FY2022 Annual Financial Report

Hanatour Service Inc.

26 January 2024

 

Annual Report

I. OUTLINE OF THE COMPANY

1. Purpose of the Company

Purpose

Remark

1. General Travel Business(Travel Agency) 2. Ticketing and Sales of Airline and Boat 3. Souvenir Sales 4. Issuing of Selling Offers 5. Real Estate Dealing and Lease 6. Optional Communication Business 7. Computer Programming and Supply 8. Telemarketing Business 9. Printing and Publishing Business 10. Issuing of Periodicals 11. Operating School to Train Travel Experts 12. Transportation Business(Chartered Buses) 13. Internet Business (Install and Provide Contents, Internet Marketing) 14. E-commerce and Information Processing 15. Advertisement (Internet and Outdoor Advertisement) 16. Information and communication Related Business 17. Web Hosting and Homepage Establishment 18. Warehousing 19. Tourists Hotel & Lodging business 20. Operation and management of Tourists Hotels & Lodging and other incidental facilities 21. Tourists Hotels & Lodging Management Business 22. Investment, Development, Operation and Asset Management of the Domestic and Overseas Real Estate 23. Real Estate Agent Business 24. Management of Intellectual Property Rights and License Business (Brand, Trademark Rights) 25. Intangible Assets Sales and Service (Knowledge, Information) 26. Production and Distribution (Movies, Broadcasting, Videos and Other Cultural Products) 27. Production and Distribution of Digital Contents 28. Operating Performance Facilities 29. Planning Performance 30. Character business 31. Exhibition and Event Agency 32. Internet Broadcasting 33. Tourism Development and Incidental Business (Marketing Counsel, Planning and Consulting) 34. Education service 35. Operation of Lifelong E-learning Education Facilities 36. Gift Certificate Sales 37. Wedding Consulting 38. Amusement Park Operation 39. Comprehensive Leisure Facilities and Operation Management 40. Tourist Attraction Development Business 41. Comprehensive Recreation Business 42. International Conference Planning Business 43. Camping Car Business 44. Bonded Goods and Tourism Product Sales Business 45. Accommodation Business 46. Accommodation reservation Service 47. Web Portal and Internet Information Service 48. Franchise Business 49. Restaurant Business 50. Shopping Center Leasing and Sublease Business 51. Ticket sales related to Culture, Arts and Sports Events 52. Database Development and Sales Related to Culture, Arts and Sports 53. Investment of Cultural Projects (Performances and Film Production) 54. Organization of Events and Sponsors 55. Importation and Agency Business of Performance Publication Rights 56. Brokerage Agency Business for Copyrights and Neighboring Copyrights of Performance 57. Membership Sales and Brokerage Arrangements 58. Overseas Studies Agency Business 59. Lifelong Education Facilities Operating 60. Financial Loan and Other Financial Service Business 61. Electronic Financial Business 62. Planning and Promotion of Performance, Concert, Exhibition 63. Credit Card Business 64. Real Estate Development Business 65. Insurance Agent Business 66. All Other Incidental Businesses

2. Important Business

General Travel Business(Travel Agency)

3. History of the Company

A. Changes after the establishment

Date	Important Changes
Oct. 25, 1993	Established Kookjin Travel Co., Ltd. (Capital: 350 million won) 55-4 Seosomun-dong, Jung-gu, Seoul
Dec. 01, 1995	Set the company policy in 'comprehensive wholesales' and launched 'Hana Tour', independent package brand, and commenced the agency sales
Nov. 28, 2000	Listed on KOSDAQ (commenced trading)
Nov. 10, 2006	Listed on LSE(London Stock Exchange)
Nov. 01, 2011	Listed on KOSPI
Jan. 01, 2012	CEO changed - SangHwan Park and HuynSyuk Choi
Mar. 25, 2016	CEO changed - SangHwan Park and JinKook Kim
Mar. 26, 2020	CEO changed - JinKook Kim and MiSun Song
Mar. 25, 2022	CEO changed - MiSun Song and KyungKen Yuk
Dec. 31, 2022	CEO changed - MiSun Song

B. Change of trade name

Date	Changes
Mar. 6, 1996	Changed the name from Kookjin Travel Co., Ltd. to Hana Tour Co., Ltd. ** Purpose is to unify the brand name and company image

C. Change of location for head office

Date	Location
Oct. 25, 1993	55-4 Seosomun-dong, Jung-gu, Seoul
Mar. 22, 1996	10F Inju Building, Tour cost fees-1 Seorin-dong, Jongro-gu, Seoul
Oct. 01, 1997	11F Hanmi Building, 1 Gonpyeong-dong, Jongro-gu, Seoul
Jun. 15, 2005	1 Gongpyeong-dong, Jongro-gu, Seoul
Jul. 01. 2013	HanaTour Bldg. 41, Insadon 5-gil, Jongno-gu, Seoul

D. Merger, spin off (merger), comprehensive stock swap, transfer, important business assignment and others

On June 29, 2022, the company issued 2,100,000 shares through rights offering.

