Tokyo Lifestyle Co., Ltd 6-K, filed Jul 18, 2023
Tokyo Lifestyle Co., Ltd. (TKLF)
About this 6-K
Tokyo Lifestyle Co., Ltd filed this 6-K on July 18, 2023.
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 2023
Commission File Number: 001-41181
Yoshitsu Co., Ltd
Harumi Building, 2-5-9 Kotobashi,
Sumida-ku, Tokyo, 130-0022
Japan
(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 an Adjourned Meeting of the Annual General Meeting of Shareholders of Yoshitsu Co., Ltd for Fiscal Year 2022
In accordance with the rules and regulations of the Japanese Companies Act, Yoshitsu Co., Ltd has sent a notice and accompanying information to all holders of its ordinary shares and American Depositary Shares with respect to an adjourned meeting of its 17th Annual General Meeting to be held in Tokyo, Japan on July 25, 2023. A complete copy of the notice is attached as Exhibit 99.1.
The notice furnished in this report as Exhibit 99.1 shall not be deemed to be “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.
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SIGNATURS
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.
| Yoshitsu Co., Ltd | ||
| Date: July 18, 2023 | By: |
/s/ Mei Kanayama |
| Name: | Mei Kanayama | |
| Title: | Representative Director and Director (Principal Executive Officer) | |
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Notice of an Adjourned Meeting of the 17th Ordinary General Meeting of Shareholders to be held on July 25, 2023 |
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Exhibit 99.1
[This is an English translation of the original issued in Japanese]
[Note] The Company 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 purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.
July 14, 2023
Harumi Building, 2-5-9 Kotobashi,
Sumida-ku, Tokyo, 130-0022, Japan
Yoshitsu Co., Ltd.
Representative Director and Director
(Principal Executive Officer)
Mei Kanayama
Notice of the Adjourned Meeting of the 17th Ordinary General Meeting of Shareholders
Dear Shareholders,
We would like to extend our deepest appreciation for the support of our shareholders.
You are cordially invited to the adjourned meeting (the “Adjourned Meeting”) of the 17th Ordinary General Meeting of the Shareholders of Yoshitsu Co., Ltd held on June 30, 2023 (the “17th Ordinary General Meeting”).
Please note that the Adjourned Meeting will form an integral part of the 17th Ordinary General Meeting, and the shareholders attending the Adjourned Meeting will be those who were entitled to exercise voting rights at the 17th Ordinary General Meeting.
| 1. | The Reason for Holding an Adjourned Meeting |
We had planned to report to our shareholders during the 17th Ordinary General Meeting the business report (the “Business Report”) for the 17th fiscal year (from April 1, 2022, to March 31, 2023), including the financial statements and the audit report on the financial statements by the accounting auditors and the board of corporate auditors (the “Audit Report”).
However, we were not able to obtain the Audit Report, which should have been attached to the Business Report at the 17th Ordinary General Meeting, and we decided that we had no choice but to abandon the Business Report.
After the approval of the shareholders present at the 17th Ordinary General Meeting, we decided to hold an Adjourned Meeting of the 17th Ordinary General Meeting, the date, time, and place of which were left at Mr. Mei Kanayama’s discretion, and present an updated business report (the “Updated Business Report”) at the Adjourned Meeting.
| 2. | Date and Time: July 25, 2023, at 11:00 AM (Registration starts at 10:00 AM), Japan Standard Time |
| 3. | Address: 5th Floor, Harumi Building, 2-5-9 Kotohashi, Sumida-ku, Tokyo, Japan |
| 4. | Agenda Items |
Report Items: Updated Business Report for the 17th fiscal year (from April 1, 2022, to March 31, 2023), including the financial statements and the Audit Report of the financial statements by the accounting auditors and the board of statutory auditors.
For those attending the meeting, please submit the enclosed attendance form at the reception desk upon arrival.
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Fiscal Year 2022 Business Report
From April 1, 2022, to March 31, 2023
Statutory Financial Statements Prepared in Accordance with Japanese GAAP
Note: The statutory financial statements 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 are provided to our shareholders and ADS holders solely in accordance with requirements under the Japanese Companies Act in connection with our Annual Meeting.
| 1. | Current Status of the Company |
| (1) | Business Progress and Results |
During the fiscal year ended March 31, 2023, the global economy was affected by the high global prices of commodities, which led to procurement restrictions and monetary tightening policies that weighed on economic activities. In addition, unstable international conditions persisted, and their impact on the domestic and international economies must be closely monitored.
The domestic inbound market is also recovering on the back of easing restrictions on entry and the weakening of yen. Still, the number of visitors from China remains sluggish, partly due to the zero-corona policy that lasted until December 2022.
Even under these circumstances, we are striving to further strengthen our group brand power with the recent initial public offering (the “IPO”) on the NASDAQ market in the U.S., to further improve ourselves as a company with an international perspective by the acquisition of Tokyo Lifestyle Limited in July 2022, and to use our entry into the Southeast Asian market as a springboard to entry into the global market.
As a result, the Company’s net sales for the fiscal year ended March 31, 2023, were 21,667,575,000 yen, representing a decrease of 15.5% as compared to the net sales for the fiscal year ended March 31, 2022. The Company’s operating income for the fiscal year ended March 31, 2023, was 484,142,000 yen, representing a decrease of 31.5% as compared to the operating income for the fiscal year ended March 31, 2022. The Company’s ordinary income for the fiscal year ended March 31, 2023, was 192,962,000 yen, representing a decrease of 60.4% as compared to the operating income for the fiscal year ended March 31, 2022.
In May 2023, based on a consumption tax audit (period subject to audit: July 2018 to December 2021), the Company filed an amended consumption tax return for prior years and filed a claim for rehabilitation of prior-year income taxes in connection with the amended return. Based on the circumstances that led to the amended tax return, the Company has negotiated with its business partners, etc. to claim compensation for damages, etc. and has reached an agreement on an appropriate share of the additional payment burden associated with such amended tax return. This event was reflected in the financial statements as an adjusted subsequent event for the fiscal year ended March 31, 2023, with an extraordinary loss of 4,581,839 thousand yen for consumption taxes for prior periods (3,772,166 thousand yen for additional consumption tax, 244,449 thousand yen for delinquent taxes through May 31, 2023, and 565,223 thousand yen for additional tax on underreported income), extraordinary gain of 3,803,447 thousand yen for compensation for damages received. The financial statements reflect the amount of compensation for damages received of 3,803,447 thousand yen in extraordinary income, and the amount of income taxes refunded of 651,121 thousand yen in income taxes, etc. As a result, net income for the current fiscal year was a loss of 884,219 thousand yen.
