| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Company is incorporated and primarily operates. The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Reclassification Certain accounts in the prior period consolidated financial statements have been reclassified to conform to the presentation of the current year consolidated financial statements. Foreign currency loss, net during the year ended March 31, 2021 of ¥591 thousand was reclassified from other income, net to a separate line item in the Consolidated Statements of Loss. This reclassification had no effect on the previously reported operating results. Liquidity and Financial Condition The Company has a history of recurring losses, including a loss from operations of ¥89,842 thousand, ¥27,754 thousand, and ¥44,482 thousand for the years ended March 31, 2022, 2021, and 2020, respectively. This operating loss has resulted in an accumulated deficit of ¥511,908 thousand, ¥414,828 thousand, and ¥389,030 thousand as of March 31, 2022, 2021, and 2020, respectively. The Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to attract and retain revenue generating customers, acquire new customer contracts, and secure additional financing. The Company may consider obtaining additional financing in the future through the issuance of the Company’s common shares, through other equity or debt financings, or other means. The Company, however, is dependent upon its ability to obtain new revenue generating customer contracts, secure equity, and/or debt financing and there are no assurances that the Company will be successful. The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts, or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Principles of Consolidation The consolidated financial statements include the accounts of Warrantee and its wholly owned subsidiary, Warrantee Pte. Warrantee Pte. has a fiscal year end of December 31, and the accounts of Warrantee Pte. are included in the Company’s consolidated financial statements based on Warrantee Pte.’s fiscal year. All intercompany accounts and transactions, including capital increase during a reporting time lag, have been eliminated upon consolidation. The Company evaluates its ownership, contractual, and other interests in other entities to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee, and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the noncontrolling interest in earnings and equity attributed to the noncontrolling interest held in its consolidated financial statements. The Company was not the primary beneficiary of any VIE during the years ended March 31, 2022, 2021, and 2020. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of revenue and expense during the reporting period. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future and include, but are not limited to, useful lives of capitalized software, valuation of stock options, impairment of deferred offering costs, and valuation allowance against net deferred tax assets. Actual results could differ from those estimates. Segment Information The Company operates as one operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer (“CEO”), who reviews financial information for purposes of making operating decisions, assessing financial performance, and allocating resources. The Company’s CODM evaluates financial information on a consolidated basis. As of March 31, 2022, 2021, and 2020, there was no revenue or long-lived assets held outside of Japan. Concentration of Customers For the years ended March 31, 2022, 2021, and 2020, one customer, two customers, and three customers, respectively, each accounted for more than 10% of the consolidated revenue. Revenue from those customers totaled ¥224,727 thousand, ¥177,000 thousand, and ¥53,895 of the total consolidated revenue for the years ended March 31, 2022, 2021, and 2020, respectively. The following represents sales revenue attributable to each of these customers as a percentage of total consolidated revenue for each respective year. Percentage of Revenue For the years ended March 31, 2022 2021 2020 Customer A 100 % — — Customer B — 51 % — Customer C — 33 % 52 % Customer D — 24 % Customer E — 17 % Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an initial maturity date of three months or less to be cash equivalents. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable primarily consist of amounts billed and currently due from customers, net of an allowance for doubtful accounts, if recorded. When the Company has an unconditional right to payment, subject only to the passage of time, the right is treated as a receivable. Fees billed in advance of the related contractual term represent contract liabilities and are presented as deferred revenue. Typical payment terms provide for customer payment within 30 days of the contract date. Trade accounts receivable are subject to collection risk. The Company performs evaluations of its customers’ financial positions and generally extends credit on account, without collateral. The Company determines the need for an allowance for doubtful accounts based upon various factors, including credit quality of the customer, age of the receivable balance and current economic conditions. There were no bad debt expense or allowance