Perpetuals.com Ltd 6-K, filed Jul 5, 2024
Perpetuals.com Ltd (PDC)
About this 6-K
Perpetuals.com Ltd filed this 6-K on July 5, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July 2024
Commission File Number: 001-41752
Earlyworks Co., Ltd.
5-7-11, Ueno, Taito-ku
Tokyo, Japan 110-0005
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Convocation of the Sixth Ordinary General Meeting of Shareholders of Earlyworks Co., Ltd.
In accordance with the rules and regulations of the Japanese Companies Act, Earlyworks Co., Ltd. (the “Company”) has caused a notice and accompanying information, including voting instructions, to be sent to all holders of its ordinary shares and American Depositary Shares with respect to its sixth ordinary general meeting of shareholders to be held in Tokyo, Japan on July 26, 2024. Copies of the meeting notice and the form of proxy card are furnished hereto as Exhibit 99.1 and Exhibit 99.2, respectively.
Exhibit 99.1 and Exhibit 99.2 furnished hereto shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
Forward-Looking Statements
This Form 6-K contains forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors 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. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the United States Securities and Exchange Commission.
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Notice of Convocation of the Sixth Ordinary General Meeting of Shareholders | |
| 99.2 | Form of Proxy Card |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Earlyworks Co., Ltd. | ||
| Date: July 5, 2024 | By: |
/s/ Satoshi Kobayashi |
| Name: | Satoshi Kobayashi | |
| Title: | Chief Executive Officer and Representative Director (Principal Executive Officer) | |
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Exhibit 99.1
[This is an English translation of the original issued in Japanese]
[NOTE] Earlyworks Co., Ltd. assumes no responsibility for this translation or for direct, indirect, or other forms of damages arising from the translation. This document has been translated from the Japanese original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
| July 5, 2024 | |
| To shareholders | |
| MR Building 3F, 5-7-11 Ueno, Taito-ku, Tokyo | |
| Earlyworks Co., Ltd. (the “Company”) | |
| CEO Satoshi Kobayashi |
Notice of the Sixth Ordinary General Meeting of Shareholders
We would like to take this opportunity to thank you for your continued support.
Notice is hereby given that the Sixth Ordinary General Meeting of Shareholders of the Company will be held as described below.
If you are unable to attend the meeting, you may exercise your voting rights in writing. Please review the reference documents for the Sixth Ordinary General Meeting of Shareholders as described below, indicate your approval or disapproval of the proposals on the enclosed Voting Right Exercise Form, and return the form to us so that it reaches us by 6:00 p.m. on Thursday, July 4, 2024 (JST).
| 1. | Date and Time | Friday, July 26, 2024, 2:00 p.m. (JST) |
| 2. | Venue | MR Building 3F, 5-7-11 Ueno, Taito-ku, Tokyo |
| Conference room of our head office | ||
| 3. | Objectives | |
| Matters to be reported | Business Report for the Sixth Fiscal Year | |
| Decisions | ||
| Item No.1 | Approval of Financial Statements for the Sixth Fiscal Year | |
| Item No.2 | Partial Amendment to the Articles of Incorporation |
If you plan to attend the meeting, please submit the enclosed Voting Right Exercise Form to the receptionist at the meeting.
In the event of any revision to the reference documents for the General Meeting of Shareholders, the Business Report or the Financial Statements, the revised items will be posted on the Company’s website (address: https://e-arly.works/).
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Important Notice Regarding Japanese GAAP Financial Information
The financial results for the fiscal year ended April 30, 2024 presented in the following business report and the accompanying Japanese generally accepted accounting principles (“GAAP”) financial statements and related notes are prepared solely in accordance with Japanese GAAP on a non-consolidated basis, have not been reviewed or audited under either the standards of the Public Company Accounting Oversight Board (“PCAOB”) or U.S. generally accepted auditing standards (“GAAS”), and do not present all information necessary for an understanding of the Company’s results of operations for the fiscal year ended April 30, 2024. Our U.S. GAAP results for the fiscal year ended April 30, 2024 remain subject to the completion of management’s reviews and reconciliations and/or adjustments under U.S. GAAP, the Company’s other financial closing procedures, and the audit by the Company’s independent auditor in accordance with the standards of the PCAOB, and may differ from the Japanese GAAP results for this period due to the completion of the Company’s financial closing procedures, the audit under the standards of the PCAOB, and other developments that may arise during the audit process.
The Company expects that its audited consolidated U.S. GAAP results for the fiscal year ended April 30, 2024, in addition to reflecting the consolidation of entities that is not reflected in the non-consolidated Japanese GAAP financial results, may differ from the Japanese GAAP results contained in the following business report and the accompanying Japanese GAAP financial statements and related notes.
The Japanese GAAP financial results included in the following business report have been prepared by and are the responsibility of the Company’s management. The Company’s independent U.S. auditor has not audited, reviewed, compiled, or performed any procedures with respect to the Japanese GAAP financial results presented in the following business report or the accompanying Japanese GAAP financial statements and related notes under either the standards of the PCAOB or U.S. GAAS. Accordingly, the Company’s independent U.S. auditor does not express an opinion or any other form of assurance with respect thereto.
The Company intends to file its Annual Report on Form 20-F containing the audited financial statements for the fiscal year ended April 30, 2024 prepared in accordance with U.S. GAAP by the filing deadline prescribed by the U.S. Securities and Exchange Commission, and such financial information for 2024 contained in the Annual Report, including the Company’s audited financial statements and related notes prepared in accordance with U.S. GAAP, may differ from the Japanese GAAP financial information disclosed in the following business report and the accompanying Japanese GAAP financial statements and related notes. As such, this Japanese GAAP financial information should not be viewed as a substitute for the Company’s audited annual financial statements and related notes prepared in accordance with U.S. GAAP and is not necessarily indicative of any future period. Accordingly, you should not place undue reliance on this Japanese GAAP information.