However, as of June 2023, 1,712,463 thousand yen of consumption tax refund receivable has been allocated for the 4,581,839 thousand yen of consumption tax, etc. for past fiscal years in extraordinary loss, and the remaining 2,869,376 thousand yen is within the 3,803,447 thousand yen of compensation for damages received in extraordinary profit, so the Company will not bear any new actual amount and there will be no material impact on cash management for business activities from Fiscal Year 2024.
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| (2) | Financing |
The Company procured 8,150,000,000 yen in syndicated loans led by MUFG Bank, Ltd. and Mizuho Bank, Ltd., to provide for working capital needs. The financing amount increased by 650,000,000 yen as compared to the total financing amount for the fiscal year ended March 31, 2022.
| (3) | Significant Reorganization |
On July 27, 2022, we acquired 100% of the equity interests in Tokyo Lifestyle Limited and Tokyo Lifestyle Limited became our wholly owned subsidiary.
| (4) | Capital Investment |
Capital investment during the period totaled 176,340,000 yen, and the main items of which are as follows:
Tokyo Lifestyle Nishikasai Branch, newly opened in June 2022.
Tokyo Lifestyle the Family Nishikawaguchi Branch, newly opened in January 2023.
| (5) | Changes in Assets and Profit and Loss |
(Unit: thousand yen)
| Fiscal year ended March 31, 2020) | Fiscal year ended March 31, 2021) | Fiscal year ended March 31, 2022) | Fiscal year ended March 31, 2023) | |||||||||||||
| Net sales | 15,169,433 | 23,480,468 | 25,655,250 | 21,667,575 | ||||||||||||
| Ordinary income | 830,230 | 936,477 | 486,715 | 192,962 | ||||||||||||
| Net income | 540,074 | 556,209 | 192,523 | △884,219 | ||||||||||||
| Net income per share (yen) | 54,553 | 5,984 | 5 | △24 | ||||||||||||
| Total assets | 9,869,635 | 12,394,392 | 14,860,428 | 22,505,180 | ||||||||||||
| Net assets | 1,877,636 | 2,583,847 | 5,628,047 | 4,701,910 | ||||||||||||
| * | Net income per share is calculated based on the number of shares outstanding at the end of the period. |
| (6) | Tasks to be undertaken by management |
Amid the significant changes in the global landscape and business environment caused by the COVID-19 pandemic, we are committed to pursuing the profitability, safety, comfort, and efficiency of various stakeholders, including customers and employees, more than ever before. We are dedicated to striving towards becoming a company that can support the global economy and be worthy of listing on the NASDAQ market in the United States.
Our priority business and financial tasks to be addressed are as follows:
| ① | Improvement and stabilization of financials |
Through proper financial analysis, we will work to create a financial management system that enables us to quantitatively assess our company and the issues we face, and to strive for improvement.
| ② | Maintaining and developing excellent human resources |
As we continually accelerate our business growth, we believe that securing and developing excellent human resources is an important issue. We will continue to hire excellent human resources, both new graduates and mid-career hires, and expand our training system to develop human resources with high level knowledge and skills.
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| ③ | Rebuilding Business Models for the Post-COVID Era |
In the domestic market, we will prioritize profitability improvement through reassessing unprofitable stores, reviewing product offerings in our e-commerce business, and enhancing our online presence. In the international market, we will focus on developing our proprietary app, expanding into Southeast Asia, and fully operationalizing our overseas warehouses to improve profit margins. These efforts form the core of our business model reconstruction with a forward-looking perspective in the post-COVID era.
In order to overcome the above issues, the entire company will make a concerted effort. We would like to ask our shareholders for further guidance and encouragement.
| (7) | Major businesses (As of March 31, 2023) |
Management of drugstores in Japan
Global EC stores operation and management
Domestic and foreign wholesale
| (8) | Principal offices and stores |
| Headquarters | 2-5-9 Koto-bashi, Sumida-ku, Tokyo | |
| Tokyo Sales Dept. | 16F Harumi Island Triton Square Office Tower W, 1-8-8 Harumi, Chuo-ku, Tokyo | |
| Saitama Center | 3-1-5 Ryutsu Danchi, Koshigaya-shi, Saitama |
Subsidiary offices
| Trade name | Location | |
| Kaika International Co., Ltd | 2-5-9 Koto-bashi, Sumida-ku, Tokyo | |
| Tokyo Lifestyle Limited | Unit 11, 12/F., Wing on Plaza, No.62 Mody Road, Tsim Sha Tsui East, Kowloon |
Names and locations of physical stores are as follows:
| Store Name | Location | Store Name | Location | |||
| Kameido Store | Koto-ku, Tokyo | Koshigaya Ryutsu-Danchi Store | Koshigaya-shi, Saitama | |||
| Hirai Store | Edogawa-ku, Tokyo | Quizgate Urawa Store | Saitama-shi, Saitama | |||
| Shinbashi Store | Minato-ku, Tokyo | Yokohama Chinatown Store | Yokohama-shi, Kanagawa | |||
| Kamata Store | Ota-ku, Tokyo | Hakuba Store | Hakuba-mura, Nagano | |||
| Nishikasai Store | Edogawa-ku, Tokyo | Nishikawaguchi Store | Kawaguchi-shi, Saitama |
| * | 1. | We established the Nishikasai store in June 2022 and the Nishikawaguchi store in January 2023. |
| * | 2. | We closed the Koiwa store in January 2023 and the Suidobashi store in March 2023. |
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| (9) | Employees (As of March 31, 2023) |
| Number of Employees | Change from the previous fiscal year | Average age | Average number of years of attendance | |||
| 146 | ±0 | About 36-year-old | 3 years and 1 month |
| * | The number of employees includes part-time employees (77). |
| (10) | Significant Subsidiaries |
| Company Name | Location | Capital stock | Business | Investment Ratio | ||||||
| Kaika International Co., Ltd. | Tokyo | 5,000,000 yen | wholesale | 100 | % | |||||
| Tokyo Lifestyle Limited | Hong Kong, China | 1,000,000 HK dollars | Wholesale and retail | 100 | % | |||||
| * | 1. | As of August 25, 2022, the subsidiary Tokyo lifestyle Co., Ltd. changed its trade name to Kaika International Co., Ltd. |
| * | 2. | As of July 27, 2022, we acquired all shares of Tokyo Lifestyle Limited. |
| (11) | Major borrowings (As of March 31, 2023) | |
| Commitment line contract |
| Financial institutions | (Unit: thousand yen) | |||
| Mizuho Bank, Ltd | 1,550,000 | |||
| MUFG Bank, Ltd | 1,300,000 | |||
| Resona Bank, Ltd | 1,000,000 | |||
| Sumitomo Mitsui Banking Corporation | 900,000 | |||
