| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying financial statements are presented in Japanese yen, the currency of the country in which the Company is incorporated and
operates. The accompanying financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”). Use
of Estimates The
preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and
these differences could have a significant impact on the financial statements. The significant accounting estimates include impairment
of inventory and property and equipment, incentive compensation expenses, and income taxes. Revenue
Recognition The
Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers The
Company recognizes revenue as it satisfies a performance obligation when its customer obtains control of promised goods or services,
in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five
steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to
contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods it transfers
to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract
to determine which performance obligations it must deliver and which of these performance obligations are distinct. The Company recognizes
revenue based on the amount of the transaction price that is allocated to each performance obligation when that performance obligation
is satisfied or as it is satisfied. The Company is a principal and records revenue on a gross basis when the Company is primarily responsible
for fulfilling the obligation, has discretion in establishing pricing and controls the promised goods before transferring those goods
or services to customers. The
Company derives its revenue mainly from two sources: (1) Product equipment, and (2) SaaS, maintenance and others. All of the Company’s
contracts with customers do not contain cancellable or refund-type provisions. The following is a description of the accounting policy
for the principal revenue streams of the Company: Product
equipment The
Company generally sells the product based on market price plus a minor markup and sets the selling price per device based on cost plus
margin. The Company does not offer discounts, price concessions, or right of return to the customers. Performance obligations are satisfied
at the point in time when control of the product is transferred to the customer, which is generally the closing date on which title to
and possession of the product or the completed installation and the risks and rewards of ownership are transferred to the customer. The
Company bills customers (i) upon the execution of the contract and (ii) when control of the product is transferred to the customer, and
customers generally pay within the same day of each billing. SaaS,
maintenance and others The
Company provides SaaS, maintenance and other services to the customers. The Company does not offer discounts or price concessions. The
only performance obligation is to provide related services stated in the SaaS or maintenance agreements the Company entered into. Fees
related to the services are billed and collected monthly. The revenue is recognized over the contract term of up to six years since the
customers simultaneously receive and consume the benefits provided by the services over the contract period. Disaggregation
of Revenue Revenue
is disaggregated among product equipment and SaaS, maintenance and others. Product
(Software or Wi-Fi equipment): Sales of equipment or software product delivered to the customer for revenue include: “PCWL,”
our mesh Wi-Fi devices with PBE installed. These products may be customized based on the customer needs. Revenue is recognized upon at
a point in time when our performance obligation is complete and control and ownership of the equipment passes to the customer or upon
customer acceptance of the product delivery. The contract to deliver a software or physical product equipment can be separated from a
service agreement that can be provided to the customer. Customers typically purchase the equipment from the Company and can choose to
use the Company’s service plan (i.e., maintenance and/or SaaS) or can have a qualified third party to perform the installation,
management and maintenance services separately. The equipment and software are separate performance obligations because the equipment
and software can be used separately from the SaaS and/or maintenance plans. Platform
Service (SaaS), Maintenance and others: we provide SaaS services through PicoManager The
Company’s revenue, disaggregated by revenue stream for the fiscal years ended September 30, 2024, 2023, and 2022, was as follows
(in thousands): SCHEDULE OF
DISAGGREGATION OF REVENUE
2024 2023 2022
For the Fiscal Years Ended
2024 2023 2022
Product equipment ¥ 627,720 ¥ 465,691 ¥ 540,857
SaaS, Maintenance and others 156,683 93,830 141,264
Total revenue ¥ 784,403 ¥ 559,521 ¥ 682,121 Operation
and Functional Currency The
Company’s reporting and functional currency is the Japanese yen and the Company operates in Japan. Emerging
Growth Company Status The
Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under
the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of
the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period
for complying with new or revised accounting standards that have different effective dates for public and private companies until the
earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended
transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with
the new or revised accounting pronouncements as of public company effective dates. Concentration
of Credit Risk and Significant Vendors Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The
Company maintains all of its bank accounts at high-quality and accredited financial institutions in Japan. Cash balances in bank accounts
