UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2023
Commission File Number:
(Translation of registrant’s name into English)
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 ☐
EXPLANATORY NOTE
Yoshitsu Co., Ltd (the “Company”) is furnishing this report on Form 6-K to provide the six-month interim financial statements for the period ended September 30, 2023 and incorporate such financial statements into the Company’s registration statement referenced below.
The information contained in this Report of Foreign Private Issuer on Form 6-K is hereby incorporated by reference into the Registration Statement on Form F-3 of the Company (File Number 333-274076), as amended, initially filed with the U.S. Securities and Exchange Commission on August 18, 2023, and into the Prospectus outstanding under the foregoing registration statement, to the extent not superseded by documents or reports subsequently filed or furnished by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
1
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Unaudited Consolidated Financial Statements for the Six Months Ended September 30, 2023 and 2022 | |
| 99.2 | Press Release Titled “Yoshitsu Co., Ltd Reports First Six Months of Fiscal Year 2024 Financial Results” | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Yoshitsu Co., Ltd | ||
| Date: December 22, 2023 | By: | /s/ Mei Kanayama |
| Name: | Mei Kanayama | |
| Title: |
Representative Director and Director (Principal Executive Officer) | |
3
Exhibit 99.1
YOSHITSU CO., LTD
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2023 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable - related parties | ||||||||
| Merchandise inventories, net | ||||||||
| Due from related parties | ||||||||
| Compensation receivable for consumption tax, current | ||||||||
| Prepaid expenses and other current assets, net | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term investment | ||||||||
| Compensation receivable for consumption tax, non-current, net | ||||||||
| Long-term prepaid expenses and other non-current assets, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term borrowings | $ | $ | ||||||
| Current portion of long-term borrowings | ||||||||
| Accounts payable | ||||||||
| Accounts payable - related parties | ||||||||
| Due to related parties | ||||||||
| Deferred revenue | ||||||||
| Taxes payable | ||||||||
| Operating lease liabilities, current | ||||||||
| Finance lease liabilities, current | ||||||||
| Representative’s warrants liability | ||||||||
| Other payables and other current liabilities | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Finance lease liabilities, non-current | ||||||||
| Long-term borrowings | ||||||||
| Other non-current liabilities | ||||||||
| Deferred tax liabilities, net | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Ordinary shares, par value, | ||||||||
| Capital reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Six Months Ended September 30, |
||||||||
| 2023 | 2022 | |||||||
| REVENUE | ||||||||
| Revenue - third parties | $ | $ | ||||||
| Revenue - related parties | ||||||||
| Total revenue | ||||||||
| COSTS AND OPERATING EXPENSES | ||||||||
| Merchandise costs | ||||||||
| Selling, general and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| INCOME FROM OPERATIONS | ||||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest expenses, net | ( |
) | ( |
) | ||||
| Additional and delinquent tax due to consumption tax correction | ( |
) | ||||||
| Gain from disposal of equity method investment | ||||||||
| Gain from disposal of a subsidiary | - | |||||||
| Other income (expenses), net | ( |
) | ||||||
| Gain from foreign currency exchange | ||||||||
| Change in fair value of representative’s warrants liability | ||||||||
| Loss from equity method investment | ( |
) | ( |
) | ||||
| Total other income (expenses), net | ( |
) | ||||||
| INCOME BEFORE INCOME TAX PROVISION | ||||||||
| PROVISION (BENEFIT) FOR INCOME TAXES | ( |
) | ||||||
| NET INCOME | ||||||||
| OTHER COMPREHENSIVE LOSS | ||||||||
| Foreign currency translation loss | ( |
) | ( |
) | ||||
| TOTAL COMPREHENSIVE LOSS | $ | ( |
) | $ | ( |
) | ||
| $ | $ | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
| Ordinary Shares | Capital | Retained | Accumulated Other Comprehensive | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Reserve | Earnings | Income (Loss) | Equity | |||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | ) | ||||||||||||||||||||
| Business combinations under common control | ( | ) | ( | ) | ||||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||
| Foreign currency translation loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For
the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Loss from disposal of property and equipment | ||||||||
| Loss (gain) from unrealized foreign currency translation | ( | ) | ||||||
| Allowance for (net recovery of) credit losses | ( | ) | ||||||
| Reversal of merchandise inventories written down | ( | ) | ||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Deferred tax benefit | ( | ) | ( | ) | ||||
| Change in fair value of representative’s warrants liability | ( | ) | ( | ) | ||||
| Investment loss from equity method investment | ||||||||
| Gain from disposal of equity method investment | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Accounts receivable - related parties | ||||||||
| Merchandise inventories | ( | ) | ||||||
| Compensation receivable for consumption tax | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Long-term prepaid expenses and other non-current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accounts payable - related parties | ( | ) | ||||||
| Deferred revenue | ||||||||
| Taxes payable | ( | ) | ( | ) | ||||
| Other payables and other current liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Other non-current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Proceeds from disposal of equity method investment | ||||||||
| Proceeds from disposal of a subsidiary | ||||||||
| Disposal of a subsidiary, net of cash | ( | ) | ||||||
| Collection of amount due from related parties | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Cash consideration paid for business combination under common control | ( | ) | ||||||
| Proceeds from short-term borrowings | ||||||||
| Repayments of short-term borrowings | ( | ) | ||||||
| Proceeds from long-term borrowings | ||||||||
| Repayments of long-term borrowings | ( | ) | ( | ) | ||||
| Payments made to related parties | ( | ) | ( | ) | ||||
| Repayment of obligations under finance leases | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate fluctuation on cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental cash flow information | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental non-cash operating activities | ||||||||
| Purchase of property and equipment financed under finance leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION
Yoshitsu Co., Ltd (the “Company”) is a stock company incorporated in Japan pursuant to the laws of Japan on December 28, 2006.
Prior to July 1, 2023, the Company owned
On June
30, 2023, the Company entered into a share transfer agreement with Seihinkokusai Co., Ltd. (“Seihinkokusai”),
a related party of the Company, to sells its
On September 6, 2023, TLS incorporated a wholly-owned subsidiary, RAKKISTAR HOLDING INC., in the State of Ontario, Canada. On October 17, 2023, TLS incorporated a wholly-owned subsidiary, Tokyo Lifestyle Holding Inc. (“TSL Holding”), in the State of Delaware. TSL Holding also incorporated a wholly-owned subsidiary, REIWATAKIYA BOS LLC, a limited liability company on October 26, 2023, in the Commonwealth of Massachusetts. These companies are currently not engaging in any active business operations.
The Company and its subsidiaries (collectively,
“Yoshitsu”) are a retailer and wholesaler of Japanese beauty and health products, as well as luxury and electronic products,
sundry products, and other products and services.
Acquisition Under Common Control
On July 20, 2022, the Company entered into a definitive
agreement (the “Agreement”) with All Seas Global Limited to acquire its
F-6
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION (continued)
On October 26, 2022, the board of directors of
TLS approved the acquisition of Reiwatakiya from All Seas Global Limited, who held
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany balances and transactions are eliminated upon consolidation. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the afore-mentioned SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal years ended March 31, 2023 and 2022. Operating results for the six-month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending March 31, 2024.
Use of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes 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 period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, assessment of expected credit losses for accounts receivable, compensation receivable for consumption tax, current and non-current prepaid expenses and other assets, valuation of inventories, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, inputs used in the calculation of the asset retirement obligation, and implicit interest rate of operating leases and financing leases. Actual results could differ from those estimates.
Cash
Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains its bank accounts in Japan, Hong Kong, China and Malaysia. The Company considers all highly-liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. As of September 30, 2023 and March 31, 2023, the Company did not have any cash equivalents.
F-7
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Receivables and credit losses
On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss impairment methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial statements.
The Company’s account receivables, compensation receivable for consumption tax and other receivable included in current and non-current prepaid expenses and other assets are within the scope of ASC Topic 326. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical experience, the age of the receivables, credit-worthiness of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.
Expected credit losses are included
in selling, general, and administrative expenses in the unaudited condensed consolidated
statements of operations and comprehensive loss. After all attempts to collect a receivable have failed, the receivable is written
off against the allowance. Account receivables, compensation receivable for consumption tax and other receivable is
recognized and carried at original amount less an allowance for credit losses, as necessary. As of September 30, 2023 and March
31, 2023, allowance for credit losses for accounts receivable amounted to $
Leases
The Company adopted Financial Accounting Standards Board (the “FASB”) ASC No. 842, Leases (“Topic 842”) on April 1, 2018 using the modified retrospective approach.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty.
F-8
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company leases retail store facilities and distribution centers, which are classified as operating leases and leases certain software and equipment and furniture as finance lease in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current, and finance leases are included in property and equipment, finance lease liabilities, current, and finance lease liabilities, non-current in the unaudited condensed consolidated balance sheet.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The operating lease right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All operating lease right-of-use assets are reviewed for impairment annually. There was no impairment for operating lease right-of-use lease assets as of September 30, 2023 and March 31, 2023.
The Company has elected the short-term lease exception, and therefore operating lease right-of-use assets and liabilities do not include leases with a lease term of twelve months or less.
In response to the large volume of anticipated lease concessions to be granted related to the effects of the COVID-19 pandemic, and the resultant expected cost and complexity of applying the lease modification requirements in Topic 842, the FASB issued Staff Q&A—Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic in April 2020 as interpretive guidance to provide clarity in response to the crisis. The FASB staff indicated that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how they would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Consequently, for such lease concessions, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can elect to apply or not to apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
Based on
the nature of the agreements reached with many of its landlords, the Company has accounted for rent concessions as if they were part of
the enforceable rights and obligations of the existing lease contracts and did not account for the concessions as lease modifications.
The Company has received a total of lease concessions amounting to $
F-9
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity investment
An investment
in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using
the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock
between
Common control transactions
In business combinations under common control, the assets and liabilities acquired are measured at the historical amounts of the acquirees in the unaudited condensed consolidated financial statements of acquirer on the acquisition date. The difference between the carrying amounts of the net assets acquired and the consideration paid is adjusted to the equity account of the acquirer. The operating results for all periods presented are retrospectively restated as if the current structure and operations resulting from the acquisition had been in existence since the beginning of the earliest year presented, with financial data of previously separate entities consolidated. The subsequent adjustment of contingent consideration after the acquisition date is also accounted for as an equity transaction.
Merchandise inventories
Merchandise
inventories are stated at the lower of cost or net realizable value, on a weighted average basis. Costs include mainly the cost of merchandise
inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to sell products. Write-down
is recorded when future estimated net realizable value is less than cost, which is recorded in merchandise costs in the unaudited
condensed consolidated statements of operations and comprehensive loss. The Company periodically
evaluates merchandise inventories for their net realizable value adjustments, and reduces the carrying value of those merchandise inventories
that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging
and expiration dates, as applicable, taking into consideration historical and expected future product sales. As of September 30, 2023
and March 31, 2023, merchandise inventories write-down was $
Property and equipment
Property
and equipment are stated at cost less accumulated depreciation and amortization. Except for assets that are not subject to depreciation,
such as land and construction in progress, depreciation and amortization of property and equipment are mainly provided using the straight-line
method or declining balance method, which allocates an asset’s cost over the periods during which the Company benefits from the
use of the asset.
| Useful life | ||
| Property and buildings | ||
| Land | ||
| Leasehold improvements | ||
| Equipment and furniture | ||
| Automobiles | ||
| Software |
F-10
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Land has infinite useful life and is not subjected to amortization. Management reviews for impairment accordance with the accounting policy stated under impairment of long-lived assets.
Expenditures for maintenance and repair, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations and comprehensive loss in other income or expenses.
Asset retirement obligations
The Company
records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated
with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the
long-lived assets. The Company’s asset retirement obligations are primarily related to leasehold improvement of its retail stores
leases, that, at the end of the leases, are required to be returned to the landlords in their original condition. As of September 30,
2023 and March 31, 2023, the balance of asset retirement obligations included in other non-current liabilities was $
Impairment of long-lived assets
The Company evaluates its long-lived assets, including property and equipment, operating lease right-of-use assets and long-term prepaid expenses and non-current assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered through the related future net cash flows, the Company did not recognize any impairment loss on long-lived assets for the six months ended September 30, 2023 and 2022.
F-11
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition
The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), on April 1, 2018 using the modified retrospective approach.
ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance (ASC Topic 605, Revenue Recognition) did not result in significant changes in the way the Company records its revenue. The Company has assessed the impact of the guidance by reviewing its existing customer contracts to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control, and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s unaudited condensed consolidated financial statements upon adoption of ASC 606.
Under ASC 606, revenue is recognized when control of promised goods is transferred or service is rendered to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from the specified goods and services.
The Company
currently generates its revenue through retail and wholesale of Japanese beauty and health products, luxury and electronic products, as
well as sundry and other products and services, through a multi-channel distribution network. Currently, the Company sells its products
and rendered its services through: (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores
and wholesale customers. For Japanese and Hong Kong domestic sales, revenue is recognized at the point of sales or delivery of the related
products and control is transferred. For international sales, the Company sells goods under Cost Insurance and Freight (“CIF”)
shipping point term, and revenue is recognized when product is loaded on the ships and control is deemed as transferred. The Company generally
offers a seven-day product return policy, as long as the products are undamaged, in their original condition, and can be resold. Products
sold in the Company’s physical stores may be returned in store with receipt subject to certain restrictions. Historically, the customer
returns were immaterial. Therefore, the Company did not provide any sales return allowances for the six months ended September 30, 2023
and 2022. The Company’s service revenue primarily consists advertising services of KOLs for its customers. The Company produces
short videos with the online celebrities to promote the brands of its customers on social media platforms, such as Tik Tok and Kuaishou.
Revenue from these services is recognized at a point in time when the service is rendered by the Company. The Company enters into franchise
agreements with franchisees in Japan under which the franchisee is granted a revocable license and non-exclusive right to use the Company’s
trademarks and stores. The Company requires an entire non-refundable initial franchise fee of ¥
F-12
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company is the principal for its transactions and recognizes revenue on a gross basis. The Company is the principal when it has control of the merchandise before it is transferred to customers, which generally is established when the Company is primarily responsible for merchandising decisions, maintains the relationship with customer, including assurance of member service and satisfaction, and has pricing discretion.
In directly-operated
physical stores in Japan and Hong Kong, customers can enroll in the Company’s rewards program, which is primarily a spending-based
rewards program, and get a rewards card. Members of the rewards program usually earn one membership point for each ¥
Contract balances and remaining performance obligations
Contract
balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs.
The Company did not have contract assets as of September 30, 2023 and March 31, 2023. The Company’s contract liabilities, which
are reflected in its unaudited condensed consolidated balance sheets as deferred revenue
of $
F-13
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Disaggregation of revenue
The Company disaggregates its revenue by geographic areas, product categories, and distribution channels, which the Company believes best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended September 30, 2023 and 2022 is as following:
Revenue by geographic areas
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Japan domestic market | $ | $ | ||||||
| China market | ||||||||
| Other overseas markets | ||||||||
| Total revenue | $ | $ | ||||||
Revenue by product categories
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Beauty products | $ | $ | ||||||
| Health products | ||||||||
| Sundry products | ||||||||
| Luxury products | ||||||||
| Electronic products | ||||||||
| Other products and services | ||||||||
| Total revenue | $ | $ | ||||||
F-14
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue by distribution channels
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Directly-operated physical stores | $ | $ | ||||||
| Online stores and services | ||||||||
| Franchise stores and wholesale customers | ||||||||
| Total revenue | $ | $ | ||||||
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, due from related parties, current portion of compensation receivable for consumption tax, prepaid expenses and other current assets, short-term borrowings, current portion of long-term borrowings, accounts payable, due to related parties, deferred revenue, taxes payable, and other payables and other current liabilities, approximate the fair value of the respective assets and liabilities as of September 30, 2023 and March 31, 2023 based upon the short-term nature of the assets and liabilities.
Foreign currency translation
The Company maintains its books and record in its local currency, Japanese yen (“YEN” or “¥”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. The Company’s subsidiaries in Hong Kong, the PRC, and Malaysia use their respective currencies Hong Kong Dollar (“HK$”), Chinese Yuan (“RMB”), and Malaysia Ringgit (“MYR”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations and comprehensive loss.
F-15
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement,” assets and liabilities of the Company are translated into US$, using the exchange rate on the balance sheet date. Revenue and expenses are translated at the average rates prevailing during the period. Shareholders’ equity is translated at the historical exchange rate at the time of transaction. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
| For
the Six Months Ended September 30, 2023 |
For
the Six Months Ended September 30, 2022 |
March 31, 2023 | ||||||||||
| Period-end spot rate |
Average rate |
Period-end spot rate |
Average rate |
Year-end spot rate |
Average rate | |||||||
| US$ against YEN | ||||||||||||
| US$ against HK$ | ||||||||||||
| US$ against RMB | ||||||||||||
| US$ against MYR | ||||||||||||
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain
tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a
tax examination. The amount recognized is the largest amount of tax benefit that is greater than
F-16
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company’s operating entities in Japan are subject to the income tax laws of Japan. As of September 30, 2023, the tax years ended March 31, 2021 through March 31, 2023 for the Company’s operating entities in Japan remain open for statutory examination by the Japanese tax authorities. The Company’s subsidiary in Hong Kong is subject to the profit taxes in Hong Kong. As of September 30, 2023, the tax years ended since the year of incorporation through March 31, 2023 for the Company’s subsidiary in Hong Kong remain open for statutory examination by the Hong Kong taxing jurisdictions. The Company’s subsidiary in China is subject to the income tax laws of the PRC. As of September 30, 2023, the tax years ended since the year of incorporation through December 31, 2022 for the Company’s PRC subsidiary remain open for statutory examination by PRC tax authorities. The Company’s subsidiary in Malaysia is subject to the income tax laws of Malaysia. As of September 30, 2023, all of the tax returns of the Company’s Malaysian subsidiary remain open for statutory examination by relevant tax authorities.
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no dilutive shares for the six months ended September 30, 2023 and 2022.
Shipping and handling cost
All shipping
and handling costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed
consolidated statements of operations and comprehensive loss. Total shipping and handling expenses
were $
Advertising expenses
Advertising
costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed consolidated
statements of operations and comprehensive loss. Advertising expenses amounted to $
Comprehensive loss
Comprehensive loss consists of two components, net income and other comprehensive loss. The foreign currency translation gain or loss resulting from the translation of the financial statements expressed in YEN, HK$, RMB and MYR to US$ is reported in other comprehensive loss in the unaudited condensed consolidated statements of operations and comprehensive loss.
F-17
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Related parties and transactions
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures,” and other relevant ASC standards.
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions.
Segment reporting
The Company uses the management approach in determining its operating segments. The management approach considers the internal reporting used by the Company’s chief operating decision maker (“CODM”). The Company’s CODM has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Company. Management has determined that the Company has three operating segments, which are (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers.
Risks and uncertainties
Political and economic risk
The directly-operated physical stores of the Company are all located in Japan and Hong Kong, and the online stores and franchise stores and wholesale partners of the Company are mainly located in Japan and mainland China. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Japan, Hong Kong and mainland China, as well as by the general state of their economy. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in Japan, Hong Kong and mainland China. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note 1, such experience may not be indicative of future results.
Credit risk
As of September
30, 2023 and March 31, 2023, $
As of September
30, 2023 and March 31, 2023, $
As of September
30, 2023 and March 31, 2023, $
F-18
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
As of September
30, 2023 and March 31, 2023, $
As of September
30, 2023 and March 31, 2023, $
Accounts receivable are typically unsecured and derived from revenue earned from customers, compensation receivables are typically unsecured and derived from damages the Company claimed from certain suppliers as well as customers, thereby exposed to credit risks. The risk is mitigated by the Company’s assessment of its customers and suppliers’ creditworthiness and its ongoing monitoring of outstanding balances.
Concentrations
For the six months ended September 30, 2023 and 2022, majority of the Company’s assets were located in Japan and Hong Kong, and all of the Company’s revenue was generated by the Company and its subsidiaries, which are located in Japan, Hong Kong and China.
For the
six months ended September 30, 2023, one customer accounted for
As of September
30, 2023, two wholesale customers accounted for
For the
six months ended September 30, 2023, four suppliers accounted for approximately
F-19
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.” This ASU expands required public entities’ segment disclosures, including disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company plans to adopt this guidance effective April 1, 2025 and the adoption of this ASU is not expected to have a material impact on its financial statements.
Except for the above-mentioned pronouncement, there are no new recently issued accounting standards that will have material impact on the Company’s unaudited condensed consolidated financial position, statements of operations, and cash flows.
NOTE 3 – GOING CONCERN
Although
the Company incurred a net loss in fiscal year ended March 31, 2023, the financial performance of the Company has improved during the
six months ended September 30, 2023. As reflected in the unaudited condensed consolidated
financial statements, the Company had a net income of $
The Company’s accounts receivable decreased
by $
As of September
30, 2023, the Company had approximately $
Based on the foreseeable future projection of continuing operating profit or loss and the need for future business funding, management has determined that these additional conditions raise substantial doubt about the Group’s ability to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements do not include adjustments that may result from this uncertainty. Therefore, the unaudited condensed consolidated financial statements are prepared on the assumption that the Group will continue as a going concern.
NOTE 4 – ACCOUNTS RECEIVABLE, NET
| September 30, 2023 | March 31, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The Company’s accounts receivable primarily include balance due from customers when the Company’s products have been sold and delivered to customers, which has not been collected as of the balance sheet dates.