| * | 1. | We have entered into a committed line of credit agreement with a maximum borrowing amount of 8,150,000,000 yen in order to secure stable and efficient working capital funding. This agreement is a syndicated loan arranged by MUFG Bank, Ltd. and Mizuho Bank, Ltd., with participation from a total of 17 financial institutions. |
| * | 2. | The outstanding borrowing balance at the end of the current fiscal year based on this agreement is 8,150,000,000 yen. |
2. Status of Stocks (As of March 31, 2023)
| ① | Total number of authorized shares: | 100,000,000 | |
| ② | Total number of shares issued and outstanding: | 36,250,054 | |
| ③ | Number of shareholders: | 4 | |
| ④ | Major Shareholders are as follows: |
| Names of shareholders | Number of shares held | Percentage of shares held (%) | ||||||
| Tokushin Goudou Kaisha | 16,838,350 | 46.45 | ||||||
| THE BANK OF NEW YORK MELLON | 11,595,214 | 31.99 | ||||||
| Mei Kanayama | 7,216,436 | 19.91 | ||||||
| SHUR Co., Ltd. | 600,054 | 1.66 | ||||||
| * | THE BANK OF NEW YORK MELLON is a depository that issues American Depository Receipts (ADRs). |
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3. Matters related to warrants of the Company (As of March 31, 2023)
The total number of warrants, etc. as of the end of the current business year is as follows:
| ① | Total number of warrants: 300,000 |
| ② | Class and number of shares to be issued upon exercise of stock warrants rights: | |
300,000 of our ordinary shares represented by American Depositary Shares in the United States
| ③ | Amount to be paid in for stock warrants rights. | |
| US$0.01 divided by the number of warrants in the Offering. | ||
| ④ | Amount of assets to be contributed upon exercise of stock warrants rights. | |
| US$4.80 per common share. | ||
| ⑤ | Exercise period of stock warrants rights. | |
| From July 6, 2022, to January 7, 2027 | ||
| ⑥ | Increase in capital stock and capital reserve when shares are issued due to the exercise of stock warrants rights. | |
| a. Amount of capital to be increased by the exercise of stock warrants rights. | ||
| The amount shall be half of the maximum amount of increase in capital, etc., as calculated in accordance with Article 17, Paragraph 1 of the Corporate Calculation Regulations, with any fraction of less than one yen resulting from the calculation being rounded up to the nearest one yen. | ||
| b. Amount of additional paid-in capital to be increased by the exercise of stock warrants rights. | ||
| The amount of capital to be increased shall be the maximum amount of increase in capital, etc. as calculated in accordance with the provisions of Article 17, Paragraph 1 of the Corporate Calculation Regulations, less the amount of capital to be increased. | ||
| ⑦ | Allottee of warrants rights: Univest Securities, LLC. |
4. Matters Relating to Corporate Officers (As of March 31, 2023)
| (1) | Directors and Auditors |
| Position | Name | Responsibilities and Important Concurrent Positions | ||
| President and Representative Director |
Mei Kanayama | President and Chief Executive Officer | ||
| Director | Sen Uehara | Executive Officer, Sales Department, Store Development Department, Product Management Department, Sales Department, Logistics Department | ||
| Director and Corporate Officer (Principal Accounting and Financial Officer) |
Yoichiro Haga | Executive Officer, Accounting Department. | ||
| Director | Tetsuya Sato | CFO, RSK Co., Ltd President, WDM Co., Ltd | ||
| Director | Yoji Takenaka | Lawyer | ||
| Director | Yukihisa Kitamura | Board of Trustees of Josai University | ||
| Auditor | Tadao Iwamatsu | None | ||
| Auditor | Keiichi Kimura |
Certified Administrative Procedures Legal Specialist Auditor, Palpitoh Co.,Ltd | ||
| Auditor | Junji Sato | Director, Seihinkokusai Co., Ltd. |
| * | 1. | Director Tetsuya Sato, Yoji Takenaka and Yukihisa Kitamura are independent directors as defined in Article 2, Item 15 of the Companies Act. |
| * | 2. | Auditor Keiichi Kimura and Junji Sato are independent corporate auditors as stipulated in Article 2, Item 16 of the Companies Act. |
| * | 3. | Mr. Xu Wang resigned from the position of Corporate Auditor at the conclusion of the Annual General Meeting of Shareholders presented on June 27, 2022, and Mr. Tadao Iwamatsu was newly elected and assumed office as a corporate auditor at the same shareholders’ meeting. |
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| (2) | Total amount of remuneration, etc. of directors and corporate auditors for the current fiscal year |
| (Unit: thousand yen | ) | |||||||||||||||||||
| Total amount of remuneration, etc. by type | ||||||||||||||||||||
| Position | Number of members | Total amount of compensation, etc. | Monetary reward | Performance- Linked Compensation, etc. | Non-monetary Compensation, etc. | |||||||||||||||
| Directors | 6 | 76,800 | 76,800 | - | - | |||||||||||||||
| (Independent directors) | (3 | ) | (9,600 | ) | (9,600 | ) | (- | ) | (- | ) | ||||||||||
| Auditors | 4 | 9,750 | 9,750 | - | - | |||||||||||||||
| (Independent auditors) | (2 | ) | (3,600 | ) | (3,600 | ) | (- | ) | (- | ) | ||||||||||
| Total | 10 | 86,550 | 86,550 | - | - | |||||||||||||||
| (5 | ) | (13,200 | ) | (13,200 | ) | (- | ) | (- | ) | |||||||||||
| * | 1. | The maximum amount of remuneration for Directors was resolved at the Ordinary General Meeting of Shareholders held on May 26, 2021 to be 150,000,000 yen per year. |
| 2. | The maximum amount of remuneration for corporate auditors was resolved at the Extraordinary General Meeting of Shareholders held on October 19, 2021 to be 30,000,000 yen per year. |
5. Accounting Auditors (As of March 31, 2023)
| (1) | Name: |
| Shine | Wing Japan LLC |
| (2) | Amount of compensation, etc. |
Amount of remuneration, etc. for services stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Act (Act No. 103 of 1948): 10,000,000 yen.
The Board of Corporate Auditors conducted necessary verification to assess the adequacy of the content of the auditor’s audit plan, the performance of the accounting audit, and the basis for determining the remuneration estimate. Based on this, the Board of Corporate Auditors has reached a decision of approval regarding the auditor’s remuneration and other related matters.
| (3) | Policy on Dismissal and Non-Reappointment of Auditors |
If the Board of Corporate Auditors determines that there is a problem with the performance of duties by the accounting auditor and that it is necessary to do so, the Board of Corporate Auditors will decide on the content of a proposal to be submitted to the General Meeting of Shareholders regarding the dismissal or non-reappointment of the accounting auditor.
