Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2021 | |
Document and Entity Information | |
Document Type | F-1 |
Entity Registrant Name | Medirom Healthcare Technologies Inc. |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Entity Central Index Key | 0001819704 |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS ¥ in Thousands, $ in Thousands | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Current assets: | ||
Cash and cash equivalents | ¥ 1,439,733 | ¥ 513,621 |
Time deposits | 32,524 | 38,520 |
Accounts receivable-trade, net | 148,540 | 337,048 |
Accounts receivable-other | 411,278 | 428,278 |
Due from shareholder | 8,266 | |
Inventories | 7,956 | 5,511 |
Prepaid expenses and other current assets | 47,193 | 47,485 |
Total current assets | 2,087,224 | 1,378,729 |
Property and equipment, net | 235,930 | 168,955 |
Goodwill | 150,720 | 78,282 |
Other intangible assets, net | 97,615 | 77,638 |
Investments | 500 | 14,044 |
Long-term accounts receivable-other, net | 116,942 | 106,208 |
Right-of-use asset - operating lease, net | 1,578,828 | 1,829,968 |
Lease and guarantee deposits | 710,636 | 769,104 |
Deferred tax assets, net | 655,591 | 222,505 |
Deferred offering costs | 0 | 57,509 |
Other assets | 79,480 | 54,523 |
Total assets | 5,713,466 | 4,757,465 |
Current liabilities: | ||
Accounts payable | 67,016 | 122,590 |
Accrued expenses | 889,112 | 447,974 |
Short-term borrowings and current portion of long-term borrowings | 242,281 | 371,570 |
Accrued income taxes | 43,198 | 17,834 |
Contract liability (current) | 172,063 | 201,559 |
Advances received | 461,665 | 483,124 |
Short-term lease liability | 658,320 | 704,024 |
Other current liabilities | 118,933 | 115,573 |
Total current liabilities | 2,652,588 | 2,262,689 |
Long-term borrowings - net of current portion | 668,380 | 150,531 |
Deposit received | 375,463 | 474,388 |
Long-term contract liability - net of current portion | 333,978 | 465,077 |
Long-term lease liability - net of current portion | 992,892 | 1,136,799 |
Asset retirement obligation | 191,192 | 127,411 |
Other liabilities | 7,716 | 5,589 |
Total liabilities | 5,222,209 | |
SHAREHOLDERS' EQUITY: | ||
Treasury stock, at cost- 92,500 common shares at December 31, 2020 and 2019 | (3,000) | (3,000) |
Additional paid-in capital | 1,018,146 | 713,267 |
Accumulated deficit | (1,703,302) | (705,309) |
Total shareholders' equity | 491,257 | 600,058 |
Total liabilities and shareholders' equity | 5,713,466 | 4,757,465 |
Common | ||
Current liabilities: | ||
Total liabilities | 5,222,209 | 4,157,407 |
SHAREHOLDERS' EQUITY: | ||
Common stock, value | 1,179,313 | 595,000 |
Class A Common | ||
SHAREHOLDERS' EQUITY: | ||
Common stock, value | ¥ 100 | ¥ 100 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - ¥ / shares | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Treasury stock shares | 92,500 | 92,500 | 92,500 |
Common | |||
Common stock, no par value | ¥ 0 | ¥ 0 | |
Common stock, shares authorized | 9,999,999 | 9,999,999 | |
Common stock, shares issued | 4,915,000 | 4,115,000 | |
Common stock, shares outstanding | 4,822,500 | 4,022,500 | |
Class A Common | |||
Common stock, no par value | ¥ 0 | ¥ 0 | ¥ 0 |
Common stock, shares authorized | 1 | 1 | 1 |
Common stock, shares issued | 1 | 1 | 1 |
Common stock, shares outstanding | 1 | 1 | 1 |
CONSOLIDATED STATEMENTS OF (LOS
CONSOLIDATED STATEMENTS OF (LOSS) INCOME - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues: | ||||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 | ¥ 3,341,617 | ¥ 3,908,264 |
Cost of revenues and operating expenses: | ||||
Selling, general and administrative expenses | 840,760 | 521,364 | 1,068,537 | 871,862 |
Impairment loss on long-lived assets | 0 | 106,501 | 44,546 | |
Total cost of revenues and operating expenses | 2,609,667 | 1,790,584 | 4,087,705 | 3,873,914 |
Operating loss | (482,188) | (434,307) | (746,088) | 34,350 |
Other income (expense): | ||||
Dividend income | 2 | 2 | 2 | 2 |
Interest income | 506 | 674 | 1,332 | 1,336 |
Interest expense | (6,683) | (6,076) | (13,234) | (13,591) |
Gain from bargain purchases | 1,014 | 1,624 | 6,487 | |
Subsidies | 1,065 | 12,230 | 111,581 | |
Other, net | 19,733 | 1,912 | 19,718 | 4,153 |
Total other income | 15,637 | 10,366 | 119,399 | (1,613) |
(Loss) income before income tax (benefit) expense and equity in earnings of investment | (626,689) | 32,737 | ||
Income tax (benefit) expense | 55,219 | 19,030 | (87,519) | 15,961 |
Equity in earnings of investment | 559 | |||
Net loss | ¥ (521,770) | ¥ (442,971) | ¥ (539,170) | ¥ 17,335 |
Net (loss) earnings per share | ||||
Basic | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.63 |
Diluted | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.06 |
Weighted average shares outstanding | ||||
Basic | 4,872,224 | 4,022,501 | 4,024,692 | 3,747,296 |
Diluted | 4,872,224 | 4,022,501 | 4,024,692 | 4,272,302 |
Directly-operated salons | ||||
Revenues: | ||||
Revenues | ¥ 1,421,413 | ¥ 751,267 | ¥ 2,026,806 | ¥ 2,031,155 |
Cost of revenues and operating expenses: | ||||
Cost of revenue | 1,415,685 | 866,297 | 2,149,843 | 1,912,893 |
Franchise fees | ||||
Revenues: | ||||
Revenues | 689,148 | 593,236 | 1,289,141 | 1,833,501 |
Cost of revenues and operating expenses: | ||||
Cost of revenue | 335,458 | 394,906 | 745,102 | 1,019,956 |
Other | ||||
Revenues: | ||||
Revenues | 16,918 | 11,774 | 25,670 | 43,608 |
Cost of revenues and operating expenses: | ||||
Cost of revenue | ¥ 17,764 | ¥ 8,017 | ¥ 17,722 | ¥ 24,657 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME | ||
Net (loss) income | ¥ (539,170) | ¥ 17,335 |
Foreign currency translation adjustments, net of tax | 278 | |
Comprehensive (loss) income | ¥ (539,170) | ¥ 17,613 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) - JPY (¥) ¥ in Thousands | Common stockClass A Common | Common stock | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficitCumulative adjustment | Accumulated deficit | Cumulative adjustment | Total |
Balance, beginning of period at Dec. 31, 2018 | ¥ 100 | ¥ 245,000 | ¥ (3,000) | ¥ 363,267 | ¥ (278) | ¥ (722,644) | ¥ (117,555) | ||
Balance, beginning of period (in shares) at Dec. 31, 2018 | 1 | 3,765,000 | 92,500 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Issuance of common stock upon initial public offering, net of offering costs and tax (Note 1) | ¥ 350,000 | 350,000 | 700,000 | ||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 350,000 | ||||||||
Net (loss) income | 17,335 | 17,335 | |||||||
Foreign currency translation adjustments | ¥ 278 | 278 | |||||||
Balance, end of period at Dec. 31, 2019 | ¥ 100 | ¥ 595,000 | ¥ (3,000) | 713,267 | (705,309) | 600,058 | |||
Balance, end of period (in shares) at Dec. 31, 2019 | 1 | 4,115,000 | 92,500 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Issuance of common stock upon initial public offering, net of offering costs and tax (Note 1) | ¥ 584,313 | 304,879 | 889,192 | ||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 800,000 | ||||||||
Net (loss) income | (539,170) | (539,170) | |||||||
Balance, end of period at Dec. 31, 2020 | ¥ 100 | ¥ 1,179,313 | ¥ (3,000) | 1,018,146 | ¥ (458,823) | (1,703,302) | ¥ (458,823) | 491,257 | |
Balance, end of period (in shares) at Dec. 31, 2020 | 1 | 4,915,000 | 92,500 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Issuance of common stock upon initial public offering, net of offering costs and tax (Note 1) | ¥ 43,821 | 43,821 | 87,642 | ||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 60,000 | ||||||||
Net (loss) income | (521,770) | (521,770) | |||||||
Balance, end of period at Jun. 30, 2021 | ¥ 100 | ¥ 1,223,134 | ¥ (3,000) | ¥ 1,210,907 | ¥ (2,225,072) | ¥ 206,069 | |||
Balance, end of period (in shares) at Jun. 30, 2021 | 1 | 4,975,000 | 92,500 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | ¥ (539,170) | ¥ 17,335 |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 62,290 | 46,174 |
Losses on sales of directly-operated salons to franchisees | 9,600 | |
Allowance for doubtful accounts | (11,376) | 271 |
Impairment loss on investments | 10,544 | |
Losses on disposal of property and equipment, net and other intangible assets, net | 33,841 | 4,631 |
Impairment loss on long-lived assets | 106,501 | 44,546 |
Gain from bargain purchases | (6,487) | |
Deferred income tax (benefit) expense | (107,264) | 5,739 |
Other non-cash (gains) expense - net | 1,903 | (895) |
Changes in operating assets and liabilities: | ||
Accounts receivable-trade, net | 189,143 | (66,877) |
Accounts receivable-other | (48,031) | (36,190) |
Inventories | (2,445) | 892 |
Prepaid expenses and other current assets | (8,167) | (39,698) |
Lease and guarantee deposits | 58,468 | (14,163) |
Accounts payable | (55,574) | (18,729) |
Accrued expenses | 206,706 | 116,856 |
Accrued income taxes | 25,364 | 4,200 |
Contract liability | (160,595) | |
Advances received | (15,322) | (39,177) |
Other current liabilities | (3,389) | 10,226 |
Deposit received | (98,925) | (20,871) |
Other assets and other liabilities - net | (10,922) | (9,513) |
Net cash used in operating activities | (366,420) | 7,870 |
Cash flows from investing activities: | ||
Purchases of time deposits | (26,703) | (37,900) |
Proceeds from maturities of time deposits | 10,000 | 6,000 |
Proceeds from sale of investments | 53,000 | |
Acquisition of investment securities | (13,544) | |
Acquisition of property and equipment | (73,556) | (7,406) |
Proceeds from sale of property and equipment | 3,227 | 5,000 |
Cost additions to internal use software | (30,569) | (12,068) |
Acquisition of businesses - net of cash acquired | (99,195) | (3,201) |
Proceeds from due from shareholder | 8,267 | 8,412 |
Payment received on short-term loans receivable | 900 | 450 |
Payment received on long-term accounts receivable-other, net | 15,030 | 16,326 |
Net cash used in investing activities | (139,599) | (37,931) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock in initial public offering - net of underwriting discounts and commissions | 1,168,627 | |
Proceeds from issuance of common stock | 700,000 | |
Net repayment of short-term borrowings | (180,000) | |
Proceeds from long-term borrowings | 775,000 | |
Repayment of long-term borrowings | (206,440) | (234,411) |
Payment of installment payables related to business acquisitions | (33,949) | (82,812) |
Payment of deferred offering costs | (97,857) | (43,283) |
Repayment of corporate bonds | (7,500) | |
Proceeds from issuance of stock options | 6,750 | |
Net cash (used in) provided provided by financing activities | 1,432,131 | 331,994 |
Net decrease in cash and cash equivalents | 926,112 | 301,933 |
Cash and cash equivalents at beginning of period | 513,621 | 211,688 |
Cash and cash equivalents at end of period | 1,439,733 | 513,621 |
Cash paid during the year for: | ||
Interest | 10,219 | 11,872 |
Income taxes | 7,005 | 24,344 |
Non-cash investing and financing activities: | ||
Right-of-use assets obtained in exchange for lease liabilities | 604,703 | 749,008 |
Purchases of property and equipment included in accrued expenses | 29,244 | |
Purchases of intangible assets included in accrued expenses | 1,535 | 3,321 |
Payables related to acquisition of businesses included in accrued expenses | 1,667 | 48,901 |
Deferred offering costs included in accrued expenses | ¥ 261,619 | ¥ 14,226 |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | ||
Basis of Presentation and Summary of Significant Accounting Policies | 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies Description of Business MEDIROM Healthcare Technologies Inc. (the "Company") and its five subsidiaries (collectively, the "Group") are one of the leading holistic health services providers in Japan. The Group is a franchiser and operator of healthcare salons across Japan and is a preferred platform partner for large consumer brands, healthcare service providers, and government entities to affect positive health outcomes. The Group primarily engages in two lines of business: Relaxation Salon Segment (retail) and Digital Preventative Healthcare Segment (healthtech). Refer to description below and Note 6 for segment information. Relaxation Salon Segment (See Note 6 for segment information) The Relaxation Salon Segment is the core of our business, whereby we own, develop, operate, or franchise and support relaxation salons. Our salon locations cover major cities throughout Japan, with strong market presence in the Tokyo metropolitan area. The Segment includes several Relaxation Salon brands including Re.Ra.Ku®, and as of June 30, 2021 and December 31, 2020, it has a total of 313 and 290 salons, respectively. The following table presents total number of salons by operation type: Number of Relaxation Salons As of June 30, As of December 31, 2021 2020 Directly-operated 188 150 Franchised 125 140 Total 313 290 See Note 2, “Business Combination” for the number of salons acquired during the period. The results of operations of directly-operated salons converted to franchised salons in sale transactions with franchisees were not material either individually or in the aggregate to the unaudited condensed consolidated financial statements. Digital Preventative Healthcare Segment (See Note 6 for segment information) The Digital Preventative Healthcare Segment mainly consists of the following operations: government-sponsored Specific Health Guidance program, utilizing our internally-developed on-demand health monitoring smartphone application, LAV®; our MOTHER Tracker® under development for fitness applications. Basis of Presentation The accompanying unaudited condensed consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The results of operations for interim period are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period. The accompanying unaudited condensed consolidated financial information should be read in conjunction with the Company’s annual financial statements and notes included in our Annual Report on Form 20-F for the year ended December 31, 2020, which was filed with the SEC on May 17, 2021. Recent Developments and Liquidity In the six months ended June 30, 2021, the Company experienced negative cash flows from operations and also used a significant amount of cash for acquisitions and investments. In addition, it has had losses from operations since 2020, and has had a working capital deficit and an accumulated deficit since inception. Management evaluates the Company’s ability to continue as a going concern for one year after the date of the unaudited condensed consolidated financial statements are available for issuance. During the first half of 2021, the Japanese government issued multiple Declarations of Emergency for COVID-19, which impacted Tokyo and other prefectures where our salons are located. This affected the operation of our salons located in shopping malls and spa facilities. Under Declarations of Emergency, up to 28 salons had shortened operation and 36 salons temporarily closed their operation. As a result, our sales and profitability have not fully recovered. We are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, all Declarations of Emergency had been lifted nationwide. However, the duration and extent of COVID-19’s impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. The Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses, capital expenditure requirements and debt service obligations through early 2022 and that the Company would require additional capital in the future. Management believes it will be able to raise capital in the short-term through the sales of directly-owned salons. We may also consider obtaining additional financing through the issuance of our common stock or through other equity or debt financings, and we may also look into refinancing our existing debt obligations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. In addition, management is actively pursuing restoring profitability of our relaxation salon business. Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation., Medirom Human Resources Inc., and SAWAN CO. LTD. All intercompany transactions have been eliminated in consolidation. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of June 30, 2021 and December 31, 2020. Recently Adopted Accounting Pronouncements Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12 Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform | 1. Basis of Presentation and Summary of Significant Accounting Policies Description of Business MEDIROM Healthcare Technologies Inc. (the "Company") and its four subsidiaries (collectively, the "Group") are one of the leading holistic health services providers in Japan. The Group is a franchiser and operator of healthcare salons across Japan and is a preferred platform partner for large consumer brands, healthcare service providers, and government entities to affect positive health outcomes. The Group primarily engages in two lines of business: Relaxation Salon Segment (retail) and Digital Preventative Healthcare Segment (healthtech). Refer to description below and Note 11 for segment information. Our Company was originally incorporated in Japan on July 13, 2000 under the name "Kabushiki Kaisha Young Leaves." In January 2017, we changed our name to "MEDIROM Inc." In March 2020, our Company's English name was changed to "MEDIROM Healthcare Technologies Inc." Relaxation Salon Segment (See Note 11 for segment information) The Relaxation Salon Segment is the core of our business, whereby we own, develop, operate, or franchise and support relaxation salons. Our salon locations cover major cities throughout Japan, with strong market presence in the Tokyo metropolitan area. The Segment includes several Relaxation Salon brands including Re.Ra.Ku®, and as of December 31, 2020 and 2019, it has a total of 290 and 283 salons, respectively. The following table presents total number of salons by operation type: Number of Relaxation Salons 2020 2019 Directly-operated 150 107 Franchised 140 176 Total 290 283 See Note 2, "Business Combination" for the number of salons acquired during each year. The results of operations of directly-operated salons converted to franchised salons in sale transactions with franchisees were not material either individually or in the aggregate to the consolidated financial statements. Digital Preventative Healthcare Segment (See Note 11 for segment information) The Digital Preventative Healthcare Segment consists of the following operations: preventative healthcare services utilizing our digital application and devices; and government-sponsored Specific Health Guidance program, utilizing our internally-developed on-demand health monitoring smartphone application, or LAV ® ; our MOTHER Tracker ® for fitness applications. Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America ("U.S. GAAP"). Initial Public Offering The Company completed the initial public offering (IPO) of 800,000 shares of common stock in the form of American Depositary Shares (ADSs) at a price to the public of $15.00 per share on December 31, 2020. Each ADS represents one common share. The Company's ADSs are traded on the Nasdaq Capital Market. The Company recognized aggregate net proceeds of approximately ¥765,867 thousand after deducting underwriting discounts and commissions of ¥69,653 thousand and offering costs of ¥402,760 thousand, which net amount was credited to shareholders' equity. Tax effects associated with costs from the initial public offering of ¥123,325 thousand was credited to equity. As described in Note 21, on February 1, 2021, the Company sold an additional 60,000 ADSs representing 60,000 shares of common at the initial offering price of $15.00 per ADS, pursuant to the partial exercise of the over-allotment option to purchase up to 120,000 ADSs granted to the underwriters in connection with the initial public offering. The Company received aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. Recent Developments and Liquidity Pursuant to Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statement Going Concern On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions. National and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The outbreak and associated restrictions that have been implemented have had a material adverse impact on the Company's business and cash flow from operations, similar to many businesses. In response to this outbreak, the Japanese government issued a Declaration of a State of Emergency (the "Declaration") on April 7, 2020. The Declaration resulted in a significant reduction in guest traffic at our relaxation salons due to changes in consumer behavior as social distancing practices. On April 21, 2020, the Company announced the temporary closure of almost all of its relaxation salons located across the country until May 6, 2020. The Declaration was lifted in Japan on May 25, 2020, however, other restrictions have been continuously encouraged by the Japanese government. In September, 2020, substantially all of the Company's relaxation salons were in operation. Because our operating results substantially depend upon our relaxation salons’ revenue volumes and profitability, the two months of idleness in April and May materially impacted our revenues. The Company implemented cost measures to mitigate topline degradation to the business from this pandemic, including reductions in executive and employee compensation and deferral of nonessential spend in order to limit the impact on our operations and financial results. Additionally, in order to further strengthen its cash position and provide financial flexibility in light of the current uncertainty arising from the COVID-19 pandemic, the Company entered into additional loan agreements with Japan Finance Corporation and Higashi-Nippon Bank, Limited to borrow ¥230,000 thousand collectively as of June 30, 2020. Furthermore, the Company entered into additional loan agreements with Higashi-Nippon Bank, Limited to borrow ¥170,000 thousand as of July 28, 2020 and to borrow additional ¥175,000 thousand from the same bank as of November 30, and entered into loan agreements with The Shoko Chukin Bank, Ltd. to borrow ¥100,000 thousand as of December 31, 2020. The Company also applied for the subsidy program for employment adjustment by the Japanese government with COVID-19 special treatment, which incentivizes companies to retain their employees. During 2020, the Company received ¥111,581 thousand from the subsidy program. The subsidy can help to cover the payroll costs of furloughed employees. The Japanese government subsidies of non-operating nature with no further conditions to be met are recorded as non-operating income in "other income (expense)" in the consolidated statements of (loss) income when received. In December 2020, the Company received aggregate net proceeds of ¥765,867 thousand that it will use for working capital and general corporate purposes. On January 7, 2021, Japanese government issued the second Declaration of Emergency for COVID-19, which applied to Tokyo, Kanagawa, Saitama, and Chiba prefectures and was planned to be effective from January 8 to February 7, 2021. In the declaration, the government requested shopping malls and other large-sized commercial properties, where many of our salons are located, to close stores at 8 p.m. The declaration also requested businesses to introduce remote work from home, which also impacted sales of our salons located in business districts. On January 13, 2021, the government expanded the declaration to seven other prefectures (Osaka, Kyoto, Hyogo, Aichi, Gifu, Fukuoka, and Tochigi). On February 2, 2021, the government decided to extend the declaration till March 7 over ten prefectures excluding Tochigi. On February 28, 2021, the government released six prefectures excluding Tokyo, Kanagawa, Saitama, and Chiba from the declaration. On March 5, 2021, the government decided to extend the declaration over the four prefectures till March 21. On March 21, 2021, the second Declaration of Emergency was fully lifted. Despite it having an adverse impact on our sales activities during the period, compared to the first Declaration of Emergency, in which most of shopping malls voluntarily closed the whole properties, there was much less impact. During the second declaration, 76 salons had shortened operations and 1 - 2 salons fully closed operations. On April 23, 2021, the Japanese government issued the third Declaration of Emergency applicable to Tokyo, Osaka, Hyogo, Kyoto during the period from April 25 to May 11. The declaration requested department stores and other large-sized commercial properties to close operation. This affected the operation of our salons located in shopping malls and spa facilities. As of May 10, 2021, 28 salons had shortened operation and 36 salons fully closed their operation. On May 6, 2021, the government announced it will extend the declaration till May 31 and add Fukuoka and Aichi prefectures to the scope of the declaration. Although the declarations have been adversely affecting our business, we are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, the duration and extent of COVID-19's impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. Whereas management presently expects proceeds from existing loans, subsidies, and the net proceeds received from our IPO, to be sufficient to fund operating needs and existing debt obligations and does not currently expect to require additional capital for the next 12 months, no assurance can be provided as to the ultimate resolution of the foregoing matters and their ultimate impact on the Company's financial position, results of operations and cash flows. Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation, and Medirom Human Resources Inc. All intercompany transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence but not control are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of December 31, 2020 and 2019. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, the allowance for doubtful accounts, fair value of intangible assets acquired through business combination, impairment of long-lived assets and goodwill, asset retirement obligations, valuation of stock-based compensation, and valuation of deferred tax assets. Management bases these estimates on assumptions that it believes to be reasonable under the circumstance, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. Actual results may differ from these estimates in future periods when the COVID-19 pandemic continues to evolve and additional information becomes available. Foreign Currency Translation The assets and liabilities of an equity method investee are translated into Japanese yen at the respective year-end exchange rates. All income and expense accounts are translated at weighted average rates. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income within shareholders' equity. Exchange gains and losses resulting from foreign currency transactions and the conversion of monetary assets and liabilities denominated in foreign currencies are included in other income (expenses) in the consolidated statements of (loss) income. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and time deposits or other highly liquid investments placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities of less than three months. There are no cash equivalents balances for the periods presented. Time deposits presented in the consolidated balance sheets are short-term investments, these maturities are longer than three months but less than one year. Accounts Receivable—Trade, Net The accounts receivable-trade on the Company's consolidated balance sheets primarily includes accounts receivables from franchisees. The balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from the Company's franchisees. The Company monitors the financial condition of its franchisees and records provisions for estimated losses on receivables when it believes franchisees are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses incurred related to existing accounts and receivables. As of December 31, 2020 and 2019, the allowance for doubtful accounts related to accounts receivable-trade was ¥4,426 thousand and ¥22,920 thousand, respectively. Accounts Receivable—Other and Long-Term Accounts Receivable—Other, Net The accounts receivable—other on the Company's consolidated balance sheets primarily includes accounts receivable from commercial facility landlords and credit card companies related directly-operated salon's revenue and franchisee's revenue collected by these entities on behalf of the Group. As of December 31, 2020 and 2019, accounts receivable from commercial facilities and credit card companies of ¥302,227 thousand and ¥318,474 thousand, respectively, are included in the accounts receivable—other on the consolidated balance sheets. Receivable of ¥50,000 thousand for the sale of the Company's investment in Re.Ra.Ku (Hong Kong) Health Science and Technology Co., Limited is included in the accounts receivable—other as of December 31, 2019. Long-term accounts receivable—other mainly consists of a non-interest bearing receivable due from an unrelated business entity, with a maturity of May 31, 2038, monthly repayment amounts of ¥720 thousand ¥1,200 thousand- and the principal balance due of ¥235,945 thousand and ¥247,450 thousand as of December 31, 2020 and 2019, respectively. The Company monitors the financial condition of its obligor and records provisions for estimated losses on receivables when it believes the obligors are unable to make their required payments. As of December 31, 2020 and 2019, the related discounts and allowance for doubtful accounts on long-term accounts receivable—other was ¥131,759 thousand and ¥141,256 thousand, respectively. Concentrations Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. The Company's cash deposits, of up to ¥10,000 thousand are insured by the Japanese government. From time to time, the Company has deposits in excess of the insured amounts. No single customer accounted for 10% or more of the Company's total revenues for the years ended December 31, 2020 and 2019. Inventories Inventories consist principally of merchandise. A portion of inventories are also used for salon services. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method for merchandise. Investments The Company uses the equity method to account for equity investments over which it has significant influence but does not own a majority equity interest or otherwise control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of (loss) income. Equity method adjustments include the company's proportionate share of investee income or loss and other adjustments required by the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that may have a significant adverse impact on the fair value of the investment. If a loss in value has occurred and is deemed to be other than temporary, an impairment loss is recorded. Several factors are reviewed to determine whether a loss has occurred that is other than temporary, including absence of an ability to recover the carrying amount of the investment, the length and extent of the fair value decline, and the financial condition and future prospects of the investee. Investments in equity securities, in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired or not, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: (1) A significant deterioration in the earnings performance or business prospects of the investee. (2) A significant adverse change in the regulatory, economic, or technological environment of the investee. (3) A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. (4) A recent example of the new issuance of a security, in which the issue price is less than our cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined as a result of considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. Leases The Group considers whether a contract is a lease or if it contains a lease element when a contract is executed. If a contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration, such contract is determined to contain a lease element. When the contract contains a lease element, a lease is either classified as operating lease or finance lease when the Group is a lessee, and a sales-type lease or direct financing lease when the Group is a lessor. The Group, as a lessee, applies the right-of-use model to account for lease transactions. Under the right-of-use model, right-of-use asset and lease liability are recognized at commencement date. The Group measures its lease liability at present value of future lease payments over the remaining term. The Group uses its incremental borrowing rate for the discount rate to calculate the present value of the payments since it is difficult and not practical to determine the interest rate implicit in the lease. The Group's incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Right-of-use asset lease liability 3 For operating leases, the Group recognizes the minimum lease payments where it is the lessee and the minimum lease income where it is the lessor on a straight-line basis over the lease term, and reflects them as rental expenses and rental revenues, respectively, in the consolidated statements of (loss) income. Operating rental expense includes amortization of right-of-use assets and interests on lease liability. Variable lease expenses are primarily linked to sales and are excluded from the measurement of lease liability. Rental expenses are recorded in the consolidated statements of (loss) income based on the nature of the underlying lease. Rental expense related to leases for directly-operated salons and for leased properties that are subsequently subleased to franchisees are recorded to "Cost of revenue from directly-operated salons" and "Cost of franchise revenues," respectively, and rental expense related to leases for corporate offices is recorded to "Selling, general and administrative expenses." Rental income for operating leases on properties subleased to franchisees is recorded to "Franchise revenue". Terms and conditions of the sublease agreements are arranged to pass through lease obligations under head leases to the franchisees. Sublease income is presented on a gross basis on the accompanying consolidated statements of (loss) income, as the Company remains the primary obligor. For newly executed contracts, renewal and revision related to leases, estimates and certain assumptions are used to determine asset value, useful lives, discount rate, lease term, etc. and these have effects on (1) classification of lease, (2) measurement of rental payments and (3) measurement of lease asset. These results may differ if varying estimates and assumptions are used. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is computed principally using the straight-line method based on the estimated useful life of the assets. The useful lives for depreciation by major asset classes are as follows: Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 Other Intangible Assets, Net Other intangible assets with finite useful lives consist primarily of capitalized software and reacquired franchise rights. The Company capitalizes both eligible internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized until the software is substantially complete and ready for its intended use. Costs related to data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. Capitalized software is amortized over the estimated useful life ( 3 1 Impairment of Long-lived Assets, Excluding Goodwill The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities. The Company reviews the carrying value of long-lived assets or a related group of assets to be held and used for impairment whenever events or circumstances occur that indicate that the carrying value of the assets may not be recoverable. The assets are considered to be impaired when the estimated undiscounted cash flows expected to result from the use of the assets and their eventual disposition are less than their carrying values. The impairment loss is measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. In determining the fair value, the Company uses present value techniques, if appropriate, based on the estimated future cash flows expected to result from the use of the assets and their eventual dispositions. During 2020, long-lived assets impairment charges related to continuing operations of ¥36,512 thousand and ¥69,989 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. During 2019, long-lived assets impairment charges related to continuing operations of ¥9,825 thousand and ¥34,721 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. Goodwill Goodwill represents the excess of cost over fair value of identifiable net assets acquired and assumed in business combinations. The Company generally records goodwill in connection with the acquisition of relaxation salons from franchisees. Upon the sale of relaxation salons to franchisees, goodwill is decremented. Goodwill and intangible assets that are deemed to have indefinite useful lives are subject to impairment testing. Impairment testing is performed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill impairment assessments are performed at the reporting unit level, which is the same as the Company's operating segments. The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair value of a reporting unit to its carrying value. The carrying value of each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit. The Company calculates estimated fair values of the reporting units based on discounted future cash flows utilizing estimates in annual revenue, service and product margins, fixed expense rates, allocated corporate overhead, directly-operated and franchise salon counts, and long-term growth rates for determining terminal value. If the carrying amount of a reporting unit exceeds its fair value, a loss will be recorded for the excess of the carrying value of the reporting unit over the fair value of the reporting unit. The Company did not recognize impairment losses for any goodwill during the years ended December 31, 2020 and 2019. Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal, consulting, accounting and other fees relating to the Company's initial public offering (IPO) completed on December 31, 2020, had been capitalized. These costs were reclassified to additional paid-in capital as a reduction from the IPO proceeds. Other incremental organization costs are expensed as incurred. As of December 31, 2020, there were no capitalized deferred offering costs in the consolidated balance sheets. As of December 31, 2019, there were ¥57,509 thousand of deferred offering costs capitalized in the consolidated balance sheets. Asset Retirement Obligations The Company records asset retirement obligations when the obligation is incurred. The obligation is measured at fair value and included in Non-current liabilities. When the liability is initially recorded, the Company capitalizes the related cost by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value, and the capitalized cost is depreciated over the asset's useful life. Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company determines revenue recognition through the following steps: Step 1: identification of the contract with a customer; Step 2: identification of the performance obligations in the contract; Step 3: determination of the transaction price; Step 4: allocation of the transaction price to the performance obligations in the contract; Step 5: recognition of revenue when, or as, the Company satisfies a performance obligation. Revenue from Directly-Operated Salons Revenues from directly-operated salons are recognized when services are provided at the salons. Franchise Revenue Franchise Revenue is comprised of (i) franchise fees, (ii) royalty income, (iii) staffing service revenue, (iv) sublease revenue, and (v) other franchise revenues. The Company and the franchisee enter into a franchise agreement which sets forth the standard terms and conditions of operating the franchised salon, as well as the fees and royalties over the term of the agreement. In most cases, an outsourcing agreement, is also entered into in conjunction with the franchise agreement that specifies the terms of the sublease arrangement with the franchisee. Upon the franchisee's request, the Company's therapists are dispatched to franchise locations and franchisees must pay dispatch fees in accordance with the dispatched employees' position. (i) Franchise fees The Company receives the entire non-refundable initial franchise fees from the franchisee based on franchise agreement. The franchise agreement typically has an initial term of five years agreement could be renewed prior to expiration by mutual consent and renewal franchise fees are paid by franchisee upon renewal of agreement. Initial franchise fees and expected renewal franchise fees are recognized as revenue ratably using the time-based input method over the expected average contract life ( 8 (ii) Royalty income The Company collects royalties, an amount calculated by multiplying a certain percentage to gross sales, on a monthly basis. The royalties are subject to the sales- and usage-based royalties constraint and are recognized as revenues based on the monthly royalty earned where such amount is determined on the basis of gross sales made from each salon. (iii) Staffing service revenue The Company also generates revenue from providing its therapists to franchisees, which are recognized as revenues based on the total number of working hours of the agency worker during the dispatched period. The Company has elected the 'as-invoiced' practical expedient for its staffing services where the fixed rate per hour is invoiced to the customer. (iv) Sublease revenue The Company leases the premises in which the majority of its franchisees operate, where the Company retains the head lease primary obligation, and has entered into corresponding sublease arrangements with franchisees. Revenues from sublease transactions with franchisees are recognized on a straight-line basis over the respective operating lease terms, or at the time of the underlying sales for variable lease payments, in accordance with Accounting Standards Codification ("ASC") 842 Leases ("ASC 842"). (v) Other franchise revenues Other franchise revenues include other services provided to franchisees separately from the franchise agreements and include advertising, training, studio construction and hiring support. These services are primarily recognized as revenues when services are provided. The Company has elected the 'as-invoiced' practical expedient for its studio construction services where the consideration is invoiced to the customer. Other Revenues Other revenues are primarily from the Digital Preventive Healthcare segment, whic |
Business Combination
Business Combination | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Business Combination | ||
Business Combination | 2. Business Combination Acquisition of SAWAN’s share On May 6, 2021, the Company acquired control of SAWAN CO. LTD. (“SAWAN”) by purchasing all outstanding shares for cash consideration of ¥140,697 thousand. As a result, “Ruam Ruam”, which is a luxury relaxation salon brand held by SAWAN, has become part of the Company’s directly-operated salons. The acquisition was accounted for by the acquisition method. Acquisition related costs of ¥12,000 thousand were recognized as expenses when incurred, which is included in “selling, general and administrative expenses” in the condensed consolidated statements of loss. The allocation of the purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The fair value of the identified intangible assets is still open as of June 30, 2021, as the Company is continuing to obtain information and coordinate with the third-party specialist to complete its valuation of identified intangible assets. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows: Thousands of Yen Fair value of assets/liabilities Cash and cash equivalents ¥ 7,824 Accounts receivable, net 18,228 Inventories 2,898 Prepaid expenses and other current assets 14,989 Property and equipment - net 50,673 Goodwill 218,138 Right-of-use asset-operating lease, net 153,269 Other long-term assets 57,323 Total assets acquired 523,342 Accounts payable (3,531) Accrued expenses (97,279) Advances received (73,353) Other current liabilities (21,995) Lease liability (151,197) Asset retirement obligation (25,060) Other liabilities (10,230) Total liabilities assumed (382,645) Net assets assumed 140,697 Fair value of the consideration transferred ¥ 140,697 The goodwill recorded primarily relates to the sales growth potential of the relaxation salons held by SAWAN. Almost all of the goodwill is expected to be nondeductible for income tax purposes. The amount of revenue and earnings from the acquisition included in the Company’s results of operations for the six months ended June 30, 2021 was ¥73,706 thousand and ¥4,483 thousand, respectively. Acquisition of relaxation salons For the six months ended June 30, 2021, the Company acquired 18 relaxation salons from a third-party company and franchise owners for total consideration of ¥167,970 thousand. The acquisitions with purchase agreements were accounted for by the acquisition method. Acquisition related costs were recognized as expenses when incurred, which were immaterial in amount. The results of operations, and assets and liabilities, of these relaxation salons were included in the condensed consolidated financial statements from the date of acquisition. The purchase price was preliminarily allocated to property and equipment of ¥38,479 thousand, asset retirement obligations of ¥35,883 thousand and goodwill of ¥166,388 thousand. The allocation of the purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The fair value of the identified intangible assets is still open as of June 30, 2021, as the Company is continuing to obtain information and coordinate with the third-party specialist to complete the valuation of identified intangible assets. The goodwill recorded primarily relates to the sales growth potential of the relaxation salons acquired and is expected to be deductible for income tax purposes. For some relaxation salons acquired, the Company recognized the excess of the fair value of the net assets assumed over the fair value of the consideration transferred as a gain from bargain purchases of ¥1,014 thousand for the six months ended June 30, 2021, which is separately presented in the condensed consolidated statements of loss. In the case of the bargain purchase gain, the seller of franchisee wanted to cease their franchise business and reached out to the Company to sell the franchise. Most of the time, the franchisee wants to sell because the studio is not generating profit or for other financial reasons. The amount of revenue and (loss) earnings from the acquired relaxation salons included in the Company’s results of operations for the six months ended June 30, 2021 was ¥80,215 thousand and ¥(10,354) thousand, respectively . | 2. Business Combination Acquisition of relaxation salons During 2020 and 2019, the Company acquired 16 relaxation salons and 17 relaxation salons for cash consideration of ¥86,916 thousand and ¥23,813 thousand, respectively. The cash consideration paid in these transactions is included within "Acquisition of businesses - net of cash acquired" in the investing activities, "Payment of installment payables related to business acquisitions" in the financing activities and "Payables related to acquisition of businesses included in accrued expenses" in the non-cash investing and financing activities sections of the consolidated statements of cash flows. The acquisitions were accounted for by the acquisition method. Acquisition related costs were recognized as expenses when incurred, which were immaterial in amount. The results of operations, and assets and liabilities, of these relaxation salons were included in the consolidated financial statements from the date of acquisition. The purchase price allocation was based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows: Thousands of Yen Fair value of assets/liabilities 2020 2019 Property and equipment - net ¥ 51,005 ¥ 27,567 Goodwill 72,438 22,156 Intangible assets 12,690 6,519 Total assets acquired 136,133 56,242 Asset retirement obligation (49,217) (25,942) Total liabilities assumed (49,217) (25,942) Net assets assumed 86,916 30,300 Fair value of the consideration transferred 86,916 23,813 Gain from bargain purchases ¥ ― ¥ 6,487 The goodwill recorded primarily relates to the sales growth potential of the relaxation salon locations acquired and is expected to be deductible for income tax purposes. Intangible assets in the table above consist of reacquired franchise rights, fair values of which were estimated using the relief from royalty method with Level 3 unobservable inputs. In order to develop these Level 3 fair value measurements, the Company used 1.2% - 2.5% of royalty rate and 11.3% - 14.0% of discount rate as significant unobservable inputs. The amount of reacquired franchise rights was ¥12,690 thousand and ¥6,519 thousand in 2020 and 2019 respectively. Reacquired franchise rights are subject to amortization, amortized over an estimated useful life of approximately three years. For some relaxation salons acquired, the Company recognized the excess of the fair value of the net assets assumed over the fair value of the consideration transferred as a gain from bargain purchases of nil and ¥6,487 thousand in 2020 and 2019 respectively, which is separately presented in the consolidated statements of (loss) income. The amount of revenue from the acquired relaxation salons included in the Company's results of operations for the years ended December 31, 2020 and 2019 was ¥375,148 thousand and ¥799,788 thousand, respectively. The amount of (loss) earnings from the acquired relaxation salons included in the Company's results of operations for the years ended December 31, 2020 and 2019 was ¥(26,595) thousand and ¥107,145 thousand, respectively. Disclosure of pro forma information is omitted as the information is not easily available. |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2020 | |
Property and Equipment, Net | |
Property and Equipment, Net | 3. Property and Equipment, Net As of December 31, 2020 and 2019, property and equipment consist of the following: Thousands of Yen 2020 2019 Leasehold improvements ¥ 272,756 ¥ 215,524 Vehicles 9,548 7,786 Tools, furniture and fixtures 37,480 19,755 Total 319,784 243,065 Accumulated depreciation and amortization (83,854) (74,110) ¥ 235,930 ¥ 168,955 Depreciation and amortization expense was ¥41,691 thousand and ¥29,557 thousand for the years ended December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, the Company recognized impairment loss of ¥36,512 thousand and ¥9,825 thousand, respectively, on leasehold improvements used in certain relaxation salons. The Company conducted strategic reviews of its future profitability forecast. Following these reviews, the Company reduced the corresponding estimated future cash flows of these assets and the estimated ability to recover the carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in the impairment charges. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill. | |
Goodwill and Other Intangible Assets, Net | 4. Goodwill and Other Intangible Assets, Net The components of intangible assets as of December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Intangible assets subject to amortization: Software for internal use ¥ 84,152 ¥ 54,710 Reacquired franchise rights 17,973 9,802 Other 750 10,750 Total 102,875 75,262 Accumulated amortization (44,330) (36,694) Net carrying amount 58,545 38,568 Intangible assets not subject to amortization: Trademark 38,922 38,922 Goodwill 150,720 78,282 Telephone rights 148 148 Total 189,790 117,352 Total intangible assets ¥ 248,335 ¥ 155,920 The aggregate amortization expense was ¥20,599 thousand and ¥16,617 thousand for the years ended December 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for other intangible assets for the next five years and thereafter is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 24,019 2022 17,857 2023 9,540 2024 6,034 2025 957 Thereafter 138 Total ¥ 58,545 The following table shows changes in carrying amount of goodwill for the years ended December 31, 2020 and 2019: Thousands of Yen Balance at December 31, 2018 Goodwill ¥ 63,955 Acquisitions of relaxation salons* 22,156 Sales of directly-operated salons to franchisees, and disposal of relaxation salon (7,829) Balance at December 31, 2019 Goodwill 78,282 Acquisitions of relaxation salons* 72,438 Balance at December 31, 2020 Goodwill ¥ 150,720 * Acquisitions for the years ended December 31, 2020 and 2019 relate to relaxation salon acquisitions in the relaxation salon segment. Refer to Note 2. No impairment losses were recognized for the years ended December 31, 2020 and 2019. The Company performed a qualitative assessment for its annual goodwill impairment test on December 31, 2020. Based on the results of the qualitative assessment, a step one test was not considered necessary. |
Investments
Investments | 12 Months Ended |
Dec. 31, 2020 | |
Investments | |
Investments | 5. Investments Equity Method Investments In December 2019, the Company sold all of its investment in Re.Ra.Ku (Hong Kong) Health Science and Technology Co., Limited, for ¥50,000 thousand, for a gain of ¥559 thousand. As of December 31, 2020 and 2019, the Company had zero ownership interest in equity method investments. Investments at Cost The carrying amount of non-marketable securities are recorded at cost as fair value is not readily determinable. The amount is ¥500 thousand and ¥14,044 thousand as of December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, impairment charges of ¥5,544 thousand and ¥5,000 thousand were recorded on the Matrix Industries, Inc. and other non-marketable securities, respectively. The Company did not recognize any impairment for the year ended December 31, 2019. The breakdown of non-marketable securities as of December 31, 2020 and 2019 are as follows: Carrying amount Thousands of Yen Ownership 2020 2019 2020 2019 Matrix Industries, Inc. ¥ ― ¥ 5,544 0.09% 14.3% Kabushiki Kaisha ReRaKu WEST ― 3,000 ― 16.6% Other 500 5,500 ― ― Total ¥ 500 ¥ 14,044 In July 2020, the Company sold all of its investment in Kabushiki Kaisha ReRaKu WEST, for ¥3,000 thousand. |
Short-term Borrowings and Long-
Short-term Borrowings and Long-term Borrowings | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Long-term Borrowings | ||
