Perpetuals.com Ltd 20-F/A for FY2026
Perpetuals.com Ltd (PDC)
About this 20-F/A
Perpetuals.com Ltd filed this 20-F/A on September 18, 2026, covering the fiscal year ended April 30, 2026 (FY2026).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
Amendment no. 1
OR
For the fiscal year ended
OR
OR
Date of event requiring this shell company report
For the transition period from to
Commission file number:
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Telephone:
Email:
At the address of the Company set forth above
(Name, Telephone, E-mail 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 | ||
representing five ordinary shares | ||||
| * |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
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 Annual Report :
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
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 ☐
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.
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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | 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.
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:
| 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
| INTRODUCTION | iv | |||
| FORWARD-LOOKING INFORMATION | v | |||
| PART I | 1 | |||
| ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 | ||
| ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE | 1 | ||
| ITEM 3. | KEY INFORMATION | 1 | ||
| ITEM 4. | INFORMATION ON THE COMPANY | 25 | ||
| ITEM 4A. | UNRESOLVED STAFF COMMENTS | 52 | ||
| ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 52 | ||
| ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 60 | ||
| ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 66 | ||
| ITEM 8. | FINANCIAL INFORMATION | 67 | ||
| ITEM 9. | THE OFFER AND LISTING | 68 | ||
| ITEM 10. | ADDITIONAL INFORMATION | 68 | ||
| ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 77 | ||
| ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 78 | ||
| PART II | 80 | |||
| ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 80 | ||
| ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 80 | ||
| ITEM 15. | CONTROLS AND PROCEDURES | 80 | ||
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| ITEM 16. | [RESERVED] | 81 | ||
| ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT | 81 | ||
| ITEM 16B. | CODE OF ETHICS | 81 | ||
| ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 81 | ||
| ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 81 | ||
| ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 82 | ||
| ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 82 | ||
| ITEM 16G. | CORPORATE GOVERNANCE | 82 | ||
| ITEM 16H. | MINE SAFETY DISCLOSURE | 83 | ||
| ITEM 16I. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 83 | ||
| ITEM 16J. | INSIDER TRADING POLICIES | 83 | ||
| ITEM 16K. | CYBERSECURITY | 83 | ||
| PART III | 84 | |||
| ITEM 17. | FINANCIAL STATEMENTS | 84 | ||
| ITEM 18. | FINANCIAL STATEMENTS | 84 | ||
| ITEM 19. | EXHIBITS | 84 | ||
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EXPLANATORY NOTE
iii
INTRODUCTION
In this Annual Report, unless the context otherwise requires, references to:
| ● | “ADRs” are to the American Depositary Receipts that may evidence the ADSs (defined below); |
| ● | “ADSs” are to the American Depositary Shares of Perpetuals.com Ltd. (formerly known as Earlyworks Co., Ltd.), each of which represents five Ordinary Shares (defined below); |
| ● | “Exchange Act” are to the Securities Exchange Act of 1934, as amended; |
| ● | “Japanese yen” or “JPY” are to the legal currency of Japan; |
| ● | “Nasdaq” are to the Nasdaq Stock Market LLC; |
| ● | “Ordinary Shares” are to the ordinary shares of Perpetuals.com Ltd. (formerly known as Earlyworks Co., Ltd.); |
| ● | “SEC” are to the United States Securities and Exchange Commission; |
| ● | “Securities Act” are to the Securities Act of 1933, as amended; |
| ● | “U.S.”, “US” or “United States” are to United States of America, its territories, its possessions and all areas subject to its jurisdiction; |
| ● | “US$,” “$,” “USD” or “U.S. dollars” are to the legal currency of the United States; and |
| ● | “we,” “us,” “our,” “our Company,” or the “Company” are to Perpetuals.com Ltd. (formerly known as Earlyworks Co., Ltd.). |
This Annual Report includes our audited financial statements for the fiscal years ended April 30, 2026, 2025, and 2024. Our functional currency and reporting currency is the Japanese yen. Convenience translations included in this Annual Report of Japanese yen into U.S. dollars have been made at the exchange rate of JPY 156.66 = $1.00, which was the foreign exchange rate on April 30, 2026 as reported by the Board of Governors of the Federal Reserve System (the “U.S. Federal Reserve”) in its weekly release on April 30, 2026. Historical and current exchange rate information may be found at https://www.federalreserve.gov/releases/h10/hist/dat00_ja.htm.
We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them.
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FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may,” or other similar expressions in this Annual Report. These statements are likely to address our growth strategy, financial results, and future development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
| ● | assumptions about our future financial and operating results, including revenue, income, expenditures, cash balances, and other financial items; |
| ● | our ability to execute our growth and expansion plan, including our ability to meet our goals; |
| ● | current and future economic and political conditions; |
| ● | our ability to compete in our industry; |
| ● | our capital requirements and our ability to raise any additional financing which we may require; |
| ● | our ability to attract customers and further enhance our brand awareness; |
| ● | our ability to hire and retain qualified management personnel and key employees in order to enable us to develop our business; |
| ● | trends in our industry; and |
| ● | other assumptions described in this Annual Report underlying or relating to any forward-looking statements. |
We describe certain material risks, uncertainties and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied, or forecast by our forward-looking statements. Accordingly, you should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this Annual Report, whether as a result of new information, future events, changes in assumptions, or otherwise.
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Part I
Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
Item 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our legacy company, Earlyworks, Co., Ltd., was dedicated to optimizing business operations with the use of blockchain technology. On January 20, 2026, our company completed the acquisition of Perpetual Markets Ltd., resulting in the rebranding of our company as Perpetuals.com Ltd. and our Nasdaq ticker symbol changing to PDC (the “Acquisition”). Following the Acquisition, we are positioned as an AI-powered financial services company focused on providing infrastructure, services, and financial products designed to enable responsible financial market participation from global clients.
Risks Related to Our Post-Acquisition Business
We have a history of operating losses and will likely incur substantial additional expenses and operating losses in the future. Management has concluded that there is, and the report of our independent registered public accounting firm contains an explanatory paragraph that expresses, substantial doubt about our ability to continue as a “going concern.”
As of April 30, 2026, we had cash of approximately JPY132.8 million (US$0.8 million), a working capital deficit of approximately JPY1,827.2 million (US$11.7 million), and net cash used in operating activities of approximately JPY641.4 million (US$4.1 million) for the fiscal year ended April 30, 2026. These conditions raise substantial doubt about our ability to continue as a going concern.
We may consider obtaining additional financing in the future through equity or debt financings, or other means. However, we are dependent upon our ability to obtain new revenue generating customer contracts, secure equity and/or debt financing and there are no assurances that we will be successful. As a result of the above, there is material uncertainty related to events or conditions that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) on our ability to continue as a going concern, and therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business. If we were to be unable to continue as a going concern, or if there were to be continued doubt about our ability to do so, the value of your investment would be materially and adversely affected.
We have recently transformed our business, and our transformed business has a limited operating history, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful in executing our business strategy.
We are transitioning from a relatively small legacy Japanese blockchain business to a much more ambitious U.S.-centered financial technology and trading-related business.
Currently, our revenue-generating operations are focused on the following offerings:
| ● | UpsideOnly.com: Launched in May 2026, UpsideOnly.com is our flagship retail-facing trading and market prediction platform that uses our proprietary BayesShield AI combined with crowd intelligence without risking their capital, and are rewarded for their skills. |
| ● | Kronos X®: Our multi-asset exchange infrastructure software solution providing fully regulated trading technology compliant with applicable EU regulations, available as a turnkey white-label solution for banks, brokers, and fintechs. Kronos X® enables clients to offer innovative services and products and is notably used by the EU-licensed Perpetual Markets Multilateral Trading Facility (the “PM MTF”) . |
Our business and operations following the Acquisition differ materially from those of the prior periods reflected in our historical financial statements, and our consolidated results for the fiscal year ended April 30, 2026 still predominantly reflect the legacy pre-Acquisition business. We have only a limited operating history with respect to our current products, services, business models, and sources of revenue.
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Accordingly, our historical financial results and operating experience may not be indicative of our future performance, and investors may have limited information on which to evaluate our prospects, including our ability to attract and retain users, develop and commercialize new products, generate sustainable revenue, manage the risks associated with our new business activities, and achieve or maintain profitability. Our ability to successfully execute our current business strategy is subject to numerous uncertainties, including our ability to scale our operations, develop and maintain our technology and infrastructure, respond to changing market conditions and regulatory requirements, forecast demand for product offerings, and compete effectively with established and emerging competitors.
We may encounter unforeseen expenses, difficulties, delays, and other challenges as we continue to develop and expand our transformed business. If we are unable to successfully execute this transformation or establish and grow our new business operations, our financial condition, results of operations, and prospects could be materially and adversely affected.
Our transition to a new, U.S.-based management team with limited experience managing a publicly traded company may adversely affect our operations and our ability to meet our obligations as a public company.
We have recently undergone a significant transition in our management and leadership structure. Our new management team is based principally in the United States and has limited experience collectively managing a publicly traded company, while our prior management and operating structure was based principally in Japan and included individuals with greater experience overseeing the operations and requirements of a public company. The transition to our new management team, together with the broader transformation of our business, may place significant demands on our management and other personnel.
Managing a publicly traded company requires substantial attention to corporate governance, financial reporting, disclosure controls and procedures, investor relations, regulatory compliance, and other obligations that may differ from those applicable to our historical operations. Our new management team may require time to develop the processes, systems, risk mitigation strategies, and institutional knowledge necessary to effectively manage these responsibilities. Any failure to establish and maintain appropriate systems, controls, and procedures, or to otherwise effectively manage the transition, could result in operational difficulties, delays, or errors, including with respect to our public reporting and regulatory obligations, and could adversely affect our business and financial condition. These challenges may be particularly significant because our management team is simultaneously responsible for implementing our new business strategy, developing new products and operations, and establishing the infrastructure necessary to satisfy the governance, reporting, disclosure, and compliance requirements applicable to a Nasdaq-listed public company.
In addition, the transition from a Japan-based management and operating structure to a predominantly U.S.-based management team involves changes in corporate culture, management practices, communication styles, decision-making processes, and approaches to corporate governance. Differences in business practices and cultural expectations between our historical and current management structures may create challenges in communication, coordination, and integration and could result in misunderstandings, inefficiencies, or delays in decision-making. We may also experience difficulty retaining institutional knowledge or effectively transferring responsibilities during the transition. If we are unable to successfully manage these changes, our business, results of operations, and financial condition could be materially and adversely affected.
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We may not be successful in operating, commercializing and scaling our UpsideOnly platform, and our ability to generate revenue from the platform depends on the continued performance of our proprietary technology, our ability to attract and retain users and our ability to successfully execute our business model.
Our UpsideOnly platform is a relatively new business, and we have limited experience operating, commercializing, and scaling the platform. We developed the platform substantially from scratch and, as with any newly developed technology platform, we may experience software bugs, errors, defects, outages, security vulnerabilities, and other technical or operational problems that require significant time and resources to identify and correct. Our ability to respond promptly and effectively to customer inquiries, complaints, and other support requests may also be constrained by our relatively limited customer service resources, particularly as our user base grows. If we are unable to maintain the functionality, reliability, and performance of the platform or provide an appropriate level of customer support, we may experience user dissatisfaction, reputational harm, loss of users, and difficulty attracting new users.
The successful operation of UpsideOnly also depends on our relationships with third-party service providers. We rely on third parties for certain critical functions, including the provision of market data, payment processing, and services associated with investing and trading our capital. Our ability to operate the platform depends on our ability to identify providers willing to work with a novel, unfamiliar financial services offering on acceptable terms or at all. Once retained, our providers may experience service interruptions, technical failures, capacity constraints, financial difficulties, regulatory restrictions, or other problems, or may terminate or materially modify their services or relationships with us. We may not be able to replace these providers quickly or on commercially reasonable terms, and the loss of or disruption to any critical third-party service could impair or prevent the operation of UpsideOnly.
Our ability to commercialize and scale UpsideOnly will also depend on our ability to continue to attract and retain users at attractive acquisition costs. To date, our user acquisition efforts have relied substantially on online advertising, and we intend to pursue additional strategies, including referral programs. There can be no assurance that these or other marketing initiatives will continue to generate users at commercially attractive acquisition costs, particularly as we expand the scale of our marketing efforts or seek to reach new user populations. If our user acquisition costs increase or our ability to attract and retain users declines, we may be unable to achieve the scale necessary to make our business model commercially viable.
The quality and composition of the data generated by our users are also important to the performance of the platform. Our proprietary BayesShield AI tool relies in part on signal data generated through user trading predictions on the platform (“Signal Data”). We believe that Signal Data generated by skilled and engaged traders may be more useful to our models than data generated by less skilled users, automated activity, bots, or other activity that does not reflect meaningful trading decisions. Accordingly, our ability to attract users whose activity generates useful Signal Data, while identifying and filtering out bots and other activity that may adversely affect the quality of our data, is important to the performance of our models. If we are unable to attract an appropriate user base or maintain the quality and integrity of our Signal Data, the effectiveness of BayesShield AI may suffer.
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The economic model underlying UpsideOnly depends substantially on the ability of BayesShield AI to continue to identify a sufficiently high percentage of profitable trading opportunities. If BayesShield AI does not perform as expected, including as a result of changes in market conditions, insufficient or lower-quality Signal Data, model errors, technical problems, or other factors, our trading activities may generate lower returns or losses. Lower trading performance could reduce our revenue, limit our ability to share profits with users, impair our ability to attract and retain users, and make it more difficult to achieve the scale necessary to operate the platform profitably.
Moreover, as we seek to increase the scale of our trading activities, we expect to require additional capital to fund our proprietary trading activities. We may be unable to obtain sufficient capital on acceptable terms or at all, which could limit our ability to scale the platform and execute our business plan.
Our business model is therefore subject to a number of interrelated dependencies. Our ability to generate meaningful and sustainable revenue from UpsideOnly will depend on our ability to successfully operate the platform, attract and retain an appropriate user base at attractive acquisition costs, generate high-quality Signal Data, maintain the performance of BayesShield AI, execute profitable trading activities, obtain sufficient capital to support those activities, and effectively manage the platform as it scales. If we are unable to successfully execute on one or more of these elements, we may not be able to commercialize or scale UpsideOnly, and our business, financial condition, results of operations, and prospects could be materially and adversely affected.
Our business model depends substantially on the ability of our proprietary BayesShield AI technology to identify profitable trading opportunities, and if BayesShield does not perform as expected, our ability to generate revenue and scale UpsideOnly could be materially adversely affected.
The economic model underlying our UpsideOnly platform depends substantially on the ability of our proprietary BayesShield AI technology to analyze Signal Data and identify trading opportunities that ultimately prove profitable. There can be no assurance that BayesShield will continue to perform as expected or that its historical or current performance will be indicative of its future performance. The effectiveness of BayesShield AI may decline as market conditions change, trading patterns evolve, historical relationships cease to apply, or other factors affect the predictive value of the data on which the model relies. Even if BayesShield AI accurately identifies the direction or general outcome of a market movement, our trading activities may not be profitable after taking into account execution prices, spreads, slippage, liquidity, financing costs, fees, and other transaction costs.
BayesShield AI is also subject to inherent model risk. The model may generate inaccurate, incomplete, or misleading predictions, including as a result of errors in its design, implementation or training, limitations in the underlying data, changes in market conditions, or other factors that we may not anticipate or be able to identify. The model may also perform differently as we increase the volume or scale of our trading activities. We may be unable to identify or correct model deficiencies before they adversely affect our trading results, and efforts to improve or retrain the model may be costly, time-consuming, or unsuccessful.
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The quality, quantity and composition of the Signal Data used by BayesShield AI are important to the performance of the model. We believe that Signal Data generated by skilled and engaged traders may provide more useful information than data generated by less experienced users, automated activity, bots, or other activity that does not reflect meaningful trading decisions. Our ability to attract and retain an appropriate user base, encourage meaningful user participation, and identify and filter bots or other activity that could adversely affect the quality of our Signal Data is therefore important to the effectiveness of BayesShield AI. If the quality or predictive value of our Signal Data deteriorates, or if we are unable to obtain sufficient Signal Data as our platform scales, BayesShield AI may become less effective.
In addition, BayesShield AI may be susceptible to changes in user behavior resulting from the operation of the UpsideOnly platform itself. As users gain a better understanding of how the platform evaluates predictions or as the composition of our user base changes, users may alter their behavior in ways that affect the nature or quality of the Signal Data available to us. We may also encounter difficulties in distinguishing genuine trading decisions from automated, coordinated, or otherwise anomalous activity. These factors could reduce the predictive value of our data and adversely affect the performance of BayesShield AI.
The use of AI and machine learning technologies also presents technological, operational, legal, regulatory, and reputational risks. AI and machine learning technologies are inherently complex, and our models may produce unexpected or erroneous results. We may also face difficulties explaining or validating the basis for particular model outputs, monitoring model performance, detecting model degradation, or implementing appropriate controls over the development and deployment of our models. Regulatory requirements relating to the use of AI and algorithmic decision-making are evolving rapidly and may require us to modify our models, data practices, disclosures, oversight procedures, or other aspects of our platform, which could increase our costs or limit our ability to use BayesShield as currently contemplated.
Finally, the performance of BayesShield AI is only one component of our overall trading process. Our ability to convert accurate predictions into profitable trading activity will depend on our ability to execute trades effectively, manage our trading capital, maintain access to appropriate market data and liquidity, and operate within applicable risk and regulatory parameters. As we seek to increase the amount of capital deployed through our trading activities, we may encounter liquidity constraints, execution challenges or other factors that cause actual trading results to differ from the results suggested by the model.
If BayesShield AI fails to identify profitable trading opportunities at a sufficient rate, if the quality or predictive value of our Signal Data deteriorates, if market conditions cause the model’s effectiveness to decline, or if we are otherwise unable to translate the model’s predictions into profitable trading activity, our trading results, revenue, ability to reward users, and ability to scale UpsideOnly could be materially and adversely affected.
Our proprietary trading activities expose us to significant market and investment losses.
As part of our business, we use our own capital to enter into positions in financial instruments based, in part, on signals and other information generated by our UpsideOnly platform, including Signal Data evaluated using artificial intelligence and machine learning models. Unlike our users, who do not bear the risk of loss from these investments, we bear the full risk of loss associated with our proprietary trading activities. Accordingly, our trading activities could result in significant losses and adversely affect our financial condition and results of operations.
Our trading results may be adversely affected by a variety of factors, many of which are beyond our control, including:
| ● | market volatility and adverse price movements, which could cause the value of our positions to decline rapidly or unexpectedly; |
| ● | inaccurate or incomplete signals or other information, including signals generated from user data or other sources, which could cause us to enter into positions that are unprofitable; |
| ● | errors, limitations, or failures in our artificial intelligence and other models, including model inaccuracies, flawed assumptions, inadequate training data, unexpected model behavior, or failures to appropriately account for changing market conditions; |
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| ● | trading and execution errors, including errors in order generation, transmission, pricing, position sizing, or other aspects of trade execution; |
| ● | insufficient liquidity, which may prevent us from establishing or closing positions at desired prices or volumes or may require us to transact at substantially less favorable prices or volumes; |
| ● | slippage and transaction costs, which may cause the actual prices at which we execute trades to differ materially from the prices reflected in our models or otherwise anticipated by us; |
| ● | concentration of our positions, including concentration in particular assets, markets, counterparties, or trading strategies, which could magnify losses resulting from adverse developments affecting those positions; |
| ● | the use of leverage, to the extent applicable, which could magnify both gains and losses and could result in losses exceeding the amount of capital initially committed to a position; |
| ● | counterparty defaults or failures, which could prevent us from receiving amounts owed to us or otherwise result in losses or delays in closing or settling positions; |
| ● | failures or disruptions in our trading systems, technology, data feeds, connectivity, or other infrastructure, which could result in erroneous trades, missed trading opportunities, inability to manage positions, or unexpected losses; |
| ● | our inability to exit positions, including because of market closures, trading halts, liquidity constraints, technical failures, or other circumstances, potentially resulting in additional losses; |
| ● | unexpected market events, including sudden market dislocations, geopolitical events, regulatory actions, natural disasters, cyberattacks, or other events that cause prices or market conditions to change rapidly or behave in ways that our models or risk-management procedures do not anticipate. |
Although we may employ risk-management procedures and position limits designed to mitigate these risks, such measures may not be effective in all circumstances, particularly during periods of extreme market volatility or market disruption. In addition, historical market data and prior trading results may not be indicative of future market conditions or trading performance. As a result, losses from our proprietary trading activities could be substantial and could materially adversely affect our business, financial condition, results of operations, and cash flows.
The markets in which we operate have relatively low barriers to entry, and we may face increasing competition from existing and new competitors.
The software, artificial intelligence, and financial technology markets in which we operate are characterized by relatively low barriers to entry and rapid technological development. Competitors may be able to develop and introduce products and platforms that are similar to, or compete directly with, our products and platforms without requiring significant capital investment or other substantial resources. In addition, advances in artificial intelligence, software development tools, cloud computing, data analytics, quantum computing, and other technologies may further reduce the time and cost required to develop competing products and services and could result in technologically superior products.
We expect competition in our markets to increase as existing companies expand their product offerings and as new companies enter these markets. Competitors may include established financial services, technology, cryptocurrency, and financial technology companies, as well as newly formed companies that may introduce innovative products or business models. We also may face competition from products or platforms that do not currently exist or that are based on technologies, business models, or applications that we cannot currently anticipate. New or improved products and platforms could provide functionality, pricing, user experiences, or other features that are more attractive to users than those offered by us.
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Our ability to compete successfully will depend on our ability to anticipate technological and market developments and to develop, introduce, and enhance our products and platforms in a timely and cost-effective manner. We may be required to devote substantial financial and other resources to research and development, technology, marketing, user acquisition, and other competitive initiatives. We may not be able to develop new products or features as quickly as our competitors, and products or technologies developed by others may render our products or platforms less attractive, obsolete, or otherwise uncompetitive.
In addition, some of our current or prospective competitors may have greater financial, technological, marketing, or other resources than we do, greater access to data, larger user bases, stronger brand recognition, or established relationships with financial institutions, technology providers, or other industry participants. Competitors may also be able to devote greater resources to developing and deploying artificial intelligence and other emerging technologies or may benefit from network effects or other competitive advantages that are not available to us.
Increased competition could result in reduced user acquisition or retention, loss of market share, pressure to reduce fees or other pricing, increased costs, reduced margins, or the need to make additional investments in our products and technology. We cannot assure you that we will be able to compete effectively or maintain or increase our market position, and any failure to do so could materially and adversely affect our business, financial condition, results of operations, and prospects.
Historical, back-tested, or simulated performance of our trading strategies and technologies may not be indicative of actual future results.
From time to time, we may evaluate, develop, or present trading strategies, models, algorithms, or other technologies based on historical or simulated performance, including through back-testing. Back-tested results are hypothetical and are derived by applying a trading strategy, model, algorithm, or methodology to historical data rather than by conducting actual trading during the relevant historical period. Accordingly, back-tested results do not represent the results of actual trading or live operation and are subject to significant limitations.
Back-tested results depend on the historical data, assumptions, parameters, models, and methodologies used in the analysis. The selection or design of a strategy or model may be influenced by knowledge of historical market conditions, which may result in hindsight bias or overfitting and may cause the strategy or model to appear more effective in historical testing than it would have been if developed or implemented without the benefit of such knowledge. In addition, back-tested results may not reflect the effects of actual trading conditions, including transaction costs, commissions, fees, bid-ask spreads, market impact, slippage, liquidity constraints, position limits, execution delays, trading halts, financing costs, or other factors that could materially affect actual performance.
Historical data and relationships reflected in back-tested results may also cease to be representative of future market conditions. Market conditions, volatility, correlations, liquidity, trading behavior, and other factors may change in ways that our models or strategies do not anticipate. In particular, strategies or models that perform well during a particular historical period may perform poorly, or may cease to perform as intended, under different market conditions.
To the extent we use artificial intelligence or machine learning models in developing or evaluating trading strategies, the results may also be affected by limitations in training data, model assumptions, model design, data quality, model drift, or other factors that may cause actual results to differ materially from historical or simulated results. There can be no assurance that the performance reflected in any back-tested or simulated results will be achieved in actual operation or that our trading strategies, models, or technologies will generate profitable results in the future. Any reliance on historical, back-tested, or simulated performance could therefore result in expectations regarding future performance that are not realized, which could materially and adversely affect our business, financial condition, results of operations, and prospects.
Our Kronos X® business is substantially dependent on the Perpetual Markets Multilateral Trading Facility.
The Kronos X® product is substantially dependent on the continued operation and commercial viability of the Perpetual Markets Multilateral Trading Facility (the “PM MTF”). Kronos X® is the infrastructure that supports PM MTF, and our ability to operate and generate revenue from Kronos X® would be adversely affected if the PM MTF were unable to operate successfully or if its operations were materially impaired or discontinued. Our dependence on a single trading venue also limits our ability to mitigate an interruption or deterioration in the PM MTF’s operations by relying on alternative venues.
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The continued viability of the PM MTF depends on a variety of factors, including its ability to maintain the regulatory authorizations necessary to operate, attract and retain sufficient trading participants, establish adequate liquidity and trading volume, maintain reliable technology and infrastructure, and protect its systems and data from cybersecurity incidents and other disruptions. The PM MTF may also be subject to regulatory inquiries, examinations, investigations, enforcement actions, changes in applicable laws or regulations, or other regulatory developments that could adversely affect its operations. In addition, obtaining and maintaining the regulatory authorizations necessary to operate the PM MTF does not guarantee that the PM MTF will attract sufficient participants, liquidity, or trading volume to become or remain commercially viable.
The PM MTF could also experience operational failures, technology or infrastructure disruptions, cybersecurity incidents, liquidity constraints, or other events that impair its ability to provide a functioning trading venue.
We do not have the ability to control the PM MTF’s operations or ensure that it continues to operate in a manner that supports our business. Our interests may also differ from those of the PM MTF or its other stakeholders, and we cannot assure you that the PM MTF will continue to prioritize initiatives or make investments that are necessary or beneficial to Kronos X®.
Any material impairment of the PM MTF’s operations or commercial viability could materially and adversely affect our ability to operate and grow Kronos X® and could materially and adversely affect our business, financial condition, results of operations, and prospects.
Our tokenization business is subject to significant regulatory, technological, operational and market risks, and changes in applicable laws or the failure of tokenized asset markets to develop could adversely affect our business, financial condition, and results of operations.
We are developing and providing infrastructure and services relating to the tokenization of real-world assets, including services relating to asset issuance, market making, and trading through regulated order book infrastructure. Our tokenization activities involve emerging technologies and business models that are subject to evolving legal, regulatory, and commercial requirements. Tokenized securities generally remain subject to applicable securities laws and regulations, and the application of those requirements may vary depending on the structure of a particular tokenized asset, the rights associated with the token, the jurisdictions involved and the activities performed by us, and our counterparties. Regulators may determine that certain aspects of our tokenization activities require additional licenses, registrations, approvals, or compliance measures, or may impose restrictions on our ability to offer, facilitate, or expand these services. Any such requirements, restrictions, or regulatory changes could increase our costs, limit our operations, or require us to modify or discontinue portions of our tokenization business.
Our tokenization activities also depend on blockchain networks, smart contracts, trading and settlement infrastructure, custodians, and other third-party technology and service providers. These systems and providers may be subject to operational failures, cybersecurity incidents, fraud, programming errors, network disruptions, changes in technology, or other vulnerabilities. Any such failure could result in transaction errors, loss or impairment of assets or records, delays in settlement, disputes with customers or counterparties, regulatory scrutiny, or reputational harm.
In addition, the commercial success of tokenized real-world assets depends on the development of sufficient market participation, liquidity, and acceptance by issuers, investors, financial institutions, and other market participants. Tokenized markets may not develop as rapidly as expected, and secondary-market liquidity and price transparency may remain limited. A lack of market adoption or liquidity could reduce demand for our tokenization services, impair the economics of our tokenization business, and limit our ability to scale this business.
The legal and economic rights associated with a tokenized asset may also differ from those associated with the underlying asset, depending on the structure of the applicable tokenization arrangement. Uncertainty regarding ownership, custody, transferability, settlement, redemption, or other rights could result in disputes, regulatory intervention or additional liabilities. Any of these risks could materially and adversely affect our business, financial condition, and results of operations.
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We will need to obtain additional financing to fund our operations and growth, including our proprietary trading activities, and such financing may not be available on commercially acceptable terms or at all.
The viability of our business is dependent on the availability of adequate capital to develop and maintain our business. We will need to continue to invest in our operations for the foreseeable future to carry out our business plan, including investments in the development and maintenance of our software and infrastructure and capital to support the growth of our UpsideOnly platform and our proprietary trading activities conducted in connection with that platform. Accordingly, we will need to seek additional financing.
Our ability to obtain additional financing may be affected by financial lending institutions’ ability or willingness to lend to us on commercially acceptable terms, as well as conditions in the capital markets and our operating and financial performance. If we are unable to obtain sufficient financing when needed, our liquidity and financial condition could be adversely affected. In addition, limited access to capital or credit could adversely affect our ability to meet our capital requirements, invest in our software and infrastructure, engage in strategic initiatives, make acquisitions or strategic investments in other companies, react to changing economic and business conditions, or repay any outstanding debt.
Any additional financing may involve the issuance of equity or equity-linked securities, which could dilute the ownership interests of our existing shareholders, or the incurrence of additional indebtedness, which could increase our interest expense and impose additional financial and operational restrictions. There can be no assurance that we will be able to obtain additional financing on terms favorable to us, or at all. Any failure to obtain adequate financing when required could materially and adversely affect our business, financial condition, liquidity, and operating results.
The loss of key personnel could have a material adverse effect on us.
Our success depends solely on the continued services of key personnel, particularly our management and officers, who have extensive market knowledge and industry experience. Our management team collectively has extensive knowledge and experience regarding cryptocurrency, derivatives, financial markets, software development, and AI. Our innovative product offerings are the result of a significant investment of time and effort by our management to build novel and innovative products in a highly specialized industry. The loss of services of our Co-Chief Executive Officers, our Chief Strategy Officer, or other members of management could diminish our business and growth opportunities.
If we are unable to successfully identify, hire, and retain skilled individuals, our business will be adversely affected.
Our growth is based, in part, on our ability to attract and retain highly skilled professionals and software engineers. We aim to motivate and retain qualified employees. However, we may face difficulties in recruiting and retaining employees of a caliber consistent with our business strategy because of competition from other companies. If our employees are unsatisfied with what we offer, such as remuneration packages or working environment, we may not be able to retain qualified employees or replace them with personnel of appropriate skill sets and personal attributes at comparable costs. In such an event, we may need to expend additional resources to retain or replace suitable employees.
We may be subject to various employment-related claims from time to time, such as individual actions or government enforcement actions relating to wage-hour, labor standards, or healthcare and benefit issues. Such actions, if brought against us and successful in whole or in part, may materially and adversely affect our business or results of operations. For example, as of the date of this Annual Report, our U.S. subsidiary Kephas Corporation is involved in two pending employment related lawsuits, one filed by a former employee in April 2026 alleging unpaid wages, and a second filed by a former employee in May 2026 alleging wrongful termination.
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Negative publicity could damage our business.
Developing and maintaining our reputation is critical to attracting users, customers, and investors. Negative publicity regarding our Company, our technology, our key personnel, or cryptocurrency or derivatives markets generally, whether based upon fact, allegation or perception and whether justified or not, could give rise to reputational risk which could significantly harm our business prospects.
We could be the victim of employee misconduct.
There is a risk that our employees or contractors could engage in fraud, conflicts of interest, unauthorized disclosure of confidential information, or other misconduct that adversely affects our business. Furthermore, our employees could make errors in recording or executing transactions for customers which would cause us to enter into transactions that customers may disavow and refuse to settle. It is not always possible to deter misconduct by our employees, and the precautions we take to prevent and detect misconduct may not be effective in all cases. Our ability to detect and prevent errors or misconduct by entities with which we do business may be even more limited. Such misconduct could subject us to financial losses and materially harm our reputation, financial condition, and operating results.
If our vendors and third-party service providers experience difficulties, our business could be adversely affected.
We outsource some operational activities and depend on relationships with vendors and third-party service providers. For example, we employ external engineers for certain outsourced systems development and maintenance projects. Our operations could be interrupted or disrupted if our vendors and third-party service providers, or even the vendors of such vendors and third-party service providers, experience operational or other systems difficulties, terminate their service, fail to comply with regulations, raise their prices, or dispute key intellectual property rights sold or licensed to or developed for our Company. If any of these events happen, and we are unable to replace vendors and service providers, on a timely basis or at all, our operations could be interrupted. If an interruption were to continue for a significant period, our business, financial condition and results of operations could be adversely affected. Even if we can replace vendors and third-party providers, it may be at a higher cost, which could also adversely affect our business, financial condition, and results of operations.
We may explore acquisitions, other investments, and strategic alliances. We may not be successful in identifying opportunities or in integrating the acquired businesses. Any such transaction may not produce the results we anticipate, which could adversely affect our business.
We may explore and pursue acquisitions, strategic partnerships, joint ventures, and other alliances to strengthen our business and grow our company in the future. The market for acquisitions and strategic opportunities is highly competitive. In addition, these transactions entail numerous operational and financial risks, including but not limited to difficulties in valuing acquired businesses, combining personnel and firm cultures, integrating acquired products, services, and operations, achieving anticipated synergies that were inherent in our valuation assumptions, exposure to unknown material liabilities, the potential loss of key vendors, clients, or employees of acquired companies, incurrence of substantial debt or dilutive issuance of equity securities to pay for acquisitions, higher-than expected acquisition or integration costs, write-downs of assets, or impairment charges, increased amortization expenses, and decreased earnings, revenue or cash flow from dispositions.
General economic, political and market conditions may have an adverse impact on our operating performance, results of operations, and cash flow.
Our business is influenced by a range of factors that are beyond our control including general economic and business conditions and legal, regulatory, and political developments. Challenging economic conditions worldwide have from time to time contributed, and may continue to contribute, to slowdowns in the information financial technology industry at large. Weakness in the economy could have a negative effect on our business, operations, and financial condition, including decreases in revenue and operating cash flow, and inability to attract future equity and debt financing on commercially reasonable terms. Additionally, in a down-cycle economic environment, we may experience the negative effects of demand for our offerings. The impact of global events, including the ongoing conflicts between Russia and Ukraine, the United States and the Islamic Republic of Iran, and Israel and Hamas-led Palestinian militant groups, may also negatively affect our company.
Our business may be adversely affected by the impact of coronavirus, other epidemics or pandemics, acts of God, wars, insurrections, riots, infrastructure failures, and other force majeure events.
Public health epidemics or outbreaks could adversely affect our business. In addition, acts of terrorism, labor activism, or unrest, and other geo-political unrest could cause disruptions in the business, the businesses of partners, or the economy as a whole. In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, or telecommunications failure, we may be unable to continue operations and may endure system interruptions, reputational harm, delays in development of our systems, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on future operating results.
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Risks Specific to our Pre-Acquisition Business
Blockchain is a nascent and rapidly changing technology and the use of blockchain technology in the commercial marketplace remains relatively small. The slowing or stopping of the development or acceptance of blockchain technology may adversely affect our business.
Blockchain is an emerging technology that offers new capabilities. The development of blockchain technology is a new and rapidly evolving industry that is subject to a high degree of uncertainty. The capabilities of blockchain technology have not been fully confirmed. The utilization of blockchain technology may face opposition by certain participants in the market, who may criticize blockchain technology for its slow processing speed, poor real-time data processing capacity, and burdensome learning costs, among other things. In addition, blockchain technology is subject to technical risks such as forking. Most blockchain networks operate based on some form of open-source software. An open-source project is not represented, maintained, or monitored by an official organization or authority. Because of the nature of open-source software projects, it may be easier for third parties not affiliated with the issuer to introduce weaknesses or bugs into the core infrastructure elements of the blockchain network. This could result in the corruption of the open-source code which may result in the loss or theft of blockchain assets.
Factors affecting the further development of blockchain industry include, without limitation:
| ● | continued worldwide growth in the adoption and use of blockchain technology; |
| ● | the maintenance and development of the open-source software protocol of blockchain networks; |
| ● | changes in consumer demographics; |
| ● | changes in public tastes and preferences; |
| ● | the popularity or acceptance of blockchain networks and assets; and |
| ● | government and quasi-government regulation of blockchain networks and assets, including any restrictions on access, operation, and use of blockchain networks and assets. |
Our blockchain business model is dependent on continued investment in and development of the blockchain industry and related technologies. If investments in the blockchain industry become less attractive to investors, innovators, and developers, or if blockchain networks and assets do not gain public acceptance or are not adopted and used by a substantial number of individuals, companies and other entities, it could have a material adverse impact on our blockchain operations.
If we are unable to apply technology effectively in driving value for our customers through blockchain-based solutions, our blockchain business could be adversely affected.
Our success depends on our ability to apply our proprietary blockchain technology, Grid Ledger System (“GLS”), develop new services, and improve the performance and cost-effectiveness of the existing services, in each case in ways that address current and anticipated customer requirements, industry needs, and future trends. Such success is dependent upon several factors, including technology effectiveness, functionality, competitive pricing, licensing, and integration with existing and emerging technologies. The blockchain industry is characterized by rapid technological changes. If we fail to develop and implement technology solutions and technical expertise that keep pace with changes in technology, industry standards, and customer preferences, our value proposition could be adversely affected. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis and our ideas may not be accepted in the marketplace. The effort to gain technological expertise and develop new technologies in our business may require us to incur significant expenses. In addition, GLS may not gain acceptance or recognition in the market, which is dominated by more established and conventional technologies, even though we believe GLS is superior to the conventional blockchains. Our unique advantage created by GLS may be threatened by intensified competition in the market if our competitors invent similar technologies in the future. Any of these events could result in a material adverse effect on our operating results, customer relationships, and business.
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Our blockchain technology is dependent on telecommunications infrastructure and the performance of devices equipped with blockchain.
The success of our blockchain-based services will depend on the continued development of a stable telecommunications infrastructure with the necessary speed, data capacity, and security, complementary products such as high-speed networking equipment for providing reliable internet access and services, and other devices that are equipped with blockchain. There is no assurance that the relevant infrastructure and devices will continue to be able to support the demands placed on it by the growth of blockchain technology. There is also no assurance that the infrastructure or complementary products or services necessary to support the blockchain technology will be developed in a timely manner, or that such development will not incur substantial costs to adapt to changing technologies. The failure of these platforms and devices or their development could materially and adversely affect our business, financial condition, and results of operation.
Cybersecurity incidents involving our blockchain business may materially and adversely affect our business.
Security breaches, computer malware, and computer hacking attacks have been a prevalent concern since the launch of blockchain technology. To reduce security concerns, GLS employs intermediate processing nodes, which are independent of the nodes that make up the blockchain network and process the actual transactions. Even if the intermediate processing nodes are stopped, the transactions cannot be tampered with. To reduce the impact of attacks on intermediate processing nodes and any unauthorized access, GLS allows the use of firewalls and other means to prevent cyberattacks, thereby providing security. However, our security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise. Techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be designed to remain dormant until a predetermined event. Outside parties may also attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the services we provide, which in turn could have an adverse effect on our business.
If we are not able to successfully compete in the blockchain market, our blockchain business will be materially harmed.
We design, upgrade, and maintain technology systems for our customers. We expect to encounter competition in our business, including from entities having substantially greater capital and resources and offering a wider range of products and services. Many of our competitors may have greater financial, marketing, technological, and personnel resources than we do, and may offer a wider range of bundled services, have broader name recognition, and have larger customer bases than we do.
Our ability to develop competitive advantages is dependent on continued improvement in GLS, enhancements to our services, investment in the development of our services, and additional marketing activities. Failure to implement timely changes into our technology, limited access to resources to make sufficient investments in the development of our blockchain services, or competitors devoting significantly more resources to competing services could adversely affect our market share, which would adversely affect our business and results of operations.
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Risks Related to Intellectual Property, Cybersecurity, and Technology
Our ability to protect our intellectual property, including our BayesShield AI technology, may be limited, which could impair our ability to maintain our competitive advantage.
Competitors may attempt to imitate our products or attempt to replicate their functionality. Our intellectual property, including our proprietary software, artificial intelligence and machine learning technologies, algorithms, models, data, methodologies, trade secrets, know-how, and other proprietary information, is an important component of our business and may provide us with a competitive advantage. We have submitted two patent applications relating to our BayesShield AI technology. However, there can be no assurance that any of our pending or future patent applications will result in issued patents, that any patents that are issued will provide meaningful protection, or that the scope of any patent protection will be sufficient to prevent competitors from developing or commercializing technologies that are similar to, or perform functions similar to, our technologies.
The patent application process is costly, time-consuming, and subject to substantial uncertainty. Patent applications may be challenged or rejected by patent offices, and the scope of any patent claims ultimately allowed may be narrower than the claims initially sought. Even if patents are issued, they may subsequently be challenged, narrowed, invalidated, circumvented, or rendered unenforceable. In addition, patent protection is territorial and may not be available, or may be more difficult or costly to obtain or enforce, in all jurisdictions in which we may operate or compete. We may also decide not to pursue or maintain patent protection in particular jurisdictions due to the costs and uncertainties involved.
We also rely on a combination of trade secret protections, confidentiality obligations, contractual restrictions, copyright, trademarks, and other legal protections to protect our intellectual property. These measures may not adequately protect our intellectual property, particularly where employees, contractors, service providers, business partners, or other persons have access to our proprietary technology or information. Unauthorized disclosure, misappropriation, reverse engineering, or other unauthorized use of our intellectual property could enable third parties to reproduce or develop competing technologies more quickly or at lower cost. In addition, competitors may independently develop technologies that are substantially similar to ours without infringing our intellectual property rights.
The rapid development of artificial intelligence and related technologies may make it increasingly difficult to protect certain aspects of our intellectual property. Technologies, algorithms, and techniques may be developed or reproduced more rapidly than we are able to obtain or enforce intellectual property protection. In addition, the use of publicly available information, third-party technologies, open-source software, and other resources in the development of AI systems may create additional challenges in identifying, protecting, or enforcing our proprietary rights.
We may also need to enforce our intellectual property rights against infringement, misappropriation, or other unauthorized use. Any such enforcement actions could be expensive, time-consuming, and uncertain, and we may not prevail. Conversely, third parties may assert that our products or technologies infringe, misappropriate, or otherwise violate their intellectual property rights. Any such claims, regardless of their merit, could result in significant costs, require us to modify or discontinue aspects of our products, or divert management and technical resources.
If we are unable to obtain, maintain, or adequately protect our intellectual property, or if third parties are able to develop, obtain, or use technologies that compete with our proprietary technologies, we may be unable to maintain our technological or competitive advantages. Any such loss of intellectual property protection or competitive advantage could materially and adversely affect our business, financial condition, results of operations, and prospects.
If one or more competitors obtain patents covering technology critical to the operation of our business, we may infringe on the intellectual property rights of others.
If one or more other persons, companies, or organizations has or obtains a valid patent covering technology critical to the operation of our business, there can be no assurance that such entity would be willing to license such technology at acceptable prices or at all, which could have a material adverse effect on our business, financial condition, and results of operations.
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We may not always be able to determine that we are using or accessing protected information or software. In addition, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may currently be pending applications of which we are unaware that may later result in issued patents that our products or services infringe.
We could expend significant resources defending against patent infringement and other intellectual property right claims, which could require us to divert resources away from our operations. Any damages we are required to pay or injunctions against our continued use of such intellectual property in resolution of such claims may cause a material adverse effect to our business, financial condition, and results of operations.
Cybersecurity incidents may materially and adversely affect our business.
We rely on information technology systems, networks, software, cloud services, data centers, and other infrastructure to operate our business, develop and maintain our platforms, process transactions, communicate with users and business partners, store and process data, and conduct our proprietary trading activities. These systems, and the systems of our third-party service providers, may be vulnerable to cybersecurity incidents, including cyberattacks, hacking, phishing, ransomware, malware, denial-of-service attacks, credential theft, exploitation of software vulnerabilities, and other forms of unauthorized access or disruption. Cybersecurity incidents may also result from inadvertent or intentional actions by our employees, contractors, or other persons who have authorized access to our systems or information, including the unauthorized disclosure, theft, misuse, or loss of confidential, proprietary, or personal information.
An unauthorized intrusion into, or other compromise of, our systems could result in the theft, destruction, alteration, or unauthorized disclosure of sensitive information, including user information, personal data, proprietary information, trading strategies, models, source code, and other confidential business information. A cybersecurity incident could also disrupt the availability or functionality of our platforms, interfere with our ability to process transactions or execute or manage proprietary trading positions, impair our operations, or cause us to incur significant costs to investigate, contain, remediate, and prevent further incidents. We may also be subject to claims, litigation, regulatory investigations, enforcement actions, fines, penalties, and other liabilities arising from cybersecurity incidents or our failure to comply with applicable cybersecurity or data privacy requirements. In addition, an actual or perceived cybersecurity incident could damage our reputation, reduce user confidence in our platforms, result in the loss of users or business partners, and adversely affect our business and results of operations.
Our collection, storage, use, and other processing of personal data also subjects us to a variety of data privacy and data protection laws and regulations, including the European Union’s General Data Protection Regulation (GDPR), the United Kingdom’s data protection laws, and applicable U.S. state privacy laws. These laws and regulations impose requirements relating to, among other things, the collection and use of personal data, data minimization, security measures, data subject rights, cross-border data transfers, data retention, and the notification of certain data breaches. The regulatory framework governing data privacy and protection continues to develop and may become more complex or restrictive. Any failure or perceived failure by us to comply with applicable requirements, including as a result of a cybersecurity incident, could result in significant regulatory scrutiny, enforcement proceedings, monetary penalties, restrictions on our ability to process personal data, or other adverse consequences.
The cybersecurity threat landscape is also continually evolving. Advances in artificial intelligence may enable malicious actors to conduct more sophisticated, automated, targeted, or convincing attacks, including attacks that may be more difficult for traditional security measures to detect. In addition, developments in quantum computing could eventually undermine certain cryptographic algorithms and other security technologies currently relied upon to protect information and communications. We may be required to make significant investments in cybersecurity technologies, personnel, controls, and procedures to address these and other emerging threats, and there can be no assurance that our security measures will prevent or adequately mitigate every cybersecurity incident.
Despite our cybersecurity measures, policies, procedures, and controls, we cannot guarantee that our systems or those of our service providers will not be compromised, that unauthorized access will not occur, or that a cybersecurity incident will not materially affect our business. Moreover, cybersecurity incidents may not be detected promptly, and the techniques used to circumvent security measures are continually evolving. As a result, any such incident could materially and adversely affect our business, financial condition, results of operations, reputation, and prospects.
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Operational risk may materially and adversely affect our performance.
Operational risk is the risk of an adverse outcome resulting from inadequate or failed internal processes, people, systems, or external events. Our exposure to operational risk arises from routine processing errors, as well as extraordinary incidents, such as major system failures or legal and regulatory matters. Because our business lines are reliant on both technology and human expertise and execution, we are exposed to material operational risks arising from a number of factors, including, but not limited to, human error, processing, and communication errors, errors of third-party service providers, counterparties, or other third parties, failed or inadequate processes, design flaws, and technology, or system failures and malfunctions. Operational errors or significant operational delays could have a materially negative impact on our ability to conduct our business, which could adversely affect our results of operations.
Risks Related to Legal and Regulatory Matters
Our characterization of the UpsideOnly platform and its activities may be challenged by regulators or courts, and changes in laws and regulations could subject our business to additional regulatory requirements.
We believe the UpsideOnly platform is best characterized as a gamified data analytics platform rather than as a provider of regulated financial services, an investment fund, a gambling operator, a payment service provider, or a platform for the offer, sale, or trading of securities, derivatives, or other regulated financial instruments. Based on the manner in which the platform currently operates, we do not believe that its activities are subject to many of the regulatory regimes that commonly apply to financial services, trading, investment, gambling, or payment businesses. However, the application of laws and regulations to novel technologies and business models is often uncertain, and regulatory authorities or courts may disagree with our characterization of the platform or its activities.