in Japan are insured by the Deposit Insurance Corporation of Japan, but may exceed the insured limits of ¥10 million from time to
time and could be negatively impacted if the underlying financial institutions fail or are subject to other adverse conditions in the
financial markets. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk. The Company has not experienced
any losses of such amounts and management believes it is not exposed to any significant credit risk beyond the normal credit risk associated
with its cash and cash equivalents. There
were 3, 2, and 3 suppliers from whom the purchase individually represents greater than 10% of the total purchase of the Company for the
years ended September 30, 2024, 2023, and 2022, respectively. As of September 30, 2024, 2023, and 2022, there were no accounts
payable from those suppliers. There
were 4, 4, and 5 customers from whom the revenue individually represents greater than 10% of the total revenue of the Company for the
years ended September 2024, 2023, and 2022, respectively. As of September 30, 2024, 2023, and 2022, accounts receivable from those customers
accounted for 68 71 89 Segment
Reporting ASC
Topic 280, Segment Reporting Cash
and Cash Equivalents Cash
and cash equivalents are defined as cash on hand, demand deposits with financial institutions, and short-term liquid investments with
an initial maturity date of three months or less. Accounts
Receivable The
Company’s accounts receivable consists primarily of receivables from distributors of our products and direct customers, which were
recorded in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers 264.1 no Inventories Inventories
consist of finished goods, raw materials, and work in progress (“WIP”). Inventory is stated at cost unless the carrying amount
is determined not to be recoverable, in which case the affected inventory is written down to net realizable value. Inventories include
the costs of finished goods, raw materials, work in progress, and direct overhead costs incurred related to the manufacturing. Indirect
overhead costs are charged to selling, general, and administrative expenses as incurred. Inventories are carried at the lower of accumulated
cost or net realizable value. The Company computes inventory cost on an average cost basis and adjusts for excess and obsolete inventories
primarily based on future demand and market conditions, including product specific facts and circumstances that considers the Company’s
customer base and an assessment of selling price in relation to product cost. Once written down, a new lower cost basis for that inventory
is established. Advance
payments Advancement
payments represent payments made to certain vendors of raw materials in advance of receiving such raw materials. As of September 30,
2024 and 2023, advance payments were ¥ 14.4 93.5 Property
and equipment, net Property
and equipment are measured using the cost model and is stated at cost less accumulated depreciation. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
Property
and equipment Useful
life/Depreciation period
Machinery
and Equipment 5 10
Tools,
Furniture and Fixtures 2 5 Impairment
of Long-Lived Assets Long-lived
assets, such as property and equipment and finite-lived intangible assets are reviewed for impairment whenever events and circumstances
indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be
tested for impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its
carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis,
an impairment is recognized to the extent that the carrying amount exceeds its fair value. In making these determinations, the Company
uses certain assumptions, including, but not limited to: (i) estimated fair value of the assets; and (ii) estimated undiscounted future
cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of the
asset being used in the Company’s operations, and (iii) estimated residual values. Fair value is determined using various valuation
techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
There were no events or circumstances identified during the fiscal years ended September 30, 2024, 2023, and 2022 that required the Company
to perform a quantitative impairment assessment. The Company’s assumptions about future conditions that are important to its assessment
of potential impairment of its long-lived assets are subject to uncertainty, and the Company will continue to monitor these conditions
in future periods as new information becomes available. There were no impairments of property, equipment and intangible assets during
the fiscal years ended September 30, 2024, 2023, and 2022. Other
intangible assets, net Intangible
assets with finite lives are initially recorded at cost and amortized on a straight-line basis over the estimated economic useful lives
of the respective assets. The
estimated useful lives of other intangible assets are as follows: SCHEDULE OF ESTIMATED
USEFUL LIVES OF OTHER INTANGIBLE ASSETS
Other
intangible assets Useful
life/Depreciation period
Software 3 5
Trademark 10 Leases Lessee
accounting The
Company has leases classified as operating leases for corporate offices in Tokyo and Fukuoka in Japan and in Warsaw in Poland. Assets
and liabilities associated with operating leases are included in operating lease right-of-use (“ROU”) assets and operating
lease liabilities in the Company’s balance sheets. ROU assets and related lease liabilities associated with operating leases are
recognized at the commencement date based on the present value of lease payments over the lease term. When determining the lease term,
the Company includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option, if any.