Short-term Borrowings and Long-term Borrowings | 4. Long-term Borrowings The Company has long-term loans with Japanese financial institutions. Some long-term loans are secured. As of June 30, 2021, time deposits with an aggregating book value of ¥72,525 thousand are pledged as collateral (the amounts of ¥20,025 thousand and ¥52,500 are included in “prepaid expenses and other current assets” and “other assets”, respectively, in the condensed consolidated balance sheets). Some long-term loans are guaranteed by Credit Guarantee Association, a Japanese governmental affiliate agency which supplements private companies with credit. The long-term loan accrue interest using fixed interest rates of 0.21% – 3.98% per annum as of June 30, 2021. Debt issuance costs related to these borrowings are immaterial. Long-term borrowings as of June 30, 2021 and December 31, 2020 are as follow: Thousands of Yen As of June 30, 2021 As of December 31, 2020 Bank loans (Due through 2035 with weighted average interest rates of 1.05% as of June 30, 2021, due through 2035 with weighted average interest rates of ¥ 755,159 ¥ 910,661 Current portion of long-term borrowings (181,884) (242,281) Total long-term borrowings ¥ 573,275 ¥ 668,380 The following is a summary of maturities of long-term borrowings subsequent to June 30, 2021: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 86,779 2022 123,460 2023 62,628 2024 60,252 2025 59,370 2026 and thereafter 362,670 Total ¥ 755,159 Long-term borrowings are primarily made under general agreements, which are to provide security and guarantees for present and future indebtedness or to secure a guarantor upon request of the bank, and that the banks shall have the right to offset cash deposits against any debts and obligations that have become due or, in the case of default, against all obligations to the banks. The Company’s CEO is a guarantor with respect to some of these borrowings. None of the loan agreements contain any financial covenants. | 6. Short-term Borrowings and Long-term Borrowings The Company has short-term borrowings from a Japanese financial institution, with a principal balance of nil and ¥180,000 thousand outstanding as of December 31, 2020 and 2019. The unsecured short-term borrowings accrue interest, compounded annually, using a fixed interest rate of 2.35%. The Company repaid the principal balance of ¥180,000 thousand during 2020. The Company has long-term loans with Japanese financial institutions. Some long-term loans are secured. As of December 31, 2020, time deposits with an aggregating book value of ¥63,524 thousand are pledged as collateral (the amounts of ¥20,024 thousand and ¥43,500 are included in “time deposits” and “other assets”, respectively, in the consolidated balance sheets). Some long-term loans are guaranteed by Credit Guarantee Association, a Japanese governmental affiliate agency which supplements private companies with credit. The long-term loan accrue interest using fixed interest rates of 0.21% – 3.98% and 0.61% – 3.30% per annum as of December 31, 2020 and 2019, respectively. Debt issuance costs related to these borrowings are immaterial. Long-term borrowings as of December 31, 2020 and 2019 are as follow: Thousands of Yen 2020 2019 Unsecured bank loans (Due through 2035 with weighted average interest rates of 1.33% as of December 31, 2020, due through 2025 with weighted average interest rates of ¥ 910,661 ¥ 342,101 Current portion of long-term borrowings (242,281) (191,570) Total long-term borrowings ¥ 668,380 ¥ 150,531 The following is a summary of maturities of long-term borrowings subsequent to December 31, 2020: Thousands of Yen Year ending December 31: 2021 ¥ 242,281 2022 123,460 2023 62,628 2024 60,252 2025 59,550 2026 and thereafter 362,490 Total ¥ 910,661 Both short-term borrowings and long-term borrowings are primarily made under general agreements, which are to provide security and guarantees for present and future indebtedness or to secure a guarantor upon request of the bank, and that the banks shall have the right to offset cash deposits against any debts and obligations that have become due or, in the case of default, against all obligations to the banks. Kouji Eguchi, the representative director and the shareholder of the Company (holds 39.09% of common stock and all Class A |
Asset Retirement Obligation
Asset Retirement Obligation | 12 Months Ended |
Dec. 31, 2020 | |
Asset Retirement Obligation | |
Asset Retirement Obligation | 7. Asset Retirement Obligation Asset retirement obligation primarily consists of estimated costs arising from a contractual obligation to a landlord to remove leasehold improvements from leased properties at the end of the lease contracts for its headquarters and directly-operated salons. Reconciliation of the beginning and ending amount of asset retirement obligation for the years ended December 31, 2020 and 2019 is as follows: Thousands of Yen 2020 2019 Beginning balance ¥ 127,411 ¥ 119,519 Liabilities incurred 80,056 63,623 Liabilities settled (16,870) (55,954) Accretion expense 595 223 Ending balance ¥ 191,192 ¥ 127,411 |
Leases
Leases | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Leases | ||
Leases | 5. Leases The Group mainly leases commercial space for its relaxation salon from external third parties, which are either operated by the Company or a franchisee and also enters into contracts with franchisees subleasing partial spaces of leased properties under the terms and conditions that are substantially the same as the head lease contracts. As of June 30, 2021 and 2020, the Group had 230 and 220 leased salons, respectively, of which 120 and 141 salons, respectively were subleased. Operating Leases Lessee There are no lease transactions classified as finance leases for the six months ended June 30, 2021 and 2020. The table below summarizes the components of operating lease costs related to operating leases: Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed lease cost (a) ¥ 386,992 ¥ 372,769 Variable lease cost (b) 13,789 7,476 Short-term cost 18,170 4,458 Total ¥ 418,951 ¥ 384,703 (a) This includes the amount of ¥ 217,083 thousand and ¥ 260,194 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. (b) This includes the amount of ¥ 7,961 thousand and ¥ 5,674 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. There are no sale-and leaseback transactions conducted in the six months ended June 30, 2021 and 2020. Supplementary information on cash flow and other information for leasing activities for the six months ended June 30, 2021 and 2020 are as follows: Thousands of Yen Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 391,650 ¥ 99,758 Right-of-use assets obtained in exchange for lease liabilities 490,342 189,240 Weighted average remaining lease term (in years) 2.9 3.1 Weighted average discount rate 1.45% 1.45% Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to June 30, 2021 are as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 430,043 2022 620,210 2023 363,730 2024 183,145 2025 110,723 2026 and thereafter 132,480 Total 1,840,331 Less: Interest component (78,116) Present value of minimum lease payments ¥ 1,762,215 The amount of ¥702,685 thousand and ¥1,059,530 thousand of the discounted present value of minimum lease payment are included in "Short-term lease liability" and "Long-term lease liability — net of current portion", respectively, in the condensed consolidated balance sheets. Subleases The Group leases space from commercial facility landlords which in turn it subleases to certain franchisees of its relaxation salons. Sublease revenues are as follows for the six months ended June 30, 2021 and 2020, and included in franchise revenues: Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed sublease income ¥ 217,083 ¥ 260,194 Variable sublease income 7,961 5,674 Total ¥ 225,044 ¥ 265,868 Expected future minimum lease collections to be received under non-cancellable subleases subsequent to June 30, 2021 are as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 178,798 2022 313,207 2023 198,400 2024 82,997 2025 43,103 2026 and thereafter 28,198 Total ¥ 844,703 There are no lease transactions classified as sale-type leases and direct financing leases for the six months ended June 30, 2021 and 2020. | 8. Leases The Group mainly leases commercial space for its relaxation salon from external third parties, which are either operated by the Company or a franchisee and also enters into contracts with franchisees subleasing partial spaces of leased properties under the terms and conditions that are substantially the same as the head lease contracts. As of December 31, 2020 and 2019, the Group had 213 and 220 leased salons, respectively, of which 130 and 165 salons, respectively were subleased. Operating Leases Lessee There are no lease transactions classified as finance leases for the years ended December 31, 2020 and 2019. The table below summarizes the components of operating lease costs related to operating leases for the year ended December 31, 2020 and 2019: Thousands of Yen 2020 2019 Fixed lease cost (a) ¥ 748,230 ¥ 851,555 Variable lease cost (b) 24,484 30,901 Short-term cost 11,669 10,979 Total ¥ 784,383 ¥ 893,435 (a) This includes the amount of ¥478,225 thousand and ¥580,074 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. (b) This includes the amount of ¥14,146 thousand and ¥27,606 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. There are no sale-and leaseback transactions conducted in the years ended December 31, 2020 and 2019. Supplementary information on cash flow and other information for leasing activities for the year ended December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 797,623 ¥ 375,270 Right-of-use assets obtained in exchange for lease liabilities 604,703 749,008 Weighted average remaining lease term (in years) 2.8 3.3 Weighted average discount rate 1.45% 1.45% Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to December 31, 2020 are as follows: Thousands of Yen Year ending December 31: 2021 ¥ 667,823 2022 493,800 2023 246,751 2024 122,654 2025 70,448 2026 and thereafter 98,245 Total 1,699,721 Less: Interest component (48,509) Present value of minimum lease payments ¥ 1,651,212 The amount of ¥658,320 thousand and ¥992,892 thousand of the discounted present value of minimum lease payment are included in "Short-term lease liability" and "Long-term lease liability — net of current portion", respectively, in the consolidated balance sheets. Subleases The Group leases space from commercial facility landlords which in turn it subleases to certain franchisees of its relaxation salons. Sublease revenues are as follows for the years ended December 31, 2020 and 2019, and included in franchise revenues: Thousands of Yen 2020 2019 Fixed sublease income ¥ 478,225 ¥ 580,074 Variable sublease income 14,146 27,606 Total ¥ 492,371 ¥ 607,680 Expected future minimum lease collections to be received under non-cancellable subleases subsequent to December 31, 2020 are as follows: Thousands of Yen Year ending December 31: 2021 ¥ 376,993 2022 276,765 2023 152,356 2024 66,450 2025 33,728 2026 and thereafter 20,488 Total ¥ 926,780 There are no lease transactions classified as sale-type leases and direct financing leases for the years ended December 31, 2020 and 2019. |
Shareholders' Equity
Shareholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Shareholders' Equity | |
Shareholders' Equity | 9. Shareholders' Equity Common stock and Class A common stock The Company's capital consists of common stock and Class A common stock. The same rights are granted to common stock and Class A common stock on the right to claim a dividend and to claim a liquidation distribution. Class A common stock is entitled to no voting rights at ordinary shareholders’ meetings. However, when the Company makes decisions on the following matters stipulated in laws or regulations or the articles of incorporation that need to be approved by the resolution of the Board of Directors, in addition, the Company needs approval at the Class General Meetings of respective shareholders, which is constituted by the shareholders of Class A common stock. 1. Subject to a demand for sale of treasury stock from inheritors; 2. Reverse stock split, stock split, issuance of stock and issuance of stock acquisition right; 3. Dismissal of the Company's corporate auditor (See Note 20); 4. Decrease of common stock; 5. Dividend paid in property other than money; 6. Change in the articles of incorporation, business transfer, dissolution and liquidation of the Company; and 7. Organizational change, merger, stock exchange and stock transfer; All issued Class A common stock are held by the Company's representative director, Kouji Eguchi. The holders of Class A common share can claim anytime to acquire Class A common share at market price. Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: Common stock Under the Companies Act, issuances of common stock are required to be credited to the common stock account for at least 50% of the proceeds and to the additional paid-in capital account for the remaining amounts. Dividends Under the Companies Act, companies can pay dividends at any time during the year in addition to the year-end dividend upon resolution at the shareholders’ meeting. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders’ subject to certain limitations and additional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million. Increases / decreases and transfer of common stock, reserve and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and additional paid-in capital equals 25% of common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, and other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. Treasury Stock The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. |
Stock-based Compensation
Stock-based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Stock-based Compensation | |
Stock-based Compensation | 10. Stock-based Compensation The fair value of stock options as part of employee incentive plans is estimated at the date of grant of the purchase rights using the Black-Sholes option-pricing model. The model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected term. According to the resolutions at the general meetings of shareholders held in December 2015, as Fourth Series of Stock Subscription Rights, stock options to purchase 1,539,500 shares of common stock were granted to the Company's director and the Company's corporate auditor (See Note 20) on December 21, 2015. The exercise term of stock options is 8 years commencing from December 22, 2017 and they must hold positions in the Company at the time of exercise to exercise their rights. The stock option's fair value as of grant date was ¥2.45 per share. The exercise price of the stock option is ¥400 per share. According to the resolutions at the general meetings of shareholders held in December 2015, as Fifth Series of Stock Subscription Rights, stock options to purchase 285,500 shares of common stock were granted to the Company's employees on December 21, 2015. The exercise term of stock options is 8 years commencing from December 22, 2017 and they must be employed by the Company at the time of exercise to exercise their rights. The stock option's fair value as of grant date was ¥2.96 per share. The exercise price of the stock option is ¥400 per share. According to the resolutions at the general meetings of shareholders held in December 2016, as Sixth Series of Stock Subscription Rights, stock options to purchase 230,000 shares of common stock were granted to the Company's corporate auditor (See Note 20) on December 21, 2016. The exercise term of stock options is 8 years commencing from December 22, 2018 and they must hold positions in the Company at the time of exercise to exercise their rights. The stock option's fair value as of grant date was ¥0.67 per share. The exercise price of the stock option is ¥2,000 per share. According to the resolutions at the general meetings of shareholders held in December 2016, as Seventh Series of Stock Subscription Rights, stock options to purchase 174,000 shares of common stock were granted to the Company's director and the Company's employees on December 21, 2016. The exercise term of stock options is 8 years commencing from December 22, 2018 and they must be employed by the Company at the time of exercise to exercise their rights. The stock option's fair value as of grant date was ¥0.82 per share. The exercise price of the stock option is ¥2,000 per share. According to the resolutions at the extraordinary general meetings of shareholders held in August 2020, as Eighth Series of Stock Subscription Rights, stock options to purchase 150,000 shares of common stock were granted to the Company’s director on October 2, 2020. The amount to be paid in for the stock option was ¥ 1.00 per share. The exercise term of stock options is 5 years commencing from October 1, 2021 and they must be employed by the Company at the time of exercise to exercise their rights. The stock option’s fair value as of grant date was ¥ 104.64 per share. The exercise price of the stock option is ¥ 2,000 per share. According to the resolutions at the extraordinary general meetings of shareholders held in August 2020, as Ninth Series of Stock Subscription Rights, stock options to purchase 300,000 shares of common stock were granted to the Company’s director, the Company’s corporate auditor (See Note 20), the Company’s employees and outside service providers on October 2, 2020. The amount to be paid in for the stock option was ¥ 22.00 per share. The exercise term of stock options is 3 years commencing from October 1, 2021 and they must be employed by the Company at the time of exercise to exercise their rights (however, this shall not apply to outside service providers). In addition, the exercise can take place only when the Company achieves an annual consolidated revenue target of ¥ 3,908,264 thousand under U.S. GAAP in any of our 2020, 2021 or 2022 fiscal years. The stock option’s fair value as of grant date was ¥ 637.02 per share. The exercise price of the stock option is ¥ 128 per share. The Company did not grant any stock options during 2019. Cash received from stock options granted during 2020 was The fair value of the Company’s stock option was estimated on the date of grant using the Black-Sholes option-pricing model that incorporates the assumptions presented below: Year ended December 31, 2020 Expected term of option (in years) 2 3 Expected volatility 58.21 – 65.93 % Expected dividend yield ― % Risk-free interest rate 0.17 – 0.19 % Expected term of option The expected term of option represents the period of time that the stock options granted are expected to be outstanding. The expected term of option was estimated utilizing the simplified method because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The simplified method primarily is calculated as the midpoint between the requisite service period and the contractual term of option. Expected volatility Since the Company does not have a trading history of its common stock, the expected volatility is based on average volatility of comparable publicly traded companies within the Company’s industry. Therefore, the Company used the average of their historical volatilities over the respective expected option terms as an estimate of the expected volatility of its own share price. Expected dividend yield The expected dividend yield is assumed to be zero as the Company has no current plans to pay any dividends in the foreseeable future. Risk-free interest rate The risk-free interest rate is based on market yield curve of the U.S. Treasury securities for the respective expected terms of options. A summary of the activity of the Company's employee stock option plans as of and for the years ended December 31, 2020 and 2019 is presented below: Yen Years Thousands of Yen Number of shares Weighted-average exercise price Weighted-average remaining contractual term Aggregate intrinsic value Outstanding at December 31, 2018 549,500 ¥ 1,552 7.6 ¥ ― Forfeited/Expired (30,000) 800 Outstanding at December 31, 2019 519,500 1,595 6.7 ― Exercisable at December 31, 2019 519,500 1,595 6.7 ― Granted 450,000 752 ― Forfeited/Expired (290,000) 1,903 Outstanding at December 31, 2020 679,500 905 4.3 531,518 Exercisable at December 31, 2020 229,500 ¥ 1,205 5.4 ¥ 123,891 For the year ended December 31, 2020, there was no material compensation cost recognized for the 8th stock options. As of December 31, 2020, the performance condition for the 9th series of stock option was not deemed probable due to the impacts of COVID-19 and no compensation cost was recorded. For the year ended December 31, 2019, there were no |
Segment Information
Segment Information | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Segment Information | ||