F-20
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – ACCOUNTS RECEIVABLE, NET (continued)
| September 30, 2023 | March 31, 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
NOTE 5 – MERCHANDISE INVENTORIES, NET
| September 30, 2023 | March 31, 2023 | |||||||
| Beauty products | $ | $ | ||||||
| Health products | ||||||||
| Luxury products | ||||||||
| Electronic products | ||||||||
| Other products | ||||||||
| Merchandise inventories, net | $ | $ | ||||||
Reversal
of merchandise inventories write-down was $
NOTE 6 – COMPENSATION RECEIVABLE FOR CONSUMPTION TAX, NET
| September 30, 2023 | March 31, 2023 | |||||||
| Compensation receivable for consumption tax | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Subtotal | ||||||||
| Less: compensation receivable for consumption tax, current | ( | ) | ( | ) | ||||
| Long-term compensation receivable for consumption tax, net | $ | $ | ||||||
The Tokyo
Regional Taxation Bureau had conducted a tax examination into the Company’s consumption tax filing for the period from July 2018
to December 2021. As a result of the examination, the Company was required to return consumption tax refund for export transactions that
were determined not to meet the tax exemption requirements due to failure in submission of relevant export documents (see Note 13) by
the Company’s certain suppliers and customers. In June 2023, the Company entered into agreements with relevant suppliers and customers
to claim compensation for damages from the additional consumption tax payment.
These suppliers and customers agreed to compensate the Company and the compensation receivable for consumption tax will be paid over two
years from the date of the agreements. As of March 31, 2023, the net total of approximately $
F-21
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – PREPAID EXPENSES AND OTHER ASSETS, NET
| September 30, 2023 | March 31, 2023 | |||||||
| Deposits (1) | $ | $ | ||||||
| Consumption tax receivable | ||||||||
| Other receivables (2) | ||||||||
| Advance to suppliers (3) | ||||||||
| Prepaid expenses and others (4) | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Subtotal | ||||||||
| Less: prepaid expenses and other current assets, net | ( | ) | ( | ) | ||||
| Long-term prepaid expenses and other non-current assets, net | $ | $ | ||||||
| (1) |
| (2) | Other receivables as of September 30, 2023 and March 31, 2023 included $
Other receivables as of September 30, 2023 and March 31, 2023 included approximately $ |
| (3) |
| (4) |
F-22
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – PROPERTY AND EQUIPMENT, NET
| September 30, 2023 | March 31, 2023 | |||||||
| Property and buildings | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Land | ||||||||
| Equipment and furniture | ||||||||
| Automobiles | ||||||||
| Software | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense was $
As of September
30, 2023 and March 31, 2023, the Company pledged a piece of land of 16,165 square feet with a carrying value of ¥
NOTE 9 – LEASES
The Company leases retail store facilities and distribution centers under non-cancellable operating leases, with terms ranging from one to 15 years, as well as finance leases for software, equipment, and furniture with a term of five years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right-of-use assets and lease liabilities.
Operating lease expenses for lease payment are recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased assets, and interest expenses, which are recognized following an effective interest rate method. Leases with initial term of 12 months or less are not recorded on the balance sheet.
Operating Leases
| September 30, 2023 | March 31, 2023 | |||||||
| Operating lease right-of-use lease assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
F-23
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – LEASES (continued)
| September 30, 2023 | March 31, 2023 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate * | % | % | ||||||
| * |
During the
six months ended September 30, 2023 and 2022, the Company incurred total operating lease expenses of $
Finance Leases
The components of finance lease expenses were as follows:
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Finance leases cost: | ||||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Interest on lease liabilities | ||||||||
| Total finance leases cost | $ | $ | ||||||
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from finance leases | $ | $ | ||||||
| September 30, 2023 | March 31, 2023 | |||||||
| Finance leases cost: | ||||||||
| Software | $ | $ | ||||||
| Equipment and furniture | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
F-24
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – LEASES (continued)
The weighted average remaining lease terms and discount rates for all of finance leases as of September 30, 2023 and March 31, 2023 were as follows:
| September 30, 2023 | March 31, 2023 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
| 12 months ending September 30, | Operating Leases | Finance Leases | ||||||
| 2024 | $ | $ | ||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Thereafter | ||||||||
| Total lease payments | ||||||||
| Less: imputed interest | ( | ) | ( | ) | ||||
| Present value of lease liabilities | $ | $ | ||||||
NOTE 10 – ACQUISITIONS
TLS Acquisition
On July
20, 2022, the Company entered into an Agreement with All Seas Global Limited to acquire
| July 20, 2022 | ||||
| Assets | $ | |||
| Liabilities | ||||
| Net liabilities | $ | ( | ) | |
| Consideration in excess of net liabilities acquired | $ | |||
| Total purchase consideration | $ | |||
F-25
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – ACQUISITIONS (continued)
Reiwatakiya Acquisition
On October
26, 2022, the board of directors of TLS approved the acquisition of Reiwatakiya from All Seas Global Limited who held
The carrying amounts of the assets and liabilities of Reiwatakiya as of the transaction date were as follows:
| October 26, 2022 | ||||
| Assets | $ | |||
| Liabilities | ||||
| Net liabilities | $ | ( | ) | |
| Non-controlling interests | ||||
| Consideration in excess of net liabilities acquired | $ | |||
| Total purchase consideration | $ | |||
NOTE 11 – BORROWINGS
| Maturity | Interest Rate | September 30, 2023 | March 31, 2023 | |||||||||
| Syndicated Loans (1) | TIBOR (1M)+1.20% | $ | $ | |||||||||
| Total short-term borrowings | $ | $ | ||||||||||
The terms of the various loan agreements related to short-term borrowings contain certain restrictive covenants which, among other things, require the Company to maintain current organization structure, specified ratios of debt to tangible net assets and debt service coverage, and positive net income. The terms also prohibit the Company from transferring part or all of its assets to third-party companies or receiving part of all of the assets from other third-party companies. Although the Company incurred a net loss in fiscal year ended March 31, 2023, the financial performance of the Company has improved during the six months ended September 30, 2023, and the Company did not receive any notices from banks, such as notices of terminating its ability to borrow under the relevant agreements and notices of accelerating its obligations to repay outstanding borrowings.
| ^ |
| (1) |
F-26
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – BORROWINGS (continued)
| Maturity | Interest Rate | September 30, 2023 | March 31, 2023 | |||||||||
| Toei Shinkin Bank (1) | $ | $ | ||||||||||
| Japan Finance Corporation (2) | ||||||||||||
| BOT Lease Co., Ltd. (3) | ||||||||||||
| MUFG Bank (4) | ||||||||||||
| Tokyo Higashi Shinkin Bank | ||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited (5) | ||||||||||||
| DFL-Shutoken Leasing (Hong Kong) Company Limited | ||||||||||||
| Resona Merchant Bank Asia Limited (6) | ||||||||||||
| Total long-term borrowings | $ | $ | ||||||||||
| Current portion of long-term borrowings | $ | $ | ||||||||||
| Non-current portion of long-term borrowings | $ | $ | ||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
F-27
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – BORROWINGS (continued)
| 12 months ending September 30, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total long-term borrowings | $ | |||
For the
above mentioned short-term and long-term loans, the Company recorded interest expenses of $
NOTE 12 – RELATED PARTY TRANSACTIONS
| Name of Related Party | Relationship to the Company | |
| Mr. Mei Kanayama | ||
| Seihinkokusai Co., Ltd. (“Seihinkokusai”) | ||
| Shintai Co., Ltd. | ||
| Palpito | ||
| Tokushin G.K. |
| a. | Accounts receivable, net–- related parties |
| Name | September 30, 2023 | March 31, 2023 | ||||||
| Seihinkokusai | $ | | $ | |||||
| Palpito | ||||||||
| Tokushin G.K. | ||||||||
| Shintai Co., Ltd. | ||||||||
| Subtotal | ||||||||
| Less: allowance for credit losses | ||||||||
| Total accounts receivable, net–- related parties | $ | $ | ||||||
F-28
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – RELATED PARTY TRANSACTIONS (continued)
| b. | Due from related parties |
| Name | September 30, 2023 | March 31, 2023 | ||||||
| Seihinkokusai (1) | $ | $ | ||||||
| Shintai Co., Ltd. | ||||||||
| Total due from related parties | $ | $ | ||||||
| (1) |
| c. | Accounts payable – related party |
| Name | September 30, 2023 | March 31, 2023 | ||||||
| Seihinkokusai | $ | $ | ||||||
| Total accounts payable – related party | $ | $ | ||||||
F-29
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – RELATED PARTY TRANSACTIONS (continued)
| d. | Due to related parties |
| Name | September 30, 2023 | March 31, 2023 | ||||||
| Mr. Mei Kanayama | $ | $ | ||||||
| Seihinkokusai | ||||||||
| Total due to related parties | $ | $ | ||||||
| e. | Sales to related parties |
| For the Six Months Ended September 30, | ||||||||
| Name | 2023 | 2022 | ||||||
| Seihinkokusai | $ | $ | ||||||
| Shintai Co., Ltd. | ||||||||
| Palpito | ||||||||
| Total revenue from related parties | $ | $ | ||||||
| f. | Purchase from related parties |
| For the Six Months Ended September 30, | ||||||||
| Name | 2023 | 2022 | ||||||
| Seihinkokusai | $ | $ | ||||||
| Palpito | ||||||||
| Total purchase from related parties | $ | $ | ||||||
| g. | Other related party transactions |
Mr. Kanayama provided guarantees in connection with certain loans the Company borrowed (see Note 11).
F-30
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – TAXES
| (a) | Corporate Income Taxes |
The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
Japan
The Company
and its subsidiary in Japan are mainly subject to Japanese national and local income taxes, inhabitant tax, and enterprise tax, which,
in the aggregate, represent a statutory income tax rate of approximately
Hong Kong
TLS is incorporated
in Hong Kong and is subject to profit taxes in Hong Kong at a rate of
PRC
Qingzhiliangpin
is incorporated in the PRC and is subject to the PRC Enterprise Income Tax. Under the Enterprise Income Tax Law of PRC, domestic enterprises
and Foreign Investment Enterprises are subject to a unified
Malaysia
Reiwatakiya
is incorporated in Malaysia, and is governed by the income tax laws of Malaysia. The income tax provision in respect of operations in
Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations,
and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Japan | $ | ( | ) | $ | ( | ) | ||
| Hong Kong | ||||||||
| PRC | ||||||||
| Malaysia | ( | ) | ||||||
| Income before tax | $ | $ | ||||||
F-31
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – TAXES (continued)
| (a) | Corporate Income Taxes (continued) |
| For the Six Months Ended September 30, |
||||||||
| 2023 | 2022 | |||||||
| Current tax provision | ||||||||
| Japan | $ | $ | ||||||
| Hong Kong | ||||||||
| PRC | ||||||||
| Malaysia | ||||||||
| Deferred tax benefit | ||||||||
| Japan | $ | ( |
) | $ | ( |
) | ||
| Hong Kong | ||||||||
| PRC | ||||||||
| Malaysia | ||||||||
| ( |
) | ( |
) | |||||
| Income tax provision (benefit) | $ | ( |
) | $ | ||||
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Japanese statutory income tax rate | % | % | ||||||
| Non-deductible expenses | % | % | ||||||
| Non-taxable income | ( | )% | ( | )% | ||||
| Tax rate difference in non-Japan subsidiaries and different prefectures in Japan | ( | )% | ( | )% | ||||
| Change in valuation allowance | ( | )% | ( | )% | ||||
| Effect of additional consumption tax charge from tax examination (1) | % | |||||||
| Prior year income tax true-up | ( | )% | ||||||
| Others | % | % | ||||||
| Effective tax rate | ( | )% | % | |||||
| (1) |
F-32
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – TAXES (continued)
| (a) | Corporate Income Taxes (continued) |
| September 30, 2023 | March 31, 2023 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit losses | $ | $ | ||||||
| Accrued member rewards | ||||||||
| Accrued employee bonus | ||||||||
| Accrued asset retirement obligation | ||||||||
| Accrued employee retirement pension | ||||||||
| Investment loss from equity method investment | - | |||||||
| Net operating loss carry-forwards | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Change in fair value of purchase option | ( | ) | ( | ) | ||||
| Accrued interest income on consumption tax receivable | - | ( | ) | |||||
| Compensation receivable for consumption tax | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Deferred tax liabilities, net | $ | ( | ) | $ | ( | ) | ||
| September 30, 2023 | March 31, 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Additions (reduction) | ( | ) | ||||||
| Disposal of a subsidiary | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
F-33
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – TAXES (continued)
| (a) | Corporate Income Taxes (continued) |
As of September
30, 2023, the Company had net operating loss carried forward from the entities in Japan of $
As of September
30, 2023, the Company had net operating loss carried forward from the entities in Hong Kong of $
| (b) | Consumption tax |
In Japan,
consumption tax collected and remitted to tax authorities is excluded from revenue, cost of sales, and expenses in the unaudited
condensed consolidated statements of operations and comprehensive loss. Before October 1, 2019,
the applicable consumption tax rate was
| (c) | Taxes payable |
| September 30, 2023 |
March 31, 2023 |
|||||||
| Income tax payable | $ | $ | ||||||
| Additional consumption tax payable due to tax examination (1) | ||||||||
| Consumption tax payable and others | ||||||||
| Total taxes payable | $ | $ | ||||||
| (1) |
|
F-34
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 – REPRESENTATIVE’S WARRANTS LIABILITY
In connection
with the Company’s IPO, the Company agreed to issue warrants to a representative of several underwriters, for a nominal consideration
of $
Because the strike price of the Representative’s Warrants is denominated in U.S. dollars, a currency other than the Company’s functional currency, ¥, the Representative’s Warrants were not considered indexed to the Company’s own stock. As such, the Representative’s Warrants were classified as a derivative liability under ASC 815-10, and recorded initially and subsequently at fair value with all future changes in the fair value recognized currently in earnings until such time as the warrants are exercised or expired. As of September 30, 2023, these Representative’s Warrants were issued and outstanding but none of the warrants had been exercised. For the six months ended September 30, 2023 and 2022, these Representative Warrants were antidilutive and accordingly were not included in the diluted EPS calculation based on treasury stock method.
On January
13, 2022, the Company recorded a fair value of $
| September 30, 2023 | March 31, 2023 | January 13, 2022 | ||||||||||
| Representative’s Warrants liability | ||||||||||||
| Stock price | $ | $ | $ | |||||||||
| Exercise price | $ | $ | $ | |||||||||
| Expected term (years) | ||||||||||||
| Risk-free interest rate | % | % | % | |||||||||
| Expected volatility | % | % | % | |||||||||
F-35
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – SHAREHOLDERS’ EQUITY
Ordinary shares
The Company is a stock company incorporated in Japan pursuant to the laws of Japan on December 28, 2006.
At the incorporation,
the number of authorized ordinary shares was
On April
25, 2011, the number of authorized ordinary shares was increased to
On October
15, 2014,
On July
30, 2016,
On March
30, 2017,
On October
22, 2020, the Company’s shareholders approved an increase in the number of the Company’s authorized ordinary shares from
On November
10, 2020,
On February
5 and 12, 2021, an issuance of
On August
18, 2021, shareholders of the Company approved an increase in the number of the Company’s authorized Ordinary Shares from
F-36
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – SHAREHOLDERS’ EQUITY (continued)
Initial public offering
On January
13, 2022, the Company closed its IPO of
Restricted net assets
The Company
is restricted in its ability to transfer a portion of its net assets, equivalent to its share capital to its shareholders in the form
of loans, advances, or cash dividends. The payment of dividends by the Company organized in Japan is subject to limitations, procedures,
and formalities. Regulations in Japan currently permit payment of dividends only out of accumulated profits as determined in accordance
with accounting standards and regulations in Japan. As of September 30, 2023 and March 31, 2023, the total restricted net assets of the
Company amounted to $
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of September 30, 2023 and March 31, 2023, there were no legal claims and litigation against the Company.
F-37
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – SEGMENT REPORTING
Segments
The Company
is engaged in the operation of retail and wholesale of Japanese beauty and health products, as well as sundry products and other products
and services. The Company’s operations are conducted in
Directly-operated physical stores segment includes physical stores in Japan and Hong Kong. Online stores and services segment includes sales through the Company’s websites and various e-commerce marketplaces in Japan, China, and Korea, as well as services from advertising business through KOLs. Franchise stores and wholesale customers segments include franchise stores in Japan, the U.S. and the U.K., and wholesale customers in Japan and other countries including China, the U.S., and Canada.
The Company measures the results of its segments using, among other measures, each segment’s revenue, merchandise costs, interest expenses, net, provision for income tax, net income (loss), depreciation and amortization, capital expenditures, total assets as well as total liabilities, which includes certain corporate overhead allocations. From time to time, the Company revises the measurement of each segment’s revenue and other measures, including any corporate overhead allocations, as determined by the information regularly reviewed by its CODM. When the measurement of a segment significantly changes, previous period amounts and balances are reclassified to be comparable to the current period’s presentation.
| For the six months ended September 30, 2023 | ||||||||||||||||
| Directly- Operated Physical Stores | Online Stores and Services | Franchise Stores and Wholesale Customers | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Merchandise costs | $ | $ | $ | $ | ||||||||||||
| Interest expenses, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Benefit for income tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Capital expenditures | $ | $ | $ | $ | ||||||||||||
F-38
YOSHITSU CO., LTD AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – SEGMENT REPORTING (continued)
| For the six months ended September 30, 2022 | ||||||||||||||||
| Directly- Operated Physical Stores | Online Stores and Services | Franchise Stores and Wholesale Customers | Total | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Merchandise costs | $ | $ | $ | $ | ||||||||||||
| Interest expenses, net | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Provision for income tax | $ | $ | $ | $ | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Depreciation and amortization | $ | $ | $ | $ | ||||||||||||
| Capital expenditures | $ | $ | $ | $ | ||||||||||||
| September 30, 2023 | March 31, 2023 | |||||||
| Total assets: | ||||||||
| Directly-Operated Physical Stores | $ | $ | ||||||
| Online Stores and Services | ||||||||
| Franchise Stores and Wholesale Customers | ||||||||
| Total assets | $ | $ | ||||||
| Total liabilities: | ||||||||
| Directly-Operated Physical Stores | $ | $ | ||||||
| Online Stores and Services | ||||||||
| Franchise Stores and Wholesale Customers | ||||||||
| Total liabilities | $ | $ | ||||||
Disaggregated Revenue
The Company disaggregates its revenue by geographic areas, product categories, and distribution channels, which the Company believes best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. See Note 2 for the Company’s disaggregation of revenue for the six months ended September 30, 2023 and 2022.
NOTE 18 – SUBSEQUENT EVENTS
On December
14, 2023, the Company entered into a Real Estate Sales Agreement with a third party (the
“Buyer”). Pursuant to the agreement, the Company will sell its head office in Japan including the building and
land with a net book value of approximately ¥
These unaudited condensed consolidated financial statements were approved by management and available for issuance on December 22, 2023, and the Company has evaluated subsequent events through this date. The Company did not identify any subsequent events except those disclosed above that would have required adjustment or disclosure in the financial statements.
F-39
Exhibit 99.2
Yoshitsu Co., Ltd Reports First Six Months of Fiscal Year 2024 Financial Results
Tokyo, Japan, December 22, 2023 (GLOBE NEWSWIRE) -- Yoshitsu Co., Ltd (“Yoshitsu” or the “Company”) (Nasdaq: TKLF), a retailer and wholesaler of Japanese beauty and health products, sundry products, luxury products, electronic products, as well as other products in Hong Kong, mainland China, Japan, North America, and the United Kingdom, today announced its unaudited financial results for the first six months of fiscal year 2024 ended September 30, 2023.
Mr. Mei Kanayama, Principal Executive Officer of Yoshitsu, commented, “We believe it has been a dynamic first half of fiscal year 2024, marked by a significant growth in revenue from physical stores and our strategic focuses on the asset-light business model and franchise expansion in Japan. Our revenue from directly-operated physical stores increased by 99.0% during the first half of fiscal year 2024, compared to the same period in 2023, which we believe reflects the success of our new luxury product lines and our expansion in key markets, like Japan and Hong Kong, and underscores our commitment to enhancing our physical store presence and adapting to market demands. Looking forward, we are optimistic about our asset-light business model and franchise expansion in Japan. We believe this strategy not only streamlines our operational efficiency but also aligns with our vision to build a strong brand presence and optimize revenue streams. As we continue to expand our business globally, we are expecting this model to bring innovative products to the market more rapidly, respond effectively to customer needs, and improve our overall profitability. Our commitment to our shareholders remains steadfast as we look to the future with optimism and a clear strategy aiming for sustained growth and value creation.”
Mr. Youichiro Haga, Principal Accounting and Financial Officer of Yoshitsu, remarked, “The financial results for the first six months of fiscal year 2024 present a diverse set of financial outcomes for Yoshitsu. We expect the adoption of the asset-light business model to enhance our market agility, foster stronger customer relationship, and elevate our customers’ shopping experiences. We are focused on continuing to strengthen our financial foundation and drive sustainable growth in the coming periods. We are committed to consistently evaluating and refining our financial strategies to align with our long-term goals and market dynamics, and to ensuring that Yoshitsu remains resilient and poised for continued success.”