6. System designed to ensure the appropriateness of business operations (As of March 31, 2023)
| (1) | System designed to ensure that the execution of duties by directors and employees complies with laws and regulations and the Articles of Incorporation： |
| ① | Directors of the Company and its subsidiaries shall comply with laws, regulations, and the Articles of Incorporation and promote the establishment of a compliance system. |
| ② | Directors of the company and its subsidiaries shall establish a compliance system to ensure that employees comply with laws, regulations, and the Articles of Incorporation, and shall manage and supervise the status of compliance with such laws, regulations, and the Articles of Incorporation. |
| ③ | Corporate auditors shall investigate the status of the compliance system and whether or not there are any problems with laws, regulations, and the Articles of Incorporation, and report to the Board of Directors. The Board of Directors shall periodically review the compliance system to identify problems and make improvements. |
| ④ | The Company shall establish regulations concerning whistle-blowing, and shall establish an internal reporting system to promptly report and consult with directors and employees of the Company and its subsidiaries in the event that they discover any suspected violation of laws and regulations, etc. |
| (2) | System for the storage and management of information related to the execution of duties by directors |
| ① | Information related to the execution of duties by Directors shall be prepared and stored in accordance with laws, regulations, and internal rules, and managed in a manner that allows access by directors, corporate auditors, and accounting auditors as necessary. |
| ② | The status of preparation, storage, and management of information related to the execution of duties by directors shall be subject to audit by corporate auditors. |
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| (3) | Regulations and other systems for managing the risk of loss |
| ① | The Company shall formulate the Risk Management Basic Regulations as the basis of the risk management system for the entire group and establish a risk management system in accordance with the said Regulations. In the event of an unforeseen event, the Company shall establish a Risk Management Committee chaired by the President and Representative Director, which shall take prompt action with the advice of legal counsel and others and establish a system to prevent and minimize the spread of damage. |
| ② | Directors and employees shall organize the contents of their respective departments’ risk management responsibilities, identify, analyze, and evaluate inherent risks, consider and implement appropriate countermeasures, and periodically review the status of such risk management. |
| ③ | Corporate auditors shall audit the risk management status of each department and report the results to the Board of Directors. The Board of Directors shall periodically review the risk management system to identify problems and make improvements. |
| (4) | System to ensure that directors execute their duties efficiently |
| ① | Aiming to increase corporate value, the Company shall work to achieve its goals based on a business plan formulated with its corporate philosophy as the axis and shall manage the progress of its activities. |
| ② | As a basis of the system to ensure the efficient execution of duties by directors, regular meetings of the Board of Directors (once a month) and extraordinary meetings of the Board of Directors shall be held as necessary. |
| ③ | The Company shall establish various internal rules, including rules on segregation of duties and rules on administrative authority and decision-making authority, to clarify the authority and responsibilities of each officer and director, and establish a system to ensure appropriate and efficient execution of duties. |
| ④ | The Company shall also supervise its subsidiaries to maintain a balance in the establishment and operation of internal control systems with ensuring efficiency and promptness in the execution of duties by the directors. |
| (5) | System to ensure the appropriateness of operations of the corporate group consisting of the Company and its subsidiaries |
In order to ensure the appropriateness of operations of the entire group, including subsidiaries, we will strive to establish a compliance system for the entire group.
| (6) | Matters concerning the system for employees to assist the duties of corporate auditors, the independence of such employees from directors, and the effectiveness of instructions to such employees |
Employees to assist the duties of corporate auditors shall be assigned when requested by corporate auditors, and the consent of the Board of Corporate Auditors shall be obtained with respect to the transfer, evaluation, etc. of such employees.
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| (7) | Systems for directors and employees to report to corporate auditors and other systems related to reporting to corporate auditors and other systems to ensure that corporate auditors’ audits are conducted effectively. |
| ① | Directors and employees of the Company and its subsidiaries shall immediately report to the Company’s corporate Auditors if they discover any fact that may cause significant damage to the Company. |
| ② | Corporate auditors shall attend meetings of the Board of Directors and other important meetings, and receive reports from the directors and other relevant personnel of the Company and its subsidiaries on the status of execution of their duties. |
| ③ | Corporate auditors may inspect important documents related to the execution of business operations, such as approval documents, and may request explanations from directors and employees of the Company and its subsidiaries. |
| ④ | Corporate auditors and representative directors shall hold periodic meetings to exchange opinions in order to promote mutual communication. |
| (8) | System to ensure that persons reporting to auditors are not subject to any disadvantageous treatment because of such reporting |
The Company and its subsidiaries shall prohibit any disadvantageous treatment of any person who reports to the Corporate Auditors by reason of such report and shall make such prohibition known to all employees.
| (9) | Matters concerning procedures for prepayment or reimbursement of expenses incurred in the execution of duties by corporate Auditors and other policies concerning the treatment of expenses or liabilities incurred in the execution of such duties |
The Company shall promptly comply with any request by a corporate auditor for prepayment or reimbursement of expenses incurred in the performance of his/her duties.
| (10) | Basic policy on elimination of antisocial forces and status of its development |
For sound corporate management, our basic policy is to take a firm stand against antisocial forces and to have no relationship with them.
The General Affairs Department is in charge of dealing with antisocial forces, and the General Manager of the General Affairs Department is responsible for this department. In addition, the Company works closely with external organizations, including legal counsel, the police, and the Metropolitan Police Department’s Special Anti-Violence Countermeasures Association, to develop a system that enables the entire organization to respond promptly, collect information, and provide thorough employee education.
| 7. | Summary of operation of the system to ensure the appropriateness of business |
The Company has established a system to ensure the appropriateness of its operations, and the Board of Directors continuously identifies and analyzes management risks and discusses measures to address them. Based on the results, the Company reviews internal rules and operations as necessary to improve the effectiveness of the internal control system. In addition to audits by corporate auditors, the Company has established a system that enables corporate auditors to monitor the status of business execution and compliance-related risks by attending important internal meetings. In addition, internal audits are conducted on a regular basis to verify that day-to-day operations do not violate laws, the Articles of Incorporation, or internal regulations.