4. Domestic Place of Business

Classification	Location	Main Business
Head Office	41, Insadong 5-gil, Jongno-gu, Seoul, Republic of Korea	General Travel Business and Ticketing
Busan Sales Office	7, Chungjang-daero 9beon-gil, Jung-gu, Busan, Republic of Korea
Airport Office (Terminal1)	271, Gonghang-ro, Jung-gu, Incheon, Republic of Korea
Airport Office (Commodity Support)	124, Yeongjong-daero, Jung-gu, Incheon, Republic of Korea
Daegu Sales Office	648, Gukchaebosang-ro, Jung-gu, Daegu, Republic of Korea
Daejeon Sales Office	69, Dunsanseo-ro, Seo-gu, Daejeon, Republic of Korea
Gwangju Sales Office	136, Geumnam-ro, Buk-gu, Gwangju, Republic of Korea
Gangneung Slaes Office	2141, Gyeonggang-ro, Gangneung-si, Gangwon-do, Republic of Korea
Chuncheon Slaes Office	110, Jungang-ro, Chuncheon-si, Gangwon-do, Republic of Korea
Wonju Sales Office	65, Neungnadong-gil, Wonju-si, Gangwon-do, Republic of Korea
Jeonju Sales Office	269, Hongsan-ro, Wansan-gu, Jeonju-si, Jeollabuk-do, Republic of Korea
Changwon Sales Office	754, Changwon-daero, Seongsan-gu, Changwon-si, Gyeongsangnam-do, Republic of Korea
Eulji-ro IT Center	343, Samil-daero, Jung-gu, Seoul, Republic of Korea
Travel Desk	51, Sogong-ro, Jung-gu, Seoul, Republic of Korea

5. Status of Employees (As of December 31, 2022)

(Unit: person)

Classification	Office & Operation
Men	579
Women	605
Total	1,184

6. Organization

II. INFORMATION ON SHARES

1. Total Number of Stocks, Etc.

A. Total number of stocks (As of December 31, 2022)

(Unit: share)

Classification		Types of stocks		Remark
		Common stock	Total
I. Total number of stocks to be issued		20,000,000	20,000,000	-
II. Total number of stocks issued to this point		16,039,185	16,039,185	-
III. Total number of stocks reduced to this point		-	-	-
	1. Reduction of capital	-	-	-
	2. Retirement of shares	-	-	-
	3. Repayment of redeemed stocks	-	-	-
	4. Others	-	-	-
IV. Total number of stocks issued (II-III)		16,039,185	16,039,185	-
V. Treasury stocks		549,253	549,253	-
VI. Outstanding stocks (IV-V)		15,489,932	15,489,932	-

B. Change of capital

(1) Status of capital increase

        (Unit: share, won)

Date of stock issuance	Type of issuance	Contents of issued stocks
		Types	Quantity	Par value	Issuance amount per stock	Remark
Oct. 25, 1993	-	Common stock	35,000	10,000	10,000	Capital for incorporation
Jun. 12, 1996	Capital increase with consideration (shareholder allotment)	Common stock	21.500	10,000	10,000	-
Jul. 25, 1997	Capital increase with consideration (shareholder allotment)	Common stock	35,840	10,000	10,000	-
Oct.01, 1997	-	Common stock	184,680	5,000	-	1 to 2 shares
Dec. 02, 1999	Capital increase with consideration (shareholder allotment)	Common stock	115,320	5,000	5,000	-
Dec. 23, 1999	Capital increase with consideration (shareholder allotment)	Common stock	60,000	5,000	10,000	-
May, 05, 2000	Stock Split	Common stock	3,600,000	500	-	1 to 10 shares
Nov. 16, 2000	Capital increase with consideration (shareholder allotment)	Common stock	900,000	500	2,850	-
Aug. 26, 2003	Capital increase without consideration	Common stock	3,764,034	500	-	-
Oct. 27,2004	Capital increase with consideration (shareholder allotment)	Common stock	76,322	500	11,850	-
Oct. 27,2004	Bonus Issue	Common stock	1,977,029	500	-	-
Nov. 11, 2006	Capital increase	Common stock	1,161,000	500	55,711	DR
Feb. 28, 2020	Capital increase with consideration (Third-party allotment)	Common stock	2,323,000	500	55,500	-
Jun. 29, 2022	Capital increase with consideration (Rights offering)	Common stock	2,100,000	500	49,800	-

(2) Status of capital decrease

 (Unit: share, won)

