UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 20-F

 

 

 

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended ________

 

OR

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

☒ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of event requiring this shell company report: May 13, 2025

 

Commission File Number: 001-42648

 

 

 

K WAVE MEDIA LTD.

(Exact name of Registrant as specified in its charter)

 

 

 

Not applicable   Cayman Islands

(Translation of Registrant’s

name into English)

  

(Jurisdiction of incorporation

or organization)

 

121 South Church Street

George Town, Grand Cayman,

KY1-1104
Cayman Islands

(Address of principal executive offices)

 

 

 

Copy to:

Tan Chin Hwee

Chief Executive Officer

121 South Church Street

George Town, Grand Cayman,

KY1-1104
Cayman Islands

Telephone: 703-790-0717

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

 

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Ordinary shares, no par value per share   KWM   The Nasdaq Stock Market LLC
Warrants, each exercisable to purchase one ordinary share at an exercise price of $11.50 per share   KWMW   The Nasdaq Stock Market LLC

 

 

 

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the shell company report:

 

On May 13, 2025, the issuer had 63,246,290 ordinary shares, no par value per share outstanding.

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐   No ☒

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐   No ☒

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐   No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒  
        Emerging growth company ☒  

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐

 

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐   Item 18 ☐

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☐

 

 

 

 

 

 

TABLE OF CONTENTS

 

EXPLANATORY NOTE   iii
     
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   v
     
PART I   1
         
ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS   1
         
A.   Directors and Senior Management   1
         
B.   Advisers   1
         
C.   Auditors   1
         
ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE   1
         
ITEM 3.   KEY INFORMATION   1
         
A.   [Reserved.]   1
         
B.   Capitalization and Indebtedness   2
         
C.   Reasons for the Offer and Use of Proceeds   2
         
D.   Risk Factors   2
         
ITEM 4.   INFORMATION ON THE COMPANY   2
         
A.   History and Development of the Company   2
         
B.   Business Overview   3
         
C.   Organizational Structure   3
         
ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS   3
         
ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES   4
         
A.   Directors and Senior Management   4
         
B.   Compensation   4
         
C.   Board Practices   6
         
D.   Employees   6
         
E.   Share Ownership   6

 

i

 

 

ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS   6
         
A.   Major Shareholders   6
         
B.   Related Party Transactions   7
         
C.   Interests of Experts and Counsel   7
         
ITEM 8.   FINANCIAL INFORMATION   8
         
A.   Consolidated Statements and Other Financial Information   8
         
B.   Significant Changes   8
         
ITEM 9.   THE OFFER AND LISTING   8
         
A.   Offer and Listing Details   8
         
B.   Plan of Distribution   8
         
C.   Markets   8
         
D.   Selling Shareholders   8
         
E.   Dilution   8
         
F.   Expenses of the Issue   8
         
ITEM 10.   ADDITIONAL INFORMATION   9
         
A.   Share Capital   9
         
B.   Memorandum and Articles of Association   9
         
C.   Material Contracts   9
         
D.   Exchange Controls and Other Limitations Affecting Security Holders   9
         
E.   Taxation   9
         
F.   Dividends and Paying Agents   9
         
G.   Statement by Experts   9
         
H.   Documents on Display   10
         
I.   Subsidiary Information   11
         
ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS   11
         
ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES   11
     
PART II   12
     
ITEM 16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT   11
     
PART III   13
         
ITEM 17.   FINANCIAL STATEMENTS   13
         
ITEM 18.   FINANCIAL STATEMENTS   13

 

ii

 

 

EXPLANATORY NOTE

 

On May 13, 2025 (the “Closing Date”), K Wave Media Ltd., a Cayman Islands exempted company (“Pubco” or the “Company”), consummated the previously announced business combination pursuant to the merger agreement, dated as of June 15, 2023, as modified by the joinder agreement, dated July 13, 2023, the First Amendment, dated March 11, 2024, the Second Amendment, dated June 28, 2024, the Third Amendment to Merger Agreement, dated July 25, 2024 and the Fourth Amendment to Merger Agreement, dated December 11, 2024 (the “Merger Agreement”), by and among the Company, Global Star Acquisition Inc., a Delaware corporation (“Global Star”), K Enter Holdings Inc., a Delaware corporation (“K Enter”) and GLST Merger Sub, Inc., a Delaware corporation (“Merger Sub”),

 

The following transactions occurred pursuant to the terms of the Merger Agreement (collectively, the “Business Combination”):

 

● On May 13, 2025, Global Star was reincorporated to Cayman Islands by merging with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Reincorporation Merger”). In connection with the closing of the Reincorporation Merger, (i) each issued and outstanding share of common stock of Global Star, other than Global Star common stock owned by Global Star as treasury shares or any Global Star common stock owned by any direct or indirect wholly owned subsidiary of Global Star, was converted into one ordinary share of PubCo (the “PubCo Ordinary Share”), (ii) each issued and outstanding warrant of Global Star was converted automatically into a warrant to purchase one PubCo Ordinary Share at a price of $11.50 per whole share (the “PubCo Warrant”), (iii) each issued and outstanding right of Global Star was converted automatically into a right to receive one-tenth (1/10) of one PubCo Ordinary Share at the closing of a business combination (the “PubCo Right”), and (iv) each issued and outstanding unit of Global Star was separated and converted automatically into one PubCo Ordinary Share, one PubCo Warrant, and one PubCo Right. At the closing of the Reincorporation Merger, all common stock, warrants, rights, units and other securities of Global Star ceased to be outstanding and were automatically canceled and retired and ceased to exist.

 

● On May 13, 2025, Merger Sub merged with and into K Enter, resulting in K Enter being a wholly owned subsidiary of PubCo (the “Acquisition Merger”). In connection with the closing of the Acquisition Merger, (i) each share of K Enter capital stock that was owned by Global Star, Merger Sub and K Enter (as treasury stock or otherwise), was automatically cancelled and retired without any conversion, (ii) each share of K Enter preferred stock issued and outstanding was deemed converted into shares of K Enter common stock, (iii) each share of K Enter common stock issued and outstanding, including shares of K Enter common stock deemed outstanding as a result of the mandatory conversion of K Enter preferred stock, was converted into the right to receive a number of PubCo Ordinary Shares equal to the Conversion Ratio, and (iv) each share of Merger Sub common stock issued and outstanding was converted into and become one newly issued, fully paid and nonassessable share of K Enter common stock.

 

In connection with the closing of the Business Combination, the aggregate consideration for the Acquisition Merger was $590,000,000, payable in the form of 59,000,000 newly issued PubCo’s Ordinary Shares valued at $10.00 per share.

 

Acquisition of the Six Korean Entities

 

K Enter’s acquisition of Play Company Co., Ltd. (“Play Company”), Solaire Partners LLC (“Solaire”), Apeitda Co., Ltd. (“Apeitda”), The LAMP Co., Ltd. (“Lamp”), Bidangil Pictures Co., Ltd. (“Bidangil”), and Studio Anseilen Co., Ltd. (“Studio,” and collectively, the “Six Korean Entities”) was a closing condition to the Business Combination.

 

On January 2nd, 2025, K Enter closed the equity purchase for Play Company first and the acquisitions of each of the Six Korean Entities other than Play Company closing subsequently.

 

The acquisition of Play company by K Enter was accounted for in accordance with the acquisition method of accounting under IFRS 3, with Play Company considered to be the acquirer of K Enter. As Play Company’s basis of accounting is IFRS, the combined K Enter – Play Company entity basis of accounting was IFRS.

 

iii

 

 

The acquisitions of each of the Six Korean Entities other than Play Company by K Enter post the acquisition of Play Company was accounted for in accordance with the acquisition method of accounting under IFRS 3, with K Enter post the acquisition of Play Company considered to be the acquirer of each of the Six Korean Entities other than Play Company. As K Enter post the acquisition of Play Company basis of accounting was IFRS, New K Enter’s basis of accounting was IFRS.

 

Under the acquisition method of accounting, the preliminary purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess purchase price, if any, allocated to goodwill. Costs related to the transaction were expensed as incurred.

 

Accounting Acquirer

 

The Business Combination was accounted for as a capital reorganization in accordance with IFRS 2 as Global Star does not meet the criteria to be determined a business under IFRS 3. Under this method of accounting, Global Star was treated as the acquired company for financial reporting purposes, and New K Enter was treated as the acquirer for financial statement reporting purposes.

 

PIPE Securities Purchase Agreement

 

On January 31, 2025, the Company entered into a securities purchase agreement (the “PIPE Securities Purchase Agreement”), with certain institutional and accredited investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to subscribe for and purchase, and the Company has agreed to issue and sell to the PIPE Investors, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), promissory notes (the “PIPE Notes”) convertible into shares of Company common stock, par value $0.0001 per share (the financing under the PIPE Securities Purchase Agreement hereinafter referred to as the “PIPE Financing”) with an aggregate original principal amount of $4.5 million (the “Aggregate Closing PIPE Proceeds”). The PIPE Notes issued in the PIPE Financing were offered in a private placement exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the PIPE Subscription Agreements. In addition, upon conversion the PIPE Investors shall receive approximately 900,000 shares of K Enter common stock from a K Enter shareholder, such shares shall be convertible into shares of Company common stock, par value $0.0001 per share.

 

The Aggregate Closing PIPE Proceeds will be a part of the aggregate cash proceeds available for release to the Company in connection with the transactions contemplated by the Business Combination Agreement. The PIPE Notes are convertible into shares of Common Stock, $0.0001 par value per share, at a price of $10.00 per share, to be adjusted downwardly as further described in the Form of Convertible Senior Unsecured Note, bear interest at 3.00% to be paid semi-annually, and mature on the thirty-sixth (36) month anniversary of the issuance date of the PIPE Notes.

 

Pursuant to the PIPE Securities Purchase Agreement, the PIPE Investors will entered into a registration rights agreement (the “PIPE Registration Rights Agreement”) at the closing of the transactions contemplated by the PIPE Securities Purchase Agreement (the “PIPE Closing”). Pursuant to the Registration Rights Agreement, the Company agrees to provide certain registration rights with respect to the shares of its Common Stock issuable upon conversion of the PIPE Notes in accordance with the terms of the PIPE Notes.

 

Pubco Ordinary Shares and Pubco Warrants are traded on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “KWM” and “KWMW”, respectively.

 

Except as otherwise indicated or required by context, references in this Shell Company Report on Form 20-F (the “Report”) to “we”, “us”, “our”, “Pubco” or the “Company” refer to K Wave Media Ltd., a Cayman Islands exempted company.

 

iv

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Report and the documents incorporated by reference herein include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to, among others, our plans, objectives and expectations for our business, operations and financial performance and condition, and can be identified by terminology such as “may”, “should”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on management’s belief and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.

 

Forward-looking statements in this Report and in any document incorporated by reference in this Report may include, but are not limited to, statements about:

 

  ● the ability of Pubco to realize the benefits expected from the Business Combination and to maintain the listing of the Pubco Ordinary Shares on Nasdaq;

 

  ● changes in global, regional or local business, market, financial, political and legal conditions, including the development, effects and enforcement of laws and regulations and the impact of any current or new government regulations in the United States and Cayman Islands affecting Pubco’s operations and the continued listing of Pubco’s securities;

 

  ● Pubco’s success in retaining or recruiting, or changes required in, its officers, key employees or directors;

 

  ● Actions relating to the business, operations and financial performance of Pubco

 

  ● Pubco’s ability to comply with applicable anti-corruption legislation and other governmental laws;

 

  ● Pubco’s ability to respond to general economic conditions;

 

  ● Pubco’s ability to develop and maintain effective internal controls;

 

  ● assumptions regarding interest rates and inflation; and

 

  ● competition and competitive pressures from other companies worldwide in the industries in which Pubco operates.

 

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors discussed under the “Risk Factors” section of the proxy statement/prospectus (the “Proxy Statement/Prospectus”) forming a part of the Registration Statement filed in connection with the Business Combination, which section is incorporated herein by reference. Accordingly, you should not rely on these forward-looking statements, which speak only as of the date of this Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks described in the reports we will file from time to time with the SEC after the date of this Report.

 

Although we believe the expectations reflected in the forward-looking statements were reasonable at the time made, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assume responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward looking statements contained in this Report and any subsequent written or oral forward-looking statements that may be issued by the Company or persons acting on its behalf.

 

v

 

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

A. Directors and Senior Management

 

Information regarding the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Pubco’s Directors and Executive Officers After the Business Combination” and is incorporated herein by reference.

 

The business address for each of the directors and executive officers of the Company is 121 South Church Street, George Town, Grand Cayman, KY1-1104 Cayman Islands.

 

B. Advisers

 

Duane Morris LLP, 901 New York Ave NW 700 E, Washington, DC 20001, United States, has acted as U.S. securities counsel for the Global Star and Merger Sub and will act as U.S. securities counsel to the Company following the completion of the Business Combination.

 

Loeb & Loeb LLP, 345 Park Avenue, New York, NY 10154, has acted as U.S. securities counsel for the Company prior to closing. Maples and Calder (Cayman) LLP, Cayman Islands, have acted as counsel for the Company with respect to Cayman law.

 

C. Auditors

 

For the period from June 22, 2023 (inception) to December 31, 2023, Samil PricewaterhouseCoopers, has acted as the independent registered public accounting firm for K Wave Media Ltd. and will be the Company’s independent registered public accounting firm following the Business Combination.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A. [Reserved.]

 

1

 

 

B. Capitalization and Indebtedness

 

The following table sets forth the capitalization of the Company on an unaudited pro forma combined basis as of December 31, 2024, after giving effect to the Business Combination and the agreements as described above:

 

   As of
DECEMbER 31,
2024		 
   Pro Forma 
(in thousands)     
Cash and cash equivalents  $9,080 
      
Equity:     
Ordinary shares   6 
Share premium   155,383 
Reserves   (19.918)
Accumulated loss   (29,566)
Total equity:   105,905 
Debt:     
Short-term borrowings   3,975 
Current portion of long-term borrowing   1,427 
Promissory note - underwriter   2,000 
Consideration payable   23,816 
Contingent consideration payable   8,630 
Convertible senior unsecured notes   8,466 
Total Debt:   46,887 
      
Total capitalization  $154,219 

 

C. Reasons for the Offer and Use of Proceeds

 

Not applicable.

 

D. Risk Factors

 

The risk factors related to the business and operations of the Company are described in the Proxy Statement/Prospectus under the section titled “Risk Factors”, which is incorporated herein by reference.

 

ITEM 4. INFORMATION ON THE COMPANY

 

A. History and Development of the Company

 

See “Explanatory Note” in this Report for additional information regarding the Company and the Merger Agreement. Certain additional information about the Company is included in the Proxy Statement/Prospectus under the section titled “K Wave’s Business” and is incorporated herein by reference. The material terms of the Business Combination are described in the Proxy Statement/Prospectus under the section titled “Questions and Answers About the Business Combination and the Special Meeting,” which is incorporated herein by reference.

 

2

 

 

The Company is subject to certain of the informational filing requirements of the Exchange Act. Since the Company is a “foreign private issuer,” it is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers, directors and principal shareholders of the Company are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of Pubco Ordinary Shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. The SEC also maintains a website at www.sec.gov that contains reports and other information that the Company files with or furnishes electronically to the SEC.

 

The website address of the Company is www.kwavemedia.com. The information contained on the website does not form a part of, and is not incorporated by reference into, this Report.

 

B. Business Overview

 

Information regarding the business of the Company is included in the Proxy Statement/Prospectus under the sections titled “K Wave’s Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of K Wave Media Ltd.,” which are incorporated herein by reference.

 

C. Organizational Structure

 

The diagram below depicts a simplified version of the Company immediately following the consummation of the Business Combination.

 

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

The discussion and analysis of the financial condition and results of operations of the Company is set forth in Exhibit 15.2 hereto, which is incorporated herein by reference.

 

3

 

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

 

Information regarding the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Pubco’s Directors and Executive Officers After the Business Combination” and is incorporated herein by reference.

 

B. Compensation

 

K Wave Named Executive Officer and Director Compensation

 

This section discusses material components of the executive compensation programs for the Company’s executive officers who are named in the “Summary Compensation Table” below. In 2024, the Company named executive officers (“NEO”) and their positions were as follows:

 

Name   Age   Position
Pyeung Ho Choi   66   Co-Founder and Chairman
Ted Kim   53   Co-Founder of K Enter and Director
Tan Chin Hwee   52   Director and Executive Chairman and Interim Chief Executive Officer
Hyuk Jin Lee   51   Director
Han Jae Kim (Patrick Kim)   35   Director
Young Jae Lee   49   Co-Founder and Director
Jun Jong   53   Chief Financial Officer

Jihun Byun

 45   Chief Accounting Officer
Jeong Hoon Bae   45   Head of Content Production

 

This discussion may contain forward-looking statements that are based on K Enter’s current plans, considerations, expectations, and determinations regarding future compensation programs.

 

Summary Compensation Table

 

The following table contains information pertaining to the compensation of K Enter named executives for the fiscal years 2023 and 2024.

 

Summary Compensation Table — Fiscal Years 2024 and 2023

 

Name and Principal Position   Year     Salary
($)		     Bonus
($)		     Stock
Awards
($)		     Option
Awards
($)		     Non-Equity
Incentive Plan
Compensation
($)		     Non-Qualified
Deferred
Compensation
Earnings
($)		     All Other
Compensation
($)		     Total
($)		  
Tan Chin Hwee   2024     $ 214,200       0     $ 500,000       0       0       0       0       714,200  
Executive Chairman and interim CEO   2023     $ 0       0       0       0       0       0       0     $ 0  
Jun Jong   2024     $ 88,013       0       0       0       0       0       0       88,013  
CFO   2023     $ 57,394       0       0       0       0       0     $ 0     $ 57,394  
Jihun Byun   2024     $ 146,689       0     $ 2,147,580       0       0       0       0       2,294,269  
    2023     $ 38,263       0       0       0       0       0     $ 0     $ 38,263  

 

Outstanding Equity Awards as of December 31, 2024

 

There were no outstanding options to acquire K Wave ordinary shares held by K Wave NEOs as of December 31, 2024. The K Wave NEOs did not hold any other outstanding equity awards as of that date.

 

4

 

 

Director Compensation — Fiscal 2024

 

The following table sets forth information regarding the compensation paid to, or earned by our directors, during fiscal 2024:

 

Name   Fees
Earned or
Paid in Cash
($)		     Stock
Awards
($)		     Total
($)		  
Pyeung Ho Choi   $ 0       0     $ 0  
Young Jae Lee   $ 0       0     $ 0  
Tan Chin Hwee   $ 0       0     $ 0  
Ted Kim   $ 13,000       0     $ 13,000  
Han Jae(Patrick) Kim   $ 0       0     $ 0  
Hyuk Jin Lee   $ 0       0     $ 0  

 

As of December 31, 2024, Pubco had no formal plan for compensating its directors.

 

Following Closing, decisions with respect to the compensation of Pubco’s executive officers, including its named executive officers, will be made by the compensation committee of the Pubco Board. The following discussion is based on the present expectations as to the compensation of the named executive officers and directors following the Business Combination. The actual compensation of the named executive officers will depend on the judgment of the members of the compensation committee and may differ from that set forth in the following discussion.

 

Pubco anticipates that compensation for its executive officers will have the following components: [base salary, cash bonus opportunities, long-term incentive compensation, broad-based employee benefits, supplemental executive perquisites and severance benefits. Base salaries, broad-based employee benefits, supplemental executive perquisites and severance benefits will be designed to attract and retain senior management talent. PubCo intends to also use annual cash bonuses and long-term equity awards to promote performance-based pay that aligns the interests of its named executive officers with the long-term interests of its equity owners and to enhance executive retention].

 

Annual Bonuses

 

Pubco expects that it will use annual cash incentive bonuses for the named executive officers to motivate their achievement of short-term performance goals and tie a portion of their cash compensation to performance. It expects that, near the beginning of each year, the compensation committee will select the performance targets, target amounts, target award opportunities and other terms and conditions of annual cash bonuses for the named executive officers, subject to the terms of their employment and service agreements. Following the end of each year, the compensation committee will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the named executive officers.

 

Stock-Based Awards

 

Pubco expects to use stock-based awards in future years to promote its interests by providing these executives with the opportunity to acquire equity interests as an incentive for their remaining in its service and aligning the executives’ interests with those of PubCo shareholders. Stock-based awards for its directors and named executive officers may be awarded in future years under a new employee incentive plan upon or after consummation of the Business Combination, which would be adopted by the PubCo Board in connection with the Business Combination.

 

Director Compensation

 

Following the Business Combination, non-employee directors of Pubco will receive varying levels of compensation for their services as directors and members of committees of the Pubco Board, in accordance with a non-employee director compensation policy that will be put in place following the Business Combination. Pubco anticipates determining director compensation in accordance with industry practice and standards.

 

5

 

 

C. Board Practices

 

Information regarding the board of directors of the Company subsequent to the Business Combination is included in the Proxy Statement/Prospectus under the section titled “Pubco’s Directors and Executive Officers After the Business Combination” and is incorporated herein by reference.

 

D. Employees

 

Information regarding the employees of the Company is included in the Proxy Statement/Prospectus under the section titled “Business of K Enter — Employees” and is incorporated herein by reference.

 

E. Share Ownership

 

Information regarding the ownership of the Post-Closing Pubco Ordinary Shares by our directors and executive officers is set forth in Item 7.A of this Report.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A. Major Shareholders

 

The following table sets forth information relating to the beneficial ownership of the Post-Closing Pubco Ordinary Shares as of the Closing Date by:

 

  ● each person, or group of affiliated persons, known by us to beneficially own more than 5% of outstanding Pubco Ordinary Shares;

 

  ● each of our directors;

 

  ● each of our executive officers; and

 

  ● all of our directors and executive officers as a group.

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, and includes shares underlying options and warrants that are currently exercisable or exercisable within 60 days. In computing the number of shares beneficially owned by a person or entity and the percentage ownership of that person or entity in the table below, all shares subject to options or warrants held by such person or entity were deemed outstanding if such securities are currently exercisable, or exercisable within 60 days of the Closing Date. These shares were not deemed outstanding, however, for the purpose of computing the percentage ownership of any other person or entity.

 

The percentage of Pubco Ordinary Shares beneficially owned is computed on the basis of 63,162,000 Pubco Ordinary Shares outstanding on the Closing Date, after giving effect to the Business Combination and the agreements described above, not including the Ordinary Shares issuable upon the exercise of outstanding warrants.

 

Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all Post-Closing Pubco Ordinary Shares beneficially owned by them. To our knowledge, no Post-Closing Pubco Ordinary Shares beneficially owned by any executive officer, director or director nominee have been pledged as security.

 

6

 

 

Unless otherwise noted, the business address of each of our shareholders is 16192 Coaster Highway, Lewes, Delaware 19958.

 

Name and Address of Beneficial Owner   Number of
Pubco
Ordinary
Shares
Beneficially
Owned		     Percentage
of Pubco
Ordinary
Shares		  
5% Holders of Pubco:            
Anthony Ang(1)(2)     2,488,047       3.94 %
Ted Kim(1)(2)(3)     8,594,918       13.61 %
Directors and Executive Officers of PubCo                
Pyeung Ho Choi(3)     5,020,283       7.95 %
Young Jae Lee(4)     4,671,301       7.40 %
Ted Kim(1)(2)(3)     8,594,918       13.61 %
Tan Chin Hwee(4)     572,792       0.91 %
Hyung Seok Cho(4)     8,673,667       13.74 %
Tae Woo Kim(4)     214,758       0.34 %
Jihun Byun(4)     214,758       0.34 %
Jung Hoon Bae(4)     603,071       0.96 %
Jae Keun Kim(5)     5,280,511       8.36 %
All Executive Officers and Directors as a Group     33,846,059       53.61 %

 

 
(1)  Global Star Acquisition 1 LLC, Global Star’s sponsor, is the record holder of 2,438,225 shares of Global Star common stock that will be converted into shares of PubCo Ordinary Shares on a 1-for-1 basis in the Reincorporation Merger. Anthony Ang, Global Star’s Chairman and Chief Executive Officer and Ted Kim, are managing members of Global Star’s Sponsor. By virtue of this relationship, Mr. Ang and Mr. Kim may be deemed to share beneficial ownership of the securities held of record by Global Star’s Sponsor. Mr. Ang and Mr. Kim disclaim any such beneficial ownership except to the extent of his pecuniary interest. The business address of Global Star Acquisition 1 LLC, Mr. Ang and Mr. Kim is 1641 International Drive, Unit 208, McLean, VA.
(2)  Interests shown before the Business Combination consist solely of founder shares, classified as shares of Class B Common Stock, as well as placement shares after the IPO. Founder shares are convertible into shares of Class A Common Stock on a one-for-one basis, subject to adjustment. These shares will be converted into Pubco Ordinary Shares on a 1-for-1 basis. The business address of Mr. Khoo, Mr. Cui, Mr. Drew, Mr. Win, Mr. Chong, Mr. Chew and Mr. Rannila is 1641 International Drive, Unit 208, McLean, VA.
(3)  Ted Kim is the beneficial owner of 19,564 shares of K Enter common stock through his ownership and control of Global Fund LLC, which owns 12,000 shares of K Enter common stock, and Lodestar USA, Inc. which owns 7,564 shares of K Enter common stock. The 19,564 shares of K Enter common stock beneficially owned by Mr. Kim through his ownership and control of Global Fund LLC and Lodestar USA, Inc. will be converted into an aggregate amount of 6,106,871 PubCo Ordinary Shares in the Business Combination.
(4)  The business address of Pyeung Ho Choi, Young Jae Lee, Tan Chin Hwee, Hyung Seok Cho, Tae Woo Kim, Jihun Byun, Jung Hoon Bae and Jae Keun Kim is 16192 Coastal Highway, Lewes DE 19958.
(5)  Jae Keun Kim is the beneficial owner of 16,917 shares of K Enter common stock as follows 250 shares of K Enter common stock he owns individually and through his ownership and control of Xeno Investment Asia, which owns 10,000 shares of K Enter common stock, and JVC Inc. which owns 6,667 shares of K Enter common stock. The 16,917 shares of K Enter common stock beneficially owned by Mr. Kim individually and through his ownership and control of Xeno Investment Asia and JVC Inc. will be converted into an aggregate amount of 5,280,511 PubCo Ordinary Shares in the Business Combination.

 

B. Related Person Transactions

 

Information regarding certain related person transactions is included in the Proxy Statement/Prospectus under the section titled “Certain Relationships and Related Person Transactions — K Enter” and is incorporated herein by reference.

 

C. Interests of Experts and Counsel

 

None.

 

7

 

 

ITEM 8. FINANCIAL INFORMATION

 

A. Consolidated Financial Statements and Other Financial Information

 

See Item 18 of this Report for consolidated financial statements and other financial information.

 

B. Significant Changes

 

A discussion of significant changes since December 31, 2024 is provided under Item 4 of this Report and is incorporated herein by reference.

 

ITEM 9. THE OFFER AND LISTING

 

A. Offer and Listing Details

 

Nasdaq Listing of Pubco Ordinary Shares and Pubco Warrants

 

Pubco Ordinary Shares and Pubco Warrants are listed on Nasdaq under the symbols “KWM” and “KWMW”, respectively. Holders of the Pubco Ordinary Shares and Pubco Warrants should obtain current market quotations for their securities.

 

Lock-ups

 

Information regarding the lock-up restrictions applicable to the Pubco Ordinary Shares is included in the Proxy Statement/Prospectus under the section titled “Summary of the Proxy Statement/Prospectus – Other Documents Relating to the Business Combination” and is incorporated herein by reference.

 

Warrants

 

Upon the completion of the Business Combination, there were 9,698,225 Pubco Warrants outstanding. The Warrants, which entitle the holder to purchase one Pubco Ordinary Share at an exercise price of $11.50 per share, will become exercisable 30 days after the completion of the Business Combination. The Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.

 

B. Plan of Distribution

 

Not applicable.

 

C. Markets

 

The Pubco Ordinary Shares and Warrants are listed on Nasdaq under the symbols KWM and KWMW, respectively. There can be no assurance that the Ordinary Shares and/or Warrants will remain listed on Nasdaq.

 

D. Selling Shareholders

 

Not applicable.

 

E. Dilution

 

Not applicable.

 

F. Expenses of the Issue

 

Not applicable.

 

8

 

 

ITEM 10. ADDITIONAL INFORMATION

 

A. Share Capital

 

The Company has a share capital of US$50,000 divided into 5,000,000 ordinary shares of par value US$0.01 each, and there is no limit on the number of shares of any class which the Company is authorized to issue.

 

Information regarding our share capital is included in the Proxy Statement/Prospectus under the section titled “Description of Pubco’s Securities” and is incorporated herein by reference.

 

B. Amended and Restated Articles of Association

 

Information regarding certain material provisions of the A&R Articles of Association is included in the Proxy Statement/Prospectus under the section titled “Proposal No. 3 The Governance Proposals” and is incorporated herein by reference.

 

C. Material Contracts

 

Except as described above under the heading “Explanatory Note”, information regarding certain material contracts is included in the Proxy Statement/Prospectus under the sections titled “The Business Combination Agreement” and “Related Agreements” and is incorporated herein by reference.

 

D. Exchange Controls and Other Limitations Affecting Security Holders

 

There are no governmental laws, decrees, regulations or other legislation in Cayman that may affect the import or export of capital, including the availability of cash and cash equivalents for use by Pubco, or that may affect the remittance of dividends, interest, or other payments by Pubco to non-resident holders of its Post-Closing Pubco Ordinary Shares. There is no limitation imposed by Cayman law or in the A&R Articles of Association on the right of non-residents to hold or vote shares.

 

E. Taxation

 

Information regarding certain tax consequences of owning and disposing of Pubco Ordinary Shares and Pubco Warrants is included in the Proxy Statement/Prospectus under the section titled “Material U.S. Federal Income Tax Consequences of The Business Combination” and is incorporated herein by reference.

 

F. Dividends and Paying Agents

 

Pubco has not paid any dividends to its shareholders. Following the completion of the Business Combination, Pubco’s board of directors will consider whether or not to institute a dividend policy. The determination to pay dividends will depend on many factors, including, among others, Pubco’s financial condition, current and anticipated cash requirements, contractual restrictions and financing agreement covenants, solvency tests imposed by applicable corporate law and other factors that Pubco’s board of directors may deem relevant.

 

G. Statement by Experts

 

The financial statements of Global Star Acquisition Inc. as of December 31, 2024 and 2023, and for the years then ended, included in the Annual Report on Form 10-K for the year ended December 31, 2024, have been audited by Marcum, LLP, an independent registered public accounting firm, as set forth in their report thereon (which contains an explanatory paragraph expressing substantial doubt about the ability of Global Star Acquisition Inc. to continue as a going concern as described in Note 1 to those financial statements) which is incorporated herein by reference. Such consolidated financial statements have been incorporated by reference in reliance upon the report pertaining to such consolidated financial statements of such firm given upon the authority of said firm as experts in auditing and accounting. 

 

9

 

 

The financial statements of K Wave Media Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and the period from June 22, 2023 (inception) to December 31, 2023 included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of K Enter Holdings Inc. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) to December 31, 2023 included in this Shell Company Report on Form 20-F have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 2 to the financial statements) of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of Play Company Co., Ltd. as of December 31, 2024 and December 31, 2023 and for each of the three years in the period ended December 31, 2024 included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of Solaire Partners LLC. as of December 31, 2024 and December 31, 2023 and for the years then ended included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of Apeitda Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of The LAMP Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of Bidangil Pictures Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended included in this Shell Company Report on Form 20-F have been so included in reliance on the report of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

The financial statements of Studio Anseilen Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and for the period from March 6, 2023 (inception) to December 31, 2023 included in this Shell Company Report on Form 20-F have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 2 to the financial statements) of Samil PricewaterhouseCoopers, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

 

H. Documents on Display

 

We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information we have filed electronically with the SEC. As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

 

10

 

 

We also make available on our website, free of charge, our Annual Report and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.kwavemedia.com. The reference to our website is an inactive textual reference only, and information contained therein or connected thereto is not incorporated into this Form 20-F.

 

I. Subsidiary Information

 

Not applicable.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Information regarding quantitative and qualitative disclosure about market risk is set forth in Exhibits 15.2, 15.3, and 15.4 hereto, which is incorporated herein by reference.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

Information pertaining to the Pubco Warrants is described in the Proxy Statement/Prospectus under the section titled “Description of Pubco’s Securities—Pubco Warrants.”

 

11

 

 

PART II

 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

 

12

 

 

PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

See Item 18.

 

ITEM 18. FINANCIAL STATEMENTS

 

The consolidated financial statements of K Wave Media Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and the period from June 22, 2023 (inception) to December 31, 2023 are attached as exhibit 15.14.

 

The consolidated financial statements of Play Company Co., Ltd. as of December 31, 2024 and December 31, 2023 and for each of the three years in the period ended December 31, 2024 are attached as exhibit 15.15

 

The financial statements of Solaire Partners LLC. as of December 31, 2024 and December 31, 2023 and for the years then ended are attached as exhibit 15.16

 

The financial statements of Apeitda Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended are attached as exhibit 15.17

 

The financial statements of The LAMP Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended are attached as exhibit 15.18

 

The consolidated financial statements of Bidangil Pictures Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended are attached as exhibit 15.19

 

The financial statements of Studio Anseilen Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and for the period from March 6, 2023 (inception) to December 31, 2023 are attached as exhibit 15.20

 

The financial statements of K Enter Holdings Inc. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) to December 31, 2023 are attached as exhibit 15.21.

 

The consolidated financial statements of Global Star Acquisition Inc. as of December 31, 2024, and December 31, 2023 and for the years then ended are incorporated by reference. Form 10-K filed with the SEC on April 29, 2025.

 

13

 

 

ITEM 19. EXHIBITS

 

Exhibit
Number		   Description
1.1   Form of Amended and Restated Memorandum and Articles of Association of K Wave Media Ltd. (incorporated by reference to Annex B to Global Star Prospectus/Proxy Statement (File No. 001-41506) filed with the SEC on January 8, 2025).
     
2.1   Warrant Agreement, dated as of September 22, 2022, between Global Star Acquisition Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to Global Star Form 8-K (File No. 001-41506) filed with the SEC on September 22, 2022).
     
2.2   Rights Agreement, dated as of September 22, 2022, between Global Star Acquisition Inc. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.2 to Global Star Form 8-K (File No. 001-41506) filed with the SEC on September 22, 2022).
     
2.3   Specimen Common Share Certificate of K Wave Media Ltd. (incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
2.4   Specimen Warrant Certificate of K Wave Media Ltd. (incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
2.5   Specimen Rights Certificate of K Wave Media Ltd. (incorporated by reference to Exhibit 4.9 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.1   Merger Agreement, dated as of June 15, 2023, by and among Global Star Acquisition Inc., K Enter Holdings Inc., K Wave Media Ltd. and GLST Merger Sub Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.2   First Amendment to the Merger Agreement, dated as of March 11, 2024, by and among Global Star Acquisition Inc., K Enter Holdings Inc., K Wave Media Ltd. and GLST Merger Sub Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.3   Second Amendment to the Merger Agreement, dated as of June 28, 2024, by and among Global Star Acquisition Inc., K Enter Holdings Inc., K Wave Media Ltd. and GLST Merger Sub Inc. (incorporated by reference to Exhibit 2.3 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.4   Third Amendment to the Merger Agreement, dated as of July 25, 2024, by and among Global Star Acquisition Inc., K Enter Holdings Inc., K Wave Media Ltd. and GLST Merger Sub Inc. (incorporated by reference to Exhibit 2.4 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.5   Fourth Amendment to the Merger Agreement, dated as of December 11, 2024, by and among Global Star Acquisition Inc., K Enter Holdings Inc., K Wave Media Ltd. and GLST Merger Sub Inc. (incorporated by reference to Exhibit 2.5 to the Company’s Registration Statement on Form F-4/A (File No. 333-278221) filed with the SEC on December 23, 2024).
     
4.6   Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed with the SEC on June 22, 2023).

 

14

 

 

4.7   Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on June 22, 2023).
     
4.8   Form of Joinder Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on July 18, 2023).
     
4.7   PIPE Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to Global Star Form 8-K filed with the SEC on February 7, 2025).
     
4.8   PIPE Notes (incorporated by reference to Exhibit 10.2 to Global Star Form 8-K filed with the SEC on February 7, 2025).
     
4.9   PIPE Registration Rights Agreement (incorporated by reference to Exhibit 10.3 to Global Star Form 8-K filed with the SEC on February 7, 2025).
     
15.1*   Unaudited pro forma condensed combined financial information.
     
15.2*   Management’s Discussion and Analysis of Financial Condition and Results of Operations of K Enter
     
15.3*  

Management’s Discussion and Analysis of Financial Condition and Results of Operations of K Wave Media Ltd.
     
15.4*   Management’s Discussion and Analysis of Financial Condition and Results of Operations of Play Company Co., Ltd., Solaire Partners LLC., Bidangil Pictures Co., Ltd., The LAMP Co., Ltd., Apeitda Co., Ltd. and Studio Anseilen Co., Ltd.
     
15.5*   Consent of Samil PricewaterhouseCoopers of K Wave Media Ltd. for report dated May 14, 2025
     
15.6*  

Consent of Samil PricewaterhouseCoopers, independent registered public accounting firm of K Enter Holdings Inc. for report dated May 14, 2025
     
15.7*  

Consent of Samil PricewaterhouseCoopers, independent registered public accounting firm of Play Company Co., Ltd. for report dated May 14, 2025
     
15.8*   Consent of Samil PricewaterhouseCoopers, independent auditors of Solaire Partners LLC. for report dated May 14, 2025
     
15.9*  

Consent of Samil PricewaterhouseCoopers, independent auditors of Bidangil Pictures Co., Ltd. for report dated May 14, 2025
     
15.10*  

Consent of Samil PricewaterhouseCoopers, independent auditors of The LAMP Co., Ltd. for report dated May 14, 2025
     
15.11*   Consent of Samil PricewaterhouseCoopers, independent auditors of Apeitda Co., Ltd. for report dated May 14, 2025
     
15.12*  

Consent of Samil PricewaterhouseCoopers, independent auditors of Studio Anseilen Co., Ltd. for report dated May 14, 2025
     
15.13*  

Consent of Marcum LLP independent registered public accounting firm for Global Star Acquisition, Inc. for report dated April 29, 2025

 

15

 

 

15.14*   The consolidated financial statements of K Wave Media Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and the period from June 22, 2023 (inception) to December 31, 2023
     
15.15*   The consolidated financial statements of Play Company Co., Ltd. as of December 31, 2024 and December 31, 2023 and for each of the three years in the period ended December 31, 2024
     
15.16*   The financial statements of Solaire Partners LLC. as of December 31, 2024 and December 31, 2023 and for the years then ended
     
15.17*   The financial statements of Apeitda Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended
     
15.18*   The financial statements of The LAMP Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended
     
15.19*   The consolidated financial statements of Bidangil Pictures Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the years then ended
     
15.20*   The financial statements of Studio Anseilen Co., Ltd. as of December 31, 2024 and December 31, 2023 and for the year ended December 31, 2024 and for the period from March 6, 2023 (inception) to December 31, 2023.
     
15.21*   The financial statements of K Enter Holdings Inc. as of December 31, 2024, and December 31, 2023, and for the year ended December 31, 2024 and for the period from January 4, 2023 (Inception) to December 31, 2023
     
15.22**   The Financial statements of Global Star Acquisition Inc. as filed in the Form 10-K for the year ended December 31, 2024

 

 
* Filed herewith.
** Filed Previously

 

16

 

 

SIGNATURE

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this report on its behalf.

 

 

K WAVE MEDIA LTD.
     
May 14, 2025 By: /s/ Chin Hwee Tan
    Name: Chin Hwee Tan
    Title: Executive Chairman and Interim Chief Executive Officer

 

17

 

Exhibit 15.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Defined terms included below shall have the same meaning as terms defined and included elsewhere in this Current Report on Form 8-K (the “Form 8-K”) filed with the Securities and Exchange Commission (the “SEC”.)

 

Introduction

 

The following unaudited pro forma condensed combined financial information presents the combination of financial information of Global Star and K Wave, and the six Korean Entities as of December 31, 2024, adjusted to give effect to the Business Combination, the acquisition of the Six Korean entities and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Global Star has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.

 

The following unaudited pro forma condensed combined balance sheet as of December 31, 2024, assumes that the Business Combination occurred December 31, 2024. The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024, presents pro forma effect to the Business Combination as if it had occurred on January 1, 2024.

 

The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Combined Company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. Further, the pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2024, has been derived from:

 

  ● the historical financial statements of K Wave as of December 31, 2024 and 2023, and for the years then ended and for the period from June 22, 2023 (inception) to December 31, 2023; and
     
  ● the historical financial statements of K Enter as of December 31, 2024 and 2023, and for the years then ended, and for the period from January 4, 2023 (inception) to December 31, 2023; and

 

  ● the historical consolidated financial statements of Global Star as of December 31, 2024 and 2023 and for the years then ended; and

 

  ● the historical consolidated financial statements of Play Company as of December 31, 2024 and 2023 and for the years then ended; and

 

  ● the historical financial statements of LAMP as of December 31, 2024 and 2023 and for the years then ended; and

 

  ● the historical financial statements of Bidangil as of December 31, 2024 and 2023 and for the years then ended; and

 

  ● the historical financial statements of Apeitda as of December 31, 2024 and 2023 and for the years then ended; and

 

  ● the historical financial statements of Anseilen as of December 31, 2024 and 2023 and for the years then ended and for the period from March 6, 2023 (inception) to December 31, 2023; and

 

  ● the historical financial statements of Solaire Partners as of December 31, 2024 and 2023 and for the years then ended.

 

 

 

 

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as in effect on the date of this Super 20-F which incorporates Transaction Accounting Adjustments. K Wave Media and Global Star have elected not to present any estimates related to potential synergies and other transaction effects that are reasonably expected to occur or have already occurred and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.

 

This information should be read together with the financial statements and related notes, as applicable, of each of Global Star, Play Company, LAMP, Bidangil, Apeitda, Anseilen, Solaire Partners, K Wave. and K Enter included in this proxy statement/prospectus and Global Star’s, Play Company’s, LAMP’s, Bidangil’s, Apeitda’s, Ansilen’s, Solaire Partners’, K Wave’s and K Enter’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere herein.

 

Description of the Transactions

 

Business Combination

 

Pursuant to the Share Purchase Agreements, on January 2, 2025, K Enter consummated the business combinations with the six Korean Entities (“New K Enter”). Pursuant to the Business Combination Agreement, on the Closing Date, Global Star reincorporated to Cayman Islands by merging with and into K Wave Media Ltd, a Cayman Islands exempted company and wholly owned subsidiary of Global Star (“PubCo”), with PubCo remaining as the surviving publicly traded entity (the “Reincorporation Merger”); (ii) one (1) business day following the Reincorporation Merger, GLST Merger Sub, Inc. (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of PubCo, merged with and into K Enter, resulting in K Enter being a wholly owned subsidiary of PubCo (the “Acquisition Merger”). The Reincorporation Merger and the Acquisition Merger are collectively referred to herein as the “Business Combination.”. Also on the Closing Date, the Global Star acquired all of the issued and outstanding ordinary shares of K Wave Media (the “Purchased Shares”) from the Sellers in exchange for the Company’s ordinary shares (“Company Ordinary Shares”) par value $0.0001 per share (the “Share Exchange”).

 

More specifically, pursuant to the Business Combination Agreement, at the effective time of the Business Combination (the “Effective Time”):

 

The following table summarizes the pro forma number of shares of K Wave Media outstanding following the consummation of the Business Combination and the Domestication, discussed further in the sections below, excluding the potential dilutive effect of the K Wave Media Public Warrants, Private Warrants, and Convertible Note Warrants.

 

Equity Capitalization Summary   Shares     %  
K Enter Stockholders     59,160,000       93.4 %
Global Star Public Stockholders     960,043       1.6 %
Sponsor and Initial Stockholders     2,961,247       4.7 %
Representative Shares     165,000       0.3 %
Total ordinary shares     63,246,290       100.0 %

 

The following table shows the per share book value  of K Wave Media held by non-redeeming holders of K Wave Media Ordinary Shares:

 

Shares     63,246,290  
Book equity per share   $ 1.84  

 

2

 

 

Accounting for the Business Combination

 

The Business Combination was accounted for as a capital reorganization, in accordance with IFRS. Under this method of accounting, Global Star is be treated as the “acquired” company for financial reporting purposes, and New K Enter is the accounting “acquirer”. This determination was primarily based on the assumption that:

 

  ● New K Enter’s existing stockholders will hold a majority of the voting rights of PubCo post Business Combination;
     
  ● By virtue of such estimated voting interest upon the Closing, New K Enter’s existing stockholders will have the ability to control decisions regarding the election and removal of directors and officers of New K Enter following the Closing;

 

  ● New K Enter will have control over the Board;

 

  ● New K Enter’s operations will substantially comprise the ongoing operations of PubCo;
     
  ● New K Enter is the larger entity in terms of substantive operations and employee base; and

 

  ● New K Enter’s senior management will comprise the senior management of PubCo.

 

Another determining factor was that Global Star does not meet the definition of a “business” pursuant to IFRS 3, and thus, for accounting purposes, the Business Combination will be accounted for as a capital reorganization within the scope of IFRS 2, where New K Enter issues stock for the net assets of Global Star. The net assets of Global Star are stated at historical cost, with no goodwill or intangible assets recorded. Any excess of the fair value of shares issued to Global Star over the fair value of Global Star’s identifiable net assets acquired represents compensation for the service of a stock exchange listing for its shares and is expensed as incurred.

 

The acquisition of Play Company by K Enter will be accounted for in accordance with the acquisition method of accounting under IFRS 3, with Play Company considered to be the acquirer of K Enter for financial reporting purposes. As Play Company’s basis of accounting is IFRS, K Enter’s basis of accounting (following the acquisition of Play Company) will be IFRS.

 

The acquisitions of each of the Six Korean Entities other than Play Company by K Enter will also be accounted for in accordance with the acquisition method of accounting under IFRS 3, with K Enter (following the acquisition of Play Company, its predecessor) considered to be the acquirer of each of the Six Korean Entities other than Play Company. New K Enter’s basis of accounting will be IFRS, consistent with that of its predecessor, Play Company.

 

The overall impact of the accounting conclusions set out above will be that the financial statements of Play Company will become those of K-Enter post-consummation and will not experience a change in basis as a result of the application of the acquisition method while each of K Enter and the Six Korean Entities other than Play Company will experience a change in basis as a result of the application of the acquisition method and will be reflected in the consolidated financial statements of Play Company on a prospective basis post-consummation.

 

This determination was primarily based on the assumption that:

 

  ● Play Company’s existing stockholders will hold a large minority voting interest in New K Enter where no other owner has a significant voting interest;

 

  ● Play Company’s CEO has the ability to appoint a majority of directors of New K Enter’s board of directors;

 

  ● Play Company’s CEO has the ability to appoint the senior management of New K Enter;

 

  ● Play Company’s operations will substantially comprise the ongoing operations of New K Enter; and

 

  ● Play Company is the larger entity in terms of substantive operations and employee base.

 

Under the acquisition method of accounting, the preliminary purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess purchase price, if any, allocated to goodwill. Costs related to the transaction are expensed as incurred.

 

3

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

FOR K WAVE

AS OF DECEMBER 31, 2024(1)

 

    K Wave
Media
(IFRS Historical)		     New K Enter
Pro Forma
Combined
(IFRS Historical)		     Global Star
(IFRS Historical -
Note 4)		     Share Redemption
Adjustment and
Elimination
Adjustment		           Global Star
Pro Forma
Adjusted
(IFRS Historical)		     Transaction
Accounting
Adjustments		           Pro Forma
Combined
(IFRS)		  
ASSETS                                                                    
Current assets                                                                    
Cash and cash equivalents   $ -     $ 7,059,075     $ 510,939     $ -           $ 510,939     $ 462,442     B     $ 9,079,947  
                                                    (500,000 )   C          
                                                    (2,429,769 )   D          
                                                    -     -          
                                                    (22,740 )   N          
                                                    4,000,000     Z          
Short-term financial instruments     -       286,579       -       -             -       -             286,579  
Short-term investment securities     -       583,863       -       -             -       -             583,863  
Accounts receivable - trade, net     -       6,348,679       -       -             -       -             6,348,679  
Other receivables     -       905,827       -       -             -                     905,827  
Other receivables - related parties     50,000       -       -       -             -       (50,000 )   U       -  
Preferred stock subscription receivable     -       -       -       -             -       -     -       -  
Deferred transaction costs     -       2,152,048       -       -             -                     2,152,048  
Short-term loans, net     -       468,515       -       -             -       -             468,515  
Accounts receivable - other, net     -       1,153,853       -       -             -       -             1,153,853  
Value added tax receivables     -       37,097       -       -             -       -             37,097  
Other current financial assets     -       158,756       -       -             -       -             158,756  
Prepaid expenses and other current assets     -       422,239       -       -             -       -             422,239  
Prepaid expenses and other current assets - related party     -       67,699       -       -             -       -             67,699  
Other current assets     -       1,363,573       7,500       -             7,500       -             1,371,073  
Contract assets     -       1,156,802       -       -             -       -             1,156,802  
Current tax assets     -       235,124       -       -             -       -             235,124  
Inventories, net     -       553,722       -       -             -       -             553,722  
                                                                     
Total current assets     50,000       22,953,451       518,439       -             518,439       1,459,933             24,981,823  
                                                                     
Non-current assets                                                                    
Long-term financial instruments     -       218,247       -       -             -       -             218,247  
Long-term loans, net     -       88,003       -       -             -       -             88,003  
Long-term investment securities     -       1,566,486       -       -             -       -             1,566,486  
Investments in associates and joint ventures     -       56,163       -       -             -       -             56,163  
Investment in subsidiary     -       -       -       50,000     T       50,000       (50,000 )   U       -  
Investment in equity securities     -       1,600,000       -       -             -       -             1,600,000  
Investment in equity securities - related party     -       -       -       -             -       -             -  
Property, plant and equipment, including right-of-use assets     -       8,569,812       -       -             -       -             8,569,812  
Investment properties     -       271,337       -       -             -       -             271,337  
Operating lease right-of-use assets, net     -       1,858       -       -             -       -             1,858  
Operating lease right-of-use assets, net - related party     -       19,189       -       -             -       -             19,189  
Intangible Asset - Intellectual Property     -       15,560,353       -       -             -       -             15,560,353  
Intangible Asset - Customer relationships     -       10,552,564       -       -             -       -             10,552,564  
Intangible Asset - Trademarks     -       4,025,354       -       -             -       -             4,025,354  
Intangible Asset - Non-compete     -       175,069       -       -             -       -             175,069  
Intangible assets other than goodwill     -       3,067,670       -       -             -       -             3,067,670  
Goodwill     -       126,827,806       -       -             -       -             126,827,806  
Other non-current assets     -       679,688       -       -             -       -             679,688  
Other non-current financial assets     -       1,595,020       -       -             -       -             1,595,020  
Other non-current non-financial assets     -       2,968,585       -       -             -       -             2,968,585  
Defined benefit assets     -       -       -       -             -       -             -  
Deferred tax assets     -       715,127       -       -             -       -             715,127  
Investments held in Trust Account     -       -       4,374,657       (3,936,142 )   X       425,863       (462,442 )   B       -  
                              (12,652 )   X               13,839     J          
                                                    22,740     N          
Long-term accounts receivable - other, net     -       31,058       -       -             -       -             31,058  
Total non-current assets     -       178,589,389       4,374,657       (3,898,794 )           475,863       (475,863 )           178,589,389  
                                                                     
Total assets   $ 50,000     $ 201,542,841     $ 4,893,096     $ (3,898,794 )         $ 994,302     $ 984,070           $ 203,571,213  
                                                                     
LIABILITIES                                                                    
Current liabilities                                                                    
Trade and other payables   $ -     $ 17,269,737     $ 1,726,331     $ -           $ 1,726,331     $ (2,613,864 )   D     $ 16,382,204  
Trade and other payables - related party     -       1,330,731       -       -             -       -             1,330,731  
Other current financial liabilities     -       152,965       -       -             -       -             152,965  
Other current non-financial liabilities     -       1,155,302       -       -             -       -             1,155,302  
Contract liabilities     -       240,614       -       -             -       -             240,614  
Other payables     7,257       (65 )     -       -             -       -             7,192  
Other payables - related parties     5,550       -       -       50,000     T       50,000       (50,000 )   U       5,550  
Short-term borrowings     -       4,229,575       -       -             -       (500,000 )   Z       3,729,575  
Short-term borrowings - related party     -       245,312       -       -             -       -             245,312  
Current portion of long-term borrowings, net     -       1,427,034       -       -             -       -             1,427,034  
Current lease liabilities     -       1,358,084       -       -             -       -             1,358,084  
Lease liability, current - related party     -       19,189       -       -             -       -             19,189  
Current tax liabilities     -       273,563       324,943       (12,652 )   X       312,291       -             585,854  
Due to Sponsor     -       -       15,094       -             15,094       -     -       15,094  
Sponsor working capital loan     -       -       1,596,000       -             1,596,000       (1,596,000 )   L       -  
Excise tax payable attributable to redemption of common stock     -       -       959,070       -             959,070       -             959,070  
Promissory note - related party     -       -       733,661       -             733,661       (982,000 )   L       -  
                                                    248,339     L          
Promissory note - underwriter     -       -       -       -             -       2,000,000     C       2,000,000  
Consideration payable     -       12,057,680       -       -             -       -             12,057,680  
Contingent consideration payable     -       8,630,305       -       -             -       -             8,630,305  
Accrued franchise tax payable     -       -       131,798       -             131,798       -             131,798  
Accrued expenses     -       -       -       -             -       -             -  
Financial guarantee liability     -       1,741       -       -             -       -             1,741  
                                                                     
Total current liabilities     12,807       48,391,767       5,486,897       37,348             5,524,245       (3,493,525 )           50,435,294  
                                                                     
Non-current liabilities                                                                    
Trade and other non-current payables     -       14,679       -       -             -       -             14,679  
Long-term borrowings, excluding current portion, net     -       -       -       -             -       -             -  
Other non-current financial liabilities     -       101,498       -       -             -       -             101,498  
Other non-current non-financial liabilities     -       -       -       -             -       -             -  
Defined benefit liabilities     -       741,137       -       -             -       -             741,137  
Convertible note             -                                                   -  
Derivative liabilities     -       602,061       -       -             -                     602,061  
Contract liabilities     -       608,989                                                   608,989  
Other non-current provisions     -       424,967       -       -             -       -             424,967  
Non-current lease liabilities     -       6,296,138       -       -             -       -             6,296,138  
Deferred tax liabilities     -       6,605,579       -       -             -       -             6,605,579  
Deferred underwriting commissions     -       -       3,220,000       -             3,220,000       (3,220,000 )   C       -  
Warrant liabilities     -       -       290,947       -             290,947       4,500     L       295,447  
Call option liability     -       849,022       -       -             -       -             849,022  
Earnout liability     -       -       -       -             -       -             -  
Consideration payable, non-current     -       11,758,370       -       -             -       -             11,758,370  
Convertible senior unsecured notes     -       4,166,833       -       -             -       4,500,000     Z       8,666,833  
Discount on note     -       (200,687 )     -       -             -       -             (200,687 )
Class A common stock subject to possible redemption     -       -       4,430,398       (3,936,142 )   X       494,256       (460,852 )   G       -  
                                                    (33,404 )   G          
Total non-current liabilities     -       31,968,586       7,941,345       (3,936,142 )           4,005,203       790,244             36,764,033  
                                                                     
Total liabilities     12,807       80,360,353       13,428,242       (3,898,794 )           9,529,448       (2,703,281 )           87,199,327  
                                                                     
Class A common stock subject to possible redemption     -       -       -       -             -       -             -  
                                                                     
EQUITY                                                                    
Share capital     -       -       -       -             -       -             -  
Global Star preferred stock     -       -       -       -             -       -             -  
K Enter Series A-1 convertible preferred stock     -       -       -       -             -       -             -  
K Enter Series A convertible preferred stock     -       355       -       -             -       (355 )   P       -  
K Enter common stock     -       2,468       -       -             -       4     P       -  
                                                    (2,472 )   E          
Pubco ordinary shares     50,000       -       -       -             -       5,683     E       6,326  
                                                    5     C          
                                                    217     D          
                                                    (50,000 )   U          
                                                    421     M          
Global Star Class A common stock     -       -       62       -             62       4     G       -  
                                                    230     I          
                                                    97     K          
                                                    28     L          
                                                    (421 )   M          
Global Star Class B common stock     -       -       230       -             230       (230 )   I       -  
Preferred stock subscription receivable     -       -       -       -             -       -             -  
Additional paid-in capital     -       106,247,121       -                     -       16,539,612     D       155,367,788  
                                                    536,057     C          
                                                    (3,211 )   E          
                                                    (10,205,097 )   F          
                                                    460,848     G          
                                                    38,041,732     H          
                                                    (97 )   K          
                                                    2,573,472     L          
                                                    1,150,000     O          
                                                    351     P          
Share premium     -       -       -       -             -       -             -  
Other reserves     (1,376 )     (19,916,668 )     -       -             -       -     -       (19,918,044 )
Retained earnings (Accumulated deficit)     (11,431 )     24,367,148       (8,535,438 )     -             (8,535,438 )     10,189,975     F       (29,566,248 )
                                                    156,938     C          
                                                    33,404     G          
                                                    (38,041,732 )   H          
                                                    13,839     J          
                                                    (248,339 )   L          
                                                    (16,355,734 )   D          
                                                    (1,150,000 )   O          
Accumulated other comprehensive income (loss)     -       (251,337 )     -                     -       -             (251,337 )
Equity attributable to the equity holders of the Company     37,193       110,449,087       (8,535,146 )     -             (8,535,146 )     3,687,351             105,638,485  
Non-controlling interest     -       10,733,400       -       -             -       -             10,733,400  
                                                                     
Total equity     37,193       121,182,487       (8,535,146 )     -             (8,535,146 )     3,687,351             116,371,885  
                                                                     
Total equity and liabilities   $ 50,000     $ 201,542,841     $ 4,893,096     $ (3,898,794 )         $ 994,302     $ 984,070           $ 203,571,213  

 

 
(1) The unaudited pro forma condensed combined balance sheet for K Wave as of December 31, 2024, combines the unaudited pro forma combined balance sheet of New K Enter as of December 31, 2024, with the historical audited balance sheet of Global Star as of December 31, 2024.

 

4

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

FOR NEW K ENTER

AS OF DECEMBER 31, 2024(2)

 

    Play Company
as converted
to USD
(IFRS
Historical)		     LAMP
as converted
to USD
(IFRS
Historical)		     Bidangil
as converted
to USD
(IFRS
Historical)		     Apeitda
as converted
to USD
(IFRS
Historical)		     Anseilen
as converted
to USD
(IFRS
Historical)		     Solaire Partners
as converted
to USD
(IFRS
Historical)		     K Enter
(IFRS
Historical -
Note 4)		     Transaction
Accounting
Adjustments		           New K Enter
Pro Forma
Combined
(IFRS
Historical)		  
ASSETS                                                                              
Current assets                                                                              
Cash and cash equivalents   $ 2,808,501     $ 584,580     $ 980,123     $ 233,132     $ 244,430     $ 240     $ 333,069     $ 1,500,000     V     $ 7,059,075  
                                                              375,000     V          
                                                                               
                                                                               
                                                                               
                                                                               
Short-term financial instruments     286,579       -       -       -       -       -       -       -             286,579  
Short-term investment securities     -       -       583,863       -       -       -       -       -             583,863  
Accounts receivable - trade, net     6,232,282       61,262       428       12,484       -       35,727       6,496       -             6,348,679  
Other receivables     -       -       -       -       -       -       905,827       -             905,827  
Other receivables - related parties     -       -       -       -       -       -       -       -             -  
Preferred stock subscription receivable     -       -       -       -       -       -               -             -  
Deferred transaction costs     -       -       -       -       -       -       2,152,048                     2,152,048  
Short-term loans, net     532,797       -       91,348       -       -       -       -       (91,348 )   W       468,515  
                                                              (64,282 )   Y          
Accounts receivable - other, net     88,291       64,366       1,872       -       -       1,441,092       -       (64,831 )   R       1,153,853  
                                                              (375,000 )   V          
                                                              (1,872 )   W          
                                                              (65 )   Y          
Value added tax receivables     -       -       -       -       37,097       -       -       -             37,097  
Other current financial assets     27,066       -       34,239       -       -       97,451       -       -             158,756  
Prepaid expenses and other current assets     -       -       -       -       -       -       422,239       -             422,239  
Prepaid expenses and other current assets - related party     -       -       -       -       -       -       67,699       -             67,699  
Other current assets     449,726       867,265       44,945       1,542       29       66       -       -             1,363,573  
Contract assets     -       415,481       490,472       -       -       250,849       -       -             1,156,802  
Current tax assets     235,124       -       -       -       -       -       -       -             235,124  
Inventories, net     553,722       -       -       -       -       -       -       -             553,722  
                                                                               
Total current assets     11,214,088       1,992,954       2,227,290       247,158       281,556       1,825,425       3,887,378       1,277,602             22,953,451  
                                                                               
Non-current assets                                                                              
Long-term financial instruments     218,247       -       -       -       -       -       -       -             218,247  
Long-term loans, net     -       88,003       -       -       -       -       -       -             88,003  
Long-term investment securities     494,222       541,323       -       48,679       -       482,262       -       -             1,566,486  
Investments in associates and joint ventures     -       -       -       -       -       56,163       -       -             56,163  
Investment in subsidiary     -       -       -       -       -       -       -       -             -  
Investment in equity securities     -       -       -       -       -       -       1,600,000       -             1,600,000  
Investment in equity securities - related party     -       -       -       -       -       -       1,178,055       (1,178,055 )   S       -  
Property, plant and equipment, including right-of-use assets     8,153,673       107,952       83,762       149,434       497       21,130       24,356       29,008     R       8,569,812  
Investment properties     271,337       -       -       -       -       -       -       -             271,337  
Operating lease right-of-use assets, net     -       -       -       -       -       -       21,048       (19,190 )   R       1,858  
Operating lease right-of-use assets, net - related party     -       -       -       -       -       -       19,189       -             19,189  
Intangible Asset - Intellectual Property     -       -       -       -       -       -       -       15,560,353     A       15,560,353  
Intangible Asset - Customer relationships     -       -       -       -       -       -       -       10,552,564     A       10,552,564  
Intangible Asset - Trademarks     -       -       -       -       -       -       -       4,025,354     A       4,025,354  
Intangible Asset - Non-compete     -       -       -       -       -       -       -       175,069     A       175,069  
Intangible assets other than goodwill     3,067,670       -       -       -       -       -       -       -             3,067,670  
Goodwill     2,211,123       -       -       -       -       -       -       124,616,683     A       126,827,806  
Other non-current assets     -       -       -       -       -       -       1,762,368       (1,014,981 )   Q       679,688  
                                                              (67,699 )   R          
Other non-current financial assets     1,220,156       26,444       58,720       292,198       -       203       -       (2,701 )   R       1,595,020  
Other non-current non-financial assets     1,291,033       930,459       350,574       -       396,519       -       -       -             2,968,585  
Defined benefit assets     -       -       -       -       -       -       -       -             -  
Deferred tax assets     684,106       31,021       -       -       -       -       -       -             715,127  
Investments held in Trust Account     -       -       -       -       -       -       -       -             -  
Long-term accounts receivable - other, net     -       31,058       -       -       -       -       -       -             31,058  
                                                                               
Total non-current assets     17,611,567       1,756,260       493,056       490,311       397,016       559,758       4,605,016       152,676,405             178,589,389  
                                                                               
Total assets   $ 28,825,655     $ 3,749,214     $ 2,720,346     $ 737,469     $ 678,572     $ 2,385,183     $ 8,492,394     $ 153,954,008           $ 201,542,841  
                                                                               
LIABILITIES                                                                              
Current liabilities                                                                              
Trade and other payables   $ 9,500,053     $ 1,378,748     $ 616,832     $ 12,933     $ 11,992     $ 1,219,139     $ 4,597,739     $ (67,699 )   R     $ 17,269,737  
Trade and other payables - related party     -       -       -       -       -       -       1,332,603       (1,872 )   W       1,330,731  
Other current financial liabilities     87,965       -       -       -       -       65,000       -       -             152,965  
Other current non-financial liabilities     976,881       36,063       5,017       79,747       41,424       16,170       -       -             1,155,302  
Contract liabilities     -       240,614       -       -       -       -       -       -             240,614  
Other payables     -       -       -       -       -       -       -       (65 )   Y       (65 )
Other payables - related parties     -       -       -       -       -       -       -       -             -  
Short-term borrowings     2,546,926       978,072       -       -       -       140,295       564,282       -             4,229,575  
Short-term borrowings - related party     -       -       -       -       -       -       400,942       (91,348 )   W       245,312  
                                                              (64,282 )   Y          
Current portion of long-term borrowings, net     1,427,034       -       -       -       -       -       -       -             1,427,034  
Current lease liabilities     1,208,895       54,244       52,730       -       -       41,239       20,165       (19,189 )   R       1,358,084  
Lease liability, current - related party     -       -       -       -       -       -       19,189       -             19,189  
Current tax liabilities     73,729       10,093       55,156       3,384       -       131,201       -       -             273,563  
Due to Sponsor     -       -       -       -       -       -       -       -             -  
Sponsor working capital loan     -       -       -       -       -       -       -       -             -  
Excise tax payable attributable to redemption of common stock     -       -       -       -       -       -       -       -             -  
Promissory note - related party     -       -       -       -       -       -       -       -             -  
Promissory note - underwriter     -       -       -       -       -       -       -       -             -  
Consideration payable     -       -       -       -       -       -       -       12,057,680     A       12,057,680  
Contingent consideration payable     -       -       -       -       -       -               8,630,305     A       8,630,305  
Accrued franchise tax payable     -       -       -       -       -       -       -       -             -  
Accrued expenses     -       -       -       -       -       -       -       -             -  
Financial guarantee liability     -       1,741       -       -       -       -       -       -             1,741  
                                                                               
Total current liabilities     15,821,483       2,699,575       729,735       96,064       53,416       1,613,044       6,934,920       20,443,530             48,391,767  
                                                                               
Non-current liabilities                                                                              
Trade and other non-current payables     14,679       -       -       -       -       -       -       -             14,679  
Long-term borrowings, excluding current portion, net     -       -       -       -       -       -       -       -             -  
Other non-current financial liabilities     101,498       -       -       -       -       -       -       -             101,498  
Other non-current non-financial liabilities     -       -       -       -       1,014,981       -       -       (1,014,981 )   Q       -  
Defined benefit liabilities     378,433       172,551       -       82,227       4,825       103,101       -       -             741,137  
Convertible note     -       -       -       -       -       -       -       -             -  
Derivative liabilities     -       -       -       -       -       -       401,374       200,687     V       602,061  
Contract liabilities     -       608,989       -       -       -       -       -       -             608,989  
Other non-current provisions     412,726       3,332       -       -       -       8,909       -       -             424,967  
Non-current lease liabilities     6,294,684       44,309       30,721       -       -       -               (73,576 )   R       6,296,138  
Deferred tax liabilities     270,091       -       -       -       -       -       -       6,335,488     A       6,605,579  
Deferred underwriting commissions     -       -       -       -       -       -       -       -             -  
Warrant liabilities     -       -       -       -       -       -       -       -             -  
Call option liability     -       -       -       -       -       -       -       849,022     A       849,022  
Earnout liability     -       -       -       -       -       -       -       -             -  
Consideration payable, non-current     -       -       -       -       -       -       -       11,758,370     A       11,758,370  
Convertible senior unsecured notes     -       -       -       -       -       -       2,666,833       1,500,000     V       4,166,833  
Discount on note     -       -       -       -       -       -       -       (200,687 )   V       (200,687 )
Class A common stock subject to possible redemption     -       -       -       -       -       -       -       -             -  
                                                                               
Total non-current liabilities     7,472,111       829,181       30,721       82,227       1,019,806       112,010       3,068,207       19,354,323             31,968,586  
                                                                               
Total liabilities     23,293,594       3,528,756       760,456       178,291       1,073,222       1,725,054       10,003,127       39,797,853             80,360,353  
                                                                               
Class A common stock subject to possible redemption     -       -       -       -       -       -       -       -             -  
                                                                               
EQUITY                                                                              
Share capital     338,327       53       33,833       6,767       10,150       575,156       -       (964,286 )   A       -  
Global Star preferred stock     -       -       -       -       -       -       -       -             -  
K Enter Series A-1 convertible preferred stock     -       -       -       -       -       -       -       -             -  
K Enter Series A convertible preferred stock     -       -       -       -       -       -       355       -             355  
K Enter common stock     -       -       -       -       -       -       1,000       1,468     A       2,468  
                                                              -     -          
Pubco ordinary shares     -       -       -       -       -       -       -       -             -  
Global Star Class A common stock     -       -       -       -       -       -       -       -             -  
Global Star Class B common stock     -       -       -       -       -       -       -       -             -  
Preferred stock subscription receivable     -       -       -       -       -       -               -             -  
Additional paid-in capital     -       -       -       -       -       -       20,542,076       85,705,045     A       106,247,121  
                                                              -     -          
                                                              -     -          
Share premium     -       (396,160 )     33,833       -       -       285,043       -       77,284     A       -  
Other reserves     (18,738,613 )     -       (1,353,308 )     (35,149 )     (1,165 )     (136,028 )     -       1,525,650     A       (19,916,668 )
                                                              (1,178,055 )   S          
Retained earnings (Accumulated deficit)     24,332,097       616,565       3,245,532       587,560       (403,635 )     (64,042 )     (21,802,827 )     17,820,847     A       24,367,148  
                                                              35,051     R          
                                                              -     -          
Accumulated other comprehensive income (loss)     -       -       -       -       -       -       (251,337 )     -             (251,337 )
Equity attributable to the equity holders of the Company     5,931,811       220,458       1,959,890       559,178       (394,650 )     660,129       (1,510,733 )     103,023,004             110,449,087  
Non-controlling interest     (399,750 )     -       -       -       -       -       -       11,133,150     A       10,733,400  
                                                                               
Total equity     5,532,061       220,458       1,959,890       559,178       (394,650 )     660,129       (1,510,733 )     114,156,154             121,182,487  
                                                                               
Total equity and liabilities   $ 28,825,655     $ 3,749,214     $ 2,720,346     $ 737,469     $ 678,572     $ 2,385,183     $ 8,492,394     $ 153,954,008           $ 201,542,841  

 

 
(2) The unaudited pro forma condensed combined balance sheet for New K Enter as of December 31, 2024, combines the historical unaudited balance sheets of the Six Korean Entities as of December 31, 2024, with the historical unaudited balance sheet of K Enter as of December 31, 2024 as adjusted for conversion to IFRS (see also Note 2 — “IFRS Conversion and Presentation Alignment”).

 

5

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR K WAVE

FOR THE YEAR ENDED DECEMBER 31, 2024(3)

 

  K Wave
Media
(IFRS Historical)		   New K
Enter Pro
Forma
Combined
(IFRS Historical)		   Global Star
(IFRS
Historical -
Note 4)		   Transaction
Accounting
Adjustments		     Pro Forma
Combined
(IFRS)		  
Sales revenue   $ -     $ 57,691,073     $ -     $ -         $ 57,691,073  
Investment management revenue     -       999,202       -       -           999,202  
Investment revenue     -       33,310       -       -           33,310  
Gains from investments in associates     -       12,022       -       -           12,022  
Cost of sales     -       (55,038,513 )     -       -         (55,038,513 )
Gross profit     -       3,697,094       -       -           3,697,094  
Administration fee - related party                     (120,000 )                    
Operating expenses     -       -       (1,971,648 )     120,000     BB       (1,851,648 )
Selling, general, and administrative expenses     -       (17,529,109 )     -       -           (17,529,109 )
Investment expenses     -       (14,757 )     -       -           (14,757 )
Losses from investments in associates     -       (46,257 )     -       -           (46,257 )
Stock-based compensation expense     -       -       -       (1,150,000 )   EE       (1,150,000 )
Other income     -       975,030       -       -           975,030  
Other expenses     -       (5,370,975 )     -       -           (5,370,975 )
Transaction costs     -       -       -       (38,041,732 )   CC       (51,975,148 )
                              (6,830,599 )   FF          
                              (7,102,817 )   LL          
Operating income (loss)     -       (18,288,974 )     (2,091,648 )     (53,005,148 )         (73,265,770 )
Other income (expense)                                            
Finance income     -       589,804       -       -           589,804  
Finance costs     -       (1,611,677 )     -       -           (1,611,677 )
Change in fair value of warrant liability     -       -       (193,965 )     -           (193,965 )
Loss on initial issuance of debt     -       -       -       -           -  
Interest income     -       399       18,394       -           18,793  
Other income (expense), net     -       (1,034,045 )             -           (1,034,045 )
Amortization of deferred finance cost     -       -       (58,855 )     (248,339 )   OO       (307,194 )
Interest income on marketable securities held in Trust Account     -       -       1,722,436       (1,722,436 )   AA       -  
Net income (loss) before taxes     -       (20,344,493 )     (603,638 )     (54,975,923 )         (75,804,054 )
Provision for taxes     -       427,196       (358,878 )     358,878   DD       427,196  
Net income (loss)   -     (19,917,297 )   (962,516 )   (54,617,045 )       (75,376,858 )
Net loss attributable to noncontrolling interest in subsidiaries     -       (2,325,352 )     -                 (2,325,352 )
Income (loss) attributable to shareholders of New K Enter   $ -   $ (17,591,945 )   $ (962,516 )   $ (54,617,045 )     $ (73,051,506 )
Basic and diluted net income per share                                            
Basic net income per share, Class A common stock subject to possible redemption                   $ (0.17 )                  
Basic net income per share, Class B common stock                   $ (0.17 )                  
Pro forma weighted average number of shares outstanding - basic and diluted                                       63,246,290  
Pro forma net loss per share - basic and diluted                                     $ (1.19 )

 

 
(3) The unaudited pro forma condensed combined statement of operations for K Wave for the year ended December 31, 2024, combines the unaudited pro forma condensed combined statements of operations for the Six Korean Entities as converted to USD and K Enter(5) for the year ended December 31, 2024 with the historical audited statement of operations of Global Star for the six months ended June 30, 2024 and the historical audited statement of operations of K Wave for the year ended December 31, 2024.
(4) Please refer to Note 8 — “Net Loss per Share” for details.

 

6

 

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR NEW K ENTER

FOR THE YEAR ENDED DECEMBER 31, 2024(5)

 

  Play Company
as converted
to USD
(IFRS Historical)		   K Enter
(US GAAP
Historical)		   Lamp
as converted
to USD
(IFRS Historical)		   Bidangil
as converted
to USD
(IFRS Historical)		   Apeitda
as converted
to USD
(IFRS
Historical)		   Anseilen
as converted
to USD
(IFRS Historical)		   Solaire Partners
as converted
to USD
(IFRS Historical)		   Transaction
Accounting
Adjustments		       New K Enter
Pro Forma
Combined
(IFRS Historical)		  
Sales revenue   $ 31,545,498     $ 485,271     $ 11,981,496     $ 13,665,824     $ 12,984     $ -     $ -     $ -         $ 57,691,073  
Investment management revenue     -       -       -       -       -       -       999,202       -           999,202  
Investment revenue     -       -       -       -       -       -       33,310       -           33,310  
Gains from investments in associates     -       -       -       -       -       -       12,022       -           12,022  
Cost of sales     (30,739,901 )     (483,462 )     (11,018,876 )     (12,796,274 )     -       -       -       -           (55,038,513 )
Gross profit     805,597       1,809       962,620       869,550       12,984       -       1,044,534       -           3,697,094  
Administration fee - related party                                                                            
Operating expenses     -       -       -       -       -       -       -       -           -  
Selling, general, and administrative expenses     (2,922,258 )     (11,838,397 )     (695,508 )     (520,932 )     (231,050 )     (169,390 )     (1,123,703 )     45,873     II       (17,529,109 )
                                                              (73,744 )   JJ          
Investment expenses     -       -       -       -       -       -       (14,757 )     -           (14,757 )
Losses from investments in associates     -       -       -       -       -       -       (46,257 )                 (46,257 )
Stock-based compensation expense     -       -       -       -       -       -       -       -           -  
Other income     749,670       -       142,581       1       2       8,732       63       237     II       975,030  
                                                              73,744     JJ          
Other expenses     (1,205,104 )     -       (209,149 )     (15,768 )     (22,266 )     (36 )     -       (3,872,542 )   HH       (5,370,975 )
                                                              (46,110 )   II          
Transaction costs     -       -       -       -       -       -       -       -           -  
Operating income (loss)     (2,572,095 )     (11,836,588 )     200,544       332,851       (240,330 )     (160,694 )     (140,120 )     (3,872,542 )         (18,288,974 )
Other income (expense)                                                                            
Finance income     422,880       -       16,642       41,052       38,373       155       72,731       (2,029 )   NN       589,804  
Finance costs     (1,013,265 )     -       (100,154 )     (108,365 )     (17,561 )     (22,003 )     (16,671 )     (335,687 )   KK       (1,611,677 )
                                                              2,029     NN          
Change in fair value of warrant liability     -       -       -       -       -       -       -       -           -  
Loss on initial issuance of debt     -       -       -       -       -       -       -       -           -  
Interest income     -       399       -       -       -       -       -       -           399  
Other income (expense), net             (1,034,045 )     -       -       -       -       -       -           (1,034,045 )
Amortization of deferred finance cost     -       -       -       -       -       -       -       -           -  
Interest income on marketable securities held in Trust Account     -       -       -       -       -       -       -       -           -  
Net income (loss) before taxes     (3,162,480 )     (12,870,234 )     117,032       265,538       (219,518 )     (182,542 )     (84,060 )     (4,208,229 )         (20,344,493 )
Provision for taxes     552,757       -       (67,543 )     (2,737 )     (5,557 )     -       (49,724 )     -           427,196  
Net income (loss)   (2,609,723 )   (12,870,234 )   49,489     262,801     (225,075 )   (182,542 )   (133,784 )   (4,208,229 )       (19,917,297 )
Net loss attributable to noncontrolling interest in subsidiaries     (745,776 )     -       -       -       -       -       -       (1,579,576 )   GG       (2,325,352 )
Income (loss) attributable to shareholders of New K Enter   $ (1,863,947 )   $ (12,870,234 )   $ 49,489   $ 262,801   $ (225,075 )   $ (182,542 )   $ (133,784 )   $ (2,628,653 )     $ (17,591,945 )
Basic and diluted net income per share   $ (18.64 )   $ (116.68 )   $ 49.49     $ 26.28     $ (22.51 )   $ -     $ -                      

 

 
(5) The unaudited pro forma condensed combined statement of operations for New K Enter for the year ended December 31, 2024, combines the historical statements of operations of the Six Korean Entities for the year ended December 31, 2024 as converted to USD, with the historical audited statement of operations of K Enter for the year ended December 31, 2024, as adjusted for conversion to IFRS (see also Note 4 — “IFRS Conversion and Presentation Alignment”).
(6) Please refer to Note 8 — “Net Loss per Share” for details.

 

7

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

Note 1 — Basis of Presentation and Accounting Policies

 

Acquisition of the Six Korean Entities

 

K Enter closed the equity purchase for Play Company first and the acquisitions of each of the Six Korean Entities other than Play Company closed subsequently on January 2, 2025.

 

The acquisition of each of the Six Korean Entities by K Enter will be accounted for in accordance with the acquisition method of accounting under IFRS 3, with Play Company considered to be the acquirer of K Enter. As Play Company’s basis of accounting is IFRS, the combined K Enter – Play Company entity basis of accounting will be IFRS.

 

The acquisitions of each of the Six Korean Entities other than Play Company by K Enter post the acquisition of Play Company will be accounted for in accordance with the acquisition method of accounting under IFRS 3, with K Enter post the acquisition of Play Company considered to be the acquirer of each of the Six Korean Entities other than Play Company. As K Enter post the acquisition of Play Company basis of accounting is IFRS, New K Enter’s basis of accounting will be IFRS.

 

Under the acquisition method of accounting, the preliminary purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess purchase price, if any, allocated to goodwill. Costs related to the transaction are expensed as incurred. K Enter and Play Company are referred to as “New K Enter” in these unaudited pro forma condensed combined financial statements.

 

The Business Combination will be accounted for as a capital reorganization in accordance with IFRS 2 as Global Star does not meet the criteria to be determined a business under IFRS 3. Under this method of accounting, Global Star is treated as the acquired company for financial reporting purposes, and New K Enter is treated as the acquirer for financial statement reporting purposes.

 

The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that PubCo will experience. New K Enter and Global Star have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The unaudited pro forma condensed combined balance sheet and statements of operations reflects the acquisition of the Six Korean Entities that closed on January 2, 2025 as if it had occurred on December 3 1, 2024, and January 1, 2024, respectively.

 

The historical financial statements of the Six Korean Entities have been prepared in accordance with IFRS as issued by the IASB and in its presentation and functional currency of the Korean Republic Won (“KRW”). The historical financial statements of Global Star have been prepared in accordance with U.S. GAAP and in its presentation and functional currency of the USD. The historical financial statements of K Enter have been prepared in accordance with U.S. GAAP and in its presentation currency of USD. The historical financial statements of K Wave Media Ltd have been prepared in accordance with IFRS and in its presentation currency of USD. The unaudited pro forma condensed combined financial information reflects IFRS, the basis of accounting that will be used by PubCo. Global Star’s and K Enter’s historical financial statements have been converted from U.S. GAAP to IFRS to align with the basis of accounting that will be used by PubCo. See Note 3 – IFRS Conversion and Presentation Alignment.

 

8

 

 

The historical financial statements of the Six Korean Entities have been translated into and are presented in USD using the following exchange rates:

 

  ● at the period exchange rate as of December 31, 2024 of US$1.00 to KRW$1,477.86 for the balance sheet;
     
  ● the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW$1,363.438 for the statement of operations for the period ending on that date;

 

Note 2 — IFRS Conversion and Presentation Alignment

 

The historical financial information of Global Star has been adjusted to give effect to the differences between U.S. GAAP and IFRS as issued by the IASB for the purposes of the unaudited pro forma condensed combined financial information. Two adjustments required to convert Global Star’s financial statements from U.S. GAAP to IFRS for purposes of the unaudited pro forma condensed combined financial information were to (i) reclassify Global Star Class A Common Stock subject to redemption to non-current financial liabilities under IFRS 2, as stockholders have the right to require Global Star to redeem the common stock and Global Star has an irrevocable obligation to deliver cash or another financial instrument for such redemption, and (ii) reclassify GLST Warrants from equity (under U.S. GAAP) to non-current financial liabilities under IAS 32 measured at fair value through profit or loss, due to the “cashless” settlement provisions in the warrant agreement.