Segment Information | 6. Segment Information The Company operates its business in two segments: Relaxation Salon and Digital Preventative Healthcare, which are based on the organizational structure and information reviewed by the Company’s Chief Operating Decision Maker, who is the President, to evaluate its operating results and allocation of resources. Information about operating results for each segment for the six months ended June 30, 2021 and 2020 is as follows: Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Six months ended June 30, 2021 (ASC 606) Revenues ¥ 2,110,561 ¥ 16,918 ¥ ― ¥ 2,127,479 Operating income (loss) 93,852 (65,004) (511,036) (482,188) Depreciation and amortization 25,345 4,201 10,085 39,631 Six months ended June 30, 2020 (ASC 605) Revenues ¥ 1,344,503 ¥ 11,774 ¥ ― ¥ 1,356,277 Operating loss (166,200) (21,016) (247,091) (434,307) Depreciation and amortization 14,453 3,771 14,881 33,105 Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate general and administrative expenses and back office expenses. Substantially all revenues are from customers in Japan. Geographic information is omitted due to immateriality of revenue and operating income attributable to other international locations for the six months ended June 30, 2021 and 2020. | 11. Segment Information The Company operates its business in two segments: Relaxation Salon and Digital Preventative Healthcare, which are based on the organizational structure and information reviewed by the Company's Chief Operating Decision Maker, who is the President, to evaluate its operating results and allocation of resources. The accounting policies of the segments are substantially the same as those described in the significant accounting policies in Note 1. Information about operating results and assets for each segment as of and for the years ended December 31, 2020 and 2019 is as follows: Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Year ended December 31, 2020 Revenues ¥ 3,315,947 ¥ 25,670 ¥ ― ¥ 3,341,617 Operating income (loss) (140,866) (66,100) (539,122) (746,088) Depreciation and amortization 32,261 8,007 22,022 62,290 Total assets 3,096,094 34,247 2,583,125 5,713,466 Year ended December 31, 2019 Revenues ¥ 3,864,656 ¥ 43,608 ¥ ― ¥ 3,908,264 Operating income (loss) 279,439 (43,056) (202,033) 34,350 Depreciation and amortization 34,025 4,764 7,385 46,174 Total assets 3,346,739 29,565 1,381,161 4,757,465 Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate general and administrative expenses and back office expenses. Assets attributed to each segment are accounts receivable-trade, net, accounts receivable-other, inventories, prepaid expenses, right-of-use asset - operating lease, property and equipment, goodwill, intangible assets, and lease and guarantee deposits. Corporate assets primarily consist of cash and cash equivalents, time deposits, long-term accounts receivable-other, net, deferred tax assets, and corporate properties. Substantially all revenues are from customers operating in Japan. Geographic information is omitted due to immateriality of revenue and operating income attributable to international operations for the years ended December 31, 2020 and 2019. |
Income Taxes
Income Taxes | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Income Taxes | 7. Income Taxes Our effective income tax rate for the six months ended June 30, 2021 and 2020 was (11.8)% and At June 30, 2021 and December 31, 2020, current unrecognized tax benefit is not material in amount. Even in the next twelve months after the end of June 2021, it is unlikely that the total amount would change dramatically. | 12. Income Taxes The following table shows a summary of income taxes for the years ended December 31, 2020 and 2019: Thousands of Yen Thousands of Yen 2020 2019 Domestic Total Domestic Total (Loss) income before income taxes ¥ (626,689) ¥ (626,689) ¥ 32,737 ¥ 32,737 Income taxes Current 19,745 19,745 10,222 10,222 Deferred (107,264) (107,264) 5,739 5,739 Total ¥ (87,519) ¥ (87,519) ¥ 15,961 ¥ 15,961 The Company and its domestic subsidiaries are subject to a number of taxes based on income, in the aggregate resulted in an effective statutory rate of approximately 30.6% and 30.6% for the years ended December 31, 2020 and 2019, respectively. A reconciliation of the differences between the effective income tax rates reflected in the accompanying consolidated statements of (loss) income and Japanese statutory tax rates for the years ended December 31, 2020 and 2019 is as follows: 2020 2019 Statutory tax rate 30.6 % 30.6 % Increases (reductions) in taxes due to: Change in valuation allowance (13.2) (10.2) Nondeductible expenses (0.3) 3.2 Inhabitant tax-per capita* (3.2) 24.5 Other-net 0.1 0.7 Effective income tax rate 14.0 % 48.8 % * Inhabitants tax is imposed on resident corporations in Japan. It consists of the corporation tax calculated as a percentage of national corporation tax and the per capita levy determined based on capital and the number of employees. For the year ended December 31, 2020, the impact of inhabitant tax per capita on the effective tax rate decreased due to fluctuation of (loss) income before income taxes. The tax effects of the major items of temporary differences giving rise to the deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Deferred tax assets: Accounts receivable-trade ¥ 13,485 ¥ 13,485 Provision for bad debt 41,700 50,271 Goodwill ― 1,135 Other prepaid expenses - currently not deductible ― 54,235 Contract liability 154,950 ― Asset retirement obligation 58,543 39,013 Operating lease liability 505,601 563,660 Operating loss carryforwards 484,040 95,490 Other 60,392 51,485 Gross deferred tax assets 1,318,711 868,774 Valuation allowance (125,376) (42,395) Total deferred tax assets 1,193,335 826,379 Deferred tax liabilities: Property and equipment (32,433) (18,141) Goodwill (4,073) Intangible assets (15,285) (6,485) Right-of-use asset - operating lease (483,437) (560,336) Deferred offering costs ― (17,609) Advances received (1,311) (1,303) Other (1,205) ― Total deferred tax liabilities (537,744) (603,874) Net deferred tax assets ¥ 655,591 ¥ 222,505 Valuation allowance for deferred tax assets have decreased by ¥82,981 thousand and decreased by ¥3,355 thousand for the years ended December 31, 2020 and 2019, respectively. Based on the level of historical taxable income and projections for future taxable income over the periods which the net deductible temporary differences are expected to reverse, the Company believes it is more likely than not that the Company will realize the benefits of these tax assets, net of valuation allowance, at December 31, 2020. At December 31, 2020, the Group had operating loss carryforwards of ¥1,580,795 thousand, which are available to offset future taxable income. These carryforwards are scheduled to expire as follows: Operating loss carryforwards (Thousands of Yen) Years ending December 31: Between 2021 and 2024 ¥ 75,596 Between 2025 and 2028 132,439 2029 and thereafter 1,372,760 Total ¥ 1,580,795 The Company does not recognize any deferred tax liabilities for undistributed earnings of domestic subsidiaries since dividends from these subsidiaries are not subject to taxation under Japanese tax law. At December 31, 2020 and 2019, current unrecognized tax benefit is not material in amount. Even in the next twelve months after the end of 2020, it is unlikely that the total amount would change dramatically. The penalties and interest expenses related to income taxes are recognized in the consolidated statements of (loss) income as of December 31, 2020 and 2019, however, the amounts are immaterial. The Company and its subsidiaries are subject to taxation in Japan. As of December 31, 2020, all years remain open to examination by the tax authority. |
Revenue Recognition
Revenue Recognition | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Revenue Recognition | 8. Revenue Recognition For the six months ended June 30, 2020, the Company recognized revenue under Financial Accounting Standards Board (“FASB”) Topic 605 (“ASC 605”)—“Revenue Recognition” as Topic 606—“Revenue from Contracts with Customers” (“ASC 606”) was not required to be implemented for interim periods in 2020. Disaggregation of revenue For the six months ended June 30, 2021, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Revenue Stream* Relaxation Salon Digital Preventative Healthcare Consolidated Six months ended June 30, 2021 Revenue from directly-operated salons ¥ 1,421,413 ¥ ― ¥ 1,421,413 Franchise fees 125,513 ― 125,513 Royalty income 99,534 ― 99,534 Staffing service revenue 126,734 ― 126,734 Sublease revenue 225,044 ― 225,044 Other franchise revenues 112,323 ― 112,323 Other revenues ― 16,918 16,918 Total revenues ¥ 2,110,561 ¥ 16,918 ¥ 2,127,479 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. Contract balance Information about receivables and contract liabilities from contracts with customers is as follows: Thousands of Yen As of As of June 30, December 31, 2021 2020 Balance sheet classification Receivables ¥ 89,416 ¥ 148,540 Accounts receivable-trade, net Contract liabilities: Current 92,988 172,063 Contract liability (current) Long-term 297,523 333,978 Long-term contract liability – net of current portion Total ¥ 390,511 ¥ 506,041 Receivables relate primarily to payments due for royalty income, staffing service revenue and sublease revenue. With respect to the payment term, payment for these revenues are generally collected monthly. As such, no significant finance component has been identified. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), and are primarily related to receivables from the Company’s franchisees. Contract liabilities primarily represents the Company’s remaining performance obligations under its franchise agreement at the end of the period, for which consideration has been received and revenue had not been recognized, and is generally recognized as revenues ratably over the remaining expected customer life. As of June 30, 2021, contract assets under contracts with customers were immaterial in amount. Changes in the Company’s contract liabilities for the six months ended June 30, 2021 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2020 ¥ 506,041 Revenues recognized during 2021 which were included in the contract liabilities balance at December 31, 2020 (131,269) Remaining amounts at June 30, 2021 which were newly recognized as contract liabilities during 2021 15,739 Balance at June 30, 2021 ¥ 390,511 For the six months ended June 30, 2021, there were no revenues recognized under performance obligations which were satisfied for past fiscal years by change of transaction price, etc. Changes in receivables and contract liabilities are primarily due to the timing of revenue recognition, billings and cash collections. Transaction price allocated to remaining performance obligations Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of June 30, 2021 is as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 45,307 2022 92,083 2023 90,272 2024 81,855 2025 53,551 2026 and thereafter 27,443 Total ¥ 390,511 | 13. Revenue Recognition Disaggregation of revenue For the year ended December 31, 2020, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Digital Preventative Revenue Stream* Relaxation Salon Healthcare Consolidated Year ended December 31, 2020 Revenue from directly-operated salons ¥ 2,026,806 ¥ ― ¥ 2,026,806 Franchise fees 175,445 ― 175,445 Royalty income 179,745 ― 179,745 Staffing service revenue 254,282 ― 254,282 Sublease revenue 492,371 ― 492,371 Other franchise revenues 187,298 ― 187,298 Other revenues ― 25,670 25,670 Total revenues ¥ 3,315,947 ¥ 25,670 ¥ 3,341,617 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. Contract balance Information about receivables and contract liabilities from contracts with customers is as follows: Thousands of Yen As of As of December 31, December 31, 2020 2019 (as adjusted- Note 1) Balance sheet classification Receivables ¥ 148,540 ¥ 337,048 Accounts receivable-trade, net Contract liabilities: Current 172,063 201,559 Contract liability (current) Long-term 333,978 465,077 Long-term contract liability - net of current portion Total ¥ 506,041 ¥ 666,636 Receivables relate primarily to payments due for royalty income, staffing service revenue and sublease revenue. With respect to the payment term, payment for these revenues are generally collected monthly. As such, no significant finance component has been identified. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), and are primarily related to receivables from the Company’s franchisees. Refer to “Accounts Receivables – Trade, Net” on Note 1 for details on the components of the receivables balance and the allowance. Contract liabilities primarily represents the Company’s remaining performance obligations under its franchise agreement at the end of the year, for which consideration has been received and revenue had not been recognized, and is generally recognized as revenues ratably over the remaining expected customer life. As of December 31, 2020, contract assets under contracts with customers were immaterial in amount. Changes in the Company’s contract liabilities for the year ended December 31, 2020 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2019 as adjusted (Note 1) ¥ 666,636 Revenues recognized during 2020 which were included in the contract liabilities balance at December 31, 2019 (203,970) Remaining amounts at December 31, 2020 which were newly recognized as contract liabilities during 2020 43,375 Balance at December 31, 2020 ¥ 506,041 For the year ended December 31, 2020, there were no revenues recognized under performance obligations which were satisfied for past fiscal years by change of transaction price, etc. Changes in receivables and contract liabilities are primarily due to the timing of revenue recognition, billings and cash collections. Transaction price allocated to remaining performance obligations Estimated revenue, which includes renewal fees not yet paid, expected to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2020 is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 172,063 2022 90,313 2023 88,310 2024 79,168 2025 53,558 2026 and thereafter 34,730 Total ¥ 518,142 |
Other Comprehensive Income (Los
Other Comprehensive Income (Loss) | 12 Months Ended |
Dec. 31, 2020 | |
Other Comprehensive Income (Loss) | |
Other Comprehensive Income (Loss) | 14. Other Comprehensive Income (Loss) Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments for the year ended December 31, 2019 are as follows: Thousands of Yen Tax Before Tax (Expense) Net of Tax Amount Benefit Amount Year ended December 31, 2019 Foreign currency translation adjustments Amount arising during the period ¥ ― ¥ ― ¥ ― Reclassification adjustments for gains and losses realized in net income 400 (122) 278 Other comprehensive income (loss) ¥ 400 ¥ (122) ¥ 278 There were no such amounts recognized for the year ended December 31, 2020. Changes in accumulated other comprehensive income (loss) for the year ended December 31, 2019 are as follows Thousands of Yen Foreign currency translation adjustments Balance at December 31, 2018 ¥ (278) Other comprehensive income (loss) before reclassifications ― Amounts reclassified from accumulated other comprehensive income (loss) 278 Net change during the year 278 Balance at December 31, 2019 ¥ ― There were no accumulated other comprehensive income (loss) as of December 31, 2020 and no changes for the year ended December 31, 2020. Reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2020 and 2019 are as follows: Affected line items Thousands of Yen in consolidated 2020 2019 statements of (loss) income Foreign currency translation adjustments ¥ ― ¥ 400 Other – net ― (122) Income tax (benefit) expense ― 278 Net (loss) income Total amount reclassified, net of tax ¥ ― ¥ 278 |
(Loss) Earnings Per Share
(Loss) Earnings Per Share | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Loss Per Share | ||
(Loss) Earnings Per Share | 9. Loss Per Share Loss per common share is allocated based on each right of common stock and Class A common stock, on the assumption that loss from current year has been distributed. Common stock and Class A common stock have equal rights with respect to surplus dividend and residual assets distribution as net loss attributable to shareholders of the Company is allocated proportionally. Reconciliations of net loss and weighted average number of common shares outstanding used for the computation of basic loss per common share for the six months ended June 30, 2021 and 2020 are as follows: Six Months Ended June 30, 2021 2020 Common Class A Common Class A (Thousands of Yen) (Thousands of Yen) Loss (Numerator) Net loss attributable to shareholders of the Company ¥ (521,770) ― ¥ (442,971) ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,872,224 1 4,022,500 1 Effect of dilutive instruments: Stock options ― ― ― ― Weighted average common shares for diluted computation 4,872,224 1 4,022,500 1 Loss per common share attributable to shareholders of the Company (Yen) (Yen) Basic ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) Diluted ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) For periods in which the Company reports net loss, diluted net loss per common share attributable to common shareholders is the same as basic net loss per common share attributable to common shareholders. Options to purchase 608,500 shares and 234,000 shares have been excluded from the diluted net loss per common share attributable to common shareholders calculation for the six months ended June 30, 2021 and 2020, respectively, because the effect of inclusion would have been anti-dilutive. | 15. (Loss) Earnings Per Share (Loss) Earnings per common share is allocated based on each right of common stock and Class A common stock, on the assumption that (loss) income from current year has been distributed. Common stock and Class A common stock have equal rights with respect to surplus dividend and residual assets distribution as net (loss) income attributable to shareholders of the Company is allocated proportionally. Reconciliations of net (loss) income and weighted average number of common shares outstanding used for the computation of basic (loss) earnings per common share for the years ended December 31, 2020 and 2019 are as follows: 2020 2019 Common Class A Common Class A (Yen) (Yen) Income (Numerator) Net (loss) income attributable to shareholders of the Company ¥ (539,170) ― ¥ 17,335 ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,024,692 1 3,747,295 1 Effect of dilutive instruments: Stock options ― ― 525,007 ― Weighted average common shares for diluted computation 4,024,692 1 4,272,302 1 (Loss) earnings per common share attributable to shareholders of the Company Basic ¥ (133.97) ¥ (133.97) ¥ 4.63 ¥ 4.63 Diluted ¥ (133.97) ¥ (133.97) ¥ 4.06 ¥ 4.06 For periods in which the Company reports net loss, diluted net loss per common share attributable to common shareholders is the same as basic net loss per common share attributable to common shareholders. Options to purchase 799,500 shares have been excluded from the diluted net loss per common share attributable to common shareholders calculation for the year ended December 31, 2020 because the effect of inclusion would have been anti-dilutive. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value of Financial Instruments | ||