Date of capital reduction	Type	Purpose	Contents of reduced stocks
			Types	Quantity	Face value per stock	Amount of acquisition per stock (for capital decrease for consideration)	Remark
-	-	-	-	-	-	-	-

C. Contents of scheduled change for capital

No applicable change

2. Matters on Dividends

A. Matters on dividend for three recent fiscal year

Classification		30th Term	29th Term
Face value per stock (won)		500	500
(Consolidated) Current net income (million won)		(66,774)	(43,987)
(Separated) Current net income (million won)		(74,617)	(38,741)
(Consolidated) Net income per share (won)		(4,618)	(3,285)
Total amount of cash dividend (million won)		-	-
Total amount of stock dividend (million won)		-	-
Dividend payout ratio (%)		-	-
Yield rate of cash dividend (%)	Common stock	-	-
	Preferred stock	-	-
Yield rate of stock dividend (%)	Common stock	-	-
	Preferred stock	-	-
Cash dividend per share (won)	Common stock	-	-
	Preferred stock	-	-
Stock dividend per share	Common stock	-	-
	Preferred stock	-	-

III. CONTENTS OF THE BUSINESS

1. Summary of the Business

In 2020, the COVID-19 pandemic posed unprecedented challenges, making the past three years exceptionally tough. Hopes of its end in 2021 were dashed with the emergence of the Omicron variant in 2022, along with subvariants, hindering the travel industry's recovery.
Fortunately, from the latter half of 2022, the global trend of decreasing COVID-19 cases led countries to ease entry and exit restrictions. In September, the South Korean government's announcement of lifting pre-entry COVID-19 tests and on-site quarantine measures marked a pivotal moment for the travel industry's recovery. Tourism to Japan resumed in October, and with the declaration of the end of the endemic situation in major Southeast Asian countries, the South Korean travel industry entered a full-fledged recovery.
By December 2022, outbound travelers had recovered to nearly 60% compared to December 2019, and our company experienced a rapid increase in customers, reaching around 40% of the 2019 volume. In Q4 2022, we recorded the highest sales since the pandemic, and operating losses hit a quarterly low. Annual figures for 2022 showed a 186% increase in sales, with the lowest operating and net losses since the pandemic, raising optimism for future recovery.
The recovery trend is accelerating in 2023, with profitability achieved in January and February, marking the first monthly surplus since the pandemic. Expectations for a surplus in Q1 are growing, and we anticipate achieving an annual surplus for the first time since the pandemic.
This year is significant for HanaTour, not only for improved operating performance but also for showcasing tangible results from efforts made during the COVID-19 period. Initiatives like 'HanaPack 2.0,' enhanced customer satisfaction, products for FIT customers, and a revamped mobile app demonstrate our commitment to growth. Targeting both traditional and FIT markets, we aim to create a new foundation for growth, leveraging our product development and overseas network. We seek the support of our shareholders as HanaTour embarks on this transformative journey.

2. Market Share Rate

The market share rate of the travel business is classified based on the calculation in which the "Total Departures from HANATOUR" is divided by the "Total Departures of Korea." (Crews are excluded from the total departing persons)

The "Total Departure of Korea" is announced by Korea Tourism Organization (KNTO) and the "Total Departures from HANATOUR" is the figure which we report to Korean Association of Travel Agents (KATA).

<Market share rate based on the number of people>

Year	2022		2021		2020
	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea	Total Departures from HANATOUR	Total Departures of Korea
	533,957	5,904,941	42,441	803,201	646,444	3,688,606
Share rate	9.04%		5.28%		17.53%

3. Characteristics of the market

There are three special characteristics that make travel industry distinctive.

First, Travel business has seasonality. The pricing and marketing strategies change in accordance to seasons. However, due to 5-work-day policy and more maturing society and corporate cultures, the gap between the demands of seasons is shrinking which demanding changes to the products and strategies of travel agents.

Second, travel industry has time limits and has no inventory. This is in-line with air transportation, and hotel business. Products must be sold on each day, or the inventories will disappear automatically. Therefore, it is very important to have marketing strategy and diversified portfolio of products in order to get rid of all the inventories that the company possesses.

Third, travel industry is easy to copy. Therefore, the company needs to find new elements that would differentiate the company among competitors.

Last, travel industry is volatile. Compared to other industries it is affected by political, diplomatic, various social issues, economic issue, diseases, and other aspects as well.

4. New Business Development

   Not Applicable.

Ⅳ. Status of the Parent Company and Affiliated Companies

1. Status of the parent company

   Not applicable.

