months ended September 30, 2023, compared to $231,697 in 2022, driven by increased personnel costs related to the upgraded FANTOO app[252]. Cash Flow and Financing - Net cash used in operating activities was $11,444,953 for the nine months ended September 30, 2023, compared to $3,421,125 in 2022, reflecting a net loss of $9,163,826[265]. - Net cash provided by financing activities was $23,566,502 for the nine months ended September 30, 2023, significantly up from $1,715,561 in 2022, driven by increased proceeds from issuing common stock and exercising warrants[267]. - The company completed its IPO in July 2023, raising gross proceeds of $8,174,860 from the sale of 877,328 shares at $10.00 per share, with net proceeds of approximately $6.8 million after expenses[260]. Debt and Obligations - As of September 30, 2023, the company had outstanding convertible debt of approximately $3,346,222, a decrease from $3,550,856 at the end of 2022[268]. - The company has fixed contractual obligations totaling $165,345, with $32,682 due within one year and $132,663 due in 1-3 years[271]. Currency Risk and Financial Reporting - The company is exposed to foreign currency risk, particularly with the Korean Won (KRW), which affects its financial position due to fluctuations in exchange rates[276][278]. - A hypothetical 10% adverse change in average exchange rates would have resulted in a decline in total net revenues of $122,543 and a change in net loss of $833,075 for the nine months ended September 30, 2023[278]. - The company expects to become a public reporting company under the Exchange Act and will report as an "emerging growth company" for up to five years, unless the market value of its common stock held by non-affiliates exceeds $700 million[290][292]. - The company will benefit from relaxed ongoing public reporting requirements, which are less rigorous than those for non-emerging growth companies, potentially resulting in less information for stockholders[291]. Future Plans and Revenue Streams - The company anticipates generating revenue from user-to-user transactions, which is expected to become a significant revenue stream in the long term[232]. - FANTOO plans to roll out a premium ERP service option for clients, which will be available for a subscription fee[239]. - The entertainment agency business, FANTOO Entertainment, is expected to start generating revenue by 2024 through advertisement agreements and performance-based contracts[240]. Accounting and Estimates - The preparation of financial statements requires management to make estimates and assumptions that could differ from actual results, impacting reported amounts of assets and liabilities[282]. - The company plans to evaluate the impact of recent accounting pronouncements, including ASU 2016-13 and ASU 2020-06, on its consolidated financial statements in future periods[284][286].