For example, we do not believe that the activities conducted through the UpsideOnly platform constitute the provision of regulated financial services or the operation of an investment fund. Users do not purchase or sell securities, derivatives, or other financial instruments through the platform, do not entrust us with funds for investment on their behalf, and do not participate in a pool of capital that we manage for their benefit. The positions displayed through the platform are simulated positions used for prediction and analytics purposes, and the virtual units used within the platform have no monetary value, are not transferable, do not represent or provide rights to any underlying asset, and can be reset by the user’s own volition. Our subsequent use of our own capital in connection with our proprietary trading activities is conducted for our own account and does not involve investing or managing users’ capital.
We also do not believe that the activities conducted through the platform constitute unlawful Internet gambling or otherwise constitute a regulated wagering activity under applicable U.S. federal or state law. Nevertheless, gambling and wagering laws vary substantially among jurisdictions, and the characterization of a particular activity may depend on factors such as consideration, chance, skill, prizes, and the nature of the underlying activity. Regulatory authorities or courts could determine that some or all aspects of our platform constitute gambling or wagering notwithstanding our characterization of the platform.
Similarly, we do not believe that our receipt and handling of user deposits in connection with the platform constitutes money transmission or the provision of regulated payment services under applicable U.S. federal or state laws. We do not believe that the deposits constitute funds that users entrust to us for transmission to third parties, and our handling of such deposits is intended to be incidental to the operation of the platform. However, the application of money transmission and payment services laws can depend on the specific structure and flow of funds, and applicable regulators could reach a different conclusion.
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We also do not believe that the platform involves the offer or sale of securities subject to U.S. federal securities laws or the offer, sale, or dealing in securities, derivatives, or other financial instruments under applicable U.S., European Union, United Kingdom, or Marshall Islands laws. In particular, we do not believe that the platform provides investment services or activities regulated under MiFID II, such as reception and transmission or execution of orders, dealing on own account on behalf of users, portfolio management, investment advice, or operation of a multilateral or organized trading facility. We similarly do not believe that the platform constitutes a regulated collective investment scheme under applicable U.K. law because users do not contribute capital that is pooled for investment purposes and do not participate in an investment arrangement managed for their benefit.
In addition, we do not believe that the simulated positions and other prediction features offered through the platform constitute futures, options, swaps, or other commodity interests subject to regulation by the U.S. Commodity Futures Trading Commission. The simulated positions do not create rights or obligations to purchase, sell, deliver, or receive an underlying commodity or financial instrument and are not transactions in actual futures or other derivatives. Nevertheless, the CFTC has broad authority over certain commodity and retail commodity transactions, and the application of that authority may depend on the substance and economic characteristics of an activity rather than how it is described.
We also do not believe that the virtual units used within the platform constitute crypto-assets or other regulated digital assets. The virtual units are internal game or platform units with no independent monetary value, no transferability to other users, no redemption rights, and no representation on a blockchain or other distributed ledger. Accordingly, we do not believe that the platform involves the issuance, offer, sale, or provision of services relating to crypto-assets subject to applicable European Union crypto-asset regulation.
Our conclusions regarding the applicability of these and other regulatory regimes are based on our current understanding of applicable laws, regulations, regulatory guidance, and the manner in which the UpsideOnly platform currently operates. These conclusions have not necessarily been tested by regulators or courts, and there can be no assurance that a regulatory authority will agree with our interpretation. If a regulator or court determines that the platform or any aspect of our activities constitutes a regulated financial service, investment product, gambling or wagering activity, money transmission or payment service, commodity interest, crypto-asset service, collective investment scheme, or other regulated activity, we could become subject to licensing, registration, reporting, capital, consumer protection, disclosure, operational, recordkeeping, or other regulatory requirements. Compliance with such requirements could require us to modify or discontinue certain aspects of the platform, incur substantial additional costs, or delay or restrict our ability to offer the platform in certain jurisdictions. We could also be subject to investigations, enforcement proceedings, fines, penalties, private claims, or other liabilities for activities conducted before any such determination.
Moreover, the regulatory environment applicable to financial technology, artificial intelligence, digital assets, online gaming and prediction products, payments, and other technology-enabled businesses is evolving rapidly. Legislatures, regulators, and courts may adopt new laws, regulations, or interpretations, or apply existing laws in new ways, that could increase the regulatory burden applicable to our business or cause activities that we currently believe are outside the scope of regulation to become regulated. Such developments could materially increase our compliance costs, limit the markets in which we may offer the platform, require changes to our business model or technology, or otherwise materially and adversely affect our business, financial condition, results of operations, and prospects.
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We may not have sufficient insurance to cover potential losses and claims.
We currently maintain insurance coverage against the risk of property damage caused by fires, lightning strikes, explosions, riots, vehicle collisions, thefts, and flooding. We also maintain earthquake insurance coverage. While we believe that there have not been instances when we had to incur losses, damages, and liabilities because of the lack of insurance coverage, there may be such instances in the future, which may in turn adversely affect our financial condition and results of operations.
We may become involved in legal and other proceedings from time to time and may suffer significant liabilities or other losses as a result
Certain shareholders of our company filed a lawsuit in the Tokyo District Court against our company and Mr. Satoshi Kobayashi, the Company’s Co-Chief Executive Officer, Interim Chief Financial Officer, and Representative Director. The complaint, which is dated December 18, 2023, was served on our company and Mr. Kobayashi on January 12, 2024. The plaintiffs alleged that Mr. Kobayashi violated Article 709 of the Japanese Civil Code by intentionally delaying or misrepresenting the procedures necessary for the sale of shares, thereby unfairly depriving the plaintiffs of the opportunity to sell their shares on the Nasdaq market at a higher price following our company’s initial public offering, and that our company shall be liable for damages caused by Mr. Kobayashi in the discharge of his duties as our company’s Representative Director under Article 350 of the Japanese Companies Act. The plaintiffs sought monetary damages in the total amount of $2,925,747, plus interest and costs. On July 17, 2026, a judicial settlement was reached before the Tokyo District Court resolving all claims between the plaintiffs and the defendants. The settlement payment of JPY20 million was completed on July 27, 2026, the parties confirmed that no further obligations or claims exist between them, and the provisional attachment orders have been withdrawn.
In addition, Alexander Capital, L.P. filed a lawsuit against our company in the United States District Court in the Southern District of New York. The complaint, which is dated April 21, 2026, alleges breach of contract claims against our company related to Alexander Capital’s engagement as our company’s placement agent in connection with a private investment in public equity (PIPE) transaction that occurred in two tranches in October and November of 2025, respectively. We are currently involved in negotiations to settle the lawsuit.
Our U.S. subsidiary Kephas Corporation is involved in two pending employment related lawsuits, one filed by a former employee in April 2026 alleging unpaid wages, and a second filed by a former employee in May 2026 alleging wrongful termination.
From time to time, we may become involved in other disputes with the provision of our services or other aspects of our business and operations, including labor disputes with employees and contract disputes with our customers. These disputes may lead to legal or other proceedings and may result in substantial costs and diversion of resources and management’s attention. Disputes and legal and other proceedings may require substantial time and expense to resolve, which could divert valuable resources, such as management time and working capital, delay our planned projects, and increase our costs. Third parties that are found liable to us may not have the resources to compensate us for our incurred costs and damages. We could also be required to pay significant costs and damages if we do not prevail in any such disputes or proceedings.
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Risks Related to Our Ordinary Shares and the Trading Market
Share ownership is concentrated in the hands of our management, who are able to exercise significant influence on us.
As of the date of this Annual Report, our directors and executive officers together beneficially own 23.21% of our outstanding Ordinary Shares. These shareholders, acting together, have significant influence over all matters that require approval by our shareholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our company that other shareholders may view as beneficial.
The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price.
Sales of a substantial amount of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. As of the date of this Annual Report, 40,570,692 Ordinary Shares are issued and outstanding, and 5,855,129 ADSs (representing 29,275,645 Ordinary Shares) are issued, outstanding and freely tradeable. In addition, 5,001,120 ADSs (representing 25,005,600 Ordinary Shares) and 204,000 ADSs (representing 1,020,000 Ordinary Shares) are issuable upon the exercise of warrants and stock options, respectively, that are issued and outstanding as of the date of this Annual Report. In addition, we have issued 53,051,000 Series P preferred shares, which, if and as converted into Ordinary Shares on a one-for-one basis, would be equivalent to 10,610,200 ADSs, subject to receipt of the required shareholder approval to provide such conversion and voting rights. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.
If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding the ADSs, the price of the ADSs, and trading volume could decline.
Any trading market for the ADSs may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of the ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of the ADSs and the trading volume to decline.
The market price of the ADSs may be volatile or may decline regardless of our operating performance.
The market price of the ADSs may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
| ● | actual or anticipated fluctuations in our revenue and other operating results; |
| ● | the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; |
| ● | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
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| ● | announcements by us or our competitors of significant products, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments; |
| ● | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
| ● | the trading volume of the ADSs on Nasdaq; |
| ● | sales of the ADSs or Ordinary Shares by us, our executive officers and directors, or our shareholders or the anticipation that such sales may occur in the future; |
| ● | lawsuits threatened or filed against us; and |
| ● | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. |
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.
If we fail to implement and maintain an effective system of internal control, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of the ADSs may be materially and adversely affected.
As a public company in the United States, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires that we include a report of management on our internal control over financial reporting in our Annual Report. In addition, once we cease to be an “emerging growth company,” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented, or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations, and civil or criminal sanctions. We may also be required to restate our financial statements for prior periods. See “Item 15. Controls And Procedures” for more information.
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We do not intend to pay dividends for the foreseeable future.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the operation, development, and growth of our business and, as a result, we do not expect to declare or pay any dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income. Accordingly, the return on your investment in the ADSs likely depends entirely upon any future price appreciation of the ADSs. There is no assurance that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.
Rights of shareholders under Japanese law may be different from rights of shareholders in other jurisdictions.
Our amended articles of incorporation and the Companies Act of Japan (Act No. 86 of 2005, as amended), or the Companies Act, govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors’ and executive officers’ fiduciary duties, and obligations and shareholders’ rights under Japanese law may be different from, or less clearly defined than, those that would apply to a company incorporated in any other jurisdiction. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the law of other countries. For example, under the Companies Act, only holders of 3% or more of our total voting rights or our outstanding shares are entitled to examine our accounting books and records. Furthermore, there is a degree of uncertainty as to what duties the directors of a Japanese joint-stock corporation may have in response to an unsolicited takeover bid, and such uncertainty may be more pronounced than that in other jurisdictions.
As holders of ADSs, you may have fewer rights than holders of our Ordinary Shares and must act through the depositary to exercise those rights.
The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records, and exercising appraisal rights, are available only to shareholders of record. ADS holders are not shareholders of record. The depositary, through its custodian agents, is the record holder of our Ordinary Shares underlying the ADSs. ADS holders are not able to bring a derivative action, examine our accounting books and records, or exercise appraisal rights through the depositary.
Holders of ADSs may exercise their voting rights only in accordance with the provisions of the deposit agreement. If we instruct the depositary to ask for your voting instructions, upon receipt of voting instructions from the ADS holders in the manner set forth in the deposit agreement, the depositary will make efforts to vote the Ordinary Shares underlying the ADSs in accordance with the instructions of the ADS holders. The depositary and its agents may not be able to send voting instructions to ADS holders or carry out their voting instructions in a timely manner. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast, or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote.
Direct acquisition of our Ordinary Shares, in lieu of ADSs, is subject to a prior filing requirement under the amendments in 2019 to the Japanese Foreign Exchange and Foreign Trade Act of Japan and related regulations.
Under the amendments in 2019 to the Foreign Exchange and Foreign Trade Act of Japan (Act No. 228 of 1949, as amended) (“FEFTA”) and related regulations, direct acquisition of our Ordinary Shares, in lieu of ADSs, by a Foreign Investor (as defined herein under “Item 10. Additional Information—D. Exchange Controls”) could be subject to the prior filing requirement under FEFTA, regardless of the number of shares to be acquired. A Foreign Investor wishing to acquire direct ownership of our Ordinary Shares, rather than ADSs, will be required to make a prior filing with the relevant governmental authorities through the Bank of Japan and wait until clearance for the acquisition is granted by the applicable governmental authorities, which approval may take up to 30 days and could be subject to further extension. Without such clearance, the Foreign Investor will not be permitted to acquire our Ordinary Shares directly.
A prior filing requirement as set forth above is not triggered for acquiring or trading the ADSs since the depositary received clearance for the acquisition of our Ordinary Shares underlying the ADS in June 2023. In addition, any Foreign Investor expecting to receive delivery of our Ordinary Shares upon surrender of ADSs must also obtain pre-clearance from the applicable Japanese governmental authority prior to accepting delivery, which approval may take up to 30 days and could be subject to further extension. Although such prior filing requirement is not triggered for trading the ADSs once the depositary receives clearance for the deposit of the underlying Ordinary Shares, we cannot assure you that there will not be delays for additional Foreign Investors who wish to acquire our Ordinary Shares or for holders of the ADSs who are Foreign Investors and who wish to surrender their ADSs and acquire the underlying Ordinary Shares. In addition, we cannot assure you that the applicable Japanese governmental authorities will grant such clearance in a timely manner or at all.
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The discussion above is not exhaustive of all possible foreign exchange controls requirements that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of our Ordinary Shares or the ADSs by consulting their own advisors. For a more detailed discussion on the requirements and procedures regarding the prior notifications under the Foreign Exchange Regulations, see “Item 10. Additional Information—D. Exchange Controls.”
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our Ordinary Shares provides that, to the fullest extent permitted by applicable law, owners and holders of ADSs irrevocably waive the right to a jury trial for any claim that they may have against us or the depositary arising from or relating to our Ordinary Shares, the ADSs, or the deposit agreement, including any claim under the U.S. federal securities laws.
However, ADS holders will not be deemed, by agreeing to the terms of the deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. In fact, ADS holders cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. If we or the depositary opposed a demand for jury trial relying on jury trial waiver mentioned above, it is up to the court to determine whether such waiver was enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law.
If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs. If you or any other owners or holders of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other owner or holder may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if the jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any owner or holder of ADSs or by us or the depositary of compliance with any substantive provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.
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Holders of ADSs may not receive distributions on our Ordinary Shares or any value for them if it is illegal or impractical to make them available to such holders.
Subject to the terms of the deposit agreement, the depositary has agreed to pay holders of ADSs the cash dividends or other distributions it or the custodian for the ADSs receives on the Ordinary Shares or other deposited securities after deducting its fees and expenses and any taxes or other government charges. Holders of ADSs will receive these distributions in proportion to the number of our Ordinary Shares that such ADSs represent. However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit distributions on our Ordinary Shares to holders of ADSs. This means that holders of ADSs may not receive the distributions we make on our Ordinary Shares if it is illegal or impractical to make them available to such holders. These restrictions may materially reduce the value of the ADSs.
Holders of ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer, or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.
We may amend the deposit agreement without consent from holders of ADSs and, if such holders disagree with our amendments, their choices will be limited to selling the ADSs or cancelling and withdrawing the underlying Ordinary Shares.
We may agree with the depositary to amend the deposit agreement without consent from holders of ADSs. If an amendment increases fees to be charged to ADS holders or prejudices a substantial existing right of ADS holders, it will not become effective until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, ADS holders are considered, by continuing to hold their ADSs, to have agreed to the amendment and to be bound by the amended deposit agreement. If holders of ADSs do not agree with an amendment to the deposit agreement, their choices will be limited to selling the ADSs or cancelling and withdrawing the underlying Ordinary Shares. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.
We are incorporated in Japan, and it may be more difficult to enforce judgments obtained in courts outside Japan.
We are incorporated in Japan as a joint-stock corporation with limited liability. Some of our directors are non-U.S. residents, and a substantial portion of our assets and the personal assets of some of our directors and executive officers are located outside the United States. As a result, when compared to a U.S. company, it may be more difficult for investors to effect service of process in the United States upon us or to enforce against us, our directors or executive officers, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal or state securities laws of the U.S. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the United States.
Dividend payments and the amount you may realize upon a sale of our Ordinary Shares or the ADSs that you hold will be affected by fluctuations in the exchange rate between the U.S. dollar and the Japanese yen.
Cash dividends, if any, in respect of our Ordinary Shares represented by the ADSs will be paid to the depositary in Japanese yen and then converted by the depositary or its agents into U.S. dollars, subject to certain conditions and the terms of the deposit agreement. Accordingly, fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will affect, among other things, the amounts a holder of ADSs will receive from the depositary in respect of dividends, the U.S. dollar value of the proceeds that a holder of ADSs would receive upon sale in Japan of our Ordinary Shares obtained upon cancellation and surrender of ADSs and the secondary market price of ADSs. Such fluctuations will also affect the U.S. dollar value of dividends and sales proceeds received by holders of our Ordinary Shares.
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If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting, and other expenses that we would not incur as a foreign private issuer.
As a foreign private issuer, we are exempt from the rules under the Exchange Act 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(b) and Section 16(c) of the Exchange Act. However, effective March 18, 2026, our directors and officers are subject to the reporting requirements of Section 16(a) 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 United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. We may cease to qualify as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse effect on our results of operations.
Because we are a foreign private issuer and have taken advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, you have less protection than you would have if we were a domestic issuer.
Nasdaq listing rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we have followed home country practice in lieu of the above requirements. The corporate governance practice in our home country, Japan, does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of the company, it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, Nasdaq listing rules also require U.S. domestic issuers to have an audit committee and a compensation committee and a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Consistent with corporate governance practices in Japan, we do not have a standalone compensation committee or nomination and corporate governance committee of our board. As a result of these exemptions, investors would have less protection than they would have if we were a domestic issuer.
If we cannot satisfy the continued listing requirements and other rules of Nasdaq, the ADSs may be delisted, which could negatively affect the price of the ADSs and your ability to sell them.
In order to maintain our listing on Nasdaq, we are required to comply with the continued listing requirements and other rules of Nasdaq. If we are unable to satisfy Nasdaq criteria for maintaining our listing, the ADSs could be subject to delisting. If Nasdaq subsequently delists the ADSs from trading, we could face significant consequences, including:
| ● | a limited availability for market quotations for the ADSs; |
| ● | reduced liquidity with respect to the ADSs; |
| ● | a determination that the ADS is a “penny stock,” which will require brokers trading in the ADSs to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the ADSs; |
| ● | limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
We are an “emerging growth company” within the meaning of the Securities Act, and we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies, which will make it more difficult to compare our performance with other public companies.
We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such an extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This will make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
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Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and the ADSs.
For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of other public companies. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the ADS price may be more volatile.
If we are classified as a passive foreign investment company, United States taxpayers who own the ADSs or our Ordinary Shares may have adverse United States federal income tax consequences.
A non-U.S. corporation such as us will be classified as a passive foreign investment company (“PFIC”) for any taxable year if, for such year, either:
| ● | at least 75% of our gross income for the year is passive income; or |
| ● | the average percentage of our assets (determined at the end of each quarter) during the taxable year which produce passive income or which are held for the production of passive income is at least 50%. |
Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds the ADSs or our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.
Based on our operations and the composition of our assets, we do not believe we were a PFIC for our 2026 taxable year. However, it is possible that, for our 2027 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year.
The classification of certain of our income as active or passive, and certain of our assets as producing active or passive income, and hence whether we are or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations and guidance are potentially subject to different interpretations. If due to different interpretations of such regulations and guidance the percentage of our passive income or the percentage of our assets treated as producing passive income increases, we may be a PFIC in one or more taxable years. For further discussion, please refer to the PFIC Consequences in the United State Federal Income Taxation section.
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U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS ABOUT THE PFIC RULES, THE POTENTIAL APPLICABILITY OF THESE RULES TO THE COMPANY CURRENTLY AND IN THE FUTURE, AND THEIR FILING OBLIGATIONS IF THE COMPANY IS A PFIC.
If we are unable to maintain compliance with Nasdaq’s listing standards, our securities will be delisted, which would negatively affect our securities’ market price and liquidity and reduce our ability to raise capital.
We have previously received deficiency notices from Nasdaq regarding our compliance with listing standards and have subsequently regained our compliance status. There can be no assurance that we will maintain compliance with Nasdaq’s continued listing requirements. If we fail to maintain compliance, our securities could be delisted from Nasdaq. We and holders of our securities could be materially adversely affected if our securities are delisted from Nasdaq. In particular:
| ● | we may be unable to raise equity capital on acceptable terms or at all; |
| ● | we may lose the confidence of our business partners, which would jeopardize our ability to continue our business as currently conducted; |
| ● | the price of our securities will likely decrease as a result of the loss of market efficiencies associated with Nasdaq; |
| ● | holders may be unable to sell or purchase our securities when they wish to do so; |
| ● | we may become subject to stockholder litigation; |
| ● | we may lose media and analyst coverage; |
| ● | our securities could be considered a “penny stock,” which would likely limit the level of trading activity in the secondary market for our securities; and |
| ● | we would likely lose any active trading market for our securities, as they may only be traded on one of the over-the-counter markets, if at all. |
Item 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
Corporate History and Structure
We were incorporated in Japan on May 1, 2018 as a joint-stock corporation with limited liability pursuant to the laws of Japan. The Company was formerly known as Earlyworks Co., Ltd. and changed its name to Perpetuals.com Ltd. in connection with the rebranding in January 2026. On January 20, 2026, the Company acquired 100% of the outstanding shares of Perpetual Markets Ltd., making it a wholly owned subsidiary of the Company (the “Acquisition”).
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Our post-Acquisition business operates through a number of direct and indirect wholly owned operating subsidiaries, with its primary business activities operated within the U.S. Kephas Corporation, a Delaware corporation, is our U.S. operating subsidiary. Its subsidiaries, USO Labs Ltd., a Marshall Islands corporation, and USO Deposit Trust LLC, a Delaware limited liability company, jointly operate our UpsideOnly business.
Corporate Information
Our principal executive office is located at 5-7-11, Ueno, Taito-ku, Tokyo, Japan 110-0005, and our telephone number is +81 03-5614-0978. Our websites are https://perpetuals.com/ and https://e-arly.works/. The information contained in, or accessible from, our website or any other website does not constitute a part of this Annual Report. Our agent for service of process in the United States is Cogency Global Inc., at 122 East 42nd Street, 18th Floor, New York, NY 10168.
The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.
For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”
B. Business Overview
For the fiscal years ended April 30, 2026, 2025, and 2024, we had total revenue of JPY 256.3 million (US$1.6 million), JPY440.4 million (US$3.1 million), and JPY179.4 million, respectively. For the same fiscal years, we had net loss of approximately JPY 2,742.2 million (US$17.5 million), JPY256.7 million net loss (US$1.8 million), and JPY336.2 million net loss, respectively.
The Acquisition
Our legacy company, Earlyworks, Co., Ltd., was dedicated to optimizing business operations with the use of blockchain technology. On January 20, 2026, our company completed the Acquisition, resulting in the rebranding of our company as Perpetuals.com Ltd. and our Nasdaq ticker symbol changing to PDC.
This following Business Overview is divided into two portions, one describing the post-Acquisition business, and the other describing the pre-Acquisition business.
During the fiscal year ended April 30, 2026, the legacy blockchain business generated the majority of our consolidated revenue, because the results of the acquired PML subgroup were consolidated only from the Acquisition Date. Following the Acquisition, however, our operational focus is centered on the post-Acquisition business, and we do not expect the legacy blockchain pre-Acquisition operations to be a meaningful part of our growth strategy for the future.
Post-Acquisition Overview
Introduction
Post-Acquisition, we are a fintech company that pairs proprietary AI with regulated market infrastructure to open global financial markets to more participants, from financial platforms to individual users. By building on fully compliant infrastructure, we keep the interests of platforms and users aligned, while making markets more transparent and accessible and minimizing incumbent structural risks to traders.
Our proprietary technology enables not only the operation of regulated financial and cryptocurrency services, it also leverages our patent-pending specialized machine learning system, BayesShield AI – trained on billions of retail trading data points – to help fintech companies create and offer innovative products and services.
Beginning with our inception in May 2018 and prior to the completion of the Acquisition, we were predominantly focused on blockchain technology, and this legacy business is discussed in detail separately below.
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Our Purpose
We believe characteristics of the conventional retail trading environment create an opportunity for alternative approaches that seek to provide individuals with access to investment opportunities without subjecting them to assume the same level of trading risk.
We believe that separating a user’s participation from the direct funding and execution of leveraged trades may address certain structural disadvantages of conventional retail trading, including the risk of substantial losses of user trading capital, the effects of leverage and margin requirements, and certain conflicts that can arise when a trading provider’s revenues are directly or indirectly linked to customer trading activity or customer losses.
Existing State of the Retail Trading Market
The Retail Trading Environment
Retail traders seeking to participate in financial markets have historically relied primarily on traditional brokerage firms, online trading platforms and, more recently, proprietary trading or “funded trader” firms. Although these businesses differ substantially in their structures, products, and regulatory status, many conventional retail trading models require the trader to commit capital and assume direct exposure to market losses. In addition, the economics of some of these models can create incentives or conflicts of interest that may not be fully aligned with the interests of retail traders.
Traditional Brokerage and Trading Platforms
A traditional brokerage firm generally provides a platform through which customers can buy and sell securities, derivatives, foreign exchange, or other financial instruments. Depending on its business model and the products offered, a broker may generate revenue from commissions, transaction fees, bid-ask spreads, margin or financing charges, payment for order flow, interest earned on customer cash, and other sources.
A broker acting solely as an agent generally does not profit directly from a customer’s trading loss. Nevertheless, a broker may have an economic incentive to increase customer trading activity or to offer or recommend products, services, or account features that generate greater revenue for the broker. The U.S. Securities and Exchange Commission (“SEC”) has recognized that broker-dealers and investment professionals can have economic incentives relating to fees, commissions, markups, payment for order flow, cash-sweep programs, proprietary products, and other sources of compensation, and that such incentives can create conflicts between a firm’s interests and those of its retail customers.
The economic relationship can be different where a trading provider acts as principal or otherwise serves as the counterparty to a customer’s transaction. For example, in certain over-the-counter (“OTC”) foreign exchange markets, the customer does not trade against an open exchange but instead trades directly against the dealer. In such circumstances, the dealer may be the seller when the customer buys and the buyer when the customer sells. The Commodity Futures Trading Commission (“CFTC”) has specifically noted that an OTC foreign exchange dealer can make money when customers trade more frequently, lose money, or pay fees, spreads, or commissions.
Accordingly, while it would be inaccurate to characterize all traditional brokerage firms as benefiting from customer losses, the economics of certain retail trading models can create conflicts of interest or incentives that may be adverse to retail customers. The nature and magnitude of those conflicts depend on the provider’s business model, the products offered, and the manner in which customer transactions are executed.
Proprietary and “Funded Trader” Firms
Retail traders also increasingly have access to businesses commonly described as proprietary trading (often referred to as “prop trading” firms) or “funded trader” firms. A traditional prop trading firm generally trades the firm’s own capital and does not operate primarily as a retail brokerage. Retail-oriented “funded trader” businesses, however, may use different models. In some cases, an individual pays an evaluation fee or subscription, trades in a simulated environment or subject to specified trading parameters, and may become eligible to receive a portion of purported trading profits if specified conditions are satisfied. Other firms may use different arrangements, including arrangements involving actual trading or deployment of firm capital.
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The economic terms of these programs can vary significantly, including with respect to evaluation fees, subscription fees, trading restrictions, profit-sharing arrangements, maximum permitted losses, payout conditions, and the circumstances under which an account may be terminated. As a result, retail traders may bear economic costs or face contractual restrictions even where they are not directly investing their own capital in the market.
Furthermore, retail-oriented proprietary trading firms commonly generate revenue by charging prospective traders fees to participate in trading evaluations or “challenges.” The trader generally pays the fee regardless of whether the trader successfully completes the evaluation. Industry data published by Finance Magnates and based on data from FPFX Tech covering more than 300,000 accounts and approximately 100,000 traders across ten proprietary trading firms found that approximately only 14% of traders passed the evaluation stage and obtained a funded account, while approximately just 7% of traders ultimately received a payout. The same data indicated that a trader spent approximately $800 on challenge purchases over the course of the trader’s activity with a prop trading firm, typically through approximately three challenge attempts.
These characteristics can create an economic model in which evaluation and related fees constitute an important source of revenue and in which the provider’s economics may depend significantly on the continued participation of prospective traders. The precise revenue mix varies among providers, however, and public information is insufficient to establish an industry-wide percentage of revenue or profit attributable to evaluation fees. Some firms may also generate revenue through profit-sharing arrangements, subscriptions, trading-related fees, data or platform charges, or other sources.
From the perspective of a retail trader, the distinction can be significant. A trader who fails an evaluation or “challenge” generally loses the evaluation fee without receiving a payout, while a relatively small proportion of participants ultimately receive payouts. This creates a potential structural tension in models in which the provider receives revenue when traders enter or repeat an evaluation regardless of whether those traders ultimately succeed.
The CFTC has specifically cautioned retail customers about offers involving proprietary trading firms’ money and profit-sharing arrangements and has noted that claims associated with such opportunities should be evaluated carefully.
Leverage and the Potential for Rapid Losses
One of the most significant risks associated with many forms of retail trading is leverage. Leverage allows a trader to obtain market exposure that is greater than the amount of capital the trader deposits or commits to a position. For example, with 10-to-1 leverage, a trader who commits $1,000 may obtain exposure to a position with a notional value of $10,000. A 10% increase in the value of the position would therefore produce a $1,000 gain before costs, while a 10% decrease would produce a $1,000 loss. Smaller changes in the underlying market can therefore result in proportionately larger gains or losses relative to the trader’s capital.
Leverage can be particularly consequential in volatile markets because losses can accumulate rapidly and may trigger margin requirements, forced liquidation, or other mechanisms that require a trader to close positions. Depending on the product and applicable protections, a trader may also incur financing charges, spreads, commissions, and other costs that further reduce returns.
Regulators have identified excessive leverage as an important source of risk to retail traders. For example, the European Securities and Markets Authority (“ESMA”) previously concluded that contracts for difference (“CFDs”) presented significant investor-protection concerns relating to, among other things, complexity, lack of transparency, excessive leverage, the disparity between potential returns and the risk of loss, and marketing and distribution practices. ESMA’s analysis across European jurisdictions found that 74% to 89% of retail CFD accounts typically lost money. ESMA responded with measures including leverage limits, margin close-out requirements, negative-balance protection, and restrictions on incentives to trade CFDs.
The prevalence of retail trading losses is also significant in other leveraged markets. The CFTC currently states that approximately two out of three retail foreign exchange traders lose money each quarter. These statistics do not mean that every retail trader will lose money or that all trading providers operate in the same manner. They nevertheless illustrate the difficulty retail traders face in generating consistent returns through conventional short-term and leveraged trading strategies.
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Challenges Inherent in Conventional Retail Trading
In addition to the potential conflicts described above, conventional retail trading generally requires individuals to make repeated decisions concerning the timing, size, and direction of trades while bearing the resulting market risk. Retail traders may therefore be exposed to a combination of market volatility, leverage, transaction costs, financing costs, liquidity constraints, margin requirements, and behavioral biases. Even where a trading strategy has generated favorable results historically, there can be no assurance that the strategy will continue to perform under future market conditions.
These characteristics can create a challenging environment for retail traders. The trader is generally required to supply the capital, assume the market risk, and bear the costs associated with trading, while the trading provider may generate revenue from the trader’s activity through fees, spreads, financing charges, order-flow arrangements, or other sources. In certain principal or counterparty models, the provider may also have an economic interest that is directly related to the customer’s trading outcome. The resulting economics can differ materially from an arrangement in which the provider and the user participate in the economic benefits of successful investment activity on more closely aligned terms.
Our Offerings
UpsideOnly.com
UpsideOnly.com, our flagship consumer facing product launched in May of 2026, changes the game. In contrast to the existing retail trading environment, UpsideOnly enables retail traders to forgo the monetary risks associated with trading with their own capital. Instead, users are rewarded when their strategic trading insights, gathered through predictions on financial market outcomes using virtual capital, prove valuable in the market. Traders face no personal monetary loss when their insights are incorrect.
Foundational to the success of UpsideOnly is our belief that the sum of human and artificial intelligence is greater than its individual components. UpsideOnly coordinates and capitalizes on the unification of mass human intelligence (from the global user base) and artificial intelligence (from our specialized machine learning system, BayesShield AI) within financial markets. By combining these inputs, we hope to build the most successful prop trading platform on the market.
The platform allows users to make simulated predictions about financial markets – including stocks, futures, foreign exchange, and cryptocurrencies – using virtual capital, without requiring users to execute conventional leveraged trades or place trading capital at risk in connection with those predictions. Rather than requiring users to generate returns principally through the successful execution of trades using their own capital, our business model is designed to use user-generated market signals or predictions as an input into our own AI-powered investment and trading activities.
When BayesShield AI determines that user-generated information may have investment value, it informs our prop trading desk, and we then use our own capital to pursue corresponding investment opportunities. When our investment activity is profitable, users may participate in the economic benefits generated from successful investment activity. Users suffer no losses if our investment activity is not profitable. In this way, users never risk personal capital and yet can participate in profits when their insights prove valuable.
We believe this approach can provide an alternative to certain aspects of the conventional retail trading experience by separating a user’s participation in potential investment opportunities from the direct market risk associated with conventional trading. Users do not directly execute trades through our platform or use their own trading capital to fund our investment activities. Instead, we assume the investment and trading risk associated with decisions to deploy our own capital, while users may receive economic benefits when their market signals or predictions contribute to successful investment activity.
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Unlike most predictive trading platforms, our interests are aligned with the interests of our user base. We and our platform users seek to win together.
Our approach does not eliminate investment risk, and there can be no assurance that our models, signals, or investment activities will be successful. In addition, users may be subject to other risks and limitations associated with our offerings, including the terms and conditions applicable to particular products. Nevertheless, we believe that separating a user’s participation from the direct funding and execution of trades, including leveraged trades, may address certain structural disadvantages of conventional retail trading, including the risk of substantial losses of user trading capital, the effects of leverage and margin requirements, and certain conflicts that can arise when a trading provider’s revenues are directly or indirectly linked to customer trading activity or customer losses.
Kronos X®
Our Kronos X® Multi-Asset Exchange provides fully regulated trading technology compliant with applicable EU regulations described in greater detail below. Kronos X® is available as a turnkey white-label solution for banks, brokers, and fintechs. Our proprietary data centers in Germany and the U.S. West Coast deliver low-latency execution with colocation options for institutional participants. Kronos X® is enabling our clients to offer innovative services and products, including barrier products, discussed in greater detail below.
Our Kronos X® technology is used by the EU-licensed Perpetual Markets Multilateral Trading Facility operated by PM MTF Ltd (the “PM MTF”). PM MTF Ltd acts as the licensed venue operator that runs entirely on our financial technology stack.
PM MTF Ltd is a Cypriot Investment Firm (CIF) that maintains legal permission to operate the PM MTF in Cyprus, with extended permission to deal on behalf of clients (act as a broker) and to self-clear (act as their own clearing house). PM MTF operates under full compliance with the following EU regulations:
| ● | MiFID II: The Markets in European Union Financial Instruments Directive II. |
| ● | MiCA: The Markets in Crypto-Assets Regulation. |
| ● | DORA: The Digital Operational Resilience Act. |
| ● | EMIR: The European Market Infrastructure Regulation. |
In March of 2026, the PM MTF secured its MiFID II MTF license through the Cyprus Securities and Exchange Commission (“CySEC”). The MiFID II license provides for the following:
| ● | Single Entity Structure: Combines a regulated MTF with direct client execution, removing the need for external brokers. |
| ● | Investor Protections: Provides clients with segregated asset accounts, best execution rules, and coverage under the Cyprus Investor Compensation Fund. |
| ● | Passporting: Operates across more than 30 countries in the European Economic Area (EEA). |
Additionally, in August of 2026, the PM MTF received approval from CySEC to offer crypto-asset services under MiCA. The authorization enables the operation of a trading platform for crypto-assets that can provide clients with crypto-asset custody and administration, order execution, order reception and transmission, and crypto-asset transfer services.
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It builds on the existing MiFID II-regulated PM MTF platform, allowing the PM MTF to broaden the range of asset classes available through its regulated European venue into digital assets, while providing a route to offer these services to clients across the EU through MiCA’s cross-border notification framework.
We believe the MiFID II license and the MiCA approval – in combination with our innovative Kronos X® technology – provide the PM MTF with a compelling competitive advantage.
We generate revenue from Kronos X® through license fees based on trading volume on the PM MTF.
Perpetuals Tokenization
We offer end-to-end infrastructure and services for the tokenization of real-world assets, including asset issuance, market making, and trading through regulated order book infrastructure. Our team has experience supporting the development and implementation of tokenized securities in regulated markets.
Business Model
Post-Acquisition, we expect to generate revenue primarily through the following means.
Profitable Prop Trading Activity Informed by Crowdsourced Trading Predictions and BayesShield AI
Our UpsideOnly users make simulated trading predictions. When BayesShield AI determines that user-generated information may have investment value, it informs our prop trading desk, and we then use our own capital to pursue corresponding investment opportunities. When our investment activity is profitable, we share the profits on a 50/50 basis with users whose predictions helped to inform the profitable trading activity.
Volume-Based Fees Through Kronos X
Kronos X generates revenue through a volume-based fee structure from the PM MTF and other brokers. The more users/higher transaction volume of the customer, the higher the fees we collect.
Our Strategy
Our current strategy relies on five programs, which operate synergistically by coordinating clients, data, or products across programs.
Program 1. Growth of the UpsideOnly Platform
We have been pleased with the rate of market adoption of UpsideOnly to-date and we are focused on continuing to expand our user base. Thus far, we have utilized a multichannel marketing approach for customer acquisition. Due to the digital nature of UpsideOnly, much of our marketing and advertising efforts have been online. This has included acquisition through paid promotion (e.g., Google Ads, Bitmedia, and Stocktwits) and organic efforts (e.g., social media, Discord, and video).
As of the date of this Annual Report, our marketing and advertising efforts have resulted in the acquisition of over 500,000 UpsideOnly users across approximately 170 countries. Our acquisition costs of approximately $0.65 per user are extremely low in comparison to the acquisition cost per client for CFD providers and brokers of approximately $500 and $200, respectively. In 2026, we also plan to launch a user referral program as a means of attracting users to the platform.
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Program 2. Improvement and Expansion of BayesShield AI Models
BayesShield AI is our proprietary, patent-pending AI system. It identifies the most skillful asset traders by using billions of retail trading data points to generate trading signals from that data. A greater number of users of our offerings such as UpsideOnly provides for more trading data points, thereby improving the performance of the system in identifying profitable trading strategies. In turn, better models attract more users. This feedback loop continuously strengthens our market position. We believe that competitors with fewer data points cannot make similar models of the same quality.
Our strategy involves improving the effectiveness of BayesShield AI by expanding the user base of our platforms such as UpsideOnly. In addition, we will continue to explore other opportunities to license BayesShield AI to, and otherwise collaborate with, third parties to improve the BayesShield AI model.
In April of 2026, we executed a strategic licensing agreement with the German University of Digital Science (German UDS) for the integration of BayesShield AI for deployment across its research centers and digital learning infrastructure, including its Research Center for Artificial Intelligence, Research Center for Cybersecurity, and Research Center for Digital Transformations. Under the license agreement, German UDS agreed to integrate BayesShield AI into its curriculum as a live case study and applied research platform across multiple graduate programs. Students and faculty can leverage BayesShield AI’s probabilistic AI models to analyze real-world trading patterns, conduct research on retail investor behavior, and develop next-generation risk management frameworks.
In addition, we believe that the coordination and capitalization of collective human intelligence combined with BayesShield AI has applications extending beyond financial markets, and our strategy involves exploration of potential new markets.
For example, in April of 2026, we announced the extension of the BayesShield AI technology into the healthcare space in the form of BayesShield Clinical. BayesShield Clinical applies the same patent-pending methodology we developed to predict trading outcomes to a new domain: identifying which physicians in hospitals and clinics are the most accurate at diagnosing specific types of cases to ensure patients get the best health outcomes.
To pilot the program, we have partnered with the European Institute of Management (EIM), a higher education institution offering doctoral programs, including a PhD in Healthcare Studies, to support the clinical implementation of BayesShield Clinical. Under the arrangement, we provide the software platform while EIM works directly with partner hospitals and clinics to manage pilot deployment, trial design, and academic oversight. EIM’s PhD in Healthcare Studies program will serve as the academic collaboration for the clinical pilots, with doctoral candidates contributing to the study design and analysis of outcomes. Additional hospital, health system, and research partnerships are in development.
Financial markets and clinical medicine share a common analytical problem: decisions made under uncertainty, where skill is obscured by noise, variable conditions, and behavioral bias. We believe the same approach that identifies performance patterns in financial markets can reveal them in clinical decision-making.
BayesShield Clinical is designed for hospitals, clinics, and health systems. It does not diagnose patients or replace physician judgment. Instead, it strips away behavioral biases, applying statistical methods to identify patterns of diagnostic strength across specific case types. Hospitals and other health care providers can use these insights for optimized case routing, second-opinion protocols, and training program design.
Program 3. Partnerships with CFD Providers and Acquisitions
Our strategy also involves collaborating with CFD providers and acquiring CFD providers that are in financial distress. The advantage of this is twofold:
| ● | Acquisition of Additional Trading Data: We would acquire additional historical trading data to improve our BayesShield AI models. |
| ● | Acquire Inactive Client Accounts: We would acquire inactive client accounts. Many of these clients lost money and then stopped trading. These accounts have almost no value for a CFD provider. We would invite these clients to use UpsideOnly with the promise of gains without the possibility of losses. On UpsideOnly, the user does not pay for trade losses. We think that many inactive clients will trade again with this protection. Thus, we believe we can attract users from inactive accounts at a low relative cost. |
Program 4. Launch of Barriers.com and Product Migration to the MTF
In the last quarter of the 2026 calendar year, we plan to launch Barriers.com in partnership with PM MTF Ltd. which will operate on our Kronos X® trading system already in use by the PM MTF. Barriers will offer innovative barrier options with a guaranteed stop-loss. A barrier option is a trading instrument pursuant to which the payoff depends on whether the underlying asset’s price hits a specific target level (the “barrier”) during its lifespan, with the purpose of minimizing risk for investors.
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Barriers is a novel financial instrument that will allow users a leveraged exposure to financial assets without actually owning the asset, while offering a guaranteed maximum loss. They are economically substitutes for Perpetual Futures, CFDs, and similar products, but with the distinct advantage that any loss is limited to the premium paid, similar to traditional call options. Using BayesShield AI, we are operating as a counterparty to the user trades within Barrier instruments. We expect this to provide an additional revenue stream from the issuance of these financial instruments.
We plan to cross-sell various products, including Barriers.com, to certain UpsideOnly clients. We also intend to connect CFD providers to the PM MTF and to our Kronos X® trading system. On the PM MTF, a CFD provider can offer the following four product types:
| Product Type | Expiry Date | Primary Revenue Source | Unique Defining Feature | |||
| Spot | None | Commission | Track the immediate, real-time market price of an underlying asset (e.g., spot Gold, EUR/USD, or Apple stock) rather than a future delivery price. | |||
| Perpetual Futures | None | Commission | A hybrid derivative highly popular in the crypto space that can be brought to traditional markets as well. The product requires specialized infrastructure that Kronos X® provides. | |||
| Barrier Products | None (unless knocked out) | Commission and liquidity provision | A specialized type of option-like derivative contract that automatically closes (knocks out) if the underlying asset’s price touches a specific, pre-determined “barrier level.” | |||
| Interest/Staking Swap | Often fixed term | Commission | Track the variable yield rate or income generated by an asset rather than the core price of the underlying asset. |
The provider can then replace CFDs with Perpetual Futures and Barrier products. At this time, CySEC does not apply the CFD product intervention measures to Perpetual Futures traded on an MTF. Our analysis shows that Barrier products are also not in the scope of these measures. Thus, we believe the provider can operate without the CFD restrictions.
Program 5. Offer Full Platform Services for Brokers
We offer a complete, electronic trading platform for retail brokers consisting of a multi-asset ecosystem incorporating three components of vital importance to brokers:
| ● | A trading interface for broker clients. |
| ● | A back-office system. |
| ● | A Customer Relationship Management (CRM) that helps brokers manage all their interactions and relationships with current and potential customers in one centralized location. |
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Brokers have traditionally required an external liquidity provider, a third-party financial institution such as a major global bank, market maker, or electronic trading firm that supplies buy and sell pricing feeds to the broker so their clients can trade seamlessly. Serving as a key differentiator, brokers using our suite do not require an external liquidity provider because PM MTF provides them with liquidity.
Post-Acquisition Competitive Marketplace
UpsideOnly
The market for online trading and investment platforms is highly competitive, and includes traditional broker-dealers and investment platforms that offer paper-trading or other simulated trading functionality, specialized trading-analysis and charting platforms, trading education and competition platforms, social trading platforms, and proprietary or “funded trader” programs. Participants in these markets compete for users based on, among other factors, the breadth of available asset classes, quality and sophistication of trading tools, user experience, educational content, social and competitive features, access to market data, and opportunities for users to generate economic returns.
Traditional brokerage and investment platforms, including platforms such as Webull, Charles Schwab’s thinkorswim, eToro, and Interactive Brokers, generally offer simulated or “paper” trading as a complement to their principal businesses of facilitating real-money investing and trading. For example, eToro provides users with a $100,000 virtual portfolio that allows users to practice trading in real-time market conditions before transitioning to a real-money portfolio. TradingView similarly provides paper trading and historical “Bar Replay” functionality that allows users to practice trading strategies using simulated funds and historical market data. Other platforms, such as investment simulators and trading competitions, emphasize education, strategy development, leaderboards, and competition among users.
The market also includes proprietary and “funded trader” programs, which generally seek to identify traders who demonstrate the ability to meet specified trading objectives and risk parameters. Such programs may require users to pay an evaluation or subscription fee and, following successful completion of an evaluation, may provide users with access to a simulated trading account and an opportunity to receive a portion of simulated trading profits. For example, FTMO currently describes an evaluation process through which users may become eligible for rewards based on profits generated in a simulated trading account.
We believe UpsideOnly differs from these models in several respects. UpsideOnly is designed primarily as an interactive simulated trading and competition platform rather than as a paper-trading feature ancillary to a brokerage business. Users may make simulated trading decisions across multiple asset classes without committing capital to trades or being required to transition to a real-money brokerage account. Unlike many funded-trader programs, UpsideOnly does not require users to pay an evaluation fee or risk their own trading capital in order to participate. Instead, users’ simulated trading activity generates signals and data that may be aggregated and evaluated by our proprietary technology and artificial intelligence systems as one of several inputs into our proprietary trading activities.
UpsideOnly also seeks to differentiate itself by combining simulated trading, competition, and potential economic rewards with the aggregation of trading signals from a broad user community. We believe this model may provide users with an opportunity to develop and demonstrate trading skills, compete with other participants, and potentially share in the economic value generated by their participation, while simultaneously creating a source of aggregated market information that may be valuable to our proprietary trading activities.
We believe these characteristics distinguish UpsideOnly from traditional paper trading products, which generally serve as educational or promotional tools for brokerage businesses, and from funded trader programs, which generally focus on identifying and evaluating individual traders against prescribed performance and risk criteria. However, the markets in which UpsideOnly operates are highly competitive, and competitors may develop products or business models that offer similar functionality, economic incentives, or combinations of simulated trading, competition, social interaction, and proprietary trading. Our ability to compete effectively will depend on our ability to attract and retain users, maintain an engaging user experience, develop effective proprietary technology and artificial intelligence systems, provide reliable market data and simulations, and create economic value for both our company and participating users.