2. Status of affiliated companies

(Unit: Share, %)

Name of the Company	Business Contents	No. of Shares	Ownership Ratio (%)
Hanatour Business Service Inc.	Travel Business	400,000	100.00
Hana Tourist Inc.	Travel Business	906,981	30.23
Hanatour Jeju Service Inc.	Travel Business	618,830	77.35
Hanatour ITC Service Inc.	Travel Business	24,400,000	100.00
Tour Marketing Korea Service Inc.	Travel Business	140,000	70.00
Web Tour Service Inc.	Travel Business	8,777,380	76.99
Mark Hotel Co., Ltd.	Hotel Business	40,000,000	100.00
Hana Finance Service Inc.	Finance Service	3,400,000	100.00
SM duty free Co., Ltd.	Duty Free Business	12,325,387	90.13
Hanatour Europe Ltd.	Travel Business	4,200	70.00
Hanatour Japan Co., Ltd.	Travel Business	6,836,300	53.98
Hanatour CHINA	Travel Business	-	100.00
Hanatour HongKong Co., Ltd.	Travel Business	5,000,000	100.00
Beijing Hana Information Technology Co., Ltd.	Software Technical Development	-	100.00
Hanatour Service (M) Sdn.Bhd.	Travel Business	1,500,000	100.00
HANATOUR EU GMBH	Travel Business	-	100.00
HANATOUR VIETNAM COMPANY LIMITED	Travel Business	-	85.00
HANATOUR PHILIPPINES CORP.	Travel Business	1,267,980	97.54

3. Concurrent status of the executive management

Not applicable.

Ⅴ. SUMMARY OF FINANCIAL DATA

* We've applied K-IFRS 1115 form 2018 and rewrote 2017 and 2016 Financial Results using K-IFRS 1115

1. Financial results

(In thousand won, except per share amounts)

Classification	30th Term	29th Term	28th Term
Sales	66,269,096	10,781,802	73,947,230
Operating Expenses	156,798,748	108,327,485	149,962,759
Operating Income	(90,529,652)	(97,545,683)	(76,015,530)
Profit Before Tax	(77,690,960)	(43,530,465)	(131,191,120)
Income Tax Expense	(3,074,173)	(4,789,718)	(31,981,313)
Net Income	(74,616,787)	(38,740,747)	(99,209,807)
Net Income per Share(Won)	(5,160)	(2,893)	(7,619)

2. Financial position

(In thousand won)

Classification	30th Term	29th Term	28th Term
Current Assets	202,531,190	86,185,310	121,274,400
Non-Current Assets	115,786,404	128,627,359	226,035,622
Total Assets	318,317,593	214,812,670	347,310,022
Current Liabilities	162,469,875	92,071,844	95,992,675
Long-term Liabilities	5,864,863	2,199,736	92,035,510
Total Liabilities	168,334,738	94,271,580	188,028,185
Capital Stock	8,019,593	6,969,593	6,969,593
Other Paid-in Capital	119,473,582	16,465,030	186,465,030
Elements of Other Shareholder's Equity	(9,097)	(9,097)	(9,097)
Retained Earnings	22,498,777	97,115,564	(34,143,689)
Total Shareholder's Equity	149,982,855	120,541,089	159,281,837
Total Liabilities and Shareholder's Equity	318,317,593	214,812,670	347,310,022

Ⅵ. RISK FACTORS

Refer to III - 1. Summary of the Business

Ⅶ. MANAGEMENT

Full-time / Part-time	Name	Position	Assigned Task
Full-time	SangHwan Park	Chairman, Director	General Management
Full-time	HeeSeok Kweon	Senior Vice Chairman, Director	General Management
Full-time	MiSun Song	Chief Executive Officer and Director	General Management
Part-time	HyeLeon Yoo	Auditor, Outside Director	Outside Director
Part-time	InWhan Chang	Auditor, Outside Director	Outside Director
Part-time	MoonHyun Kim	Auditor, Outside Director	Outside Director
Part-time	SangMan Han	Auditor, Outside Director	Outside Director
Part-time	InJun Song	Non-Executive Director	Non-Executive Director
Part-time	YoungHo Kim	Non-Executive Director	Non-Executive Director
Part-time	ChanWoo Park	Non-Executive Director	Non-Executive Director

Ⅷ. LIST OF MAJOR SHAREHOLDERS

Shareholder	Number of shares	Percentage
Harmonia 1 limited company and 11 people with a special relationship	4,457,202	27.79%
HANATOUR INC.	549,253	3.42%

