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Earlyworks Co., Ltd. Reports Financial and Operational Performance for the Six Months Ended October 31, 2023

TOKYO, May 01, 2024 (GLOBE NEWSWIRE) -- Earlyworks Co., Ltd. (NASDAQ: ELWS) (the “Company”), a Japanese provider of blockchain technology solutions, yesterday announced its financial results for the six months ended October 31, 2023.

For the six months ended October 31, 2023, the Company’s revenue increased by approximately JPY 22,738 thousand, gross profit increased by approximately JPY 39,631 thousand and net loss decreased by approximately JPY 28,393 thousand, as compared to the same period in 2022.

Management Commentary

The six-month period ended October 31, 2023 marks several milestones for the Company.

First, the Company achieved its initial public offering and listing on the NASDAQ in the six months ended October 31, 2023.

Second, the Company has been able to leverage its research and development achievements for business opportunities. In the 2023 fiscal year, the Company was dedicated to the research and development of its proprietary blockchain system (Grid Ledger System, hereinafter “GLS”). This was a strategic decision made by Company’s management to contribute to its future business. During the six months ended October 31, 2023, the Company made significant efforts to promote GLS. As announced in the Company’s previous press releases, the Company’s research and development efforts resulted in the launch of Phase 1 of the System Development Kit package for GLS, and collaborations with large Japanese corporations, including NTT DOCOMO, INC., one of Japan’s largest cell phone operators, have been implemented. The Company is hopeful that these collaborations will contribute to future business growth.

Third, the Company has updated its revenue generation model. The Company’s previous model centered on securing system development contracts using blockchain technology. With the development of GLS, the Company has been able to provide decentralized blockchain solutions based on GLS. Large and venture companies in Japan are currently seeking collaborations to launch new businesses, termed “co-creation new business development.” The Company has sought to take full advantage of opportunities created by the “co-creation new business development” model and establish collaborations as a business partner, rather than a contracting system developer, by leveraging GLS. For example, as announced in the Company’s previous press release, the Company has been selected as a co-creation business partner for MetaMe®, a meta-communication service utilizing technology from NTT DOCOMO, INC. The Company believes this initiative of updating its revenue generation model has redefined the Company’s position and presented new opportunities for recurring income and revenue.

Comparison Between the Six Months Ended October 31, 2023 and 2022

  For the
six months

October 31,
  For the
six months

October 31,
  For the
six months
October 31,
Software and system development services  11,358,517   4,812,000   31,771 
Consulting and solution services  20,847,940   1,267,620   8,369 
Sale of NFTs     48,864,935   322,626 
TOTAL OPERATING REVENUES  32,206,457   54,944,555   362,766 
COST OF REVENUES  (20,229,847)  (3,336,792)  (22,031)
GROSS PROFIT  11,976,610   51,607,763   340,735 
Selling and marketing expenses  (11,366,838)  (27,077,415)  (178,776)
General and administrative expenses  (162,606,424)  (200,231,599)  (1,322,010)
Share-based compensation expenses     (1,616,463)  (10,673)
Research and development expenses  (50,234,955)  (44,821,606)  (295,930)
TOTAL OPERATING EXPENSES  (224,208,217)  (273,747,083)  (1,807,389)
LOSS FROM OPERATIONS  (212,231,607)  (222,139,320)  (1,466,654)
Loss on digital assets     (167,879)  (1,108)
Interest expenses, net  (700,617)  (1,789,278)  (11,814)
Foreign exchange gain, net     38,823,264   256,327 
Other (expense) income, net  (213,799)  129,617   856 
LOSS BEFORE INCOME TAXES  (213,146,023)  (185,143,596)  (1,222,393)
Provision for income (tax) benefit            
Current  (145,000)      
Deferred  (56,966)  188,496   1,245 
Total provision for income (tax) benefit  (201,966)  188,496   1,245 
NET LOSS  (213,347,989)  (184,955,100)  (1,221,148)
LOSS PER SHARE            
Basic  (15.42)  (12.77)  (0.08)
Diluted  (15.42)  (12.77)  (0.08)
Basic  13,839,400   14,478,530   14,478,530 
Diluted  13,839,400   14,478,530   14,478,530 

The accompanying notes are an integral part of these unaudited interim condensed financial statements.