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Balance Sheet
(As of March 31, 2023)
(Unit: thousand yen)
| Assets | Liabilities | |||||||||
| Subjects | Amounts | Subjects | Amounts | |||||||
| [Current assets] | 16,065,799 | [Current liabilities] | 15,552,429 | |||||||
| Cash and deposits | 126,016 | Accounts payable | 2,118,989 | |||||||
| Accounts receivable trade | 12,576,884 | Short-term borrowings | 8,150,000 | |||||||
| Merchandise inventories | 719,794 | Long-term borrowing Scheduled to be repaid within 1 year | 292,580 | |||||||
| Advances paid | 6,425 | Other payables | 920,469 | |||||||
| Prepaid expenses | 330,281 | Accrued expenses | 19,418 | |||||||
| Employee advances | 4,302 | Deposit | 4,971 | |||||||
| Accounts receivable | 53,930 | Accrued income taxes | 70,975 | |||||||
| Income taxes receivable | 651,121 | Unpaid consumption tax, etc. | 3,873,668 | |||||||
| Consumption taxes receivable | 1,712,463 | Provision for bonuses | 20,225 | |||||||
| Allowance for doubtful accounts | △115,420 | Provision for allowance for point card certificates | 2,659 | |||||||
| [Fixed assets] | 6,439,.380 | Contract liability | 14,288 | |||||||
| Tangible fixed assets | 1,552,785 | Short-term lease debt accounting | 53,554 | |||||||
| Buildings | 584,633 | Asset retirement obligations | 10,629 | |||||||
| Building and accessories | 480,073 | [Fixed liabilities] | 2,250,840 | |||||||
| Structures | 34,984 | Long-term borrowings | 1,063,955 | |||||||
| Vehicles & delivery | 48,278 | Deposit received for guarantee | 1,050 | |||||||
| Equipment, tools, equipment, and fixtures | 121,275 | Long-term other payables | 205,703 | |||||||
| Tangible leased assets | 180,829 | Long-term lease obligations | 73,522 | |||||||
| Deferred tax liabilities | 757,817 | |||||||||
| Land | 464,107 | Allowance for retirement benefits | 25,782 | |||||||
| Accumulated depreciation | △341,476 | Asset retirement obligations | 123,009 | |||||||
| Accumulated impairment loss | △19,920 | Total liabilities | 17,803,269 | |||||||
| [Intangible assets] | 35,907 | Net assets | ||||||||
| Intangible lease assets | 35,907 | Subjects | Amount | |||||||
| [Investments and other assets] | 4,850,687 | [Shareholders’ equity] | 4,701,898 | |||||||
| capital | 2,010 | Capital stock | 1,659,974 | |||||||
| Security deposit | 127,787 | Capital surplus | 1,408,991 | |||||||
| Guarantee deposits | 165,783 | Capital reserve | 1,408,991 | |||||||
| Insurance reserve fund | 21,233 | Retained earnings | 1,632,933 | |||||||
| Recycling deposit | 79 | Other retained earnings | 1,632,933 | |||||||
| Long-term prepaid expenses | 8,131 | Retained earnings brought-forward | 1,632,933 | |||||||
| Long-term accounts receivable | 4,134,317 | [Equity warrant] | 11 | |||||||
| bankruptcy reorganization claim | 107,400 | |||||||||
| Allowance for doubtful accounts | △148,730 | |||||||||
| Shares of subsidiaries and affiliates | 432,673 | Total net assets | 4,701,910 | |||||||
| Total assets | 22,505,180 | Total liabilities and net assets | 22,505,180 | |||||||
11
Income Statement
(For the fiscal year beginning April 1, 2022 ended March 31, 2023)
(Unit: thousand yen)
| Subject | Amount | |||||||
| Sales | 21,667,575 | |||||||
| Cost of sales | 18,312,570 | |||||||
| Gross profit | 3,355,004 | |||||||
| Selling, general and administrative expenses | 2,870,862 | |||||||
| Operating income | 484,142 | |||||||
| Non-operating income | ||||||||
| Interest and dividends income | 19 | |||||||
| Interest on refund | 8,640 | |||||||
| Miscellaneous income | 63,272 | 71,933 | ||||||
| Non-operating expenses | ||||||||
| Interest expense | 137,596 | |||||||
| Foreign exchange loss | 38,610 | |||||||
| Loan commission | 186,589 | |||||||
| miscellaneous losses | 317 | 363,113 | ||||||
| Ordinary income | 192,962 | |||||||
| Extraordinary income | ||||||||
| Gain on sales of fixed assets | 253 | |||||||
| Compensation for damages received | 3,803,447 | 3,803,700 | ||||||
| Extraordinary loss | ||||||||
| Impairment loss | 19,920 | |||||||
| Past annual consumption tax amount, etc. | 4,581,839 | 4,601,759 | ||||||
| Income before income taxes | △605,096 | |||||||
| Corporate, inhabitant and enterprise taxes | 87,152 | |||||||
| Income taxes refundable | △651,121 | |||||||
| Income taxes-deferred | 843,091 | 279,122 | ||||||
| Net income | △884,219 | |||||||
12
Statement of Changes in Net Assets
From April 1, 2022, to March 31, 2023
(Unit: thousand yen)
| Shareholders’ equity | ||||||||||||||||||||||||||||||||
| Capital surplus | Retained earnings | |||||||||||||||||||||||||||||||
| Other retained earnings | ||||||||||||||||||||||||||||||||
| Capital | Capital reserve | Total capital surplus | Retained earnings brought forward | Total retained earnings | Total shareholders’ equity | Subscription warrant | Total net assets | |||||||||||||||||||||||||
| Balance on April 1, 2021 | 1,659,974 | 1,408,991 | 1,408,991 | 2,559,070 | 2,559,070 | 5,628,036 | 11 | 5,628,047 | ||||||||||||||||||||||||
| Cumulative effect of a change in accounting policy | △41,917 | △41,917 | △41,917 | △41,917 | ||||||||||||||||||||||||||||
| Balance at the beginning of the period after retroactive processing | 1,659,974 | 1,408,991 | 1,408,991 | 2,517,152 | 2,517,152 | 5,586,118 | 11 | 5,586,130 | ||||||||||||||||||||||||
| Fluctuations during the fiscal year | ||||||||||||||||||||||||||||||||
| Net income | △884,219 | △884,219 | △884,219 | △884,219 | ||||||||||||||||||||||||||||
| Changes in items other than shareholders’ equity during the fiscal year (net amount) | ||||||||||||||||||||||||||||||||
| Total fluctuations during the fiscal year | △884,219 | △884,219 | △884,219 | △884,219 | ||||||||||||||||||||||||||||
| Balance at the end of March 31, 2022 | 1,659,974 | 1,408,991 | 1,408,991 | 1,632,933 | 1,632,933 | 4,701,898 | 11 | 4,701,910 | ||||||||||||||||||||||||
13
Individual Note Table
| 1. | Notes to Significant Accounting Policies |
| (1) | Valuation standards and methods for securities |
Stocks of subsidiaries and affiliates -- Stated at cost based on the moving average method.
| (2) | Valuation standards and methods for inventories |
Cost method based on the moving average method -- The amount on the balance sheet is calculated by writing down the book value based on a decline in profitability.
| (3) | Depreciation method for fixed assets |
| ① | Property, plant and equipment (excluding lease assets) -- Declining-balance method (except for buildings acquired on or after April 1, 1998) Buildings (excluding annexed facilities) acquired on or after April 1, 1998, and annexed facilities and structures acquired on or after April 1, 2016, are depreciated using the straight-line method). |
The main useful lives are as follows
Buildings 38 ~50 years
Building ancillary equipment 3 ~18 years
Buildings 10~30 years
Vehicles 4~7 years
Tool and appliance spare parts 2~20 years
| ② | Leased asset. |
Lease assets related to finance lease transactions that do not transfer ownership.
