| 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”). Going
concern The
Company had a loss of ¥221,023 thousand, a loss of ¥15,796 thousand, and a profit of ¥241 thousand for the fiscal years
ended September 30, 2024, 2023, and 2022, respectively. This operating loss has resulted in an accumulated deficit of ¥237,512
thousand, ¥16,489 thousand, and ¥693 thousand as of September 30, 2024, 2023, and 2022, 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 Ordinary 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 and 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. 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 property
and equipment and intangible assets, the impairment of long-lived assets and deferred 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 September 30,
2024, 2023, and 2022, there was no revenue derived or long-lived assets held outside of Japan. Concentration
of Customers and Vendors For
the fiscal years ended September 30, 2024, 2023, and 2022, there were three customers, four customers, and three customers
who accounted for more than 10% of the Company’s total revenue, respectively. As of September 30, 2024 and 2023, there were
three customers and two customers who accounted for more than 10% of the Company’s total accounts receivable, respectively. For
the fiscal years ended September 30, 2024, 2023, and 2022, there were three suppliers, zero supplier, and one supplier who
accounted for more than 10% of the Company’s total purchase, respectively. As of September 30, 2024 and 2023, there was zero
supplier and one supplier who accounted for more than 10% of the Company’s total accounts payable, respectively. 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, Net Accounts
receivable primarily consist of amounts billed and currently due from customers, net of an allowance for credit losses, if recorded.
When the Company has an unconditional right to payment, subject only to the passage of time, the right is treated as 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. 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
estimate for the allowance for credit losses is based on the Company’s historical loss data and the aging of receivables. This
estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events,
and any other factors deemed relevant by the Company. The Company believes that historical loss information is a reasonable starting
point to calculate the expected allowance for credit losses, given that the composition of the Company’s customers has remained
constant. The Company recorded ¥517 thousand and ¥17 thousand
as the allowance for credit loss at September 30, 2024 and 2023, respectively. Provisions for the
allowance for expected credit losses are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations.
for the fiscal years ended September 30,
2024, 2023, and 2022 Deferred
Offering Costs The
Company capitalizes certain legal, accounting and other third-party fees that are directly related to equity financing that is probably
of successful completion until such financing is consummated. After the consummation of equity financing, these costs are recorded as
a reduction of the proceeds received as a result of the financing. Should planned equity financing be abandoned, terminated or significantly
delayed, the deferred offering costs are immediately written off to operating expenses in the Statements of Operations in the period
of determination. The
Company capitalized nil Property
and Equipment, Net Property
and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using 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 three Intangible
assets, Net Intangible
assets with finite lives primarily consist of joint investments used to participate in future productions of anime. During the fiscal
year ended September 30, 2024, the Company acquired 65% right in one project and 5% right in another project. During the fiscal
year ended September 30, 2023, the Company acquired 32% right in one project and 4% right in another project. During the fiscal
year ended September 30, 2022, the Company acquired 1% right in three projects. The total project value was determined based on
the estimated total production costs of the projects for voice recording and animation. Intangible assets with finite lives are generally
amortized using the straight-line method over their estimated useful lives, which is generally two Impairment
or Disposal of Long-Lived Assets Long-lived
assets used in operations 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. Leases Leases
are comprised of operating leases for office space. In accordance with FASB ASC Topic 842, Leases, the Company determines if an arrangement
is a lease at inception. Operating leases are included in operating lease right-of-use assets (“ROU”), current portion of
operating lease liabilities, and non-current operating lease liabilities in the Balance Sheets. Operating lease ROU assets and operating
lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. For
leases with terms greater than 12 months, the Company records a right-of-use asset and a lease liability representing the present value
of future lease payments. The discount rate used to measure the lease asset and liability is determined at the beginning of the lease
term using the rate implicit in the lease, or the Company’s collateralized incremental borrowing rate. The implicit rate within
the Company’s leases is generally not determinable and, therefore, the incremental borrowing rate at lease commencement is utilized
to determine the present value of lease payments. The Company estimates its incremental borrowing rate based on third-party lender quotes
to obtain secured debt in a like currency for a similar asset over a timeframe similar to the term of the lease. For those contracts
that include fixed rental payments for both the use of the asset (“lease costs”) as well as for other occupancy or service
costs relating to the asset (“non-lease costs”), the Company generally includes both the lease costs and non-lease costs
in the measurement of the lease asset and liability. The
Company has elected the “package of practical expedients” and as a result is not required to reassess its prior accounting
conclusions about lease identification, lease classification and initial direct costs for lease contracts that exist as of the transition
date. The Company accounts for each lease and any non-lease components associated with that lease as a single lease component for all
asset classes. Lease expenses for the Company’s operating leases are recognized on a straight-line basis over the lease term except
for variable lease costs, which are expensed as incurred. Foreign
Currency The
Company uses Japanese yen as its reporting currency. The Company’s functional currency is Japanese yen. Monetary assets and liabilities
denominated in currencies other than the functional currency are remeasured into the functional currency of the Company 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. 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 5
— Recognition of revenue when, or as, a performance obligation is satisfied The
Company’s revenue is primarily derived from audio production and the talent management business, the Internet business, the workshop
business, and investment distribution. The Company assesses the contract term as the period in which the parties to the contract have
enforceable rights and obligations. 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. Regarding
