United States securities and exchange commission logo
November 23, 2022
Chang-Hyuk Kang
Chief Executive Officer
Hanryu Holdings, Inc.
160, Yeouiseo-ro
Yeongdeungpo-gu, Seoul
Republic of Korea 07231
Re: Hanryu Holdings,
Inc.
Amendment No. 3 to
Draft Registration Statement on Form S-1
Submitted October
28, 2022
CIK No. 001911545
Dear Chang-Hyuk Kang:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments. Unless we note otherwise, any reference to prior comments are
to comments in our
September 13, 2022 letter.
Amendment No. 3 to Draft Registration Statement on Form S-1
General
1. We note your response
to prior comments 2 and 3 regarding your user base and market
opportunity. Please
incorporate your response to prior comment 3 regarding your decision
not to enter the
Chinese market due to regulatory concerns in your prospectus summary.
You should also include
a risk factor that China represents a large market opportunity, but
since you will not
offer your products and services to Chinese users, it will limit your
market opportunity and
ability to grow your business. Further, please clarify if the nearly
10% of your users that
fall within the Other category consists of users in Hong Kong.
Chang-Hyuk Kang
FirstName LastNameChang-Hyuk Kang
Hanryu Holdings, Inc.
Comapany 23,
November NameHanryu
2022 Holdings, Inc.
November
Page 2 23, 2022 Page 2
FirstName LastName
Clarify whether you consider Hong Kong the same as the Chinese market.
If your
FANTOO app. is available to Hong Kong users, please add disclosure to
address any
material regulatory concerns such as the Chinese government s
increased restrictions as to
data privacy and censorship.
Prospectus Summary
FANTOO Offerings, page 4
2. Revise to disclose here and on page 46 that no KDG have been issued to
date, consistent
with what you state in response to prior comment 4.
KDG and Divestiture of Kingdom Coin ("KDC"), page 4
3. We note your response to prior comment 4 regarding your divestiture of
Kingdom Coin to
the KDC Foundation.
Please provide us a copy of the executed Business Transfer
Agreement, which
includes the signatories.
Clarify on page 4 that KDC Foundation may issue or mine additional
KDC beyond
the nearly 300 billion KDC it already possesses or possessed.
Clarify whether your revenue sharing agreement with the KDC
Foundation includes
any post-transfer newly created KDC.
Provide more details of the operation and management of the KDC
Foundation and
its management company, Plus Meta PTE Ltd. Identify any control
persons.
Clarify whether the KDC Foundation will coordinate any of its
activities with you or
your operation of FANTOO, or if KDC will be marketed to FANTOO
users.
Clarify that the market price of KDC ($0.00017) is significantly
lower
than the valuation used to extinguish your debt, and that you may
not generate any
cash from the revenue sharing agreement with the KDC Foundation.
4. We also note the disclosure on page 65 that in connection with the
transfer of assets to the
KDC Foundation, the company may be entitled to future contingent
payments depending
on the sales generated from the transferred assets.
Please advise us as to any agreements, relationships or other
involvement of the
company and/or its officers, directors and shareholders with or in
the KDC
Foundation.
Given the interest of the company in future sales generated by the
transferred assets,
please advise us as to the promotional or other efforts that the
company and/or its
officers, directors and shareholders may employ with respect to
the transferred assets.
5. If the company no longer controls the FANTOO Wallet, tell us how users
of the
FANTOO platform will be issued KDG.
6. Tell us if the KDC Foundation is able to obtain KDG on more favorable
terms than
other users of the FANTOO Platform.
7. Tell us what the company s expectations are regarding payments under
the Agreement to
Chang-Hyuk Kang
FirstName LastNameChang-Hyuk Kang
Hanryu Holdings, Inc.
Comapany 23,
November NameHanryu
2022 Holdings, Inc.
November
Page 3 23, 2022 Page 3
FirstName LastName
be received from KDC Foundation through December 31, 2024. Clarify if
KDC will be a
significant source of revenues compared to the company s other
businesses.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Performance Metrics, page 47
8. Your revised disclosures for the ARPU measure indicate that it
represents total revenue
divided by the average number of customer relationships. Further you
state that this helps
you understand the rate at which you are monetizing your active user
base. Please
explain, and revise as necessary to clarify, what is meant by
"customer relationships" and
"active user base" and how they relate to MAUs or User Base. Also,
explain further how
you calculate the average number of customer relationships for
purposes of your
calculation and specifically address your reference to dividing by the
number of months in
the period.
9. Please tell us why the number of Users and MAU for May 2022 changed
from your prior
amendment or revise as necessary. To the extent the amounts disclosed
in the current
filing are correct, revise to explain the reason for the increase in
Users and MAU from
April 2022 to May 2022 with a subsequent decrease in June 2022.
The FANTOO Ecosystem, page 64
10. We note your disclosure in response to prior comments 11 and 12
regarding KDG. Please
clarify here that KDG may not be purchased or redeemed for cash by
your users, and only
awarded as prizes or as a medium of exchange for your user-to-user
sales.
11. With respect to the KDC divestiture to the KDC Foundation, we note
that KDC and
KDG both still carry the Kingdom branding and the KDC Foundation
will own the
FANTOO Wallet. Please clarify whether you intend to seek changes to
KDG or the
FANTOO Wallet branding to avoid confusion relating to your involvement
with KDC and
the FANTOO Wallet.
12. Please provide more details of how KDG will be stored in your internal
reserve and how
you will ensure that the KDG will be accurately recorded and protected
for your
FANTOO users. To the extent you believe there are material risks
related to storage
and/or recordkeeping of the KDG, please clarify.