We use the straight-line method with the lease term as the useful life and the residual value as zero.
14
| (4) | Basis for provisions |
| ① | Allowance for doubtful accounts |
The allowance for doubtful accounts is provided for possible losses on receivables based on the historical write-off ratio for general receivables and on the estimated number of uncollectible receivables based on a case-by-case determination of collectability for specific receivables such as doubtful receivables.
| ② | Reward and lead when gold |
To provide for the payment of bonuses to employees, the Company accrues an estimated number of bonuses to be paid, corresponding to the current fiscal year.
| ③ | Retirement benefit reserve |
To provide for the payment of retirement benefits to employees, the Company records an amount recognized to have accrued at the end of the current fiscal year based on the retirement benefit obligation at the end of the current fiscal year. The retirement benefit obligation is calculated based on the required amount at the end of the fiscal year in accordance with the retirement benefit regulations.
| ④ | Allowance for point card certificates |
The unused number of points issued under the point system for the purpose of sales promotion is recognized based on the estimated future use of the points, which is based on the historical usage rate and other factor
| (5) | Basis for recording revenues and expenses |
The Company’s principal business is the sale of cosmetics and household goods. The Company recognizes revenue from the sale of these products at the time of delivery because the Company believes that the customer obtains control of the products, and the performance obligation is satisfied at the time the products are delivered. Revenue is measured at the amount of consideration promised in the contract with the customer, less returns, discounts, and rebates. Consideration for transactions is received within one year of satisfaction of the performance obligation.
| (6) | Other important matters that form the basis for the preparation of financial statements |
Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.
| 2. | Notes to Revenue Recognition |
| (1) | Decomposition of earnings |
The Company operates a wholesale and retail business and an e-commerce business for domestic and overseas markets, and the main types of goods or services in each business are daily necessities and sundries, cosmetics, and pharmaceuticals.
| (Unit: thousand yen) | ||
| Sales of each business | Domestic wholesale 7,454,347 | |
| Domestic EC 1,098,013 | ||
| Domestic retail 1,161,648 | ||
| Overseas wholesale 7,358,085 | ||
| Overseas EC 4,595,480 |
15
| (2) | Information that serves as a basis for understanding earnings |
It is as described in “Revenue and Expense Recording Standards” in “Notes on Matters Related to Important Accounting Policies”.
| 3. | Note on balance sheet. |
| (Unit: thousand yen) | ||
| (1) Assets provided as collateral and debt related to collateral | ||
| Assets pledged as collateral | Land 464,107 | |
| Building 552,875 | ||
| Total 1,016,982 | ||
| Debt related to collateral | Long-term borrowing 956,535 | |
| (2) Receivables from and payables to subsidiaries and affiliates | Accounts receivable trade 849,831 | |
| Advance money 58 | ||
| Accounts receivable 2,749 | ||
| Long-term accounts receivable 116,296 | ||
| Account payable 744 | ||
| (3) Monetary debt to directors | Other payables 8,388 | |
| (4) Guaranteed liabilities | ||
| The Company guarantees the borrowing obligations of other companies from financial institutions. | (Unit: thousand yen) | |
| Tokyo Lifestyle Limited | 250,000 | |
| Shintai Co., Ltd. | 25,640 | |
| Total | 275,640 |
| 4. | Notes on income statement |
Transaction volume with affiliated companies
Operating transaction amount
| (Unit: thousand yen) | ||||
| Sales | 1,488,202 | |||
| Purchase | 46,072 | |||
| Non-operating transaction amount | 127,514 | |||
| 5. | Notes on the statement of changes in shareholders’ equity, etc. |
① Matters concerning the type and total number of issued shares on the last day of the current fiscal year.
| Ordinary Shares | 36,250,054 |
② The type and quantity of shares intended to be allocated for the stock options (excluding those for which the exercise period has not yet commenced) as of the last day of the fiscal year.
| Ordinary Shares | 300,000 |
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6. Notes on tax effect accounting
Breakdown of deferred tax assets and deferred tax liabilities by major causes
| (Deferred tax assets) | (Unit: thousand yen) | |||
| Accrued business tax | 6,838 | |||
| Accrued business office taxes | 588 | |||
| Allowance for doubtful accounts | 80,895 | |||
| Allowance for bonuses | 6,193 | |||
| Allowance for points | 814 | |||
| Product deterioration write-down | 5,998 | |||
| Net operating loss carried forward | 404,319 | |||
| Asset retirement obligations | 40,926 | |||
| Accumulated impairment loss | 5,515 | |||
| Loss on valuation of stocks of subsidiaries and affiliates | 1,531 | |||
| Allowance for retirement benefits | 7,895 | |||
| Subtotal of deferred tax assets | 561,517 | |||
| Valuation allowance | △127,993 | |||
| Total deferred tax assets | 433,523 | |||
| (Deferred tax liabilities) | ||||
| Retirement costs corresponding to asset retirement obligations | △23,897 | |||
| Interest on refund | △2,646 | |||
| Compensation for damages received | △1,164,797 | |||
| Total deferred tax liabilities | △1,191,340 | |||
| Net deferred tax assets | △757,817 | |||
| 7. | Notes on financial products |
| (1) | Matters concerning the status of financial products |
Borrowings are used for working capital (mainly short-term) and capital investment funds (long-term).
| (2) | Matters concerning the market value of financial products |
The balance sheet amount, market value and the difference between them as of March 31, 2023 (the settlement date for the current fiscal year) are as follows.
Cash is omitted from the notes, while deposits, accounts receivable, accounts payable and short-term loans payable are settled in a short period of time and their fair value approximates their book value.
| (Unit thousand yen) | ||||||||||||
| Balance sheet amount*1 | Market price*1 | Difference | ||||||||||
| Long-term borrowing*2 | (1,356,535 | ) | (1,337,643 | ) | 18,892 | |||||||
| * | 1 | Items recorded in liabilities are shown in parentheses. |
| * | 2 | Current portion of long-term debt is included. |
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(Note1) How to calculate the market value of financial products.
Liabilities
| Long-term borrowing |
The actual price of the above items is calculated by discounting the total value of principal and interest at the interest rate assumed when a new loan is made.
The carrying amount of long-term borrowing with floating interest rates is used as their fair value approximates their carrying amount as long as the market interest rate is reflected within a short period of time (within one year) and the Company’s credit status has not changed significantly since the execution of the loan.
(Note2) Carrying number of financial instruments whose fair value is extremely difficult to determine.