 

There were no adjustments required to adjust the historical financial information of K Enter to give effect to the differences between U.S. GAAP and IFRS as issued by the IASB for the purposes of the unaudited pro forma condensed combined financial information.

 

Further, as part of the preparation of the unaudited pro forma condensed combined financial information, certain reclassifications were made to align Global Star’s historical financial information and K Enter’s historical financial information in accordance with the presentation of Play Company’s historical financial information.

 

9

 

 

BALANCE SHEET

FOR GLOBAL STAR

AS OF DECEMBER 31, 2024

 

    Global Star
(US GAAP
Historical)		     IFRS Conversion
and Presentation
Alignment		     Global Star
(IFRS
Historical)		  
ASSETS                        
Cash and cash equivalents   $ 510,939     $ -     $ 510,939  
Other current assets     7,500       -       7,500  
Total current assets     518,439       -       518,439  
                         
Investments held in Trust Account     4,374,657       -       4,374,657  
Total non-current assets     4,374,657       -       4,374,657  
                         
Total assets   $ 4,893,096     $ -     $ 4,893,096  
                         
LIABILITIES                        
Trade and other payables     -       1,726,331 (2)      1,726,331  
Sponsor working capital loan     1,596,000       -       1,596,000  
Promissory note - related party     733,661       -       733,661  
Excise tax payable attributable to redemption of common stock     959,070       -       959,070  
Current tax liabilities     324,943       -       324,943  
Due to Sponsor     15,094       -       15,094  
Accrued franchise tax payable     131,798       -       131,798  
Accrued expenses     1,726,331       (1,726,331 )(2)      -  
Total current liabilities     5,486,897       -       5,486,897  
                         
Deferred underwriting commissions     3,220,000       -       3,220,000  
Warrant liabilities     -       290,947 (1)      290,947  
Class A common stock subject to possible redemption     -       4,430,398 (1)      4,430,398  
Total non-current liabilities     3,220,000       4,721,345       7,941,345  
                         
Total liabilities     8,706,897       4,721,345       13,428,242  
                         
Class A common stock subject to possible redemption     4,430,398       (4,430,398 )(2)      -  
                         
EQUITY                        
Global Star preferred stock     -       -       -  
Global Star Class A common stock     62       -       62  
Global Star Class B common stock     230       -       230  
Additional paid-in capital     -       -       -  
Retained earnings (Accumulated deficit)     (8,244,491 )     (290,947 )(1)      (8,535,438 )
Total stockholders’ equity     (8,244,199 )     (290,947 )     (8,535,146 )
                         
Total equity and liabilities   $ 4,893,096     $ -     $ 4,893,096  

 

 
(1) IFRS Conversion
(2) Presentation Alignment

 

10

 

 

STATEMENT OF OPERATIONS

FOR GLOBAL STAR

FOR THE YEAR ENDED DECEMBER 31, 2024

 

    Global Star
(US GAAP
Historical)		     IFRS Conversion
and Presentation
Alignment		     Global Star
(IFRS
Historical)		  
Administration fee - related party   $ (120,000 )     -       (120,000 )
General and administrative expenses     (1,971,648 )     -       (1,971,648 )
Total operating expenses     (2,091,648 )     -       (2,091,648 )
                         
Loss from operations     (2,091,648 )     -       (2,091,648 )
                         
Other income (expense)                        
Amortization of deferred finance cost     (58,855 )     -       (58,855 )
Change in fair value of warrant liability     -       (193,965 )(1)      (193,965 )
Interest income     18,394       -       18,394  
Interest income on marketable securities held in Trust Account     1,722,436       -       1,722,436  
Net income before taxes     (409,673 )     (193,965 )     (603,638 )
                         
Provision for taxes     (358,878 )     -       (358,878 )
                         
Net income   $ (768,551 )   $ (193,965 )   $ (962,516 )
                         
Basic and diluted net income per share, redeemable Class A common stock   $ (0.13 )           $ (0.17 )
                         
Basic and diluted net income per share, non-redeemable Class A and Class B common stock   $ (0.13 )           $ (0.17 )

 

11

 

 

BALANCE SHEET

FOR K ENTER

AS OF DECEMBER 31, 2024

 

    K Enter
(US GAAP
Historical)		     IFRS Conversion
and Presentation
Alignment		     K Enter
(IFRS
Historical)		  
ASSETS                        
Cash and cash equivalents     333,069       -       333,069  
Accounts receivable     6,496       -       6,496  
Other receivables     905,827       -       905,827  
Deferred transaction costs     2,152,048       -       2,152,048  
Prepaid expenses and other current assets     422,239               422,239  
Prepaid expenses and other current assets - related party     67,699       -       67,699  
Total current assets     3,887,378       -       3,887,378  
                         
Investment in equity securities     1,600,000       -       1,600,000  
Investment in equity securities - related party     1,178,055       -       1,178,055  
Property, plant and equipment, net     24,356       -       24,356  
Operating lease right-of-use assets, net     21,048       -       21,048  
Operating lease right-of-use assets, net - related party     19,189       -       19,189  
Other non-current assets     1,762,368       -       1,762,368  
Total non-current assets     4,605,016       -       4,605,016  
                         
Total assets   $ 8,492,394     $ -     $ 8,492,394  
                         
LIABILITIES                        
Trade and other payables     -       4,597,739 (2)      4,597,739  
Trade and other payables - related party             1,332,603 (2)      1,332,603  
Accounts payable     836,592       (836,592 )(2)      -  
Accounts payable - related party     1,332,603       (1,332,603 )(2)      -  
Accrued expenses and other current liabilities     3,761,147       (3,761,147 )(2)      -  
Short-term borrowings     564,282               564,282  
Short-term borrowings - related party     400,942               400,942  
Lease liability, current     20,165       -       20,165  
Lease liability, current - related party     19,189       -       19,189  
Total current liabilities     6,934,920       -       6,934,920  
                         
Convertible note     2,666,833       -       2,666,833  
Derivative liabilities     401,374       -       401,374  
Total liabilities     10,003,127       -       10,003,127  
                         
Equity                        
Series A-1 convertible preferred stock     -               -  
Series A convertible preferred stock     355       -       355  
Common stock     1,000       -       1,000  
Additional paid-in capital     20,542,076       -       20,542,076  
Accumulated deficit     (21,801,180 )     (1,647 )(2)      (21,802,827 )
Accumulated other comprehensive income     (252,984 )     1,647 (2)      (251,337 )
Total stockholders’ equity     (1,510,733 )     -       (1,510,733 )
                         
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 8,492,394     $ -     $ 8,492,394  

 

 
(1) IFRS Conversion
(2) Presentation Alignment

 

12

 

 

STATEMENT OF OPERATIONS

FOR K ENTER

FOR THE YEAR ENDED DECEMBER 31, 2024

 

    K Enter
(US GAAP
Historical)		     IFRS Conversion
and Presentation
Alignment		     K Enter
(IFRS
Historical)		  
Revenue     485,271       -       485,271  
                         
Cost of revenue     (483,462 )             (483,462 )
Gross profit     1,809       -       1,809  
                         
Selling, general and administrative expenses     (11,838,397 )     -       (11,838,397 )
                         
Operating income (loss)     (11,836,588 )     -       (11,836,588 )
                         
Other income (expense)                        
Interest income (expense), net     399       -       399  
Other income (expense), net     (1,034,045 )     -       (1,034,045 )
Total other expense     (1,033,646 )     -       (1,033,646 )
                         
Provision for taxes     -       -       -  
                         
Net loss     (12,870,234 )     -       (12,870,234 )

 

13

 

 

Note 3 — Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

 

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only.

 

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). EFHAC has elected not to present Management’s Adjustments and is only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to include all necessary Transaction Accounting Adjustments pursuant to Article 11 of Regulation S-X, including those that are not expected to have a continuing impact.

 

The audited historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to transaction accounting adjustments that reflect the accounting for the transaction under IFRS. K Wave Media and Global Star have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of the Combined Company’s shares outstanding, assuming the Business Combination occurred on January 1, 2024.

 

14

 

 

Transaction Accounting Adjustments to Unaudited Pro Foma Condensed Combined Balance Sheet

 

The Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet as of December 31, 2024, are as follows:

 

  A. Reflects the allocation, on a preliminary basis, of the cost associated with the acquisition of K Enter and the Six Korean Entities other than Play Company as if the acquisition had occurred on December 31, 2024. Play Company was determined to be the accounting acquirer under IFRS 3. The final allocation of the purchase consideration will be determined after the completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed, but in no event later than one year following the completion of the transaction. Accordingly, the final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of New K Enter due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities. The preliminary allocation of the purchase price is as follows:

 

    K Enter     LAMP     Bidangil     Apeitda     Anseilen     Solaire Partners     Total  
Estimated fair value of common stock issued  (see below)   $ 62,450,402     $ 14,986,150     $ 9,987,754     $ 7,493,062     $ 3,769,006     $ 6,973,906     $ 105,660,280  
Fair value of Earnout(b)     -       -       -       -       -       -       -  
Contingent consideration payable(e)     8,630,305       -       -       -       -       -       8,630,305  
Call option liability(c)     849,022       -       -       -       -       -       849,022  
Proportionate share of non-controlling interest(k)     -       3,642,941       3,791,199       2,207,873       1,253,814       237,324       11,133,150  
Cash to be paid(d)     23,816,050       -       -       -       -       -       23,816,050  
Total consideration     95,745,779       18,629,091       13,778,953       9,700,935       5,022,820       7,211,230       150,088,807  
Allocated to:                                                        
Cash   $ 333,069     $ 584,580     $ 980,123     $ 233,132     $ 244,430     $ 240     $ 2,375,574  
Accounts receivable - trade     6,496       61,262       428       12,484       -       35,727       116,397  
Value added tax receivable     -       -       -       -       37,097       -       37,097  
Short-term financial instruments     -       -       -       -       -       -       -  
Short-term investment securities     -       -       583,863       -       -       -       583,863  
Other receivables, contract assets and current assets     905,827       1,347,112       571,528       1,542       29       1,789,458       4,615,496  
Short-term loans, net     -       -       91,348       -       -       -       91,348  
Prepaid expenses and other     489,938       -       -       -       -       -       489,938  
Property, plant and equipment, net     24,356       107,952       83,762       149,434       497       21,130       387,131  
Long-term loans, net     -       88,003       -       -       -       -       88,003  
Convertible debt security     -       -       -       -       -       -       -  
Deferred transaction costs     2,152,048       -       -       -       -       -       2,152,048  
Long-term investment securities     -       541,323       -       48,679       -       482,262       1,072,264  
Investments in associates and joint ventures     -       -       -       -       -       56,163       56,163  
Investment in equity securities     1,600,000       -       -       -       -       -       1,600,000  
Investment in equity securities - related parties     1,178,055       -       -       -       -       -       1,178,055  
Operating lease right-of-use assets, net     21,048       -       -       -       -       -       21,048  
Operating lease right-of-use assets, related party     19,189       -       -       -       -       -       19,189  
Other non-current assets     1,762,368       987,924       409,294       292,198       396,519       203       3,848,506  
Long-term accounts receivable - other, net     -       31,058       -       -       -       -       31,058  
Accounts payable, accrued expenses, contract liabilities and other current liabilities     (4,597,739 )     (1,619,362 )     (616,832 )     (12,933 )     (11,992 )     (1,219,139 )     (8,077,997 )
Accounts payable - related party     (1,332,603 )     -       -       -       -       -       (1,332,603 )
Current portion of long-term borrowings     -       -       -       -       -       -       -  
Lease liability, current     (20,165 )     (54,244 )     (52,730 )     -       -       (41,239 )     (168,378 )
Short term borrowings     (564,282 )     (978,072 )     -       -       -       (140,295 )     (1,682,649 )
Short-term borrowings - related party     (400,942 )     -       -       -       -       -       (400,942 )
Other current financial liabilities     -       -       -       -       -       (65,000 )     (65,000 )
Other current non-financial liabilities     -       (36,063 )     (5,017 )     (79,747 )     (41,424 )     (16,170 )     (178,421 )
Current tax liability     -       (10,093 )     (55,156 )     (3,384 )     -       (131,201 )     (199,834 )
Financial guarantee liability     -       (1,741 )     -       -       -       -       (1,741 )
Lease liability - related party     (19,189 )     -       -       -       -       -       (19,189 )
Other non-current liabilities, contract liabilities, and provisions     -       (612,321 )     -       -       (1,014,981 )     (8,909 )     (1,636,211 )
Other non-current financial liabilities     -       -       -       -       -       -       -  
Long-term borrowings     -       -       -       -       -       -       -  
Defined benefit liabilities     -       (172,551 )     -       (82,227 )     (4,825 )     (103,101 )     (362,704 )
Convertible note     (2,666,833 )     -       -       -       -       -       (2,666,833 )
Derivative liabilities     (401,374 )     -       -       -       -       -       (401,374 )
Defined severance benefits non-current     -       -       -       -       -       -       -  
Lease liability, non-current     -       (44,309 )     (30,721 )     -       -       -       (75,030 )
Long-term lease liability, related party     -       -       -       -       -       -       -  
Deferred tax liability(j)     -       (1,906,133 )     (1,526,479 )     (1,042,803 )     (780,369 )     (1,079,704 )     (6,335,488 )
Net assets acquired (liabilities assumed)     (1,510,733 )     (1,685,675 )     433,411       (483,625 )     (1,175,019 )     (419,575 )     (4,841,216 )
Excess of purchase price over net tangible assets acquired, aggregate fair value purchase consideration, non-controlling interest, and net liabilities assumed  before allocation to identifiable intangible assets and goodwill   $ 97,256,512     $ 20,314,766     $ 13,345,542     $ 10,184,560     $ 6,197,839     $ 7,630,805     $ 154,930,023  

 

15

 

 

Management made an initial determination that approximately $30.3 million of the excess of the purchase price over the net assets acquired (liabilities assumed), non-controlling interest, and aggregate fair value purchase consideration should be allocated to identifiable intangible assets. The unidentified excess of the purchase price over the fair value of the net assets acquired has been recorded as goodwill.

 

  (a) The Six Korean Entities were issued an aggregate of 14,675,034 shares of K Wave Media ordinary shares, par value $0.0001, at a value of $7.20 per share. The price per share was calculated as follows:

 

Total shares of K Wave Media issued to the Six Korean Entities     14,675,034  
Estimated Price per share of Global Star as of May 12, 2025   $ 7.20  
Value of K Wave Media ordinary shares   $ 105,660,245  

 

  (b) The Earnout was determined to be part of the business combination (i.e., consideration) and therefore in accordance with IFRS 3, such contingent consideration will be measured at fair value at the acquisition date and included within the calculation of goodwill. The liability-classified arrangement is recorded at fair value at initial recognition; measurement is updated at each reporting date, with changes recognized in the income statement each reporting period until the arrangement is settled or derecognized. The terms of the Earnout state that depending on the achievement by Play Company of the annual average net profit for Fiscal Years 2023 to 2025, New K Enter shall make additional payments to the Seller as follows: (1) if the average net profit for the said years is less than 75% (KRW 12.105 billion) of the target amount separately agreed between the Parties (KRW 16.14 billion) or exceeds 125% of the said target amount (KRW 20.175 billion), New K Enter shall pay to the Seller in cash (KRW) on January 31, 2027 and January 31, 2028 (the “Payment Date”, respectively) an amount calculated by multiplying the achieved percentage based on the annual average net profit for Fiscal Years 2023 to 2025 by KRW 9.05 billion and (ii) if the average net profit for the said years is no less than 75% of the target amount (KRW 12.105 billion) and no greater than 125% of the target amount (KRW 20.175 billion) New K Enter shall pay KRW 9.05 billion to the Seller on each Payment Date. Each payment above shall be deemed as an adjustment to the Purchase Price. The Earnout was valued with a Monte Carlo Model simulation. The fair value was the discounted cash flow from the date of payment. The net profit was assumed to grow at a specified industry growth rate and fluctuate with the projected earnings volatility. The projected earnings volatility was based upon guideline public companies.
     
  (c) In accordance with IAS 32 and IFRS 9, the call option liability is representative of a financial liability to potentially issue equity shares and/or transfer assets of the combined entity; therefore, the call option liability will be measured at fair value at the acquisition date and included within the calculation of goodwill. The liability-classified arrangement is recorded at fair value at initial recognition; measurement is updated at each reporting date, with changes recognized in the income statement each reporting period until the arrangement is settled or derecognized. The fair value pricing of the call option liability was determined by applying the binomial option pricing model. The assumptions utilized in the option pricing model included: (a) equity share price of 10,010,425,600 KRW, (b) volatility of 43.75%, and (c) risk-free rate of 3.642%
     
  (d) Pursuant to the Play Company equity purchase agreement, an aggregate of KRW 36,233,103,400 (or approximately USD $24,716,377) will be paid as follows:

 

Payment Date  

Purchase
Price
(KRW)

     Purchase
Price
(USD)		     Present
Value
(USD)		  
Within 3 months from the listing date     18,133,103,400       12,269,838       12,057,680  
January 31, 2025     9,050,000,000       6,123,719       6,087,039  
January 31, 2026     9,050,000,000       6,123,719       5,671,331  
Total     36,233,103,400       24,517,276       23,816,050  

 

16

 

 

  (e) An additional payment in cash may be owed to the owner of Play Company if the shares of PubCo that the shares of New K Enter’s common stock convert to at closing of the Acquisition Merger are sold during the three-month period (the “Sale Period”) following the six-month lock-up period of the newly issued shares of PubCo at a per share price less than the per share value at closing of the Acquisition Merger for the shortfall in share price. The amount to be paid will be reduced by (i) any realized gains from the sale of additional shares of PubCo by the owner of Play Company between the end of the Sale Period and December 31, 2026, and (ii) the unrealized gain as of December 31, 2026 for the shares that remain held by the owner of Play Company (calculated as the number of remaining shares of PubCo times the difference of (i) the average closing price of PubCo from December 1, 2026 to December 31, 2026 and (ii) the per-share value of PubCo at the closing of the Acquisition Merger). The contingent consideration liability is recorded at fair value determined using a Black Scholes model that values the put option related to the Shortfall payment obligation as detailed in the Shares Purchase Agreement.
     
  (f) Trademarks were valued based on a Relief of Royalty Method (“RRM”) with a 5-year life. RRM determines the value of an intangible asset by calculating how much a company would save in hypothetical royalty payments if it we to own the asset rather than licensing it from a third party.
     
  (g) IP/Technology was valued based on a Multi-Period Excess Earnings Method (“MPEE”) for LAMP, Bidangil, Apeitda, and Anseilen. The expected life was 10 years. MPEE is a financial valuation model that estimates revenues and cash flows derived from the intangible asset and then deducts portions of the cash flow that can be attributed to supporting assets, such as a brand name or fixed assets, that contributed to the generation of the cash flows. IP/Technology was valued based on RRM for Solaire Partners. The expected life was 5 years.
     
  (h) Customer relationships/bases were valued using MPEE. The expected life for LAMP was 8 years, the expected life for Bidangil was 8 years, the expected life for Apeitda was 8 years, and the expected life for Solaire Partners was 8.4 years.
     
  (i) Non-competes were valued using a With and Without Method (“WWM”) with a 5-year term for Bidangil, Apeitda, Anseilen, and Solaire Partners and a 4 year term for LAMP. WWM calculates the difference between two discounted cash flow models: one that represents the status quo for the business enterprise with the asset in place, and another without it.
     
  (j) The table below presents the calculation of the deferred tax liability on the intangible assets recorded in Entry (A) in the unaudited pro forma balance sheet of New K Enter using a tax rate of 20.9%:

 

    K Enter     LAMP     Bidangil     Apeitda     Anseilen     Solaire Partners     Total  
Trademark(f)   $ -     $ 718,789     $ 1,161,370     $ 1,086,872     $ -     $ 1,058,323     $ 4,025,354  
Intellectual property(g)     -       4,368,088       3,443,501       2,350,644       3,693,016       1,705,104       15,560,353  
Customer relationships(h)     -       4,018,319       2,661,564       1,535,634       -       2,337,047       10,552,564  
Non-competes(i)     -       15,052       37,294       16,338       40,807       65,578       175,069  
Goodwill     97,256,512       11,194,517       6,041,813       5,195,072       2,464,016       2,464,754       124,616,684  
                                                         
Total   $ 97,256,512     $ 20,314,765     $ 13,345,542     $ 10,184,560     $ 6,197,839     $ 7,630,806     $ 154,930,024  

 

 
* The goodwill for K Enter is supported by the following qualitative factor:

 

17

 

 

  ● Synergic growth between (a) content production and investment businesses, in which K Enter secures IP rights of its films and TV series for additional distribution and advertisement revenues and (b) content production and merchandising businesses, in which K Enter produces goods and merchandises for its films and TV series for additional merchandising revenues.

 

This is further supported by the following qualitative factors:

 

  ● Organic growth of the content production business, assuming an increase in the production of films and TV series collectively by the four studios (Anseilen, Apeitda, Bidangil and Lamp) and K Enter’s internal production team;
     
  ● Organic growth of the content merchandising business, assuming an increase in the IP rights coverage for merchandising by Play Company, reflecting Play Company’s recent contract with SM Entertainment;
     
  ● Organic growth of the content investment business, assuming a serial launching of new content investment funds by Solaire Partners.

 

  (k) As part of the acquisition, the sellers of the Six Korean entities other than Play maintained their respective non-controlling interests. The following table presents the proportionate share of the non-controlling interest recorded to goodwill for each company calculated on the intangible assets identified and the net assets acquired (liabilities assumed), net of the deferred tax liability:

 

Company  

Net Assets
Acquired
(Liabilities Assumed)
(USD)

    

Intangible Assets
Identified
(USD)

    

Deferred Tax
Liability
(USD)

     Subtotal     Non-Controlling
Interest %		    

Total
Non-Controlling
Interest Recorded
to Goodwill
(USD)

  
LAMP   $ 220,458     $ 9,120,248     $ (1,906,132 )   $ 7,434,574       49.00 %   $ 3,642,941  
Bidangil     1,959,890       7,303,729       (1,526,479 )     7,737,140       49.00 %     3,791,199  
Apeitda     559,178       4,989,488       (1,042,803 )     4,505,863       49.00 %     2,207,873  
Anseilen     (394,650 )     3,733,823       (780,369 )     2,558,804       49.00 %     1,253,814  
Solaire Partners     660,129       5,166,052       (1,079,705 )     4,746,476       5.00 %     237,324  
    $ 3,005,005     $ 30,313,340     $ (6,335,488 )   $ 26,982,857             $ 11,133,150  

 

  B. Reflects the liquidation and reclassification of $0.5 million of funds held in the Trust Account to cash that becomes available following the Business Combination.
     
  C. Reflects the settlement of deferred underwriting fees payable of $3.0 million upon the closing of the Business Combination with a payment of $0.5 million, the issuance of a promissory note of $2.0 million and the issuance of 50,000 of PubCo shares at $10 per share.
     
  D. Reflects the payment of Global Star transaction costs of approximately $1.2 million and the accrual of $0.6 million of business combination-related fees to be paid post-closing of the Business Combination. The costs for Global Star are accounted for as a reduction in the combined cash account with a corresponding reduction in accumulated deficit.

 

18

 

 

    Reflects the payment of K Enter transaction costs of $1.2 million and to accrue $0.7 of business combination-related fees to be paid post-closing of the Business Combination. $15.8 million is reflected as an adjustment to accumulated deficit and $16.5 million is included as an adjustment to additional paid-in capital. The adjustment to accumulated losses includes $15.6 million related to success fees, with a corresponding increase to trade and other payables as 30% of the success fee is due three months after the Combined Company is listed and traded publicly and 70% of the success fee is due twelve months after the Combined Company is listed and traded publicly. These transaction costs are non-recurring. $8.5 million of the K Enter transaction costs are being paid in shares of K Enter common stock. The 4,997 shares of K Enter common stock were converted to 2,170,125 shares of Pubco, par value of $0.0001 per share at a value of $7.20 per share. A net amount of $6.7 million was recorded to accumulated deficit for the difference between the value of the shares issued and the value of the debt transferred.
     
    The Global Star transaction costs exclude the deferred underwriting commissions included (C) above.
     
  E. Represents the exchange of outstanding New K Enter shares into 56,829,875 PubCo Ordinary Shares at par value of $0.0001 per share. These shares plus the 2,170,125 shares presented as being issued to satisfy K Enter transaction expenses, as described in (D) above, total the 59,000,000 New K Enter shares to be issued at the consummation of the Business Combination.
     
  F. Represents the elimination of Global Star’s historical accumulated losses after recording the transaction costs to be incurred by Global Star as described in (D) above, the remeasurement common stock subject to redemption in (G) below, the interest earned in the Trust as described in (J) below and the stock-based compensation as described in (O) below.
     
  G. Reflects the remeasurement and reclassification of 40,043 shares of Global Star common stock subject to redemption to permanent equity.
     
  H. Represents the expense recognized, in accordance with IFRS 2, for the excess of the deemed costs of the shares issued by PubCo and the fair value of Global Star’s identifiable net assets at the date of the Business Combination, resulting in a $38.0 million increase to accumulated deficit. The fair value of shares issued was based on a market price of $7.20 per share (as of May 12, 2025).

 

    Shares     Dollars  
Global Star shareholders                
Public shareholders(1)     960,043          
Sponsor and other shareholders(2)     3,126,247          
Deemed costs of shares to be issued to Global Star shareholders           $ 29,421,288  
Net assets of Global Star as of December 31, 2024             (3,813,801 )
Less: Global Star Transaction Costs             (566,902 )
Less: Global Star Warrant liabilities             (290,947 )
Less: Effect of March redemptions and interest withdrawal             (3,948,794 )
Adjusted net assets (liabilities) of Global Star as of December 31, 2024             (8,620,444 )
Difference – being IFRS 2 charge for listing services           $ 38,041,732  

 

 
(1) Includes 9,200,000 Public Rights automatically converted into 920,000 shares of common stock upon consummation of the Business Combination.
(2) Includes 498,225 Private Rights automatically converted into 49,822 shares of common stock upon consummation of the Business Combination and includes 150,000 Convertible Note Rights automatically converted into 15,000 shares of common stock upon consummation of the Business Combination.

 

19

 

 

  I. Reflects the conversion of Global Star Class B Common Stock into Class A Common Stock on a one-for-one basis upon consummation of the Business Combination.
     
  J. Reflects the net effect of interest earned in and interest withdrawn from the Trust Account subsequent to December 31, 2024.
     
  K. Reflects the conversion of 9,698,225 GLST Rights into 969,823 ordinary shares upon the closing of the Business Combination.
     
  L. Reflects additional draws on the Global Star April 15, 2024, promissory note of $96,000 subsequent to December 31, 2024. Reflects the conversion of $1.5 million of the July 31, 2023, Global Star Working Capital Loan into 150,000 GLST Units at a price of $10.00 per unit upon consummation of the Business Combination. Each unit consists of one share of GLST Class A Common Stock, one GLST Warrant, and one GLST Right. Also reflects the conversion of 150,000 GLST Rights into 15,000 shares of GLST Class A Common Stock upon the closing of the Business Combination. The warrants were recorded as non-current financial liabilities under IAS 32.Reflects the conversion of $100,000 of the Global Star July 31, 2023, Working Capital Loan and $807,000 of the Global Star April 15, 2024, promissory note into shares of Global Star Class B common stock at a price of $10.00 per share upon the consummation of the business combination.
     
  M. Reflects the conversion of GLST Class A Common Stock into PubCo ordinary shares upon consummation of the Business Combination.
     
  N. Reflects the extension payments made to the Trust Account subsequent to December 31, 2024.
     
  O. Reflects the recognition of stock-based compensation related to the sale of Founders Shares to Global Star’s directors and strategic advisors upon consummation of the Business Combination.
     
  P. Reflects the conversion of 35,484 shares of K Enter Series A preferred stock to New K Enter common stock, par value $0.01, and the conversion of 5,314 shares of K Enter Series A-1 preferred stock to New K Enter common stock, par value $0.01, at a conversion ratio of 1:1 at the consummation of the business combination.
     
  Q. Reflects the elimination upon consolidation of the intercompany balances for advances paid by K Enter to Anseilen for content development.
     
  R. Reflects the elimination upon consolidation of legal fees paid by Solaire Partners on behalf of K Enter and the sublease agreement between K Enter and Solaire Partners.
     
  S. Reflects the elimination of the Investment in Play Company related to the 1,000 shares of Play Company owned by Solaire Partners.
     
  T. Reflects the adjustment to Global Star historical balance sheet to reverse the consolidation of its wholly-owned subsidiary, K Wave Media, Ltd.
     
  U. Reflects the intercompany elimination upon consolidation of the intercompany accounts of Global Star and K Wave Media Ltd.
     
  V. Reflects the proceeds of $1.5 million from the convertible senior unsecured debt and the bifurcation of the conversion option at a fair value of $0.6 million and the cash received from a pre-PIPE investor of $0.4 million.
     
  W. Reflects the intercompany elimination upon consolidation of the short-term borrowing from Bidangil to K Enter.

 

20

 

 

  x. Reflects the redemption of 340,832 shares of Global Star Class A common stock at approximately $11.55 per share for $3.9 million and the withdrawal of $0.01 million of interest income from the Trust to pay certain tax obligations.
     
  Y. Reflects the intercompany elimination upon consolidation of the short-term borrowing from Bidangil to K Enter.
     
  Z. Reflects the proceeds received under the PIPE agreement of $4.0 million and the reclassification of $0.5 million of funding from short-term borrowings to convertible senior unsecured notes. The Company is currently evaluating the accounting treatment of the PIPE agreement.

 

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

 

The Transaction Accounting Adjustments included in the unaudited pro forma condensed combined statement of operations for year ended December 31, 2024 are as follows:

 

  AA. Reflects the elimination of interest income generated from the investments held in the Trust Account.
     
  BB. Reflects the elimination of administrative service fees that will cease to be paid upon the closing of the Business Combination.
     
  CC. Represents the preliminary estimated expense recognized, in accordance with IFRS 2, for the excess of the deemed costs of the shares issued by PubCo over the fair value of Global Star’s identifiable net assets at the date of the Business Combination, as described in (H) above. This cost is a non-recurring item.
     
  DD. Reflects the income tax impacts of the pre-tax transaction adjustments.
     
  EE. Reflects the recognition of stock-based compensation related to the sale of Founders Shares to Global Star’s directors and strategic advisors at the consummation of the Business Combination.
     
  FF. Reflects the expenses incurred by New K Enter for transaction costs related to accounting, advisory and valuation services.
     
  GG. Reflects the recognition of net loss attributable to non-controlling interests in the Six Korean Entities other than Play Company.
     
  HH. Reflects the amortization of Intellectual Property, Trademarks, Non-competes and Customer Relationships intangible assets recognized on New K Enter.

 

    K Enter     Lamp     Bidangil     Apeitda     Anseilen     Solaire Partners     Total  
Intellectual Property (USD)   $ -     $ 4,368,088     $ 3,443,501     $ 2,350,644     $ 3,693,016     $ 1,705,104     $ 15,560,353  
Useful Life           $ 10     $ 10     $ 10     $ 10     $ 5          
Customer Relationships (USD)   $ -     $ 4,018,319     $ 2,661,564     $ 1,535,634     $ -     $ 2,337,047     $ 10,552,564  
Useful Life             8       8       8       -       8.4          
Trademarks (USD)   $ -     $ 718,789     $ 1,161,370     $ 1,086,872     $ -     $ 1,058,323     $ 4,025,354  
Useful Life             5       5       5       -       5          
Non-competes (USD)   $ -     $ 15,052     $ 37,294     $ 16,338     $ 40,807     $ 65,578     $ 175,069  
Useful Life             4       5       5       5       5          
Annual Amortization   $ -     $ 1,086,619     $ 916,778     $ 647,661     $ 377,463     $ 844,021     $ 3,872,542  
6 months Amortization   $ -     $ 543,310     $ 458,390     $ 323,830     $ 188,732     $ 422,010     $ 1,936,272  

 

21

 

 

  II. Reflects the elimination upon consolidation of the sublease agreement between K Enter.
     
  JJ. Reflects the elimination upon consolidation of the intercompany balances related to the consulting transaction between K Enter and Solaire Partners.
     
  KK. Reflects the amortization of the debt discount of $0.2 million, and accrual of interest expense at an annual coupon rate of 3% of $0.1 million.
     
  LL. Reflects the expense recognized for the K Enter shares issued for the satisfaction of transaction expenses as described in (D) above.
     
  NN. Reflects the intercompany elimination upon consolidation of the short-term borrowing from Bidangil to Kenter
     
  OO. To record the amortization of deferred finance cost on the Global Star promissory note

 

Note 4 — Net Loss per Share

 

Represents the loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2024. As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted loss per share assumes that the shares issued in connection with the Business Combination have been outstanding for the entire period presented.

 

The unaudited pro forma condensed combined financial information has been prepared with the actual redemptions of Public Shares by Global star’s Public Shareholders for the year ended December 31, 2024:

 

    Year Ended
December 31,
2024		  
Pro forma net loss   $ (73,051,506 )
Weighted average shares outstanding of ordinary shares – basic and diluted     63,246,290  
Net loss per share – basic and diluted   $ (1.19 )
Excluded securities:(1)        
Public Warrants     9,200,000  
Private Warrants     498,225  
Convertible Note Warrants     150,000  
Shares underlying convertible senior secured notes     450,000  

 

 
(1) The potentially dilutive outstanding securities were excluded from the computation of pro forma net loss per share, basic and diluted, because their effect would have been anti-dilutive.

 

22

 

Exhibit 15.2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF K ENTER

 

The following discussion and analysis should be read in conjunction with “Selected Financial Information of K Enter” and the audited financial statements and related notes that are included elsewhere in this proxy statement/prospectus. The discussion and analysis should also be read together with K Enter’s pro forma financial information for the period ended December 31, 2024 and as of December 31, 2024 (in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information”). In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties, and assumptions that could cause K Enter’s actual results to differ materially from management’s expectations due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement/prospectus of Form 20-F. Factors which could cause such differences are discussed herein. Unless otherwise specifically noted or the context otherwise requires, all references in this section to “K Enter” refers to K Enter Holdings Inc. prior to the consummation of the Business Combination, which will become the business of PubCo following the consummation of the Business Combination.

 

Business Overview

 

K Enter was formed on January 4, 2023, under the laws of the State of Delaware, to become a leading tech and intellectual property (“IP”) based diversified entertainment company. To fulfill this vision, the Company established and internal Korean drama production team and entered into equity purchase agreements to acquire a controlling equity interest in six separate Korean entertainment companies (collectively, the “Six Korean Entities”) in order to combine initial capabilities believed to serve as the foundation for the Company’s growth – content production, content merchandising, and content investment. The Six Korean Entities include one Korean content-specialized private equity firm, one Korean drama production company, three Korean movie production companies, and one IP merchandising company. On January 3, 2025, K Enter completed the acquisitions of the controlling interests of each of the Six Korean Entities through the share exchange.

 

Business Combinations and Public Company Costs

 

Merger Agreement with Global Star

 

On June 15, 2023, K Enter announced that K Enter entered into a Merger Agreement with Global Star, a publicly traded special purpose acquisition company and certain of its subsidiaries. On March 11, 2024, Global Star, K Enter, PubCo and Merger Sub executed the First Amendment to Merger Agreement. On June 28, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Second Amendment to Merger Agreement. On July 25, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Third Amendment to Merger Agreement. On December 11, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Fourth Amendment to Merger Agreement. Under the terms of the proposed transaction, the estimated combined enterprise value of the surviving entity following the proposed transaction is approximately $590.0 million, which is based on an assumed share price of PubCo’s Ordinary Shares of $10.00 per share. The actual fair value, which will be determined on the acquisition date, may be significantly different from the estimated combined enterprise value disclosed herein. See the rest of this proxy statement/prospectus for additional information regarding the Business Combination, including the sections entitled “Proposal No. 1 The Reincorporation Merger Proposal” and Proposal No. 2 The Acquisition Merger Proposal.”

 

While the legal acquirer in the Business Combination is Global Star, for financial accounting and reporting purposes under International Financial Reporting Standards (“IFRS”), based on K Enter’s initial analysis, we believe we will be the accounting acquirer and the business combination will be accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of K Enter’s financial statements in many respects. Under this method of accounting, Global Star will be treated as the acquired entity whereby we will be deemed to have issued common stock for the net assets and equity of Global Star consisting mainly of cash, accompanied by a simultaneous equity recapitalization of Global Star (the “Recapitalization”).

 

Upon consummation of the Business Combination, the most significant change in K Enter’s future reported financial position and results is expected to be an estimated increase in cash (on a pro forma basis as compared to K Enter’s balance sheet at June 30, 2024) of approximately $0.1 million. Total direct and incremental transaction costs are estimated at approximately $2.2 million. Total direct and incremental transaction costs will be treated as a reduction of the cash proceeds and deducted from the combined company’s additional paid-in-capital or added to the combined company’s accumulated deficit. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

 

 

 

 

As a consequence of the Business Combination, we will become the successor to an SEC-registered and NASDAQ-listed company which will require us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.

 

K Enter expect its capital and operating expenditures will increase significantly in connection with K Enter’s ongoing activities as we:

 

  ● complete the acquisition of the Six Korean Entities

 

  ● increase K Enter’s investment in marketing, advertising, sales infrastructure for K Enter’s products and services;

 

  ● obtain, maintains and improves K Enter’s operational, financials and management information systems;

 

  ● hire additional personnel;

 

  ● obtain, maintains, expands and protects its intellectual property portfolio; and

 

  ● operate a public company

 

On June 28, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Second Amendment to Merger Agreement, which extended the outside date for the parties to consummate the closing of the Business Combination from June 22, 2024 to December 22, 2024.

 

On July 25, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Third Amendment to Merger Agreement, which conditioned the closing of the Business Combination on K Enter’s prior consummation of the acquisition of the controlling equity interests in the Six Korean Entities.

 

On December 11, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the Fourth Amendment to Merger Agreement, which extended the outside date for the parties to consummate the closing of the Business Combination from December 22, 2024 to June 22, 2025.

 

Acquisitions of Six Korean Entities

 

K Enter’s acquisition of Play Company Co., Ltd. (“Play Company”), Solaire Partners LLC (“Solaire”), Apeitda Co., Ltd. (“Apeitda”), The LAMP Co., Ltd. (“Lamp”), Bidangil Pictures Co., Ltd. (“Bidangil”), and Studio Anseilen Co., Ltd. (“Studio,” and collectively, the “Six Korean Entities”) was a closing condition to the Business Combination.

 

On January 3rd, 2025 K Enter closed the equity purchase for Play Company first and the acquisitions of each of the Six Korean Entities other than Play Company closing subsequently.

 

The acquisition of each of the Six Korean Entities by K Enter was accounted for in accordance with the acquisition method of accounting under IFRS 3, with Play Company considered to be the acquirer of K Enter. As Play Company’s basis of accounting is IFRS, the combined K Enter – Play Company entity basis of accounting was IFRS.

 

The acquisitions of each of the Six Korean Entities other than Play Company by K Enter post the acquisition of Play Company was accounted for in accordance with the acquisition method of accounting under IFRS 3, with K Enter post the acquisition of Play Company considered to be the acquirer of each of the Six Korean Entities other than Play Company. As K Enter post the acquisition of Play Company basis of accounting was IFRS, New K Enter’s basis of accounting was IFRS.

 

Under the acquisition method of accounting, the preliminary purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess purchase price, if any, allocated to goodwill. Costs related to the transaction were expensed as incurred.

 

2

 

 

The Business Combination was accounted for as a capital reorganization in accordance with IFRS 2 as Global Star does not meet the criteria to be determined a business under IFRS 3. Under this method of accounting, Global Star was treated as the acquired company for financial reporting purposes, and New K Enter was treated as the acquirer for financial statement reporting purposes.

 

Recent Developments

 

During October 2023, K Enter entered into an agreement to issue 615 shares of Series A-1 for gross proceeds of $369,000. If any founding member shareholder(s) owning together more than 20% of the Company decide to sell its shares, the investor was provided the right, but not an obligation, to participate in the relevant sale along with the founding member shareholder(s) with the identical terms and conditions given to the lead seller. As of the date these unaudited financial statements were issued, the investor has not yet transferred consideration for this agreement to the Company.

 

During January 2024, we entered into an agreement with a six-month term to engage an exclusive US-based financial advisor and placement agent (the “Advisor”) in connection with a pre-PIPE financing transaction in exchange for 7.0% of the gross proceeds from an equity investment and 5.0% of the gross proceeds from a debt investment. The Advisor may elect to receive up to 50.0% of the compensation owed in common equity of K Enter or the entity that survives the transaction. Additionally, the Advisor will earn a fee of $500,000 in the form of K Enter common stock at the closing of the business combination if a minimum of $5,000,000 of investment (debt or equity) is secured by the Advisor. No investment commitments have been secured to date.

 

On January 31, 2024, K Enter entered into the Stock Purchase Agreement with Solaire Partners LLC, which the company acquired 1,000 shares of Play Company Co., Ltd totaling 1,741,000,000 Korean Won ($1,178,055 at December 31, 2024).

 

On January 31, 2024, an amendment was made to the share purchase agreement, originally entered into on April 12, 2023, with the CEO of First Virtual, and the share purchase agreement with the shareholder of First Virtual was renewed due to the spin-off of the First Virtual, which was executed in October 2023. As a result of this amendment, the value of shares to be exchanged has been decreased to 10,199,577,468 Korean won.

 

On March 5, 2024, K Enter entered into the Termination and Re-Purchase Option Agreement with the owners of First Virtual, which terminated all agreements entered into in connection with the original equity purchase agreement. The major conditions in the agreement are followings.

 

  ● The Company shall repurchase shares if the related suits are finally resolved by a final, non-appealable judgment or the involved parties’ mutually agreed settlement with prejudice of all claims related to and arising from the related suits in each case in a manner satisfactory to the Company as determined by the Company at its sole discretion based on what is considered legally and commercially reasonable.

 

  ● The repurchase price shall be the fair market value, which shall be determined by an accounting firm selected by both parties’ mutual agreement. The transaction shall be consummated within 15 days after the determination of the fair value, excluding the date of government approval if required. The term of this agreement shall be effective and in force only for the time period between the agreement date and the five year anniversary thereof.

 

Based on the termination of the New FVL Agreements, Global Star and K Enter agreed to decrease the base merger consideration Global Star will issue to the stockholders of K Enter in connection with the Business Combination. On March 11, 2024, Global Star, K Enter, PubCo and Merger Sub entered into the First Amendment to Merger Agreement, which among other things decreased the base merger consideration from $610 million to $590 million that Global Star will issue to the stockholders of K Enter. Accordingly, pursuant to the First Amendment to Merger Agreement, PubCo will issue 59,000,000 ordinary shares of PubCo to the stockholders of K Enter in exchange for all of the shares of common stock of K Enter.

 

While no definitive action has been taken to terminate the FVL Termination and Option Agreement, K Enter currently views the acquisition of a controlling interest in First Virtual pursuant to the FVL Termination and Option Agreement as uncertain due to the uncertainty as to the outcome of the Prototype Lawsuits and there can be no assurance that K Enter will acquire a controlling interest in First Virtual pursuant to the FVL Termination and Option Agreement.

 

3

 

 

In June 2024, K Enter issued two convertible senior unsecured notes (the “Notes”) in the aggregate amount of $4,500,000. The Notes have a maturity date of 3 years and will pay an annual coupon rate of 3% to be paid semi-annually until the maturity date of the Notes.

 

Under one Note (the “$1.5MM Note”), which is in the principal amount of $1,500,000, the proceeds shall be wired to K Enter as follows:

 

  (1) 25% of the committed amount at the time of signing this definitive agreement,

 

  (2) 25% at the time SEC declares effectiveness on the F-4, and

 

  (3) the remaining 50% at the time of shareholder approval and going public.

 

Under the other Note (the “$3MM Note”), which is in the principal amount of $3,000,000, the proceeds shall be wired to K Enter as follows:

 

  (1) 25% of the committed amount at the time of signing this definitive agreement,

 

  (2) 50% at the time SEC declares effectiveness on the F-4, and

 

  (3) the remaining 25% at the time of shareholder approval and going public.

 

From the time K Enter issued the Notes and until the closing of the Business Combination, the Notes will be convertible, at the option of the holders, at a conversion price per share of $1,200 per share. The Post-Merger Conversion Price for the Notes shall be the greater of the following:

 

  ● 60% discount to the 5-day average of the volume-weighted average prices of ordinary shares over 5 consecutive trading days following the conversion notice date, and

 

  ● a Floor price of $4 per share.

 

Upon execution of the $1.5MM Note, K Enter received $375,000 pursuant to the $1.5MM Note. Upon execution of the $3MM Note, K Enter received $750,000 pursuant to the $3MM Note. On October 3, 2024, K Enter received $300,000 pursuant to the $3MM Note and on October 18, 2024, K Enter received $1,200,000 pursuant to the $3MM Note. On January 8 2025, Kenter received $375,000 Pursuant to the 1.5MM Note. Accordingly, K Enter is not due any payment under the $3MM Note and 1.5 MM Note at the time SEC declares effectiveness on the F-4.

 

On, August 9, 2024, K Enter entered into an extension agreement on the convertible bond with Prototype Groupe Inc to extend the maturity date to August 9, 2025. The Loan bears interest at the rate of 5.96% per annum. If there are any overdue payments, Prototype shall bear a late payment interest rate of the Applicable Federal Rate plus 10% additional interest.

 

On August 19. 2024, Global Star Acquisition I LLC loaned K Enter $120,000. The loan is for a term of three months or within five business days after K Enter F4 registration statement becomes effective, whichever is earlier and bears no interest. The proceeds of the loan will be used to fund the operations of K Enter. On October 18. 2024, K Enter repaid $120,000 of Global Star Acquisition I LLC loan, leaving a balance of $0.00 on the loan.

 

On December 31, 2024, K Enter entered into a loan agreement with Nikhil Suresh Nanda, pursuant to which the Nikhil Suresh Nanda will provide working capital loans to K Enter. The total loan amount will not exceed 50% of the total committed PIPE financing totaling $1,000,000 for the SPAC. The loan will be paid by converting the subject loan to a Convertible Senior Unsecured Note (PIPE) immediately prior to the completion of the business combination. The agreement includes various conditions, including the issuance of free trading bonus shares by K Enter and the use of the loan for working capital purposes related to the business combination.

 

4

 

 

Comparability of Financial Information

 

Our results of operations and statement of assets and liabilities may not be comparable between prospective periods as a result of the Business Combination.

 

Key factors Affecting Operating Results

 

We believe that K Enter’s performance and future success depend on several factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section entitled “Risk Factors—Risks related to K Enter’s Business and Industry.

 

Limited Operating History

 

While we do not have significant past operating history, K Enter’s management is aware that the future operating results and K Enter’s future financial condition may be different than K Enter’s past operating results and financial condition. Major factors that will have a material impact on future financial results and condition include whether investments in the development of new motion pictures or new IP content achieve significant commercial success. Even if significant commercial success is achieved, K Enter’s business plan is complex and there are many factors which could impact K Enter’s operating results and financial conditions including delays in projects, opportunity cost of divesting management and financial resources away from other IP content and volatility in the demand for K Enter’s products and services. For more information, please see the section of the Proxy Statement/Prospectus entitled “Risk Factors — Risks Related to K Enter Holdings Inc.’s Business and Industry”.

 

Government Regulation

 

We plan to have significant international sales and operations that are subject to government regulation and compliance requirements (such as regulation of K Enter’s IP content and service offerings, competition, censorship of content, data privacy), restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), nationalization, and restrictions on foreign ownership. Compliance with international and U.S. laws and regulations that apply to K Enter’s international operations may increase K Enter’s cost of doing business. For more information, please see the section of the Proxy Statement/Prospectus entitled “Risk Factors — Risks Related to K Enter Holdings Inc.’s Business and Industry”.

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with GAAP, expressed in U.S. dollars. References to GAAP issued by the FASB in these accompanying notes to the financial statements are to the FASB Accounting Standards Codification (“ASC”).

 

Key Components of Statement of Operations

 

Revenue

 

K Enter’s operating income was driven by videography services for television programs.

 

General and Administrative Expense

 

General and administrative expenses consist of personnel-related expenses for K Enter’s administrative functions, expenses for outside professional services, including legal, audit and accounting services, as well as expenses for facilities, depreciation, and travel costs. Personnel-related expenses consist of salaries, benefits, and share-based compensation.

 

We expect K Enter’s general and administrative expenses to increase for the foreseeable future as we complete the acquisition of the controlling equity interests in the Six Korean Entities, scale headcount with the growth of K Enter’s business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expense, investor relations activities and other administrative and professional services.

 

5

 

 

Other Income (Expense)

 

Other income (expense) consists primarily of the realized gain on transactions that are denominated in a currency other than K Enter’s reporting currency.

 

Results of Operations

 

Presented below is a summary of K Enter’s results of operations:

 

    Year Ended
December 31,
2024		     For the
period from
January 4, 2023
(inception) to
December 31,
2023		  
Statement of Profit or Loss:                
Revenue   $ 485,271       208,704  
Operating expenses     　       　  
Cost of revenues     483,462       207,153  
General and Administrative     11,838,397       8,954,316  
Loss From Operations     (11,836,588 )     (8,952,765 )
Other income (expense)             　  
Interest income     399       7,956  
Other income (expense)     (1,034,045 )     13,863  
Total other income (expense)     (1,033,646 )     21,819  
Net loss   $ (12,870,234 )     (8,930,946 )

 

For the year ended December 31, 2024 and the period from January 4, 2023 (inception) to December 31, 2023, K Enter’s operating income was driven by its media production segment, which realized revenues totaling $0.49 million and $0. 21 million, respectively.

 

K Enter’s revenue has increased for the year ended December 31, 2024, as compared to the period from January 4, 2023 (inception) to December 31, 2023 by $0.28 million, or 132.5%. This is attributable to the agreements entered into in 2024 for the production design services including set construction, props, and overall visual concept development.

 

For the year ended December 31, 2024, K Enter’s operating expenses are primarily driven by payroll related costs to run its internal Korean drama production and operating team and advisory fees paid to auditor, financial and legal experts.

 

K Enter’s operating expenses increased for the year ended December 31, 2024 as compared to the period from January 4, 2023 (inception) to December 31, 2023 by $3.16 million, or 34.5%. This is attributable to an increase in payroll and payroll related expenses of $0.89 million associated with an increased employee headcount in 2024 compared to 2023 and an increase in advisory fees paid of $1.27 million. Also, the share-based compensation expenses increased for the year ended December 31, 2024 as compared to the period from January 4, 2024 (inception) to December 31, 2023 by $0.47 million due to the additional grant of treasury shares to employees and others.

 

For the year ended December 31, 2024, K Enter’s other expense is comprised of impairment loss on convertible debt security of $959,459 and interest expenses of $47,608.

 

6

 

 

Cash Flow

 

Presented below is a summary of K Enter’s operating, investing and financing cash flows:

 

    Year Ended
December 31,
2024		     For the
period from
January 4, 2023
(inception) to
December 31,
2023		  
Net cash provided by (used in)                
Operating activities   $ (5,800,647 )     (8,002,540 )
Investing activities     (16,819 )     (2,637,390 )
Financing activities     3,776,281       13,121,268  
Effect of exchange rates on cash     (151,428 )     44,344  
Net change in cash and cash equivalents   $ (2,192,613 )     2,525,682  

 

The cash flow used in K Enter’s operating activities for the year ended December 31, 2024 primarily related to K Enter’s net loss of $12.9 million, adjusted for changes in K Enter’s working capital accounts.

 

K Enter’s cash flows used in operating activities decreased for the year ended December 31, 2024 as compared to the period from January 4, 2023 (inception) to December 31, 2023 by $2.2 million due to an increase in share-based compensation expenses of $0.5 million, an increase in impairment loss on convertible debt security of $1.0 million, a decrease in cash outflows from other non-current assets of $1.4 million, an increase in cash outflows from account payables of $0.4 million and an increase in cash inflows from accrued expenses and other current liabilities of $2.4 million for the year ended December 31, 2024, partially offset by an increase in net loss of $3.9 million.

 

The cash flow used in K Enter’s investing activities for the year ended December 31, 2024 primarily relates to K Enter’s payments for short-term loans of $0.01 million.

 

K Enter’s cash flow used in investing activities decreased for the year ended December 31, 2024 as compared to the period from January 4, 2023 (inception) to December 31, 2023 by $2.6 million due to the purchase of convertible debt security of $1.0 million, and purchase of investment in equity securities of $1.6 million for the period from January 4, 2023 (inception) to December 31, 2023, that did not recur for the year ended December 31, 2024.

 

The cash flow generated in K Enter’s financing activities for the year ended December 31, 2024 primarily relates to the issuance of preferred shares of $0.7 million and the issuance of convertible note of $2.6 million.

 

The cash flow provided by financing activities decreased for the year ended December 31, 2024 as compared to the period from January 4, 2023 (inception) to December 31, 2023 by $9.3 million and primarily relates to the proceeds from the issuance of preferred shares of $10.6 million for period from January 4, 2023 (inception) to December 31, 2023, that did not recur for the year ended December 31, 2024.

 

Liquidity and Capital Resources

 

K Enter has incurred significant losses and negative cash flows from operations, net loss was $12,870,234 for the year ended December 31, 2024. During the year ended December 31, 2024, K Enter had negative cash flows from operations of $5,800,647. As of December 31, 2024, K Enter’s accumulated deficit was $21,801,180. K Enter has funded its operations to date through equity and debt financing and has cash equivalents of $333,069 as of December 31, 2024. K Enter monitors its cash flow projections on a current basis and takes active measures to obtain the funding it requires to continue its operations. However, these cash flow projections are subject to various uncertainties concerning their fulfilment such as the ability to increase revenues by attracting and expanding its customer base and completing additional financing. K Enter expects to fund operations using cash on hand and raising additional proceeds. There are no assurances, however, that K Enter will be able to generate the revenue necessary to support its cost structure or that it will be successful in obtaining the level of financing necessary for its operations. These conditions raise substantial doubt as to K Enter’s ability to continue as a going concern.

 

7

 

 

Historically, K Enter’s primary sources of liquidity have been cash flows from contributions from founders, the issuance of Series A convertible preferred stock, and the issuance of Series A-1 convertible preferred stock. As of December 31, 2024, we had an aggregate cash balance of $333,069 and net working capital deficit of $3.0 million.

 

We intend to operate with its current cash on hand. In the future, we may borrow money and sell equity to finance K Enter’s operations. As we have a limited operating history, K Enter’s liquidity and capital resources may change substantially from past results.

 

Our future capital requirements will depend on many factors, including K Enter’s revenue growth rate, the timing and extent of spending to support future sales and marketing and research and development efforts. In order to finance these opportunities, we may need to raise additional financing. While there can be no assurances, if additional capital is required, we intend to raise such capital through operations, additional issuances of convertible preferred stock, and through the Business Combination. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, K Enter’s business, results of operations and financial condition would be materially and adversely affected.

 

Contractual Obligations and Commitments

 

We manage K Enter’s use of cash in the operation of K Enter’s business to support the execution of K Enter’s primary strategic goals of launching K Enter’s internal Korean drama production team and acquiring the controlling interests in the Six Korean Entities. We primarily use cash for capital investments, purchases of equity shares in related parties, loans, including purchases of bonds, to companies that will assist us in achieving K Enter’s strategic goals, acquisitions of businesses and general and administrative costs.

 

Our cash requirements beyond twelve months are for operating leases – Refer to Note 12 of the notes to the financial statement for further information of K Enter’s obligations and the timing of expected payments.

 

Related Parties

 

Two of K Enter’s directors, one of whom is the Chairman of K Enter’s board of directors, are also senior officers of Solaire Partners, which is one of the Six Korean Entities. A director of K Enter is also a managing member of Global Star Acquisition 1, LLC, the entity K Enter purchased its shares of Global Star Class B common stock from.

 

K Enter entered into a two-year operating lease for one of its office spaces commencing in June 2023 with Solaire Partners as the landlord. At inception, total gross rental payments due under this operating lease approximated $92,938 and a security deposit due approximated $67,699. For the year ended December 31, 2024, K Enter made $46,469 of rental payments associated with this operating lease. As of December 31, 2024, $19,189 associated with the present value of lease payments is included as components of lease liabilities, current – related party on the accompanying balance sheet, $67,699 associated with the security deposit is included as a component of prepaid expenses and other current assets - related party on the accompanying balance sheet.

 

During January 2024, K Enter purchased 1,000 shares of Play Company Co., Ltd. Common Stock for an aggregate purchase price of $1,178,055 from Solaire Partners LLC.

 

On April 22, 2024, Young Jae Lee, K Enter’s Chief Executive Officer, loaned K Enter $121,798 (the “1st Lee Loan”). On May 3, 2024, K Enter repaid $67,665 of the 1st Lee Loan, leaving a balance of $54,132 on the 1st Lee Loan. The 1st Lee Loan is for a term of nine months and bears interest at the rate of 4.6% per annum. On October 23, 2024, K Enter entered into an extension agreement on the 1st Lee Loan to amend the maturity date to June 30, 2025 or within five days after the K Wave Media Ltd registration statement on Form F-4 is declared effective by the U.S. Securities and Exchange Commission. The Loan bears interest at the rate of 4.6% per annum. On February 10, 2025, K Enter fully repaid the 1st Lee Loan, leaving a balance of $0.00.

 

8

 

 

On April 23, 2024, Young Jae Lee, K Enter’s Chief Executive Officer, loaned K Enter $169,164 (the “2nd Lee Loan”). On May 3, 2024, K Enter repaid $169,164 of the 2nd Lee Loan, leaving a balance of $0.00 on the 2nd Lee Loan. The 2nd Lee Loan is for a term of three months and bears interest at the rate of 4.6% per annum.

 

On April 26, 2024, Bidangil Pictures Co.,Ltd., loaned K Enter $91,348. The Loan is for a term of three months and bears interest at the rate of 3% per annum. On July 26, 2024, K Enter entered into the extension agreement with Bidangil in order to differ the maturity to October 23, 2024. On October 25, 2024, K Enter entered into an extension agreement on the loan with Bidangil Pictures Co.,Ltd. to amend the maturity date to June 30, 2025 or within five business days after K Wave Media Ltd F-4 registration statement becomes effective. The Loan is for a term of three months and bears interest at the rate of 3% per annum.

 

On May 3, 2024, Young Jae Lee, K Enter’s Chief Executive Officer, loaned K Enter $236,829 (the “3rd Lee Loan”). The 3rd Lee Loan is for a term of nine months and bears interest at the rate of 4.6% per annum. On November 3, 2024, K Enter entered into an extension agreement on the 3rd Lee Loan to amend the maturity date to April 30, 2025 or within five days after the K Wave Media Ltd registration statement on Form F-4 is declared effective by the U.S. Securities and Exchange Commission. The Loan bears interest at the rate of 4.6% per annum. On February 10, 2025, K Enter repaid $25,046, leaving a balance of $222,091.

 

On June 4, 2024, K Enter issued a convertible senior unsecured note in the principal amount of $3,000,000 to Innocus Global Group Pte Ltd., an entity owned by Jaekeun (Jason) Kim, a nominee director PubCo (the “Jason Note”). The Jason Note has a maturity date of 3 years and will pay an annual coupon rate of 3% to be paid semi-annually until the maturity date of the Jason Notes. Under the Jason Note, the proceeds shall be wired to the company as follows: (i) 25% of the committed amount at the time of signing this definitive agreement, (ii) 50% at the time SEC declares effectiveness on the F-4, and (iii) the remaining 25% at the time of shareholder approval and going public. From the time the company issued the Jason Note and until the closing of the Business Combination, the Jason Note will be convertible, at the option of the holder, at a conversion price per share of $1,200 per share. The Post-Merger Conversion Price for the Notes shall be the greater of (a) a 60% discount to the 5-day average of the volume-weighted average prices of ordinary shares over 5 consecutive trading days following the conversion notice date, and (b) a Floor price of $4 per share.

 

On August 19. 2024, Global Star Acquisition I LLC loaned K Enter $120,000. The loan is for a term of three months or within five business days after K Wave Media Ltd F-4 registration statement becomes effective, whichever is earlier and bears no interest. On October 18. 2024, K Enter repaid $120,000 of Global Star Acquisition I LLC loan, leaving a balance of $0.00 on the loan.

 

On August 31, 2024, K Enter issued 1,932 shares ($1,075,622, $556.74 per share) of K Enter’s common stock to an employee of K Enter, in consideration for services rendered.

 

On August 31, 2024, a total of 1,376 shares of treasury stock were returned as a settlement for no consideration to K Enter under the employment agreements, which were initially given to two employees.

 

On September 12, 2024, one founder of K Enter transferred a total of 688 shares ($383,037, $556.74 per share) of the founder to an employee at par value. K Enter recognized the transaction as a share-based compensation at fair value (See Note 8), which is included within general and administrative expenses on the accompanying statement of operations and comprehensive loss.

 

On September 24, 2024, K Enter entered into a share subscription agreement with GF Korea Inc. (the “GF Agreement”) pursuant to which the Company issued 4,997 shares ($2,782,030, $556.74 per share) of K Enter’s common stock to GF Korea Inc. in consideration for GF Korea Inc. assuming certain payment obligations of the Company in the aggregate $8.52 million owed to its service providers of K Enter. The GF Agreement closed on September 25, 2024 and K Enter issued the 4,997 shares of its common stock to GF Korea Inc., which will be converted to 1,559,805 shares of Pubco based on an estimated 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1,470.00 / USD $1.00 in the Business Combination. Pursuant to the GF Agreement, GF Korea Inc. shall sell the shares within sixty(60) days following the listing date on the NASDAQ Stock Market.; However, if any lock-up period is imposed under applicable laws, GF Korea shall sell those ordinary shares within sixty (60) days after the expiration of such lock-up period.

 

9

 

 

On September 29, 2024, K Enter entered into an agreement with Lodestar USA, Inc. (the “Lodestar Agreement”) pursuant to which K Enter issued 1,202 shares ($669,201, $556.74 per share) of K Enter’s common stock to Lodestar USA, Inc. in consideration for services rendered to K Enter by Ted Kim, a co-founder and a director of K Enter and the owner of Lodestar USA Inc. K Enter’s common stock will be converted to 375,202 shares of Pubco based on an estimated 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1, 470.00 / USD $1.00.

 

On September 30, 2024, K Enter issued Tan Chin Hwee, a director, Executive Chairman and Interim CEO of K Enter, 168 shares ($93,532, $556.74 per share) of K Enter’s common stock in consideration for services rendered.

 

Off-Balance Sheet Arrangements

 

During the period presented, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date, as well as the reported expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to K Enter’s financial statements.

 

We believe the accounting policies discussed below are critical to understanding K Enter’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

While K Enter’s significant accounting policies are described in the notes to K Enter’s financial statements, we believe that the following accounting policies require a greater degree of judgment and complexity. Accordingly, these are the policies we believe are most critical to aid in fully understanding and evaluating K Enter’s financial condition and results of operations.

 

See Summary of Significant Accounting Policies under Note 2 in the notes to the financial statements for the year ended December 31, 2024 for more information about K Enter’s significant accounting policies.

 

Estimating Fair Value of Convertible Debt Security

 

We do not have a history of market price for the obligor on K Enter’s convertible debt security because the obligor is not publicly traded. As such, the fair value of the convertible debt security was determined using the Tsiveriotis-Fernandes model (the “T-F Model”).

 

The T-F Model separates convertible hybrid instruments into equity value and debt value. The risk-neutral probability is applied to the equity value, discounted at the risk-free interest rate, while the debt value is discounted at the risk interest rate reflecting the credit risk of the obligor. The model calculates each value separately and measures the value of the hybrid financial product through the summation of these two values, known as the blended discount model. The T-F Model distinguishes discount rates that align with the expected future cash flows inherent in the option structure within complex financial instruments, which aligns with the characteristics of cash flows.

 

The following assumptions were used in determining the fair value of the convertible debt security as of December 31, 2024:

 

Risk-neutral probability     49.43 %
Risk-free interest rate     4.14 %
Risk interest rate reflect the credit risk of the obligor     16.31 %

 

10

 

 

Estimating Fair Value of Convertible Notes

 

The fair value of the convertible notes was determined using the Probability Weighted Return Model. The convertible notes issued contain a right to convert the notes into the common shares. The Probability Weighted Return Model separates the embedded conversion features associated with the convertible notes separately from the host contract as the economic characteristics and risks of the embedded conversion feature are not closely related to the economic characteristics and risks of the host contract. The carrying amount of the convertible notes was determined for the difference between the fair value of the embedded conversion features and the principal amount of the convertible notes. The difference between the carrying value and principal amount of the convertible notes represents the discount on notes that was amortized to interest expense over the terms of the convertible notes using the effective interest rate method.

 

Leveraged adjusted guideline volatility for public companies was utilized in determining the fair value of the convertible notes because we do not have a history of market price on convertible notes as we are not publicly traded.

 

The following assumptions were used in determining the fair value of the convertible bond as of December 31, 2024:

 

Risk-free interest rate     3.62~4.55 %
Debt rate     6.67~7.31 %

 

Estimating Fair Value of Common Stock

 

We do not have a history of market price for K Enter’s common stock because it is not publicly traded. As such, the fair value of K Enter’s common stock was determined by K Enter’s board of directors as of the date shares of common stock were issued from treasury shares, by considering a number of objective and subjective factors, including:

 

  ● Our business, financial condition and results of operations, including related industry trends affecting K Enter’s operations and the progress of conversations concerning:

 

  ○ the potential acquisitions of controlling equity interests of the Six Korean Entities

 

  ○ a potential merger with Global Star and the eventual execution of the Merger Agreement

 

  ○ a capital rise through the issuance of convertible preferred stock

 

  ● Our forecasted operating performance and projected future cash flows;

 

  ● the lack of an active market for K Enter’s common stock and K Enter’s convertible preferred stock;

 

  ● the likelihood of securing additional financing beyond the ongoing Series A and Series A-1 capital raises

 

  ● liquidation preferences, redemption rights and other rights and privileges of K Enter’s common stock and convertible preferred stock;

 

  ● market multiples of K Enter’s comparable public peers; and

 

  ● market conditions affecting K Enter’s industry.

 

In connection with estimating the fair value of K Enter’s common stock at the time shares of common stock were issued from K Enter’s treasury shares, we obtained a third-party valuation from an independent valuation firm. The valuation dated as of December 31, 2024 was conducted in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation utilizing an option pricing model (the “OPM”)

 

11

 

 

The OPM estimated K Enter’s enterprise value by asserting the September 2024 Series A-1 issuances to third parties was transacted at a fair value of $600.00 per share. The OPM utilizes the recent sale of the Preferred Series A-1 shares to a third-party as the best indicator of fair value in order to estimate the fair value of the respective classes of equity. We used a market approach, whereby we applied the recent transaction method for each outcome, or management estimations to estimate the implied equity value.

 

The OPM utilizes K Enter’s best estimates of the timing and likelihood of two scenarios, (a) merger with a special purpose acquisition company (“SPAC”) and (b) sale, in order to estimate the fair value of the respective classes of equity. For each scenario, we used either a market approach, whereby we applied the precedent transaction method for each outcome, or management estimations to estimate the implied equity value.

 

The equity value was allocated until the Series A-1 Preferred was equal to the sale price and allocated to each of the equity–linked instruments using an OPM. Based on the structure of the Company’s equity linked instruments, we developed breakpoints based on the conversion prices and exercise prices of the various preferred stock, and outstanding options and warrants. These breakpoints were used to allocate value as each instrument would be exercised/converted as it was in the money. We calculated allocation percentages for each equity–linked instrument. The value of each tranche was determined by subtracting the value of the previous tranche, which is multiplied by the applicable allocation percentages, and summed to yield the total value of each equity–linked instrument. The total value for each class of equity was then divided by the respective shares outstanding for that class to determine the per share value. The resulting value per share was the indicated present value, on a non-marketable basis.

 

For the valuation used to establish the fair value of K Enter’s common stock as of December 31, 2024, the following assumptions were used:

 

    SPAC
Merger
Scenario		     Sale
Scenario		  
Probability     90.0 %     10.0 %
Time to liquidity event     0.33 years       2.5 years  
Risk free rate     4.38 %     4.38 %
Volatility     42.8 %     42.8 %
Discount for lack of marketability     6.9 %     6.9 %

 

There is inherent uncertainty in K Enter’s forecasts and projections, and if we had made different assumptions and estimates than those described previously, the amount of K Enter’s share-based compensation expense, net loss, and net loss per share amounts could have been materially different.

 

The per-share fair value of K Enter’s common stock were newly issued or issued from K Enter’s treasury shares during the period from January 1, 2024 to December, 2024, were $556.74 with six months restriction and 598.01 with no restriction. The difference in fair value per share of common stock newly issued or issued from treasury shares is driven by the length of the restricted period for which the underlying share of common stock cannot be sold by the individual.

 

We were formed on January 4, 2023 for the purpose of acquiring the Six Korean Entities. We entered into equity purchase agreements with the Six Korean Entities between March 2023 and April 2023, all of which are contingent upon PubCo’s proxy statement/prospectus on Form F-4 being declared effective by the SEC. We entered into conversations with Global Star, a special purpose acquisition company in February 2023, and we executed a term sheet with Global Star in April 2023 to consummate a business combination. On June 15, 2023, we executed a Merger Agreement with Global Star to consummate the Business Combination. The completion of the equity purchase agreements with the Six Korean Entities prior to the consummation of the Business Combination is the primary driver of the increase in the estimated fair value of the common stock from the date of the common stock issuances from K Enter’s treasury shares to the estimated merger price of approximately $3,121 per share on an as converted basis.

 

12

 

 

We believe that it is reasonable to expect that the completion of the equity purchase agreements with the Six Korean Entities will add value to the shares of K Enter’s common stock as the entities are operational and revenue generating entities with balance sheets that will be combined with ours subsequent to the transaction consummation. We believe that it is reasonable to expect that the completion of the Business Combination will add value to the shares of K Enter’s common stock because they will have increased liquidity and marketability. We believe that the preceding estimates are a reasonable description of the value that market participants would place on K Enter’s common stock as of the valuation date.

 

Income Taxes

 

We recognize deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. As a pre-revenue company we generate net operating losses that would be available to carryforward to future years and applied against future taxable income.

 

Under Section 382 of the Code, substantial changes in K Enter’s ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset K Enter’s taxable income. Specifically, the limitation may arise in the event of a cumulative change in K Enter’s ownership of more than 50% within a three-year period. Any such limitation may significantly reduce the utilization of K Enter’s net operating loss carry forwards before they expire. We have not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since K Enter’s inception, due to the significant costs and complexities associated with the study. However, we believe it is likely that transaction that have occurred in the past, alone or together with the closing of the Business Combination and other transactions that may occur in the future, would trigger an ownership change pursuant to Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset out taxable income, if any.

 

For additional information on K Enter’s accounting policy on income taxes, see Note 2 – Summary of significant accounting policies – Income Taxes and Note 17 – Income Taxes in the accompanying audited financial statements.

 

Emerging Growth Company Status

 

We intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we are not required to, among other things: (a) provide an auditor’s attestation report on K Enter’s system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance comparison of the Chief Executive Officer’s compensation to median employee compensation.

 

We will remain an emerging growth company under the JOBS Act until the earliest of (a) the day of K Enter’s first fiscal year following the fifth anniversary of the Closing, (b) the last date of K Enter’s fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding securities held by non-affiliates or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.

 

Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to a variety of market and other risks, including the effects of interest rate changes, foreign currency fluctuations, inflation, and the availability of funding sources.

 

13

 

 

Interest Rate Risk

 

We hold cash and cash equivalents for working capital purposes. We do not have material exposure with respect to investments, as any investments that we enter into are primarily highly liquid investments. As of December 31, 2024, we had a cash balance of $333,069, consisting of operating accounts which are not affected by changes in the general level of U.S. interest rates.

 

Foreign Currency Risk

 

We conduct K Enter’s operations through two branches, one located in the United States and one in Korea. The transactions of each branch are primarily denominated in the U.S. dollar and the Korean Won, respectively, the functional currency. We have elected to use a reporting currency of the U.S. dollar. As foreign exchange rates change, the U.S. dollar equivalent of K Enter’s existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses will change. We are evaluating the best method to manage K Enter’s exposure to foreign currency fluctuations to reduce volatility of earnings and cash flow in order to allow management to focus on core business issues and challenges.

 

The economic and political conditions in the countries we are currently in and plan to operate in could impact K Enter’s ability to manage K Enter’s exposure to foreign currency fluctuations in those countries or repatriate cash from those countries.

 

Inflation Risk

 

We do not believe that inflation currently has a material effect on K Enter’s business. Inflation may become a greater risk in the event of changes in current economic and governmental fiscal policy.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on K Enter’s financial position or results of operations under adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted under Note 2 – Summary of significant accounting policies in the notes to the financial statement for the year ended December 31, 2024 for more information about recent accounting pronouncements, the timing of their adoption and K Enter’s assessment, to the extent we have made one, of their potential impact on K Enter’s financial condition and results of operations.

 

Subsequent Event

 

On January 2, 2025, upon the closing of equity purchase agreement, K Enter completed the acquisition of the controlling interest of Six Korean Entities by share exchange. However, the purchase price allocation to assets acquired and liabilities assumed allocation to assets and liabilities is based on estimates, assumptions, valuations, and other studies that have not progressed to a stage where there is sufficient information to make a definitive calculation.

 

On February 3, 2025, shareholders of Global Star and K Wave Media approved the proposals regarding Merger Agreement on the shareholders’ meeting. The Merger Agreement was approved by NASDAQ on February [●], 2025.

 

On February 10, the company fully repaid the “1st Lee Loan” and partially paid the 3rd Lee Loan by $25,046, leaving a balance of $222,091.

 

On February 27, 2025, Play company Co.,Ltd. loaned K Enter $744,319. The Loan is for a term of one year and bears interest at the rate of 4.6% per annum.

 

14

 

Exhibit 15.3

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF K Wave media ltd.

 

References to the “K Wave Media” refers to K Wave Media Ltd. The following discussion and analysis of K Wave Media Ltd.’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein) K Wave Media Ltd.’s audited financial statements as of December 31, 2024 and December 31, 2023 and for the period ended December 31, 2024 and the period from June 22, 2023 (inception) to December 31, 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

K Wave Media Ltd. (“the Company”), a wholly-owned subsidiary of Global Star Acquisition Inc. (“Global Star”), was incorporated on June 22, 2023 and the Company’s registered office is at c/o Maples Corporate Services Limited PO Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands. The Company was formed for the purpose of becoming the ultimate parent company following the transactions contemplated in the Merger Agreement. The Company maintains one direct wholly owned subsidiary, GLST Merger Sub Inc. (“Merger Sub”), a Delaware corporation. Merger Sub was incorporated to facilitate the consummation of the Business Combination Agreement. As of December 31, 2024, Merger Sub had no operations. The Company and Merger Sub are together referred to as the “Group”.

 

Global Star has entered into a merger agreement, dated as of June 15, 2023, and as amended on March 11, 2024, June 28, 2024, and July 25, 2024 (as it may be amended from time to time, the “Merger Agreement”), which provides for a Business Combination between Global Star and K Enter Holdings, Inc., a Delaware corporation (“K Enter”). Pursuant to the Merger Agreement, the Business Combination will be effected in two steps: (i) subject to the approval and adoption of the Merger Agreement by the stockholders of Global Star, Global Star will reincorporate to Cayman Islands by merging with and into the Company, with the Company remaining as the surviving publicly traded entity (the “Reincorporation Merger”); (ii) one (1) business day following the Reincorporation Merger, Merger Sub will be merged with and into K Enter, resulting in K Enter being a wholly owned subsidiary of the Group.

 

As of December 31, 2024, the Company issued 5,000,000 shares of the Company’s ordinary shares. Pursuant to the Merger Agreement, the Company expects to cancel all the outstanding 5,000,000 shares of the Company’s ordinary shares as of the effective date of the Business Combination. Also, the Company expects to issue a total of 59,000,000 ordinary shares of the Company at a price of $10 per share as consideration for a total of 189,013 shares of K Enter. This consists of 101,202 shares of outstanding K Enter’s common stock, 47,013 shares of K Enter common stock to be issued to the owners of the Six Korean Entities pursuant to the equity purchase agreement based on an estimated 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1,470.00 / USD $1.00, and 40,798 K Wave shares of common stock to be issued to the holders of K Enter’s Series A Preferred Stock and Series A-1 Preferred Stock based on the conversion of the of K Enter Series A Preferred Stock and Series A-1 Preferred Stock. The total ordinary shares of the Company to be issued to the stockholders of K Enter will be 59,000,000 ordinary shares in connection with the closing of the Business Combination.

 

Following the consummation of the transactions contemplated by the Merger Agreement, the Group will be the surviving publicly-traded entity. However, the consummation of the transactions contemplated by the Merger Agreement is subject to numerous conditions, and there can be no assurances that such conditions will be satisfied.

 

 

 

 

Results of operations

 

Present below is a summary of K Wave Media’s operating results as follows:

 

Comparison of the year ended December 31, 2024 and the Period from June 22, 2023 (inception) to December 31, 2023

 

   For the
year ended
December 31,
2024		   For the
period from
June 22, 2023
(inception) through
December 31,
2023		 
Statement of Profit or Loss:          
Operating expenses  $-   $(11,431)
General and Administrative   -    (11,431)
Loss From Operations   -    (11,431)
Other income   -    - 
Net loss  $-   $(11,431)

 

K Wave Media’s all expenses decreased for the year ended December 31, 2024 as compared to the period from June 22, 2023 (inception) to December 31, 2023, by $11,431 or 100%. For the period from June 22, 2023 (inception) to December 31, 2023, K Wave Media’s all expenses have been related to initial start-up costs incurred with setting up a legal entity. As of December 31, 2024, the Company had no operation and the Company expects to incur the operating expenses after becoming the ultimate parent company following the transactions contemplated in the Merger Agreement.

 

Liquidity and capital resources

 

As of December 31, 2024, we had no cash or cash equivalents.

 

From inception to December 31, 2024, we did not have any operating, investing, or financing cash flows.

 

Contractual obligations and commitments

 

As of December 31, 2024, we have no contractual obligations and commitments outside of our related party transaction with K Wave Media.

 

Off-balance sheet arrangements

 

As of December 31, 2024, we do not have any off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

We prepare our Financial Statements in accordance with the IFRS issued by the International Accounting Standards Board (“IASB”). Refer to “Note3 - Material accounting policies” in the accompanying Financial Statements for discussion of the accounting policies applied by us. From inception to December 31, 2024, we did not have operating activities or become party to transactions requiring the application of significant, difficult, subjective, or complex accounting judgements.

 

Quantitative and qualitative disclosures about market risk

 

As of December 31, 2024, we had no material exposure to market risk.

 

Subsequent Event

 

In January 2025, K Wave Media entered into agreements with five investors issuing a Convertible Senior Unsecured Note (PIPE), which is entitled to convert to common shares of K Wave Media immediately after the completion of the business combination. The agreement includes various conditions, including the issuance of free trading bonus shares by K Wave Media and 3-year maturity with 3% annual coupon rate. The total amount of principal is $4.41 million and will be paid upon the completion of business combination, with $0.5 million of the total principal being paid to K Enter Holdings Inc as a working capital loan.

 

 

 

Exhibit 15.4

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF Play Company

 

References to the “Play Company” refer to Play Company Co., Ltd. The following discussion and analysis of Play Company’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein): Play Company’s audited financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023 and 2022 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

Play Company Co., Ltd. (“Play Company”) sells its entertainment content and services and food and beverage products, as well as licenses its intellectual property in the food and beverage business. Play Company offers made-to-order services to plan projects, design merchandise and deliver customized products to its customers who are primarily music talent agencies that work with K-Pop artists, and operates a retail bakery-café business and franchising business under the concept names “Our Bakery”. As of December 31, 2024, retail operations consist of 13 Company-owned bakery-cafes and 19 franchise-operated bakery-cafes located in South Korea and China. Accordingly, Play Company has identified two operating segments for which Play Company’s management reviews discrete financial information as it makes decisions about its business – Content and Food and Beverage.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

Key Components of Statement of Operations

 

Play Company’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

 

 

 

Results of Operations

 

A summary of Play Company’s operating results as translated to the U.S. dollar prepared under IFRS is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Income Statement:                                
Revenues   ₩ 43,010     $ 31,545,495     ₩ 67,481     $ 51,640,054  
Cost of sales     (41,912 )     (30,739,899 )     (60,837 )     (46,555,654 )
Gross profit     1,098       805,596       6,644       5,084,400  
Operating expenses     (4,605 )     (3,377,691 )     (3,147 )     (2,408,011 )
Operating income(loss)     (3,507 )     (2,572,095 )     3,497       2,676,389  
Other income (expense)     (805 )     (590,384 )     56       42,647  
Profit(Loss) before taxes     (4,312 )     (3,162,479 )     3,553       2,719,036  
Income tax benefit (expense)     754       552,757       (761 )     (582,186 )
Net income(loss)   ₩ (3,558 )   $ (2,609,722 )   ₩ 2,792     $ 2,136,850  

 

For the year ended December 31, 2024 and 2023, Play Company’s operating income was driven by its content segment, which realized revenues totaling Korean Won 28,380 million ($20.8 million) and Korean Won 49,772 million ($38.1 million), respectively, and its food and beverage segment, which realized revenues of Korean Won 14,630 million ($10.7 million) and Korean Won 17,709 million ($13.6 million), respectively.

 

The operating result for the year ended December 31, 2024 represents only 33.8% of Play Company’s forecasted revenue of Korean Won 127.4 billion for the financial year of 2024 and also marks a 36.3% decline year-over-year compared to Korean Won 67.5 billion of revenues for the year ended December 31, 2023. This relatively low performance is largely attributable to (i) unexpected delays in some of the merchandising projects previously planned for the year and (ii) slower-than-expected progress in developing new business opportunities, among other factors.