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The table below illustrates the key differences between UpsideOnly and other platforms occupying the same competitive marketplace.
| Competitive category | Representative competitors | Primary proposition | How UpsideOnly differs | |||
| Traditional brokers with paper trading | Webull, Schwab/thinkorswim, Interactive Brokers | Learn or test trading strategies using simulated money before committing real capital | UpsideOnly is designed around simulation as the core product, rather than as an ancillary feature intended to lead users toward real-money brokerage accounts and, in addition, offers users the potential for risk-free payouts | |||
| Funded-trader/prop-trading firms | FTMO, Topstep, Apex Trader Funding | Traders pay an evaluation/subscription fee and attempt to qualify for a simulated account and profit-sharing opportunities | UpsideOnly does not require users to pay an evaluation fee or risk trading capital and does not primarily sell access to a larger notional trading account; users instead provide simulated trading signals that can potentially generate rewards | |||
| Trading simulators/ competitions | Investopedia Simulator, TradingView’s The Leap, other trading competitions | Practice, education, leaderboards, and friendly competition | UpsideOnly combines simulation and competition with a potential economic reward tied to users’ trading performance/signals | |||
| Trading simulators with potential economic reward | Marketdraft | Trading competitions, many of which require an entry fee | UpsideOnly does not require a fee to participate | |||
| Traditional cryptocurrency exchanges | Kraken | Offer users the ability to trade digital assets and, in certain jurisdictions, leveraged and derivative products | UpsideOnly users execute no actual trades or expose any voluntarily deposited funds to market losses; rather, it uses users’ simulated predictions as data signals in connection with our company’s proprietary trading activities and provides eligible users with an opportunity to participate economically based on their contributions to those signals |
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Kronos X
We believe an additional competitive advantage of our company is that our Kronos X platform, which operates regulated trading infrastructure, provides us with trading data for our BayesShield AI system in addition to the trading data generated by UpsideOnly. Additionally, we use BayesShield AI to enable a customer to be the counterparty of our Barrier instruments.
Research and Development
We conduct independent research in applied machine learning in quantitative finance and quantitative behavioural finance with in-house researchers. Besides independent research and development, we may also conduct joint research and development projects with strategic partners. For example, we currently have partnerships with the German UDS gGmbH, a German University specializing in AI and Computer/Data Science, and the European Institute of Management (EIM), a Malta-based higher education institution specializing in doctoral and graduate education in Computer Science, Finance, and AI.
For example, we currently have a partnership with the German UDS gGmbH, a German University specializing in AI and Computer/Data Science. German UDS, a state-recognized, accredited, fully digital university based in Potsdam, Germany, licenses BayesShield AI for deployment across its research centers and digital learning infrastructure, including its Research Center for Artificial Intelligence, Research Center for Cybersecurity, and Research Center for Digital Transformations. The university’s dedicated research centers will also serve as applied research and development environments for advancing BayesShield AI’s machine learning models, which we hope will strengthen our intellectual property portfolio. German UDS will integrate BayesShield AI into its curriculum as a live case study and applied research platform across multiple graduate programs. Students and faculty can leverage BayesShield AI’s probabilistic AI models to analyze real-world trading patterns, conduct research on retail investor behavior, and develop next-generation risk management frameworks.
In addition, we have a partnership with the European Institute of Management (“EIM”), a Malta-based higher education institution specializing in doctoral and graduate education in Computer Science, Finance, and AI. The partnership provides for a joint research group between our company and EIM. More than 20 EIM doctoral students will work alongside our leaders developing sophisticated AI trading models that combine machine learning with crowd intelligence to surface unique market insights. With direct access to our proprietary trading datasets and live venue data, the EIM researchers are focusing on behavioral finance, trader performance classification, market microstructure, and model risk, which we hope will enable them to develop real-world applications. The partnership provides us with access to some of the field’s most promising doctoral talent. The initiative is expected to run for at least three years, broadly reflecting the duration of the doctoral research cycle. More than half of the researchers participating in the group are currently our employees.
Post-Acquisition Business Intellectual Property
We seek to protect our intellectual property rights by relying on applicable intellectual property laws and on contractual measures. To protect our confidential information and proprietary technology, we enter into confidentiality, non-disclosure, and invention assignment agreements with our employees and contractors and we also include confidentiality obligations in our contractual arrangements with other third parties. In addition to these contractual measures, we also rely on a combination of trademarks, registered domain names, and patent rights to protect our brand and our intellectual property.
Below are descriptions of our patents and trademarks applicable to our post-Acquisition business.
Patents
We maintain the following two provisional patent applications in the United States related to our BayesShield AI technology, both filed by our U.S.-based subsidiary, Kephas Corporation:
| Name | Jurisdiction | Application/Issuance Date/Number | Status | |||
| BayesShield performance-classification system | US | 64/051,603 | Provisional | |||
| Smart Cohorts live consensus-deployment system | US | July 21, 2026 | Provisional |
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Trademarks
We, including through our subsidiaries, currently maintain the following trademarks:
| Name | Issuing Authority | Application/Issuance Date/Number | Status | |||
| Perpetuals.com | EU | July 4th, 2026 | Registered | |||
| UpsideOnly.com | EU | May 31, 2026 | Registered | |||
| UpsideOnly.com | UK | May 1, 2026 | Registered | |||
| UpsideOnly.com | Philippines | June 28, 2026 | Registered | |||
| UpsideOnly.com | China | Last update: April 30, 2026 | Pending | |||
| UpsideOnly.com | US | August 17, 2026 | Pending | |||
| UpsideOnly.com | Australia | July 7, 2026 | Pending | |||
| UpsideOnly.com | Nigeria | June 2, 2026 | Pending | |||
| UpsideOnly.com | South Korea | May 18, 2026 | Pending | |||
| UpsideOnly.com | Brazil | April 6, 2026 | Pending | |||
| UpsideOnly.com | Brazil | May 15, 2026 | Pending | |||
| UpsideOnly.com | India | March 2, 2026 | Pending | |||
| UpsideOnly.com | Japan | February 27, 2026 | Pending | |||
| UpsideOnly.com | Canada | February 5, 2026 | Pending | |||
| Barriers.com | EU | May 28, 2026 | Registered | |||
| Barriers.com | UK | May 1, 2026 | Registered | |||
| Barriers.com | US | July 21, 2026 | Pending | |||
| Barriers.com | Japan | February 27, 2026 | Pending | |||
| BayesShield | EU | May 15, 2026 | Registered | |||
| BayesShield | US | June 29, 2026 | Pending | |||
| Kronos X | EU | May 15, 2026 | Registered | |||
| Kronos X | UK | January 31, 2025 | Registered | |||
| Kronos | US | October 29, 2024 | Pending | |||
| PerpetualPay.Net | EU | March 22, 2024 | Registered | |||
| PerpetualPay.Net | UK | March 8, 2024 | Registered |
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Property and Equipment
See “—B. Pre-Acquisition Overview—Property and Equipment.”
Employees
See “—B. Pre-Acquisition Overview—Employees.”
Insurance
See “—B. Pre-Acquisition Overview—Insurance.”
Seasonality
Our business is not subject to seasonal fluctuations. We enter into business contracts with our customers throughout the year.
Regulations Applicable to Post-Acquisition Business
Our post-Acquisition business is subject to a variety of laws and regulations in the jurisdictions in which we operate. The regulatory framework applicable to our businesses is evolving, particularly with respect to financial technology, digital assets, tokenization, artificial intelligence, data privacy, payments, and the use of technology by regulated financial institutions. The following describes the government regulations that we believe currently have, or may have, material effects on our business.
U.S. Financial Services Regulation
Our UpsideOnly platform is designed as a simulated trading and prediction platform. Users do not receive actual trading accounts, execute securities or commodities transactions on the platform, or bear losses from actual market transactions. The company may separately conduct trading activities for its own account using its own capital. Based on the current structure and operation of UpsideOnly, we believe that the platform does not currently constitute a broker-dealer, investment adviser, futures commission merchant, commodity trading advisor, or other regulated financial-services business solely as a result of the simulated activities conducted through the platform.
Nevertheless, the application of U.S. federal and state financial-services laws to our products and services depends on the particular facts and circumstances. Changes to the structure or operation of UpsideOnly, the introduction of new products or services, or changes in regulatory interpretation could result in additional regulatory requirements. We therefore monitor the potential application of federal and state securities, commodities, derivatives, and other financial-services laws to our activities.
Tokenization and Digital Asset Regulation
Our tokenization business provides end-to-end infrastructure for the issuance, market making, and trading of tokenized real-world assets, including tokenized securities. Our technology may support the lifecycle of tokenized assets from issuance through secondary-market trading, including order book functionality. Our team has developed technology used in connection with regulatory-approved tokenized securities. Certain of our technology is also used in connection with a multilateral trading facility (“MTF”) located in Cyprus and regulated by the Cyprus Securities and Exchange Commission (“CySEC”).
The regulatory requirements applicable to a particular tokenized asset, issuer, intermediary, trading venue, market maker, and other participant may vary depending on the nature and structure of the relevant asset and transaction. In the United States, the Securities and Exchange Commission (“SEC”) and applicable state securities regulators regulate the offer, sale, trading, and certain intermediary activities involving securities. Tokenization does not, by itself, cause an asset that otherwise constitutes a security to fall outside the federal securities laws. The SEC has stated that a tokenized security is a security under the federal securities laws when the underlying financial instrument satisfies the applicable definition of a security, notwithstanding that the security is represented by or formatted as a crypto asset.
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Accordingly, to the extent our tokenization activities involve securities, including tokenized stocks, such activities may be subject to requirements relating to registration or applicable exemptions, disclosure, broker-dealer activities, trading venues, market making, custody, clearing and settlement, transfer agency, and anti-fraud and market-manipulation provisions, depending on the structure of the relevant activities. The regulatory treatment may also differ depending on whether a security is tokenized by or on behalf of its issuer or by an unaffiliated third party.
We seek to structure our tokenization activities in accordance with applicable regulatory requirements and, where appropriate, to conduct regulated activities through appropriately licensed or regulated counterparties and trading venues. To the extent our activities or those of our affiliates or counterparties involve regulated securities-market functions, changes in applicable law, regulatory interpretation, licensing requirements, or the structure of the relevant tokenization arrangements could materially affect our business.
Cyprus and European Union Financial Regulation
Our Kronos X technology provides software infrastructure used by a multilateral trading facility (“MTF”) located in Cyprus. The MTF is subject to supervision by CySEC and to the regulatory framework applicable to MTFs under the European Union’s Markets in Financial Instruments Directive and related legislation (“MiFID II” and “MiFIR”). Under MiFID II, an MTF is a multilateral system that brings together multiple third-party buying and selling interests in financial instruments pursuant to nondiscretionary rules. CySEC identifies MTFs as trading venues subject to the MiFID II regulatory framework.
Although we do not own the MTF, the regulatory requirements applicable to the MTF may materially affect our provision and operation of Kronos X , as well as our Barriers product, which is designed to run on the Kronos X platform. In particular, requirements applicable to regulated trading venues may affect the specifications, development, testing, security, resilience, capacity, monitoring, recordkeeping, business continuity, and other operational characteristics of Kronos X. MiFID II also contains requirements concerning algorithmic trading systems and controls designed to promote orderly markets and prevent erroneous orders and other disruptions.
Our tokenization business may similarly be affected by the regulatory requirements applicable to regulated European trading venues, market participants, and intermediaries that use our technology. These requirements may affect the manner in which our technology is designed, tested, documented, monitored, maintained, and integrated with regulated financial market infrastructure.
Digital Operational Resilience
The European Union’s Digital Operational Resilience Act (“DORA”) establishes a regulatory framework for digital operational resilience in the financial sector. DORA imposes requirements on financial entities concerning Information and Communication Technology (“ICT”) risk management and their use of ICT third-party service providers, including requirements concerning contractual arrangements, security, business continuity, incident reporting, audit and access rights, and ICT third-party risk management.
Because our Kronos X ® technology provides ICT infrastructure used by regulated financial-market participants, the requirements applicable to those financial entities may materially affect our contractual arrangements and the technical and operational requirements applicable to our services. For example, DORA requires regulated financial entities to maintain information concerning their ICT third-party arrangements and imposes additional contractual requirements for ICT services supporting critical or important functions.
In addition, certain ICT third-party providers may themselves become subject to direct oversight under DORA if designated as critical ICT third-party providers. The European Supervisory Authorities, including the European Securities and Markets Authority (“ESMA”), have established a framework for identifying and overseeing such providers.
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European Union Crypto-Asset Regulation
To the extent our tokenization activities involve crypto-assets or crypto-asset services that fall within the scope of the European Union’s Markets in Crypto-Assets Regulation (“MiCA”), those activities may also be subject to MiCA and related requirements. The application of MiCA depends on the characteristics of the relevant asset and services. In particular, tokenized assets that constitute financial instruments may instead be subject to the existing European Union financial services framework, including MiFID II and related legislation.
Accordingly, the regulatory treatment of a particular tokenization arrangement depends on the nature and characteristics of the relevant asset, the rights associated with the token, the manner in which the token is issued and transferred, and the services provided in connection with the token. Changes in European Union legislation, regulatory guidance, or regulatory interpretation could materially affect our tokenization business.
Money Transmission, Payments, Anti-Money Laundering, and Sanctions Regulation
Our receipt, custody, investment, and return of user deposits in connection with UpsideOnly, as well as our use of third-party payment processors and financial institutions, may implicate federal and state laws governing money transmission, payment services, stored value, and related activities. State money transmission laws may regulate the receipt of money or monetary value for transmission and may require licensing unless an exemption applies. The application of these laws depends on the particular structure and operation of our payment and deposit arrangements.
We have structured our payment and deposit arrangements based on our assessment of the applicable regulatory requirements. Nevertheless, the characterization of our activities under money-transmission and payment laws is dependent on the facts and circumstances and may be subject to regulatory interpretation. Changes to our payment or deposit structure, the jurisdictions in which we operate, or the interpretation or enforcement of applicable laws could result in additional licensing, compliance, capital, safeguarding, reporting, or other requirements.
To the extent applicable to our activities, federal anti-money laundering and know-your-customer requirements administered by the Financial Crimes Enforcement Network (“FinCEN”) under the Bank Secrecy Act may impose registration, recordkeeping, reporting, transaction-monitoring, and other compliance requirements. We maintain procedures designed to comply with applicable know-your-customer (“KYC”), anti-money laundering (“AML”), and sanctions requirements.
We also maintain procedures designed to comply with applicable economic sanctions and trade restrictions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and comparable requirements in jurisdictions in which we operate or offer our services. Our global user base and international operations may require us to restrict access to our products or services, decline transactions, or terminate relationships with users or counterparties in jurisdictions or circumstances subject to applicable sanctions or other restrictions.
Data Protection and Privacy Regulation
We collect and process personal information in connection with our products and services, including information used for account administration, KYC and AML procedures, fraud prevention, compliance, analytics, customer support, and operation of our technology platforms. Our collection, use, disclosure, retention, and security of personal information are subject to data protection and privacy laws in the jurisdictions in which we operate or offer our services.
These laws include, where applicable, the European Union’s General Data Protection Regulation (“GDPR”), the United Kingdom’s data protection regime, and the California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CCPA/CPRA”), as well as other applicable U.S. state and international privacy laws. These laws impose requirements concerning, among other things, transparency, data minimization, data security, retention, individual rights, data processing agreements, international data transfers, and the use of certain automated decision-making technologies.
The regulatory requirements applicable to privacy and data protection are continuing to develop, including in connection with artificial intelligence and automated decision-making. Failure to comply with applicable privacy and data protection requirements could result in regulatory investigations, enforcement actions, penalties, restrictions on data processing, and reputational harm, and could require us to modify our products, technology, or business practices.
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Intellectual Property Protection
Our business depends substantially on proprietary software, technology, trademarks, copyrights, trade secrets, and other intellectual property. We rely on applicable patent, copyright, trademark, trade secret, and other intellectual property laws in the jurisdictions in which we operate to establish and protect our intellectual property rights.
Our ability to protect our intellectual property may be affected by the laws of the jurisdictions in which we operate, as well as by contractual restrictions and laws governing the ownership, licensing, and use of software and other technology. Changes in applicable intellectual property laws, infringement claims, or disputes concerning ownership or licensing of intellectual property could materially affect our business.
Online Gambling Regulation
Our UpsideOnly platform could potentially be subject to laws and regulations governing gambling, contests, gaming, and wagering if the platform were determined to constitute gambling or wagering under applicable law. In the United States, the Unlawful Internet Gambling Enforcement Act of 2006 (“UIGEA”) generally prohibits certain persons engaged in the business of betting or wagering from knowingly accepting payments in connection with unlawful Internet gambling and defines “unlawful Internet gambling” by reference to bets or wagers made over the Internet that are unlawful under applicable federal or state law. UIGEA also preserves the authority of states to prohibit or otherwise regulate gambling activities.
We do not believe that UpsideOnly constitutes gambling or wagering under applicable U.S. federal or state laws because users do not stake or risk funds on the outcome of actual securities, commodities, or other market transactions, do not incur losses based on the performance of those markets, and do not receive a return of their funds based on the outcome of an actual wager. Rather, users participate in simulated activities using virtual or simulated trading capital, and their participation and performance are used as inputs into our business activities. Nevertheless, the application of gambling laws to novel online platforms can depend on the particular facts and circumstances, including the manner in which a platform is structured, marketed, operated, and monetized.
Certain jurisdictions outside the United States also regulate online gambling, gaming, contests, and wagering, and the applicable requirements may differ substantially among jurisdictions. Although we do not believe that UpsideOnly currently constitutes regulated gambling in the jurisdictions in which we offer the platform, a regulator or court could reach a different conclusion, particularly if the structure or operation of the platform changes or if applicable laws or regulatory interpretations evolve. A determination that UpsideOnly constitutes gambling or wagering in any jurisdiction could require us to obtain licenses or approvals, restrict or discontinue our services in that jurisdiction, modify our products or payment arrangements, or comply with additional requirements relating to age and location verification, responsible gaming, advertising, consumer protection, reporting, and payments.
Payment Processing and Consumer Payment Surcharges
Our use of third-party payment processors and our ability to allocate payment processing costs to users may also be subject to laws and regulations governing consumer payments, payment services, and payment surcharges. Certain jurisdictions, including jurisdictions in the European Union and the United Kingdom, restrict or prohibit merchants from imposing additional charges on consumers based on their use of certain payment methods, including consumer credit and debit cards. For example, European Union rules generally prohibit merchants from charging consumers an additional fee for using a consumer credit or debit card, subject to specified exceptions.
We are evaluating the application of these requirements to fees that may be charged in connection with payments made to or through our platforms, including payments made by credit card or other payment methods. We believe that certain payment surcharge restrictions may apply primarily to charges associated with purchases of goods or services rather than to refundable deposits or other payments that do not constitute a purchase; however, the applicability of these requirements to our particular payment and deposit arrangements may depend on the applicable jurisdiction, the characterization of the underlying transaction, the payment method, and other facts and circumstances. Accordingly, we may be required to modify the manner in which payment processing costs are allocated to users in certain jurisdictions.
Changes in payment surcharge laws, payment-network rules, or regulatory interpretations could increase our payment processing costs, limit our ability to pass those costs through to users, require us to modify our pricing or payment arrangements, or otherwise adversely affect our business.
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Pre-Acquisition Overview
Our mission is to optimize business operations with our creative ideas and the use of blockchain technology. We believe in a data centric future where blockchain technology will be indispensable and widely used, due to its efficiency, security, and reliability.
Industry Background
A distributed ledger is a ledger containing records of transactions between parties in a shared network. When a party in the network adds a transaction to the ledger, it is synchronized to other parties in the network through a consensus algorithm. The consensus algorithm enables transactions to be validated and confirmed without the need for a central point of authority. A validated transaction is added to the network in a permanent and immutable way. Every party in the network has simultaneous access to view the information, which is kept secure with the use of cryptographic functions.
A blockchain is a type of distributed ledger where transaction data is grouped into specific, time-stamped sets. Once consensus is reached for the data to go into a set, the set is sealed with a cryptographic signature, creating a sealed block. This block is then mathematically tied to the previous block on the ledger, forming a chain.
The potential benefits of blockchain technology include, among others:
| ● | decentralization, where value is created from the removal of a need for a central point of control to verify transactions; |
| ● | efficiency, where transactions are processed and settled automatically between parties without an intermediary; |
| ● | transparency, where data is written into the blockchain to allow it to be shared publicly among parties in the network, thereby enabling more transparent data management; |
| ● | security, where data is written in a mechanism with the aim of ensuring its immutability; as a result of the provision of information that parties know to be verified and immutable, the value lost by a lack of trust between parties is reduced; |
| ● | stability, where data on blockchain is managed on multiple servers, or a peer-to-peer blockchain network, so that even if one server goes down, the service will continue stably as long as the other servers in the network are up and running; |
| ● | cost-effectiveness in equipment installation, maintenance, and inspection; currently the data necessary to provide services is stored on servers, which require high-performance servers to process the data in time depending on the number of service users, resulting in high initial installation costs. In contrast, with blockchain, the role of the server can be substituted for the user’s personal computer, and the initial installation and ongoing service costs can be reduced without the need for a high-performance server; and |
| ● | privacy, where personal information is stored in an encrypted manner. |
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While blockchains have various benefits, we believe that the conventional blockchains cannot yet be widely applied in business settings. The issues associated with the conventional blockchains include, among others:
| ● | slow processing speed due to their complexity and their encrypted, distributed nature; |
| ● | poor real-time data processing because data is not immediately fixed due to the lack of absolute finality, which is also known as a definite consensus algorithm. The conventional blockchains use the proof-of-work method, which validates and confirms transaction data based on the amount of computational effort expended. The proof-of-work method requires time for each server to send and receive information about the approvers of a transaction. If a majority of them approve a transaction, the transaction will be approved as correct, even if it is a wrong transaction and needs to be overturned. Thus, even if a transaction is approved in conventional blockchains, the transaction cannot enjoy the status of absolute finality and may be overturned later if it is a wrong transaction; |
| ● | impossible to complete an emergency stop, even if a serious problem occurs in the system, due to the lack of a kill switch; and |
| ● | burdensome learning costs due to the need to develop in a proprietary development language. |
Our Technology
Since our inception in May 2018 and until the Acquisition, we focused on blockchain technology and developing systems with a view to making our proprietary GLS an infrastructural technology. As of the date of this Annual Report , GLS has been developed with collaboration efforts from the following partners:
| ● | NTT Docomo, Inc. In July 2018, we evaluated the data transfer speed from PC to PC using GLS under the 5G environment at the demonstration test site of NTT Docomo, Inc. and also evaluated the compatibility between 5G and blockchain. In December 2018, we participated in an exhibition hosted by NTT Docomo, Inc. |
| ● | Professor Kazuyuki Shudo, who was an associate professor at Tokyo Institute of Technology and is now a professor at Kyoto University, has served as our advisor since November 2018. Professor Kazuyuki Shudo has a research lab on software and networks. With the advice of Professor Kazuyuki Shudo, we have improved the simultaneous processing of GLS and its resistance against malicious attacks. We have continually received academic reports and advice from Professor Kazuyuki Shudo. |
| ● | NEC Communication Systems, Ltd. Since January 2020, we have started joint research with NEC Communication Systems. We conducted performance evaluation of the GLS node alone and with other RDB products when using Structured Query Language. |
| ● | Other projects. We have been involved in other projects in various industries, such as applying GLS to online identity verification and authentication. |
We believe that GLS is superior to the conventional blockchains. The conventional blockchains provide a high level of security but are criticized for being slow in processing data reads and writes, especially when the number of parties in the network increases to a certain level. We have developed GLS to balance the trade-off between security and convenience and believe that GLS achieves both security performance and processing speed.
GLS is a hybrid blockchain that combines the technical advantages of both blockchain technology and database technology. Database technology provides the traditional infrastructure for data storage, collection, organization and processing, and enables the construction of systems. GLS demonstrates the following features:
| ● | high processing speed. We believe GLS enables the construction of blockchain systems with high processing speed. The conventional blockchain systems slow down their processing speeds and require at least a few seconds to complete one transaction due to the need for enhanced security measures. The conventional blockchain systems generate blocks in series. In comparison, GLS generates blocks in parallel and the approval time for one transaction in GLS can reach 0.016 seconds while GLS offers enhanced security at the same time; |
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| ● | parallel processing and auto-scale functions, which provide appropriate performance according to the user’s expansion and contraction needs. The conventional blockchain networks expand at random and consolidate processing in a single node, which represents one of the personal computers in a blockchain network. In comparison, GLS arranges nodes within the network in a circular fashion and reduces the processing load for each node by sharing the processing load among intermediate processing nodes, thereby accommodating the user’s different levels of needs; |
| ● | high tamper-resistance. The incorporation of blockchain technology ensures that data managed by GLS is more resistant to tampering and cannot be easily overwritten. Even if a tampering incident occurs, the record of when and by whom the data was tampered with can be traced; |
| ● | zero server downtime. The use of peer-to-peer blockchain network ensures that the services provided by GLS remain stable, even in the event of system maintenance or malicious cyber-attacks. To eliminate security concerns related to a single point of failure, GLS employs intermediate processing nodes, which are independent of the nodes that make up the blockchain network and process the actual transactions. Even if the intermediate processing nodes are stopped, the transactions cannot be tampered with. To reduce the impact of attacks on intermediate processing nodes and any unauthorized access, GLS allows the use of firewalls and other means to prevent cyberattacks, thereby providing transaction security; |
| ● | versatile applications. The conventional blockchains have limited commercial applications in part due to their lack of absolute finality. In comparison, we believe that GLS has a wider range of business applications partly because GLS enables finality by adopting a definite consensus algorithm; |
| ● | emergency stop. The conventional blockchains cannot be stopped in the event of emergencies because of their lack of a kill switch. In comparison, GLS can be stopped in an emergency due to the presence of a kill switch; |
| ● | lower construction, installation and maintenance costs compared to the conventional database infrastructure. The conventional database infrastructure often stores data on expensive high-performance servers. In comparison, GLS enables the storage of data on the user’s personal computer, thereby reducing the initial and ongoing costs of the services supported by GLS; and |
| ● | flexible fees. Generally, public blockchains are structured to charge fees for each transaction that occurs. We are enterprise-oriented and have a private blockchain GLS that allows us to process a large number of transactions at high speed, making it possible to set fees flexibly. |
GLS was designed and developed as an integrated distributed computing management system that we believe will serve as the infrastructure for the latest technologies such as artificial intelligence, big data, and the Internet of Things. The services provided by GLS are limited to the scope of the current telecommunications infrastructure and the capabilities of blockchain-equipped devices, and we believe that future advances in telecommunications infrastructure and blockchain devices will further enhance the potential value of GLS.
We recognized that there was a lack of engineers who could handle blockchain in Japan, and prior to the Acquisition we planned to increase the number of use cases for GLS and to invest in researching and developing a universally usable System Development Kit (“SDK”) for GLS. We operated with an eye on Web3 and hoped that various applications using our blockchain technology would be developed and the industry as a whole would grow.
Our Services
We derive our revenue from our (i) software and system development services, (ii) consulting and solution services.
Through our software and system development services, we serve companies that have digital assets and intend to leverage these assets for the purposes of creating new businesses and new systems. We develop systems that are tailored to the specific needs of each customer.
Through our consulting services, we assist companies that seek to update their existing data and digital technology, add additional functions to their systems, and transform their businesses, operations, and processes. The companies that purchase our solution services are often repeat customers for whom we have developed systems and who return to us for additional services.
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Business Model
The process for achieving our revenue is as follows.
Identifying business opportunities
We are introduced to customers through our sales team as well as personal connections of our board members and shareholders. We also use other marketing channels, such as participating in industry online programs and events. We evaluate our sales strategies and progress at least once per month.
We typically receive orders from customers who are interested in blockchain and hope to digitally transform their internal databases. To determine whether to accept an order, we consider whether the project is profitable, whether the customer is credible and reputable, and whether a long-standing business relationship will be created with the customer.
Forming business cooperation
When a customer places an order with us, we invite the customer to consider whether the ordered system has the potential to contribute to the customer’s future earnings, whether it will reduce the customer’s costs, and whether the customer’s investment in the system is reasonable. We assist our customers with making well informed business decisions.
For the fiscal year ended April 30, 2026, we had three customers that each contributed over 10% of our total sales revenue, accounting for approximately 31.4%, 33.8% and 17.9% of our total sales revenue, respectively. For the fiscal year ended April 30, 2025, we had two customers that each contributed over 10% of our total sales revenue, accounting for approximately 50.7% and 35.7% of our total sales revenue, respectively. For the fiscal year ended April 30, 2024, we had three customers that each contributed over 10% of our total sales revenue, accounting for approximately 42.6%, 27.2%, and 21.5% of our total sales revenue, respectively.
Planning the project
In the planning phase, we enter into discussions with our customers and divide roles and responsibilities. We select specialists on our team and put them in charge of designing proposals, developing solutions, and providing other incidental support to our customers. Our customers appoint points of contact and make them responsible for reviewing proposals, facilitating communications in the course of the projects, and inspecting solutions upon completion.
We develop blockchain-based solutions tailored to the needs of each customer. To understand our customers’ issues, we interview our customers, engage a group of specialists across industries, study our customers’ business flow, and verify whether there are any areas where the ordered systems can solve the issues. We then evaluate the available proposals and discuss the solutions to be developed with our customers.
Working on the project
In the course of the projects, we strive to eliminate the discrepancies between the project progress and the project targets. We keep close communications with our customers for updates on the project progress. We hold regular meetings with our customers at least once per month to discuss the project progress and future plans. We also hold additional meetings as needed, for example where the customers need to immediately change their functional requirements.
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We sometimes outsource work to external engineers. To determine whether to outsource, we consider the availability of our resources, the outsourcing fee structures, and the technical requirements of ordered systems. The external engineers are responsible for ancillary support to our team and not for greater roles. To control the quality of outsourced work, our team evaluates the quality of the outsourced work each day and requires the external engineers to submit a work report each month, so that our team can confirm the outsourced work is executed efficiently in accordance with the project schedules.
Completing the project
At the end of projects, we provide work completion reports to our customers. Our customers review the reports during the inspection period. When our customers have no objections to our products and services, they will stamp their names on the reports and deliver the reports to us to confirm project completion. When our customers do not sign the reports and raise no objections before the termination of the inspection period, the projects will also be considered completed.
Competition and Strengths
Market entry
The technological barrier to enter the blockchain industry is high, therefore many companies hesitate to enter this industry. Another challenge in the blockchain industry is that it is difficult to balance the trade-off among speed, security and transparency. Other companies seek to develop their solutions to balance such trade-off but such development processes can be lengthy and costly. In addition, we believe that conventional blockchains are too slow to go beyond the realm of demonstration testing and achieve monetization in business settings. Companies equipped with the conventional blockchains are only able to create limited commercial value. Our Company sought to overcome the technical issues of conventional blockchains and has developed our proprietary GLS, which we believe can be widely and flexibly applied in various business settings.
Market competition
We believe that we are one of the very few companies in Japan that are capable of commercializing blockchain technology. However, the market for blockchain technology is developing and we anticipate new entrants to the market and competition to intensify in the future. Our future competitors may have greater resources than us and there can be no assurance that we will have the financial and operational resources necessary to carry out our business plan and successfully compete with our competitors.
Our strengths
We believe the following competitive advantages are essential for our success and differentiate us from our competitors.
Our transformative blockchain-based technology
GLS constituted the core strength of our pre-Acquisition business and demonstrates the following advantages compared to the conventional blockchains:
| ● | faster processing speed. The conventional blockchains require at least a few seconds to generate a block and complete one transaction. For example, the cryptocurrency EOS requires 3 seconds, the Ethereum requires 15 seconds, and the Bitcoin requires 10 minutes. In comparison, the approval time for one transaction in GLS can reach 0.016 seconds depending on the design of systems; |
| ● | greater real-time data processing. The conventional blockchains are poor at processing real-time data because they lack absolute finality, also known as a definite consensus algorithm. Therefore, the conventional blockchains require some time to confirm that transactions are finalized and will not be reverted. In comparison, we believe that GLS resolves this issue and is better at processing and validating real-time data; |
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| ● | flexible fee. The conventional public blockchains are structured to charge fees for each transaction that occurs. We have a private blockchain GLS that allows us to process a large number of transactions at high speed, making it possible to set fees flexibly; and |
| ● | wider business applications and proven track record. The conventional blockchains have limited business applications. In comparison, we believe that GLS can be widely applied in various business settings due to its processing speed, parallel processing, auto-scale functions, and other features. Our GLS realizes a cyclic network structure for nodes (computer devices participating in the blockchain network), making it easy for multiple nodes to simultaneously execute approval processes in parallel, thereby speeding up the transaction approval process and ensuring scalability. |
Dedicated talent team
Our robust research and development team members are dedicated to blockchain research, operations, and development to support the improvement of blockchain technology. We, on occasions, consult with academia to keep abreast of the most recent advancement and technological issues of blockchain technology and to apply academic perspectives to system development. Our professional management team collectively has experience working with corporations of various operating scales across different industries. Our management has cultivated business knowledge and expertise by undertaking diverse roles, including sales, business planning, consulting, accounting, and programming. We also have an agreement with a third-party company for external engineers, some of whom are graduates of Hanoi University of Technology, Vietnam’s leading school for IT professionals, majoring in information technology.
Trusted relationships with business partners
We value the trust that we have built with our customers and business partners, who work with us for advice, joint research, and system development. Some of our system development customers return to us for additional consulting and system maintenance services. Our customers are of different operating scales, ranging from venture companies to multi-national businesses. Our customers represent a wide spectrum of industries, including information technology, metaverse, advertisement, real estate, telecommunication and entertainment industry, among others. We will continue to grow by leveraging the trust and expertise of the companies that we have worked with.
Growth Strategies
Prior to the Acquisition our medium- to long-term strategy was to establish ourselves as a key technology enabler by expanding the real-world deployment of GLS.
We believe GLS has the potential to be applicable across multiple industries. We pursued its development, proof-of-concept validations, and implementation in eight key sectors: stablecoins, carbon offset, advertising, supply chain, entertainment, energy, trade logistics, and insurance.
In stablecoins, GLS can provide a high-integrity infrastructure for issuing and managing fiat-pegged digital currencies. GLS can support real-time settlement, auditability, and compliance tracking, making it well-suited for use by financial institutions, payment providers, and emerging Web3 platforms.
In carbon offset, GLS can be used to track and verify carbon credit generation and consumption in a transparent and auditable manner, contributing to sustainability and ESG goals.
In advertising, GLS can provide transparent, immutable tracking of advertisement impressions and conversions, helping to reduce fraud and improve trust among advertisers, publishers, and agencies.
In the supply chain, GLS can deliver real-time, transparent tracking of goods, improving operational visibility from the manufacturer to the end user.
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In entertainment, particularly online gaming, GLS can support large-scale user authentication, high-frequency transactions, and tamper-proof activity logs.
In energy, GLS can offer high-speed processing of energy generation and transaction records, supporting distributed and real-time energy systems.
In trade, GLS can facilitate reliable, high-speed data exchange among importers, exporters, shipping carriers, and customs authorities.
In insurance, GLS can enable secure and efficient identity verification and contract data management, helping to simplify onboarding, policy transitions, and regulatory compliance.
To achieve these goals, we are committed to strengthening our R&D investments, attracting top-tier engineering and business talent, and pursuing potential strategic alliances both domestically and globally.
Research and Development
We conducted independent research and development with dedication to innovation. Our research and development team members also worked with external engineers to improve GLS.
We design, implement, and review a comprehensive set of rules governing our independent research and development projects. To start an R&D project, an inventor must make an application where the inventor must specify certain information including the content to be developed, development schedule, delivery date, required resources, and estimated profitability. The relevant heads of department evaluate the project. To determine whether to approve the project, they consider factors such as the availability of resources and profitability. After they approve the project, they select and appoint a project manager. The project manager supervises the progress of the project and reports to the relevant heads of department at least once a month. At the end of the project, the relevant heads of department review and inspect the final product. When the product passes the inspection, the project will be considered completed.
Besides independent research and development, we also conduct joint research and development projects with academia and business partners. One such joint project to develop an ultra-high-speed next-generation hybrid database called “SmokeDB,” which is expected to facilitate the introduction of blockchain into non-financial fields. Applying blockchain to non-financial fields incur various issues such as low processing speeds and technical difficulties in development and maintenance. We aim to resolve these challenges by combining our blockchain technology and our business partner’s network expertise.
Intellectual Property
We seek to protect our intellectual property rights by relying on Japanese intellectual property laws and on contractual measures. It is our practice to enter into confidentiality, non-disclosure, and invention assignment agreements with our employees and contractors, and into confidentiality and non-disclosure agreements with other third parties, in order to limit access to our confidential information and proprietary technology. In addition to these contractual measures, we also rely on a combination of trademarks, registered domain names, and patent rights to protect our brand and our intellectual property. As of the date of this Annual Report , we have registered three patents, 14 trademarks and 9 domain names. Our pending intellectual property applications include two trademarks. We consider the patent “Information processing equipment and program (GLS)” to be material to our pre-Acquisition blockchain business. The chart below presents information about some intellectual property that we have registered or applied for.
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| Type | Name | Issuing authority | Application date | Status | Expiration date | |||||
| Trademark | Cloud Native Block Chain | Japan Patent Office | July 1, 2024 | In progress | N/A | |||||
| Virtual Block Chain | Japan Patent Office | July 1, 2024 | In progress | N/A | ||||||
 | Japan Patent Office | August 12, 2022 | registered | April 28, 2033 | ||||||
| データキャナル | Japan Patent Office | October 14, 2021 | registered | April 04, 2032 | ||||||
| Data Canal | Japan Patent Office | October 13, 2021 | registered | April 04, 2032 | ||||||
 | Japan Patent Office | February 25, 2021 | registered | August 12, 2031 | ||||||
| APO | Japan Patent Office | February 27, 2020 | registered | June 22, 2031 | ||||||
| SmokeDB | Japan Patent Office | January 22, 2020 | registered | January 28, 2031 | ||||||
 | Japan Patent Office | November 25, 2019 | registered | December 15, 2030 | ||||||
| アーリーワークス | Japan Patent Office | November 25, 2019 | registered | December 15, 2030 | ||||||
 | Japan Patent Office | July 01, 2019 | registered | June 23, 2030 | ||||||
| Grid Ledger System | Japan Patent Office | May 14, 2019 | registered | June 25, 2030 | ||||||
| Patent | Information processing equipment and program | Japan Patent Office | October 31, 2022 | registered | October 27, 2040 | |||||
| Information processing equipment and program | Japan Patent Office | December 2, 2020 | registered | December 2, 2040 | ||||||
| Information processing equipment and program (GLS) | Japan Patent Office | October 27, 2020 | registered | October 27, 2040 |
Property and Equipment
Our principal executive office is located in Tokyo, Japan. Our office space is leased from an independent third party with an area of 184.12 square meters starting from October 1, 2019. Mr. Satoshi Kobayashi, our Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director, is the guarantor on the lease agreement. The lease agreement automatically renews for another two years, unless either party notifies the other party of its intention to the contrary no later than six months before the expiration of the current term. The current lease term runs through September 30, 2027. The lease agreement may be terminated on six months’ notice of the intention to terminate.
In addition, we own real property used for office space located at 16455 William Foss Road, La Pine, OR 97739. The property was transferred by our co-CEO Patrick Gruhn to Kephas Corporation, our wholly owned subsidiary, in December 2025. The property sits on 0.43 acres of land and consists of two buildings with a combined size of 1972 square feet.
We believe that the current office facilities are adequate for the time being. As our business grows, there may be a need to secure additional office space.
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Employees
We strive to attract, recruit, and retain talents through our compensation and benefit programs, as well as learning and development opportunities that support career advancement. In addition to salaries, we offer complementary benefits including bonuses, communications allowance, commuting allowance, overtime allowance, employment insurance, health insurance, and employee pension.
In the selection of team members, we consider whether the candidates empathize with our mission and vision, and whether the candidates can flexibly endure changes in a rapidly evolving environment. In the selection of engineers, we consider whether the candidates have sufficient experience in designing databases.
We enter into employment agreements with each of our employees. The employment agreements typically contain certain restrictions, including non-compete covenants for a period of one year following the termination of employment, and confidentiality restrictions through the time period the information remains confidential, among other covenants. The employment agreements typically last for indefinite terms. There is no labor union or collective agreement that covers any of our employees.
As of the date of this Annual Report, we have a headcount of 4 full-time employees (excluding our directors and company auditors) and seven independent contractors at our principal executive office in Japan, and Perpetual Markets Ltd., our wholly owned subsidiary (including through its wholly owned subsidiary, Kephas Corporation), has 35 full-time employees, one part-time employee, and one independent contractor. The chart below presents the number of our employees as of April 30, 2026, 2025, and 2024.
| Number of employees | ||||||||||||
| For the fiscal years ended April 30, | Full-time | Part-time | Contract | |||||||||
| 2026 | 39 | 1 | 8 | |||||||||
| 2025 | 19 | 1 | 0 | |||||||||
| 2024 | 15 | 0 | 0 | |||||||||
During the fiscal year ended April 30, 2026, we transitioned a portion of our employees from employment contracts to independent contractor arrangements in order to better align personnel costs with actual workloads and capabilities and to improve our overall cost efficiency.
We also enter into outsourcing contracts with external engineers from time to time, which enables us to have access to additional engineers as needed.
Insurance
We currently maintain insurance coverage against the risk of property damage caused by fires, lightning strikes, explosions, riots, vehicle collisions, thefts, flooding and certain other damaging accidents. We also maintain earthquake insurance coverage. We have obtained directors and officers liability insurance. We review and renegotiate our premiums, coverage limits, and other terms of insurance policies on an annual basis. We do not hold major tangible assets and our assets are predominantly intangible and intellectual. We believe our insurance coverage is sufficient for our business practice and consistent with the customary industry practice in Japan.
Seasonality
Our business is not subject to seasonal fluctuations. We enter into business contracts with our customers throughout the year.
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Pre-Acquisition Regulations
Set forth below are government regulations applicable to our pre-Acquisition business.
Intellectual Property Protection Laws
There are various intellectual property laws in Japan, including the Patent Act (Act No. 121 of April 13, 1959, as amended), the Utility Model Act (Act No. 123 of April 13, 1959, as amended), the Design Act (Act No. 125 of April 13, 1959, as amended), the Trademark Act (Act No. 127 of April 13, 1959, as amended), the Copyright Act (Act No. 48 of May 6, 1970). The Patent Act provides patent rights and regulates protection and utilization of inventions. The Utility Model Act provides utility model rights and regulates protection and utilization of devices. The Design Act provides design rights. The Trademark Act provides trademark rights. The Copyright Act provides for authors’ rights and neighboring rights.
Labor Laws
There are various labor-related laws in Japan, including the Labor Standards Act (Act No. 49 of April 7, 1947, as amended), the Industrial Safety and Health Act (Act No. 57 of June 8, 1972, as amended), and the Labor Contracts Act (Act No. 128 of December 5, 2007). The Labor Standards Act regulates, among others, minimum standards for working conditions such as working hours, leave period, and leave days. The Industrial Safety and Health Act requires, among others, the implementation of measures to secure employee safety and protect the health of workers in the workplace. The Labor Contracts Act regulates, among others, the change of terms of employment contracts and working rules, and dismissal and disciplinary action.
According to our Japanese legal counsel, as of the date of this Annual Report, we comply with these laws and regulations.
Regulations on Lease Agreements
Our lease agreements are generally subject to the Civil Code (Act No. 89 of April 27, 1896, as amended) and Act on Land and Building Leases (Act No. 90 of October 4, 1991, as amended).
According to our Japanese legal counsel, as of the date of this Annual Report , the terms and conditions of our lease agreements are consistent with these laws and are valid and enforceable as provided for in these agreements.
Regulations on Privacy Protection
The Act on the Protection of Personal Information (Act No. 57 of May 30, 2003, as amended) aims to protect an individual’s rights and interests and establishes obligations that a personal information handling business operator shall fulfill.
According to our Japanese legal counsel, as of the date of this Annual Report , we comply with these laws and regulations.
Regulations on Whistleblower Protection
The Whistleblower Protection Act No. 122 of June 18, 2004 (Act No. 122 of June 18, 2004, as amended) provides prohibition of disadvantageous treatment of whistleblowers on the grounds of whistleblowing and the measures that a business operator and administrative organ should take concerning whistleblowing to protect whistleblowers.
According to our Japanese legal counsel, as of the date of this Annual Report , we comply with these laws and regulations.
C. Organizational Structure
See “—A. History and Development of the Company.”
D. Property, Plants and Equipment
See “—B. Business Overview—Property and Equipment.”
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Item 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our financial statements and their related notes included in this Annual Report. This report contains forward-looking statements. In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this Annual Report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.
A. Operating Results
The following table sets forth our selected profit or loss data, both in absolute amount and as a percentage of total revenue, for the periods indicated.
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||||
| Software and system development services | 1,014,347 | 158,907,578 | 62.0 | % | 375,349,324 | 85.2 | % | 125,618,177 | 70.0 | % | ||||||||||||||||||
| Consulting and solution services | 621,658 | 97,388,932 | 38.0 | % | 65,011,839 | 14.8 | % | 2,800,620 | 1.6 | % | ||||||||||||||||||
| Sale of NFTs | - | - | - | - | - | 50,936,854 | 28.4 | % | ||||||||||||||||||||
| Royalty Revenue | 30 | 4,682 | - | - | - | - | - | |||||||||||||||||||||
| TOTAL OPERATING REVENUES | 1,636,035 | 256,301,192 | 100.0 | % | 440,361,163 | 100.0 | % | 179,355,651 | 100.0 | % | ||||||||||||||||||
| COST OF REVENUES | (663,362 | ) | (103,922,257 | ) | -40.5 | % | (213,258,663 | ) | -48.4 | % | (37,582,914 | ) | -21.0 | % | ||||||||||||||
| GROSS PROFIT | 972,673 | 152,378,935 | 59.5 | % | 227,102,500 | 51.6 | % | 141,772,737 | 79.0 | % | ||||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||
| Selling and marketing expenses | (442,575 | ) | (69,333,752 | ) | -27.1 | % | (74,465,551 | ) | -16.9 | % | (55,259,489 | ) | -30.8 | % | ||||||||||||||
| General and administrative expenses | (17,941,181 | ) | (2,810,665,387 | ) | -1,096.6 | % | (355,237,986 | ) | -80.7 | % | (390,301,519 | ) | -217.6 | % | ||||||||||||||
| Share-based compensation expenses | - | - | - | - | - | (1,616,463 | ) | -0.9 | % | |||||||||||||||||||
| Research and development expenses | (150,375 | ) | (23,557,762 | ) | -9.2 | % | (43,252,205 | ) | -9.8 | % | (76,081,726 | ) | -42.4 | % | ||||||||||||||
| TOTAL OPERATING EXPENSES | (18,534,131 | ) | (2,903,556,901 | ) | -1,132.9 | % | (472,955,742 | ) | -107.4 | % | (523,259,197 | ) | -291.7 | % | ||||||||||||||
| LOSS FROM OPERATIONS | (17,561,458 | ) | (2,751,177,966 | ) | -1,073.4 | % | (245,853,242 | ) | -55.8 | % | (381,486,460 | ) | -212.7 | % | ||||||||||||||
| Gain (loss) on digital assets | 745 | 116,715 | - | (156,213 | ) | - | (61,860 | ) | - | |||||||||||||||||||
| Interest expenses, net | (103,826 | ) | (16,265,421 | ) | -6.3 | % | (1,716,856 | ) | -0.4 | % | (1,589,399 | ) | -0.9 | % | ||||||||||||||
| Foreign exchange gain (loss), net | 146,027 | 22,876,553 | 8.9 | % | (10,226,794 | ) | -2.3 | % | 46,666,234 | 26.0 | % | |||||||||||||||||
| Government grants | - | - | - | 1,255,000 | 0.3 | % | - | - | ||||||||||||||||||||
| Other (expense) income, net | 14,160 | 2,218,288 | 0.9 | % | 1,159 | - | 132,317 | 0.1 | % | |||||||||||||||||||
| LOSS BEFORE INCOME TAXES | (17,504,352 | ) | (2,742,231,831 | ) | -1,069.9 | % | (256,696,946 | ) | -58.2 | % | (336,339,168 | ) | -187.5 | % | ||||||||||||||
| Provision for income tax | - | - | - | - | - | 188,496 | 0.1 | % | ||||||||||||||||||||
| NET LOSS | (17,504,352 | ) | (2,742,231,831 | ) | -1,069.9 | % | (256,696,946 | ) | -58.2 | % | (336,150,672 | ) | -187.4 | % | ||||||||||||||
Revenue
The following table sets forth the breakdown of our revenue by category, both in absolute amount and as a percentage of the total revenue for each category for the periods indicated:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Software and system development services | 1,014,347 | 158,907,578 | 62.0 | % | 375,349,324 | 85.2 | % | 125,618,177 | 70.0 | % | ||||||||||||||||||
| Consulting and solution services | 621,658 | 97,388,932 | 38.0 | % | 65,011,839 | 14.8 | % | 2,800,620 | 1.6 | % | ||||||||||||||||||
| Sale of NFTs | - | - | - | - | - | 50,936,854 | 28.4 | % | ||||||||||||||||||||
| Royalty income | 30 | 4,682 | - | - | - | - | - | |||||||||||||||||||||
| Total | 1,636,035 | 256,301,192 | 100.0 | % | 440,361,163 | 100.0 | % | 179,355,651 | 100.0 | % | ||||||||||||||||||
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Our total revenue for the fiscal year ended April 30, 2026 decreased by approximately JPY184.06 million, or 41.8%, compared to that of the fiscal year ended April 30, 2025. Our total revenue for the fiscal year ended April 30, 2025 increased by approximately JPY261.0 million, or 145.5%, compared to that of the fiscal year ended April 30, 2024.
