v3.26.3
BUSINESS COMBINATIONS
 6 Months Ended
Jun. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATIONS

Note 3 — BUSINESS COMBINATIONS

 

The Company accounts for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The consideration transferred in an acquisition is measured at fair value, and the identifiable assets acquired and liabilities assumed are recognized at their acquisition-date fair values.

 

Well Resources Co., Ltd. (Business Transfer)

 

On May 1, 2026, the Company completed a business transfer agreement to acquire the operations and related assets/liabilities of four child development support and after-school daycare facilities located in Miyagi Prefecture from Well Resources Co., Ltd. (“Well Resources”) for a total cash consideration of JPY120,000,000 (US$737,962) (excluding consumption tax). The transaction was accounted for as a business combination as the acquired set included inputs, substantive processes, and outputs. The acquisition allows the Company to expand its child development support and daycare service network in the Tohoku region.

 

Tokai Sports Co., Ltd.

 

On June 1, 2026, the Company acquired 100% of the outstanding shares of Tokai Sports Co., Ltd. (“Tokai Sports”), a company engaged in operating sports schools and events for children, for a total cash consideration of JPY101,276,400 (US$622,818). The acquisition allows the Company to expand its sports school network and market presence.

 

Consideration Transferred and Purchase Price Allocation

 

The following table summarizes the consideration transferred, the recognized fair values of identifiable net assets acquired, and the goodwill recognized as of the respective acquisition dates:

 

               
   Well Resources   Tokai Sports   Total 
   JPY   JPY   JPY 
Cash consideration transferred   120,000,000    101,276,400    221,276,400 
Recognized amounts of identifiable assets acquired:               
Cash and bank deposits   -    39,236,980    39,236,980 
Accounts receivable   -    561,228    561,228 
Advance payments   -    286,000    286,000 
Prepaid expenses   -    65,835    65,835 
Suspense payments and other current assets   -    180,390    180,390 
Property and equipment, net   214,526    4,300,949    4,515,475 
Telephone subscription rights   -    284,491    284,491 
Deposits and guarantees   -    524,240    524,240 
Operating lease right-of-use assets   13,610,473    3,327,164    16,937,637 
Finance lease right-of-use assets   3,381,666    4,359,094    7,740,760 
Intangible assets, net   61,464,000    21,925,000    83,389,000 
Deferred tax assets   731,954    407,179    1,139,133 
Liabilities assumed:               
Accounts payable and accruals   -    (4,312,971)   (4,312,971)
Other current liabilities   -    (1,266,310)   (1,266,310)
Deposits received   -    (1,070,287)   (1,070,287)
Accrued liabilities and other   -    (2,020,960)   (2,020,960)
Accrued liabilities   (2,065,916)   (1,149,250)   (3,215,166)
Operating lease liabilities, current   (7,047,559)   (1,830,672)   (8,878,231)
Finance lease liabilities, current   (1,382,200)   (815,594)   (2,197,794)
Operating lease liabilities, non-current   (6,562,914)   (1,496,492)   (8,059,406)
Finance lease liabilities, non-current   (1,999,466)   (3,543,500)   (5,542,966)
Deferred tax liabilities   (21,776,695)   (7,768,028)   (29,544,723)
Total identifiable net assets acquired   38,567,869    50,184,486    88,752,355 
Goodwill recognized   81,432,131    51,091,914    132,524,045 

 

The goodwill resulting from these acquisitions is primarily attributable to expected operational synergies, assembled workforce, and future sales growth potential from expanded service offerings.

 

Acquisition-related costs associated with these acquisitions were JPY47,365,619 for the six months ended June 30, 2026, which were expensed as incurred and included in selling, general, and administrative expenses in the unaudited interim condensed consolidated statements of income.

 

Since their respective acquisition dates through June 30, 2026, the amounts of net revenue and net income of Tokai Sports included in the Company’s consolidated statements of income were JPY6,237,758 (US$38,360) and JPY1,288,594 (US$7,924), respectively. For Well Resources, net revenue included in the Company’s consolidated statements of income since its acquisition date was JPY25,314,472 (US$155,676); net income is not applicable as the transaction was structured as a business transfer. 

 

Supplemental pro forma revenue and earnings information has not been presented because the acquisitions of Well Resources and Tokai Sports, individually and in the aggregate, are not material to the Company’s consolidated financial statements.