Fair Value of Financial Instruments | 10. Fair Value of Financial Instruments Fair value of financial instruments The estimated fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020 are set forth below: The following summary excludes cash and cash equivalents, accounts receivable-trade, accounts receivable-other, long-term accounts receivable-other, lease and guarantee deposits, current portion of long-term borrowings, accounts payable-trade, accrued expenses, deposit received and operating lease liability for which fair values approximate their carrying amounts. The summary also excludes investments. Thousands of Yen As of June 30, 2021 As of December 31, 2020 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (573,275) ¥ (554,257) ¥ (668,380) ¥ (644,499) The following methods and assumptions are used to estimate the fair value in the above table. Long-term borrowings The Company’s long-term borrowings instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar borrowings instruments of comparable maturity. The classification of levels is fully described in Note 11. Assumptions used in fair value estimates Fair value estimates are made at a specific point in time, based on relevant market information available and details of the financial instruments. These estimates are practically conducted by the Company which involve uncertainties and matters of significant judgment, therefore, these cannot be determined with precision. Changes in assumptions could significantly affect the estimates. | 16. Fair Value of Financial Instruments Fair value of financial instruments The estimated fair values of the Company's financial instruments at December 31, 2020 and 2019 are set forth below: The following summary excludes cash and cash equivalents, time deposits, accounts receivable-trade, accounts receivable-other, due from shareholder, long-term accounts receivable-other, lease and guarantee deposits, short-term borrowings and current portion of long-term borrowings, accounts payable-trade, accrued expenses, deposit received and operating lease liability for which fair values approximate their carrying amounts. The summary also excludes investments which are disclosed in Note 5. Thousands of Yen 2020 2019 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (668,380) ¥ (644,499) ¥ (150,531) ¥ (145,600) The following methods and assumptions are used to estimate the fair value in the above table. Long-term borrowings The Company's long-term borrowings instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar borrowings instruments of comparable maturity. The classification of levels is fully described in Note 17. Assumptions used in fair value estimates Fair value estimates are made at a specific point in time, based on relevant market information available and details of the financial instruments. These estimates are practically conducted by the Company which involve uncertainties and matters of significant judgment, therefore, these cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value Measurements | ||
Fair Value Measurements | 11. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. There were no assets or liabilities to be measured at fair value on "recurring" basis for the six months ended June 30, 2021 and 2020. Impairment of long-lived assets Significant judgments and unobservable inputs categorized as Level 3 in the fair value hierarchy are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. The Company believes that the assumptions used in its annual and any interim date impairment tests are reasonable, but variations in any of the assumptions may result in different calculations of fair values and impairment charges. The Company’s primary business is the operations of Relaxation Salons. It regularly conducts reviews of past performances and future profitability forecast for individual Salons. Based on the evaluation, if the Company determines that the Salon assets are impaired and not fully recoverable, it reduces the carrying amounts of the Salon’s long-lived assets to the estimated fair value. Fair value is determined based on income approach using Level 3 inputs under ASC 820 Fair Value Measurement For the six months ended June 30, 2021, as a result of the continued impact of the COVID-19 pandemic, the Company evaluated whether the carrying values of the long-lived assets in certain relaxation salons were recoverable as of June 30, 2021. Based on the business recovery to-date, the Company did not identify any triggering event during the period. No impairments of long-lived assets were recorded for the six months ended June 30, 2021. | 17. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity's own assumptions about the assumptions that market participants would use in establishing a price. There were no assets or liabilities to be measured at fair value on "recurring" basis during 2020 and 2019. Long-lived assets and liabilities measured at fair value on "nonrecurring" basis include leasehold improvements and right-of-use assets — operating lease. Assets and liabilities measured at fair value on "nonrecurring" basis as of December 31, 2020 and 2019 are as follows: Thousands of Yen Impairment Level 1 Level 2 Level 3 loss Year ended December 31, 2020 Assets Leasehold improvements ¥ ― ¥ ― ¥ 213,314 ¥ 36,512 Right-of-use asset - operating lease ― ― 1,578,828 69,989 Total ¥ ― ¥ ― ¥ 1,792,142 ¥ 106,501 Year ended December 31, 2019 Assets Leasehold improvements ¥ ― ¥ ― ¥ 161,330 ¥ 9,825 Right-of-use asset - operating lease ― ― 1,829,968 34,721 Total ¥ ― ¥ ― ¥ 1,991,298 ¥ 44,546 Impairment of long-lived assets Significant judgments and unobservable inputs categorized as Level 3 in the fair value hierarchy are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. The Company believes that the assumptions used in its annual and any interim date impairment tests are reasonable, but variations in any of the assumptions may result in different calculations of fair values and impairment charges. The Company's primary business is the operations of Relaxation Salons. It regularly conducts reviews of past performances and future profitability forecast for individual Salons. Based on the evaluation, if the Company determines that the Salon assets are impaired and not fully recoverable, it reduces the carrying amounts of the Salon's long-lived assets to the estimated fair value. Fair value is determined based on income approach using Level 3 inputs under ASC 820 Fair Value Measurement For the year ended December 31, 2020, the Company recognized impairment loss of ¥106,501 thousand on leasehold improvements and right-of-use asset — operating lease used in certain relaxation salons. The Company conducted strategic reviews of its future profitability forecast for the salons. Following these reviews, the Company reduced the corresponding estimated future cash flows of these assets and the estimated ability to recover the carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in the impairment charges. For the year ended December 31, 2019, the Company recognized impairment loss of ¥44,546 thousand on leasehold improvements and right-of-use assets — operating lease used in certain relaxation salons. The Company conducted strategic reviews of its future profitability forecast for the salons. Following these reviews, the Company reduced the corresponding estimated future cash flows of these assets and the estimated ability to recover the carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in the impairment charges. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Commitments and Contingencies. | ||
Commitments and Contingencies | 12. Commitments and Contingencies Operating leases The Group mainly in addition to its headquarters facility, leases salon spaces from external third parties, which are either directly-operated salons or franchised salons. Refer to Note 5 "Leases" for details on the components of operating lease costs and future minimum lease payments under non-cancellable leases. Borrowings The Company has long-term borrowings that are primarily made under general agreements. Refer to Note 4 "Long-term Borrowing" for future debt payments. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. The Company reviews these provisions at least on a yearly basis and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, the Company believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of the Company’s potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or cash flows. | 18. Commitments and Contingencies Operating leases The Group mainly in addition to its headquarters facility, leases salon spaces from external third parties, which are either directly-operated salons or franchised salons. Refer to Note 8 "Leases" and Note 7 "Asset Retirement Obligation" for details on the components of operating lease costs and future minimum lease payments under non-cancellable leases and asset retirement obligation, respectively. Borrowings The Company has both short-term borrowings and long-term borrowings that are primarily made under general agreements. Refer to Note 6 "Short term and Long-term Borrowing" for future debt payments. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. The Company reviews these provisions at least on a yearly basis and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, the Company believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of the Company's potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows. |
Related Party Transactions
Related Party Transactions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Related Party Transactions | ||
Related Party Transactions | 13. Related Party Transactions Transactions with the Company’s director Akira Nojima, the Company’s independent director, is the sole owner of Kabushiki Kaisha No Track. As of June 30, 2021 and December 31, 2020, the outstanding accrued expenses to Kabushiki Kaisha No Track are ¥55 thousand and ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥300 thousand and ¥300 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha No Track, respectively. Tomoya Ogawa, the Company’s independent director and the shareholder of the Company (holds 0.58% and 0.59% of common stock as of June 30, 2021 and December 31, 2020, respectively), is the sole owner of Kabushiki Kaisha LTW. As of December 31, 2020, the outstanding accrued expenses to Kabushiki Kaisha LTW are ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥ Transactions with the Company’s corporate auditor As permitted under the Companies Act, we have elected to structure our corporate governance system as a company with a separate board of corporate auditors instead of an audit committee of our board of directors. Corporate auditors are typically nominated at the board level and are elected at general meetings of shareholders by a majority of shareholders entitled to vote, where a quorum is established by shareholders holding one Osamu Sato, the Company’s corporate auditor and the shareholder of the Company (holds 0.36% and 0.36% of common stock as of June 30, 2021 and December 31, 2020 respectively), is a part-time employee of Ebis 20 Co., Ltd., a Japanese company. As of December 31, 2020, the outstanding accrued expenses to Ebis 20 Co., Ltd. are ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥600 thousand and ¥600 thousand (included in selling, general and administrative expenses) to Ebis 20 Co., Ltd. respectively. | 19. Related Party Transactions Transactions with the Company's representative director As of December 31, 2019, the outstanding balance due from Kouji Eguchi, the representative director and the shareholder of the Company (holds 48.04% of common stock and all Class A Transactions with the Company's director Akira Nojima, the Company's independent director, is the sole owner of Kabushiki Kaisha No Track. As of December 31, 2020 and 2019, the outstanding accrued expenses to Kabushiki Kaisha No Track are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥600 thousand and ¥600 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha No Track, in each year respectively. Tomoya Ogawa, the Company's independent director and the shareholder of the Company (holds 0.59% and 0.71% of common stock as of December 31, 2020 and 2019 respectively), is the sole owner of Kabushiki Kaisha LTW. As of December 31, 2020 and 2019, the outstanding accrued expenses to Kabushiki Kaisha LTW are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥1,200 thousand and ¥1,200 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha LTW, in each year respectively. Transactions with the Company's corporate auditor (See Note 20) Osamu Sato, the Company's corporate auditor and the shareholder of the Company (holds 0.36% and 0.44% of common stock as of December 31, 2020 and 2019 respectively), is a part-time employee of Ebis 20 Co., Ltd. As of December 31, 2020 and 2019, the outstanding accrued expenses to Aoyama Consulting Group Co., Ltd are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥1,200 thousand and ¥1,200 thousand (included in selling, general and administrative expenses) to Aoyama Consulting Group Co., Ltd in each year, respectively. |
Corporate Auditor
Corporate Auditor | 12 Months Ended |
Dec. 31, 2020 | |
Corporate Auditor | |
Corporate Auditor | 20. Corporate Auditor As permitted under the Companies Act, we have elected to structure our corporate governance system as a company with a separate board of corporate auditors instead of an audit committee of our board of directors. Corporate auditors are typically nominated at the board level and are elected at general meetings of shareholders by a majority of shareholders entitled to vote, where a quorum is established by shareholders holding one Our corporate auditors are not required to be certified public accountants. Our corporate auditors may not concurrently serve as directors, employees or accounting advisors ( kaikei sanyo one requirements for an outside corporate auditor under the Companies Act, and at least one of the corporate auditors must be a full-time corporate auditor. The function of our board of corporate auditors and each corporate auditor is similar to that of independent directors, including those who are members of the audit committee of a U.S. public company. Each corporate auditor has a statutory duty to supervise the administration by the directors of our affairs, to examine our financial statements and business reports to be submitted by a representative director at the general meetings of shareholders, and to prepare an audit report. Our corporate auditors are obligated to participate in meetings of our board of directors and, if necessary, to express their opinion at such meetings, but are not entitled to vote. Our corporate auditors must inspect the proposals, documents and any other materials to be submitted by our board of directors to the shareholders at the shareholders' meeting. If a corporate auditor finds a violation of statutory regulations or our articles of incorporation, or another significant improper matter, such auditor must report those findings to the shareholders at the shareholders' meeting. |
Subsequent Events
Subsequent Events | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Subsequent Events | ||
Subsequent Events | 14. Subsequent Events Reorganization of the salon operation business Effective July 1, 2021, Bell Epoc Wellness Inc., a subsidiary of the Company, was merged with Decollte Wellness Corporation, another subsidiary of the Company pursaunt to an absorption-type company split agreement, with Bell Epoc Wellness Inc. being the successor entity. The purpose of this reorganization is to achieve more efficiency in training therapists and operating the relaxation salons, and to integrate the brands. As these subsidiaries were under common control, there was no impact to the consolidated financial statements. Bell Epoc Wellness Inc. changed its name to Wing Inc. effective November 1, 2021. Acquisition of ZACC’s share On August 31, 2021, the Company entered into a share transfer agreement with all of the existing shareholders of ZACC Kabusiki kaisha (“ZACC”), a Japanese hair salon operator of ”ZACC” brand, pursuant to which it will acquire 100% of the outstanding shares of ZACC through a two-stage acquisition for total consideration of ¥370,000 thousand. ZACC owns and operates 3 luxury hair salon brands (ZACC vie, ZACC raffine, and ZACC ginza), all of which have been recognized by customers for over 30 years for their high level of techniques and hospitality. The purchase price will be paid by cash on hand, and an initial payment of ¥69,014 thousand was made on August 31, 2021. The first stage of the acquisition closed on October 1, 2021, when the shareholders of ZACC transferred 60% of the common shares of ZACC to the Company for ¥152,986 thousand. The second stage, at which point the remaining shares of ZACC will be transferred to the Company, is scheduled to close on January 1, 2022 for ¥148,000 thousand. Conversion of Underlying Shares into ADSs The ADSs representing our common shares are listed on The Nasdaq Capital Market under the symbol “MRM”. As of July 31, 2021, more than 40% of our common shares were converted to ADSs which are tradable on DTC (Depository Trust Company) in the United States. Upon IPO and following over-allotment, we had only 17% of common shares converted and traded as ADSs on DTC. | 21. Subsequent Events Acquisition of relaxation salons In 2021, the Company acquired 18 relaxation salons from our franchisee located in Japan for cash consideration of ¥171,601 thousand. The results of operations, assets and liabilities of these acquired relaxation salons are expected to be included in the consolidated financial statements from the date of each acquisition during 2021. Exercise of Over-Allotment Option by the Underwriter On February 1, 2021, the Company completed the sale of an additional 60,000 ADSs, each representing one common share, no par value, of the Company, at the initial public offering price of $15.00 per ADS, pursuant to the exercise by the underwriter of the over-allotment option granted to it in connection with the Company’s initial public offering. The Company received additional aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. Acquisition of SAWAN’s share On April 28, 2021, the Company acquired 100% ownership of SAWAN CO. LTD. (“SAWAN”), a relaxation salon operator of “Ruam Ruam” from BOX GROUP Co., Ltd., a Japanese holding company specializing in beauty and spa products and services. Ruam Ruam is a luxury relaxation salon brand, which is characterized with Oriental relaxation techniques to fit the needs and preferences of the Japanese consumer. SAWAN directly operates 8 salons across the Tokyo metropolitan area. In addition, SAWAN entered into an agreement with Nine Roots Co., LTD., the sole franchisee of Ruam Ruam, to acquire its The acquisition was closed on May 6, 2021. The purchase price was paid by cash on hand and non-interest-bearing short-term liabilities. No shares were issued to the seller or its affiliates. The 21 st Ordinary General Meeting of Shareholders On March 29, 2021, the Company held its 21st Ordinary General Meeting of Shareholders, whereby the proposal to amend the Articles of Incorporation to increase the total number of authorized shares was approved. The total number of authorized shares increased to 19,900,000 shares, and the total number of authorized class shares increased to ommon shares and one (1) Class A common share. |