First Six Months of Fiscal Year 2024 Financial Highlights
| ● | Revenue was $74.2 million for the six months ended September 30, 2023, compared to $77.6 million for the same period of last year. |
| ● | Gross profit was $9.5 million for the six months ended September 30, 2023, compared to $14.6 million for the same period of last year. |
| ● | Net income was $2.0 million for the six months ended September 30, 2023, increased by 496.6% from $0.3 million for the same period of last year. |
| ● | Basic and diluted earnings per share was $0.05 for the six months ended September 30, 2023, compared to $0.01 for the same period of last year. |
First Six Months of Fiscal Year 2024 Financial Results
Revenue
Total revenue was $74.2 million for the six months ended September 30, 2023, decreased by 4.4% from $77.6 million for the same period of last year.
| For the Six Months Ended September 30, | ||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||
| ($ millions) | Revenue | Cost of Revenue | Gross Margin | Revenue | Cost of Revenue | Gross Margin | ||||||||||||||||||
| Directly-operated physical stores | 11.6 | 9.9 | 14.6 | % | 5.8 | 4.7 | 20.2 | % | ||||||||||||||||
| Online stores and services | 6.0 | 4.9 | 17.9 | % | 16.3 | 13.0 | 20.5 | % | ||||||||||||||||
| Franchise stores and wholesale customers | 56.5 | 49.9 | 11.8 | % | 55.5 | 45.4 | 18.1 | % | ||||||||||||||||
| Total | 74.2 | 64.7 | 12.8 | % | 77.6 | 63.1 | 18.8 | % | ||||||||||||||||
Revenue from directly-operated physical stores increased by 99.0%, to $11.6 million for the six months ended September 30, 2023, from $5.8 million for the six months ended September 30, 2022. The increase was mainly driven by the introduction of luxury products in directly-operated physical stores in Japan during the six months ended September 30, 2023. The increase in directly-operated physical stores sales was also due to revenue contributed from the Company’s newly-opened physical stores in Hong Kong.
Revenue from online stores and services decreased by 63.2%, to $6.0 million for the six months ended September 30, 2023, from $16.3 million for the six months ended September 30, 2022. The decrease was mainly due to a shift in the Company’s business strategy since August 2022. Instead of operating the online stores by itself, the Company entrusted the entire operations of all its online stores in China to third-party companies to minimize the operating risk. After the change, these third-party companies purchased products from the Company like other wholesale customers, and hence this portion of revenue was recorded under franchise stores and wholesale customers. The decrease was partially offset by increased revenue generated by the Company’s online stores in Japan and revenue from advertising services through key opinion leaders.
Revenue from franchise stores and wholesale customers increased by 1.9%, to $56.5 million for the six months ended September 30, 2023, from $55.5 million for the six months ended September 30, 2022. During the six months ended September 30, 2023, the Company started to offer luxury products and electronic products, which led to an increase in revenue from franchise stores and wholesale customers due to their higher unit selling price. The increase was also due to increased revenue previously recognized under physical stores and online stores as mentioned above. However, the increase was partially offset by the temporary suspension of sale to certain customers. In order to mitigate the increased credit risk due to slow collection of the Company’s overdue account receivable, the Company suspended its sales to certain customers during the period from May to June 2023. Sales to these customers have only gradually resumed since July 2023 after they accelerated their payments of the overdue accounts receivable to the Company.
2
Cost of Revenue
Cost of revenue increased by 2.6%, to $64.7 million for the six months ended September 30, 2023, from $63.1 million for the six months ended September 30, 2022.
Gross Profit and Gross Margin
Gross profit decreased by 35.1%, to $9.5 million for the six months ended September 30, 2023, from $14.6 million for the same period of last year.
Gross margin decreased by 6 percentage points, to 12.8% for the six months ended September 30, 2023, from 18.8% for the same period of last year.
Operating Expenses
Operating expenses decreased by 32.5%, to $9.1 million for the six months ended September 30, 2023, from $13.5 million for the same period of last year. The decrease in operating expenses was primarily attributable to a decrease in shipping expenses, promotion and advertising expenses, transaction commission paid to third-party e-commerce marketplace operators, payroll, employee benefit expenses, and bonus expenses and allowance for credit losses. The decrease was partially offset by an increase in consulting and professional service fees.
Interest Expenses, net
Interest expenses, net included interest expenses calculated at interest rate per loan agreements and loan service costs, which were directly incremental to the loan agreements and amortized over the loan periods. Interest expenses, net decreased by 27.4%, to $1.0 million for the six months ended September 30, 2023, from $1.4 million for the same period of last year. The decrease mainly consisted of a decrease in interest expenses at interest rate by $0.4 million, which was mainly because the weighted average interest rate decreased to 0.98% for the six months ended September 30, 2023, from 1.83% for the same period of last year. The decrease was partially offset by the slight increase in amortized loan service costs in relation to the Company’s syndicated loans by $63,497.
Other Income (Expenses), net
The Company’s other income (expenses), net primarily includes tax refund, disposal gain or loss from property and equipment, government subsidies, and other immaterial income and expense items. Other income, net increased by 159.0%, to $66,947 for the six months ended September 30, 2023, from net other expenses of $113,409 for the same period of last year. The increase was mainly due to the decreased loss from disposal of property and equipment, which was partially offset by decreased government subsidies received during the six months ended September 30, 2023 as compared to the same period of last year.
Gain from Foreign Currency Exchange
Gain from foreign currency exchange was $2.4 million for the six months ended September 30, 2023, as compared to a gain from foreign currency exchange of $1.0 million for the same period of last year. The gain from foreign currency exchange was mainly due to the significant fluctuations of foreign exchange rate on the Company’s accounts receivable denominated in foreign currencies, such as U.S. dollars and Chinese Yuan, during the six months ended September 30, 2023. The increase was also due to the increased gain from foreign currency exchange by the Company’s Hong Kong subsidiaries, which was mainly due to the significant fluctuations of foreign exchange rate on its payables denominated in Japanese Yen during the six months ended September 30, 2023.
3
Provision (Benefit) for Income Taxes
Benefit for income taxes was $0.4 million for the six months ended September 30, 2023, as compared to provision for income taxes of $0.2 million for the same period of last year. The Company’s benefit for income taxes increased by 268.1%. The increase in benefit for income taxes was mainly due to the increased deferred income tax benefit, which was partially offset by the increased current income tax expenses resulting from the increased taxable income for the six months ended September 30, 2023.
Net Income
Net income increased by 496.6%, to $2.0 million for the six months ended September 30, 2023, from $0.3 million for the same period of last year.
Basic and Diluted Earnings per Share
Basic and diluted earnings per share was $0.05 for the six months ended September 30, 2023, compared to $0.01 for the same period of last year.
Financial Condition
As of September 30, 2023, the Company had cash of $2.8 million, compared to $1.8 million as of March 31, 2023. As of September 30, 2023, the Company also had approximately $74.2 million of account receivable balance due from third parties. Approximately 38.05% of the September 30, 2023 balance has been subsequently collected, and the majority of the remaining balance is expected to be collected by March 31, 2024. The collection of such receivables made cash available for use in the Company’s operations as working capital, if necessary.
Net cash provided by operating activities was $3.7 million for the six months ended September 30, 2023, mainly derived from net income of $2.0 million for the period, and net changes in the Company’s operating assets and liabilities, which mainly due to the decrease in accounts receivable due from third parties of $6.4 million as a result of the Company’s great effort in collection of overdue accounts receivable and the decrease in compensation receivable for consumption tax of $6.1 million as the Company received payments from the debtors according to the collection plan. Net cash used in operating activities was $21.9 million for the six months ended September 30, 2022, mainly derived from net income of $0.3 million for the period, and net changes in the Company’s operating assets and liabilities, which mainly included an increase in accounts receivable from third parties of $21.8 million, which was due to the delayed shipments and longer payment processing procedures as affected by the COVID-19 pandemic.
Net cash provided by investing activities was $0.4 million for the six months ended September 30, 2023, mainly due to repayments from related parties of $0.4 million and proceeds from disposal of equity method investment of $0.3 million, partially offset by the purchases of property and equipment in the aggregate amount of $0.2 million and disposal of a subsidiary of $0.2 million. Net cash provided by investing activities was $0.1 million for the six months ended September 30, 2022, mainly due to repayments from related parties of $0.1 million.
4
Net cash used in financing activities was $1.1 million for the six months ended September 30, 2023, which primarily consisted of repayments of long-term borrowings of $0.6 million, payments made to related parties of $0.2 million, and repayments of obligations under finance leases of $0.3 million. Net cash provided by financing activities was $16.4 million for the six months ended September 30, 2022, which primarily consisted of proceeds from short-term borrowings of $74.8 million and proceeds from long-term borrowings of $2.2 million, partially offset by repayments of short-term borrowings of $56.1 million, repayments of long-term borrowings of $1.5 million, and cash consideration paid for business combination under common control of $2.8 million.
Conference Call Information
The Company will host an earnings conference call at 8:30 am U.S. Eastern Time (10:30 pm Japan Standard Time) on December 22, 2023. Dial-in details for the conference call are as follows:
| Date: | December 22, 2023 |
| Time: | 8:30 am U.S. Eastern Time |
| International: | 1-412-902-4272 |
| United States Toll Free: | 1-888-346-8982 |
| Japan Toll Free: | 0066-33-812830 |
| Conference ID | Yoshitsu Co., Ltd |
Please dial in at least 15 minutes before the commencement of the call to ensure timely participation.
For those unable to participate, an audio replay of the conference call will be available from approximately one hour after the end of the live call until December 29, 2023. The dial-in for the replay is +1-877-344-7529 within the United States or +1-412-317-0088 internationally. The replay access code is No. 1325694.
A live and archived webcast of the conference call will also be available at the Company’s investor relations website at https://www.ystbek.co.jp/irlibrary/.
About Yoshitsu Co., Ltd
Headquartered in Tokyo, Japan, Yoshitsu Co., Ltd is a retailer and wholesaler of Japanese beauty and health products, sundry products, luxury products, electronic products, as well as other products in Hong Kong, mainland China, Japan, North America, and the United Kingdom. The Company offers various beauty products (including cosmetics, skincare, fragrance, and body care products), health products (including over-the-counter drugs, nutritional supplements, and medical supplies and devices), sundry products (including home goods), luxury products (including branded watches, perfume, handbags, clothes, and jewelry), electronic products (including entertainment gaming products), and other products (including food and alcoholic beverages). The Company currently sells its products through directly-operated physical stores, through online stores, and to franchise stores and wholesale customers. For more information, please visit the Company’s website at https://www.ystbek.co.jp/irlibrary/.
5
Forward-Looking Statements
Certain statements in this press release are forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy, and financial needs. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to,” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. In addition, there is uncertainty about the further spread of the COVID-19 virus or the occurrence of another wave of cases and the impact it may have on the Company’s operations, the demand for the Company’s products, global supply chains, and economic activity in general. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and in its other filings with the U.S. Securities and Exchange Commission.
For more information, please contact:
Yoshitsu Co., Ltd
Investor Relations Department
Email: ir@ystbek.co.jp
Ascent Investor Relations LLC
Tina Xiao
President
Phone: +1-646-932-7242
Email: investors@ascent-ir.com
6
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | March 31, | |||||||
| 2023 | 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 2,790,801 | $ | 1,766,441 | ||||
| Accounts receivable, net | 74,181,423 | 89,447,155 | ||||||
| Accounts receivable - related parties | 44 | 327,807 | ||||||
| Merchandise inventories, net | 14,828,587 | 7,187,800 | ||||||
| Due from related parties | 9,035 | 444,567 | ||||||
| Compensation receivable for consumption tax, current | 9,229,456 | 3,912,719 | ||||||
| Prepaid expenses and other current assets, net | 3,453,592 | 3,542,864 | ||||||
| TOTAL CURRENT ASSETS | 104,492,938 | 106,629,353 | ||||||
| Property and equipment, net | 11,284,906 | 12,938,598 | ||||||
| Operating lease right-of-use assets | 3,113,422 | 2,709,954 | ||||||
| Long-term investment | - | 169,148 | ||||||
| Compensation receivable for consumption tax, non-current, net | 6,106,954 | 19,230,370 | ||||||
| Long-term prepaid expenses and other non-current assets, net | 4,128,092 | 4,997,857 | ||||||
| TOTAL ASSETS | $ | 129,126,312 | $ | 146,675,280 | ||||
| CURRENT LIABILITIES: | ||||||||
| Short-term borrowings | $ | 54,539,800 | $ | 60,636,412 | ||||
| Current portion of long-term borrowings | 3,618,832 | 2,783,445 | ||||||
| Accounts payable | 13,344,531 | 12,719,160 | ||||||
| Accounts payable - related parties | 67,848 | - | ||||||
| Due to related parties | 108,064 | 297,559 | ||||||
| Deferred revenue | 85,989 | 146,024 | ||||||
| Taxes payable | 12,283,353 | 18,219,803 | ||||||
| Operating lease liabilities, current | 1,348,045 | 1,323,900 | ||||||
| Finance lease liabilities, current | 231,406 | 369,786 | ||||||
| Representative’s warrants liability | 20,222 | 24,663 | ||||||
| Other payables and other current liabilities | 1,284,569 | 1,520,756 | ||||||
| TOTAL CURRENT LIABILITIES | 86,932,659 | 98,041,508 | ||||||
| Operating lease liabilities, non-current | 1,833,622 | 1,416,508 | ||||||
| Finance lease liabilities, non-current | 340,899 | 622,922 | ||||||
| Long-term borrowings | 7,315,955 | 10,326,399 | ||||||
| Other non-current liabilities | 2,152,875 | 2,535,123 | ||||||
| Deferred tax liabilities, net | 2,583,854 | 4,451,077 | ||||||
| TOTAL LIABILITIES | $ | 101,159,864 | $ | 117,393,537 | ||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Ordinary shares, 100,000,000 shares authorized; 36,250,054 shares and 36,250,054 shares issued and outstanding as of September 30, 2023 and March 31, 2023, respectively | 14,694,327 | 14,694,327 | ||||||
| Capital reserve | 9,078,915 | 9,078,915 | ||||||
| Retained earnings | 15,532,199 | 13,577,844 | ||||||
| Accumulated other comprehensive loss | (11,338,993 | ) | (8,069,343 | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | 27,966,448 | 29,281,743 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 129,126,312 | $ | 146,675,280 | ||||
7
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| REVENUE | ||||||||
| Revenue - third parties | $ | 74,049,115 | $ | 77,607,361 | ||||
| Revenue - related parties | 115,034 | 8,188 | ||||||
| Total revenue | 74,164,149 | 77,615,549 | ||||||
| COSTS AND OPERATING EXPENSES | ||||||||
| Merchandise costs | 64,706,599 | 63,052,437 | ||||||
| Selling, general and administrative expenses | 9,124,805 | 13,518,943 | ||||||
| Total operating expenses | 73,831,404 | 76,571,380 | ||||||
| INCOME FROM OPERATIONS | 332,745 | 1,044,169 | ||||||
| OTHER INCOME (EXPENSES) | ||||||||
| Interest expenses, net | (995,997 | ) | (1,372,444 | ) | ||||
| Additional and delinquent tax due to consumption tax correction | (644,780 | ) | - | |||||
| Gain from disposal of equity method investment | 195,391 | - | ||||||
| Gain from disposal of a subsidiary | 341,755 | - | ||||||
| Other income (expenses), net | 66,947 | (113,409 | ) | |||||
| Gain from foreign currency exchange | 2,371,226 | 981,017 | ||||||
| Change in fair value of representative’s warrants liability | 1,833 | 89,049 | ||||||
| Loss from equity method investment | (71,200 | ) | (88,737 | ) | ||||
| Total other income (expenses), net | 1,265,175 | (504,524 | ) | |||||
| INCOME BEFORE INCOME TAX PROVISION | 1,597,920 | 539,645 | ||||||
| PROVISION (BENEFIT) FOR INCOME TAXES | (356,435 | ) | 212,052 | |||||
| NET INCOME | 1,954,355 | 327,593 | ||||||
| OTHER COMPREHENSIVE LOSS | ||||||||
| Foreign currency translation loss | (3,269,650 | ) | (7,374,799 | ) | ||||
| TOTAL COMPREHENSIVE LOSS | $ | (1,315,295 | ) | $ | (7,047,206 | ) | ||
| Earnings per ordinary share - basic and diluted | $ | 0.05 | $ | 0.01 | ||||
| Weighted average shares - basic and diluted | 36,250,054 | 36,250,054 | ||||||
8
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
| Ordinary Shares | Capital | Retained | Accumulated Other Comprehensive | Total Shareholders’ | ||||||||||||||||||||
| Shares | Amount | Reserve | Earnings | Income (Loss) | Equity | |||||||||||||||||||
| Balance, March 31, 2022 | 36,250,054 | $ | 14,694,327 | 11,921,065 | 21,465,317 | $ | (3,628,669 | ) | 44,452,040 | |||||||||||||||
| Business combinations under common control | - | - | (2,842,173 | ) | - | - | (2,842,173 | ) | ||||||||||||||||
| Net income for the period | - | - | - | 327,593 | - | 327,593 | ||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | (7,374,799 | ) | (7,374,799 | ) | ||||||||||||||||
| Balance, September 30, 2022 | 36,250,054 | $ | 14,694,327 | $ | 9,078,892 | $ | 21,792,910 | $ | (11,003,468 | ) | $ | 34,562,661 | ||||||||||||
| Balance, March 31, 2023 | 36,250,054 | $ | 14,694,327 | $ | 9,078,915 | $ | 13,577,844 | $ | (8,069,343 | ) | $ | 29,281,743 | ||||||||||||
| Net income for the period | - | - | - | 1,954,355 | - | 1,954,355 | ||||||||||||||||||
| Foreign currency translation loss | - | - | - | - | (3,269,650 | ) | (3,269,650 | ) | ||||||||||||||||
| Balance, September 30, 2023 | 36,250,054 | $ | 14,694,327 | $ | 9,078,915 | $ | 15,532,199 | $ | (11,338,993 | ) | $ | 27,966,448 | ||||||||||||
9
YOSHITSU CO., LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | 1,954,355 | $ | 327,593 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 526,994 | 514,000 | ||||||
| Loss from disposal of property and equipment | 13,704 | 304,133 | ||||||
| Loss (gain) from unrealized foreign currency translation | 139,012 | (175,351 | ) | |||||
| Allowance for (net recovery of) credit losses | (148,556 | ) | 87,250 | |||||
| Reversal of merchandise inventories written down | (10,713 | ) | - | |||||
| Amortization of operating lease right-of-use assets | 876,122 | 1,086,370 | ||||||
| Deferred tax benefit | (1,460,623 | ) | (29,689 | ) | ||||
| Change in fair value of representative’s warrants liability | (1,833 | ) | (89,049 | ) | ||||
| Investment loss from equity method investment | 71,200 | 88,737 | ||||||
| Gain from disposal of equity method investment | (195,391 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 6,372,895 | (21,785,420 | ) | |||||
| Accounts receivable - related parties | 309,809 | - | ||||||
| Merchandise inventories | (8,645,561 | ) | 4,774,980 | |||||
| Compensation receivable for consumption tax | 6,116,206 | - | ||||||
| Prepaid expenses and other current assets | (2,342,968 | ) | (4,009,679 | ) | ||||
| Long-term prepaid expenses and other non-current assets | 2,767,762 | 1,681,064 | ||||||
| Accounts payable | 2,128,474 | (1,509,149 | ) | |||||
| Accounts payable - related parties | 67,840 | (211,615 | ) | |||||
| Deferred revenue | 68,324 | 84,979 | ||||||
| Taxes payable | (4,136,000 | ) | (106,681 | ) | ||||
| Other payables and other current liabilities | 103,774 | (1,894,627 | ) | |||||
| Operating lease liabilities | (838,782 | ) | (1,102,199 | ) | ||||
| Other non-current liabilities | (38,735 | ) | 26,812 | |||||
| Net cash provided by (used in) operating activities | 3,697,309 | (21,937,541 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (197,825 | ) | (45,472 | ) | ||||
| Proceeds from disposal of property and equipment | 710 | 2,992 | ||||||
| Proceeds from disposal of equity method investment | 283,800 | - | ||||||
| Proceeds from disposal of a subsidiary | 35,475 | - | ||||||
| Disposal of a subsidiary, net of cash | (176,133 | ) | - | |||||
| Collection of amount due from related parties | 410,181 | 145,017 | ||||||
| Net cash provided by investing activities | 356,208 | 102,537 | ||||||
| Cash flows from financing activities: | ||||||||
| Cash consideration paid for business combination under common control | - | (2,840,957 | ) | |||||
| Proceeds from short-term borrowings | - | 74,800,000 | ||||||
| Repayments of short-term borrowings | - | (56,100,000 | ) | |||||
| Proceeds from long-term borrowings | - | 2,190,669 | ||||||
| Repayments of long-term borrowings | (608,947 | ) | (1,450,671 | ) | ||||
| Payments made to related parties | (166,252 | ) | (48,632 | ) | ||||
| Repayment of obligations under finance leases | (297,843 | ) | (200,104 | ) | ||||
| Net cash provided by (used in) financing activities | (1,073,042 | ) | 16,350,305 | |||||
| Effect of exchange rate fluctuation on cash | (1,956,115 | ) | (3,618,859 | ) | ||||
| Net increase (decrease) in cash | 1,024,360 | (9,103,558 | ) | |||||
| Cash at beginning of period | 1,766,441 | 18,256,220 | ||||||
| Cash at end of period | $ | 2,790,801 | $ | 9,152,662 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for income taxes | $ | 592,194 | $ | 334,323 | ||||
| Cash paid for interest | $ | 341,583 | $ | 644,244 | ||||
| Supplemental non-cash operating activities | ||||||||
| Purchase of property and equipment financed under finance leases | $ | - | $ | 30,892 | ||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | 1,512,843 | $ | 464,940 | ||||
10
Document And Entity Information |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Document Information Line Items | |
| Entity Registrant Name | Yoshitsu Co., Ltd |
| Document Type | 6-K |
| Current Fiscal Year End Date | --03-31 |
| Amendment Flag | false |
| Entity Central Index Key | 0001836242 |
| Document Period End Date | Sep. 30, 2023 |
| Document Fiscal Year Focus | 2024 |
| Document Fiscal Period Focus | Q2 |
| Entity File Number | 001-41181 |
Unaudited Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Ordinary shares, no par value (in Dollars per share) | ||
| Ordinary shares, shares authorized | 100,000,000 | 100,000,000 |
| Ordinary shares, shares issued | 36,250,054 | 36,250,054 |
| Ordinary shares, shares outstanding | 36,250,054 | 36,250,054 |
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (Parentheticals) - $ / shares |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||
| Earnings per ordinary share - diluted | $ 0.05 | $ 0.01 |
| Weighted average shares - diluted | 36,250,054 | 36,250,054 |
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity - USD ($) |
Ordinary Shares |
Capital Reserve |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total |
|---|---|---|---|---|---|
| Balance at Mar. 31, 2022 | $ 14,694,327 | $ 11,921,065 | $ 21,465,317 | $ (3,628,669) | $ 44,452,040 |
| Balance (in Shares) at Mar. 31, 2022 | 36,250,054 | ||||
| Business combinations under common control | (2,842,173) | (2,842,173) | |||
| Net income for the period | 327,593 | 327,593 | |||
| Foreign currency translation loss | (7,374,799) | (7,374,799) | |||
| Balance at Sep. 30, 2022 | $ 14,694,327 | 9,078,892 | 21,792,910 | (11,003,468) | 34,562,661 |
| Balance (in Shares) at Sep. 30, 2022 | 36,250,054 | ||||
| Balance at Mar. 31, 2023 | $ 14,694,327 | 9,078,915 | 13,577,844 | (8,069,343) | $ 29,281,743 |
| Balance (in Shares) at Mar. 31, 2023 | 36,250,054 | 36,250,054 | |||
| Net income for the period | 1,954,355 | $ 1,954,355 | |||
| Foreign currency translation loss | (3,269,650) | (3,269,650) | |||
| Balance at Sep. 30, 2023 | $ 14,694,327 | $ 9,078,915 | $ 15,532,199 | $ (11,338,993) | $ 27,966,448 |
| Balance (in Shares) at Sep. 30, 2023 | 36,250,054 | 36,250,054 |
Organization and Business Description |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization and Business Description [Abstract] | |
| ORGANIZATION AND BUSINESS DESCRIPTION | NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION
Yoshitsu Co., Ltd (the “Company”) is a stock company incorporated in Japan pursuant to the laws of Japan on December 28, 2006.