Revenue generated from our software and system development services accounted for approximately 62.0%, 85.2% and 70.0% of our total revenue for the fiscal years ended April 30, 2026, 2025 and 2024, respectively. Revenue from software and system development services for the fiscal year ended April 30, 2026 decreased by approximately JPY216.4 million, or 57.7%, compared to that of the fiscal year ended April 30, 2025. The primary reason for the change was lower software and system development revenue generated by the legacy Company. Revenue from software and system development services for the fiscal year ended April 30, 2025 increased by approximately JPY249.7 million, or 198.8%, compared to that of the fiscal year ended April 30, 2024. The primary reason for this increase was an increase in system development projects, including preliminary research conducted before development and maintenance and support provided after delivery.
Revenue generated from our consulting and solution services accounted for approximately 38.0%, 14.8% and 1.6% of our total revenue for the fiscal years ended April 30, 2026, 2025 and 2024, respectively. Revenue from consulting and solution services for the fiscal year ended April 30, 2026 increased by approximately JPY32.4 million, or 49.8%, compared to that of the fiscal year ended April 30, 2025. The primary reasons for the change were higher revenue from consulting and solution projects of the legacy Company and JPY13.2 million of revenue generated by the acquired PML subgroup from the Acquisition Date through April 30, 2026. Revenue from consulting and solution services for the fiscal year ended April 30, 2025 increased by approximately JPY62.2 million, or 2,221.3%, compared to that of the fiscal year ended April 30, 2024. This increase was mainly due to the completion and delivery of new projects that had been undertaken since the fiscal year ended April 30, 2024, which led to an increase in consulting and solution services.
Royalty income was immaterial during the fiscal year ended April 30, 2026 and nil during the fiscal years ended April 30, 2025 and 2024.
Revenue generated from the sale of NFTs accounted for nil, nil and 28.4% of our total revenue for the fiscal years ended April 30, 2026, 2025 and 2024, respectively. Revenue from the sale of NFTs was nil for both the fiscal years ended April 30, 2026 and April 30, 2025. Revenue from the sale of NFTs for the fiscal year ended April 30, 2025 decreased by JPY50.9 million, or 100.0%, compared to that of the fiscal year ended April 30, 2024. This decrease was mainly due to the reallocation of resources to our core growth area—software and system development services.
Cost of Revenue
The following table sets forth the breakdown of our cost of revenue by category, both in absolute amount and as a percentage of the cost of revenue, for the periods indicated:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Outsourced staff cost | 405,650 | 63,549,118 | 61.2 | % | 175,325,621 | 82.2 | % | 26,109,793 | 69.5 | % | ||||||||||||||||||
| Staff cost | 112,457 | 17,617,470 | 17.0 | % | 19,672,042 | 9.2 | % | 9,135,039 | 24.3 | % | ||||||||||||||||||
| Telecommunication cost | 138,784 | 21,741,854 | 20.9 | % | 17,116,691 | 8.0 | % | 1,411,352 | 3.8 | % | ||||||||||||||||||
| Rental expense | 5,676 | 889,190 | 0.8 | % | 1,009,018 | 0.5 | % | 816,030 | 2.2 | % | ||||||||||||||||||
| Others | 796 | 124,625 | 0.1 | % | 135,291 | 0.1 | % | 110,700 | 0.2 | % | ||||||||||||||||||
| Total | 663,362 | 103,922,257 | 100.0 | % | 213,258,663 | 100.0 | % | 37,582,914 | 100.0 | % | ||||||||||||||||||
Cost of revenue primarily comprises (1) outsourced staff cost; (2) staff cost; (3) telecommunication cost; (4) rental expense; and (5) others. Cost of revenue for the fiscal year ended April 30, 2026 decreased by approximately JPY109.3 million, or 51.3%, compared to that of the fiscal year ended April 30, 2025. The primary drivers of the change were lower outsourced staff cost, together with lower telecommunication cost. Cost of revenue for the fiscal year ended April 30, 2025 increased by approximately JPY175.7 million, or 467.4%, compared to that of the fiscal year ended April 30, 2024. The primary driver of this increase was higher outsourced staff cost and telecommunication cost associated with the growth in sales.
Gross Profit/Loss
As a result of changes in revenue and cost of revenue, our gross profit for the fiscal year ended April 30, 2026 decreased by approximately JPY74.7 million, or 32.9%, compared to that of the fiscal year ended April 30, 2025. Our gross profit for the fiscal year ended April 30, 2025 increased by approximately JPY85.3 million, or 60.2%, compared to that of the fiscal year ended April 30, 2024. The following table sets forth a breakdown of gross profit by services offered for the fiscal years ended April 30, 2026, 2025 and 2024:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Software and system development services | 359,554 | 56,327,724 | 37.0 | 168,768,357 | 74.3 | % | 97,159,712 | 68.5 | % | |||||||||||||||||||
| Consulting and solution services | 613,089 | 96,046,529 | 63.0 | 59,962,408 | 26.4 | % | 1,696,999 | 1.2 | % | |||||||||||||||||||
| Others | 30 | 4,682 | 0.0 | (1,628,265 | ) | -0.7 | % | 42,916,026 | 30.3 | % | ||||||||||||||||||
| Total | 972,673 | 152,378,935 | 100.0 | % | 227,102,500 | 100.0 | % | 141,772,737 | 100.0 | % | ||||||||||||||||||
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Operating Expenses
The following table sets forth our operating expenses, both in absolute amount and as a percentage of the total operating expenses, for the periods indicated:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Selling and marketing expenses | 442,575 | 69,333,752 | 2.4 | % | 74,465,551 | 15.7 | % | 55,259,489 | 10.6 | % | ||||||||||||||||||
| General and administrative expenses | 17,941,181 | 2,810,665,387 | 96.8 | % | 355,237,986 | 75.1 | % | 390,301,519 | 74.6 | % | ||||||||||||||||||
| Share-based compensation expenses | - | - | - | - | - | 1,616,463 | 0.3 | % | ||||||||||||||||||||
| Research and development expenses | 150,375 | 23,557,762 | 0.8 | % | 43,252,205 | 9.2 | % | 76,081,726 | 14.5 | % | ||||||||||||||||||
| Total | 18,534,131 | 2,903,556,901 | 100.0 | % | 472,955,742 | 100.0 | % | 523,259,197 | 100.0 | % | ||||||||||||||||||
Selling and marketing expenses
Selling and marketing expenses include (1) salaries and benefits of our sales and marketing staff, and (2) others, such as advertising expense and other related payment for our sales and marketing staff. Selling and marketing expenses for the fiscal year ended April 30, 2026 decreased by approximately JPY5.1 million, or 6.9%, compared to those of the fiscal year ended April 30, 2025. The primary reason for the change was lower staff salaries and benefits, partially offset by slightly higher advertising expenses. Selling and marketing expenses for the fiscal year ended April 30, 2025 increased by approximately JPY19.2 million, or 34.8%, compared to those of the fiscal year ended April 30, 2024. The primary reason for this increase was an increase in personnel expenses due to new hires and an increase in advertising expenses. The following table sets forth the breakdown of selling and marketing expenses, both in absolute amount and as a percentage of the total selling and marketing expenses, for the periods indicated:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Staff salaries and benefits | 150,414 | 23,563,887 | 34.0 | % | 28,722,303 | 38.6 | % | 20,903,945 | 37.8 | % | ||||||||||||||||||
| Other advertising expenses | 292,161 | 45,769,865 | 66.0 | % | 45,743,248 | 61.4 | % | 34,355,544 | 62.2 | % | ||||||||||||||||||
| Total | 442,575 | 69,333,752 | 100.0 | % | 74,465,551 | 100.0 | % | 55,259,489 | 100.0 | % | ||||||||||||||||||
General and administrative expenses
General and administrative expenses include (1) professional service fee; (2) salaries and benefits of our management, finance, operations and other staff and outsourced administrative staff; (3) insurance fee; (4) office operating expenses; (5) taxes and duties; (6) transportation fee; (7) outsourced staff cost; (8) rental expense; (9) Acquisition-related expenses, and (10) other, including depreciation and amortization, entertainment fee. General and administrative expenses for the fiscal year ended April 30, 2026 increased by approximately JPY2,455.4 million, or 691.1%, compared to those of the fiscal year ended April 30, 2025. The primary reasons for the change were increases in professional service fees, staff salaries and benefits, outsourced staff costs and other administrative costs, including the effects of consolidating the PML subgroup from January 20, 2026. The general and administrative expenses for the fiscal year ended April 30, 2025 decreased by approximately JPY35.1 million, or 9.0%, compared to those of the fiscal year ended April 30, 2024. The primary reason for the decrease was the absence of one-time costs that were incurred in the previous year in connection with the NASDAQ listing. The following table sets forth the breakdown of general and administrative expenses, both in absolute amount and as a percentage of the total general and administrative expenses, for the periods indicated:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Acquisition-related costs | 12,806,766 | 2,006,307,904 | 71.4 | % | - | - | - | - | ||||||||||||||||||||
| Professional service fee | 2,348,982 | 367,991,542 | 13.1 | % | 184,134,058 | 51.8 | % | 213,060,659 | 54.6 | % | ||||||||||||||||||
| Staff salaries and benefits | 1,850,064 | 289,830,995 | 10.3 | % | 104,892,633 | 29.5 | % | 106,792,806 | 27.4 | % | ||||||||||||||||||
| Insurance fee | 156,978 | 24,592,235 | 0.9 | % | 28,103,054 | 7.9 | % | 26,894,080 | 6.9 | % | ||||||||||||||||||
| Office expense | 166,108 | 26,022,540 | 0.9 | % | 12,356,160 | 3.5 | % | 11,354,771 | 2.9 | % | ||||||||||||||||||
| Taxes and duties | 43,322 | 6,786,749 | 0.2 | % | 1,494,162 | 0.4 | % | 7,082,825 | 1.8 | % | ||||||||||||||||||
| Transportation fee | 24,167 | 3,786,076 | 0.1 | % | 9,279,889 | 2.6 | % | 6,925,970 | 1.8 | % | ||||||||||||||||||
| Outsourced staff cost | 185,439 | 29,050,815 | 1.0 | % | 2,493,225 | 0.7 | % | 6,695,384 | 1.7 | % | ||||||||||||||||||
| Rental expense | 72,624 | 11,377,224 | 0.4 | % | 8,529,344 | 2.4 | % | 5,533,245 | 1.4 | % | ||||||||||||||||||
| Others | 286,731 | 44,919,307 | 1.7 | % | 3,955,461 | 1.2 | % | 5,961,779 | 1.5 | % | ||||||||||||||||||
| Total | 17,941,181 | 2,810,665,387 | 100.0 | % | 355,237,986 | 100.0 | % | 390,301,519 | 100.0 | % | ||||||||||||||||||
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Share-based compensation expenses
On July 1, 2019, the shareholders and board of directors of the Company approved the 2019 trust-type stock option plan (the “2019 Trust-type Plan”), which has an exercise period of 10 years from July 4, 2019 to July 3, 2029. Under the 2019 Trust-type Plan, options were established that were exercisable into a total of 2,000,000 Ordinary Shares (retrospectively restated to include the effects of the share split of 50-for-1 and 100-for-1 on July 16, 2019 and October 25, 2021, respectively). On August 12, 2024, the 1,960,000 allocated options then outstanding were cancelled. No options under the 2019 Trust-type Plan were outstanding at April 30, 2026, and there was no activity under the plan during the fiscal year ended April 30, 2026. Share-based compensation expenses were nil, nil and JPY1.6 million for the fiscal years ended April 30, 2026, 2025 and 2024, respectively. See our financial statements and the related notes included elsewhere in this Annual Report for more information.
Research and development expenses
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||||||||||||||
| USD | JPY | % | JPY | % | JPY | % | ||||||||||||||||||||||
| Staff cost | 67,408 | 10,560,195 | 44.8 | % | 10,708,244 | 24.8 | % | 32,668,949 | 42.9 | % | ||||||||||||||||||
| Outsourced staff cost | 43,603 | 6,830,811 | 29.0 | % | 25,718,173 | 59.5 | % | 31,635,213 | 41.6 | % | ||||||||||||||||||
| Telecommunication cost | 35,831 | 5,613,264 | 23.8 | % | 6,370,533 | 14.7 | % | 9,306,677 | 12.2 | % | ||||||||||||||||||
| Rental expense | 2,951 | 462,340 | 2.0 | % | 376,638 | 0.9 | % | 2,005,725 | 2.6 | % | ||||||||||||||||||
| Others | 582 | 91,152 | 0.4 | % | 78,617 | 0.1 | % | 465,162 | 0.7 | % | ||||||||||||||||||
| Total | 150,375 | 23,557,762 | 100.0 | % | 43,252,205 | 100.0 | % | 76,081,726 | 100.0 | % | ||||||||||||||||||
Research and development expenses include (1) salaries and benefits of our research development staff; (2) outsourced development cost; and (3) other miscellaneous expenses for our research and development department, such as telecommunication expenses and rental and utility expenses. Research and development expenses for the fiscal year ended April 30, 2026 decreased by approximately JPY19.7 million, or 45.5%, compared to those of the fiscal year ended April 30, 2025. The primary reasons for the change were lower outsourced staff cost and, to a lesser extent, lower telecommunication cost. Research and development expenses for the fiscal year ended April 30, 2025 decreased by approximately JPY32.8 million, or 43.2%, compared to those of the fiscal year ended April 30, 2024. This decrease was due to the completion of projects in the fiscal year ended April 30, 2025, following the research phase in the fiscal year ended April 30, 2024.
Income tax provisions
Income tax expense was nil for the fiscal year ended April 30, 2026, as compared to income tax benefit of nil for the fiscal year ended April 30, 2025. Income tax benefit was nil for the fiscal year ended April 30, 2025, as compared to income tax benefit of JPY0.2 million for the fiscal year ended April 30, 2024. Such decrease was primarily due to income tax benefit of JPY0.2 million recorded for the fiscal year ended April 30, 2024, which resulted from the reversal of deferred tax liabilities of approximately JPY0.2 million which existed as of April 30, 2023.
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Net loss
As a result of the foregoing reasons, we reported a net loss of approximately JPY2,742.2 million (US$17.5 million) for the fiscal year ended April 30, 2026. For comparative purposes, we reported a net loss of approximately JPY256.7 million for the fiscal year ended April 30, 2025, and a net loss of approximately JPY336.2 million for the fiscal year ended April 30, 2024.
B. Liquidity and Capital Resources
Our primary source of liquidity historically has been cash generated from our business operations, bank loans, equity contributions from our shareholders and borrowings, which have historically been sufficient to meet our working capital and capital expenditure requirements.
The following table sets forth the breakdown and terms of our outstanding borrowings as of April 30, 2026, 2025 and 2024.
| Maturity date | Interest rate | As of April 30, 2026 | As of April 30, 2025 | As of April 30, 2024 | ||||||||||||||
| Kiraboshi bank* | November 2024 | 1.60 | % | - | - | 4,101,000 | ||||||||||||
| Kiraboshi bank* | March 2030 | 1.60 | % | 19,559,000 | 24,563,000 | 29,567,000 | ||||||||||||
| Resona bank Ltd** | July 2024 | 1.48 | % | - | - | 100,000,000 | ||||||||||||
| Shoko Chukin Bank Ltd. | September 2027 | 2.69 | % | 14,300,000 | 24,500,000 | 34,700,000 | ||||||||||||
| * | Guaranteed by Mr. Satoshi Kobayashi, our Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director and Tokyo guarantee. |
| ** | Guaranteed by Mr. Satoshi Kobayashi, our Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director. |
As of April 30, 2026, we had cash of approximately JPY132.8 million (US$0.8 million), a working capital deficit of approximately JPY1,827.2 million (US$11.7 million), and net cash used in operating activities of approximately JPY641.4 million (US$4.1 million) for the fiscal year ended April 30, 2026. These conditions raise substantial doubt about our ability to continue as a going concern. Management has commenced a strategy to raise debt and equity and may seek to refinance existing debt obligations. However, the exact amount of proceeds we use for our operations and expansion plans will depend on the amount of cash generated from our operations and any strategic decisions we may make that could alter our expansion plans and the amount of cash necessary to fund these plans. We may, however, decide to enhance our liquidity position or increase our cash reserve for future investments through additional capital and finance funding. We may need additional cash resources in the future if we experience changes in business conditions or other developments, or if we find and wish to pursue opportunities for investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We have a history of operating losses and will likely incur substantial additional expenses and operating losses in the future. Management has concluded that there is, and the report of our independent registered public accounting firm contains an explanatory paragraph that expresses, substantial doubt about our ability to continue as a ‘going concern.’”
Our ability to manage our working capital, including receivables and other assets and liabilities and accrued liabilities, may materially affect our financial condition and results of operations.
The following table sets forth our selected cash flow data for the fiscal years ended April 30, 2026, 2025 and 2024:
| Year Ended April 30, 2026 | Year Ended April 30, 2025 | Year Ended April 30, 2024 | ||||||||||||||
| USD | JPY | JPY | JPY | |||||||||||||
| Net cash flows used in operating activities | (4,094,488 | ) | (641,442,451 | ) | (191,733,955 | ) | (393,864,227 | ) | ||||||||
| Net cash flows provided by (used in) investing activities | (2,870,319 | ) | (449,664,105 | ) | 87,764,909 | (100,336,193 | ) | |||||||||
| Net cash flows provided by (used in) financing activities | 7,126,413 | 1,116,423,943 | (119,305,000 | ) | 644,854,140 | |||||||||||
| Effect of exchange rate | 19,876 | 3,113,475 | (10,257,683 | ) | 40,857,242 | |||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 181,482 | 28,430,862 | (233,531,729 | ) | 191,510,962 | |||||||||||
| Cash, cash equivalents and restricted cash at the beginning of the year | 867,264 | 135,865,626 | 369,397,355 | 177,886,393 | ||||||||||||
| Cash, cash equivalents and restricted cash at the end of the year | 1,048,746 | 164,296,488 | 135,865,626 | 369,397,355 | ||||||||||||
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Operating Activities
Net cash used in operating activities for the fiscal year ended April 30, 2026 was JPY641.4 million (US$4.1 million), primarily reflecting the net loss of JPY2,742.2 million (USD17.5 million), partially offset by non-cash and working-capital adjustments, including depreciation and amortization and changes in contract assets and other payables and accrued liabilities.
Net cash used in operating activities for the fiscal year ended April 30, 2025 was JPY191.7 million (US$1.3 million), which primarily reflected our net loss of JPY256.7 million (US$1.8 million) as mainly adjusted for foreign currency exchange loss of JPY10.3 million (US$0.1 million) and changes in working capital. Adjustments for changes in working capital primarily consisted of (1) JPY31.6 million (US$0.2 million) decrease of accounts receivable and (2) JPY23.2 million (US$0.2 million) decrease of contract assets.
Net cash used in operating activities for the fiscal year ended April 30, 2024 was JPY393.9 million (US$2.5 million), which primarily reflected our net loss of JPY336.2 million (US$2.1 million) as mainly adjusted for foreign currency exchange gain of JPY40.9 million (US$0.3 million) and changes in working capital. Adjustments for changes in working capital primarily consisted of (1) JPY40.4 million (US$0.3 million) increase of contract assets, (2) JPY19.0 million (US$0.1 million) increase of income taxes, net, and (3) JPY18.2 million (US$0.1 million) increase of other payables and accrued liabilities.
Investing Activities
Net cash used in investing activities for the fiscal year ended April 30, 2026 was JPY449.7 million (US$2.9 million), primarily attributable to JPY441.6 million (US$2.8 million) for the Acquisition, net of cash acquired and JPY8.1 million (US$.05 million) of property and equipment purchases.
Net cash provided by investing activities for the fiscal year ended April 30, 2025 was JPY87.8 million (US$0.6 million), primarily attributable to proceeds from redemption of time deposit of JPY100.0 million (US$0.7 million) and receipts of government grants of JPY20.0 million (US$0.1 million), partially offset by purchase of software of JPY31.8 million (US$0.2 million).
Net cash used in investing activities for the fiscal year ended April 30, 2024 was JPY100.3 million (US$0.6 million), attributable to purchase of property and equipment of JPY0.3 million (US$0.0 million) and a purchase of time deposit of JPY100.0 million (US$0.6 million).
Financing Activities
Net cash provided by financing activities for the fiscal year ended April 30, 2026 was JPY1,116.4 million (US$7.1 million), primarily reflecting cash flows associated with the issuance of warrants and ordinary shares, related-party financing activity, proceeds from and repayment of receivables factoring arrangements, and repayment of bank loans.
Net cash used in financing activities for the fiscal year ended April 30, 2025 was JPY119.3 million (US$0.8 million), attributable to repayment of loans of JPY119.3 million (US$0.8 million).
Net cash provided by financing activities for the fiscal year ended April 30, 2024 was JPY644.9 million (US$4.1 million), mainly attributable to proceeds from issuance of equity securities to shareholders upon IPO on July 27, 2023 in the amount of JPY783.1 million (US$5.0 million), partially offset by payments on IPO costs of JPY114.2 million (US$0.7 million) and repayment of loan in the amount of JPY24.1 million (US$0.2 million).
Effect of exchange rate
The effect of exchange rate changes on cash and restricted cash for the fiscal year ended April 30, 2026 was JPY3.1 million (US$0.02 million). The effect of exchange rate changes for the fiscal year ended April 30, 2025 was a decrease of JPY10.3 million (US$0.1 million), while the fiscal year ended April 30, 2024 reflected an increase of JPY40.9 million (US$0.3 million).
Capital Expenditures
We made capital expenditures of JPY8.0 million (US$0.05 million), JPY32.2 million and JPY0.3 million in the fiscal years ended April 30, 2026, 2025 and 2024, respectively. In these fiscal years, our capital expenditures were mainly used for procurement of office equipment and software.
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Contractual Obligations and Commitments
The following table sets forth our contractual obligations as of April 30, 2026:
| Payment due by period | ||||||||||||||||||||
| Total | Less than one year | One to three years | Three to five years | More than five years | ||||||||||||||||
| Long-term loan | 33,859,000 | 15,204,000 | 13,691,000 | 4,964,000 | - | |||||||||||||||
| Short-term loan | - | - | - | - | - | |||||||||||||||
| Operating lease obligations | 60,121,434 | 29,279,335 | 30,842,099 | - | - | |||||||||||||||
| Loans to related parties | 616,655,809 | - | 616,655,809 | - | - | |||||||||||||||
| Total | 710,636,243 | 44,483,335 | 661,188,908 | 4,964,000 | - | |||||||||||||||
Off-Balance Sheet Arrangements
As of April 30, 2026, 2025, and 2024, we were not party to any material off-balance sheet financial arrangements that are reasonably likely to have a current or future effect on our financial condition or operating results. We do not have any relationship with unconsolidated entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.
C. Research and Development, Patents and Licenses, etc.
See “Item 4. Information on the Company—B. Business Overview—Research and Development” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”
D. Trend Information
Other than as disclosed below and elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments, or events for the period from May 1, 2025 to April 30, 2026 that are reasonably likely to have a material adverse effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
Factors and Trends Affecting Our Results of Operations
Our results of operations are affected by a number of factors and trends, including the growth and engagement of our UpsideOnly user base, the quantity and quality of data generated through the UpsideOnly platform, the availability of capital for proprietary trading, the effectiveness of our BayesShield AI technology, conditions in the financial markets, the scalability and adoption of our Kronos X business, the successful launch and adoption of our Barriers.com product, our ability to scale our technology infrastructure and operations, competitive conditions, and the regulatory environment applicable to our businesses. Because several of these factors are interrelated, changes in one factor may affect the impact of others on our results of operations.
Growth and Engagement of the UpsideOnly User Base.
The growth and engagement of the UpsideOnly user base is expected to be an important driver of our future results of operations. As the number of users participating on the UpsideOnly platform increases, we expect to receive a greater volume and diversity of user-generated trading signals and related data. The quality, breadth, and frequency of these signals may affect the information available to BayesShield AI in generating trading recommendations. Accordingly, our ability to attract, activate, and retain users, as well as the level and nature of their activity on the platform, may have a significant effect on our future trading activity and revenues. Our ability to grow the UpsideOnly user base will depend on, among other things, the effectiveness of our marketing and customer acquisition efforts, the user experience and performance of the platform, competitive conditions, and our ability to maintain user confidence and engagement.
Availability of Capital for Proprietary Trading.
Our results may also be affected by the amount of capital available to us to execute proprietary trades based on recommendations generated by BayesShield AI. Greater availability of capital may enable us to pursue a larger number or greater volume of trading opportunities, while limitations on available capital may constrain the scale of our trading activities. The amount of capital available for trading may be affected by our cash position, operating requirements, financing activities, capital allocation decisions, and the profitability or losses of our proprietary trading activities. As a result, our ability to obtain and maintain sufficient capital on acceptable terms may affect both the scale of our trading activities and our financial results.
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Effectiveness of BayesShield AI.
The performance of our BayesShield AI technology is expected to be a significant factor affecting our results of operations. BayesShield AI is intended to analyze trading signals and other information and generate recommendations for proprietary trading activities. Our results will depend, in part, on the ability of BayesShield AI to identify trading opportunities and generate recommendations that result in profitable trades over time. Its effectiveness may vary as market conditions change, as the composition and behavior of our user base changes, and as the volume and characteristics of available data evolve. There can be no assurance that BayesShield AI will consistently generate profitable recommendations, that historical or simulated performance will be indicative of future results, or that improvements to the system will result in corresponding improvements in our trading results.
Financial Market Conditions and Volatility.
Our results of operations may be significantly affected by conditions in the financial markets in which we conduct proprietary trading activities. Market volatility, liquidity, interest rates, economic conditions, geopolitical events, regulatory developments, and other unexpected events may affect both the number and quality of trading opportunities available to us and the profitability of trades executed using BayesShield AI recommendations. Periods of heightened volatility may create additional trading opportunities, but may also increase the risk of losses, execution difficulties, and adverse price movements. Conversely, periods of low volatility or reduced market liquidity may limit trading opportunities or otherwise reduce the profitability of our trading activities. Accordingly, our results may fluctuate materially from period to period as a result of changes in financial market conditions that are outside our control.
Growth and Scalability of Kronos X.
Our future results may also depend on our ability to expand and monetize our Kronos X business. The financial performance of Kronos X will depend on our ability to attract and retain customers, increase usage and transaction or other activity on the platform, develop additional functionality and use cases, establish appropriate pricing and commercial arrangements, and scale the business efficiently. Our ability to increase revenue from Kronos X may also depend on our ability to expand the markets in which the product is offered and to control the personnel, technology, infrastructure, sales, marketing, and other costs associated with its growth.
Launch and Adoption of Barriers.com.
We expect the launch and subsequent adoption of Barriers.com to be another potential driver of our future results of operations. The financial contribution of Barriers.com will depend on our ability to successfully complete the development and launch of the product, attract and retain users or customers, establish an effective business and pricing model, and scale the product and its supporting infrastructure. As with our other products, the timing and extent of customer adoption may be difficult to predict, and the costs associated with developing, marketing, supporting, and operating the product may precede any material revenue contribution.
Technology Infrastructure, Product Development, and Cybersecurity.
Our ability to grow our businesses will depend on our ability to maintain and expand reliable technology infrastructure and to continue developing our artificial intelligence, data-processing, and other technology capabilities. Increases in users, trading activity, data volumes, and product offerings may require additional investments in computing capacity, software, personnel, security, and other infrastructure. In addition, cybersecurity incidents, system failures, interruptions, or other technology-related problems could increase our costs, impair our ability to operate our platforms, reduce user or customer activity, and adversely affect our results of operations. We may therefore experience increases in operating expenses as we invest in technology and infrastructure in anticipation of future growth.
Competition and Customer Acquisition.
Our ability to grow revenue will depend in part on our ability to compete effectively for users and customers. The markets in which we operate are rapidly evolving and include established financial services companies, proprietary trading and funded-trader businesses, digital asset and trading platforms, and emerging technology and artificial intelligence companies. Increased competition may result in higher customer acquisition costs, greater expenditures on marketing and product development, pricing pressure, or reduced user engagement and retention. Our results of operations will therefore be affected by our ability to differentiate our products, maintain competitive functionality and pricing, and efficiently acquire and retain users and customers.
Regulatory and Legal Environment.
Our results of operations may also be affected by changes in laws, regulations, regulatory interpretations, and enforcement practices applicable to our businesses. In particular, the novel characteristics of certain of our products and business models may result in regulatory uncertainty, and governmental authorities could interpret or apply existing laws in ways that differ from our current expectations. Changes in applicable requirements, or the need to obtain additional licenses, registrations, approvals, or compliance infrastructure, could increase our operating expenses, restrict the manner in which we operate or market our products, delay product launches, or otherwise affect our ability to generate revenue. We expect the regulatory environment applicable to our businesses to continue to evolve as financial technology and artificial intelligence applications develop.
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E. Critical Accounting Estimates
Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our accounting estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. However, actual results may differ from those estimates. Our critical accounting policies are those that materially affect our financial statements and are subject to complex judgment by our management.
Income taxes
Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and tax loss carryforwards. These deferred taxes are measured using the currently enacted tax rates in effect for the year in which the temporary differences or tax loss carryforwards and tax credits are expected to reverse.
Valuation allowances are provided against deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company considers all available evidence (both positive and negative) when determining whether a valuation allowance is required, with emphasis on its past operating results, the existence of cumulative losses in the most recent years and its forecast of near-term taxable income.
Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following sets forth information regarding members of our board of directors and our executive officers as of the date of this Annual Report .
| Name | Age | Position(s) | |||
| Satoshi Kobayashi | 40 | Co-Chief Executive Officer, Interim Chief Financial Officer, and Representative Director | |||
| Patrick Gruhn | 45 | Co-Chief Executive Officer and Representative Director | |||
| Matthew Nicoletti | 40 | Chief Strategy Officer and Director | |||
| Masahiro Tominaga | 47 | Independent Director | |||
| Michael Hilmer | 58 | Independent Director | |||
| Brandon J. Williams | 41 | Independent Director | |||
| Koichi Goto | 59 | Independent Director | |||
| Jason D. Sawyer * | 54 | Company Auditor |
| * | Company auditors are not members of our board of directors. |
Mr. Satoshi Kobayashi has served as our Chief Executive Officer and Representative Director since our inception, and has served as our Interim Chief Financial Officer since August 2025. He co-founded our Company in May 2018. From July 2017 to December 2018, Mr. Satoshi Kobayashi served as the representative director with FEELO.Co. to oversee that company’s entire merchandising business. From January 2013 to December 2015, he acted as a manager of Pasona Inc., where he was in charge of temporary staff management and consulting.
Mr. Patrick Gruhn has served as Co-Chief Executive Officer and Representative Director of the Company since January 2026. Mr. Gruhn has served as the chief executive officer and president of Kephas Corporation (d/b/a Perpetuals.com) since 2016. He has served as the chief executive officer of Kephas Stiftung gemeinnützige GmbH since 2011. He has served as a Professor of Practice in Entrepreneurship, Digital Innovation and Ethics at the European Institute of Management since 2025. He obtained a Master of Business Administration from Danube University Krems in 2014 and a Master of Laws from University Liechtenstein in 2014.
Mr. Matthew Nicoletti has served as a Director and Chief Strategy Officer of the Company since March 2026. Mr. Nicoletti has served as the chief executive officer of Vadar Management LLC, which delivers hands-on operational improvement, value-creation planning, and post-acquisition integration services, since 2015. He has served as a managing member of One9 LLC, a capital markets advisory firm focused on taking private companies public in the United States, since 2014. He has served as the chief executive officer and a managing member of Distinguished LLC, a Florida-based real estate development and investment company, since 2022. He obtained a Bachelor’s Degree in Communications from the University of Central Florida in 2007.
Mr. Masahiro Tominaga has served as our Independent Director since July 2019. Since January 2016, he has served as the representative director of Dizzy Co., which is engaged in the business of management consulting and web-related consulting. From January 2003 to December 2015, he was the executive vice president of UNIMEDIA INC., a company dedicated to digital innovation. He studied economics and obtained a Bachelor’s degree from Musashi University in March 2001.
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Mr. Michael Hilmer has served as our Independent Director since November 2025. Mr. Hilmer has over 30 years of leadership experience spanning the fields of financial technology (FinTech), data monetization, structured finance, and digital transformation. He served as the chairman and chief executive officer of FUTR Corporation from April 2018 to January 2026 and has served as the vice chairman of FUTR Corporation since January 2026.
Mr. Brandon J. Williams has served as our Independent Director since March 2026. Mr. Williams has served as the co-founder and head of global business development at Digital Assets DA AG (Switzerland) since 2020. He has also served as the managing director of Cosima Capital LLC since 2018. He served as the senior vice president of Laidlaw & Co.(UK) Ltd. from 2016 to 2018, and the senior investment executive of Dawson James Securities Inc. from 2009 to 2016. He obtained a Bachelor’s degree in Finance and International Business from University of Maryland in 2007.
Mr. Koichi Goto has served as our Independent Director since March 2026. Since July 2020, he has served as an auditor of KakaoPiccoma Inc., which operates the electronic comic and novel service “Piccoma.” From June 2023 to June 2024, he served as a director at WASEDA GAKUSHUKENKYUKAI CO., LTD, which is a publicly listed company in Japan (TYO: 5869). From April 2016 to January 2024, he served as an auditor of WAKUWAKU Corporation, which is engaged in a renovation platform. From August 2014 to December 2018, he served as a director at SPRIX Inc. He graduated from the Faculty of Economics at Keio University in March 1990.
Mr. Jason D. Sawyer has served as our Company Auditor since March 2026. Mr. Sawyer has approximately 30 years of experience in the alternative investment sector and has served as the general manager of Access Alternative Group S.A. (AAG) since February 2004. He currently serves as a director for multiple corporations, including FUTR Corporation (TSXV: FTRC), Lixte Biotechnology Holdings, Inc. (Nasdaq: LIXT), and Entero Therapeutics, Inc. (Nasdaq: ENTO).
There is no family relationship among any of the directors, company auditors, and officers. Except as described below, there is no arrangement or understanding with major shareholders or others pursuant to which any of our directors or members of senior management was selected. Mr. Patrick Gruhn and Mr. Matthew Nicoletti were designated for nomination to our board pursuant to the Shareholders Agreement entered into in connection with the Perpetual Markets Acquisition. Mr. Jason D. Sawyer and Mr. Michael Hilmer were elected pursuant to the director nomination provisions of the securities purchase agreements for our October 2025 private placement. Each of these arrangements has been previously disclosed in our Reports on Form 6-K.
B. Compensation
Compensation
In accordance with the Companies Act, compensation for our directors, including bonuses, retirement allowances, and incentive stock options, must be approved at our general meeting of shareholders, unless otherwise specified in our amended articles of incorporation. The shareholders’ approval may specify the upper limit of the aggregate amount of compensation or calculation methods, but if compensation includes benefits in kind, the shareholders’ approval must include the description of such benefits. Compensation for a director is fixed by our board of directors in accordance with our internal regulations and practice and, in the case of retirement allowances, generally reflects the position of the director or executive officer at the time of retirement, length of service as a director and contribution to our performance.
For the fiscal year ended April 30, 2026, we paid an aggregate of JPY 40,009,181 (US$263,983) as compensation to our executive officers and directors. For the fiscal year ended April 30, 2026, we did not grant stock options or provide discretionary bonuses. We have not set aside or accrued any amount to provide pension, retirement, or other similar benefits to our directors and senior management.
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Stock Options
We have granted stock options to purchase our Ordinary Shares under the share option plan authorized by our shareholders on February 5, 2019.
The purpose of these stock option grants is to enable our directors, senior management, and employees to share in our success and to foster and strengthen a corporate culture that aligns employee interests with those of our shareholders.
Our stock option grants generally prohibit the transfer of options. A stock option holder generally forfeits such stock options if they cease to be a director, company auditor, or employee of our Company, except under limited circumstances or as otherwise determined by our board of directors.
In addition, stock options may generally be exercised only if our Ordinary Shares are listed on a financial instrument exchange.
The following table summarizes the outstanding stock options we have granted under our share option plan.
| Name of Issuance | Grant Date | Beginning of Exercise Period | End of Exercise Period | Exercise Price (per share) | Number of Ordinary Shares Granted | |||||||||
| Share option plan | 2/28/2019 | 3/1/2021 | 2/28/2029 | JPY | 2 | 1,020,000 | (1) | |||||||
Notes:
| (1) | As of April 30, 2026, stock options to acquire 1,020,000 Ordinary Shares remained outstanding. |
The following table summarizes the outstanding stock options that we have granted to our directors and senior management under our option plan.
| Name | Grant Date | Beginning of Exercise Period | End of Exercise Period | Exercise Price (per share) | Total Number of Stock Options Granted | Total Number of Ordinary Shares Underlying Stock Options | ||||||||||||
| Hiroki Yamamoto | 2/28/2019 | 3/1/2021 | 2/28/2029 | JPY | 2 | 200 | 1,000,000 | |||||||||||
C. Board Practices
Board of Directors
Our board of directors has the ultimate responsibility for the administration of our affairs. Under the Companies Act and our amended articles of incorporation, we are required to have no fewer than three but not more than ten directors. Directors are elected at general meetings of shareholders. The normal term of office of any director expires at the close of the annual general meeting of shareholders held with respect to the last fiscal year ended within two years after such director’s election to office.
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The board of directors appoints from among its members one or more representative directors, who have the authority individually to represent us in the conduct of our affairs. Mr. Satoshi Kobayashi and Mr. Patrick Gruhn are the representative directors of our Company. The board of directors may appoint from among its members a chairperson and a president, or one or more vice-presidents, senior managers, and executive managers of the board.
Our board of directors consists of seven directors. Our board of directors has determined that our outside directors, Masahiro Tominaga, Michael Hilmer, Brandon J. Williams and Koichi Goto, satisfy the “independence” requirements of the Nasdaq corporate governance rules and the rules and regulations of the SEC.
Company auditors (kansayaku)
We currently have one company auditor. As permitted under the Companies Act, we have elected to structure our corporate governance system as a company with a statutory auditor instead of board committees. Under the Companies Act and our amended articles of incorporation, we are required to have at least one company auditor. Company auditors are elected at general meetings of shareholders. The normal term of office of any company auditor expires at the close of the annual general meeting of shareholders held with respect to the last fiscal year ended within four years after such company auditor’s election to office. Our company auditors may, however, serve any number of consecutive terms. Company auditors may be removed by a special resolution of a general meeting of shareholders.
Our company auditors are not required to be certified public accountants. Our company auditors may not at the same time be directors, employees, or accounting advisors (kaikei sanyo) of our Company.
The function of company auditors is similar to that of independent directors, including those who are members of the audit committee, of a U.S. company. Each company auditor has a statutory duty to supervise the administration by the directors of our affairs, to examine the financial statements and business reports to be submitted by a representative director at the general meetings of shareholders and to prepare an audit report. They are obligated to participate in meetings of the board of directors and, if necessary, to express their opinion at such meetings, but are not entitled to vote. Our company auditors must inspect the proposals, documents, and any other materials to be submitted by our board of directors to the shareholders at the shareholders’ meeting. If a company auditor finds a violation of statutory regulations or our amended articles of incorporation, or another significant improper matter, such auditor must report those findings to the shareholders at the shareholders’ meeting.
Furthermore, if a company auditor believes that a director has engaged in, or is likely to engage in, misconduct or acts that are significantly improper, or that there has been a violation of statutory regulations or our amended articles of incorporation, the company auditor: (i) must report that fact to our board of directors; (ii) can demand that a director convene a meeting of our board of directors; and (iii) if no such meeting is convened in response to the demand, can convene the meeting under the company auditor’s own authority. If a director engages in, or is likely to engage in, an activity outside the scope of the objectives of our Company or otherwise in violation of laws or regulations or our amended articles of incorporation, and such act is likely to cause significant damage to our Company, then a company auditor can demand that the director cease such activity.
Our auditor has a statutory duty to prepare an audit report based on the audit reports issued by the individual company auditors and submit such audit reports to a relevant director and, in the case of audit reports related to financial statements, the independent auditors of our Company each year. A company auditor may note an opinion in an audit report issued by our board of company auditors, if the opinion expressed in such company auditor’s individual audit report is different from the opinion expressed in the audit report issued by our board of company auditors. Our board of company auditors is empowered to establish the audit principles, the method of examination by our company auditors of our affairs and financial position, and any other matters relating to the performance of our company auditors’ duties.
Additionally, our company auditors must represent our Company in: (i) any litigation between our Company and a director; (ii) dealing with shareholders’ demands seeking a director’s liability to our Company; and (iii) dealing with notices of litigation and settlement in a derivative suit seeking a director’s liability to our Company. A company auditor can file court actions relating to our Company within the authority of our company auditors, such as an action to nullify the incorporation of our Company, the issuance of shares, or a merger, or to cancel a resolution at a shareholders’ meeting.
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Limitation of Liability of Directors
Under the Companies Act and our amended articles of incorporation we may exempt, by resolution of the board of directors, our directors from liabilities to us arising in connection with their failure to execute their duties in good faith and without gross negligence, within the limits stipulated by applicable laws and regulations. In addition, our amended articles of incorporation provide that we may enter into agreements with our directors (excluding executive directors) to limit their respective liabilities to us arising in connection with a failure to execute their duties in good faith and without gross negligence to an amount stipulated in laws and regulations. We have obtained directors and officers liability insurance, which covers expenses, capped at a certain amount, that our directors and officers may incur in connection with their conduct as our directors or executive officers.
D. Employees
See “Item 4. Information on the Company—B. Business Overview—Employees.”
E. Share Ownership
The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Ordinary Shares as of the date of this Annual Report for:
| ● | each of our named executive officers and directors; |
| ● | all our named executive officers and directors as a group; and |
| ● | each person or entity (or group of affiliated persons or entities) known by us to be the beneficial owner of 5% or more of our Ordinary Shares. |
Beneficial ownership includes voting or investment power with respect to the Ordinary Shares. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership of each listed person is based on 40,570,692 Ordinary Shares outstanding and 1,020,000 Ordinary Shares subject to options that are currently exercisable.
Information with respect to beneficial ownership has been furnished by each named executive officer, director, or beneficial owner of 5% or more of our Ordinary Shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants, or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this Annual Report are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person.
| Ordinary Shares Beneficially Owned | ||||||||
| Number | Percent | |||||||
| Directors and Executive Officers(1): | ||||||||
| Satoshi Kobayashi(2) | 7,938,510 | 19.57 | % | |||||
| Patrick Gruhn(3) | 1,294,860 | 3.19 | % | |||||
| Masahiro Tominaga | — | — | ||||||
| Michael Hilmer(4) | 20,000 | * | ||||||
| Brandon J. Williams | — | — | ||||||
| Koichi Goto | 25,000 | * | ||||||
| Matthew Nicoletti(5) | 138,590 | * | ||||||
| Jason D. Sawyer | — | — | ||||||
| All directors and executive officers as a group (8 individuals): | 9,416,960 | 23.21 | % | |||||
| 5% Shareholders: | ||||||||
| Satoshi Kobayashi(2) | 7,938,510 | 19.57 | % | |||||
| Themis Capital GK(6) | 4,000,000 | 9.86 | % | |||||
| * | Represents less than 1% of the number of Ordinary Shares outstanding. |
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Notes:
| (1) | Unless otherwise indicated, the business address of each of the individuals is 5-7-11, Ueno, Taito-ku, Tokyo, Japan. |
| (2) | Represents (i) 3,938,510 Ordinary Shares held personally, and (ii) 4,000,000 Ordinary Shares held by Themis Capital GK (合同会社テミスキャピタル), which is 100% owned by Satoshi Kobayashi. |
| (3) | The aggregate number of Ordinary Shares beneficially owned by Patrick Gruhn represents 1,294,860 outstanding Ordinary Shares held personally. |
| (4) | Represents 20,000 Ordinary Shares underlying 4,000 ADSs purchased by Mr. Hilmer. |
| (5) | Represents an aggregate of 277,180 Ordinary Shares held through One9, LLC, a Florida limited liability company, of which Mr. Nicoletti disclaims beneficial ownership of 50%. |
| (6) | Represents 4,000,000 ordinary shares held by Themis Capital GK (合同会社テミスキャピタル), which is 100% owned by Satoshi Kobayashi. Its business address is 5-7-11, Ueno, Taito-ku, Tokyo, Japan. |
On May 16, 2024, we effected the change to the ratio of our ADSs to Ordinary Shares, from one (1) ADS representing one (1) Ordinary Share to one (1) ADS representing five (5) Ordinary Shares. Such change has no impact on an ADS holder’s proportional equity interest in the Company.
On October 15, 2025, the Company completed the first closing of a private placement offering (the “First Closing”) pursuant to Securities Purchase Agreements dated October 10, 2025 (the “Securities Purchase Agreements”) with certain investors (the “First Closing Investors”), whereby the Company sold and issued: (i) pre-funded warrants to purchase up to an aggregate of 2,403,847 American Depositary Shares (“ADSs”) of the Company at an exercise price of $0.0005 per ADS, and (ii) ordinary warrants to purchase up to an aggregate of 2,403,847 ADSs at an exercise price of $2.72 per ADS, for an aggregate purchase price of $5,000,001.76. The units were sold at $2.08 per unit. The Company received net cash proceeds of approximately $4.33 million after deducting placement agent fees and other expenses. Alexander Capital L.P. acted as placement agent and received a cash fee of 8% of gross proceeds and a warrant to purchase up to 96,154 ADSs at $2.08 per ADS.
On November 18, 2025, the Company completed the second closing of the private placement offering (the “Second Closing”) pursuant to the Securities Purchase Agreements, whereby the Company sold and issued to the Second Closing Investors: (i) pre-funded warrants to purchase up to an aggregate of 1,000,000 ADSs at an exercise price of $0.0005 per ADS, and (ii) ordinary warrants to purchase up to an aggregate of 1,000,000 ADSs (the “Ordinary Warrants”) at an exercise price of $2.72 per ADS, for an aggregate gross purchase price of $2,080,000. The Ordinary Warrants are immediately exercisable and will expire on November 17, 2030. In connection with the Second Closing, Alexander Capital received a cash fee of 8% of gross proceeds and warrants to purchase up to 40,000 ADSs at $2.08 per ADS.