Basis of Presentation and Sum_2
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | ||
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America ("U.S. GAAP"). | |
Initial Public Offering | Initial Public Offering The Company completed the initial public offering (IPO) of 800,000 shares of common stock in the form of American Depositary Shares (ADSs) at a price to the public of $15.00 per share on December 31, 2020. Each ADS represents one common share. The Company's ADSs are traded on the Nasdaq Capital Market. The Company recognized aggregate net proceeds of approximately ¥765,867 thousand after deducting underwriting discounts and commissions of ¥69,653 thousand and offering costs of ¥402,760 thousand, which net amount was credited to shareholders' equity. Tax effects associated with costs from the initial public offering of ¥123,325 thousand was credited to equity. As described in Note 21, on February 1, 2021, the Company sold an additional 60,000 ADSs representing 60,000 shares of common at the initial offering price of $15.00 per ADS, pursuant to the partial exercise of the over-allotment option to purchase up to 120,000 ADSs granted to the underwriters in connection with the initial public offering. The Company received aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. | |
Recent Developments and Liquidity | Recent Developments and Liquidity In the six months ended June 30, 2021, the Company experienced negative cash flows from operations and also used a significant amount of cash for acquisitions and investments. In addition, it has had losses from operations since 2020, and has had a working capital deficit and an accumulated deficit since inception. Management evaluates the Company’s ability to continue as a going concern for one year after the date of the unaudited condensed consolidated financial statements are available for issuance. During the first half of 2021, the Japanese government issued multiple Declarations of Emergency for COVID-19, which impacted Tokyo and other prefectures where our salons are located. This affected the operation of our salons located in shopping malls and spa facilities. Under Declarations of Emergency, up to 28 salons had shortened operation and 36 salons temporarily closed their operation. As a result, our sales and profitability have not fully recovered. We are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, all Declarations of Emergency had been lifted nationwide. However, the duration and extent of COVID-19’s impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. The Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses, capital expenditure requirements and debt service obligations through early 2022 and that the Company would require additional capital in the future. Management believes it will be able to raise capital in the short-term through the sales of directly-owned salons. We may also consider obtaining additional financing through the issuance of our common stock or through other equity or debt financings, and we may also look into refinancing our existing debt obligations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. In addition, management is actively pursuing restoring profitability of our relaxation salon business. | Recent Developments and Liquidity Pursuant to Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statement Going Concern On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions. National and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The outbreak and associated restrictions that have been implemented have had a material adverse impact on the Company's business and cash flow from operations, similar to many businesses. In response to this outbreak, the Japanese government issued a Declaration of a State of Emergency (the "Declaration") on April 7, 2020. The Declaration resulted in a significant reduction in guest traffic at our relaxation salons due to changes in consumer behavior as social distancing practices. On April 21, 2020, the Company announced the temporary closure of almost all of its relaxation salons located across the country until May 6, 2020. The Declaration was lifted in Japan on May 25, 2020, however, other restrictions have been continuously encouraged by the Japanese government. In September, 2020, substantially all of the Company's relaxation salons were in operation. Because our operating results substantially depend upon our relaxation salons’ revenue volumes and profitability, the two months of idleness in April and May materially impacted our revenues. The Company implemented cost measures to mitigate topline degradation to the business from this pandemic, including reductions in executive and employee compensation and deferral of nonessential spend in order to limit the impact on our operations and financial results. Additionally, in order to further strengthen its cash position and provide financial flexibility in light of the current uncertainty arising from the COVID-19 pandemic, the Company entered into additional loan agreements with Japan Finance Corporation and Higashi-Nippon Bank, Limited to borrow ¥230,000 thousand collectively as of June 30, 2020. Furthermore, the Company entered into additional loan agreements with Higashi-Nippon Bank, Limited to borrow ¥170,000 thousand as of July 28, 2020 and to borrow additional ¥175,000 thousand from the same bank as of November 30, and entered into loan agreements with The Shoko Chukin Bank, Ltd. to borrow ¥100,000 thousand as of December 31, 2020. The Company also applied for the subsidy program for employment adjustment by the Japanese government with COVID-19 special treatment, which incentivizes companies to retain their employees. During 2020, the Company received ¥111,581 thousand from the subsidy program. The subsidy can help to cover the payroll costs of furloughed employees. The Japanese government subsidies of non-operating nature with no further conditions to be met are recorded as non-operating income in "other income (expense)" in the consolidated statements of (loss) income when received. In December 2020, the Company received aggregate net proceeds of ¥765,867 thousand that it will use for working capital and general corporate purposes. On January 7, 2021, Japanese government issued the second Declaration of Emergency for COVID-19, which applied to Tokyo, Kanagawa, Saitama, and Chiba prefectures and was planned to be effective from January 8 to February 7, 2021. In the declaration, the government requested shopping malls and other large-sized commercial properties, where many of our salons are located, to close stores at 8 p.m. The declaration also requested businesses to introduce remote work from home, which also impacted sales of our salons located in business districts. On January 13, 2021, the government expanded the declaration to seven other prefectures (Osaka, Kyoto, Hyogo, Aichi, Gifu, Fukuoka, and Tochigi). On February 2, 2021, the government decided to extend the declaration till March 7 over ten prefectures excluding Tochigi. On February 28, 2021, the government released six prefectures excluding Tokyo, Kanagawa, Saitama, and Chiba from the declaration. On March 5, 2021, the government decided to extend the declaration over the four prefectures till March 21. On March 21, 2021, the second Declaration of Emergency was fully lifted. Despite it having an adverse impact on our sales activities during the period, compared to the first Declaration of Emergency, in which most of shopping malls voluntarily closed the whole properties, there was much less impact. During the second declaration, 76 salons had shortened operations and 1 - 2 salons fully closed operations. On April 23, 2021, the Japanese government issued the third Declaration of Emergency applicable to Tokyo, Osaka, Hyogo, Kyoto during the period from April 25 to May 11. The declaration requested department stores and other large-sized commercial properties to close operation. This affected the operation of our salons located in shopping malls and spa facilities. As of May 10, 2021, 28 salons had shortened operation and 36 salons fully closed their operation. On May 6, 2021, the government announced it will extend the declaration till May 31 and add Fukuoka and Aichi prefectures to the scope of the declaration. Although the declarations have been adversely affecting our business, we are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, the duration and extent of COVID-19's impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. Whereas management presently expects proceeds from existing loans, subsidies, and the net proceeds received from our IPO, to be sufficient to fund operating needs and existing debt obligations and does not currently expect to require additional capital for the next 12 months, no assurance can be provided as to the ultimate resolution of the foregoing matters and their ultimate impact on the Company's financial position, results of operations and cash flows. |
Consolidation and Variable Interest Entities | Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation., Medirom Human Resources Inc., and SAWAN CO. LTD. All intercompany transactions have been eliminated in consolidation. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of June 30, 2021 and December 31, 2020. | Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation, and Medirom Human Resources Inc. All intercompany transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence but not control are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of December 31, 2020 and 2019. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, the allowance for doubtful accounts, fair value of intangible assets acquired through business combination, impairment of long-lived assets and goodwill, asset retirement obligations, valuation of stock-based compensation, and valuation of deferred tax assets. Management bases these estimates on assumptions that it believes to be reasonable under the circumstance, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. Actual results may differ from these estimates in future periods when the COVID-19 pandemic continues to evolve and additional information becomes available. | |
Foreign Currency Translation | Foreign Currency Translation The assets and liabilities of an equity method investee are translated into Japanese yen at the respective year-end exchange rates. All income and expense accounts are translated at weighted average rates. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income within shareholders' equity. Exchange gains and losses resulting from foreign currency transactions and the conversion of monetary assets and liabilities denominated in foreign currencies are included in other income (expenses) in the consolidated statements of (loss) income. | |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and time deposits or other highly liquid investments placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities of less than three months. There are no cash equivalents balances for the periods presented. Time deposits presented in the consolidated balance sheets are short-term investments, these maturities are longer than three months but less than one year. | |
Accounts Receivable-Trade, Net | Accounts Receivable—Trade, Net The accounts receivable-trade on the Company's consolidated balance sheets primarily includes accounts receivables from franchisees. The balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from the Company's franchisees. The Company monitors the financial condition of its franchisees and records provisions for estimated losses on receivables when it believes franchisees are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses incurred related to existing accounts and receivables. As of December 31, 2020 and 2019, the allowance for doubtful accounts related to accounts receivable-trade was ¥4,426 thousand and ¥22,920 thousand, respectively. | |
Accounts Receivable-Other and Long-Term Accounts Receivable-Other, Net | Accounts Receivable—Other and Long-Term Accounts Receivable—Other, Net The accounts receivable—other on the Company's consolidated balance sheets primarily includes accounts receivable from commercial facility landlords and credit card companies related directly-operated salon's revenue and franchisee's revenue collected by these entities on behalf of the Group. As of December 31, 2020 and 2019, accounts receivable from commercial facilities and credit card companies of ¥302,227 thousand and ¥318,474 thousand, respectively, are included in the accounts receivable—other on the consolidated balance sheets. Receivable of ¥50,000 thousand for the sale of the Company's investment in Re.Ra.Ku (Hong Kong) Health Science and Technology Co., Limited is included in the accounts receivable—other as of December 31, 2019. Long-term accounts receivable—other mainly consists of a non-interest bearing receivable due from an unrelated business entity, with a maturity of May 31, 2038, monthly repayment amounts of ¥720 thousand ¥1,200 thousand- and the principal balance due of ¥235,945 thousand and ¥247,450 thousand as of December 31, 2020 and 2019, respectively. The Company monitors the financial condition of its obligor and records provisions for estimated losses on receivables when it believes the obligors are unable to make their required payments. As of December 31, 2020 and 2019, the related discounts and allowance for doubtful accounts on long-term accounts receivable—other was ¥131,759 thousand and ¥141,256 thousand, respectively. | |
Concentrations | Concentrations Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. The Company's cash deposits, of up to ¥10,000 thousand are insured by the Japanese government. From time to time, the Company has deposits in excess of the insured amounts. No single customer accounted for 10% or more of the Company's total revenues for the years ended December 31, 2020 and 2019. | |
Inventories | Inventories Inventories consist principally of merchandise. A portion of inventories are also used for salon services. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method for merchandise. | |
Investments | Investments The Company uses the equity method to account for equity investments over which it has significant influence but does not own a majority equity interest or otherwise control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of (loss) income. Equity method adjustments include the company's proportionate share of investee income or loss and other adjustments required by the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that may have a significant adverse impact on the fair value of the investment. If a loss in value has occurred and is deemed to be other than temporary, an impairment loss is recorded. Several factors are reviewed to determine whether a loss has occurred that is other than temporary, including absence of an ability to recover the carrying amount of the investment, the length and extent of the fair value decline, and the financial condition and future prospects of the investee. Investments in equity securities, in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired or not, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: (1) A significant deterioration in the earnings performance or business prospects of the investee. (2) A significant adverse change in the regulatory, economic, or technological environment of the investee. (3) A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. (4) A recent example of the new issuance of a security, in which the issue price is less than our cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined as a result of considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. | |
Leases | Leases The Group considers whether a contract is a lease or if it contains a lease element when a contract is executed. If a contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration, such contract is determined to contain a lease element. When the contract contains a lease element, a lease is either classified as operating lease or finance lease when the Group is a lessee, and a sales-type lease or direct financing lease when the Group is a lessor. The Group, as a lessee, applies the right-of-use model to account for lease transactions. Under the right-of-use model, right-of-use asset and lease liability are recognized at commencement date. The Group measures its lease liability at present value of future lease payments over the remaining term. The Group uses its incremental borrowing rate for the discount rate to calculate the present value of the payments since it is difficult and not practical to determine the interest rate implicit in the lease. The Group's incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Right-of-use asset lease liability 3 For operating leases, the Group recognizes the minimum lease payments where it is the lessee and the minimum lease income where it is the lessor on a straight-line basis over the lease term, and reflects them as rental expenses and rental revenues, respectively, in the consolidated statements of (loss) income. Operating rental expense includes amortization of right-of-use assets and interests on lease liability. Variable lease expenses are primarily linked to sales and are excluded from the measurement of lease liability. Rental expenses are recorded in the consolidated statements of (loss) income based on the nature of the underlying lease. Rental expense related to leases for directly-operated salons and for leased properties that are subsequently subleased to franchisees are recorded to "Cost of revenue from directly-operated salons" and "Cost of franchise revenues," respectively, and rental expense related to leases for corporate offices is recorded to "Selling, general and administrative expenses." Rental income for operating leases on properties subleased to franchisees is recorded to "Franchise revenue". Terms and conditions of the sublease agreements are arranged to pass through lease obligations under head leases to the franchisees. Sublease income is presented on a gross basis on the accompanying consolidated statements of (loss) income, as the Company remains the primary obligor. For newly executed contracts, renewal and revision related to leases, estimates and certain assumptions are used to determine asset value, useful lives, discount rate, lease term, etc. and these have effects on (1) classification of lease, (2) measurement of rental payments and (3) measurement of lease asset. These results may differ if varying estimates and assumptions are used. | |