(Unit: thousand yen)
| Balance sheet amount | ||||
| Shares of subsidiaries and affiliates | 432,673 | |||
Affiliates are not subject to fair value disclosure because they have no market value, and it is extremely difficult to determine their fair value.
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| 8. | Notes on transactions with related parties |
| (1) | Transactions with subsidiaries and related parties |
(Unit: thousand yen)
| Type | Name of Company | Percentage of voting rights, etc. held by the Company | Relationship with related parties | Transaction details | Amount of transaction | Accounts | Balance at the end of year | |||||||||||
| Subsidiary company | Kaika International Co., Ltd. | Ownership
100% | Sales of products
Consignment of administrative services | Purchase
Miscellaneous income | 25,119
6,917 | Accounts payable
Accounts receivable | 744
49 | |||||||||||
| Subsidiary company | Tokyo Lifestyle Limited | Ownership
100% | Purchasing Merchandise Merchandise Sales Debt guarantee*2 Claim for Damages | Purchases Sales miscellaneous income loan guarantee Compensation for damages received |
8,030 1,481,690 4,140 250,000 116,296 |
Accounts receivable trade Long-term accounts receivable |
848,466 2,700
116,296 | |||||||||||
| Subsidiary company | Shen Zhen Qingzhiliangpin Network technology Co., Ltd | Ownership Indirect | Purchase of goods | Purchase | 3,428 | |||||||||||||
| Affiliated company | Palpito Co., Ltd. | Ownership
40% | Sales of products
Merchandise | Purchase
Sales
miscellaneous | 9,493
5,808
160 |
Advance money Accounts receivable trade |
58
1,083 | |||||||||||
Transaction conditions and policy for determining transaction conditions, etc.
| * | 1 | Prices and other transaction conditions are determined by price negotiations, etc. taking into consideration market performance. |
| * | 2 | The Company guarantees borrowings from financial institutions. The Company does not receive guarantee fees from its subsidiaries. |
19
| (2) | Officers and major individual shareholders, etc. |
(Unit: thousand yen)
| Type | Name of Company, etc. | Voting rights, etc. Percentage of voting rights, etc. held | Transaction details | Transactions | Amount of transaction | subject | Balance at end of year | |||||||||||||
| Company or entity where officers and their close relatives hold a majority of voting rights | Tokushin Goudou Kaisha | None | Merchandise Sales | Sales | 668 | Accounts receivable trade | 281 | |||||||||||||
| Company or entity where officers and their close relatives hold a majority of voting rights | Takuetsu International Co.,Ltd | None | Merchandise Sales | Sales | 34 | None | None | |||||||||||||
Terms and conditions of transactions and policy for determining terms and conditions of transactions, etc.
| * | Prices and other transaction terms are determined by price negotiations, etc., in consideration of market performance. |
| 9. | Note on fixed assets used by leasing |
In addition to the fixed assets recorded on the balance sheet, some office equipment, etc. are used under a finance lease contract that does not transfer ownership.
| 10.1 | Information of per share |
| (Unit: yen) | ||||
| (1) Net assets per share | 129.71 | |||
| (2) Net income per share | △24.39 | |||
| 11. | Other notes |
The stated amount is rounded down to the nearest thousand yen.
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Annexed specification
From April 1, 2022 to March 31, 2023
| 1. | Details of property, plant and equipment and intangible assets (including those incurring depreciation expenses recorded in investments and other assets) |
(Unit: thousand yen)
| Asset types | Book value at the beginning of the fiscal year | Increase of the fiscal year | Decreased Amount of the fiscal year | Current reimbursement | Book value at the end of the fiscal year | Accumulated impairment loss | Accumulated depreciation | End of period Acquisition Price | ||||||||||||||||||||||||||
| Property, plant and equipment | Building | 567,434 | - | - | 14,559 | 552,875 | - | 31,758 | 584,633 | |||||||||||||||||||||||||
| Equipment attached to buildings | 306,396 | 90,218 | 3,080 | 56,105 (19,920 | ) | 337,428 | 19,920 | 122,724 | 480,073 | |||||||||||||||||||||||||
| structure | 33,113 | 359 | - | 2,122 | 31,351 | - | 3,632 | 34,984 | ||||||||||||||||||||||||||
| Vehicles and transportation equipment | 14,287 | 16,028 | - | 9,342 | 20,974 | - | 27,303 | 48,278 | ||||||||||||||||||||||||||
| Tools and equipment spare parts | 45,822 | 40,443 | 146 | 20,668 | 65,451 | - | 55,823 | 121,275 | ||||||||||||||||||||||||||
| Land | 464,107 | - | - | - | 464,107 | - | - | 464,107 | ||||||||||||||||||||||||||
| Tangible leased assets | 92,433 | 22,881 | - | 34,718 | 80,596 | - | 100,232 | 180,829 | ||||||||||||||||||||||||||
| Total amount | 1,523,595 | 169,932 | 3,227 | 137,515 (19,920 | ) | 1,552,785 | 19,920 | 341,476 | 1,914,181 | |||||||||||||||||||||||||
| Intangible fixed assets | Intangible lease assets | 46,825 | 6,408 | - | 17,326 | 35,907 | ||||||||||||||||||||||||||||
| Total amount | 46,825 | 6,408 | - | 17,326 | 35,907 | |||||||||||||||||||||||||||||
| Investments and other assets | Long-term prepaid expenses | 511,800 | 3,587 | 334,073 | 173,184 | 8,131 | ||||||||||||||||||||||||||||
| Total amount | 511,800 | 3,587 | 334,073 | 173,184 | 8,131 | |||||||||||||||||||||||||||||
| * | Figures in parentheses in the “Depreciation for the fiscal year” column indicate the amount of impairment loss recorded for the fiscal year. The increase in building fixtures during the period was mainly due to the construction of the Nishi-Kasai and Nishi-Kawaguchi stores. |
21
| 2. | Details of provisions |
(Unit: thousand yen)
| Subject | Balance at beginning of the fiscal year |
Increase during the fiscal year |
Decrease during the fiscal year |
Balance at end of the fiscal year |
||||||||||||
| Allowance for doubtful accounts | 129,601 | 134,549 | - | 264,150 | ||||||||||||
| Allowance for bonuses | 26,595 | 20,225 | 26,595 | 20,225 | ||||||||||||
| Allowance for point card certificates | 640 | 2,659 | 640 | 2,659 | ||||||||||||
| Retirement benefit reserve | 21,187 | 22,941 | 18,346 | 25,782 | ||||||||||||
| 3. | Details of selling, general and administrative expenses |
(Unit: thousand yen)
| Subject | Balance at the end of current period | Summary | ||||||
| Advertising expenses | 101,083 | |||||||
| Sales promotion expenses | 25,836 | |||||||
| Packing and freight charges | 642,861 | |||||||
| Provision for allowance for point card certificates | 2,019 | |||||||
| Recruitment and training expenses | 1,636 | |||||||
| Loss on disposal of inventory | 14,992 | |||||||
| Officer’s compensation or remuneration | 86,550 | |||||||
| Salary supplement | 364,858 | |||||||
| Bonus | 2,024 | |||||||
| Provision for bonuses | 45,825 | |||||||
| Legal welfare expenses | 62,429 | |||||||
| Welfare expense | 3,982 | |||||||
| Depreciation and amortization | 134,921 | |||||||
| Repair expense | 352 | |||||||
| Health expenses | 5,429 | |||||||
| Office supplies | 21,103 | |||||||
| Utilities charge | 28,153 | |||||||
| Travel expenses | 40,799 | |||||||
| Commission | 644,903 | |||||||
| Taxes and public dues | 29,472 | |||||||
| Entertainment expenses | 48,950 | |||||||
| Insurance premium | 29,364 | |||||||
| Postage | 6,658 | |||||||
| Sundry expenses | 344 | |||||||
| Vehicle expenses | 4,405 | |||||||
| Allowance for doubtful accounts | 134,549 | |||||||
| Lease payment | 8,000 | |||||||
| Expenses for rent of space, land, etc. | 166,789 | |||||||
| Advisory fee | 16,323 | |||||||
| Conference expenses | 73 | |||||||
| Miscellaneous expenses | 42 | |||||||
| Retirement benefit expenses | 22,941 | |||||||
| Amortization of long-term prepaid expenses | 173,184 | |||||||
| Selling, general and administrative expenses | 2,870,862 | |||||||
22
Audit Report
In regard to the directors’ performance of their duties for the 17th business year from April 1,2022 to March 31,2023, the audit and supervisory board has prepared this Audit Report after deliberations based on the audit reports prepared by each audit and supervisory board member and reports as follows.