On December 28, 2025, the Company entered into the Share Exchange Agreement with Perpetual Markets Ltd. (“Perpetual Markets”) and its shareholders (the “Perpetual Shareholders”). On January 20, 2026, the Company consummated the transactions contemplated by the Share Exchange Agreement (the “Perpetual Markets Acquisition”), pursuant to which the Company acquired 100% of the outstanding shares of Perpetual Markets. As consideration for the acquisition, the Company paid an upfront cash consideration of US$3.5 million at closing, with the remaining US$11.5 million of consideration to be satisfied through: (i) the allocation of certain cash proceeds received from the exercise of outstanding warrants, up to an aggregate cap of US$7.5 million (the “Financing Warrants Consideration”); and (ii) the proceeds of a future capital raise by the Company (the “Capital Raise Consideration”). The timing, structure, and other terms of the Capital Raise Consideration are subject to further agreement between the parties and satisfaction of specified conditions. In addition to the cash consideration, the Company will also issue equity consideration to the Perpetual Shareholders, which will include (i) the issuance of ADSs of the Company, in an amount equal to 19.99% of the Company’s issued and outstanding ADSs as of January 20, 2026, and (ii) the issuance of 53,051,000 Series P preferred shares of the Company, which, if and as converted into Ordinary Shares on a one-for-one basis, would be equivalent to 10,610,200 ADSs, subject to receipt of the required shareholder approval to provide such conversion and voting rights. As of May 1, 2026, the Company completed the issuance of equity consideration shares to the Perpetual Shareholders pursuant to the Share Exchange Agreement.
In addition, on January 20, 2026, the Company issued a warrant to Sigma9 Capital Ltd. (“Sigma9”) to purchase an aggregate of 2,500,000 ADSs of the Company (the “Sigma9 Warrants”). The Sigma9 Warrant is exercisable for one ADS of the Company at an exercise price of US$5.00 per ADS, has a term of three years from the date of grant, and includes customary anti-dilution and adjustment provisions.
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As of April 30, 2026, approximately 60.3% of our issued and outstanding Ordinary Shares were held in the United States by one record holder, the Bank of New York Mellon.
To our knowledge, the Company is not directly or indirectly owned or controlled by another corporation(s), by any foreign government, or by any other natural or legal person(s) severally or jointly.
F. Disclosure of a registrant’s action to recover erroneously awarded compensation
Not applicable.
Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
B. Related Party Transactions
The relationship and the nature of related party transactions are summarized as follows:
| Name of Related Party | Relationship to Our Company | |
| Satoshi Kobayashi | Our Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director |
On October 1, 2019, our Company entered into an office space lease agreement with a third party, pursuant to which our Company promised to pay JPY696,250 (US$5,120) per month to lease our office space. Mr. Satoshi Kobayashi is a guarantor for the rental payment. The lease automatically renews for successive two-year terms, and the current term expires on September 30, 2027.
On April 16, 2020, our Company entered into a second loan agreement with Kiraboshi Bank, pursuant to which our Company borrowed JPY50,000,000 (US$317,380) at an annual interest rate of 1.6%. Mr. Satoshi Kobayashi was a guarantor for the loan. The maturity date for such loan is March 31, 2030. As of April 30, 2024, the outstanding principal balance of such loan was JPY29,567,000 (US$187,679). As of the date of this Annual Report, the outstanding principal balance of such loan is JPY24,563,000 (US$172,214).
On July 21, 2026, we entered into a loan agreement with Mr. Satoshi Kobayashi, our Co-Chief Executive Officer, pursuant to which we borrowed JPY13,000,000 (US$85,774) from Mr. Kobayashi. The loan was interest free and unsecured, with a maturity date of October 31, 2026, and has been repaid in full as of the date of this Annual Report . In addition, we borrowed JPY27,000,000 (US$178,147) from Mr. Kobayashi as working capital, which was ratified by our board of directors on August 20, 2026, with a maturity date of October 30, 2026. As of the date of this Annual Report, the outstanding principal balance of this borrowing is JPY27,000,000 (US$178,147).
As of April 30, 2026, the Company had JPY 216,004,619 (USD 1,378,811) in amounts owing to Patrick Gruhn, included in loans to related parties, noncurrent in the accompanying consolidated balance sheet. During the year ended April 30, 2026, Patrick Gruhn advanced the Company an aggregate JPY 59,531,661 (USD 380,005) and the Company repaid amounts of JPY 30,016,490 (USD 191,603)
We own real property used for office space located at 16455 William Foss Road, La Pine, OR 97739. The property was transferred by our co-CEO Patrick Gruhn to Kephas Corporation, our wholly owned subsidiary, in December 2025. The property was valued at $480,000 at the time of transfer.
C. Interests of Experts and Counsel
Not applicable.
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Item 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended financial statements filed as part of this Annual Report . See “Item 18. Financial Statements.”
Legal Proceedings
Certain shareholders of the Company filed a lawsuit in the Tokyo District Court against the Company and Mr. Satoshi Kobayashi, the Company’s Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director. The complaint, which is dated December 18, 2023, was served on the Company and Mr. Kobayashi on January 12, 2024. The plaintiffs alleged that Mr. Kobayashi violated Article 709 of the Japanese Civil Code by intentionally delaying or misrepresenting the procedures necessary for the sale of shares, thereby unfairly depriving the plaintiffs of the opportunity to sell their shares on the Nasdaq market at a higher price following the Company’s initial public offering, and that the Company shall be liable for damages caused by Mr. Kobayashi in the discharge of his duties as the Company’s Representative Director under Article 350 of the Japanese Companies Act. The plaintiffs sought monetary damages in the total amount of $2,925,747, plus interest and costs. On July 17, 2026, a judicial settlement was reached before the Tokyo District Court resolving all claims between the plaintiffs and the defendants. The settlement payment of JPY20 million was completed on July 27, 2026, the parties confirmed that no further obligations or claims exist between them, and the provisional attachment orders have been withdrawn. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of our business. Any litigation or other legal or administrative proceedings, regardless of the outcome, are likely to result in substantial costs and a diversion of our resources, including our management’s time and attention.
Alexander Capital, L.P. filed a lawsuit against our Company in the United States District Court for the Southern District of New York, styled Alexander Capital, L.P. v. Earlyworks Co. Ltd., Case No. 1:26-cv-03256. The complaint, which was filed April 21, 2026, alleges breach of contract claims against our Company related to Alexander Capital’s engagement as our Company’s Placement Agent in connection with a private investment in public equity (PIPE) transaction that occurred in two tranches in October and November of 2025, respectively. We are currently in discussions to settle the lawsuit.
Our U.S. subsidiary Kephas Corporation is involved in two pending employment related lawsuits, one filed by a former employee in April 2026 alleging unpaid wages, and a second filed by a former employee in May 2026 alleging wrongful termination.
Dividend Policy
We currently intend to retain any future earnings to finance the development and expansion of our businesses and, therefore, do not intend to pay any cash dividends in the foreseeable future. Since our inception, we have not declared or paid any cash dividends on our shares. Any decision to pay dividends in the future will be subject to a number of factors, including our financial condition, results of operations, the level of our retained earnings, capital demands, general business conditions, and other factors our board of directors may deem relevant. Accordingly, we cannot give any assurance that any dividends may be declared and paid in the future.
If declared, holders of our outstanding shares on a dividend record date will be entitled to the full dividend declared without regard to the date of issuance of the shares or any subsequent transfer of the shares. Payment of declared annual dividends in respect of a particular year, if any, will be made in the following year after approval by our shareholders at the annual general meeting of shareholders, subject to certain provisions of our amended articles of incorporation and the Companies Act. Any dividend we declare will be paid by the depositary bank to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders of our shares, to the extent permitted by applicable law and regulations, less the fees and expenses payable under the deposit agreement.
B. Significant Changes
Except as disclosed elsewhere in this Annual Report, we have not experienced any significant changes since the date of our audited financial statements included in this Annual Report.
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Item 9. THE OFFER AND LISTING
A. Offer and Listing Details.
Our ADSs are listed on the Nasdaq Capital Market under the symbol “PDC.” Holders of our ADSs should obtain current market quotations for their ADSs.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs are listed on the Nasdaq Capital Market under the symbol “PDC.” Holders of our ADSs should obtain current market quotations for their ADSs.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We incorporate by reference into this Annual Report the description of differences in corporate laws contained in our registration statement on Form F-1 (File No. 333-269068), as amended, initially filed with the SEC on December 30, 2022. Also see Exhibit 2.5 attached to this Annual Report.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in this Annual Report.
D. Exchange Controls
Foreign Exchange Regulations
FEFTA and related regulations regulate certain transactions involving a “Non-Resident of Japan” or a “Foreign Investor,” including “inward direct investments” by Foreign Investors, and payments from Japan to foreign countries or by residents of Japan to Non-Residents of Japan.
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“Non-Residents of Japan” are defined as individuals who are not residents in Japan and corporations whose principal offices are located outside of Japan. Generally, branches and other offices of Japanese corporations which are located outside of Japan are regarded as Non-Residents of Japan, and branches and other offices of non-resident corporations which are located within Japan are regarded as residents of Japan.
“Foreign Investors” are defined as:
| (i) | individuals who are Non-Residents of Japan; |
| (ii) | entities which are organized under the laws of foreign countries or whose principal offices are located outside of Japan; |
| (iii) | companies of which 50% or more of their voting rights are held by individuals who are Non-Residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan; |
| (iv) | partnerships engaging in investment activities and investment limited partnerships (including partnerships formed under the laws of foreign countries) which satisfy one of the following conditions: |
(a) 50% or more of contributions to the partnership were made by (i) individuals who are Non-Residents of Japan, (ii) entities which are organized under the laws of foreign countries or whose principal offices are located outside of Japan, (iii) companies of which 50% or more of their voting rights are held by individuals who are Non-Residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan, (iv) entities a majority of whose officers, or officers having the power of representation, are individuals who are Non-Residents of Japan, or (v) partnerships a majority of whose executive partners fall within items (i) through (iv) above; and
(b) a majority of the executive partners of the partnership are (A) any persons or entities who fall within items (i) through (v) above, (B) any partnerships to which 50% or more of contribution were made by persons or entities who fall within items (i) through (v) above, or (C) limited partnerships a majority of whose executive partners fall within Non-Residents of Japan, persons or entities who fall within (A) or (B), or any officers of entities which fall within (A) or (B); and
| (v) | entities, a majority of whose officers are individuals who are Non-Residents of Japan. |
Under FEFTA and related regulations, dividends paid on, and the proceeds of sales in Japan of, shares held by Non-Residents of Japan may in general be converted into any foreign currency and repatriated abroad.
Under FEFTA, among other triggering events, a Foreign Investor who desires to acquire shares in a Japanese company which is not listed on any stock exchange in Japan, is subject to a prior filing requirement, regardless of the acquired amount of shares, if such Japanese company engages any business in certain industries related to the national security. Such industries include, among other things, manufacturing in relation to weapons, aircraft, space, and nuclear power, as well as agriculture, fishery, mining, and utility service. Additionally, due to today’s growing awareness of cybersecurity, the recent amendment to FEFTA expanded the scope of the prior filing requirement, broadly covering industries related to data processing businesses and information and communication technologies service. Since our software services could potentially involve custom software services and miscellaneous fixed telecommunications, direct acquisition of our Ordinary Shares, rather than ADSs, by a Foreign Investor could be subject to the prior filing requirement under FEFTA.
A Foreign Investor wishing to acquire or hold our Ordinary Shares directly will be required to make a prior filing with the relevant government authorities through the Bank of Japan and wait until clearance for the acquisition is granted by the applicable governmental authorities. Without such clearance, the Foreign Investor will not be permitted to acquire or hold our Ordinary Shares directly. Once clearance is obtained, the Foreign Investor may acquire shares in the amount indicated in the filing any time within six months of the filing. While the standard waiting period to obtain clearance is 30 days, the waiting period could be expedited to two weeks, at the discretion of the applicable governmental authorities, depending on the level of potential impact to national security.
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In addition to the prior filing requirement above, when a Foreign Investor who completed a prior filing and received clearance has acquired shares in accordance with the filed information, such Foreign Investor will be required to make a post-acquisition notice filing to report the completed acquisition. Such post-acquisition notice filing must be made no later than 45 days after the acquisition of the shares.
Under FEFTA, in each case where a resident of Japan receives a single payment of more than JPY30 million from a Non-Resident of Japan for a transfer of shares in a Japanese company, such resident of Japan is required to report each receipt of payment to the Minister of Finance of Japan.
E. Taxation
Japanese Taxation
The following is a general summary of the principal Japanese tax consequences (limited to national tax) to owners of our Ordinary Shares, in the form of Ordinary Shares or ADSs, who are non-resident individuals of Japan or who are non-Japanese corporations without a permanent establishment in Japan, collectively referred to in this section as non-resident holders. The statements below regarding Japanese tax laws are based on the laws and treaties in force and as interpreted by the Japanese tax authorities as of the date of this Annual Report , and are subject to changes in applicable Japanese laws, tax treaties, conventions, or agreements, or in the interpretation of them, occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership, and disposition of our Ordinary Shares, including, specifically, the tax consequences under Japanese law, under the laws of the jurisdiction of which they are resident and under any tax treaty, convention, or agreement between Japan and their country of residence, by consulting their own tax advisors.
For the purpose of Japanese tax law and the tax treaty between the United States and Japan, a U.S. holder of ADSs will generally be treated as the owner of the Ordinary Shares underlying the ADSs evidenced by the ADRs.
Generally, a non-resident holder of Ordinary Shares or ADSs will be subject to Japanese income tax collected by way of withholding on dividends (meaning in this section distributions made from our retained earnings for the Companies Act purposes) we pay with respect to our Ordinary Shares and such tax will be withheld prior to payment of dividends. Share splits generally are not subject to Japanese income or corporation taxes.
In the absence of any applicable tax treaty, convention, or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of the Japanese withholding tax applicable to dividends paid by Japanese corporations on their Ordinary Shares to non-resident holders is generally 20.42% (or 20% for dividends due and payable on or after January 1, 2038) under Japanese tax law. However, with respect to dividends paid on listed shares issued by a Japanese corporation (such as Ordinary Shares or ADSs) to non-resident holders, other than any individual shareholder who holds 3% or more of the total number of shares issued by the relevant Japanese corporation (to whom the aforementioned withholding tax rate will still apply), the aforementioned withholding tax rate is reduced to (i) 15.315% for dividends due and payable up to and including December 31, 2037 and (ii) 15% for dividends due and payable on or after January 1, 2038. The withholding tax rates described above include the special reconstruction surtax (2.1% multiplied by the original applicable withholding tax rate, i.e., 15% or 20%, as the case may be), which is imposed during the period from and including January 1, 2013 to and including December 31, 2037, to fund the reconstruction from the Great East Japan Earthquake.
If distributions were made from our capital surplus, rather than retained earnings, for the Companies Act purposes, the portion of such distributions in excess of the amount corresponding to a pro rata portion of return of capital as determined under Japanese tax laws would be deemed dividends for Japanese tax purposes, while the rest would be treated as return of capital for Japanese tax purposes. The deemed dividend portion, if any, would generally be subject to the same tax treatment as dividends as described above, and the return of capital portion would generally be treated as proceeds derived from the sale of Ordinary Shares and subject to the same tax treatment as sale of our Ordinary Shares as described below. Distributions made in consideration of repurchase by us of our own shares or in connection with certain reorganization transactions will be treated substantially in the same manner.
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Japan has income tax treaties whereby the withholding tax rate (including the special reconstruction surtax) may be reduced, generally to 15%, for portfolio investors, with, among others, Belgium, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Singapore, and Spain, while the income tax treaties with, among others, Australia, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States generally reduce the withholding tax rate to 10% for portfolio investors. In addition, under the income tax treaty between Japan and the United States, dividends paid to pension funds which are qualified U.S. residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the carrying on of a business, directly or indirectly, by the pension funds. Similar treatment is applicable to dividends paid to pension funds under the income tax treaties between Japan and the United Kingdom, the Netherlands, and Switzerland. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty shall be available when such maximum rate is below the rate otherwise applicable under the Japanese tax law referred to in the second preceding paragraph with respect to the dividends to be paid by us on our Ordinary Shares or the ADSs.
Non-resident holders of our Ordinary Shares who are entitled under an applicable tax treaty to a reduced rate of, or exemption from, Japanese withholding tax on any dividends on our Ordinary Shares, in general, are required to submit, through the withholding agent to the relevant tax authority prior to the payment of dividends, an Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends together with any required forms and documents. A standing proxy for a non-resident holder of our Ordinary Shares or the ADSs may be used in order to submit the application on a non-resident holder’s behalf. In this regard, a certain simplified special filing procedure is available for non-resident holders to claim treaty benefits of reduction of or exemption from Japanese withholding tax, by submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stock, together with any required forms or documents. If the depositary needs investigation to identify whether any non-resident holders of ADSs are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax the depositary or its agent submits an application form before payment of dividends so that the withholding cannot be made in connection with such holders for eight months after the record date concerning such payment of dividends. If it is proved that such holders are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax within the foregoing eight-month period, the depositary or its agent submits another application form together with certain other documents so that such holder can be subject to exemption from or reduction of Japanese withholding tax. To claim this reduced rate or exemption, such non-resident holder of ADSs will be required to file a proof of taxpayer status, residence, and beneficial ownership, as applicable, and to provide other information or documents as may be required by the depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty), as the case may be, by complying with a certain subsequent filing procedure. We do not assume any responsibility to ensure withholding at the reduced treaty rate, or exemption therefrom, for shareholders who would be eligible under an applicable tax treaty but who do not follow the required procedures as stated above.
Gains derived from the sale of our Ordinary Shares or the ADSs outside Japan by a non-resident holder that is a portfolio investor will generally not be subject to Japanese income or corporation taxes. Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired from another individual our Ordinary Shares or the ADSs as a legatee, heir, or donee, even if none of the acquiring individual, the decedent, or the donor is a Japanese resident.
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United States Federal Income Taxation
WE URGE POTENTIAL PURCHASERS OF THE ADSS OR OUR ORDINARY SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING, AND DISPOSING OF THE ADSS OR OUR ORDINARY SHARES.
The following brief summary does not address the tax consequences to any particular investor or to persons in special tax situations such as:
| ● | banks; |
| ● | financial institutions; |
| ● | insurance companies; |
| ● | regulated investment companies; |
| ● | real estate investment trusts; |
| ● | broker-dealers; |
| ● | persons that elect to mark their securities to market; |
| ● | U.S. expatriates or former long-term residents of the U.S.; |
| ● | governments or agencies or instrumentalities thereof; |
| ● | tax-exempt entities; |
| ● | persons liable for alternative minimum tax; |
| ● | persons holding our Ordinary Shares or the ADSs as part of a straddle, hedging, conversion or integrated transaction; |
| ● | persons that actually or constructively own 10% or more of our voting power or value (including by reason of owning our Ordinary Shares or the ADSs); |
| ● | persons who acquired our Ordinary Shares or the ADSs pursuant to the exercise of any employee share option or otherwise as compensation; |
| ● | persons holding our Ordinary Shares or the ADSs through partnerships or other pass-through entities; |
| ● | beneficiaries of a Trust holding our Ordinary Shares or the ADSs; or |
| ● | persons holding our Ordinary Shares or the ADSs through a trust. |
The brief summary set forth below is addressed only to U.S. Holders (defined below) that purchase Ordinary Shares or ADSs. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares or the ADSs.
Material Tax Consequences Applicable to U.S. Holders of the ADSs or Ordinary Shares
The following brief summary sets forth the material U.S. federal income tax consequences related to the ownership and disposition of the ADSs or our Ordinary Shares. This description does not deal with all possible tax consequences relating to ownership and disposition of the ADSs or our Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences under non-U.S. tax laws, state, local, and other tax laws.
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The following brief description applies only to U.S. Holders (defined below) that hold ADSs or Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this Annual Report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this Annual Report, as well as judicial and administrative interpretations thereof available on or before such date, and the income tax treaty between the United States and Japan (the “Tax Convention”). All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.
The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of ADSs or Ordinary Shares and you are, for U.S. federal income tax purposes,
| ● | an individual who is a citizen or resident of the United States; |
| ● | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia; |
| ● | an estate whose income is subject to U.S. federal income taxation regardless of its source; or |
| ● | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
If a partnership (or other entities treated as a partnership for United States federal income tax purposes) is a beneficial owner of the ADSs or our Ordinary Shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding the ADSs or our Ordinary Shares are urged to consult their tax advisors regarding an investment in the ADSs or our Ordinary Shares.
An individual is considered a resident of the U.S. for federal income tax purposes if he or she meets either the “Green Card Test” or the “Substantial Presence Test” described as follows:
The Green Card Test: You are a lawful permanent resident of the United States, at any time, if you have been given the privilege, according to the immigration laws of the United States, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services issued you an alien registration card, Form I-551, also known as a “green card.”
The Substantial Presence Test: If an alien is present in the United States on at least 31 days of the current calendar year, he or she will (absent an applicable exception) be classified as a resident alien if the sum of the following equals 183 days or more (See §7701(b)(3)(A) of the Internal Revenue Code and related Treasury Regulations):
| 1. | The actual days in the United States in the current year; plus |
| 2. | One-third of his or her days in the United States in the immediately preceding year; plus |
| 3. | One-sixth of his or her days in the United States in the second preceding year. |
This summary is based, in part, upon the representations made by the depositary to us and assumes that the deposit agreement for the ADSs, and all other related agreements, will be performed in accordance with their terms.
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Treatment of the ADSs
U.S. Holders of ADSs generally will be treated for U.S. federal income tax purposes as holding our Ordinary Shares represented by the ADSs. No gain or loss will be recognized on an exchange of our Ordinary Shares for ADSs or an exchange of ADSs for our Ordinary Shares if the depositary has not taken any action inconsistent with the material terms of the deposit agreement for the ADSs or the U.S. Holder’s ownership of the underlying Ordinary Shares. A U.S. Holder’s tax basis in the Ordinary Shares received in exchange for ADSs will be the same as its tax basis in the ADSs, and the holding period in the shares will include the holding period in the ADSs.
Taxation of Dividends and Other Distributions on the ADSs or Our Ordinary Shares
Subject to the application of the passive foreign investment company rules discussed below, a U.S. Holder generally will recognize ordinary dividend income in an amount equal to the amount of any cash and the value of any property we distribute as a distribution with respect to the U.S. Holder’s Ordinary Shares (or ADSs), to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, when the distribution is received (or when received by the depositary in the case of ADSs). We do not maintain calculations of earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that distributions paid with respect to our Ordinary Shares or the ADSs generally will be treated as dividend income. Dividends will not be eligible for the dividends received deduction generally allowable to U.S. corporations. Dividends paid on our Ordinary Shares or the ADSs will be treated as “qualified dividends” taxable at preferential rates, if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the IRS has approved for the purposes of the qualified dividend rules, (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC, and (iii) the U.S. Holder satisfies certain holding period and other requirements. The Tax Convention has been approved for the purposes of the qualified dividend rules and we believe we will be eligible for the benefits of the Tax Convention. We did not issue any dividends during the fiscal year ended April 30, 2026.
Dividend income will include any amounts withheld in respect of Japanese taxes, and will be treated as foreign-source income for foreign tax credit purposes. Subject to applicable limitations, some of which vary depending upon the U.S. Holder’s circumstances, Japanese taxes withheld from dividends on our Ordinary Shares or the ADSs generally will be creditable against the U.S. Holder’s U.S. federal income tax liability to the extent such taxes do not exceed any reduced withholding rate available under the Tax Convention. The rules governing foreign tax credits are complex, and U.S. Holders should consult their tax advisors regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, a U.S. Holder may, at its election, deduct creditable foreign taxes, including Japanese taxes, in computing its taxable income, subject to applicable limitations. Generally, an election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid by the U.S. Holder in the taxable year.
Dividends paid in a currency other than U.S. dollars will be includable in income in a U.S. dollar amount based on the exchange rate in effect on the date of receipt (or the date of the depositary’s receipt in the case of ADSs), whether or not the payment is converted into U.S. dollars at that time. A U.S. Holder should not recognize any foreign currency gain or loss in respect of the distribution if the foreign currency is converted into U.S. dollars on the date the distribution is received. If the foreign currency is not converted into U.S. dollars on the date of receipt, however, gain or loss may be recognized upon a subsequent sale or other disposition of the foreign currency. The foreign currency gain or loss (if any) generally will be treated as ordinary income or loss to the U.S. Holder and generally will be treated as U.S.-source income or loss, which may be relevant in calculating the U.S. Holder’s foreign tax credit limitation.
Taxation of Dispositions of ADSs or Ordinary Shares
Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the ADSs or Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADSs or Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.
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Passive Foreign Investment Company (“PFIC”) Consequences
A non-U.S. corporation is considered a PFIC, as defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:
| ● | at least 75% of its gross income for such taxable year is passive income; or |
| ● | at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income (the “asset test”). |
Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we raised in our initial public offering will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based on the market value of the ADSs or our Ordinary Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets on any particular quarterly testing date for purposes of the asset test.
Based on our operations and the composition of our assets, we do not believe we were a PFIC for our 2026 taxable year. However, it is possible that, for our 2027 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year. If we are a PFIC for your taxable year(s) during which you hold ADSs or Ordinary Shares, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ADSs or Ordinary Shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or Ordinary Shares will be treated as an excess distribution. Under these special tax rules:
| ● | the excess distribution or gain will be allocated ratably over your holding period for the ADSs or Ordinary Shares; |
| ● | the amount allocated to your current taxable year, and any amount allocated to any of your taxable year(s) prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and |
| ● | the amount allocated to each of your other taxable year(s) will be subject to the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or Ordinary Shares cannot be treated as capital, even if you hold the ADSs or Ordinary Shares as capital assets.
A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election under Section 1296 of the US Internal Revenue Code for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) ADSs or Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the excess, if any, of the fair market value of the ADSs or Ordinary Shares as of the close of such taxable year over your adjusted basis in such ADSs or Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess, if any, of the adjusted basis of the ADSs or Ordinary Shares over their fair market value as of the close of the taxable year. Such ordinary loss, however, is allowable only to the extent of any net mark-to-market gains on the ADSs or Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the ADSs or Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or Ordinary Shares. Your basis in the ADSs or Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under “—Taxation of Dividends and Other Distributions on the ADSs or our Ordinary Shares” generally would not apply.
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The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the Nasdaq Capital Market. If the ADSs or Ordinary Shares continue to be regularly traded on the Nasdaq Capital Market and if you are a holder of ADSs or Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC.
Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election under Section 1295(b) of the US Internal Revenue Code with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. The qualified electing fund election, however, is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently prepare or provide the information that would enable you to make a qualified electing fund election. If you hold ADSs or Ordinary Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year and provide certain annual information regarding such ADSs or Ordinary Shares, including regarding distributions received on the ADSs or Ordinary Shares and any gain realized on the disposition of the ADSs or Ordinary Shares.
If you do not make a timely “mark-to-market” election (as described above), and if we were a PFIC at any time during the period you hold the ADSs or our Ordinary Shares, then such ADSs or Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless you make a “purging election” for the year we cease to be a PFIC. A “purging election” creates a deemed sale of such ADSs or Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value of the ADSs or Ordinary Shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your ADSs or Ordinary Shares for tax purposes.
IRC Section 1014(a) provides for a step-up in basis to the fair market value for the ADSs or our Ordinary Shares when inherited from a decedent that was previously a holder of the ADSs or our Ordinary Shares. However, if we are determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) the ADSs or our Ordinary Shares, or a mark-to-market election and ownership of those ADSs or Ordinary Shares are inherited, a special provision in IRC Section 1291(e) provides that the new U.S. Holder’s basis should be reduced by an amount equal to the Section 1014 basis minus the decedent’s adjusted basis just before death. As such if we are determined to be a PFIC at any time prior to a decedent’s passing, the PFIC rules will cause any new U.S. Holder that inherits the ADSs or our Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will receive a carryover basis in those ADSs or Ordinary Shares.
You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in the ADSs or our Ordinary Shares and the elections discussed above.
Information Reporting and Backup Withholding
Dividend payments with respect to the ADSs or our Ordinary Shares and proceeds from the sale, exchange or redemption of the ADSs or our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.
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Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. Transactions effected through certain brokers or other intermediaries, however, may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.
Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to the ADSs or our Ordinary Shares, subject to certain exceptions (including an exception for ADSs or Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ADSs or Ordinary Shares. Failure to report such information could result in substantial penalties. You should consult your own tax advisor regarding your obligation to file a Form 8938.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We have previously filed with the SEC our registration statements on Form F-1 (File No. 333-269068), as amended. We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16(b) and Section 16(c) of the Exchange Act. However, effective March 18, 2026, our directors and officers are subject to the reporting requirements of Section 16(a) of the Exchange Act.
I. Subsidiary Information
For information about our subsidiary, see “Item 4. Information on the Company—A. History and Development of the Company.”
J. Annual Report to Security Holders
Not applicable.
Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Concentration of Credit Risk
Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with financial institutions with high credit ratings and quality.
We conduct credit evaluations of customers, and generally do not require collateral or other security from our customers. We establish an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
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Liquidity Risk
Our policy is to regularly monitor our liquidity requirements and our compliance with lending covenants, to ensure that we maintain sufficient reserves of cash and readily realizable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.
Inflation
Inflation does not materially affect our business or the results of our operations.
Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
The Bank of New York Mellon, as depositary, registers and delivers ADSs. Each ADS represents five Ordinary Shares (or a right to receive five Ordinary Shares) deposited with MUFG Bank Ltd., as custodian for the depositary in Japan. Each ADS also represents any other securities, cash, or other property that may be held by the depositary. The deposited shares together with any other securities, cash, or other property held by the depositary are referred to as the deposited securities. The depositary’s principal executive office at which the ADSs will be administered is located at 240 Greenwich Street, New York, New York 10286.
The form of deposit agreement for the ADSs and the form of ADRs that represents an ADS have been incorporated by reference as exhibits to this Annual Report.
Fees and Expenses
| Persons depositing or withdrawing shares or ADS holders must pay: | For: | |
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | |
| $.05 (or less) per ADS | Any cash distribution to ADS holders | |
| A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders | |
| $.05 (or less) per ADS per calendar year | Depositary services | |
| Registration or transfer fees | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | |
| Expenses of the depositary | Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)
Converting foreign currency to U.S. dollars | |
| Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | As necessary | |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary |
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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary, or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers, or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads, or commissions.
The depositary may convert currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary. Where the depositary converts currency itself or through any of its affiliates, the depositary acts as principal for its own account and not as agent, advisor, broker, or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made by the depositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to ADS holders, and the depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate. In certain instances, the depositary may receive dividends or other distributions from us in U.S. dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by us and, in such cases, the depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither it nor we will be liable for any direct or indirect losses associated with the rate.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
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Part II
Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
See “Item 10. Additional Information” for a description of the rights of securities holders, which remain unchanged.
Use of Proceeds
This “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-291781), which was declared effective by the SEC on December 4, 2025 (the “Registration Statement”). The Registration Statement relates to the public offering by the selling shareholders of up to an aggregate of 6,943,848 ADSs. The Company did not receive any of the proceeds from the sale of such ADSs by the selling shareholders.
Item 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our Co-Chief Executive Officers and Interim Chief Financial Officer has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our management has concluded that, as of April 30, 2026, our disclosure controls and procedures were not effective in certain respects, primarily due to the material weakness in our internal controls, as discussed below, to ensure that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers and interim Chief Financial Officer, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered Public Accounting Firm
This Annual Report includes a report of management’s assessment regarding internal control over financial reporting.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining internal control over financial reporting (“ICFR”) as defined in Rule 13a-15(f) under the Exchange Act. Management evaluated the effectiveness of our ICFR as of April 30, 2026 based on the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on this evaluation, management concluded that our ICFR was not effective as of April 30, 2026. In particular, the material weakness identified in the prior fiscal year ended April 30, 2025—namely, insufficient financial reporting and accounting personnel to formalize, design, implement and operate key controls to report in accordance with U.S. GAAP and SEC reporting requirements—has not been fully remediated as of April 30, 2026.
We also identified a further material weakness related to our SEC filing approval procedures during the fiscal year ended April 30, 2026. This weakness arose as a result of personnel turnover, whereby relevant roles and responsibilities had not been properly assessed and assigned following the changes in management. To remediate this weakness, management is strengthening formal review-and-approval controls for future SEC submissions, together with recruiting additional qualified personnel with relevant U.S. GAAP and SEC reporting experience.
80
Changes in Internal Control over Financial Reporting
Management is continuing to remediate the material weaknesses by appointing a Chief Financial Officer with relevant U.S. GAAP and SEC reporting experience, hiring additional qualified finance and accounting personnel, and implementing enhanced internal control procedures, which are being tested for design and operating effectiveness. In 2026, we will continue to implement additional measures to remediate the existing material weaknesses as discussed above. However, we cannot assure you that we will remediate our material weakness in a timely manner. Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 16. [RESERVED]
Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Under the Companies Act, we have elected to structure our corporate governance system as a company with a statutory auditor and therefore do not have an audit committee. The function of our company auditor is similar to that of independent directors, including those who are members of the audit committee of a U.S. public company. Our company auditor satisfies the requirements of Rule 10A-3 under the Exchange Act.
Item 16B. CODE OF ETHICS
Our board of directors has adopted a code of business conduct and ethics, which is applicable to all of our directors and employees. Our code of business conduct and ethics has been attached as Exhibit 11.1 to this Annual Report .
Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered and billed by WWC, P.C., our independent registered public accounting firm for the periods indicated.
| For the Fiscal Years Ended April 30, | ||||||||||||
| 2026 | 2025 | 2024 | ||||||||||
| Audit fees | $ | 150,000 | $ | 160,000 | $ | 166,428 | ||||||
| Audit-Related fees | - | - | - | |||||||||
| Tax fees | - | - | - | |||||||||
| All other fees | - | - | - | |||||||||
| Total | $ | 150,000 | $ | 160,000 | $ | 166,428 | ||||||
The policy of our company auditor is to pre-approve all audit and non-audit services provided by our independent registered public accounting firm, including audit services, audit-related services, tax services, and other services as described above.
Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Please refer to “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Ordinary Shares and the Trading Market— Because we are a foreign private issuer and have taken advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, you have less protection than you would have if we were a domestic issuer.”
81
Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
Item 16G. CORPORATE GOVERNANCE
We are a “foreign private issuer” as defined under the federal securities laws of the U.S. and the Nasdaq listing standards. Under the federal securities laws of the United States, foreign private issuers are subject to different disclosure requirements than U.S.-domiciled public companies. We intend to take all actions necessary for us to maintain our status as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the Exchange Act and other applicable rules adopted by the SEC, and the NASDAQ listing standards. Under the SEC rules and the NASDAQ listing standards, a foreign private issuer is subject to less stringent corporate governance requirements. Subject to certain exceptions, the SEC and NASDAQ permit a foreign private issuer to follow its home country practice in lieu of their respective rules and listing standards. In general, our amended articles of incorporation and the Companies Act govern our corporate affairs.
In particular, as a foreign private issuer, we have followed Japanese law and corporate practice in lieu of the corporate governance provisions set out under NASDAQ Rule 5600, the requirement in NASDAQ Rule 5250(b)(3) to disclose third party director and nominee compensation, and the requirement in NASDAQ Rule 5250(d) to distribute annual and interim reports. Of particular note, the following rules under NASDAQ Rule 5600 differ from Japanese law requirements:
| ● | NASDAQ Rule 5605(b)(1) requires that at least a majority of a listed company’s board of directors be independent directors, and NASDAQ Rule 5605(b)(2) requires that independent directors regularly meet in executive session, where only independent directors are present. Under our current corporate structure, the Companies Act does not require independent directors. However, our board of directors is currently comprised of seven directors, four of whom are considered “independent,” as determined in accordance with the applicable NASDAQ rules. We expect our independent directors to regularly meet in executive sessions, where only the independent directors are present; |
| ● | NASDAQ Rule 5605(c)(2)(A) requires a listed company to have an audit committee composed entirely of not less than three directors, each of whom must be independent. Under Japanese law, a company may have a statutory auditor or a board of auditors. We have a statutory auditor. See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Company auditors (kansayaku)” for additional information; |
| ● | NASDAQ Rule 5605(d) requires, among other things, that a listed company’s compensation committee be comprised of at least two members, each of whom is an independent director as defined under such rule. Our board of directors collectively participates in the discussions and determination of compensation for our executive officers and directors, and other compensation related matters; |
| ● | NASDAQ Rule 5605(e) requires that a listed company’s nomination and corporate governance committee be comprised solely of independent directors. Our board of directors does not have a standalone nomination and corporate governance committee. Our board of directors collectively participates in the nomination process of potential directors and oversee our corporate governance practices; |
| ● | NASDAQ Rule 5620(c) sets out a quorum requirement of 33-1/3% applicable to meetings of shareholders. In accordance with Japanese law and generally accepted business practices, our amended articles of incorporation provide that there is no quorum requirement for a general resolution of our shareholders. However, under the Companies Act and our amended articles of incorporation, a quorum of not less than one-third of the total number of voting rights is required in connection with the election of directors, statutory auditors, and certain other matters; |
82
| ● | NASDAQ Rule 5635(a) requires prior shareholder approval for a certain number of stock issuance in connection with the acquisition of the stock or assets of another company, whereas the Companies Act and our amended articles of incorporation do not have the same requirement; | |
| ● | NASDAQ Rule 5635(b) requires prior shareholder approval for a stock issuance that could result in a change of control of a company, whereas the Companies Act and our amended articles of incorporation do not have the same requirement; | |
| ● | NASDAQ Rule 5635(c) requires prior shareholder approval for equity compensation arrangement for officers, directors, employees or consultants, whereas the Companies Act and our amended articles of incorporation do not have the same requirement; and | |
| ● | NASDAQ Rule 5635(d) which requires prior shareholder approval for a 20% issuance at a price that is less than the price that is the lower of: (i) the Nasdaq official closing price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq official closing price of the securities (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement, whereas the Companies Act and our amended articles of incorporation do not have the same requirement. |
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
Item 16J. INSIDER TRADING POLICIES
Our board of directors has
Our board of directors has also adopted a compensation recovery policy required by the Nasdaq Listing Rule 5608, which is attached as Exhibit 97.1 to this Annual Report.
Item 16K. Cybersecurity
Risk Management and Strategy
Cybersecurity Governance
We consider cybersecurity risk through our Risk Compliance Committee as part of our risk oversight function.
83
Part III
Item 17. FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
Item 18. FINANCIAL STATEMENTS
The financial statements of our Company are included at the end of this Annual Report .
Item 19. EXHIBITS
EXHIBIT INDEX
| * | Filed with this Annual Report. |
| ** | Furnished with this Annual Report. |
84
SIGNATURES
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 annual report on its behalf.
Perpetuals.com Ltd. | ||
| By: | /s/ Satoshi Kobayashi | |
| Satoshi Kobayashi | ||
| Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director | ||
| (Principal Executive Officer) | ||
| Date: September 18, 2026 | ||
85
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| To: | The Board of Directors and Shareholders of |
Perpetuals.com Ltd. |
Opinion on the Financial Statements
In our opinion, the consolidated financial statements of Perpetuals.com Ltd. and its subsidiaries (collectively the “Company”) present fairly, in all material respects, the financial position of the Company as of April 30, 2025 and 2026, and the results of its operations and its cash flows for each of the three years in the year ended April 30, 2026, in conformity with accounting principles generally accepted in the United States of America.
We have audited the accompanying consolidated balance sheets of the Company as of April 30, 2025 and 2026, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ deficit, and cash flows for each of the three years in the period ended April 30, 2026, and the related notes (collectively referred to as the “consolidated financial statements”).
Emphasis of Matter — Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2, the Company has incurred significant losses, has significant net cash outflows from operating activities and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
WWC, P.C.
Certified Public Accountants
PCAOB ID No.
We have served as the Company’s auditor since 2022.
September 18, 2026
F-2
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
CONSOLIDATED BALANCE SHEETS
| As of April 30, 2025 |
As of April 30, 2026 |
As of April 30, 2026 |
||||||||||
| JPY | JPY | USD | ||||||||||
| ASSETS | ||||||||||||
| CURRENT ASSETS: | ||||||||||||
| Cash | ||||||||||||
| Digital assets | ||||||||||||
| Receivables from related parties | ||||||||||||
| Accounts receivable, net | ||||||||||||
| Contract assets | ||||||||||||
| Prepayments | ||||||||||||
| Short-term deposits | ||||||||||||
| Income tax receivable | ||||||||||||
| Value added tax receivable | ||||||||||||
| Other current assets, net | ||||||||||||
| TOTAL CURRENT ASSETS | ||||||||||||
| Property and equipment, net | ||||||||||||
| Goodwill | ||||||||||||
| Intangible assets | ||||||||||||
| Operating lease right-of-use assets | ||||||||||||
| Long-term deposits | ||||||||||||
| Restricted cash | ||||||||||||
| TOTAL ASSETS | ||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||||||
| Accounts payable | ||||||||||||
| Payables to related parties | ||||||||||||
| Short-term borrowings and current portion of long-term debt | ||||||||||||
| Other payables and accrued liabilities | ||||||||||||
| Other payable - investment deferred payment | ||||||||||||
| Value added tax payable | ||||||||||||
| Operating lease liabilities, current | ||||||||||||
| TOTAL CURRENT LIABILITIES | ||||||||||||
| Loans to related parties, noncurrent | ||||||||||||
| Post-employment retirement benefits liability | ||||||||||||
| Bank loans – non-current, net | ||||||||||||
| Operating lease liabilities, non-current | ||||||||||||
| TOTAL LIABILITIES | ||||||||||||
| Commitments and contingencies | ||||||||||||
| Mezzanine equity: | ||||||||||||
| Participating Convertible Preference Virtual Shares: and | ||||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||||
| Ordinary shares, | ||||||||||||
| P series preferred shares, and | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Cumulative translation adjustment | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the year ended April 30, 2024 |
For the year ended April 30, 2025 |
For the year ended April 30, 2026 |
For the year ended April 30, 2026 |
|||||||||||||
| JPY | JPY | JPY | USD | |||||||||||||
| OPERATING REVENUES | ||||||||||||||||
| Software and system development services | ||||||||||||||||
| Consulting and solution services | ||||||||||||||||
| Sale of NFTs | ||||||||||||||||
| Royalty revenue | ||||||||||||||||
| TOTAL OPERATING REVENUES | ||||||||||||||||
| COST OF REVENUES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Selling and marketing expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| General and administrative expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Share-based compensation expenses | ( | ) | ||||||||||||||
| Research and development expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| TOTAL OPERATING EXPENSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Fair value gain(loss) on digital assets | ( | ) | ( | ) | ||||||||||||
| Interest expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange gain (loss), net | ( | ) | ||||||||||||||
| Government grants | ||||||||||||||||
| Other income (expense), net | ||||||||||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Current | ||||||||||||||||
| Deferred | ||||||||||||||||
| Total provision for income taxes | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS PER SHARE | ||||||||||||||||
| Basic | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Diluted | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| COMPREHENSIVE LOSS | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign exchange translation adjustment | ||||||||||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| Ordinary shares | Preference shares | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ | Total Shareholders’ | ||||||||||||||||||||||||||||||
| Share | Amount | Share | Amount | Capital | Deficit | Income | Equity | Equity | ||||||||||||||||||||||||||||
| JPY | JPY | JPY | JPY | JPY | JPY | USD | ||||||||||||||||||||||||||||||
| Balance, April 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for cash | ( | ) | ||||||||||||||||||||||||||||||||||
| Exercise of share options | ( | ) | ||||||||||||||||||||||||||||||||||
| Capital reduction to cover deficit | - | ( | ) | - | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Share based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Balance, April 30, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, April 30, 2025 | ( | ) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares for cash | ||||||||||||||||||||||||||||||||||||
| Issuance of warrants for cash | - | - | - | - | ||||||||||||||||||||||||||||||||
| Issuance of ordinary shares and P series preference shares for subsidiaries acquisition | ||||||||||||||||||||||||||||||||||||
| Issuance of warrants for subsidiaries acquisition | ||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||
| Capital reduction | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign exchange translation adjustment | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, April 30, 2026 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the year ended April 30, 2024 |
For the year ended April 30, 2025 |
For the year ended April 30, 2026 |
For the year ended April 30, 2026 |
|||||||||||||
| JPY | JPY | JPY | USD | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Adjustment to reconcile net loss to net cash generated from operating activities: | ||||||||||||||||
| Issuance costs | ||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| Research and development costs | ||||||||||||||||
| Loan origination fee | ||||||||||||||||
| Deferred tax expense | ( | ) | ||||||||||||||
| Foreign currency exchange loss (gain) | ( | ) | ||||||||||||||
| Unrealized loss on digital assets | ( | ) | ( | ) | ||||||||||||
| Interest expense, net | ||||||||||||||||
| Share-based compensation expense | ||||||||||||||||
| Changes in assets and liabilities: | ||||||||||||||||
| Accounts receivable | ( | ) | ||||||||||||||
| Contract assets | ( | ) | ||||||||||||||
| Prepayments | ( | ) | ( | ) | ||||||||||||
| Short-term deposits | ||||||||||||||||
| Digital assets | ( | ) | ||||||||||||||
| Other current assets, net | ( | ) | ( | ) | ||||||||||||
| Income taxes, net | ( | ) | ||||||||||||||
| Value added tax, net | ||||||||||||||||
| Accounts payable | ( | ) | ( | ) | ( | ) | ||||||||||
| Contract liabilities | ( | ) | ||||||||||||||
| Other payables and accrued liabilities | ||||||||||||||||
| Lease obligations net cash | ( | ) | ( | ) | ( | ) | ||||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Purchases of time deposit | ( | ) | ||||||||||||||
| Proceeds from redemption of time deposit | ||||||||||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Purchases of software | ( | ) | ||||||||||||||
| Acquisitions, net of cash acquired | ( | ) | ( | ) | ||||||||||||
| Government grant proceeds | ||||||||||||||||
| NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ( | ) | ( | ) | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Issuance of ordinary shares for cash | ||||||||||||||||
| Issuance of warrants | ||||||||||||||||
| Issuance of ordinary shares through exercise of warrants | ||||||||||||||||
| Proceeds from exercise of share options | ||||||||||||||||
| Proceeds from related party loans | ||||||||||||||||
| Repayments of related party loans | ( | ) | ( | ) | ||||||||||||
| Proceeds from loans | ||||||||||||||||
| Repayment of loans | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Proceeds from receivables factoring arrangements | ||||||||||||||||
| Repayments of receivables factoring arrangements | ( | ) | ( | ) | ||||||||||||
| Payments on deferred initial public offering (“IPO”) costs | ( | ) | ||||||||||||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ) | ||||||||||||||
| EFFECT OF EXCHANGE RATE | ( | ) | ||||||||||||||
| CHANGE IN CASH AND RESTRICTED CASH | ( | ) | ||||||||||||||
| CASH AND RESTRICTED CASH, AT BEGINNING OF PERIOD | ||||||||||||||||
| CASH AND RESTRICTED CASH, AT PERIOD END | ||||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||||
| Cash paid (received) for: | ||||||||||||||||
| Interest | ||||||||||||||||
| Income taxes | ( | ) | ||||||||||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | ||||||||||||||||
| RECONCILIATION OF CASH AND RESTRICTED CASH REPORTED IN THE BALANCE SHEETS: | ||||||||||||||||
| Cash | ||||||||||||||||
| Restricted cash | ||||||||||||||||
| Total cash and restricted cash shown in the statements of cash flows | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
PERPETUALS.COM LTD.
(formerly Earlyworks Co., Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of Business and Organization
Perpetuals.com Ltd. (the “Company”), formerly Earlyworks Co., Ltd., is a stock company incorporated in Japan pursuant to the laws of Japan on
On January 20, 2026, the Company consummated the transactions contemplated by a share exchange agreement, dated December 28, 2025, by and among the Company, Perpetual Markets Ltd. (“PML”), and the shareholders of PML listed therein (the “Acquisition”). Pursuant to the Acquisition, all of PML’s outstanding Class A and Class B ordinary shares were transferred by its existing shareholders to the Company, and upon completion PML became a wholly owned subsidiary of the Company. PML is a private limited liability company incorporated in Cyprus on September 19, 2023 under the Cyprus Companies Law, Cap. 113, with its registered office at 21 Kasou, Nicosia, 1086, Cyprus, and its principal activity is the holding of investments and intellectual property; together with its subsidiaries, PML operates in financial markets infrastructure and technology services. These consolidated financial statements reflect the operations of the Company’s legacy business together with PML and its controlled subsidiaries from the Acquisition Date forward.