Prior to July 1, 2023, the Company owned 100% of the equity interests of Kaika International Co., Ltd, formerly known as Tokyo Lifestyle Co., Ltd. (“Kaika International”), a stock company incorporated pursuant to the laws of Japan on October 24, 2019. The Company acquired 100% equity interests in Tokyo Lifestyle Limited (“TLS”) on July 27, 2022, and TLS acquired 60% equity interests in Reiwatakiya (MYS) SDN. BHD. (“Reiwatakiya”) on October 26, 2022 and the remaining 40% equity interests on January 4, 2023. These transactions were accounted for as acquisitions under common control (see details in “Acquisition Under Common Control”).
On June 30, 2023, the Company entered into a share transfer agreement with Seihinkokusai Co., Ltd. (“Seihinkokusai”), a related party of the Company, to sells its 100% equity interests in Kaika International to Seihinkokusai for cash consideration of ¥5,000,000 ($37,595). The transaction contemplated by the agreement was approved by the Company’s board of directors at a board meeting on June 30, 2023. The sale of Kaika International was part of a strategic restructuring of the Company to concentrate its management resources on its core businesses and maintain operational efficiency. The cash consideration was received in its entirety and the transaction was completed on July 1, 2023.
On September 6, 2023, TLS incorporated a wholly-owned subsidiary, RAKKISTAR HOLDING INC., in the State of Ontario, Canada. On October 17, 2023, TLS incorporated a wholly-owned subsidiary, Tokyo Lifestyle Holding Inc. (“TSL Holding”), in the State of Delaware. TSL Holding also incorporated a wholly-owned subsidiary, REIWATAKIYA BOS LLC, a limited liability company on October 26, 2023, in the Commonwealth of Massachusetts. These companies are currently not engaging in any active business operations.
The Company and its subsidiaries (collectively, “Yoshitsu”) are a retailer and wholesaler of Japanese beauty and health products, as well as luxury and electronic products, sundry products, and other products and services. The Company offers approximately 39,500 stock keeping units (“SKUs”) of beauty products, including cosmetics, skin care, fragrance, and body care, among others; 15,000 SKUs of health products, including over-the-counter (“OTC”) drugs, nutritional supplements, and medical supplies and devices; 41,600 SKUs of sundry products, including home goods, 150 SKUs of electronic products, including entertainment gaming products, such as Nintendo Switch and Xbox Series, 590 SKUs of luxury products, including branded watches, perfume, handbags, clothes, and jewelry, and 44,800 SKUs of other products, including food, alcoholic beverages The Company also provides advertising services by key opinion leaders (“KOLs”).
Acquisition Under Common Control
On July 20, 2022, the Company entered into a definitive agreement (the “Agreement”) with All Seas Global Limited to acquire its 100% equity interests in TLS, a company incorporated pursuant to the laws of Hong Kong on May 10, 2019 and principally engaged in the import and retail of Japanese beauty and cosmetic products in Hong Kong and engaged in the live e-commerce business through its wholly-owned subsidiary, Shenzhen Qingzhiliangpin Network Technology Co., Ltd. (“Qingzhiliangpin”), a company incorporated on April 16, 2020 in the People’s Republic of China (the “PRC”). Pursuant to the Agreement, the Company agreed to acquire 100% of the equity interests in TLS in total consideration of Japanese yen 392,673,800 in cash (US$2,842,173), subject to certain terms. The transaction contemplated by the Agreement was approved by the Company’s board of directors at a special board meeting on June 27, 2022. The 100% of the equity interests in TLS were transferred to the Company on July 20, 2022, and cash consideration was paid in full and the transaction was closed on July 27, 2022. As the Company and TLS previously were controlled by the same ultimate controlling shareholder before this acquisition, this transaction was accounted for as an acquisition of a business under common control, and accordingly, the Company’s comparative financial information prior to the acquisition date of July 20, 2022 was retrospectively adjusted to include the financial results of TLS. See “Note 10—Acquisitions.”
On October 26, 2022, the board of directors of TLS approved the acquisition of Reiwatakiya from All Seas Global Limited, who held 60% interests in Reiwatakiya, and subsequently, approved the acquisition of the remaining 40% interests in Reiwatakiya from a third-party shareholder on January 4, 2023. Reiwatakiya is a private limited company incorporated in Malaysia on June 14, 2022, and principally engaged in the import and retail of Japanese beauty and cosmetic products in Malaysia, and is currently not engaging in any active business operations. The 60% and 40% of the equity interests in Reiwatakiya were transferred to the TLS on October 26, 2022 and January 4, 2023, respectively, with no consideration. As TLS and Reiwatakiya previously were controlled by the same ultimate controlling shareholder before this acquisition, this transaction was accounted for as an acquisition of a business under common control, accordingly, the Company’s comparative financial information prior to the acquisition date of October 26, 2022 was retrospectively adjusted to include the financial results of Reiwatakiya. See “Note 10—Acquisitions.” |
Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany balances and transactions are eliminated upon consolidation. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the afore-mentioned SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal years ended March 31, 2023 and 2022. Operating results for the six-month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending March 31, 2024.
Use of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes 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 period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, assessment of expected credit losses for accounts receivable, compensation receivable for consumption tax, current and non-current prepaid expenses and other assets, valuation of inventories, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, inputs used in the calculation of the asset retirement obligation, and implicit interest rate of operating leases and financing leases. Actual results could differ from those estimates.
Cash
Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains its bank accounts in Japan, Hong Kong, China and Malaysia. The Company considers all highly-liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. As of September 30, 2023 and March 31, 2023, the Company did not have any cash equivalents.
Receivables and credit losses
On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss impairment methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial statements.
The Company’s account receivables, compensation receivable for consumption tax and other receivable included in current and non-current prepaid expenses and other assets are within the scope of ASC Topic 326. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical experience, the age of the receivables, credit-worthiness of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.
Expected credit losses are included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Account receivables, compensation receivable for consumption tax and other receivable is recognized and carried at original amount less an allowance for credit losses, as necessary. As of September 30, 2023 and March 31, 2023, allowance for credit losses for accounts receivable amounted to $3,038,819 and $3,219,772, respectively, allowance for credit losses for other receivables amounted to $743,508 and $904,598, respectively, and allowance for credit losses for compensation receivable for consumption tax amounted to $152,169 and $436,145, respectively.
Leases
The Company adopted Financial Accounting Standards Board (the “FASB”) ASC No. 842, Leases (“Topic 842”) on April 1, 2018 using the modified retrospective approach.
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty.
The Company leases retail store facilities and distribution centers, which are classified as operating leases and leases certain software and equipment and furniture as finance lease in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current, and finance leases are included in property and equipment, finance lease liabilities, current, and finance lease liabilities, non-current in the unaudited condensed consolidated balance sheet.
At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The operating lease right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All operating lease right-of-use assets are reviewed for impairment annually. There was no impairment for operating lease right-of-use lease assets as of September 30, 2023 and March 31, 2023.
The Company has elected the short-term lease exception, and therefore operating lease right-of-use assets and liabilities do not include leases with a lease term of twelve months or less.
In response to the large volume of anticipated lease concessions to be granted related to the effects of the COVID-19 pandemic, and the resultant expected cost and complexity of applying the lease modification requirements in Topic 842, the FASB issued Staff Q&A—Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic in April 2020 as interpretive guidance to provide clarity in response to the crisis. The FASB staff indicated that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how they would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Consequently, for such lease concessions, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can elect to apply or not to apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract.
Based on the nature of the agreements reached with many of its landlords, the Company has accounted for rent concessions as if they were part of the enforceable rights and obligations of the existing lease contracts and did not account for the concessions as lease modifications. The Company has received a total of lease concessions amounting to $253,206, and among which, $ and $49,368 was received during the six months ended September 30, 2023 and 2022, respectively. The Company remeasured the lease payments using the same discount rate, and has continued to recognize lease expenses on a straight-line basis for its leases over the related lease terms.
Equity investment
An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the board of directors, voting rights, and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary. The Company did not record impairment losses on its equity method investment during the six months ended September 30, 2023 and 2022.
Common control transactions
In business combinations under common control, the assets and liabilities acquired are measured at the historical amounts of the acquirees in the unaudited condensed consolidated financial statements of acquirer on the acquisition date. The difference between the carrying amounts of the net assets acquired and the consideration paid is adjusted to the equity account of the acquirer. The operating results for all periods presented are retrospectively restated as if the current structure and operations resulting from the acquisition had been in existence since the beginning of the earliest year presented, with financial data of previously separate entities consolidated. The subsequent adjustment of contingent consideration after the acquisition date is also accounted for as an equity transaction.
Merchandise inventories
Merchandise inventories are stated at the lower of cost or net realizable value, on a weighted average basis. Costs include mainly the cost of merchandise inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to sell products. Write-down is recorded when future estimated net realizable value is less than cost, which is recorded in merchandise costs in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company periodically evaluates merchandise inventories for their net realizable value adjustments, and reduces the carrying value of those merchandise inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and expiration dates, as applicable, taking into consideration historical and expected future product sales. As of September 30, 2023 and March 31, 2023, merchandise inventories write-down was $125,853 and $152,759, respectively.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Except for assets that are not subject to depreciation, such as land and construction in progress, depreciation and amortization of property and equipment are mainly provided using the straight-line method or declining balance method, which allocates an asset’s cost over the periods during which the Company benefits from the use of the asset. The expected economic useful lives of the Company’s assets are as follows:
Land has infinite useful life and is not subjected to amortization. Management reviews for impairment accordance with the accounting policy stated under impairment of long-lived assets.
Expenditures for maintenance and repair, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations and comprehensive loss in other income or expenses.
Asset retirement obligations
The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company’s asset retirement obligations are primarily related to leasehold improvement of its retail stores leases, that, at the end of the leases, are required to be returned to the landlords in their original condition. As of September 30, 2023 and March 31, 2023, the balance of asset retirement obligations included in other non-current liabilities was $824,105 and $1,004,838, respectively, and will be subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the leasehold improvements and are depreciated over the shorter of the estimated useful life of the asset or the term of the lease subsequent to the initial measurement. Due to the time over which these obligations could be settled and the judgment used to determine the liability, the ultimate obligation may differ from the estimate. Upon settlement, any difference between actual cost and the estimate is recognized as a gain or loss in that period.
Impairment of long-lived assets
The Company evaluates its long-lived assets, including property and equipment, operating lease right-of-use assets and long-term prepaid expenses and non-current assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered through the related future net cash flows, the Company did not recognize any impairment loss on long-lived assets for the six months ended September 30, 2023 and 2022.
Revenue recognition
The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), on April 1, 2018 using the modified retrospective approach.
ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance (ASC Topic 605, Revenue Recognition) did not result in significant changes in the way the Company records its revenue. The Company has assessed the impact of the guidance by reviewing its existing customer contracts to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control, and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s unaudited condensed consolidated financial statements upon adoption of ASC 606.
Under ASC 606, revenue is recognized when control of promised goods is transferred or service is rendered to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from the specified goods and services.
The Company currently generates its revenue through retail and wholesale of Japanese beauty and health products, luxury and electronic products, as well as sundry and other products and services, through a multi-channel distribution network. Currently, the Company sells its products and rendered its services through: (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers. For Japanese and Hong Kong domestic sales, revenue is recognized at the point of sales or delivery of the related products and control is transferred. For international sales, the Company sells goods under Cost Insurance and Freight (“CIF”) shipping point term, and revenue is recognized when product is loaded on the ships and control is deemed as transferred. The Company generally offers a seven-day product return policy, as long as the products are undamaged, in their original condition, and can be resold. Products sold in the Company’s physical stores may be returned in store with receipt subject to certain restrictions. Historically, the customer returns were immaterial. Therefore, the Company did not provide any sales return allowances for the six months ended September 30, 2023 and 2022. The Company’s service revenue primarily consists advertising services of KOLs for its customers. The Company produces short videos with the online celebrities to promote the brands of its customers on social media platforms, such as Tik Tok and Kuaishou. Revenue from these services is recognized at a point in time when the service is rendered by the Company. The Company enters into franchise agreements with franchisees in Japan under which the franchisee is granted a revocable license and non-exclusive right to use the Company’s trademarks and stores. The Company requires an entire non-refundable initial franchise fee of ¥30.0 million (approximately $20,000) to be paid upon execution of a franchise agreement, which typically has an initial term of three years and automatically renew for successive one-year terms, unless either party sends a written non-renewal notice no later than two months prior to the expiration of the then current term. Initial franchise fees are recognized on a straight-line basis over the term of the franchise agreement. In addition, the Company is also entitled to continuing franchise fees (royalties), equal to 5% of the monthly gross sales of the franchise store, and royalties are recognized as revenue based on the monthly royalty earned. Franchise fees from the franchisees were included in revenue from franchise stores and wholesale customers, and were immaterial for the six months ended September 30, 2023 and 2022.
The Company is the principal for its transactions and recognizes revenue on a gross basis. The Company is the principal when it has control of the merchandise before it is transferred to customers, which generally is established when the Company is primarily responsible for merchandising decisions, maintains the relationship with customer, including assurance of member service and satisfaction, and has pricing discretion.
In directly-operated physical stores in Japan and Hong Kong, customers can enroll in the Company’s rewards program, which is primarily a spending-based rewards program, and get a rewards card. Members of the rewards program usually earn one membership point for each ¥100 and HK$1 spent in the Company’s directly-operated physical stores in Japan and Hong Kong, respectively, and subsequently one membership point can be used as ¥1 at the Company’s directly-operated physical stores in Japan, and 250 membership points can be used as HK$1 at the Company’s directly-operated physical stores in Hong Kong when making payments; the membership points are valid for one year and ten years starting from the last use of the rewards card in directly-operated physical stores in Japan and Hong Kong, respectively. The Company initially accounts for these membership points as a reduction in sales based on the estimated monetary value of the membership points with the corresponding liability classified as deferred revenue in the unaudited condensed consolidated balance sheets. When a customer redeems earned membership points at its stores, the Company recognizes revenue and reduce the deferred revenue. Unused membership points are recognized as breakage, which is recorded as revenue in the unaudited condensed consolidated statements of operations and comprehensive loss. Membership point breakage was immaterial for the six months ended September 30, 2023 and 2022.
Contract balances and remaining performance obligations
Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. The Company did not have contract assets as of September 30, 2023 and March 31, 2023. The Company’s contract liabilities, which are reflected in its unaudited condensed consolidated balance sheets as deferred revenue of $85,989 and $146,024 as of September 30, 2023 and March 31, 2023 respectively, consist primarily of revenue for amount received in advance from the Company’s wholesale customers and unredeemed membership points. These amounts represent the Company’s unsatisfied performance obligations as of the balance sheet dates. The amount of revenue recognized in the six months ended September 30, 2023 and 2022 that was included in the opening deferred revenue was $56,811 and $59,000, respectively. As of September 30, 2023, the amount received in advance from wholesale customers and unredeemed membership points was $85,989. The Company expects to recognize revenue when products are delivered to the wholesale customers or when customers redeem their membership points, which is expected to occur within one year.
Disaggregation of revenue
The Company disaggregates its revenue by geographic areas, product categories, and distribution channels, which the Company believes best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended September 30, 2023 and 2022 is as following:
Revenue by geographic areas
The summary of the Company’s total revenue by geographic areas for the six months ended September 30, 2023 and 2022 was as follows:
Revenue by product categories
The summary of the Company’s total revenue by product categories for the six months ended September 30, 2023 and 2022 was as follows:
Revenue by distribution channels
The summary of the Company’s total revenue by distribution channels for the six months ended September 30, 2023 and 2022 was as follows:
Fair value of financial instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, due from related parties, current portion of compensation receivable for consumption tax, prepaid expenses and other current assets, short-term borrowings, current portion of long-term borrowings, accounts payable, due to related parties, deferred revenue, taxes payable, and other payables and other current liabilities, approximate the fair value of the respective assets and liabilities as of September 30, 2023 and March 31, 2023 based upon the short-term nature of the assets and liabilities.
Foreign currency translation
The Company maintains its books and record in its local currency, Japanese yen (“YEN” or “¥”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. The Company’s subsidiaries in Hong Kong, the PRC, and Malaysia use their respective currencies Hong Kong Dollar (“HK$”), Chinese Yuan (“RMB”), and Malaysia Ringgit (“MYR”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations and comprehensive loss.
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement,” assets and liabilities of the Company are translated into US$, using the exchange rate on the balance sheet date. Revenue and expenses are translated at the average rates prevailing during the period. Shareholders’ equity is translated at the historical exchange rate at the time of transaction. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. No significant penalties or interest relating to income taxes were incurred during the six months ended September 30, 2023 and 2022, and there was no uncertain tax provision as of September 30, 2023 and March 31, 2023.
The Company’s operating entities in Japan are subject to the income tax laws of Japan. As of September 30, 2023, the tax years ended March 31, 2021 through March 31, 2023 for the Company’s operating entities in Japan remain open for statutory examination by the Japanese tax authorities. The Company’s subsidiary in Hong Kong is subject to the profit taxes in Hong Kong. As of September 30, 2023, the tax years ended since the year of incorporation through March 31, 2023 for the Company’s subsidiary in Hong Kong remain open for statutory examination by the Hong Kong taxing jurisdictions. The Company’s subsidiary in China is subject to the income tax laws of the PRC. As of September 30, 2023, the tax years ended since the year of incorporation through December 31, 2022 for the Company’s PRC subsidiary remain open for statutory examination by PRC tax authorities. The Company’s subsidiary in Malaysia is subject to the income tax laws of Malaysia. As of September 30, 2023, all of the tax returns of the Company’s Malaysian subsidiary remain open for statutory examination by relevant tax authorities.
Earnings per share
The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no dilutive shares for the six months ended September 30, 2023 and 2022.
Shipping and handling cost
All shipping and handling costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. Total shipping and handling expenses were $665,727 and $3,514,186 for the six months ended September 30, 2023 and 2022, respectively.
Advertising expenses
Advertising costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. Advertising expenses amounted to $254,524 and for the six months ended September 30, 2023 and 2022, respectively.
Comprehensive loss
Comprehensive loss consists of two components, net income and other comprehensive loss. The foreign currency translation gain or loss resulting from the translation of the financial statements expressed in YEN, HK$, RMB and MYR to US$ is reported in other comprehensive loss in the unaudited condensed consolidated statements of operations and comprehensive loss.
Related parties and transactions
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures,” and other relevant ASC standards.
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions.
Segment reporting
The Company uses the management approach in determining its operating segments. The management approach considers the internal reporting used by the Company’s chief operating decision maker (“CODM”). The Company’s CODM has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Company. Management has determined that the Company has three operating segments, which are (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers.
Risks and uncertainties
Political and economic risk
The directly-operated physical stores of the Company are all located in Japan and Hong Kong, and the online stores and franchise stores and wholesale partners of the Company are mainly located in Japan and mainland China. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Japan, Hong Kong and mainland China, as well as by the general state of their economy. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in Japan, Hong Kong and mainland China. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note 1, such experience may not be indicative of future results.