The discussion of financial results below is presented to our shareholders and holders of our American Depositary Shares (“ADSs”) solely for purposes of compliance with requirements under the Japanese Companies Act in connection with our sixth Ordinary General Meeting of Shareholders.
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[This is an English translation of the original issued in Japanese]
[NOTE] Earlyworks Co., Ltd. assumes no responsibility for this translation or for direct, indirect, or other forms of damages arising from the translation. This document has been translated from the Japanese original for reference purpose only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
Business Report
(May 1, 2023 to
April 30, 2024)
1. Current Status of the Company
| (1) | Status of Business in the 2024 Fiscal Year |
| ① | Business Progress and Results |
During the 2024 fiscal year, the Japanese economy showed signs of recovery as the spread of the COVID-19 began to subside, accompanied by the movement of people.
Since the 2023 fiscal year, our Company has actively engaged in sales activities for the purpose of planning, proposing, designing, and developing system solutions to solve customer issues, and promoted consulting and contract development for customers in a variety of industries. Furthermore, we focused on the development of our proprietary blockchain technology, Grid Ledger System (“GLS”), and its System Development Kit (“SDK”) package, and made necessary preparations to develop partnerships using GLS with other technology providers. In addition, our work on metaverse services with NTT DOCOMO and large project contracts with Pocket RD Inc. are progressing, and we are in the process of creating several cases that utilize blockchain technology, which is one of our strengths.
As a major capital policy topic, in July 2023, we completed our listing on the NASDAQ Capital Market in the U.S. and raised a total of 781 million yen.
As for strengthening the organizational structure, we also increased the number of personnel in the sales, development, and administrative departments for future business expansion.
As a result of the above, net sales for the 2024 fiscal year were 179 million yen (up by 435.1% from the previous fiscal year), operating loss was 499 million yen (compared to an operating loss of 592 million yen in the previous fiscal year), ordinary loss was 455 million yen (compared to an ordinary loss of 594 million yen in the previous fiscal year), and net loss was 456 million yen (compared to a net loss of 585 million yen in the previous fiscal year).
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Sales by Business Segment
(Unit: Million Yen)
| Business Segment | Year
5 (April 2023) (2023 fiscal year) |
Year
6 (April 2024) (2024 fiscal year) |
Prior year comparison | |||
| Amount | Composition
Ratio |
Amount | Composition Ratio | Amount | % change | |
| Blockchain Business | 41 | 100% | 179 | 100% | 138 | 435.1% |
| ② | Status of Capital Expenditures |
Not applicable.
| ③ | Status of Fundraising |
In July 2023, during the 2024 fiscal year, the Company went public on the NASDAQ Capital Market in the U.S. Accordingly, a cumulative total of JPY 781 million was raised through the issue of new shares to provide liquidity.
| ④ | Status of Business Transfer, Absorption-Type Demerger, or Incorporation-Type Demerger |
Not applicable.
| ⑤ | Acquisition of other company’s business |
Not applicable.
| ⑥ | Succession to rights and obligations relating to the business of other corporations, etc., as a result of absorption-type merger or absorption-type split |
Not applicable.
| ⑦ | Acquisition or disposal of shares or other equity or stock options in other companies |
Not applicable.
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| (2) | Assets and profit and loss |
| Year
3 (Year ending April 30, 2021) |
Year
4 (Year ending April 30, 2022) |
Year
5 (Year ending April 30, 2023) |
Year
6 (Year ending April 30, 2024) | ||
| Sales | (Million Yen) | 218 | 467 | 41 | 179 |
| Ordinary income(△Loss) | (Million Yen) | △28 | 98 | △594 | △455 |
| Net Income(△Loss) | (Million Yen) | △28 | 85 | △585 | △456 |
| Net income per share (△Loss) | (Yen) | △214.44 | 6.17 | △43.97 | △31.54 |
| Total Asset | (Million Yen) | 418 | 744 | 250 | 564 |
| Total Shareholder’s Equity | (Million Yen) | 308 | 59 | 9 | 336 |
| Shareholder’s Equity per share | (Yen) | 2,270.93 | 42.94 | 0.03 | 21.69 |
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| (3) | Issues to be addressed. |
| ① | Strengthening of management and internal control systems |
The Company will further strengthen its business management system, which is a prerequisite for stable business expansion, and will make further efforts to ensure thorough compliance for transparent, fair and speedy decision-making and to respond to disclosure requirements. Specifically, the Company will further strengthen its corporate governance system, risk management system, compliance system, etc. by providing thorough training to employees and new recruits and by continuously enhancing their expertise through the willing participation of those in charge of various study groups.
| ② | Strengthening the development system by securing and training personnel |
The Company believes that it is necessary for the Company to secure and train personnel with outstanding skills beyond their field of expertise, such as personnel for the development of new systems and for marketing to grow the business. The Company will endeavor to develop and secure such personnel.
| ③ | Strengthening the sales structure |
The Company operates with a few elites in terms of its development department, and considers it necessary to secure and train development personnel to expand the business and respond to various functional requirements, and we will strengthen our development system.
| (4) | Principal business activities (as of April 30, 2024) |
| Business segment | Business activities |
| Blockchain business | We provide systems and services related to blockchain technology |
| (5) | Principal offices and plants (as of April 30, 2024) |
| Head office | Taito-ku, Tokyo |
| (6) | Status of employers (as of April 30, 2024) |
Business segment |
Number of employees | Change from the end of previous fiscal year |
| Blockchain business | 15 employees | 2 employees |
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| (7) | Principal lenders (as of April 30, 2024) |
| Lender | Loan amount |
| Resona Bank, Limited | 100 million Yen |
| Kiraboshi Bank, Ltd. | 33 million Yen |
| The Shoko Chukin Bank, Ltd | 34 million Yen |
| (8) | Other important matters relating to the current status of the Company |
Not applicable.