Ⅸ. CURRENT STATUS OF INVESTMENTS

1. Domestic

Name of the Company	Ownership Company	No. of Shares	Ownership Ratio (%)
Hanatour Business Service Inc.	HANATOUR Service Inc.	400,000	100.00
Hana Tourist Inc.	HANATOUR Service Inc.	906,981	30.23
Hanatour Jeju Service Inc.	HANATOUR Service Inc.	618,830	77.35
Hanatour ITC Service Inc.	HANATOUR Service Inc.	24,400,000	100.00
Tour Marketing Korea Service Inc.	HANATOUR Service Inc.	140,000	70.00
OK Tour Service Inc.	HANATOUR Service Inc.	9,784	48.92
Web Tour Service Inc.	HANATOUR Service Inc.	8,777,380	76.99
Nextour Co., Ltd.	Web Tour Service Inc.	40,000	100.00
Gyoyugyeohaeng Co., Ltd	HANATOUR Service Inc.	398,000	19.90
Mark Hotel Co., Ltd.	HANATOUR Service Inc.	40,000,000	100.00
Hana Finance Service Inc.	HANATOUR Service Inc.	3,400,000	100.00
SM duty free Co., Ltd.	HANATOUR Service Inc.	12,325,387	90.13
Interpark Corp.	HANATOUR Service Inc.	60,876	0.50
K Culture Industry Co., Ltd.	HANATOUR Service Inc.	-	40.00
Hani Tour Inc.	HANATOUR Service Inc.	19,078	9.54
SAM Consulting Co.,Ltd.	HANATOUR Service Inc.	1,667	7.41
KC HOSPITALITY CO.,LTD	HANATOUR Service Inc.	57,600	10.00
KBSJ Tourism Venture Union	HANATOUR Service Inc.	-	9.26
P&I Cultural Innovation Investment Union	HANATOUR Service Inc.	-	9.26
Silla Animal Inc.	HANATOUR Service Inc.	11,310	11.87
Jeju Channel Inc.	Hanatour Jeju Service Inc.	50,000	8.06
Dream Co., Ltd.	HANATOUR Service Inc.	2,250	2.08
	Hanatour Jeju Service Inc.	2,250	2.08

2. Overseas

Name of the Company	Ownership Company	Region	No. of Shares	Ownership Ratio (%)
Hanatour Europe Ltd.	HANATOUR Service Inc.	London	4,200	70.00
Hanatour Japan Co., Ltd.	HANATOUR Service Inc.	Japan	6,836,300	53.98
U.I Sightseeing Bus LLC	HANATOUR JAPAN CO., LTD	Japan	1,900	100.00
Hanatour CHINA	HANATOUR Service Inc.	China	-	100.00
Hanatour HongKong Co., Ltd.	HANATOUR Service Inc.	Hong Kong	5,000,000	100.00
Hanatour Europe S.R.L	HANATOUR Service Inc.	Italy	5,250	50.00
Allegrox TM Hotel	HANATOUR JAPAN CO., LTD	Japan	396	100.00
Beijing Hana Information Technology Co., Ltd.	HANATOUR Service Inc.	China	-	100.00
Hanatour Service (M) Sdn.Bhd.	HANATOUR Service Inc.	Malaysia	1,500,000	100.00
Hanatour Janpan System Vietnam	HANATOUR JAPN CO., LTD	Vietnam	-	100.00
HANATOUR EU GMBH	HANATOUR Service Inc.	Germany	-	100.00
HANATOUR VIETNAM COMPANY LIMITED	HANATOUR Service Inc.	Vietnam	-	85.00
HANATOUR PHILIPPINES CORP.	HANATOUR Service Inc.	Philippines	1,267,980	97.54

Ⅹ. MAJOR CREDITORS

Not applicable.

XI. IMPORTANT EVENTS AFTER THE SETTLEMENT OF

ACCOUNTS PERIOD

(1)  HANATOUR EU GMBH which is one of subsidiaries of the Group resolved to dissolve on January 18, 2023.

(2)  Mark Hotel Co., Ltd. which is one of subsidiaries of the Group resolved to dissolve on January 12, 2023.

XII. OTHER IMPORTANT FACTS ABOUT THE BUSINESS

None.

Independent Auditors' Report

Based on a report originally issued in Korean

To the Shareholders and Board of Directors of   

Hanatour Service Inc.:

Opinion

We audited the consolidated financial statements of Hanatour Service Inc. and its subsidiaries (the "Group"), which comprise the consolidated statements of financial position as of December 31, 2022 and 2021, the consolidated statements of comprehensive income (loss), changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

In our opinion, these consolidated financial statements fairly represent the financial position and performance of the group as of December 31, 2022, in accordance with Korean International Financial Reporting Standards. ("K-IFRS").

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing (KSAs).  Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report.  We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements.  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matter

This section highlights matters that do not affect the audit opinion but require attention from users:

• Uncertainties Due to COVID-19

The travel and hotel industries, to which the consolidated company belongs, face uncertainties in future revenue generation and cash flows due to the widespread impact of COVID-19. This includes extensive booking cancellations and a decrease in new travel demand.

Items affected by COVID-19 mainly involve the occurrence of operating revenue, impairment assessment of cash-generating units, and the realizability of deferred tax assets. The consolidated company has reasonably estimated the impact of COVID-19 on its financial statements for the period ending December 31, 2022. However, predicting the ultimate impact of the ongoing COVID-19 spread on the company's financial position, performance, and cash flows is challenging as of the date of this audit report.