Credit risk
As of September 30, 2023 and March 31, 2023, $1,817,832 and $1,001,582 of the Company’s cash was on deposit at financial institutions in Japan, respectively, which were insured by the Deposit Insurance Corporation of Japan subject to certain limitations. The Company has not experienced any losses in such accounts.
As of September 30, 2023 and March 31, 2023, $503,455 and $ of the Company’s cash was on deposit at financial institutions in the U.S. which were insured by the Federal Deposit Insurance Corporation subject to certain limitations.
As of September 30, 2023 and March 31, 2023, $370,930 and $590,116 of the Company’s cash was on deposit at financial institutions in Hong Kong, respectively, which were insured by the Hong Kong Deposit Protection Board for compensation up to a limit of HK$500,000 (approximately US$64,000) if the bank with which an individual/a company hold its eligible deposit fails.
As of September 30, 2023 and March 31, 2023, $17,605 and $69,537 of the Company’s cash was on deposit at financial institutions in mainland China, respectively, where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. The Company has not experienced any losses in such accounts.
As of September 30, 2023 and March 31, 2023, $19,070 and $27,137 of the Company’s cash was on deposit at financial institutions in Malaysia, respectively, which were subject to certain protection under the requirement of the deposit insurance system up to a limit of MYR250,000 (approximately US$53,000) if the bank with which an individual/a company hold its eligible deposit fails.
Accounts receivable are typically unsecured and derived from revenue earned from customers, compensation receivables are typically unsecured and derived from damages the Company claimed from certain suppliers as well as customers, thereby exposed to credit risks. The risk is mitigated by the Company’s assessment of its customers and suppliers’ creditworthiness and its ongoing monitoring of outstanding balances.
Concentrations
For the six months ended September 30, 2023 and 2022, majority of the Company’s assets were located in Japan and Hong Kong, and all of the Company’s revenue was generated by the Company and its subsidiaries, which are located in Japan, Hong Kong and China.
For the six months ended September 30, 2023, one customer accounted for 20.3% of the Company’s total revenue. For the six months ended September 30, 2022, three customers accounted for 12.7%, 12.3% and 11.3% of the Company’s total revenue.
As of September 30, 2023, two wholesale customers accounted for 20.8% and 18.3% of the total account receivable balance, respectively. As of March 31, 2023, four wholesale customers accounted for 15.7%, 15.2%, 14.8% and 13.0% of the total account receivable balance, respectively.
For the six months ended September 30, 2023, four suppliers accounted for approximately 23.8%, 21.2%, 16.1% and 12.8% of the Company’s total purchases, respectively. For the six months ended September 30, 2022, four suppliers accounted for approximately 21.1%, 13.1%, 12.7% and 12.0% of the Company’s total purchases, respectively.
Recent accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.” This ASU expands required public entities’ segment disclosures, including disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company plans to adopt this guidance effective April 1, 2025 and the adoption of this ASU is not expected to have a material impact on its financial statements.
Except for the above-mentioned pronouncement, there are no new recently issued accounting standards that will have material impact on the Company’s unaudited condensed consolidated financial position, statements of operations, and cash flows. |
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Going Concern |
6 Months Ended |
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Sep. 30, 2023 | |
| LIquidity [Abstract] | |
| GOING CONCERN | NOTE 3 – GOING CONCERN
Although the Company incurred a net loss in fiscal year ended March 31, 2023, the financial performance of the Company has improved during the six months ended September 30, 2023. As reflected in the unaudited condensed consolidated financial statements, the Company had a net income of $2.0 million and cash provided by operating activities of $3.7 million for the six months ended September 30, 2023. Total cash increased by $1.0 million from $1.8 million as of March 31, 2023 to $2.8 million as of September 30, 2023, and working capital increased by $9.0 million from $8.6 million as of March 31, 2023 to $17.6 million as of September 30, 2023.
The Company’s accounts receivable decreased by $15.2 million from $89.4 million as of March 31, 2023 to $74.2 million as of September 30, 2023 which was due to the management’s great efforts in collection of overdue accounts receivable. Approximately 38.1% of the September 30, 2023 balance has been subsequently collected. The collection of such receivables made cash available for use in our operations as working capital, if necessary.
As of September 30, 2023, the Company had approximately $54.5 million in short-term borrowings and $10.9 million in long-term borrowings outstanding. However, as the banks did not commit to extending the syndicated loans to the Company for one more year, there is an uncertainty about repayment of the short-term borrowings upon maturity on December 29, 2023. Management plans to address this uncertainty through equity financing. There is no assurance that the Group’s plans of equity financing will be successful.
Based on the foreseeable future projection of continuing operating profit or loss and the need for future business funding, management has determined that these additional conditions raise substantial doubt about the Group’s ability to continue as a going concern.
The accompanying unaudited condensed consolidated financial statements do not include adjustments that may result from this uncertainty. Therefore, the unaudited condensed consolidated financial statements are prepared on the assumption that the Group will continue as a going concern. |
Accounts Receivable, Net |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTS RECEIVABLE, NET | NOTE 4 – ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
The Company’s accounts receivable primarily include balance due from customers when the Company’s products have been sold and delivered to customers, which has not been collected as of the balance sheet dates.
Movement of allowance for credit losses was as follows:
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Merchandise Inventories, Net |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchandise Inventories, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MERCHANDISE INVENTORIES, NET | NOTE 5 – MERCHANDISE INVENTORIES, NET
Merchandise inventories, net consisted of the following:
Reversal of merchandise inventories write-down was $10,713 and for the six months ended September 30, 2023 and 2022, respectively. |
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Compensation Receivable for Consumption Tax, Net |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation Receivable for Consumption Tax, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMPENSATION RECEIVABLE FOR CONSUMPTION TAX, NET | NOTE 6 – COMPENSATION RECEIVABLE FOR CONSUMPTION TAX, NET
Compensation receivable for consumption tax, net consisted of the following:
The Tokyo Regional Taxation Bureau had conducted a tax examination into the Company’s consumption tax filing for the period from July 2018 to December 2021. As a result of the examination, the Company was required to return consumption tax refund for export transactions that were determined not to meet the tax exemption requirements due to failure in submission of relevant export documents (see Note 13) by the Company’s certain suppliers and customers. In June 2023, the Company entered into agreements with relevant suppliers and customers to claim compensation for damages from the additional consumption tax payment. These suppliers and customers agreed to compensate the Company and the compensation receivable for consumption tax will be paid over two years from the date of the agreements. As of March 31, 2023, the net total of approximately $23.2 million (approximately ¥3.1 billion), including approximately $23.1 million due from third parties and approximately $0.1 million due from a related party (see Note 12). During the six months ended September 30, 2023, the Company received a total of approximately $8.2 million (approximately ¥836.0 million), and the net total of approximately $15.3 million (approximately ¥2.3 billion) of compensation receivable for consumption tax was all due from third parties as of September 30, 2023. |
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Prepaid Expenses and Other Assets, Net |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses and Other Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PREPAID EXPENSES AND OTHER ASSETS, NET | NOTE 7 – PREPAID EXPENSES AND OTHER ASSETS, NET
Prepaid expenses and other assets, net consisted of the following:
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Property and Equipment, Net |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | NOTE 8 – PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of the following:
Depreciation expense was $526,994 and $514,000 for the six months ended September 30, 2023 and 2022, respectively.
As of September 30, 2023 and March 31, 2023, the Company pledged a piece of land of 16,165 square feet with a carrying value of ¥340.1 million (approximately $2.3 million) as collateral to safeguard the Company’s bank borrowings from MUFG Bank (see Note 11). |
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Leases |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | NOTE 9 – LEASES
The Company leases retail store facilities and distribution centers under non-cancellable operating leases, with terms ranging from one to 15 years, as well as finance leases for software, equipment, and furniture with a term of five years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right-of-use assets and lease liabilities.
Operating lease expenses for lease payment are recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased assets, and interest expenses, which are recognized following an effective interest rate method. Leases with initial term of 12 months or less are not recorded on the balance sheet.
Operating Leases
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of September 30, 2023 and March 31, 2023:
During the six months ended September 30, 2023 and 2022, the Company incurred total operating lease expenses of $1,087,873 and $1,092,859, respectively.
Finance Leases
The components of finance lease expenses were as follows:
Supplemental cash flow information related to finance leases was as follows:
Supplemental balance sheet information related to leases was as follows:
The weighted average remaining lease terms and discount rates for all of finance leases as of September 30, 2023 and March 31, 2023 were as follows:
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2023:
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Acquisitions |
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACQUISITIONS | NOTE 10 – ACQUISITIONS
TLS Acquisition
On July 20, 2022, the Company entered into an Agreement with All Seas Global Limited to acquire 100% equity interests in TLS. The 100% of the equity interests in TLS were transferred to the Company on July 20, 2022, and cash consideration was paid in full and the transaction was closed on July 27, 2022. As the TLS and the Company were controlled by the same ultimate controlling shareholder before this acquisition, the transaction was accounted for as an acquisition of a business between entities under common control, and therefore, the related acquired assets and liabilities were transferred at TLS’s historical carrying value. The Company recognized $3.6 million of consideration in excess of the book value of net liabilities acquired, with $2.84 million recorded in capital reserve and $0.74 million recorded in retained earnings at the acquisition date.
The carrying amounts of the assets and liabilities of TLS as of the transaction date were as follows:
Reiwatakiya Acquisition
On October 26, 2022, the board of directors of TLS approved the acquisition of Reiwatakiya from All Seas Global Limited who held 60% interests in Reiwatakiya. The 60% the equity interests in Reiwatakiya were transferred to the TLS on October 26, 2022 with no consideration. As the TLS and Reiwatakiya were controlled by the same ultimate controlling shareholder before this acquisition, the transaction was accounted for as an acquisition of a business between entities under common control, and therefore, the related acquired assets and liabilities were transferred at Reiwatakiya’s historical carrying value. On January 4, 2023, TLS acquired the remaining 40% of the equity interests in Reiwatakiya from a third-party shareholder with no consideration and Reiwatakiya became the wholly owned subsidiary of TLS. The Company recognized $2,502 of consideration in excess of the book value of net liabilities acquired, which is reflected in retained earnings at the acquisition date.
The carrying amounts of the assets and liabilities of Reiwatakiya as of the transaction date were as follows:
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Borrowings |
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| Borrowings [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BORROWINGS | NOTE 11 – BORROWINGS
Short-term borrowings consisted of the following:
The terms of the various loan agreements related to short-term borrowings contain certain restrictive covenants which, among other things, require the Company to maintain current organization structure, specified ratios of debt to tangible net assets and debt service coverage, and positive net income. The terms also prohibit the Company from transferring part or all of its assets to third-party companies or receiving part of all of the assets from other third-party companies. Although the Company incurred a net loss in fiscal year ended March 31, 2023, the financial performance of the Company has improved during the six months ended September 30, 2023, and the Company did not receive any notices from banks, such as notices of terminating its ability to borrow under the relevant agreements and notices of accelerating its obligations to repay outstanding borrowings.
Long-term borrowings consisted of the following:
The future maturities of long-term borrowings as of September 30, 2023 were as follows:
For the above mentioned short-term and long-term loans, the Company recorded interest expenses of $1,061,277 and $1,334,723 for the six months ended September 30, 2023 and 2022, respectively. The annual weighted average interest rates were 0.98% and 1.83% for the six months ended September 30, 2023 and 2022, respectively. |
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Related Party Transactions |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS | NOTE 12 – RELATED PARTY TRANSACTIONS
The Company’s relationships with related parties who had transactions with the Company are summarized as follows:
Accounts payable – related party consisted of the following:
Due to related parties consisted of the following:
Mr. Kanayama provided guarantees in connection with certain loans the Company borrowed (see Note 11). |
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Taxes |
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| Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TAXES | NOTE 13 – TAXES
The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
Japan
The Company and its subsidiary in Japan are mainly subject to Japanese national and local income taxes, inhabitant tax, and enterprise tax, which, in the aggregate, represent a statutory income tax rate of approximately 30.6% and 34.0% for the six months ended September 30, 2023 and 2022, respectively.
Hong Kong
TLS is incorporated in Hong Kong and is subject to profit taxes in Hong Kong at a rate of 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000 for the six months ended September 30, 2023 and 2022.
PRC
Qingzhiliangpin is incorporated in the PRC and is subject to the PRC Enterprise Income Tax. Under the Enterprise Income Tax Law of PRC, domestic enterprises and Foreign Investment Enterprises are subject to a unified 25% enterprise income tax rate. Qingzhiliangpin is recognized as small low-profit enterprises. According to the relevant PRC tax policies, once an enterprise meets certain requirements and is identified as a small-scale minimal profit enterprise, the portion of its taxable income not more than RMB1 million is subject to a reduced effective rate of 2.5% and the portion between RMB1 million and RMB3 million is subject to a reduced effective rate of 5% for the period from January 1, 2021 to December 31, 2022. During the period from January 1, 2023 to December 31, 2027, the taxable income not more than RMB3 million is subject to a reduced effective rate of 5%.
Malaysia
Reiwatakiya is incorporated in Malaysia, and is governed by the income tax laws of Malaysia. The income tax provision in respect of operations in Malaysia is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations, and practices. Under the Income Tax Act of Malaysia, enterprises incorporated in Malaysia are usually subject to a unified 24% enterprise income tax rate while preferential tax rates, tax holidays, and tax exemptions may be granted on a case-by-case basis. The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less) is 17% for the first MYR600,000 taxable income, with the remaining balance being taxed at the 24% rate.
The income before tax were as follows:
The components of the income tax provision (benefit) were as follows:
The following table reconciles the Japan statutory rate to the Company’s effective tax rates for the six months ended September 30, 2023 and 2022:
The Company’s deferred tax liabilities, net comprised of the following:
The Company’s movement of the valuation allowance were as follows:
As of September 30, 2023, the Company had net operating loss carried forward from the entities in Japan of $3,087,556. The carry forward loss of $2,908,440 and $179,116 will expire by the fiscal years ended March 31, 2029 and 2030, respectively, if not utilized.
As of September 30, 2023, the Company had net operating loss carried forward from the entities in Hong Kong of $983,345, which can be offset against future taxable profit indefinitely.
In Japan, consumption tax collected and remitted to tax authorities is excluded from revenue, cost of sales, and expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. Before October 1, 2019, the applicable consumption tax rate was 8%, and since October 1, 2019, the Company has been subject to the applicable consumption tax rate of 10%, with an 8% rate applicable to a limited number of exceptions based on the new Japanese tax law. For overseas sales, the Company is exempted from paying consumption tax. The Company can deduct all its qualified input consumption tax paid when purchasing from suppliers, against the output consumption tax derived from domestic sales. The Company is eligible for consumption tax refund from the tax authorities for excess input consumption tax, which is recorded as additional consumption tax payable due to tax examination in taxes payable on the balance sheets (See note (c) - tax payable).
Taxes payable consisted of the following:
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Representative's Warrants Liability |
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| Representative's Warrants Liability [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REPRESENTATIVE'S WARRANTS LIABILITY | NOTE 14 – REPRESENTATIVE’S WARRANTS LIABILITY
In connection with the Company’s IPO, the Company agreed to issue warrants to a representative of several underwriters, for a nominal consideration of $0.01 to purchase 300,000 ADSs of the Company (equal to 5% of the total number of ADSs sold in the IPO, but not including any over-allotment ADSs sold in the over-allotment option) (the “Representative’s Warrants”). The Representative’s Warrants have an exercise price of $4.8 per ADS (equal to 120% of the Company’s IPO offering price of $4.00 per ADS). The Representative’s Warrants will be exercisable beginning from six months after the date of commencement of sales in the Company’s IPO and for a period of five years after the date of commencement of sales in the Company’s IPO.
Because the strike price of the Representative’s Warrants is denominated in U.S. dollars, a currency other than the Company’s functional currency, ¥, the Representative’s Warrants were not considered indexed to the Company’s own stock. As such, the Representative’s Warrants were classified as a derivative liability under ASC 815-10, and recorded initially and subsequently at fair value with all future changes in the fair value recognized currently in earnings until such time as the warrants are exercised or expired. As of September 30, 2023, these Representative’s Warrants were issued and outstanding but none of the warrants had been exercised. For the six months ended September 30, 2023 and 2022, these Representative Warrants were antidilutive and accordingly were not included in the diluted EPS calculation based on treasury stock method.
On January 13, 2022, the Company recorded a fair value of $522,116 for the Representative’s Warrants liability at issuance resulting in a decrease in additional paid-in capital of $522,116, as the Company determined these warrants issued to the representative of underwriters were part of its incremental cost directly attributable to the Company’s IPO. The Company recognized a gain of $ 1,833 and $89,049 from the change in fair value of the Representative’s Warrants liability subsequently for the six months ended September 30, 2023 and 2022, respectively.
These warrants do not trade in an active securities market, and as such, the Company estimates its fair value using the Black-Scholes Option Pricing Model (the “Black-Scholes Model”) on the date that these warrants were originally issued and as of September 30, 2023 and March 31, 2023 using the following assumptions:
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Shareholders' Equity |
6 Months Ended |
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Sep. 30, 2023 | |
| Shareholders' Equity [Abstract] | |
| SHAREHOLDERS' EQUITY | NOTE 15 – SHAREHOLDERS’ EQUITY
Ordinary shares
The Company is a stock company incorporated in Japan pursuant to the laws of Japan on December 28, 2006.
At the incorporation, the number of authorized ordinary shares was 1,000 and 1,000 ordinary shares were issued to the original shareholder of the Company for cash of ¥10,000,000 ($85,060). The issued ordinary shares were subsequently transferred to Mr. Mei Kanayama, the controlling shareholder of the Company.
On April 25, 2011, the number of authorized ordinary shares was increased to 10,000. 2,000 new ordinary shares were issued to Mr. Mei Kanayama for cash of ¥20,000,000 ($248,640), the controlling shareholder of the Company.
On October 15, 2014, 500 shares were transferred from Mr. Mei Kanayama to Mr. Yingjia Yang, the minority shareholder of the Company.
On July 30, 2016, 2,000 new ordinary shares were issued to Mr. Mei Kanayama for cash of ¥20,000,000 ($195,960).
On March 30, 2017, 4,410 new ordinary shares were issued to Mr. Mei Kanayama for cash of ¥44,100,000 ($396,327), and 490 new ordinary shares were issued to Mr. Yingjia Yang for cash of ¥4,900,000 ($44,036).
On October 22, 2020, the Company’s shareholders approved an increase in the number of the Company’s authorized ordinary shares from 10,000 to 300,000, and 72,909 new ordinary shares were issued to Mr. Mei Kanayama and 8,101 new ordinary shares were issued to Mr. Yingjia Yang, which share issuances were equivalent to a forward split of the Company’s outstanding ordinary shares at an approximate or rounded ratio of 9.1828-for-1 share. The Company has retroactively restated the shares and per share data for all the periods presented. As a result, the Company had 300,000 authorized ordinary shares and 90,910 ordinary shares were issued and outstanding as of March 31, 2020.
On November 10, 2020, 9,090 ordinary shares were issued to Grand Elec-Tech Limited, which the Company subsequently repurchased and cancelled on January 20, 2021. On December 25, 2020, 2,041 new ordinary shares were issued to SHUR Co., Ltd. for cash of ¥150,001,254 ($1,446,012).
On February 5 and 12, 2021, an issuance of 9,090 ordinary shares to Grand Elec-Tech Limited was authorized by the Company’s board of directors and a general meeting of shareholders, respectively. Grand Elec-Tech Limited was obliged to contribute the price of such issuance amounting to ¥200,007,270 (approximately $1.9 million) by August 12, 2021. Grand Elec-Tech Limited started to make payments in April 2021 and contributed the fully amount by June 22, 2021. On June 22, 2021, the Company’s shareholders and board of directors passed a resolution to amend the original date of payment from August 12, 2021 to June 22, 2021, and on the same day, the Company issued the 9,090 shares to Grand Elec-Tech Limited.
On August 18, 2021, shareholders of the Company approved an increase in the number of the Company’s authorized Ordinary Shares from 300,000 to 100,000,000 and the Company’s board of directors approved a forward split of the Company’s outstanding Ordinary Shares at a ratio of 294-for-1 share, which became effective on the same day.
Initial public offering
On January 13, 2022, the Company closed its IPO of 6,250,000 ADSs at a public offering price of $4.00 per ADS, which included 250,000 ADSs issued pursuant to the partial exercise of the underwriters’ over-allotment option. Each ADS represents one ordinary share of the Company. The closing for the sale of the over-allotment shares took place on February 21, 2022. Gross proceeds of the Company’s IPO, including the proceeds from the sale of the over-allotment ADSs, totaled $25.0 million, before deducting underwriting discounts and other related expenses. Net proceeds of the Company’s IPO, including the over-allotment, were approximately $21.4 million. In connection with the IPO, the Company’s ADSs began trading on the Nasdaq Capital Market under the symbol “TKLF” on January 18, 2022.
Restricted net assets
The Company is restricted in its ability to transfer a portion of its net assets, equivalent to its share capital to its shareholders in the form of loans, advances, or cash dividends. The payment of dividends by the Company organized in Japan is subject to limitations, procedures, and formalities. Regulations in Japan currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in Japan. As of September 30, 2023 and March 31, 2023, the total restricted net assets of the Company amounted to $23,773,242 and $23,773,242, respectively. |
Commitments and Contingencies |
6 Months Ended |
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Sep. 30, 2023 | |
| Commitments and Contingencies [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 16 – COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of September 30, 2023 and March 31, 2023, there were no legal claims and litigation against the Company. |
Segment Reporting |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT REPORTING | NOTE 17 – SEGMENT REPORTING
Segments
The Company is engaged in the operation of retail and wholesale of Japanese beauty and health products, as well as sundry products and other products and services. The Company’s operations are conducted in three reported segments: (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers. The Company defines its segments as those operations whose results the CODM regularly reviews to analyze performance and allocate resources. The Company sells similar individual products and services in each of its segments. It is impractical to segregate and identify revenue for each of these individual products and services.