2. Shares (as of April 30, 2024)
| (1) Total number of shares authorized to be issued | 55,300,000 shares | |
| (2) Total number of shares issued | 15,076,900 shares | |
| (3) Number of shareholders | 29 members | |
| (4) Major shareholders |
| Shareholder Name | Number of shares held | Shareholding ratio | |
| Satoshi Kobayashi | 5,462,265 shares | 36.2 | % |
| The Bank of New York Mellon | 5,128,700 | 34.0 | |
| Themis Capital LLC | 4,000,000 | 26.5 | |
| Tomokazu Saito | 60,700 | 0.4 | |
| Kenji Ishida | 53,000 | 0.3 | |
| Diamond Management Inc. | 33,000 | 0.2 | |
| Yoshihisa Suzuki | 31,200 | 0.2 | |
| IX LLC | 29,800 | 0.1 | |
| Yasutomo Toyofuku | 26,400 | 0.1 | |
| Tomoaki Akai | 25,000 | 0.1 | |
(Note) The Bank of New York Mellon holds shares in the Company as a depositary bank for the purpose of issuing American Depository Receipts.
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3.Stock Options, etc.
| (1) | Stock options granted as compensation for the execution of duties held by the Company’s directors and officers at the end of the 2024 fiscal year. |
| 1st Stock Options | |||
| Date of resolution to issue | February 5, 2019 | ||
| Number of stock options | 200 | ||
| Stock options | Ordinary shares | 1,000,000 | |
| ● type and number of shares to be issued | shares (5,000 shares per stock option) | ||
| Amount to be paid for stock options | No payment is required in exchange for stock options. | ||
| Value of assets to be contributed upon exercise of stock options | Per
stock option 2 JPY (0.0004 JPY per share) | ||
| Exercise period | March 1, 2021 to February 28, 2029. | ||
| Conditions for exercise | (Note 1) | ||
| Directors’ holdings | Directors (excluding independent directors) | Number
of stock options Number of shares to be issued Number of holders |
200 1,000,000 shares 1 member |
| Independent directors | ― | ||
| Company auditors | ― | ||
Note 1
| ① | Holders of stock options must hold the position of director, auditor or employee of the Company or its subsidiaries at the time of exercising their rights. However, this shall not apply if the Company’s board of directors (the “Board of Directors”) considers that there is a justifiable reason. |
| ② | In the event of the death of a stock option holder, the exercise of stock options by his/her heirs shall not be permitted. |
Note 2
Due to the 50-for-1 stock split executed on July 16, 2019 and the 100-for-1 stock split executed on October 26, 2021, the “number of shares to be issued upon exercise of stock option” and “value of assets to be contributed upon exercise of stock option” have been adjusted.
| (2) | Stock options issued to employees, etc. as compensation for execution of duties during the 2024 fiscal year |
Not applicable
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| (3) | Other matters related to stock options to shares, etc. |
At the Ordinary General Meeting of Shareholders on July 1, 2019, the Company resolved to issue the following stock options to Shohei Samata, the trustee of the Trust for Market Value Issuance Stock options, which were granted on July 3, 2019.
2nd Stock Options
Number of stock options |
20,000 | |
| Class and number of shares to be issued upon exercise of stock options | Ordinary shares 2,000,000 shares | |
| Amount to be paid for stock options | 10,000,000 yen | |
| Issue price amount of stock options | 110 yen per share | |
| Amount to be paid upon exercise of stock options | 5,000 yen per share | |
| Exercise period between stock options | From July 4, 2019 to July 3, 2029 | |
| Increase in capital stock and capital reserve | ① |
The amount of capital to be increased in the event of the issuance of shares upon the exercise of these stock options shall be half of the maximum amount of increase in capital, etc., calculated in accordance with Article 17, Paragraph 1 of the Corporate Calculation Regulations. Any fraction of less than one yen resulting from the calculation shall be rounded up to the nearest one yen. |
| ② | The amount of capital reserve to be increased in the event of the issuance of shares upon the exercise of the stock options shall be the amount obtained by subtracting the amount of capital to be increased as set forth in ①above from the maximum amount of increase in capital, etc. as set forth in ①above. | |
| Matters concerning transfer of stock options to shares | The approval of the Board of Directors shall be required. | |
| Conditions for exercise of stock options to shares (Note 1) | (Note 1) | |
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| Note 1 | ①The person who has been allocated the stock options (hereinafter referred to as the “Trustee”) shall not be able to exercise the stock options, and except as otherwise provided in this provision, only the person who has been granted the stock options by the Trustee (hereinafter referred to as the “Stock Option Holder”) shall be able to exercise the stock options. |
② The Stock Option Holder shall only be unable to exercise the stock options if any of the following events occur between the grant date of the stock options and the expiration date of the exercise period.
(a) When ordinary shares of the Company are issued at a price below 50 yen (provided that the price shall be appropriately adjusted in the same manner as the exercise price in the event of a stock split or reverse stock split by the Company), excluding cases where the payment amount is considered a “specially favorable amount” as defined in Article 199, Paragraph 3, and Article 200, Paragraph 2 of the Companies Act, cases where the price is deemed different from the market price of the ordinary shares, and cases where such issuance is by allotment to shareholders, etc.
(b) When stock options are issued with an exercise price below 50 yen (provided that the price shall be appropriately adjusted in the same manner as the exercise price in the event of a stock split or reverse stock split by the Company), except in cases where the exercise price is set at a price different from the market price of the Company’s ordinary shares at the time of issuance.
(c) When transactions, including sales, are conducted at a price below 50 yen (provided that the price shall be appropriately adjusted in the same manner as the exercise price in the event of a stock split or reverse stock split by the Company) if the Company’s ordinary shares, which are the subject of the stock options, are not listed on any securities exchange in Japan, except in cases where the transactions are conducted at a significantly lower price than the market price at the time of the transaction for purposes such as capital policy.
