NOTE 6 — LEASE

The Company uses approximately 19,200 square feet of office space at the Seoul Marina free of charge. Although there is no formal lease agreement, the Company determined that the ASC 842 accounting standard applies and recognized the fair value of the rent-free use of the property through May 2031 as a right-of-use (ROU) asset, with corresponding lease expense recognized in the statement of operations.

At the time of initial acquisition from SMC in July 2021, the Company used the following assumptions:

Based on the assumptions outlined, the Company calculated the present value of 10 years of free rent to be $2,775,512 and recognized it as a long-term right-of-use (ROU) asset as of June 30, 2021. Since the space was provided free of charge, no lease liability was recognized. The ROU asset was amortized at approximately $23,000 per month over the 10-year lease term.

As the Company initially allocated $2,935,658 to the SMC receivable and leasehold rights, an impairment loss of $158,278 was recognized on the ROU asset as of December 31, 2021.

In December 2024, the Company sold its entire equity interest in Hanryu Bank Co., Ltd. (“HBC”), a subsidiary that held the rent-free rights to the Seoul Marina building. However, through an asset transfer agreement between the Company and HBC, the Company acquired the rent-free rights to the Seoul Marina building. The transfer amount was based on the net book value of the ROU asset as of the contract date and was offset against the Company’s outstanding loan receivable. As of June 30, 2025 and December 31, 2024, the carrying amounts of the ROU asset were $1,459,342 and $1,458,780, respectively. Lease cost is $115,519 for the six months ended June 30, 2025. The carrying amount of the ROU asset reflects the exchange rate fluctuation from 1,470.00KRW/USD as of December 31, 2024, to 1,356.40KRW/USD as of June 30, 2025.