Directly-operated physical stores segment includes physical stores in Japan and Hong Kong. Online stores and services segment includes sales through the Company’s websites and various e-commerce marketplaces in Japan, China, and Korea, as well as services from advertising business through KOLs. Franchise stores and wholesale customers segments include franchise stores in Japan, the U.S. and the U.K., and wholesale customers in Japan and other countries including China, the U.S., and Canada.
The Company measures the results of its segments using, among other measures, each segment’s revenue, merchandise costs, interest expenses, net, provision for income tax, net income (loss), depreciation and amortization, capital expenditures, total assets as well as total liabilities, which includes certain corporate overhead allocations. From time to time, the Company revises the measurement of each segment’s revenue and other measures, including any corporate overhead allocations, as determined by the information regularly reviewed by its CODM. When the measurement of a segment significantly changes, previous period amounts and balances are reclassified to be comparable to the current period’s presentation.
The following table presents the segment information for the six months ended September 30, 2023 and 2022, respectively:
Disaggregated Revenue
The Company disaggregates its revenue by geographic areas, product categories, and distribution channels, which the Company believes best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. See Note 2 for the Company’s disaggregation of revenue for the six months ended September 30, 2023 and 2022. |
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Subsequent Events |
6 Months Ended |
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Sep. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 18 – SUBSEQUENT EVENTS
On December 14, 2023, the Company entered into a Real Estate Sales Agreement with a third party (the “Buyer”). Pursuant to the agreement, the Company will sell its head office in Japan including the building and land with a net book value of approximately ¥307.7 million (approximately $2.1 million) to the Buyer for a total consideration of ¥430.0 million (approximately $2.9 million). As of the date of the report, the Company has received the purchase deposit of ¥9.0 million (approximately $60,000), the final payment and the transfer of the legal title of the properties is expected to be completed by January 30, 2024.
These unaudited condensed consolidated financial statements were approved by management and available for issuance on December 22, 2023, and the Company has evaluated subsequent events through this date. The Company did not identify any subsequent events except those disclosed above that would have required adjustment or disclosure in the financial statements. |
Accounting Policies, by Policy (Policies) |
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| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of presentation and principles of consolidation | Basis of presentation and principles of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”). The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany balances and transactions are eliminated upon consolidation. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the afore-mentioned SEC rules and regulations. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal years ended March 31, 2023 and 2022. Operating results for the six-month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending March 31, 2024. |
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| Use of estimates | Use of estimates In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes 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 period. These estimates are based on information as of the date of the unaudited condensed consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, assessment of expected credit losses for accounts receivable, compensation receivable for consumption tax, current and non-current prepaid expenses and other assets, valuation of inventories, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, inputs used in the calculation of the asset retirement obligation, and implicit interest rate of operating leases and financing leases. Actual results could differ from those estimates. |
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| Cash | Cash Cash includes currency on hand and deposits held by banks that can be added or withdrawn without limitation. The Company maintains its bank accounts in Japan, Hong Kong, China and Malaysia. The Company considers all highly-liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. As of September 30, 2023 and March 31, 2023, the Company did not have any cash equivalents.
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| Receivables and credit losses | Receivables and credit losses On April 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss impairment methodology with an expected loss methodology that is referred to as the current expected credit loss methodology. The expected credit loss impairment model requires the entity to recognize its estimate of expected credit losses for affected financial assets using an allowance for credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial statements. The Company’s account receivables, compensation receivable for consumption tax and other receivable included in current and non-current prepaid expenses and other assets are within the scope of ASC Topic 326. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical experience, the age of the receivables, credit-worthiness of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and other debtors. The Company also provides specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected. Expected credit losses are included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Account receivables, compensation receivable for consumption tax and other receivable is recognized and carried at original amount less an allowance for credit losses, as necessary. As of September 30, 2023 and March 31, 2023, allowance for credit losses for accounts receivable amounted to $3,038,819 and $3,219,772, respectively, allowance for credit losses for other receivables amounted to $743,508 and $904,598, respectively, and allowance for credit losses for compensation receivable for consumption tax amounted to $152,169 and $436,145, respectively. |
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| Leases | Leases The Company adopted Financial Accounting Standards Board (the “FASB”) ASC No. 842, Leases (“Topic 842”) on April 1, 2018 using the modified retrospective approach. The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty.
The Company leases retail store facilities and distribution centers, which are classified as operating leases and leases certain software and equipment and furniture as finance lease in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current, and finance leases are included in property and equipment, finance lease liabilities, current, and finance lease liabilities, non-current in the unaudited condensed consolidated balance sheet. At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The operating lease right-of-use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All operating lease right-of-use assets are reviewed for impairment annually. There was no impairment for operating lease right-of-use lease assets as of September 30, 2023 and March 31, 2023. The Company has elected the short-term lease exception, and therefore operating lease right-of-use assets and liabilities do not include leases with a lease term of twelve months or less. In response to the large volume of anticipated lease concessions to be granted related to the effects of the COVID-19 pandemic, and the resultant expected cost and complexity of applying the lease modification requirements in Topic 842, the FASB issued Staff Q&A—Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic in April 2020 as interpretive guidance to provide clarity in response to the crisis. The FASB staff indicated that it would be acceptable for entities to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how they would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Consequently, for such lease concessions, an entity will not need to reassess each existing contract to determine whether enforceable rights and obligations for concessions exist and an entity can elect to apply or not to apply the lease modification guidance in Topic 842 to those contracts. The election is available for concessions related to the effects of the COVID-19 pandemic that result in the total payments required by the modified contract being substantially the same as or less than total payments required by the original contract. Based on the nature of the agreements reached with many of its landlords, the Company has accounted for rent concessions as if they were part of the enforceable rights and obligations of the existing lease contracts and did not account for the concessions as lease modifications. The Company has received a total of lease concessions amounting to $253,206, and among which, $ and $49,368 was received during the six months ended September 30, 2023 and 2022, respectively. The Company remeasured the lease payments using the same discount rate, and has continued to recognize lease expenses on a straight-line basis for its leases over the related lease terms.
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| Equity investment | Equity investment An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the board of directors, voting rights, and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary. The Company did not record impairment losses on its equity method investment during the six months ended September 30, 2023 and 2022. |
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| Common control transactions | Common control transactions In business combinations under common control, the assets and liabilities acquired are measured at the historical amounts of the acquirees in the unaudited condensed consolidated financial statements of acquirer on the acquisition date. The difference between the carrying amounts of the net assets acquired and the consideration paid is adjusted to the equity account of the acquirer. The operating results for all periods presented are retrospectively restated as if the current structure and operations resulting from the acquisition had been in existence since the beginning of the earliest year presented, with financial data of previously separate entities consolidated. The subsequent adjustment of contingent consideration after the acquisition date is also accounted for as an equity transaction. |
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| Merchandise inventories | Merchandise inventories Merchandise inventories are stated at the lower of cost or net realizable value, on a weighted average basis. Costs include mainly the cost of merchandise inventories. Net realizable value is the estimated selling price in the normal course of business less any costs to sell products. Write-down is recorded when future estimated net realizable value is less than cost, which is recorded in merchandise costs in the unaudited condensed consolidated statements of operations and comprehensive loss. The Company periodically evaluates merchandise inventories for their net realizable value adjustments, and reduces the carrying value of those merchandise inventories that are obsolete or in excess of the forecasted usage to their estimated net realizable value based on various factors including aging and expiration dates, as applicable, taking into consideration historical and expected future product sales. As of September 30, 2023 and March 31, 2023, merchandise inventories write-down was $125,853 and $152,759, respectively. |
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| Property and equipment | Property and equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Except for assets that are not subject to depreciation, such as land and construction in progress, depreciation and amortization of property and equipment are mainly provided using the straight-line method or declining balance method, which allocates an asset’s cost over the periods during which the Company benefits from the use of the asset. The expected economic useful lives of the Company’s assets are as follows:
Land has infinite useful life and is not subjected to amortization. Management reviews for impairment accordance with the accounting policy stated under impairment of long-lived assets. Expenditures for maintenance and repair, which do not materially extend the useful lives of the assets, are charged to expenses as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the unaudited condensed consolidated statements of operations and comprehensive loss in other income or expenses. |
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| Asset retirement obligations | Asset retirement obligations The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company’s asset retirement obligations are primarily related to leasehold improvement of its retail stores leases, that, at the end of the leases, are required to be returned to the landlords in their original condition. As of September 30, 2023 and March 31, 2023, the balance of asset retirement obligations included in other non-current liabilities was $824,105 and $1,004,838, respectively, and will be subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized as part of the carrying amount of the leasehold improvements and are depreciated over the shorter of the estimated useful life of the asset or the term of the lease subsequent to the initial measurement. Due to the time over which these obligations could be settled and the judgment used to determine the liability, the ultimate obligation may differ from the estimate. Upon settlement, any difference between actual cost and the estimate is recognized as a gain or loss in that period. |
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| Impairment of long-lived assets | Impairment of long-lived assets The Company evaluates its long-lived assets, including property and equipment, operating lease right-of-use assets and long-term prepaid expenses and non-current assets for impairment whenever events or changes in circumstances, such as a significant adverse change to market conditions that will impact the future use of the assets, indicate that the carrying amount of an asset may not be fully recoverable. When these events occur, the Company evaluates the recoverability of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets, when the market prices are not readily available. The adjusted carrying amount of the assets become new cost basis and are depreciated over the assets’ remaining useful lives. Long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Given no events or changes in circumstances indicating the carrying amount of long-lived assets may not be recovered through the related future net cash flows, the Company did not recognize any impairment loss on long-lived assets for the six months ended September 30, 2023 and 2022.
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| Revenue recognition | Revenue recognition The Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), on April 1, 2018 using the modified retrospective approach. ASC 606 requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance (ASC Topic 605, Revenue Recognition) did not result in significant changes in the way the Company records its revenue. The Company has assessed the impact of the guidance by reviewing its existing customer contracts to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control, and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s unaudited condensed consolidated financial statements upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods is transferred or service is rendered to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Control is the ability to direct the use of, and obtain substantially all of the remaining benefits from the specified goods and services. The Company currently generates its revenue through retail and wholesale of Japanese beauty and health products, luxury and electronic products, as well as sundry and other products and services, through a multi-channel distribution network. Currently, the Company sells its products and rendered its services through: (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers. For Japanese and Hong Kong domestic sales, revenue is recognized at the point of sales or delivery of the related products and control is transferred. For international sales, the Company sells goods under Cost Insurance and Freight (“CIF”) shipping point term, and revenue is recognized when product is loaded on the ships and control is deemed as transferred. The Company generally offers a seven-day product return policy, as long as the products are undamaged, in their original condition, and can be resold. Products sold in the Company’s physical stores may be returned in store with receipt subject to certain restrictions. Historically, the customer returns were immaterial. Therefore, the Company did not provide any sales return allowances for the six months ended September 30, 2023 and 2022. The Company’s service revenue primarily consists advertising services of KOLs for its customers. The Company produces short videos with the online celebrities to promote the brands of its customers on social media platforms, such as Tik Tok and Kuaishou. Revenue from these services is recognized at a point in time when the service is rendered by the Company. The Company enters into franchise agreements with franchisees in Japan under which the franchisee is granted a revocable license and non-exclusive right to use the Company’s trademarks and stores. The Company requires an entire non-refundable initial franchise fee of ¥30.0 million (approximately $20,000) to be paid upon execution of a franchise agreement, which typically has an initial term of three years and automatically renew for successive one-year terms, unless either party sends a written non-renewal notice no later than two months prior to the expiration of the then current term. Initial franchise fees are recognized on a straight-line basis over the term of the franchise agreement. In addition, the Company is also entitled to continuing franchise fees (royalties), equal to 5% of the monthly gross sales of the franchise store, and royalties are recognized as revenue based on the monthly royalty earned. Franchise fees from the franchisees were included in revenue from franchise stores and wholesale customers, and were immaterial for the six months ended September 30, 2023 and 2022.
The Company is the principal for its transactions and recognizes revenue on a gross basis. The Company is the principal when it has control of the merchandise before it is transferred to customers, which generally is established when the Company is primarily responsible for merchandising decisions, maintains the relationship with customer, including assurance of member service and satisfaction, and has pricing discretion. In directly-operated physical stores in Japan and Hong Kong, customers can enroll in the Company’s rewards program, which is primarily a spending-based rewards program, and get a rewards card. Members of the rewards program usually earn one membership point for each ¥100 and HK$1 spent in the Company’s directly-operated physical stores in Japan and Hong Kong, respectively, and subsequently one membership point can be used as ¥1 at the Company’s directly-operated physical stores in Japan, and 250 membership points can be used as HK$1 at the Company’s directly-operated physical stores in Hong Kong when making payments; the membership points are valid for one year and ten years starting from the last use of the rewards card in directly-operated physical stores in Japan and Hong Kong, respectively. The Company initially accounts for these membership points as a reduction in sales based on the estimated monetary value of the membership points with the corresponding liability classified as deferred revenue in the unaudited condensed consolidated balance sheets. When a customer redeems earned membership points at its stores, the Company recognizes revenue and reduce the deferred revenue. Unused membership points are recognized as breakage, which is recorded as revenue in the unaudited condensed consolidated statements of operations and comprehensive loss. Membership point breakage was immaterial for the six months ended September 30, 2023 and 2022. Contract balances and remaining performance obligations Contract balances typically arise when a difference in timing between the transfer of control to the customer and receipt of consideration occurs. The Company did not have contract assets as of September 30, 2023 and March 31, 2023. The Company’s contract liabilities, which are reflected in its unaudited condensed consolidated balance sheets as deferred revenue of $85,989 and $146,024 as of September 30, 2023 and March 31, 2023 respectively, consist primarily of revenue for amount received in advance from the Company’s wholesale customers and unredeemed membership points. These amounts represent the Company’s unsatisfied performance obligations as of the balance sheet dates. The amount of revenue recognized in the six months ended September 30, 2023 and 2022 that was included in the opening deferred revenue was $56,811 and $59,000, respectively. As of September 30, 2023, the amount received in advance from wholesale customers and unredeemed membership points was $85,989. The Company expects to recognize revenue when products are delivered to the wholesale customers or when customers redeem their membership points, which is expected to occur within one year.
Disaggregation of revenue The Company disaggregates its revenue by geographic areas, product categories, and distribution channels, which the Company believes best depicts how the nature, amount, timing, and uncertainty of the revenue and cash flows are affected by economic factors. The Company’s disaggregation of revenue for the six months ended September 30, 2023 and 2022 is as following: Revenue by geographic areas The summary of the Company’s total revenue by geographic areas for the six months ended September 30, 2023 and 2022 was as follows:
Revenue by product categories The summary of the Company’s total revenue by product categories for the six months ended September 30, 2023 and 2022 was as follows:
Revenue by distribution channels The summary of the Company’s total revenue by distribution channels for the six months ended September 30, 2023 and 2022 was as follows:
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| Fair value of financial instruments | Fair value of financial instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, due from related parties, current portion of compensation receivable for consumption tax, prepaid expenses and other current assets, short-term borrowings, current portion of long-term borrowings, accounts payable, due to related parties, deferred revenue, taxes payable, and other payables and other current liabilities, approximate the fair value of the respective assets and liabilities as of September 30, 2023 and March 31, 2023 based upon the short-term nature of the assets and liabilities. |
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| Foreign currency translation | Foreign currency translation The Company maintains its books and record in its local currency, Japanese yen (“YEN” or “¥”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. The Company’s subsidiaries in Hong Kong, the PRC, and Malaysia use their respective currencies Hong Kong Dollar (“HK$”), Chinese Yuan (“RMB”), and Malaysia Ringgit (“MYR”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations and comprehensive loss.
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. In accordance with ASC Topic 830-30, “Translation of Financial Statement,” assets and liabilities of the Company are translated into US$, using the exchange rate on the balance sheet date. Revenue and expenses are translated at the average rates prevailing during the period. Shareholders’ equity is translated at the historical exchange rate at the time of transaction. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations. The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
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| Income taxes | Income taxes The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expenses in the period incurred. No significant penalties or interest relating to income taxes were incurred during the six months ended September 30, 2023 and 2022, and there was no uncertain tax provision as of September 30, 2023 and March 31, 2023.
The Company’s operating entities in Japan are subject to the income tax laws of Japan. As of September 30, 2023, the tax years ended March 31, 2021 through March 31, 2023 for the Company’s operating entities in Japan remain open for statutory examination by the Japanese tax authorities. The Company’s subsidiary in Hong Kong is subject to the profit taxes in Hong Kong. As of September 30, 2023, the tax years ended since the year of incorporation through March 31, 2023 for the Company’s subsidiary in Hong Kong remain open for statutory examination by the Hong Kong taxing jurisdictions. The Company’s subsidiary in China is subject to the income tax laws of the PRC. As of September 30, 2023, the tax years ended since the year of incorporation through December 31, 2022 for the Company’s PRC subsidiary remain open for statutory examination by PRC tax authorities. The Company’s subsidiary in Malaysia is subject to the income tax laws of Malaysia. As of September 30, 2023, all of the tax returns of the Company’s Malaysian subsidiary remain open for statutory examination by relevant tax authorities. |
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| Earnings per share | Earnings per share The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There were no dilutive shares for the six months ended September 30, 2023 and 2022. |
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| Shipping and handling cost | Shipping and handling cost All shipping and handling costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. Total shipping and handling expenses were $665,727 and $3,514,186 for the six months ended September 30, 2023 and 2022, respectively. |
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| Advertising expenses | Advertising expenses Advertising costs are expensed as incurred and included in selling, general, and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive loss. Advertising expenses amounted to $254,524 and for the six months ended September 30, 2023 and 2022, respectively. |
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| Comprehensive loss | Comprehensive loss Comprehensive loss consists of two components, net income and other comprehensive loss. The foreign currency translation gain or loss resulting from the translation of the financial statements expressed in YEN, HK$, RMB and MYR to US$ is reported in other comprehensive loss in the unaudited condensed consolidated statements of operations and comprehensive loss.
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| Related parties and transactions | Related parties and transactions The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures,” and other relevant ASC standards. Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. |
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| Segment reporting | Segment reporting The Company uses the management approach in determining its operating segments. The management approach considers the internal reporting used by the Company’s chief operating decision maker (“CODM”). The Company’s CODM has been identified as the CEO who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Company. Management has determined that the Company has three operating segments, which are (i) directly-operated physical stores, (ii) online stores and services, and (iii) franchise stores and wholesale customers. |
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| Risks and uncertainties | Risks and uncertainties Political and economic risk The directly-operated physical stores of the Company are all located in Japan and Hong Kong, and the online stores and franchise stores and wholesale partners of the Company are mainly located in Japan and mainland China. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in Japan, Hong Kong and mainland China, as well as by the general state of their economy. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in Japan, Hong Kong and mainland China. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, including its organization and structure disclosed in Note 1, such experience may not be indicative of future results. Credit risk As of September 30, 2023 and March 31, 2023, $1,817,832 and $1,001,582 of the Company’s cash was on deposit at financial institutions in Japan, respectively, which were insured by the Deposit Insurance Corporation of Japan subject to certain limitations. The Company has not experienced any losses in such accounts. As of September 30, 2023 and March 31, 2023, $503,455 and $ of the Company’s cash was on deposit at financial institutions in the U.S. which were insured by the Federal Deposit Insurance Corporation subject to certain limitations. As of September 30, 2023 and March 31, 2023, $370,930 and $590,116 of the Company’s cash was on deposit at financial institutions in Hong Kong, respectively, which were insured by the Hong Kong Deposit Protection Board for compensation up to a limit of HK$500,000 (approximately US$64,000) if the bank with which an individual/a company hold its eligible deposit fails.
As of September 30, 2023 and March 31, 2023, $17,605 and $69,537 of the Company’s cash was on deposit at financial institutions in mainland China, respectively, where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. The Company has not experienced any losses in such accounts. As of September 30, 2023 and March 31, 2023, $19,070 and $27,137 of the Company’s cash was on deposit at financial institutions in Malaysia, respectively, which were subject to certain protection under the requirement of the deposit insurance system up to a limit of MYR250,000 (approximately US$53,000) if the bank with which an individual/a company hold its eligible deposit fails. Accounts receivable are typically unsecured and derived from revenue earned from customers, compensation receivables are typically unsecured and derived from damages the Company claimed from certain suppliers as well as customers, thereby exposed to credit risks. The risk is mitigated by the Company’s assessment of its customers and suppliers’ creditworthiness and its ongoing monitoring of outstanding balances. Concentrations For the six months ended September 30, 2023 and 2022, majority of the Company’s assets were located in Japan and Hong Kong, and all of the Company’s revenue was generated by the Company and its subsidiaries, which are located in Japan, Hong Kong and China. For the six months ended September 30, 2023, one customer accounted for 20.3% of the Company’s total revenue. For the six months ended September 30, 2022, three customers accounted for 12.7%, 12.3% and 11.3% of the Company’s total revenue. As of September 30, 2023, two wholesale customers accounted for 20.8% and 18.3% of the total account receivable balance, respectively. As of March 31, 2023, four wholesale customers accounted for 15.7%, 15.2%, 14.8% and 13.0% of the total account receivable balance, respectively. For the six months ended September 30, 2023, four suppliers accounted for approximately 23.8%, 21.2%, 16.1% and 12.8% of the Company’s total purchases, respectively. For the six months ended September 30, 2022, four suppliers accounted for approximately 21.1%, 13.1%, 12.7% and 12.0% of the Company’s total purchases, respectively.