(d) When the Company’s ordinary shares, which are the subject of the stock options, are listed on any securities exchange in Japan and the closing price of the Company’s ordinary shares in regular trading on such exchange falls below 50 yen (provided that the price shall be appropriately adjusted in the same manner as the exercise price in the event of a stock split or reverse stock split by the Company) after the listing date.
③The Stock Option Holder must be a director, auditor, employee, advisor, or an external collaborator such as an outside consultant or contractor of the Company or its subsidiaries or affiliates at the time of exercising the stock options. However, this requirement does not apply if the Company’s Board of Directors acknowledges that the holder has resigned due to the expiration of their term, retired due to reaching retirement age, or for other legitimate reasons.
④The exercise of the stock options by the heirs of the Stock Option Holder is not permitted.
⑤The stock options cannot be exercised if such exercise would result in the total number of issued shares of the Company exceeding the authorized number of shares at that time.
⑥Fractions of a stock option cannot be exercised.
Note 2
On April 30, 2024, the trustee for the 1,000 stock options of the second series of stock options (A02) was changed to Kotaeru Trust Co., Ltd.
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4. Corporate Officers
(1) Directors and Company Auditors (as of April 30, 2024)
| Position in the Company | Name | Responsibilities and Important Concurrent Positions |
| Representative Director | Satoshi Kobayashi | CEO |
| Director | Hiroki Yamamoto | CTO in charge of System Development Dept. |
| Director | Masahiro Tominaga | Representative director, Dizzy Co. |
| Director | Kiyomitsu Takayama | Chairman, Pendo.io Japan Senior Vice President of Japan Business, Josys Inc. |
| Director | Masanori Gomita | Representative director, JWS Japan White Spread Chairman of the board, Create Management Association Representative employee, Peer pressure LLC |
| Full-time Auditor | Shinpei Ogose |
Shinpei Ogose CPA office Representative director, Tokyo Global Consulting Inc. |
| Auditor | Koichi Goto |
Auditor, KakaoPiccoma Inc. Company auditor, Walklog Inc. |
| Auditor | Masaaki Aono |
Partner, CrossOver Law Offices in Japan Outside director, and audit and supervisory committee member, Halmek Holdings Inc |
Note
1. Directors Mr. Masahiro Tominaga, Mr. Kiyomitsu Takayama, and Mr. Masanori Gomita are independent directors.
2. Auditors Mr. Shinpei Ogose, Mr. Koichi Goto, and Mr. Masaaki Aono are outside company auditors.
3. Full-time Auditor Mr. Shinpei Ogose is a certified public accountant.
4. Auditor Mr. Koichi Goto has considerable knowledge of finance and accounting.
5. Auditor Mr. Masaaki Aono is a qualified lawyer.
6. Auditor Mr. Shozo Kaneko resigned and left his position on October 31, 2023.
(2) Outline of the contents of the liability limitation agreement
Our Company has entered into agreements with independent directors Mr. Masahiro Tominaga, Mr. Kiyomitsu Takayama, and Mr. Masanori Gomita, as well as outside company auditors Mr. Shinpei Ogose, Mr. Koichi Goto, and Mr. Masaaki Aono, that limit their liability to the minimum liability amount stipulated in Article 425, Paragraph 1 of the Companies Act, provided that they act in good faith and without gross negligence in the performance of their duties.
Additionally, we had a similar limited liability agreement with Auditor Mr. Shozo Kaneko, who resigned on October 31, 2023.
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(3) Summary of the contents of the indemnity agreement, etc.
Pursuant to Article 430-2, Paragraph 1 of the Companies Act, the Company has entered into an indemnification agreement with each of the directors and corporate auditors listed in (1) above, under which the Company indemnifies them for the expenses listed in Paragraph 1 and losses listed in Paragraph 2 to the extent permitted by law.
The Company had also entered into a similar indemnification agreement with Mr. Shozo Kaneko, Company Auditor, who resigned as of October 31, 2023.
(4) Summary of contents of directors’ and officers’ liability insurance policy, etc.
The Company has maintained a directors’ and officers’ liability insurance policy with an insurance company as stipulated in Article 430-3, Paragraph 1 of the Companies Act. The policy covers all directors, executive officers, and company auditors of the Company, and the insured does not bear the premiums. The policy provides indemnification for legal damages and dispute expenses in the event of a claim for damages arising out of acts (including omissions) performed by the insured in his/her capacity as an insured. Measures are taken to ensure that the appropriateness of the execution of duties by officers, etc. is not impaired by setting a limit on the amount of compensation to be paid.
(5) Remuneration for Directors and Auditors
①Total amount of compensation, etc. for the 2024 fiscal year
| Total
amount of remuneration, etc |
Total amount of remuneration, etc. by type | Subject | |||
| Basic remuneration |
Performance- linked compensation, etc |
Non- monetary compensation, etc |
Number of directors | ||
| Directors | 33 million yen | 33 million yen | — | — | 5 |
| (Independent Directors) | (9) | (9) | (3) | ||
| Auditor | 9 | 9 | — | — | 4 |
| (Independent Auditors) | (9) | (9) | (4) | ||
| Total | 42 | 42 | — | — | 9 |
| (Independent Directors and Auditors) | (18) | (18) | (7) | ||
Note
1. The above includes one auditor who resigned during the 2024 fiscal year.
2. The amount of remuneration for directors does not include salaries for directors who also serve as employees.
3. The amount of monetary remuneration for directors was resolved to be within 180 million yen per year (of which, up to 30 million yen per year for independent directors) at the 2nd Annual General Meeting of Shareholders held on July 28, 2020 (excluding salaries for directors who also serve as employees). At the conclusion of this shareholders’ meeting, the number of directors was six (of which, one was an independent director).