 

The operating result for the year ended December 31, 2024 represents only 33.8% of Play Company’s forecasted revenue of Korean Won 127.4 billion for the financial year of 2024 and also marks a 36.3% decline year-over-year compared to Korean Won 67.5 billion of revenues for the year ended December 31, 2023. This relatively low performance is largely attributable to (i) unexpected delays in some of the merchandising projects previously planned for the year and (ii) slower-than-expected progress in developing new business opportunities, among other factors.

 

(i) Unexpectedly delayed projects: As stated within this document, Play Company entered into a new business agreement with SM Entertainment in December 2023 and has been developing new merchandise projects for K-Pop artists from SM Entertainment. Since this is the first year of business cooperation between Play Company and SM Entertainment, the two companies needed to work closely to align their teamwork. As a result, several projects that were initially planned for release in the first half of the year have been adjusted, revised and delayed to ensure quality improvements. The first merchandise project for a top-tier K-pop artist under SM Entertainment’s management, Aespa, was released in the first quarter of 2025. This project generated approximately Korean Won 1.8 billion in revenue and is comparable to that of previous projects involving other top-tier K-pop artists under HYBE. Play Company is currently focusing on releasing the delayed projects according to the revised schedule, aiming to generate substantial revenue in 2025.

 

2

 

 

(ii) New business development: As stated in this document, Play Company has been preparing for several new business opportunities to offset the anticipated decline in HYBE-related revenues in 2024. These opportunities include expanding from K-pop artists to a broader range of artists, including actors and virtual artists, and diversifying its merchandise offerings, such as light sticks and other concert-related collectibles. During the year ended December 31, 2024, Play Company developed and released merchandise for the fan meeting of Korean male actor Byun Woo-seok, the lead cast in the Korean drama "Lovely Runner." This project resulted in a significant achievement and led to new opportunities in Play Company’s core business areas. The slower-than-expected progress in developing these opportunities contributed to the relatively low performance in the year ended December 31, 2024. However, Play Company is currently investing substantial effort and resources to launch these new business initiatives, aiming to generate meaningful revenue in 2025.

 

Play Company is actively implementing strategies to address and overcome the current challenges, as mentioned above. Play Company, however, runs the risk of generating annual results that fall short of forecasted revenue if it (i) encounters further delays or cancellations of its merchandising projects rescheduled due to internal decisions made by artist agencies, (ii) fails to distribute and sell the expected quantities of its merchandises, or (iii) experiences further delays or setbacks in the development of its new business opportunities. Acknowledging this risk, we have been closely cooperating with and supporting the executive management of Play Company to meet its forecasted revenue for the financial year of 2025.

 

Play Company’s gross profit has decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 5,546 million ($4.3 million), or 83.5%, corresponding to a decrease in revenue of Korean Won 24,471 million ($20.1 million), or 36.3%. This is primarily attributable to a group of projects associated with a K-pop boybands, which generated Korean Won 595 million ($0.4 million) and Korean Won 16,040 million ($12.3 million) for the years ended December 31, 2024 and 2023, respectively, as these projects were completed early in 2024. For the year ended December 31, 2024 and 2023, three of Play Company’s customers account for 27.4% and 60.0%, respectively, of total content segment revenue and 41.5% and 81.4%, respectively, of total Play Company revenue.

 

For the year ended December 31, 2024 and 2023, Play Company’s operating expenses are primarily driven by payroll and payroll related costs of Korean Won 2,006 million ($1.5 million) and Korean Won 2,118 million ($1.6 million), respectively. Additional components of operating expenses consisted of bad debt expenses of Korean Won 297 million ($0.2 million) and Korean Won 172 million ($0.1 million), respectively, depreciation expense of Korean Won 679 million ($0.5 million) and Korean Won 649 million ($0.4 million), respectively, losses on disposal of property, plant and equipment of Korean Won 324 million ($0.2 million) and Korean Won 31 million (less than $0.1 million), respectively, impairment losses on property, plant and equipment of Korean Won 965 million ($0.7 million) and Korean Won 2 million (less than $0.1 million), respectively, and other administrative costs of Korean Won 335 million ($0.2 million) and Korean Won 175 million ($0.2 million) respectively, for the years ended December 31, 2024 and 2023.

 

Play Company’s operating expenses increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 1,458 million ($1.0 million), or 46.3%.This is primarily attributable to an increase in bad debt expenses of Korean Won 126 million ($0.1 million), losses on the disposal of property, plant and equipment of Korean Won 293 million ($0.2 million) and an increase in impairment loss on property, plant and equipment of Korean Won 962 million ($0.7 million).

 

For the year ended December 31, 2024, Play Company has executed only a partial number of targeted projects in 2024 due to unexpected delays in launching the projects as decided by some customers, although Play Company had more than enough production capacity.

 

Play Company’s cost of sales is closely related to the revenues generated because Play Company’s cost of sales primarily consist of costs incurred in connection with the manufacturing of the video merchandises. Therefore, the related manufacturing costs correlatedly decrease if the revenue declines.

 

3

 

 

For the years ended December 31, 2024 and 2023, Play Company’s other income (expense) is comprised of

 

  ● finance income of $0.4 million and $1.3 million, respectively, primarily attributable to gains on foreign currency translation of less than $0.1 million and $0.3 million, respectively, gains on foreign currency transactions of less than $0.1 million and $0.2 million, respectively. Interest income earned from interest bearing notes and accounts was $0.2 million and $0.3 million, respectively. Gains on disposal of financial instruments of $0.5 million of was recognized for the year ended December 31, 2023 that did not recur for the year ended December 31, 2024.

 

  ● finance costs of $1.0 million and $1.3 million, respectively, primarily attributable to interest expense relating to lease liabilities of $0.9 and $1.1 million, respectively, and losses on foreign currency transactions of less than $0.1 million and $0.2 million, respectively.

 

Cash Flow:

 

A summary of Play Company’s operating, investing, and financing cash flows prepared under IFRS is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ (2,857 )   $ (2,095,561 )   ₩ (8,378 )   $ (6,410,933 )
Investing activities     (361 )     (264,799 )     (1,790 )     (1,369,862 )
Financing activities     (1,287 )     (944,212 )     (12,190 )     (9,328,274 )
Effect of exchange rates on cash     71       51,721       362       276,657  
Net change in cash and cash equivalents   ₩ (4,434 )   $ (3,252,851 )   ₩ (21,996 )   $ (16,832,412 )

 

Play Company’s cash flows used in operating activities decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 5,521 million ($4 million). This is primarily attributable to a decrease in payments for trade payables of Korean Won 21,788 million ($16.7 million) and in prepaid expenses of Korean Won 2,733 million ($2.1 million), offset by a decrease in net income of Korean Won 6,351 million ($4.7 million) and a decrease in collections of trade receivables of Korean Won 10,616 million ($8.0 million) for the year ended December 31, 2024.

 

Operational cash flow reflects the similar trend of fluctuation of revenue and operating expenses.

 

Play Company’s cash flows used in investing activities decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 1,429 million ($1.1 million). This is primarily attributable to an increase in proceeds from loans of Korean Won 4,221 million ($3.2 million) and a decrease in cash outflows from payments made for the acquisition of property, plant and equipment of Korean Won 676 million ($0.5 million), partially offset by a decrease in cash inflows from the disposal of other financial assets of Korean Won 3,801 million ($2.9 million).

 

Play Company’s cash flows used in financing activities decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 10,903 million ($8.4 million) and primarily relates to the acquisition of treasury shares for the year ended December 31, 2023.

 

4

 

 

Liquidity and Capital Resources:

 

Anseilen incurred a loss of Korean Won 248,885 thousand ($ 168,488) for the year ended December 31, 2024, and had net total deficit of Korean Won 596,517 thousand ($ 403,824) as of December 31, 2024. Anseilen acknowledges that there is a risk that the quantum and timing of cash flows sufficient to sustain operations may not be achievable and that management forecasts regarding cash flow from operations may prove inaccurate. The continuation of Anseilen’s activities is dependent on the availability of adequate financial support. Anseilen has stated that these conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.

 

Historically, Play Company’s sources of liquidity have been cash flows from the issuance of common stock and the generation of net income. As of December 31, 2024, Play Company had an aggregate cash balance of Korean Won 4,151 million ($2,808,501) and net working capital deficit of Korean Won 6,809 million ($4,607,395).

 

Play Company intends to operate with its current cash on hand and the profits it anticipates earning in the future. Play Company intends to expand its current business operations, including providing additional offerings such as obtaining intellectual property rights and expand its international footprint. Play Company may need to borrow money or sell equity to finance its operations and planned growth.

 

Play Company’s future capital requirements will depend on many factors, including its revenue growth rate, potential acquisitions, the timing and extent of spending to support future sales and marketing efforts. In order to finance these opportunities, Play Company may need to raise additional financing. While there can be no assurances, if additional capital is required, Play Company intends to raise such capital through operations or additional issuances of equity. If additional financing is required from outside sources, Play Company may not be able to raise it on terms acceptable to it or at all. If Play Company is unable to raise additional capital when desired, Play Company’s business, results of operations and financial condition would be materially and adversely affected.

 

Related Parties

 

The related parties of Play Company’s comprise key management personnel and entities controlled by or affiliated with key management personnel. As of December 31, 2024, Play Company entered into revenue and purchase agreement with related parties. Under the agreements, total gross revenue of approximately Korean Won 8,856 million ($6.5 million).

 

As of December 31, 2024, Korean Won 1,116 million ($0.8 million) of accounts payable and Korean Won 2,790 million ($1.9 million) of borrowings are outstanding as Play Company entered into the agreements for acquisition of treasury stock and borrowing with Chief Executive Officer for the year ended As of December 31, 2024. Play Company is provided guarantees for the borrowings obtained from financial institutions by Chief Executive Officer.

 

See Related Parties under Note 32 in the notes to the consolidated financial statement for the year ended December 31, 2024, 2023 and 2022 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the period presented, Play Company did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Play Company’s consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires Play Company to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date, as well as the reported expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Play Company’s consolidated financial statements.

 

Play Company believes the accounting policies discussed in the notes to Play Company’s consolidated financial statements are critical to understanding Play Company’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

5

 

 

See Summary of Material Accounting Policies under Note 5 in the notes to the consolidated financial statements for the years ended December 31, 2024, 2023 and 2022 for more information about Play Company’s material accounting policies.

 

Impairment assessment on CGU

 

Play Company estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, Play Company estimates the recoverable amount of cash-generating unit (“CGU”). The value in use is estimated by applying a weighted average cost of capital that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

 

As of December 31, 2024 and 2023, Play Company performed impairment test for Food and Beverages operating segment. Play Company identifies each of bakery-cafés as CGU. As the individual CGUs are tested for impairment at the same time as the group of CGUs containing the goodwill, Play Company tested the individual CGUs for impairment before the group of CGUs is tested.

 

The recoverable amount of each CGU is determined based on its value in use. Value in use is calculated using the estimated cash flow based on 5-year business plan approved by management. The estimated revenue and operating expenditures on Play Company’s products used in the forecast was determined considering external sources and Play Company’s experience. Management estimated the future cash flows based on its past performance and forecasts on consumer inflation rate. The key assumptions used in the estimation of value in use for Food and Beverages CGU include revenue and operating expenditures for the forecast period, growth rates for subsequent years (“terminal growth rate”), and discount rate. Terminal growth rate and the discount rate used in the estimation of value in use are as follows

 

    Weighted average
cost of capital		     Terminal
growth rate		  
2024     9.6 %     1.0 %
2023     10.7 %     1.0 %

 

The discount rate was calculated using the weighted average cost of equity capital and debt and the beta of equity capital was calculated as the average of four Korean listed companies in the same industry and Play Company. Cost of debt was calculated using the yield rate of non-guaranteed corporate bond considering Play Company’s credit rating and debt ratio was determined using the average of the debt ratios of the four Korean listed companies in the same industry and Play Company. Play Company calculates the value in use of Food and Beverages CGU using post-tax cash flows and a post-tax discount rate.

 

As a result of the impairment test for goodwill for groups of Food and Beverages CGUs, the recoverable amount exceeded its carrying amount by Korean Won 2,524 million in 2024. Korean Won 4,779 million in 2023 and 6,576 million in 2022 ($4.4 million in 2024, $3.2 million in 2023 and $1.7 million in 2022). The recoverable amount exceeded its carrying amount accounts 13.3% of the amount of value in use (2023: 18.9%, 2022: 24.9%). The value in use determined for this CGU is sensitive to the discount rate and terminal growth rate used in the discounted cash flow model.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Play Company’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which Play Company’s risk management program focuses on minimizing any adverse effects on its financial performance. Play Company operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of Play Company’s financial risk management under Note 27 in the notes to the consolidated financial statements for the years ended December 31, 2024, 2023 and 2022 for more information.

 

6

 

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, Play Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on Play Company’s consolidated financial position or results of operations under adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted under Note 5 Material accounting policies in the notes to the consolidated financial statement for the years ended December 31, 2024, 2023 and 2022 for more information about recent accounting pronouncements, the timing of their adoption and Play Company’s assessment, to the extent Play Company has made one, of their potential impact on Play Company’s consolidated financial condition and results of operations.

 

7

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SOLAIRE

 

References to the “Solaire” refer to Solaire Partners, LLC. The following discussion and analysis of Solaire’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein): (i) Solaire’s audited financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

Solaire Partners, LLC (“Solaire”) is a content-specialized private equity firm based in Korea that invests in movies, dramas, and content companies since 2017. It is led by their CEO, Pyeungho Choi and Solaire’s team of content and finance experts with extensive experience in the entertainment industry. Solaire follows a disciplined project selection process, followed by a thorough hands-on, value add approach to investments. It monitors, reviews and shapes marketing and distribution strategy (teaser, poster, setting release date, distribution), scenario development, and participates in the casting of a project. Solaire has invested in some of the highest-grossing films out of Korea. It has also invested in entertainment tech companies that digitize.

 

Among its distinctions, it has created Korea’s first and only movie investment fund based on proprietary movie data. The fund invests to capture the returns of the broad segment of Korean commercial movies. Solaire has invested over $138 million in over 200 content projects in the last five years. Solaire has received distinctions from the Korean government as one of the leading venture capitalist firms in the cultural content sector and has secured the investments from some of the largest financial institutions in Korea such as Samsung Securities, Industrial Bank of Korea that have started to invest in the movie industry.

 

The revenues of Solaire would account for approximately 1.8% of New K Enter’s total revenues in 2023 on a pro forma basis. Solaire derives revenues through a management fee (around 1%) on the amount invested. Solaire expect its share of total New K Enter revenues to remain at these levels.

 

Solaire’s priority includes helping K Enter extend the investment scope from films to TV series and other formats of content including webtoons and animation and expanding K Enter’s business globally.

 

Solaire’s distinctiveness stems from the fact that its all members have a various experience in contents investment and also possess finance capabilities. This combination allows Solaire to approach investments in the content industry with a deeper understanding of the creative and artistic aspects, rather than solely focusing on the financial aspects of a project. In addition, due to their extensive experience and expertise in the content industry, Solaire has built a strong network in this industry. Strong relationships with influential producers and directors have allowed it to become the anchor investor in acclaimed movies such as “Parasite” and “Decision to Leave.” This showcases their ability to identify and support promising projects and talent.

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

8

 

 

Key Components of Statement of Operations

 

Solaire’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

Results of Operations

 

A summary of Solaire’s operating results is as follows:

 

Comparison of Year Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Income Statement:                                
Revenues   ₩ 1,424     $ 1,044,534     ₩ 1,716     $ 1,313,449  
Cost of sales     (83 )     (61,014 )     (146 )     (111,904 )
Gross profit     1,341       983,520       1,570       1,201,545  
Operating expenses     (1,532 )     (1,123,640 )     (1,755 )     (1,343,224 )
Operating income     (191 )     (140,120 )     (185 )     (141,679 )
Other income (expense)     76       56,059       (77 )     (58,604 )
Loss before taxes     (115 )     (84,061 )     (262 )     (200,283 )
Income tax expense     (68 )     (49,724 )     (39 )     (30,264 )
Net income   ₩ (183 )   $ (133,785 )   ₩ (301 )   $ (230,547 )

 

For the year ended December 31, 2024 and 2023, Solaire’s operating income was driven by its content investment segment, which realized revenues totaling Korean Won 1,424 million ($1,044,534) and Korean Won 1,716 million ($1,313,450), respectively.

 

Solaire’s gross profit has decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 229 million ($218,025), or 14.6% corresponding to a decrease in revenue of Korean Won 292 million ($268,916), or 17.0%. This is attributable to a decrease in investment management revenue resulting from investment funds that were liquidated in September 2024. For the year ended December 31, 2024 and 2023, four of Solaire’s customers account for 100% and 100% of total Solaire revenue, respectively.

 

For the year ended December 31, 2024 and 2023, Solaire’s operating expenses are primarily driven by payroll and payroll related costs, commissions expenses, share-based payments for both periods presented.

 

Solaire’s operating expenses decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 223 million ($219,584), or 12.7%. This is primarily attributable to an increase in payroll and payroll related costs of Korean Won 263 million ($169,754) associated with an increased average salary of the management, a decrease in commission expenses of Korean Won 20 million ($17,082) associated with the development of software, and a decrease in share-based payments of Korean Won 421 million ($322,365) associated with the shares transferred to the employees that was held by Solaire Partners’ largest shareholder during the year ended December 31, 2023.

 

9

 

 

Cash Flows

 

A summary of Solaire’ operating, investing, and financing cash flows is as follows:

 

Comparison of Year Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ (511 )   $ (374,580 )   ₩ 417     $ 319,212  
Investing activities   ₩ 101     $ 74,052     ₩ (115 )   $ (88,447 )
Financing activities   ₩ 67     $ 49,294     ₩ (31 )   $ (23,435 )
Net change in cash and cash equivalents   ₩ (343 )   $ (251,234 )   ₩ 271     $ 207,330  

 

Solaire’s net cash flows used in operating activities for the year ended December 31, 2024 was Korean Won 511 million ($374,580), compared to Korean Won 417 million ($319,212) of net cash flows provided by operating activities for the year ended December 31, 2023. This is primarily attributable to an increase in Solaire’s income tax paid by Korean Won 18 million ($13,240), a decrease in share-based payments of Korean Won 421 million ($322,365), a decrease in project investment assets of Korean Won 220 million ($162,143), and a decrease in contract assets of Korean Won 149 million ($105,564) during the year ended December 31, 2024.

 

Solaire’s net cash flows provided by investing activities for the year ended December 31, 2024 was Korean Won 101 million ($74,052), compared to Korean Won 116 million ($88,447) of net cash flows used in investing activities for the year ended December 31, 2023. This is primarily attributable to a decrease in leasehold deposit of Korean Won 65 million ($47,674) and a decrease in payment made for leasehold deposit of Korean Won 150 million ($114,788).

 

Solaire’s net cash flows provided by financing activities for the year ended December 31, 2024 was Korean Won 67 million ($49,294), compared to Korean Won 31 million ($23,435) of net cash flows used in financing activities for the year ended December 31, 2023. This is primarily attributable to an increase in short-term borrowings of Korean Won 207 million ($152,069), partially offset by security deposits received during the year ended December 31, 2023, which did not recur in the year ended December 31, 2024.

 

Liquidity and Capital Resources

 

Historically, Solaire’s sources of liquidity have been cash flows from fundraising and the generation of net income. As of December 31, 2024, Solaire had an aggregate cash balance of Korean Won 0.4 million ($240) and net working capital of Korean Won 314 million ($212,382).

 

Solaire intends to operate with its current cash on hand and the profits it anticipates earning in the future. Solaire intends to expand it current business operations through oversea fund raising and exploit investment opportunities to scale up its profit. Solaire may need to borrow money or sell equity to finance its operations and planned growth.

 

Solaire’s future capital requirements will depend on many factors, including its revenue growth rate, potential acquisitions, the timing and extent of spending to support future sales and marketing efforts. In order to finance these opportunities, Solaire may need to raise additional financing. While there can be no assurances, if additional capital is required, Solaire intends to raise such capital through operations or additional issuances of equity. If additional financing is required from outside sources, Solaire may not be able to raise it on terms acceptable to it or at all. If Solaire is unable to raise additional capital when desired, Solaire’s business, results of operations and financial condition would be materially and adversely affected.

 

10

 

 

Related Parties

 

The related parties of Solaire comprise individuals, entities with significant influence over the Company, and associates. Solaire entered into multiple investment management agreements with said associates, pursuant to which Solaire will deliver investment management services.

 

See Related Parties under Note 28 in the notes to the financial statement for the year ended December 31, 2024 and 2023 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the periods presented, Solaire did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Solaire’s financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires Solaire to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting dates, as well as the reported income and expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Solaire’s financial statements.

 

Solaire believes the accounting policies discussed in the notes to Solaire’s financial statements are critical to understanding Solaire’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

See Summary of Material Accounting Policies in Note 5 to the financial statements as of and for the years ended December 31, 2024 and 2023 for more information about Solaire’s material accounting policies.

 

Equity-accounted investees

 

In determining whether Solaire has significant influence, Solaire takes into account whether Solaire directly or indirectly holds 20% or more of the voting rights over the investee, whether Solaire participates in the board or other decision-making body equivalent thereto of the investees, or whether Solaire’s potential voting rights will affect these rights.

 

Although Solaire holds less than 20% of equity interests in investment fund, investments in such investees were classified as investments in associates as Solaire can exercise significant influence over financial and operating policy decisions as a general partner.

 

Financial Instruments – Fair values and risk management

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Solaire uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

 

These valuation techniques use as much market observable information as possible and use the least amount of Solaire-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2. If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

11

 

 

The valuation techniques used to measure the fair value of a financial instrument include:

 

  ● Market price or dealer price of a similar financial instrument
     
  ● The fair value of derivative instruments is determined by discounting the amount to present value using the leading exchange rate as of the end of the reporting period

 

Quantitative and Qualitative Disclosures about Market Risk

 

Solaire’s operating activities expose itself to a variety of financial risks: credit risk and liquidity risk from which Solaire’s risk management program focuses on minimizing any adverse effects on its financial performance. Solaire operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of Solaire’s financial risk management under Note 24 in the notes to the financial statements for the years ended December 31, 2024 and 2023 for more information.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, Solaire believes that the impact of recently issued standards that are not yet effective will not have a material impact on Solaire’s financial statements upon adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted in Note 5 Material accounting policies in the notes to the financial statement for the years ended December 31, 2024 and 2023 for more information about recent accounting pronouncements, the timing of their adoption and Solaire’s assessment, to the extent Solaire has made one, of their potential impact on Solaire’s financial condition and results of operations.

 

12

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF APEITDA

 

References to the “Apeitda” refer to Apeitda Co., Ltd. The following discussion and analysis of Apeitda’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein): (i) Apeitda’s audited financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

Established in 2013, Apeitda Co., Ltd. (“Apeitda”)’s main business is a film production studio and is led by Jung Byung-gil and his brother Jung Byung-sik. Apeitda’s focus has been on action and thriller movies such as The Villainess and Carter which received recognition from Hollywood for its unique camerawork to create a sense of realism in action films.

 

Apeitda is actively involved in the film production business, producing both domestic and foreign movies. As a forward-thinking production company with a commitment to original ideas, Apeitda creates content that remains true to the fundamental values of entertainment and visual enjoyment. Apeitda’s portfolio includes films spanning various genres, from commercial blockbusters to independent features. Notably, Apeitda’s recent success in the box office was marked by the global streaming of the action film "Carter" on Netflix, solidifying its position as a production company capable of delivering world-class films.

 

Looking ahead, Apeitda has ambitious plans for numerous upcoming projects set to be streamed on global OTT channels like Amazon and Netflix. This strategic move reflects its dedication to further expanding its capabilities as a global film production studio.

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

Key Components of Statement of Operations

 

Apeitda’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

13

 

 

Results of Operations

 

A summary of Apeitda’s operating results is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Income Statement:                                
Revenues   ₩ 18     $ 12,984     ₩ 90     $ 68,873  
Cost of sales     -       -       (26 )     (20,259 )
Gross profit     18       12,984       64       48,614  
Operating expenses     (346 )     (253,314 )     (321 )     (245,456 )
Operating profit (loss)     (328 )     (240,330 )     (257 )     (196,842 )
Other income (expense)     29       20,812       87       66,258  
Loss before taxes     (299 )     (219,518 )     (170 )     (130,584 )
Income tax benefit (expense)     (8 )     (5,557 )     15       11,181  
Net income (loss)   ₩ (307 )   $ (225,075 )   ₩ (155 )   $ (119,403 )

 

For the years ended December 31, 2024 and 2023, Apeitda’s operating income was driven by its content production segment, which realized revenues totalling Korean Won 18 million ($12,984) and Korean Won 90 million ($68,873) from settlement proceeds related to the secondary distribution rights of previously released films, respectively.

 

Apeitda’s gross profit has decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 46 million ($35,630), or 71.9% corresponding to a decrease in revenue of Korean Won 72 million ($55,889), or 80.0%.

 

For the years ended December 31, 2024 and 2023, Apeitda’s operating expenses are primarily driven by payroll and payroll related costs, depreciation expenses, commissions expenses and other bad debt expenses for both periods presented.

 

Apeitda’s operating expenses increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 25 million ($7,858), or 7.8%. This is primarily attributable to a decrease in commission expenses of Korean Won 18 million ($13,654) associated with professional consulting fees, an increase in advertising expenses of Korean Won 20 million ($14,669) due to Apeitda’s marketing efforts, a decrease in entertainment expenses of Korean Won 13 million ($10,084), and an increase in impairment of prepayment of Korean Won 30 million ($22,003) which incurred due to the delay in completing the projects.

 

Apeitda typically takes approximately three years to complete a content project. Apeitda currently has no content projects in the production stage, but Apeitda may generate revenue from agreements Apeitda has entered into, or may enter into, with respect to Apeitda’s content project candidates, as well as content projects in production stage in the future. Apeitda’s ability to generate content revenues will depend on the successful development of its content project candidates.

 

14

 

 

Cash Flows

 

A summary of Apeitda’s operating, investing and financing cash flows prepared under IFRS is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ (217 )   $ (158,979 )   ₩ (159 )   $ (121,559 )
Investing activities     1     $ 924     ₩ 428     $ 327,256  
Financing activities     (100 )   $ (73,344 )   ₩ (83 )   $ (63,439 )
Effect of exchange rates on cash     -     $ 314     ₩ -     $ 10  
Net change in cash and cash equivalents   ₩ (316 )   $ (231,085 )   ₩ 186     $ 142,268  

 

Net cash flows used in operating activities increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 58 million ($37,420). This is primarily attributable to an increase in Apeitda’s net loss by Korean Won 151 million ($105,672) and a decrease in accounts receivable due to a decline in revenue of Korean Won 232 million ($176,851) for the year ended December 31, 2024. These effects were partially offset by an increase in cash inflows from an income tax refund by Korean Won 302 million ($230,616) and an increase in other bad debt expenses of Korean Won 30 million ($22,003).

 

Net cash flows provided by investing activities decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 427 million ($326,332). This was primarily attributable to a decrease in cash inflows from the disposal of short-term financial instruments by Korean Won 500 million ($382,626) and an acquisition of property, plant, and equipment of Korean Won 70 million ($53,874) for the year ended December 31, 2023, which did not recur in the year ended December 31, 2024.

 

Net cash flows used in financing activities increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 17 million ($9,905). This is attributable to the repayment of long-term borrowings of Korean Won 17 million ($9,905).

 

Liquidity and Capital Resources

 

Historically, Apeitda’s sources of liquidity have been cash flows from the generation of net income. As of December 31, 2024, Apeitda had an aggregate cash balance of Korean Won 345 million ($233,132) and net working capital of Korean Won 223 million ($151,094).

 

Related Parties

 

The related parties of Apeitda comprise two of Apeitda’s Chief Executive Officers, who are also the shareholders of Apeitda, and other related parties. Apeitda entered into multiple agreements for leasing the office space and loans with related parties.

 

See Related Parties under Note 24 in the notes to the financial statement for the year ended December 31, 2024 and 2023 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the periods presented, Apeitda did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

15

 

 

Critical Accounting Estimates

 

Apeitda’s financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires Apeitda to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting dates, as well as the reported income and expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Apeitda’s financial statements.

 

Apeitda believes the accounting policies discussed in the notes to Apeitda’s financial statements are critical to understanding Apeitda’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

See Summary of Material Accounting Policies in Note 5 to the financial statements as of and for the years ended December 31, 2024 and 2023 for more information about Apeitda’s material accounting policies.

 

Measurement of defined benefit obligations: key actuarial assumptions

 

Apeitda’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for Apeitda, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Uncertain tax treatments

 

Apeitda establishes additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, is included in income taxes in the statements of operations.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Apeitda’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which Apeitda’s risk management program focuses on minimizing any adverse effects on its financial performance. Apeitda operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of Apeitda’s financial risk management under Note 21 in the notes to the financial statements for the years ended December 31, 2024 and 2023 for more information.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, Apeitda believes that the impact of recently issued standards that are not yet effective will not have a material impact on Apeitda’s financial position or results of operations adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted in Note 5 Material accounting policies in the notes to the financial statement for the years ended December 31, 2024 and 2023 for more information about recent accounting pronouncements, the timing of their adoption and Apeitda’s assessment, to the extent Apeitda has made one, of their potential impact on Apeitda’s financial statements upon operations.

 

16

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE LAMP

 

References to the “The Lamp” refer to The LAMP Co., Ltd. The following discussion and analysis of The Lamp’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein): (i) The Lamp’s audited financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

The Lamp Co., Ltd. is actively involved in the production of video content, encompassing both domestic and international films and dramas. The Lamp’s commitment to the video content industry is evident in its ongoing contributions through content planning, development, and production. Boasting top-tier hits in the history of the Korean box office, The Lamp has also garnered numerous awards for The Lamp work in both domestic and international realms.

 

Recent endeavors include a strategic focus on attracting investments and producing content for OTT streaming platforms such as Netflix and Wavve. Through these initiatives, The Lamp is consistently broadening the global reach of its content. Adapting to the dynamic landscape of the rapidly growing content industry, The Lamp currently possesses a diverse portfolio of intellectual properties (IPs), including musicals and novels. The Lamp’s dedication to enhancing content competitiveness is unwavering, as The Lamp continually expands its repertoire of IPs to meet the evolving demands of the market.

 

Established in 2003. Led by Park Un-kyoung, The Lamp is a film and TV series production studio specializing in thought-provoking yet commercially successful movies including ‘A Taxi Driver’, ‘Mal-Mo-E’ and ‘Samjin Company English Class’. A Taxi Driver, for example, achieved commercial success attracting 12.2 million viewers at the box office. The Lamp has received awards at various film festivals and awards for content quality, including Blue Dragon Awards, Baeksang Art Awards and Houston International Film Festival. One of her current projects includes Aema, a Netflix original series that is scheduled for release in 2025. In Netflix’s press release of September 11, 2023, it confirmed the production of its upcoming series Aema, a fictional comedy.

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

Key Components of Statement of Operations

 

The Lamp’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

17

 

 

Results of Operations

 

A summary of The Lamp’s operating results is as follows:

 

Comparison of Year Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Income Statement:                                
Revenues   ₩ 16,336     $ 11,981,495     ₩ 20,837     $ 15,945,434  
Cost of sales     (15,024 )     (11,018,875 )     (19,509 )     (14,929,569 )
Gross profit     1,312       962,620       1,328       1,015,865  
Operating expenses     (1,039 )     (762,076 )     (750 )     (573,991 )
Operating income     273       200,544       578       441,874  
Other expense, net     (114 )     (83,511 )     (59 )     (45,107 )
Profit before taxes     159       117,033       519       396,767  
Income tax benefit (expense)     (92 )     (67,543 )     19       14,386  
Net income   ₩ 67     $ 49,490     ₩ 538     $ 411,153  

 

For the year ended December 31, 2024 and 2023, The Lamp’s operating income was driven by its content production segment, which realized revenues totalling Korean Won 16,336 million ($11,981,495) and Korean Won 20,837 million ($15,945,434), respectively.

 

The Lamp’s gross profit has decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 15 million ($53,245), or 1.1%, corresponding to a decrease in revenue of Korean Won 4,501 million ($3,963,939), or 21.6%. This is attributable to a content project reached post-production stage during the year ended December 31, 2024, which was in the production stage during the year ended December 31, 2023, despite the initiation of a new project in May 2024. For the year ended December 31, 2024 and 2023, three of The Lamp’s customers account for 93.1% and 92.2%, respectively, of total revenue.

 

For the year ended December 31, 2024 and 2023, The Lamp’s operating expenses are primarily driven by payroll and payroll related costs, depreciation expenses, supplies expenses, commission expenses, and other bad debt expenses for both periods presented.

 

The Lamp’s operating expenses increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 289 million ($188,085), or 38.5%. This is primarily attributable to other bad debt expense of Korean Won 242 million ($177,492) and losses on the disposal of property and equipment of Korean Won 40 million ($29,055) which did not occur for the year ended December 31, 2023.

 

18

 

 

Cash Flows

 

A summary of The Lamp’s operating, investing and financing cash flows is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ (1,009 )   $ (740,194 )   ₩ 876     $ 670,014  
Investing activities     103     $ 75,887     ₩ 225     $ 172,125  
Financing activities     (150 )   $ (110,198 )   ₩ (124 )   $ (94,517 )
Net change in cash and cash equivalents   ₩ (1,056 )   $ (774,505 )   ₩ 977     $ 747,622  

 

Net cash flows used in operating activities for the year ended December 31, 2024 was Korean Won 1,009 million ($740,194), compared to Korean Won 876 million ($670,014) of net cash flows provided by operating activities for the year ended December 31, 2023. This is primarily attributable to a decrease in contract liabilities related to in-progress content projects of Korean Won 2,636 million ($1,958,276), partially offset by a decrease in trade receivables of Korean Won 184 million ($137,184) as a major content project reached completion during the year ended December 31, 2024, an increase in income tax expenses of Korean Won 111 million ($81,929) and other bad debt expenses of Korean Won 137 million ($97,141).

 

Net cash flows provided by investing activities decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 122 million ($96,238). This is primarily attributable to a decrease in long-term investment securities collection of Korean Won 331 million ($253,576), partially offset by a decrease in leasehold deposit receivables of Korean Won 160 million ($118,941), an increase in collection of other deposits receivables of Korean Won 15 million ($10,645), and a decrease in long-term borrowings of Korean Won 20 million ($15,305).

 

Net cash flows used in financing activities increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 26 million ($15,681). This is primarily attributable to the repayments made of short-term borrowings of Korean Won 30 million ($22,003).

 

Liquidity and Capital Resources

 

Historically, The Lamp’s sources of liquidity have been cash flows from the generation of net income. As of December 31, 2024, The Lamp had an aggregate cash balance of Korean Won 864 million ($584,580) and net working capital deficit of Korean Won 1,044 million ($706,621).

 

The Lamp intends to operate with its current cash on hand and the profits it anticipates earning in the future. The Lamp intends to expand its current business operations, including increasing drama and movie projects with global OTT and expanding its international footprint. The Lamp may need to borrow money or sell equity to finance its operations and planned growth.

 

The Lamp’s future capital requirements will depend on many factors, including its revenue growth rate, potential acquisitions, the timing and extent of spending to support future sales and marketing efforts. In order to finance these opportunities, The Lamp may need to raise additional financing. While there can be no assurances, if additional capital is required, The Lamp intends to raise such capital through operations or additional issuances of equity. If additional financing is required from outside sources, The Lamp may not be able to raise it on terms acceptable to it or at all. If The Lamp is unable to raise additional capital when desired, The Lamp’s business, results of operations and financial condition would be materially and adversely affected.

 

Related Parties

 

The related parties of The Lamp comprise the Chief Executive Officers of The Lamp, who is also the shareholder of The Lamp, and other related parties. The Lamp entered into multiple agreements for loans with related parties.

 

19

 

 

See Related Parties under Note 26 in the notes to the financial statement for the year ended December 31, 2024 and 2023 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the periods presented, The Lamp did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

The Lamp’s financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires The Lamp to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting dates, as well as the reported income and expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to The Lamp’s financial statements.

 

The Lamp believes the accounting policies discussed in the notes to The Lamp’s financial statements are critical to understanding The Lamp’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

See Summary of Material Accounting Policies in Note 5 to the financial statements as of and for the years ended December 31, 2024 and 2023 for more information about The Lamp’s material accounting policies.

 

Measurement of defined benefit obligations: key actuarial assumptions

 

The Lamp’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for The Lamp, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Uncertain tax treatments

 

The Lamp establishes additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, is included in income taxes in the statements of operations.

 

Quantitative and Qualitative Disclosures about Market Risk

 

The Lamp’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which The Lamp’s risk management program focuses on minimizing any adverse effects on its financial performance. The Lamp operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of The Lamp’s financial risk management under Note 22 in the notes to the financial statements for the years ended December 31, 2024 and 2023 for more information.

 

20

 

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, The Lamp believes that the impact of recently issued standards that are not yet effective will not have a material impact on The Lamp’s financial statements upon adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted in Note 5 Material accounting policies in the notes to the financial statement for the years ended December 31, 2024 and 2023 for more information about recent accounting pronouncements, the timing of their adoption and The Lamp’s assessment, to the extent The Lamp has made one, of their potential impact on The Lamp’s financial condition and results of operations.

 

21

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BIDANGIL PICTURES

 

References to the “Bidangil” refer to Bidangil Pictures Co., Ltd. The following discussion and analysis of Bidangil’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein): (i) Bidangil’s audited financial statements as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

Bidangil Pictures Co., Ltd. (“Bidangil”) is engaged in the vibrant landscape of content production, covering a spectrum that includes both domestic and international movies and dramas. Distinguished by a world-class production sense and a highly efficient production system, Bidangil actively pursues innovation by venturing into diverse genres within the film industry. Many acclaimed directors play pivotal roles in shaping the landscape of K-content, and Bidangil stands out as an exceptional production studio, skillfully navigating the intersection of artistic quality and commercial success.

 

Established in 2005 and led by Kim, Soo Jin and Yoon, In Bum. Bidangil is a production studio that has produced over 10 movies including thrillers such as The Chaser and Korea’s first space-based sci-fi movie Space Sweepers which was released on Netflix. Bidangil has also been successful in discovering talented new directors, including Na Hongjin for The Chaser and Jo Sunghee for A Werewolf Boy and Space Sweepers. Bidangil also has created a distinctive portfolio of films with unique story lines and settings.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

Key Components of Statement of Operations

 

Bidangil’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

22

 

 

Results of Operations

 

A summary of Bidangil’s operating results is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Income Statement:                                
Revenues   ₩ 18,633     $ 13,665,823     ₩ 7,746     $ 5,927,700  
Cost of sales     (17,447 )     (12,796,273 )     (7,070 )     (5,410,029 )
Gross profit     1,186       869,550       676       517,671  
Operating expenses     (732 )     (536,698 )     (725 )     (555,119 )
Operating income (loss)     454       332,852       (49 )     (37,448 )
Other income (expense)     (92 )     (67,313 )     234       178,982  
Profit before taxes     362       265,539       185       141,534  
Income tax benefit(expense)     (4 )     (2,737 )     2       1,165  
Net income   ₩ 358     $ 262,802     ₩ 187     $ 142,699  

 

For the year ended December 31, 2024 and 2023, Bidangil’s operating income (loss) was driven by its content production segment, which realized revenues totalling Korean Won 18,633 million ($13,665,823) and Korean Won 7,746 million ($5,927,700), respectively.

 

Bidangil’s gross profit has increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 510 million ($351,879), or 75.4%, corresponding to an increase in revenue of Korean Won 10,887million ($7,738,123), or 140.5%. This is attributable to an increase in media production revenue due to a new agreement initiated in August 2023. For the year ended December 31, 2024 and 2023, one of Bidangil Pictures’ customers accounts for 99.4% and 97.6%, respectively, of total revenue.

 

For the year ended December 31, 2024 and 2023, Bidangil’s operating expenses are primarily driven by payroll and payroll related costs, depreciation expenses, and commissions expenses for both periods presented.

 

Bidangil’s operating expenses increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 7 million (decreased by $18,421 due to foreign exchange rate fluctuation), or 1.0%. This is primarily attributable to other bad debt expenses of Korean Won 21 million ($15,402), which did not occur in the year ended December 31, 2023, partially offset by a decrease in payroll and payroll related costs of Korean Won 10 million ($24,732).

 

23

 

 

Cash Flows

 

A summary of Bidangil’s operating, investing, and financing cash flows is as follows:

 

Comparison of Years Ended December 31, 2024 and 2023

 

    Year Ended
December 31,
2024		     Year Ended
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ (1,401 )   $ (1,027,600 )   ₩ 2,088     $ 1,598,066  
Investing activities     1,417     $ 1,039,135     ₩ 1,293     $ 989,446  
Financing activities     (2,291 )   $ (1,680,061 )   ₩ (685 )   $ (524,298 )
Net change in cash and cash equivalents   ₩ (2,275 )   $ (1,668,526 )   ₩ 2,696     $ 2,063,214  

 

Net cash flows used in operating activities for the year ended December 31, 2024 was Korean Won 1,401 million ($1,027,600), compared to Korean Won 2,088 million ($1,598,066) of net cash flows provided by operating activities for the year ended December 31, 2023. This is primarily attributable to a decrease in contract liabilities of Korean Won 12,366 million ($9,266,349) as one of the content projects are nearing completion, partially offset by an increase in net income by Korean Won 172 million ($120,103) and a decrease in prepaid expenses of Korean Won 8,236 million ($6,171,954).

 

Net cash flows provided by investing activities increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 124 million ($49,689). This is attributable to a decrease in payments made for the purchase of short-term investment securities of Korean Won 4,932 million ($3,838,049) and an increase in the proceeds from short-term loans collected of Korean Won 953 million ($698,602), partially offset by a decrease in the proceeds from disposal of short-term investment securities of Korean Won 5,748 million ($4,480,155).

 

Net cash flows used in financing activities increased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 by Korean Won 1,606 million ($1,155,763). This is primarily attributable to the purchase of treasury shares of Korean Won 2,000 million ($1,466,880), partially offset by a decrease in cash outflows from other current liabilities by Korean Won 400 million ($312,775).

 

Liquidity and Capital Resources

 

Historically, Bidangil’s sources of liquidity have been cash flows from the generation of net income. As of December 31, 2024, Bidangil had an aggregate cash balance of Korean Won 1,448 million ($980,123) and net working capital of Korean Won 2,078 million ($1,406,205).

 

Bidangil intends to operate with its current cash on hand and the profits it anticipates earning in the future. Bidangil intends to expand its current business operations, increasing drama and movie projects with global OTT and expanding its international footprint. Bidangil may need to borrow money or sell equity to finance its operations and planned growth.

 

Bidangil’s future capital requirements will depend on many factors, including its revenue growth rate, potential acquisitions, the timing and extent of spending to support future sales and marketing efforts. In order to finance these opportunities, Bidangil may need to raise additional financing. While there can be no assurances, if additional capital is required, Bidangil intends to raise such capital through operations or additional issuances of equity. If additional financing is required from outside sources, Bidangil may not be able to raise it on terms acceptable to it or at all. If Bidangil is unable to raise additional capital when desired, Bidangil’s business, results of operations and financial condition would be materially and adversely affected.

 

Related Parties

 

The related parties of Bidangil comprise two of Chief Executive Officers, who are also the shareholder of Bidangil. Bidangil entered into a loan agreement with two of Bidangil’s Chief Executive Officers.

 

24

 

 

See Related Parties under Note 25 in the notes to the consolidated financial statement for the year ended December 31, 2024 and 2023 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the periods presented, Bidangil did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Bidangil’s consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires Bidangil to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting dates, as well as the reported income and expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Bidangil’s consolidated financial statements.

 

Bidangil believes the accounting policies discussed in the notes to Bidangil’s consolidated financial statements are critical to understanding Bidangil’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

See Summary of Material Accounting Policies in Note 5 to the consolidated financial statements as of and for the years ended December 31, 2024 and 2023 for more information about Bidangil’s material accounting policies.

 

Uncertain tax treatments

 

Bidangil establishes additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, is included in income taxes in the statements of operations.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Bidangil’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which Bidangil’s risk management program focuses on minimizing any adverse effects on its financial performance. Bidangil operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of Bidangil’s financial risk management under Note 22 in the notes to the consolidated financial statements for the years ended December 31, 2024 and 2023 for more information.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, Bidangil believes that the impact of recently issued standards that are not yet effective will not have a material impact on Bidangil’s consolidated financial statements upon adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted in Note 5 Material accounting policies in the notes to the consolidated financial statement for the years ended December 31, 2024 and 2023 for more information about recent accounting pronouncements, the timing of their adoption and Bidangil’s assessment, to the extent Bidangil has made one, of their potential impact on Bidangil’s consolidated financial condition and results of operations.

 

25

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ANSEILEN

 

References to the “Anseilen” refers to Studio Anseilen Co., Ltd. The following discussion and analysis of Anseilen’s financial condition and results of operations should be read in conjunction with (in each case, included elsewhere herein)): (i) Anseilen’s audited financial statements as of December 31, 2024 and 2023 and for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 (and related notes). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Business Overview

 

Studio Anseilen Co., Ltd. (“Anseilen”) is engaged in the video content production business, spanning movies and dramas, and including IP planning and development. Anseilen’s team comprises accomplished directors who have played key roles in shaping the landscape of K-drama, contributing invaluable expertise to the creation of global video content. Recognizing the evolving trends in the video content market that demand diversity, Anseilen strategically plans and develops new content, drawing on Anseilen’s extensive experience across various formats, including plays, classics, novels, foreign dramas, and documentaries.

 

In alignment with the global demand for content, Anseilen is actively working on projects slated for streaming on platforms such as Disney and Netflix. Anseilen’s upcoming productions aim to lead the way in the ever-changing landscape of video content trends. Through the independent directorial skills and the synergy derived from Studio Anseilen’s seasoned directors, Anseilen plans to spearhead the emergence of fresh and innovative video content.

 

Anseilen’s main business is production studio for multi-form TV series and movies. While it is a newly established entity (March 2023), it is led by Kyung-su Shin, Jun-Woo Park, Seung-Ho Kim, 3 top executive producers who worked for SBS, one of the leading Korean TV broadcasting channels. They have created some of Korea’s most famous dramas such as an adaptation of the webtoons taxi driver and other works such as the ‘First Responders’ and ‘Twenty-Five Twenty-One’.

 

Basis of Presentation

 

The accompanying financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), expressed in Korean Won.

 

Key Components of Statement of Operations

 

Anseilen’s reporting currency is the Korean Won and its operating results and cash flows have been translated to U.S. dollar using the following exchange rates that represent the average daily rate in place for the respective period:

 

  ● At the period exchange rate as of December 31, 2024 of US$1.00 to KRW1,477.86 for the balance sheet;
     
  ● At the average exchange rate for the year ended December 31, 2024 of US$1.00 to KRW1,363.44 for the statements of operations and cash flow;
     
  ● At the average exchange rate for the year ended December 31, 2023 of US$1.00 to KRW 1,306.76 for the statements of operations and cash flow;

 

26

 

 

Results of Operations

 

A summary of Anseilen’s operating results is as follows:

 

Comparison of Year Ended December 31, 2024 and the Period from March 6, 2023 (inception) to December 31, 2023

 

    Year Ended
December 31,
2024		     For the
Period from
March 6, 2023
(inception) to
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Statement of Profit or Loss                        
Operating expenses   ₩ (219 )   $ (160,694 )   ₩ (348 )   $ (266,258 )
Operating loss     (219 )     (160,694 )     (348 )     (266,258 )
Other income (expense)     (30 )     (21,848 )     -       232  
Net loss   ₩ (249 )   $ (182,542 )   ₩ (348 )   $ (266,026 )

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023, Anseilen’s operating expenses consist of personnel-related expenses for administrative functions and expenses for outside professional services, including legal, audit and accounting services. Personnel-related expenses consist of salaries and severance.

 

Anseilen’s operating expenses decreased for the year ended December 31, 2024 as compared to the period from March 6, 2023 (inception) to December 31, 2023 by Korean Won 129 million ($105,563), or 37.1%. This is primarily attributable to a decrease in payroll and payroll-related costs of Korean Won 138 million ($111,619) due to a decrease in the number of employees supporting the internal multi-format TV series and film production team, partially offset by an increase in rent expenses by Korean Won 11 million ($7,539).

 

27

 

 

Cash Flows

 

A summary of Anseilen’s operating, investing, and financing cash flows is as follows:

 

Comparison of Year Ended December 31, 2024 and the Period from March 6, 2023 (inception) to December 31, 2023

 

    Year Ended
December 31,
2024		     For the
period from
March 6, 2023
(inception) to
December 31,
2023		  
    (In millions of Korean won and US dollar)  
Net cash provided by (used in)                                
Operating activities   ₩ 87     $ 63,690     ₩ 343     $ 262,482  
Investing activities     (2 )     (1,100 )     (81 )     (62,024 )
Financing activities     -       -       14       10,672  
Net change in cash and cash equivalents   ₩ 85     $ 62,590     ₩ 276     $ 211,130  

 

Net cash flows provided by operating activities decreased for the year ended December 31, 2024 as compared to the period from March 6, 2023 (inception) to December 31, 2023 by Korean Won 256 million ($198,792).This is primarily attributable to an decrease in cash inflows of Korean Won 500 million ($398,531) from contract liabilities, partially offset by a decrease in Anseilen’s net loss by Korean Won of 99 million ($83,484) and an increase in cash inflows of Korean Won of 134 million ($109,733) from other non-current non-financial assets.

 

Net cash flows used in investing activities decreased for the year ended December 31, 2024 as compared to the period from March 6, 2023 (inception) to December 31, 2023 by Korean Won 79 million ($60,924). This is due to advances of leasehold deposit receivables of Korean Won 49 million ($37,162) and purchase of investment securities of Korean Won 30 million ($22,958) for the period from March 6, 2023 (inception) to December 31, 2023, which did not recur for the year ended December 31, 2024.

 

Net cash flows provided by financing activities decreased for the year ended December 31, 2024 as compared to the period from March 6, 2023 (inception) to December 31, 2023 by Korean Won 14 million ($10,672). This is primarily attributable to the proceeds received from the common shares issued, which did not recur for the year ended December 31, 2024.

 

Liquidity and Capital Resources

 

Historically, Anseilen’s sources of liquidity have been cash flows from the payments received from K Enter Holdings. In June 2024, Anseilen entered into the agreement with K Enter Holdings to receive payment totaling Korean Won 1,000 million ($676,654) by June 30, 2025. Also, Anseilen has received totaling Korean Won 500 million ($338,327) has been received and the remaining Korean Won 500 million ($338,327) will be received before June 30, 2025. As of December 31, 2024, Anseilen had an aggregate cash balance of Korean Won 361 million ($244,430) and net working capital of Korean Won 337 million ($228,139).

 

Anseilen intends to operate with its current cash on hand and the profits it anticipates earning in the future. Anseilen intends to expand its current business operations, including providing additional offerings such as producing intellectual property rights of K-Drama and expand its international footprint. Anseilen may need to borrow money or sell equity to finance its operations and planned growth.

 

Anseilen’s future capital requirements will depend on many factors, including its revenue growth rate, potential acquisitions, the timing and extent of spending to support future sales and marketing efforts. In order to finance these opportunities, Anseilen may need to raise additional financing. While there can be no assurances, if additional capital is required, Anseilen intends to raise such capital through operations or additional issuances of equity. If additional financing is required from outside sources, Anseilen may not be able to raise it on terms acceptable to it or at all. If Anseilen is unable to raise additional capital when desired, Anseilen’s business, results of operations and financial condition would be materially and adversely affected.

 

28

 

 

Related Parties

 

The related parties of Anseilen comprise shareholders of the Company and other related parties.

 

See Related Parties under Note 22 in the notes to the financial statement for the year ended December 31, 2024 and for the period from March 6, 2023 (inception) to December 31, 2023 for more information about transactions entered into with related parties.

 

Off-Balance Sheet Arrangements

 

During the period presented, Anseilen did not have any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of facilitating off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Anseilen’s financial statements have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires Anseilen to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the reporting date, as well as the reported income and expenses incurred during the reporting period. Management bases its estimates on historical experience and in various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to Anseilen’s financial statements.

 

Anseilen believes the accounting policies discussed in the notes to Anseilen’s financial statements are critical to understanding Anseilen’s historical and future performance, as these policies relate to more significant areas involving management’s judgments and estimates.

 

See Summary of Material Accounting Policies in Note 5 to the financial statements as of and for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 for more information about Anseilen’s significant accounting policies.

 

Measurement of defined benefit obligations: key actuarial assumptions

 

Anseilen’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for Anseilen, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Quantitative and Qualitative Disclosures about Market Risk

 

Anseilen’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which Anseilen’s risk management program focuses on minimizing any adverse effects on its financial performance. Anseilen operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

See Summary of Anseilen’s financial risk management under Note 19 in the notes to the financial statements for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 for more information.

 

29

 

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the IASB or other standard setting bodies that are adopted by use as of the specified effective date. Unless otherwise discussed, Anseilen believes that the impact of recently issued standards that are not yet effective will not have a material impact on Anseilen’s financial statements upon adoption.

 

See Recent Accounting Pronouncements issued, not yet adopted in Note 5 Material accounting policies in the notes to the financial statement for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 for more information about recent accounting pronouncements, the timing of their adoption and Anseilen’s assessment, to the extent Anseilen has made one, of their potential impact on Anseilen’s financial condition and results of operations.

 

30

 

Exhibit 15.5

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of K Wave Media Ltd., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.6

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of K Enter Holdings Inc., which appear in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.7

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of Play Company Co., Ltd., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.8

 

CONSENT OF INDEPENDENT AUDITORS

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of Solaire Partners LLC., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.9

 

CONSENT OF INDEPENDENT AUDITORS

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of Bidangil Pictures Co., Ltd., which appears in this Shell Company Report on Form 20-F.We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.10

 

CONSENT OF INDEPENDENT AUDITORS

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of The LAMP Co., Ltd., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.11

 

CONSENT OF INDEPENDENT AUDITORS

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of Apeitda Co., Ltd., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.12

 

CONSENT OF INDEPENDENT AUDITORS

 

We hereby consent to the use in this Shell Company Report on Form 20-F of K Wave Media Ltd. of our report dated May 14, 2025 relating to the financial statements of Studio Anseilen Co., Ltd., which appears in this Shell Company Report on Form 20-F. We also consent to the reference to us under the heading “Statement by Experts” in this Shell Company Report on Form 20-F.

 

/s/ Samil PricewaterhouseCoopers

 

Seoul, KOREA

May 14, 2025

 

 

 

Exhibit 15.13

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We consent to the incorporation by reference in this Report on Form 20-F of our report dated April 29, 2025 with respect to the financial statements of Global Star Acquisition Inc. for the years ended December 31, 2024 and 2023 included in the Annual Report on Form 10-K. We also consent to the reference to us under the heading “Experts” in such Report.

 

/s/ Marcum LLP

 

New York, NY

May 14, 2025

 

 

 

Exhibit 15.14

 

K WAVE MEDIA LTD.

 

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated Financial Statements:    
Consolidated Statements of Financial Position as of December 31, 2024 and 2023   F-2
Consolidated Statements of Operations for the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023   F-3
Consolidated Statements of Changes in Stockholders’ Deficit (Equity) for the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023   F-4
Consolidated Statements of Cash Flows for the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023   F-5
Notes to Consolidated Financial Statements   F-6 – F-9

 

F-1

 

 

K WAVE MEDIA LTD.

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and December 31, 2023

 

　  

December 31,
2024

     December 31,
2023		  
ASSETS     　       　  
Other receivables – related parties     50,000       50,000  
                 
TOTAL ASSETS   $ 50,000     $ 50,000  
　     　       　  
LIABILITIES AND STOCKHOLDERS’ EQUITY     　       　  
Other payables     7,256       7,256  
Other payables – related parties     5,551       5,551  
TOTAL LIABILITIES   $ 12,807     $ 12,807  
　     　       　  
STOCKHOLDERS’ EQUITY     　       　  
Common stock     50,000       50,000  
Other reserves     (1,376 )     (1,376 )
Accumulated deficit     (11,431 )     (11,431 )
Total stockholders’ equity     37,193       37,193  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 50,000     $ 50,000  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-2

 

 

K WAVE MEDIA LTD.

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

    2024     For the
period from
June 22, 2023
(inception) to
December 31,
2023		  
Revenue   $ -     $ -  
Operating expenses                
General and administrative expenses     -       11,431  
Total operating cost and expenses     -       11,431  
Loss from operations     -       (11,431 )
Net loss   $ -     $ (11,431 )
                 
Comprehensive loss   $ -     $ (11,431 )
                 
Weighted average number of shares of common stock outstanding, basic and diluted     5,000,000       5,000,000  
Basic and diluted net loss per share of common stock   $ -     $ (0.002 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3

 

 

K WAVE MEDIA LTD.

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

    Common stock    

Other

     Accumulated        
    Shares     Amount     Reserves     Deficit     Total  
Balance, June 22, 2023 (inception)     -     $ -     $ -     $ -     $ -  
Shares issued for related party receivable     5,000,000       50,000       -       -       50,000  
Other reserves     -       -       (1,376 )     -       (1,376 )
Net loss     -       -       -       (11,431 )     (11,431 )
Balance, December 31, 2023     5,000,000     $ 50,000     $ (1,376 )   $ (11,431 )   $ 37,193  
                                         
Balance, January 1, 2024     5,000,000     $ 50,000     $ (1,376 )   $ (11,431 )   $ 37,193  
Net loss     -       -       -       -       -  
Balance, December 31, 2024     5,000,000     $ 50,000     $ (1,376 )   $ (11,431 )   $ 37,193  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4

 

 

K WAVE MEDIA LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

    2024     For the
period from
June 22, 2023
(inception) to
December 31,
2023		  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ -     $ (11,431 )
Adjustments to reconcile net income to net cash used in operations:             　  
Changes in operating assets and liabilities:                
Other payables     -       7,257  
Other payables – related parties     -       4,174  
CASH USED IN OPERATING ACTIVITIES     -       -  
                 
CASH FLOWS FROM INVESTING ACTIVITIES     -       -  
CASH USED IN INVESTING ACTIVITIES     -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES     -       -  
CASH USED IN FINANCING ACTIVITIES     -       -  
                 
Cash and cash equivalents, beginning of period     -       -  
Cash and cash equivalents, end of period   $ -     $ -  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5

 

 

K WAVE MEDIA LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

1. General Information

 

K Wave Media Ltd. (“the Company”), a wholly-owned subsidiary of Global Star Acquisition Inc. (“Global Star”), was incorporated on June 22 2023 and the Company’s registered office is at c/o Maples Corporate Services Limited PO Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands. The Company was formed for the purpose of becoming the ultimate parent company following the transactions contemplated in the Merger Agreement. The Company maintains one direct wholly owned subsidiary, GLST Merger Sub Inc. (“Merger Sub”), a Delaware corporation. Merger Sub was incorporated to facilitate the consummation of the Business Combination Agreement. As of June 30, 2024, Merger Sub had no operations. The Company and Merger Sub are together referred to as the “Group”.

 

Global Star entered into a merger agreement, dated as of June 15, 2023 and as amended on March 11, 2024, June 28, 2024, and July 25, 2024 (the “Merger Agreement”), which provides for a Business Combination between Global Star and K Enter Holdings, Inc., a Delaware corporation (“K Enter”). Pursuant to the Merger Agreement, the Business Combination will be effected in two steps: (i) subject to the approval and adoption of the Merger Agreement by the stockholders of Global Star, Global Star will reincorporate to Cayman Islands by merging with and into the Company, with the Company remaining as the surviving publicly traded entity (the “Reincorporation Merger”); (ii) one (1) business day following the Reincorporation Merger, the Merger Sub will be merged with and into K Enter, resulting in K Enter being a wholly owned subsidiary of the Company.

 

On July 13, 2023, the Company and the Merger Sub executed a written Joinder Agreement to become parties to the Merger Agreement to comply with the terms and conditions of the Merger Agreement, accordingly, the Merger Agreement is by and among Global Star, the Company, Merger Sub, and K Enter.

 

As of December 31, 2024, the Company issued 5,000,000 shares of the Company’s ordinary shares. Pursuant to the Merger Agreement, the Company expects to cancel all the outstanding 5,000,000 shares of the Company’s ordinary shares as of the effective date of the Business Combination. In connection with the Reincorporation Merger, the Company expects to issue 4,178,790 ordinary shares of the Company to the stockholders of Global Star, Also, pursuant to the Merger Agreement the Company expects to issue a total of 59,000,000 ordinary shares of the Company as consideration for a total of 189,013 shares of K Enter. This consists of 101,202 shares of outstanding K Enter’s common stock, 47,013 shares of K Enter common stock to be issued to the owners of the Six Korean Entities pursuant to the equity purchase agreement based on 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1,470.00 / USD $1.00, and 40,798 K Wave shares of common stock to be issued to the holders of K Enter’s Series A Preferred Stock and Series A-1 Preferred Stock based on the conversion of the of K Enter Series A Preferred Stock and Series A-1 Preferred Stock. The total ordinary shares of the Company to be issued to the stockholders of K Enter will be 59,000,000 ordinary shares in connection with the closing of the Business Combination. Following the consummation of all the transactions contemplated by the Business Combination, the total outstanding shares of the Company will be 63,178,790.

 

On February 3, 2025, shareholders of Global Star approved the proposals regarding Merger Agreement on the shareholders’ meeting. The Merger Agreement was completed on May 13, 2025, and the Company became the surviving publicly-traded entity.

 

2. Basis of Accounting

 

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”), on the historical cost basis, and in the presentation currency USD. All amounts are in actual USD unless otherwise stated. The costs of business operations are paid by K Enter and therefore no accounting transactions have been recorded in 2024. These consolidated financial statements were authorized for issuance by the board of directors on May 14, 2025.

 

The number of shares used to calculate diluted loss per share of common shares attributable to common shareholders is the same as the number of shares used to calculate basic loss per share of common shares attributable to common shareholders for the period presented because there were no potentially dilutive securities outstanding during the period.

 

F-6

 

 

K WAVE MEDIA LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

The loss per share presented in the statements of operations and comprehensive loss is based on the following for the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023:

 

    2024     For the
period from
June 22, 2023
(inception) to
December 31,
2023		  
Basic and diluted net loss per share:                
Numerator                
Allocation of net loss   $ -     $ (11,431 )
Denominator:                
Basic and diluted weighted average number of shares outstanding     5,000,000       5,000,000  
Basic and diluted net loss per share   $ -     $ (0.002 )

 

3. Material accounting policies

 

The material accounting policies followed by the Group in preparation of its financial statements are as follows:.

 

A. New and amended standards or interpretations adopted by the Company

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments do not have a significant impact on the financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

B. New and amended standards or interpretations not yet adopted by the Company

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Company.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Company does not expect that these amendments have a significant impact on the Company’s financial statements.

 

F-7

 

 

K WAVE MEDIA LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI.

 

The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Company does not expect that these amendments have a significant impact on the financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

- IFRS 1 First-time adoption of International Financial Reporting Standards;

 

- IFRS 7 Financial instruments: Disclosures;

 

- IFRS 9 Financial instruments;

 

- IFRS 10 Consolidated financial instruments; and

 

- IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Company to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

C. Financial assets and Financial liabilities

 

Financial instruments are any form of contract that gives rise to a financial asset in one company and a financial liability or equity instrument in another company. A financial asset or financial liability is included in the balance sheet when the entity becomes a party to the contractual terms of the instrument. Other financial liabilities and other financial assets, including liabilities to and receivables from related parties, are valued at amortized cost. A financial asset is removed from the balance sheet when the contractual right to cash flow from the asset has ceased or been settled. The same applies where the risks and benefits associated with the holding are essentially transferred to another party and the entity no longer has control over the financial asset. A financial liability is derecognized when the agreed obligation has been fulfilled or ceased.

 

F-8

 

 

K WAVE MEDIA LTD.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and period from June 22, 2023 (inception) to December 31, 2023

 

D. Transaction costs in issuing equity securities, organization costs, and other service fees

 

When issuing common stock, incremental costs directly attributable to the equity transaction that otherwise would have been avoided are accounted for as a deduction from equity while other issuing related costs and organization costs are expensed as incurred. For the period from June 22, 2023 (inception) to December 31, 2023, $1,376 was deducted from equity while $3,882 was expensed as incurred. $7,549 service fees were expensed as incurred. $5,551 is owed to Global Star and recorded as a payable under the caption Other payables - related parties in the Group’s Consolidated Statement of Financial Position.

 

4. Share capital

 

Details of share capital as of December 31, 2024 and 2023 are as follows:

 

   

December 31,
2024

    

December 31,

2023

  
Number of authorized shares     5,000,000       5,000,000  
Value per share   $ 0.01     $ 0.01  
Number of shares issued     5,000,000       5,000,000  
Common shares   $ 50,000     $ 50,000  

 

During June 2023, the Group entered into an agreement to issue 5,000,000 shares of common shares for gross proceeds of $50,000. Each ordinary share maintains one voting right. The entire amount of this equity is held by Global Star and recorded as a receivable under the caption Other receivables - related parties in the Group’s Consolidated Statements of Financial Position.

 

5. Subsequent Events

 

During January 2025, the Company entered into agreements with five investors to issue Convertible Senior Unsecured Notes (principal amount $4.5 million), contingent  upon the consummation of the business combination. The agreements include various terms and conditions, including the issuance of bonus shares by the Company and 3-year maturity with 3% annual coupon rate.

 

On February 3, 2025, shareholders of Global Star approved the proposals regarding Merger Agreement on the shareholders’ meeting. The Merger Agreement was completed on May 13, 2025.

 

F-9

 

Exhibit 15.15

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

   Note   

December 31,

2024

   December 31,
2023		 
        (In thousands of Korean won) 
Assets               
Cash and cash equivalents  17,21,23,27,32₩   4,150,572     8,585,634 
Short-term financial instruments  21,27     423,524    419,391 
Accounts receivable — trade, net  16,21,27     9,210,441    6,754,011 
- Related parties  32     1,983,270    1,017,018 
- Non-related parties        7,227,171    5,736,993 
Short-term loans, net  21,24,27     787,400    859,900 
- Related parties  32     662,400    149,900 
- Non-related parties        125,000    710,000 
Accounts receivable — other, net  16,21,27     130,482    351,166 
- Related parties  32     125,687    51,619 
- Non-related parties        4,795    299,547 
Value added tax receivables        -    200,407 
Other current assets  14     664,632    719,193 
Other current financial assets  21,27     40,000    203,266 
Contract assets  7     -    73,463 
Current tax assets  13     347,480    - 
Inventories, net  15     818,324    424,560 
Total current assets        16,572,855    18,590,991 
Long-term financial instruments  21,27     322,538    307,729 
Long-term investment securities  21,27     730,391    640,739 
Property, plant and equipment including right-of-use assets  19,29     12,049,988    14,867,677 
Intangible assets other than goodwill  20     4,533,587    4,889,597 
Goodwill  20     3,267,730    3,267,730 
Investment properties  18     400,999    3,260,795 
Other non-current financial assets  21,27     1,803,220    1,390,486 
Other non-current non-financial assets  14     1,907,965    2,606,623 
Deferred tax assets  13     1,011,013    565,144 
Total non-current assets        26,027,431    31,796,520 
Total assets   ₩   42,600,286     50,387,511 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

   Note     

December 31,

2024

   December 31,
2023		 
Liabilities               
Trade and other payables  21,25,27  ₩   14,039,752     14,407,610 
- Related parties  32       1,357,101    1,297,426 
- Non-related parties          12,682,651    13,110,184 
Other current financial liabilities  21,27       130,000    - 
Other current non-financial liabilities          1,443,694    870,830 
Short-term borrowings  21,24,27       3,764,000    3,330,000 
- Related parties  32       864,000    830,000 
- Non-related parties          2,900,000    2,500,000 
Current portion of long-term borrowings, net  21,24,27       2,108,956    24,960 
- Related parties  32       2,090,236    - 
- Non-related parties          18,720    24,960 
Current lease liabilities  24,29       1,786,577    1,630,482 
Current tax liabilities  13       108,961    845,547 
Total current liabilities          23,381,940    21,109,429 
Trade and other non-current payables  21,25,27       21,694    335,871 
Long-term borrowings, excluding current portion, net  21,24,27       -    2,008,041 
- Related parties  32       -    1,989,321 
- Non-related parties          -    18,720 
Other non-current financial liabilities  21       150,000    200,000 
Other non-current non-financial liabilities          -    109,764 
Defined benefit liabilities  12       559,270    706,102 
Other non-current provisions  26       609,951    674,148 
Non-current lease liabilities  24,29       9,302,661    12,878,027 
Deferred tax liabilities  13       399,158    676,406 
Total non-current liabilities          11,042,733    17,588,359 
Total liabilities     ₩   34,424,673    38,697,788 
Equity                 
Share capital  22  ₩   500,000     500,000 
Other reserves  22       (27,693,046)   (27,722,641)
Retained earnings          35,959,433    38,500,808 
Equity attributable to owners of the Parent Company          8,766,387    11,278,167 
Non-controlling interest  28       (590,774)   411,556 
Total equity          8,175,613    11,689,723 
Total liabilities and equity     ₩   42,600,286     50,387,511 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)

 

For the Years Ended December 31, 2024, 2023 and 2022

 

   Note      2024   2023   2022 
          (In thousands of Korean won) 
Revenues                      
Content revenue  6,7  ₩   28,379,904     49,771,824    151,858,729 
- Related parties  32       8,785,673    11,184,157    4,167,544 
- Non-related parties          19,594,231    38,587,667    147,691,185 
F&B revenue  6,7       13,697,884    16,984,621    16,469,551 
- Related parties  32       70,477    15,303    8,529 
- Non-related parties          13,627,407    16,969,318    16,461,022 
Other revenue  6,7       932,542    724,711    694,108 
Total revenues          43,010,330    67,481,156    169,022,388 
Cost of revenues  8       (41,911,949)   (60,837,065)   (150,752,230)
Gross profit          1,098,381    6,644,091    18,270,158 
Selling, general and administrative expenses  8       (3,984,317)   (4,598,226)   (5,146,556)
Other income  8       1,022,129    1,487,080    84,462 
Other expenses  8       (1,643,085)   (35,547)   (46,157)
Operating profit (loss)          (3,506,892)   3,497,398    13,161,907 
Finance income  9,21       576,570    1,743,941    1,221,147 
- Related parties  32       125,779    831,200    215,988 
- Non-related parties          450,791    912,741    1,005,159 
Finance costs  9,21,24,30       (1,381,523)   (1,688,210)   (1,811,321)
- Related parties  32       (242,559)   (176,597)   - 
- Non-related parties          (1,138,964)   (1,511,612)   (1,811,321)
Profit (Loss) before income tax          (4,311,845)   3,553,129    12,571,733 
Income tax benefit (expense)  13       753,650    (760,779)   (2,687,108)
Profit (Loss) for the year     ₩   (3,558,195)   2,792,350    9,884,625 
Other comprehensive income                      
Items that will not be reclassified to income or loss:                      
Remeasurement of defined benefit liabilities  12,22       44,085    109,558    143,829 
Total comprehensive income (loss) for the year     ₩   (3,514,110)   2,901,908    10,028,454 
Profit (loss) attributable to:                      
Owners of the Parent Company          (2,541,375)   3,137,186    10,189,718 
Non-controlling interest  28       (1,016,820)   (344,836)   (305,093)
Total comprehensive income (loss) attributable to:                      
Owners of the Parent Company          (2,511,780)   3,210,734    10,286,272 
Non-controlling interest  28       (1,002,330)   (308,826)   (257,818)
Earnings (Loss) per share (in Korean won)                      
Basic earnings (loss) per share  10  ₩   (30,105)   35,683    101,897 
Diluted earnings (loss) per share  10       (30,105)   35,683    101,897 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

For the Years Ended December 31, 2024, 2023 and 2022

 

          Attributable to owners of the Parent Company   Non-     
   Note      Share
capital		   Other
reserves		   Retained
earnings		   Total   controlling
interest		   Total
equity		 
          (In thousands of Korean won) 
Balance at January 1, 2022     ₩   500,000     (988,645)   25,173,904    24,685,259    1,273,314    25,958,573 
Total comprehensive income (loss) for the year                                     
Profit (loss) for the year          -    -    10,189,718    10,189,718    (305,093)   9,884,625 
Remeasurement of defined benefit liabilities          -    96,554    -    96,554    47,275    143,829 
Total comprehensive income (loss) for the year          -    96,554    10,189,718    10,286,272    (257,818)   10,028,454 
Transaction with owners, recognized directly in equity                                     
Additional acquisition of non-controlling interest in subsidiary          -    (1,004,886)   -    (1,004,886)   (295,114)   (1,300,000)
De-recognition of the obligation to purchase the Group’s own equity instruments          -    1,229,050    -    1,229,050    -    1,229,050 
Balance at December 31, 2022     ₩   500,000    (667,927)   35,363,622    35,195,695    720,382    35,916,077 
Balance at January 1, 2023     ₩   500,000    (667,927)   35,363,622    35,195,695    720,382    35,916,077 
Total comprehensive income (loss) for the year                                     
Profit (loss) for the year          -    -    3,137,186    3,137,186    (344,836)   2,792,350 
Remeasurement of defined benefit liabilities  12       -    73,548    -    73,548    36,010    109,558 
Total comprehensive income (loss) for the year          -    73,548    3,137,186    3,210,734    (308,826)   2,901,908 
Transaction with owners, recognized directly in equity                                     
Acquisition of Treasury shares  31       -    (27,128,262)   -    (27,128,262)   -    (27,128,262)
Balance at December 31, 2023     ₩   500,000    (27,722,641)   38,500,808    11,278,167    411,556    11,689,723 
Balance at January 1, 2024     ₩   500,000    (27,722,641)   38,500,808    11,278,167    411,556    11,689,723 
Total comprehensive income (loss) for the year                                     
Loss for the year          -    -    (2,541,375)   (2,541,375)   (1,016,820)   (3,558,195)
Remeasurement of defined benefit liabilities  12       -    29,595    -    29,595    14,490    44,085 
Total comprehensive income (loss) for the year          -    29,595    (2,541,375)   (2,511,780)   (1,002,330)   (3,514,110)
Balance at December 31, 2024     ₩   500,000    (27,693,046)   35,959,433    8,766,387    (590,774)   8,175,613 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

   Note      2024   2023   2022 
          (In thousands of Korean won) 
Cash flows from operating activities  31                   
Net income     ₩   (3,558,195)   2,792,350    9,884,625 
Adjustments to reconcile net income to net cash provided by (used in) operating activities  31       2,368,242    (6,881,338)   19,396,280 
Interest received          38,436    70,995    72,808 
Interest paid          (999,198)   (1,184,042)   (800,423)
Income taxes paid          (707,915)   (3,176,978)   (2,369,065)
Dividend received          1,463    1,463    700 
Net cash inflow(outflow) from operating activities          (2,857,167)   (8,377,550)   26,184,925 
Cash flows from investing activities                      
Payments for short-term loans          (2,079,000)   (3,840,576)   (3,773,050)
- Related parties  32       (1,834,000)   (3,690,576)   (520,050)
- Non-related parties          (245,000)   (150,000)   (3,253,000)
Proceeds from short-term loans          1,779,500    320,000    2,700,000 
- Related parties  32       1,279,500    310,000    - 
- Non-related parties          500,000    10,000    2,700,000 
Payments for long-term loans          -    (1,000,000)   (700,000)
- Related parties  32       -    (1,000,000)   (700,000)
- Non-related parties          -    -    - 
Payments for other financial assets          (178,068)   (610,093)   (5,543,599)
Collection of other financial assets          334,987    4,135,728    3,956,661 
Collection of long-term financial instruments          -    -    63,138 
Purchase of long-term investment securities          -    -    (443,164)
Proceeds from disposal of property and equipment          53,277    4,293    - 
Purchase of property and equipment          (273,220)   (949,583)   (3,166,783)
Purchase of intangible assets          -    -    (113,900)
Proceeds from lease incentives          1,486    150,150    1,980,492 
Net cash outflow from investing activities          (361,038)   (1,790,081)   (5,040,205)
Cash flows from financing activities  31                   
Proceeds from short-term borrowings          870,000    130,000    - 
- Related parties  32       470,000    130,000    - 
- Non-related parties          400,000    -    - 
Repayment of short-term borrowings          (394,000)   -    - 
- Related parties  32       (394,000)   -    - 
- Non-related parties          -    -    - 
Repayment of current portion of long-term borrowings          (24,960)   (24,960)   (24,960)
Acquisition of Treasury shares          (75,000)   (10,677,100)   - 
Transaction with non-controlling interests          -    -    (650,000)
Repayment of lease liabilities          (1,663,415)   (1,617,756)   (1,088,224)
Net cash outflow for financing activities          (1,287,375)   (12,189,816)   (1,763,184)
Effect of exchange rate changes on cash and cash equivalents          70,518    361,525    96,536 
Net increase(decrease) in cash and cash equivalents          (4,505,580)   (22,357,447)   19,381,536 
Cash and cash equivalents at beginning of the year  17       8,585,634    30,581,556    11,103,484 
Cash and cash equivalents at end of the year  17  ₩   4,150,572    8,585,634    30,581,556 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

1. Reporting entity

 

The Parent Company

 

Play Company Co., Ltd. (“the Parent Company”) was incorporated in June 2012 and the Parent Company's registered office is at Business Tower 20F, 396 World Cup buk-ro, Mapo-gu, Seoul, Korea. These consolidated financial statements comprise the Parent Company and its subsidiary (together referred to as the “Group”). The Group generates revenue primarily through the sale of the Group's entertainment content and services, and food and beverage products as well as through the licensing of the Group's intellectual property in food and beverage business. The Parent company primarily engages in the provision of goods to its customers by offering made-to-order services to plan the projects, design merchandise, and deliver customized products to its customers, utilizing the intellectual property associated with K-pop artists. Play F&B Co., Ltd. (the “Subsidiary”) operates a retail bakery-cafe business and franchising business under the concept names ‘Our Bakery’. As of December 31, 2024, retail operations consist of 13 Company-owned bakery-cafes and 19 franchise-operated bakery-cafes located in South Korea and China.

 

The Parent Company’s major shareholders and their respective percentage of ownership as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Number of shares
(in shares)		   Percentage of ownership
(%)		   Number of shares
(in shares)		   Percentage of ownership
(%)		 
Cho, Hyeong Seok   83,418    83.4%   83,418    83.4%
K Enter Holdings   1,000    1.0%   -    - 
Solaire Partners LLC.   -    -    1,000    1.0%
Subtotal (outstanding)   84,418    84.4%   84,418    84.4%
Plus: Treasury shares   15,582    15.6%   15,582    15.6%
Total (issued)   100,000    100.0%   100,000    100.0%

 

Consolidated Subsidiary

 

Details of the consolidated subsidiary as of December 31, 2024 and 2023 are as follows:

 

      Percentage of ownership (%)       
Subsidiary  Location  December 31,
2024		   December 31,
2023		   January 1,
2023		   Fiscal year end  Main business
Play F&B  Korea   67.1    67.1    67.1   December  Sale of food and beverages

 

Condensed financial information of subsidiary

 

Condensed financial information of subsidiary as of and for the years ended December 31, 2024 and 2023 are as follows:

 

   December 31, 2024 
   (In thousands of Korean Won) 
Subsidiary  Total assets
(*)		   Total liabilities
(*)		   Revenues
(*)		   Profit for the period
(*)		 
Play F&B   13,174,076    18,990,058    14,630,426    (3,101,420)

 

6

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

   December 31, 2023
   (In thousands of Korean Won)
Subsidiary  Total assets
(*)		  Total liabilities
(*)		   Revenues
(*)		   Profit for the period
(*)		 
Play F&B  18,958,244   21,716,891    17,709,332    (1,140,267)

 

(*) The condensed financial information was prepared based on amounts before eliminating intergroup transactions.

 

2. Basis of Accounting

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These consolidated financial statements were authorized for issuance by the Board of directors on May 14, 2025.

 

Details of the Group’s accounting policies, including changes thereto, are included in Note 5.

 

Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement bases
Defined benefit liabilities   Present value
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value

 

3. Functional and presentation currency

 

These consolidated financial statements are presented in Korean Won, which the Group’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

7

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

A.Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:

 

Note 29(A): lease term: whether the Group is reasonably certain to exercise extension options.

 

B.Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

• Note 20(C): goodwill impairment: The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). The value in use is estimated by applying a weighted average cost of capital that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

 

i.Measurement of fair values

 

A number of the Group’s accounting policies and disclosures require the measurement of fair values for financial assets.

 

When measuring the fair value of a financial instruments measured at FVTPL, the Group uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

●Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

●Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

●Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following notes:

 

●Note 11(B): share-based payment arrangements;

 

●Note 27(B): financial instruments.

 

8

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

5. Material accounting policies

 

The material accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:

 

A.New and amended standards or interpretations adopted by the Group

 

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2024.

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Non-current Liabilities with Covenants

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. Covenants that the entity must comply with after the end of the reporting period do not affect the classification of a liability at the end of the reporting period. However, if a liability is classified as non-current as of the end of the reporting period despite covenants that must be complied with within 12 months after that date, the entity shall disclose information about the risk that the liability could become repayable within 12 months after the reporting period. The amendments do not have a significant impact on the financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

B.New and amended standards or interpretations not yet adopted by the Group

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Group.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Group does not expect that these amendments have a significant impact on the Group’s financial statements.

 

9

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI. The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Group does not expect that these amendments have a significant impact on the financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

-IFRS 1 First-time adoption of International Financial Reporting Standards;
-IFRS 7 Financial instruments: Disclosures;
-IFRS 9 Financial instruments;
-IFRS 10 Consolidated financial instruments; and
-IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Group is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Group to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Group is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

Basis of consolidation

 

i.Business combinations

 

The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.

 

The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

 

10

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

 

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent event changes in the fair value of the contingent consideration are recognized in profit or loss.

 

If share-based payment awards are required to be exchanged for awards held by the acquiree's employees (acquiree's awards), then all or a portion of the amount of the acquirer's replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree's awards and the extent to which the replacement awards relate to pre- combination service.