Key Audit Matters

Key audit matters are the most significant issues identified based on our professional judgment during the audit of the financial statements. These matters have been addressed in the context of our audit of the financial statements as a whole, and we do not provide a separate opinion on these matters.

• Evaluation of Realizability of Deferred Tax Assets of Hanatour Service Inc., the Parent Company

The parent company recognized deferred tax assets of 50,554 million Won, limited to the extent that sufficient taxable income is expected to be generated.

The evaluation of the realizability of deferred tax assets involves management's judgment regarding the estimation of future taxable income and the timing of loss carryforwards. Due to the high subjectivity in these estimates, we identified this evaluation as a key audit matter.

Our main audit procedures included assessing the design and operational effectiveness of internal controls related to the realizability of deferred tax assets, reviewing tax adjustments and corporate tax expenses with the help of tax experts, examining the reliability of the underlying data used in future taxable income estimates, reviewing the timing of realization of deductible temporary differences and tax carryforward losses, and recalculating the amount of deferred tax assets calculated by the company.

Other Matters

The consolidated financial statements for the period ending December 31, 2021, of the consolidated company were audited by KPMG Samjong Accounting Firm. In their audit report dated March 17, 2022, an unqualified opinion was expressed regarding these consolidated financial statements.

Responsibilities of Management and Governance for the Consolidated Financial Statements

Management is responsible for preparing and fairly presenting the consolidated financial statements in accordance with K-IFRS. They are also responsible for internal controls deemed necessary to ensure the preparation of consolidated financial statements free from material misstatements, whether due to fraud or error.

Management has the duty to assess the going concern status of the consolidated company and disclose related matters as applicable. They are responsible for using the going concern basis of accounting unless there is an intention to liquidate the company or cease operations.

The governing body is responsible for overseeing the financial reporting process of the consolidated company. Management is also accountable for establishing and maintaining effective internal controls for the preparation of consolidated financial statements that are free from significant misrepresentation.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion.  Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists.  Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit.  We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

• Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.  We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The director in charge of performing this audit is Lee Yong Woo.

Ernst & Young Han Young

Seoul, Korea

March 16, 2023

This audit report is valid as of the date of the report. Therefore, events or circumstances that could significantly affect the attached company's consolidated financial statements may occur between the date of this audit report and the time when the report is accessed. As a result, this audit report may be subject to revision based on such events or circumstances.

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2022 and 2021

(In thousands of won)				2022		2021
Assets
Cash and cash equivalents			W	92,497,218		105,686,896
Short-term financial instruments				88,602,428		17,109,692
Trade receivables				39,362,975		11,253,911
Other receivables				5,856,639		4,105,493
Finance lease receivables				570,354		449,764
Inventories				8,274,560		1,711,235
Advance payments				25,212,457		11,664,075
Other current assets				2,996,919		2,456,982
Other financial assets				6,795,589		11,437,194
Current tax assets				371,081		332,808
Assets held for sale				-		-
Current financial assets at FVTPL				-		-
Total current assets				270,540,219		166,208,050
Non-current financial assets at FVTPL				3,012,260		2,938,115
Financial assets at FVOCI				1,189,200		1,187,148
Investments in associates and joint ventures				702,932		946,873
Long-term finance lease receivables				-		-
Long-term other receivables				2,048,848		3,363,839
Investment property, net				1,108,747		1,396,521
Property and equipment, net				10,176,272		13,379,039
Right-of-use assets				76,601,501		140,108,105
Intangible assets				22,932,160		32,852,801
Other financial assets				14,800,596		20,293,002
Deferred tax assets				52,292,869		47,721,079
Other non-current assets				23,838		201,012
Total non-current assets				184,889,221		264,387,534
Total assets			W	455,429,440		430,595,584

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

As of December 31, 2022 and 2021

(In thousands of won)				2022		2021
Liabilities
Trade payables			W	41,976,540		8,887,001
Other payables				47,177,054		57,384,884
Income tax payables				362,065		304,682
Deposits received for travel				77,008,167		8,068,636
Advances received				22,423,174		26,119,418
Short-term borrowings				14,370,131		16,563,494
Current portion of long-term borrowings				2,086,092		4,122,122
Finance lease liabilities				13,914,120		35,112,340
Provisions				892,688		1,023,018
Other financial liabilities				2,084,106		2,217,777
Other current liabilities				10,464,511		12,719,477
Total current liabilities				232,758,647		172,522,849
Long-term other payables				142,878		463,288
Long-term borrowings				7,865,108		10,527,204
Debentures				-		102,385
Long-term provisions				198,919		181,744
Long-term finance lease liabilities				105,785,176		182,746,487
Provision for long-term employee benefits				4,404,615		1,023,381
Other financial liabilities				-		-
Other non-current liabilities				4,572,449		5,272,119
Total non-current liabilities				122,969,145		200,316,608
Total liabilities				355,727,793		372,839,457
Equity
Capital stock				8,019,593		6,969,593
Other contributed capital				132,914,209		29,905,656
Components of other capital				2,642,459		1,947,292
Retained earnings				(20,268,959)		46,504,986
Equity attributable to the owners of the Parent Company				123,307,301		85,327,527
Non-controlling interests				(23,605,653)		(27,571,400)
Total equity				99,701,648		57,756,127
Total liabilities and equity			W	455,429,440		430,595,584