4. The amount of monetary remuneration for company auditors was resolved to be within 18 million yen per year at the 1st Annual General Meeting of Shareholders held on July 1, 2019. At the conclusion of this shareholders’ meeting, the number of company auditors was three.
5. The Board of Directors has delegated the decision on the amount of base remuneration for each director to Representative Director Satoshi Kobayashi. The reason for this delegation is that the Representative Director is deemed suitable to evaluate each director, taking into consideration the overall performance of the company.
(6) Matters Related to Independent Directors and Outside Company Auditors
| ① | Status of Significant Concurrent Positions in Other Corporations, and Relationship Between Our Company and Such Other Corporations |
| ● | Director Masahiro Tominaga is the representative director of Dizzy Co., but there is no special relationship between our Company and Dizzy Co. |
| ● | Director Kiyomitsu Takayama is Chairman, Pendo.io Japan and Senior Vice President of Japan Business, Josys Inc., but there is no special relationship between our Company and these companies. |
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| ● | Director Masanori Gomita is representative director of JWS Japan White Spread, chairman of the board of Create Management Association and Representative employee of Peer pressure LLC, but there is no special relationship between our Company and these entities. |
| ● | Full time auditor Shinpei Ogose is the head of Shinpei Ogose CPA office, representative director of Tokyo Global Consulting Inc. , but there is no special relationship between our Company and these entities. |
| ● | Auditor Koichi Goto is the auditor of KakaoPiccoma Inc. and company auditor of Walklog, but there is no special relationship between our Company and these entities. |
| ● | Auditor Masaaki Aono is a partner of CrossOver Law Offices in Japan and outside director and audit and supervisory committee member at Halmek Holdings Inc., but there is no special relationship between our Company and these entities. |
| ● | Auditor Shozo Kaneko is the Chairman of the Board of Directors at Social Beauty Photo Co., Ltd., but there is no special relationship between our company and Social Beauty Photo Co., Ltd. |
| ② | Major activities during the 2024 fiscal year |
| Summary of attendance and statements made, and duties performed with respect to the role expected of an independent director | ||
| Director | Masahiro Tominaga | He attended all the 21 meetings of the Board of Directors held during the 2024 fiscal year. At the Board of Directors meetings he attended, he made comments as appropriate from an overall management perspective based on his extensive experience and broad insight as a corporate manager. |
| Director | Kiyomitsu Takayama | He attended all the 21 meetings of the Board of Directors held during the 2024 fiscal year. At the Board of Directors meetings he attended, he made comments as appropriate from an overall management perspective based on his extensive experience and broad insight as a manager of a foreign-affiliated company. |
| Director | Masanori Gomita | He attended all the 9 meetings of the Board of Directors held after his appointment during the 2024 fiscal year. At the Board of Directors meetings he attended, he made comments as appropriate from an overall management perspective based on his extensive experience and broad insight as a corporate manager. |
| Company Auditor | Shinpei Ogose | He attended all the 9 meetings of the Board of Directors and 6 meetings of the Board of Company Auditors held after his appointment during the 2024 fiscal year. At the Board of Directors meetings and Board of Company Auditors meetings he attended, he made comments as appropriate, mainly from his professional perspective as a certified public accountant. |
| Company Auditor | Koichi Goto |
He attended all 21 meetings of the Board of Directors and all 11 meetings of the Board of Company Auditors held during the 2024 fiscal year. At the Board of Directors meetings and Board of Company Auditors meetings he attended, he made comments as appropriate based on his extensive experience and knowledge, mainly with respect to finance and accounting. |
| Company Auditor | Masaaki Aono | He attended all 21 meetings of the Board of Directors and all 11 meetings of the Board of Company Auditors held during the 2024 fiscal year. At the Board of Directors meetings and Board of Company Auditors meetings he attended, he made comments as appropriate, mainly from his professional perspective as an attorney-at-law. |
| Company Auditors | Shozo Kaneko |
He attended 4 out of 13 meetings of the Board of Directors and all 5 meetings of the Board of Company Auditors held prior to his resignation in the 2024 fiscal year. At the Board of Directors meetings and Board of Company Auditors meetings he attended, he made comments as appropriate, mainly based on his extensive experience in the establishment of internal controls. |
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5. System to ensure the appropriateness of business operations and the status of operation of such system
(1) Systems to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation (Article 362, Paragraph 4, Item 6 of the Companies Act, Article 100, Paragraph 1, Item 4 of the Rules of the Company)
| ① | Maintain a collection of corporate regulations (including the Articles of Incorporation) that are accessible to directors and employees at all times, and ensure that these regulations are a prerequisite for corporate activities. |
| ② | Appoint independent directors to maintain and improve the supervisory function of the Board of Directors. |
| ③ | Conduct internal audits and audits by company auditors to confirm that the execution of duties is in compliance with laws and regulations and the Articles of Incorporation. |
| ④ | As a measure to ensure and raise awareness of compliance, the Company will hold training sessions for directors and employees on the basics of compliance and information management essential for business operations, and conduct ongoing education and dissemination activities. |
| ⑤ | The Company shall establish regulations to ensure the effectiveness of the internal reporting system and set up a contact point to receive reports and consultations regarding compliance violations and possible violations related to business execution. |
(2) System for the storage and management of information related to the execution of duties by directors (Article 100, Paragraph 1, Item 1 of the Companies Act Enforcement Regulation)
| ① | Documents and other information related to the execution of duties shall be stored and managed in accordance with laws, regulations, and internal rules including the Document Management Rules. The storage and management system shall be reviewed as necessary. |
| ② | The Company shall establish a storage and management system that enables directors and company auditors to immediately inspect the above documents and other items when necessary for the performance of their duties. |
(3) Regulations and Other Systems for Managing the Risk of Loss (Article 100, Paragraph 1, Item 2 of the Companies Act Enforcement Regulation)