1. Method and Contents of Audits by the Audit and Supervisory Board Members and the Audit and Supervisory Board
| (1) | The audit and supervisory board determined the audit policies and division of duties, etc. and received reports from each audit and supervisory board member regarding the implementation status and results of their audits, in addition to which it received reports from the directors, etc. and the accounting auditor regarding the status of the performance of their duties and requested explanations as necessary. |
| (2) | In compliance with the audit and supervisory board member audit standards established by the audit and supervisory board and in accordance with the audit policies and division of duties, etc., each audit and supervisory board member communicated with the directors, the internal audit department, and other employees, etc., endeavored to gather information and develop the audit environment, and conducted audits using the following methods. |
| (i) | The audit and supervisory board members attended meetings of the board of directors and other important meetings, received reports from directors and employees, etc. regarding the status of the performance of their duties, requested explanations as necessary, viewed important decision-making documents, etc., and inspected the status of operations and assets at the head office and main business locations. Additionally, regarding subsidiaries, the audit and supervisory board members communicated and exchanged information with the directors and audit and supervisory board members, etc. of subsidiaries and received reports on business from subsidiaries as necessary. |
| (ii) | In regard to the content of resolutions of the board of directors regarding the development of systems to ensure that the directors’ performance of their duties complies with laws, regulations, and the articles of incorporation and other systems provided for in Article 100, paragraph (1) and paragraph (3) of the Ordinance for Enforcement of the Companies Act as systems necessary to ensure the appropriateness of operations of the corporate group composed of a stock company and its subsidiaries, as well as the systems developed pursuant to those resolutions (i.e., internal control systems) stated in the business report, the audit and supervisory board members periodically received reports from directors and employees, etc. regarding the status of the establishment and operation of those systems and as necessary requested explanations and expressed opinions in regard thereto. |
| (iii) | The audit and supervisory board members oversaw and verified whether the accounting auditor maintained an independent position and conducted an appropriate audit, received reports from the accounting auditor on the status of the performance of its duties, and requested explanations as necessary. Additionally, the audit and supervisory board members received notification from the accounting auditor that, in accordance with the “Quality Control Standards for Audits” (Business Accounting Council, October 28, 2005), etc., it had developed systems in order to ensure that its duties are appropriately performed (i.e., notification of the matters stated in the items of Article 131 of the Ordinance on Accounting of Companies) and requested explanations as necessary. |
2.Audit Results
| (1) | Results of audit of business report, etc. |
| (i) | We find that the business report and the supplementary schedules thereto accurately present the status of the company in accordance with laws, regulations, and the articles of incorporation. |
| (ii) | We do not find any misconduct nor any material fact constituting a violation of any law, regulation, or the articles of incorporation in relation to the directors’ performance of their duties. |
| (iii) | We find the content of the resolutions of the board of directors regarding internal control systems to be reasonable. Additionally, we do not find any matters that should be commented upon in regard to the statements in the business report or the directors’ performance of their duties relating to the internal control systems. |
23
| (2) | Results of audit of accounting documents and supplementary schedules thereto We find the methods and results of the audit by the accounting auditor, ShineWing Japan LLC to be reasonable. |
Thursday, July 13, 2023
Yoshitsu Co., Ltd.; Audit and Supervisory Board
Full-time Audit and Supervisory Board Member
Tadao Iwamatsu
Audit and Supervisory Board Member
Keiichi Kimura
Audit and Supervisory Board Member
Junji Sato
(Note) Keiichi Kimura, Auditor, and Junji Sato, Auditor, are Outside auditor as stipulated in Article 2, Item 16 of the Companies Act.
24
(TRANSLATION)
INDEPENDENT AUDITOR’S REPORT
| To the Board of Directors of Yoshitsu Co., Ltd: | July 13, 2023 |
ShineWing Japan LLC
Designated Engagement Partner
Certified Public Accountant
Satoshi Koishikawa
Opinion
We have audited the financial statements of Yoshitsu Co., Ltd (the “Company”), namely, the balance sheet as of March 31, 2023, and the statement of operations and statement of changes in capital deficiency for the 17th fiscal year from April 1, 2022, to March 31, 2023, and the related notes.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2023, and its financial performance for the year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Audit & Supervisory Board Members for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan.
Audit &Supervisory Board members are responsible for overseeing the Directors’ execution of duties relating to the design and operating effectiveness of the controls over the Company’s financial reporting process.
(TRANSLATION)
25
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| ● | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks. The procedures selected depend on the auditor’s judgment. In addition, we obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. |
| ● | Obtain, when performing risk assessment procedures, an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. |
| ● | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| ● | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
| ● | Evaluate whether the overall presentation and disclosures of the financial statements are in accordance with accounting principles generally accepted in Japan, as well as the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
We communicate with Audit &Supervisory Board members regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partner do not have any interest in the Company which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Notes to the Readers of Independent Auditor’s Report
This is an English translation of the independent auditor’s report for the conveniences of the reader.
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