for doubtful accounts recorded as of and for the years ended March 31, 2022, 2021, and 2020. Property and Equipment, Net Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the declining balance method or the straight-line method, depending on the pattern of consumption of the economic benefits by asset class, over the estimated useful lives of the assets. The estimated useful lives are four years for computers and three Capitalized Software, Net The Company capitalizes certain costs in property and equipment associated with website and software developed for internal use in accordance with ASC 350-50, Intangibles - Goodwill and Other - Website Development Costs Intangibles - Goodwill and Other - Internal Use Software Impairment or Disposal of Long-Lived Assets Long-lived assets used in operations, which include capitalized software developed for internal use and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if the carrying amount is not recoverable when compared to the Company’s undiscounted cash flows and the impairment loss is measured based on the difference between the carrying amount and fair value. Long-lived assets held for sale are reported at the lower of cost or fair value less costs to sell. Debt Issuance Costs Debt issuance costs are amortized as interest expense on a basis which approximates the effective interest method over the term of the related debt. Debt issuance costs are reported at cost, less accumulated amortization and are presented in the Consolidated Balance Sheets as a direct deduction from the carrying value of the associated debt. Deferred Offering Costs Deferred offering costs are capitalized and consist of fees incurred in connection with the anticipated sale of common shares in an initial public offering (“IPO”) and include direct incremental legal, accounting, printing, and other IPO-related costs. Upon completion of an IPO, these deferred costs will be reclassified to shareholders’ equity and recorded against the proceeds from the offering. In the event a proposed IPO is deemed not likely to be completed, the deferred offering costs would be charged to expenses in the period of such determination. Foreign Currency The Company uses Japanese yen as its reporting currency. Warrantee’s functional currency is the Japanese yen and Warrantee Pte.’s functional currency is the Singapore dollar. Financial statements of Warrantee Pte. are prepared using the functional currency and translated into Japanese yen for reporting purposes. Assets and liabilities are translated using the fiscal year end foreign exchange rate, and income and expenses are translated using the weighted average exchange rate for the period. Foreign currency translation adjustments related to the financial statements of Warrantee Pte. net of related income tax effects, are credited or charged directly to the foreign currency translation adjustments account, a component of accumulated other comprehensive loss. The tax effects related to the foreign currency translation of financial statements of Warrantee Pte. are not recognized unless it is apparent that the temporary differences will reverse in the foreseeable future. Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into the functional currency of the respective entity at the fiscal year end foreign exchange rate, and gains and losses resulting from such remeasurement are included in foreign exchange gains (losses). Foreign currency denominated income and expenses are remeasured using the average exchange rate for the period. Share-Based Compensation The Company applies the provisions of ASC Topic 718, Compensation — Stock Compensation Revenue Recognition The Company applies ASC Topic 606, Revenue from Contracts with Customers 1 – Identification of the contract with a customer; 2 – Identification of the performance obligation in the contract; 3 – Determination of the transaction price; 4 – Allocation of the transaction price to the performance obligation in the contract; and 5 – Recognition of revenue when, or as, a performance obligation is satisfied. The Company’s revenue is primarily derived from the Durables Vertical, and the Commercial Healthcare Vertical. The Company’s services are marketed and sold directly to the customers. The Company assesses the contract term as the period in which the parties to the contract have enforceable rights and obligations. The contract term may differ from the stated term in contracts with certain termination or renewal rights, depending on whether there are substantive penalties associated with those rights. Customer contracts are generally standardized and noncancellable for the duration of the stated contract term. Consumption taxes collected and remitted to tax authorities are excluded from revenue. The Company may use third-party vendors to provide certain goods or services to its customers. The Company evaluates those relationships to determine whether revenue should be reported gross or net. The Company recognizes revenue on a gross basis where it acts as principal and controls the goods and services used to fulfill the performance obligations to the customer and on a net basis where it acts as an agent. The Company has not acted as an agent during the fiscal years ended March 31, 2022, 