HANATOUR SERVICE INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2022 and 2021

(In thousands of won, except earnings per share data)				2022		2021
Operating revenue			W	114,969,463		40,258,282
Operating expense				216,153,549		167,551,792
Bad debt expense				(1,500,026)		1,907,047
Other operating expense				217,653,575		165,644,745
Operating income				(101,184,086)		(127,293,510)
Interest income by effective interest method				2,854,656		1,173,029
Other financial income				303,802		12,622
Financial expense				2,847,390		8,594,071
Loss from investment in associates and joint ventures				355,249		(99,510)
Other income				43,045,885		110,530,654
Other expense				10,749,533		47,730,324
Other bad debt expense				629,191		3,304,424
Income (loss) before income taxes				(68,850,608)		(75,305,534)
Income taxes of continuing operations				(4,083,086)		(4,768,524)
Net loss			W	(64,572,425)		(70,446,260)
Net loss from continuing operations				(64,767,522)		(70,537,010)
Net loss from discontinued operations				195,097		90,750
Other comprehensive income after tax expense				2,757,022		740,869
Items that will never be reclassified to profit of loss:
Loss on valuation financial assets at FVOCI				2,749		(98,639)
Items that are or may be reclassified subsequently to profit of loss:
Changes in valuation of equity-accounted investees, net				-		-
Gain on foreign operations translation, net				2,754,273		839,507
Total comprehensive income (loss)			W	-61,815,403		(69,705,391)
Net income (loss) attributable to:
Owners of the Parent Company				(66,773,945)		(43,987,430)
Non-controlling interests				2,201,520		(26,458,830)
			W	(64,572,425)		(70,446,260)
Comprehensive income (loss) attributable to:
Owners of the Parent Company				(66,053,865)		(43,678,822)
Non-controlling interests				4,238,462		(26,026,569)
			W	(61,815,403)		(69,705,391)
Earnings (losses) per share
Basic earnings (losses) per share attributable to (in won) :				(4,618)		(3,285)
Continuing operation (in won)				(4,630)		(3,288)
Discontinued operation (in won)				12		3
Diluted earnings (losses) per share attributable to (in won) :			W	(4,618)		(3,285)
Continuing operation (in won)				(4,630)		(3,288)
Discontinued operation (in won)				12		3

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2022 and 2021

(In thousands of won)		Capital Stock		Other contributed capital		Components of other capital		Retained earnings		Non-controlling interests		Total shareholders' equity
January 1, 2021	W	6,969,593		205,366,093		2,210,944		(79,507,584)		(9,725,055)		125,313,991
Net loss		-		-		-		(43,987,430)		(26,458,830)		(70,446,260)
Gain on foreign operations translation		-		-		384,299		-		455,208		839,507
Gain on valuation financial assets at FVOCI		-		-		9,528		-		-		9,528
Loss on valuation financial assets at FVOCI		-		-		(85,219)		-		(22,947)		(108,166)
Introduction of capital surplus		-		(170,000,000)		-		170,000,000		-		-
Acquisition of treasury stock		-		(534)		-		-		(310)		(844)
Acquisition of investing stock		-		-		-		-		2,317,404		2,317,404
Paid-in capital increase of Subsidiaries		-		(5,522,994)		-		-		9,524,734		4,001,740
Changes in scope of consolidation		-		63,091		(572,260)		-		(3,661,604)		(4,170,773)
December 31, 2021	W	6,969,593		29,905,656		1,947,292		46,504,986		(27,571,400)		57,756,127

January 1, 2022	W	6,969,593		29,905,656		1,947,292		46,504,986		(27,571,399)		57,756,127
Net loss		-		-		-		(66,773,945)		2,201,520		(64,572,425)
Gain on foreign operations translation		-		-		718,621		-		2,035,652		2,754,273
Gain on valuation financial assets at FVOCI		-		-		1,458		-		1,291		2,749
Loss on valuation financial assets at FVOCI		-		-		-		-		-		-
Introduction of capital surplus		-		-		-		-		-		-
Acquisition of treasury stock		-		-		-		-		-		-
Acquisition of investing stock		-		-		-		-		2,317,404		2,317,404
Paid-in capital increase of parent company		1,050,000		103,008,553		-		-		-		104,058,553
Paid-in capital increase of Subsidiaries		-		-		-		-		-		-
Dividends of Subsidiaries										(343,611)		(343,611)
Changes in scope of consolidation		-		-		(24,913)		-		70,895		45,982
December 31, 2022	W	8,019,593		132,914,209		2,642,459		(20,268,959)		(23,605,653)		99,701,648