 

ii.Subsidiary

 

Subsidiary is an entity controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiary are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

iii.Non-controlling interests

 

Non-controlling interests are measured initially at their proportionate share of the acquiree's identifiable net assets at the date of acquisition.

 

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

iv.Loss of control

 

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

v.Interests in equity- accounted investees

 

The Group's interests in equity- accounted investees comprise interests in associates and a joint venture. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

 

Interests in associates and the joint venture are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group's share of the profit or loss and other comprehensive income (“OCI”) of equity- accounted investees, until the date on which significant influence or joint control ceases.

 

vi.Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealized income and expenses (except for foreign currency transaction gains or losses) arising from intra- group transactions, are eliminated. Unrealized gains arising from transactions with equity- accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

11

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

C.Foreign currency

 

i.Foreign currency transactions

 

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss and presented within finance costs. Translation differences on Non-monetary assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

 

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

 

●an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognized in OCI are reclassified to profit or loss);

 

●a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

 

●qualifying cash flow hedges to the extent that the hedges are effective.

 

D.Revenue from contracts with customers

 

The Group generates revenue primarily through the sale of the Group's entertainment content and services, and food and beverage products as well as through the licensing of the Group's intellectual property in food and beverage business.

 

The Group determines revenue recognition by:

 

●identifying the contract, or contracts, with a customer;

 

●identifying the performance obligations in each contract;

 

●determining the transaction price;

 

●allocating the transaction price to the performance obligations in each contract; and

 

●recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

 

Content revenue

 

Content revenues consist of sales of the physical and digital content consumer products and merchandises. The Group recognizes revenues from the sale of consumer products and merchandises after both (1) control of the products has been transferred to customers and (2) the underlying performance obligations have been satisfied.

 

Content revenues are recognized after deducting the estimated allowance for returns, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns are estimated at contract inception and updated at the end of each reporting period as additional information becomes available.

 

Food and beverages revenue

 

Food and beverages revenues consist of sales of the consumer products including food and beverages. The Group recognizes revenues from the sale of consumer products after both (1) control of the products has been transferred to customers and (2) the underlying performance obligations have been satisfied.

 

Food and beverages revenues are recognized after deducting the estimated allowance for returns, which are accounted for as variable consideration when estimating the amount of revenue to recognize.

 

12

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Other revenues

 

Under franchise agreements, the Group’s performance obligation is to provide a license to use Our Bakery’s trademarks and other intellectual property. Franchise royalties and fees are typically charged as a percentage of food and beverage revenues and are treated as variable consideration, recognized as the underlying food and beverage revenues occur.

 

Franchise agreements also contain a promise to provide training support and recipe teaching services to franchise-operated stores. A monthly franchise loyalty fee, based on gross food and beverage revenues, is charged, and recognized over time as these services are delivered.

 

E.Operating segments

 

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The chief operating decision-maker has been identified as the chief executive officer. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief executive officer for the purpose of resource allocation and assessment of segment performance. The Group has two reportable segments as described in Note 6. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

F.Employee benefits

 

i.Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

 

ii.Share-based payment arrangements

 

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

 

The fair value of the amount payable to employees in respect of share-based payment arrangements, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share-based payment arrangements. Any changes in the liability are recognized in profit or loss.

 

The fair value of the share-based payment arrangements with cash alternatives granted to employees, which is sum of the fair values of the equity component and liabilities component, is recognized as an expense, with a corresponding increase in equity and liabilities, over the vesting period of the awards. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share-based payment arrangements. Any changes in the liability are recognized in profit or loss.

 

13

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

iii.Defined contribution plans

 

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

 

iv.Defined benefit plans

 

The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset) , taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

G.Finance income and finance costs

 

The Group’s finance income and finance costs include:

 

●interest income;

 

●interest expense;

 

●dividend income;

 

●the net gain or loss on financial assets at FVTPL;

 

●the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

●the gross carrying amount of the financial asset; or

 

●the amortized cost of the financial liability.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

H.Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

14

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The Group has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i.Current income tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

-Has a legally enforceable right to set off the recognized amounts; and

 

-Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

ii.Deferred income tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

●temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

●temporary differences related to investments in subsidiary, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

●taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiary in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

-Has a legally enforceable right to set off the recognized amounts; and

 

-Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

I.Cash and Cash Equivalents

 

Cash and cash equivalents comprise cash on hand, deposits held at banks, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

15

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

J.Inventories

 

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in, first-out allocation method, and includes expenditures incurred in acquiring the inventories, production or conversion cost and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses.

 

The Group makes adjustments to reduce the cost of inventory to its net realizable value, for estimated excess, obsolescence or impaired balances.

 

K.Investment property

 

Property held by a lessee as a right-of-use asset to earn rentals or for capital appreciation or both is classified as investment property. Investment properties held by a lessee as a right-of-use assets are initially measured at its cost in accordance with IFRS 16. The Company remeasures the investment property held by a lessee as a right-of-use asset if necessary, in accordance with IFRS 16.

 

Among investment properties, land is not depreciated, and investment properties except land are depreciated on a straight-line basis according to the economic depreciation period. Depreciation methods, useful lives and residual values of investment properties are reviewed at each reporting period-end and if appropriate, the changes are accounted for as changes in accounting estimates.

 

L.Property, plant and equipment

 

i.Recognition and measurement

 

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

 

ii.Subsequent expenditure

 

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred.

 

iii.Depreciation

 

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives as follows:

 

Machinery   5 ~ 8 years
Vehicles   5 years
Office equipment   5 ~ 8 years
Furniture and fixtures   5 ~ 8 years
Right-of-use assets   2 ~ 10 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

16

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

M.Intangible assets and goodwill

 

i.Recognition and measurement

 

Goodwill: Goodwill arising on the acquisition of subsidiary is measured at cost less accumulated impairment losses.

 

Other intangible assets: Other intangible assets, including trademarks that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

 

ii.Subsequent expenditure

 

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

 

iii.Amortization

 

Amortization is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives as follows:

 

Software   5 years
Other Intangible assets   20 years
Goodwill   Indefinite

 

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

N.Financial instruments

 

i.Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

ii.Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

●amortized cost;

 

●FVOCI - debt investment;

 

●FVOCI - equity investment;

 

●or FVTPL.

 

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

17

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

Financial assets - Business model assessment

 

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

●the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

●how the performance of the portfolio is evaluated and reported to the Group’s management;

 

●the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

●how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

●the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

18

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

 

●contingent events that would change the amount or timing of cash flows;

 

●terms that may adjust the contractual coupon rate, including variable-rate features;

 

●prepayment and extension features; and

 

●terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

iii.Derecognition

 

Financial assets

 

The Group derecognizes a financial asset when:

 

●the contractual rights to the cash flows from the financial asset expire; or

 

●it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

-substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

-the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Group enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

19

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Financial liabilities

 

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Group first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on accounting for modifications to the additional changes.

 

O.Impairment

 

i.Non- derivative financial assets

 

Financial instruments and contract assets

 

The Group recognizes loss allowances for ECLs on:

 

●financial assets measured at amortized cost;

 

●debt investments measured at FVOCI; and

 

●contract assets.

 

The Group also recognizes loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables.

 

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

●debt securities that are determined to have low credit risk at the reporting date; and

 

●other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment, that includes forward-looking information.

 

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 12 months past due.

 

The Group considers a financial asset to be in default when:

 

●the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held).

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

 

20

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

 

ECLs are discounted at the effective interest rate of the financial asset.

 

Credit-impaired financial assets

 

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

●significant financial difficulty of the debtor;

 

●a breach of contract such as a default or being more than 90 days past due;

 

●the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

 

●it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

●the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in OCI.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

 

ii.Non-financial assets

 

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

21

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. The Group recognizes the impairment loss if there is any indication of impairment of individual CGU. And then, the Group performed impairment test of goodwill for groups of CGUs.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

P.Provisions

 

Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

 

Building restoration: In accordance with the Group’s policy and applicable legal requirements, a provision for restoration in respect of leased buildings, and the related expense, is recognized when the lease term is commenced.

 

Q.Leases

 

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

i.As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

 

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

●fixed payments, including in-substance fixed payments;

 

22

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

●variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

●amounts expected to be payable under a residual value guarantee; and

 

●the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

At the date of transition to IFRSs, The Group applies the following approach to all of its leases.

 

The Group measures that lease liability at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at the date of transition to IFRSs.

 

The Group measures right-of-use asset at its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee's incremental borrowing rate at the date of transition to IFRSs.

 

The Group uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date), including IT equipment. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

ii.As a lessor

 

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

 

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

 

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

 

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

 

If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.

 

The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

 

23

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

 

R.Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Group uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

S.Earnings per Share

 

Basic earnings per share is calculated by dividing the net profit for the period available to the ordinary shareholders by the weighted-average number of ordinary shares outstanding during the year.

 

Diluted earnings per share is calculated by dividing the profit for the year attributable to owners of the parent company from the consolidated statements of profit or loss by the weighted-average number of ordinary shares outstanding and potential dilutive shares. Potential dilutive shares are used in the calculation of dilutive earnings per share only when they have dilutive effects.

 

T.Concentration of Credit Risk

 

The Group performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Group maintains reserves for potential credit losses, which are periodically reviewed.

 

U.Share capital

 

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

 

When the Group repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.

 

24

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

6. Operating segments

 

A.Basis for segmentation

 

The Group’s operating segments have been identified to be each business unit, by which the Group provides different services and merchandise.

 

The Group assesses the performance of each operating segment based on operating profit, and there is no difference with the amounts reported on the consolidated statement of profit or loss, except for intergroup transactions.

 

The following summary describes the operations of each reportable segment.

 

Operating segments   Operations
Content   Sale and distribution of content consumer products and providing production services
Food and beverages   Sale of food and beverages products and licensing of the intellectual property

 

The Group’s chief executive officer reviews the internal management reports of each business unit at least quarterly.

 

B.Information about reportable segments

 

Information related to each reportable segment is set out below. Segment operating profit is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

 

The segment information for the years ended December 31, 2024, 2023 and 2022 is as follows:

 

       2024 
       Content   F&B   Total 
       (In thousands of Korean won) 
Segment revenue  ₩   28,379,904    14,630,426    43,010,330 
Elimination of intersegment revenue       -    -    - 
Consolidated net revenue       28,379,904    14,630,426    43,010,330 
Depreciation/Amortization       501,513    2,672,170    3,173,683 
Segment operating profit(loss)       (969,001)   (2,537,890)   (3,506,891)

 

       2023 
       Content   F&B   Total 
       (In thousands of Korean won) 
Segment revenue  ₩   49,771,824    17,709,332    67,481,156 
Elimination of intersegment revenue       -    -    - 
Consolidated net revenue       49,771,824    17,709,332    67,481,156 
Depreciation/Amortization       750,031    2,534,001    3,284,032 
Segment operating profit(loss)       3,802,307    (304,909)   3,497,398 

 

25

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

       2022 
       Content   F&B   Total 
       (In thousands of Korean won) 
Segment revenue  ₩   151,858,729    17,163,659    169,022,388 
Elimination of intersegment revenue       -    -    - 
Consolidated net revenue       151,858,729    17,163,659    169,022,388 
Depreciation/Amortization       733,182    1,702,091    2,435,273 
Segment operating profit(loss)       13,546,382    (384,475)   13,161,907 

 

C.Geographic information

 

Content segment and food and beverages segments are managed on a worldwide basis, but operate manufacturing facilities and sales offices primarily in Seoul, South Korea. The geographic information analyses the Group’s revenue by the customer’s country of domicile. In presenting the geographic information, segment revenue and non-current assets have been based on the geographic location of customers.

 

Summary of the Group’s operation by region based on the location of customers for the years ended December 31, 2024, 2023 and 2022 is as follows:

 

       2024   2023   2022 
       (In thousands of Korean won) 
Korea  ₩   39,343,631    54,892,741    93,764,173 
USA       13    335,239    9,879,723 
Japan       3,516,708    11,948,054    64,996,330 
China       141,419    142,303    353,095 
Other       8,560    162,819    29,067 
Total  ₩   43,010,330    67,481,156    169,022,388 

 

Summary of the Group’s non-current assets based on the location as of December 31, 2024 and 2023 is as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Korea₩    23,963,489    30,282,905 

 

26

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

D.Major customer

 

Revenues from major customers that amount to 10% or more of the Group’s revenue for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Customer A (Content segment)   　    　      
Revenue₩     8,785,673    11,184,157    4,167,544 
%   20.43%   16.57%   2.47%
Customer B (Content segment)               
Revenue   2,063,499    11,463,821    62,713,081 
%   4.80%   16.99%   37.10%
Customer C (Content segment)               
Revenue   926,101    17,859,876    62,174,920 
%   2.15%   26.47%   36.79%
Total₩ 11,775,273    40,507,854    129,055,545 

 

7. Revenue

 

A.Revenue streams

 

The Group generates revenue primarily through the sale of the Group's entertainment content and production services, and food and beverage products. Other sources of revenue include the franchise royalty fees from licensing of the Group's intellectual property in food and beverage business.

 

Revenue from contracts with customers for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Revenue from contracts with customers₩    43,010,330    67,481,156    169,022,388 

 

B.Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 6).

 

Revenue from contracts with customers based on the service contract type and the timing of satisfaction of performance obligations for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Major products/service lines   　    　      
Content goods and merchandises               
Video Project & Merchandise Items₩    23,536,076    47,511,123    150,972,943 
Others   4,843,828    2,260,701    885,786 
Subtotal₩ 28,379,904    49,771,824    151,858,729 
F&B               
Food and beverages₩ 13,697,884    17,067,663    16,469,551 
Franchise royalties and fees   932,542    641,669    694,108 
Subtotal₩ 14,630,426    17,709,332    17,163,659 
Total₩ 43,010,330    67,481,156    169,022,388 
Timing of revenue recognition   　    　    　 
At a point in time₩ 42,453,366    66,925,610    168,328,280 
Over time   556,964    555,546    694,108 
Total₩ 43,010,330    67,481,156    169,022,388 

 

27

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

C.
Contract balance

 

The balance of contract assets from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Contract assets₩           -    73,463 

 

8. Income and Expenses

 

A.Other income

 

Details of other income for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won 
Gains on disposal of Property, Plant & Equipment₩    6,100    928    - 
Gains on disposal of right-of-use assets   131,193    1,042,833    - 
Rental income   808,123    283,983    - 
Miscellaneous income   76,713    159,336    84,462 
Total₩ 1,022,129    1,487,080    84,462 

 

B.Other expenses

 

Details of other expenses for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Other bad debt expenses₩    347,419    -    8,000 
Losses on disposal of Property, Plant & Equipment   329,882    31,975    - 
Impairment losses on Property, Plant & Equipment   964,626    2,246    15,583 
Securities purchase expenses   -    -    188 
Miscellaneous expenses   1,158    1,326    22,386 
Total₩ 1,643,085    35,547    46,157 

 

28

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

C.Expenses by nature

 

Details of classification of expenses by nature for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Changes in inventories₩    (393,764)   2,931,297    (1,555,535)
Raw materials and consumables   5,029,668    4,989,957    4,322,808 
Employee benefits   9,549,202    11,777,876    11,483,075 
Depreciation   2,817,673    2,921,232    2,082,277 
Amortization of intangible assets   356,010    362,800    352,996 
Commission paid   13,430,421    21,501,616    84,065,732 
Outsourcing fee   11,421,682    16,071,848    48,710,311 
Copyright fee   714,124    1,348,620    2,365,794 
Rent   484,204    856,282    792,174 
Supplies   234,611    307,350    470,966 
Water and fuel expenses   487,384    633,874    444,240 
Transportation   347,864    369,182    429,703 
Bad debt expenses   297,162    171,560    696,977 
Building Maintenance   110,866    96,425    201,353 
Other expenses   1,009,159    1,095,372    1,035,915 
Total   45,896,266    65,435,291    155,898,786 

 

Total expenses consist of cost of sales and selling, general and administrative expenses.

 

9. Finance income and costs

 

Details of finance income and costs for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

   2024   2023   2022 
   (In thousands of Korean won) 
Finance income               
Interest income₩     287,285    406,933    520,526 
Dividend income   1,463    1,462    700 
Realized gains on foreign currency transaction   43,037    199,697    529,995 
Unrealized gains on foreign currency transaction   88,458    376,295    154,896 
Gains on valuation of short-term financial instruments   33    55    - 
Gains on valuation of long-term financial instruments   6,368    7,241    6,514 
Gains on disposal of long-term investment securities   -    -    5,878 
Gains on valuation of long-term investment securities   149,926    116,900    2,638 
Gains on disposal of short-term loans   -    12,819    - 
Gains on disposal of long-term loans   -    622,539    - 
Total₩ 576,570    1,743,941    1,221,147 
Finance costs   　    　      
Interest expenses₩ 1,257,378    1,385,142    810,047 
Realized losses on foreign currency transaction   57,308    255,886    723,307 
Unrealized losses on foreign currency transaction   6,447    26,064    149,586 
Losses on valuation of short-term financial instruments   -    6    421 
Losses on valuation of long-term financial instruments   115    8,717    5,263 
Losses on disposal of long-term investment securities   -    -    4,090 
Losses on valuation of long-term investment securities   60,275    12,395    118,607 
Total₩ 1,381,523    1,688,210    1,811,321 

 

29

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

10. Earnings per share

 

A.Basic earnings per share

 

The calculation of basic EPS has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding.

 

i.Profit attributable to ordinary shareholders (basic)

 

   2024   2023   2022 
   (In thousands of Korean Won) 
Profit for the year, attribute to the owners of Parent Company₩    (2,541,375)   3,137,186    10,189,718 
Dividends on non-redeemable preference shares   -    -    - 
Profit attributable to ordinary shareholders₩ (2,541,375)   3,137,186    10,189,718 

 

ii.Weighted-average number of ordinary shares (basic)

 

   2024   2023   2022 
   (In number of shares) 
Number of ordinary shares issued at January 1   100,000    100,000    100,000 
Effect of treasury shares held   (15,582)   (12,081)   - 
Weighted-average number of ordinary shares at December 31   84,418    87,919    100,000 

 

B.Anti-diluted earnings per share

 

Diluted earnings per share is not different from basic earnings per share as there is no dilution effects of potential ordinary shares for the years ended December 31, 2024, 2023 and 2022.

 

C.Earnings per share

 

   2024   2023   2022 
   (In Korean Won) 
Basic earnings per share₩    (30,105)   35,683    101,897 

 

30

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

11. Share-based payment arrangements

 

A.Description of share-based payment arrangements

 

As of December 31, 2024, the Group had the following share-based payment arrangements.

 

i.Share option plan (cash-settled)

 

On June 30, 2021, the Subsidiary granted 400 share options entitling employees to a cash payment after satisfying 2 vesting conditions below. The amount of the cash payment is determined based on the difference between the share price of the Group at the time of exercise and exercise price.

 

The key terms and conditions related to the grants under these plans are as follows:

 

Grant date /employees entitled  Number of instrumentts  Vesting conditions  Contractual life of options  Type  Underlying assets
Options granted to employees         
As of June 30, 2021  400  2 years' service from grant date and the Play F&B’s annual average Adjusted EBITDA (*1) equals or exceeds Korean Won 1,375,000 thousand at the date of exercise  7 years  Cash-settled  Play F&B’s ordinary shares

 

(*1) Adjusted EBITDA = Operating Income +Depreciation of PP&E +Amortization of Intangible Assets +Advertising & marketing expenses

 

31

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Measurement of fair values

 

i.Cash-settled share-based payment arrangement

 

The fair value of the employee share options has been measured using a binomial model.

 

The inputs used in the measurement of the fair values at grant date and measurement date of the cash-settled share-based payment arrangement are as follows:

 

Share appreciation rights (cash-settled)     December 31,
2024		   December 31,
2023		 
       (In Korean Won) 
Fair value of option  ₩   54,230    504,547 
Share price      643,735    1,247,333 
Exercise price  ₩   1,100,000    1,100,000 
Risk- free interest rate (based on government bonds)      2.71%   3.15%
Volatility(*)      30.00%   37.49%

 

(*) Volatility has been based on an evaluation of the historical volatility of other companies’ share price, which are listed in KOSDAQ, particularly over the historical period commensurate with prior one year.

 

C.Reconciliation of outstanding share options

 

The number and exercise prices of share options under the share option plan for the years ended December 31, 2024, 2023 and 2022 are as follows.

 

  2024   2023   2022 
Share option plan
(cash-settled)		  Number of options   Exercise price   Number of options   Exercise price   Number of options   Exercise price 
   (In Korean Won and number of options) 
Outstanding at January 1   400   ₩1,100,000    400   ₩1,100,000    400   ₩1,100,000 
Outstanding at December 31   400    1,100,000    400    1,100,000    400    1,100,000 
Exercisable at December 31   -   ₩-    -   ₩-    -   ₩- 

 

 

   2022 
Share option plan
(Either of equity-settled or cash-settled)		  Number of options   Exercise price 
   (In Korean Won and number of options) 
Outstanding at January 1  3,000   ₩560,000 
Cancelled during the year   (3,000)   (560,000)
Outstanding at December 31   -    - 
Exercisable at December 31   -   ₩- 

 

32

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Details of the liabilities arising from the share option plan (cash-settled) are as follows.

 

      2024   2023   2022 
      (In thousands of Korean won) 
Total carrying amount of liabilities for share-based payment  ₩   21,692    201,819    227,577 
Total intrinsic value of liabilities for vested benefits      -    58,933    115,306 

 

12. Employee benefits

 

Details of defined benefit liability recognized as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Defined benefit liability₩  559,271    706,102 

 

The Group operates both the defined benefit plans and defined contribution plans as a retirement pension scheme. Defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

 

The expense recognized in relation to defined contribution plan for the year ended December 31, 2024, 2023 and 2022 is Korean Won 295,080 thousand, 435,139 thousand and 339,901 thousand, respectively.

A.Movement in net defined benefit (asset) liability

 

Details of reconciliation from the opening balances to the closing balances for the net defined benefit liability and its components for the years ended December 31, 2024, 2023 and 2022 is as follows:

 

   Defined benefit obligation   Fair value of plan assets   Net defined benefit liabilities 
   2024   2023   2022   2024   2023   2022   2024   2023   2022 
   (In thousands of Korean won) 
Balance at 1 January₩  706,102    928,148    796,366    -    -    -    706,102    928,148    796,366 
Included in profit or loss                                             
 Current service cost   375,158    514,505    550,108    -    -    -    375,158    514,505    550,108 
 Interest expense   19,015    31,375    19,095    -    -    -    19,015    31,375    19,095 
Subtotal   394,173    545,880    569,203    -    -    -    394,173    545,880    569,203 
Included in OCI                                             
Remeasurement loss(gain)                                             
Demographic assumption   (4,954)   -    -    -    -    -    (4,954)   -    - 
Financial assumption   41,683    49,584    (201,015)   -    -    -    41,683    49,584    (201,015)
Adjustment based on experience   (80,813)   (159,142)   57,186    -    -    -    (80,813)   (159,142)   57,186 
Subtotal   (44,084)   (109,558)   (143,829)   -    -    -    (44,084)   (109,558)   (143,829)
Other                                             
Benefits paid   (496,920)   (658,368)   (293,592)   -    -    -    (496,920)   (658,368)   (293,592)
Subtotal   (496,920)   (658,368)   (293,592)   -    -    -    (496,920)   (658,368)   (293,592)
Balance at 31 December₩  559,271    706,102    928,148        -       -       -    559,271    706,102    928,148 

 

33

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Plan assets

 

There are no contributions funded to its defined benefit plans as of December 31, 2024 and 2023.

 

C.Defined benefit obligation

 

i.Actuarial assumptions

 

Details of actuarial assumptions used for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

  2024   2023   2022
Discount rate 4.2%   4.9%   5.6%
Future salary growth 5.5%~8.4%   6.1%~8.2%   6.1%~8.2%

 

Assumptions regarding future longevity and standard salary scale have been based on issued by Korea Insurance Development Institute.

 

As of December 31, 2024, the weighted average duration of the defined benefit obligation was 10.9 years.

 

ii.Sensitivity analysis

 

The Group measures the risk of actuarial assumption changes as a 1% fluctuation in the discount rate and future salary growth rate of the amounts of defined benefit obligation, which reflects the management's assessment of the risk of actuarial assumption fluctuation that can reasonably occur. The impact of a 1% fluctuation in discount rates and future salary growth rates on the Group’s defined benefit obligation as of December 31, 2024 and 2023 are as follows:

 

      December 31, 2024   December 31, 2023 
      Increased by 1%   Decreased by 1%   Increased by 1%  

Decreased by 1%

 
      (In thousands of Korean won) 
Discount rate  ₩   (55,066)   66,463    (68,906)   83,674 
Future salary growth      66,204    (55,864)   83,967    (70,331)

 

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

 

D.Employee benefit expenses

 

i.Details of employee benefit expenses recognized for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

       2024   2023   2022 
       (In thousands of Korean won) 
Wages and salaries   ₩    8,056,765    9,641,567    9,321,946 
Expenses related to post-employment plans        689,253    981,019    909,103 
Social security contributions        398,066    582,545    476,938 
Fringe benefit        585,245    598,503    622,293 
Cash-settled Share-based payments        (180,127)   (25,758)   152,795 
Total   ₩    9,549,202    11,777,876    11,483,075 

 

34

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

ii.Expenses are recognized in the consolidated statements of comprehensive income (loss) as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Cost of revenues  ₩   7,280,355    9,290,041    8,454,607 
Selling, general and administrative expenses      2,268,847    2,487,835    3,028,468 
Total  ₩   9,549,202    11,777,876    11,483,075 

 

13. Income taxes

 

A.Amounts recognized in profit or loss

 

      2024   2023   2022 
      (In thousands of Korean won) 
Current tax expense     　   　     
Current year  ₩   233,403    1,319,643    2,827,858 
Adjustments recognized related to prior period incomes (*)      (263,935)   (518,699)   539,038 
   ₩   (30,532)   800,944    3,366,896 
Deferred tax expense      　         　 
Origination and reversal of temporary differences  ₩   (723,118)   (40,165)   (679,788)
Deferred taxes charged directly to equity      -    -    - 
Tax expense on continuing operations  ₩   (753,650)   760,779    2,687,108 

 

(*) In the normal course of business, the Group and its respective subsidiary are examined by taxation authority. Our management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liabilities for income taxes.

 

We establish additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the consolidated statements of operations.

 

35

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Amounts recognized in OCI

 

      2024   2023   2022 
      Before tax  

Tax (expense)
benefit

   Net of tax   Before tax  

Tax (expense)

 benefit

   Net of tax   Before tax  

Tax (expense)

 benefit

   Net of tax 
      (In thousands of Korean won) 
Items that will not be reclassified to profit or loss                                                
Remeasurements of defined benefit liability  ₩   44,085      -    44,085    109,558        -    109,558    143,829       -    143,829 

 

C.Reconciliation of effective tax rate

 

      2024   2023   2022 
      (In thousands of Korean won) 
Profit before income tax  ₩   (4,311,845)   3,553,129    12,571,733 
Tax at the statutory income tax rate      (844,871)   720,604    2,743,781 
Adjustments:                  
Tax-exempt income      (408)   (92)   (42)
Expenses not deductible for tax purposes      31,689    37,369    33,114 
Tax credits      (84,755)   (124,290)   (348,559)
Changes in unrecognized deferred tax      380,738    (149,470)   81,485 
Adjustments recognized related to prior period incomes      (263,935)   121,794    137,205 
Other (differences in tax rate, etc)      27,892    154,864    40,124 
Income tax expenses  ₩   (753,650)   760,779    2,687,108 
Effective income tax rate(*)      -    21.4%   21.4%

 

(*) The effective tax rate is not calculated as the Group incurred a loss before income taxes for the year ended December 31, 2024.

 

36

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

D.Movement in deferred tax balances

 

i.Movement in deferred tax balances as of December 31, 2024

 

      Tax effect 
      Beginning   Increase (decrease)   Ending 
      (In thousands of Korean won) 
Accrued income  ₩   (54,469)   38,593    (15,876)
Short-term financial instruments      74,007    17,067    91,074 
Inventories      220,559    349,407    569,966 
Property, plant and equipment including right-of-use assets      (2,261,920)   209,791    (2,052,129)
Intangible assets other than goodwill      (10,712)   17,710    6,998 
Allowance for bad debts      267,801    127,416    395,217 
Investments in associate and subsidiary (*)      924,522    281,227    1,205,749 
Accrued expenses      -    (5,291)   (5,291)
Lease liabilities      2,988,900    (742,040)   2,246,860 
Provisions      192,644    (17,518)   175,126 
Investment property      (681,506)   597,697    (83,809)
Defined benefit liabilities      143,140    (25,204)   117,936 
Brand      (676,406)   277,249    (399,157)
Other      50,733    6,667    57,400 
Total  ₩   1,177,293    1,132,771    2,310,064 
Loss carried forward  ₩   509,696    529,562    1,039,258 
Carryover tax credit      4,246,455    (1,128,338)   3,118,117 
Unrecognized deferred tax liabilities (assets) (*)      (6,044,706)   189,123    (5,855,583)
Deferred tax assets (liabilities)  ₩   (111,262)   723,118    611,856 

 

(*) As of December 31, 2024, the Group did not recognize deferred income tax asset for the temporary difference relating to investments in subsidiary as it is not probable such temporary differences can be utilized in the foreseeable future.

 

37

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

ii.Movement in deferred tax balances as of December 31, 2023

 

      Tax effect 
      Beginning   Increase (decrease)   Ending 
      (In thousands of Korean won) 
Accrued income  ₩   (119,556)   65,087    (54,469)
Short-term financial instruments      79,158    (5,151)   74,007 
Inventories      (60,881)   281,440    220,559 
Property, plant and equipment including right-of-use assets      (3,600,206)   1,338,286    (2,261,920)
Intangible assets other than goodwill      15,853    (26,565)   (10,712)
Allowance for bad debts      203,306    64,495    267,801 
Investments in associate and subsidiary (*)      805,615    118,907    924,522 
Accrued expenses      102,454    (102,454)   - 
Lease liabilities      3,637,330    (648,430)   2,988,900 
Provisions      220,431    (27,787)   192,644 
Investment property      -    (681,506)   (681,506)
Defined benefit liabilities      193,983    (50,843)   143,140 
Brand      (1,036,943)   360,537    (676,406)
Other      869,670    (818,937)   50,733 
Total  ₩   1,310,214    (132,921)   1,177,293 
Loss carried forward  ₩   4,787    504,909    509,696 
Carryover tax credit      2,756,092    1,490,363    4,246,455 
Unrecognized deferred tax liabilities (assets) (*)      (4,222,519)   (1,822,187)   (6,044,706)
Deferred tax assets (liabilities)  ₩   (151,426)   40,164    (111,262)

 

(*) As of December 31, 2023, the Group did not recognize deferred income tax asset for the temporary difference relating to investments in subsidiary as it is not probable such temporary differences can be utilized in the foreseeable future.

 

38

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

E.Deferred assets (liabilities)

 

i.Details of unrecognized as deferred income tax assets as of December 31, 2024 and 2023 are as follows:

 

      2024   2023 
      (In thousands of Korean won) 
Tax loss carryforwards  ₩   1,039,258    509,696 
Tax credit carryforwards      3,118,117    4,246,455 
Unrecognized temporary difference      1,698,208    1,288,555 

 

ii.Details of unused tax loss carryforwards and unused tax credit carryforwards that are not recognized as deferred income tax assets as of December 31, 2024 are as follows:

 

Year of expiration     Unused loss carryforwards  

Unused tax credit

carryforwards

 
      (In thousands of Korean won) 
2025  ₩   -    - 
2026      -    - 
2027      -    - 
2028      -    188,128 
2029      -    - 
2030      -    - 
After 2030      4,972,526    2,929,989 
Total  ₩   4,972,526    3,118,117 

 

iii.The timing of recovery of deferred tax assets and liabilities as of December 31, 2024 and 2023 is as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Deferred tax assets             
- Deferred tax assets to be recovered after more than 12 months  ₩   593,760    510,711 
- Deferred tax assets to be recovered within 12 months      978,311    516,316 
Sub-total      1,572,071    1,027,027 
Deferred tax liabilities      　    　 
- Deferred tax liabilities to be recovered after more than 12 months      (939,073)   (1,126,473)
- Deferred tax liabilities to be recovered within 12 months      (21,142)   (11,816)
Sub-total      (960,215)   (1,138,289)
Deferred tax assets (liabilities), net  ₩   611,856    (111,262)

 

39

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

14. Other assets

 

Details of other assets as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Current           
Prepayments  ₩   3,078    18,423 
Prepaid expenses (*)      661,554    700,770 
Subtotal      664,632    719,193 
Non-Current             
Non-current prepaid expenses (*)      1,907,965    2,606,623 
Total  ₩   2,572,597    3,325,816 

 

(*) On July 2023, the Group granted a retention bonus to 7 employees, as a compensation for being employed for the next 5 years. Prepaid and Non-current prepaid expenses are expensed in a straight-line basis, during the employment period defined in the contract.

 

15. Inventories

 

Details of inventories as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Merchandise  ₩   2,717,915    1,110,974 
Work in process      756,802    391,939 
Allowance for Inventories valuation      (2,656,393)   (1,078,353)
Total  ₩   818,324    424,560 

 

In 2024, inventories amounted to Korean Won 32,616,031 thousand (2023: Korean Won 38,465,045 thousand, 2022: Korean Won 65,875,206 thousand) were recognized as an expense during the year and included in ‘cost of sales’.

 

The Group recognizes the full provision for inventories with more than one year aging from the initiation of project according to the Company's accounting policies. For inventories with less than one year aging from the initial production with an estimated recovery period exceeding one year, it is also recognized as a provision. Loss on valuation of inventories amounted to Korean Won 1,919,734 thousand (2023: Korean Won 140,077 thousand, 2022: Korean Won 1,358,651 thousand) and reversal of allowance for inventories valuation amounted to Korean Won 341,694 thousand (2023: Korean Won 538,072 thousand, 2022: Korean Won 215,553 thousand) were recognized during the year ended December 31, 2024 and 2023, respectively.

 

40

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

16. Trade and other receivables

 

Details of trade and other receivables as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Trade receivable             
Accounts receivable — Trade  ₩   9,945,757    7,192,166 
Allowance for doubtful accounts (Accounts receivable)      (735,316)   (438,155)
Accounts receivable — trade, net  ₩   9,210,441    6,754,011 

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Other receivables             
Accrued income  ₩   74,233    46,893 
Allowance for doubtful accounts (Accrued income)      (44,104)   (26,685)
Non-trade receivables      600,352    830,958 
Allowance for doubtful accounts (Non-trade receivables)      (500,000)   (500,000)
Accounts receivable — other, net  ₩   130,482    351,166 

 

Details of the changes in the loss allowance of trade and other receivables during the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean Won) 
Allowance for doubtful accounts (Trade receivable)                  
Beginning of the year  ₩   438,155    766,595    69,618 
Bad debt expenses      297,162    -    696,977 
Reversal of bad debt expenses      -    (328,440)   - 
Ending of the year  ₩   735,316    438,155    766,595 

 

      2024   2023   2022 
      (In thousands of Korean Won) 
Allowance for doubtful accounts (Other receivables)                  
Beginning of the year  ₩   526,685    26,685    18,685 
Bad debt expenses - other      17,419    500,000    8,000 
Ending of the year  ₩   544,104    526,685    26,685 

 

41

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

17. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Cash on hand  ₩   2,355    2,661 
Deposits in banks      4,148,217    8,582,973 
Total  ₩   4,150,572    8,585,634 

 

The Group doesn't have any restricted cash and cash equivalents as of December 31, 2024, 2023, and January 1, 2023.

 

18. Investment properties

 

A.Reconciliation of carrying amount

 

B.Details of Investment properties as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Book value  ₩   667,739    4,311,539 
Accumulated depreciation      (266,740)   (1,050,744)
Carrying amount  ₩   400,999    3,260,795 

 

Changes in Investment properties for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Balance as of January 1  ₩   3,260,795    -          - 
Transfer (*)      (2,385,812)   3,483,371    - 
Lease modification      (35,216)   -    - 
Depreciation      (438,768)   (222,576)   - 
Balance as of December 31  ₩   400,999    3,260,795    - 

 

(*) As of December 31, 2023, the right-of-use assets associated with six stores were reclassified as investment properties. For the year ended December 31, 2024, five of these investment properties were reclassified back to right-of-use assets due to a change in intended use, as the Company determined to utilize the properties for its own operations (Note 19).

 

C.Amounts recognized in profit or loss

 

Rental income recognized by the Group during the year ended December 31, 2024 was Korean Won 808,123 thousand (2023: 283,983, 2022: nil). Depreciation expense, included in 'cost of revenues’, was as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Depreciation  ₩   438,768    222,576    - 

 

42

 

  

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

19. Property, plant and equipment

 

A.Reconciliation of carrying amount

 

Details of property, plant and equipment as of December 31, 2024 and 2023 are as follows:

 

      December 31, 2024 
      Book value  

Accumulated
depreciation

  

Accumulated
impairment loss

   Carrying amount 
        
Machinery  ₩   2,601,550    (1,078,409)   -    1,523,141 
Vehicles      51,419    (51,418)   -    1 
Office equipment      559,571    (343,099)   -    216,472 
Construction-in-progress      8,662    -    -    8,662 
Furniture and fixtures      4,401,909    (1,787,018)   (748,162)   1,866,729 
Right-of-use assets      13,716,930    (5,065,483)   (216,464)   8,434,983 
Total  ₩   21,340,041    (8,325,427)   (964,626)   12,049,988 

 

      December 31, 2023 
      Book value   Accumulated depreciation   Carrying amount 
      (In thousands of Korean won) 
Machinery  ₩   2,658,245    (830,223)   1,828,022 
Vehicles      51,419    (51,417)   2 
Office equipment      545,651    (262,359)   283,292 
Construction-in-progress      -    -    - 
Furniture and fixtures      4,668,349    (1,337,809)   3,330,540 
Right-of-use assets      12,104,207    (2,678,386)   9,425,821 
Total  ₩   20,027,871    (5,160,194)   14,867,677 

 

43

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Details of the changes in property, plant and equipment for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024 
      Machinery   Vehicles   Office equipment   Construction-
in-progress		   Furniture and fixture  

Right-of-
use
assets

   Total 
      (In thousands of Korean won) 
Beginning balance  ₩   1,828,022    2    283,292    -    3,330,540    9,425,821    14,867,677 
Acquisitions      42,801    46,057    13,919    8,662    161,780    419,934    693,153 
Depreciation      (322,641)   (1,535)   (80,739)   -    (569,932)   (1,404,058)   (2,378,905)
Disposals      (25,041)   (44,523)   -    -    (307,497)   -    (377,061)
Transfer(*1)      -    -    -    -    -    2,385,812    2,385,812 
Impairment loss(*2)      -    -    -    -    (748,162)   (216,464)   (964,626)
Lease modification      -    -    -    -    -    (1,603,440)   (1,603,440)
Lease termination      -    -    -    -    -    (572,622)   (572,622)
Ending balance  ₩   1,523,141    1    216,472    8,662    1,866,729    8,434,983    12,049,988 

 

(*1) As of December 31, 2023, the right-of-use assets associated with six stores were reclassified as investment properties. For the year ended December 31, 2024, five of these investment properties were reclassified back to right-of-use assets due to a change in intended use, as the Company determined to utilize the properties for its own operations (Note 18).

 

(*2) An impairment loss was recognized due to the discontinuation of operations at six stores.

 

      2023 
      Machinery   Vehicles   Office equipment   Construction-
in-progress		   Furniture and fixture  

Right-of-
use
assets

   Total 
      (In thousands of Korean won) 
Beginning balance  ₩   2,041,579    4,075    276,711    9,950    3,207,619    15,089,571    20,629,505 
Acquisitions      172,534    -    92,819    -    684,228    578,409    1,527,990 
Depreciation      (345,202)   (4,074)   (86,238)   -    (559,061)   (1,704,081)   (2,698,656)
Disposals      (50,839)   -    -    -    -    -    (50,839)
Transfer(*1)      9,950    1    -    (9,950)   -    (3,483,372)   (3,483,371)
Impairment loss(*2)      -    -    -    -    (2,246)   -    (2,246)
Lease modification      -    -    -    -    -    (45,282)   (45,282)
Lease termination      -    -    -    -    -    (1,009,424)   (1,009,424)
Ending balance  ₩   1,828,022    2    283,292    -    3,330,540    9,425,821    14,867,677 

 

(*1) During the year ended December 31, 2023, the Group transferred Right-of-use assets to investment properties because the Group decided to lease the building to a third party. (Note 18)

 

(*2) The Group identified each bakery-café store as CGU and recognized impairment loss to bakery-café stores located in Garosu-gil and Jamwon.

 

44

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

      2022 
      Machinery   Vehicles   Office equipment   Construction-
in-progress		   Furniture and fixture  

Right-of-
use
assets

   Total 
      (In thousands of Korean won) 
Beginning balance  ₩   1,124,834    8,150    320,471    20,000    1,615,335    7,974,791    11,063,581 
Acquisitions      421,201    -    21,607    2,603,716    88,110    8,529,150    11,663,784 
Depreciation      (235,991)   (4,075)   (65,367)   -    (385,623)   (1,391,221)   (2,082,277)
Transfer      731,535    -    -    (2,613,766)   1,905,380    (23,149)   - 
Impairment loss(*)      -    -    -    -    (15,583)   -    (15,583)
Ending balance  ₩   2,041,579    4,075    276,711    9,950    3,207,619    15,089,571    20,629,505 

 

(*) The Group identified each bakery-café store as CGU and recognized impairment loss to bakery-café stores located in Garosu-gil and Jamwon.

 

The classification of depreciation expenses in the statements of comprehensive income for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Cost of revenues  ₩   1,970,417    2,318,730    1,706,191 
Selling, general and administrative expenses      408,488    379,926    376,086 
Total  ₩   2,378,905    2,698,656    2,082,277 

 

B.Leased property, plant and equipment

 

The Group leased the building and vehicles during the years ended December 31, 2024 and 2023. As of December 31, 2024, Korean Won 8,434,983 thousand of right-of-use assets was recognized. (December 31, 2023: Korean Won 9,425,821 thousand of building, vehicles and other).

 

C.Collateral

 

As of December 31, 2024 and 2023, Korean Won 113,874 thousand of machinery and Korean Won 133,948 thousand of machinery are pledged as collateral for short-term borrowings provided from Industrial Bank of Korea.

 

45

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

20. Intangible assets and goodwill

 

A.Reconciliation of carrying amount

 

Details of intangible assets as of December 31, 2024 and 2023 are as follows:

 

      December 31, 2024 
      (In thousands of Korean won) 
      Book value   Accumulated depreciation   Carrying amount 
Software  ₩   487,309    (376,372)   110,937 
Brand      5,388,000    (965,350)   4,422,650 
Goodwill      3,267,730    -    3,267,730 
Total  ₩   9,143,039    (1,341,722)   7,801,317 

 

      December 31, 2023 
      (In thousands of Korean won) 
      Book value   Accumulated depreciation   Carrying amount 
Software  ₩   487,309    (289,762)   197,547 
Brand      5,388,000    (695,950)   4,692,050 
Goodwill      3,267,730    -　    3,267,730 
Total  ₩   9,143,039    (985,712)   8,157,327 

 

Details of the changes in intangible assets for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024 
      Software   Brand   Goodwill   Total 
      (In thousands of Korean Won) 
Beginning balance  ₩   197,547    4,692,050    3,267,730    8,157,327 
Amortization  　   (86,610)   (269,400)   -    (356,010)
Ending balance  ₩   110,937    4,422,650    3,267,730    7,801,317 

 

      2023 
      Software   Brand   Goodwill   Total 
      (In thousands of Korean Won) 
Beginning balance  ₩   290,947    4,961,450    3,267,730    8,520,127 
Amortization      (93,400)   (269,400)   -　    (362,800)
Ending balance  ₩   197,547    4,692,050    3,267,730    8,157,327 

 

46

 

  

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

      2022 
      Software   Brand   Goodwill   Total 
      (In thousands of Korean Won) 
Beginning balance  ₩   260,643    5,230,850    3,267,730    8,759,223 
Acquisitions      113,900    -    -    113,900 
Amortization      (83,596)   (269,400)   -    (352,996)
Ending balance  ₩   290,947    4,961,450    3,267,730    8,520,127 

 

B.Amortization

 

The classification of amortization in the statements of comprehensive income for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Selling, general and administrative expenses  ₩   356,010    362,800    352,996 

 

C. Impairment assessment on CGU

 

As of December 31, 2024, 2023 and January 1, 2023, the Group performed impairment test for Food and Beverages operating segment. The Group identifies each of bakery-cafés as CGU. As the individual CGUs are tested for impairment at the same time as the group of CGUs containing the goodwill, the Group tested the individual CGUs for impairment before the group of CGUs is tested.

 

The recoverable amount of each CGU is determined based on its value in use. Value in use is calculated using the estimated cash flow based on 5-year business plan approved by management. The estimated revenue and operating expenditures on the Group’s products used in the forecast was determined considering external sources and the Group’s experience. Management estimated the future cash flows based on its past performance and forecasts on consumer inflation rate. The key assumptions used in the estimation of value in use for Food and Beverages CGU include revenue and operating expenditures for the forecast period, growth rates for subsequent years (“terminal growth rate”), and discount rate. Terminal growth rate and the discount rate used in the estimation of value in use are as follows.

 

   Weighted average cost of capital   Terminal growth rate 
2024   9.6%   1.0%
2023   10.7%   1.0%

 

The discount rate was calculated using the weighted average cost of equity capital and debt and the beta of equity capital was calculated as the average of four Korean listed companies in the same industry and the Group. Cost of debt was calculated using the yield rate of non-guaranteed corporate bond considering the Group’s credit rating and debt ratio was determined using the average of the debt ratios of the four Korean listed companies in the same industry and the Group. The Group calculates the value in use of Food and Beverages CGU using post-tax cash flows and a post-tax discount rate.

 

As a result of the impairment test for goodwill for groups of Food and Beverages CGUs, the recoverable amount exceeded its carrying amount by Korean Won 2,524,000 thousand in 2024 (2023: Korean Won 4,778,529 thousand, 2022: 6,575,660 thousand). The recoverable amount exceeded its carrying amount accounts 13.3% of the amount of value in use (2023: 18.9%, 2022: 24.9%). The value in use determined for this CGU is sensitive to the discount rate and terminal growth rate used in the discounted cash flow model.

 

47

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The impact of a 0.5% fluctuation in discount rates and terminal growth rates on the value in use as of December 31, 2024 and 2023 are as follows:

 

December 31, 2024  0.5% Increase   0.5% Decrease 
Discount rate   (-) 5.5%   6.1%
Terminal growth rate   4.6%   (-) 4.1%

 

December 31, 2023  0.5% Increase   0.5% Decrease 
Discount rate   (-) 4.6%   5.1%
Terminal growth rate   3.7%   (-) 3.3%

 

21. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Financial assets at amortized cost             
Cash and cash equivalents  ₩   4,150,572    8,585,634 
Short-term financial instruments (*)      410,000    410,000 
Accounts receivable — trade, net      9,210,441    6,754,011 
Accounts receivable — other, net      130,482    351,166 
Short-term loans, net      787,400    859,900 
Other current financial assets      40,000    203,266 
Other non-current financial assets      1,803,220    1,390,486 
Financial assets at fair value through profit or loss             
Short-term financial instruments      13,524    9,391 
Long-term financial instruments      322,538    307,729 
Long-term investment securities      730,391    640,739 
Total  ₩   17,598,568    19,512,322 

 

(*) Short-term financial instruments consist of time deposits and saving-based insurance. As of December 31, 2024, Korean Won 231,000 thousand of time deposits in banks are provided as collateral for employee loans and restricted for use. (December 31, 2023: Korean Won 231,000 thousand)

 

48

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

      December 31,
2024		  

December 31,
2023

 
      (In thousands of Korean won) 
Financial liabilities at amortized cost             
Trade and other payables (*)  ₩   13,280,410    12,086,332 
Short-term borrowings      3,764,000    3,330,000 
Current portion of long-term borrowings, net  　   2,108,956    24,960 
Other current financial liabilities      130,000    - 
Trade and other non-current payables (*)      2    134,052 
Long-term borrowings, excluding current portion, net  　   -    2,008,041 
Other non-current financial liabilities      150,000    200,000 
Total  ₩   19,433,368    17,783,385 

 

(*) Trade and other payables that are not financial liabilities are excluded.

 

A.Classification of investment assets based on liquidity

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Current investments             
Fixed deposit – at amortized cost (*)  ₩   410,000    410,000 
Saving based insurance – at FVTPL      13,524    9,391 
Total  ₩   423,524    419,391 
Non-Current investments             
Saving based insurance – at FVTPL  ₩   322,538    307,729 
Equity securities – at FVTPL      726,991    637,478 
Debt securities – at FVTPL      3,400    3,262 
Total  ₩   1,052,929    948,469 

 

(*) As of December 31, 2024, Korean Won 231,000 thousand of time deposits is provided as collateral for employee loans and restricted for use. (December 31, 2023: Korean Won 231,000 thousand)

 

B.Equity Securities designated as at FVTPL

 

The Group designated the investments shown below as equity securities at FVTPL because these equity securities represent investment that the Group intends to sell for strategic purposes.

 

      Fair value at
December 31,
2024		   Fair value at
December 31,
2023		 
      (In thousands of Korean won) 
Equity Securities (listed stocks)  ₩   140,592    198,468 
Equity Securities (unlisted stocks)      586,398    439,010 
Total  ₩   726,990    637,478 

 

49

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

C.Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024 
      Financial assets at amortized cost   Financial assets at fair value through profit or loss   Financial liabilities at amortized cost   Total 
      (In thousands of Korean won) 
Interest income  ₩   287,067    -    -    287,067 
interest expense      -    -    (389,080)   (389,080)
Foreign currency differences  　   74,646    -    (6,906)   67,740 
Gain or loss on valuation of investment securities  　   -    89,651    -    89,651 
Gain or loss on valuation of financial instruments      -    6,286    -    6,286 
Dividend income  　   -    1,463    -    1,463 
Total  ₩   361,713    97,400    (395,986)   63,127 

 

      2023 
      Financial assets at amortized cost   Financial assets at fair value through profit or loss   Financial liabilities at amortized cost   Total 
      (In thousands of Korean won) 
Interest income  ₩   406,933    -    -    406,933 
interest expense      -    -    (320,209)   (320,209)
Foreign currency differences  　   294,087    -    (45)   294,042 
Gain or loss on disposal of  financial instruments      635,358    -    -    635,358 
Gain or loss on valuation of investment securities  　   -    104,505    -    104,505 
Gain or loss on valuation of financial instruments      -    (1,427)   -    (1,427)
Dividend income  　   -    1,463    -    1,463 
Total  ₩   1,336,378    104,541    (320,254)   1,120,665 

 

50

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

      2022 
      Financial assets at amortized cost   Financial assets at fair value through profit or loss   Financial liabilities at amortized cost   Total 
      (In thousands of Korean won) 
Interest income  ₩   520,526    -    -    520,526 
interest expense      -    -    (96,225)   (96,225)
Foreign currency differences  　   (191,335)   -    3,333    (188,002)
Gain or loss on disposal of  investment securities      -    1,788    -    1,788 
Gain or loss on valuation of investment securities  　   -    (115,969)   -    (115,969)
Gain or loss on valuation of financial instruments      -    830    -    830 
Dividend income  　   -    700    -    700 
Total  ₩   329,191    (112,651)   (92,892)   123,648 

 

22. Capital and reserves

 

A.Share capital and share premium

 

Details of share capital and share premium as of December 31, 2024 and 2023 are as follows:

 

     

December 31,

2024

   December 31,
2023		 
      (In Korean won and number of shares) 
Number of authorized shares      900,000    900,000 
Value per share  ₩   5,000    5,000 
Number of shares issued      100,000    100,000 
Common shares  ₩   500,000,000    500,000,000 

 

51

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

i.Ordinary shares

 

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Group.

 

ii.Treasury shares

 

On March 24, 2023, the Group acquired a 15.6% interest of the Parent Company’s issued shares for approximately Korean Won 27,128,262 thousand.

 

Details of treasury shares for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      Number of shares   Carrying amount   Number of shares   Carrying amount   Number of shares   Carrying amount 
      (In Korean won and number of shares) 
Beginning balance  ₩   15,582    27,128,262    -    -    -    - 
Acquisition      -    -    15,582    27,128,262       -       - 
Ending balance  ₩   15,582    27,128,262    15,582    27,128,262    -    - 

 

B.Other components of equity

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Remeasurements of defined benefit liability  ₩   181,515    151,921 
Other capital surplus      (746,300)   (746,300)
Treasury shares      (27,128,262)   (27,128,262)
Other components of equity  ₩   (27,693,047)   (27,722,641)

 

52

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

23. Capital management

 

The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group monitors capital using a ratio of ‘net debt’ to ‘total equity’. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Group’s net debt to adjusted equity ratio as of December 31, 2024 and 2023 is as follows.

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Total liabilities  ₩   34,424,674    38,697,788 
Less: Cash and cash equivalents      (4,150,572)   (8,585,634)
Net debt      30,274,102    30,112,154 
Total equity  ₩   8,175,613    11,689,723 
Net debt to total equity ratio      3.70    2.58 

 

24. Borrowings/payable and Loans/receivable

 

Borrowings as of December 31, 2024 and 2023 are as follows:

 

     

December 31,
2024

   December 31,
2023		 
      (In thousands of Korean won) 
Current Liabilities             
Short-term borrowings  ₩   3,764,000    3,330,000 
Current portion of long-term borrowings, net      2,108,956    24,960 
Current lease liabilities (*)      1,786,577    1,630,482 
Total  ₩   7,659,533    4,985,442 
Non-Current liabilities             
Long-term borrowings, excluding current portion, net  ₩   -    2,008,041 
Non-current lease liabilities (*)      9,302,661    12,878,027 
Total  ₩   9,302,661    14,886,068 

 

(*) The interest rate related to lease liabilities reflects the incremental borrowing rate based on the Group's credit. The amount of interest expense related to lease liabilities incurred during the year ended December 31, 2024 is Korean Won 851,543 thousand (2023: Korean Won 1,047,738 thousand). Additionally, the amount of short-term lease payments and low-value assets lease payments not included in the measurement of lease liabilities during 2024 are Korean Won 33,846 thousand (2023: Korean Won 23,157 thousand)

 

53

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

A.Terms and repayment schedule

 

The terms and conditions of outstanding borrowings as of December 31, 2024 and 2023 are as follows:

 

            December 31, 2024   December 31, 2023 
            (In thousands of Korean won) 
   Currency 

Nominal

interest rate

  Maturity  Face value   Carrying amount   Face value   Carrying amount 
Secured borrowings (*1)  KRW  KORIBOR
+1.75%		  20-Dec-25   500,000    500,000    500,000    500,000 
Secured borrowings (*2)  KRW  5.95%  27-Feb-25   1,000,000    1,000,000    1,000,000    1,000,000 
Secured borrowings (*3)  KRW  5.55%  27-Jun-25   1,000,000    1,000,000    1,000,000    1,000,000 
Secured borrowings (*4)  KRW  KORIBOR
+2.39%		  16-Sep-25   100,000    18,720    100,000    43,680 
Secured borrowings (*5)  KRW  4.98%  02-Dec-25   400,000    400,000    -    - 
Unsecured borrowings  KRW  4.60%  31-Dec-25   700,000    700,000    700,000    700,000 
Unsecured borrowings  KRW  4.60%  31-Dec-25   2,200,000    2,090,236    2,200,000    1,989,321 
Unsecured borrowings  KRW  4.60%  31-Dec-25   164,000    164,000    130,000    130,000 
Total interest-bearing liabilities            6,064,000    5,872,956    5,630,000    5,363,001 

 

(*1) As of December 31, 2024, the Group is provided a guarantee of Korean Won 458,626 thousand (2023: Korean Won 412,775 thousand) by the CEO of the Group. The Group provided the intellectual property(IP) rights as collateral.

 

(*2) As of December 31, 2024, the Group is provided a guarantee of Korean Won 1,200,000 thousand (2023: Korean Won 1,200,000 thousand) from the CEO of the Group.

 

(*3) As of December 31, 2024, the Group is provided a guarantee of Korean Won 900,000 thousand (2023: Korean Won 900,000 thousand) by Korea Credit Guarantee Fund.

 

(*4) As of December 31, 2024, the Group provides machines with a carrying amount of Korean Won 113,874 thousand (2023: Korean Won 133,948 thousand) as collaterals for the secured borrowings with equal amortization repayment condition.

 

(*5) As of December 31, 2024, the Group is provided a building as collateral of Korean Won 480,000 thousand by the key management personnel.

 

54

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Terms and collection schedule

 

The terms and conditions of outstanding loans as of December 31, 2024 and 2023 are as follows:

 

            December 31, 2024   December 31, 2023 
            (In thousands of Korean won) 
   Currency 

Nominal

interest rate

  Maturity(*6)  Face value   Carrying amount   Face value   Carrying amount 
Cho Mi Kyung(*1)  KRW  2.00%  31-Aug-25   400,000    -    400,000    - 
Bonanza Pictures  KRW  4.60%  31-Mar-21   30,000    -    30,000    30,000 
Coam payments(*2)  KRW  12.00%  31-May-22   -    -    500,000    500,000 
Jung Kyung Han  KRW  3.00%  14-Sep-23   30,000    30,000    30,000    30,000 
YY entertainment (*3)  KRW  4.60%  31-Dec-23   150,000    -    150,000    150,000 
Second plan  KRW  4.60%  31-Dec-23   30,000    30,000    30,000    30,000 
Second plan(*4)  KRW  4.60%  31-Dec-25   100,000    100,000    -    - 
Rainier(*5)  KRW  4.60%  31-Dec-25   150,000    -    -    - 
Beacon Holdings, Inc.  KRW  4.60%  31-Dec-25   100,000    100,000    -    - 
K Wave Media Ltd.  KRW  4.60%  23-Dec-25   95,000    95,000    -    - 
Second plan(*4)  KRW  4.60%  31-Dec-25   264,400    264,400    76,900    76,900 
Studio Coite(*4)  KRW  4.60%  31-Dec-25   43,000    43,000    43,000    43,000 
Beacon Holdings, Inc.(*4)  KRW  4.60%  31-Dec-25   125,000    125,000    -    - 
Total            1,517,400    787,400    1,259,900    859,900 

 

(*1) The Group recognized a full provision for the balance of loan and accrued interest income as of January 1, 2021. Accrued interest income as of December 31, 2024 and December 31, 2023 are Korean Won 26,685 thousand and Korean Won 26,685 thousand, respectively.

 

(*2) The Group is provided a joint guarantee by third party.

 

(*3) The Group recognized a full provision for the balance of loan and accrued interest income as of December 31, 2024. Accrued interest income as of December 31, 2024 are Korean Won 6,333 thousand.

 

(*4) The contract is automatically extended by one year if the loan is not collected until maturity date.

 

(*5) The Group recognized a full provision for the balance of loan and accrued interest income as of December 31, 2024. Accrued interest income as of December 31, 2024 are Korean Won 3,789 thousand.

 

(*6) If the repayment is not made by the due date, the repayment due date will be automatically extended for one year.

 

25. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean Won) 
Trade payables  ₩   10,073,408    9,536,869 
Other payables      1,247,271    2,016,077 
Accrued expenses      2,719,073    2,854,664 
Trade and other non-current payables      21,694    335,871 
Total  ₩   14,061,446    14,743,481 

 

55

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

26. Provisions

 

Provisions for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Site restoration  ₩               
Beginning of the year      674,148    711,086    353,117 
Provisions made during the year      12,578    26,833    350,837 
Interest expense      16,755    17,195    9,262 
Lease termination      (49,842)   (78,722)   - 
Lease modification      (18,419)   (2,244)   - 
Provisions used during the year      (25,269)   -    (2,130)
Ending of the year  ₩   609,951    674,148    711,086 

 

The provision for building restoration relates mainly to buildings leased during 2024, 2023, and 2022. The provision has been estimated based on historical data associated with similar buildings.

 

56

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

27. Financial Instruments – Fair values and risk management

 

A.Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

The carrying amounts of financial instruments by category as of December 31, 2024 are as follows:

 

      Fair value   Level 1   Level 2   Level 3   Total 
      (In thousands of Korean won) 
Financial assets at fair value                            
Guaranteed Return Insurances (short-term)(*)  ₩   13,524    -    13,524    -    13,524 
Guaranteed Return Insurances (long-term)(*)      322,538    -    322,538    -    322,538 
Long-term investment securities      730,390    143,992    -    586,398    730,390 
Total  ₩   1,066,452    143,992    336,062    586,398    1,066,452 

 

(*) The fair value of guaranteed return insurances classified at Level 2 in the fair value hierarchy is determined using an evaluation of surrender proceeds received from financial institutions.

 

The carrying amounts of financial instruments by category as of December 31, 2023 are as follows:

 

      Fair value   Level 1   Level 2   Level 3   Total 
      (In thousands of Korean won) 
Financial assets at fair value                            
Guaranteed Return Insurances (short-term)(*)  ₩   9,391    -    9,391    -    9,391 
Guaranteed Return Insurances (long-term)(*)      307,729    -    307,729    -    307,729 
Long-term investment securities      640,739    201,729    -    439,010    640,739 
Total  ₩   957,859    201,729    317,120    439,010    957,859 

 

(*) The fair value of guaranteed return insurances classified at Level 2 in the fair value hierarchy is determined using an evaluation of surrender proceeds received from financial institutions.

 

57

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

●Level 1: quoted prices (unadjusted) in active markets for identical asset or liability

 

●Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability

 

●Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of group-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

The valuation techniques used to measure the fair value of a financial instrument include:

 

●Market price or dealer price of a similar financial instrument

 

●The fair value of derivative instruments is determined by discounting the amount to present value using the leading exchange rate as of the end of the reporting period

 

C.Financial risk management

 

The Group’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which the Group’s risk management program focuses on minimizing any adverse effects on its financial performance. The Group operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i.Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers. In order to manage credit risk, the Group regularly evaluate the credit worthiness of each customer or counterparty considering the party's financial information, past experience, its own trading records and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Group recognizes the changes in expected credit loss("ECL") in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

58

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The maximum exposure to credit risk of the Group as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Cash and cash equivalents  ₩   4,150,572    8,585,634 
Short-term financial instruments      410,000    410,000 
Accounts receivable, net      9,340,923    7,105,177 
Short-term loans, net      787,400    859,900 
Other current financial assets      40,000    203,266 
Other non-current financial assets      1,803,220    1,390,486 
Total  ₩   16,532,115    18,554,463 

 

Cash and cash equivalents and short-term financial instruments are deposited in financial institutions with strong credit rating. Accounts receivables of the Subsidiary are mainly due from payment processing companies and platform service providers, which in the Group believes have low levels of credit risk. In addition, the Parent Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has established a credit policy under which each new customer is analyzed individually before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

 

The Group monitors customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trading history with the Group and existence of previous financial difficulties. The Group does not require collateral in respect of trade and other receivables. Expected credit losses (ECLs) and credit risk exposures for accounts as of December 31, 2024 and 2023 are as follows:

 

- Accounts receivables

 

As of December 31, 2024 

Expected
loss rate

     Carrying
amount		   Loss
allowance		 
         (In thousands of Korean won) 
Not due or overdue less than 90 days  0.35%  ₩   9,186,195    32,453 
More than 90 days ~ Less than 180 days  3.95%      12,952    512 
More than 180 days ~ Less than 270 days  13.01%  　   36,013    4,686 
More than 270 days ~ Less than 1 year  0.00%      7,374    - 
More than 1 year  99.21%  　   703,223    697,666 
Total     ₩   9,945,757    735,317 

 

 

As of December 31, 2023 

Expected

loss rate

    

Carrying

amount

  

Loss

 allowance

 
         (In thousands of Korean won) 
Not due or overdue less than 90 days  0.41%  ₩   6,498,419    26,871 
More than 90 days ~ Less than 180 days  0.00%      4,229    - 
More than 180 days ~ Less than 270 days  32.14%  　   410,028    131,793 
More than 270 days ~ Less than 1 year  0.00%      -    - 
More than 1 year  100.00%  　   279,491    279,491 
Total     ₩   7,192,167    438,155 

 

59

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

ii.Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions.

 

Financial liabilities of the Group by maturity according to the remaining period from December 31, 2024 to the contractual maturity date are as follows:

 

      December 31, 2024 
     

Carrying
Amount

  

Less than
3 months

  

3 months
~ 1 year

   1~2 years   2~5 years  

More than
5 years

   Total 
      (In thousands of Korean won) 
Non-derivative financial liabilities
Trade payables  ₩   10,073,408    10,073,408    -    -    -    -    10,073,408 
Other payable      1,239,546    1,239,544    -    2    -    -    1,239,546 
Accrued expense      1,967,458    1,967,458    -    -    -    -    1,967,458 
Secured borrowings      2,918,720    1,040,954    1,960,815    -    -    -    3,001,769 
Non-secured borrowings      2,954,236    34,658    3,169,901    -    -    -    3,204,559 
Lease liabilities      11,089,239    635,413    1,824,646    2,361,688    5,546,102    2,875,871    13,243,720 
Other financial liabilities      280,000    50,000    80,000    130,000    20,000    -    280,000 
Total  ₩   30,522,607    15,041,435    7,035,362    2,491,690    5,566,102    2,875,871    33,010,460 

 

Financial liabilities of the Group by maturity according to the remaining period from December 31, 2023 to the contractual maturity date are as follows:

 

      December 31, 2023 
     

Carrying
Amount

  

Less than

3 months

  

3 months
~ 1 year

   1~2 years   2~5 years  

More than

5 years

   Total 
      (In thousands of Korean won) 
Non-derivative financial liabilities
Trade payables  ₩   9,536,869    9,527,035    9,834    -    -    -    9,536,869 
Other payable      2,144,395    1,452,795    557,548    134,052    -    -    2,144,395 
Accrued expense      539,120    539,048    72    -    -    -    539,120 
Secured borrowings      2,543,680    1,038,189    1,555,661    19,206    6,305    -    2,619,361 
Non-secured borrowings      2,819,321    34,654    934,725    2,301,200    -    -    3,270,579 
Lease liabilities      14,508,509    752,242    1,882,864    2,499,840    6,927,468    6,399,847    18,462,261 
Other non-current financial liabilities
      200,000    -    -    200,000    -    -    200,000 
Total  ₩   32,291,894    13,343,963    4,940,704    5,154,298    6,933,773    6,399,847    36,772,585 

 

60

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

iii.Market risk

 

(a)Foreign exchange risk

 

The Group is exposed to foreign exchange risk arising from cash equivalents and accounts receivables primarily with respect to the US Dollar and Japanese Yen, Chinese Yuan, Brazilian Real, Singapore Dollar, Malaysian Ringgit, Philippine Peso, and Thai Baht.

 

Financial assets and liabilities are exposed to foreign currency risk as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024 
   Assets in foreign currency   Liabilities in foreign currency   Assets in Korean Won   Liabilities in Korean Won 
   (Individual amounts in each foreign currency)   (In thousands of Korean won) 
USD   55,174    222    81,105    327 
JPY   275,425,381    7,665,387    2,579,304    71,785 
CNY   157,619    -    31,724    - 
BRL   340    -    81    - 
SGD   1,051    -    1,136    - 
MYR   10,721    -    3,530    - 
PHP   910    -    23    - 
THB   90,877    -    3,908    - 
Total   　    　    2,700,811    72,112 

 

   December 31, 2023 
   Assets in foreign currency   Liabilities in foreign currency   Assets in Korean Won   Liabilities in Korean Won 
   (Individual amounts in each foreign currency)   (In thousands of Korean won) 
USD   60,191    -    79,018    - 
JPY   805,407,622    5,448,213    7,350,633    49,724 
Total   　    　    7,429,651    49,724 

 

61

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The Group measures foreign exchange risk as a 10% fluctuation in the exchange rate of each foreign currency, which reflects the management's assessment of the risk of exchange rate fluctuation that can be reasonably occur. The impact of a 10% fluctuation in foreign currency exchange rates on the Group’s profit or loss (before income tax effects) for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   Increased by 10%   Decreased by 10%   Decreased by 10%   Decreased by 10% 
   (In thousands of Korean won) 
USD   8,078    (8,078)   7,902    (7,902)
JPY   250,752    (250,752)   730,091    (730,091)
CNY   3,172    (3,172)          
BRL   8    (8)   -    - 
SGD   114    (114)   -    - 
MYR   353    (353)   -    - 
PHP   2    (2)   -    - 
THB   391    (391)   -    - 
Total   262,870    (262,870)   737,993    (737,993)

 

The sensitivity analysis is based on monetary assets and liabilities denominated in foreign currencies other than the functional currency as of the end of the reporting period.

 

(b)Interest rate risk

 

The sensitivity analysis is based on borrowing under variable interest rate conditions as of December 31, 2024 and 2023.

 

      December 31, 2024   December 31, 2023 
      Increased by 100 bp   Decreased by 100 bp   Increased by 100 bp   Decreased by 100 bp 
      (In thousands of Korean won) 
Interest  ₩   5,070    (5,070)   5,329    (5,329)　 

 

62

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

28. Non-controlling interests

 

A.Summary of financial statements

 

Summary of financial statements of the Group’s subsidiary that has material non-controlling interest, before any intercompany transactions eliminations for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
NCI percentage      32.9%   32.9%   32.9%
Current assets  ₩   1,623,260    1,873,566    2,114,532 
Non-current assets      15,973,466    21,776,729    24,406,198 
Current liabilities      10,443,166    6,838,358    6,810,043 
Non-current liabilities      8,946,049    15,859,171    17,514,118 
Net assets      (1,792,489)   952,766    2,196,569 
Revenue      14,630,426    17,709,332    17,163,659 
Profit (loss)      (3,101,420)   (1,140,267)   (772,658)
OCI      44,084    109,558    143,829 
Total comprehensive income  ₩   (3,057,335)   (1,030,709)   (628,829)
Cash flows from operation activities      568,367    (94,618)   1,909,605 
Cash flows from investment activities      (293,624)   (860,374)   (2,603,987)
Cash flows from financing activities      (375,958)   480,119    115,318 
Net increase(decrease) in cash and cash equivalents  ₩   (101,215)   (474,873)   (579,064)

 

B.Movement in NCI

 

Movement in NCI for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Net assets attributable to NCI at beginning of the year  ₩   411,556    720,382    1,273,314 
Profit allocated to NCI      (1,016,820)   (344,836)   (305,093)
OCI allocated to NCI      14,490    36,011    47,275 
Transaction with non-controlling interest      -    -    (295,114)
Net assets attributable to NCI at the end of the year  ₩   (590,774)   411,556    720,382 

 

63

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

29. Leases

 

A.Leases as lessee

 

The Group leases buildings and vehicles. The leases typically run for a period of 1 ~5 years, with an option to renew or terminate the lease after that date. The Group also leases water purifiers, copy machines, and others with contract terms of one to three years. These leases are short-term and/or leases of low-value items. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases. Information about leases for which the Group is a lessee is presented below.

 

i.Right-of-use assets

 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment.

 

Details of right-of-use assets and lease liabilities recognized in the consolidated statements of financial position as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Right-of-use assets (Acquisition price)             
Buildings  ₩   13,168,074    11,783,393 
Vehicles      548,856    320,813 
Total  ₩   13,716,930    12,104,206 

 

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Right-of-use assets (Accumulated depreciation)             
Buildings  ₩   (4,895,688)   (2,514,457)
Vehicles      (169,795)   (163,928)
Total  ₩   (5,065,483)   (2,678,385)

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Right-of-use assets (Accumulated impairment loss)             
Buildings  ₩   (216,464)       - 
Vehicles      -    - 
Total  ₩   (216,464)   - 

 

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Right-of-use assets (Net book value)             
Buildings  ₩   8,055,922    9,268,936 
Vehicles      379,061    156,885 
Total  ₩   8,434,983    9,425,821 

 

64

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Changes in right-of-use assets for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024 
      Building   Vehicles   Total 
      (In thousands of Korean won) 
Balance as of January 1, 2024  ₩   9,268,936    156,885    9,425,821 
Depreciation      (1,307,211)   (96,847)   (1,404,058)
Acquisitions      56,020    363,914    419,934 
Transfer      2,385,812    -    2,385,812 
Impairment loss      (216,464)   -    (216,464)
Lease termination      (527,731)   (44,891)   (572,622)
Lease modification      (1,603,440)   -    (1,603,440)
Balance as of December 31, 2024  ₩   8,055,922    379,061    8,434,983 

 

      2023 
      Building   Vehicles   Total 
      (In thousands of Korean won) 
Balance as of January 1, 2023  ₩   14,941,069    148,502    15,089,571 
Depreciation      (1,627,945)   (76,136)   (1,704,081)
Acquisitions      489,855    88,554    578,409 
Transfer      (3,483,371)   (1)   (3,483,372)
Lease termination      (1,009,424)   -    (1,009,424)
Lease modification      (41,248)   (4,034)   (45,282)
Balance as of December 31, 2023  ₩   9,268,936    156,885    9,425,821 

 

      2022 
      Building   Vehicles   Other   Total 
      (In thousands of Korean won) 
Balance as of January 1, 2022  ₩   7,791,572    158,100    25,119    7,949,672 
Depreciation      (1,327,134)   (62,117)   (1,970)   (1,389,251)
Acquisitions      8,476,631    52,519    　    8,529,150 
Transfer                (23,149)   - 
Balance as of December 31, 2022  ₩   14,941,069    148,502    -    15,089,571 

 

65

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

ii.Amounts recognized in profit or loss

 

Amounts recognized in profit or loss for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Interest expense relating to lease liabilities (included in finance cost)  ₩   851,543    1,047,738    704,560 
Expense relating to short-term leases      17,763    6,268    - 
Expense relating to leases of low-value assets excluding short-term leases      16,083    16,889    11,285 
Gains on disposal of right-of-use assets      131,193    1,042,833    - 
Expense relating to variable lease payments not included in the measurement of lease liabilities  ₩   398,671    853,983    792,174 

 

iii.Amounts recognized in statement of cash flows

 

Amounts recognized in statements of cash flows for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Total cash outflows of leases  ₩   2,947,475    3,536,265    2,594,294 

 

iv.Extension options

 

Some property leases contain extension options exercisable by the Group. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

 

The Group has entered into a contract to pay revenue-based rent payment for a several lease agreements. If the revenue of the store that entered into the contract increase, the rent to be paid may proportionally increase. According to the contract, it is expected to pay 9 to 18% of sales will be paid.

 

66

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

B.Leases as lessor

 

i.Operating lease

 

The Group leases out its investment property consisting of its leased property.

 

The Group has classified these leases as operating leases because they do not transfer substantially all the risk and rewards incidental to the ownership of the assets. Note 18 sets out information about the operating leases of investment property.

 

Rental income recognized by the Group during the year ended December 31, 2024 was Korean Won 808,123 thousand (2023: 283,983, 2022: nil).

 

Maturity analysis of lease payments, showing the undiscounted lease payments to be received after December 31, 2024 and 2023 as follows:

 

      2024   2023 
      (In thousands of Korean won) 
Less than 1 year  ₩   59,315    830,723 
1 ~ 2 years      -    549,062 
Total  ₩   59,315    1,379,785 


 

67

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

30. Commitments

 

A.Key commitments

 

Key commitments the Group has entered into with financial institutions and others as of December 31, 2024 are as follows:

 

Financial institutions  Categories     Credit limit   Borrowings amount 
         (In thousands of Korean won) 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*1)  ₩   2,000,000    - 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*2)      500,000    500,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*3)      1,000,000    1,000,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*4)      1,000,000    1,000,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*5)      100,000    18,720 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*6)      400,000    400,000 
Shinhan Bank  Revolving credit(*7)      500,000    - 
Total     ₩   5,500,000    2,918,720 

 

(*1) The Group is provided a joint guarantee of Korean Won 2,400,000 thousand by the CEO of the Group.

 

(*2) The Group is provided a joint guarantee of Korean Won 458,526 thousand by the CEO of the Group. Also, the Group provides intellectual property (IP) rights of Korean Won 676,000 thousand as collateral for the borrowing.

 

(*3) The Group is provided a joint guarantee of Korean Won 1,200,000 thousand by the CEO of the Group.

 

(*4) The Group is provided a guarantee of Korean Won 900,000 thousand by Korea Credit Guarantee Fund.

 

(*5) The Group provides machinery as collateral for the borrowing.

 

(*6) The Group is provided a building as collateral of Korean Won 480,000 thousand for the borrowings by the key management personnel.

 

(*7) The Group is provided a joint guarantee of Korean Won 600,000 thousand by the CEO of the Group.

 

(*8) The CEO of the Group provides a joint guarantee for the vehicle lease to Mirae Asset Securities as of December 31, 2024.

 

68

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Key commitments the Group has entered into with financial institutions and others as of December 31, 2023 are as follows:

 

Financial institutions  Categories     Credit limit   Borrowings amount 
         (In thousands of Korean won) 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*1)  ₩   2,000,000    - 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*2)      500,000    500,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*3)      1,000,000    1,000,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*4)      1,000,000    1,000,000 
Industrial Bank of Korea  Small and medium-sized enterprise financing(*5)      100,000    43,680 
Shinhan Bank  Revolving credit(*6)      500,000    - 
Total     ₩   5,100,000    2,543,680 

 

(*1) The Group is provided a joint guarantee of Korean Won 2,400,000 thousand by the CEO of the Group.

 

(*2) The Group is provided a joint guarantee of Korean Won 412,775 thousand by the CEO of the Group. Also, the Group provides intellectual property (IP) rights of Korean Won 676,000 thousand as collateral for the borrowing.

 

(*3) The Group is provided a joint guarantee of Korean Won 1,200,000 thousand by the CEO of the Group.

 

(*4) The Group is provided a guarantee of Korean Won 900,000 thousand by Korea Credit Guarantee Fund.

 

(*5) The Group provides machinery as collateral for the borrowing.

 

(*6) The Group is provided a joint guarantee of Korean Won 600,000 thousand by the CEO of the Group.

 

B.Guarantees by individuals

 

Details of guarantees provided by individuals other than related parties as of December 31, 2024 are as follows:

 

Guaranteed by  Details of guarantee     Guarantee limit 
         (In thousands of Korean won) 
Seoul Guarantee Insurance Company  Performance guarantee, etc.  ₩   814,371 
Korea credit guarantee fund  Loan guarantee      900,000 
Total     ₩   1,714,371 

 

Details of guarantees provided by individuals other than related parties as of December 31, 2023 are as follows:

 

Guaranteed by  Details of guarantee     Guarantee limit 
         (In thousands of Korean won) 
Seoul Guarantee Insurance Company  Performance guarantee, etc.  ₩   808,693 
Korea credit guarantee fund  Loan guarantee      900,000 
Total     ₩   1,708,693 

 

69

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

C.List of assets provided as collateral

 

List of assets that the Group provided as collateral as of December 31, 2024 and 2023 are as follows:

 

   Counterparty receiving the collateral  usage restrictions     December 31,
2024		   December 31,
2023		 
            (In thousands of Korean won) 
Short-term financial instruments  Industrial Bank of Korea  Provided as collateral
for employee loans(*)		  ₩   300,000    300,000 
Machinery  Industrial Bank of Korea  Provided as collateral
for short-term
 
borrowings
      113,874    133,948 

 

(*) The Group provided a joint guarantee of Korean Won 231,000 thousand as of December 31, 2024. (December 31, 2023: Korean Won 231,000 thousand)

  

The Group provides intellectual property (IP) rights as collateral for the borrowing.

 

D.Other commitments

 

On March 31, 2023, the CEO, who is the dominant shareholder of the Group, entered into an equity interest exchange agreement with K Enter Holdings, for the purpose of listing on the NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective upon the approval of the shareholders of K Enter Holdings and SPAC. Upon the approval, the CEO of the Group will exchange 83,418 shares with the equity interest of K Enter Holdings. Following the equity interest exchange transaction, the Parent Company is expected to be a subsidiary of K Enter Holdings.

 

On March 31, 2023, the CEO agreed to enter into a call option agreement prior to closing date of equity interest exchange agreement with K Enter Holdings, under which the CEO of Group will be granted with an option to acquire the shares of Play F&B Co., Ltd held by the Group within three years from the closing date of equity interest exchange agreement.