The accompanying consolidated financial statements include the accounts of the Company and the following entities from January 20, 2026 through April 30, 2026. All material intercompany balances and transactions have been eliminated in consolidation.
| Entity | Jurisdiction | Ownership | Principal activity | |||
| Perpetual Markets Ltd. | ||||||
| Perpetual Products AG | ||||||
| Perpetual Data AG | ||||||
| Kephas Corporation | ||||||
| PM Broker Ltd. | ||||||
| Perpetual IT GmbH | ||||||
| PerpetualPay Ltd. |
Note 2 – Liquidity and Going Concern
In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within
The Company’s accounts have been prepared assuming that the Company will continue as a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the consolidated financial statements. The Company’s ability to continue as a going concern depends upon aligning its sources of funding (debt and equity) with the expenditure requirements of the Company and repayment of the short-term debt facilities as and when they fall due.
The Company has considered whether there is a substantial doubt about its ability to continue as a going concern. Cash flow from operations and capital contributions and loans have been utilized to finance the working capital requirements of the Company. For the year ended April 30, 2026, the Company had negative cash flow from operating activities of JPY
F-7
To sustain its ability to support the Company’s operating activities, the Company considered supplementing its sources of funding through the following:
If necessary, the Company will consider additional financings through the issuance of ordinary shares or debt financings and look into refinancing the Company’s existing debt obligations. However, there can be no assurances that the Company will be successful in securing any debt on terms favorable to the Company, or at all, and it is not possible to predict whether any financing efforts will be successful or if the Company will obtain the necessary financing.
Management has commenced a strategy to raise debt and equity, including two rounds of issuance of pre-funded warrants and ordinary warrants, as described in Note 14 – Shareholders’ equity. If necessary, the Company will consider additional financing through the issuance of ordinary shares or debt financings and will look into refinancing the Company’s existing debt obligations. However, there can be no assurance that the Company will be successful in securing additional financing or debt on terms favorable to the Company, or at all. If management is unable to execute this plan, there would likely be a material adverse effect on the Company’s business. All of these factors raise substantial doubt about the ability of the Company to continue as a going concern. The consolidated financial statements for the year ended April 30, 2026 have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Note 3 – Summary of significant accounting policies
Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the accounts of . the Company and entities in which the Company has a controlling financial interest. PML and its subsidiaries are included in the consolidated financial statements from January 20, 2026, the date on which the Company obtained control. All material intercompany balances and transactions have been eliminated in consolidation.
The entities included in the consolidated group are described in Note 1.
Use of estimates and assumptions
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Significant estimates and judgments include revenue recognition, expected credit losses, useful lives and recoverability of property and equipment and intangible assets, capitalization and useful lives of internal-use software, lease measurement, goodwill recognition and impairment, income taxes, share-based compensation, fair value measurements, and the acquisition-date fair values of consideration transferred and identifiable assets acquired and liabilities assumed in business combinations. Actual results could differ materially from those estimates.
Foreign currency translation and transactions
The Company uses Japanese yen (“JPY”) as its reporting currency. The functional currency of the Japanese parent is JPY. Each consolidated entity determines its functional currency based on the currency of the primary economic environment in which it operates. Following the Acquisition, the consolidated group includes entities whose functional currencies include JPY, euro (“EUR”), Swiss franc (“CHF”) and U.S. dollar (“USD”).
Foreign currency transactions are translated into an entity’s functional currency using exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured using exchange rates at the balance sheet date, with resulting gains and losses recognized in foreign exchange gain (loss), net.
Assets and liabilities of subsidiaries whose functional currencies differ from JPY are translated into JPY using exchange rates at the balance sheet date. Income and expense accounts are translated using average exchange rates for the reporting period, and equity accounts are generally translated at historical rates. Resulting translation adjustments are reported in accumulated other comprehensive income (loss) within shareholders’ equity.
Convenience translation
Translations of balances in the consolidated balance sheets, consolidated statements of operations, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows from JPY into USD as of April 30, 2026 are solely for the convenience of the readers and are calculated at the rate of USD
F-8
Cash, cash equivalents and restricted cash
Cash includes cash on hand and demand deposits with financial institutions. The Company considers highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Restricted cash consists of cash for which withdrawal or use is restricted by contractual or legal requirements and is presented separately from unrestricted cash. Restricted cash at April 30, 2026 relates principally to amounts subject to an order of the Tokyo District Court in connection with shareholder litigation.
Digital assets
Effective May 1, 2025, the Company adopted ASU 2023-08, Crypto Assets (Subtopic 350-60). Digital assets within the scope of the guidance are initially recognized at fair value on the date of receipt and are subsequently measured at fair value at each reporting date, with changes in fair value recognized in net income. Realized gains and losses on dispositions are recognized in earnings using the first-in, first-out method. The Company accounts for receipts and disbursements of digital assets as operating activities in the consolidated statement of cash flows. The adoption of ASU 2023-08 did not have a material impact on the Company’s results of operations or financial position; due to the immateriality of the cumulative effect at May 1, 2025, the Company recognized the cumulative effect in operations during the year ended April 30, 2026.
Immediately prior to adoption, as of April 30, 2025, the Company held
Accounts receivable and allowance for expected credit losses
Accounts receivable consist primarily of amounts due from customers for services provided. The Company estimates expected credit losses in accordance with ASC 326 using relevant information about historical collection experience, customer creditworthiness, aging, specific customer exposures, current conditions and reasonable and supportable forecasts. Receivables are written off when collection efforts have been exhausted and collection is no longer probable. No allowance for expected credit losses was recognized as of April 30, 2025 and 2026.
Prepayments and deposits
Prepayments consist primarily of payments to vendors and service providers for goods or services to be received in future periods. Short-term and long-term deposits consist primarily of refundable deposits for rent and service arrangements. These balances are reviewed for recoverability at each reporting date.
Factoring and pledged receivables
The Company evaluates transfers of accounts receivable under ASC 860 to determine whether the transfers qualify for sale accounting. When the applicable sale criteria are not met, proceeds received are accounted for as secured borrowings and the related receivables remain recognized. Receivables subject to arrangements under which the transferee has the right to sell or repledge the receivables are presented as pledged assets, when applicable.
During the year ended April 30, 2026, the Company obtained JPY
The Company compared the April 30, 2026 receivables’ delinquency status and customer payment performance with the experience underlying its historical loss rates. The Company also reviewed available customer financial information for evidence of reduced repayment capacity. The assessment identified no differences requiring an adjustment to the historical loss rates. As of April 30, 2026, no unpaid factored receivables remained outstanding. Accordingly, the Company recognized no allowance for expected credit losses related to factored receivables.
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recognized on a straight-line basis over the estimated useful lives of the assets. Land is not depreciated and leasehold improvements are depreciated over the shorter of the lease term or expected useful life. The estimated useful lives of the Company’s principal categories of property and equipment are: buildings,
Impairment of long-lived assets
Long-lived assets, including property and equipment and finite-lived intangible assets, are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability is assessed by comparing the carrying amount of the asset or asset group with the undiscounted cash flows expected to result from its use and eventual disposition. If the carrying amount is not recoverable, an impairment loss is measured as the excess of carrying amount over fair value.
F-9
Intangible assets
Finite-lived intangible assets are initially recorded at cost, or at fair value when acquired in a business combination, and are amortized over their estimated useful lives using a method that reflects the pattern in which the economic benefits are consumed. If that pattern cannot be reliably determined, the straight-line method is used. The parent’s legacy software is amortized over an estimated useful life of five years.
Goodwill
Goodwill represents the excess of consideration transferred in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized and is tested for impairment annually, and more frequently if events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. The Company may first perform a qualitative assessment. If a quantitative test is required, an impairment loss is recognized for the amount by which a reporting unit’s carrying amount exceeds its fair value, limited to the goodwill allocated to that reporting unit.
Business combinations
Business combinations are accounted for using the acquisition method under ASC 805. Identifiable assets acquired and liabilities assumed are generally measured at acquisition-date fair value, and consideration transferred is measured at fair value. Contingent consideration, when applicable, is included at its acquisition-date fair value. Goodwill is recognized for the excess of consideration transferred, together with any noncontrolling interest and previously held interest, over the fair value of identifiable net assets acquired.
When the initial accounting for a business combination is incomplete at the end of the reporting period in which the combination occurs, provisional amounts are reported for items for which accounting is incomplete. Provisional amounts may be adjusted during the measurement period, not to exceed one year from the acquisition date, for new information about facts and circumstances that existed at the acquisition date. Acquisition-related costs are expensed as incurred, except for costs of issuing debt or equity securities, which are accounted for under the applicable guidance. Acquisition-related expenses of JPY
Fair value measurements
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. The Company applies the fair value hierarchy in ASC 820, which prioritizes inputs as Level 1 for quoted prices in active markets for identical assets or liabilities, Level 2 for observable inputs other than Level 1 quoted prices, and Level 3 for unobservable inputs. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.
The carrying amounts of cash, accounts receivable, prepayments and other short-term financial assets and liabilities generally approximate fair value because of their short-term maturities. Fair values of other financial instruments are disclosed when required.
Revenue recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Revenue is recognized when control of the promised goods or services is transferred to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
The Company applies the following five-step model to contracts with customers: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the identified performance obligations based on their relative stand-alone selling prices; and (v) recognize revenue when, or as, the Company satisfies each performance obligation. The Company applies this model only when collectability of the consideration to which it expects to be entitled is probable.
Amounts collected from customers on behalf of governmental authorities, including sales and value-added taxes, are excluded from the transaction price and revenue is presented net of such amounts.
The Company records revenue on a gross basis when it acts as principal in an arrangement because it controls the promised good or service before it is transferred to the customer. Indicators considered in this assessment include whether the Company is primarily responsible for fulfilling the promise to the customer and whether it has discretion in establishing pricing. When the Company does not control the promised good or service before it is transferred to the customer, the Company acts as an agent and recognizes revenue on a net basis.
F-10
The Company’s principal revenue-generating activities are described below.
(1) Software and system development services
The Company enters into primarily fixed-price contracts to design, develop and integrate software and systems based on customers’ specific requirements. These arrangements generally involve significant customization and do not provide post-contract customer support or upgrades.
The design, development and integration activities are highly interdependent and are not separately beneficial to the customer in the context of the contract. Accordingly, the Company accounts for these activities as a single performance obligation.
Revenue from software and system development services is recognized over time because the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced. The Company measures progress toward complete satisfaction of the performance obligation using a cost-based input method based on costs incurred to date relative to total estimated costs required to complete the contract. Management believes this method faithfully depicts the transfer of control to the customer because the costs incurred are directly related to the Company’s performance in satisfying the performance obligation.
Costs included in the measure of progress include direct materials, labor and subcontractor costs and other costs directly related to contract performance. Total expected contract costs are estimated based on the scope of the contract, work completed to date, remaining development requirements, expected labor and material requirements and other relevant project information. Management periodically evaluates these estimates using the experience and professional judgment of its engineers and project managers. Changes in estimated contract costs or contract values are accounted for as changes in estimates in the period in which the revisions are identified.
Billing arrangements generally include multiple payment milestones throughout the contract term, with a portion of the contract price commonly billed upon completion of the project. The timing of billings does not determine when revenue is recognized.
If estimated total contract costs exceed the related contract revenue, the Company recognizes the estimated loss in the period in which the loss becomes probable and can be reasonably estimated.
(2) Consulting and solution services
The Company provides professional consulting and solution services under arrangements that are primarily fixed-fee contracts with terms generally ranging from one to twelve months. These arrangements typically represent a single performance obligation consisting of the provision of consulting and related professional services over the contract term.
Revenue from consulting and solution services is recognized over time because the customer simultaneously receives and consumes the benefits of the Company’s services as they are performed.
For fixed-price arrangements, progress toward satisfaction of the performance obligation is measured based on the proportion of services provided through the reporting date relative to the total services expected to be provided under the contract. Management believes this measure faithfully depicts the transfer of control because revenue is recognized as the underlying services are performed and the customer receives and consumes the benefits of those services.
Customers are generally billed monthly or quarterly over the contract term. Reimbursements of travel and other out-of-pocket costs charged to customers are included in revenue, with corresponding amounts recognized in cost of revenue. Revenue earned by Kephas Corporation from platform access, regulatory and compliance support, system setup and integration, customization, know-your-customer services and related information technology and professional services is presented within consulting and solution services.
(3) Sale of NFTs
The Company engages in sale of NFTs, or non-fungible tokens. NFTs are assets that have been tokenized via a blockchain and are assigned unique identification codes and metadata that distinguish them from other tokens. The Company typically enters into contracts with its customers where the rights of the parties, including payment terms, are identified and sales prices to the customers are fixed with no separate sales rebate, discount, or other incentive and no right of return exists on sales of NFTs. The Company’s performance obligation is to deliver products according to contract specifications. The Company recognizes product revenue at a time when the control of products is transferred to customers. The Company recognized no revenue from the sale of NFTs in the years ended April 30, 2025 and 2026 and does not expect further activity in this revenue stream. The policy is retained because NFT revenue is presented for the year ended April 30, 2024.
(4) Royalty revenue
The Company licenses certain intellectual property to third parties in exchange for royalties based on the licensee’s sales or usage. Royalty revenue is a sales-based or usage-based royalty promised in exchange for a license of intellectual property and is recognized under ASC 606-10-55-65 at the later of when the subsequent sale or usage occurs and when the performance obligation to which some or all of the royalty has been allocated has been satisfied. Royalty revenue for the year ended April 30, 2026 was JPY
F-11
Contract balances
Contract assets represent rights to consideration for goods or services transferred to customers when the right is conditional on something other than the passage of time. Contract liabilities represent consideration received, or amounts due, before the related performance obligations have been satisfied. Contract assets are reclassified to accounts receivable when the right to consideration becomes unconditional, and contract liabilities are recognized as revenue as the related performance obligations are satisfied.
Leases
The Company determines whether an arrangement contains a lease at inception and classifies leases as operating or finance leases in accordance with ASC 842. For leases with terms greater than 12 months, the Company recognizes a right-of-use (“ROU”) asset and lease liability at commencement. Lease liabilities are measured at the present value of unpaid lease payments using the rate implicit in the lease when readily determinable or, otherwise, the Company’s incremental borrowing rate based on the term, currency and economic environment of the lease. ROU assets are initially measured based on the lease liability, adjusted for prepayments, initial direct costs and lease incentives.
Operating lease expense is recognized on a straight-line basis over the lease term. Variable lease payments not included in the measurement of the lease liability are expensed as incurred. The Company has elected not to recognize ROU assets and lease liabilities for leases with an initial term of 12 months or less; expense for those leases is recognized on a straight-line basis over the lease term. Lease terms include renewal or termination options when exercise or nonexercise, as applicable, is reasonably certain.
Cost of revenues
Cost of revenues consists primarily of employee and outsourced personnel costs, subcontractor and development costs, telecommunications, hosting and other direct costs incurred to provide the Company’s products and services.
Selling and marketing expenses
Selling and marketing expenses consist primarily of payroll, promotional and other costs of personnel engaged in selling and marketing activities. Advertising costs are expensed as incurred and included in selling and marketing expenses.
Research and development expenses
Research and development costs that do not qualify for capitalization under the Company’s internal-use software policy are expensed as incurred and consist primarily of payroll, outsourced development and related costs of personnel engaged in research and development activities.
Government grants
The Company recognizes government grants when it is probable that the conditions attached to the grant will be met and the grant will be received. Grants related to assets are accounted for using a cost-accumulation approach under which the grant reduces the cost of the related asset. Grants related to income are recognized in earnings on a systematic basis over the periods in which the related costs are recognized.
Trade and other payables
Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost, as applicable.
Employee benefits
The Company and certain of its employees participate in government-mandated social insurance and similar defined contribution arrangements in the jurisdictions in which they operate. Employer contributions are recognized as expense as the related employee services are rendered. In connection with the Acquisition, the Company also acquired a pension and similar-obligation provision of Perpetual IT GmbH, a German subsidiary, which is presented as a post-employment benefits liability in the consolidated balance sheet.
Borrowing costs
Borrowing costs are expensed as incurred except for interest costs that are required to be capitalized as part of the cost of a qualifying asset under ASC 835-20, including qualifying internal-use software development costs.
Income taxes
The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities and for tax loss and credit carryforwards, using enacted tax rates expected to apply when the differences reverse. A valuation allowance is recorded when it is more likely than not that some or all of a deferred tax asset will not be realized.
Tax benefits from uncertain tax positions are recognized only when it is more likely than not that the position will be sustained upon examination. The amount recognized is the largest amount of benefit that is greater than
F-12
Preference shares
Preference shares are classified as equity when they are nonredeemable or redeemable only at the issuer’s option and related dividends are discretionary. Preference shares are classified as liabilities when they are mandatorily redeemable or redeemable at the holder’s option, or when dividend payments are not discretionary. The accounting for preferred equity issued or issuable in connection with the Acquisition is based on the substantive terms of the instruments and applicable U.S. GAAP.
Virtual Shares
PML has Participating Preferred Virtual Shares (the “Virtual Shares”) outstanding under a Virtual Shareholder Agreement. The Virtual Shares are contractual economic participation rights that do not confer legal ownership, voting rights or participation in management. They provide preferred economic, dividend and liquidation participation rights and contain settlement features associated with specified liquidity events. The classification and acquisition-date measurement of the Virtual Shares are discussed in Notes 4 and 13.
Loss per share
Basic loss per share is computed by dividing net loss attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Diluted loss per share reflects potentially dilutive ordinary share equivalents when their effect is dilutive. Potential ordinary shares are excluded from diluted loss per share when their inclusion would be anti-dilutive.
Share-based compensation
The Company applies ASC 718, Compensation – Stock Compensation (“ASC 718”), to account for its employee share-based payments. In accordance with ASC 718, the Company determines whether an award should be classified and accounted for as a liability award or equity award. All the Company’s share-based awards to employees were classified as equity awards and are recognized based on their grant date fair values. In accordance with ASC 718, the Company recognizes share-based compensation cost for equity awards to employees with a performance condition based on the probable outcome of that performance condition. Compensation cost is recognized using the accelerated method if it is probable that the performance condition will be achieved. The Company accounts for forfeitures as they occur in accordance with ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting.
Segment reporting
Operating segments are identified based on the information reviewed by the chief operating decision maker (“CODM”) for purposes of allocating resources and assessing performance. The Company has identified its Chief Executive Officer as its CODM and presents reportable segment based on the information currently provided to and reviewed by the CODM.
Related parties
The Company identifies related parties in accordance with ASC 850. Related-party transactions and balances are disclosed when required, including the nature of the relationship, the transactions, amounts due to or from related parties and other information necessary to understand the effects of the relationship on the consolidated financial statements. Intercompany balances and transactions among consolidated entities are eliminated in consolidation.
Commitments and contingencies
The Company is subject to legal proceedings, claims and other contingencies arising in the ordinary course of business. A loss contingency is accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. When a loss is reasonably possible but not probable, or is probable but cannot be reasonably estimated, the nature of the contingency and an estimate of the possible loss or range of loss is disclosed when required.
Risks and uncertainties
Following the Acquisition, the Company has operations and assets in multiple jurisdictions and is exposed to political, economic, regulatory, legal, foreign currency and credit risks. The Company’s reporting currency is JPY and the consolidated group includes entities with functional currencies including EUR, CHF and USD. The Company has not historically entered into material foreign currency hedging arrangements. Cash deposits are maintained with financial institutions in multiple jurisdictions and deposit-insurance coverage varies by jurisdiction and institution.
Concentrations
Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company monitors customer creditworthiness and outstanding balances and maintains its cash with financial institutions it considers creditworthy.
Concentration of demand
As of April 30, 2025, two customers accounted for
For the year ended April 30, 2024, three customers accounted for
F-13
Concentration of supply
As of April 30, 2025, four vendors accounted for
Dividends
Dividends are recognized as distributions within shareholders’ equity when declared or approved in accordance with the applicable corporate requirements. The Company has not declared or paid dividends during the periods presented.
Recently adopted accounting standards
In December 2023, the FASB issued ASU 2023-08, Crypto Assets (Subtopic 350-60), which requires in-scope crypto assets to be measured at fair value with changes in fair value recognized in net income and requires additional disclosures. The Company adopted ASU 2023-08 effective May 1, 2025. See “Digital assets” above.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which enhances annual disclosures primarily related to the income tax rate reconciliation and income taxes paid. The Company adopted ASU 2023-09 effective May 1, 2025. The adoption had no impact on the Company’s results of operations or financial position and affects the related income tax disclosures.
Recently issued accounting standards not yet adopted
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, and in January 2025 issued ASU 2025-01 to clarify its effective date. The amendments require additional disclosure of specified expense information for public business entities and are effective for annual reporting periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the impact of the guidance.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which amends ASC 350-40. The Company has not early adopted the guidance and is evaluating its effect on the consolidated financial statements and disclosures.
Note 4 – Business Combinations
Overview
On January 20, 2026 (the “Acquisition Date”), the Company completed the transactions contemplated by the Share Exchange Agreement, dated December 28, 2025 (the “Share Exchange Agreement”), by and among the Company, PML, and the shareholders of PML named therein, pursuant to which the Company acquired
PML, together with the subsidiaries included in the Acquisition, operates a financial markets infrastructure and technology-services business, including software-as-a-service and related trading-infrastructure technology. PML licenses core technology from PM MTF Ltd. (“MTF”) The SEA granted the Company a put and call option to acquire MTF for the nominal amount of $
The Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, using the acquisition method of accounting, with the Company as the accounting acquirer. The results of PML’s operations are included in the Company’s consolidated financial statements from the Acquisition Date.
Consideration
The fair value of the consideration transferred is as follows:
| JPY | ||||
| Cash consideration | ||||
| Ordinary shares issued (American Depositary Shares) | ||||
| Series P preference shares issued (American Depositary Shares) | ||||
| Deferred cash consideration | ||||
| Total fair value of consideration transferred | ||||
The deferred cash consideration of JPY
F-14
Purchase price allocation
The table below presents the acquired PML subgroup’s consolidated carrying amounts as of January 20, 2026. The measurement period under ASC 805 ends on January 20, 2027.
| Acquired assets and liabilities | Acquisition-date fair value | |||
| JPY | ||||
| Cash and cash equivalents | ||||
| Receivables from related parties | ||||
| Prepayments, consumption tax receivables and other current assets | ||||
| Property and equipment | ||||
| Operating lease right-of-use assets | ||||
| Total assets | ||||
| Accounts payable, accrued liabilities and other payables | ( | ) | ||
| Payables to related parties | ( | ) | ||
| Short-term borrowings | ( | ) | ||
| Indebtedness to related parties | ( | ) | ||
| Operating lease liabilities | ( | ) | ||
| Post-employment benefits liability | ( | ) | ||
| Mezzanine equity | ||||
| Virtual Shares | ( | ) | ||
| Total liabilities and mezzanine equity | ( | ) | ||
| Net liabilities | ( | ) | ||
| Foreign currency translation adjustment | ||||
| Fair value of consideration transferred | ||||
| Acquisition goodwill | ||||
The acquired subgroup’s historical goodwill is not carried forward as a separately identifiable asset in the Company’s acquisition accounting. Acquisition goodwill is determined as the excess of consideration transferred over the acquisition-date fair value of identifiable net assets acquired. The PML subgroup’s historical equity balances, including accumulated deficit and cumulative translation adjustment, are eliminated in consolidation and are not carried forward into the Company’s post-Acquisition shareholders’ equity. No separately identifiable intangible assets were recognized in the acquisition accounting, and accordingly no deferred tax liability arose on the allocation. The acquired subgroup’s capitalized software of JPY
Results included since the Acquisition Date
The following amounts represent the acquired PML subgroup’s results included in the consolidated statement of operations from the Acquisition Date through April 30, 2026:
| January 20, 2026 through April 30, 2026 | ||||
| JPY | ||||
| Revenue, net | ||||
| Net loss | ( | ) | ||
Acquisition-related expenses
Acquisition-related expenses are expensed as incurred and included in general and administrative expenses, except for costs associated with issuing debt or equity securities, which are accounted for under the applicable U.S. GAAP guidance.
F-15
Supplemental pro forma financial information (unaudited)
The following unaudited financial information presents PML’s historical financial position and results of operations on a standalone basis as of the dates and for the periods indicated. All amounts are presented in euros. This information relates solely to PML and does not present the combined pro forma financial position or results of operations of the Company and PML. There were no intercompany transactions between the Company and PML during either of the two years presented.
| As of April 30, 2024 | As of April 30, 2025 | |||||||
| Euro | Euro | |||||||
| Cash | ||||||||
| Trade accounts receivable, net | ||||||||
| Receivables from related parties | ||||||||
| Value added tax receivable | ||||||||
| Other receivables – Sale of Investment | ||||||||
| Other receivables | ||||||||
| Prepayments and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Equity method investments | ||||||||
| Operating right-of-use assets | ||||||||
| Total Non-current assets | ||||||||
| Total assets | ||||||||
| Trade accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Value added tax payable | ( | ) | ||||||
| Other payables | ( | ) | ||||||
| Payables to related parties | ( | ) | ( | ) | ||||
| Loans to related parties, current | ( | ) | ||||||
| Operating lease liabilities, current | ( | ) | ||||||
| Total current liabilities | ( | ) | ( | ) | ||||
| Long-term liabilities: | ||||||||
| Loans to related parties, noncurrent | ( | ) | ( | ) | ||||
| Operating lease liabilities, noncurrent | ( | ) | ||||||
| Post-employment retirement benefits liability | ( | ) | ||||||
| Total non-current liabilities | ( | ) | ( | ) | ||||
| Total liabilities | ( | ) | ( | ) | ||||
| Commitments and contingencies | ||||||||
| Mezzanine equity:Participating Convertible Preference Virtual Shares: and | ( | ) | ||||||
| Shareholders’ deficit: | ||||||||
| Class A Ordinary Voting Shares, par value € | ( | ) | ( | ) | ||||
| Class B Ordinary Non-Voting Shares, par value € | ( | ) | ||||||
| Class C Redeemable Preference Shares, par value € | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ||||||||
| Accumulated other comprehensive income | ( | ) | ||||||
| Total shareholders’ deficit | ||||||||
| Total liabilities, mezzanine equity and shareholders’ deficit | ( | ) | ( | ) | ||||
F-16
| For the year ended April 30, 2024 | For the year ended April 30, 2025 | |||||||
| Euro | Euro | |||||||
| Revenue, net | ( | ) | ||||||
| Cost of revenue | ||||||||
| Gross income | ( | ) | ||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Operating Loss | ||||||||
| Interest expenses, net | ||||||||
| Gain from the sale of controlling interests in ESGCX | ( | ) | ||||||
| Impairment of goodwill | ||||||||
| Foreign currency remeasurement gain | ( | ) | ||||||
| Other (expense) income, net | ||||||||
| Total other income (expense), net | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ||||||||
| Provision for income tax | ||||||||
| Loss before equity in net loss of equity method investment | ||||||||
| Equity in losses of equity method investee | ||||||||
| Net Loss | ||||||||
| Weighted average shares | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Loss per share (basic) | ||||||||
| Loss per share (diluted) | ||||||||
| Other comprehensive loss: | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Release of cumulative translation adjustment upon disposal of a foreign subsidiary | ||||||||
| Total comprehensive loss | ||||||||
F-17
Note 5 – Revenues
The following table presents the Company’s revenues disaggregated by service lines for the years ended April 30, 2024, 2025 and 2026:
| April 30, 2024 | April 30, 2025 | April 30, 2026 | April 30, 2026 | |||||||||||||
| JPY | JPY | JPY | USD | |||||||||||||
| OPERATING REVENUES | ||||||||||||||||
| Software and system development services | ||||||||||||||||
| Consulting and solution services | ||||||||||||||||
| Sale of NFTs | ||||||||||||||||
| Royalty revenue | ||||||||||||||||
| Total operating revenues | ||||||||||||||||
Note 6 – Accounts receivable, net
Accounts receivable, net consist of the following:
| April 30, 2025 | April 30, 2026 | April 30, 2026 | ||||||||||
| JPY | JPY | USD | ||||||||||
| Accounts receivable | ||||||||||||
| Less: Allowance for expected credit loss | ||||||||||||
| Accounts receivable, net | ||||||||||||
Note 7 – Property and equipment, net
Property and equipment consist of the following:
| April 30, 2025 | April 30, 2026 | April 30, 2026 | ||||||||||
| JPY | JPY | USD | ||||||||||
| At cost: | ||||||||||||
| Buildings | ||||||||||||
| Land | ||||||||||||
| Vehicles | ||||||||||||
| Computer hardware and equipment | ||||||||||||
| Furniture, fixtures and office equipment | ||||||||||||
| Leasehold improvements | ||||||||||||
| Total cost | ||||||||||||
| Accumulated depreciation | ( | ) | ( | ) | ( | ) | ||||||
| Property and equipment, net | ||||||||||||
The acquired PML subgroup had property and equipment with a consolidated carrying amount of JPY
Note 8 – Intangible assets
The components of intangible assets as of April 30, 2025 and 2026 are as follows:
| April 30, 2025 | April 30, 2026 | April 30, 2026 | ||||||||||
| JPY | JPY | USD | ||||||||||
| Intangible assets subject to amortization | ||||||||||||
| Legacy software - cost* | ||||||||||||
| Accumulated amortization - legacy software | ( | ) | ( | ) | ( | ) | ||||||
| Total intangible assets, net | ||||||||||||
| * |
F-18
Amortization expense recognized for the years ended April 30, 2024, 2025 and 2026 was JPY
The 2026 amount recognized relates to the Company’s legacy software.
Estimated amortization of the Company’s legacy software is as follows:
| Years ending April 30, | JPY | USD | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Thereafter | ||||||||
| Total | ||||||||
Note 9 – Other payables and accrued expenses
The components of other payables and accrued expenses are as follows:
| April 30, 2025 | April 30, 2026 | April 30, 2026 | ||||||||||
| JPY | JPY | USD | ||||||||||
| Salary and benefit payables | ||||||||||||
| Consumption tax payable | ||||||||||||
| Professional service fee | ||||||||||||
| Communication costs | ||||||||||||
| Advertisement | ||||||||||||
| Withholding tax | ||||||||||||
| Outsourced research and development costs | ||||||||||||
| Corporate business tax | ||||||||||||
| Resident tax for employees | ||||||||||||
| Other | ||||||||||||
Professional service fees include JPY
Note 10 – Borrowings
As of April 30, 2026, the Company had total third-party borrowings of JPY
As of April 30, 2025
| Balance JPY | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | |||||||||
| Kiraboshi Bank | % | |||||||||||
| Shoko Chukin Bank | % | |||||||||||
| Total loans | ||||||||||||
| Less: Loan origination fee | ||||||||||||
| Current portion of long – term loan | ( | ) | ||||||||||
| Long-term loan – due over one year | ||||||||||||
F-19
As of April 30, 2026
| Balance JPY | Balance USD | Maturity Date | Effective Interest Rate | Collateral/ Guarantee | ||||||||||||
| Kiraboshi Bank | % | |||||||||||||||
| Shoko Chukin Bank | % | |||||||||||||||
| Total borrowings | ||||||||||||||||
| Less: current portion | ( | ) | ( | ) | ||||||||||||
| Long-term borrowings | ||||||||||||||||
Interest expense on the parent company’s third-party bank loans for the years ended April 30, 2024, 2025 and 2026 amounted to JPY
| Years ending April 30, | JPY | USD | ||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| 2031 | ||||||||
| Thereafter | ||||||||
| Total | ||||||||
Related-party indebtedness is presented separately in Note 16.
Note 11 – Operating leases
The Company and its subsidiaries are parties to operating lease arrangements for office and data-center space. None of the amounts disclosed below for these leases contain variable payments, residual value guarantees or options that were recognized as part of the right-of-use assets and lease liabilities. Where a lease does not provide an implicit discount rate, the Company uses an incremental borrowing rate based on the information available at the commencement or acquisition date in determining the present value of lease payments.
At the January 20, 2026 Acquisition Date, the acquired PML subgroup had operating lease right-of-use assets with a consolidated carrying amount of JPY
As of April 30, 2026, consolidated operating lease right-of-use assets were JPY
As of April 30, 2025, the Company had operating lease liabilities in the amount of JPY
Rent and operating lease expenses of the parent company for the year ended April 30, 2024, 2025 and 2026 were JPY
Lease commitments
The Company’s maturity analysis of operating lease liabilities as of April 30, 2026 is as follows:
| Operating Leases | ||||||||
| JPY | USD | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Total lease payments | ||||||||
| Less imputed interest | ( | ) | ( | ) | ||||
| Present value of operating lease liabilities | ||||||||
| Less: current obligation | ( | ) | ( | ) | ||||
| Long-term obligation as of April 30, 2026 | ||||||||
F-20
Supplemental disclosure related to operating leases were as follows:
| For the year ended April 30, 2026 | ||||||||
| JPY | USD | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows for operating leases | ||||||||
| Weighted average remaining lease term of operating leases | ||||||||
| Weighted average discount rate of operating leases | % | |||||||
Note 12 – Income taxes
The Company is domiciled in Japan and is subject to Japanese national and local income taxes, inhabitant tax and enterprise tax. Following the January 20, 2026 acquisition of PML, the consolidated group is also subject to income taxes in foreign jurisdictions in which its subsidiaries operate, including Cyprus, Germany, Switzerland and the United States. The April 30, 2024 and 2025 comparative information reflects the parent company before the Acquisition.
Effective May 1, 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. The adoption did not affect the Company’s financial position or results of operations but expands the annual income tax disclosures, principally the income tax rate reconciliation and income taxes paid by jurisdiction.
Income (loss) before income taxes
The components of loss before income taxes are as follows:
| For the years ended April 30, | 2024 | 2025 | 2026 | 2026 | ||||||||||||
| JPY | JPY | JPY | USD | |||||||||||||
| Domestic (Japan) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign | ( | ( | ) | |||||||||||||
| Total loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Provision for income taxes
The significant components of the provision for income taxes are as follows:
| For the years ended April 30, | 2024 | 2025 | 2026 | 2026 | ||||||||||||
| JPY | JPY | JPY | USD | |||||||||||||
| Current income tax expense (benefit) | ||||||||||||||||
| Deferred income tax expense (benefit) | ( | ) | ||||||||||||||
| Total provision for income taxes | ( | ) | ||||||||||||||
Income tax rate reconciliation
For FY2026, the Company uses the Japanese national statutory income tax rate applicable to the parent company, its jurisdiction of domicile, as the starting point for the reconciliation. The rate reconciliation is presented using the categories required by ASU 2023-09.
| Year ended April 30, 2026 | JPY | % | USD | |||||||||
| Tax at Japanese statutory income tax rate | ( | ) | % | ( | ) | |||||||
| State and local income tax, net of national income tax effect | ||||||||||||
| Foreign tax effects | ( | )% | ||||||||||
| Effect of changes in tax laws or rates | ||||||||||||
| Effect of cross-border tax laws | ||||||||||||
| Tax credits | ||||||||||||
| Changes in valuation allowances | ( | )% | ||||||||||
| Nontaxable or nondeductible items – acquisition-related expense | ( | )% | ||||||||||
| Outside-basis / related-company share basis difference | ||||||||||||
| Other nontaxable or nondeductible items | % | |||||||||||
| Other | ( | )% | ||||||||||
| Effective income tax rate / provision | ||||||||||||
F-21
The comparative FY2024 and FY2025 rate reconciliations, prior to adoption of ASU 2023-09, were as follows:
| Year ended April 30, | 2024 | 2025 | ||||||
| Japanese statutory income tax rate | % | % | ||||||
| Deferred IPO costs | % | |||||||
| Non-taxable income | % | |||||||
| Valuation allowance | ( | )% | ( | )% | ||||
| Share-based compensation | ( | )% | ||||||
| Non-deductible compensation | ||||||||
| Others | ( | )% | ( | )% | ||||
| Effective tax rate | % | % | ||||||
Deferred tax assets and liabilities
Deferred tax assets and liabilities are recognized for temporary differences and tax loss carryforwards and are measured using enacted tax rates expected to apply when the related amounts are recovered or settled. The April 30, 2025 comparative amounts below reflect the parent company.
| As of April 30, | 2025 | 2026 | 2026 | |||||||||
| JPY | JPY | USD | ||||||||||
| Japan tax loss carryforwards | ||||||||||||
| Other Japan temporary differences | ||||||||||||
| Foreign tax loss carryforwards | ||||||||||||
| Foreign / other deferred tax assets | ||||||||||||
| Gross deferred tax assets | ||||||||||||
| Valuation allowance | ( | ) | ( | ) | ( | ) | ||||||
| Deferred tax assets, net | ||||||||||||
| Parent / other deferred tax liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Foreign / other deferred tax liabilities | ( | ) | ( | ) | ||||||||
| Deferred tax liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net deferred tax asset (liability) | ||||||||||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which the temporary differences become deductible and tax loss carryforwards are available.
Income taxes paid
Income taxes paid, net of refunds received, are presented by jurisdiction below.
| Year ended April 30, 2026 | JPY | USD | ||||||
| Japan – national income taxes | ||||||||
| Japan – local income taxes | ||||||||
| Cyprus | ||||||||
| Germany | ||||||||
| Switzerland | ||||||||
| United States | ||||||||
| Other foreign jurisdictions | ||||||||
| Total income taxes paid, net of refunds | ||||||||
F-22
Uncertain tax positions
The Company recognizes the financial statement effects of a tax position when it is more likely than not that the position will be sustained upon examination. Interest and penalties related to uncertain tax positions are recognized in income tax expense.
(b) Consumption tax
Consumption tax collected and remitted to tax authorities is excluded from revenue, cost of sales and expenses in the statements of operations. The Company is subject to the applicable Japanese consumption tax rate of
Note 13 – Virtual Shares
On November 21, 2024, PML entered into a virtual shareholder arrangement under which a counterparty was granted a non-equity economic interest equivalent to
The Virtual Shares also include a liquidation preference that is separate from the Virtual Preferred Dividend and the
The Virtual Shares provide economic participation rights, including dividend and liquidation participation rights, and customary tag-along and drag-along rights. The arrangement includes a stated preferred return of US$
The January 20, 2026 Acquisition did not constitute a liquidity event under the Virtual Shareholder Agreement and did not trigger the liquidation preference. The virtual shareholder elected to participate in the related share exchange pursuant to its tag-along rights.
Note 14 – Shareholders’ equity
Ordinary shares
The Company is a stock company incorporated in Japan pursuant to the laws of Japan on May 1, 2018. As of April 30, 2025 and 2026, the number of outstanding shares is
During the year ended April 30, 2026, the Company issued
On August 27, 2025, the Company entered into an investment agreement with a non-U.S. investor to issue
On April 30, 2026, the Company completed the issuance of
| Ordinary share activity | Shares | |||
| Balance, April 30, 2025 | ||||
| Private placement | ||||
| Warrant exercises | ||||
| Shares issued in connection with Acquisition | ||||
| Balance, April 30, 2026 | ||||
F-23
Series P preference shares
In connection with the acquisition of PML, the Company issued
Capital reduction
On April 30, 2026, the Company’s shareholders approved an amendment to its equity structure whereby the Company reduced capital associated with ordinary shares with a corresponding increase to additional paid-in capital of JPY
Warrants
On October 15, 2025, the Company completed the initial closing of private placement offering whereby the Company sold and issued to several investors in an initial closing (i) pre-funded warrants of the Company to purchase up to an aggregate of
The warrants were immediately exercisable on the date of issuance and will expire when exercised in full and the ordinary warrants were immediately exercisable and expire on October 9, 2030. Each investor’s ability to exercise the warrants is subject to certain
The Company engaged Alexander Capital L.P. as the Company’s placement agent for the offering and issued to Alexander an ordinary warrant to purchase up to
Net cash proceeds of JPY
On November 18, 2025, the Company completed a second closing for a private placement offering (i) pre-funded warrants of the Company to purchase up to an aggregate of
The warrants were immediately exercisable on the date of issuance and will expire when exercised in full and the ordinary warrants were immediately exercisable. Each investor’s ability to exercise the warrants is subject to certain
The Company engaged Alexander Capital L.P. as the Company’s placement agent for the offering and issued to Alexander an ordinary warrant to purchase up to
Net cash proceeds of JPY
On January 20, 2026, the Company issued Sigma9 Capital Ltd. warrants to purchase
| FY2026 warrant class | Issued | Exercised | Outstanding Apr. 30, 2026 | Exercise price | |||||||||||
| Pre-funded warrants | US$ | ||||||||||||||
| Ordinary investor warrants | US$ | ||||||||||||||
| Placement-agent warrants | US$ | ||||||||||||||
| Sigma9 strategic warrants | US$ | ||||||||||||||
| Total FY2026 warrants | |||||||||||||||
Note 15 – Share-based compensation
For the year ended April 30, 2026, the parent company recognized no share-based compensation expense.
F-24
Share option plan (the “2019 Plan”)
On February 5, 2019, the shareholders and Board of Directors of the Company approved the 2019 Plan, which is administered by the Board of Directors and has a term of
The options granted under the 2019 Plan have a contractual term of
The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of -
A summary of the employee equity award activity under the 2019 Plan is stated below:
| Number of options | Weighted- average exercise price JPY | Weighted- average remaining contractual term Years | Aggregate intrinsic Value JPY | |||||||||||||
| Outstanding, April 30, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | - | |||||||||||||||
| Outstanding, April 30, 2025 | ||||||||||||||||
| Vested at April 30, 2025 | ||||||||||||||||
| Exercisable at April 30, 2025 | ||||||||||||||||
| Number of options | Weighted- average exercise price JPY | Weighted- average remaining contractual term Years | Aggregate intrinsic Value JPY | |||||||||||||
| Outstanding, April 30, 2025 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding, April 30, 2026 | ||||||||||||||||
| Vested at April 30, 2026 | ||||||||||||||||
| Exercisable at April 30, 2026 | ||||||||||||||||
| Number of options | Weighted- average exercise price USD | Weighted- average remaining contractual term Years | Aggregate intrinsic Value USD | |||||||||||||
| Outstanding, April 30, 2025 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding, April 30, 2026 | ||||||||||||||||
| Vested at April 30, 2026 | ||||||||||||||||
| Exercisable at April 30, 2026 | ||||||||||||||||
F-25
The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s ordinary share as of fiscal year end and the option’s respective exercise price.
For the year ended April 30, 2024, the Company recognized share-based compensation expense of JPY
Trust-Type Share Option Plan (the “2019 Trust-Type Plan”)
On July 1, 2019, the shareholders and Board of Directors of the Company approved the 2019 Trust-Type Share Option Plan (the “2019 Trust-Type Plan”); 2019 Trust-Type Plan is administered by the Board of Directors, and has a term of
The trust-type share option (trust for market value-issue stock acquisition rights) is a scheme of where the option holder is granted the right to acquire the Company’s stock in the open market at pre-determined price, which can be lower than the fair market value; therefore, generating immediate benefit to the holder to option. The trust type plan was initiated and created by the trustor (Mr. Kobayashi, the Company’s Chief Executive Officer) when he deposited funds into the trust with the intention to reward the beneficiaries of the plan. The trustee is entrusted with the responsibility to grant to beneficiaries (officers and employees, etc.) the options.
The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions: risk-free interest rate of -
A summary of the employee equity award activity under the 2019 Trust-Type Plan is stated below:
| Number of options | Weighted- average exercise price JPY | Weighted- average remaining contractual term Years | Aggregate intrinsic Value JPY | |||||||||||||
| Outstanding, April 30, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised | - | |||||||||||||||
| Outstanding, April 30, 2025 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | ||||||||||||||||
| Exercised | - | |||||||||||||||
| Outstanding, April 30, 2026 | ||||||||||||||||
On August 12, 2024, allocated share options of
No options under the 2019 Trust-Type Plan were outstanding at April 30, 2026, and there was no activity under the plan during the year ended April 30, 2026.
F-26
Note 16 – Related Party Transactions
Related party transactions
Related parties include directors, officers, significant shareholders and entities controlled by or under common control with such persons. Transactions and balances with consolidated subsidiaries are eliminated in consolidation.
Related-party balances
Amounts due from and due to related parties were as follows:
| Nature of transaction | April 30, 2025 | April 30, 2026 | April 30, 2026 | |||||||||||
| JPY | JPY | USD | ||||||||||||
| Receivables from related parties | ||||||||||||||
| PM MTF Ltd. | ||||||||||||||
| Total receivables from related parties | ||||||||||||||
| Payables to related parties | ||||||||||||||
| Patrick Gruhn | ||||||||||||||
| Panagiota Ziourti | ||||||||||||||
| Total payables to related parties | ||||||||||||||
| Loans to related parties, noncurrent | ||||||||||||||
| Lorem Ipsum RM UG GmbH | ||||||||||||||
| Patrick Gruhn | ||||||||||||||
| Total loans to related parties, noncurrent | ||||||||||||||
Receivables from related parties as of April 30, 2026 principally represent JPY
Payables to related parties as of April 30, 2026 comprise JPY
Loans to related parties, noncurrent includes amounts due to Lorem Ipsum RM UG GmbH and Patrick Gruhn.
Lorem Ipsum RM UG GmbH facility
The Company has an unsecured loan facility with Lorem Ipsum RM UG GmbH with a maximum principal amount of JPY
Patrick Gruhn balances at Kephas Corporation
As of April 30, 2026, the Company had JPY
F-27
Loan from Satoshi Kobayashi
During the year ended April 30, 2026, Satoshi Kobayashi, a director and significant shareholder of the Company, advanced an aggregate of JPY
Note 17 – Commitments and contingencies
Lease commitments
The Company and its subsidiaries are parties to operating lease arrangements for office and data-center space. The related lease liabilities and future minimum lease payments as of April 30, 2026 are disclosed in Note 11 - Operating leases.
Litigation
Certain shareholders of the Company filed a lawsuit in the Tokyo District Court against the Company and Mr. Satoshi Kobayashi, the Company’s Co-Chief Executive Officer, Interim Chief Financial Officer and Representative Director. The complaint, dated December 18, 2023 and served on January 12, 2024, alleged that Mr. Kobayashi intentionally delayed or misrepresented procedures necessary for certain shareholders to sell their shares following the Company’s initial public offering and that the Company was liable for damages under Article 350 of the Japanese Companies Act. The plaintiffs sought monetary damages of US$
Alexander Capital litigation
On April 21, 2026, Alexander Capital, L.P. filed an action against the Company in the United States District Court for the Southern District of New York alleging breach of contract and seeking approximately US$
Other Matters
On April 22, 2026, James Warren filed an action against the Company’s subsidiary, Kephas Corporation, and Patrick Gruhn in the United States District Court for the District of Oregon alleging unpaid overtime wages and penalty wages under Oregon law, alleged unpaid overtime wages and liquidated damages under federal law, failure to pay final wages and penalty wages under Oregon law, and retaliation and whistleblower retaliation under Oregon law. The matter was pending as of April 30, 2026. No provision for this matter has been separately recorded in the consolidated financial statements. The ultimate outcome of the proceeding cannot presently be determined from the information available to the Company.
On February 18, 2025, Ronald R. Thomson filed an action against Ryan Braswell, Patrick Gruhn, and Kephas Corporation in the Circuit Court of the State of Oregon for the County of Deschutes. An amended complaint was filed on February 18, 2025. The action alleges claims against defendants Braswell and Gruhn of trespass, invasion of privacy and security, and nuisance and asserts that the plaintiff suffered emotional distress. The claim asserts that defendant Braswell was an employee of Kephas Corporation at the time of the alleged wrongful acts and seeks to hold Kephas Corporation liable for defendant Braswell’s actions. The matter was pending as of April 30, 2026. No provision for this matter has been separately recorded in the consolidated financial statements. The ultimate outcome of the proceeding cannot presently be determined from the information available to the Company.
On April 2, 2025, Rachel Ann Thompson filed an action against Patrick Gruhn, Daniel Bentley, and Kephas Corporation in the Circuit Court of the State of Oregon for the County of Deschutes alleging wrongful termination. The case was dismissed without prejudice to refile on March 23, 2026. As of April 30, 2026, the matter is still open, as Kephas Corporation is awaiting an award of its attorney fees. The ultimate outcome of the proceeding cannot presently be determined from the information available to the Company.
F-28
On May 2026, Rachel Ann Thompson refiled her claims against the defendants Patrick Gruhn, Daniel Bentley, and Kephas Corporation wherein the plaintiff seeks damages for her alleged wrongful termination. The plaintiff has not yet served her complaint on any of the defendants. The ultimate outcome of the proceeding cannot presently be determined from the information available to the Company.