revenue derived from audio production and talent management business, the Company did not act as an agent during the fiscal years
ended September 30, 2024, 2023, and 2022. During the fiscal year ended September 30, 2023, the Company started sales of novel games
as part of their Internet business. The Company evaluated the relationship with retailers and recognized revenue on a gross basis when
the Company acted as principal and recognized in net when the Company acted as an agent. Audio
production and talent management business: Revenue
from sounds production and talent management business is recognized when promised goods or services are delivered to customers in an
amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The
transaction price is generally fixed at contract inception. However, the transaction price might change when the actual amount of work
performed by the voice actor differs from what was originally agreed due to retake and extra word count. The Company and the voice actor
or voice actor’s management company negotiate and agree on the price. The Company records audio production and talent management
business revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenue and expenses. The Company
has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified vendors,
(ii) has the discretion to select the vendors and establish their price and duties, and (iii) bears the risk for services that
are not fully paid for by customers. VTuber
Management (Internet) business: Revenue
from the internet business is primarily comprised of advertising revenue from voice actors’ real-time live streaming on various
online platforms. Internet business revenue is recognized when advertisements are displayed on digital platforms. Revenue from the internet
business also consists of sales of goods and merchandise featuring the virtual characters of voice actors. Revenue from sales of goods
and merchandise is recognized upon delivery or when goods or merchandise are downloaded by the customer. The
transaction price for internet business is determined based on an agreed upon contractual rate applied to the number of advertisements
displayed during live streamlining in the month. For sales of goods and merchandise, transaction prices are generally fixed and presented
on the digital platforms. Voice
Actor (Workshop) business: Revenue
from the workshop business are primarily comprised of fees received for lessons and workshops conducted by the Company. Workshop business
revenue is recognized over the duration of the lessons or workshops as the Company satisfies its performance obligation by conducting
lessons or workshops. The
transaction price is generally fixed at contract inception for a specified number of lessons and duration. Investment
Distribution Revenue
from investment distribution is primarily comprised of distributions the Company receives from its investments to participate in the
production of anime. Each month or quarter, the production management company calculates the distribution amount based on the earnings
during the period and sends a notification letter to all participating companies. Investment distribution revenue is recognized when
the amount of distribution is declared by the production company. 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 customers are sometimes 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 fiscal years ended September 30,
2024 2023 2022
Audio production and talent management
business ¥ 114,987 ¥ 63,835 ¥ 120,121
Internet business 91,564 57,442 18,630
Workshop business 4,679 5,054 5,805
Distributions from investments 8,798 1,982 847
Total ¥ 220,028 ¥ 128,313 ¥ 145,403 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 fiscal years ended
2024 2023
Balance, beginning of year ¥ 33,839 ¥ 6,341
Revenue earned (31,639 ) (3,617 )
Revenue deferred 117,135 31,115
Balance, end of year ¥ 119,335 ¥ 33,839 Changes
in deferred revenue are primarily due to the timing of revenue recognition and cash collections. Remaining
Performance Obligations Remaining
performance obligations represent 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 September 30, 2024 and 2023, deferred revenue primarily represents the Company’s remaining performance obligations related
to prepaid consideration for audio production and workshop businesses. Deferred
Contract Costs The
Company capitalizes certain costs to fulfill a contract related to its projects if they are identifiable, generate or enhance resources
used to satisfy future performance obligations, and are expected to be recovered under ASC Topic 926-20 Entertainment — Films — Other
Assets — Film Costs 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. Changes
in deferred contact costs were as follows:
Yen
in thousands
For
the fiscal year ended September 30, 2024
Beginning Capitalization Amortization Ending
Total contract costs capitalized ¥ 27,628 ¥ 170,764 ¥ (22,128 ) ¥ 176,264
Yen
in thousands
For
the fiscal years ended September 30, 2023
Beginning
Capitalization
Amortization Ending
Total contract costs capitalized ¥ 7,871 ¥ 27,628 ¥ (7,871 ) ¥ 27,628 Cost
of Revenue Cost
of revenue is comprised of outsourcing expenses which was paid for the Company’s vendors. The Company’s vendors are generally
voice actors’ productions or voice actors and outsourcing expenses paid were for the services provided by voice actors. 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 consolidated 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. The
Company files tax returns in the tax jurisdictions of Japan. 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)/Income per Share Basic
net (loss)/income per Ordinary Share is calculated by dividing the net (loss)/income by the weighted-average number of Ordinary Shares
outstanding during the period, without consideration for potentially dilutive securities. Diluted net (loss)/income per Ordinary Share
is computed by dividing the net (loss)/income by the weighted-average number of Ordinary Shares and potentially dilutive securities outstanding
for the period determined using the treasury stock method. 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. In
December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09 Income Taxes (Topic 740): Improvements
to Income Tax Disclosures In November 2023, FASB issued ASU 2023-07 Segment Reporting
(Topic 280): Improvements to Reportable Segment Disclosures. The standard requires entities to improve reportable segment disclosure
requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years
beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is
currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements. In
October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure
Update and Simplification Initiative” (“ASU 2023-06”). This ASU incorporates certain SEC disclosure requirements into
the FASB Accounting Standards Codification (“ASC”). The amendments in the ASU are expected to clarify or improve disclosure
and presentation requirements of a variety of ASC Topics, allow users to more easily compare entities subject to the SEC’s existing
disclosures with those entities that were not previously subject to the requirements, and align the requirements in the ASC with the
SEC’s regulations. The ASU has an unusual effective date and transition requirements since it is contingent on future SEC rule
setting. If the SEC fails to enact required changes by June 30, 2027, this ASU is not effective for any entities. Early adoption is not
permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial
statement |