 

70

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

31. Statement of Cash flows

 

Adjustments for income and expenses from operating activities for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Depreciation  ₩   2,817,673    2,921,232    2,082,277 
Amortization      356,010    362,800    352,996 
Impairment loss on Property, Plant and Equipment      964,626    2,246    15,583 
Bad debt expenses      297,162    500,000    696,977 
Reversal of bad debt expenses      -　    (328,439)   - 
Other Bad debt expenses      347,419    -    8,000 
Losses on valuation of short-term financial instruments      -    6    421 
Losses on valuation of long-term financial instruments      115    8,717    5,263 
Losses on valuation of long-term investment securities      60,275    12,395    118,607 
Losses on disposal of long-term investment securities      -    -    4,090 
Gains on disposal of long-term investment securities      -    -    (5,878)
Gains on valuation of long-term financial instruments      (6,368)   (7,241)   (6,514)
Gains on valuation of long-term investment securities      (149,926)   (116,900)   (2,638)
Gains on disposal of short-term financial instruments      -    (12,819)   - 
Gains on disposal of long-term financial instruments      -    (622,539)   - 
Gains on valuation of short-term financial instruments      (33)   (55)   - 
Inventory valuation loss (gains)      1,578,040    (397,995)   1,143,098 
Losses on foreign currency translation      6,447    26,064    149,586 
Gains on foreign currency translation      (88,458)   (376,295)   (154,896)
Gains on disposal of right-of-use assets      (131,193)   (1,042,833)   - 
Losses on disposal of property, plant and equipment      329,882    31,975    - 
Gains on disposal of property, plant and equipment      (6,100)   (928)   - 
Interest expenses      1,257,378    1,385,142    810,047 
Interest income      (287,285)   (406,933)   (520,526)
Dividend income      (1,463)   (1,462)   (700)
Miscellaneous expenses      -    -    8,649 
Miscellaneous income      -    -    (6,028)
Share-based payments expenses (reversal)      (180,127)   (25,758)   152,795 
Severance Benefits      394,173    545,880    569,203 
Tax expenses      (747,380)   760,779    2,687,108 
Total  ₩   6,810,867    3,217,039    8,107,520 

 

71

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Changes in assets and liabilities from operating activities for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Other non-current non-financial assets  ₩   698,657    -    - 
Other current non-financial liabilities      593,949    299,334    9,264 
Other current assets      54,560    (2,708,583)   257,134 
Accounts receivable – trade, net      (2,665,062)   7,951,197    9,010,819 
Accounts receivable — other, net      (346,964)   (303,948)   (303,462)
Trade and other payables      (447,975)   (19,972,438)   4,579,752 
Inventories, net      (1,971,804)   3,329,293    (2,698,635)
Defined benefit liabilities      (496,920)   (658,367)   (293,592)
Value added tax receivables      145,204    1,965,135    727,480 
Total  ₩   (4,436,355)   (10,098,377)   11,288,760 

 

Significant non-cash transactions for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Recognition of restoration provision  ₩   -    26,833    350,837 
Transfer of construction in progress      -    9,950    2,613,766 
Reclassification of long-term borrowings      2,218,720    24,960    24,960 
Reclassification of Non-current lease liabilities      1,744,031    1,911,047    1,891,507 
Increase in Lease liabilities      364,731    612,220    9,301,914 
Offset of loans      42,000    14,804,782    - 
Offset of other receivables      -    646,380    - 
Loan Reassignment: Involvement of the Parent company’s CEO      -    2,900,000    - 
Payables related to the acquisition of treasury shares      -    1,000,000    - 
Reclassification of Investment properties      2,360,275    3,483,371    - 

 

72

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

The movements of liabilities to cash flows arising from financing activities for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      Short-term
borrowings		   Current portion of long-term borrowings   Long-term
borrowings		   Current lease liabilities   Non-current lease liabilities   Total 
      (In thousands of Korean won) 
Balance at 1 January 2022      2,500,000    24,960    68,640    837,785    8,362,848    11,794,233 
Changes from financing cash flows                                 
Repayment of borrowings      -    (24,960)   -    -    -    (24,960)
Payment of lease liabilities      -    -    -    (1,088,224)   -    (1,088,224)
Reclassification (*1)      -    24,960    (24,960)   1,880,677    (1,891,508)   (10,831)
Total      -    -    (24,960)   792,453    (1,891,508)   (1,124,015)
Other changes                               - 
New leases      -    -    -    -    9,301,914    9,301,914 
Interest expense      -    -    -    704,560    -    704,560 
Interest paid      -    -    -    (704,560)   -    (704,560)
Total      -    -    -    -    9,301,914    9,301,914 
Balance at 31 December 2022      2,500,000    24,960    43,680    1,630,238    15,773,254    19,972,132 
Balance at 1 January 2023  ₩   2,500,000    24,960    43,680    1,630,238    15,773,254    19,972,132 
Changes from financing cash flows      　    　    　    　    　    - 
Proceeds from borrowings      130,000    -    -    -    -    130,000 
Repayment of borrowings      -    (24,960)   -    -    -    (24,960)
Payment of lease liabilities      -    -    -    (1,617,756)   -    (1,617,756)
Reclassification      -    24,960    (24,960)   1,911,047    (1,911,047)   - 
Total  ₩   130,000    -    (24,960)   293,291    (1,911,047)   (1,512,716)
Other changes      　    　    　    　    　    - 
Borrowing assumed(*1)      700,000    -    2,200,000    -    -    2,900,000 
Present value discount      -    -    (282,734)   -    -    (282,734)
New leases      -    -    -    -    612,220    612,220 
Lease termination / lease modification      -    -    -    (293,047)   (1,596,400)   (1,889,447)
Interest expense      -    -    72,055    1,047,738    -    1,119,793 
Interest paid      -    -    -    (1,047,738)   -    (1,047,738)
Total  ₩   700,000    -    1,989,321    (293,047)   (984,180)   1,412,094 
Balance at 31 December 2023  ₩   3,330,000    24,960    2,008,041    1,630,482    12,878,027    19,871,510 
Balance at 1 January 2024  ₩   3,330,000    24,960    2,008,041    1,630,482    12,878,027    19,871,510 
Changes from financing cash flows                                 
Proceeds from borrowings      870,000    -    -    -    -    870,000 
Repayment of borrowings      (394,000)   (24,960)   -    -    -    (418,960)
Payment of lease liabilities      -    -    -    (1,663,415)   -    (1,663,415)
Reclassification      -    2,218,720    (2,218,720)   1,744,031    (1,744,031)   - 
Total      476,000    2,193,760    (2,218,720)   80,616    (1,744,031)   (1,212,375)
Other changes                               - 
Offset of loans      (42,000)   -    -    -    -    (42,000)
Present value discount      -    (109,764)   210,679    -    -    100,915 
New leases      -    -    -    10,081    354,650    364,731 
Lease termination/lease modification      -    -    -    65,398    (2,185,986)   (2,120,588)
Interest expense      -    -    -    851,543    -    851,543 
Interest paid      -    -    -    (851,543)   -    (851,543)
Total      (42,000)   (109,764)   210,679    75,479    (1,831,336)   (1,696,942)
Balance at 31 December 2024      3,764,000    2,108,956    -    1,786,577    9,302,660    16,962,193 

 

(*1) Prior to 2023, the Parent Company granted a loan amounting to Korean Won 1,700,000 thousand to its subsidiary. Upon consolidation, this intercompany transaction was offset. During 2023, the obligation, along with a new loan of Korean Won 1,200,000 thousand borrowed by the subsidiary within the year, was transitioned to Cho Hyeong Seok, CEO of the Parent Company. This reallocated liability is presented as "borrowing assumed", denoting a change in debtor, not the origination of a new loan.

 

73

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

      2024   2023   2022 
      (In thousands of Korean won) 
Cash flows from other financing activities                - 
Acquisition of Treasury shares  ₩   (75,000)   (10,677,100)   (650,000)

 

32. Related parties

 

A.List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   December 31,
2024		   December 31,
2023
Other related parties   FF Company Co., Ltd. (“FF Company”)   FF Company Co., Ltd. (“FF Company”)
Other related parties   OURcoffee gangnamjum Co.,Ltd. (“OURcoffee Gangnamjum”)   OURcoffee gangnamjum Co.,Ltd. (“OURcoffee Gangnamjum”)
Other related parties   SecondPlan Co.,Ltd. (“SecondPlan”)   SecondPlan Co.,Ltd. (“SecondPlan”)
Other related parties   ThirdPlan Co., Ltd. (“ThirdPlan”)   ThirdPlan Co., Ltd. (“ThirdPlan”)
Other related parties   PLAYVERSE Co., Ltd. (“PLAYVERSE”)   PLAYVERSE Co., Ltd. (“PLAYVERSE”)
Other related parties   Studio Cuat. Co., Ltd. (“Studio Cuat”)   Studio Cuat. Co., Ltd. (“Studio Cuat”)
Other related parties   Beacon Holdings, Inc. (“Beacon Holdings”)   Beacon Holdings, Inc. (“Beacon Holdings”)

 

B.Transactions with related parties

 

Details of transaction with related parties for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

         2024 
Related party  Name of entity     Revenue  

Finance
income

   Purchases  

Finance
Costs

 
         (In thousands of Korean won) 
Other related parties  FF Company  ₩   8,785,673    -    556,469    - 
Other related parties  SecondPlan      31,833    15,274    -    913 
Other related parties  ThirdPlan      -    -    60,317    7,332 
Other related parties  Studio Cuat  　   38,645    1,978    248,660    - 
Other related parties  Beacon Holdings      -    7,613    -    - 
Key management personnel  Cho Hyeong Seok      -    100,915    -    234,315 
Key management personnel  Jeong Bo Ram  　   -    -    -    - 
Total     ₩   8,856,151    125,780    865,446    242,560 

 

74

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

         2023 
Related party  Name of entity     Revenue  

Finance
income

   Purchases  

Finance
Costs

 
         (In thousands of Korean won) 
Other related parties  FF Company  ₩   11,184,157    -    62,415    - 
Other related parties  SecondPlan      15,052    3,041    -    - 
Other related parties  ThirdPlan      -    -    -    2,435 
Other related parties  Studio Cuat  　   251    194    527,864    - 
Other related parties  Beacon Holdings      -    -    -    - 
Key management personnel  Cho Hyeong Seok      -    151,624    -    176,597 
Key management personnel  Jeong Bo Ram  　   -    676,341    -    - 
Total     ₩   11,199,460    831,200    590,279    179,032 

 

         2022 
Related party  Name of entity     Revenue  

Finance
income

   Purchases 
         (In thousands of Korean won) 
Other related parties  FF Company  ₩   4,167,544    -    - 
Other related parties  OURcoffee Gangnamjum  　   8,529    -    - 
Other related parties  SecondPlan      -    -    - 
Other related parties  ThirdPlan  　   -    -    - 
Other related parties  PLAYVERSE      -    -    28,000 
Other related parties  Studio Cuat  　   -    -    611,991 
Key management personnel  Cho Hyeong Seok      -    179,749    - 
Key management personnel  Jeong Bo Ram  　   -    36,239    - 
Total     ₩   4,176,073    215,988    639,991 

 

C.Account balances with related parties

 

The balances of receivables and payables to related parties as of December 31, 2024 and 2023 are as follows:

  

          December 31, 2024    December 31, 2023 
Related party  Name of entity      Receivables    Loans    Payables    Borrowings    Receivables    Loans    Payables    Borrowings 
          (In thousands of Korean won) 
Other related parties  FF Company  ₩   1,934,166    -    230,698    -    1,002,931    -    38,115    - 
Other related parties  SecondPlan      121,284    394,400    730    -    63,589    106,900    -    - 
Other related parties  ThirdPlan      -    -    9,767    164,000    -    -    2,435    130,000 
Other related parties  Studio Cuat      2,172    43,000    -    -    2,117    43,000    -    - 
Other related parties  Beacon Holdings      7,613    225,000    -    -    -    -    -    - 
Key management
personnel		  Cho Hyeong Seok      -    -    1,115,906    2,790,236    -    -    1,256,876    2,689,321 
Key management
personnel		  Jeong Bo Ram      43,721    -    -    -    -    -    -    - 
Total  ₩   2,108,956    662,400    1,357,101    2,954,236    1,068,637    149,900    1,297,426    2,819,321 

 

75

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

D.

Financial transactions with related parties

 

Details of significant financial transactions with related parties for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

         2024 
Related party  Company     Loans   Collection(*1)   Borrowings   Repayment 
          (In thousands of Korean won) 
Other related parties  Second Plan(*1)  ₩   449,500    120,000    355,000    313,000 
Other related parties  ThirdPlan      -    -    80,000    46,000 
Other related parties  Studio Cuat      19,500    19,500    -    - 
Other related parties  Beacon Holdings      1,365,000    1,140,000    35,000    35,000 
Total     ₩   1,834,000    1,279,500    470,000    394,000 

 

(*1) Short-term borrowings and short-term loans of Korean Won 42,000 thousand were offset during the year ended December 31, 2024.

 

         2023 
Related party  Company     Loans   Collection(*1)   Borrowings 
          (In thousands of Korean won) 
Other related parties  Second Plan  ₩   1,136,900    1,030,000    - 
Other related parties  ThirdPlan      -    -    130,000 
Other related parties  Studio Cuat      43,000    -    - 
Key management personnel  Cho Hyeong Seok(*2)      10,738,538    15,084,782    2,900,000 
Key management personnel  Jeong Bo Ram      -    2,905,000    - 
Total     ₩   11,918,438    19,019,782    3,030,000 

 

(*1) During 2023, the collection of loans related to Second Plan and Jeong Bo Ram was due to a liability transfer to Cho Hyeong Seok, with no resulting cash inflows.

 

(*2) During 2023, the Parent Company secured a loan of Korean Won 3,510,676 thousand from Cho Hyeong Seok. Cho Hyeong Seok then assumed obligations for loans amounting to Korean Won 7,227,862 thousand made by Play Company to third parties. Of this amount, Korean Won 2,900,000 thousand originally loaned by Play Company to Play F&B is now effectively a loan from Cho Hyeong Seok to the Group. In addition, the Parent Company received repayments of Korean Won 280,000 thousand, and an outstanding loan of Korean Won 14,804,782 thousand was offset against proceeds from the purchase of treasury share.

 

76

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

           2022 
Related party    Name of entity     Loans   Collection 
           (In thousands of Korean won) 
Key management personnel    Cho Hyeong Seok(*1)      520,050    - 
Key management personnel    Jeong Bo Ram  　   700,000         - 
Total       ₩   1,220,050    - 

 

E.Commitments with related parties

 

Commitments the Group has entered into with related parties as of December 31, 2024 are as follows:

 

Related party  Financial institutions  Categories     Credit limit   Borrowings amount 
            (In thousands of Korean won) 
Key management personnel  Industrial Bank of Korea  Revolving credit(*1)  ₩   2,000,000    - 
Key management personnel  Industrial Bank of Korea  Small and medium-sized
 
enterprise financing(*2)
      500,000    500,000 
Key management personnel  Industrial Bank of Korea  Small and medium-sized
 
enterprise financing(*3)
      1,000,000    1,000,000 
Key management personnel  Industrial Bank of Korea  Small and medium-sized
 
enterprise financing(*4)
      400,000    400,000 
Key management personnel  Shinhan Bank  Revolving credit(*5)      500,000    - 
Total        ₩   4,400,000    1,900,000 

 

(*1) The Group is provided a joint guarantee of Korean Won 2,400,000 thousand by the CEO of the Group.

 

(*2) The Group is provided a joint guarantee of Korean Won 458,526 thousand by the CEO of the Group.

 

(*3) The Group is provided a joint guarantee of Korean Won 1,200,000 thousand by the CEO of the Group.

 

(*4) The Group is provided a building as collateral of Korean Won 480,000 thousand for the borrowings by the key management personnel.

 

(*5) The Group is provided a joint guarantee of Korean Won 600,000 thousand by the CEO of the Group.

 

(*6) The CEO of the Group provides a joint guarantee for the vehicle lease to Mirae Asset Securities as of December 31, 2024.

 

77

 

 

PLAY COMPANY CO., LTD. AND SUBSIDIARY

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024, 2023 and 2022

 

Commitments the Group has entered into with related parties as of December 31, 2023 are as follows:

 

Related party  Financial institutions  Categories     Credit limit   Borrowings amount 
            (In thousands of Korean won) 
Key management personnel  Industrial Bank of Korea  Revolving credit(*1)  ₩   2,000,000    - 
Key management personnel  Industrial Bank of Korea  Small and medium-sized
 
enterprise financing(*2)
      500,000    500,000 
Key management personnel  Industrial Bank of Korea  Small and medium-sized
 
enterprise financing(*3)
      1,000,000    1,000,000 
Key management personnel  Shinhan Bank  Revolving credit(*4)      500,000    - 
Total        ₩   4,000,000    1,500,000 

 

(*1) The Group is provided a joint guarantee of Korean Won 2,400,000 thousand by the CEO of the Group.

 

(*2) The Group is provided a joint guarantee of Korean Won 412,775 thousand by the CEO of the Group.

 

(*3) The Group is provided a joint guarantee of Korean Won 1,200,000 thousand by the CEO of the Group.

 

(*4) The Group is provided a joint guarantee of Korean Won 600,000 thousand by the CEO of the Group.

 

F.Key management personnel compensation

 

The compensation for the key management personnel for the years ended December 31, 2024, 2023 and 2022 are as follows:

 

      2024   2023   2022 
      (In thousands of Korean won) 
Short-term employee benefits  ₩   1,185,704    1,426,806    1,516,788 
Post-employment benefits      270,695    279,982    91,773 
Share-based payments      (135,095)   38,530    114,596 
Total  ₩   1,321,304    1,745,318    1,723,157 

 

Compensation of the Group’s key management personnel includes salaries, non-cash benefits and contributions to a post-employment defined benefit plan and defined contribution plan.

 

Executive officers also participate in the Group’s share option plan.

 

33. Subsequent event

 

On January 3, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including Play Company Co., Ltd, through a share exchange. Upon the approval, the CEO of the Group exchanged 83,418 shares with the equity interest of K Enter Holdings Inc. Following the equity interest exchange transaction, the Company became a subsidiary of K Enter Holdings Inc.

 

78

 

Exhibit 15.16

 

SOLAIRE PARTNERS LLC.

STATEMENTS OF FINANCIAL POSITION

As of December 31, 2024 and 2023

 

   Note  December 31,
2024		   December 31,
2023		 
Assets     (In thousands of Korean won) 
Cash and cash equivalents  14,17,19,24,27  ₩355     342,896 
Short-term investment securities  17,24   -    1,664,720 
Accounts receivable — trade, net  13,17,24   52,800    384,675 
- Related parties  28   52,800    384,675 
Accounts receivable — other, net  13,17,24   2,129,732    118,633 
- Related parties  28   1,854,732    118,633 
- Non related parties      275,000    - 
Other current financial assets  13,17,24   144,019    - 
- Non related parties      144,019    - 
Other current assets  12   97    - 
Contract assets  7   370,720    110,988 
- Related parties  28   183,866    110,988 
- Non related parties      186,854    - 
Total current assets      2,697,723    2,621,912 
Long-term investment securities  17,24   712,715    12,180 
Investments in associates  16   83,001    669,043 
Property and equipment including right-of-use asset  15,25   31,227    83,659 
Other non-current financial assets  13,17,24   300    231,846 
- Related parties  28   -    36,082 
- Non related parties      300    195,764 
Deferred tax assets  11   -    64,863 
Defined benefit assets  10   -    21 
Total non-current assets      827,243    1,061,612 
Total assets     ₩3,524,966    3,683,524 
Liabilities             
Trade and other payables  17,22,24  ₩1,801,718    1,830,848 
- Related parties  28   308    27,346 
- Non related parties      1,801,410    1,803,502 
Other current financial liabilities  17,24   96,060    - 
- Related parties  28   96,060    - 
Other current non-financial liabilities  17,24   23,896    26,988 
Short-term borrowings  17,21,24   207,336    - 
Current tax liabilities  11   193,897    211,124 
Current Lease liabilities  21,24,25   60,945    145,798 
Total current liabilities      2,383,852    2,214,758 
Other non-current financial liabilities  17,24   -    87,123 
- Related parties  28   -    87,123 
Defined benefit liabilities  10   152,368    - 
Other non-current provisions  23   13,167    12,989 
Non-current Lease liabilities  21,24,25   -    55,275 
Total non-current liabilities      165,535    155,387 
Total liabilities     ₩2,549,387    2,370,145 

 

The accompanying notes are an integral part of these financial statements.

 

1

 

 

SOLAIRE PARTNERS LLC.

STATEMENTS OF FINANCIAL POSITION

As of December 31, 2024 and 2023

 

   Note  December 31,
2024		   December 31,
2023		 
Equity     (In thousands of Korean won) 
Share capital  18  ₩850,000     850,000 
Share premium  18,20   421,254    421,254 
Other reserves  10,18   (201,030)   (45,637)
Retained earnings      (94,645)   87,762 
Total equity      975,579    1,313,379 
Total liabilities and equity     ₩3,524,966    3,683,524 

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

SOLAIRE PARTNERS LLC.

STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2024 and 2023

 

   Note  2024   2023 
      (In thousands of Korean won) 
Operating income             
Investment management revenue  6,7   1,362,349    1,714,271 
- Related parties  28   1,276,195    1,714,271 
- Non-related parties      86,154    - 
Investment revenue  6,7   45,417    2,092 
- Related parties  28   -    114 
- Non-related parties      45,417    1,978 
Gains from investments in associates  6,7   16,391    - 
- Related parties  28   16,391    - 
       1,424,157    1,716,363 
Operating expenses             
Selling, general and administrative expenses  8   (1,532,099)   (1,710,391)
Investment expenses  8   (20,121)   - 
Losses from investments in associates  8   (63,068)   (146,232)
- Related parties  28   (63,068)   (146,232)
       (1,615,288)   (1,856,623)
Other income  8   86    7 
Other expense  8   -    (44,886)
Operating loss      (191,045)   (185,139)
Finance income  9,17,25   99,164    21,382 
- Related parties  28   84,895    8,826 
- Non-related parties      14,269    12,556 
Finance costs  9,17,25   (22,730)   (97,964)
- Related parties  28   (8,938)   (4,825)
- Non-related parties      (13,792)   (93,139)
loss before income tax      (114,611)   (261,721)
Income tax expenses  11   (67,796)   (39,549)
loss for the year     ₩(182,407)   (301,270)
Other comprehensive income             
Items that will not be reclassified to income or loss:             
Remeasurement of defined benefit liabilities  10,11,18   (155,393)   (12,724)
Total comprehensive loss for the year     ₩(337,800)   (313,994)

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

SOLAIRE PARTNERS LLC.

STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2024 and 2023

 

   Note 

Share

capital

  

Share

premium

  

Other

reserves

  

Retained

earnings

   Total 
Balance at January 1, 2023  1  ₩850,000     -    (32,913)   389,032    1,206,119 
Total comprehensive income for the year                            
loss for the year      -    -    -    (301,270)   (301,270)
Remeasurement of defined benefit liabilities  18   -    -    (12,724)   -    (12,724)
Total comprehensive loss for the year      -    -    (12,724)   (301,270)   (313,994)
Share-based Payment  18   -    421,254    -    -    421,254 
Balance at December 31, 2023  1  ₩850,000    421,254    (45,637)   87,762    1,313,379 
Balance at January 1, 2024  1  ₩850,000    421,254    (45,637)   87,762    1,313,379 
Total comprehensive income for the year                            
loss for the year      -    -    -    (182,407)   (182,407)
Remeasurement of defined benefit liabilities  18   -    -    (155,393)   -    (155,393)
Total comprehensive loss for the year      -    -    (155,393)   (182,407)   (337,800)
Balance at December 31, 2024  1  ₩850,000    421,254    (201,030)   (94,645)   975,579 

 

The accompanying notes are an integral part of these financial statements.

 

4

 

 

SOLAIRE PARTNERS LLC.

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2024 and 2023

 

   Note  2024   2023 
      (In thousands of Korean won) 
Cash flows from operating activities             
loss for the year     ₩(182,407)   (301,270)
Adjustments to reconcile profit for the year to net cash provided by operating activities  27   (303,862)   594,658 
Interest received      9,329    9,286 
Interest paid      (13,615)   (16,757)
Income taxes refunded(paid)      (20,161)   131,217 
Net cash inflow(outflow) from operating activities     ₩(510,716)   417,134 
Cash flows from investing activities             
Payment for other non-current financial assets     ₩-    (150,000)
Collection of lease receivables      104,410    38,435 
Collection of other non-current financial assets      -    80 
Purchase of property and equipment      (3,444)   (4,094)
Net cash inflow(outflow) in investing activities     ₩100,966    (115,579)
Cash flows from financing activities  27          
Proceeds from short-term borrowings     ₩207,336    - 
Collection of rent deposit      -    100,050 
Repayment of lease liabilities      (140,127)   (130,674)
Net cash inflow(outflow) in financing activities     ₩67,209    (30,624)
Net increase (decrease) in cash and cash equivalents      (342,541)   270,931 
Cash and cash equivalents at beginning of the year     ₩342,896    71,965 
Cash and cash equivalents at end of the year  14  ₩355    342,896 

 

The accompanying notes are an integral part of these financial statements.

 

5

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

1. Reporting entity

 

The Company

 

Solaire Partners LLC. (“the Company”) was incorporated in June 2017 and the Company's registered office is at 112, Yeoksam-ro, Gangnam-gu, Seoul, Republic of Korea. The Company is investment management company focusing on contents. The Company primarily generates revenue from the investment in securities of Korean content companies and commissions received from the customers from providing the investment management services.

 

The Company’s major shareholders and their respective percentage of ownership as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Number of shares   Ownership (%)   Number of shares   Ownership (%) 
Choi, Pyeung ho   514,250,000    60.5%   514,250,000    60.5%
Lee, Young Jae   208,250,000    24.5%   208,250,000    24.5%
Song, Hyo Jeong   42,500,000    5.0%   42,500,000    5.0%
CY Holdings Co., Ltd   42,500,000    5.0%   42,500,000    5.0%
Park, Su Kyung   17,000,000    2.0%   17,000,000    2.0%
Hyun, Na Young   8,500,000    1.0%   8,500,000    1.0%
Lee, Myung Hyun   8,500,000    1.0%   8,500,000    1.0%
Kim, Min Soo   8,500,000    1.0%   8,500,000    1.0%
Total   850,000,000    100.0%   850,000,000    100.0%

 

2. Basis of Accounting

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These financial statements were authorized for issuance by the management on May 14, 2025.

 

Details of the Company’s accounting policies are included in Note 5.

 

Basis of measurement

 

The financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement bases
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value
Defined benefit plans – plan assets   Fair value

 

6

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

3. Functional and presentation currency

 

These financial statements are presented in Korean Won, which the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these financial statements, management has made judgements and estimates that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

A.Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:

 

Note 25(A): lease term: whether the Company is reasonably certain to exercise extension options.

 

B.Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

●Note 16: Equity-accounted investees;

 

In determining whether the Company has significant influence, the Company takes into account whether the Company directly or indirectly holds 20% or more of the voting rights over the investee, whether the Company participates in the board or other decision-making body equivalent thereto of the investees, or whether the Company’s potential voting rights will affect these rights.

 

●Note 24(B): Financial Instruments – Fair values and risk management;

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

 

i.Measurement of fair values

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for financial assets.

 

When measuring the fair value of a financial instruments measured at FVTPL, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

●Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

●Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

●Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

7

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following notes:

 

●Note 24(B): financial instruments.

 

5. Material accounting policies

 

The Company has consistently applied the following accounting policies to all periods presented in these financial statements, except if mentioned otherwise.

 

A.New and amended standards or interpretations adopted the Company

 

The Company has applied the following standards and amendments for the first time for its annual reporting period commencing January 1, 2024.

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments do not have a significant impact on the financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

8

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

B.New and amended standards or interpretations not yet adopted

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Company.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Company does not expect that these amendments have a significant impact on the Company’s financial statements.

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI. The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Company does not expect that these amendments have a significant impact on the financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

-IFRS 1 First-time adoption of International Financial Reporting Standards;
-IFRS 7 Financial instruments: Disclosures;
-IFRS 9 Financial instruments;
-IFRS 10 Consolidated financial instruments; and
-IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Company to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

9

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

C.Revenue from contracts with customers

 

The Company generates revenue primarily through providing the service for investment management for investment funds, investing in Korean theatrical films, and investing in content companies based in Korea.

 

The Company determines revenue recognition by:

 

●identifying the contract, or contracts, with a customer;

 

●identifying the performance obligations in each contract;

 

●determining the transaction price;

 

●allocating the transaction price to the performance obligations in each contract; and

 

●recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

 

Investment management revenue

 

The Company manages and operates the investment funds on behalf of investors and receives commissions from its customers. The investment management revenues are received in exchange for investment management services that include a series of fund administration services, fund compliance, fund transfer agent services and fund distribution services. Control of investment management services is transferred to the customer over time as these customers receive and consume the benefits provided by these services. Investment management revenues are calculated as a contractual percentage of financial assets the Company manages for clients on either a discretionary or non-discretionary basis. Investment management revenues are recognized for each distinct performance obligation identified in customer contracts when the performance obligation has been satisfied by transferring services to a customer over time.

 

Other revenues

 

Other revenues are from other sources, not from the contract with customers. Other sources of revenue are earned from investing in investment funds, which are investees accounted for using the equity method. An associate is an entity in which the Company has significant influence, but not control, over the entity’s financial and operating policies. Under this method of accounting, the Company typically records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Other revenues also include valuation gains or losses on investment funds that are not accounted for using the equity method. In addition, other sources of revenue are also earned from investing directly in content being produced such as theatrical films and television programs.

 

D.Operating segments

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. The chief operating decision-maker has been identified as the chief executive officer. The Company’s operating segments have been determined to be a single business unit, for which the Company generates identifiable financial information that is regularly reported to the chief executive officer for the purpose of resource allocation and assessment of segment performance. The Company has a reportable segment as described in note 6. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

10

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

E.Employee benefits

 

i.Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

 

ii.Defined benefit plans

 

The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

F.Finance income and finance costs

 

The Company’s finance income and finance costs include:

 

●interest income;

 

●interest expense;

 

●dividend income;

 

●the net gain or loss on financial assets at FVTPL;

 

●the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

●the gross carrying amount of the financial asset; or

 

●the amortized cost of the financial liability.

 

11

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

G.Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i.Current income tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

-Has a legally enforceable right to set off the recognized amounts; and

 

-Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

ii.Deferred income tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

●temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

●temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

●taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plan of the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Company has not rebutted this presumption.

 

12

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

-Has a legally enforceable right to set off the recognized amounts; and

 

-Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

H.Cash and Cash Equivalents

 

Cash and cash equivalents comprise cash on hand, deposits held at banks, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

I.Property and equipment

 

i.Recognition and measurement

 

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

 

Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss.

 

ii.Subsequent expenditure

 

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred.

 

iii.Depreciation

 

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives as follows:

 

Office equipment   5 years
Right-of-use assets   Lease term

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

J.Financial instruments

 

i.Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

13

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

ii.Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

●amortized cost;

 

●FVOCI - debt investment;

 

●FVOCI - equity investment;

 

●or FVTPL.

 

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

Financial assets - Business model assessment

 

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

●the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

●how the performance of the portfolio is evaluated and reported to the Company’s management;

 

●the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

●how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

●the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

14

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

 

●contingent events that would change the amount or timing of cash flows;

 

●terms that may adjust the contractual coupon rate, including variable-rate features;

 

●prepayment and extension features; and

 

●terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

15

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

iii.Derecognition

 

Financial assets

 

The Company derecognizes a financial asset when:

 

●the contractual rights to the cash flows from the financial asset expire; or

 

●it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

-substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

-the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Company enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

Financial liabilities

 

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.

 

16

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

K.Impairment

 

i.Non- derivative financial assets

 

Financial instruments and contract assets

 

The Company recognizes loss allowances for ECLs on:

 

●financial assets measured at amortized cost; and

 

●contract assets.

 

The Company also recognizes loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables.

 

The Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

●debt securities that are determined to have low credit risk at the reporting date; and

 

●other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment, that includes forward-looking information.

 

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 12 months past due.

 

The Company considers a financial asset to be in default when:

 

●the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held).

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

 

ECLs are discounted at the effective interest rate of the financial asset.

 

17

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Credit-impaired financial assets

 

At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

●significant financial difficulty of the debtor;

 

●a breach of contract such as a default or being more than 90 days past due;

 

●the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;

 

●it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

●the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Company has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

 

ii.Non- financial assets

 

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

18

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

L.Leases

 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

i.As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

●fixed payments, including in-substance fixed payments;

 

●variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

●amounts expected to be payable under a residual value guarantee; and

 

●the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

At the date of transition to IFRSs, The Company applies the following approach to all of its leases.

 

The Company measures that lease liability at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at the date of transition to IFRSs.

 

19

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

The Company measures right-of-use asset at its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee's incremental borrowing rate at the date of transition to IFRSs.

 

The Company uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date), including IT equipment. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

ii.As a lessor

 

At inception or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

 

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

 

To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

 

When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.

 

If an arrangement contains lease and non-lease components, then the Company applies IFRS 15 to allocate the consideration in the contract.

 

The Company applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease (see Note 4(K)(i)). The Company further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

 

The Company recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

 

M.Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

20

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

If there is no quoted price in an active market, then the Company uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Company determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

N.Equity-accounted investees

 

Associates are entities over which the Company has significant influence over the financial and operating policy decisions. Generally, if the Company holds 20% or more of the voting power of the investee, it is presumed that the Company has significant influence.

 

Investments in associates are initially recognized at cost and equity method is applied after initial recognition. The carrying amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee and changes in the investee’s equity after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment. Unrealized gains and losses resulting from transactions between the Company and associates are eliminated to the extent of the Company’s share in associates. If unrealized losses are an indication of an impairment that requires recognition in the consolidated financial statements, those losses are recognized for the period.

 

If associates use accounting policies other than those of the Company for like transactions and events in similar circumstances, if necessary, adjustments shall be made to make the associates’ accounting policies conform to those of the Company when the associates’ financial statements are used by the Company in applying the equity method.

 

If the Company’s share of losses of associates equals or exceeds its interest in the associates (including long-term interests that, in substance, form part of the Company’s net investment in the associates), the Company discontinues recognizing its share of further losses. After the Company’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the investee.

 

The Company determines at each reporting period whether there is any objective evidence that the investments in the associates are impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying amount and recognizes the amount as non-operating expenses in the consolidated statement of comprehensive income.

 

O.Concentration of Credit Risk

 

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit losses, which are periodically reviewed.

 

21

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

6. Operating segments

 

A.Basis for segmentation

 

The Company’s operating segments have been identified to be a single business unit, by which the Company provides the services for investment fund management.

 

The following summary describes the operations of each reportable segment

 

Reportable segments   Operations
Investment management   Providing investment management services to investment funds

 

B. Information about reportable segments

 

Information related to each reportable segment is set out below. Segment operating loss is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

 

The segment information for the years ended December 31, 2024 and 2023 is as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Segment revenue  ₩1,424,157    1,716,363 
Depreciation/Amortization   (55,876)   (93,126)
Investment expenses   (20,121)   - 
Losses from investments in associates   (63,068)   (146,232)
Segment operating loss   (191,045)   (185,139)

 

C. Geographic information

 

Investment and commission revenues are managed and operated in Seoul, Korea. The geographic information analyses the Company’s revenue by the customer’s country of domicile. In presenting the geographic information, segment revenue and non-current assets have been based on the geographic location of customers.

 

Summary of the Company’s operation by region based on the location of customers for the years ended December 31, 2024 and 2023 is as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Korea  ₩1,424,157    1,716,363 

 

Summary of the Company’s non-current assets based on the location as of December 31, 2024 and 2023 is as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Korea  ₩114,228    752,702 

 

22

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

D. Major customer

 

Revenues from major customers that amount to 10% or more of the Company’s revenue for the years ended December 31, 2024 and 2023 is as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Solaire Main Movie Fund          
Revenue  ₩562,528    748,459 
%   39%   44%
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2          
Revenue  ₩395,066    89,858 
%   28%   5%
Solaire Culture Plus Fund          
Revenue  ₩358,580    573,678 
%   25%   33%
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1          
Revenue  ₩104,007    302,276 
%   7%   18%
Total  ₩1,420,181    1,714,271 

 

7. Operating income

 

A.Operating income streams

 

The Company generates operating income primarily through providing the services for investment management for initial exhibition in theaters.

 

Revenue from contracts with customers and other operating income for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Revenue from contracts with customers  ₩1,366,325    1,716,363 
Other sources of operating income (*)          
Investment revenue   41,441    - 
Gains from investments in associates   16,391    - 
Total  ₩1,424,157    1,716,363 

 

(*)Other sources of operating income consists of the entity's interest in the profit of associates accounted for by the equity method, and gains from disposal of investments in associates.

 

23

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

B.Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by primary geographical market, major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Company’s reportable segments. (See Note 6)

 

Revenue from contracts with customers based on the service contract type, the timing of satisfaction of performance obligations for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Major products/service lines          
Investment management revenue  ₩1,362,350    1,714,271 
Investment revenue   3,976    2,092 
Total  ₩1,366,326    1,716,363 
Timing of revenue recognition          
Over time   1,366,326    1,716,363 
Revenue from contracts with customers   1,366,326    1,716,363 
Other sources of operating income   57,831    - 
External operating income as reported in Note 6  ₩1,424,157    1,716,363 

 

C.Contract balance

 

The balance of contract assets and contract liabilities from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Contract assets (Unbilled revenue)  ₩370,719    110,988 

 

The contract liabilities primarily relate to the advance consideration received from customers, for which revenue is recognized over time. This will be recognized as revenue when the Company satisfies the performance obligations.

 

No information is provided about remaining performance obligations as of December 31, 2024 or as of December, 31 2023 that have an original expected duration of one year or less, as allowed by IFRS 15.

 

24

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

8. Income and Expenses

 

A.Other income

 

Details of other income for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Other income  ₩86    7 

 

B.Other expenses

 

Details of other expenses for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Donations  ₩          -    30,000 
Losses on disposition of PP&E   -    14,367 
Other expenses   -    520 
Total  ₩-    44,887 

 

C.Expenses by nature

 

Details of classification of expenses by nature for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Losses from investments in associates  ₩63,068    146,232 
Investment expenses   20,121    - 
Employee benefits   1,208,645    978,553 
Depreciation and amortization   55,876    93,126 
Commission paid   52,165    68,534 
Other expenses   215,414    570,178 
Total  ₩1,615,289    1,856,623 

 

25

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

9. Finance income and costs

 

Details of finance income and costs for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean Won) 
Finance income        
Interest income  ₩22,884    21,382 
Gains on dispoal of short-term investment securities   76,280    - 
Total  ₩99,164    21,382 
Finance costs          
Interest expenses  ₩22,730    21,684 
Losses on valuation of short-term investment securities   -    76,280 
Total  ₩22,730    97,964 

 

10. Employee benefits

 

Details of Net defined benefit liability(asset) recognized as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean Won) 
Defined benefit asset  ₩(395,354)   (314,885)
Defined benefit liability   547,722    314,864 
Net defined benefit liability(asset)  ₩152,368    (21)

 

The Company operates defined benefit plans as a retirement pension scheme. Defined benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk.

 

26

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

A.Movement in net defined benefit liability(asset)

 

Details of reconciliation from the opening balances to the closing balances for the net defined benefit liability(asset) and its components for the years ended December 31, 2024 and 2023 is as follows:

 

   Defined benefit obligation   Fair value of plan assets  

Net defined benefit

liabilities (asset)

 
   (In thousands of Korean won) 
   2024   2023   2024   2023   2024   2023 
Balance at 1 January  ₩314,864    243,736    314,885    246,218    (21)   (2,482)
Included in profit or loss                              
Current service cost   66,863    56,091    -    -    66,863    56,091 
Past service credit   -    -    -    -    -    - 
Interest   9,427    9,394    9,429    7,943    (2)   1,451 
Subtotal   76,290    65,485    9,429    7,943    66,861    57,542 
Included in OCI                              
Remeasurement loss(gain)                              
Demographic assumption   (67)   -    -    -    (67)   - 
Financial assumption   35,899    16,645    -    -    35,899    16,645 
Adjustment based on experience   120,736    236    -    -    120,736    236 
Return on plan assets excluding interest income   -    -    1,174    2,759    (1,174)   (2,759)
Subtotal   156,568    16,881    1,174    2,759    155,394    14,122 
Other                              
Benefits paid   -    (11,238)   -    (6,131)   -    (5,107)
Contribution paid by the employer   -    -    69,866    64,096    (69,866)   (64,096)
Subtotal   -    (11,238)   69,866    57,965    (69,866)   (69,203)
Balance at 31 December  ₩547,722    314,864    395,354    314,885    152,368    (21)

 

B.Plan assets

 

In 2024, the Company contributed Korean Won 69,866 thousand to the defined benefit plans. In 2023, the Company contributed Korean Won 64,096 thousand to the defined benefit plans.

 

Details of plan assets as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean Won) 
Cash  ₩295    76 
Time deposits   395,059    314,809 
Total  ₩395,354    314,885 

 

Most of the plan assets are invested in one-year time deposits.

 

Company invests in financial instruments with guaranteed principal to manage risks to plan assets, and there are no separate restrictions on refundability.

 

Company reviews the level of fund reserves every year and has a policy to compensate for the deficit in the plan assets.

 

The estimated contribution for 2025 is nil.

 

27

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

C.Defined benefit obligation

 

i.Actuarial assumptions

 

Details of actuarial assumptions used for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
Discount rate   3.3%   3.9%
Future salary growth   3.7%   3.7%

 

Assumptions regarding future longevity and standard salary scale have been based on issued by Korea Insurance Development Institute.

 

As of December 31, 2024, the weighted average duration of the defined benefit obligation was 4.6 years.

 

ii.Sensitivity analysis

 

The Company measures the risk of actuarial assumption changes as a 1% fluctuation in the discount rate and future salary growth rate of the amounts of defined benefit obligation, which reflects the management's assessment of the risk of actuarial assumption fluctuation that can reasonably occur. The impact of a 1% fluctuation in discount rates and future salary growth rates on the Company’s defined benefit obligation as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Increased
by 1%		   Decreased
by 1%		   Increased
by 1%		   Decreased
by 1%		 
   (In thousands of Korean won) 
Discount rate  ₩(23,537)   26,377    (13,013)   14,572 
Future salary growth   26,038    (23,693)   14,470    (13,169)

 

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

 

D.Employee benefit expenses

 

i.Details of employee benefit expenses recognized for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Wages and salaries  ₩1,092,393    876,912 
Defined benefits plan expenses   66,862    57,542 
Social security contributions   49,390    44,099 
Total  ₩1,208,645    978,553 

 

ii.Expenses are recognized in the statements of comprehensive income (loss) as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Selling, general and administrative expenses  ₩1,208,645    978,553 

 

28

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

11. Income taxes

 

A.Amounts recognized in profit or loss

 

   2024   2023 
   (In thousands of Korean won) 
Current tax expense          
Current year  ₩11,018    24,875 
Adjustments recognized related to period income taxes (*)   (8,086)   51,253 
    2,932    76,128 
Deferred tax expense          
Origination and reversal of temporary differences  ₩64,864    (37,977)
Deferred taxes charged directly to equity   -    1,398 
Tax expense on continuing operations  ₩67,796    39,549 

 

(*)In the normal course of business, the Company and its respective subsidiary are examined by taxation authority. Our management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liabilities for income taxes.

 

The Company establish additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the statements of operations.

 

B.Amounts recognized in OCI

 

   2024   2023 
   Before tax  

Tax (expense)

benefit

   Net of tax   Before tax  

Tax (expense)

benefit

   Net of tax 
   (In thousands of Korean won) 
Items that will not be reclassified to profit or loss                              
Remeasurements of defined benefit liability  ₩(155,393)                -    (155,393)   (14,122)   1,398    (12,724)

 

29

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

C.Reconciliation of effective tax rate

 

   2024   2023 
   (In thousands of Korean won) 
Profit (loss) before income tax  ₩(114,611)   (261,721)
Tax at the statutory income tax rate   (11,347)   (25,910)
Adjustments:          
Expenses not deductible for tax purposes   -    455 
Tax credits   -    (13,740)
Adjustments recognized related to prior period incomes   (8,086)   38,044 
Changes in unrecognized deferred tax assets   86,814    - 
Other (differences in tax rate, etc)   415    40,700 
Income tax expenses  ₩67,796    39,549 
Effective income tax rate (*)   -    - 

 

(*)The effective tax rate is not calculated as the Company incurred a loss before income taxes for the year ended December 31, 2024 and December 31, 2023.

 

D.Movement in deferred tax balances

 

i.Movement in deferred tax balances as of December 31, 2024

 

   Tax effect 
   Beginning   Increase (decrease)   Ending 
   (In thousands of Korean won) 
Short-term financial instruments  ₩7,552    (7,552)   - 
Long-term investment securities   -    23,455    23,455 
Property and equipment including right-of-use assets   (7,632)   5,213    (2,419)
Investments in associates   21,677    (21,182)   495 
Lease liabilities   19,906    (13,872)   6,034 
Lease receivables   (12,595)   8,656    (3,939)
Defined benefit liabilities   (2)   15,086    15,084 
Other   6,541    332    6,873 
Total  ₩35,447    10,136    45,583 
Loss carried forward  ₩-    11,815    11,815 
Carryover tax credit   29,416    -    29,416 
Unrecognized deferred tax income asset (*)   -    (86,814)   (86,814)
Deferred tax assets (liabilities)  ₩64,863    (64,863)   - 

 

(*)As of December 31, 2024, the Company did not recognize deferred income tax asset for the temporary difference as it is not probable such loss carried forward and carryover tax credit can be utilized in the foreseeable future.

 

30

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

iiMovement in deferred tax balances as of December 31, 2023

 

   Tax effect 
   Beginning   Increase (decrease)   Ending 
   (In thousands of Korean won) 
Short-term financial instruments  ₩-    7,552    7,552 
Property and equipment including right-of-use assets   (8,731)   1,099    (7,632)
Investments in associates   12,453    9,224    21,677 
Lease liabilities   8,423    11,483    19,906 
Lease receivables   -    (12,595)   (12,595)
Defined benefit liabilities   (5,216)   5,214    (2)
Other   4,282    2,259    6,541 
Total  ₩11,211    24,236    35,447 
Loss carried forward  ₩-    -    - 
Carryover tax credit   15,676    13,740    29,416 
Deferred tax assets (liabilities)  ₩26,887    37,976    64,863 

 

E.Deferred assets (liabilities)

 

i.The timing of recovery of deferred tax assets and liabilities as of December 31, 2024 and 2023 is as follows:

 

   December 31, 2024   December 31, 2023 
   (In thousands of Korean won) 
Deferred tax assets          
- Deferred tax assets to be recovered after more than 12 months  ₩205,426    127,210 
- Deferred tax assets to be recovered within 12 months   177,737    6,977 
Sub-total   383,163    134,187 
Deferred tax liabilities   　    　 
- Deferred tax liabilities to be recovered after more than 12 months   (120,045)   (56,730)
- Deferred tax liabilities to be recovered within 12 months   (176,304)   (12,594)
Sub-total   (296,349)   (69,324)
Unrecognized deferred tax assets   (86,814)   - 
Deferred tax assets (liabilities), net  ₩-    64,863 

 

ii.Details of unrecognized as deferred income tax assets as of December 31, 2024 and 2023 is as follows:

 

   December 31, 2024   December 31, 2023 
   (In thousands of Korean won) 
Unrecognized temporary difference  ₩45,583    - 
Loss carried forward   11,815    - 
Carryover tax credit   29,416    - 
Total  ₩86,814    - 

 

31

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

iii.Details of unused tax loss carryforwards and unused tax credit carryforwards that are not recognized as deferred income tax assets as of December 31, 2024, are as follows:

 

Year of expiration  Unused loss carryforwards  

Unused tax credit carryforwards

 
   (In thousands of Korean won) 
2032  ₩-    15,676 
2033   -    13,740 
2039   119,346    - 
Total  ₩119,346    29,416 

 

12. Other assets

 

Details of other assets as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   (In thousands of Korean Won) 
Current          
Prepaid expenses  ₩97    - 

 

13. Trade and other receivables

 

Details of trade and other receivables as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Trade receivable   　    　 
Accounts receivable — Trade  ₩52,800    384,675 
Other receivables   　    　 
Non-trade receivables   2,089,948    27,498 
Lease receivable(current)   39,784    91,135 
Other current financial assets          
Leasehold deposit receivables(current)   144,019    - 
Other non-current financial assets          
Leasehold deposit receivables   -    195,464 
Other deposits receivables   300    300 
Lease receivable(non-current)   -    36,082 
Total  ₩2,326,851    735,154 

 

32

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

14. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   (In thousands of Korean Won) 
Deposits in banks  ₩355    342,896 

 

The Company doesn't have any restricted cash and cash equivalents as of December 31, 2024 and 2023.

 

15. Property and equipment

 

A.Reconciliation of carrying amount

 

Details of property and equipment as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024 
   Book value   Accumulated depreciation   Carrying amount 
   (In thousands of Korean won) 
Office equipment  ₩27,584    (17,792)   9,792 
Right-of-use assets   102,887    (81,452)   21,435 
Total  ₩130,471    (99,244)   31,227 

 

   December 31, 2023 
   Book value   Accumulated depreciation   Carrying amount 
   (In thousands of Korean won) 
Office equipment  ₩24,140    (15,129)   9,011 
Right-of-use assets   270,012    (195,363)   74,649 
Total  ₩294,152    (210,492)   83,660 

 

Details of the changes in property and equipment for the years ended December 31, 2024 and 2023 are as follows:

 

   2024 
   Office equipment   Right-of-use assets   Total 
   (In thousands of Korean won) 
Beginning balance  ₩9,011    74,649    83,660 
Acquisitions   3,444    -    3,444 
Depreciation   (2,663)   (53,214)   (55,877)
Ending balance  ₩9,792    21,435    31,227 

 

33

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

   2023 
   Office equipment   Right-of-use assets   Total 
   (In thousands of Korean won) 
Beginning balance  ₩6,869    86,739    93,608 
Acquisitions   4,094    308,663    312,757 
Depreciation   (1,952)   (91,174)   (93,126)
Lease modification   -    (23,804)   (23,804)
Provision of sublease   -    (205,775)   (205,775)
Ending balance  ₩9,011    74,649    83,660 

 

The classification of depreciation expenses in the statements of comprehensive income for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Selling, general and administrative expenses  ₩55,877    93,126 

 

B.Leased property and equipment

 

The Company leased the building during the years ended December 31, 2024 and 2023. As of December 31, 2024, Korean Won 21,435 thousand of right-of-use assets was recognized. (December 31, 2023: Korean Won 74,649 thousand of building.).

 

34

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

16. Equity-accounted investees

 

A.Acquisition cost of investments in associates

 

Details of acquisition cost of investments in associates as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
  

Percentage of

Ownership(*1)

   Acquisition Cost  

Percentage of

Ownership(*1)

   Acquisition Cost 
   (In thousands of Korean won) 
Investments in associates                    
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1 (*2)  ₩-    -    1.04%   200,000 
Solaire Culture Plus Fund (*2)   -    -    1.25%   300,000 
Solaire Main Movie Fund (*2)   -    -    1.00%   300,000 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   1.04%   88,000    1.04%   88,000 
Total  ₩     88,000         888,000 

 

(*1)Although the Company holds less than 20% of equity interests in investment fund, investments in such investees were classified as investments in associates as the Company can exercise significant influence over financial and operating policy decisions as a general partner.
(*2) Due to loss of exercising significant influence account has been reclassified as Long-term investment securities.

 

B.Carrying amount of investments in associates

 

Details of carrying amount of investments in associates as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
  

Percentage of

Ownership(*1)

   Carrying amount  

Percentage of

Ownership(*1)

   Carrying amount 
   (In thousands of Korean won) 
Investments in associates                    
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1 (*2)  ₩-    -    1.04%   112,425 
Solaire Culture Plus Fund (*2)   -    -    1.25%   208,522 
Solaire Main Movie Fund (*2)   -    -    1.00%   260,944 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   1.04%   83,001    1.04%   87,152 
Total  ₩     83,001         669,043 

 

(*1)Although the Company holds less than 20% of equity interests in investment fund, investments in such investees were classified as investments in associates as the Company can exercise significant influence over financial and operating policy decisions as a general partner.
(*2) Due to loss of exercising significant influence account has been reclassified as Long-term investment securities.

 

35

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

C.Movement of investments in associates

 

Details of the changes in investments in associates for the years ended December 31, 2024 are as follows:

 

  

January 1,

2024

  

Capital

withdrawal

   Share in the profit of associates   Changing Account Classification  

December 31,

2024

 
   (In thousands of Korean won) 
Investments in associates                         
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1 (*)  ₩112,425    (53,368)   (38,306)   (20,751)   - 
Solaire Culture Plus Fund (*)   208,522    -    (20,611)   (187,911)   - 
Solaire Main Movie Fund (*)   260,944    -    16,391    (277,335)   - 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   87,152    -    (4,151)   -　    83,001 
Total  ₩669,043    (53,368)   (46,677)   (485,997)   83,001 

 

(*)Due to loss of exercising significant influence account has been reclassified as Long-term investment securities.

 

Details of the changes in investments in associates for the years ended December 31, 2023 are as follows:

 

  

January 1,

2023

  

Capital

contribution

  

Capital

withdrawal

   Share in the profit of associates  

December 31,

2023

 
   (In thousands of Korean won) 
Investments in associates                         
SOLAIRE Contents Investment Fund No.8 (*)  ₩35,636    -    (22,155)   (13,481)   - 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1   158,862    -    -    (46,437)   112,425 
Solaire Culture Plus Fund   264,846    -    -    (56,324)   208,522 
Solaire Main Movie Fund   290,086    -    -    (29,142)   260,944 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   -    88,000    -    (848)   87,152 
Total  ₩749,430    88,000    (22,155)   (146,232)   669,043 

 

(*)Investment fund was liquidated during the year ended December 31, 2023.

 

36

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

D. Summary of financial information of associates

 

Details of the summary of financial information of associates for the years ended December 31, 2024 and 2023 are as follows:

 

   December 31, 2024 
  

Current

assets

   Investment asset  

Total

assets

  

Current

liabilities

  

Total

liabilities

 
   (In thousands of Korean won) 
Investments in associates                         
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   2,517,418    5,711,104    8,228,522    260,416    260,416 

 

 

   2024 
   Investment income  

Profit (Loss)

for the year

  

Total Comprehensive

income

 
   (In thousands of Korean won) 
Investments in associates               
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   972,269    (398,508)   (398,508)

 

   December 31, 2023 
  

Current

assets

   Investment asset  

Total

assets

  

Current

liabilities

  

Total

liabilities

 
   (In thousands of Korean won)     
Investments in associates                         
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1  ₩3,149,532    7,767,287    10,916,819    67,819    67,819 
Solaire Culture Plus Fund   2,270,036    14,561,389    16,831,425    149,698    149,698 
Solaire Main Movie Fund   1,084,379    25,204,198    26,288,577    194,154    194,154 
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   4,644,693    3,800,000    8,444,693    78,079    78,079 
Total  ₩11,148,640    51,332,874    62,481,514    489,750    489,750 

 

   2023 
   Investment income  

Profit (Loss)

for the year

  

Total Comprehensive

income

 
   (In thousands of Korean won) 
Investments in associates               
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1  ₩350,251    (4,481,096)   (4,481,096)
Solaire Culture Plus Fund   40,872    (4,505,988)   (4,505,988)
Solaire Main Movie Fund   11,332    (2,914,190)   (2,914,190)
SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   12,202    (81,386)   (81,386)
Total  ₩414,657    (11,982,660)   (11,982,660)

 

37

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

17. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Financial assets at amortized cost  　 
Cash and cash equivalents  ₩355    342,896 
Accounts receivable — trade, net   52,800    384,675 
Accounts receivable — other, net   2,129,732    118,633 
Other current financial assets   144,019    - 
Other non-current financial assets   300    231,846 
Financial assets at fair value through profit or loss          
Short-term investment securities   -    1,664,720 
Long-term investment securities   712,715    12,180 
Total  ₩3,039,921    2,754,950 

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Financial liabilities at amortized cost  　 
Trade and other payables (*)  ₩1,747,396    1,784,365 
Other current financial liabilities   96,060    - 
Short-term borrowings   207,336    - 
Other non-current financial liabilities   -    87,123 
Total  ₩2,050,792    1,871,488 

 

(*)Trade and other payables that are not financial liabilities are excluded.

 

38

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

A.Classification of investment assets based on liquidity

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Equity securities – at FVTPL  ₩510,317    1,667,720 
Project investment   202,398    9,180 
Total  ₩712,715    1,676,900 

 

B.Equity Securities designated as at FVTPL

 

The Company designated the investments shown below as equity securities at FVTPL because these equity securities represent investment that the Company intends to sell for strategic purposes.

 

  

Fair value at

December 31,
2024

  

Fair value at

December 31,
2023

 
   (In thousands of Korean won) 
Equity Securities (unlisted stocks)  ₩510,317    1,667,720 

 

C.Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments for the years ended December 31, 2024 and 2023 are as follows:

 

   2024 
   Financial assets at amortized cost   Financial assets at fair value through profit or loss   Financial liabilities at amortized cost   Total 
   (In thousands of Korean won)     
Interest income  ₩22,884    -    -    22,884 
Interest expense   -    -    (9,261)   (9,261)
Gain or loss on disposal of investment securities   -    76,280    -    76,280 
Investment revenue   -    45,417    -    45,417 
Investment expense   -    (20,121)   -    (20,121)
Total  ₩22,884    101,576    (9,261)   115,199 

 

39

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

   2023 
   Financial assets at amortized cost   Financial assets at fair value through profit or loss   Financial liabilities at amortized cost   Total 
   (In thousands of Korean won) 
Interest income  ₩21,382    -    -    21,382 
Interest expense   -    -    (4,825)   (4,825)
Gain or loss on valuation of investment securities   -    (76,280)   -    (76,280)
Total  ₩21,382    (76,280)   (4,825)   (59,723)

 

18. Capital and reserves

 

A.Share Capital

 

Details of share capital as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Shares  ₩850,000    850,000 

 

B.Share Premium

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Share Premium(*)  ₩421,254    421,254 

 

(*)On January 2, 2023, Choi, Pyeung ho, the Company's major shareholder, transferred the Company's shares to the employees for less than fair value.

 

C.Other reserves

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Remeasurements of defined benefit liability  ₩(201,030)   (45,637)

 

40

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

19. Capital management

 

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors capital using a ratio of ‘Net debt’ to ‘Total equity’. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Company’s net debt to total equity ratio as of December 31, 2024 and 2023 are as follows.

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Total liabilities  ₩2,549,387    2,370,145 
Less: Cash and cash equivalents   (355)   (342,896)
Net debt   2,549,032    2,027,249 
Total equity   975,579    1,313,379 
Net debt to total equity ratio   261.28%   154.35%

 

41

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

20. Share-based payment arrangements

 

A.Measurement of fair values

 

The fair value of the employee share options has been measured using a discounted cash flow method.

 

The inputs used in the measurement of the fair values at grant date are as follows:

 

Share option plan (Either of equity-settled or cash-settled)    December 31, 2023 
     (In thousands of Korean won)
Estimated fair value of Share (in aggregate)  ₩  455,254 
Transfer Price     34,000 
Fair Value of options  ₩  421,254 
Risk- free interest rate (based on government bonds)     3.74%
Discount rate     15.80%

 

21. Borrowings

 

Borrowings as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Current Liabilities          
Short-term borrowings  ₩207,336    - 
Lease liabilities (*)   60,945    145,798 
Subtotal   268,281    145,798 
Non-Current liabilities   　    　 
Lease liabilities (*)   -    55,275 
Total  ₩268,281    201,073 

 

(*)The interest rate related to lease liabilities reflects the incremental borrowing rate based on the Company's credit. The amount of interest expense related to lease liabilities incurred during 2024 is Korean Won 13,293 thousand (2023: Korean Won 16,757 thousand). Additionally, the amount of low-value assets lease payments not included in the measurement of lease liabilities during 2024 is Korean Won 2,327 thousand (2023: Korean Won 3,034 thousand).

 

A.Terms and repayment schedule

 

The terms and conditions of outstanding borrowings as of December 31, 2024 and 2023 are as follows:

 

               December 31, 2024   December 31, 2023 
               (In thousands of Korean won) 
   Currency  

Nominal

interest rate

   Maturity   Limit Amount   Exercise Amount   Limit Amount   Exercise Amount 
Unsecured borrowings   KRW    6.85%   17-Jul-25    300,000    207,336    -    - 


 

The company is provided a joint and several guarantee of Korean Won 330,000 thousand by the CEO of the Company as of December 31, 2024.

 

42

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

22. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Other payable  ₩1,747,396    1,784,364 
Accrued expenses   54,322    46,484 
Total  ₩1,801,718    1,830,848 

 

23. Provisions

 

Provisions for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean Won) 
Site restoration   　      
Beginning of the year  ₩12,989    - 
Provisions made during the year   -    12,888 
Interest expense   178    101 
Ending of the year  ₩13,167    12,989 

 

The provision for building restoration relates mainly to buildings leased during 2023. The provision has been estimated based on historical data associated with similar buildings.

 

43

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

24. Financial Instruments – Fair values and risk management

 

A.Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

Carrying amounts of financial instruments by category as of December 31, 2024 are as follows:

 

   Fair value   Level 1   Level 2   Level 3   Total 
   (In thousands of Korean won) 
Financial assets at fair value   　    　    　    　    　 
Long-term investment securities  ₩510,317    -    -    510,317    510,317 
Project investment   202,398    -    -    202,398    202,398 
Total  ₩712,715    -    -    712,715    712,715 

 

Carrying amounts of financial instruments by category as of December 31, 2023 are as follows:

 

   Fair value   Level 1   Level 2   Level 3   Total 
   (In thousands of Korean won) 
Financial assets at fair value                         
Short-term investment securities  ₩1,664,720    -    -    1,664,720    1,664,720 
Long-term investment securities   3,000    -    -    3,000    3,000 
Project investment   9,180    -    -    9,180    9,180 
Total  ₩1,676,900    -    -    1,676,900    1,676,900 

 

Details of the changes in financial instruments for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Beginning balance  ₩1,676,900    38,875 
 Acquisitions(*1)   200,000    1,741,000 
 Changing Account Classification(*2)   485,997    - 
Disposals(*3)   (1,671,502)   (26,695)
 Valuation(*4)   21,320    (76,280)
Ending balance  ₩712,715    1,676,900 

 

(*1)On March 23, 2023, the Company acquired 1,000 shares of Play Company Co., Ltd., which represents 1% of total shares issued. Acquisition price per share is Korean Won 1,741 thousand. On April 23, 2024, the Company invest Korean Won 200 thousand for the purpose of planning and developing a movie.
(*2) Due to loss of exercising significant influence account has been reclassified as Long-term investment securities.
(*3) On January 31, 2024, the Company disposed of all shares of Play Company Co., Ltd..
(*4) Unlisted stocks were revalued on December 31, 2024 and 2023.


 

44

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 


B.Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

●Level 1: quoted prices (unadjusted) in active markets for identical asset or liability;

 

●Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability;

 

●Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of Company-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

The valuation techniques used to measure the fair value of a financial instrument include:

 

●Market price or dealer price of a similar financial instrument

 

●The fair value of derivative instruments is determined by discounting the amount to present value using the leading exchange rate as of the end of the reporting period

 

C.Financial risk management

 

The Company’s operating activities expose itself to a variety of financial risks: credit risk and liquidity risk from which the Company’s risk management program focuses on minimizing any adverse effects on its financial performance. The Company operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i.Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Company's receivables from customers. In order to manage credit risk, the Company regularly evaluate the credit worthiness of each customer or counterparty considering the party's financial information, past experience, its own trading records and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss("ECL") in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

45

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

The maximum exposure to credit risk of the Company as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Cash and cash equivalents  ₩355    342,896 
Other current financial assets   144,019    - 
Other non-current financial assets   300    231,846 
Accounts receivable — trade, net   52,800    384,675 
Accounts receivable — other, net   2,129,732    118,633 
Contract assets   370,720    110,988 
Total  ₩2,697,926    1,189,038 

 

Cash and cash equivalents are deposited in financial institutions with strong credit rating. Accounts receivables are mainly due from investment funds, which management believes such customers are of low credit risk.

 

ii.Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions. All assets and liabilities on the balance sheet and off-balance sheet transactions are subject to liquidity risk management.

 

Financial liabilities and off-balance sheet transactions of the Company by maturity according to the remaining period from December 31, 2024 to the contractual maturity date are as follows:

 

   December 31, 2024 
  

Carrying

Amount

  

Less than

3 months

  

3 months

~ 1 year

   1~2 years   2~5 years  

More than

5 years

   Total 
   (In thousands of Korean won) 
Non-derivative financial liabilities                              
Other payables(*1)  ₩1,747,396    6,396    1,741,000    -    -    -    1,747,396 
Other current financial liabilities   96,060    -    100,050    -    -    -    100,050 
Short-term borrowings   207,336    3,502    211,539    -    -    -    215,041 
Lease liabilities   60,945    37,200    25,258    -    -    -    62,458 
Off-balance sheet items                                   
Commitments(*2)   -    -    -    -    132,000    -    132,000 
Total  ₩2,111,737    47,098    2,077,847    -    132,000    -    2,256,945 

 

(*1)Payables and accrued expense that are not financial liabilities are excluded.
(*2) The Company classifies the amount, which is due to maintain the status of the member of investment fund in accordance with the agreement, based on its earliest contractual maturity. (Note 26)

 

46

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Financial liabilities and off-balance sheet transactions of the Company by maturity according to the remaining period from December 31, 2023 to the contractual maturity date are as follows:

 

   December 31, 2023 
  

Carrying

 

Amount

 

  

Less than

 

3 months

 

  

3 months

 

~ 1 year

 

   1~2 years   2~5 years  

More than

 

5 years

 

   Total 
   (In thousands of Korean won) 
Non-derivative financial liabilities                               
Other payables(*1)  ₩1,784,365    43,365    1,741,000    -    -    -    1,784,365 
Other non-current financial liabilities   87,123    -    -    100,050    -    -    100,050 
Lease liabilities   201,073    41,820    111,600    62,458    -    -    215,878 
Off-balance sheet items                                   
Commitments(*2)   -    -    -    -    132,000    -    132,000 
Total  ₩2,072,561    85,185    1,852,600    162,508    132,000    -    2,232,293 

 

(*1) Payables and accrued expense that are not financial liabilities are excluded.


(*2)The Company classifies the amount, which is due to maintain the status of the member of investment fund in accordance with the agreement, based on its earliest contractual maturity. (Note 26)

 

25. Leases

 

A.Leases as lessee

 

The Company leases building. The leases typically run for a period of 1~3 years, with an option to renew or terminate the lease after that date. The Company also leases printer with contract terms of one year. These leases is leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases. Information about leases for which the Company is a lessee is presented below.

 

i.Right-of-use assets

 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property and equipment.

 

Details of right-of-use assets and lease liabilities recognized in the statements of financial position as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Right-of-use assets (Building)          
Acquisition price  ₩102,887    270,012 
Accumulated depreciation   (81,452)   (195,363)
Book amount  ₩21,435    74,649 

 

47

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Changes in right-of-use assets for the years ended December 31, 2024 and 2023 are as follows:

 

   2024 
   Building 
   (In thousands of Korean won) 
Balance as of January 1, 2024  ₩74,649 
Depreciation   (53,214)
Balance as of December 31, 2024  ₩21,435 

 

   2023 
   Building 
   (In thousands of Korean won) 
Balance as of January 1, 2023  ₩86,739 
Depreciation   (91,174)
Acquisitions   308,663 
Lease modification   (23,804)
Provision of sublease   (205,775)
Balance as of December 31, 2023  ₩74,649 

 

ii.Amounts recognized in profit or loss

 

Amounts recognized in profit or loss for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Interest expense relating to lease liabilities (included in finance cost)  ₩13,293    16,757 
Expense relating to leases of low-value assets excluding short-term leases   2,327    3,034 

 

iii.Amounts recognized in statement of cash flows

 

Amounts recognized in statement of cash flows for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Total cash outflows of leases  ₩155,747    150,464 

 

B.Leases as lessor

 

i.Finance lease

 

During the year ended December 31, 2024 the Company has sub-leased a building that has been presented as a right-of-use asset.

 

During the year ended December 31, 2024 the Company did not dispose of any right-of-use assets and therefore recognized no losses (2023 : Korean Won 14,367 thousand) on disposition of right-of-use asset.

 

During the year ended December 31, 2024 the Company recognized interest income on lease receivables Korean Won 8,615 thousand (2023 : Korean Won 8,826 thousand).

 

48

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

26. Commitments

 

A.Amount of investment agreement
The outstanding balances of contributions according to the investment agreements as of December 31, 2024 and 2023 are as follows:

 

December 31, 2024  Total amount of investment agreement  

Cumulative

investment

  

Outstanding

Balance

 
   (In thousands of Korean won) 
SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.1		  ₩200,000    200,000    - 
SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.2		   220,000    88,000    132,000 
Solaire Culture Plus Fund   300,000    300,000    - 
Solaire Main Movie Fund   300,000    300,000    - 
Total  ₩1,020,000    888,000    132,000 

 

December 31, 2023  Total amount of investment agreement  

Cumulative

investment

  

Outstanding

Balance

 
   (In thousands of Korean won) 
SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.1		  ₩200,000    200,000    - 
SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.2		   220,000    88,000    132,000 
Solaire Culture Plus Fund   300,000    300,000    - 
Solaire Main Movie Fund   300,000    300,000    - 
Total  ₩1,020,000    888,000    132,000 

 

B.Other commitments

 

On September 14, 2023, an amendment was made to the equity interest exchange agreement, originally entered into on March 31, 2023, between the CEO, other shareholders of the Company, and K Enter Holdings for the purpose of listing on the NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective on the date designated by K Enter Holdings. Upon the effective date, the CEO and other shareholders of the Company will exchange 95.1% of its shares with the equity interest of K Enter Holdings. Following the equity interest exchange transaction, the Company is expected to be a subsidiary of K Enter Holdings.

 

49

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

On August 9, 2024, the Company provided a guarantee for an investment made by Industrial Bank of Korea intended for movie production <pupil of the eye>. The investee for this investment is SPC(Special Purpose Company), which specializes in the cultural industry and is responsible for the production, and the investment amount is KRW 1.6 billion.

 

C.Borrowing commitments

 

borrowing commitments the company has entered into with financial institutions as of December 31, 2024 are as follows:

 

Financial institutions  Categories  Credit limit    Borrowings amount 
      (In thousands of Korean won)
KB Kookmin Bank  overdraft loan₩ 300,000     207,336 

 

The company is provided a joint and several guarantee of Korean Won 330,000 thousand by the CEO of the Company as of December 31, 2024.

 

27. Statement of Cash flows

 

Adjustments for income and expenses from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Depreciation  ₩55,877    93,126 
Interest expenses   22,730    21,684 
Interest income   (22,884)   (21,382)
Severance Benefits   66,862    57,542 
Share-based payments expenses   -    421,254 
Tax expenses   67,796    39,549 
Gains on valuation of securities under equity method   (16,391)   - 
Gains on disposal of securities under equity method   (76,280)   - 
Losses on valuation of short-term financial instruments   -    76,280 
Losses on valuation of securities under equity method   63,068    146,232 
Losses on disposition of PP&E   -    14,367 
Investment revenue   (41,441)   - 
Investment expenses   20,121    - 
Total  ₩139,458    848,652 

 

50

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

Changes in assets and liabilities from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Other current liabilities  ₩(3,092)   (23,218)
Other current assets   (97)   520 
Accounts receivable - other   (273,426)   (29,139)
Trade and other payables   (29,131)   (33,673)
Accounts receivable-trade   331,875    50,858 
Liabilities due to payment of benefits   -    (5,107)
Net defined benefit asset   (69,866)   (64,096)
Contract assets   (259,732)   (110,988)
Decrease(Increase) in Project investment   (193,218)   26,695 
Decrease in securities under equity method   53,367    22,154 
Increase in securities under equity method   -    (88,000)
Total  ₩(443,320)   (253,994)

 

Significant non-cash transactions for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Increase in Lease liabilities (new contract)  ₩-    269,160 
Decrease in Lease liabilities (lease modification)   -    (22,498)
Increase in Short-term investment securities   -    1,741,000 
Increase in Long-term investment securities (Reclassification)   485,997    - 
Increase in Lease receivable   -    173,656 
Decrease in Short-term investment securities   1,741,000    - 

 

51

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

The movements of liabilities to cash flows arising from financing activities for the years ended December 31, 2024 and 2023 are as follows:

 

   Short term borrowings   Other current financial liabilities   Other non-current financial liabilities  

Current

lease liabilities

  

Non-current

lease liabilities

   Total 
Balance at 1 January 2023  ₩-    -    -    61,718    23,366    85,084 
Changes from financing cash flows   　    　    　    　    　    　 
Payment of lease liabilities  ₩-    -    -    (130,674)   -    (130,674)
Collection of rent deposit   -    -    100,050    -    -    - 
Reclassification   -    -    -    237,252    (237,252)   - 
Total  ₩-    -    100,050    106,578    (237,252)   (30,624)
Other changes             　    　    　    　 
New leases   -    -    -    -    269,160    269,160 
Lease modification   -    -    -    (22,498)   -    (22,498)
Present value discount   -    -    (17,752)   -    -    (17,752)
Interest expense   -    -    4,825    16,757    -    21,582 
Interest paid   -    -    -    (16,757)   -    (16,757)
Total  ₩-    -    (12,927)   (22,498)   269,160    233,735 
Balance at 31 December 2023  ₩-    -    87,123    145,798    55,274    288,195 
Balance at 1 January 2024   -    -    87,123    145,798    55,274    288,195 
Changes from financing cash flows                              
Payment of lease liabilities  ₩-    -    -    (140,127)   -    (140,127)
Proceeds from borrowings   207,336    -    -    -    -    207,336 
Reclassification   -    87,123    (87,123)   55,274    (55,274)   - 
Total  ₩207,336    87,123    (87,123)   (84,853)   (55,274)   67,209 
Other changes                              
Interest expense   323    8,937    -    13,293    -    22,553 
Interest paid   (323)   -    -    (13,293)   -    (13,616)
Total  ₩-    8,937    -    -    -    8,937 
Balance at 31 December 2024  ₩207,336    96,060    -    60,945    -    364,341 

 

52

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

28. Related parties

 

A.List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   December 31,
2024		   December 31,
2023
Key management personnel   Choi, Pyeung ho   Choi, Pyeung ho
Key management personnel   Lee, Young Jae   Lee, Young Jae

Personnel with significant

 

influence over the Company

 

   Song, Hyo Jeong   Song, Hyo Jeong

Entities with significant

 

influence over the Company

 

   CY Holdings Co., Ltd   CY Holdings Co., Ltd

Personnel with significant

 

influence over the Company

 

   Park, Su Kyung   Park, Su Kyung
Personnel with
significant influence
over the Company		   Hyun, Na Young   Hyun, Na Young
Personnel with
significant influence
over the Company		   Lee, Myung Hyun   Lee, Myung Hyun
Personnel with
significant influence
over the Company		   Kim, Min Soo   Kim, Min Soo
Other related parties   K Enter Holdings INC   K Enter Holdings INC
Associates(*1)   -   SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1
Associates   SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.2		   SOLAIRE
SCALE-UP MOVIE INVESTMENT FUND NO.2
Associates(*1)   -   Solaire Culture Plus Fund
Associates(*1)   -   Solaire Main Movie Fund
Other related parties   Bluefire Studio Co., Ltd   Bluefire Studio Co., Ltd
Other related parties(*2)   -   Secret: Untold Melody Limited Company Specializing in The Cultural Industry
Other related parties(*2)   -   Next Sohee Limited Company Specializing in The Cultural Industry
Other related parties(*2)   -   Falling starlight Limited Company Specializing in The Cultural Industry

 

(*1)Investments in associates were excluded from related parties due to a change in account classification during the year ended December 31, 2024.
(*2) Due to the Company's loss of significant influence over the Solaire Main Movie Fund, the Limited Company Specializing in the Cultural Industry—previously controlled by the Solaire Main Movie Fund—has been excluded from the scope of related parties.

 

53

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

B. Transactions with related parties

 

Details of transaction with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

      2024   2023 
Related party  Name of entity  Revenues   Purchases   Revenues   Purchases 
      (In thousands of Korean won)     
Key management
 
personnel
  Lee, Young Jae  ₩3    -    67    - 
Personnel with
significant influence
over the Company		  Song, Hyo Jeong   2    -    48    - 
Other related parties(*1)  K Enter Holdings INC   84,895    8,938    8,826    4,825 
Associates(*2)  SOLAIRE Contents
Investment Fund No.8		   -    -    -    13,481 
Associates(*3)  SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.1   84,279    38,306    302,276    46,436 
Associates  SOLAIRE SCALE-UP MOVIE INVESTMENT FUND NO.2   395,066    4,151    89,858    848 
Associates(*3)  Solaire Culture Plus Fund   272,427    20,611    573,678    56,325 
Associates(*3)  Solaire Main Movie Fund   540,815    -    748,459    29,142 
Total     ₩1,377,487    72,006    1,723,212    151,057 

 

(*1)A gain of 76,280 thousand won from the disposal of Play Company Co., Ltd shares was included.
(*2)Amounts before the liquidation during the year ended December 31, 2023.
(*3)Due to loss of exercising significant influence, account has been reclassified as Long-term investment securities, the amount represents the balance prior to the loss of significant influence.

 

54

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

C.Account balances with related parties

 

The balances of receivables and payables to related parties as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
Related party  Name of entity  Receivable   Lease receivable   Payables   Receivable  

Lease

receivable

   Payables 
      (In thousands of Korean won)     
Key management
personnel
  Lee, Young Jae  ₩-    -    180    -    -    1,949 
Personnel with
significant influence
over the Company		  Song, Hyo Jeong   -    -    128    -    -    1,392 
Other related
parties
  K Enter Holdings INC   1,814,948    39,784    96,060    27,498    127,217    87,123 
Associates  SOLAIRE SCALE-UP
 
MOVIE INVESTMENT FUND NO.1
 		   -    -    -    87,238    -    24,005 
Associates  SOLAIRE SCALE-UP
 
MOVIE INVESTMENT FUND NO.2
 		   236,666    -    -    76,550    -    - 
Associates  Solaire Culture Plus Fund   -    -    -    144,375    -    - 
Associates  Solaire Main Movie Fund   -    -    -    187,500    -    - 
Total     ₩2,051,614    39,784    96,368    523,161    127,217    114,469 

 

55

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

D.Financial transactions with related parties

 

Details of significant financial transactions with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

      2024   2023 
Related party  Name of entity  Repayment   Borrowing   Repayment   Borrowing 
      (In thousands of Korean won) 
Key management personnel  Choi, Pyeung ho  ₩14,000    14,000    -    - 

 

E.Capital contribution transactions with related parties

 

Details of significant capital contribution transactions with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

      2024   2023 
Related party  Name of entity 

Additional

investment

  

Recovery of

investment

  

Additional

investment

  

Recovery of

investment

 
      (In thousands of Korean won) 
Associates  SOLAIRE Contents
Investment Fund No.8		   -    -    -    22,155 
Associates  SOLAIRE SCALE-UP
 
MOVIE INVESTMENT FUND NO.1
 		   -    53,368    -    - 
Associates  SOLAIRE SCALE-UP
 
MOVIE INVESTMENT FUND NO.2
 		   -    -    88,000    - 
Total     ₩-    53,368    88,000    22,155 

 

F.Key management personnel compensation

 

The compensation for the key management personnel for the years ended December 31, 2024 and 2023 are as follows:

 

   2024   2023 
   (In thousands of Korean won) 
Short-term employee benefits  ₩736,324    552,935 
Defined benefits plan expenses   62,675    41,084 

 

Compensation of the Company’s key management personnel includes salaries, non-cash benefits and contributions to a post-employment defined benefit plan.

 

G.Commitments with related parties

 

The Company is provided a joint and several guarantee of Korean Won 330,000 thousand by the CEO of the Company as of December 31, 2024.

 

56

 

 

SOLAIRE PARTNERS LLC.

NOTES TO FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

 

29. Subsequent Events

 

On January 3, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including Solaire Partners LLC., through a share exchange. Upon the approval, the CEO and other shareholders of the Company exchanged 95.0% of its shares with the equity interest of K Enter Holdings Inc. Following the equity interest exchange transaction, the Company became a subsidiary of K Enter Holdings Inc.

 

57

 

 

Exhibit 15.17

 

APEITDA CO., LTD.

 

STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

    Note       December 31,
2024		     December 31,
2023		  
            (In thousands of Korean won)  
Assets                        
Cash and cash equivalents   14,16,18,21   ₩     344,537       659,606  
Accounts receivable — trade, net   13,16,21         18,449       -  
Accounts receivable — other, net   13,16,21         -       30  
Other current assets   12         2,279       2,164  
Value added tax receivable             -       384  
Current tax assets             -       8,289  
Total current assets             365,265       670,473  
Long-term investment securities   16,21         71,941       93,219  
Property, plant and equipment including right-of-use assets   15,22         220,843       301,006  
Other non-current financial assets   16,21         431,827       385,494  
- Related parties   24         431,827       385,494  
- Non-related parties             -       -  
Other non-current non-financial assets   12         -       30,000  
Deferred tax assets   11         -       15,771  
Total non-current assets             724,611       825,490  
Total assets       ₩     1,089,876       1,495,963  
Liabilities                        
Trade and other payables   16,20,21   ₩     19,112       19,119  
Other current non-financial liabilities             116,588       133,700  
- Related parties   24         115,000       128,905  
- Non-related parties             1,588       4,795  
Value added tax payable             1,267       -  
Current portion of long-term borrowings, net   16,19,21,23         -       100,000  
- Related parties   24         -       100,000  
- Non-related parties             -       -  
Current tax liabilities             5,002       -  
Total current liabilities             141,969       252,819  
Defined benefit liabilities   10         121,520       139,459  
Total non-current liabilities             121,520       139,459  
Total liabilities       ₩     263,489       392,278  

 

The accompanying notes are an integral part of these financial statements.

 

1

 

 

APEITDA CO., LTD.

 

STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

    Note       December 31,
2024		     December 31,
2023		  
            (In thousands of Korean won)  
Equity                        
Share capital   17   ₩     10,000       10,000  
Other reserves   17         (51,945 )     (81,522 )
Retained earnings             868,332       1,175,207  
Total equity             826,387       1,103,685  
Total liabilities and equity       ₩     1,089,876       1,495,963  

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

APEITDA CO., LTD.

 

STATEMENTS OF COMPREHENSIVE INCOME

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won except per share data)  
Revenues                        
Contents revenue   6,7   ₩     17,703       90,000  
Cost of revenues   8         -       (26,473 )
Gross profit             17,703       63,527  
Selling, general and administrative expenses   8         (315,021 )     (320,482 )
Other income   8         2       256  
Other expenses   8         (30,359 )     (526 )
Operating loss             (327,675 )     (257,225 )
Finance income   9,16         52,319       87,852  
- Related parties   24         46,334       41,362  
- Non-related parties             5,985       46,490  
Finance costs   9,16         (23,943 )     (1,269 )
Loss before income tax             (299,299 )     (170,642 )
Income tax benefit (expenses)   11         (7,576 )     14,612  
Loss for the year       ₩     (306,875 )     (156,030 )
Other comprehensive income (loss)                        
Items that will not be reclassified to income or loss:                        
Remeasurement of defined benefit liabilities   10         29,577       (40,126 )
Total comprehensive loss for the year       ₩     (277,298 )     (196,156 )

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

APEITDA CO., LTD.