On November 14, 2024, Modulus Global, Inc. filed a lawsuit in the U.S. District Court for the District of Arizona against Patrick Gruhn, Brandon Williams, Kephas Corporation, Stephen Stephens, WIB Technologies Inc., and DAAG USA LLC. On April 1, 2025, Modulus filed a First Amended Complaint asserting claims for federal trade-secret misappropriation under the Defend Trade Secrets Act, Arizona trade-secret misappropriation, civil conspiracy, and fraud. Modulus alleged, among other things, that certain defendants improperly disclosed, used, or facilitated the use of Modulus’s proprietary exchange software, source code, and other confidential information in violation of contractual and other obligations. Modulus did not specify a dollar amount of damages in the First Amended Complaint, instead stating that its damages were “in an amount to be proven at trial.” Modulus sought damages for its alleged actual loss and any resulting unjust enrichment, a reasonable royalty for the alleged unauthorized misappropriation, punitive and exemplary damages, an injunction prohibiting further distribution of its alleged trade secrets, attorneys’ fees and costs, post-judgment interest, and such other relief as the court deemed appropriate. On February 13, 2026, the Court dismissed the claims against Brandon Williams, Kephas Corporation, and WIB Technologies Inc. for lack of personal jurisdiction and dismissed the claims against DAAG USA LLC on the same basis, with leave to amend. The Court denied the motions to dismiss filed by Patrick Gruhn and Stephen Stephens. The action was subsequently dismissed without prejudice. The dismissal was not an adjudication on the merits of Modulus’s claims.
Note 18 – Subsequent events
Dissolution of dormant subsidiary
On May 22, 2026, PerpetualPay Ltd., a dormant Polish subsidiary held through PML, was dissolved. The dissolution did not result in a material change to the consolidated group’s operations.
Termination of PML customer arrangement
In May 2026, PML and its sole customer mutually agreed to terminate their SaaS Agreement before its contractual expiration date in exchange for a negotiated early termination fee. The termination occurred after the April 30, 2026 balance-sheet date.
Settlement of shareholder litigation
On July 17, 2026, the Company and Mr. Satoshi Kobayashi reached a judicial settlement with the plaintiffs in the Tokyo District Court litigation described in Note 17. The defendants agreed to pay JPY
Warrant exercises
From May 1, 2026 through August 12, 2026, holders exercised warrants resulting in the issuance of
Related party loans
The Company borrowed a total of JPY
Co-CEO Patrick Gruhn provided interest free loan to Kephas Corp. on July 27, 2026 for JPY
Except as disclosed above, the Company has not identified any other material subsequent events requiring disclosure through the date these consolidated financial statements were available to be issued.
F-29
Exhibit 2.5
Description of Rights of Securities
Registered under Section 12 of the Securities Exchange Act of 1934, as Amended (the “Exchange Act”)
American depositary shares (“ADSs”) of Perpetuals.com Ltd (“we,” “our,” “our company,” or “us”) are listed and traded on the Nasdaq Capital Market under the symbol “ELWS,” and our ADSs are registered under Section 12(b) of the Exchange Act. Each ADS represents one of our ordinary shares (“Ordinary Shares”). This exhibit contains a description of the rights of the holders of Ordinary Shares and ADSs.
Description of Ordinary Shares
The following description is a summary of the material information concerning our Ordinary Shares, including a summary of the relevant provisions of our articles of incorporation (“Articles of Incorporation”), the Companies Act of Japan (Act No. 86 of 2005, as amended) (the “Companies Act”) relating to stock companies (kabushiki kaisha), and certain related laws and legislation, each as currently in effect. Because it is a summary, this discussion should be read together with our Articles of Incorporation and the applicable share handling regulations.
Type and Class of Securities (Item 9.A.5 of Form 20-F)
We are a stock company incorporated in Japan under the Companies Act. The rights of our shareholders are represented by our Ordinary Shares as described below, and shareholders’ liability is limited to the amount of subscription for such Ordinary Shares. As of the date hereof, our authorized share capital consists of 55,300,000 Ordinary Shares. Our Articles of Incorporation currently in effect do not provide any restrictions on transfer of shares.
Pre-Emptive Rights (Item 9.A.3 of Form 20-F)
Holders of Ordinary Shares have no pre-emptive rights under our Articles of Incorporation.
Rights of Other Types of Securities (Item 9.A.7 of Form 20-F)
Not applicable.
Distribution of Surplus (Item 10.B.3 of Form 20-F)
Under the Companies Act, the distribution of dividends takes the form of distribution of surplus, and a distribution of surplus may be made in cash and/or in kind, with no restrictions on the timing and frequency of such distributions. The Companies Act generally requires a stock company to make distributions of surplus authorized by a resolution of a general meeting of shareholders. Distributions of surplus are, however, permitted pursuant to a resolution of the board of directors if:
| (a) | the company’s articles of incorporation so provide; | |
| (b) | the normal term of office of directors expires on or before the day of the conclusion of the annual shareholders meeting for the last business year ending within one year from the time of their election (our Articles of Incorporation do not have provisions to this effect); | |
| (c) | the company has accounting auditor(s) and board of company auditors, audit and supervisory committee, or nominating committee, etc.; and | |
| (d) | the company’s non-consolidated annual financial statements and certain documents for the latest fiscal year fairly present its assets and profit or loss, as required by the ordinances of the Ministry of Justice. |
In an exception to the above rule, even if the requirements described in (a) through (d) are not met, the company may be permitted to make distributions of surplus in cash to its shareholders by resolution of the board of directors once per fiscal year if its articles of incorporation so provide. Our Articles of Incorporation provide that the company may, by a resolution of our board of directors, distribute interim dividends to those shareholders or pledgees who are entered or recorded in the register of shareholders as of the close of business on October 30 of each year.
A resolution of a general meeting of shareholders authorizing a distribution of surplus must specify the kind and aggregate book value of the assets to be distributed, the manner of allocation of such assets to shareholders, and the effective date of the distribution. If a distribution of surplus is to be made in kind, we may, pursuant to a resolution of a general meeting of shareholders, grant a right to the shareholders to require us to make such distribution in cash instead of in kind. If no such right is granted to shareholders, the relevant distribution of surplus must be approved by a special resolution of a general meeting of shareholders. See “—Voting Rights” for more details regarding a special resolution. Our Articles of Incorporation provide that we are relieved of our obligation to pay any distributions in cash that go unclaimed for 3 years after the date they first become payable.
Restriction on Distribution of Surplus (Item 10.B.3 of Form 20-F)
Under the Companies Act, we may distribute surplus up to the excess of the aggregate of (a) and (b) below, less the aggregate of (c) through (f) below, as of the effective date of such distribution, if our net assets are not less than JPY3,000,000:
| (a) | the amount of surplus, as described below; | |
| (b) | in the event that extraordinary financial statements as of, or for a period from the beginning of the fiscal year to, the specified date are approved, the aggregate amount of (i) the aggregate amount as provided for by an ordinance of the Ministry of Justice as the net income for such period described in the statement of income constituting the extraordinary financial statements, and (ii) the amount of consideration that we received for the treasury shares that we disposed of during such period; | |
| (c) | the book value of our treasury shares; | |
| (d) | in the event that we disposed of treasury shares after the end of the previous fiscal year, the amount of consideration that we received for such treasury shares; | |
| (e) | in the event described in (b) in this paragraph, the aggregate amount as provided for by an ordinance of the Ministry of Justice as the net loss for such period described in the statement of income constituting the extraordinary financial statements; and | |
| (f) | certain other amounts set forth in the ordinances of the Ministry of Justice, including (if the sum of one-half of goodwill and the deferred assets exceeds the total of share capital, additional paid-in capital and legal earnings reserve, each such amount as it appears on the balance sheet as of the end of the previous fiscal year) all or a certain part of such excess amount as calculated in accordance with the ordinances of the Ministry of Justice. |
For the purposes of this section, the amount of “surplus” is the excess of the aggregate of (I) through (IV) below, less the aggregate of (V) through (VII) below:
| (I) | the aggregate of other capital surplus and other retained earnings at the end of the previous fiscal year; | |
| (II) | in the event that we disposed of treasury shares after the end of the previous fiscal year, the difference between the book value of such treasury shares and the consideration that we received for such treasury shares; | |
| (III) | in the event that we reduced our share capital after the end of the previous fiscal year, the amount of such reduction less the portion thereof that has been transferred to additional paid-in capital and/or legal earnings reserve (if any); | |
| (IV) | in the event that we reduced additional paid-in capital and/or legal earnings reserve after the end of the previous fiscal year, the amount of such reduction less the portion thereof that has been transferred to share capital (if any); | |
| (V) | in the event that we cancelled treasury shares after the end of the previous fiscal year, the book value of such treasury shares; | |
| (VI) | in the event that we distributed surplus after the end of the previous fiscal year, the aggregate of the following amounts: |
| a. | the aggregate amount of the book value of the distributed assets, excluding the book value of such assets that would be distributed to shareholders but for their exercise of the right to receive dividends in cash instead of dividends in kind; |
| b. | the aggregate amount of cash distributed to shareholders who exercised the right to receive dividends in cash instead of dividends in kind; and |
| c. | the aggregate amount of cash paid to shareholders holding fewer shares than the shares that were required in order to receive dividends in kind; |
| (VII) | the aggregate amounts of (1) through (4) below, less (5) and (8) below: |
| (1) | in the event that the amount of surplus was reduced and transferred to additional paid-in capital, legal earnings reserve and/or share capital after the end of the previous fiscal year, the amount so transferred; |
| (2) | in the event that we distributed surplus after the end of the previous fiscal year, the amount set aside in additional paid-in capital and/or legal earnings reserve; |
| (3) | in the event that we disposed of treasury shares in the process of (x) a merger in which we acquired all rights and obligations of a company, (y) a corporate split in which we acquired all or a part of the rights and obligations of a split company, or (z) a share exchange (kabushiki kokan) in which we acquired all shares of a company after the end of the previous fiscal year, the difference between the book value of such treasury shares and the consideration that we received for such treasury shares; |
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| (4) | in the event that the amount of surplus was reduced in the process of a corporate split in which we transferred all or a part of our rights and obligations after the end of the previous fiscal year, the amount so reduced; |
| (5) | in the event of (x) a merger in which we acquired all rights and obligations of a company, (y) a corporate split in which we acquired all or a part of the rights and obligations of a split company, or (z) a share exchange in which we acquired all shares of a company after the end of the previous fiscal year, the aggregate amount of (i) the amount of the other capital surplus after such merger, corporate split or share exchange, less the amount of other capital surplus before such merger, corporate split or share exchange, and (ii) the amount of the other retained earnings after such merger, corporate split or share exchange, less the amount of other retained earnings before such merger, corporate split or share exchange; |
| (6) | in the event that an obligation to cover a deficiency, such as the obligation of a person who subscribed newly issued shares with an unfair amount to be paid in, was fulfilled after the end of the previous fiscal year, the amount of other capital surplus increased by such payment; |
| (7) | the amount of other capital surplus changed pursuant to the provisions of Article 42-2, Paragraph (5), item 1 of the Regulations on Corporate Accounting after the last day of the most recent business year; and |
| (8) | in the event that the amount of treasury shares is increased pursuant to the provisions of Article 42-2, Paragraph (7) of the Regulations on Corporate Accounting after the last day of the most recent business year, the amount of treasury shares increased. |
In Japan, the “ex-dividend” date and the record date for any distribution of surplus come before the date a company determines the amount of distribution of surplus to be paid.
Capital and Reserves
Under the Companies Act, the paid-in amount of any newly-issued shares is required to be accounted for as share capital, although we may account for an amount not exceeding one-half of such paid-in amount as additional paid-in capital. We may generally reduce additional paid-in capital and/or legal earnings reserve by resolution of a general meeting of shareholders, subject to completion of protection procedures for creditors in accordance with the Companies Act, and, if so decided by the same resolution, we may account for the whole or any part of the amount of such reduction as share capital. We may generally reduce share capital by a special resolution of a general meeting of shareholders and, if so decided by the same resolution, we may account for the whole or any part of the amount of such reduction as additional paid-in capital.
Share Splits
Under the Companies Act, we may at any time split shares in issue into a greater number of the same class of shares by a resolution of the board of directors. When a share split is to be made, we must give public notice of the share split, specifying the record date therefor, at least two weeks prior to such record date.
Reverse Share Splits
Under the Companies Act, we may at any time consolidate our shares into a smaller number of shares by a special resolution of the general meeting of shareholders. We must disclose the reason for the reverse share split at the general meeting of shareholders. When a reverse share split is to be made, we must give public notice of the reverse share split, at least two weeks (or, in certain cases where any fractions of shares are left as a result of a reverse share split, 20 days) prior to the effective date of the reverse share split.
General Meeting of Shareholders
Our ordinary general meeting of shareholders is usually held in the head office of the company in Tokyo, Japan. The record date for an ordinary general meeting of shareholders is April 30th. In addition, we may hold an extraordinary general meeting of shareholders whenever necessary by giving at least 2-week advance notice to shareholders.
Notice of convocation of a general meeting of shareholders setting forth the time, place, purpose thereof, and certain other matters set forth in the Companies Act and relevant ordinances must be mailed to each shareholder having voting rights (or, in the case of a non-resident shareholder, to his or her standing proxy or mailing address in Japan) at least 2 weeks prior to the date set for such meeting. Such notice may be given to shareholders by electronic means, subject to the consent of the relevant shareholders.
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In a public company, any shareholder or group of shareholders holding at least 3% of the total number of voting rights for a period of 6 months or more may require, with an individual shareholder notice, the convocation of a general meeting of shareholders for a particular purpose. Unless such general meeting of shareholders is convened without delay or a convocation notice of a meeting which is to be held not later than 8 weeks from the day of such demand is dispatched, the requiring shareholder may, upon obtaining a court approval, convene such general meeting of shareholders.
In a public company, any shareholder or group of shareholders holding at least 300 voting rights or 1% of the total number of voting rights for a period of 6 months or more, which period is required after the removal of restrictions on the transfer of shares, may propose a matter to be included in the agenda of a general meeting of shareholders, and may propose to describe such matter together with a summary of the proposal to be submitted by such shareholder in a notice to our shareholders, by submitting a request to a director at least 8 weeks prior to the date set for such meeting, with an individual shareholder notice.
The Companies Act enables a company to amend its articles of incorporation in order to loosen the requirements for the number of shares held and shareholding period, as well as the period required for dispatching a convocation notice or submission of requests, all of which are required for any shareholder or group of shareholders to request the convocation of a general meeting of shareholders or to propose a matter to be included in the agenda of a general meeting of shareholders. Our Articles of Incorporation do not provide for loosening such requirements.
Voting Rights (Item 9.A.6, Item 10.B.3, Item 10.B.4 of Form 20-F)
A shareholder of record is entitled to one vote per Ordinary Share, except that neither we nor any corporation, partnership, or other similar entity in which we hold, directly or indirectly, 25% or more of the voting rights shall exercise any voting rights in respect of Ordinary Shares held by us or such entity, as the case may be. Except as otherwise provided by law or by our Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a majority of the voting rights represented at the meeting. Shareholders may also exercise their voting rights through proxies. The Companies Act and our Articles of Incorporation provide that the quorum for the election of directors and company auditors is 1/3 of the total number of voting rights. Our Articles of Incorporation provide that the Ordinary Shares may not be voted cumulatively for the election of directors.
The Companies Act provides that a special resolution of the general meeting of shareholders is required for certain significant corporate transactions, including:
| ● | any amendment to our Articles of Incorporation (except for amendments that may be authorized solely by the board of directors under the Companies Act); | |
| ● | a reduction of share capital, subject to certain exceptions under which a shareholders’ resolution is not required, such as a reduction of share capital for the purpose of replenishing capital deficiencies; | |
| ● | transfer of the whole or a part of our equity interests in any of our subsidiaries (if any), subject to certain exceptions under which a shareholders’ resolution is not required; | |
| ● | a dissolution, merger, or consolidation, subject to certain exceptions under which a shareholders’ resolution is not required; |
| ● | the transfer of the whole or a substantial part of our business, subject to certain exceptions under which a shareholders’ resolution is not required; | |
| ● | the taking over of the whole of the business of any other corporation, subject to certain exceptions under which a shareholders’ resolution is not required; | |
| ● | a corporate split, subject to certain exceptions under which a shareholders’ resolution is not required; | |
| ● | share exchange (kabushiki kokan) or share transfer (kabushiki iten) for the purpose of establishing 100% parent-subsidiary relationships, subject to certain exceptions under which a shareholders’ resolution is not required; | |
| ● | any issuance of new shares or transfer of existing shares held by us as treasury shares at a “specially favorable” price and any issuance of share acquisition rights or bonds with share acquisition rights at a “specially favorable” price or in a “specially favorable” condition to any persons other than shareholders; | |
| ● | any acquisition by us of our own shares from specific persons other than our subsidiaries (if any); | |
| ● | reverse share split; or | |
| ● | the removal of a company auditor. |
Except as otherwise provided by law or in our Articles of Incorporation, a special resolution of the general meeting of shareholders requires the approval of the holders of at least 2/3 of the voting rights of all shareholders present or represented at a meeting where a quorum is present. Our Articles of Incorporation provide that a quorum exists when 1/3 or more of the total number of voting rights is present or represented.
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The Companies Act provides additional specific rights for shareholders owning a substantial number of voting rights.
A shareholder holding 90% or more of the total number of voting rights of all shareholders has the right to demand that all other shareholders sell their shares to such shareholder who holds 90% or more of the voting rights.
Shareholders holding 10% or more of the total number of voting rights of all shareholders, or 10% or more of the total number of our outstanding shares, have the right to apply to a court of competent jurisdiction for our dissolution.
Shareholders who have held 3% or more of the total number of voting rights of all shareholders, or 3% or more of the total number of our outstanding shares, for six months or more have certain rights under the Companies Act, which include the right to:
| ● | apply to a competent court for removal of a director or a company auditor; and | |
| ● | apply to a competent court for removal of a liquidator. |
Shareholders holding 3% or more of the total number of voting rights of all shareholders have the right to object to the exculpation of a director or a company auditor from certain liabilities.
Shareholders holding 3% or more of the total number of voting rights of all shareholders, or 3% or more of the total number of our outstanding shares, have certain rights under the Companies Act, which include the right to:
| ● | examine our accounting books and documents and make copies of them; and | |
| ● | apply to a competent court for the appointment of an inspector to inspect our operation and/or financial condition. |
Shareholders who have held 1% or more of the total number of voting rights of all shareholders for six months or more have the right to apply to a competent court for the appointment of an inspector to review the correctness of the convocation and voting procedures of a shareholders’ meeting.
Shareholders who have held any number of shares for six months or more have the right to demand that we take certain actions under the Companies Act, which include the rights to demand:
| ● | the institution of an action to enforce the liabilities of our directors or company auditors; | |
| ● | the institution of an action to disgorge from a recipient the benefit of a proprietary nature given in relation to the exercise of the right of a shareholder; and | |
| ● | on our behalf, that a director cease an illegal or ultra vires action. |
There are no provisions under the Companies Act or our Articles of Incorporation which force shareholders to make additional contributions when requested by us.
Liquidation Rights (Item 10.B.3 of Form 20-F)
In accordance with the Companies Act and the Articles of Incorporation, liquidations must be approved by shareholders holding at least a two-thirds majority of Ordinary Shares present at a meeting where a quorum of one-third of the issued and outstanding Ordinary Shares with voting rights is present. If we are liquidated, the assets remaining after payment of all taxes, liquidation expenses, and debts will be distributed among shareholders in proportion to the number of shares they hold.
Gratuitous Allocations
Under the Companies Act, we may allot any class of shares to our existing shareholders without any additional contribution by resolution of the board of directors; provided that although our treasury shares may be allotted to our shareholders, any allotment of shares will not accrue to shares of our treasury shares.
Rights to Allotment of Shares
Authorized but unissued shares may be issued at the times and on the terms as the board of directors determines, so long as the limitations with respect to the issuance of new shares at “specially favorable” prices (as described in “—Voting Rights”) are observed. Our board of directors may, however, determine that shareholders shall be given rights to allotment regarding a particular issue of new shares, in which case such rights must be given on uniform terms to all holders of the shares as of a record date for which not less than 2 weeks’ prior public notice must be given. Each shareholder to whom such rights are given must also be given notice of the expiration date thereof at least 2 weeks prior to the date on which such rights expire. The rights to allotment of new shares may not be transferred. However, the Companies Act enables us to allot share acquisition rights to shareholders without consideration therefor, and such share acquisition rights are transferable. See “—Share Acquisition Rights” below.
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In cases where a particular issuance of new shares (i) violates laws and regulations or our Articles of Incorporation, or (ii) will be performed in a manner materially unfair, and shareholders may suffer disadvantages therefrom, such shareholders may file an injunction with a court of law to enjoin such issuance.
Share Acquisition Rights
Subject to certain conditions and to the limitations on issuances at a “specially favorable” price or on “specially favorable” conditions described in “—Voting Rights,” we may issue share acquisition rights (shinkabu yoyakuken) and bonds with share acquisition rights (shinkabu yoyakuken-tsuki shasai) by a resolution of the board of directors (and before the removal of restrictions on the transfer of shares, a resolution of the general meeting of shareholders is required instead). Holders of share acquisition rights may exercise their rights to acquire a certain number of shares within the exercise period as set forth in the terms of their share acquisition rights. Upon exercise of share acquisition rights, we will be obligated either to issue the relevant number of new shares or, alternatively, to transfer the necessary number of shares of treasury shares held by us.
Record Date
The record date for annual dividends and the determination of shareholders entitled to vote at the ordinary general meeting of our shareholders is April 30. In addition, by a resolution of the board of directors, we may set a record date for determining the shareholders entitled to other rights and for other purposes by giving at least 2 weeks’ prior public notice.
Purchase of Our Own Shares
Under the Companies Act, we may acquire our own shares:
| ● | by purchase from a specific party other than any of our subsidiaries (if any), pursuant to a special resolution of a general meeting of shareholders; and | |
| ● | by purchase from any of our subsidiaries (if any), pursuant to a resolution of the board of directors. |
Any such acquisition of shares must satisfy certain requirements, such as that we may only acquire our own shares in an aggregate amount up to the amount that we may distribute as surplus. See “—Distribution of Surplus” above for more details regarding this amount.
Our own shares acquired by us may be held by us as treasury shares for any period or may be cancelled by resolution of the board of directors. We may also transfer the shares held by us to any person, subject to a special resolution of a general meeting of shareholders or a resolution of the board of directors, as the case may be, and subject also to other requirements similar to those applicable to the issuance of new shares, as described in “—Rights to Allotment of Shares” above. We may also utilize our treasury shares (x) for the purpose of transfer to any person upon exercise of share acquisition rights or (y) for the purpose of acquiring another company by way of merger, share exchange, or corporate split through exchange of treasury shares for shares or assets of the acquired company.
Sale by Us of Shares Held by Shareholders Whose Addresses Are Unknown
Under the Companies Act, we are not required to send a notice to a shareholder if notices to such shareholder fail to arrive for a continuous period of five or more years at the registered address of such shareholder in the register of our shareholders or at the address otherwise notified to us.
In addition, we may sell or otherwise dispose of the shares held by a shareholder whose location is unknown. Generally, if
| ● | notices to a shareholder fail to arrive for a continuous period of five or more years at the shareholder’s registered address in the register of our shareholders or at the address otherwise notified to us, and | |
| ● | the shareholder fails to receive distribution of surplus on the shares for a continuous period of five or more years at the address registered in the register of our shareholders or at the address otherwise notified to us, |
we may sell or otherwise dispose of the shareholder’s shares at the market price after giving at least three months’ prior public and individual notices, and hold or deposit the proceeds of such sale or disposal for the shareholder.
Limitations on Liability
Our Articles of Incorporation permit us to exempt, by resolution of our board of directors, company auditors (kansayaku) from liabilities arising in connection with their failure to execute their duties in good faith (but without gross negligence), to the fullest extent permitted by the Companies Act. In addition, our Articles of Incorporation permit us to exempt, by resolution of our board of directors, directors from liabilities arising in connection with any failure to execute their duties in good faith or due to simple negligence (excluding gross negligence and willful misconduct), to the fullest extent permitted by the Companies Act. Should our board of directors, exempt a company auditor or director from any such liabilities, our rights and those of our shareholders to file shareholders’ derivative suits on behalf of our Company to recover monetary damages from such director or company auditor for breach of their duties under the Companies Act will be eliminated or reduced. However, exculpation does not apply to any director or company auditor if they have breached their duties under the Companies Act intentionally (koi) or by gross negligence (ju-kashitsu). Furthermore, we have entered into agreements for the limitation of liabilities with our independent directors and company auditors.
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Restrictions on Holders of our Ordinary Shares (Item 10.B.6, Item 10.B.7, Item 10.B.8 of Form 20-F)
There are no restrictions with respect to non-residents of Japan or foreign shareholders holding our Ordinary Shares or on the exercise of voting rights, except for filing requirements with respect to an acquisition of shares by a Non-Resident of Japan under the Foreign Exchange and Foreign Trade Act of Japan and related regulations. However, pursuant to a provision of our share handling regulations, a shareholder who does not have an address or residence in Japan is required to file with our depositary its temporary address to receive notices in Japan or that of a standing proxy having any address or residence in Japan.
There are no provisions in our Articles of Incorporation that would have the effect of delaying, deferring or preventing a change in control that would operate only with respect to a merger, acquisition or corporate restructuring involving us.
There are no provisions in our Articles of Incorporation or other subordinated rules regarding an ownership threshold, above which shareholder ownership must be disclosed.
There are no provisions in our Articles of Incorporation governing changes in our Company’s capital more stringent than is required by law.
Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)
With respect to Items 10.B.2 to 10.B.8, the Company has identified in the responses above where provisions of the Companies Act applicable to the Company are significantly different from the comparable Delaware law.
Changes in Capital (Item 10.B.10 of Form 20-F)
There are no provisions in our Articles of Incorporation governing changes in our Company’s capital more stringent than is required by law.
Debt Securities (Item 12.A of Form 20-F)
Not applicable.
Warrants and Rights (Item 12.B of Form 20-F)
In connection with our IPO, we issued to US Tiger Securities, Inc. warrants to purchase up to 55,200 ADSs (the “Representative’s Warrants”), all of which are outstanding.
The exercise price of the Representative’s Warrants is $6.25 per ADS. The Representative’s Warrants are exercisable commencing on July 27, 2023 and will become void on July 27, 2026. The Representative’s Warrants provide for adjustment in the number and price of such warrants and the ADSs underlying such warrants in the event of recapitalization, merger, or other structural transaction to prevent mechanical dilution. The Representative’s Warrants and the underlying ADS are deemed compensation by FINRA, and therefore are subject to FINRA Rule 5110(e)(1). In accordance with FINRA Rule 5110(e)(1), and except as otherwise permitted by FINRA rules, neither the Representative’s Warrants nor any of our ADS issued upon exercise of the Representative’s Warrants may be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person, for a period of 180 days beginning on the date of commencement of sales of our IPO.
On October 10, 2025, the Company sold to certain investors: (i) pre-funded warrants of the Company to purchase up to an aggregate of 2,403,847 ADSs, at an exercise price of $0.0005 per ADS, immediately exercisable on the date of issuance and will expire when exercised in full, and (ii) warrants of the Company to purchase up to an aggregate of 2,403,847 ADSs, at an exercise price of $2.72 per ADS, immediately exercisable and expire on October 9, 2030. On the same day, the Company also issued to certain representatives of Alexander Capital L.P. a warrant to purchase up to 96,154 ADSs, representing 480,770 Ordinary Shares, at an exercise price of $2.08 per ADS, subject to adjustment set forth therein, which are immediately exercisable and expire five years from issuance.
On November 18, 2025, the Company issued and sold to certain investors: (i) pre-funded warrants of the Company to purchase up to an aggregate of 1,000,000 ADSs, at an exercise price of $0.0005 per ADS, immediately exercisable on the date of issuance and will expire when exercised in full, and (ii) warrants of the Company to purchase up to an aggregate of 1,000,000 ADSs, at an exercise price of $2.72 per ADS, immediately exercisable and will expire on November 17, 2030. Each investor’s ability to exercise the warrants is subject to certain 4.99% and 9.99% beneficial ownership limitation provisions set forth therein. On the same day, the Company issued to certain representatives of Alexander Capital L.P. warrants to purchase up to 40,000 ADSs, representing 200,000 Ordinary Shares, at an exercise price of $2.08 per ADS, subject to adjustment set forth therein, which were immediately exercisable and will expire five years from issuance.
In addition, on January 20, 2026, the Company issued a warrant to Sigma9 Capital Ltd. (“Sigma9”) to purchase an aggregate of 2,500,000 ADSs of the Company (the “Sigma9 Warrants”). The Sigma9 Warrant is exercisable for one ADS of the Company at an exercise price of US$5.00 per ADS, has a term of three years from the date of grant, and includes customary anti-dilution and adjustment provisions.
Other Securities (Item 12.C of Form 20-F)
Not applicable.
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Description of American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)
The Bank of New York Mellon, as depositary, registers and delivers our ADSs. Each ADS represents one Ordinary Share (or a right to receive one Ordinary Share) deposited with MUFG Bank Ltd., as custodian for the depositary in Japan. Each ADS will also represent any other securities, cash, or other property that may be held by the depositary. The deposited shares together with any other securities, cash, or other property held by the depositary are referred to as the deposited securities. The depositary’s office at which the ADSs are administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.
You may hold ADSs either (A) directly (i) by having an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.
As an ADS holder, we do not treat you as one of our shareholders and you do not have shareholder rights. Japanese law governs shareholder rights. The depositary is the holder of the Ordinary Shares underlying your ADSs. As a registered holder of ADSs, you have ADS holder rights. A deposit agreement among us, the depositary, and ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.
The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR, which are filed as exhibits to the annual report.
Dividends and Other Distributions
How will you receive dividends and other distributions on the Ordinary Shares?
The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of Ordinary Shares your ADSs represent.
| ● | Cash. The depositary will convert any cash dividend or other cash distribution we pay on the Ordinary Shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest. | |
| Before making a distribution, any withholding taxes or other governmental charges that must be paid will be deducted. The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution. | ||
| ● | Shares. The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution. | |
| ● | Rights to purchase additional shares. If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders, or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer. |
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| ● | Other distributions. The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair, and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash, or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. The depositary, however, is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer. |
The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights, or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights, or anything else to ADS holders. This means that you may not receive the distributions we make on our Ordinary Shares or any value for them if it is illegal or impractical for us to make them available to you.
Deposit, Withdrawal, and Cancellation
How are ADSs issued?
The depositary will deliver ADSs if you or your broker deposits Ordinary Shares or evidence of rights to receive Ordinary Shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.
How can ADS holders withdraw the deposited securities?
You may surrender your ADSs to the depositary for the purpose of withdrawal. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the Ordinary Shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk, and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary, however, is not required to accept surrender of ADSs to the extent it would require delivery of a fraction of a deposited Ordinary Share or other security. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.
What are the Requirements for Depositing and Withdrawing Shares under FEFTA?
Under recent amendments in 2019 to FEFTA, a proposed transferee of our Ordinary Shares who is a Foreign Investor (as defined under FEFTA) must submit an application for pre-clearance to the applicable Japanese governmental authority prior to the transfer of our Ordinary Shares, which approval may take up to 30 days and could be subject to further extension. Prior to accepting Ordinary Shares for deposit in return for the issuance of ADSs, the depositary, which is considered a Foreign Investor for purposes of FEFTA, must obtain pre-clearance from the Japanese governmental authority. Accordingly, investors wishing to deposit Ordinary Shares with the depositary for the issuance of ADSs should notify the depositary at least 30 days prior to such deposit to allow time for the depositary to apply for any required pre-clearance, if not already obtained. The depositary will not accept any Ordinary Shares for deposit until any required pre-clearance has been obtained. In addition, any Foreign Investor expecting to receive delivery of our Ordinary Shares upon surrender of ADSs must also obtain pre-clearance from the applicable Japanese governmental authority prior to accepting delivery, which approval may take up to 30 days and could be subject to further extension. Accordingly, ADS holders who are Foreign Investors wishing to surrender ADSs for the purpose of withdrawing the underlying deposited Ordinary Shares should apply for pre-clearance at least 30 days in advance of such surrender. The depositary will not accept surrender of ADSs for the purpose of withdrawal of Ordinary Shares until it receives assurances satisfactory to the depositary that any required pre-clearance for the delivery of the Ordinary Shares to a Foreign Investor has been obtained.
How do ADS holders interchange between certificated ADSs and uncertificated ADSs?
You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.
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Voting Rights
How do you vote?
ADS holders may instruct the depositary how to vote the number of deposited Ordinary Shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of Japan and the provisions of our Articles of Incorporation or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.
Except by instructing the depositary as described above, you will not be able to exercise voting rights unless you surrender your ADSs and withdraw the Ordinary Shares. However, you may not know about the meeting enough in advance to withdraw the Ordinary Shares. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.
We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the Ordinary Shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if the Ordinary Shares represented by your ADSs are not voted as you requested.
In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 45 days in advance of the meeting date.
Fees and Expenses
| Persons depositing or withdrawing shares or ADS holders must pay: | For: | |
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | |
| $.05 (or less) per ADS | Any cash distribution to ADS holders | |
| A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders | |
| $.05 (or less) per ADS per calendar year | Depositary services | |
| Registration or transfer fees | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | |
| Expenses of the depositary | Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)
Converting foreign currency to U.S. dollars | |
| Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | As necessary | |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary |
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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary, or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers, or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads, or commissions.
The depositary may convert currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary. Where the depositary converts currency itself or through any of its affiliates, the depositary acts as principal for its own account and not as agent, advisor, broker, or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made by the depositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to ADS holders, and the depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate. In certain instances, the depositary may receive dividends or other distributions from us in U.S. dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by us and, in such cases, the depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither it nor we will be liable for any direct or indirect losses associated with the rate.
Payment of Taxes
You are responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.
Tender and Exchange Offers; Redemption, Replacement, or Cancellation of Deposited Securities
The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do so by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.
If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.
If there is any change in the deposited securities such as a sub-division, combination, or other reclassification, or any merger, consolidation, recapitalization, or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. If the depositary, however, decides it would not be lawful and practical to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.
If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADSs in exchange for new ADSs identifying the new deposited securities.
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If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender of those ADSs or cancel those ADSs upon notice to the ADS holders.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges, or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.
How may the deposit agreement be terminated?
The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if
| ● | 90 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment; | |
| ● | we delist the ADSs from an exchange in the United States on which they were listed and do not list the ADSs on another exchange in the United States or make arrangements for trading of ADSs on the | |
| ● | U.S. over-the-counter market; | |
| ● | we delist our shares from an exchange outside the United States on which they were listed and do not list the shares on another exchange outside the United States; | |
| ● | the depositary has reason to believe the ADSs have become, or will become, ineligible for registration on Form F-6 under the Securities Act; | |
| ● | we appear to be insolvent or enter insolvency proceedings; | |
| ● | all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities; | |
| ● | there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or | |
| ● | there has been a replacement of deposited securities. |
If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.
After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities or reverse previously accepted surrenders of that kind that have not settled if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADS holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.
Limitations on Obligations and Liability
Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs
The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:
| ● | are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith, and the depositary will not be a fiduciary or have any fiduciary duty to holders of ADSs; |
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| ● | are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement; | |
| ● | are not liable if we or it exercises discretion permitted under the deposit agreement; | |
| ● | are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential, or punitive damages for any breach of the terms of the deposit agreement; | |
| ● | have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person; | |
| ● | may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person; | |
| ● | are not liable for the acts or omissions of any securities depository, clearing agency, or settlement system; and | |
| ● | the depositary has no duty to make any determination or provide any information as to our tax status, or any liability for any tax consequences that may be incurred by ADS holders as a result of owning or holding ADSs or be liable for the inability or failure of an ADS holder to obtain the benefit of a foreign tax credit, reduced rate of withholding, or refund of amounts withheld in respect of tax or any other tax benefit. |
In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.
Requirements for Depositary Actions
Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:
| ● | payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities; | |
| ● | satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and | |
| ● | compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents. |
The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.
Your Right to Receive the Shares Underlying Your ADSs
ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:
| ● | when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our transfer books; (ii) the transfer of shares is blocked to permit voting at a shareholders’ meeting; or (iii) we are paying a dividend on our shares; | |
| ● | when you owe money to pay fees, taxes, and similar charges; or | |
| ● | when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities. |
This right of withdrawal may not be limited by any other provision of the deposit agreement.
Direct Registration System
In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.
In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.
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Shareholder Communications; Inspection of Register of Holders of ADSs
The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.
Jury Trial Waiver
The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our Ordinary Shares, the ADSs, or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law.
You will not, by agreeing to the terms of the deposit agreement, be deemed to have waived our or the depositary’s compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder.
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Exhibit 8.1
Subsidiaries
| Entity | Jurisdiction | Principal activity | ||
| Perpetual Markets Ltd. | Cyprus | Holding of investments and intellectual property; financial markets infrastructure and technology services | ||
| Perpetual Products AG | Switzerland | Technology and financial products | ||
| Perpetual Data AG | Switzerland | Financial information and index services | ||
| Kephas Corporation | United States | Technology and software development services | ||
| PM Broker Ltd. | Cyprus | Dormant | ||
| Perpetual IT GmbH | Germany | Information technology services, hosting and hardware infrastructure | ||
| USO Labs Ltd. | Marshall Islands | Joint management of UpsideOnly.com platform | ||
| USO Deposit Trust LLC | United States | Joint management of UpsideOnly.com platform | ||
| Barriers Trading Ltd. | Marshall Islands | Management of the Barriers platform |
Exhibit 11.2
INSIDER TRADING COMPLIANCE MANUAL
PERPETUALS.COM LTD
Adopted March 21, 2024, Amended March 5, 2026
In order to take on an active role in the prevention of insider trading violations by its officers, directors, employees, consultants, advisors, and other related individuals, the Board of Directors (the “Board”) of Perpetuals.com Ltd, a joint-stock corporation with limited liability organized under Japanese law (the “Company”), has adopted the policies and procedures described in this Insider Trading Compliance Manual.
| I. | Adoption of Insider Trading Policy. |
Effective as of the date written above, the Company has adopted the Insider Trading Policy (the “Policy”), attached hereto as Exhibit A, which prohibits trading based on material, non-public information regarding the Company and its subsidiaries (“Inside Information”). The Policy covers all officers and directors of the Company and its subsidiaries, all other employees of the Company and its subsidiaries, all secretaries and assistants supporting such officers, directors, or employees and consultants or advisors to the Company or its subsidiaries who have or may have access to Inside Information and members of the immediate family or household of any such person. The Policy (and/or a summary thereof) is to be delivered to all new officers, directors, employees, consultants, advisors and related individuals who are within the categories of covered persons upon the commencement of their relationships with the Company, and is to be circulated to all covered personnel at least annually.
| II. | Designation of Certain Persons. |
A. Insiders. All directors and executive officers of the Company, and any direct or indirect beneficial owner of 10% or more of any of the Company’s registered equity security of any class are deemed to be “Insiders” of the Company. Among such Insiders, the directors and executive officers of the Company are required to comply with the Section 16(a) reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) beginning March 18, 2026. Attached hereto as Exhibit B is a separate memorandum which discusses the relevant terms of Section 16 of the Exchange Act.
Under Sections 13(d) and 13(g) of the Exchange Act, and the U.S. Securities and Exchange Commission (“SEC”) related rules, subject to certain exemptions, any person who after acquiring, directly or indirectly the beneficial ownership of the Company’s registered securities of any class, becomes, either directly or indirectly, the beneficial owner of more than 5% of such class (the “Section 13(d) Individuals”) must deliver a statement to the issuer of the security and to each exchange where the security is traded. Delivery to each exchange can be satisfied by making a filing on EDGAR (as defined below). In addition, Section 13(d) Individuals must file with the SEC a statement containing certain information, as well as any additional information that the SEC may deem necessary or appropriate in the public interest or for the protection of investors. Attached hereto as Exhibit C is a separate memorandum which discusses the relevant terms of Section 13 of the Exchange Act.
B. Other Persons Subject to Policy. In addition, certain employees, consultants, and advisors of the Company as described in Section I above have, or are likely to have, from time to time access to Inside Information and together with the Insiders, are subject to the Policy.
| III. | Appointment of Chief Compliance Officer. |
The Company has appointed Masahiro Tominaga (Independent Director) as the Company’s Chief Compliance Officer (the “Compliance Officer”).
| IV. | Duties of the Compliance Officer. |
The Compliance Officer has been designated by the Board to handle any and all matters relating to the Company’s Insider Trading Compliance Program. Certain duties may be delegated to outside counsel with special expertise in securities issues and relevant law. The duties of the Compliance Officer shall include the following:
A. Pre-clearing all transactions involving the Company’s securities by the Insiders and those individuals having regular access to Inside Information, defined for these purposes to include all officers, directors, and employees of the Company and its subsidiaries and members of the immediate family or household of any such person, in order to determine compliance with the Policy, insider trading laws, Section 13 and Section 16 of the Exchange Act and Rule 144 promulgated under the Securities Act of 1933, as amended. Attached hereto as Exhibit D is a Pre-Clearance Checklist to assist the Compliance Officer in the performance of his or her duties hereunder.
B. Assisting in the preparation and filing of Section 13(d) reports for all Section 13(d) Individuals although the filings are their individual obligations.
C. Serving as the designated recipient at the Company of copies of reports filed with the SEC by Section 13(d) Individuals under Section 13(d) of the Exchange Act.
D. Ensuring that all directors and officers of the Company have obtained the necessary EDGAR filing credentials (CIK, CCC, and password codes) to file Section 16(a) reports with the SEC.
E. Assisting in the preparation and filing of Section 16(a) reports for all directors and officers of the Company. The Compliance Officer shall maintain a system to track all transactions by directors and officers and assist with Form 4 filings.
F. Performing periodic reviews of available materials, which may include Schedule 13D, Schedule 13G, Form 3/4/5, Form 144, director and officer questionnaires, as applicable, and reports received from the Company’s stock administrator and transfer agent, to determine trading activity by officers, directors and others who have, or may have, access to Inside Information.
G. Circulating the Policy (and/or a summary thereof) to all covered employees, including the Insiders, on an annual basis, and providing the Policy and other appropriate materials to new officers, directors and others who have, or may have, access to Inside Information.
H. Assisting the Board in implementing the Policy and Sections I and II of this memorandum.
I. Coordinating with Company counsel regarding all securities compliance matters.
J. Retaining copies of all appropriate securities reports, and maintaining records of his or her activities as Compliance Officer.
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Exhibit A
PERPETUALS.COM LTD
INSIDER TRADING POLICY
and Guidelines with Respect to Certain Transactions in the Company’s Securities
SECTION I
APPLICABILITY OF POLICY
This Policy applies to all transactions in the Company’s securities, including ordinary shares, options and warrants to purchase ordinary shares, and any other securities the Company may issue from time to time, such as preferred shares, and convertible debentures, as well as derivative securities relating to the Company’s shares, whether issued by the Company, such as exchange-traded options. It applies to all officers and directors of the Company, all other employees of the Company and its subsidiaries, all secretaries and assistants supporting such directors, officers, and employees, and consultants or advisors to the Company or its subsidiaries who have or may have access to Material Non-public Information (as defined below) regarding the Company and members of the immediate family or household of any such person. This group of people is sometimes referred to in this Policy as “Insiders.” This Policy also applies to any person who receives Material Non-public Information from any Insider.
Any person who possesses Material Non-public Information regarding the Company is an Insider for so long as such information is not publicly known.
SECTION II
DEFINITION OF MATERIAL NON-PUBLIC INFORMATION
It is not possible to define all categories of material information. However, information should be regarded as “material” if there is a reasonable likelihood that it would be considered important to an investor in making an investment decision regarding the purchase or sale of the Company’s securities. Material information may be positive or negative. “Non-public Information” is information that has not been previously disclosed to the general public and is otherwise not available to the general public.
While it may be difficult to determine whether any particular information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information may include:
| ● | Financial results; |
| ● | Entry into a material agreement or discussions regarding entry into a material agreement; |
| ● | Projections of future earnings or losses; |
| ● | Major contract awards, cancellations or write-offs; |
| ● | Joint ventures or commercial ventures with third parties; |
| ● | News of a pending or proposed merger or acquisition; |
| ● | News of the disposition of material assets; |
A-1
| ● | Impending bankruptcy or financial liquidity problems; |
| ● | Gain or loss of a significant line of credit; |
| ● | Significant breach of a material agreement; |
| ● | New business or services announcements of a significant nature; |
| ● | Share splits; |
| ● | New equity or debt offerings; |
| ● | Significant litigation exposure due to actual or threatened litigation; |
| ● | Changes in senior management or the Board; |
| ● | Capital investment plans; and |
| ● | Changes in dividend policy. |
All of the foregoing categories of information and any similar information should be considered “Material Non-public Information” for purposes of this Policy. If there are any questions regarding whether a particular item of information is Material Non-public Information, please consult the Compliance Officer or the Company’s legal counsel before taking any action with respect to such information.
SECTION III
CERTAIN EXCEPTIONS
For purposes of this Policy, the Company considers that the exercise of stock options under the Company’s stock option plan (but not the sale of any such shares) is exempt from this Policy, since the other party to the transaction involving only the Company itself and the price does not vary with the market but is fixed by the terms of the option agreement or the plan.
SECTION IV
STATEMENT OF POLICY
General Policy
It is the policy of the Company to prohibit the unauthorized disclosure of any non-public information acquired in the workplace and the misuse of Material Non-public Information in securities trading.
Specific Policies
1. Trading on Material Non-public Information. With certain exceptions, no officer or director of the Company, no employee of the Company or its subsidiaries and no consultant or advisor to the Company or any of its subsidiaries and no members of the immediate family or household of any such person, shall engage in any transaction involving a purchase or sale of the Company’s securities, including any offer to purchase or offer to sell, during any period commencing with the date that he or she possesses Material Non-public Information concerning the Company, and ending at the close of business on the second Trading Day (as defined below) following the date of public disclosure of that information, or at such time as such non-public information is no longer material. However, see “Permitted Trading Period” below for a full discussion of trading pursuant to a pre-established plan or by delegation.
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As used herein, the term “Trading Day” shall mean a day on which national stock exchanges are open for trading.
2. Tipping. No Insider shall disclose (“tip”) Material Non-public Information to any other person (including family members) where such information may be used by such person to his or her profit by trading in the securities of companies to which such information relates, nor shall such Insider or related person make recommendations or express opinions on the basis of Material Non-public Information as to trading in the Company’s securities.
Regulation FD (Fair Disclosure) (“Disclosure Regulation”) is an issuer disclosure rule implemented by the SEC that addresses selective disclosure. The Disclosure Regulation provides that when the Company, or person acting on its behalf, discloses Material Non-public Information to certain enumerated persons (in general, securities market professionals and holders of the Company’s securities who may well trade on the basis of the information), it must make public disclosure of that information. The timing of the required public disclosure depends on whether the selective disclosure was intentional or unintentional; for an intentional selective disclosure, the Company must make public disclosures simultaneously; for a non-intentional disclosure, the Company must make public disclosure promptly. Under the Disclosure Regulation, the required public disclosure may be made by filing or furnishing a Form 6-K, or by another method or combination of methods that is reasonably designed to effect broad, non-exclusionary distribution of the information to the public.
It is the Company’s policy that all communications with the press be handled through our designated spokespersons mentioned in the Company’s written disclosure policy or investor/public relations firm. Please refer all press, analyst or similar requests for information to the Company’s designated spokespersons and do not respond to any inquiries without prior authorization from the Company’s designated spokespersons.
3. Confidentiality of Non-public Information. Non-public information relating to the Company is the property of the Company and the unauthorized disclosure of such information (including, without limitation, via email or by posting on Internet message boards or blogs, anonymously or otherwise) is strictly forbidden.