2021, and 2020. Durables Vertical: Performance Obligation Revenue from the Durables Vertical is primarily comprised of sponsorship fees from Corporate Sponsors in exchange for Participant Users’ personal information or Participant Clinics’ information (collectively, “Participants’ Data”). During the sponsorship campaigns, the Company aggregates Participants’ Data, organizes that data, and then provides it to Corporate Sponsors. The Company has identified one performance obligation, the delivery of Participants’ Data. All other immaterial deliverables occur prior to this but revenue is not recognized until the delivery of Participants’ Data, which is the performance obligation. Accordingly, the Company recognizes revenue at a point in time when the personal information is provided to, or accepted by, Corporate Sponsors upon satisfying its single distinct performance obligation. Contractual Consideration The transaction price is generally fixed at contract inception. However, the Company’s contracts with Corporate Sponsors within Durables Vertical may include a specified quantity, which entitles the customer to refunds, when defined quantity levels are not met at the end of the provision period. These arrangements represent a form of variable consideration, which is estimated using the most likely amount method to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. During the fiscal years ended March 31, 2022, 2021, and 2020, no revenue was recognized from estimates that had not been resolved as of March 31, 2022 and 2021. Commercial Healthcare Vertical: Performance Obligations Revenue from the Commercial Healthcare Vertical is primarily comprised of sponsorship fees from Corporate Sponsors in exchange for healthcare-related promotional campaigns. During healthcare-related promotional campaigns targeted to Participant Users based on results of their free genetic test kits, the Company has the stand-ready obligation to provide promotional services for the duration of the campaign promotion period. Accordingly, revenue is recognized ratably based on the time-elapsed method over the contractual term with the Corporate Sponsor. Contractual Consideration The transaction price may be fixed at contract inception within the Commercial Healthcare Vertical in a form of non-refundable minimum guarantee but may also have a component of variable consideration such as sales incentives which are calculated by multiplying the amount of work accomplished by a fixed unit price of remuneration. Due to the variable consideration being entirely constrained, the sales incentive is excluded from the transaction price until the uncertainty is subsequently resolved. During the fiscal years ended March 31, 2022, 2021, and 2020, no revenue was recognized from estimates that had not been resolved as of March 31, 2022 and 2021. Other Revenue: System Development : Advertising: Licensing: Transaction Price The transaction price is the amount of consideration to which the Company expects to be entitled to for transferring goods and services to the customer. Payments from the customers are often made in advance before satisfaction of the performance obligations. When payments are not due in advance, they are due within 30 days of delivery of the goods or service. In instances where the timing of revenue recognition differs from the timing of the right to invoice, the Company has determined that a significant financing component generally does not exist. Additionally, the Company has elected the practical expedient that permits an entity not to recognize a significant financing component if the time between the transfer of a good or service and payment is one year or less. Disaggregation of Revenue The table reflects revenue by major source for the following periods: Yen in thousands For the years ended March 31, 2022 2021 2020 Sources of revenue: Durables Vertical ¥ 224,727 ¥ 85,000 ¥ 13,570 Commercial Healthcare Vertical — 107,000 210 Advertising 30,000 Licensing 13,894 System Development — 20,000 — Total revenue ¥ 224,727 ¥ 212,000 ¥ 57,674 Contract Balances The timing of revenue recognition may not align with the right to invoice the customer. The Company records trade accounts receivable when it has the unconditional right to issue an invoice and receive payment regardless of whether revenue has been recognized. If revenue has not yet been recognized, then deferred revenue is also recorded. Deferred revenue classified as current on the Consolidated Balance Sheets are expected to be recognized as revenue within one year. If revenue is recognized in advance of the right to invoice, a contract asset is recorded. Changes in deferred revenue were as follows: Yen in thousands For the years ended March 31, 2022 2021 2020 Balance, beginning of year ¥ — ¥ 106,919 ¥ 121,894 Revenue earned — (106,919) (46,295) Deferral of revenue 33,000 — 31,320 Balance, end of year ¥ 33,000 ¥ — ¥ 106,919 Changes in deferred revenue are primarily due to the timing of revenue recognition and cash collections. Remaining Performance Obligations Remaining performance obligations represents the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less. As of March 31, 2022, deferred revenue represented the Company’s remaining performance obligations