 

STATEMENTS OF CHANGES IN EQUITY

 

For the Years Ended December 31, 2024 and 2023

 

       

Share
capital

    

Other

components

of equity

    

Retained

earnings

     Total  
        (In thousands of Korean won)  
Balance at January 1, 2023   ₩     10,000       (41,396 )     1,331,237       1,299,841  
Total comprehensive income (loss) for the year                                    
Loss for the year         -       -       (156,030 )     (156,030 )
Remeasurement of defined benefit liabilities         -       (40,126 )     -       (40,126 )
Total comprehensive loss for the year         -       (40,126 )     (156,030 )     (196,156 )
Balance at December 31, 2023   ₩     10,000       (81,522 )     1,175,207       1,103,685  
Balance at January 1, 2024   ₩     10,000       (81,522 )     1,175,207       1,103,685  
Total comprehensive income (loss) for the year                                    
Loss for the year         -       -       (306,875 )     (306,875 )
Remeasurement of defined benefit liabilities         -       29,577       -       29,577  
Total comprehensive income (loss) for the year         -       29,577       (306,875 )     (277,298 )
Balance at December 31, 2024   ₩     10,000       (51,945 )     868,332       826,387  

 

The accompanying notes are an integral part of these financial statements.

 

4

 

 

APEITDA CO., LTD.

 

STATEMENTS OF CASH FLOWS

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won)  
Cash flows from operating activities   23                    
Loss for the year       ₩     (306,875 )     (156,030 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities             75,782       260,798  
Interest received             552       24,616  
Income taxes refunded (paid)             12,528       (289,353 )
Dividend received             1,256       1,121  
Net cash outflow from operating activities       ₩     (216,757 )     (158,848 )
Cash flows from investing activities                        
Disposal of short-term financial instruments       ₩     -       500,000  
Purchase of long-term investment securities             (66,933 )     (40,944 )
Disposal of long-term investment securities             68,193       38,989  
Purchase of property and equipment             -       (70,400 )
Net cash inflow in investing activities       ₩     1,260       427,645  
Cash flows from financing activities   23                    
Repayment of long-term borrowings       ₩     (100,000 )     (82,900 )
- Related parties             (100,000 )     (82,900 )
- Non-related parties             -       -  
Net cash outflow in financing activities       ₩     (100,000 )     (82,900 )
Effect of exchange rate changes on cash and cash equivalents             428       13  
Net increase (decrease) in cash and cash equivalents             (315,497 )     185,897  
Cash and cash equivalents at beginning of the year   14         659,606       473,696  
Cash and cash equivalents at end of the year   14   ₩     344,537       659,606  

 

The accompanying notes are an integral part of these financial statements.

 

5

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

1. Reporting entity

 

The Company

 

Apeitda Co., Ltd. (“the Company”) was incorporated in January 2013 and the Company’s registered office is at 156, Ohyeon-ro, Anigbogu, Seoul, Korea. The Company is primarily providing the media production service that consists of planning, producing, and selling the theatrical films and television programs. The Company is specialized film production company with expertise in action and thriller genres.

 

The Company’s major shareholders and their respective percentage of ownership as of December 31, 2024 and 2023 are as follows:

 

    December 31, 2024     December 31, 2023  
    Number of shares     Ownership (%)     Number of shares     Ownership (%)  
Jung, Byung Gil     9,000       90 %     9,000       90 %
Seo, Sun Yeo     1,000       10 %     1,000       10 %
Total     10,000       100 %     10,000       100 %

 

2. Basis of Accounting

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These financial statements were authorized for issuance by the Board of directors on May 14, 2025.

 

Details of the Company’s accounting policies, including changes thereto, are included in Note 5.

 

Basis of measurement

 

The financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement bases
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value
Defined benefit liabilities   Present value

 

6

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

3. Functional and presentation currency

 

These financial statements are presented in Korean Won, which the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these financial statements, management has made judgements and estimates that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

A. Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:

 

Note 7(B): revenue recognition: whether revenue from providing service is recognized over time or at a point in time; and

 

Note 22(A): lease term: whether the Company is reasonably certain to exercise extension options.

 

B. Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

● Note 10(C): defined benefit obligations;

 

● Note 11(A): uncertain tax treatments.

 

7

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

i. Measurement of fair values

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for financial assets.

 

When measuring the fair value of a financial instruments measured at FVTPL, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

● Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

● Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following notes:

 

● Note 21(B): financial instruments.

 

8

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

5. Material accounting policies

 

The material accounting policies followed by the Company in preparation of its financial statements are as follows:

 

A. New and amended standards or interpretations adopted by the Company

 

The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2024.

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Non-current Liabilities with Covenants

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. Covenants that the entity must comply with after the end of the reporting period do not affect the classification of a liability at the end of the reporting period. However, if a liability is classified as non-current as of the end of the reporting period despite covenants that must be complied with within 12 months after that date, the entity shall disclose information about the risk that the liability could become repayable within 12 months after the reporting period. The amendments do not have a significant impact on the financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

B. New and amended standards or interpretations not yet adopted by the Company

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Company.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Company does not expect that these amendments have a significant impact on the Company’s financial statements.

 

9

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI. The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Company does not expect that these amendments have a significant impact on the financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

- IFRS 1 First-time adoption of International Financial Reporting Standards;

 

- IFRS 7 Financial instruments: Disclosures;

 

- IFRS 9 Financial instruments;

 

- IFRS 10 Consolidated financial instruments; and

 

- IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Company to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

10

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Foreign currency

 

Transactions in foreign currencies are translated into the functional currency of Company at the exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss and presented within finance costs. Translation differences on non-monetary assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

 

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

 

● an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognized in OCI are reclassified to profit or loss);

 

● a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

 

● qualifying cash flow hedges to the extent that the hedges are effective.

 

D. Revenue from contracts with customers

 

The Company generates revenue primarily through providing the media production service.

 

The Company determines revenue recognition by:

 

● identifying the contract, or contracts, with a customer;

 

● identifying the performance obligations in each contract;

 

● determining the transaction price;

 

● allocating the transaction price to the performance obligations in each contract; and

 

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

 

Media production revenue

 

The Company operates the media production business that consists of planning, producing, and selling the theatrical films and television programs. The Company identifies the license which is provided along with media product as combined output and recognizes revenue over time by measuring its progress based on cost incurred towards complete satisfaction of the performance obligation in accordance with Paragraph 35 (2) of IFRS 15 Revenue from contracts with customers. The percentage-of-completion for each contract is calculated by dividing the cumulative cost incurred in relation to service performed by the Company by estimated total contract costs.

 

The Company recognizes unbilled receivables from media production service as contract assets and recognizes receipts in advance for prepaid media production services as contract liabilities. The Company capitalizes the cost associated with the production, including development costs, direct costs, and production overhead per title as prepayments and prepaid expenses. The Company amortizes the capitalized asset in ‘Cost of revenues’ on the statements of comprehensive income based on the percentage-of-completion for each contract.

 

11

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

In addition to media production revenue, according to the terms of the contract with the customer, the Company is providing additional cable TV rights for the produced film with no other goods or services to be transferred to the customer under the contract apart from the obligation to provide licenses. The license agreement pertains to the right to use the entity’s intellectual property as that intellectual property exists at the point in time. This means that at the time of transferring the license, the customer can instruct the use of the license and obtain most of the remaining benefits arising from the license. For the rights, revenue is recognized at the point when the rights become available for use after the execution of the rights usage agreement.

 

In certain licensing agreements, the Company is entitled to receive consideration in the form of sales-based royalties, which are calculated as a percentage of the customer’s sales of licensed media content. In accordance with Paragraph B63 of IFRS 15 Revenue from Contracts with Customers, the Company recognizes revenue from such arrangements only when the subsequent sales occur.

 

E. Operating segments

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. The chief operating decision-maker has been identified as the chief executive officer. The Company’s operating segment has been determined to be a single business unit, for which the Company generates identifiable financial information that is regularly reported to the chief executive officer for the purpose of resource allocation and assessment of segment performance. The Company has a reportable segment as described in Note 6. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

F. Employee benefits

 

i. Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service

 

ii. Defined benefit plans

 

The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

12

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

G. Finance income and finance costs

 

The Company’s finance income and finance costs include:

 

● interest income;

 

● interest expense;

 

● dividend income;

 

● the net gain or loss on financial assets at FVTPL;

 

● the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

● the gross carrying amount of the financial asset; or

 

● the amortized cost of the financial liability.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

H. Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i. Current income tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

- has a legally enforceable right to set off the recognized amounts; and

 

- intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

13

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

ii. Deferred income tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

● temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

● temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

● taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Company has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

- has a legally enforceable right to set off the recognized amounts; and

 

- intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

14

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

I. Cash and cash Equivalents

 

Cash and cash equivalents comprise cash on hand, deposits held at banks, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

J. Property, plant and equipment

 

i. Recognition and measurement

 

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

 

ii. Subsequent expenditure

 

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred.

 

iii. Depreciation

 

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives as follows:

 

Vehicles   5 years
Office equipment   5 years
Furniture and fixtures   5 years
Right-of-use assets   5 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

15

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

K. Financial instruments

 

i. Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

ii. Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

● amortized cost; or

 

● FVTPL

 

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

● it is held within a business model whose objective is to hold assets to collect contractual cash flows;

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL;

 

● it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

16

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Financial assets - Business model assessment

 

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

● the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

● how the performance of the portfolio is evaluated and reported to the Company’s management;

 

● the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

● how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

● the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

 

● contingent events that would change the amount or timing of cash flows;

 

● terms that may adjust the contractual coupon rate, including variable-rate features;

 

● prepayment and extension features; and

 

● terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

17

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

iii. Derecognition

 

Financial assets

 

The Company derecognizes a financial asset when:

 

● the contractual rights to the cash flows from the financial asset expire; or

 

● it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

- substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

- the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Company enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

Financial liabilities

 

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.

 

18

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

L. Impairment

 

i. Non- derivative financial assets

 

Financial instruments and contract assets

 

The Company recognizes loss allowances for ECLs on:

 

● financial assets measured at amortized cost; and

 

● contract assets.

 

The Company also recognizes loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables.

 

The Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

● debt securities that are determined to have low credit risk at the reporting date; and

 

● other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment, that includes forward-looking information.

 

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 12 months past due.

 

The Company considers a financial asset to be in default when:

 

● the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held).

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

 

ECLs are discounted at the effective interest rate of the financial asset.

 

19

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Credit-impaired financial assets

 

At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

● significant financial difficulty of the debtor;

 

● a breach of contract such as a default or being more than 90 days past due;

 

● the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;

 

● it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

● the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Company has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

 

ii. Non- financial assets

 

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, developing contents, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

20

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

M. Leases

 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

i. As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

● fixed payments, including in-substance fixed payments;

 

● variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

● amounts expected to be payable under a residual value guarantee; and

 

● the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

At the date of transition to IFRSs, The Company applies the following approach to all of its leases.

 

The Company measures that lease liability at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

21

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

The Company measures right-of-use asset at its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

The Company uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date), including IT equipment. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

N. Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Company uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Company determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

O. Concentration of Credit Risk

 

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit losses, which are periodically reviewed.

 

22

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

6. Operating segments

 

A. Basis for segmentation

 

The Company’s operating segments have been identified to be a single business unit, by which the Company provides media production services.

 

The following summary describes the operations of each reportable segment.

 

Operating segment   Operations
Media Production   Planning, producing, and selling the media content such as theatrical films and television programs

 

The Company’s chief executive officer reviews the internal management reports at least quarterly.

 

B. Geographic information

 

Media production segment is managed and operated in Seoul, South Korea. The geographic information analyses the Company’s revenue by the customer’s country of domicile and other countries. In presenting the geographic information, segment revenue and non-current assets have been based on the geographic location of customers.

 

Summary of the Company’s operation by region based on the location of customers for the years ended December 31, 2024 and 2023 is as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Korea   ₩     17,703       90,000  

 

Summary of the Company’s non-current assets based on the location as of December 31, 2024 and 2023 is as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Korea   ₩     724,611       809,720  

 

23

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Major customer

 

Revenues from major customers that amount to 10% or more of the Company’s revenue for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Customer A                 　  
Revenue   ₩     -       90,000  
%         -       100.0 %
Customer B                    
Revenue         16,772       -  
%         94.7 %     -  

 

7. Revenue

 

A. Revenue streams

 

The Company generates revenue primarily through providing the services for planning, producing, and selling the media content such as theatrical films and television programs to third parties.

 

Revenue from contracts with customers for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Revenue from contracts with customers   ₩     17,703       90,000  

 

B. Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by major products and service lines and timing of revenue recognition.

 

Revenue from contracts with customers based on the service contract type and the timing of satisfaction of performance obligations for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Major products/service lines                 　  
Media production   ₩     17,703       90,000  
Timing of revenue recognition                    
At a point in time   ₩     17,703       90,000  
Total   ₩     17,703       90,000  

 

24

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Contract balance

 

The balance of accounts receivables and contract liabilities from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		    

December 31,
2023

  
        (In thousands of Korean won)  
Account receivables – trade, net   ₩     18,449       -  

 

The contract liabilities primarily relate to the advance consideration received from customers for media production service, for which revenue is recognized over time. This will be recognized as revenue when the Company satisfies the performance obligations.

 

The amount of contract liabilities as of December 31, 2023 has been recognized as revenue in 2024 is nil (2023: Korean Won 90,000 thousand).

 

8. Income and Expenses

 

A. Other income

 

Details of other income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Miscellaneous income   ₩     2       256  

 

B. Other expenses

 

Details of other expenses for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Impairment of prepayment (*)   ₩     30,000       -  
Miscellaneous expenses         359       526  
Total   ₩     30,359       526  

 

 
(*) Loss on impairment of prepaid movie development fee for the project that has been prolonged without progress.

 

25

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Expenses by nature

 

Details of classification of expenses by nature for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean Won)  
Employee benefits   ₩     151,179       141,708  
Depreciation         80,163       76,459  
Actor’s appearance fee         -       19,300  
Staff and equipment, etc         7,220       4,131  
Transportation         27,965       26,261  
Entertainment         7,378       20,250  
Supplies         2,971       11,352  
Vehicle maintenance         1,339       3,141  
Advertising and marketing expenses         20,000       -  
Other         16,806       44,353  
Total   ₩     315,021       346,955  

 

Total expenses consist of cost of revenues and selling, general and administrative expenses.

 

9. Finance income and costs

 

Details of finance income and costs for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean Won)  
Finance income                    
Interest income   ₩     46,885       65,979  
Dividend income         1,256       1,121  
Unrealized gains on foreign currency translation         428       13  
Gains on valuation of long-term investment securities         3,750       20,739  
Total   ₩     52,319       87,852  
Finance costs                    
Realized losses on foreign currency transaction   ₩     176       106  
Losses on valuation of long-term investment securities         23,767       1,163  
Total   ₩     23,943       1,269  

 

26

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

10. Employee benefits

 

Details of defined benefit liability recognized as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Defined benefit liability   ₩     121,520       139,459  

 

The Company operates defined benefit plans as a retirement pension scheme. Defined benefit plans expose the Company to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

 

A. Movement in net defined benefit asset (liability)

 

Details of reconciliation from the opening balances to the closing balances for the net defined benefit liability and its components for the years ended December 31, 2024 and 2023 is as follows:

 

        Defined benefit obligation     Fair value of plan assets     Net defined benefit liabilities  
        (In thousands of Korean won)  
        2024     2023     2024     2023     2024     2023  
Beginning Balance   ₩     139,459       80,707       -       -       139,459       80,707  
Included in profit or loss                                                    
Current service cost         14,391       9,863       -       -       14,391       9,863  
Interest cost         6,204       4,354       -       -       6,204       4,354  
Subtotal         20,595       14,217       -       -       20,595       14,217  
Included in OCI                                                    
Remeasurement loss (gain)                                                    
Demographic assumption         (163 )     -       -       -       (163 )     -  
Financial assumption         19,266       2,022       -       -       19,266       2,022  
Adjustment based on experience         (57,637 )     42,513       -       -       (57,637 )     42,513  
Subtotal         (38,534 )     44,535       -       -       (38,534 )     44,535  
Ending Balance   ₩     121,520       139,459       -       -       121,520       139,459  

 

B. Plan assets

 

There are no contributions funded to its defined benefit plans as of December 31, 2024 and 2023.

 

27

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Defined benefit obligation

 

i. Actuarial assumptions

 

Details of actuarial assumptions used for the years ended December 31, 2024 and 2023 are as follows:

 

    2024   2023
Discount rate   3.90%   4.60%
Future salary growth   4.7%~7.6%   5.3%~7.4%

 

Assumptions regarding future longevity and standard salary scale have been based on issued by Korea Insurance Development Institute.

 

As of December 31, 2024 and 2023, the weighted average duration of the defined benefit obligation was 8.7 years and 9 years, respectively.

 

ii. Sensitivity analysis

 

The Company measures the risk of actuarial assumption changes as a 1% fluctuation in the discount rate and future salary growth rate of the amounts of defined benefit obligation, which reflects the management’s assessment of the risk of actuarial assumption fluctuation that can reasonably occur. The impact of a 1% fluctuation in discount rates and future salary growth rates on the Company’s defined benefit obligation as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        Increased by 1%     Decreased by 1%     Increased by 1%     Decreased by 1%  
        (In thousands of Korean won)  
Discount rate   ₩     (9,956 )     11,255       (11,682 )     13,286  
Future salary growth         11,270       (10,151 )     13,397       (11,983 )

 

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

 

D. Employee benefit expenses

 

i. Details of employee benefit expenses recognized for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Wages and salaries   ₩     124,800       117,300  
Defined benefits plan expenses         20,595       14,218  
Fringe benefit         5,784       10,190  
Total   ₩     151,179       141,708  

 

ii. Expenses are recognized in the statements of comprehensive income (loss) as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Selling, general and administrative expenses   ₩     151,179       141,708  

 

28

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

11. Income taxes

 

A. Amounts recognized in profit or loss

 

        2024     2023  
        (In thousands of Korean won and number of shares)  
Current tax expense                    
Current year   ₩     -       8,217  
Adjustments recognized related to prior period incomes (*)         762       910  
          762       9,127  
Deferred tax income         　       　  
Origination and reversal of temporary differences         15,771       (28,148 )
Deferred taxes charged directly to equity         (8,957 )     4,409  
          6,814       (23,739 )
Tax expense (benefit) on continuing operations   ₩     7,576       (14,612 )

 

 
(*) In the normal course of business, the Company is examined by taxation authority. The Company’s management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liabilities for income taxes.

 

The Company establishes additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, is included in income taxes in the statements of operations.

 

B. Amounts recognized in OCI

 

        2024     2023  
        Before tax    

Tax (expense)

benefit

     Net of tax     Before tax    

Tax (expense)

benefit

     Net of tax  
        (In thousands of Korean won)  
Items that will not be reclassified to profit or loss                                                    
Remeasurements of defined benefit liabilities   ₩     38,534       (8,957 )     29,577       (44,535 )     4,409       (40,126 )

 

29

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Reconciliation of effective tax rate

 

        2024     2023  
        (In thousands of Korean won)  
Loss before income tax   ₩     (299,299 )     (170,642 )
Tax at the statutory income tax rate         (29,631 )     (16,894 )
Adjustments:                    
Expenses not deductible for tax purposes         1,034       1,310  
Changes in unrecognized temporary difference         40,553       -  
Adjustments recognized related to prior period incomes         762       910  
Other (differences in tax rate, etc)         (5,142 )     62  
Tax expense (benefit)   ₩     7,576       (14,612 )
Effective income tax rate (*)         -       -  

 

 
(*) The effective tax rate is not calculated as the Company incurred a loss before income taxes for the year ended December 31, 2024 and 2023.

 

30

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

D. Movement in deferred tax balances

 

i. Movement in deferred tax balances as of December 31, 2024

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Prepayments   ₩     (2,675 )     2,756       81  
Property, plant and equipment         (22,212 )     4,985       (17,227 )
Other non-current financial assets         21,236       (2,330 )     18,906  
Other non-current non-financial assets         (2,970 )     2,970       -  
Contract liabilities         (2,473 )     2,473       -  
Short-term borrowings         (327 )     -       (327 )
Withholdings         11,385       -       11,385  
Other non-current non-financial liabilities         -       (5,229 )     (5,229 )
Defined benefit liabilities         13,807       (1,776 )     12,031  
Total   ₩     15,771       3,849       19,620  
Loss carried forward   ₩     -       20,933       20,933  
Unrecognized deferred tax assets         -       (40,553 )     (40,553 )
Deferred tax assets (liabilities)   ₩     15,771       (15,771 )     -  

 

ii. Movement in deferred tax balances as of December 31, 2023

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Accounts receivable — Trade   ₩     (21,129 )     21,129       -  
Prepayments         (5,509 )     2,834       (2,675 )
Property, plant and equipment         (25,323 )     3,111       (22,212 )
Other non-current financial assets         25,331       (4,095 )     21,236  
Other non-current non-financial assets         -       (2,970 )     (2,970 )
Contract liabilities         3,817       (6,290 )     (2,473 )
Short-term borrowings         (18,434 )     18,107       (327 )
Long-term borrowings         18,107       (18,107 )     -  
Withholdings         -       11,385       11,385  
Defined benefit liabilities         7,990       5,817       13,807  
Others         2,774       (2,774 )     -  
Total   ₩     (12,376 )     28,147       15,771  
Deferred tax assets (liabilities)   ₩     (12,376 )     28,147       15,771  

 

31

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

E. Deferred assets (liabilities)

 

i. Details of unrecognized deferred income tax assets as of December 31, 2024 and 2023 is as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Unrecognized temporary difference   ₩     19,620       -  
Loss carried forward         20,933       -  
Total   ₩     40,553       -  

 

ii. The maturity of unused loss carryforwards that are not recognized as deferred income tax assets as of December 31, 2024 is as follows:

 

Year of expiration       Unused loss
carryforwards		  
        (In thousands of Korean won)  
2039   ₩     211,448  

 

iii. The timing of recovery of deferred tax assets and liabilities as of December 31, 2024 and 2023 is as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Deferred tax assets                    
- Deferred tax assets to be recovered after more than 12 months   ₩     51,870       35,043  
- Deferred tax assets to be recovered within 12 months         11,385       11,385  
Sub-total         63,255       46,428  
Deferred tax liabilities         　       　  
- Deferred tax liabilities to be recovered after more than 12 months         (22,457 )     (25,182 )
- Deferred tax liabilities to be recovered within 12 months         (245 )     (5,475 )
Sub-total         (22,702 )     (30,657 )
Unrecognized deferred tax assets         (40,553 )     -  
Deferred tax assets (liabilities), net   ₩     -       15,771  

 

12. Other assets

 

Details of other assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		    

December 31,

2023

  
        (In thousands of Korean won)  
Current                    
Prepaid expenses   ₩     2,279       2,164  
Non-current                 　  
Non-current prepayments         -       30,000  
Total   ₩     2,279       32,164  

 

32

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

13. Trade and other receivables

 

Details of trade and other receivables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Trade receivables                    
Accounts receivable — Trade   ₩     18,449       -  
Other receivables                    
Accounts receivable — Other   ₩     -       30  

 

33

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

14. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		    

December 31,

2023

  
        (In thousands of Korean won)  
Deposits in banks   ₩     344,530       645,917  
Foreign currency deposit in banks         7       13,689  
Total   ₩     344,537       659,606  

 

The Company doesn’t have any restricted cash and cash equivalents as of December 31, 2024 and 2023.

 

15. Property, plant and equipment

 

A. Reconciliation of carrying amount

 

Details of property, plant and equipment as of December 31, 2024 and 2023 are as follows:

 

        December 31, 2024  
        Book value     Accumulated depreciation     Carrying amount  
        (In thousands of Korean won)  
Vehicles   ₩     86,947       (64,215 )     22,732  
Office equipment         16,778       (12,492 )     4,286  
Furniture and fixtures         70,400       (27,171 )     43,229  
Right-of-use assets         259,838       (109,242 )     150,596  
Total   ₩     433,963       (213,120 )     220,843  

 

        December 31, 2023  
        Book value     Accumulated depreciation     Carrying amount  
        (In thousands of Korean won)  
Vehicles   ₩     86,947       (52,925 )     34,022  
Office equipment         16,778       (11,022 )     5,756  
Construction in progress         70,400       (11,734 )     58,666  
Right-of-use assets         259,838       (57,276 )     202,562  
Total   ₩     433,963       (132,957 )     301,006  

 

34

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Details of the changes in property and equipment for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Vehicles    

Office

equipment

     Furniture
and fixtures		     Right-of-Use
assets		     Total  
        (In thousands of Korean won)  
Beginning balance   ₩     34,022       5,756       58,666       202,562       301,006  
Depreciation         (11,290 )     (1,470 )     (15,437 )     (51,966 )     (80,163 )
Ending balance   ₩     22,732       4,286       43,229       150,596       220,843  

 

        2023  
        Vehicles    

Office

equipment

     Furniture
and fixtures		    

Construction-

In progress

     Right-of-Use
assets		     Total  
        (In thousands of Korean won)  
Beginning balance   ₩     45,311       7,225       -       70,400       254,529       377,465  
Replacement         -       -       70,400       (70,400 )     -       -  
Depreciation         (11,289 )     (1,469 )     (11,734 )     -       (51,967 )     (76,459 )
Ending balance   ₩     34,022       5,756       58,666       -       202,562       301,006  

 

The classification of depreciation expenses in the statements of comprehensive income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Selling, general and administrative expenses   ₩     80,163       76,459  

 

B. Leased property, plant and equipment

 

The Company leased the building during the years ended December 31, 2024 and 2023. As of December 31, 2024, Korean Won 150,596 thousand of right-of-use assets was recognized (December 31, 2023: Korean Won 202,562 thousand of building).

 

35

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

16. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial assets at amortized cost                    
Cash and cash equivalents   ₩     344,537       659,606  
Accounts receivable         18,449       30  
Other non-current financial assets         431,827       385,494  
Financial assets at fair value through profit or loss                    
Long-term investment securities         71,941       93,219  
Total   ₩     866,754       1,138,349  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial liabilities at amortized cost                    
Trade and other payables (*)   ₩     19,112       19,119  
Current portion of long-term borrowings, net         -       100,000  
Total   ₩     19,112       119,119  

 

 
(*) Trade and other payables that are not financial liabilities are excluded.

 

36

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

A. Classification of investment assets based on liquidity

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Non-Current investments                    
Equity securities – at FVTPL   ₩     71,941       93,219  

 

 
(*) Short-term financial instruments are consisted of time deposits.

 

B. Equity Securities as at FVTPL

 

The Company designated the investments shown below as equity securities at FVTPL because these equity securities represent investment that the Company intends to sell for strategic purposes.

 

       

Fair value at

December 31,
2024

    

Fair value at

December 31,
2023

  
        (In thousands of Korean won)  
Equity Securities (listed stocks)   ₩     71,941       93,219  

 

37

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Financial assets at
amortized cost		     Financial assets at fair
value through profit or loss		     Total  
        (In thousands of Korean won)  
Interest income   ₩     46,885       -       46,885  
Gain or loss on foreign currency transactions         253       -       253  
Gain or loss on valuation of long-term investment securities         -       (20,017 )     (20,017 )
Dividend income         -       1,256       1,256  
Total   ₩     47,138       (18,761 )     28,377  

 

        2023  
        Financial assets at
amortized cost		     Financial assets at fair
value through profit or loss		     Total  
        (In thousands of Korean won)  
Interest income   ₩     65,979       -       65,979  
Gain or loss on foreign currency transactions         (93 )     -       (93 )
Gain or loss on valuation of long-term investment securities         -       19,576       19,576  
Dividend income         -       1,121       1,121  
Total   ₩     65,886       20,697       86,583  

 

38

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

17. Capital and reserves

 

A. Share capital and share premium

 

Details of share capital and share premium as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In Korean won and number of shares)  
Number of authorized shares         40,000       40,000  
Value per share   ₩     1,000       1,000  
Number of shares issued         10,000       10,000  
Common shares   ₩     10,000,000       10,000,000  

 

B. Other components of equity

 

        December 31,
2024		     December 31,
2023		  
        (In Korean won and number of shares)  
Remeasurements of defined benefit liability   ₩     (51,945 )     (81,522 )

 

18. Capital management

 

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors capital using a ratio of ‘net debt’ to ‘total equity’. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Company’s net debt to adjusted equity ratio as of December 31, 2024 and 2023 is as follows.

 

        December 31,
2024		     December 31,
2023		  
        (In Korean won and number of shares)  
Total liabilities   ₩     263,489       392,278  
Less: Cash and cash equivalents         (344,537 )     (659,606 )
Net debt   ₩     (81,048 )     (267,328 )
Total equity         826,387       1,103,685  
Net debt to total equity ratio         -       -  

 

39

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

19. Borrowings

 

Borrowings as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current Liabilities                    
Current portion of long-term borrowings, net   ₩     -       100,000  
Total         -       100,000  

 

A. Terms and repayment schedule

 

The terms and conditions of outstanding borrowings as of December 31, 2024 and 2023 are as follows:

 

                        December 31, 2024     December 31, 2023  
                        (In thousands of Korean won)  
    Currency    

Nominal

interest rate

     Maturity       Face value     Carrying amount     Face value     Carrying amount  
Unsecured borrowings   KRW     -     30-Sep-24         -       -       100,000       100,000  

 

40

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

20. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Other payable   ₩     19,112       19,119  

 

21. Financial Instruments – Fair values and risk management

 

A. Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

As of December 31, 2024       Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                            
Long-term investment securities   ₩     71,941       71,941       -       -       71,941  

 

As of December 31, 2023       Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                            
Long-term investment securities   ₩     93,219       93,219       -       -       93,219  

 

41

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

B. Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

● Level 1: quoted prices (unadjusted) in active markets for identical asset or liability.

 

● Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability.

 

● Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of Company-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

The valuation techniques used to measure the fair value of a financial instrument include:

 

● Market price or dealer price of a similar financial instrument

 

● The fair value of derivative instruments is determined by discounting the amount to present value using the leading exchange rate as of the end of the reporting period.

 

C. Financial risk management

 

The Company’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which the Company’s risk management program focuses on minimizing any adverse effects on its financial performance. The Company operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i. Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. In order to manage credit risk, the Company regularly evaluate the credit worthiness of each customer or counterparty considering the party’s financial information, past experience, its own trading records and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss(“ECL”) in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

42

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

The maximum exposure to credit risk of the Company as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Cash and cash equivalents   ₩     344,537       659,606  
Accounts receivable, net         18,449       30  
Other non-current financial assets         431,827       385,494  
Total   ₩     794,813       1,045,130  

 

Cash and cash equivalents and short-term financial instruments are deposited in financial institutions with strong credit rating.

 

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company has established a credit policy under which each new customer is analyzed individually before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

 

The Company monitors customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trading history with the Company and existence of previous financial difficulties. The Company does not require collateral in respect of trade and other receivables.

 

Expected credit losses (ECLs) and credit risk exposures for Accounts receivable as of December 31, 2024 and 2023 are as follows:

 

① Accounts receivable — trade

 

As of December 31, 2024  

Expected

loss rate

        

Carrying

amount

    

Loss

allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     18,449       -  
More than 1 year     100.00 %         -       -  
Total           ₩     18,449       -  

 

② Other receivables

 

As of December 31, 2024  

Expected

loss rate

        

Carrying

amount

    

Loss

allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     431,827       -  
More than 1 year     100.00 %         -       -  
Total           ₩     431,827       -  

 

As of December 31, 2023  

Expected

loss rate

        

Carrying

amount

    

Loss

allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     385,524       -  
More than 1 year     100.00 %         -       -  
Total           ₩     385,524       -  

 

43

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

ii. Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions. Financial liabilities of the Company by maturity according to the remaining period from December 31, 2024 to the contractual maturity date are as follows:

 

        December 31, 2024  
       

Carrying

Amount

    

Less than

3 months

    

3 months

~ 1 year

     1~2 years     2~5 years    

More than

5 years

     Total  
        (In thousands of Korean won)  
Non-derivative financial liabilities                                                            
Other payable (*)   ₩     19,112       19,112       -       -       -       -       19,112  

 

 
(*) Other payable excludes non-financial liabilities.

 

Financial liabilities of the Company by maturity according to the remaining period from December 31, 2023 to the contractual maturity date are as follows:

 

        December 31, 2023  
       

Carrying

Amount

    

Less than

3 months

    

3 months

~ 1 year

     1~2 years     2~5 years    

More than

5 years

     Total  
        (In thousands of Korean won)  
Non-derivative financial liabilities                                                            
Other payable (*)   ₩     19,119       19,119       -       -       -       -       19,119  
Current portion of long-term borrowings, net         100,000       -       100,000       -       -       -       100,000  
Total   ₩     119,119       19,119       100,000       -       -       -       119,119  

 

 
(*) Other payable excludes non-financial liabilities.

 

44

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

iii. Market risk

 

(a) Foreign exchange risk

 

The Company is exposed to foreign exchange risk arising from cash equivalents primarily with respect to the US Dollar. Financial assets are exposed to foreign currency risk as of December 31, 2024 and 2023 are as follows:

 

    December 31, 2024
    (In U.S. Dollars)       (In thousands of Korean won)
    Assets in U.S. Dollars     Liabilities in U.S. Dollars       Assets in Korean Won     Liabilities in Korean Won  
$     4.69       -   ₩     7       -  

 

    December 31, 2023
    (In U.S. Dollars)       (In thousands of Korean won)
    Assets in U.S. Dollars     Liabilities in U.S. Dollars       Assets in Korean Won     Liabilities in Korean Won  
$     10,616       -   ₩     13,689       -  

 

The Company measures foreign exchange risk as a 10% fluctuation in the exchange rate of each foreign currency, which reflects the management’s assessment of the risk of exchange rate fluctuation that can be reasonably occur. The impact of a 10% fluctuation in foreign currency exchange rates on the Company’s profit or loss (before income tax effects) for the years ended December 31, 2024 and 2023 are as follows:

 

    2024     2023  
    Increased by 10%     Decreased by 10%     Decreased by 10%     Decreased by 10%  
    (In thousands of Korean won)  
USD     1       (1 )     1,369       (1,369 )

 

The sensitivity analysis is based on monetary assets and liabilities denominated in foreign currencies other than the functional currency as of the end of the reporting period.

 

45

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

(b) Price risk

 

The Company’s marketable available-for-sale equity securities are susceptible to market price risk arising from the fluctuation in the price of the securities. The following table demonstrates the sensitivity analysis of a 10% change in the price of marketable equity securities on the Company’s statements of comprehensive income (before income tax effects) as of December 31, 2024 and 2023.

 

        December 31, 2024     December 31, 2023  
        (In thousands of Korean won)  
        Increased by 10%     Decreased by 10%     Increased by 10%     Decreased by 10%  
Gain (loss) on valuation of financial assets at fair value through profit or loss   ₩     7,194       (7,194 )     9,322       (9,322 )

 

22. Leases

 

A. Leases as lessee

 

The Company leases building. The leases typically run for a period of 5 years with an option to renew or terminate the lease after that date.

 

Information about leases for which the Company is a lessee is presented below.

 

i. Right-of-use assets

 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment.

 

Details of right-of-use assets and lease liabilities recognized in the statements of financial position as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Building)                    
Acquisition price   ₩     259,838       259,838  
Accumulated depreciation         (109,242 )     (57,276 )
Net book value   ₩     150,596       202,562  

 

46

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Changes in right-of-use assets for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Beginning balance   ₩     202,562       254,529  
Depreciation         (51,966 )     (51,967 )
Ending balance   ₩     150,596       202,562  

 

ii. Extension options

 

Some property leases contain extension options exercisable by the Company. Where practicable, the Company seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Company and not by the lessors. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

 

47

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

23. Statement of Cash flows

 

Adjustments for income and expenses from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Depreciation   ₩     80,163       76,459  
Impairment of prepayment         30,000       -  
Gains on valuation of long-term investment securities         (3,750 )     (20,739 )
Losses on valuation of long-term investment securities         23,767       1,163  
Gains on foreign currency translation         (428 )     (13 )
Interest income         (46,885 )     (65,979 )
Severance benefits         20,595       14,217  
Dividend income         (1,256 )     (1,121 )
Tax benefit (expenses)         7,576       (14,612 )
Total   ₩     109,782       (10,625 )

 

Changes in assets and liabilities from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Other current non-financial liabilities   ₩     (17,113 )     115,433  
Other current assets         (84 )     26,724  
Trade and other payables         (7 )     (959 )
Accounts receivable         (18,449 )     213,419  
Value added tax payable         1,267       -  
Value added tax receivable         385       6,806  
Contract liabilities         -       (90,000 )
Total   ₩     (34,001 )     271,423  

 

Significant non-cash transactions for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Reclassification of long-term borrowings   ₩     -       100,000  

 

48

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

The movements of liabilities to cash flows arising from financing activities for the years ended December 31, 2024 and 2023 are as follows:

 

        Current portion of
long-term
borrowings, net		     Long-term
borrowings,
excluding current
portion, net		     Total  
Balance at 1 January 2023   ₩     82,900       100,000       182,900  
Changes from financing cash flows                            
Repayment of borrowings         (82,900 )     -       (82,900 )
Reclassification         100,000       (100,000 )     -  
Total   ₩     17,100       (100,000 )     (82,900 )
Balance at 31 December 2023   ₩     100,000       -       100,000  
Balance at 1 January 2024         100,000       -       100,000  
Changes from financing cash flows                            
Repayment of borrowings         (100,000 )     -       (100,000 )
Total   ₩     (100,000 )     -       (100,000 )
Balance at 31 December 2024   ₩     -       -       -  

 

49

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

24. Related parties

 

A. List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   Entity
Key management personnel   Jung, Byung Shik
Key management personnel   Jung, Byung Gil
Other related parties   Jung, Moon Young
Other related parties   Dominico Inc.

 

B. Transactions with related parties

 

Details of transaction with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

            2024     2023  
Related party   Name       Interest income     Interest income  
            (In thousands of Korean won)  
Other related parties   Jung, Moon Young   ₩     46,334       41,362  

 

C. Account balances with related parties

 

The balances of receivables and payables to related parties as of December 31, 2024 and 2023 are as follows:

 

            December 31, 2024     December 31, 2023  
Related party   Name of entity       Receivables    

Other current

non-financial

liabilities

(*1)

 Receivables     Borrowings    

Other current

non-financial

liabilities

(*1)
            (In thousands of Korean won)  

Key management personnel

 Jung, Byung Gil   ₩     -       70,000       -       100,000       83,905  

Key management personnel

 Jung, Byung Shik         -       45,000       -       -       45,000  
Other related parties  

Jung, Moon Young (*2)

       600,000       -       600,000       -       -  
Total   ₩     600,000       115,000       600,000       100,000       128,905  

 

 
(*1) The company has entered into a service contract with the key management personnels and an unrelated film production company for the provision of services. Pursuant to this agreement, the key management personnels undertakes the provision of services while the Company acts in the capacity of an agency. The company received the service contract amount from an unrelated film production company in the previous year and paid 13,905 thousand Korean won to the key management during the current period. As of December 31, 2024 and 2023, the outstanding amount payable to the key management personnels is related to this contract. In connection with this contract, the Company has neither recognized revenue from the received amount nor incurred expenses.
(*2) This is the amount excluding the present value discount of 168,173 in thousands of Korean won (prior year: 214,506 in thousands of Korean won) for the lease deposit.

 

50

 

 

APEITDA CO., LTD.

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

D. Financial transactions with related parties

 

Details of significant financial transactions with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

            2024     2023  
Related party   Name       Repayment of borrowings     Repayment of borrowings  
            (In thousands of Korean won)  
Key management personnel   Jung, Byung Gil   ₩     100,000       82,900  
Total   ₩     100,000       82,900  

 

E. Key management personnel compensation

 

The compensation for the key management personnel for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Short-term employee benefits   ₩     124,800       111,300  
Post-employment benefits         20,595       13,685  
Total   ₩     145,395       124,985  

 

Compensation of the Company’s key management personnel includes salaries, non-cash benefits and contributions to a defined benefit plan.

 

25. Commitments

 

On September 14, 2023, an amendment was made to the equity interest exchange agreement, originally entered into on April 9, 2023, between the CEO, who is the dominant shareholder of the Company, and K Enter Holdings, Inc. for the purpose of listing on the NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective on the date designated by K Enter Holdings, Inc. Upon the approval, the CEO of the Company will exchange 5,100 shares with the equity interest of K Enter Holdings, Inc. Following the equity interest exchange transaction, the Company is expected to be a subsidiary of K Enter Holdings, Inc.

 

26. Subsequent event

 

On January 2, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including Apeitda Co., Ltd., through a share exchange. Upon the approval, the CEO of the Company exchanged 5,100 shares with the equity interest of K Enter Holdings, Inc. Following the equity interest exchange transaction, the Company become a subsidiary of K Enter Holdings, Inc.

 

51

 

Exhibit 15.18

 

THE LAMP CO., LTD.

 

STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

    Note       December 31,
2024		     December 31,
2023		  
            (In thousands of Korean won)  
Assets                        
Cash and cash equivalents   14,16,18,22,25   ₩     863,927       1,919,916  
Accounts receivable — trade, net   7,13,16,22         90,537       196,380  
- Related parties   26         20,000       20,000  
- Non-related parties             70,537       176,380  
Accounts receivable — other, net   13,16,22         95,124       7,287  
- Related parties   26         1,357       897  
- Non-related parties             93,767       6,390  
Other current assets   12         1,281,695       2,270,255  
Contract assets   7         614,023       158,697  
Total current assets             2,945,306       4,552,535  
Long-term loans, net   16,19,22         130,056       130,087  
- Related parties   26         130,056       130,087  
- Non-related parties             -       -  
Long-term investments   9,16,22         800,000       800,000  
- Related parties   26         800,000       800,000  
- Non-related parties             -       -  
Property and equipment including right-of-use assets   15,23         159,539       374,000  
Other non-current financial assets   16,22         39,080       147,406  
Other non-current non-financial assets   12         1,375,087       1,394,586  
Long-term accounts receivable – other, net   13,16,22         45,899       -  
Deferred tax assets   11         45,845       166,846  
Total non-current assets             2,595,506       3,012,925  
Total assets       ₩     5,540,812       7,565,460  
Liabilities                        
Trade and other payables   16,20,22   ₩     2,037,596       1,999,967  
- Related parties             1,184,828       1,138,798  
- Non-related parties             852,768       861,169  
Other current non-financial liability             53,296       69,553  
Contract liability   7         355,594       2,210,942  
Short-term borrowings   16,19,22         1,445,453       1,505,000  
Current lease liability   19,22,23         80,165       62,797  
Current tax liability   11         14,915       61,453  
Financial guarantee liability   16,22,26         2,573       -  
- Related parties             2,573       -  
- Non-related parties             -       -  
Total current liabilities             3,989,592       5,909,712  
Defined benefit liability   10         255,006       258,999  
Non-current contract liability   7         900,000       900,000  
Other non-current provisions   21         4,924       3,471  
Non-current lease liability   19,22,23         65,483       267,583  
Total non-current liabilities             1,225,413       1,430,053  
Total liabilities       ₩     5,215,005       7,339,765  
Equity                        
Share capital   17         78       78  
Other reserves   17         (585,468 )     (585,468 )
Retained earnings             911,197       811,085  
Total equity             325,807       225,695  
Total liabilities and equity       ₩     5,540,812       7,565,460  

 

The accompanying notes are an integral part of these financial statements.

 

1

 

 

THE LAMP CO., LTD.

 

STATEMENTS OF COMPREHENSIVE INCOME

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won)  
Revenues                        
Media production revenue   6,7   ₩     16,336,027       20,836,856  
- Related parties   26         254,615       432,411  
- Non-related parties             16,081,412       20,404,445  
Cost of revenues   8         (15,023,554 )     (19,509,364 )
Gross profit             1,312,473       1,327,492  
Selling, general and administrative expenses   8         (948,282 )     (729,875 )
Other income   8         194,401       89,285  
Other expenses   8         (285,162 )     (109,479 )
Operating Profit             273,430       577,423  
Finance income   9,16         22,690       48,640  
- Related parties   26         428       430  
- Non-related parties             22,262       48,210  
Finance costs   9,16,22         (136,554 )     (107,583 )
- Related parties   26         (52,283 )     (57,521 )
- Non-related parties             (84,270 )     (50,062 )
Profit before income tax             159,566       518,480  
Income tax benefit(expenses)   11         (92,089 )     18,799  
Income for the year       ₩     67,477       537,279  
Other comprehensive income(loss)                        
Items that will not be reclassified to income or loss:                        
Remeasurement of defined benefit liabilities   10,17         32,635       (61,004 )
Total comprehensive income for the year       ₩     100,112       476,275  

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

THE LAMP CO., LTD.

 

STATEMENTS OF CHANGES IN EQUITY

 

For the Years Ended December 31, 2024 and 2023

 

    Note       Net parent investment     Share capital    

Other

reserves

    

Retained

earnings

     Total  
            (In thousands of Korean won)  
Balance at January 1, 2023       ₩     1,874,660       -       -       -       1,874,660  
Total comprehensive income (loss) for the year                                                
Income (loss) for the year             (334,810 )     -       -       872,089       537,279  
Remeasurement of defined benefit liabilities   17         -       -       -       (61,004 )     (61,004 )
Total comprehensive income (loss) for the year             (334,810 )     -       -       811,085       476,275  
Transaction directly recognized in equity             　       　       　       　       　  
Capital distribution to the Parent company             (2,125,240 )     -       -       -       (2,125,240 )
Capital re-organization             585,390       78       (585,468 )     -       -  
Balance at December 31, 2023       ₩     -       78       (585,468 )     811,085       225,694  
Balance at January 1, 2024       ₩     -       78       (585,468 )     811,085       225,695  
Total comprehensive income (loss) for the year                                                
Income (loss) for the year             -       -       -       67,477       67,477  
Remeasurement of defined benefit liabilities   17         -       -       -       32,635       32,635  
Total comprehensive income (loss) for the year             -       -       -       100,112       100,112  
Balance at December 31, 2024       ₩     -       78       (585,468 )     911,197       325,807  

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

THE LAMP CO., LTD.

 

STATEMENTS OF CASH FLOWS

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won)  
Cash flows from operating activities   25                    
Net income(loss)       ₩     67,477       537,279  
Adjustments to reconcile net loss to net cash provided by(used in) operating activities             (969,063 )     398,172  
Interest received             4,802       1,995  
Interest paid             (84,501 )     (48,130 )
Income taxes paid             (27,924 )     (13,770 )
Net cash inflow(outflow) from operating activities       ₩     (1,009,209 )     875,546  
Cash flows from investing activities                      
Payments for long-term loans       ₩     -       (20,000 )
- Related parties   26         -       (20,000 )
- Non-related parties             -       -  
Payments for other financial assets             (22,285 )     (64,730 )
Proceeds from other financial assets             138,505       13,410  
Disposal of long-term investments             5,094       336,246  
Purchase of property and equipment             (17,846 )     (40,000 )
Net cash inflow(outflow) from investing activities       ₩     103,468       224,926  
Cash flows from financing activities   25                    
Proceeds from short-term borrowings       ₩     883,302       1,000,000  
Repayments of short-term borrowings             (942,850 )     (15,000 )
Capital contribution(distribution) from(to) Parent company             -       (1,043,963 )
Repayment of lease liability             (90,700 )     (64,547 )
Net cash inflow(outflow) from financing activities       ₩     (150,248 )     (123,510 )
Net increase(decrease) in cash and cash equivalents             (1,055,989 )     976,962  
Cash and cash equivalents at beginning of the year   14         1,919,916       942,954  
Cash and cash equivalents at end of the year   14   ₩     863,927       1,919,916  

 

The accompanying notes are an integral part of these financial statements.

 

4

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

1. Reporting entity

 

The LAMP Co., Ltd. (formerly, The LAMP Pictures Co., Ltd.)

 

On February 15, 2023, Pluto Co., Ltd. (formerly, The LAMP Co., Ltd.) (“Pluto” or “Parent”) announced the proposed plan (“the Separation Proposal”) to establish a new company, The LAMP Co., Ltd. (formerly, The LAMP Pictures Co., Ltd.) (the “Company”) through a spin-off of its media production business. Before the spin-off, Pluto produced television programs and feature films including “Commitment”, “Three Summer Night”, “Love, Lies”, “Taxi Driver”, “Samjin Company English Class”, “Life is beautiful”, and “Phantom”. Following the spin-off, the Company primarily engaged in the business of media production for theatrical films and television programs, and the surviving split, Pluto, continued to engage in the remaining investment properties leasing business. The Company was separated from the remaining businesses of Pluto through the spin-off that resulted in the transfer of the media production business. The spin-off will permit the Company to strengthen competitiveness and concentrate its financial resources solely on its own operations in media content production industry and increase transparency in governance and stability in management.

 

In accordance with the Separation Proposal, the Company’s common shares were distributed pro rata to the shareholders of Pluto. On March 31, 2023, the date of spin-off, the spin-off of media production business was completed. The Company’s registered office is at 35 Dosan-daero 26 gil, Gangnam-gu, Seoul, Korea. Park Un Kyoung, the CEO of the Company, holds 100% of ownership of the Company as of December 31, 2024 and 2023.

 

2. Basis of Accounting

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These financial statements were authorized for issuance by the Board of Directors on May 14, 2025.

 

These financial statements are presented in a combined basis whereby combining the Pluto’s standalone financial statements using historical results of operation, cashflows and assets and liabilities attributable to the media production division before the spin-off as at March 31, 2023 with the Company’s financial statements after the spin-off as at March 31, 2023. The Company accounts the spin-off as a capital re-organization. On the basis that there is no substantive economic change, the Company incorporated the assets and liabilities of the Pluto at their pre-transaction carrying amounts.

 

Details of the Company’s accounting policies, including changes thereto, are included in Note 5.

 

5

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Basis of measurement

 

The financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement basis
Defined benefit liability   Present value
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value

 

3. Functional and presentation currency

 

These financial statements are presented in Korean Won, which the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these financial statements, management has made judgements and estimates that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

A. Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements is included in the following notes:

 

Note 5(C): revenue recognition: whether revenue from providing service is recognized over time or at a point in time and the methods used to recognize revenue;

 

Note 23(A): lease term: whether the Company is reasonably certain to exercise extension options.

 

6

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

B. Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

● Note 10(C) (i): measurement of defined benefit obligations: key actuarial assumptions;

 

● Note 11(E): uncertain tax treatments;

 

i. Measurement of fair values

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values for financial assets.

 

When measuring the fair value of a financial instruments, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

● Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

● Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following notes:

 

● Note 22(B): financial instruments.

 

7

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

5. Material accounting policies

 

The material accounting policies followed by the Company in preparation of its financial statements are as follows:

 

A. New and amended standards or interpretations adopted by the Company

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Non-current Liabilities with Covenants

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. Covenants that the entity must comply with after the end of the reporting period do not affect the classification of a liability at the end of the reporting period. However, if a liability is classified as non-current as of the end of the reporting period despite covenants that must be complied with within 12 months after that date, the entity shall disclose information about the risk that the liability could become repayable within 12 months after the reporting period. The amendments do not have a significant impact on the financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

B. New and amended standards or interpretations not yet adopted by the Company

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Company.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Company does not expect that these amendments have a significant impact on the Company’s financial statements.

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI.

 

The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Company does not expect that these amendments have a significant impact on the financial statements.

 

8

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

- IFRS 1 First-time adoption of International Financial Reporting Standards;

 

- IFRS 7 Financial instruments: Disclosures;

 

- IFRS 9 Financial instruments;

 

- IFRS 10 Consolidated financial instruments; and

 

- IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Company to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

C. Revenue from contracts with customers

 

The Company generates revenue primarily through providing the media production service.

 

The Company determines revenue recognition by:

 

● identifying the contract, or contracts, with a customer;

 

● identifying the performance obligations in each contract;

 

● determining the transaction price;

 

● allocating the transaction price to the performance obligations in each contract; and

 

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

 

9

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Media production revenue

 

The Company operates the media production business that consists of planning, producing, and selling the theatrical films and television programs. The Company identifies the license which is provided along with media product as combined output and recognizes revenue over time by measuring its progress based on cost incurred towards complete satisfaction of the performance obligation of media production in accordance with Paragraph 35 (3) of IFRS 15 Revenue from contracts with customers. The percentage-of-completion for each contract is calculated by dividing the cumulative cost incurred in relation to service performed by the Company by estimated total contract costs. The Company is also eligible to receive its share of profits from film distributors once the film generates profits beyond the break-even point, which is considered as variable consideration and recognized as the revenue on the settlement date.

 

The Company recognizes unbilled receivables from media production service as contract assets and recognizes receipts in advance for prepaid media production services as contract liabilities. The Company capitalizes the cost associated with the production, including development costs, direct costs, and production overhead per title as prepayments and prepaid expenses. The Company amortizes the capitalized asset in ‘Cost of revenues’ on the combined statements of comprehensive income based on the percentage-of-completion for each contract.

 

D. Operating segments

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The Company has one reportable segment, for which it generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

 

E. Common control transactions

 

The Company accounts the Spin-off as a capital re-organization. On the basis that there is no substantive economic change, the Company incorporates the assets and liabilities of the Pluto at their pre-transaction carrying amounts.

 

F. Employee benefits

 

i. Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

 

ii. Defined benefit plans

 

The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

10

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

G. Finance income and finance costs

 

The Company’s finance income and finance costs include:

 

● interest income;

 

● interest expense;

 

● dividend income;

 

● the net gain or loss on settlement and/or impairment of project investments;

 

● the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

● the gross carrying amount of the financial asset; or

 

● the amortized cost of the financial liability.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

H. Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i. Current tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

● Has a legally enforceable right to set off the recognized amounts; and

 

● Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

ii. Deferred tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

● temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

● temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

● taxable temporary differences arising on the initial recognition of goodwill.

 

11

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans of the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

● Has a legally enforceable right to set off the recognized amounts; and

 

● Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

I. Cash and Cash Equivalents

 

Cash and cash equivalents comprise cash on hand, deposits held at banks, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

J. Property and equipment

 

i. Recognition and measurement

 

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

 

Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss.

 

ii. Subsequent expenditure

 

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company. The carrying amount of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred.

 

iii. Depreciation

 

Depreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognized in profit or loss. Land is not depreciated.

 

The estimated useful lives of property and equipment for current and comparative periods are as follows:

 

Office equipment   5 years
Furniture and fixtures   5 years
Right-of-use assets   5 – 10 years

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

12

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

K. Financial instruments

 

i. Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

ii. Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

● amortized cost;

 

● FVOCI - debt investment;

 

● FVOCI - equity investment;

 

● or FVTPL.

 

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

● it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

● it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

13

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Financial assets - Business model assessment

 

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

● the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

● how the performance of the portfolio is evaluated and reported to the Company’s management;

 

● the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

● how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

● the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

 

● contingent events that would change the amount or timing of cash flows;

 

● terms that may adjust the contractual coupon rate, including variable-rate features;

 

● prepayment and extension features; and

 

● terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

14

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

iii. Derecognition

 

Financial assets

 

The Company derecognizes a financial asset when:

 

● the contractual rights to the cash flows from the financial asset expire; or

 

● it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

- substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

- the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Company enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

Financial liabilities

 

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.

 

15

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

L. Impairment

 

i. Non- derivative financial assets

 

Financial instruments and contract assets

 

The Company recognizes loss allowances for ECLs on:

 

● financial assets measured at amortized cost; and

 

● contract assets and financial guarantee contracts

 

The Company also recognizes loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables.

 

The Company measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

● debt securities that are determined to have low credit risk at the reporting date; and

 

● other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and informed credit assessment, that includes forward-looking information.

 

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

 

The Company considers a financial asset to be in default when:

 

● the debtor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held); or

 

● the financial asset is more than 90 days past due.

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

 

ECLs are discounted at the effective interest rate of the financial asset.

 

Credit-impaired financial assets

 

At each reporting date, the Company assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

16

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

● significant financial difficulty of the debtor;

 

● a breach of contract such as a default or being more than 90 days past due;

 

● the restructuring of a loan or advance by the Company on terms that the Company would not consider otherwise;

 

● it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

● the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Company has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

 

ii. Non- financial assets

 

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, developing contents, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

M. Leases

 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

17

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

i. As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

● fixed payments, including in-substance fixed payments;

 

● variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

● amounts expected to be payable under a residual value guarantee; and

 

● the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

At the date of transition to IFRSs, the Company applies the following approach to all of its leases.

 

The Company measures that lease liability at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

The Company measures right-of-use asset at its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

The Company uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date). The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

18

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

N. Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Company uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Company determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

O. Concentration of Credit Risk

 

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit losses, which are periodically reviewed.

 

6. Operating segments

 

A. Basis for segmentation

 

The Company’s operating segments have been identified to be a single unit, by which the Company provides the services for media production.

 

The following summary describes the operations of each reportable segment.

 

Reportable segments   Operations
Media Production   Media production revenue

 

B. Information about reportable segments

 

        2024     2023  
        (In thousands of Korean won)  
Segment revenue   ₩     16,336,027       20,836,856  
Depreciation/Amortization         (109,094 )     (77,808 )
Segment operating profit (loss)         273,430       577,423  

 

19

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Geographic information

 

Media production is managed and operated in Seoul, Korea. The geographic information analyses the Company’s revenue by the Company’s country of domicile and other countries. In presenting the geographic information, segment revenue has been based on the geographic location of customers.

 

Summary of the Company’s operation by region based on the location of customers for the years ended December 31, 2024 and 2023 is as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Korea   ₩     16,336,027       20,836,856  

 

Summary of the Company’s non-current assets based on the location as of December 31, 2024 and 2023 is as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Korea   ₩     1,534,626       1,768,586  

 

D. Major customer

 

Revenues by major customers for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Customer A (Media production segment)         　       　  
Revenue   ₩     9,649,408       10,938,655  
%         59 %     52 %
Customer B (Media production segment)                    
Revenue   ₩     5,135,473       -  
%         31 %     0 %
Customer C (Media production segment)         　       　  
Revenue   ₩     421,035       8,274,728  
%         3 %     40 %
Total   ₩     15,205,916       19,213,383  

 

20

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

7. Revenue

 

A. Revenue streams

 

The Company generates revenue primarily through providing the services for production of feature films for initial exhibition in theaters and production of television programs to third parties for internal television and streaming services.

 

Revenue from contracts with customers for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Revenue from contracts with customers   ₩     16,336,027       20,836,856  

 

B. Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Company’s reportable segment. (see Note 6)

 

Revenue from contracts with customers based on the service contract type and the timing of satisfaction of performance obligations for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Major products/service lines                    
Media production   ₩     16,336,027       20,836,856  
Timing of revenue recognition         　       　  
Over time   ₩     16,336,027       20,836,856  

 

C. Contract balance

 

The balance of accounts receivables and contract liability from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current                    
Accounts receivable — trade, net   ₩     90,537       196,380  
Contract asset (Unbilled receivables)         614,023       158,697  
Contract liability (Deferred revenue)         355,594       2,210,942  
Non-current         　       　  
Contract liability (Deferred revenue)   ₩     900,000       900,000  

 

The contract liability primarily relate to the advance consideration received from customers for media production service, for which revenue is recognized over time. This will be recognized as revenue when the Company satisfies the performance obligations.

 

The amount of Korean Won 2,150,034 thousand included in contract liability as of December 31, 2023 has been recognized as revenue in 2024. (2023: Korean Won 1,306,160 thousand)

 

21

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

8. Income and Expenses

 

A. Other income

 

Details of other income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Gain on disposal of right-of-use assets         14,767       -  
Reversal of bad debt expenses (*1)         179,533       -  
Grants for film production   ₩     -       66,300  
Miscellaneous income         101       22,985  
Total   ₩     194,401       89,285  

 

 
(*1) A portion of the balance recognized under Other non-current non-financial assets was previously subject to an allowance for doubtful accounts. During the reporting period, certain amounts were recovered and the corresponding allowance was reversed. The reversal was recognized as other income.

 

B. Other expenses

 

Details of other expenses for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Other bad debt expenses   ₩     242,000       105,000  
Donations         2,500       -  
Loss on retirement of Property and equipment         39,615       -  
Miscellaneous expenses         1,047       4,479  
Total   ₩     285,162       109,479  

 

C. Expenses by nature

 

Details of classification of expenses by nature for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Outsourcing Fee   ₩     10,922,033       13,985,841  
Employee benefits         1,176,699       1,372,480  
Depreciation         109,094       77,809  
Commission paid         119,051       63,236  
Transportation         986,843       917,159  
Rent         1,950,254       2,436,273  
Supplies         585,700       1,271,958  
Other expenses         122,162       114,483  
Total   ₩     15,971,836       20,239,239  

 

Total expenses consist of cost of sales and selling, general and administrative expenses.

 

22

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

9. Finance income and costs

 

Details of finance income and costs for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean Won)  
Finance income                    
Reversal of loss on valuation of long-term investments   ₩     3,897       39,355  
Gain on project settlements         3,165       3,999  
Interest income         15,628       5,286  
Total   ₩     22,690       48,640  
Finance costs         　       　  
Interest expenses   ₩     133,981       107,583  
Financial guarantee expense         2,573       -  
Total   ₩     136,554       107,583  

 

23

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

10. Employee benefits

 

Details of defined benefit liability recognized as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean Won)  
Defined benefit liability   ₩     255,006       258,999  

 

The Company operates defined benefit plans as a retirement pension scheme. Defined benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk.

 

A. Movement in net defined benefit (asset) liability

 

Details of reconciliation from the opening balances to the closing balances for the net defined benefit liability and its components as of December 31, 2024 and 2023 is as follows:

 

        Defined benefit obligation     Fair value of plan assets     Net defined benefit liability  
        2024     2023     2024     2023     2024     2023  
        (In thousands of Korean won)  
Balance at January 1   ₩     258,999       156,092       -       -       258,999       156,092  
Included in profit or loss                                                    
Current service cost         28,464       20,542       -       -       28,464       20,542  
Past service credit         -       -       -       -       -       -  
Interest cost         10,473       7,948       -       -       10,473       7,948  
Subtotal         38,937       28,490       -       -       38,937       28,490  
Included in OCI                                                    
Remeasurement loss(gain)                                                    
Demographic assumption         (162 )     -       -       -       (162 )     -  
Financial assumption         22,719       17,816       -       -       22,719       17,816  
Adjustment based on experience         (65,487 )     56,601       -       -       (65,487 )     56,601  
Return on plan assets excluding interest income         -       -       -       -       -       -  
Subtotal         (42,930 )     74,417       -       -       (42,930 )     74,417  
Other                                                    
Benefits paid         -       -       -       -       -       -  
Subtotal         -       -       -       -       -       -  
Balance at December 31   ₩     255,006       258,999       -       -       255,006       258,999  

 

B. Plan assets

 

There are no contributions funded to its defined benefit plans as of December 31, 2024 and 2023.

 

24

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Defined benefit obligation

 

i. Actuarial assumptions

 

Details of actuarial assumptions used for the years ended December 31, 2024 and 2023 are as follows:

 

    2024     2023  
Discount rate   3.50%     4.20%  
Future salary growth   5.52~8.44%     6.10~8.20%  

 

Assumptions regarding future longevity have been based on published statistics and mortality tables.

 

As of December 31, 2024 and 2023, the weighted average duration of the defined benefit obligation was 6.7 years and 6.7 years, respectively.

 

ii. Sensitivity analysis

 

The Company measures the risk of actuarial assumption changes as a 1% fluctuation in the discount rate and future salary growth rate of the amounts of defined benefit obligation, which reflects the management’s assessment of the risk of actuarial assumption fluctuation that can be reasonably occur. The impact of a 1% fluctuation in discount rates and future salary growth rates on the Company’s defined benefit obligation as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        Increased by 1%     Decreased by 1%     Increased by 1%     Decreased by 1%  
        (In thousands of Korean won)  
Discount rate   ₩     (16,161 )     18,210       (16,283 )     18,227  
Future salary growth         18,015       (16,300 )     18,158       (16,524 )

 

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

 

D. Employee benefit expenses

 

i. Details of employee benefit expenses recognized for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Wages and salaries   ₩     1,035,401       1,257,852  
Fringe benefit         102,361       86,139  
Expenses related to post-employment defined benefit plans         38,937       28,490  
Total   ₩     1,176,699       1,372,481  

 

ii. Expenses are recognized in the statements of comprehensive income (loss) as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Cost of revenues   ₩     683,857       965,955  
Selling, general and administrative expenses         492,842       406,525  
Total   ₩     1,176,699       1,372,481  

 

25

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

11. Income taxes

 

A. Amounts recognized in profit or loss

 

        2024     2023  
        (In Korean won and number of shares)  
Current tax expenses (benefit)                    
Current year   ₩     -       24,614  
Adjustments recognized related to prior period incomes (*)         (18,616 )     5,563  
          (18,616 )     30,177  
Deferred tax expenses (benefit)         　       　  
Origination and reversal of temporary differences   ₩     121,001       (62,389 )
Deferred taxes charged directly to equity         (10,296 )     13,413  
Income tax expenses (benefit)   ₩     92,089       (18,799 )

 

 
(*) In the normal course of business, the Company is examined by taxation authority. The Company’s management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liability for income taxes.

 

The Company establish additional current tax liability for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liability for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the statements of operations.

 

B. Amounts recognized in OCI

 

        2024     2023  
        Before tax    

Tax (expense)

benefit

    Net of tax     Before tax    

Tax (expense)

benefit

    Net of tax  
        (In thousands of Korean won)  
Items that will not be reclassified to profit or loss                                                    
Remeasurements of defined benefit liability   ₩     42,931       (10,296 )     32,635       (74,418 )     13,413       (61,004 )

 

26

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Reconciliation of effective tax rate

 

        2024     2023  
        (In thousands of Korean won)  
Profit before income tax   ₩     159,566       518,480  
Tax at the statutory income tax rate         15,798       86,362  
Adjustments:         　          
Expenses not deductible for tax purposes         3,526       3,661  
Tax credits         -       (18,110 )
Adjustments recognized related to prior period incomes         (18,616 )     5,563  
Changes in unrecognized deferred tax assets         -       (1,186 )
Change in tax rates         71,689       (102,326 )
Other         19,692       7,237  
Income tax expenses (benefit)   ₩     92,089       (18,799 )
Effective income tax rate (*)         57.7 %     -  

 

 
(*)The effective tax rate is not calculated as the Company recognized tax benefit for the year ended December 31, 2023.

 

D. Movement in deferred tax balances

 

i. Movement in deferred tax balances as of December 31, 2024

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Defined benefit liability   ₩     54,131       (28,885 )     25,246  
Lease liability         69,049       (54,630 )     14,419  
Right-of-use assets         (68,845 )     54,146       (14,699 )
Contract liability         427,192       (380,108 )     47,084  
Contract assets         (48,476 )     (12,312 )     (60,788 )
Prepaid expenses         (409,539 )     289,450       (120,089 )
Prepayments         (98,809 )     77,444       (21,365 )
Other         222,994       (107,428 )     115,566  
Total   ₩     147,697       (162,323 )     (14,626 )
Loss carried forward   ₩     -       41,322       41,322  
Carryover tax credit         19,149       -       19,149  
Deferred tax assets   ₩     166,846       (121,001 )     45,845  

 

27

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

ii. Movement in deferred tax balances as of December 31, 2023

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Defined benefit liability   ₩     15,453       38,678       54,131  
Lease liability         39,098       29,951       69,049  
Right-of-use assets         (39,581 )     (29,264 )     (68,845 )
Contract liability         153,466       273,726       427,192  
Contract assets         (17,837 )     (30,639 )     (48,476 )
Prepaid expenses         (96,550 )     (312,989 )     (409,539 )
Prepayments         (25,474 )     (73,335 )     (98,809 )
Other         63,519       159,475       222,994  
Total   ₩     92,094       55,603       147,697  
Loss carried forward   ₩     -       -       -  
Carryover tax credit         13,549       5,600       19,149  
Unrecognized deferred tax assets         (1,186 )     1,186       -  
Deferred tax assets   ₩     104,457       62,389       166,846  

 

E. Details of unused tax loss carryforwards and unused tax credit carryforwards

 

i. Details of unused tax loss carryforwards and unused tax credit carryforwards as of December 31, 2024 are as follows:

 

Year of expiration       Unused loss
carryforwards		    

Unused tax credit
carryforwards

  
        (In thousands of Korean won)  
2032   ₩     -       10,969  
2033         -       8,180  
2039         417,397       -  
Total   ₩     417,397       19,149  

 

28

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

ii. The timing of recovery of deferred tax assets and liability as of December 31, 2024 and 2023 is as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Deferred tax assets                    
- Deferred tax assets to be recovered after more than 12 months   ₩     150,218       248,080  
- Deferred tax assets to be recovered within 12 months         141,020       579,367  
Sub-total         291,238       827,447  
Deferred tax liability         　       　  
- Deferred tax liability to be recovered after more than 12 months         (166,504 )     (388,154 )
- Deferred tax liability to be recovered within 12 months         (78,889 )     (272,447 )
Sub-total         (245,393 )     (660,601 )
Deferred tax assets (liabilities), net   ₩     45,845       166,846  

 

12. Other assets

 

Details of other assets for the years ended December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current                    
Prepayments   ₩     4,989       5,246  
Prepaid expenses (*1)         1,213,021       1,959,519  
Value added tax receivables         63,685       305,490  
Non-current                    
Non-current prepayments (*2)         1,375,087       1,394,586  
Total   ₩     2,656,782       3,664,841  

 

 
(*1) The amount of Korean Won 1,040,653 thousand included in prepaid expenses as of December 31, 2023 has been recognized as cost of revenues in 2024. (2023: Korean Won 749,552 thousand)
(*2) The Company recognized an impairment loss amounting to Korean Won 242,000 thousand in 2024. (2023: Korean Won 105,000 thousand)

 

29

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

13. Trade and other receivables

 

Details of trade and other receivables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Trade receivable                    
Accounts receivable — Trade   ₩     90,537       196,380  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Other current receivables                    
Accrued income   ₩     3,326       6,325  
Non-trade receivables         91,798       962  
Sub-total         95,124       7,287  
Other non-current receivables                    
Long-term accounts receivable – other, net         45,899       -  
Total   ₩     141,023       7,287  

 

14. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Cash on hand   ₩     8,232       3,214  
Deposits in banks         855,695       1,916,702  
Total   ₩     863,927       1,919,916  

 

The Company doesn’t have any restricted cash and cash equivalents as of December 31, 2024 and 2023.

 

15. Property and equipment

 

A. Reconciliation of carrying amount

 

Details of property and equipment as of December 31, 2024 and 2023 are as follows:

 

        December 31, 2024  
        Book value     Accumulated depreciation     Carrying amount  
        (In thousands of Korean won)  
Office equipment   ₩     32,250       (21,183 )     11,067  
Right-of-use assets         263,210       (114,738 )     148,472  
Total   ₩     295,460       (135,921 )     159,539  

 

30

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

        December 31, 2023  
        Book value     Accumulated depreciation     Carrying amount  
        (In thousands of Korean won)  
Office equipment   ₩     22,304       (16,796 )     5,508  
Furniture and fixtures         52,700       (13,608 )     39,092  
Right-of-use assets         560,795       (231,395 )     329,400  
Total   ₩     635,799       (261,799 )     374,000  

 

Details of the changes in property and equipment for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
       

Office

equipment

    

Furniture

and fixture

     Right-of-Use assets     Total  
        (In thousands of Korean won)  
Beginning balance   ₩     5,508       39,092       329,400       374,000  
Acquisitions         9,947       7,900       119,948       137,795  
Depreciation         (4,388 )     (7,377 )     (97,329 )     (109,094 )
Disposals         -       (39,615 )     (203,547 )     (243,162 )
Ending balance   ₩     11,067       -       148,472       159,539  

 

        2023  
       

Office

equipment

    

Furniture

and fixture

     Right-of-Use assets     Total  
        (In thousands of Korean won)  
Beginning balance   ₩     9,037       2,965       399,806       411,808  
Acquisitions         -       40,000       -       40,000  
Depreciation         (3,529 )     (3,873 )     (70,406 )     (77,808 )
Ending balance   ₩     5,508       39,092       329,400       374,000  

 

The classification of depreciation expenses in the statements of comprehensive income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Selling, general and administrative expenses   ₩     109,094       77,808  

 

B. Leased property and equipment

 

As of December 31, 2024,, the Company leased vehicles and building and recognized right-of-use assets of Korean Won 148,472 thousand. (2023: Korean Won 329,400 thousand)

 

31

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

16. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial assets at amortized cost                    
Cash and cash equivalents   ₩     863,927       1,919,916  
Accounts receivable — trade, net         90,537       196,380  
Accounts receivable — other, net         95,124       7,287  
Long-term loans, net         130,056       130,087  
Long-term accounts receivable – other, net         45,899       -  
Other non-current financial assets         39,080       147,406  
Financial assets at fair value through profit or loss         　       　  
Long-term investments         800,000       800,000  
Total   ₩     2,064,623       3,201,076  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial liability at amortized cost                    
Trade and other payables (*)   ₩     2,037,596       1,995,641  
Short-term borrowings         1,445,453       1,505,000  
Other financial liabilities                    
Financial guarantee liability         2,573       -  
Total   ₩     3,485,622       3,500,641  

 

A. Classification of investment assets

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Non-Current investments                  
Equity investments – at FVTPL (*)   ₩     800,000       800,000  

 

 
(*) Equity investments consist of profit-sharing project investment asset.

 

32

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

B. Project investment designated as at FVTPL

 

The Company designated the investments shown below as equity investments at FVTPL because there is no contractual obligation for repayment and it does not qualify as a cash flow with principal and interest payments.

 

   

Fair value at

December 31,
2024

    

Fair value at

December 31,
2023

  
    (In thousands of Korean won)  
Falling starlight     800,000       800,000  

 

C. Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments as of December 31, 2024 and 2023 are as follows:

 

        2024  
        Financial assets at
amortized cost		     Financial assets at
fair value through
profit or loss		     Financial liabilities at
amortized cost		     Other Financial liabilities     Total  
        (In thousands of Korean won)  
Gain on project settlements   ₩     -       3,165       -       -       3,165  
Interest income         15,628       -       -       -       15,628  
Interest expense         -       -       (124,087 )     -       (124,087 )
Reversal of losses on valuation of long-term investments         -       3,897       -       -       3,897  
Financial guarantee expense         -       -       -       (2,573 )     (2,573 )
Total   ₩     15,628       7,062       (124,087 )     (2,573 )     (103,970 )

 

        2023  
        Financial assets at
amortized cost		     Financial assets at
fair value through
profit or loss		     Financial liabilities at amortized cost     Total  
        (In thousands of Korean won)  
Gain on project settlements   ₩     -       3,999       -       3,999  
Interest income         5,286       -       -       5,286  
Interest expense         -       -       (96,512 )     (96,512 )
Reversal of losses on valuation of long-term investments         -       39,355       -       39,355  
Total   ₩     5,286       43,354       (96,512 )     (47,872 )

 

33

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

17. Capital and reserves

 

A. Share capital

 

Details of share capital as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In Korean won and number of shares)  
Number of authorized shares         4,000       4,000  
Value per share   ₩     1,000       1,000  
Number of shares issued         78       78  
Common shares   ₩     78,000       78,000  

 

i. Ordinary shares

 

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.

 

B. Other reserves

 

        December 31,
2024		    

December 31,

2023

  
        (In thousands of Korean won)  
Other reserves   ₩     (585,468 )     (585,468 )

 

Upon the spin-off, the aggregate net parent investment and accumulated other comprehensive income are reclassified to share capital and other reserves.

 

18. Capital management

 

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Company monitors capital using a ratio of ‘net debt’ to ‘total equity’. Net debt is calculated as total liability (as shown in the statement of financial position) less cash and cash equivalents. The Company’s net debt to total equity ratio as of December 31, 2024 and 2023 is as follows.

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Total liability   ₩     5,215,005       7,339,765  
Less: Cash and cash equivalents         (863,927 )     (1,919,916 )
Net debt         4,351,078       5,419,849  
Total equity   ₩     325,807       225,695  
Net debt to total equity ratio         13.35       24.01  

 

34

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

19. Borrowings/payable and Loans/receivable

 

Borrowings as of December 31, 2024 and 2023 are as follows:

 

       

December 31,

2024

     December 31,
2023		  
        (In thousands of Korean won)  
Current Liability                    
Short-term borrowings   ₩     1,445,453       1,505,000  
Lease liability (*)         80,165       62,797  
Total   ₩     1,525,618       1,567,797  
Non-Current liability                    
Lease liability (*)   ₩     65,483       267,583  

 

 
(*) The interest rate related to lease liability reflects the incremental borrowing rate based on the Company’s credit. The amount of interest expense related to lease liability incurred during 2024 is Korean Won 9,766 thousand (2023: Korean Won 11,049 thousand). Additionally, the amount of short-term lease payments not included in the measurement of lease liability during 2024 is Korean Won 1,950,254 thousand (2023: Korean Won 2,436,273 thousand).

 

A. Terms and repayment schedule

 

The terms and conditions of outstanding borrowings as of December 31, 2024 and 2023 are as follows:

 

                      December 31,
2024		     December 31,
2023		  
    Currency    

Nominal

interest rate

     Maturity     Face value     Carrying
amount		     Face value     Carrying
amount		  
                      (In thousands of Korean won)  
Secured bank borrowings(*1)   KRW     4.57%     09-May-25       520,000       520,000       520,000       520,000  
Secured bank borrowings(*2)   KRW     4.45%     23-Sep-25       940,000       925,000       1,000,000       985,000  
Secured bank borrowings(*3)   KRW     6.90%     17-Oct-25       2,000,000       453       -       -  
Total interest-bearing liability                       3,460,000       1,445,453       1,520,000       1,505,000  

 

 
(*1) The Company has received a payment guarantee of Korean Won 468,000 thousand (2023: Korean Won 468,000 thousand) from Korea Credit Guarantee Fund as of December 31, 2024. The Company is provided a joint guarantee of Korean Won 62,400 thousand (2023: Korean Won 62,400 thousand) by the CEO of the Company as of December 31, 2024.
(*2) The Company is provided a joint guarantee of Korean Won 1,128,000 thousand (2023: Korean Won 1,200,000 thousand) by the CEO of the Company as of December 31, 2024. The borrowing will be repaid in monthly installments of 5,000 thousand.
(*3) The Company has received collateral in the form of land and buildings owned by Pluto Co., Ltd., a related party, to secure its borrowings of KRW 2,400,000 thousand as of December 31, 2024.

 

35

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

B. Terms and collection schedule

 

The terms and conditions of outstanding loans as of December 31, 2024 and 2023 are as follows:

 

                      December 31,
2024		     December 31,
2023		  
    Currency    

Nominal

interest rate

     Maturity     Face value     Carrying
amount		     Face value     Carrying
amount		  
                      (In thousands of Korean won)  
Falling Starlight Limited Company Specializing in The Cultural Industry   KRW     -     -       120,054       120,054       120,054       120,054  
Park, Un Kyoung   KRW     4.60%     16-Jan-25       10,000       10,002       10,000       10,033  
Total                       130,054       130,056       130,054       130,087  

 

 
(*) The maturity of the loan is set as the later of January 16, 2025, or the liquidation date of Falling Starlight Limited Company Specializing in The Cultural Industry.

 

20. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Other payable   ₩     1,118,423       1,312,994  
Accrued expenses         919,173       686,973  
Total   ₩     2,037,596       1,999,967  

 

21. Provisions

 

Provisions for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean Won)  
Site restoration                    
Beginning of the year   ₩     3,471       3,448  
Interest expense         128       23  
Lease termination         (3,479 )     -  
New Lease Contract         4,804       -  
Ending of the year   ₩     4,924       3,471  

 

The provision for building restoration relates to buildings leased during 2024 and 2023. The provision has been estimated based on historical data associated with similar buildings.

 

36

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

22. Financial Instruments – Fair values and risk management

 

A. Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liability, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liability not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

Carrying amounts of financial instruments by category as of December 31, 2024 are as follows:

 

        Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                          
Long-term investments   ₩     800,000       -       -       800,000       800,000  
Other financial liabilities                                            
Financial guarantee liability   ₩     2,573       -       -       2,573       2,573  

 

Carrying amounts of financial instruments by category as of December 31, 2023 are as follows:

 

        Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                          
Long-term investments   ₩     800,000       -       -       800,000       800,000  

 

37

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

B. Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

● Level 1: quoted prices (unadjusted) in active markets for identical asset or liability;

 

● Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability;

 

● Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of Company-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

If the information is insufficient to measure fair value of the project investment, the Company recognizes gain on project settlements when the accumulated settlements exceed the project investment’s original invested amount. Before exceeding the project investment’s original invested amount, the settlements are recognized as the return of original project investment. The Company recognizes the valuation loss of the project investment based on its judgment as to whether the total amount of production costs and distribution fees could exceed the shared profit.

 

C. Financial risk management

 

The Company’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which the Company’s risk management program focuses on minimizing any adverse effects on its financial performance. The Company operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i. Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. In order to manage credit risk, the Company regularly evaluate the credit worthiness of each customer or counterparty considering the party’s financial information, past experience, its own trading records and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss(“ECL”) in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

38

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

The maximum exposure to credit risk of the Company as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Cash and cash equivalents (*1)   ₩     863,927       1,919,916  
Accounts receivable, net         185,661       203,667  
Long-term loans, net         130,056       130,087  
Long-term accounts receivable – other, net         45,899       -  
Other non-current financial assets         39,080       147,406  
Financial guarantee liability (*2)         318,256       -  
Total   ₩     1,582,879       2,401,076  

 

 
(*1) Cash and cash equivalents are deposited in financial institutions with strong credit rating.
(*2) The Company has provided a financial guarantee for the repayment of loans to other related parties.

 

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company has established a credit policy under which each new customer is analyzed individually before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

 

The Company monitors customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trading history with the Company and existence of previous financial difficulties. The Company does not require collateral in respect of trade and other receivables. Expected credit losses (ECLs) and credit risk exposures for accounts receivable and other receivables as of December 31, 2024 and 2023 are as follows:

 

- Accounts receivables and other receivables

 

As of December 31, 2024  

Expected

loss rate

        

Carrying

amount

    

Loss

allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     231,560       -  
More than 90 days ~ Less than 1 year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     231,560       -  

 

As of December 31, 2023  

Expected

loss rate

        

Carrying

amount

    

Loss

allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     203,667       -  
More than 90 days ~ Less than 1 year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     203,667       -  

 

39

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

ii. Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions.