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| Recent accounting pronouncements | Recent accounting pronouncements In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.” This ASU expands required public entities’ segment disclosures, including disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company plans to adopt this guidance effective April 1, 2025 and the adoption of this ASU is not expected to have a material impact on its financial statements. Except for the above-mentioned pronouncement, there are no new recently issued accounting standards that will have material impact on the Company’s unaudited condensed consolidated financial position, statements of operations, and cash flows. |
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Summary of Significant Accounting Policies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Expected Economic Useful Lives | The expected economic useful lives of the Company’s assets are as follows:
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| Schedule of Total Revenue by Geographic Areas | The summary of the Company’s total revenue
by geographic areas for the six months ended September 30, 2023 and 2022 was as follows:
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| Schedule of Total Revenue by Product Categories | The summary
of the Company’s total revenue by product categories for the six months ended September 30, 2023 and 2022 was
as follows:
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| Schedule of Total Revenue by Distribution Channels | The summary
of the Company’s total revenue by distribution channels for the six months ended September 30, 2023 and 2022 was
as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Consolidated Financial Statements | The following
table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated
financial statements in this report:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, Net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Receivable | Accounts
receivable, net consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Allowance for Credit Losses | Movement of allowance for credit losses was as
follows:
|
|||||||||||||||||||||||||||||||||||||||||||||
Merchandise Inventories, Net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merchandise Inventories, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Merchandise Inventories | Merchandise
inventories, net consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation Receivable for Consumption Tax, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation Receivable for Consumption Tax, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Compensation Receivable for Consumption Tax, Net | Compensation
receivable for consumption tax, net consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Assets, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses and Other Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Prepaid Expenses and Other Assets, Net | Prepaid
expenses and other assets, net consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment, Net | Property
and equipment, net, consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Operating Lease Related Assets and Liabilities | The table
below presents the operating lease related assets and liabilities recorded on the balance sheets.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Lease Terms and Discount Rates for All of Operating Leases | The weighted
average remaining lease terms and discount rates for all of operating leases were as follows as of September 30, 2023 and March 31, 2023:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Cash Flow Information Related To Finance Leases | Supplemental
cash flow information related to finance leases was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental
balance sheet information related to leases was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Maturities of Lease Liabilities | The following
is a schedule, by years, of maturities of lease liabilities as of September 30, 2023:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Carrying Amounts of the Assets and Liabilities | The carrying
amounts of the assets and liabilities of TLS as of the transaction date were as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Borrowings [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of short-term borrowings | Short-term
borrowings consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-Term Borrowings | Long-term
borrowings consisted of the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Maturities of Long-Term Borrowings | The future
maturities of long-term borrowings as of September 30, 2023 were as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Relationships with Related Parties who had Transactions | The Company’s
relationships with related parties who had transactions with the Company are summarized as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Receivable, Net - Related Parties | Accounts receivable, net–- related parties consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Due from Related Parties | Due from related parties consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accounts Payable - Related Parties | Accounts
payable – related party consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Due to Related Parties | Due to related
parties consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Sales to Related Parties |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Purchase from Related Parties |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Income Before Tax | The income
before tax were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Income Tax Provision (Benefit) | The components
of the income tax provision (benefit) were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Reconciles the Japan Statutory Rate to the Company’s Effective Tax Rates | The following
table reconciles the Japan statutory rate to the Company’s effective tax rates for the six months ended September 30, 2023 and 2022:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Deferred Tax Assets Comprised | The Company’s
deferred tax liabilities, net comprised of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Valuation Allowance | The Company’s movement
of the valuation allowance were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Taxes Payable | Taxes payable
consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Representative's Warrants Liability (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Representative's Warrants Liability [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value Using the Black-Scholes Option Pricing Model | These warrants
do not trade in an active securities market, and as such, the Company estimates its fair value using the Black-Scholes Option Pricing
Model (the “Black-Scholes Model”) on the date that these warrants were originally issued and as of September 30, 2023 and
March 31, 2023 using the following assumptions:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Presents the Segment Information | The following
table presents the segment information for the six months ended September 30, 2023 and 2022, respectively:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Assets and Liabilities |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Business Description (Details) |
6 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2023
JPY (¥)
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Jul. 01, 2023 |
Jan. 04, 2023 |
Oct. 26, 2022 |
Jul. 27, 2022 |
Jul. 20, 2022 |
|
| Organization and Business Description [Line Items] | |||||||||
| Total cash | $ (37,595) | ¥ 5,000,000 | $ 2,842,173 | ¥ 392,673,800 | |||||
| Stock keeping units, description | The Company offers approximately 39,500 stock keeping units (“SKUs”) of beauty products, including cosmetics, skin care, fragrance, and body care, among others; 15,000 SKUs of health products, including over-the-counter (“OTC”) drugs, nutritional supplements, and medical supplies and devices; 41,600 SKUs of sundry products, including home goods, 150 SKUs of electronic products, including entertainment gaming products, such as Nintendo Switch and Xbox Series, 590 SKUs of luxury products, including branded watches, perfume, handbags, clothes, and jewelry, and 44,800 SKUs of other products, including food, alcoholic beverages The Company also provides advertising services by key opinion leaders (“KOLs”). | The Company offers approximately 39,500 stock keeping units (“SKUs”) of beauty products, including cosmetics, skin care, fragrance, and body care, among others; 15,000 SKUs of health products, including over-the-counter (“OTC”) drugs, nutritional supplements, and medical supplies and devices; 41,600 SKUs of sundry products, including home goods, 150 SKUs of electronic products, including entertainment gaming products, such as Nintendo Switch and Xbox Series, 590 SKUs of luxury products, including branded watches, perfume, handbags, clothes, and jewelry, and 44,800 SKUs of other products, including food, alcoholic beverages The Company also provides advertising services by key opinion leaders (“KOLs”). | |||||||
| Tokyo Lifestyle Limited [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 100.00% | 60.00% | 100.00% | 100.00% | |||||
| Reiwatakiya [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 40.00% | 40.00% | |||||||
| Kaika International [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 100.00% | 100.00% | |||||||
| Seas Global Limited [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 60.00% | 100.00% | |||||||
| Shenzhen Qingzhiliangpin Network Technology Co., Ltd. [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 100.00% | 100.00% | |||||||
| Maximum [Member] | Reiwatakiya [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 60.00% | ||||||||
| Minimum [Member] | Tokyo Lifestyle Limited [Member] | |||||||||
| Organization and Business Description [Line Items] | |||||||||
| Equity interests percentage | 40.00% | ||||||||
Summary of Significant Accounting Policies (Details) - Schedule of Total Revenue by Geographic Areas - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Schedule of Total Revenue by Geographic Areas [Abstract] | ||
| Total revenue | $ 74,164,149 | $ 77,615,549 |
| Japan domestic market [Member] | ||
| Schedule of Total Revenue by Geographic Areas [Abstract] | ||
| Total revenue | 25,127,967 | 21,050,460 |
| China market [Member] | ||
| Schedule of Total Revenue by Geographic Areas [Abstract] | ||
| Total revenue | 43,965,472 | 50,723,547 |
| Other overseas markets [Member] | ||
| Schedule of Total Revenue by Geographic Areas [Abstract] | ||
| Total revenue | $ 5,070,710 | $ 5,841,542 |
Summary of Significant Accounting Policies (Details) - Schedule of Total Revenue by Product Categories - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | $ 74,164,149 | $ 77,615,549 |
| Beauty products [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | 16,780,967 | 58,276,846 |
| Health products [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | 2,563,142 | 7,468,482 |
| Sundry products [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | 3,441,388 | 4,722,084 |
| Luxury products [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | 31,551,744 | |
| Electronic products [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | 16,541,351 | |
| Other Products and Service [Member] | ||
| Schedule of Total Revenue by Product Categories [Abstract] | ||
| Total revenue | $ 3,285,557 | $ 7,148,137 |
Summary of Significant Accounting Policies (Details) - Schedule of Total Revenue by Distribution Channels - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Schedule of Total Revenue by Distribution Channels [Abstract] | ||
| Total revenue | $ 74,164,149 | $ 77,615,549 |
| Directly-operated physical stores [Member] | ||
| Schedule of Total Revenue by Distribution Channels [Abstract] | ||
| Total revenue | 11,618,183 | 5,838,536 |
| Online stores and services [Member] | ||
| Schedule of Total Revenue by Distribution Channels [Abstract] | ||
| Total revenue | 6,004,400 | 16,300,547 |
| Franchise stores and wholesale customers [Member] | ||
| Schedule of Total Revenue by Distribution Channels [Abstract] | ||
| Total revenue | $ 56,541,566 | $ 55,476,466 |
Going Concern (Details) - USD ($) $ in Millions |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Liquidity [Line Items] | ||
| Net income amount | $ 2.0 | |
| Cash provided by operating activities | $ 3.7 | |
| Collected percentage | 38.10% | |
| Short-term borrowings | $ 54.5 | |
| Long-term borrowings outstanding | 10.9 | |
| Minimum [Member] | ||
| Liquidity [Line Items] | ||
| Total cash increased | $ 1.0 | |
| Working capital increased | 9.0 | |
| Accounts receivable decreased | 15.2 | |
| Maximum [Member] | ||
| Liquidity [Line Items] | ||
| Total cash increased | 2.8 | 1.8 |
| Working capital increased | 17.6 | 8.6 |
| Accounts receivable decreased | $ 74.2 | $ 89.4 |
Accounts Receivable, Net (Details) - Schedule of Accounts Receivable - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of Accounts Receivable [Line Items] | ||
| Accounts receivable | $ 77,220,242 | $ 92,666,927 |
| Less: allowance for credit losses | (3,038,819) | (3,219,772) |
| Accounts receivable, net | $ 74,181,423 | $ 89,447,155 |
Accounts Receivable, Net (Details) - Schedule of Allowance for Credit Losses - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Schedule of Allowance for Credit Losses [Line Items] | ||
| Beginning balance | $ 3,219,772 | $ 237,037 |
| Additions | 166,966 | 2,951,045 |
| Foreign currency translation adjustments | (347,919) | 31,690 |
| Ending balance | $ 3,038,819 | $ 3,219,772 |
Merchandise Inventories, Net (Details) - USD ($) |
Sep. 30, 2023 |
Sep. 30, 2022 |
|---|---|---|
| Merchandise Inventories, Net [Abstract] | ||
| Inventories write-down | $ 10,713 |
Merchandise Inventories, Net (Details) - Schedule of Merchandise Inventories - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of Merchandise Inventories [Line Items] | ||
| Merchandise inventories, net | $ 14,828,587 | $ 7,187,800 |
| Beauty products [Member] | ||
| Schedule of Merchandise Inventories [Line Items] | ||
| Subtotal | 6,453,514 | 3,866,209 |
| Health products [Member] | ||
| Schedule of Merchandise Inventories [Line Items] | ||
| Subtotal | 660,245 | 714,601 |
| Luxury products [Member] | ||
| Schedule of Merchandise Inventories [Line Items] | ||
| Subtotal | 5,020,666 | |
| Electronic products [Member] | ||
| Schedule of Merchandise Inventories [Line Items] | ||
| Subtotal | 723,104 | |
| Other products [Member] | ||
| Schedule of Merchandise Inventories [Line Items] | ||
| Subtotal | $ 1,971,058 | $ 2,606,990 |
Compensation Receivable for Consumption Tax, Net (Details) ¥ in Millions |
12 Months Ended | |||
|---|---|---|---|---|
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
|
| Compensation Receivable for Consumption Tax, Net (Details) [Line Items] | ||||
| Due from third parties | $ 23,200,000 | ¥ 3,100.0 | ||
| Related party | 100,000 | |||
| Total received | 444,567 | $ 9,035 | ||
| Compensation receivable | 15,300,000 | ¥ 2,300.0 | ||
| Third Parties [Member] | ||||
| Compensation Receivable for Consumption Tax, Net (Details) [Line Items] | ||||
| Due from third parties | $ 23,100,000 | |||
| Total received | $ 8,200,000 | ¥ 836.0 | ||
Compensation Receivable for Consumption Tax, Net (Details) - Schedule of Compensation Receivable for Consumption Tax, Net - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Schedule of Compensation Receivable for Consumption Tax, Net [Abstract] | ||
| Compensation receivable for consumption tax | $ 15,488,579 | $ 23,579,234 |
| Less: allowance for credit losses | (152,169) | (436,145) |
| Subtotal | 15,336,410 | 23,143,089 |
| Less: compensation receivable for consumption tax, current | (9,229,456) | (3,912,719) |
| Long-term compensation receivable for consumption tax, net | $ 6,106,954 | $ 19,230,370 |
Prepaid Expenses and Other Assets, Net (Details) ¥ in Millions |
6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Sep. 30, 2023
USD ($)
|
Mar. 31, 2023
USD ($)
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
|
| Prepaid Expenses and Other Assets, Net [Line Items] | ||||||
| Due from third-party | $ 2,400,000 | $ 2,900,000 | $ 2,400,000 | $ 2,900,000 | ||
| Allowance for credit loss | 23,984 | 96,155 | ||||
| Prepaid expenses and others | 1,900,000 | ¥ 279.3 | 2,100,000 | ¥ 279.3 | ||
| Related Party [Member] | ||||||
| Prepaid Expenses and Other Assets, Net [Line Items] | ||||||
| Other receivables | $ 718,721 | $ 807,541 | $ 718,721 | $ 807,541 | ||
Prepaid Expenses and Other Assets, Net (Details) - Schedule of Prepaid Expenses and Other Assets, Net - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Schedule of Prepaid Expenses and Other Assets, Net [Abstract] | ||||||||||
| Deposits | [1] | $ 1,523,856 | $ 1,927,362 | |||||||
| Consumption tax receivable | 20,993 | |||||||||
| Other receivables | [2] | 4,367,632 | 4,590,901 | |||||||
| Advance to suppliers | [3] | 158,774 | 262,598 | |||||||
| Prepaid expenses and others | [4] | 2,274,930 | 2,643,465 | |||||||
| Allowance for credit losses | (743,508) | (904,598) | ||||||||
| Subtotal | 7,581,684 | 8,540,721 | ||||||||
| Less: prepaid expenses and other current assets, net | (3,453,592) | (3,542,864) | ||||||||
| Long-term prepaid expenses and other non-current assets, net | $ 4,128,092 | $ 4,997,857 | ||||||||
| ||||||||||
Property and Equipment, Net (Details) ¥ in Millions |
6 Months Ended | ||||
|---|---|---|---|---|---|
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
|
| Property and Equipment, Net [Abstract] | |||||
| Depreciation expense | $ 526,994 | $ 514,000 | |||
| Land carrying value | $ 2,300,000 | ¥ 340.1 | $ 2,300,000 | ¥ 340.1 | |
Property and Equipment, Net (Details) - Schedule of Property and Equipment, Net - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | $ 14,206,884 | $ 15,997,488 |
| Less: accumulated depreciation | (2,921,978) | (3,058,890) |
| Property and equipment, net | 11,284,906 | 12,938,598 |
| Property and Buildings [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | 3,999,035 | 4,469,370 |
| Leasehold Improvements [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | 3,709,916 | 4,262,580 |
| Land [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | 3,105,804 | 3,489,621 |
| Equipment and Furniture [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | 2,516,848 | 2,723,113 |
| Automobiles [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | 261,620 | 364,916 |
| Software [Member] | ||
| Schedule of Property and Equipment, Net [Abstract] | ||
| Subtotal | $ 613,661 | $ 687,888 |
Leases (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Leases [Line Items] | ||
| Operating lease expenses | $ 1,087,873 | $ 1,092,859 |
| Japan [Member] | ||
| Leases [Line Items] | ||
| Operating Leases | 6.98% | |
| Hong Kong [Member] | ||
| Leases [Line Items] | ||
| Operating Leases | 2.83% | |
Leases (Details) - Schedule of Operating Lease Related Assets and Liabilities - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Mar. 31, 2023 |
|
| Schedule of Operating Lease Related Assets and Liabilities [Abstract] | |||
| Operating lease right-of-use lease assets | $ 3,113,422 | $ 2,709,954 | |
| Operating lease liabilities – current | 1,348,045 | 1,323,900 | |
| Operating lease liabilities – non-current | 1,833,622 | 1,416,508 | |
| Total operating lease liabilities | 3,181,667 | $ 2,740,408 | |
| Finance leases cost: | |||
| Amortization of right-of-use assets | 163,624 | $ 111,641 | |
| Interest on lease liabilities | 29,141 | 205,074 | |
| Total finance leases cost | $ 192,765 | $ 316,715 | |
Leases (Details) - Schedule of Lease Terms and Discount Rates for All of Operating Leases |
Sep. 30, 2023 |
Mar. 31, 2023 |
||
|---|---|---|---|---|
| Minimum [Member] | ||||
| Schedule of Lease Terms and Discount Rates for All of Operating Leases [Line Items] | ||||
| Weighted average remaining lease term (years) | 3 years 8 months 8 days | 4 years 7 months 24 days | ||
| Weighted average discount rate | [1] | 4.74% | 5.33% | |
| Maximum [Member] | ||||
| Schedule of Lease Terms and Discount Rates for All of Operating Leases [Line Items] | ||||
| Weighted average remaining lease term (years) | 2 years 10 months 13 days | 3 years 8 months 12 days | ||
| Weighted average discount rate | 8.07% | 8.07% | ||
| ||||
Leases (Details) - Schedule of Cash Flow Information Related to Finance Leases - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Schedule of Cash Flow Information Related to Finance Leases [Abstract] | ||
| Operating cash flows from finance leases | $ 29,141 | $ 205,074 |
Leases (Details) - Schedule of Supplemental Balance Sheet Information Related to Leases - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Finance leases cost: | ||
| Less: accumulated depreciation | $ (1,357,636) | $ (710,153) |
| Property and equipment, net | 239,502 | 657,604 |
| Software [Member] | ||
| Finance leases cost: | ||
| Property and equipment, gross | 316,627 | 355,756 |
| Equipment and furniture [Member] | ||
| Finance leases cost: | ||
| Property and equipment, gross | 1,280,511 | 1,012,001 |
| Subtotal [Member] | ||
| Finance leases cost: | ||
| Property and equipment, gross | $ 1,597,138 | $ 1,367,757 |
Leases (Details) - Schedule of Maturities of Lease Liabilities |
6 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Operating Leases [Member] | |
| Schedule of Maturities of Lease Liabilities [Line Items] | |
| 2024 | $ 1,480,891 |
| 2025 | 722,332 |
| 2026 | 392,444 |
| 2027 | 236,966 |
| 2028 | 205,134 |
| Thereafter | 621,288 |
| Total lease payments | 3,659,055 |
| Less: imputed interest | (477,388) |
| Present value of lease liabilities | 3,181,667 |
| Finance Leases [Member] | |
| Schedule of Maturities of Lease Liabilities [Line Items] | |
| 2024 | 271,254 |
| 2025 | 167,087 |
| 2026 | 145,521 |
| 2027 | 56,918 |
| 2028 | 4,019 |
| Thereafter | |
| Total lease payments | 644,799 |
| Less: imputed interest | (72,494) |
| Present value of lease liabilities | $ 572,305 |
Acquisitions (Details) - USD ($) |