| ① | Establish and implement compliance policies and risk management committee rules for the prevention of loss risks (hereinafter referred to as “risks”) and the handling of occurred risks, and provide education to employees. |
| ② | Each director and officer in charge shall identify risks within their respective areas of responsibility, continuously monitor the situation, and regularly report to the board of directors. |
| ③ | Conduct internal audits by internal auditors and address any findings appropriately and promptly. |
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(4) Systems to Ensure Efficient Execution of Duties by Directors (Article 100, Paragraph 1, Item 3 of the Companies Act Enforcement Regulations)
| ① | Establish and operate regulations related to the execution of duties, including job authority regulations. |
| ② | Place a director or officer in charge in each organizational unit, who will execute duties with the designated authority and report the status of duty execution to the board of directors monthly. |
| ③ | Check the content of business execution among decision-makers at each level based on the approval regulations and ensure that a restraining function works during the execution phase. |
| ④ | The representative director and executive directors hold meetings to share management conditions, understand the activity status of each organization, and improve the efficiency of their own business execution. |
(5) Systems to Ensure Proper Business Operations in Our Company (Article 100, Paragraph 1, Item 5 of the Companies Act Enforcement Regulations)
| ① | Ensure that business execution complies with laws and articles of incorporation, and establish internal regulations including organizational and job responsibility regulations to ensure propriety and efficiency in operations. |
| ② | To ensure the conformity of the performance of duties by directors and employees, internal audits shall be conducted in accordance with the Internal Audit Regulations. In addition, the internal audit manager shall exchange information with company auditors and auditing firms as necessary, and conduct internal audits in an efficient manner. |
(6) Matters related to employees requested by auditors to assist in their duties (Article 100, Paragraph 3, Item 1 of the Companies Act Enforcement Regulations).
| ① | At the request of the Company Auditors, the Board of Directors shall, upon consultation with the Company Auditors, appoint assistants to the Company Auditors to assist them in their audit duties. |
(7) Matters Related to the Independence of Assistant Auditors from Directors (Article 100, Paragraph 3, Item 2 of the Companies Act Enforcement Regulations)
| ① | Assistant auditors shall assist in the audit tasks under the direction and command of the auditors |
| ② | The appointment, transfer, personnel evaluation, and discipline of the assistant auditors shall be conducted with the consent of the auditors to ensure independence from the directors. |
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(8) Matters related to ensuring the effectiveness of instructions to assistants for auditors (Article 100, Paragraph 3, Item 3 of the Companies Act Enforcement Regulations).
| ① | Directors and employees shall be thoroughly informed that assistant auditors follow the directions and commands of the auditors. |
(9) Systems for directors and employees to report to auditors and to ensure that they are not treated unfavorably for making such reports (Article 100, Paragraph 3, Items 4 and 5 of the Companies Act Enforcement Regulations)
| ① | Directors and employees shall report to the auditors upon request and shall also report significant matters such as the status of duty execution and facts that have a significant impact on management in a timely and appropriate manner directly to the auditors or the board of auditors or through relevant departments, thereby sharing information with the auditors. |
| ② | Auditors shall attend important meetings such as the board of directors meetings and share information on agenda items. |
| ③ | Approval documents shall be made available for auditors to view at any time, ensuring that the status of business execution is continuously shared. |
| ④ | In accordance with the internal reporting regulations, those who make the reports specified in the preceding three items shall not be treated unfavorably for making such reports. |
(10) Matters related to the policy for handling expenses and other costs arising from the execution of duties by auditors (Article 100, Paragraph 3, Items 6 of the Companies Act Enforcement Regulations)
| ① | When an auditor makes a claim for expenses incurred in the execution of their duties, the expenses shall be promptly processed for settlement unless it is determined that the expenses are not necessary for the execution of the auditor’s duties. |
(11) Other systems to ensure that audits by auditors are conducted effectively (Article 100, Paragraph 3, Item 7 of the Companies Act Enforcement Regulations)
| ① | Auditors shall attend the board of directors meetings and establish a system to always stay informed about the progress of business operation. |
| ② | Establish regular liaison meetings with internal auditors and accounting auditors to deepen cooperation and ensure effective auditing. |
(12) Systems to ensure the reliability of financial reporting (Article 24, Paragraph 4, Item 4 of the Financial Instruments and Exchange Act)
| ① | Position the establishment of internal control systems to ensure the reliability of financial reporting as one of the most important management issues and promote the reliability of financial reporting. |
| ② | Build systems that enable internal controls to function effectively, manage to reduce the risk of false statements in financial reports, and prevent them in advance. |
| ③ | In order to ensure the reliability of financial reporting, an assessment team, with the internal auditor serving as the core, shall continuously assess the risks of business processes and report the assessment results to the President and Representative Director. |
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| ④ | As necessary, establish and operate various regulations while considering compliance with relevant laws and regulations, such as the Financial Instruments and Exchange Act. |
<Basic Policy and Status of Measures to Eliminate Anti-Social Forces>
During the 2024 fiscal year, the Board of Directors met 21 times to fully deliberate on each agenda item, report on the status of business execution by directors, and engage in a lively exchange of opinions.
Furthermore, we conduct internal training for our employees to eliminate any connections with anti-social forces and collaborate with external professional organizations such as lawyers to prevent harm caused by such forces. Additionally, we are a member of the “Federation for the Prevention of Special Violence,” where we gather information on anti-social forces and implement appropriate response methods for unjust demands, thereby striving to establish a preparedness system for any eventualities.