 

Financial liability of the Company by maturity according to the remaining period from December 31, 2024 to the contractual maturity date are as follows:

 

        December 31, 2024  
       

Carrying

Amount

    

Less than

3 months

    

3 months

~ 1 year

     1~2 years     2~5 years    

More than

5 years

     Total  
        (In thousands of Korean won)  
Payables (*1)   ₩     1,118,423       25,072       1,093,351       -       -       -       1,118,423  
Accrued expense (*1)         919,173       58,222       860,951       -       -       -       919,173  
Short-term borrowings         1,445,453       31,394       1,452,667       -       -       -       1,484,061  
Lease liability         145,647       22,577       67,730       35,306       27,781       -       153,394  
Financial guarantee liability (*2)         2,573       285,000       -       -　       -　       -　       285,000  
Total   ₩     3,631,269       422,265       3,474,699       35,306       27,781       -       3,960,051  

 

 
(*1) Payables and accrued expense exclude non-financial liability.
(*2) For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

 

Financial liability of the Company by maturity according to the remaining period from December 31, 2023 to the contractual maturity date are as follows:

 

        December 31, 2023  
       

Carrying

Amount

    

Less than

3 months

    

3 months

~ 1 year

     1~2 years     2~5 years    

More than

5 years

     Total  
        (In thousands of Korean won)  
Payables (*)   ₩     1,312,994       238,741       1,074,253       -       -       -       1,312,994  
Accrued expense (*)         682,647       472,164       210,483       -       -       -       682,647  
Short-term borrowings         1,505,000       33,985       1,517,736       -       -       -       1,551,721  
Lease liability         330,379       18,947       56,840       75,786       194,527       7,580       353,680  
Total   ₩     3,831,020       763,837       2,859,312       75,786       194,527       7,580       3,901,042  

 

 
(*) Payables and accrued expense exclude non-financial liability.

 

iii. Interest rate risk

 

The sensitivity analysis is based on borrowing under variable interest rate conditions as of December 31, 2024 and 2023.

 

        December 31, 2024 (*)   December 31, 2023
       

Increased by

100 bp

  

Decreased by

100 bp

    

Increased by

100 bp

  

Decreased by

100 bp

  
        (In thousands of Korean won)
Interest   ₩     -     -     7,250　     (7,250 )

 

 
(*) As of December 31, 2024, The company had no borrowings subject to variable interest rates. Accordingly, a sensitivity analysis for interest rate risk has not been presented.

 

40

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

23. Leases

 

A. Leases as lessee

 

The Company leases buildings and vehicles. The leases typically run for a period of 5 to 10 years, with an option to renew or terminate the lease after that date. The Company also leases vehicles with contract terms of one year. This lease is short-term item. The Company has elected not to recognize right-of-use assets and lease liability for these leases. Information about leases for which the Company is a lessee is presented below.

 

i. Right-of-use assets

 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property and equipment.

 

Details of right-of-use assets and lease liability recognized in the statements of financial position as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Acquisition price)         　       　  
Building   ₩     119,948       417,533  
Vehicles         143,262       143,262  
Total   ₩     263,210       560,795  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Accumulated depreciation)         　       　  
Building   ₩     (54,814 )     (200,123 )
Vehicles         (59,924 )     (31,272 )
Total   ₩     (114,738 )     (231,395 )

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Net book value)         　       　  
Building   ₩     65,134       217,410  
Vehicles         83,338       111,990  
Total   ₩     148,472       329,400  

 

41

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Changes in right-of-use assets for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Building     Vehicles     Total  
        (In thousands of Korean won)  
Balance as of January 1, 2024   ₩     217,410       111,990       329,400  
Depreciation         (68,677 )     (28,652 )     (97,329 )
Lease termination         (203,547 )     -       (203,547 )
Acquisitions         119,948       -       119,948  
Balance as of December 31, 2024   ₩     65,134       83,338       148,472  

 

        2023  
        Building     Vehicles     Total  
        (In thousands of Korean won)  
Balance as of January 1, 2023   ₩     259,163       140,643       399,806  
Depreciation         (41,753 )     (28,653 )     (70,406 )
Balance as of December 31, 2023   ₩     217,410       111,990       329,400  

 

ii. Amounts recognized in profit or loss

 

Amounts recognized in profit or loss for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Interest expense relating to lease liability (included in finance cost)     ₩   9,766       11,049  
Expense relating to short-term leases         1,950,254       2,436,273  

 

iii. Amounts recognized in statement of cash flows

 

Amounts recognized in statement of cash flows for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Total cash outflows of leases   ₩     2,050,720       2,511,869  

 

iv. Extension options

 

Some property leases contain extension options exercisable by the Company. The Company reflected extension options in measuring the lease liability. The extension options held are exercisable only by the Company and not by the lessors. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

 

42

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

24. Commitments

 

A. Key commitments

 

Key commitments the Company has entered into with financial institutions and others as of December 31, 2024 are as follows:

 

Financial institutions   Categories         Credit limit     Disbursed
borrowing
amount		  
              (In thousands of Korean won)  
Woori Bank   Corporate operating borrowings(*1)     ₩     520,000       520,000  
Woori Bank   Corporate operating borrowings(*2)           940,000       925,000  
Pureun Savings Bank   Corporate operating borrowings(*3)           2,000,000       453  
Total     ₩     3,460,000       1,445,453  

 

 
(*1) The Company has received a payment guarantee of Korean Won 468,000 thousand (2023: Korean Won 468,000 thousand) from Korea Credit Guarantee Fund as of December 31, 2024. The Company is provided a joint guarantee of Korean Won 62,400 thousand (2023: Korean Won 62,400 thousand) by the CEO of the Company as of December 31, 2024.
(*2) The Company is provided a joint guarantee of Korean Won 1,128,400 thousand (2023: Korean Won 1,200,000 thousand) by the CEO of the Company as of December 31, 2024.
(*3) The Company has received collateral in the form of land and buildings owned by Pluto Co., Ltd., a related party, to secure its borrowings of KRW 2,400,000 thousand as of December 31, 2024.

 

B. Other commitment

 

On September 14, 2023, an amendment was made to the equity interest exchange agreement, originally entered into on March 31, 2023, between the CEO, who is the dominant shareholder of the Company, and K Enter Holdings Inc. for the purpose of listing on the NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective on the date designated by K Enter Holdings Inc. Upon the effective date, the CEO of the Company will exchange 40 shares with the equity interest of K Enter Holdings Inc. Following the equity interest exchange transaction, the Company is expected to be a subsidiary of K Enter Holdings Inc.

 

C. Guarantees received

 

Details of guarantees received as of December 31, 2024 are as follows:

 

Guaranteed by   Details of guarantee     Guarantee limit  
          (In thousands of Korean won)  
Korea Credit Guarantee Fund   Payment guarantee       468,000  

 

Details of guarantees received as of December 31, 2023 are as follows:

 

Guaranteed by   Details of guarantee     Guarantee limit  
          (In thousands of Korean won)  
Korea Credit Guarantee Fund   Payment guarantee       468,000  

 

43

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

D. Details of guarantees

 

Contingent liabilities on outstanding guarantees provided by The company as of December 31, 2024 are as follows:

 

Guarantor   Guarantee beneficiary     Guarantee limit     Guarantee amount  
          (In thousands of Korean won)  
The LAMP Co., Ltd.,   Falling Starlight Limited Company Specializing in The Cultural Industry (*)     285,000       285,000  

 

 
(*) In relation to the above guarantee, the company assessed the financial guarantee obligation and recognized the associated financial guarantee expense under other financial liabilities in accordance with the relevant accounting standards.

 

E. Legal Proceedings

 

Subsequent to the end of the current fiscal year, the company is involved in one pending legal proceeding in which it is named as a defendant, with a total claimed amount of KRW 50 million.
The outcome of the lawsuit is currently not reasonably predictable, and the timing and amount of any potential outflow of resources are uncertain. However, the Company believes that the ultimate resolution of this matter is not expected to have a material adverse effect on its financial statements for the current fiscal year.

 

25. Statement of Cash flows

 

Adjustments for income and expenses from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Depreciation   ₩     109,094       77,808  
Other bad debt expenses         242,000       105,000  
Reversal of allowance for doubtful accounts         (179,533 )        
Interest expenses         133,981       107,583  
Interest income         (15,628 )     (5,286 )
Financial Guarantee Expense         2,573       -  
Gain on project settlements         (3,165 )     (3,999 )
Reversal of losses on valuation of long-term investments         (3,897 )     (39,355 )
Severance benefits         38,937       28,490  
Income tax expenses         92,089       (18,799 )
Loss on retirement of Property and equipment         39,615       -  
Gain on disposal of right of use assets         (14,767 )     -  
Total   ₩     441,299       251,442  

 

44

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

Changes in assets and liabilities from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Other current non-financial liabilities   ₩     (16,256 )     12,612  
Other current assets         988,560       (1,180,909 )
Other non-current non-financial assets         (222,503 )     131,000  
Accounts receivable — other, net         162,234       (77,888 )
Trade and other payables         (11,723 )     509,249  
Contract liabilities         (1,855,348 )     780,775  
Contract assets         (455,326 )     (28,109 )
Total   ₩     (1,410,362 )     146,730  

 

Significant non-cash transactions for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Unsettled distribution to Pluto due to Spin-off   ₩     -       1,081,277  
Reclassification of non-current lease liability       89,377       66,822  
Right-of-use assets obtained in exchange for lease liability         (115,143 )     -  
Lease termination         209,175       -  
Total   ₩     183,409       1,148,099  

 

45

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

The movements of liability to cash flows arising from financing activities for the years ended December 31, 2024 and 2023 are as follows:

 

        Short-term
borrowings		     Current lease liability     Non-current lease liability     Total  
        (In thousands of Korean won)  
Balance at January 1, 2023   ₩     520,000       60,522       334,405       914,927  
Changes from financing cash flows                                    
Proceeds from borrowings         1,000,000       -       -       1,000,000  
Repayment of borrowings         (15,000 )     -       -       (15,000 )
Payment of lease liability         -       (64,547 )     -       (64,547 )
Reclassification         -       66,822       (66,822 )     -  
Total         985,000       2,275       (66,822 )     920,453  
Other changes                                    
Interest expense         -       11,049       -       11,049  
Interest paid         -       (11,049 )     -       (11,049 )
Total   ₩     -       -       -       -  
Balance at December 31, 2023   ₩     1,505,000       62,797       267,583       1,835,380  
Balance at January 1, 2024         1,505,000       62,797       267,583       1,835,380  
Changes from financing cash flows                                    
Proceeds from borrowings         883,302       -       -       883,302  
Repayment of borrowings         (942,849 )     -       -       (942,849 )
Payment of lease liability         -       (90,700 )     -       (90,700 )
Reclassification         -       89,377       (89,377 )     -  
Total   ₩     (59,547 )     (1,323 )     (89,377 )     (150,247 )
Other changes                                    
Right-of-use assets obtained in exchange for lease liability         -       56,321       58,822       115,143  
Disposal of Lease liabilities                 (37,630 )     (171,545 )     (209,175 )
Interest expense         -       9,766       -       9,766  
Interest paid         -       (9,766 )     -       (9,766 )
Total   ₩     -       18,691       (112,723 )     (94,032 )
Balance at December 31, 2024   ₩     1,445,453       80,165       65,483       1,591,101  

 

46

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

26. Related parties

 

A. List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   Entity
Other related parties  

- Falling Starlight Limited Company Specializing in The Cultural Industry (hereafter referred to as “Falling Starlight”)

- Pluto Co., Ltd
Key management personnel   - Park, Un Kyoung

 

B. Transactions with related parties

 

Details of transaction with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

            2024  
Related party   Name of entity       Revenue     Interest income     Interest expenses     Financial Guarantee Expense  
            (In thousands of Korean won)  
Other related parties   Falling Starlight   ₩     239,615       -       -       2,573  
Other related parties   Pluto         15,000       -       49,710          
Key management personnel   Park, Un Kyoung         -       428       -       -  
Total       ₩     254,615       428       49,710       2,573  

 

            2023  
Related party   Name of entity       Revenue     Interest income     Interest expenses  
            (In thousands of Korean won)  
Other related parties   Falling Starlight   ₩     432,411       -       -  
Other related parties   Pluto         -       -       57,521  
Key management personnel   Park, Un Kyoung         -       430       -  
Total       ₩     432,411       430       57,521  

 

47

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

C. Account balances with related parties

 

The balances of receivables and payables to related parties as of December 31, 2024 are as follows:

 

Related party   Name of entity       Receivables     Loans     Project investment     Payables     Financial Guarantee Liability  
            (In thousands of Korean won)  
Other related parties   Falling Starlight   ₩     20,000       120,054       800,000       -       2,573  
Other related parties   Pluto (*)         -       -       -       1,184,828       -  
Key management personnel   Park, Un Kyoung         1,357       10,002       -       -       -  
Total       ₩     21,357       130,056       800,000       1,184,828       2,573  

 

 

(*)On March 31, 2023, the date of spin-off, the Company agreed to pay Korean Won 2,053,480 thousand to Pluto in accordance with the Separation Proposal. As of December 31, 2024, the payables to Pluto is Korean Won 1,184,828 thousand after the settlement during the period ended December 31, 2024.

 

The balances of receivables and payables to related parties as of December 31, 2023 are as follows:

 

Related party   Name of entity       Receivables     Loans     Project investment     Payables  
            (In thousands of Korean won)  
Other related parties   Falling Starlight   ₩     20,000       120,054       800,000       -  
Other related parties   Pluto (*)         -       -       -       1,138,798  
Key management personnel   Park, Un Kyoung         897       10,033       -       -  
Total       ₩     20,897       130,087       800,000       1,138,798  

 

 

(*)On March 31, 2023, the date of spin-off, the Company agreed to pay Korean Won 2,053,480 thousand to Pluto in accordance with the Separation Proposal. As of December 31, 2023, the payables to Pluto is Korean Won 1,138,798 thousand after the settlement during the period ended December 31, 2023.

 

D. Financing and investing transactions with related parties

 

Details of significant financing and investing transactions with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

            2024  
Related party   Name of entity       Loans     Increase in accrued income    

Increase in

Payables

  
            (In thousands of Korean won)  
Other related parties   Pluto   ₩     -       -       46,030  
Key management personnel   Park, Un Kyoung         -       460       -  
Total       ₩     -       460       46,030  

 

            2023  
Related party   Name of entity       Loans     Increase in accrued income    

Increase in

Payables

  
            (In thousands of Korean won)  
Other related parties   Falling starlight   ₩     20,000       -       -  
Other related parties   Pluto         -       -       1,043,964  
Key management personnel   Park, Un Kyoung         -       460       -  
Total       ₩     20,000       460       1,043,964  

 

48

 

THE LAMP CO., LTD

 

NOTES TO FINANCIAL STATEMENTS

 

For the Years Ended December 31, 2024 and 2023

 

E. Commitments with related parties

 

During the year ended December 31, 2022, the Company entered into an agreement with Falling Starlight for the production service and profit sharing.

 

As of December 31, 2024, the Company has been satisfying its performance obligation for production service in accordance with the agreement and has received the consideration for the service provided. After the release of the content, the Company is entitled to share the profits in accordance with the agreed profit-sharing ratio.

 

The Company is provided a joint guarantee of Korean Won 1,190,400 thousand by the CEO of the Company as of December 31, 2024.

 

As of December 31, 2024, the Company has provided a joint guarantee of Korean Won 285,000 thousand to Falling Starlight, classified as other related parties.

 

The Company has received collateral in the form of land and buildings owned by Pluto Co., Ltd., a related party, to secure its borrowings of KRW 2,400,000 thousand as of December 31, 2024.

 

F. Transactions with key management personnel

 

The compensation for the key management personnel for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Short-term employee benefits   ₩     268,000       205,500  
Post-employment benefits         27,760       19,468  
Total   ₩     295,760       224,968  

 

Compensation of the Company’s key management personnel include salaries, non-cash benefits and contributions to a post-employment defined benefit plan.

 

27. Subsequent event

 

On January 3, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including The LAMP Co., Ltd., through a share exchange. Upon the effective date, the CEO of the Company exchanged 40 shares with the equity interest of K Enter Holdings Inc. Following the equity interest exchange transaction, the Company became a subsidiary of K Enter Holdings Inc.

 

49

 

Exhibit 15.19

 

BIDANGIL PICTURES CO., LTD.

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

    Note       December 31,
2024		     December 31,
2023		  
            (In thousands of Korean won)  
Assets                      
Cash and cash equivalents   14,17,19,22,24   ₩     1,448,485       3,723,417  
Short-term financial instruments   17,22         862,868       1,537,640  
Accounts receivable — trade, net   7,13,17,22         633       2,647  
Accounts receivable — other, net   13,17,22         2,766       42,665  
- Related parties   25         -       42,664  
- Non-related parties             2,766       1  
Short-term loans — net   15,17,22         135,000       952,500  
- Related parties   25         -       952,500  
- Non-related parties             135,000       -  
Other current assets   12         66,424       5,070,905  
Other current financial assets   17,22         50,600       49,000  
Contract assets   7,17,22         724,848       143,834  
Total current assets             3,291,624       11,522,609  
Property, plant and equipment including right-of-use assets   16,23         123,789       138,006  
Other non-current financial assets   17,22         86,781       131,620  
Other non-current non-financial assets   12         518,100       441,600  
Total non-current assets             728,670       711,226  
Total assets       ₩     4,020,294       12,233,835  
Liabilities                        
Trade and other payables   17,21,22   ₩     911,596       1,060,087  
Other current financial liabilities   17,20,22         -       200,200  
Other current non-financial liabilities             7,415       40,010  
Contract liabilities   7         -       6,182,960  
Current Lease liabilities   20,22         77,927       95,509  
Current tax liabilities             81,512       72,520  
Total current liabilities             1,078,450       7,651,286  
Non-current Lease liabilities   20,22         45,402       44,421  
Total non-current liabilities             45,402       44,421  
Total liabilities       ₩     1,123,852       7,695,707  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1

 

 

BIDANGIL PICTURES CO., LTD.

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

    Note       December 31,
2024		     December 31,
2023		  
            (In thousands of Korean won)  
Equity                        
Share capital   18   ₩     50,000       50,000  
Share premium   18         50,000       50,000  
Treasury shares   18         (2,000,000 )     -  
Retained earnings             4,796,442       4,438,128  
Equity attributable to owners of the Parent Company             2,896,442       4,538,128  
Total equity             2,896,442       4,538,128  
Total liabilities and equity       ₩     4,020,294       12,233,835  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2

 

 

BIDANGIL PICTURES CO., LTD.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won)  
Revenues                        
Media production revenue   6,7   ₩     18,632,504       7,746,081  
Cost of revenues   8         (17,446,927 )     (7,069,610 )
Gross profit             1,185,577       676,471  
Selling, general and administrative expenses   8         (710,258 )     (759,395 )
Other income   8         2       36,004  
Other expenses   8         (21,498 )     (2,016 )
Operating profit (loss)             453,823       (48,936 )
Finance income   9,17         55,972       245,390  
- Related parties   25         2,154       42,664  
- Non-related parties             53,818       202,726  
Finance costs   9,17         (147,749 )     (11,504 )
Profit before income tax             362,046       184,950  
Income tax benefit (expenses)   11         (3,732 )     1,523  
Profit for the year       ₩     358,314       186,473  
Total comprehensive income for the year       ₩     358,314       186,473  
Profit attributable to:                        
Owners of the Parent Company       ₩     358,314       186,473  
Total comprehensive income attributable to:                        
Owners of the Parent Company       ₩     358,314       186,473  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

BIDANGIL PICTURES CO., LTD.

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

For the Years Ended December 31, 2024 and 2023

 

    Note      

Share
capital

     Share premium    

Treasury

shares

    

Retained

earnings

     Total  
            (In thousands of Korean won)  
Balance at January 1, 2023       ₩     50,000       50,000       -       4,251,655       4,351,655  
Total comprehensive income for the year                                                
Profit for the year             -       -       -       186,473       186,473  
Balance at December 31, 2023       ₩     50,000       50,000       -       4,438,128       4,538,128  
Balance at January 1, 2024       ₩     50,000       50,000       -       4,438,128       4,538,128  
Total comprehensive income for the year                                                
Profit for the year             -       -       -       358,314       358,314  

Transaction with owners, recognized directly in equity

                                                
Acquisition of treasury shares   18         -       -       (2,000,000 )     -       (2,000,000 )
Balance at December 31, 2024       ₩     50,000       50,000       (2,000,000 )     4,796,442       2,896,442  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

BIDANGIL PICTURES CO., LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the Years Ended December 31, 2024 and 2023

 

    Note       2024     2023  
            (In thousands of Korean won)  
Cash flows from operating activities   24                    
Profit for the year       ₩     358,314       186,473  
Adjustments to reconcile net income to net cash provided by operating activities             (1,825,268 )     1,862,599  
Interest received             71,241       58,849  
Interest paid             (10,616 )     (11,504 )
Income taxes refund(paid)             5,260       (8,128 )
Net cash inflow(outflow) from operating activities       ₩     (1,401,069 )     2,088,289  
Cash flows from investing activities                        
Disposal of short-term financial instruments       ₩     2,551,823       8,300,231  
Purchase of short-term financial instruments             (2,001,527 )     (6,933,733 )
Payments for short-term loans             (135,000 )     (25,380 )
Payments for other current financial assets             -       (49,000 )
Proceeds from other current financial assets             49,000       -  
Proceeds from other non-current financial assets             -       850  
Collection of short-term loans             952,500       -  
- Related parties             952,500       -  
- Non-related parties             -       -  
Net cash inflow in investing activities       ₩     1,416,796       1,292,968  
Cash flows from financing activities   24                    
Acquisition of treasury shares             (2,000,000 )     -  
Repayment of investment withholdings             (200,200 )     (600,600 )
Repayment of lease liabilities             (90,459 )     (84,532 )
Net cash outflow in financing activities       ₩     (2,290,659 )     (685,132 )
Net increase (decrease) in cash and cash equivalents             (2,274,932 )     2,696,125  
Cash and cash equivalents at beginning of the year   14         3,723,417       1,027,292  
Cash and cash equivalents at end of the year   14   ₩     1,448,485       3,723,417  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

1. Reporting entity

 

The Parent Company

 

Bidangil Pictures Co., Ltd. (“the Parent Company”) was incorporated in February 2005 and the Parent Company’s registered office is at 220, Yeoksam-ro, Gangnam-gu, Seoul, Korea. These consolidated financial statements comprise the Parent Company and its subsidiary (together referred to as the “Group”). The Group generates revenue primarily through providing the media production services. The Parent Company is primarily providing the media production service that consists of planning, producing, and selling the theatrical films and television programs. Trigger Limited Company Specializing in The Cultural Industry (the “Subsidiary”) is engaged in the business of planning, development and production of the film Trigger.

 

The Parent Company’s major shareholders and their respective percentage of ownership as of December 31, 2024 and 2023 are as follows:

 

    December 31,
2024		     December 31,
2023		  
    Number of
shares		     Ownership
(%)		     Number of
shares		     Ownership
(%)		  
Yoon, In Bum     4,750       47.50 %     5,000       50 %
Kim, Soo Jin     4,750       47.50 %     5,000       50 %
Treasury shares     500       5.00 %     -       -  
Total     10,000       100 %     10,000       100 %

 

Consolidated Subsidiary

 

Details of the consolidated subsidiary as of December 31, 2024 and December 31, 2023 are as follows:

 

        Percentage of ownership (%)          
Subsidiary   Location  

December 31,
2024

    

December 31,
2023

     Fiscal year end   Main business
Trigger Limited Company Specializing in The Cultural Industry   Korea   100     100     December  

Planning, development and production of the film Trigger

 

The Parent Company established a special purpose company to plan, develop and manage the production of the new project ‘Trigger’ as of April 5, 2023. The initial capital amounted to Korean won 10,000 thousand, but no capital has been contributed as of December 31, 2024.

 

6

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

2. Basis of Accounting

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These consolidated financial statements were authorized for issuance by the Board of Directors on May 14, 2025.

 

Details of the Group’s accounting policies are included in Note 5.

 

Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement bases
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value

 

3. Functional and presentation currency

 

These consolidated financial statements are presented in Korean Won, which the Group’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

A. Judgements

 

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in the following note:

 

Note 7(B): revenue recognition: whether revenue from providing service is recognized over time or at a point in time; and

 

Note 23(A): lease term: whether the Group is reasonably certain to exercise extension options.

 

B. Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

● Note 11(A): uncertain tax treatments;

 

i. Measurement of fair values

 

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for financial assets.

 

7

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

When measuring the fair value of a financial instruments measured at FVTPL, the Group uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

● Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

● Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

● Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following note:

 

● Note 22(B): financial instruments.

 

5. Material accounting policies

 

The material accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:

 

A. New and amended standards or interpretations adopted by the Group

 

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2024.

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Non-current Liabilities with Covenants

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. Covenants that the entity must comply with after the end of the reporting period do not affect the classification of a liability at the end of the reporting period. However, if a liability is classified as non-current as of the end of the reporting period despite covenants that must be complied with within 12 months after that date, the entity shall disclose information about the risk that the liability could become repayable within 12 months after the reporting period. The amendments do not have a significant impact on the consolidated financial statements.

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the consolidated financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the consolidated financial statements.

 

8

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

B. New and amended standards or interpretations not yet adopted by the Group

 

The following new accounting standards and interpretation that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Group.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting policy choice to derecognise financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI. The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

- IFRS 1 First-time adoption of International Financial Reporting Standards;

 

- IFRS 7 Financial instruments: Disclosures;

 

- IFRS 9 Financial instruments;

 

- IFRS 10 Consolidated financial instruments; and

 

- IAS 7 Statement of cash flows

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Group is in review for the impact of this new standard on the consolidated financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Group to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Group is in review for the impact of this new standard on the consolidated financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the consolidated financial statements.

 

9

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

C. Basis of consolidation

 

i. Subsidiary

 

Subsidiary is an entity controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiary are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

 

ii. Non-controlling interests

 

Non-controlling interests are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

 

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

 

iii. Loss of control

 

When the Group loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

 

iv. Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealized income and expenses (except for foreign currency transaction gains or losses) arising from intra- group transactions, are eliminated. Unrealized gains arising from transactions with equity- accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

 

D. Foreign currency

 

Transactions in foreign currencies are translated into the respective functional currencies of Group at the exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss and presented within finance costs. Translation differences on Non-monetary assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

 

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

 

● an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognized in OCI are reclassified to profit or loss);

 

● a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

 

● qualifying cash flow hedges to the extent that the hedges are effective.

 

10

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

E. Revenue from contracts with customers

 

The Group generates revenue primarily through providing the media production service.

 

The Group determines revenue recognition by:

 

● identifying the contract, or contracts, with a customer;

 

● identifying the performance obligations in each contract;

 

● determining the transaction price;

 

● allocating the transaction price to the performance obligations in each contract; and

 

● recognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods or services.

 

Media production revenue

 

The Group operates the media production business that consists of planning, producing, and selling the theatrical films and television programs. The Group identifies the license which is provided along with media product as combined output and recognizes revenue over time by measuring its progress based on cost incurred towards complete satisfaction of the performance obligation in accordance with Paragraph 35 (2) and (3) of IFRS 15 Revenue from contracts with customers. The percentage-of-completion for each contract is calculated by dividing the cumulative cost incurred in relation to service performed by the Group by estimated total contract costs.

 

The Group recognizes unbilled receivables from media production service as contract assets and recognizes receipts in advance for prepaid media production services as contract liabilities. The Group capitalizes the cost associated with the production, including development costs, direct costs, and production overhead per title as prepayments and prepaid expenses. The Group amortizes the capitalized asset in ‘Cost of revenues’ on the consolidated statements of comprehensive income based on the percentage-of-completion for each contract.

 

F. Operating segments

 

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The chief operating decision-maker has been identified as the chief executive officer. The Group’s operating segment has been determined to be a single business unit, for which the Group generates identifiable financial information that is regularly reported to the chief executive officer for the purpose of resource allocation and assessment of segment performance. The Group has a reportable segment as described in Note 6. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

G. Employee benefits

 

i. Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service

 

ii. Defined contribution plans

 

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

 

11

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

H. Finance income and finance costs

 

The Group’s finance income and finance costs include:

 

● interest income;
     
● interest expense;
     
● dividend income;
     
● the net gain or loss on financial assets at FVTPL;
     
● the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

● the gross carrying amount of the financial asset; or
     
● the amortized cost of the financial liability.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

I. Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

i. Current income tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

- Has a legally enforceable right to set off the recognized amounts; and

 

- Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

ii. Deferred income tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

● temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
     
● temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
     
● taxable temporary differences arising on the initial recognition of goodwill.

 

12

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

- Has a legally enforceable right to set off the recognized amounts; and

 

- Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

J. Cash and Cash Equivalents

 

Cash and cash equivalents comprise cash on hand, deposits held at banks, and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

K. Property, plant and equipment

 

i. Recognition and measurement

 

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

 

If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

 

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

 

ii. Subsequent expenditure

 

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Group. The carrying amount of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred.

 

iii. Depreciation

 

Depreciation is calculated using the straight-line method to allocate the cost or revalued amounts of the assets, net of their residual values, over their estimated useful lives as follows:

 

Office equipment   5 years  
Furniture and fixtures   5 years  
Right-of-use assets   5~7 years  

 

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

L. Financial instruments

 

i. Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.

 

13

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

ii. Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

● amortized cost; or

 

● FVTPL

 

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

● it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

● it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

● its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

Financial assets - Business model assessment

 

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

● the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

● how the performance of the portfolio is evaluated and reported to the Group’s management;

 

● the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

● how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

● the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

14

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

 

● contingent events that would change the amount or timing of cash flows;

 

● terms that may adjust the contractual coupon rate, including variable-rate features;

 

● prepayment and extension features; and

 

● terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

15

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

iii. Derecognition

 

Financial assets

 

The Group derecognizes a financial asset when:

 

● the contractual rights to the cash flows from the financial asset expire; or

 

● it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

- substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

- the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Group enters into transactions whereby it transfers assets recognized in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

Financial liabilities

 

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Group first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on accounting for modifications to the additional changes.

 

M. Impairment

 

i. Non- derivative financial assets

 

Financial instruments and contract assets

 

The Group recognizes loss allowances for ECLs on:

 

● financial assets measured at amortized cost; and

 

● contract assets.

 

The Group also recognizes loss allowances for ECLs on lease receivables, which are disclosed as part of trade and other receivables.

 

The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are measured at 12-month ECLs:

 

● debt securities that are determined to have low credit risk at the reporting date; and

 

● other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

 

Loss allowances for trade receivables (including lease receivables) and contract assets are always measured at an amount equal to lifetime ECLs.

 

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment, that includes forward-looking information.

 

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 12 months past due.

 

16

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

The Group considers a financial asset to be in default when:

 

● the debtor is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realizing security (if any is held).

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

 

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

 

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

 

Measurement of ECLs

 

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

 

ECLs are discounted at the effective interest rate of the financial asset.

 

Credit-impaired financial assets

 

At each reporting date, the Group assesses whether financial assets carried at amortized cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

Evidence that a financial asset is credit-impaired includes the following observable data:

 

● significant financial difficulty of the debtor;

 

● the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

 

● it is probable that the debtor will enter bankruptcy or other financial reorganization; or

 

● the disappearance of an active market for a security because of financial difficulties.

 

Presentation of allowance for ECL in the statement of financial position

 

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

 

Write-off

 

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

 

ii. Non- financial assets

 

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, developing contents, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

17

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

N. Leases

 

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

i. As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

 

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

● fixed payments, including in-substance fixed payments;

 

● variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

● amounts expected to be payable under a residual value guarantee; and

 

● the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

 

18

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

At the date of transition to IFRSs, The Group applies the following approach to all of its leases.

 

The Group measures that lease liability at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

The Group measures right-of-use asset at its carrying amount as if IFRS 16 had been applied since the commencement date of the lease, but discounted using the lessee’s incremental borrowing rate at the date of transition to IFRSs.

 

The Group uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date), including IT equipment. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

O. Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Group uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

 

P. Concentration of Credit Risk

 

The Group performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Group maintains reserves for potential credit losses, which are periodically reviewed.

 

19

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

6. Operating segments

 

A. Basis for segmentation

 

The Group’s operating segments have been identified to be a single business unit, by which the Group provides media production services.

 

The following summary describes the operations of each reportable segment.

 

Reportable segment   Operations
Media Production   Planning, producing, and selling the media content such as theatrical films and television programs

 

The Group’s chief executive officer reviews the internal management reports at least quarterly.

 

B. Geographic information

 

Media production is managed and operated in Seoul, South Korea. The geographic information analyses the Group’s revenue by the customer’s country of domicile. In presenting the geographic information, segment revenue and non-current assets have been based on the geographic location of customers.

 

Summary of the Group’s operation by region based on the location of customers for the years ended December 31, 2024 and 2023 is as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Korea   ₩     115,571       188,823  
USA         18,516,933       7,557,258  
Total   ₩     18,632,504       7,746,081  

 

Summary of the Group’s non-current assets based on the location as of December 31, 2024 and 2023 is as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Korea   ₩     728,670       711,226  

 

20

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

C. Major customer

 

Revenues from major customers that amount to 10% or more of the Group’s revenue for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Customer A (Media production segment)                    
Revenue   ₩     18,516,933       7,557,258  
%         99.4 %     97.6 %

 

7. Revenue

 

A. Revenue streams

 

The Group generates revenue primarily through providing the services for production of feature films for initial exhibition in theaters and streaming services.

 

Revenue from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Revenue from contracts with customers   ₩     18,632,504       7,746,081  

 

B. Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 6).

 

Revenue from contracts with customers based on the service contract type and the timing of satisfaction of performance obligations for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Major products/service lines                 　  
Media production   ₩     18,632,504       7,746,081  
Timing of revenue recognition                    
At a point in time   ₩     102,939       171,691  
Over time         18,529,565       7,574,390  
Total   ₩     18,632,504       7,746,081  

 

21

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

C. Contract balance

 

The balance of contract assets from contracts with customers as of December 31, 2024 and 2023 are as follows:

 

       

December 31,

2024

    

December 31,
2023

  
        (In thousands of Korean won)  
Accounts receivable — trade, net   ₩     633       2,647  
Contract asset (Unbilled receivables)         724,848       143,834  
Contract liabilities (Deferred revenue)         -       6,182,960  

 

The contract liabilities primarily relate to the advance consideration received from customers for media production service, for which revenue is recognized over time. This will be recognized as revenue when the Group satisfies the performance obligations.

 

The amount of revenue recognized that was included in the contract liability balance at the beginning of the year is 6,182,960 thousand Korean won.

 

As of December 31, 2024, the Group had two ongoing projects. The aggregate transaction prices allocated to the remaining performance obligations under these contracts amounted to KRW 742,534 thousand and KRW 183,809 thousand, respectively, all of which are expected to be recognized as revenue during the year ending December 31, 2025.

 

D. Asset recognized from costs to fulfil a Contract

 

The Group recognized the expenses related to the screenplay for the film and drama production as assets, which are presented under “Other assets” in the statement of financial position.

 

       

December 31,
2024

    

December 31,

2023

  
        (In thousands of Korean won)  
Asset recognized from costs to fulfil a contract (*)   ₩     19,170       4,128,054  

 

 
(*) This is presented within ‘other assets’ in the statements of financial position.

 

The costs relate directly to the contract, generate resources that will be used in satisfying the contract and are expected to be recovered. They were therefore recognized as an asset from costs to fulfil a contract. The asset is amortized as expense on a basis that is consistent with the transfer to the customer of the services to which the asset related over the term of the specific film production contract.

 

22

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

8. Income and Expenses

 

A. Other income

 

Details of other income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Reversal for impairment of prepayments (*)   ₩     -       20,000  
Miscellaneous income         2       103  
Debt forgiveness gain         -       15,901  
Total   ₩     2       36,004  

 

 
(*) Recouping prepaid directing fees that were previously acknowledged as a prepayment impairment in the past.

 

B. Other expenses

 

Details of other expenses for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Miscellaneous expenses   ₩     498       2,016  
Impairment of prepayments (*)         21,000       -  
Total   ₩     21,498       2,016  

 

 
(*) Loss on impairment of prepaid movie development fee for the project that has been prolonged without progress.

 

C. Expenses by nature

 

Details of classification of expenses by nature for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Subcontracted production and operating services   ₩     959,872       690,459  
Employee benefits         548,451       557,970  
Depreciation and amortization         94,285       84,999  
Actor’s appearance fee         4,435,410       1,673,030  
Staff and equipment, etc         9,087,898       3,290,008  
Transportation         477,886       147,706  
Rent         1,624,749       816,587  
Supplies         840,519       485,067  
Other         88,115       83,179  
Total   ₩     18,157,185       7,829,005  

 

Total expenses consist of cost of sales and selling, general and administrative expenses.

 

23

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

9. Finance income and costs

 

Details of finance income and costs for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean Won)  
Finance income                    
Interest income   ₩     43,315       69,940  
Gains on disposal of short-term financial instruments         12,657       137,811  
Gains on valuation of short-term financial instruments         -       37,639  
Total   ₩     55,972       245,390  
Finance costs         　          
Interest expenses   ₩     10,617       11,504  
Losses on valuation of short-term financial instruments         137,132       -  
Total   ₩     147,749       11,504  

 

10. Employee benefits

 

The expenses recognized in relation to defined contribution plan for the years ended December 31, 2024 and 2023 are Korean Won 75,450 thousand and Korean Won 79,537 thousand.

 

A. Employee benefit expenses

 

i. Details of employee benefit expenses recognized for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Wages and salaries   ₩     434,027       437,543  
Expenses related to post-employment plans         75,450       79,537  
Fringe benefit         38,974       40,890  
Total   ₩     548,451       557,970  

 

ii. Expenses are recognized in the consolidated statements of comprehensive income (loss) as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Selling, general and administrative expenses   ₩     548,451       557,970  

 

24

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

11. Income taxes

 

A. Amounts recognized in profit or loss

 

        2024     2023  
        (In thousands of Korean won)  
Current tax expense                    
Current year   ₩     -       -  
Adjustments recognized related to prior period incomes (*)         3,732       (1,523 )
Tax expense (benefit) on continuing operations   ₩     3,732       (1,523 )

 

 
(*) In the normal course of business, the Group is examined by taxation authority. The Group’s management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liabilities for income taxes.

 

The Group establish additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the consolidated statements of operations.

 

B. Reconciliation of effective tax rate

 

        2024     2023  
        (In thousands of Korean won)  
Profit before income tax   ₩     362,046       184,950  
Tax at the statutory income tax rate         35,843       18,310  
Adjustments:         　          
Expenses not deductible for tax purposes         1,119       1,658  
Changes in unrecognized deferred tax assets         (36,703 )     (15,085 )
Adjustments recognized related to prior period incomes         3,732       (1,523 )
Differences in tax rate         (259 )     (4,883 )
Income tax expenses (benefit)   ₩     3,732       (1,523 )
Effective income tax rate (*)         1.03 %     -  

 

 
(*) The effective tax rate is not calculated as the Group incurred a income tax benefit for the year ended December 31, 2023.

 

25

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

C. Movement in deferred tax balances

 

i. Movement in deferred tax balances as of December 31, 2024

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Contract assets   ₩     367,244       (488,801 )     (121,557 )
Prepayments         (1,311 )     (16,438 )     (17,749 )
Lease liabilities         2,086       (806 )     1,280  
Others         (363,533 )     465,687       102,154  
Total   ₩     4,486       (40,358 )     (35,872 )
Loss carried forward   ₩     29,972       3,395       33,367  
Carryover tax credit         2,155,094       (1,870,543 )     284,551  
Unrecognized deferred tax income asset (*)         (2,189,552 )     1,907,506       (282,046 )
Deferred tax assets (liabilities)   ₩     -       -       -  

 

 
(*) As of December 31, 2024, the Group did not recognize deferred income tax assets for the carryover tax credit exceeding taxable temporary difference as it is not probable such carryover tax credit can be utilized in the foreseeable future.

 

ii. Movement in deferred tax balances as of December 31, 2023

 

        Tax effect  
        Beginning     Increase (decrease)     Ending  
        (In thousands of Korean won)  
Contract assets   ₩     (584,353 )     951,597       367,244  
Prepayments         539,340       (540,651 )     (1,311 )
Lease liabilities         3,137       (1,051 )     2,086  
Others         10,703       (374,236 )     (363,533 )
Total   ₩     (31,173 )     35,659       4,486  
Loss carried forward   ₩     85,649       (55,677 )     29,972  
Carryover tax credit         2,119,665       35,429       2,155,094  
Unrecognized deferred tax income assets (*)         (2,174,141 )     (15,411 )     (2,189,552 )
Deferred tax assets (liabilities)   ₩     -       -       -  

 

 
(*) As of December 31, 2023, the Group did not recognize deferred income tax asset for the temporary difference as it is not probable such loss carried forward and carryover tax credit can be utilized in the foreseeable future.

 

26

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

D. Deferred assets (liabilities)

 

i. Details of unrecognized deferred income tax assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Unrecognized temporary difference   ₩     -       4,486  
Loss carried forward         -       29,972  
Carryover tax credit         282,046       2,155,094  
Total   ₩     282,046       2,189,552  

 

ii. The maturity of unused carryover tax credit that are not recognized as deferred income tax assets as of December 31, 2024 is as follows:

 

Year of expiration       Unused carryover
tax credit		  
        (In thousands of Korean won)  
2029   ₩     282,046  
Total   ₩     282,046  

 

 

iii. The timing of recovery of deferred tax assets and liabilities as of December 31, 2024 and 2023 is as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Deferred tax assets                    
- Deferred tax assets to be recovered after more than 12 months   ₩     387,211       2,275,843  
- Deferred tax assets to be recovered within 12 months         214,840       949,054  
Sub-total         602,051       3,224,897  
Deferred tax liabilities         　          
- Deferred tax liabilities to be recovered after more than 12 months         (108,591 )     (132,409 )
- Deferred tax liabilities to be recovered within 12 months         (211,414 )     (902,936 )
Sub-total         (320,005 )     (1,035,345 )
Unrecognized deferred tax assets         (282,046 )     (2,189,552 )
Deferred tax assets (liabilities), net   ₩     -       -  

 

27

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

12. Other assets

 

Details of other assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current                    
Prepaid expenses   ₩     21,195       4,129,482  
Value added tax receivables         45,229       941,424  
Non-current                    
Non-current prepayments         518,100       441,600  
Total   ₩     584,524       5,512,505  

 

13. Trade and other receivables

 

Details of trade and other receivables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)
Trade receivable                    
Accounts receivable — Trade   ₩     633       2,647  
Other receivables                    
Accrued income         2,766       42,664  
Non-trade receivables         -       1  
Accounts receivable — other, net         2,766       42,665  
Total   ₩     3,399       45,312  

 

14. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Deposits in banks   ₩     1,448,485       3,723,417  

 

The Group doesn’t have any restricted cash and cash equivalents as of December 31, 2024 and 2023.

 

28

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

15. Loans receivable

 

The terms and conditions of outstanding loans as of December 31, 2024 and 2023 are as follows:

 

                December 31,
2024		     December 31,
2023		  
                (In thousands of Korean won)  
    Currency    

Nominal
interest rate

     Face value     Carrying
amount		     Face value     Carrying
amount		  
Key management personnel   KRW     4.60%       -       -       927,120       927,120  
Key management personnel   KRW     4.60%       -       -       25,380       25,380  
K Enter Holdings Inc.   KRW     3.00%       135,000       135,000       -       -  
Total loans receivable       135,000       135,000       952,500       952,500  

 

16. Property, plant and equipment

 

A. Reconciliation of carrying amount

 

Details of property, plant and equipment as of December 31, 2024 and 2023 are as follows:

 

        December 31, 2024  
        Book value     Accumulated
depreciation		     Carrying
amount		  
        (In thousands of Korean won)  
Office equipment   ₩     6,067       (6,063 )     4  
Furniture and fixtures         2,500       (2,499 )     1  
Right-of-use assets         678,021       (554,237 )     123,784  
Total   ₩     686,588       (562,799 )     123,789  

 

        December 31, 2023  
        Book value     Accumulated
depreciation		     Carrying
amount		  
        (In thousands of Korean won)  
Office equipment   ₩     6,067       (6,063 )     4  
Furniture and fixtures         2,500       (2,499 )     1  
Right-of-use assets         597,953       (459,952 )     138,001  
Total   ₩     606,520       (468,514 )     138,006  

 

29

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

Details of the changes in property and equipment for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Office
equipment		    

Furniture
and fixture

     Right-of-Use
assets		     Total  
                                     
Beginning balance   ₩     4       1       138,001       138,006  
Depreciation         -       -       (94,285 )     (94,285 )
Lease modification         -       -       80,068       80,068  
Ending balance   ₩     4       1       123,784       123,789  

 

        2023  
        Office
equipment		    

Furniture
and fixture

     Right-of-Use
assets		     Total  
          (In thousands of Korean won)  
Beginning balance   ₩     4       1       145,725       145,730  
Depreciation         -       -       (84,999 )     (84,999 )
Lease modification         -       -       77,275       77,275  
Ending balance   ₩     4       1       138,001       138,006  

 

The classification of depreciation expenses in the consolidated statements of comprehensive income for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Cost of revenues   ₩     27,000       18,400  
Selling, general and administrative expenses         67,285       66,599  
Total   ₩     94,285       84,999  

 

B. Leased property, plant and equipment

 

The Group leased the building and vehicles during the years ended December 31, 2024 and 2023. The amount of right-of-use assets recognized by category is as follows.

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Buildings   ₩     122,758       111,555  
Vehicles         1,026       26,446  
Total   ₩     123,784       138,001  

 

30

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

17. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial assets at amortized cost                    
Cash and cash equivalents   ₩     1,448,485       3,723,417  
Accounts receivable — trade, net         633       2,647  
Accounts receivable — other, net         2,766       42,665  
Contract assets         724,848       143,834  
Short-term loans, net         135,000       952,500  
Other current financial assets         50,600       49,000  
Other non-current financial assets         86,781       131,620  
Financial assets at fair value through profit or loss         　       　  
Short-term financial instruments         862,868       1,537,640  
Total   ₩     3,311,981       6,583,323  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Financial liabilities at amortized cost                    
Trade and other payables (*)   ₩     835,225       894,333  
Other current financial liabilities         -       200,200  
Total   ₩     835,225       1,094,533  

 

 
(*) Trade and other payables that are not financial liabilities are excluded.

 

A. Classification of investment assets

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current investments                    
Other securities – at FVTPL   ₩     862,868       1,537,640  

 

31

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

B. Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Financial assets at
amortized cost		     Financial assets
at fair value
through profit or loss		     Total  
        (In thousands of Korean won)  
Interest income   ₩     21,192       22,123       43,315  
Gain on disposal of short-term financial instruments         -       12,657       12,657  
Loss on valuation of short-term financial instruments         -       (137,132 )     (137,132 )
Total   ₩     21,192       (102,352 )     (81,160 )

 

        2023  
        Financial assets at
amortized cost		     Financial assets
at fair value
through profit or loss		     Total  
        (In thousands of Korean won)  
Interest income   ₩     66,322       3,618       69,940  
Gain on disposal of short-term financial instruments         -       137,811       137,811  
Gain on valuation of short-term financial instruments         -       37,639       37,639  
Total   ₩     66,322       179,068       245,390  

 

32

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

18. Capital and reserves

 

A. Share capital

 

Details of share capital as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In Korean won and number of shares)  
Number of authorized shares         40,000       40,000  
Value per share   ₩     5,000       5,000  
Number of shares issued         10,000       10,000  
Common shares   ₩     50,000,000       50,000,000  

 

i. Ordinary shares

 

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Group.

 

B. Share Premium

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Share premium   ₩     50,000       50,000  

 

C. Treasury shares

 

On January 31, 2024, the Group acquired a 5% interest of the Parent Company’s issued shares for Korean Won 2,000,000 thousand.

 

Details of treasury shares as of December 31, 2024 and 2023 are as follows:

 

          December 31,
2024		     December 31,
2023		  
          Number of
shares		     Carrying
amount		     Number of
shares		     Carrying
amount		  
          (In thousands of Korean won and number of shares)  
Beginning balance     ₩     -       -       -       -  
Acquisition           500       2,000,000       -       -  
Ending balance     ₩     500       2,000,000       -       -  

 

33

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

19. Capital management

 

The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group monitors capital using a ratio of ‘net debt’ to ‘adjusted equity’. Net debt is calculated as total liabilities (as shown in the statement of financial position) less cash and cash equivalents. The Group’s net debt to adjusted equity ratio as of December 31, 2024 and 2023 is as follows.

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Total liabilities   ₩     1,123,852       7,695,707  
Less: Cash and cash equivalents         (1,448,485 )     (3,723,417 )
Net debt         (324,633 )     3,972,290  
Total equity   ₩     2,896,442       4,538,128  
Net debt to total equity ratio (*)         -       87.5 %

 

 
(*) The net debt to total equity ratio is not calculated as the Company’s net debt is negative.

 

20. Borrowings/payable

 

Borrowings as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Current Liabilities                    
Lease liabilities (*1)         77,927       95,509  
Investment withholdings (*2)         -       200,200  
Total   ₩     77,927       295,709  
Non-Current liabilities                 　  
Lease liabilities (*1)         45,402       44,421  

 

 
(*1) The interest rate related to lease liabilities reflects the incremental borrowing rate based on the Group’s credit. The amount of interest expense related to lease liabilities incurred during the year ended December 31, 2024 is Korean Won 10,617 thousand (2023: Korean Won 11,504 thousand). Additionally, the amount of short-term lease payments and low-value assets lease payments not included in the measurement of lease liabilities during 2024 is Korean Won 6,280 thousand (2023: Korean Won 31,629 thousand).
(*2) The amount corresponds to a payment made in accordance with the share subscription agreement with G&G Production, dated October 17, 2022. Notably, no shares were issued as a consequence of this subscription payment. On December 20, 2023, an additional agreement was established, outlining the complete refund of the subscription payment by June 30, 2024. A refund was fully processed and remitted to G&G Production as of December 31, 2024.

 

34

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

21. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Other payable   ₩     576       381,377  
Accrued expenses         911,020       678,710  
Total   ₩     911,596       1,060,087  

 

22. Financial Instruments – Fair values and risk management

 

A. Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

The carrying amounts of financial instruments by category as of December 31, 2024 are as follows:

 

        Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                            
Short-term financial instruments   ₩     862,868       -       862,868       -       862,868  

 

Carrying amounts of financial instruments by category as December 31, 2023 are as follows:

 

        Fair value     Level 1     Level 2     Level 3     Total  
        (In thousands of Korean won)  
Financial assets at fair value                                            
Short-term financial instruments   ₩     1,537,640       -       1,537,640       -       1,537,640  

 

35

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

B. Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

● Level 1: quoted prices (unadjusted) in active markets for identical asset or liability;

 

● Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability;

 

● Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of Company-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

The valuation techniques used to measure the fair value of a financial instrument include:

 

● Market price or dealer price of a similar financial instrument

 

● The fair value of derivative instruments is determined by discounting the amount to present value using the leading exchange rate as of the end of the reporting period

 

C. Financial risk management

 

The Group’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which the Group’s risk management program focuses on minimizing any adverse effects on its financial performance. The Group operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i. Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers. In order to manage credit risk, the Group regularly evaluate the credit worthiness of each customer or counterparty considering the party’s financial information, past experience, its own trading records and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Group recognizes the changes in expected credit loss(“ECL”) in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

36

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

The maximum exposure to credit risk of the Group as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Cash and cash equivalents   ₩     1,448,485       3,723,417  
Accounts receivable, net         3,399       45,312  
Short-term loans, net         135,000       952,500  
Other current financial assets         50,600       49,000  
Contract assets         724,848       143,834  
Other non-current financial assets         86,781       131,620  
Total   ₩     2,449,113       5,045,683  

 

Cash and cash equivalents are deposited in financial institutions with strong credit rating. The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group has established a credit policy under which each new customer is analyzed individually before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

 

The Group monitors customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trading history with the Group and existence of previous financial difficulties. The Group does not require collateral in respect of trade and other receivables. Expected credit losses (ECLs) and credit risk exposures for accounts and other receivables as of December 31, 2024 and 2023 are as follows:

 

① Accounts receivables— trade, net

 

As of December 31, 2024  

Expected
loss rate

        

Carrying
amount

    

Loss
allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     633       -  
More than 90 days ~ Less than 1year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     633       -  

 

As of December 31, 2023  

Expected
loss rate

        

Carrying
amount

    

Loss
allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     2,647       -  
More than 90 days ~ Less than 1year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     2,647       -  

 

37

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

② Other receivables

 

As of December 31, 2024  

Expected
loss rate

        

Carrying
amount

    

Loss
allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     140,147       -  
More than 90 days ~ Less than 1year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     140,147       -  

 

As of December 31, 2023  

Expected
loss rate

        

Carrying
amount

    

Loss
allowance

  
              (In thousands of Korean won)  
Not due or overdue less than 90 days     0.00 %   ₩     223,285       -  
More than 90 days ~ Less than 1year     0.00 %         -       -  
More than 1 year     100.00 %         -       -  
Total           ₩     223,285       -  

 

38

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

ii. Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions.

 

Financial liabilities of the Group by maturity according to the remaining period from December 31, 2024 to the contractual maturity date are as follows:

 

        December 31, 2024  
       

Carrying
Amount

    

Less than
3 months

    

3 months
~ 1 year

     1~2 years     2~5 years    

More than
5 years

     Total  
        (In thousands of Korean won)  
Non-derivative financial liabilities
Other payables (*)   ₩     576       576       -       -       -       -       576  
Accrued expense (*)         834,649       834,649       -       -       -       -       834,649  
Lease liabilities         123,329       21,766       58,185       51,720       -       -       131,671  
Total   ₩     958,554       856,991       58,185       51,720       -       -       966,896  

 

 
(*) Trade and other payables and accrued expense exclude non-financial liabilities.

 

Financial liabilities of the Group by maturity according to the remaining period from December 31, 2023 to the contractual maturity date are as follows:

 

        December 31, 2023  
       

Carrying
Amount

    

Less than
3 months

    

3 months
~ 1 year

     1~2 years     2~5 years    

More than
5 years

     Total  
        (In thousands of Korean won)  
Non-derivative financial liabilities
Other payables (*)   ₩     381,377       381,377       -       -       -       -       381,377  
Accrued expense (*)         512,956       512,956       -       -       -       -       512,956  
Lease liabilities         139,930       24,849       74,547       50,731       -       -       150,127  
Investment withholdings         200,200       -       200,200       -       -       -       200,200  
Total   ₩     1,234,463       919,182       274,747       50,731       -       -       1,244,660  

 

 
(*) Trade and other payables and accrued expense exclude non-financial liabilities.

 

39

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

23. Leases

 

A. Leases as lessee

 

The Group leases building and vehicles. The leases typically run for a period of 1~5 years, with an option to renew or terminate the lease after that date. The Group also leases printer with contract terms of one year. These leases are short-term and/or leases of low-value items. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases. Information about leases for which the Group is a lessee is presented below.

 

i. Right-of-use assets

 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented as property, plant and equipment.

 

Details of right-of-use assets and lease liabilities recognized in the consolidated statements of financial position as of December 31, 2024 and 2023 are as follows:

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Acquisition price)                    
Buildings   ₩     550,924       470,856  
Vehicles         127,097       127,097  
Total   ₩     678,021       597,953  

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Accumulated depreciation)                    
Buildings   ₩     (428,166 )     (359,301 )
Vehicles         (126,071 )     (100,651 )
Total   ₩     (554,237 )     (459,952 )

 

        December 31,
2024		     December 31,
2023		  
        (In thousands of Korean won)  
Right-of-use assets (Carrying amount)   ₩                
Buildings         122,758       111,555  
Vehicles         1,026       26,446  
Total   ₩     123,784       138,001  

 

40

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

Changes in right-of-use assets for the years ended December 31, 2024 and 2023 are as follows:

 

        2024  
        Building     Vehicles     Total  
        (In thousands of Korean won)  
Balance as of January 1, 2024   ₩     111,555       26,446       138,001  
Depreciation         (68,865 )     (25,420 )     (94,285 )
Lease modification         80,068       -       80,068  
Balance as of December 31, 2024   ₩     122,758       1,026       123,784  

 

        2023  
        Building     Vehicles     Total  
        (In thousands of Korean won)  
Balance as of January 1, 2023   ₩     93,860       51,865       145,725  
Depreciation         (59,580 )     (25,419 )     (84,999 )
Lease modification         77,275       -       77,275  
Balance as of December 31, 2023   ₩     111,555       26,446       138,001  

 

ii. Amounts recognized in profit or loss

 

Amounts recognized in profit or loss for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Interest expense relating to lease liabilities (included in finance cost)   ₩     10,617       11,504  
Expense relating to short-term leases         4,176       30,284  
Expense relating to leases of low-value assets excluding short-term leases         2,104       1,345  

 

iii. Amounts recognized in statement of cash flows

 

Amounts recognized in statement of cash flows for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Total cash outflows of leases   ₩     107,356       127,665  

 

iv. Extension options

 

Some property leases contain extension options exercisable by the Group. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at the lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control.

 

41

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

24. Statement of Cash flows

 

Adjustments for income and expenses from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Depreciation   ₩     94,285       84,999  
Impairment of prepayments         21,000       -  
Gains on disposal of short-term financial instruments         (12,657 )     (137,811 )
Gains on valuation of short-term financial instruments         -       (37,639 )
Losses on valuation of short-term financial instruments         137,132       -  
Debt forgiveness gain         -       (15,901 )
Interest expenses         10,617       11,504  
Interest income         (43,315 )     (69,940 )
Tax expenses (benefit)         3,732       (1,523 )
Total   ₩     210,794       (166,311 )

 

Changes in assets and liabilities from operating activities for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Other current non-financial liabilities   ₩     (32,595 )     32,634  
Accounts receivable — trade, net         2,014       (843 )
Other current assets         5,004,481       (5,069,181 )
Other non-current non-financial assets         (97,500 )     (58,000 )
Accounts receivable — other, net         2       8,119  
Trade and other payables         (148,491 )     925,353  
Contract assets         (581,013 )     7,868  
Contract liabilities         (6,182,960 )     6,182,960  
Total   ₩     (2,036,062 )     2,028,910  

 

Significant non-cash transactions for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Reclassification of long-term loans   ₩     -       927,120  
Increase in lease liabilities due to lease agreements         73,858       67,166  

 

42

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

The movements of liabilities to cash flows arising from financing activities for the years ended December 31, 2024 and 2023 are as follows:

 

       

Current
Lease liabilities

     Non-current
lease liabilities		    

Current
investment
withholdings

    

Non-current
investment
withholdings

     Total  
        (In thousands of Korean won)  
Balance at 1 January 2023   ₩     79,232       78,064       150,800       650,000       958,096  
Changes from financing cash flows                                            
Payment of lease liabilities         (84,532 )     -       -       -       (84,532 )
Repayment of investment withholdings         -       -       (600,600 )     -       (600,600 )
Reclassification         96,959       (96,959 )     650,000       (650,000 )     -  
Total   ₩     12,427       (96,959 )     49,400       (650,000 )     (685,132 )
Other changes                                            
Lease modification         3,850       63,316       -       -       67,166  
Interest expense         11,504       -       -       -       11,504  
Interest paid         (11,504 )     -       -       -       (11,504 )
Total   ₩     3,850       63,316       -       -       67,166  
Balance at 31 December 2023   ₩     95,509       44,421       200,200       -       340,130  
Balance at 1 January 2024         95,509       44,421       200,200       -       340,130  
Changes from financing cash flows                                            
Payment of lease liabilities         (90,459 )     -       -       -       (90,459 )
Repayment of investment withholdings         -       -       (200,200 )     -       (200,200 )
Reclassification         73,660       (73,660 )     -       -       -  
Total   ₩     (16,799 )     (73,660 )     (200,200 )     -       (290,659 )
Other changes                                            
Lease modification         (783 )     74,641       -       -       73,858  
Interest expense         10,616       -       -       -       10,616  
Interest paid         (10,616 )     -       -       -       (10,616 )
Total         (783 )     74,641       -       -       73,858  
Balance at 31 December 2024   ₩     77,927       45,402       -       -       123,329  

 

43

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

25. Related parties

 

A. List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   Name
Key management personnel 　 Yoon, In Bum
Key management personnel   Kim, Soo Jin

 

B. Account balances with related parties

 

The balances of receivables and payables to related parties as of December 31, 2024 and 2023 are as follows:

 

            December 31,
2024		     December 31,
2023		  
Related party   Name       Receivables     Receivables  
            (In thousands of Korean won)  
Key management personnel   Yoon, In Bum   ₩     -       497,582  
Key management personnel   Kim, Soo Jin         -       497,582  
Total   ₩     -       995,164  

 

C. Financial transactions with related parties

 

Details of significant financial transactions with related parties for the years ended December 31, 2024 and 2023 are as follows:

 

            2024     2023  
Related party   Name       Increase in
accrued income		     Collection (*)     Payment for
Loans		     Increase in
accrued income		     Collection (*)  
            (In thousands of Korean won)  
Key management personnel   Yoon, In Bum   ₩     1,077       498,659       12,690       21,332       21,324  
Key management personnel   Kim, Soo Jin         1,077       498,659       12,690       21,332       21,324  
Total   ₩     2,154       997,318       25,380       42,664       42,648  

 

 
(*) Collection includes the accrued interest (2024: Korean Won 44,818 thousand, 2023: Korean Won 42,648 thousand).

 

Additionally, the Parent Company acquired 500 shares of treasury shares for Korean won 2,000 million from the Group’s key management personnel during the years ended December 31, 2024 (See Notes 1 and 18).

 

D. Transactions with key management personnel

 

The compensation for the key management personnel for the years ended December 31, 2024 and 2023 are as follows:

 

        2024     2023  
        (In thousands of Korean won)  
Wages and salaries   ₩     336,000       363,000  
Post-employment benefits         67,200       72,600  

 

Compensation of the Group’s key management personnel includes salaries, non-cash benefits and contributions to a defined contribution plan (See Note 10).

 

44

 
BIDANGIL PICTURES CO., LTD.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
For the Years Ended December 31, 2024 and 2023

 

26. Commitments

 

On September 14, 2023, an amendment was made to the equity interest exchange agreement, originally entered into on April 10, 2023, between the CEOs, who is the dominant shareholder of the Parent Company, and K Enter Holdings, Inc. for the purpose of listing on the NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective on the date designated by K Enter Holdings, Inc. Upon the approval, the CEOs of the Group will exchange 5,100 shares with the equity interest of K Enter Holdings, Inc. Following the equity interest exchange transaction, the Group is expected to be a subsidiary of K Enter Holdings, Inc.

 

27. Subsequent events

 

On January 3, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including Bidangil Pictures Co., Ltd. through a share exchange. Upon the approval, the CEOs of the Group exchanged 5,100 shares with the equity interest of K Enter Holdings, Inc. Following the equity interest exchange transaction, the Group become a subsidiary of K Enter Holdings, Inc.

 

45

 

Exhibit 15.20

 

Studio Anseilen Co., Ltd.

 

STATEMENTS OF FINANCIAL POSITION

 

As of December 31, 2024 and 2023

 

   Note     December 31,
2024		   December 31,
2023		 
         (In thousands of Korean won) 
Assets  　  　   　    　 
Cash and cash equivalents  12,14,16,19  ₩   361,234    275,897 
Other current financial assets  14,19  　   54,824    50,000 
Other current assets  11  　   43    26,465 
Total current assets         416,101    352,362 
Long-term investments  14,19  　   -    30,000 
Property, plant, and equipment  13      735    945 
Other non-current non-financial assets  11  　   586,000    360,000 
Total non-current assets         586,735    390,945 
Total assets  　  ₩   1,002,836    743,307 
Liabilities                
Trade and other payables  14,17,19  ₩   17,724    2,715 
Other current non-financial liabilities  11      61,220    1,931 
Total current liabilities  　  　   78,944    4,646 
Other non-current non-financial liabilities  11,18      1,500,000    1,000,000 
Defined benefit liability  9  　   7,130    72,347 
Total non-current liabilities         1,507,130    1,072,347 
Total liabilities  　  　   1,586,074    1,076,993 
Equity                
Share capital  15  　   15,000    15,000 
Other reserves  15      (1,721)   (1,054)
Accumulated deficit  2　  　   (596,517)   (347,632)
Total equity         (583,238)   (333,686)
Total liabilities and equity  　  ₩   1,002,836    743,307 

 

The accompanying notes are an integral part of these financial statements.

 

1

 

 

Studio Anseilen Co., Ltd.

 

STATEMENTS OF COMPREHENSIVE INCOME

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

   Note     2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
         (In thousands of Korean won) 
Revenue     　   　    　 
Cost of revenue         -    - 
Gross profit  　  　   -    - 
Selling, general, and administrative expenses  7      (230,952)   (348,549)
Operating loss  　  　   (230,952)   (348,549)
Other income  7      11,905    614 
Other expense     　   (49)   - 
Finance income  8,14      211    303 
Finance costs  8,14  　   (30,000)   　- 
Loss before income tax         (248,885)   (347,632)
Income tax income (expenses)  10  　   -    - 
Loss for the period         (248,885)   (347,632)
Other comprehensive loss  　  　   　    　 
Items that will not be reclassified to income or loss:                
Remeasurement of defined benefit liability  9      (667)   - 
Total comprehensive loss for the period  　  ₩   (249,552)   (347,632)

 

The accompanying notes are an integral part of these financial statements.

 

2

 

 

Studio Anseilen Co., Ltd.

 

STATEMENTS OF CHANGES IN EQUITY

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

   Note     Share
capital		   Other
reserves		   Accumulated
deficit		   Total 
         (In thousands of Korean won) 
Balance at March 6, 2023 (inception)  15  ₩   -    -    -    - 
Total comprehensive loss for the period                          
Loss for the period  　  　   -    -    (347,632)   (347,632)
Transaction with owners, recognized directly in equity                          
Shares issued  22  　   15,000    (1,054)   -    13,946 
Balance at December 31, 2023  15  ₩   15,000    (1,054)   (347,632)   (333,686)
Balance at January 1, 2024  15  ₩   15,000    (1,054)   (347,632)   (333,686)
Total comprehensive loss for the period                          
Loss for the period  　  　   -    -    (248,885)   (248,885)
Remeasurement of defined benefit liability  9      -    (667)   -    (667)
Balance at December 31, 2024  15  ₩   15,000    (1,721)   (596,517)   (583,238)

 

The accompanying notes are an integral part of these financial statements.

 

3

 

 

Studio Anseilen Co., Ltd.

 

STATEMENTS OF CASH FLOWS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

   Note     2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
         (In thousands of Korean won) 
Cash flows from operating activities     　   　    　 
Loss for the period     ₩   (248,885)   (347,632)
Adjustments to reconcile net loss to net cash provided by operating activities  21  　   335,497    690,376 
Interest received         211    303 
Income taxes received (paid)  　  　   13    (46)
Net cash provided (used) by operating activities     ₩   86,836    343,001 
Cash flows from investing activities  　  　   　    　 
Payments for other current financial assets         (1,500)   (50,000)
Purchases of long-term investments  　  　   -    (30,000)
Purchase of property and equipment         -    (1,050)
Net cash outflow in investing activities  　  ₩   (1,500)   (81,050)
Cash flows from financing activities                
Proceeds from issues of shares  15,22　  　   -    15,000 
Share issue cost  15      -    (1,054)
Net cash inflow in financing activities  　  ₩   -    13,946 
Net increase in cash and cash equivalents         85,337    275,897 
Cash and cash equivalents at beginning of the period  12  　   275,897    - 
Cash and cash equivalents at end of the period  12  ₩   361,234    275,897 

 

The accompanying notes are an integral part of these financial statements.

 

4

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

1. Reporting entity

 

The Company

 

Studio Anseilen Co., Ltd. (“the Company”) was incorporated in March 2023 and the Company’s registered office is at B 907, 606, Hosu-ro, Ilsandong-gu, Goyang-si, Gyeonggi-do, Republic of Korea. The Company is primarily providing the media production service that consists of planning, producing, and selling the television programs.

 

The Company’s major shareholders and their respective percentage of ownership as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Number of
shares		   Ownership
(%)		   Number of
shares		   Ownership
(%)		 
Park, Jun Woo   1,000    33.33    1,000    33.33 
Shin, Kyung Soo   1,000    33.33    1,000    33.33 
Kim, Seung Ho   1,000    33.33    1,000    33.33 
Total   3,000    100    3,000    100 

 

2. Basis of Accounting

 

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by International Accounting Standard Board (“IASB”). These financial statements were authorized for issuance by the board of directors on May 14, 2025.

 

Details of the Company’s accounting policies are included in Note 5.

 

Going concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which is dependent upon the Company receiving the proceeds from the loans or securing other forms of investment and/or financing. The Company incurred a loss of Korean Won 248,885 thousand for the year ended December 31, 2024, and had net total deficit of Korean Won 596,517 thousand as of December 31, 2024. The Company acknowledges that there is a risk that the quantum and timing of cash flows sufficient to sustain operations may not be achievable and that management forecasts regarding cash flow from operations may prove inaccurate. The continuation of the Company’s activities is dependent on the availability of adequate financial support. The Company has stated that these conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Based on management’s forecasts, the day-to-day operations and expenditure requirements as described above are anticipated to be funded by the cash generated through the new commitments from K Enter Holdings. On June 21, 2024, the Company entered into an investment agreement with K Enter Holdings for Korean Won 1,000,000 thousand, designated for content development purposes. As of December 31, 2024, Korean Won 500,000 thousand has been received and the remaining Korean Won 500,000 thousand will be received before June 30, 2025. In addition, the Company received a separate non-binding loan LOI from K Enter Holdings to support the Company’s day-to-day operational expenditure. The maximum loan amount, conditions, and execution timing will be discussed in detail depending on the company’s future business environment.

 

5

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

Basis of measurement

 

These financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date.

 

Items   Measurement bases
Defined benefit liability   Present value
Financial instruments measured at fair value through profit or loss (“FVTPL”)   Fair value

 

3. Functional and presentation currency

 

These financial statements are presented in Korean Won, which the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

 

4. Use of judgements and estimates

 

In preparing these financial statements, management has made judgements and estimates that affect the application of the Company’s accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

 

6

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

A. Assumptions and estimation uncertainties

 

Information about assumptions and estimation uncertainties at the reporting date that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is included in the following notes:

 

-Note 9: measurement of defined benefit obligations: key actuarial assumptions;

 

i. Measurement of fair values

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for financial assets.

 

When measuring the fair value of a financial instruments measured at FVTPL, the Company uses observable market data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

●Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

●Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

 

●Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

 

The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

Further information about the assumptions made in measuring fair values is included in the following note:

 

●Note 19(B): financial instruments.

 

5. Material Accounting Policies.

 

The material accounting policies followed by the Company in preparation of its financial statements are as follows:

 

A.New and amended standards or interpretations adopted by the Company

 

The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2024.

 

IAS 1 Presentation of Financial Statements - Classification of Liabilities as Current or Non-current, Non-current Liabilities with Covenants

 

The amendments to IAS 1 clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability includes the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. Covenants that the entity must comply with after the end of the reporting period do not affect the classification of a liability at the end of the reporting period. However, if a liability is classified as non-current as of the end of the reporting period despite covenants that must be complied with within 12 months after that date, the entity shall disclose information about the risk that the liability could become repayable within 12 months after the reporting period. The amendments do not have a significant impact on the financial statements.

 

7

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

IAS 7 Statement of Cash Flows - IFRS 7 Financial Instruments: Disclosures – Supplier finance arrangements

 

The amendments to IAS 7 require entity to disclose information about its supplier finance arrangements that enables users of financial statements to assess the effects of those arrangements on the entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk when applying supplier finance arrangements. The amendments do not have a significant impact on the financial statements.

 

IFRS 16 – Lease Liability in a Sale and Leaseback

 

The amendments to IFRS 16 require a seller-lessee shall determine lease payments or revised lease payments in a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use retained by the seller-lessee when subsequently measuring lease liabilities arising from a sale and leaseback. The amendments do not have a significant impact on the financial statements.

 

B. New and amended standards or interpretations not yet adopted by the Company

 

The following new accounting standards and interpretations that have been published that are not mandatory for December 31, 2024 reporting periods and have not been early adopted by the Company.

 

IAS 21 The Effects of Changes in Foreign Exchange Rates – Lack of Exchangeability

 

The amendments require exchangeability of two currencies should be assessed in order to clarify reporting of foreign currency transactions in the absence of normal-functioning foreign exchange market. The amendments also require applicable spot exchange rate should be determined when the assessment indicates two currencies lack exchangeability. The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early application permitted. The Company does not expect that these amendments have a significant impact on the Company’s financial statements.

 

IFRS 9 Financial Instruments - IFRS 7 Financial Instruments: Disclosures – Classification and Measurement of Financial Instruments

 

The amendments clarify that a financial liability is derecognized on the ‘settlement date’ and introduce an accounting policy choice to derecognize financial liabilities settled using an electronic payment system before the settlement date. Other clarifications include the classification of financial assets with ESG linked features via additional guidance on the assessment of contingent features. Clarifications have been made to non-recourse loans and contractually linked instruments. Additional disclosures are introduced for financial instruments with contingent features and equity instruments classified at fair value through OCI.

 

The amendments should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted, with an option to early adopt the amendments for contingent features only. The Company does not expect that these amendments have a significant impact on the financial statements.

 

Annual Improvements to IFRS Accounting Standards – Volume 11

 

The amendments are annual improvements to the following standards:

 

A. IFRS 1 First-time adoption of International Financial Reporting Standards;

 

B. IFRS 7 Financial instruments: Disclosures;

 

C. IFRS 9 Financial instruments;

 

D. IFRS 10 Consolidated financial instruments; and

 

E. IAS 7 Statement of cash flows

 

8

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

The new standard should be applied for annual periods beginning on or after January 1, 2026, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 18 Presentation and Disclosure in Financial Statements

 

Items in the statement of profit or loss will need to be classified into one of five categories: operating, investing, financing, income taxes and discontinued operations. IFRS 18 requires the Company to present specified totals and subtotals: ‘Operating profit or loss’, ‘Profit or loss’ and ‘Profit or loss before financing and income taxes’. Information related to management-defined performance measures should be disclosed. IFRS 18 also provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items based on their shared characteristics. The new standard should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company is in review for the impact of this new standard on the financial statements.

 

IFRS 19 Subsidiaries without Public Accountability: Disclosures

 

IFRS 19 allows eligible subsidiaries to apply IFRS Accounting Standards with the reduced disclosure requirements of IFRS 19. A subsidiary may choose to apply the new standard in its consolidated, separate, or individual financial statements provided that, at the reporting date, it does not have public accountability, and its parent produces consolidated financial statements under IFRS Accounting Standards. A subsidiary applying IFRS 19 is required to disclose in its explicit and unreserved statements of compliance with IFRS Accounting Standards that IFRS 19 has been adopted. The amendments should be applied for annual periods beginning on or after January 1, 2027, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

The significant following accounting policies followed by the Company in preparation of its financial statements are as follows:

 

C. Foreign currency

 

Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates at the dates of the transactions.

 

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non- monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in profit or loss and presented within finance income and finance costs. Translation differences on Non-monetary assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

 

However, foreign currency differences arising from the translation of the following items are recognized in OCI:

 

●an investment in equity securities designated as at FVOCI (except on impairment, in which case foreign currency differences that have been recognized in OCI are reclassified to profit or loss);

 

●a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; and

 

●qualifying cash flow hedges to the extent that the hedges are effective.

 

D. Operating segments

 

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. The chief operating decision-maker has been identified as the chief executive officer. The Company’s operating segment has been determined to be a single business unit, for which the Company generates identifiable financial information that is regularly reported to the chief executive officer for the purpose of resource allocation and assessment of segment performance. The Company has a reportable segment as described in Note 6. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

9

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

E. Employee benefits

 

i. Short- term employee benefits

 

Short-term employee benefits are employee benefits due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service

 

ii. Defined benefit plans

 

The Company’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount, and deducting the fair value of any plan assets.

 

The calculation of defined benefit obligations is performed annually using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

 

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then- net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

 

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

 

F. Finance income and finance costs

 

The Company’s finance income and finance costs include:

 

●interest income;

 

●interest expense;

 

●the net gain or loss on settlement of project investments;

 

●the foreign currency gain or loss on financial assets and financial liabilities;

 

The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

●the gross carrying amount of the financial asset; or

 

●the amortized cost of the financial liability.

 

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

 

10

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

G. Income tax

 

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

 

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

 

i. Current income tax

 

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.

 

Current tax assets and liabilities are offset only if certain criteria are met.

 

- Has a legally enforceable right to set off the recognized amounts; and

 

- Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

ii. Deferred income tax

 

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

 

●temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

 

●temporary differences related to investments in subsidiaries, associates, and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

 

●taxable temporary differences arising on the initial recognition of goodwill.

 

Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.

 

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Company has not rebutted this presumption.

 

Deferred tax assets and liabilities are offset only if certain criteria are met.

 

- Has a legally enforceable right to set off the recognized amounts; and

 

- Intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

11

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

H. Cash and cash Equivalents

 

Cash and cash equivalents comprise deposits held at banks with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

I. Financial instruments

 

i. Recognition and initial measurement

 

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

 

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

 

ii. Classification and subsequent measurement

 

Financial assets

 

On initial recognition, a financial asset is classified as measured at:

 

●amortized cost; or

 

●FVTPL

 

●FVOCI

 

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

●it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

●its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

 

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

 

12

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

Financial assets - Business model assessment

 

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes:

 

●the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

 

●how the performance of the portfolio is evaluated and reported to the Company’s management;

 

●the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

 

●how managers of the business are compensated - e. g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

●the frequency, volume, and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Company’s continuing recognition of the assets.

 

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest

 

For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g., liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

 

●contingent events that would change the amount or timing of cash flows;

 

●terms that may adjust the contractual coupon rate, including variable-rate features;

 

●prepayment and extension features; and

 

●terms that limit the Company’s claim to cash flows from specified assets (e.g., non-recourse features).

 

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable compensation for early termination of the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

 

Financial assets - Subsequent measurement and gains and losses

 

Financial assets at FVTPL: These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

13

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

Financial assets at amortized cost: These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

Financial liabilities - Classification, subsequent measurement and gains and losses

 

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

 

iii. Derecognition

 

Financial assets

 

The Company derecognizes a financial asset when:

 

●the contractual rights to the cash flows from the financial asset expire; or

 

●it transfers the rights to receive the contractual cash flows in a transaction in which either:

 

-substantially all of the risks and rewards of ownership of the financial asset are transferred; or

 

-the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

 

The Company enters into transactions whereby it transfers assets recognized in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

 

Financial liabilities

 

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

 

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.

 

J. Impairment

 

●Non- financial assets

 

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, developing contents, contract assets and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

 

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

 

14

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs of disposal. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

 

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

 

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

K. Leases

 

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

 

●As a lessee

 

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

 

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

 

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

 

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

 

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

 

Lease payments included in the measurement of the lease liability comprise the following:

 

●fixed payments, including in-substance fixed payments;

 

●variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

●amounts expected to be payable under a residual value guarantee; and

 

●the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

 

15

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

 

The Company uses hindsight in applying IFRS 16 such as the determination of lease term for contracts that contain options to extend or terminate a lease.

 

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less) and short-term leases (leases that have a lease term of 12 months or less at the commencement date). The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

L. Fair value measurement

 

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

 

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

 

When one is available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

If there is no quoted price in an active market, then the Company uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

 

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price - i. e. the fair value of the consideration given or received. If the Company determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data, or the transaction is closed out.

 

M. Concentration of credit risk

 

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral for customers on accounts receivable. The Company maintains reserves for potential credit losses, which are periodically reviewed.

 

16

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

6. Operating segments

 

A.Basis for segmentation

 

The Company’s operating segments have been identified to be a single business unit, by which the Company provides media production services.

 

The following summary describes the operations of the reportable segment.

 

Reportable segment   Operations
Media Production   Planning, producing, and selling the media content such as television programs

 

7. Income and Expenses

 

A.Other income

 

Details of other income for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

   2024  

For the
period from
March 6, 2023

(inception) to
December 31,
2023

 
   (In thousands of Korean won) 
Miscellaneous income   11,905    614 

 

B.Expenses by nature

 

Details of classification of expenses by nature for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024  

For the

period from
March 6, 2023
(inception) to
December 31,
2023

 
      (In thousands of Korean won) 
Employee benefits  　   182,082    320,372 
Commission paid      6,005    5,732 
Rent  　   22,800    12,000 
Supplies      1,568    5,422 
Taxes & dues  　   63    909 
Depreciation and amortization      210    105 
Other expenses  　   18,224    4,009 
Total  ₩   230,952    348,549 

 

Total expenses consist of cost of sales and selling, general and administrative expenses.

 

17

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

8. Finance income and costs

 

Details of finance income and costs for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024  

For the

period from
March 6, 2023

(inception) to
December 31,
2023

 
      (In thousands of Korean won) 
Finance income  　   　    　 
Interest income  ₩   211    303 
Finance costs  　   　    　 
Loss on the fair value of financial investment assets      30,000    - 

 

9. Employee benefits

 

Details of defined benefit liability recognized as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Defined benefit liability  ₩   7,130    72,347 

 

The Company operates the defined benefit plans as a retirement pension scheme. Defined benefit plans expose the Company to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk.

 

A. Movement in net defined benefit (asset) liability

 

Details of reconciliation from the opening balances to the closing balances for the net defined benefit liability and its components for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      Defined benefit obligation   Fair value of plan assets   Net defined benefit liability 
      (In thousands of Korean won) 
      2024   2023   2024   2023   2024   2023 
Balance at 1 January  ₩   72,347    -    -    -    72,347    - 
Included in profit or loss                                 
Current service cost  　   91,684    72,347    -    -    91,684    72,347 
Gains on settlement      (160,656)   -    -    -    (160,656)   - 
Interest cost(income)  　   3,088    -    -    -    3,088    - 
       (65,884)   72,347    -    -    (65,884)   72,347 
Included in OCI                                 
Remeasurement loss(gain)                                 
- Demographic assumption  　   (13)   -    -    -    (13)   - 
- Financial assumption      925    -    -    -    925    - 
- Adjustment based on experience  　   (245)   -    -    -    (245)   - 
- Return on plan assets excluding interest income      　    -    -    -    -    - 
       667    -    -    -    667    - 
Other                                 
Benefits paid  　   -    -    -    -    -    - 
Balance at 31 December  ₩   7,130    72,347    -    -    7,130    72,347 

 

18

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

B. Plan assets

 

There are no contributions funded to its defined benefit plans as of December 31, 2024 and 2023.