related to prepaid consideration for the campaign starting after August 2022 with a new customer, all of which is expected to be recognized within one year. Deferred Contract Costs Sales commissions that are incremental to the acquisition of customer contracts are capitalized as deferred contract costs on the Consolidated Balance Sheets when the period of benefit is determined to be greater than one year. Amortization of deferred contract acquisition costs is included within selling, general and administrative expenses in the Consolidated Statements of Loss. The Company also capitalizes certain costs to fulfill a contract related to its proprietary products or services if they are identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered under ASC Topic 340-40, Other Assets and Deferred Costs-Contracts with Customers Deferred contract costs are amortized to be consistent with the timing of transfer to the customer of the goods or services to which the costs relate, either at a point in time or over time in proportion to the amount of the related goods and services transferred to the customer. The Company periodically reviews these capitalized contract costs to determine whether changes in events or circumstances have occurred that could impact the period of benefit of these assets. There were no impairment losses recorded for the periods presented. As of March 31, 2022 and 2021, the Company had no deferred costs to obtain and fulfill a contract. The Company amortized ¥1,500 thousand and ¥17,692 thousand of costs to obtain and fulfill the contract, respectively, and capitalized ¥1,575 thousand of costs to fulfill the contract during the year ended March 31, 2021. The Company capitalized ¥1,500 thousand and ¥16,117 thousand of costs to obtain and fulfill the contract, respectively, during the year ended March 31, 2020. The balance of costs to obtain the contract was ¥1,500 thousand and the balance of costs to fulfill the contract was ¥16,117 thousand as of March 31, 2020. Cost of Revenue Cost of revenue primarily comprised of the insurance costs, depreciation and amortization, and personnel-related expenses. For the year ended March 31, 2021, the cost of revenue also included the direct cost to develop software products, Participant User recruiting costs for the Durables Vertical, and genetic testing costs for Commercial Healthcare Vertical. Advertising Costs Advertising costs are expensed as incurred and presented within selling, general and administrative expenses in the Consolidated Statements of Loss. Advertising costs were ¥325 thousand, ¥888 thousand, and ¥500 for the years ended March 31, 2022, 2021, and 2020, respectively. Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the differences between the financial statement and tax basis of assets, liabilities and net operating loss by using enacted tax rate in effect for the year in which the differences are expected to reverse. The effect of a change in tax rate on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognizes deferred tax assets to the extent that these assets are believed to be more likely than not to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. Warrantee and its subsidiary file tax returns in the tax jurisdictions of Japan and Singapore. Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. To be recognized in the consolidated financial statements, a tax benefit must be at least more likely than not of being sustained based on technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. Net Loss per Share Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per common share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury stock method. For purposes of the diluted net loss per common share calculation, stock options are considered to be potentially dilutive securities. However, as disclosed in Note 7, Share-Based Compensation, the Company’s 2nd and 3rd Series stock options include a triggering liquidation performance condition prior to vesting. As such, these are treated as contingently issuable shares and will be excluded from potential dilutive impact until the triggering liquidation performance condition is satisfied. Recently Issued Accounting Pronouncements As an emerging growth company, the Jumpstart Our Business Startups Act allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to delay adoption of certain new or revised accounting standards. As a result, the Company’s consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Leases In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) , Leases In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Leases - Targeted Improvements In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities The Company adopted this standard effective April 1, 2022 and the adoption did not have a material impact on the Company’s consolidated financial statements. Financial Instruments — Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Income Taxes In December 2019, the FASB issued ASU 2019-12, Income Taxes — Simplifying the Accounting for Income Taxes (Topic 740) Government Assistance In November 2021, the FASB issued Accounting Standards Update No 2021-10, Government Assistance (Topic 832)—Disclosures by Business Entities about Government Assistance |