<Overview of the Operation Status of Systems to Ensure Proper Business Operation >
Our Company, based on the “Basic Policy on Internal Control Systems,” has implemented the following specific measures:
| (1) | Status of Important Meetings Held |
In the 2024 fiscal year, the board of directors met 21 times, with sufficient deliberation on each agenda item and reports on the status of the directors’ business execution, leading to active exchanges of opinions.
| (2) | Compliance and Risk Management Efforts |
To ensure thorough compliance awareness, regular training is conducted. Company-wide education on information security and compliance has been provided. The Internal Audit Department includes the compliance with laws, articles of incorporation, and internal regulations as audit items to confirm that the Company’s operations are being conducted properly. From a risk management perspective, an internal reporting system has been established to detect compliance violations. If any compliance violations occur, countermeasures are formulated and company-wide alerts are issued.
| (3) | Audit System of Company Auditor |
In the 2024 fiscal year, the board of auditors met 11 times and conducted audits based on the audit plan established by the board of auditors. In addition to attending the 21 board of directors meetings held during the fiscal year, full-time auditors attended executive meetings to audit the directors’ business execution. To enhance the effectiveness of the audits, the board of auditors exchanges information with the head of the management department and conducts interviews with the representative director as needed
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Statutory Financial Statements Prepared in Accordance with Japanese GAAP
[Note] The statutory financial statements and related notes on the following pages have been prepared in accordance with Japanese GAAP. These results may differ in material respects from our audited consolidated financial results under U.S. GAAP that will be reported at a later date and included in our Annual Report on Form 20-F, which will be filed with the U.S. Securities and Exchange Commission and available at www.sec.gov. The attached financial statements and related notes are provided to our shareholders and ADS holders solely in accordance with requirements under the Japanese Companies Act in connection with our Annual Meeting. See “Important Notice Regarding Japanese GAAP Financial Information” above.
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Balance Sheet
(As of April 30, 2024)
(Unit: Thousand Yen)
| Account Item | Amount | Account Item | Amount | |||||||
| (Asset) | (Debt) | |||||||||
| Current Assets | 528,043 | Current Liabilities | 181,861 | |||||||
| Cash and Deposits | 435,368 | Short-term Loans | 100,000 | |||||||
| Accounts Receivable | 79,338 | Long-term Loans Payable within One Year | 22,200 | |||||||
| Prepaid Expenses | 8,923 | Accounts payable | 33,863 | |||||||
| Accounts Receivable - Other | 0 | Accrued Corporate Taxes | 950 | |||||||
| Cryptocurrencies | 137 | Provision for Bonuses | 6,915 | |||||||
| Accrued Consumption Taxes | 1,732 | Accrued Expenses | 15,543 | |||||||
| Accrued Refundable Corporate Taxes | 0 | Deposits Received | 2,389 | |||||||
| Deposits | 2,542 | Fixed Liabilities | 46,168 | |||||||
| Fixed Assets | 36,052 | Long-term debt | 46,168 | |||||||
| Tangible Fixed Assets | 696 | Total Debt | 228,029 | |||||||
| Buildings | 37 | (Shareholder’s equity) | ||||||||
| Tools, Furniture, and Fixtures | 659 | Capital stock | 333,907 | |||||||
| Investments and Other Assets | 35,356 | Capital | 50,000 | |||||||
| Investments in Capital | 10 | Capital surplus | 1,325,236 | |||||||
| Security Deposits and Guarantee Money | 35,230 | Capital reserve | 100,958 | |||||||
| Long-term Prepaid Expenses | 115 | Other capital surplus | 1,224,278 | |||||||
| Earned surplus | ∆1,041,328 | |||||||||
| Other retained earnings | ∆1,041,328 | |||||||||
| Retained earnings carried forward | ∆1,041,328 | |||||||||
| Stock options | 2,158 | |||||||||
| Total Shareholder’s equity | 336,066 | |||||||||
| Total Asset | 564,096 | Total Liabilities and Shareholder’s equity | 564,096 | |||||||
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Income Statement
(From May 1, 2023
To April 30, 2024)
(Unit：Thousand)
| Account Item | Amount | |||||||
| Sales | 179,355 | |||||||
| Cost of Sales | 49,050 | |||||||
| Gross Profit | 130,304 | |||||||
| Selling, General and Administrative Expenses | 630,195 | |||||||
| Operating Loss (△) | △499,890 | |||||||
| Non-operating Income | ||||||||
| Interest Income | 1,838 | |||||||
| Foreign Exchange Gains | 46,745 | |||||||
| Others | 132 | 48,715 | ||||||
| Non-operating Expenses | ||||||||
| Interest Expenses | 3,427 | |||||||
| Others | 559 | 3,986 | ||||||
| Ordinary Loss (△) | △455,161 | |||||||
| Loss before Income Taxes (△) | △455,161 | |||||||
| Corporate, Inhabitant, and Business Taxes | 950 | |||||||
| Net Loss (△) | △456,111 | |||||||
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Statement of Changes in Shareholders’ Equity
(From May 1, 2023
To April 30, 2024)
(Unit：Thousand)
| Capital Stock | ||||||||||||||||||||||||||||||||||
| Capital Surplus | Earned Surplus | |||||||||||||||||||||||||||||||||
| Other Retained Earnings | ||||||||||||||||||||||||||||||||||
| Capital | Capital Reserve | Other Capital Surplus | Capital Surplus | Retained Earnings Carried Forward | Earned Surplus | Shareholders’ Equity | Stock Options | Total Shareholders’ Equity | ||||||||||||||||||||||||||
| Beginning Balance | 100,000 | 100,000 | 392,120 | 492,120 | ∆585,216 | ∆585,216 | 6,903 | 2,200 | 9,103 | |||||||||||||||||||||||||
| Changes during the Period | ||||||||||||||||||||||||||||||||||
| Issuance of New Shares | 782,158 | 958 | 958 | 783,116 | ∆41 | 783,075 | ||||||||||||||||||||||||||||
| Capital Reduction | ∆832,158 | 832,158 | 832,158 | － | － | |||||||||||||||||||||||||||||
| Net Income for the Period | ∆456,111 | ∆456,111 | ∆456,111 | ∆456,111 | ||||||||||||||||||||||||||||||
| Total Changes during the Period | ∆50,000 | 958 | 832,158 | 833,116 | ∆456,111 | ∆456,111 | 327,004 | ∆41 | 326,963 | |||||||||||||||||||||||||
| Ending Balance | 50,000 | 100,958 | 1,224,278 | 1,325,236 | ∆1,041,328 | ∆1,041,328 | 333,907 | 2,158 | 336,066 | |||||||||||||||||||||||||
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Individual Notes Table
| 1. | Notes on Matters Related to Significant Accounting Policies |
| (1) | Depreciation Method for Fixed Assets |
Tangible Fixed Assets: Buildings and building fixtures are depreciated using the straight-line method, while tools, furniture, and fixtures are depreciated using the declining balance method
The main useful lives are as follows:
Buildings and building fixtures: 2 years
Tools, furniture, and fixtures: 2 to 4 years
| (2) | Basis for Provision Recording |
Provision for Bonuses: To cover the payment of bonuses to employees, the amount expected to be paid is recorded in proportion to the applicable fiscal year
| (3) | Other Significant Matters for the Preparation of Financial Statements |
Accounting for Consumption Taxes: The accounting treatment for consumption tax and local consumption tax is based on the tax-excluded method.