 

C. Defined benefit obligation

 

i.Actuarial assumptions

 

Details of actuarial assumptions used for the year ended December 31, 2024 and period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

   2024   2023 
Discount rate   4.00%   4.50%
Future salary growth   2.88%   2.88%

 

Assumptions regarding future longevity have been based on published statistics and mortality tables. As of December 31, 2024 and 2023, the weighted average duration of the defined benefit obligation was 9.2 years and 8.6 years, respectively.

 

The expected maturity analysis of undiscounted defined severance benefits as of December 31, 2024 and 2023 are as follows:

 

      December 31, 2024 
      Less than
1 year		   Between
1~2 years		   Between
2~5 years		   Over
5 years		   Total 
Expected Retirement Benefits  ₩   443    438    1,273    8,486    10,640 

 

      December 31, 2023 
      Less than
1 year		   Between
1~2 years		   Between
2~5 years		   Over
5 years		   Total 
Expected Retirement Benefits  ₩   4,564    4,550    13,496    87,210    109,820 

 

ii.Sensitivity analysis

 

The Company measures the risk of actuarial assumption changes as a 1% fluctuation in the discount rate and future salary growth rate of the amounts of defined benefit obligation, which reflects the management’s assessment of the risk of actuarial assumption fluctuation that can be reasonably occur. The impact of a 1% fluctuation in discount rates and future salary growth rates on the Company’s defined benefit obligation as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Increased by 1%   Decreased by 1%   Increased by 1%   Decreased by 1% 
   (In thousands of Korean won) 
Discount rate   (610)   699    (5,819)   6,578 
Future salary growth   700    (622)   6,625    (5,964)

 

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

 

19

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

D. Employee benefit expenses

 

i.Details of employee benefit expenses recognized for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Wages and salaries  ₩   207,000    231,000 
Expenses related to post-employment plans (*)      (65,884)   72,347 
Fringe benefit  　   40,966    17,025 
Total  ₩   180,082    320,372 

 

 
(*)Gains on defined benefit settlement occurred as management agreed on the settlement of retirement benefits in December, 2024.

 

ii.Expenses are recognized in the statements of comprehensive income (loss) as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Selling, general, and administrative expenses  ₩   182,082    320,372 

 

20

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

10. Income Tax

 

A. Amounts recognized in profit or loss

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Current tax expense             
Current period  ₩   -    - 

 

The Company establish additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the statements of operations.

 

B. Reconciliation of effective tax rate

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Loss before income tax  ₩   (248,885)   (347,632)
Tax at the statutory income tax rate      (24,640)   (34,416)
Adjustments:      　    　 
Tax credits      -    - 
Changes in unrecognized temporary difference      24,706    34,520 
Other      (66)   (104)
Income tax expenses  ₩   -    - 
Effective income tax rate (*)      -    - 

 

 
(*)The effective tax rate is not calculated as the Company incurred a loss before income taxes for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023.

 

21

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

C. Movement in deferred tax balances

 

A. Movement in deferred tax balances for the year ended December 31, 2024

 

      Tax effect 
      Beginning   Increase (decrease)   Ending 
      (In thousands of Korean won) 
Property and equipment      183    21    204 
Defined benefit liability      7,162    (6,456)   706 
Non-current prepayments      (11,879)   (46,134)   (58,013)
Long-term investments      -    2,970    2,970 
Contract liabilities      -    49,500    49,500 
Others      269    (229)   40 
Total      (4,265)   (328)   (4,593)
Loss carried forward  ₩   38,785    25,034    63,819 
Unrecognized deferred tax income asset (*)      (34,520)   (24,706)   (59,226)
Deferred tax assets (liabilities)  ₩   -    -    - 

 

 
(*)As of December 31, 2024, the Company did not recognize deferred income tax asset for the temporary difference as it is not probable such loss carried forward can be utilized in the foreseeable future.

 

B. Movement in deferred tax balances for the period from March 6, 2023 (inception) to December 31, 2023

 

      Tax effect 
      Beginning   Increase (decrease)   Ending 
      (In thousands of Korean won) 
Property and equipment      -    183    183 
Defined benefit liability      -    7,162    7,162 
Non-current prepayments      -    (11,879)   (11,879)
Others      -    269    269 
Total      -    (4,265)   (4,265)
Loss carried forward  ₩   -    38,785    38,785 
Unrecognized deferred tax income asset (*)      -    (34,520)   (34,520)
Deferred tax assets (liabilities)  ₩   -    -    - 

 

 
(*)As of December 31, 2023, the Company did not recognize deferred income tax asset for the temporary difference as it is not probable such loss carried forward can be utilized in the foreseeable future.

 

22

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

D. Deferred assets (liabilities)

 

●Details of unrecognized as deferred income tax assets as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Loss carried forward  ₩   59,226    34,520 
Total  ₩   59,226    34,520 

 

 

i. The timing of recovery of deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Deferred tax assets  ₩          
- Deferred tax assets to be recovered after more than 12 months      58,124    11,611 
- Deferred tax assets to be recovered within 12 months  　   368    269 
Sub-total      58,492    11,880 
Deferred tax liabilities      　    　 
- Deferred tax liabilities to be recovered after more than 12 months      (58,014)   (11,880)
- Deferred tax liabilities to be recovered within 12 months      (478)   - 
Sub-total      (58,492)   (11,880)
Deferred tax assets (liabilities), net (*)  ₩   -    - 

 

 
(*)Deferred tax assets have not been recognized because it is not probable that sufficient taxable profit will be available against which part or all of the deferred tax assets can be utilized.

 

ii. Details of unused tax loss carryforwards and unused tax credit carryforwards that are recognized as deferred income tax assets as of December 31, 2024 are as follows:

 

Year of expiration     Unused loss
carryforwards		 
      (In thousands of Korean won) 
2038  ₩   34,191 
2039      25,035 
Total  ₩   59,226 

 

23

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

11. Other assets and liabilities

 

Details of other assets as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Current             
Prepayments  　   11    - 
Value added tax receivables      -    26,419 
prepayment tax  　   32    46 
Non-current             
Non-current prepayments      586,000    360,000 
Total  ₩   586,043    386,465 

 

Details of other liabilities as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Current             
Withholdings  　   15,929    1,931 
Value added tax payables      45,291    - 
Non-current             
Contract liabilities (*)  　   1,500,000    1,000,000 
Total  ₩   1,561,220    1,001,931 

 

 
(*)The contract liabilities primarily relate to the advance consideration received from the counterparty for drama scenario development service.

 

12. Cash and cash equivalents

 

Cash and cash equivalents as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Deposits in banks  ₩   361,234    275,897 

 

The Company doesn’t have any restricted cash and cash equivalents as of December 31, 2024 and 2023.

 

24

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

13. Property, plant, and equipment

 

A.Reconciliation of carrying amount

 

Details of property and equipment as of December 31, 2024 and 2023 are as follows:

 

   December 31, 2024   December 31, 2023 
   Book
value		   Accumulated
depreciation		   Carrying
amount		   Book
value		   Accumulated
depreciation		   Carrying
amount		 
   (In thousands of Korean won)   (In thousands of Korean won) 
Office equipment   1,050    (315)   735    1,050    (105)   945 

 

Details of the changes in property and equipment for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      Office equipment   Office equipment 
      (In thousands of Korean won) 
Beginning balance  ₩   945    - 
Acquisitions      -    1,050 
Depreciation  　   (210)   (105)
Ending balance  ₩   735    945 

 

The classification of depreciation expenses in the statements of comprehensive income for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      December 31,
2024		   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Selling, general and administrative expenses  ₩   210    105 

 

14. Financial instruments by category

 

The carrying amounts of financial instruments by category as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Financial assets at amortized cost             
Cash and cash equivalents  ₩   361,234    275,897 
Other current financial assets (*)      54,824    50,000 
Subtotal  ₩   416,058    325,897 
Financial assets at fair value through profit or loss  　   　    　 
Long-term investments      -    30,000 
Total  ₩   416,058    355,897 

 

 
(*)Other current financial assets consist of a rent deposit and other receivables.

 

25

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won)   (In thousands of Korean won) 
Financial liabilities at amortized cost             
Trade and other payables  ₩   17,724    2,715 

 

A.Classification of investment assets based on liquidity

 

The classification of investment assets as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won)   (In thousands of Korean won) 
Non-Current investments             
Project investment (*)  ₩   -    30,000 

 

 
(*)An investment in a film production company.

 

B.Net gains and losses by category of financial instruments

 

The net gains and losses by category of financial instruments for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      Financial assets at
amortized cost		   Financial assets at
amortized cost		 
      (In thousands of Korean won) 
Interest income  ₩   211    303 
Loss on the fair value of financial investment assets      (30,000)   - 
Total  ₩   (29,789)   303 

 

15. Capital and reserves

 

A. Share capital and share premium

 

Details of share capital and share premium as of December 31, 2024 and 2023 are as follows:

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Number of authorized shares  　   1,000,000    1,000,000 
Value per share  ₩   5    5 
Number of shares issued  　   3,000    3,000 
Common shares  ₩   15,000    15,000 

 

26

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

i. Ordinary shares

 

Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company.

 

B. Other reserves

 

Details of other reserves as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Share issue cost  ₩   (1,054)   (1,054)
Remeasurement of defined benefit liability      (667)   - 
Total  　   (1,721)   (1,054)

 

16. Capital management

 

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence and to sustain future development of the business. The Company monitors capital using a ratio of ‘net debt’ to ‘total capital.’ Net debt is calculated as total borrowings (as shown in the statement of financial position) less cash and cash equivalents. The Company’s net debt to total capital ratio as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won) 
Total liabilities  ₩   1,586,074    1,076,993 
Less: Cash and cash equivalents      (361,234)   (275,897)
Net debt  　   1,224,840    801,096 
Total equity      (583,238)   (333,686)
Total capital  ₩   641,602    467,410 
Net debt to total capital ratio      191%   171%

 

17. Trade and other payables

 

Trade and other payables as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Other payables   15,503    - 
Accrued expenses   2,221    2,715 
Total   17,724    2,715 

 

18. Contract liabilities

 

Contract liabilities as of December 31, 2024 and 2023 are as follows:

 

   December 31,
2024		   December 31,
2023		 
   (In thousands of Korean won) 
Contract liabilities   1,500,000    1,000,000 

 

The Company received Korean Won 250,000 thousand in October 2024, 250,000 thousand in June 2024 and 1,000,000 thousand in May 2023 from K Enter Holdings for the purpose of planning and developing a drama. In accordance with the terms of the contract with K Enter Holdings, the Company received payment before having completed performance obligations and recognized contract liabilities.

 

27

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

19. Financial Instruments – Fair values and risk management

 

A. Accounting classifications and fair values

 

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

The carrying amounts of financial instruments by category as of December 31, 2024 are as follows:

 

   Fair value   Level 1   Level 2   Level 3   Total 
   (In thousands of Korean won) 
Financial assets at fair value                         
Project investment   -    -    -    -    - 

 

The carrying amounts of financial instruments by category as of December 31, 2023 are as follows:

 

   Fair value   Level 1   Level 2   Level 3   Total 
   (In thousands of Korean won) 
Financial assets at fair value                         
Project investment   30,000    -    -    30,000    30,000 

 

Details of the changes in project investment for the year ended December 31, 2024 are as follows:

 

      2024 
      Beginning balance   Loss on the fair value of financial investment assets   Ending balance 
      (In thousands of Korean won) 
Project investment  ₩   30,000    (30,000)   - 

 

Details of the changes in project investment intangible assets for the period from March 6, 2023 (inception) to December 31, 2023 are as follows

 

      For the period from
March 6, 2023 (inception) to
December 31, 2023
      Beginning balance    Acquisitions   Ending balance 
        (In thousands of Korean won)
Project investment  ₩    -     30,000    30,000 

 

28

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

B. Measurement of fair values

 

Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

A. Level 1: quoted prices (unadjusted) in active markets for identical asset or liability;

 

B. Level 2: all inputs other than quoted prices included in Level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability;

 

C. Level 3: unobservable inputs for the asset or liability.

 

The fair value of financial instruments traded in an active market is determined based on the quoted market price as of the end of the reporting period. If the quoted prices are readily and regularly available through exchanges, sellers, brokers, industry groups, rating agencies or regulators and such prices represent actual market transactions that occur regularly between independent parties, they are considered active markets.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques use as much market observable information as possible and use the least amount of Company-specific information. At this time, if all the significant input variables required to measure the fair value are observable, the financial instruments are classified as Level 2.

 

If more than one significant input variable is not based on observable market information, the item is included in Level 3.

 

If the information is insufficient to measure fair value of the project investment, the Company recognizes gain on project settlements when the accumulated settlements exceed the project investment’s original invested amount. Before exceeding the project investment’s original invested amount, the settlements are recognized as the return of original project investment. The Company recognizes the valuation loss of the project investment based on its judgment as to whether the total amount of production costs and distribution fees could exceed the shared profit.

 

C. Financial risk management

 

The Company’s operating activities expose itself to a variety of financial risks: market risk, credit risk and liquidity risk from which the Company’s risk management program focuses on minimizing any adverse effects on its financial performance. The Company operates financial risk management policies and programs that closely monitor and respond to each risk factor.

 

i. Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterpart to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers. In order to manage credit risk, the Company regularly evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, past experience, its own trading records, and other factors. In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss(“ECL”) in profit or loss at each reporting date. The carrying amount of a financial asset represents the maximum exposure to credit risk.

 

29

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

The maximum exposure to credit risk of the Company as of December 31, 2024 and 2023 are as follows:

 

      December 31,
2024		   December 31,
2023		 
      (In thousands of Korean won)   (In thousands of Korean won) 
Cash and cash equivalents  ₩   361,234    275,897 
Other current financial assets  　   54,824    50,000 
Total  ₩   416,058    325,897 

 

Cash and cash equivalents are deposited in financial institutions with strong credit rating. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Company has established a credit policy under which each new customer is analyzed individually before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, financial statements, credit agency information, industry information and in some cases bank references.

 

The Company monitors customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or a legal entity, their geographic location, industry, trading history with the Company and existence of previous financial difficulties. The Company does not require collateral in respect of trade and other receivables.

 

ii. Liquidity risk

 

Liquidity risk management includes the maintenance of sufficient cash and marketable securities, the availability of funds from appropriately committed credit lines, and the ability to settle market positions.

 

Financial liabilities of the Company by maturity according to the remaining period from December 31, 2024 and 2023 to the contractual maturity date are as follows:

 

   December 31, 2024 
  

Carrying

Amount

  

Less than

3 months

  

3 months

~ 1 year

   1~2 years   2~5 years  

More than

5 years

   Total 
   (In thousands of Korean won) 
Non-derivative financial liabilities                                   
Other payables   17,724    -    17,724    -    -    -    17,724 

 

   December 31, 2023 
  

Carrying

Amount

  

Less than

3 months

  

3 months

~ 1 year

   1~2 years   2~5 years  

More than

5 years

   Total 
   (In thousands of Korean won) 
Non-derivative financial liabilities                                   
Other payables   2,715    2,715    -    -    -    -    2,715 

 

30

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

20. Leases

 

A. Leases as lessee

 

The Company leases an office. The lease typically run for a period of 1 year, with an option to renew or terminate the lease after that date. The Company has elected not to recognize right-of-use asset and lease liability for this lease. Information about lease for which the Company is a lessee is presented below.

 

i. Amounts recognized in profit or loss.

 

Amounts recognized in profit or loss for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Expense relating to short-term leases  ₩   22,800    12,000 

 

ii. Amounts recognized in statement of cash flows.

 

Amounts recognized in statements of cash flows for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Total cash outflows of leases  ₩   22,800    12,000 

 

iii. Extension options

 

The lease contains an extension option exercisable by the Company. Where practicable, the Company seeks to include extension option in new lease to provide operational flexibility. The extension option held is exercisable only by the Company and not by the lessor. The Company assesses at the lease commencement date whether it is reasonably certain to exercise the extension option. The Company reassesses whether it is reasonably certain to exercise the option if there is a significant event or significant changes in circumstances within its control.

 

31

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

21. Statement of cash flows

 

Adjustments for income from operating activities for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Interest income  ₩   (211)   (303)
Severance Benefits  　   (65,884)   72,347 
Depreciation      210    105 
Loss on the fair value of financial investment assets  　   30,000    - 
Total  ₩   (35,885)   72,149 

 

Changes in assets and liabilities from operating activities for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Other current assets  ₩   26,408    (26,419)
Other non-current non-financial assets      (226,000)   (360,000)
Accounts receivable — other, net      (3,324)     
Trade and other payables  　   15,010    2,715 
Other current non-financial liabilities      59,288    1,931 
Other non-current non-financial liabilities  　   500,000    1,000,000 
Total  ₩   371,382    618,227 

 

32

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

22. Related parties

 

A. List of related parties

 

List of related parties as of December 31, 2024 and 2023 are as follows:

 

Relationship   December 31, 2024   December 31, 2023
Key management personnel   Park, Jun Woo (*1)   Park, Jun Woo
Key management personnel 　 Shin, Kyung Soo 　 Shin, Kyung Soo
Key management personnel   Kim, Seung Ho (*1)   Kim, Seung Ho
Other related parties 　 Shining park Co., Ltd. 　 Shining park Co., Ltd.
Other related parties   Its story Co., Ltd.   Its story Co., Ltd.
Other related parties 　 - (*2) 　 Poseidon pictures Co., Ltd.

 

 
(*1)Two key management personnel resigned as registered directors subsequent to the end of the reporting period.
(*2)Due to a change in the management of Poseidon pictures Co., Ltd. during the year, the entity has been excluded from the scope of related parties.

 

B. Transactions with related parties

 

Details of transactions with related parties for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

         2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
Related party  Name     Acquisition of prepayments   Acquisition of prepayments 
         (In thousands of Korean won) 
Other related parties  Its story Co., Ltd.  ₩    -    60,000 

 

C. Account balances with related parties.

 

The balances of receivables and payables to related parties as of December 31, 2024 are as follows:

 

         December 31,
2024		 
Related party  Name of entity     Other payables (*) 
         (In thousands of Korean won) 
Key management personnel  Park, Jun Woo  ₩   4,655 
Key management personnel  Shin, Kyung Soo      4,655 
Key management personnel  Kim, Seung Ho  　   4,694 

 

 
(*)Other payables is the income tax refund payable to each management.

 

There are no balances of receivables and payables to related parties as of December 31, 2023.

 

D. Financial transactions with related parties

 

There are no significant financial transactions with related parties for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023.

 

33

 

Studio Anseilen Co., Ltd.

 

NOTES TO FINANCIAL STATEMENTS

 

For the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023

 

E. Transactions with key management personnel

 

The compensation for the key management personnel for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Short-term employee benefits  ₩   150,000    196,000 
Post-employment benefits (*)      (70,718)   70,718 
Total  ₩   79,282    266,718 

 

 
(*)Gains on defined benefit settlement occurred as management agreed on the settlement of retirement benefits in December, 2024.

 

Compensation of the Company’s key management personnel includes salaries, contributions to a post-employment defined benefit plan.

 

F. Financial Transactions with key management personnel

 

Details of significant financial transaction the key management personnel for the year ended December 31, 2024 and the period from March 6, 2023 (inception) to December 31, 2023 are as follows:

 

      2024   For the
period from
March 6, 2023
(inception) to
December 31,
2023		 
      (In thousands of Korean won) 
Shares issued  ₩   -    15,000 

 

23. Commitments

 

On September 14, 2023, an amendment was made to the equity interest exchange agreement, originally entered into on April 9, 2023, between the CEOs, who are the dominant shareholders of the Company, and K Enter Holdings for the purpose of listing on NASDAQ through a merger with a SPAC company. The equity interest exchange agreement is effective on the date designated by K Enter Holdings. Upon the approval, the CEOs of the Company will exchange each of 510 shares with the equity interest of K Enter Holdings. Following the equity interest exchange transaction, the Group is expected to be a subsidiary of K Enter Holdings, Inc.

 

24. Subsequent event

 

On January 3, 2025, K Enter Holdings Inc. completed the acquisition of a controlling interest in six Korean entities, including Studio Anseilen Co., Ltd., through a share exchange. Upon the approval, the CEOs of the Company exchanged 1,530 shares with the equity interest of K Enter Holdings Inc. Following the equity interest exchange transaction, the Company became a subsidiary of K Enter Holdings Inc.

 

34

 

Exhibit 15.21

 

K ENTER HOLDINGS INC.

INDEX TO THE FINANCIAL STATEMENTS

 

Report of Independent Registered Public Accounting Firm   F-2
Financial statements:    
Balance Sheets as of December 31, 2024 and 2023   F-3
Statements of Operations and Comprehensive Loss for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) through December 31, 2023   F-4
Statements of Changes in Stockholders’ Equity for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) through December 31, 2023   F-5
Statements of Cash Flow for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) through December 31, 2023   F-6
Notes to Financial Statements   F-7 – F-29

 

F-1

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

F-2

 

 

K ENTER HOLDINGS INC.

BALANCE SHEETS

 

  December 31,
2024		     December 31,
2023		  
ASSETS                
Current assets                
Cash and cash equivalents   $ 333,069     $ 2,525,682  
Accounts receivable     6,496       -  
Other receivables     905,827       70,906  
Convertible debt security     -       1,006,757  
Deferred transaction costs     2,152,048       1,363,241  
Prepaid expenses and other current assets     422,239       227,416  
Prepaid expenses and other current assets - related party     67,699       -  
Total current assets     3,887,378       5,194,002  
                 
Investment in equity securities     1,600,000       1,600,000  
Investment in equity securities - related party     1,178,055       -  
Property and equipment, net     24,356       33,598  
Operating lease right-of-use assets, net     21,048       95,191  
Operating lease right-of-use assets, net - related party     19,189       72,635  
Other assets, noncurrent     1,762,368       1,705,412  
Other assets, noncurrent - related party     -       77,500  
Total non-current assets     4,605,016       3,584,336  
TOTAL ASSETS   $ 8,492,394     $ 8,778,338  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable   $ 836,592     $ 294,717  
Accounts payable - related party     1,332,603       16,828  
Accrued expenses and other current liabilities     3,761,147       2,237,163  
Short-term borrowings     564,282       405  
Short-term borrowings - related party     400,942       142  
Defined severance benefits, current     -       2,462  
Lease liabilities, current     20,165       60,619  
Lease liabilities, current - related party     19,189       55,122  
Total current liabilities     6,934,920       2,667,458  
               
Defined severance benefits, noncurrent     -       46,691  
Convertible Note     2,666,833       -  
Derivative liabilities     401,374       -  
Lease liabilities, noncurrent     -       34,571  
Lease liabilities, noncurrent - related party     -       17,514  
Total non-current liabilities     3,068,207       98,776  
TOTAL LIABILITIES   $ 10,003,127     $ 2,766,234  
                 
STOCKHOLDERS’ EQUITY                
Series A-1 convertible preferred stock     -       -  
Series A convertible preferred stock     355       355  
Preferred stock subscription receivable     -       (369,000 )
Common stock     1,000       1,000  
Treasury Stock     -       (57 )
Additional paid-in capital     20,542,076       15,238,711  
Accumulated deficit     (21,801,180 )     (8,930,946 )
Accumulated other comprehensive income(loss)     (252,984 )     72,041  
Total stockholders’ equity   $ (1,510,733 )   $ 6,012,104  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 8,492,394     $ 8,778,338  

 

The accompanying notes are an integral part of these financial statements.

 

F-3

 

 

K ENTER HOLDINGS INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

 

    2024     For the
period from
January 4, 2023
(inception) to
December 31,
2023		  
Revenue   $ 485,271     $ 208,704  
Cost of revenues   $ 483,462     $ 207,153  
Operating expenses                
General and administrative expenses   $ 11,838,397     $ 8,954,316  
Total operating expenses     12,321,859       9,161,469  
                 
Loss from operations     (11,836,588 )     (8,952,765 )
                 
Other income (expense)                
Interest income     399       7,956  
Other income (expense)     (1,034,045 )     13,863  
                 
Total other income (expense), net     (1,033,646 )     21,819  
                 
Income tax expense     -       -  
                 
Net loss   $ (12,870,234 )   $ (8,930,946 )
                 
Other comprehensive loss                
Foreign currency translation adjustment     (277,727 )     65,284  
Unrealized gain(loss) of available-for-sales     (47,297 )     6,757  
Comprehensive loss   $ (13,195,258 )   $ (8,858,905 )
                 
Weighted average number of shares of common stock outstanding, basic and diluted     96,150       76,540  
Basic and diluted net loss per share of common stock   $ (133.86 )   $ (116.68 )

 

The accompanying notes are an integral part of these financial statements.

 

F-4

 

 

K ENTER HOLDINGS INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

 

   

Series A-1

Convertible Preferred

Stock

    

Series A

Convertible Preferred
Stock

     Common stock     Treasury stock    

Preferred
Stock

Subscription

    

Additional

Paid-in

    Accumulated    

Accumulated
Other
Comprehensive

        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Receivable     Capital     Deficit     Loss     Total  
Balance, January 4, 2023 (inception)     -     $ -       -     $ -       -     $ -       -     $ -     $ -     $ -     $ -     $ -     $ -  
Shares issued for common stock     -       -       -       -       100,000       1,000       -       -       -       -       -       -       1,000  
Shares issued for Series A convertible preferred stock, net of issuance costs     -       -       35,484       355       -       -       -       -       -       10,600,609       -       -       10,600,964  
Shares issued for Series A-1 convertible preferred stock     4,814       -       -       -       -       -       -       -       (369,000 )     2,888,400       -       -       2,519,400  
Treasury stock shares acquired     -       -       -       -       -       -       (12,074 )     (121 )     -       -       -       -       (121 )
Shares transferred back to the Company     -       -       -       -       -       -       6,353       64       -       1,749,702       -       -       1,749,766  
Net loss     -       -       -       -       -       -       -       -       -       -       (8,930,946 )     -       (8,930,946 )
Unrealized gain of available-for-sales                                                                                             6,757       6,757  
Foreign currency translation adjustment     -       -       -       -       -       -       -       -       -       -       -       65,284       65,283  
Balance, December 31, 2023     4,814     $ -       35,484     $ 355       100,000     $ 1,000       (5,721 )   $ (57 )   $ (369,000 )   $ 15,238,711     $ (8,930,946 )   $ 72,041     $ 6,012,104  
                                                                                                         
Balance, January 1, 2024     4,814     $ -       35,484     $ 355       100,000     $ 1,000       (5,721 )   $ (57 )   $ (369,000 )   $ 15,238,711     $ (8,930,946 )   $ 72,041     $ 6,012,104  
Shares issued for Series A-1 convertible preferred stock     500       -       -       -       -       -       -       -       -       300,000       -       -       300,000  
Shares issued for common stock as a share-based compensation     -       -       -       -       1,202       -       -       -       -       669,201       -       -       669,201  
Cash received for Preferred Stock Subscription Receivable     -       -       -       -       -       -       -       -       369,000       -       -       -       369,000  
Treasury stock shares acquired     -       -       -       -       -       -       (1,376 )     -       -       -       -       -       -  
Shares issued for common stock from the Company’s treasury shares     -       -       -       -       -       -       2,100       7       -       1,169,147       -       -       1,169,154  
Settlement of liabilities by issuance of shares                                                     4,997       50               2,781,980                       2,782,030  
Share-based compensation                                                                             383,037                       383,037  
Net loss     -       -       -       -       -       -       -       -       -       -       (12,870,234 )     -       (12,870,234 )
Unrealized Loss of Available-For-Investments     -       -       -       -       -       -       -       -       -       -       -       (47,297 )     (47,297 )
Foreign currency translation adjustment     -       -       -       -       -       -       -       -       -       -       -       (277,728 )     (277,728 )
Balance, December 31, 2024     5,314     $ -       35,484     $ 355       101,202     $ 1,000       -     $ -     $ -     $ 20,542,076     $ (21,801,180 )   $ (252,984 )   $ (1,510,733 )

 

The accompanying notes are an integral part of these financial statements.

 

F-5

 

 

K ENTER HOLDINGS INC.

STATEMENTS OF CASH FLOWS

 

    2024     For the
period from
January 4, 2023
(inception) to
December 31,
2023		  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss   $ (12,870,234 )   $ (8,930,946 )
Adjustments to reconcile net income to net cash provided by (used in) operating activities                
Share-based compensation     2,221,393       1,749,741  
Severance Benefits     37,078       48,559  
Amortization of operating lease right-of-use assets     108,909       36,638  
Amortization of operating lease right-of-use assets – related party     13,276       27,957  
Depreciation expense     7,562       4,198  
Interest expenses     41,445       -  
Loss on valuation of Derivative liabilities     26,762          
Impairment Loss on Convertible Debt Security     959,459       -  
Loss on valuation of Convertible Debt Security     40,541       -  
Changes in operating assets and liabilities                
Accounts receivable     (7,041 )     -  
Other receivables     51,473       (70,070 )
Deferred transaction costs     -       (212,079 )
Prepaid and other current assets     (49,713 )     (224,895 )
Other assets, noncurrent     (408,647 )     (1,684,800 )
Other assets, noncurrent – related party     -       (76,563 )
Accounts payable     (612,612 )     292,354  
Accounts payable – related party     1,314,531       16,625  
Accrued expenses and other current liabilities     3,531,931       1,085,336  
Lease liabilities     (70,573 )     (36,638 )
Lease liabilities – related party     (52,568 )     (27,957 )
Defined benefit liabilities     (83,619 )     -  
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES     (5,800,647 )     (8,002,540 )
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of property and equipment     (2,150 )     (37,390 )
Payments for short-term loans     (14,669 )     -  
Collection of short-term loans     -       1,530,499  
Advances under note receivable     -       (1,530,499 )
Purchase of convertible debt security     -       (1,000,000 )
Purchase of investment in equity securities     -       (1,600,000 )
CASH USED IN INVESTING ACTIVITIES     (16,819 )     (2,637,390 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from issuance of Series A-1convertible preferred stock, net of issuance costs     669,000       2,519,400  
Proceeds from issuance of Series A convertible preferred stock, net of issuance costs     -       10,600,964  
Proceeds from issuance of convertible notes, net of issuance costs     2,625,000       -  
Proceeds from issuance of common stock, net of issuance costs     -       1,000  
Purchase of treasury shares     -       (121 )
Proceeds from issuance of common stock from treasury shares     -       25  
Proceeds from short-term borrowings     120,000       -  
Proceeds from short-term borrowings – related party     740,265       -  
Repayment of short-term borrowings     (120,547 )     -  
Repayment of short-term borrowings – related party     (257,437 )     -  
CASH PROVIDED BY FINANCING ACTIVITIES     3,776,281       13,121,268  
Effect of exchange rate changes on cash     (151,428 )     44,345  
Change in cash and cash equivalents     (2,192,613 )     2,525,682  
Cash and cash equivalents, beginning of period     2,525,682       -  
Cash and cash equivalents, end of period   $ 333,069     $ 2,525,682  
                 
Supplemental disclosure of noncash investing and financing activities:                
Outstanding payable related to acquisition of Play Company common stock.   $ 1,276,919     $ -  
Operating right-of-use assets obtained in exchange for lease obligations             129,236  
Operating right-of-use assets obtained in exchange for lease obligations – related party             98,613  
Deferred transaction costs included in Accrued Expenses   $ 788,694     $ 1,151,162  
Consulting Fee included in Accrued Expenses   $ 2,781,980     $ -  
Proceeds from Convertible Notes not yet received   $ 375,000       -  
Proceeds from short-term borrowings not yet received   $ 500,000       -  

 

The accompanying notes are an integral part of these financial statements.

 

F-6

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

1. NATURE OF OPERATIONS

 

K Enter Holdings Inc. (the “Company”), a Delaware corporation, was formed on January 4, 2023 to become a leading tech and intellectual property (“IP”) based diversified entertainment company. To fulfill this vision, the Company established an internal Korean drama production team and entered into equity purchase agreements to acquire a controlling equity interest in six separate Korean entertainment companies (collectively, the “Six Korean Entities”) in order to combine initial capabilities believed to serve as the foundation for the Company’s growth – content production, content merchandising, and content investment. The Six Korean Entities include one Korean content-specialized private equity firm, one Korean drama production company, three Korean movie production companies, and one IP merchandising company.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting: The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). References to GAAP in the accompanying financial statements are to the Accounting Standards Codification (“ASC”).

 

Going Concern: The Company has incurred significant losses and negative cash flows from operations, net loss was $12,870,234 for the year ended December 31, 2024. During 2024, the Company had negative cash flows from operations of $5,800,647. As of December 31, 2024, the Company’s accumulated deficit was $21,801,180. The Company has funded its operations to date through equity and debt financing and has cash equivalents of $333,069 as of December 31, 2024. The Company monitors its cash flow projections on a current basis and takes active measures to obtain the funding it requires to continue its operations. However, these cash flow projections are subject to various uncertainties concerning their fulfilment such as the ability to increase revenues by attracting and expanding its customer base and completing additional financing. The Company expects to fund operations using cash on hand and raising additional proceeds. There are no assurances, however, that the Company will be able to generate the revenue necessary to support its cost structure or that it will be successful in obtaining the level of financing necessary for its operations. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

 

Foreign Currency: The U.S. dollar is the reporting currency of the Company. The functional currency of the Company’s domestic branch and international branch is the U.S. dollar and Korean Won, respectively. The functional currencies are the local currencies used in the primary economic environment for each respective branch. Remeasurement gains and losses from transactions that are not denominated in the functional currency are recorded as other income (expense) in the statement of operations and comprehensive loss. The Company recognized realized loss of $2,249 on foreign currency transactions and balances within other income on the accompanying statement of operations and comprehensive loss for the year ended December 31, 2024.(2023: gains of $15,979)

 

Assets and liabilities of the international branch are translated into U.S. dollars at the exchange rate in effect at the balance sheet date. Revenue and expenses are translated at average exchange rates in effect during the period. Foreign currency translation gains and losses are recorded in the cumulative translation adjustment account, which is a separate component of other comprehensive income.

 

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses in the financial statements and accompanying notes. The Company’s most significant estimates and judgments involve the valuation of share-based compensation, convertible debt security and convertible note, including the fair value of common stock. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.

 

F-7

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Segment Information: ASC 280, Segment Reporting (“ASC 280”), defines operating segments as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company operates as a single operating segment. The Company’s CODM is the chief executive officer, who has ultimate responsibility for the operating performance of the Company and the allocation of resources. The Company has concluded that net income (loss) is the measure of segment profitability. The CODM assesses performance for the Company, monitors budget versus actual results, and determines how to allocate resources based on net income (loss) as reported in the statements of operations. There are no other expense categories regularly provided to the CODM that are not already included in the primary financial statements herein. The Company currently operates a branch office in Korea, which serves as the Company’s principal business management. Accordingly, during the year ended December 31, 2024 and period from January 4, 2023 (inception) through December 31, 2023, the Company only generated revenues in Korea and as of December 31, 2024 and 2023, the Company did not have material assets located outside of Korea.

 

The following table sets forth the Company’s significant segment expenses:

 

    2024     2023  
Revenue   $ 485,271     $ 208,704  
Less:                
Drama Production cost     483,462       207,153  
Stock-based compensation expense     2,221,393       1,749,742  
Salaries and benefits     1,696,289       807,088  
Consulting Fees     7,427,273       6,160,204  
Other items     493,442       237,283  
Total cost and expense     12,321,859       9,161,469  
Loss from operations     (11,836,588 )     (8,952,765 )
Interest income     399       7,956  
Impairment loss on Investment Assets     (959,459 )     -  
Other income (expense), net     (74,586 )     13,863  
Income before income taxes     (12,870,234 )     (8,930,946 )
Provision for (benefit from) income taxes     -       -  
Net income   $ (12,870,234 )   $ (8,930,946 )

 

Cash and Cash Equivalents: Cash and cash equivalents comprise cash in bank which are subject to an insignificant risk of changes in value. The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of December 31, 2024.

 

Fair Value Measurements: ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company can assess at the measurement date.

 

Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market date.

 

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

 

F-8

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820:

 

  ● Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.
     
  ● Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).
     
  ● Income approach: Techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option pricing, and excess earning models)

 

The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

The Company’s financial instruments with a carrying value that approximates fair value consists of cash, other receivables, accounts payable, accrued expenses, and other current liabilities because of the short-term nature of these instruments. The convertible note, classified as a non-current liability, is initially recognized at fair value, net of transaction costs directly attributable to the issuance of the financial liability. Subsequent to initial recognition, this financial liability is measured at amortized cost using the effective interest method. The Company’s financial instruments measured at fair value on a recurring basis consist of the convertible debt security and derivative liabilities (see Note 5, Note 10 and Note 11).

 

Other Receivables: Other receivables consist of a refund for value add tax from the government, outstanding loan amounts, and receivables from convertible senior unsecured note. All amounts are expected to be received within the next 12 months.

 

Convertible Debt Security: Convertible debt security consists of a convertible bond purchased from a private company and is considered an available for sale debt securities with a private company that is recorded at fair value (see Note 5).

 

Prepaid Expenses and Other Current Assets: Prepaid expenses and other current assets consist entirely of advance payments to vendors which are expected to be recognized or realized within the next 12 months.

 

Deferred Transaction Costs: Commissions, legal fees and other costs that are direct and incremental costs related to a contemplated transaction are capitalized as deferred transaction costs until the consummation of the transaction. The costs will be reclassified to additional paid-in capital upon the closing of the transaction. If the transaction does not close, these transaction costs will be written off to general and administrative expenses at such time the transaction is determined to be unsuccessful. As of December 31, 2024 and December 31, 2023, deferred transaction costs related to the Merger Agreement (see Note 3) totaled $2,152,048 and $1,363,241 respectively.

 

F-9

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Investment in Equity Securities: Investments in equity securities that have a readily determinable fair value are reported at fair value. Changes in fair value between accounting periods are recorded in other income (expense) in the statement of operations and comprehensive loss. The Company has elected to account for investments in equity securities that do not have a readily determinable fair value under the measurement alternative permitted by ASC 321, Investments in Equity Securities (“ASC 321”). Under the measurement alternative, investments in equity securities that do not have a readily determinable fair value are recorded at cost, less impairment. The investment in equity securities without readily determinable fair values will be subsequently remeasured to fair value when observable price changes occur as of the date the transaction occurred or its impairment, with all changes in fair value reflected as a component of other income (expense) on the accompanying statement of operations and comprehensive loss. Realized gains or losses upon sale are recorded in other income (expense) in the statement of operations and comprehensive loss.

 

Property and Equipment, Net: Purchased and constructed property and equipment is recorded at cost. Property and equipment consists of office equipment and is depreciated using the straight-line method over a five year period.

 

Other Assets, Noncurrent: Other assets, noncurrent include security deposits on the Company’s office leases, capitalized implementation costs associated with the Company’s cloud computing arrangement, advances to production companies for content development, and advances to writers for content development which are not expected to be recognized or realized within the next 12 months.

 

The Company measures the capitalized implementation costs associated with its cloud computing arrangements for its accounting software at cost in accordance with ASC 350-40, Internal-use software (“ASC 350-40”), and will amortize these costs over the remaining life of the three-year hosting arrangement at the time the cloud computing arrangement is placed into service. Options to extend or terminate the hosting arrangement that are reasonably certain to be exercised will be included in the determination of the useful life at the time the cloud computing arrangement is placed into service.

 

The Company advanced money to additional production companies to fund the planning and development costs for the production of dramas. Certain contracts with production companies permit the Company to earn a set percentage of the profit of the drama. Other contracts with production companies require a separate agreement to be entered into that will define the Company’s role with the production of the drama (e.g., co-producer) as well as its investment stake in the drama. These factors will then be used to allocate the profits of the drama between the Company and the production company, at which point the recognition pattern of the costs will be determined. To the extent that the production of a drama developed using this advance is not approved, the planning and development costs paid by the Company will be reclassified to the statement of operations and comprehensive loss in the period the decision is made. Certain contracts permit the advance to be returned to the Company if a separate agreement is not entered into that will define the Company’s role with the production of the drama.

 

The Company advanced money to writers to fund the writing of drama scripts for a set number of episodes for a set number of dramas. Payments are owed to the writers based on achievement of milestones which may include (1) contract execution (2) start of filming (3) filming completion (4) broadcasting schedule confirmation (5) approval to write a subsequent draft of a script (6) approval of a script. Certain contracts with writers permit a revenue share of the profit distribution of the drama.

 

Impairment of Long-Lived Assets: The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that an asset group’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analysis in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets (“ASC 360-10”), which requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value. The Company did not record impairment losses for the year ended December 31, 2024 and period from January 4, 2023 (inception) to December 31, 2023.

 

F-10

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Leases: The Company’s determination of whether an arrangement contains a lease is based on an evaluation of whether the arrangement conveys the right to use and control specific property or equipment. The Company leases office facilities under operating leases primarily having initial terms of two years.

 

Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any one of these criteria.

 

The Company recognizes a lease liability and a right of use (“ROU”) asset at the commencement date of each lease. Lease payments may be fixed or variable; however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Lease agreements may include options to extend or terminate the lease which are included in the measurement of the lease liability when it is reasonably certain that the option will be exercised.

 

The lease liability is initially and subsequently recognized based on the present value of the contract’s fixed future lease payments. The discount rate used to calculate the present value is the implicit rate, if it is readily determinable, or the Company’s incremental borrowing rate. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. For all leases entered into during the year ended December 31, 2024 and period from January 4, 2023 (inception) to December 31, 2023, the ICE BofA BBB US Corporate Index Effective Yield in effect on the lease commencement date was used as the incremental borrowing rate.

 

Variable lease payments, such as periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property, are expensed as incurred on the accompanying statement of operations and comprehensive loss and future variable rent obligations are not included within the lease liabilities on the balance sheet.

 

The depreciable life of right of use assets and leasehold improvements are limited by the expected lease term. None of the Company’s leases contain any material residual value guarantees or restrictive covenants.

 

The Company accounts for fixed lease and non-lease components of a lease as a single lease component. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term within general administrative expenses on the accompanying statement of operations and comprehensive loss.

 

Rent expense for the Company’s operating leases, which may have escalating rentals over the term of the lease and may include rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal or termination periods that are reasonably certain that the option to extend or terminate will be exercised. Payments received from landlords as incentives for leasehold improvements are recorded as a reduction of the operating lease right-of-use asset and amortized on a straight-line basis over the term of the lease as a reduction of rent expense.

 

Defined Severance Benefits: The Company accrues severance benefits for employees of Korean branch. Pursuant to the Employee Retirement Benefit Security Act of Korea, eligible employees with one or more years of service are entitled to severance payments upon the termination of their employment based on their length of service and pay rate.

 

F-11

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

The Company recognizes the defined severance benefits obligation in the balance sheets with a corresponding adjustment to operating expenses. The obligations are measured annually, or more frequently if there is a remeasurement event, based on the Company’s measurement date utilizing various actuarial assumptions and methodologies. The Company uses certain assumptions including, but not limited to, the selection of the: (i) discount rates; (ii) salary growth rates; and (iii) certain employee-related factors, such as turnover, retirement age and mortality. The Company reviews actuarial assumptions and make modifications to the assumptions based on current rates and trends when appropriate.

 

Defined Contribution plans: The Company has transitioned from a defined benefit retirement plan to a defined contribution retirement plan in 2024. Obligations for contributions to defined contributions plans are expensed as the related service is provided.

 

Revenue: The Company is a holding company which operates as a drama production studio. The Company provides the service for planning, producing, and selling stage set and prop production and the television programs such as dramas. The Company recognizes revenue using the input method for performance obligations to be satisfied over time, as the customers receive and use the benefits simultaneously. This determination is based on the actual costs incurred relative to the total expected costs. Payment for services is collected within a short period following transfer of control or commencement of delivery of services, as applicable.

 

Share-Based Compensation: The Company accounts for its share-based compensation awards in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”), under which share based payments that involve the issuance of shares of common stock from the Company’s treasury shares to employees and nonemployees and meet the criteria for equity-classified awards are recognized in the financial statements as share-based compensation expense based on the fair value of common stock on the date of issuance. Also, the Company recognizes the fair value of common shares transferred from shareholders to employees as a share-based compensation, which is included within general and administrative expenses. The inputs and assumption used in determining the fair value of a share of common stock are management’s best estimates, but the estimates involve inherent uncertainties and the application of management judgment (see Note 8). Share-based compensation is recognized in the period the shares of common stock are issued from the Company’s treasury shares as the awards do not have a vesting period for employees or a specified contract period for nonemployees.

 

Other Comprehensive Loss: Other comprehensive loss reflects gains and losses that are recorded as a component of stockholders’ equity and are excluded from net loss and consists of foreign currency translation gains and losses related to the translation of the Company’s functional currency into its reporting currency.

 

Tax Incentives: In the normal course of business, the Company, or a third-party producing content on the Company’s behalf, may qualify for tax incentives through eligible spend on productions. The accounting for tax incentives is dependent on the particular type of incentive, including the nature of the benefit and the location where the incentive is earned. In general, tax incentives are realized as cash receipts and may be received prior to or after a title was launched. Tax incentives are generally accounted for as a reduction to the cost basis of the Company’s content assets and reduces cost of revenue when the content is sold on the statement of operations and comprehensive loss. For the year ended December 31, 2024 and period from January 4, 2023 (inception) to December 31, 2023, there were no tax incentives received.

 

Income Taxes: The Company accounts for income taxes in accordance with authoritative guidance, which requires the use of the asset and liability method. Under this method, deferred income tax assets and liabilities are determined based upon the difference between the financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted tax rate expected to apply to taxable income in the years in which the differences are expected to be reversed.

 

F-12

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies.

 

In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, the valuation allowance is adjusted with a corresponding impact to the provision for income taxes in the period in which such determination is made.

 

The Company is required to evaluate the tax positions taken when preparing its tax returns to determine whether tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax expense in the current year. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount that is initially recognized.

 

Earnings (Loss) per Share: Basic earnings (loss) per share (“EPS”) is computed using the two-class method as the Company had issued securities, other than common stock, that contractually entitle the holds to participate in dividends and earnings. Under the two-class method, all securities that meet the definition of a participating security, irrespective of whether the securities are convertible, nonconvertible, or potential common stock securities, are included in the computation of basic EPS. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

 

Under the two-class method, for period with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

 

The number of shares used to calculate diluted loss per share of common shares attributable to common shareholders is the same as the number of shares used to calculate basic loss per share of common shares attributable to common shareholders for the period presented because there were no potentially dilutive securities outstanding during the period.

 

The earnings (loss) per share presented in the statement of operations and comprehensive loss is based on the following for the year ended December 31, 2024 and period from January 4, 2023 (inception) to December 31, 2023:

 

   

December 31,

2024

     Period from
January 4, 2023
(inception) to
December 31,
2023		  
Basic and diluted net loss per share:                
Numerator                
Allocation of net loss   $ (12,870,234 )   $ (8,930,946 )
Denominator:                
Basic and diluted weighted average number of shares outstanding     96,150       76,540  
Basic and diluted net loss per share   $ (133.86 )   $ (116.68 )

 

F-13

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Emerging Growth Company: The Company is expected to be an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, the Company will not be subject to the same implementation timeline for new or revised accounting standards as other public companies that are not emerging growth companies. At times, the Company may elect to early adopt a new or revised accounting standard.

 

Recent Accounting Pronouncements, not yet adopted: In October 2023, the FASB issued ASU 2023-06, Disclosure Agreements - Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (ASU 2023-06). This amendment will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets. The amendments in ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC, and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is prohibited. We are currently evaluating the impacts of the amendment on our disclosures.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) (“ASC 280”): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), that would enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. ASC 280 also requires other specified segment items and amounts such as depreciation, amortization and depletion expense to be disclosed under certain circumstances. The amendments in ASU 2023-07 do not change or remove those disclosure requirements. The amendments in ASU 2023-07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. The Company adopted ASU 2023-07 for the year ended December 31, 2024 and the impact was considered immaterial on Company’s financial statements.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 will be effective for us in the annual period beginning October 1, 2025, though early adoption is permitted. We are still evaluating the presentational effect that ASU 2023-09 will have on our financial statements, but we expect considerable changes to our income tax footnote.

 

F-14

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

In November 2024, the FASB issued ASU No. 2024-03, “Disaggregation of Income Statements Expenses (DISE)” (ASU 2024-03), which requires that a public entity provide additional disclosure of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 will be effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with retrospective application. The standard allows early adoption of these requirements. We are currently evaluating the impact of this standard on our financial statements and related disclosures.

 

In November 2024, the FASB issued ASU No. 2024-04, “Induced Conversions of Convertible Debt Instruments” (ASU 2024-04), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions. ASU 2024-04 will be effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual periods. The standard allows early adoption of these requirements for all entities that have adopted the amendments in ASU 2020-06. We are currently evaluating the impact of this standard on our financial statements and related disclosures.

 

3. BUSINESS COMBINATIONS

 

Merger Agreement with Global Star Acquisition, Inc.

 

On June 15, 2023, and as amended on March 11, 2024, June 28, 2024, and July 25, 2024, the Company entered into a merger agreement (the “Merger Agreement”) with Global Star Acquisition Inc., a Delaware corporation, (“Global Star”) and GLST Merger Sub Inc., a Delaware corporation and wholly owned sub of Global Star, (“Merger Sub”). The Merger Agreement provides that Global Star will merge with and into K Wave Media Ltd., a Cayman Islands exempted company (“K Wave Media” or “PubCo”), with PubCo continuing as the surviving publicly traded entity (the “Reincorporation Merger”). One day following the Reincorporation Merger, Merger Sub will be merged with and into K Enter, with K Enter the surviving corporation and resulting in K Enter being a wholly owned subsidiary of PubCo (“Acquisition Merger”).The Reincorporation Merger and the Acquisition Merger are collectively referred to herein as the “Business Combination”.

 

Key terms of the Merger Agreement include, but are not limited to, the following:

 

● The consideration for Reincorporation Merger is expected to be settled by issuing: (a) one share of PubCo’s ordinary shares in exchange for each share of Global Star Class A common stock that is outstanding as of the effective time of the Reincorporation Merger and (b) one warrant to purchase one of PubCo’s ordinary shares at an exercise price of $11.50 in exchange for each share of each Global Star warrant that is outstanding as of the effective time of the Reincorporation Merger.

 

● Certain of Global Star’s stockholders have provided written consent, pursuant to which, among other things, such stockholders have approved the Merger Agreement and the Reincorporation Merger. Each issued and outstanding share of Global Star’s Class A common stock and each issued and outstanding Global Star right on an as-converted basis, will automatically be cancelled and converted into an equal number of shares of the PubCo’s ordinary shares in accordance with the Merger Agreement and each Global Star warrant shall be exchanged for a PubCo warrant.

 

F-15

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

● The aggregate consideration for the Acquisition Merger is $590,000,000 and is expected to be settled by issuing 59,000,000 shares of PubCo’s ordinary shares in exchange for 189,013 shares of Company common stock, including the shares of the Company’s common stock underlying the Company’s outstanding Series A and Series A-1 preferred stock at an exchange rate of approximately 312.148 shares of the Company’s common stock on an as converted basis for each ordinary share of the PubCo (the “Conversion Ratio”) at the time of the Acquisition Merger.

 

● Certain of the Company’s stockholders have provided written consent, pursuant to which, among other things, such stockholders have approved the Merger Agreement and the Acquisition Merger. Each issued and outstanding share of the Company’s common stock and each issued and outstanding share of convertible preferred stock on an as-converted basis will automatically be cancelled and converted into the right to receive the number of shares of the PubCo’s ordinary shares equal to the Conversion Ratio in accordance with the Acquisition Merger.

 

● The Merger Agreement is subject to the approval by the stockholders of the Company and Global Star. Holders of Global Star’s Class A Common Stock will have the opportunity to redeem their shares of Global Star Class A Common Stock for cash in connection with the Business Combination.

 

On February 3, 2025 (the “Closing Date”), the Company closed the previously announced business combination pursuant to the Merger Agreement, dated as of June 15, 2023, amended on March 11, 2024, June 28, 2024, and July 25, 2024, with Global Star and Merger Sub.

 

Acquisitions of Controlling Equity Interests in the Six Korean Entities

 

During March 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owner of Play Company Corp (“Play Company”) to acquire 100% of the outstanding shares of common stock in exchange for 163,732,016,220 Korean Won ($110,789,937 at December 31, 2024), payable through the issuance of the shares of the Company’s common stock totaling 127,498,912,820 Korean Won ($86,272,660 at December 31, 2024) and in exchange for cash totaling 36,233,103,400 Korean Won ($24,517,277 at December 31, 2024). Additional payments in cash will be made to the owner of Play Company if the annual average net profit for fiscal years from 2023 to 2025 reaches specified thresholds, with payments due to the owner of Play Company on January 31, 2027 and January 31, 2028.

 

An additional payment in cash may be owed to the owner of Play Company if the shares of PubCo that shares of the Company’s common stock convert to at closing of the Acquisition Merger are sold during the three-month period (the “Sale Period”) following the six-month lock-up period of the newly issued shares of PubCo at a per share price less than the per-share value at closing of the Acquisition Merger for the shortfall in share price. The amount to be paid will be reduced by (i) any gains from the sale of shares of PubCo by the owner of Play Company between the end of the Sale Period and December 31, 2026 and (ii) any unrealized gain as of December 31, 2026 for the shares of PubCo that remain held by the owner of Play Company (calculated as the number of remaining shares of PubCo times the difference of (i) the average closing price of PubCo from December 1, 2026 to December 31, 2026 and (ii) the per-share value of PubCo at the closing of the Acquisition Merger).

 

During March 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owners of Solaire Partners, LLC (“Solaire Partners”) to acquire 95% of the outstanding shares of common stock in exchange for shares of the Company’s common stock totaling 14,250,000,000 Korean Won ($9,642,321 at December 31, 2024).

 

F-16

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

During April 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owners of Studio Anseilen Co., Ltd (“Anseilen”) to acquire 51% of the outstanding shares of common stock in exchange for shares of the Company’s common stock totaling 7,700,000,400 Korean Won ($5,210,237 at December 31, 2024).

 

During April 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owner of Apeitda Co. Ltd (“Apeitda”) to acquire 51% of the outstanding shares of common stock in exchange for shares of the Company’s common stock totaling 15,300,000,000 Korean Won ($10,352,807 at December 31, 2024).

 

During April 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owners of Bidangil Pictures Co., Ltd. (“Bidangil”) to acquire 51% of the outstanding shares of common stock in exchange for shares of the Company’s common stock totaling 20,400,000,000 Koren Won ($13,803,743 at December 31, 2024).

 

During April 2023, and as amended in December 2023, the Company entered into an equity purchase agreement with the owner of The LAMP Co., Ltd. (“Lamp”) to acquire 51% of the outstanding shares of common stock in exchange for shares of the Company’s common stock totaling 30,600,000,000 Korean Won ($20,705,615 at December 31, 2024).

 

During April 2023, the Company entered into an equity purchase agreement with the owners of First Virtual Lab Inc.(“First Virtual”) to acquire 51% of the outstanding shares of common stock and preferred stock in exchange for shares of the Company’s common stock totaling 25,500,000,000 Korean Won ($17,254,679 at December 31, 2024). However, the Company entered into the termination agreement during March 2024, which terminated all agreements entered into in connection with the original equity purchase agreement.

 

The number of shares of the Company’s common stock to be issued to the sellers of the Six Korean Entities at closing of the respective transactions will be adjusted by changes in exchange rates as the share purchase agreements are denominated in Korean Won and the Company’s equity transactions are denominated in U.S. Dollar.

 

In certain circumstances, including prior to the closing of the Merger Agreement and if the shares of PubCo, excluding the shares subject to a lock-up on the Nasdaq market, remain not issued or registered sixty days after the shareholder vote approving the merger, either party may elect to terminate the equity purchase agreements.

 

4. REVENUE

 

Details of total revenue was as follows:

 

    2024     Period from
January 4, 2023
(inception) to
December 31,
2023		  
Revenue                
Media production   $ 485,271       208,704  

 

    2024     Period from
January 4, 2023
(inception) to
December 31,
2023		  
Geographic information:                
Korea   $ 485,271       208,704  

 

F-17

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

5. CONVERTIBLE DEBT SECURITY

 

During August 2023, the Company purchased a $1,000,000 convertible bond from Prototype Group, Inc. (“Prototype Group”), a company that operates in virtual studio technology. The convertible bond was due and payable on demand after August 10, 2024 and the company entered into 1-year extension agreement with Prototype group, and bears interest at a fixed rate equal to the Applicable Federal Rate plus 1% additional interest for short term loans, which as of the date of the bond was 5.96%. If there are any overdue payments, Prototype shall bear a late payment interest rate of the Applicable Federal Rate plus 10% additional interest.

 

At the Company’s option, at any time prior to payment in full of the principal amount and all accrued interest, the convertible bond can be converted into such number of shares of common stock of Prototype Group equal to the entire principal amount of the convertible bond and all accrued and unpaid interest thereon, divided by $7.40 per share in case the pre-money valuation of Prototype Group shall meet or exceed $94,800,000. In the event the pre-money valuation is below $94,800,000, the conversion price shall be proportionally reduced.

 

If the convertible bond is not repaid or converted through the Company’s voluntary election and Prototype Group issues and sells shares of its equity securities before the maturity date resulting in gross proceeds of $10,000,000 (excluding the conversion of this bond), then at any time on or after the maturity date, Prototype Group shall have the option to (a) repay all outstanding principal and accrued unpaid interest of the convertible bond or (b) convert all or any portion of the outstanding principal and accrued unpaid interest of the convertible bond into such number of its common shares equal to the principal amount and all accrued unpaid interest thereon to be converted divided by the conversion price.

 

On December 31, 2024, the company measured the repayment possibilities and concluded that the possibility of recovery is low. Therefore, the Company recognized $959,459 as an impairment loss, which was included within other expenses on the accompanying statement of operations and comprehensive loss

 

6. INVESTMENT IN EQUITY SECURITIES

 

During July 2023, the Company purchased 160,000 shares of Global Star Class B Common Stock (the “Founder Shares”) for an aggregate purchase price of $1,600,000 from Global Star Acquisition 1, LLC, the sponsor of Global Star (the “Sponsor”). During January 2024, the Company purchased 1,000 shares of Play Company Co., Ltd. Common Stock for an aggregate purchase price of $1,178,055 from Solaire Partners LLC. The Company’s investments are recorded at cost minus impairment and adjusted for changes in observable prices.

 

As of December 31, 2024, there were no indicators of impairment and for the period between the date of acquisition and December 31, 2024, there were no observable price changes or sales of Founder Shares and Play Company shares.

 

7. STOCKHOLDERS’ EQUITY

 

The Company was authorized to issue 100,000 shares of common stock at a par value of $0.01 when it was formed on January 4, 2023. The Company amended its certificate of incorporation on May 31, 2023 and again on August 31, 2023 in order to increase the shares of common stock it is authorized to issue to 10,000,000 shares of common stock at a par value of $0.0001 per share and 1,000,000 shares of preferred stock at a par value of $0.0001 per share, of which 45,000 shares have been designated as Series A Convertible Preferred Stock (“Series A”) and 15,000 shares have been designated as Series A-1 Convertible Preferred Stock (“Series A-1”) by the board of directors (the “Board”).

 

F-18

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Common Stock: On September 29, 2024, the Company issued 1,202 shares ($669,201, $556.74 per share) of the Company’s common stock to Lodestar USA, Inc. in consideration for services rendered to the Company by Ted Kim, a co-founder and a director of the Company and the owner of Lodestar USA Inc. (See Note 18).

 

Convertible preferred stock: On September 21, 2024, the Company entered into an agreement to issue 250 shares of Series A-1 for gross proceeds of $150,000 (“Say Coon Loh Agreement”). Each issued Series A-1 shares are convertible into common stock of the Company on a one-for-one basis. On September 25, 2024, the Company entered into an agreement to issue 250 shares of Series A-1 for gross proceeds of $150,000 (“Innocus Global Agreement”). Each issued Series A-1 shares are convertible into common stock of the Company on a one-for-one basis.

 

Treasury Stock: On August 31, 2024, the Company issued 1,932 shares ($1,075,622, $556.74 per share) of the Company’s common stock to one employee in consideration for services rendered. On August 31, 2024, a total of 1,376 shares of treasury stock were returned as a settlement for no consideration to the Company under the employment agreements, which were initially given to two employees. On September 24, 2024, the Company entered into a share subscription agreement with GF Korea Inc. (the “GF Agreement”) pursuant to which the Company issued 4,997 shares ($2,782,030, $556.74 per share) of the Company’s common stock to GF Korea Inc. The liabilities were paid with the shares and the difference between fair value of issued shares and liabilities was recognized as expense. On September 30, 2024, the Company issued Tan Chin Hwee, a director, Executive Chairman and Interim CEO of the Company, 168 shares ($93,532, $556.74 per share) of the Company’s common stock in consideration for services rendered. (See Note 18)

 

As of December 31, 2024 and 2023, 101,202 shares (no treasury share) and 94,279 shares (5,721 treasury shares) of common stock were issued and outstanding, respectively, and the Company reserved 40,798 shares and 40,298 shares of common stock for the conversion of Series A and Series A-1, respectively.

 

8. SHARE-BASED COMPENSATION

 

Share-based compensation expense of $2,221,393 was recorded during the period from January 1, 2024 to December 31, 2024, and $1,749,741 was recorded during the period from January 4, 2023 (inception) to December 31, 2023, in connection with the issuance of shares of common stock from the Company’s treasury shares to employees and nonemployees (See Note 8) as the estimated fair value of such common stock as of the issuance date exceeded the consideration paid, if any, and is included within general and administrative expenses on the accompanying statement of operations and comprehensive loss. Details of share-based compensation that the Company recognized as expense for the period from January 1, 2024 to December 31, 2024 are as follows:

 

Grant date     Holder     Total shares     Share fair value     Total fair value  
August 31, 2024     Employee       1,932     $ 556.74     $ 1,075,622  
September 29, 2024     Lodestar USA       1,202       556.74       669,201  
September 30, 2024     Employee       168       556.74       93,532  
September 12, 2024     Employee*       688       556.74       383,037  
              3,990               2,221,393  

 

 
* One employee purchased 688 shares from a shareholder at a price lower than the fair value. The difference between the transaction price and the fair value was accounted for as an expense.

 

F-19

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

The Company’s board of directors (the “Board”) determines the fair value of common stock at the time of issuance due to the absence of an active market for the Company’s common stock. The Board determined the fair value of such common stock by considering a number of objective and subjective factors, operating and financial performance, the lack of liquidity of capital stock, and general and industry-specific economic outlook, amongst other factors. The fair value of the underlying common stock will be determined by the Company’s Board until such time the Company’s common stock is listed on an established exchange or national market system.

 

In connection with estimating the fair value of common stock at the time shares of common stock were issued from the Company’s treasury shares an option pricing model (the “OPM”) was utilized.

 

9. EMPLOYEE BENEFITS

 

Changes in defined severance benefits obligation were as follows:

 

    2024     2023  
Balance at 1 January   $ 49,153     $ -  
Current service cost     37,078       48,559  
Included in profit or loss (*1)     (12,712 )     -  
Benefits paid     (6,752 )     -  
Payments from plans for the transition to a defined contribution retirement plan     (58,665 )     -  
Cumulative effects of foreign currency translation     (8,102 )     594  
Balance at 31 December   $ -     $ 49,153  
Current     -       2,462  
Noncurrent     -       46,691  

 

 
(*1) The difference between the defined benefit obligations and the settled amount upon the transition of post-employment benefit.

 

Effective May 3, 2024, the Company has transitioned from a defined benefit retirement plan to a defined contribution retirement plan. The expense recognized in relation to defined contribution plan for the period ended December 31, 2024 is $55,392.

 

The principal actuarial assumptions used to determine defined severance benefits obligation were as follows:

 

    2024     2023  
Discount rates   -     4.70%  
Salary growth rates   -     3.38%+Experienced salary scale  

 

F-20

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

10. FAIR VALUE MEASUREMENTS

 

The convertible debt security is classified within Level 3 value hierarchy because the value of the asset is based on the credit worthiness of the obligor, which is an unobservable input. The Company used a Tsiveriotis-Fernandes model (the “T-F Model”) to value the convertible debt security as of December 31, 2024.

 

Financial assets measured at fair value on a recurring basis are as follows:

 

    Level 1     Level 2     Level 3     Total  
Financial liabilities:                                
Derivative liabilities   $ -       -       401,374       401,374  

 

The table below presents the ranges of significant unobservable inputs used to value the Company’s Level 3 financial instruments. These ranges represent the significant unobservable inputs that were used in the valuation of each type of financial instrument. These inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument. Valuation techniques and inputs for assets measured by the fair value hierarchy Level 3 are as follows:

 

Classification   Valuation technique   Input
Financial assets at fair value        
Convertible debt security   Tsiveriotis-Fernandes model   Discount rate, stock price and volatility
Derivative liabilities   Probability Weighted Return model   Discount rate, stock price and volatility

 

A reconciliation of the beginning and ending balances for the convertible debt security measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

 

Balance as of January 1, 2024   $ 1,006,757  
Adjustment to fair value     (47,298 )
Impairment Loss     (959,459 )
Balance as of December 31, 2024   $    

 

A reconciliation of the beginning and ending balances for the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows:

 

Balance as of January 1, 2024   $ -  
Issuance     374,612  
Adjustment to fair value     26,762  
Balance as of December 31, 2024   $ 401,374  

 

F-21

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

11. CONVERTIBLE NOTES

 

In May and December 2024, The Company issued $3 million in aggregate principal amount of the convertible senior unsecured notes. The convertible notes contain a right to convert the notes into the common shares. The Company accounted the embedded conversion features associated with the convertible notes separately from the host contract as the economic characteristics and risks of the embedded conversion feature are not closely related to the economic characteristics and risks of the host contract. The Company accounted the embedded conversion feature as a derivative instrument and periodically measures its fair value in accordance with ASC 820. The Company determined the carrying amount of the convertible notes for the difference between the fair value of the embedded conversion features and the principal amount of the convertible notes. The difference between the carrying value and principal amount of the convertible notes represents the discount on notes that was amortized to interest expense over the terms of the convertible notes using the effective interest rate method.

 

Details of convertible notes issued and outstanding as of December 31, 2024 are as follows:

 

    December 31,
2024		  
Noncurrent        
Convertible Notes   $ 3,000,000  
Discount on Notes     (333,168 )
    $ 2,666,833  

 

Amounts recognized in profit or loss and changes in fair value of derivative liabilities at fair value through profit or loss for the period ended December 31, 2024 are as follows:

 

    1st     2nd     Total  
Balance at 1 January   $ -       -       -  
Issuance     283,324       91,288       374,612  
Adjustment to fair value     17,706       9,056       26,762  
Balance at 31 December   $ 301,030       100,344       401,374  

 

F-22

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

Details of the convertible notes issued by the Company and outstanding as of December 31, 2024 are as follows:

 

Series   1st   2nd(*)
Type   Convertible Notes Convertible Notes
Issuance amount   2,250,000   750,000
Coupon rate (%)   3% 3%
Issuance date   2024-06-04 / 2024-12-30   2024-06-05 / 2024-12-30
Maturity date   2027-06-03 2027-06-04
Principal redemption  

1. Redemption at maturity:

Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed

  

1. Redemption at maturity:

Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed
Conversion price  

●

Conversion before the business combination:

 

Before the consummation of the Business Combination, the holders shall be entitled to convert the Pre-PIPE Notes into ordinary shares in the Company at the conversion price of $1,200 per share (the Pre-Merger Conversion Price).

 

Upon the consummation of the Business Combination, 1 ordinary share of the Company shall be converted into 300 ordinary shares (1 share is worth $10.00) of a combined entity (the Combined Entity).

 

●

Conversion after the business combination

 

Upon the consummation of the Business Combination, the Pre-PIPE Notes shall be a part of the Combined Entity and the Investor shall be entitled to convert the Pre- PIPE Notes into ordinary shares in the Combined Entity at the conversion price of $10 per share (the Post-Merger Conversion Price).

 

The Post-Merger Conversion Prices shall be adjusted downwardly to the greater of the following:

 

●

60% discount to the 5-day average of the volume-weighted average prices of ordinary shares over 5 consecutive trading days following the conversion notice date; and

 

●

Floor price of $4 per share.

●

Conversion before the business combination:

 

Before the consummation of the Business Combination, the Investor shall be entitled to convert the Pre-PIPE Notes into ordinary shares in the Company at the conversion price of $1,200 per share (the Pre-Merger Conversion Price).

 

Upon the consummation of the Business Combination, 1 ordinary share of the Company shall be converted into 300 ordinary shares (1 share is worth $10.00) of a combined entity (the Combined Entity).

 

●

Conversion after the business combination

 

Upon the consummation of the Business Combination, the Pre-PIPE Notes shall be a part of the Combined Entity and the Investor shall be entitled to convert the Pre- PIPE Notes into ordinary shares in the Combined Entity at the conversion price of $10 per share (the Post-Merger Conversion Price).

 

The Post-Merger Conversion Prices shall be adjusted downwardly to the greater of the following:

 

●

60% discount to the 5-day average of the volume-weighted average prices of ordinary shares over 5 consecutive trading days following the conversion notice date; and

 

●

Floor price of $4 per share.

 

 
(*) As of December 31, 2024, the Company satisfied the conditions to receive $375,000; however, the payment remained outstanding as of that date and was subsequently received in January 2025.

 

F-23

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

12. PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consisted of the following as of December 31, 2024 and 2023:

 

    2024     2023  
Office equipment   $ 35,044     $ 37,847  
      35,044       37,847  
Less: accumulated depreciation     (10,688 )     (4,249 )
Property and equipment, net   $ 24,356     $ 33,598  

 

Depreciation expense for the year ended December 31, 2024 and for the period from January 4, 2023 (inception) to December 31, 2023 totaled $7,562 and $4,198 and was included within general and administrative expenses on the accompanying statement of operations and comprehensive loss.

 

13. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of the following as of December 31, 2024 and 2023:

 

    2024     2023  
Advances to a production company for content development   $ 153,328     $ 77,461  
Advances to writers for development of content             69,716  
Prepaid cloud computing arrangement hosting services     96,925       61,413  
Prepaid income tax     55       -  
Accounting services     -       18,826  
Security deposit for office lease     67,665       -  
Capitalized implementation costs for cloud computing arrangement     104,265          
    $ 422,238     $ 227,416  

 

Prepaid expenses and other current assets – related party consisted of a security deposit for an office lease totaling $67,699 (see Note 18).

 

14. OTHER ASSETS, NONCURRENT

 

Other assets, noncurrent consisted of the following as of December 31, 2024 and 2023:

 

    2024     2023  
Advances to production companies for content development   $ 1,082,647     $ 852,072  
Advances to writers for development of content     630,303       480,259  
Capitalized implementation costs for cloud computing arrangement     49,418       295,619  
Security deposit for office lease     -       77,462  
    $ 1,762,368     $ 1,705,412  

 

As of December 31, 2023, Other assets, noncurrent – related party consisted of a security deposit for an office lease totaling $77,500 (see Note 18).

 

F-24

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

15. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following as of December 31, 2024 and 2023:

 

    2024     2023  
Accrued legal services   $ 2,000,722     $ 1,468,900  
Accrued accounting services     1,461,779       667,906  
Unearned Revenue     135,331       -  
Annual leave allowance     66,479       65,272  
Payroll withholding tax     36,784       34,337  
Other payable     60,052       1,295  
    $ 3,761,147     $ 2,237,710  

 

16. COMMITMENTS AND CONTINGENCIES

 

Operating Leases: The Company has obligations as a lessee for two office space leases, both of which are classified as operating leases. For the year ended December 31, 2024, the total lease cost was $123,337.(2023: $70,831)

 

The weighted average remaining lease term was 0.4 years and the weighted average discount rate was 5.7% as of December 31, 2024.

 

Future minimum payments of lease liabilities under the noncancelable operating leases are as follows at December 31, 2024 and 2023:

 

    2024     2023  
Less than 1 year   $ 39,662     $ 122,911  
1 ~ 2years     -       51,213  
Total undiscounted lease payments     39,662       174,124  
Less: imputed interest     (307 )     (6,297 )
Total future minimum payments   $ 39,354     $ 167,826  

 

Legal Matters: From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation, that would have a material adverse effect on the Company’s business, operating results, cash flows, or financing condition should such litigation be resolved unfavorably.

 

Loan: On December 31, 2024, the Company entered into a loan agreement with Nikhil Suresh Nanda, pursuant to which the Nikhil Suresh Nanda will provide working capital loans to the Company. The total loan amount will not exceed 50% of the total committed PIPE financing totaling $1,000,000 for the SPAC. The loan will be paid by converting the subject loan to a Convertible Senior Unsecured Note (PIPE) immediately prior to the completion of the business combination. The agreement includes various conditions, including the issuance of free trading bonus shares by the Company and the use of the loan for working capital purposes related to the business combination.

 

F-25

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

17. INCOME TAXES

 

The Company’s effective tax rate for the year ended December 31, 2024 and the period from January 4, 2023 (inception) the December 31, 2023 was zero percent. The effective tax rate may vary significantly from period to period and can be influenced by many factors. These factors include, but are not limited to, changes to the statutory rates in the jurisdictions where the Company has operations and changes in the valuation of deferred tax assets and liabilities. The difference between the effective tax rate and the federal statutory rate of 21.0% (Korea: 20.9%) primarily relates to certain nondeductible items, state and local income taxes, the absence of current income tax, and a full valuation allowance for deferred tax assets.

 

    2024       2023  
Current taxes                
United States   $ -     $ -  
Foreign - Korea     -       -  
Current taxes   $ -     $ -  
Deferred taxes                
United States   $ -     $ -  
Foreign - Korea     -       -  
Deferred taxes   $ -     $ -  

 

Deferred tax assets of the following as of December 31, 2024 and 2023:

 

    2024     2023  
Deferred tax assets                
Net operating loss carryforward   $ 2,802,948     $ 1,837,180  
Lease liabilities     8,225       48,741  
Accrued Expenses     751,990       -  
Stock Compensation     811,711       -  
Defined severance benefits     -       10,273  
Others     (1,283 )     (36,495 )
Total gross deferred tax assets     4,373,591       1,859,699  
Valuation allowance     (4,373,591 )     (1,859,699 )
Net deferred tax assets   $ -     $ -  

 

There are no deferred taxes that are directly charged to (credited from) equity for the years ended December 31, 2024 and 2023.

 

The Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes or unrecognized tax benefits as a component of its income tax provision. The Company has not recorded any interest or penalties related to unrecognized tax benefits through December 31, 2024 and 2023.

 

In the normal course of business, the Company is subject to examination by federal and state jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. The Company is not currently under audit by the taxing jurisdictions to which the Company is subject.

 

F-26

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

18. RELATED PARTIES

 

Two of the Company’s directors, one of whom is the Executive Chairman and the other is also the Chief Executive Officer, are also senior officers of Solaire Partners. A director of the Company is also a managing member of Global Star Acquisition 1, LLC, the entity the Company purchased its shares of Global Star Class B common stock from.

 

The Company entered into a two-year operating lease for one of its office spaces commencing in June 2023 with Solaire Partners as the landlord. At inception, total gross rental payments due under this operating lease approximated $92,938 and a security deposit due approximated $67,699. For the year ended December 31, 2024, the Company made $46,469 of rental payments associated with this operating lease. As of December 31, 2024, $19,189 associated with the present value of lease payments is included as components of lease liabilities, current – related party on the accompanying balance sheet, $67,699 associated with the security deposit is included as a component of prepaid expenses and other current assets - related party on the accompanying balance sheet

 

During January 2024, the Company purchased 1,000 shares of Play Company Co., Ltd. Common Stock for an aggregate purchase price of $1,178,055 from Solaire Partners LLC.

 

On April 22, 2024, Young Jae Lee, the Company’s Chief Executive Officer, loaned the Company $121,798 (the “1st Lee Loan”). On May 3, 2024, the Company repaid $67,665 of the 1st Lee Loan, leaving a balance of $54,132 on the 1st Lee Loan. The 1st Lee Loan is for a term of nine months and bears interest at the rate of 4.6% per annum. On October 23, 2024, the Company entered into an extension agreement on the 1st Lee Loan to amend the maturity date to June 30, 2025 or within five days after the K Wave Media Ltd registration statement on Form F-4 is declared effective by the U.S. Securities and Exchange Commission. The Loan bears interest at the rate of 4.6% per annum.

 

On April 23, 2024, Young Jae Lee, the Company’s Chief Executive Officer, loaned the Company $169,164 (the “2nd Lee Loan”). On May 3, 2024, the Company repaid $169,164 of the 2nd Lee Loan, leaving a balance of $0.00 on the 2nd Lee Loan. The 2nd Lee Loan is for a term of three months and bears interest at the rate of 4.6% per annum.

 

On April 26, 2024, Bidangil Pictures Co.,Ltd., loaned the Company $91,348. The Loan is for a term of three months and bears interest at the rate of 3% per annum. On July 26, 2024, the Company entered into the extension agreement with Bidangil in order to differ the maturity to October 23, 2024. On October 25, 2024, the Company entered into an extension agreement on the loan with Bidangil Pictures Co.,Ltd. to amend the maturity date to June 30, 2025 or within five business days after K Wave Media Ltd F-4 registration statement becomes effective. The Loan is for a term of three months and bears interest at the rate of 3% per annum.

 

On May 3, 2024, Young Jae Lee, K Enter’s Chief Executive Officer, loaned the Company $236,829 (the “3rd Lee Loan”). The 3rd Lee Loan is for a term of nine months and bears interest at the rate of 4.6% per annum. On November 3, 2024, the Company entered into an extension agreement on the 3rd Lee Loan to amend the maturity date to April 30, 2025 or within five days after the K Wave Media Ltd registration statement on Form F-4 is declared effective by the U.S. Securities and Exchange Commission. The Loan bears interest at the rate of 4.6% per annum.

 

F-27

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

On June 4, 2024, the Company issued a convertible senior unsecured note in the principal amount of $3,000,000 to Innocus Global Group Pte Ltd., an entity owned by Jaekeun (Jason) Kim, a nominee director PubCo (the “Jason Note”). The Jason Note has a maturity date of 3 years and will pay an annual coupon rate of 3% to be paid semi-annually until the maturity date of the Jason Notes. Under the Jason Note, the proceeds shall be wired to the company as follows: (i) 25% of the committed amount at the time of signing this definitive agreement, (ii) 50% at the time SEC declares effectiveness on the F-4, and (iii) the remaining 25% at the time of shareholder approval and going public. From the time the company issued the Jason Note and until the closing of the Business Combination, the Jason Note will be convertible, at the option of the holder, at a conversion price per share of $1,200 per share. The Post-Merger Conversion Price for the Notes shall be the greater of (a) a 60% discount to the 5-day average of the volume-weighted average prices of ordinary shares over 5 consecutive trading days following the conversion notice date, and (b) a Floor price of $4 per share.

 

On August 19. 2024, Global Star Acquisition I LLC loaned the Company $120,000. The loan is for a term of three months or within five business days after K Wave Media Ltd F-4 registration statement becomes effective, whichever is earlier and bears no interest. On October 18. 2024, the Company repaid $120,000 of Global Star Acquisition I LLC loan, leaving a balance of $0.00 on the loan.

 

On August 31, 2024, the Company issued 1,932 shares ($1,075,622, $556.74 per share) of the Company’s common stock to an employee of the Company, in consideration for services rendered.

 

On August 31, 2024, a total of 1,376 shares of treasury stock were returned as a settlement for no consideration to the Company under the employment agreements, which were initially given to two employees.

 

On September 12, 2024, one founder of the Company transferred a total of 688 shares ($383,037, $556.74 per share) of the founder to an employee at par value. The Company recognized the transaction as a share-based compensation at fair value (See Note 8), which is included within general and administrative expenses on the accompanying statement of operations and comprehensive loss.

 

On September 24, 2024, the Company entered into a share subscription agreement with GF Korea Inc. (the “GF Agreement”) pursuant to which the Company issued 4,997 shares ($2,782,030, $556.74 per share) of the Company’s common stock to GF Korea Inc. in consideration for GF Korea Inc. assuming certain payment obligations of the Company in the aggregate $8.52 million owed to its service providers of the Company. The GF Agreement closed on September 25, 2024 and the company issued the 4,997 shares of its common stock to GF Korea Inc., which will be converted to 1,559,805 shares of Pubco based on an estimated 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1,470.00 / USD $1.00 in the Business Combination. Pursuant to the GF Agreement, GF Korea Inc. shall sell the shares within sixty(60) days following the listing date on the NASDAQ Stock Market.; However, if any lock-up period is imposed under applicable laws, GF Korea shall sell those ordinary shares within sixty (60) days after the expiration of such lock-up period.

 

On September 29, 2024, the Company entered into an agreement with Lodestar USA, Inc. (the “Lodestar Agreement”) pursuant to which the Company issued 1,202 shares ($669,201, $556.74 per share) of the Company’s common stock to Lodestar USA, Inc. in consideration for services rendered to the Company by Ted Kim, a co-founder and a director of the Company and the owner of Lodestar USA Inc. The Company’s common stock will be converted to 375,202 shares of Pubco based on an estimated 312.1:1 conversion ratio calculated with a foreign exchange rate of KRW 1, 470.00 / USD $1.00.

 

On September 30, 2024, the Company issued Tan Chin Hwee, a director, Executive Chairman and Interim CEO of the Company, 168 shares ($93,532, $556.74 per share) of the Company’s common stock in consideration for services rendered.

 

F-28

 

 

K ENTER HOLDINGS INC.
NOTES TO THE FINANCIAL STATEMENTS
For the Year Ended December 31, 2024 and Period from January 4, 2023 (inception) to December 31, 2023

 

19. SUBSEQUENT EVENTS

 

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to May 14, 2025, the date that the financial statements were available to be issued.

 

On January 2, 2025, upon the closing of equity purchase agreement, the Company completed the acquisition of the controlling interest of Six Korean Entities by share exchange. However, the purchase price allocation to assets acquired and liabilities assumed allocation to assets and liabilities is based on estimates, assumptions, valuations, and other studies that have not progressed to a stage where there is sufficient information to make a definitive calculation.

 

On February 3, 2025, shareholders of Global Star approved the proposals regarding Merger Agreement on the shareholders’ meeting. The Merger Agreement was completed on May 13, 2025.

 

On, February 10, the company fully repaid the “1st Lee Loan” and partially paid the 3rd Lee Loan by $25,046, which remaining balance is $222,091.

 

On February 27, 2025, Play company Co.,Ltd. loaned the Company $744,319. The Loan is for a term of one year and bears interest at the rate of 4.6% per annum.

 

F-29