6 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2023 |
Jan. 04, 2023 |
Oct. 26, 2022 |
Jul. 20, 2022 |
|
| Acquisitions [Abstract] | ||||
| Net assets acquired (in Dollars) | $ 3,600,000 | |||
| Shareholders’ equity (in Dollars) | 2,840,000 | |||
| Capital reserve (in Dollars) | $ 740,000 | |||
| All Seas Global Limited [Member] | ||||
| Acquisitions [Abstract] | ||||
| Equity interests, percentage | 60.00% | 100.00% | ||
| Tokyo Lifestyle Limited [Member] | ||||
| Acquisitions [Abstract] | ||||
| Equity interests, percentage | 40.00% | 100.00% | ||
| Reiwatakiya [Member] | ||||
| Acquisitions [Abstract] | ||||
| Equity interests, percentage | 60.00% | |||
| Net liabilities acquired (in Dollars) | $ 2,502 |
Acquisitions (Details) - Schedule of Carrying Amounts of the Assets and Liabilities - USD ($) |
1 Months Ended | |
|---|---|---|
Oct. 26, 2022 |
Jul. 20, 2022 |
|
| Schedule Of Carrying Amounts Of The Assets And Liabilities Abstract | ||
| Assets | $ 32,838 | $ 7,293,021 |
| Liabilities | 37,008 | 8,030,370 |
| Net liabilities | (4,170) | (737,349) |
| Non-controlling interests | 1,668 | |
| Consideration in excess of net liabilities acquired | 2,502 | 3,579,522 |
| Total purchase consideration | $ 2,842,173 | |
Borrowings (Details) ¥ in Millions |
6 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
|
Sep. 27, 2022
USD ($)
|
Sep. 27, 2022
JPY (¥)
|
Sep. 30, 2023
USD ($)
ft²
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2023
JPY (¥)
ft²
|
Sep. 22, 2023 |
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
|
| Borrowings (Details) [Line Items] | ||||||||
| Aggregate credit line | $ 61,300,000 | ¥ 8,150.0 | ||||||
| Percentage of interest rate | 0.70% | 0.70% | ||||||
| Borrowed amount | $ 61,300,000 | ¥ 8,150.0 | ||||||
| Net outstanding balance | $ 2,300,000 | ¥ 340.1 | 60,600,000 | 8,100.0 | ||||
| Unamortized loan service | $ 643,438 | 85.6 | ||||||
| Maturity date | Dec. 29, 2023 | |||||||
| Bears interest rate, percentage | 1.20% | |||||||
| Total outstanding loan | $ 54,500,000 | ¥ 8,150.0 | ||||||
| Interest rate description | The loan bears an interest rate of TIBOR (3M)+6.0% (in the case EBITDA exceeds ¥0) or TIBOR (3M)+0.7% (in the case EBITDA is ¥0 or less). | |||||||
| Piece of land (in Square Feet) | ft² | 16,165 | 16,165 | ||||||
| Interest expenses (in Dollars) | $ | $ 1,061,277 | $ 1,334,723 | ||||||
| Long-term Borrowings [Member] | ||||||||
| Borrowings (Details) [Line Items] | ||||||||
| Weighted average interest rates | 0.98% | 1.83% | 0.98% | |||||
| Resona Merchant Bank Asia Limited [Member] | ||||||||
| Borrowings (Details) [Line Items] | ||||||||
| Aggregate credit line | ¥ 200.0 | |||||||
| Borrowed amount | ¥ 200.0 | ¥ 200.0 | ||||||
Borrowings (Details) - Schedule of short-term borrowings - USD ($) |
6 Months Ended | |||||
|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|||||
| Short-Term Debt [Line Items] | ||||||
| Total short-term borrowings | $ 54,539,800 | $ 60,636,412 | ||||
| Syndicated Loans Tranche A [Member] | ||||||
| Short-Term Debt [Line Items] | ||||||
| Maturity | [1] | December 2023 | ||||
| Interest Rate | [1],[2] | TIBOR^(3M)+0.70%- TIBOR (1M)+1.20% | ||||
| Total short-term borrowings | [1] | $ 54,539,800 | $ 60,636,412 | |||
| ||||||
Borrowings (Details) - Schedule of Long-Term Borrowings - USD ($) |
6 Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Total long-term borrowings | $ 10,934,787 | $ 13,109,844 | ||||||||||||
| Current portion of long-term borrowings | 3,618,832 | 2,783,445 | ||||||||||||
| Non-current portion of long-term borrowings | $ 7,315,955 | 10,326,399 | ||||||||||||
| Toei Shinkin Bank [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [1] | December 2053 | ||||||||||||
| Interest Rate | [1] | 1.10% | ||||||||||||
| Total long-term borrowings | [1] | $ 1,739,652 | 1,981,520 | |||||||||||
| Japan Finance Corporation [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [2] | December 2023 - April 2025 | ||||||||||||
| Interest Rate | [2] | 0.71% - 4.25% | ||||||||||||
| Total long-term borrowings | [2] | $ 1,338,400 | 1,665,007 | |||||||||||
| BOT Lease Co., Ltd. [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [3] | March 2028 | ||||||||||||
| Interest Rate | [3] | TIBOR (3M) + 6.0% | ||||||||||||
| Total long-term borrowings | [3] | $ 1,338,400 | 1,503,800 | |||||||||||
| MUFG Bank [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [4] | August 2026 | ||||||||||||
| Interest Rate | [4] | TIBOR (3M) + 0.8% | ||||||||||||
| Total long-term borrowings | [4] | $ 4,356,492 | 5,210,667 | |||||||||||
| Tokyo Higashi Shinkin Bank [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | July 2026 | |||||||||||||
| Interest Rate | 2.0% | |||||||||||||
| Total long-term borrowings | 100,153 | |||||||||||||
| The Hongkong and Shanghai Banking Corporation Limited [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [5] | July 2024 – February 2033 | ||||||||||||
| Interest Rate | [5] | 2.750% - 3.375% | ||||||||||||
| Total long-term borrowings | [5] | $ 491,528 | 619,032 | |||||||||||
| DFL-Shutoken Leasing (Hong Kong) Company Limited [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | March 2024 – October 2025 | |||||||||||||
| Interest Rate | 2.990% | |||||||||||||
| Total long-term borrowings | $ 335,124 | 518,731 | ||||||||||||
| Resona Merchant Bank Asia Limited [Member] | ||||||||||||||
| Debt Instrument [Line Items] | ||||||||||||||
| Maturity | [6] | No maturity date | ||||||||||||
| Interest Rate | [6] | 1.2% | ||||||||||||
| Total long-term borrowings | [6] | $ 1,335,191 | $ 1,510,934 | |||||||||||
| ||||||||||||||
Borrowings (Details) - Schedule of Future Maturities of Long-Term Borrowings |
Sep. 30, 2023
USD ($)
|
|---|---|
| Schedule of future maturities of long-term borrowings [Abstract] | |
| 2024 | $ 3,618,832 |
| 2025 | 768,605 |
| 2026 | 686,451 |
| 2027 | 2,767,954 |
| 2028 | 1,437,632 |
| Thereafter | 1,655,313 |
| Total long-term borrowings | $ 10,934,787 |
Related Party Transactions (Details) ¥ in Millions |
6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Sep. 30, 2022 |
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
Sep. 30, 2023
JPY (¥)
|
|
| Related Party Transaction [Line Items] | ||||||
| Security deposit | $ 334,600 | ¥ 50 | ||||
| Working capital | $ 66,920 | ¥ 10 | $ 267,680 | ¥ 40 | ||
| Transaction commission percentage | 1.00% | 1.00% | 1.00% | |||
| Consumption tax amounted | $ 109,144 | |||||
| Seihinkokusai [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Security deposit | $ 93,688 | 14 | ||||
| Operating security deposit to Seihinkokusai [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Security deposit | $ 133,840 | ¥ 20 | ||||
Related Party Transactions (Details) - Schedule of Relationships with Related Parties who had Transactions |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Mr. Mei Kanayama [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship to the Company | Representative director, director, and controlling shareholder |
| Seihinkokusai Co., Ltd. (“Seihinkokusai”) [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship to the Company | An entity of which Mr. Kanayama’s wife is a director and the representative director |
| Shintai Co., Ltd. [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship to the Company | The entity’s representative director is Mr. Kanayama’s wife before April 30, 2023. |
| Palpito [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship to the Company | An equity investment entity of the Company, which was sold to Seihinkokusai on June 30, 2023. |
| Tokushin G.K.[Member] | |
| Related Party Transaction [Line Items] | |
| Relationship to the Company | A shareholder of the Company. |
Related Party Transactions (Details) - Schedule of Due from Related Parties - Related Party [Member] - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
||
|---|---|---|---|---|
| Related Party Transactions (Details) - Schedule of Due from Related Parties [Line Items] | ||||
| Total due from related parties | $ 9,035 | $ 444,567 | ||
| Seihinkokusai [Member] | ||||
| Related Party Transactions (Details) - Schedule of Due from Related Parties [Line Items] | ||||
| Total due from related parties | [1] | 9,035 | 443,664 | |
| Shintai Co., Ltd. [Member] | ||||
| Related Party Transactions (Details) - Schedule of Due from Related Parties [Line Items] | ||||
| Total due from related parties | $ 903 | |||
| ||||
Related Party Transactions (Details) - Schedule of Accounts Payable - Related Parties - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Related Party Transactions (Details) - Schedule of Accounts Payable - Related Parties [Line Items] | ||
| Total accounts payable - related parties | $ 67,848 | |
| Seihinkokusai [Member] | ||
| Related Party Transactions (Details) - Schedule of Accounts Payable - Related Parties [Line Items] | ||
| Total accounts payable - related parties | $ 67,848 |
Related Party Transactions (Details) - Schedule of Due to Related Parties - Related Party [Member] - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
|---|---|---|
| Related Party Transactions (Details) - Schedule of Due to Related Parties [Line Items] | ||
| Total due to related parties | $ 108,064 | $ 297,559 |
| Mr. Mei Kanayama [Member] | ||
| Related Party Transactions (Details) - Schedule of Due to Related Parties [Line Items] | ||
| Total due to related parties | 105,356 | 63,916 |
| Seihinkokusai [Member] | ||
| Related Party Transactions (Details) - Schedule of Due to Related Parties [Line Items] | ||
| Total due to related parties | $ 2,708 | $ 233,643 |
Related Party Transactions (Details) - Schedule of Sales to Related Parties - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Related Party Transactions (Details) - Schedule of Sales to Related Parties [Line Items] | ||
| Total revenue from related parties | $ 115,034 | $ 8,188 |
| Seihinkokusai [Member] | ||
| Related Party Transactions (Details) - Schedule of Sales to Related Parties [Line Items] | ||
| Total revenue from related parties | 100,132 | 5,968 |
| Shintai Co., Ltd. [Member] | ||
| Related Party Transactions (Details) - Schedule of Sales to Related Parties [Line Items] | ||
| Total revenue from related parties | 1,171 | |
| Palpito [Member] | ||
| Related Party Transactions (Details) - Schedule of Sales to Related Parties [Line Items] | ||
| Total revenue from related parties | $ 14,902 | $ 1,049 |
Related Party Transactions (Details) - Schedule of Purchase from Related Parties - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Related Party Transactions (Details) - Schedule of Purchase from Related Parties [Line Items] | ||
| Total purchase from related parties | $ 139,351 | $ 139,031 |
| Seihinkokusai [Member] | ||
| Related Party Transactions (Details) - Schedule of Purchase from Related Parties [Line Items] | ||
| Total purchase from related parties | 139,351 | 68,235 |
| Palpito [Member] | ||
| Related Party Transactions (Details) - Schedule of Purchase from Related Parties [Line Items] | ||
| Total purchase from related parties | $ 70,796 | |
Taxes (Details) ¥ in Millions, ¥ in Millions |
6 Months Ended | 60 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2023
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Sep. 30, 2023
HKD ($)
|
Sep. 30, 2023
CNY (¥)
|
Sep. 30, 2022
HKD ($)
|
Dec. 31, 2027
CNY (¥)
|
Mar. 31, 2030
USD ($)
|
Mar. 31, 2029
USD ($)
|
Sep. 30, 2023
JPY (¥)
|
Mar. 31, 2023
USD ($)
|
Mar. 31, 2023
JPY (¥)
|
Oct. 01, 2019 |
|
| Taxes (Details) [Line Items] | ||||||||||||
| Statutory income tax rate | 30.60% | 30.60% | 30.60% | 30.60% | 34.00% | |||||||
| Profit taxes rate | 50.00% | 50.00% | 50.00% | 50.00% | ||||||||
| Taxable income (in Yuan Renminbi) | ¥ | ¥ 1 | |||||||||||
| Profit taxes rate | 2.50% | 2.50% | 2.50% | 2.50% | ||||||||
| Reduced effective rate amount | $ 1,000,000 | |||||||||||
| Reduced amount of effective rate | $ 3,000,000 | |||||||||||
| Reduced effective percentage | 5.00% | 5.00% | 5.00% | 5.00% | ||||||||
| Income taxes description | The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less) is 17% for the first MYR600,000 taxable income, with the remaining balance being taxed at the 24% rate. | The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less) is 17% for the first MYR600,000 taxable income, with the remaining balance being taxed at the 24% rate. | The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less) is 17% for the first MYR600,000 taxable income, with the remaining balance being taxed at the 24% rate. | The tax rate for small and medium sized companies (generally companies incorporated in Malaysia with paid-in capital of MYR2,500,000 or less) is 17% for the first MYR600,000 taxable income, with the remaining balance being taxed at the 24% rate. | ||||||||
| Applicable consumption tax rate | 8.00% | |||||||||||
| Consumption tax amount | $ 28,300,000 | ¥ 3,800.0 | ||||||||||
| Tax consultant amount | 6,100,000 | ¥ 800.0 | ||||||||||
| Consumption tax payable | $ 16,600,000 | ¥ 2,200.0 | ||||||||||
| Consumption tax amount | ¥ | 30.0 | |||||||||||
| Additional consumption tax amount | 600,000 | ¥ 90.9 | ||||||||||
| Consumption tax payable instalment | 200,760 | |||||||||||
| Consumption tax payable | $ 10,758,638 | |||||||||||
| Maximum [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Applicable consumption tax rate | 10.00% | |||||||||||
| Minimum [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Applicable consumption tax rate | 8.00% | |||||||||||
| Hong Kong [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Profit taxes rate | 16.50% | 16.50% | 16.50% | 16.50% | 16.50% | |||||||
| Effective income tax value (in Dollars) | $ 2,000,000 | $ 2,000,000 | ||||||||||
| Operating loss carryforward | $ 983,345 | |||||||||||
| PRC [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Foreign income tax rate | 25.00% | 25.00% | 25.00% | 25.00% | ||||||||
| Malaysia [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Foreign income tax rate | 24.00% | 24.00% | 24.00% | 24.00% | ||||||||
| Japan [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Operating loss carryforward | $ 3,087,556 | |||||||||||
| Tokyo Regional Taxation Bureau [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Consumption tax amount | 12,900,000 | 1,700.0 | ||||||||||
| Tokyo Regional Taxation Bureau [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Additional consumption tax amount | $ 4,900,000 | ¥ 700.0 | ||||||||||
| Forecast [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Taxable income amount (in Yuan Renminbi) | ¥ | ¥ 3 | |||||||||||
| Taxable income percentage | 5.00% | |||||||||||
| Operating loss carryforward | $ 179,116 | $ 2,908,440 | ||||||||||
| TLS [Member] | Hong Kong [Member] | ||||||||||||
| Taxes (Details) [Line Items] | ||||||||||||
| Profit taxes rate | 8.25% | 8.25% | 8.25% | 8.25% | ||||||||
| Effective income tax value (in Dollars) | $ 2,000,000 | $ 2,000,000 | ||||||||||
Taxes (Details) - Schedule of Income Before Tax - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Taxes (Details) - Schedule of Income Before Tax [Line Items] | ||
| Income before tax | $ 1,597,920 | $ 539,645 |
| Japan [Member] | ||
| Taxes (Details) - Schedule of Income Before Tax [Line Items] | ||
| Income before tax | (424,749) | (98,047) |
| Hong Kong [Member] | ||
| Taxes (Details) - Schedule of Income Before Tax [Line Items] | ||
| Income before tax | 1,968,464 | 464,816 |
| PRC [Member] | ||
| Taxes (Details) - Schedule of Income Before Tax [Line Items] | ||
| Income before tax | 59,938 | 172,876 |
| Malaysia [Member] | ||
| Taxes (Details) - Schedule of Income Before Tax [Line Items] | ||
| Income before tax | $ (5,733) | |
Taxes (Details) - Schedule of Income Tax Provision (Benefit) - USD ($) |
6 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Taxes (Details) - Schedule of Income Tax Provision (Benefit) [Line Items] | ||
| Total current tax provision | $ 1,104,188 | $ 241,741 |
| Total deferred tax provision | (1,460,623) | (29,689) |
| Income tax provisions (benefit) | (356,435) | 212,052 |
| Japan [Member] | ||
| Taxes (Details) - Schedule of Income Tax Provision (Benefit) [Line Items] | ||
| Total current tax provision | 1,096,800 | 192,271 |
| Total deferred tax provision | (1,460,667) | (29,689) |
| Hong Kong [Member] | ||
| Taxes (Details) - Schedule of Income Tax Provision (Benefit) [Line Items] | ||
| Total current tax provision | ||
| Total deferred tax provision | ||
| PRC [Member] | ||
| Taxes (Details) - Schedule of Income Tax Provision (Benefit) [Line Items] | ||
| Total current tax provision | 7,388 | 49,470 |
| Total deferred tax provision | ||
| Malaysia [Member] | ||
| Taxes (Details) - Schedule of Income Tax Provision (Benefit) [Line Items] | ||
| Total current tax provision | ||
| Total deferred tax provision | $ 44 | |
Taxes (Details) - Schedule of Reconciles the Japan Statutory Rate to the Company’s Effective Tax Rates |
6 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|||
| Schedule of Reconciles the Japan Statutory Rate to the Company Effective Tax Rates [Abstract] | ||||
| Japanese statutory income tax rate | 30.60% | 34.00% | ||
| Non-deductible expenses | 3.10% | 16.40% | ||
| Non-taxable income | (10.70%) | (3.40%) | ||
| Tax rate difference in non-Japan subsidiaries and different prefectures in Japan | (19.40%) | (6.30%) | ||
| Change in valuation allowance | (24.50%) | (2.70%) | ||
| Effect of additional consumption tax charge from tax examination | [1] | 12.40% | ||
| Prior year income tax true-up | (15.30%) | |||
| Others | 1.50% | 1.30% | ||
| Effective tax rate | (22.30%) | 39.30% | ||
| ||||
Taxes (Details) - Schedule of Deferred Tax Assets Comprised - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Deferred tax assets: | ||
| Allowance for credit losses | $ 1,209,854 | $ 1,434,120 |
| Accrued member rewards | 23,473 | 39,019 |
| Accrued employee bonus | 22,210 | 46,564 |
| Accrued asset retirement obligation | 103,266 | 123,626 |
| Accrued employee retirement pension | 56,707 | 59,358 |
| Investment loss from equity method investment | 40,300 | |
| Net operating loss carry-forwards | 1,107,661 | 3,187,904 |
| Total deferred tax assets | 2,523,171 | 4,930,891 |
| Valuation allowance | (199,350) | (597,777) |
| Total deferred tax assets | 2,323,821 | 4,333,114 |
| Deferred tax liabilities: | ||
| Change in fair value of purchase option | (6,192) | (7,552) |
| Accrued interest income on consumption tax receivable | (19,894) | |
| Compensation receivable for consumption tax | (4,901,483) | (8,756,745) |
| Total deferred tax liabilities | (4,907,675) | (8,784,191) |
| Deferred tax liabilities, net | $ (2,583,854) | $ (4,451,077) |
Taxes (Details) - Schedule of Valuation Allowance - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Schedule of Valuation Allowance [Abstract] | ||
| Beginning balance | $ 597,777 | $ 386,436 |
| Additions (reduction) | (335,671) | 214,389 |
| Disposal of a subsidiary | (58,887) | |
| Foreign currency translation adjustments | (3,869) | (3,048) |
| Ending balance | $ 199,350 | $ 597,777 |
Taxes (Details) - Schedule of Taxes Payable - USD ($) |
6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Mar. 31, 2023 |
|||
| Schedule of taxes payable [Abstract] | ||||
| Income tax payable | $ 1,501,243 | $ 663,503 | ||
| Additional consumption tax payable due to tax examination | [1] | 10,758,638 | 16,597,264 | |
| Consumption tax payable and others | 23,472 | 959,036 | ||
| Total taxes payable | $ 12,283,353 | $ 18,219,803 | ||
| ||||
Representative's Warrants Liability (Details) - USD ($) |
6 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Jan. 13, 2022 |
|
| Representative's Warrants Liability [Line Items] | |||
| Purchase price per share (in Dollars per share) | $ 0.01 | ||
| Shares purchase (in Shares) | 300,000 | ||
| Percentage of sale of stock | 5.00% | ||
| Warrants exercise price per share (in Dollars per share) | $ 4.8 | ||
| Offering price Per share (in Dollars per share) | $ 4 | ||
| Warrants liability | $ 522,116 | ||
| Additional paid-in capital | $ 522,116 | ||
| Change in fair value of the representative’s warrants liability | $ 1,833 | $ 89,049 | |
| IPO [Member] | |||
| Representative's Warrants Liability [Line Items] | |||
| Percentage of sale of stock | 120.00% | ||
Representative's Warrants Liability (Details) - Schedule of Fair Value Using the Black-Scholes Option Pricing Model - $ / shares |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jan. 13, 2022 |
Sep. 30, 2023 |
Mar. 31, 2023 |
|
| Representative’s Warrants liability | |||
| Stock price | $ 4 | $ 1 | $ 0.98 |
| Exercise price | $ 4.8 | $ 4.8 | $ 4.8 |
| Expected term (years) | 5 years | 3 years 3 months 14 days | 3 years 9 months 14 days |
| Risk-free interest rate | 1.47% | 4.60% | 3.60% |
| Expected volatility | 55.39% | 57.84% | 55.57% |
Segment Reporting (Details) |
6 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Segment Reporting [Abstract] | |
| Reported segments | 3 |
Segment Reporting (Details) - Schedule of Assets and Liabilities - USD ($) |
Sep. 30, 2023 |
Mar. 31, 2023 |
Mar. 31, 2022 |
|---|---|---|---|
| Total assets: | |||
| Total assets | $ 129,126,312 | $ 146,675,280 | $ 146,675,280 |
| Total liabilities: | |||
| Total liabilities | 101,159,864 | $ 117,393,537 | 117,393,537 |
| Directly-Operated Physical Stores [Member] | |||
| Total assets: | |||
| Total assets | 15,521,030 | 8,815,957 | |
| Total liabilities: | |||
| Total liabilities | 18,121,356 | 9,728,199 | |
| Online Stores and Services [Member] | |||
| Total assets: | |||
| Total assets | 7,909,941 | 20,070,215 | |
| Total liabilities: | |||
| Total liabilities | 7,282,353 | 11,812,654 | |
| Franchise Stores and Wholesale Customers [Member] | |||
| Total assets: | |||
| Total assets | 105,695,341 | 117,789,108 | |
| Total liabilities: | |||
| Total liabilities | $ 75,756,155 | $ 95,852,684 |
Subsequent Events (Details) - 1 months ended Dec. 31, 2023 - Forecast [Member] ¥ in Millions |
USD ($) |
JPY (¥) |
JPY (¥) |
|---|---|---|---|
| Subsequent Events [Line Items] | |||
| Net book value | $ 2,100,000 | ¥ 307.7 | |
| Total consideration | (2,900,000) | ¥ 430.0 | |
| Purchase deposit | $ 60,000 | ¥ 9.0 |