| 2. | Notes Related to the Balance Sheet |
|
Accumulated Depreciation of Tangible Fixed Assets | 14 million Yen |
| 3. | Notes to the Statement of Changes in Shareholders’ Equity |
(1)Types and Number of Issued Shares as of the End of the Fiscal Year
| Ordinary Shares | 15,076,900 shares |
(2)Class and number of shares to be issued or transferred upon exercise of stock options (excluding those for which the first day of the exercise period has not arrived) as of the end of the 2024 fiscal year
|
Ordinary Shares |
2,980,000 shares |
| 4. | Notes on Per Share Information |
| (1) Net Assets per Share | 21.69 Yen |
| (2) Net Loss per Share | △31.54 Yen |
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Audit Report by the Board of Auditors
| Audit Reports | ||
|
The Board of Auditors has deliberated on the audit reports prepared by each auditor regarding the execution of duties by the directors for the sixth fiscal year from May 1, 2023, to April 30, 2024, and has prepared this audit report as follows:
1. Methods and Content of Audits by the Auditors and the Board of Auditors
The Board of Auditors established the audit policies and the division of duties and received reports on the implementation status and results of audits from each auditor. Additionally, we received reports on the execution of duties from the directors and others, and requested explanations as necessary.
Each Company Auditor, in accordance with the auditing standards for company auditors established by the Board of Company Auditors and in accordance with the auditing policy, assignment of duties, etc., communicated with the Directors, management and other employees, etc., made efforts to collect information and improve the auditing environment, attended the Board of Directors meetings and other important meetings, received reports from the Directors and employees, etc. on the status of execution of their duties, requested explanations as necessary, and investigated the business and financial conditions at the head office. We also attended meetings of the Board of Directors and other important meetings, received reports from Directors and employees regarding the execution of their duties, requested explanations as necessary, perused important approval documents, etc., and investigated the status of operations and assets at the head office. Based on the above methods, we have examined the business report and its supporting schedules for the 2024 fiscal year.
Furthermore, we examined the accounting books and related documents, and reviewed the financial statements (balance sheet, income statement, statement of changes in shareholders’ equity, and individual notes) and their supplementary schedules for the relevant fiscal year.
|
||
|
2. Audit Results
(1) Results of Audits of the Business Reports
1 The business report and its supplementary schedules are deemed to correctly reflect the Company’s status in accordance with laws and the articles of incorporation.
2 No fraudulent acts or significant facts violating laws or the articles of incorporation related to the execution of duties by the directors were recognized.
(2) Results of Audits of the Financial Statements and Their Supplementary Schedules
The financial statements and their supplementary schedules are deemed to fairly present the Company’s financial position and results of operations in all material respects.
|
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| July 1, 2024 | ||
Board of Auditors, Early Works Co., Ltd.
|
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| Full-time Auditor | Shinpei Ogose | ㊞ |
| Auditor | Koichi Goto | ㊞ |
| Auditor | Masaaki Aono | ㊞ |
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Reference Documents for the General Meeting of Shareholders
Proposal No. 1: Approval of Financial Statements for the Sixth Fiscal Year (From May 1, 2023 to April 30, 2024)
In accordance with Article 438, Paragraph 2 of the Companies Act, we request your approval of the financial statements for the sixth fiscal year. The details of the proposal are as stated in the provided documents. The board of directors has determined that the financial statements for the sixth fiscal year accurately reflect the Company’s assets and profit/loss status in accordance with laws and the articles of incorporation.
No. 2: Partial Amendment to the Articles of Incorporation
| 1. | Reason for the Proposal |
To clarify the business activities in line with the current status of the Company’s operations, we propose to amend Article 2 of the current Articles of Incorporation.
| 2. | Details of the Amendment |
The details of the amendment are as follow.
(The underlined indicates the portions to be changed)
|
Current Articles of Incorporation |
Proposed Amendment |
|
(Purpose)
Article 2: The purpose of the Company shall be to engage in the following businesses:
1.～8. (Omitted)
(newly established)
(newly established)
(newly established)
(newly established)
|
(Purpose)
Article 2: The purpose of the Company shall be to engage in the following businesses:
1.～8.(Unchanged)
9.Financial business and investment in venture capital
11.Brokerage and intermediary services for domestic and foreign investments
12.Listing support and listing consulting business
13.(Unchanged) |
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| Memo |
25
Exhibit 99.2
