Business Context and Reporting Period
Ryojbaba Co., Ltd. (Ticker: RYOJ) is a Japanese foreign private issuer incorporated in Japan and listed on the Nasdaq Capital Market. The company operates two primary segments: Consulting Services (labor and corporate consulting) and Health Services (osteopathic clinics and beauty salons). This Form 20-F covers the fiscal year ended December 31, 2025.
The company completed its Initial Public Offering (IPO) in August 2025, raising approximately $3.9 million in net proceeds. As of December 31, 2025, the company operated 29 directly-operated osteopathic clinics and one osteopathic beauty salon in Japan.
Key Financial Metrics
| Metric | 2025 (USD) | 2024 (USD) | Change |
|---|---|---|---|
| Total Revenue | $9,335,591 | $11,576,848 | (19.4%) |
| Net Income | $119,394 | $1,332,399 | (91.0%) |
| Operating Income (Loss) | $(755,407) | $1,860,935 | (140.6%) |
| EBITDA | $64,096 | $2,489,996 | (97.4%) |
| Cash Flow from Operations | $863,925 | $802,386 | +7.7% |
| Cash and Equivalents (End of Period) | $6,158,462 | $2,605,275 | +136.4% |
| Total Debt Outstanding | $3,815,683 | $4,107,554 | (7.1%) |
Note: Revenue declined primarily due to a 50% drop in consulting services revenue and a 53% drop in beauty salon revenue, partially offset by a 4% decline in clinic revenue. Net income decreased significantly due to higher operating expenses and a one-time impairment loss.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue fell 19% year-over-year. Consulting services revenue dropped from $3.13 million to $1.56 million, largely due to the non-recurring nature of government subsidy-related "spot revenues" which were $2.48 million in 2024 versus $0.88 million in 2025. Health services revenue also declined, driven by the closure of unprofitable beauty salons.
- Operating Loss: The company shifted from an operating profit of $1.86 million in 2024 to an operating loss of $0.76 million in 2025. This was driven by a 25% increase in operating expenses (primarily outsourcing fees and stock-based compensation) and a one-time impairment loss of $364,944 related to terminated customer contracts.
- Stock-Based Compensation: The company recognized $537,000 in stock-based compensation expense in 2025 related to the vesting of stock acquisition rights upon the successful IPO, a non-cash expense not present in the same form in 2024.
- Liquidity Improvement: Cash and cash equivalents more than doubled to $6.16 million, primarily due to net proceeds from the August 2025 IPO ($4.37 million gross proceeds) and strong operating cash flows.
Guidance, Outlook, and Risks
Management Commentary & Outlook: Management plans to use IPO proceeds to expand consulting services, develop an IT platform for labor consulting, and expand osteopathic clinics through acquisitions and franchising. The company intends to restore profitability in its beauty salon business and is actively pursuing new geographic markets in Japan (Tokyo, Osaka, Fukuoka) and potentially overseas.
Key Risks and Contingencies:
- Internal Controls: The company identified two material weaknesses in internal controls over financial reporting: (1) lack of procedures to identify/approve related party transactions, and (2) insufficient financial reporting personnel. Management is remediating these issues.
- Concentration Risk: Approximately 97% of clinics are located in the Kyushu region of Japan, exposing the company to regional economic or natural disaster risks. Additionally, the CEO, Ryoji Baba, controls approximately 69.47% of voting power, limiting minority shareholder influence.
- Regulatory & Legal: The company faces risks related to Japanese labor laws, healthcare regulations, and potential tax investigations. There is also a risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes.
- Client Concentration: Consulting revenue is derived from a limited number of clients, and engagement agreements are often non-recurring and terminable without penalty.
Investor Verification Checklist
- Revenue Sustainability: Verify the sustainability of consulting revenue given the significant drop in government subsidy-related "spot revenues" from 2024 to 2025.
- Internal Control Remediation: Monitor the company's progress in remediating the identified material weaknesses in internal controls over financial reporting.
- Debt Guarantees: Note that a portion of the company's debt ($1.4 million) is personally guaranteed by the CEO and a Director of a subsidiary, creating potential related-party exposure.
- Impairment Charges: Review the $365,000 impairment loss on customer lists to assess if further write-downs are necessary for remaining intangible assets.
- Geographic Concentration: Assess the risk exposure given that nearly all physical operations are concentrated in the Kyushu region of Japan.