4. Duty to Report Inappropriate and Irregular Conduct. All employees, and particularly executives, managers and/or supervisors, have a responsibility for maintaining financial integrity within the Company, and being consistent with generally accepted accounting principles and both federal and state securities laws. Any employee who becomes aware of any incidents involving financial or accounting manipulation or irregularities, whether by witnessing the incident or being told of it, must report it to their immediate supervisor and to the chairman of the Company’s Audit Committee of the Board (or to the Chairman of the Board, if an Audit Committee has not been established). For a more complete understanding of this issue, employees should consult their employee manual or seek the advice of the Company’s general counsel or outside counsel.
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SECTION V
POTENTIAL CRIMINAL AND CIVIL LIABILITY
AND/OR DISCIPLINARY ACTION
1. Liability for Insider Trading. Insiders may be subject to penalties of up to $5,000,000 and up to twenty (20) years in jail for engaging in transactions in the Company’s securities at a time when they possess Material Non-public Information regarding the Company, regardless of whether such transactions were profitable. In addition, the SEC has the authority to seek a civil monetary penalty of up to three times the amount of profit gained or loss avoided by illegal insider trading. “Profit gained” or “loss avoided” generally means the difference between the purchase or sale price of the Company’s shares and its value as measured by the trading price of the shares a reasonable period after public dissemination of the non-public information.
2. Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly referred to as a “tippee”) to whom they have disclosed Material Non-public Information regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in the Company’s securities. The SEC has imposed large penalties even when the disclosing person did not profit from the trading. The SEC, the stock exchanges and the Financial Industry Regulatory Authority, Inc. use sophisticated electronic surveillance techniques to monitor all trades and uncover insider trading.
3. Possible Disciplinary Actions. Individuals subject to the Policy who violate this Policy shall also be subject to disciplinary action by the Company, which may include suspension, forfeiture of perquisites and ineligibility for future participation in the Company’s equity incentive plans and/or termination of employment.
SECTION VI
PERMITTED TRADING PERIOD
1. Black-Out Period and Trading Window.
To ensure compliance with this Policy and applicable federal and state securities laws, the Company requires that all officers, directors, employees, and all members of the immediate family or household of any such person refrain from conducting any transactions involving the purchase or sale of the Company’s securities, other than during the period within thirty Trading Days commencing at the close of business on the second Trading Day following the date of public disclosure of the Material Non-public Information (the “Trading Window”). The Trading Window shall close either when it is five business days prior to the Company’s fiscal year end or the Company’s interim fiscal period end. Notwithstanding the foregoing, persons subject to this Policy may submit a request to the Company to purchase or sell the Company’s securities outside the Trading Window on the basis that they do not possess any Material Non-public Information. The Compliance Officer shall review all such requests and may grant such requests on a case-by-case basis if he or she determines that the person making such request does not possess any Material Non-public Information at that time.
If such public disclosure occurs on a Trading Day before the markets close, then such date of disclosure shall be considered the first Trading Day following such public disclosure. For example, if such public disclosure occurs at 1:00 p.m. EST on June 10, then June 10 shall be considered the first Trading Day following such disclosure.
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Please be advised that these guidelines are merely estimates. The actual trading window may be different because the Company’s interim report or annual report may be filed earlier or later. The filing date of an interim report or annual report may fall on a weekend or the Company may delay filing an annual report due to an extension. Please check with the Compliance Officer to confirm whether the trading window is open.
It is the Company’s policy that the period when the Trading Window is “closed” is a particularly sensitive period of time for transactions in the Company’s securities from the perspective of compliance with applicable securities laws. This is because the officers, directors and certain other employees are, as any half-year period progresses, increasingly likely to possess Material Non-public Information about the expected financial results for the period. The purpose of the Trading Window is to avoid any unlawful or improper transactions or even the appearance of any such transactions.
It should be noted that even during the Trading Window any person possessing Material Non-public Information concerning the Company shall not engage in any transactions involving the Company’s securities until such information has been known publicly for at least two Trading Days. The Company has adopted the policy of delaying trading for “at least two Trading Days” because the securities laws require that the public be informed effectively of previously undisclosed material information before Insiders trade in the Company’s shares. Public disclosure may occur through a widely disseminated press release or through filings, such as Form 6-K, with the SEC. Furthermore, in order for the public to be effectively informed, the public must be given time to evaluate the information disclosed by the Company. Although the amount of time necessary for the public to evaluate the information may vary depending on the complexity of the information, generally two Trading Days is sufficient.
From time to time, the Company may also require that directors, officers, selected employees, and others suspend trading because of developments known to the Company and not yet disclosed to the public. In such event, such persons may not engage in any transaction involving the purchase or sale of the Company’s securities during such period and may not disclose to others the fact of such suspension of trading.
Although the Company may from time to time require during a Trading Window that directors, officers, selected employees, and others suspend trading because of developments known to the Company and not yet disclosed to the public, each person is individually responsible at all times for compliance with the prohibitions against insider trading. Trading in the Company’s securities during the Trading Window should not be considered a “safe harbor,” and all directors, officers and other persons should use good judgment at all times.
Notwithstanding these general rules, Insiders may trade outside of the Trading Window provided that such trades are made pursuant to a pre-established plan or by delegation. These alternatives are discussed in the next section.
2. Trading According to a Pre-established Plan or by Delegation.
Trading which is not “on the basis of” Material Non-public Information may not give rise to insider trading liability. The SEC has adopted Rule 10b5-1 under which insider trading liability can be avoided if Insiders follow very specific procedures. In general, such procedures involve trading according to pre-established instructions (a “Pre-established Trade”).
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Pre-established Trades must:
(a) Be documented by a contract, written plan, or formal instruction which provides that the trade take place in the future. For example, an Insider can contract to sell his or her shares on a specific date, or simply delegate such decisions to an investment manager, 401(k) plan administrator or a similar third party. This documentation must be provided to the Compliance Officer;
(b) Include in its documentation the specific amount, price and timing of the trade, or the formula for determining the amount, price and timing. For example, the Insider can buy or sell shares in a specific amount and on a specific date each month, or according to a pre-established percentage (of the Insider’s salary, for example) each time that the share price falls or rises to pre-established levels. In the case where trading decisions have been delegated, the specific amount, price and timing need not be provided;
(c) Include additional representation in its documentation for Directors and Officers. If the person who entered into the pre-established contract, written plan, or formal instruction (discussed in Section VI.2(a) above) is a director or officer of the Company, such director or officer shall include a representation certifying that, on the date of adoption of the pre-established contract, plan, or instruction, (i) he or she is not aware of any material nonpublic information about the Company or its securities, and (ii) he or she is adopting the pre-established contract, plan, or instruction in good faith and not as part of a plan or scheme to evade prohibitions on inside trading;
(d) Be implemented at a time when the Insider does not possess Material Non-public Information and Upon the Expiration of a Cooling-Off Period. As a practical matter, this means that the Insider may set up Pre-established Trades, or delegate trading discretion, only during a “Trading Window” (discussed in Section VI.1 above); provided that (i) any director or officer of the Company may not conduct a Pre-established Trade until the expiration of a cooling-off period, consisting of the later of (A) 90 days after the adoption or modification of the pre-established contract, plan, or instruction, and (B) two business days following the disclosure of the Company’s financial results in a Form 20-F or Form 6-K (but, in any event, this required cooling period is subject to a maximum of 120 days after adoption of the pre-established contract, plan, or instruction), and (ii) any other persons, who are covered by the Policy (as discussed in Section I above) and are not directors or officers, may not conduct a Pre-established Trade until the expiration of a cooling-off period that is 30 days after the adoption of the pre-established contract, plan, or instruction; and,
(e) Remain beyond the scope of the Insider’s influence after implementation. In general, the Insider must allow the Pre-established Trade to be executed without changes to the accompanying instructions, and the Insider cannot later execute a hedge transaction that modifies the effect of the Pre-established Trade. An Insider wishing to change the amount, price or timing of a Pre-established Trade, or terminate a Pre-established Trade, can do so only during a “Trading Window” (discussed in Section 1, above). If the Insider has delegated decision-making authority to a third party, the Insider cannot subsequently influence the third party in any way and such third party must not possess material non-public information at the time of any of the trades.
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Prior to implementing a pre-established plan for trading, all officers and directors must receive the approval for such plan from the Compliance Officer. In addition, Insiders are generally prohibited from having more than one pre-established contract, plan, or instruction covering the same time period for open market purchases or sales of the Company’s securities, unless one of the exceptions under 17 C.F.R. 240.10b5-1(c)(1)(ii)(D) is met. Furthermore, Insiders are prohibited from entering into more than one pre-established contract, plan, or instruction, which is designed to effect open-market purchase or sale of the Company’s securities as a single transaction, for any given 12-month period.
3. Pre-Clearance of Trades.
Even during a Trading Window, all officers, directors, employees, as well as members of the immediate family or household of such individuals, must comply with the Company’s “pre-clearance” process prior to trading in the Company’s securities, implementing a pre-established plan for trading, or delegating decision-making authority over the Insider’s trades. To do so, each officer and director must contact the Compliance Officer prior to initiating any of these actions. Trades executed pursuant to a properly implemented Pre-Established Trade approved by the Compliance Officer do not need to be pre-cleared. The Company may also find it necessary, from time to time, to require compliance with the pre-clearance process from certain individuals other than those mentioned above.
4. Individual Responsibility.
As Insiders, every person subject to this Policy has the individual responsibility to comply with this Policy against insider trading, regardless of whether the Company has established a Trading Window applicable to that Insider or any other Insiders of the Company. Each individual, and not necessarily the Company, is responsible for his or her own actions and will be individually responsible for the consequences of their actions. Therefore, appropriate judgment, diligence and caution should be exercised in connection with any trade in the Company’s securities. An Insider may, from time to time, have to forego a proposed transaction in the Company’s securities even if he or she planned to make the transaction before learning of the Material Non-public Information and even though the Insider believes he or she may suffer an economic loss or forego anticipated profit by waiting.
5. Exceptions to the Policy.
Any exceptions to this Policy may only be made by advance written approval of each of: (i) the CEO, (ii) the Compliance Officer and (iii) the Chairman of the Audit Committee of the Board (or the Chairman of the Board if an Audit Committee has not been established). Any such exceptions shall be immediately reported to the remaining members of the Board.
6. Post-Separation Applicability.
Upon an individual’s separation from the Company, including without limitation, by resignation, termination of employment, or expiration of a consulting, employment or advisory arrangement, such individual shall cease to be subject to the Trading Window restrictions set forth in Section VI.1 and the pre-clearance requirements set forth in Section VI.3 of this Policy, effective as of the date of such separation; provided, however, that any such individual who possesses Material Non-public Information at the time of separation shall remain subject to the prohibitions set forth in Section IV of this Policy with respect to such information until such time as such information has been publicly disclosed or is no longer material. For the avoidance of doubt, nothing in this provision shall relieve any former officer, director, employee, consultant, or advisor of any obligations arising under applicable securities laws, including but not limited to the prohibition against trading while in possession of Material Non-public Information.
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SECTION VII
APPLICABILITY OF POLICY TO INSIDE INFORMATION
REGARDING OTHER COMPANIES
This Policy and the guidelines described herein also apply to Material Non-public Information relating to other companies, including the Company’s customers, vendors or suppliers or potential acquisition targets (“business partners”), when that information is obtained in the course of employment or performance of other services on behalf of the Company. Civil and criminal penalties, as well as the termination of employment, may result from trading on inside information regarding the Company’s business partners. All employees should treat Material Non-public Information about the Company’s business partners with the same care as is required with respect to the information relating directly to the Company.
SECTION VIII
PROHIBITION AGAINST BUYING AND SELLING
COMPANY ORDINARY SHARES WITHIN A SIX-MONTH PERIOD
Insiders
Generally, purchases and sales (or sales and purchases) of Company ordinary shares occurring within any six-month period in which a mathematical profit is realized result in illegal “short-swing profits”. The prohibition against short-swing profits is found in Section 16 of the Exchange Act. Section 16 was drafted as a prohibition against profitable “insider trading” in a company’s securities within any six-month period regardless of the presence or absence of Material Non-public Information that may affect the market price of those securities. Each executive officer, director and 10% or greater shareholder of the Company is subject to the prohibition against short-swing profits under Section 16. The measure of damages is the profit computed from any purchase and sale or any sale and purchase within the short-swing (i.e., six-month) period, without regard to any setoffs for losses, any first-in or first-out rules, or the identity of the ordinary shares. This approach sometimes has been called the “lowest price in, highest price out” rule and can result in a realization of “profits” for Section 16 purposes even when the Insider has suffered a net loss on his or her trades. Historically, Rule 3a12-3 under the Exchange Act exempted securities registered by a foreign private issuer (“FPI”) from Section 16 of the Exchange Act. However, effective March 18, 2026, pursuant to the Holding Foreign Insiders Accountable Act (HFIAA), directors and officers of FPIs are required to comply with the reporting requirements of Section 16(a) of the Exchange Act. Notwithstanding the foregoing, directors and officers of FPIs remain exempt from Section 16(b) (short-swing profit liability) and Section 16(c) (short sale prohibitions), and therefore are not subject to the prohibition against short-swing profits described above. Additionally, beneficial owners of 10% or more of the Company’s equity securities who are not also directors or officers remain entirely exempt from Section 16.
SECTION IX
INQUIRIES
Please direct your questions as to any of the matters discussed in this Policy to the Compliance Officer.
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Exhibit B
MEMORANDUM REGARDING SECTION 16 REPORTING REQUIREMENTS FOR
DIRECTORS AND OFFICERS OF FOREIGN PRIVATE ISSUERS
SECTION I
INTRODUCTION
This memorandum summarizes the Section 16(a) reporting requirements of the Exchange Act, as they apply to directors and officers of the Company, following the enactment of the Holding Foreign Insiders Accountable Act (HFIAA).
SECTION II
BACKGROUND
Historically, Rule 3a12-3 under the Exchange Act exempted securities registered by an FPI from Section 16 of the Exchange Act in its entirety. However, pursuant to the HFIAA, effective March 18, 2026, directors and officers of FPIs are subject to the reporting requirements of Section 16(a) of the Exchange Act. Notably, directors and officers of FPIs remain exempt from Section 16(b) (short-swing profit liability) and Section 16(c) (short sale prohibitions). Additionally, beneficial owners of 10% or more of the Company’s equity securities who are not also directors or officers remain entirely exempt from Section 16.
SECTION III
PERSONS SUBJECT TO SECTION 16(A) REPORTING
Beginning March 18, 2026, directors and officers are required to comply with Section 16(a) reporting requirements. For purposes of Section 16, “officer” means the Company’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company.
SECTION IV
REPORTING OBLIGATIONS
Form 3 - Initial Statement of Beneficial Ownership. Each director and officer must file a Form 3 with the SEC via EDGAR within ten (10) days of becoming a director or officer of the Company. For individuals who are directors or officers as of March 18, 2026, Form 3 must be filed by 10:00 p.m. Eastern Time on March 18, 2026.
Form 4 - Statement of Changes in Beneficial Ownership. Each director and officer must file a Form 4 with the SEC via EDGAR within two (2) business days following any change in beneficial ownership of the Company’s equity securities. Reportable transactions include, but are not limited to: (i) open market purchases and sales; (ii) acquisitions or dispositions pursuant to employee benefit plans; (iii) gifts; (iv) exercises of stock options; and (v) acquisitions of securities pursuant to equity compensation awards.
Form 5 - Annual Statement of Changes in Beneficial Ownership. Each director and officer must file a Form 5 with the SEC via EDGAR within forty-five (45) days after the end of the Company’s fiscal year to report all transactions that occurred during the previous fiscal year that are specifically permitted to be reported on a Form 5 or should have been reported on a Form 3 or Form 4 but were not.
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SECTION V
BENEFICIAL OWNERSHIP
For purposes of Section 16(a) reporting, a person is deemed to be the beneficial owner of securities if that person has or shares a direct or indirect pecuniary interest in the securities. Pecuniary interest means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the securities. Beneficial ownership includes securities held by: (i) immediate family members sharing the same household; (ii) partnerships in which the reporting person is a general partner; (iii) corporations in which the reporting person is a controlling shareholder; and (iv) trusts of which the reporting person is a trustee or beneficiary.
SECTION VI
EDGAR FILING REQUIREMENTS
All Section 16(a) reports must be filed electronically with the SEC via EDGAR. Each director and officer must obtain EDGAR filing credentials, including a Central Index Key (“CIK”), EDGAR access codes, and a password, prior to filing. The Company’s Compliance Officer will assist directors and officers in obtaining the necessary EDGAR credentials.
SECTION VII
PENALTIES FOR NON-COMPLIANCE
The SEC may bring enforcement actions against individuals who fail to comply with Section 16(a) reporting requirements, which may result in civil monetary penalties.
SECTION VIII
COMPANY ASSISTANCE
The Company’s Compliance Officer will assist directors and officers in complying with Section 16(a) reporting requirements, including: (i) providing reminders of filing deadlines; (ii) assisting in the preparation of Forms 3, 4, and 5; (iii) coordinating with the Company’s stock administrator or transfer agent to track transactions; and (iv) facilitating the EDGAR filing process.
Notwithstanding such assistance, each director and officer remains individually responsible for ensuring timely and accurate compliance with Section 16(a) reporting requirements.
SECTION IX
QUESTIONS
Any questions regarding Section 16(a) reporting requirements should be directed to the Company’s Compliance Officer.
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Exhibit C
Section 13 Memorandum
To: Beneficial owners of more than 5% of the Company’s registered equity securities
Re: Overview of Section 13 under the Exchange Act of 1934, as amended
A. Introduction.
This Memorandum provides an overview of Section 13 of the Exchange Act of 1934, as amended (the “Exchange Act”), and the related rules promulgated by the SEC.
Each beneficial owner of more than 5% of the Company’s voting securities (including any Executive Officer or Director who reaches this threshold) (“Section 13 Reporting Persons”) of Perpetuals.com Ltd (the “Company”) is personally responsible for complying with the provisions of Section 13, and failure by a Section 13 Reporting Person to comply strictly with his or her reporting requirements will result in an obligation by the Company to publicly disclose such failure. Moreover, Congress has granted the SEC authority to seek monetary court-imposed fines on Section 13 Reporting Persons who fail to timely comply with their reporting obligations.
Under Section 13 of the Exchange Act, reports made to the SEC are filed on Schedule 13D, Schedule 13G, Form 13F, and Form 13H. A securities firm (and, in some cases, its parent company or other control persons) generally will have a Section 13 reporting obligation if the firm directly or indirectly:
| ● | beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the “Section 13(d) Securities”): |
| ● | registered under Section 12 of the Exchange Act, |
| ● | issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), or |
| ● | issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see Schedules 13D and 13G: Reporting Significant Acquisition and Ownership Positions below); |
| ● | manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more; or | |
| ● | manages discretionary accounts that, in the aggregate, purchase or sell any NMS securities (generally exchange-listed equity securities and standardized options) in an aggregate amount equal to or greater than (i) 2 million shares or shares with a fair market value of over $20 million during a day, or (ii) 20 million shares or shares with a fair market value of over $200 million during a calendar month. |
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B. Reporting Requirements Under Section 13(d) and 13(g).
1. General. Sections 13(d) and 13(g) of the Exchange Act require any person or group of persons1 who directly or indirectly acquires or has beneficial ownership2 of more than 5% of a class of an issuer’s Section 13(d) Securities (the “5% threshold”) to report such beneficial ownership on Schedule 13D or Schedule 13G, as appropriate. Both Schedule 13D and Schedule 13G require background information about the reporting persons and the Section 13(d) Securities listed on the schedule, including the name, address, and citizenship or place of organization of each reporting person, the amount of the securities beneficially owned and aggregate beneficial ownership percentage, and whether voting and investment power is held solely by the reporting persons or shared with others. Reporting persons that must report on Schedule 13D are also required to disclose a significant amount of additional information, including certain disciplinary events, the source and amount of funds or other consideration used to purchase the Section 13(d) Securities, the purpose of the acquisition, any plans to change or influence the control of the issuer, and a list of any transactions in the securities effected in the last 60 days. A reporting person may use the less burdensome Schedule 13G if it meets certain criteria described below.
In general, Schedule 13G is available to any reporting person that falls within one of the following three categories:
| ● | Exempt Investors. A reporting person is an “Exempt Investor” if the reporting person beneficially owns more than 5% of a class of an issuer’s Section 13(d) Securities at the end of a calendar quarter, but its acquisition of the securities is exempt under Section 13(d)(6) of the Exchange Act. For example, a person that acquired all of its Section 13(d) Securities prior to the issuer’s registration of such securities (or class of securities) under the Exchange Act, or acquired no more than 2% of the Section 13(d) Securities within a 12-month period, is considered to be an Exempt Investor and would be eligible to file reports on Schedule 13G. |
| ● | Qualified Institutions. Along with certain other institutions listed under the Exchange Act3, a reporting person that is a registered investment adviser or broker-dealer may file a Schedule 13G as a “Qualified Institution” if it (a) acquired its position in a class of an issuer’s Section 13(d) Securities in the ordinary course of its business, (b) did not acquire |
| 1 | A “group” is defined in Rule 13d-5 as “two or more persons [that] agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer.” See, for example, the persons described above in Reporting Obligations of “Control Persons”. An agreement to act together does not need to be in writing and may be inferred by the SEC or a court from the concerted actions or common objective of the group members. |
| 2 | Under Rule 13d-3, “beneficial ownership” of a security exists if a person, directly or indirectly, through any contract, arrangement, understanding, or relationship or otherwise, has or shares voting power and/or investment power over a security. “Voting power” means the power to vote or direct the voting of a security. “Investment power” means the power to dispose of or direct the disposition of a security. Under current SEC rules, a person holding securities-based swaps or other derivative contracts may be deemed to beneficially own the underlying securities if the swap or derivative contract provides the holder with voting or investment power over the underlying securities. Please contact us if you would like guidance regarding the application of Section 13 to securities-based swaps or other derivative contracts. |
| 3 | Under Rule 13d-1, a reporting person also qualifies as a Qualified Institution if it is a bank as defined in Section 3(a)(6) of the Exchange Act, an insurance company as defined in Section 3(a)(19) of the Exchange Act, an investment company registered under the Investment Company Act, or an employee benefit plan, savings association, or church plan. The term “Qualified Institution” also includes a non-U.S. institution that is the functional equivalent of any of the foregoing entities and the control persons and parent holding companies of an entity that qualifies as a Qualified Institution. such securities with the purpose or effect of changing or influencing control of the issuer, nor in connection with any transaction with such purpose or effect (such purpose or effect, an “activist intent”), and (c) promptly notifies any discretionary account owner on whose behalf the firm holds more than 5% of the Section 13(d) Securities of such account owner’s potential reporting obligation. |
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| ● | Passive Investors. A reporting person is a “Passive Investor” if it beneficially owns more than 5% but less than 20% of a class of an issuer’s Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. There is no requirement that a Passive Investor limit its acquisition of Section 13(d) Securities to purchases made in the ordinary course of its business. In addition, a Passive Investor does not have an obligation to notify discretionary account owners on whose behalf the firm holds more than 5% of such Section 13(d) Securities of such account owner’s potential reporting obligation. |
2. Method of Filing.
(a) A Section 13 Reporting Person must file Section 13 schedules in electronic format via the Commission’s Electronic Data Gathering Analysis and Retrieval System (“EDGAR”) in accordance with EDGAR rules set forth in Regulation S-T.
(b) Filing Date. Schedules are deemed filed with the SEC or the applicable exchange on the date recognized by EDGAR. For Section 13 purposes, filings may be made up to 10 p.m. EST. In the event that a due date falls on a weekend or SEC holiday, the filing will be deemed timely filed if it is filed on EDGAR by the next business day after such weekend or holiday. A Section 13 Reporting Person must first obtain several different identification codes from the SEC before the filings can be submitted. In order to receive such filing codes, the Section 13 Reporting Person first submits a Form ID to the SEC. The Form ID must be signed, notarized, and submitted electronically through the SEC’s Filer Management website, which can be accessed at https://www.filermanagement.edgarfiling.sec.gov. The Section 13 Reporting Person is required to retain a manually signed hard copy of all EDGAR filings (and related documents like powers of attorney) in its records available for SEC inspection for a period of five years after the date of filing.
(c) Company. In addition, the rules under Section 13 require that a copy of the applicable filing be sent to the issuer of the security at its principal executive office by registered or certified mail. A copy of Schedules filed pursuant to §§ 240.13d-1(a) and 240.13d-2(a) shall also be sent to each national securities exchange where the security is traded.
(d) Securities to be Reported. A person who is subject to Section 13 must only report as beneficially owned those securities in which he or she has a pecuniary interest. See the discussion of “beneficial ownership” below at Section D.
3. Initial Report of Ownership – Schedule 13D or 13G. Under Section 13, Section 13 Reporting Persons are required to make an initial report on Schedule 13D or Schedule 13G to the SEC of their holdings of all equity securities of the corporation (whether or not such equity securities are registered under the Exchange Act). This would include all traditional types of securities, such as ordinary shares, preferred shares and junior shares, as well as all types of derivative securities, such as warrants to purchase shares, options to purchase shares, puts and calls.Even Section 13 Reporting Persons who do not beneficially own any equity securities of the Company must file a report to that effect.
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(a) Initial Filing Deadline. A Section 13 Reporting Person who is not eligible to use Schedule 13G must file a Schedule 13D within five business days of such reporting person’s direct or indirect acquisition of beneficial ownership of more than 5% of a class of an issuer’s Section 13(d) Securities.
| ● | A reporting person that is an Exempt Investor is required to file its initial Schedule 13G within 45 days after the calendar quarter-end in which the person exceeds the 5% threshold. |
| ● | A reporting person that is a Qualified Institution also is required to file its initial Schedule 13G within 45 days after the calendar quarter-end in which the person exceeds the 5% threshold. However, a Qualified Institution that acquires direct or indirect beneficial ownership of more than 10% of a class of an issuer’s Section 13(d) Securities must file an initial Schedule 13G within five business days after the first month in which the person exceeds the 10% threshold. |
| ● | A reporting person that is a Passive Investor must file its initial Schedule 13G within five business days of the date on which it exceeds the 5% threshold. |
(b) Switching from Schedule 13G to Schedule 13D. If a Section 13 Reporting Person that previously filed a Schedule 13G no longer satisfies the conditions to be an Exempt Investor, Qualified Institution, or Passive Investor, the person must switch to reporting its beneficial ownership of a class of an issuer’s Section 13(d) Securities on a Schedule 13D (assuming that the person continues to exceed the 5% threshold). This could occur in the case of (1) a Section 13 Reporting Person that changes from acquiring or holding Section 13(d) Securities for passive investment to acquiring or holding such securities with an activist intent, (2) a Section 13 Reporting Person that is a Qualified Institution that deregisters as an investment adviser pursuant to an exemption under the Investment Advisers Act of 1940, as amended, or applicable state law, or (3) a Section 13 Reporting Person that is a Passive Investor that acquires 20% or more of a class of an issuer’s Section 13(d) Securities. In each case, the Section 13 Reporting Person must file a Schedule 13D within five business days of the event that caused it to no longer satisfy the necessary conditions.
A Section 13 Reporting Person who is required to switch to reporting on a Schedule 13D will be subject to a “cooling off” period from the date of the event giving rise to a Schedule 13D obligation (such as the change to an activist intent or acquiring 20% of a class of an issuer’s Section 13(d) Securities) until 10 calendar days after the filing of Schedule 13D. During the “cooling off” period, the reporting person may not vote or direct the voting of the Section 13(d) Securities or acquire additional beneficial ownership of such securities. Consequently, a person should file a Schedule 13D as soon as possible once he is obligated to switch from a Schedule 13G to reduce the duration of the “cooling off” period.
The Section 13 Reporting Person will thereafter be subject to the Schedule 13D reporting requirements with respect to the Section 13(d) Securities until such time as the former Schedule 13G reporting person once again qualifies as a Qualified Institution or Passive Investor with respect to the Section 13(d) Securities or has reduced its beneficial ownership interest below the 5% threshold. However, only a reporting person that was originally eligible to file a Schedule 13G and was later required to file a Schedule 13D may switch to reporting on Schedule 13G.4
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4. Changes in Ownership – Amendments to Schedule 13D or 13G.
Amendments to Schedule 13D. If there has been any material change to the information in a Schedule 13D previously filed by a Section 13 Reporting Person5, the person must file an amendment to such Schedule 13D within two business days. A material change includes, without limitation, a reporting person’s acquisition or disposition of 1% or more of a class of the issuer’s Section 13(d) Securities, including as a result of an issuer’s repurchase of its securities. An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. A disposition that reduces a reporting person’s beneficial ownership interest below the 5% threshold, but is less than a 1% reduction, is not necessarily a material change that triggers an amendment to Schedule 13D. However, an amendment in such a circumstance is recommended to eliminate the reporting person’s filing obligations if the reporting person does not in the near term again expect to increase its ownership above 5%.
Amendments to Schedule 13G.
| ● | Quarterly. If a reporting person previously filed a Schedule 13G and there has been any material change to the information reported in such Schedule 13G as of the end of a calendar quarter, then an amendment to such Schedule 13G must be filed within 45 days of the calendar quarter end. A reporting person is not required to make a quarterly amendment to Schedule 13G if there has been no change since the previously filed Schedule 13G or if the only change results from a change in the person’s ownership percentage as a result of a change in the aggregate number of Section 13(d) Securities outstanding (e.g., due to an issuer’s repurchase of its securities). |
| ● | Other than Quarterly (Qualified Institutions). A reporting person that previously filed a Schedule 13G as a Qualified Institution reporting beneficial ownership of less than 10% of a class of an issuer’s Section 13(d) Securities, must file an amendment to its Schedule 13G within five business days of the end of the first month such Qualified Institution is the direct or indirect beneficial owner of more than 10% of a class of the issuer’s Section 13(d) Securities. Thereafter, within five business days after the end of any month in which the person’s direct or indirect beneficial ownership of such securities increases or decreases by more than 5% of the class of securities (computed as of the end of the month), the person must file an amendment to Schedule 13G. |
| ● | Other than Quarterly (Passive Investors). A reporting person that previously filed a Schedule 13G as a Passive Investor must file an amendment within two business days after it directly or indirectly acquires more than 10% of a class of an issuer’s Section 13(d) Securities. Thereafter, the reporting person must file an amendment to Schedule 13G within two business days after its direct or indirect beneficial ownership of such securities increases or decreases by more than 5%. |
| 4 | See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. |
| 5 | This includes a change in the previously reported ownership percentage of a reporting person even if such change results solely from an increase or decrease in the aggregate number of outstanding securities of the issuer. |
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5. Reporting Identifying Information for Large Traders - Form 13H. Rule 13h-1 of the Exchange Act requires a Form 13H to be filed with the SEC by any individual or entity (each, a “Large Trader”) that, directly or indirectly, exercises investment discretion over one or more accounts and effects transactions in NMS Securities (as defined below) for those accounts through one or more registered broker-dealers that, in the aggregate, equal or exceed (a) 2 million shares or $20 million in fair market value during any calendar day, or (b) 20 million shares or $200 million in fair market value during any calendar month (each, an “identifying activity level”). Under Regulation NMS, an “NMS Security” is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. A Large Trader must file an initial Form 13H promptly after effecting aggregate transactions equal to or greater than one of the identifying activity levels. The SEC has indicated that filing within 10 days will be deemed a prompt filing. Amendments to Form 13H must be filed within 45 days after the end of each full calendar year and then promptly following the end of a calendar quarter if any of the information on Form 13H becomes inaccurate.
Form 13H requires that a Large Trader, reporting for itself and for any affiliate that exercises investment discretion over NMS securities, list the broker-dealers at which the Large Trader and its affiliates have accounts and designate each broker-dealer as a “prime broker,” an “executing broker,” and/or a “clearing broker.” Form 13H filings with the SEC are confidential and exempt from disclosure under the United States Freedom of Information Act. The information is, however, subject to disclosure to Congress and other federal agencies and when ordered by a court. If a securities firm has multiple affiliates in its organization that qualify as Large Traders, Rule 13h-1 permits the Large Traders to delegate their reporting obligation to a control person that would file a consolidated Form 13H for all of the Large Traders it controls. Otherwise, each Large Trader in the organization will be required to file a separate Form 13H.
6. Reporting Obligations of Control Persons and Clients.
The Firm’s Obligations. As discussed above, a securities firm is deemed to be the beneficial owner of Section 13(d) Securities in all accounts over which it exercises voting and/or investment power. Therefore, a firm will be a reporting person if it directly or indirectly acquires or has beneficial ownership of more than 5% of a class of an issuer’s Section 13(d) Securities. Unless a securities firm has an activist intent with respect to the issuer of the Section 13(d) Securities, the firm generally will be able to report on Schedule 13G as either a Qualified Institution or as a Passive Investor.
Obligations of a Firm’s Control Persons. Any control person (as defined below) of a securities firm, by virtue of its ability to direct the voting and/or investment power exercised by the firm, may be considered an indirect beneficial owner of the Section 13(d) Securities. Consequently, the direct or indirect control persons of a securities firm may also be reporting persons with respect to a class of an issuer’s Section 13(d) Securities. The following persons are likely to be considered “control persons” of a firm:
| ● | any general partner, managing member, trustee, or controlling shareholder of the firm; and |
| ● | the direct or indirect parent company of the firm and any other person that indirectly controls the firm (e.g., a general partner, managing member, trustee, or controlling shareholder of the direct or indirect parent company). |
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If a securities firm (or parent company) is directly or indirectly owned by two partners, members, trustees, or shareholders, generally each such partner, member, trustee, or shareholder is deemed to be a control person. For example, if a private fund that beneficially owns more than 5% of a class of an issuer’s Section 13(d) Securities is managed by a securities firm that is a limited partnership, the general partner of which is a limited liability company that in turn is owned in roughly equal proportions by two managing members, then each of the private fund, the securities firm, the firm’s general partner, and the two managing members of the general partner likely will have an independent Section 13 reporting obligation.
Availability of Filing on Schedule 13G by Control Persons. Any direct and indirect control person of a securities firm may file a Schedule 13G as an Exempt Investor, a Qualified Institution or as a Passive Investor to the same extent as any other reporting person as described above. In order for a control person to file a Schedule 13G as a Qualified Institution, however, no more than 1% of a class of an issuer’s Section 13(d) Securities may be held (i) directly by the control person or (ii) directly or indirectly by any of its subsidiaries or affiliates that are not Qualified Institutions. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuer’s Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act.
A securities firm that has one of its control persons serving on an issuer’s board of directors may not be eligible to qualify as a Passive Investor with respect to such issuer. Even though the securities firm may not otherwise have an activist intent, the staff of the SEC has stated “the fact that officers and directors have the ability to directly or indirectly influence the management and policies of an issuer will generally render officers and directors unable to certify to the requirements” necessary to file as a Passive Investor.6
Obligations of a Firm’s Clients. If a client of a securities firm (including a private or registered fund or a separate account client) by itself beneficially owns more than 5% of a class of an issuer’s Section 13(d) Securities, the client has its own independent Section 13 reporting obligation.
Availability of Joint Filings by Reporting Persons. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. The direct and indirect beneficial owners of the same Section 13(d) Securities may satisfy their reporting obligations by making a joint Schedule 13D or Schedule 13G filing, provided that:
| ● | each reporting person is eligible to file on the Schedule used to make the Section 13 report (e.g., each person filing on a Schedule 13G is a Qualified Institution, Exempt Investor, or Passive Investor); |
| 6 | See Question 103.04 (September 14, 2009), Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting Compliance and Disclosure Interpretations of the Division of Corporation Finance of the SEC (the “Regulation 13D-G C&DIs”). |
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| ● | each reporting person is responsible for the timely filing of the Schedule 13D or Schedule 13G and for the completeness and accuracy of its information in such filing7; and |
| ● | the Schedule 13D or Schedule 13G filed with the SEC (i) contains all of the required information with respect to each reporting person; (ii) is signed by each reporting person in his, her, or its individual capacity (including through a power of attorney); and (iii) has a joint filing agreement attached. |
C. Determining Beneficial Ownership.
In determining whether a securities firm has crossed the 5% threshold with respect to a class of an issuer’s Section 13(d) Securities8, it must include the positions held in any proprietary accounts and the positions held in all discretionary client accounts that it manages (including any private or registered funds, accounts managed by or for principals and employees, and accounts managed for no compensation), and positions held in any accounts managed by the firm’s control persons (which may include certain officers and directors) for themselves, their spouses, and dependent children (including IRA and most trust accounts).
1. Determining Who is a Five Percent Holder. Beneficial ownership in the Section 13 context is determined by reference to Rule 13d-3, which provides that a person is the beneficial owner of securities if that person has or shares voting or disposition power with respect to such securities, or can acquire such power within 60 days through the exercise or conversion of derivative securities.
2. Determining Beneficial Ownership for Reporting and Short-Swing Profit Liability. For all Section 13 purposes other than determining who is a five percent holder, beneficial ownership means a direct or indirect pecuniary interest in the subject securities through any contract, arrangement, understanding, relationship or otherwise. “Pecuniary interest” means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities. Discussed below are several of the situations that may give rise to an indirect pecuniary interest.
(a) Family Holdings. A Section 13 Reporting Person is deemed to have an indirect pecuniary interest in securities held by members of the Section 13 Reporting Person’s immediate family sharing the same household. Immediate family includes grandparents, parents (and step-parents), spouses, siblings, children (and step-children) and grandchildren, as well as parents-in-laws, siblings-in-laws, children-in-law and all adoptive relationships. A Section 13 Reporting Person may disclaim beneficial ownership of shares held by members of his or her immediate family, but the burden of proof will be on the Section 13 Reporting Person to uphold the lack of a pecuniary interest.
| 7 | If the reporting persons are eligible to file jointly on Schedule 13G under separate categories (e.g., a private fund as a Passive Investor and its control persons as Qualified Institutions), then the reporting persons must comply with the earliest filing deadlines applicable to the group in filing any joint Schedule 13G. |
| 8 | In calculating the 5% test, a person is permitted to rely upon the issuer’s most recent interim or annual report for purposes of determining the amount of outstanding voting securities of the issuer, unless the person knows or has reason to believe that such information is inaccurate. |
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(b) Partnership Holdings. Beneficial ownership of a partnership’s securities is attributed to the general partner of a limited partnership in proportion of such person’s partnership interest. Such interest is measured by the greater of the general partner’s share of partnership profits or of the general partner’s capital account (including any limited partnership interest held by the general partner).
(c) Corporate Holdings. Beneficial ownership of securities held by a corporation will not be attributed to its shareholders who are not controlling shareholders and who do not have or share investment control over the corporation’s portfolio securities.
(d) Derivative Securities. Ownership of derivative securities (warrants, share appreciation rights, convertible securities, options and the like) is treated as indirect ownership of the underlying equity securities. Acquisition of derivative securities must be reported. If the derivative securities are acquired pursuant to an employee plan, the timing of such reporting depends upon the Rule 16b-3 status of the employee plan under which the grant was made.
D. Delinquent Filings.
1. Correcting Late Filings. In the case of a Section 13 Reporting Person that has failed to make required amendments to its Schedule 13D or Schedule 13G in a timely manner (i.e., any material changes), the Section 13 Reporting Person must immediately amend its schedule to disclose the required information. The SEC Staff has explained that, “[r]egardless of the approach taken, the security holder must ensure that the filings contain the information that it should have disclosed in each required amendment, including the dates and details of each event that necessitated a required amendment.” However, the SEC Staff has also affirmed that, irrespective of whether a security holder takes any of these actions, a security holder may still face liability under the federal securities laws for failing to promptly file a required amendment to a Schedule 13D or Schedule 13G.
2. Potential Liability. The SEC may bring an enforcement action, in the context of a Schedule 13D or Schedule 13G filing, for violations of Section 13(d), Section 13(g), Rule 10b-5 and Section 10(b), provided that the SEC specifically shows: (1) a material misrepresentation or omission made by the defendant; (2) scienter on the part of the defendant; and (3) a connection between a misrepresentation or omission and purchase or sale of a security regarding the Rule 10b-5 claim it brings. The SEC may seek civil remedies in the form of injunctive relief, a cease-and-desist order, monetary penalties, and other forms of equitable relief (e.g., disgorgement of profits). Under Section 32 of the Exchange Act, criminal sanctions may also extend to the willful violation of Section 13(d) and Section 13(g). The U.S. Department of Justice, which prosecutes criminal offenses under the Exchange Act, may seek numerous penalties against any person that violates the Exchange Act and any rules thereunder, including a monetary fine of up to $5,000,000, imprisonment for up to 20 years and/or disgorgement.
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Exhibit D
PERPETUALS.COM LTD
Insider Trading Compliance Program - Pre-Clearance Checklist
| Individual Proposing to Trade: | ||
| Number of Shares covered by Proposed Trade: | ||
| Date: |
| ☐ | Trading Window. Confirm that the trade will be made during the Company’s “trading window.” |
| ☐ | Section 13 and Section 16 Compliance. Confirm, if the individual is subject to Section 13, that the proposed trade will not give rise to any potential liability under Section 13 as a result of matched past (or intended future) transactions. Also, ensure that an amendment to Schedule 13D or 13G has been or will be completed and will be timely filed. If the individual is a director or officer, confirm that a Form 4 will be filed within two (2) business days of the transaction. |
| ☐ | Prohibited Trades. Confirm, if the individual is subject to Section 13, that the proposed transaction is not a “short sale,” put, call or other prohibited or strongly discouraged transaction. |
| ☐ | Rule 144 Compliance. Confirm that: |
| ☐ | Current public information requirement has been met; |
| ☐ | Shares are not restricted or, if restricted, the six-month holding period has been met; | |
| ☐ | Volume limitations are not exceeded (confirm that the individual is not part of an aggregated group); |
| ☐ | The manner of sale requirements has been met; and | |
| ☐ | The Notice of Form 144 Sale has been completed and filed. |
| ☐ | Rule 10b-5 Concerns. Confirm that (i) the individual has been reminded that trading is prohibited when in possession of any material information regarding the Company that has not been adequately disclosed to the public, and (ii) the Compliance Officer has discussed with the individual any information known to the individual or the Compliance Officer which might be considered material, so that the individual has made an informed judgment as to the presence of inside information. |
| Signature of Compliance Officer |
D-1
Transactions Report
| Officer or Director: |
| I. | TRANSACTIONS: |
☐ No transactions. ☐ The transactions described below.
| Owner of Record | Transaction Date (1) | Transaction Code (2) | Security (Common, Preferred) |
Number of Securities Acquired | Number of Securities Disposed of |
Purchase/ Sale Unit Price | ||||||
| (1) | (a) | Brokerage transactions - trade date | (d) | Acquisitions under stock bonus plan - date of grant | |
| (b) | Other purchases and sales - date firm commitment is made | (e) | Conversion - date of surrender of convertible security | ||
| (c) | Option and SAR exercises - date of exercise | (f) | Gifts - date on which gift is made | ||
| (2) | Transaction Codes: | ||||
| (P) | Pre-established Purchase or Sale | (Q) | Transfer pursuant to marital settlement | ||
| (N) | Purchase or Sale (not “Pre-established”) | (U) | Tender of shares | ||
| (G) | Gift | (W) | Acquisition or disposition of will | ||
| (M) | Option exercise (in-the-money option) | (J) | Other acquisition or disposition (specify) | ||
| II. | SECURITIES OWNERSHIP FOLLOWING TRANSACTION |
| A. | Company Securities Directly or Indirectly Owned (other than stock options noted below): |
Title of Security (e.g., Preferred, Common, etc.) |
Number of Shares Units |
Record Holder Reporting Person) |
Relationship to Reporting Person | |||
D-2
| B. | Stock Option Ownership: |
| Date of Grant | Number of Shares | Exercise Price | Vesting Dates | Expiration Date | Exercises to Date (Date, No. of Shares) | ||||||
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Exhibit E
PERPETUALS.COM LTD
Transaction Reminder
| TO: | [Name of Officer or Director] |
| FROM: | |
| DATED: | |
| RE: | Amendment to Schedule 13D filing / Section 16(a) Reporting Reminder |
This is to remind you that if there is a change in your beneficial ownership of ordinary shares or other securities of Perpetuals.com Ltd (the “Company”), you must file an amendment to Schedule 13D with the Securities and Exchange Commission (the “SEC”) within 2 business days following the transaction. In addition, effective March 18, 2026, if you are a director or officer of the Company, you must also file a Form 4 with the SEC within two (2) business days of any change in beneficial ownership of the Company’s equity securities pursuant to Section 16(a) of the Exchange Act.
Our records indicate that on ___________ (specify date) you had the transactions in the Company’s securities indicated on the attached exhibit.
| 1. | Please advise us whether the information on the attached exhibit is correct: |
| ☐ | The information is complete and correct. |
| ☐ | This information is not complete and correct. I have marked the correct information on the attached exhibit. |
| 2. | Please advise us if we should assist you by preparing the amendment to Schedule 13D and Form 4 for your signature and filing them for you with the SEC based upon the information you provided to us, or if you will prepare and file the amendment to Schedule 13D and Form 4 yourself. (Please note that we have prepared and attached for your convenience an amendment to Schedule 13D and Form 4 reflecting the information we have, which (if complete and correct), you may sign and return in the envelope enclosed.) |
| ☐ | The Company should prepare and file the amendment to Schedule 13D and Form 4 on my behalf after receiving my signature on the form. |
| ☐ | I shall prepare and file the amendment to Schedule 13D and Form 4 myself. |
Signed
Dated
If you have any questions, contact Masahiro Tominaga, the Company’s Compliance Officer.
I understand that my amendment to Schedule 13D must be filed as follows: (i) on EDGAR (the SEC Electronic Data-Gathering, Analysis and Retrieval system) and (ii) one copy with the Company’s Compliance Officer.
I also understand that, as a director or officer of the Company, effective March 18, 2026, I am required to file Form 4 with the SEC via EDGAR within two (2) business days of any change in my beneficial ownership of the Company’s equity securities pursuant to Section 16(a) of the Exchange Act.
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Exhibit 12.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Satoshi Kobayashi, certify that:
| 1. | I have reviewed this annual report on Form 20-F, as amended, of Perpetuals.com Ltd (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: September 18, 2026
| By: | /s/ Satoshi Kobayashi | ||
| Name: | Satoshi Kobayashi | ||
| Title: | Co-Chief Executive Officer | ||
| (Principal Executive Officer) | |||
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Patrick Gruhn, certify that:
| 1. | I have reviewed this annual report on Form 20-F, as amended, of Perpetuals.com Ltd (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: September 18, 2026
| By: | /s/ Patrick Gruhn | ||
| Name: | Patrick Gruhn | ||
| Title: | Co-Chief Executive Officer | ||
| (Principal Executive Officer) | |||
Exhibit 12.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Satoshi Kobayashi, certify that:
| 1. | I have reviewed this annual report on Form 20-F, as amended, of Perpetuals.com Ltd (the “Company”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Company as of, and for, the periods presented in this report; |
| 4. | The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and |
| 5. | The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. |
Date: September 18, 2026
| By: | /s/ Satoshi Kobayashi | ||
| Name: | Satoshi Kobayashi | ||
| Title: | Interim Chief Financial Officer | ||
| (Principal Accounting and Financial Officer) | |||
Exhibit 13.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Perpetuals.com Ltd (the “Company”) on Form 20-F/A for the year ended April 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Satoshi Kobayashi, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 18, 2026
| By: | /s/ Satoshi Kobayashi | ||
| Name: | Satoshi Kobayashi | ||
| Title: | Co-Chief Executive Officer (Principal | ||
| Executive Officer) | |||
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Perpetuals.com Ltd (the “Company”) on Form 20-F/A for the year ended April 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick Gruhn, Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 18, 2026
| By: | /s/ Patrick Gruhn | ||
| Name: | Patrick Gruhn | ||
| Title: | Co-Chief Executive Officer | ||
| (Principal Executive Officer) | |||
Exhibit 13.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Perpetuals.com Ltd (the “Company”) on Form 20-F/A for the year ended April 30, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Satoshi Kobayashi, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: September 18, 2026
| By: | /s/ Satoshi Kobayashi | ||
| Name: | Satoshi Kobayashi | ||
| Title: | Interim Chief Financial Officer | ||
| (Principal Accounting and Financial Officer) | |||