Notes to Consolidated Financial Statements
Note 2 - Significant Accounting Policies
Revenue Recognition, page F-41
13. We note your response and revised disclosures to prior comment 21.
Please describe to us
the "high volume" of products shipped. Also, you state that
merchandise sales are
fulfilled with inventory sourced from your own inventory, however, you
do not have any
inventory on your balance sheet for any period presented. Please
explain. In
addition, describe the contractual terms of the agreements with your
partners that give the
Chang-Hyuk Kang
FirstName LastNameChang-Hyuk Kang
Hanryu Holdings, Inc.
Comapany 23,
November NameHanryu
2022 Holdings, Inc.
November
Page 4 23, 2022 Page 4
FirstName LastName
company the ability to control the promised goods or services and
include in your
response a signed copy of a sample agreement that supports your
conclusion.
Earnings (Loss) per share, page F-44
14. We note your revised disclosure in response to prior comment 22.
Please further revise to
exclude the noncontrolling interest's share of net loss in the
earnings (loss) per share
calculation for each period presented. We refer to ASC 260-10-45-11A.
Note 3 - Acquisitions, page F-45
15. We note your response to prior comment 24. Please file a Merger
Agreement, which lists
the correct shareholders and corporate registration numbers in Article
3, consistent with
the information provided in your response and disclosures.
16. You state in your response to prior comment 24 that on or around March
11, 2021 you
obtained the right to the name "Hanryu Times." Please tell us from
whom you obtained
such right and the consideration paid. Also, provide us with a copy of
the executed
agreement. You also state that Sports, the company, and the company's
subsidiaries do not
share any officers, directors, or principal owners and you disclose
that there are no
familial relationships with members of management of Sport and the
company. Please tell
us whether any related party interests, beyond familial relationships,
exist between any of
these entities officers, directors or principal owners and if so,
explain further such
relationships.
17. We note your response to prior comment 25 where you state that March
31, 2021 is the
date you obtained control of RnDeep. Please further clarify in your
disclosures whether
this is the date when the consideration was transferred and you
acquired the assets and
assumed the liabilities of RnDeep. Refer to 805-10-25-7.
18. We refer to your response to comment 39 in your letter dated August
24, 2022. Regarding
the income test you state that for the year ended December 31, 2020,
RnDeep had no
income from continuing operations and therefore the acquisition was
below the 20%
significance level. However, the income test described in Rule
1-02(w)(1)(iii)(A) of
Regulation S-X, refers to using the absolute value of income or loss
from continuing
operations, and therefore it is not clear why no income from
continuing operations
results in a below 20% significance level. Please advise and
include your calculations
in the response.
Note 9 - Investments, page F-51
19. You disclose that as of June 30, 2022 you sold the Midas Bonds in
exchange for total cash
consideration of $1,687,052. Please revise to disclose the specific
date of the sale and
tell us where this is reflected on the statement of cash flows on page
F-5. Also, tell us the
name of the third-party that purchased the bond and whether they have
any relationship to
the company or your officers or directors.
Chang-Hyuk Kang
Hanryu Holdings, Inc.
November 23, 2022
Page 5
20. You disclose in footnote (2) that the amount for "Seoul Marina (Debt,
Right
Management)" represents the Lien held by the company for the right to
manage and
occupy the Seoul Marina. However, you state in the response to prior
comment 30 that it
is the right to receive debt in the amount of approximately $6 million
from SMC. Tell us
and revise to clarify whether you are accounting for this asset as a
right to the payment of
debt or as a lien on property. If it is a right to payment of debt,
further explain how you
account for this investment. In this regard, we note your reference to
ASC 325, which has
been superseded by ASU 2016-01. Please tell us what existing guidance you
applied to
account for this right to payment of debt and revise your disclosures
accordingly.
Alternatively, if this represents a lien on property, explain further why
you believe this is
in an investment and how your accounting is consistent with the guidance.
Note 17 - Other, page F-58
21. We note your revised disclosures regarding the KDC Agreement and the
terms under
which the KDC Foundation will pay consideration. Please revise to clarify
whether you
recorded any amount for this contingent consideration. In this regard,
tell us whether the
non-trade receivables relates to this transaction or explain what this
receivable relates to.
If you believe the fair value of contingent consideration in the KDC
Agreement is zero,
revise to indicate as such. Similar revisions should be made on page
F-25.
Exhibits
22. We note your response to prior comment 16 regarding the exclusive forum
provision and
how it is not intended to apply to claims under the Securities Act or
Exchange Act. Please
clarify whether your certificate of incorporation will be revised to
address the carve-out
for Securities Act and Exchange Act claims. If not, please revise your
disclosure to
clarify the risks and uncertainty as to whether Securities Act and
Exchange Act claims
would be subject to a carve-out of your exclusive forum provision.
You may contact Melissa Kindelan, Senior Staff Accountant, at (202)
551-
3564 or Kathleen Collins, Accounting Branch Chief at (202) 551-3499 if you have
questions regarding comments on the financial statements and related matters.
Please contact
Edwin Kim, Staff Attorney, at (202) 551-3297or Larry Spirgel, Office Chief, at
(202) 551-
3815 with any other questions.
Sincerely,
FirstName LastNameChang-Hyuk Kang
Division of
Corporation Finance
Comapany NameHanryu Holdings, Inc.
Office of
Technology
November 23, 2022 Page 5
cc: Daniel Rumsey, Esq.
FirstName LastName