As the Company’s leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information
available at commencement date in determining the present value of lease payments. For
leases with a term of 12 months or less, the Company makes an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. The Company recognizes lease expenses for such leases on a straight-line basis over the lease term. Modification
to existing lease agreements, including changes to the lease term or payment amounts, are reviewed to determine whether they result in
a separate contract. For modifications that do not result in a separate contract, management reviews the lease classification and re-measures
the related ROU assets and lease liabilities at the effective date of the modification. Lessor
accounting The
Company enters into non-cancellable sales-type lease agreements for PCWL equipment with a renewal option. There is no purchase option.
At the commencement date of the lease agreements, the Company derecognizes the carrying amount of the underlying assets and recognizes
the net investment in the lease measured at the present value, discounted using the rate implicit in the lease, of the lease receivable
and unguaranteed residual asset. Current portion of net investment in leases is included in accounts receivable-trade, net and the long-term
portion of the net investment in the lease is included in other assets on the balance sheets. The
Company also recognizes selling profit or selling loss at the commencement date and interest income using the effective interest method
over the lease term. Revenue from the sales-type leases is included in revenue from SaaS, maintenance and others and the corresponding
cost is included in cost of SaaS, maintenance and others on the statements of operations. Interest income from the sales-type leases
is included in interest income on the statements of operations. The
Company elected to exclude the taxes assessed and collected from the lessee from consideration in the contract and from variable payments
not included in the consideration in the contract, if applicable. Deferred
IPO costs Deferred
IPO costs represent the incremental costs incurred for the Company’s initial public offering (“IPO”). These costs are
deferred and will be deducted from the proceeds of the IPO upon the completion of the IPO. Deferred IPO costs primary include professional
fees related to the IPO. As of September 30, 2024 and 2023, the deferred IPO costs were ¥ 205.7 77.7 Warranty
Cost The
Company provides a limited warranty for its hardware products: PCWLs for one year. The Company’s standard warranty requires the
Company or its subcontractors to repair or replace defective products during such warranty period at no cost to the customer as far as
the damages or defects are not caused by the customer and the claimed defects are violating our written product specifications. Warranty
costs are charged to cost of sales as incurred due to immaterial warranty costs. Contract
Liabilities Contract
liabilities are amounts collected from customers with the execution of the sales contract. Contract liabilities represent advances received
on contracts in progress and are recognized as revenue as we provide related services. In the event of contract default or termination,
the customer deposit is forfeited and recognized as revenue. Stock
Based Compensation The
Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “ Compensation – Stock Compensation. Net
Income (Loss) Per Share Basic
net income (loss) per share is computed by dividing the net income (loss) attributable to common shareholders for the period by the weighted
average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income
(loss) for the period by the weighted average number of common shares and potential common shares outstanding during the period. Potential
common shares, composed of incremental common shares issuable upon the exercise of options in all periods, are included in the computation
of diluted net income (loss) per share to the extent such shares are dilutive. In a period in which a loss is incurred, only the weighted
average number of common shares issued and outstanding is used to compute the diluted net loss per share, as the inclusion of potential
common shares would be anti-dilutive. Cost
of Revenue Cost
of sales includes product costs, processing costs, and software costs of each product. Selling,
general and administrative expenses Selling,
general and administrative expenses consist primarily of directors’ compensations, salaries and allowances, bonuses, welfare expenses,
recruitment expenses, travel expenses, advertising expenses, rent, taxes and duties, commission fees, depreciation and amortization,
shipping and handling costs, research and development costs and others. Research and development costs incurred were ¥ 49.0 75.6 40.6 Selling
and Commission Costs Sales
commissions are paid and expensed based on products closed, if any. Other selling costs are expensed in the period incurred. Advertising
Costs Advertising
costs are expensed as incurred. Advertising costs were ¥ 7.9 10.3 11.2 Income
Taxes Income
taxes are computed in accordance with the provision of ASC, 740, Income Taxes 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. 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 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. Recent
Accounting Pronouncements New
Accounting Pronouncements Recently Adopted In
November, 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government
Assistance New
Accounting Pronouncements Not Yet Effective The
Company has reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected
to have a material impact on the Company’s financial statements. |