HANATOUR SERVICE INC. AND SUBSIDIARIES                                           

Consolidated Statements of Cash Flows

For the years ended December 31, 2022 and 2021

(In thousands of won)			2022		2021
Cash flows from operating activities
Net loss		W	(64,572,425)		(70,446,260)
Additions of expenses not involving cash outflows and others			39,113,602		97,422,910
Deduction of incomes not involving cash inflows and others			(35,842,600)		(108,779,131)
Movements in operating assets and liabilities:
Decrease (increase) in trade receivables			(29,287,969)		(1,361,937)
Decrease in other receivables			2,242,569		2,725,948
Decrease in inventories			(6,699,621)		2,494
Decrease (increase) in advance payments			(12,171,934)		(8,527,408)
Decrease in other current assets			(960,839)		1,070,342
Increase in other non-current assets			167,560		(162,291)
Increase (decrease) in trade payables			33,362,874		1,540,475
Decrease in other payables			301,053		(17,153,030)
Increase (decrease) in deposits received for travel			68,989,862		1,830,804
Increase in advances received			(3,404,855)		2,405
Decrease in other financial liabilities			7,868		(110,315)
Decrease in other current liabilities			1,048,138		(844,767)
Decrease in provisions			(525,909)		(595,758)
Decrease in long-term other payables			(49,960)		(312,711)
Decrease in other long-term employee benefit			(179,055)		(324,900)
			(8,461,641)		(104,023,130)
Interest expense paid			(2,859,892)		(4,338,649)
Interest income received			1,608,360		1,101,003
Dividend income received			-		-
Income taxes paid			(527,693)		(28,930)
Net cash provided by operating activities		W	(10,240,866)		(107,289,706)

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2022 and 2021

(In thousands of won)			2022		2021
Cash flows from investing activities
Cash inflows from investing activities:
Decrease in short-term financial instruments		W	39,696,173		19,923,883
Decrease in other receivables			159,233		247,390
Disposal of financial assets at FVTPL			200,000		1,165,183
Disposal of investment in associates and joint venture			251,100		162,722
Disposal of financial assets at FVOCI			-		-
Disposal of property and equipment			677,031		308,437
Disposal of intangible assets			488,022		11,517
Disposal of intangible assets being acquired			-		-
Decrease in finance lease receivables			588,448		211,479
Decrease in other financial assets			5,997,337		11,332,739
Government Grants			32,846		-
Disposal of assets held for sale			-		211,178,338
Cash outflows for investing activities:
Increase in short-term financial instruments			111,311,078		16,676,202
Increase in other receivables			9,523		403,294
Acquisition of financial assets at FVTPL			-		250,000
Acquisition of financial assets at FVOCI			-		-
Acquisition of property and equipment			1,810,936		2,544,706
Acquisition of intangible assets			3,223,260		2,031,228
Increase in other financial assets			3,073,373		2,974,553
Net cash used in investing activities		W	(71,337,980)		219,661,705

HANATOUR SERVICE INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2022 and 2021

(In thousands of won)			2022		2021
Cash flows from financing activities
Cash inflows from financing activities:
Proceeds from short-term borrowings		W	40,488,800		55,724,965
Proceeds from long-term borrowings			15,923		1,281,219
Paid-in capital increase of parent company			104,058,553		-
Paid-in capital increase of subsidiaries			80,970		4,001,740
Proceeds from leasehold deposits received			296,200		110,457
Cash outflows for financing activities:
Repayment of short-term borrowings			41,521,004		62,722,484
Repayment of current portion of long-term borrowings			3,916,979		6,614,496
Repayment of long-term borrowings			-		81,570,000
Repayment of finance lease liabilities			28,930,991		16,130,912
Payment of cost of stock issuing			-		74,841
Acquisition of treasury stocks			-		1,083
Payment of dividends			352,519		2,972,884
Payment of leasehold deposits received			204,194		419,879
Net cash provided by financing activities			70,014,760		(109,388,198)
Increase (decrease) in cash on changes in scope of consolidation			-		641,277
Net decrease in cash and cash equivalents			(11,564,086)		3,625,078
Cash and cash equivalents at beginning of year			105,686,896		101,851,025
Effect of exchange rate change			(1,625,592)		210,794
Cash and cash equivalents at end of year		W	92,497,218		105,686,896

 

END