  As of
April 30,
  As of
October 31,
  As of
October 31,
     (Unaudited)  (Unaudited) 
Cash  177,886,393   701,384,530   4,630,824 
Digital assets  750,307   465,464   3,073 
Accounts receivable, net  30,934,916   10,986,371   72,536 
Prepayments  2,591,297   24,329,264   160,632 
Short-term deposits  3,096,509   3,096,509   20,444 
Income tax receivable  19,147,994   9,635,241   63,616 
Other current assets, net  275,577   2,226,920   14,703 
TOTAL CURRENT ASSETS  234,682,993   752,124,299   4,965,828 
Property and equipment, net  2,067,013   1,752,601   11,571 
Operating lease right-of-use assets  3,467,368   15,781,366   104,195 
Deferred initial public offering (“IPO”) costs  212,160,121       
Long-term deposits  657,740   657,740   4,343 
TOTAL ASSETS  453,035,235   770,316,006   5,085,937 
Bank loans – current portion, net  123,819,000   121,969,000   805,289 
Other payables and accrued liabilities  47,250,464   95,948,571   633,491 
Operating lease liabilities, current  3,467,368   8,173,403   53,964 
Income taxes payable  145,000       
Contract liabilities  1,397,470       
TOTAL CURRENT LIABILITIES  176,079,302   226,090,974   1,492,744 
Bank loans – non-current, net  68,252,500   57,268,000   378,106 
Operating lease liabilities, non-current     6,911,713   45,634 
Deferred tax liabilities – non-current  188,496       
TOTAL LIABILITIES  244,520,298   290,270,687   1,916,484 
Ordinary shares, 55,300,000 shares authorized; 13,839,400 and 15,039,400 shares issued and outstanding as of April 30, 2023 and October 31, 2023, respectively  100,000,000   881,200,000   5,818,038 
Additional paid-in capital  1,702,120,099   1,377,405,581   9,094,187 
Accumulated deficit  (1,593,605,162)  (1,778,560,262)  (11,742,772)
TOTAL SHAREHOLDERS’ EQUITY  208,514,937   480,045,319   3,169,453 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  453,035,235   770,316,006   5,085,937 

Total revenue for the six months ended on October 31, 2023, increased by approximately JPY 22,738 thousand from approximately JPY 32,206 thousand in the same period in 2022 to approximately JPY 54,944 thousand. Revenue from software and system development services decreased by approximately JPY 6,547 thousand and revenue from consulting and solution services also decreased by approximately JPY 19,580 thousand, mainly because the timing of certain projects was delayed to the second half of the 2024 fiscal year. Revenue from sales of NFTs increased by approximately JPY 48,865 thousand from zero, due to increased revenue from the NFT trading platform that the Company developed for a business partner, as previously disclosed in the Company’s annual report on Form 20-F for the fiscal year ended April 30, 2023, filed on September 15, 2023.

Cost of revenue decreased by approximately JPY 16,893 thousand from approximately JPY 20,230 thousand in the same period in 2022 to approximately JPY 3,337 thousand, primarily due to the absence of associated costs with the sale of NFTs. The initial cost of approximately JPY 11,550 thousand incurred for designing NFTs was accounted for as research and development expenses in the fiscal year ended April 30, 2023. From May 2023 onwards, minimal cost of revenue has been incurred for the sale of NFTs.  

Total operating expenses increased by approximately JPY 49,539 thousand from approximately JPY 224,208 thousand in the same period in 2022 to approximately 273,747 thousand. The main reason contributing to the increase was that general and administrative expenses increased by approximately JPY 37,625 thousand, mainly attributable to the commission fees, consulting fees and listing maintenance costs paid to the Company’s depositary, the Bank of New York Mellon. Selling and marketing expenses also increased by approximately JPY 15,710 thousand from approximately JPY 11,367 thousand in the same period in 2022 to approximately JPY 27,077 thousand, primarily due to increased advertising and promotion expenses.

As of October 31, 2023, the Company had approximately JPY 701,385 thousand in cash and cash equivalents after the initial public offering was completed in July 2023, and the total shareholder’s equity increased by approximately JPY 271,530 thousand compared to the same period in 2022.

About Earlyworks Co., Ltd.

Earlyworks Co., Ltd. is a Japanese company operating its proprietary private blockchain technology, GLS, to leverage blockchain technology in various applications in a wide range of industries. GLS is a hybrid blockchain that combines the technical advantages of blockchain and database technology. GLS features high-speed processing, which can reach 0.016 seconds per transaction, tamper-resistance, security, zero server downtime, and versatile applications. The applicability of GLS is verified in multiple domains, including real estate, advertisement, telecommunications, metaverse, and financial services. The Company’s mission is to keep updating GLS and make it an infrastructure in the coming Web3/metaverse-like data society.

For more information, please visit the Company’s website:

For inquiries about this release, please contact:

Earlyworks Co., Ltd.
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Forward-Looking Statements

Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may,” or other similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. 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 other filings with the U.S. Securities and Exchange Commission.

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