Property and Equipment, Net | Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is computed principally using the straight-line method based on the estimated useful life of the assets. The useful lives for depreciation by major asset classes are as follows: Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 | |
Other Intangible Assets, Net | Other Intangible Assets, Net Other intangible assets with finite useful lives consist primarily of capitalized software and reacquired franchise rights. The Company capitalizes both eligible internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized until the software is substantially complete and ready for its intended use. Costs related to data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. Capitalized software is amortized over the estimated useful life ( 3 1 | |
Impairment of Long-lived Assets, Excluding Goodwill | Impairment of Long-lived Assets, Excluding Goodwill The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities. The Company reviews the carrying value of long-lived assets or a related group of assets to be held and used for impairment whenever events or circumstances occur that indicate that the carrying value of the assets may not be recoverable. The assets are considered to be impaired when the estimated undiscounted cash flows expected to result from the use of the assets and their eventual disposition are less than their carrying values. The impairment loss is measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. In determining the fair value, the Company uses present value techniques, if appropriate, based on the estimated future cash flows expected to result from the use of the assets and their eventual dispositions. During 2020, long-lived assets impairment charges related to continuing operations of ¥36,512 thousand and ¥69,989 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. During 2019, long-lived assets impairment charges related to continuing operations of ¥9,825 thousand and ¥34,721 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. | |
Goodwill | Goodwill Goodwill represents the excess of cost over fair value of identifiable net assets acquired and assumed in business combinations. The Company generally records goodwill in connection with the acquisition of relaxation salons from franchisees. Upon the sale of relaxation salons to franchisees, goodwill is decremented. Goodwill and intangible assets that are deemed to have indefinite useful lives are subject to impairment testing. Impairment testing is performed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill impairment assessments are performed at the reporting unit level, which is the same as the Company's operating segments. The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair value of a reporting unit to its carrying value. The carrying value of each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit. The Company calculates estimated fair values of the reporting units based on discounted future cash flows utilizing estimates in annual revenue, service and product margins, fixed expense rates, allocated corporate overhead, directly-operated and franchise salon counts, and long-term growth rates for determining terminal value. If the carrying amount of a reporting unit exceeds its fair value, a loss will be recorded for the excess of the carrying value of the reporting unit over the fair value of the reporting unit. The Company did not recognize impairment losses for any goodwill during the years ended December 31, 2020 and 2019. | |
Deferred Offering Costs | Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal, consulting, accounting and other fees relating to the Company's initial public offering (IPO) completed on December 31, 2020, had been capitalized. These costs were reclassified to additional paid-in capital as a reduction from the IPO proceeds. Other incremental organization costs are expensed as incurred. As of December 31, 2020, there were no capitalized deferred offering costs in the consolidated balance sheets. As of December 31, 2019, there were ¥57,509 thousand of deferred offering costs capitalized in the consolidated balance sheets. | |
Asset Retirement Obligations | Asset Retirement Obligations The Company records asset retirement obligations when the obligation is incurred. The obligation is measured at fair value and included in Non-current liabilities. When the liability is initially recorded, the Company capitalizes the related cost by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value, and the capitalized cost is depreciated over the asset's useful life. | |
Revenue Recognition | Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company determines revenue recognition through the following steps: Step 1: identification of the contract with a customer; Step 2: identification of the performance obligations in the contract; Step 3: determination of the transaction price; Step 4: allocation of the transaction price to the performance obligations in the contract; Step 5: recognition of revenue when, or as, the Company satisfies a performance obligation. Revenue from Directly-Operated Salons Revenues from directly-operated salons are recognized when services are provided at the salons. Franchise Revenue Franchise Revenue is comprised of (i) franchise fees, (ii) royalty income, (iii) staffing service revenue, (iv) sublease revenue, and (v) other franchise revenues. The Company and the franchisee enter into a franchise agreement which sets forth the standard terms and conditions of operating the franchised salon, as well as the fees and royalties over the term of the agreement. In most cases, an outsourcing agreement, is also entered into in conjunction with the franchise agreement that specifies the terms of the sublease arrangement with the franchisee. Upon the franchisee's request, the Company's therapists are dispatched to franchise locations and franchisees must pay dispatch fees in accordance with the dispatched employees' position. (i) Franchise fees The Company receives the entire non-refundable initial franchise fees from the franchisee based on franchise agreement. The franchise agreement typically has an initial term of five years agreement could be renewed prior to expiration by mutual consent and renewal franchise fees are paid by franchisee upon renewal of agreement. Initial franchise fees and expected renewal franchise fees are recognized as revenue ratably using the time-based input method over the expected average contract life ( 8 (ii) Royalty income The Company collects royalties, an amount calculated by multiplying a certain percentage to gross sales, on a monthly basis. The royalties are subject to the sales- and usage-based royalties constraint and are recognized as revenues based on the monthly royalty earned where such amount is determined on the basis of gross sales made from each salon. (iii) Staffing service revenue The Company also generates revenue from providing its therapists to franchisees, which are recognized as revenues based on the total number of working hours of the agency worker during the dispatched period. The Company has elected the 'as-invoiced' practical expedient for its staffing services where the fixed rate per hour is invoiced to the customer. (iv) Sublease revenue The Company leases the premises in which the majority of its franchisees operate, where the Company retains the head lease primary obligation, and has entered into corresponding sublease arrangements with franchisees. Revenues from sublease transactions with franchisees are recognized on a straight-line basis over the respective operating lease terms, or at the time of the underlying sales for variable lease payments, in accordance with Accounting Standards Codification ("ASC") 842 Leases ("ASC 842"). (v) Other franchise revenues Other franchise revenues include other services provided to franchisees separately from the franchise agreements and include advertising, training, studio construction and hiring support. These services are primarily recognized as revenues when services are provided. The Company has elected the 'as-invoiced' practical expedient for its studio construction services where the consideration is invoiced to the customer. Other Revenues Other revenues are primarily from the Digital Preventive Healthcare segment, which include revenues from serving implementation of health and wellness programs (Specific Health Guidance Program), and are recognized when services are provided. Health monitoring wearable device service (MOTHER Tracker ® ) is still at the development stage and as such generates no revenue. See Note 13 for further disclosures required under ASC 606 and Recently Adopted Accounting Pronouncements below for impacts of the ASC 606 adoption. Revenue is recognized net of consumption tax collected from customers and subsequently remitted to governmental authorities. | |
Advertising Expenses | Advertising Expenses Advertising costs are expensed as incurred and are recorded in "selling, general and administration expenses". Advertising expenses for the years ended December 31, 2020 and 2019 were ¥92,460 thousand and ¥77,911 thousand, respectively. | |
Stock-Based Compensation | Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments at the fair value of the award on the grant date and recognizes the cost over the requisite service period which the employee is required to provide services in exchange for the award. Compensation expenses are recognized on a straight-line basis over the requisite service period of the awards which are expected to be vested. The Company accounts for forfeitures as they occur. The Company uses option pricing methods that require the input of subjective assumptions, including the expected term, expected volatility, dividend yield and risk-free interest rate. The Company estimates the likelihood and the rate of achievement for performance sensitive stock-based awards at the end of each reporting period. Changes in the estimated rate of achievement can have a significant effect on the recorded stock-based compensation expense as the effect of a change in the estimated achievement level is recognized in the period the change occurs. | |
Income Taxes | Income Taxes Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and tax loss carryforwards. These deferred taxes are measured using the currently enacted tax rates in effect for the year in which the temporary differences or tax loss carryforwards and tax credits are expected to reverse. Valuation allowances are provided against deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company recognizes the financial statement effect of uncertain tax positions when it is more likely than not, based on the technical merits, that the tax positions will be sustained upon examination by the tax authorities. Benefits from tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Accrued interest and penalties related to the unrecognized tax benefits are included in income tax (benefit) expense in the consolidated statements of (loss) income. | |
(Loss) Earnings Per Share | (Loss) Earnings Per Share Basic and diluted (loss) earnings per common share are presented in conformity with the two-class method required for participating securities. Basic net (loss) income attributable to the Company per common share is computed by dividing net (loss) income attributable to the Company by the weighted-average number of shares of common stock outstanding during the year. Diluted net income attributable to the Company per common share reflects the potential dilutive effect of stock options. (See Note 15) | |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12 Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform | Recently Adopted Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (ASC 606) and Leases (ASC 842) -Effective Dates for Certain Entities The Company adopted ASC 606 as of January 1, 2020 using the modified retrospective method of adoption for contracts that were not completed as of the adoption and recognized a cumulative-effect adjustment to accumulated deficit of ¥(458,823) thousand. Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. As a result, the Company has changed its accounting policy for revenue recognition of franchise fees as detailed below. The adoption of this new guidance did not have a material impact for revenue recognition of other than franchise fees. The comparative periods have not been adjusted and continue to be reported under the previous revenue recognition guidance. The details of the significant changes and quantitative impact of the changes are discussed below. Franchise fees The adoption of the new revenue recognition guidance changed the timing of recognition of initial franchise fees and renewal franchise fees . Prior to the adoption of ASC 606, the Company recognized revenue under FASB Topic 605 Revenue Recognition ("ASC 605") 8 Impacts on consolidated financial statements Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC 606, are as follows: Thousands of Yen As reported on Effect of As adjusted on December 31, adoption of December 31, 2019 ASC 606 2019 Assets: Deferred tax assets, net 222,505 202,496 425,001 Liabilities: Accrued expenses 447,974 820 448,794 Contract liability (current) ― 201,559 201,559 Advances received 483,124 (6,137) 476,987 Long-term contract liability - net of current portion ― 465,077 465,077 Shareholders’ equity: Accumulated deficit ¥ (705,309) ¥ (458,823) ¥ (1,164,132) Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without As of December 31, 2020 As reported amount adoption Assets: Deferred tax assets, net ¥ 655,591 ¥ (135,345) ¥ 520,246 Liabilities: Accrued expenses 889,112 (600) 888,512 Contract liability (current) 172,063 (172,063) ― Advances received 461,665 26 461,691 Long-term contract liability - net of current portion 333,978 (333,978) ― Shareholders’ equity (deficit): Accumulated deficit ¥ (1,703,302) ¥ 371,270 ¥ (1,332,032) Selected condensed consolidated statement of (loss) income line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Revenues ¥ 3,341,617 ¥ (154,702) ¥ 3,186,915 Operating loss (746,088) (154,702) (900,790) Loss before income tax (626,689) (154,702) (781,391) Income tax benefit (87,519) (67,151) (154,670) Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Selected condensed consolidated statement of cash flows line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Cash flows from operating activities: Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Adjustments to reconcile net loss to net cash used in operating activities: Deferred income tax expense (107,264) (67,151) (174,415) Changes in operating assets and liabilities: Accrued expenses 206,706 220 206,926 Contract liability (160,595) 160,595 ― Advances received (15,322) (6,113) (21,435) Net cash used in operating activities ¥ (366,420) ¥ ― ¥ (366,420) Fair Value Measurement Disclosures In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Income Taxes In December 2019, the FASB issued ASU 2019-12 Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740) Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321) Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform |
Basis of Presentation and Sum_3
Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Significant Accounting Policies | ||
Schedule of total number of salons by operation type | Number of Relaxation Salons As of June 30, As of December 31, 2021 2020 Directly-operated 188 150 Franchised 125 140 Total 313 290 | |
Schedule of useful lives for depreciation by major asset classes | Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 | |
Accounting Standards Update and Change in Accounting Principle [Table Text Block] | Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC 606, are as follows: Thousands of Yen As reported on Effect of As adjusted on December 31, adoption of December 31, 2019 ASC 606 2019 Assets: Deferred tax assets, net 222,505 202,496 425,001 Liabilities: Accrued expenses 447,974 820 448,794 Contract liability (current) ― 201,559 201,559 Advances received 483,124 (6,137) 476,987 Long-term contract liability - net of current portion ― 465,077 465,077 Shareholders’ equity: Accumulated deficit ¥ (705,309) ¥ (458,823) ¥ (1,164,132) Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without As of December 31, 2020 As reported amount adoption Assets: Deferred tax assets, net ¥ 655,591 ¥ (135,345) ¥ 520,246 Liabilities: Accrued expenses 889,112 (600) 888,512 Contract liability (current) 172,063 (172,063) ― Advances received 461,665 26 461,691 Long-term contract liability - net of current portion 333,978 (333,978) ― Shareholders’ equity (deficit): Accumulated deficit ¥ (1,703,302) ¥ 371,270 ¥ (1,332,032) Selected condensed consolidated statement of (loss) income line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Revenues ¥ 3,341,617 ¥ (154,702) ¥ 3,186,915 Operating loss (746,088) (154,702) (900,790) Loss before income tax (626,689) (154,702) (781,391) Income tax benefit (87,519) (67,151) (154,670) Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Selected condensed consolidated statement of cash flows line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Cash flows from operating activities: Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Adjustments to reconcile net loss to net cash used in operating activities: Deferred income tax expense (107,264) (67,151) (174,415) Changes in operating assets and liabilities: Accrued expenses 206,706 220 206,926 Contract liability (160,595) 160,595 ― Advances received (15,322) (6,113) (21,435) Net cash used in operating activities ¥ (366,420) ¥ ― ¥ (366,420) | |
Schedule of franchise revenue | Thousands of Yen Revenue Stream* Relaxation Salon Digital Preventative Healthcare Consolidated Six months ended June 30, 2021 Revenue from directly-operated salons ¥ 1,421,413 ¥ ― ¥ 1,421,413 Franchise fees 125,513 ― 125,513 Royalty income 99,534 ― 99,534 Staffing service revenue 126,734 ― 126,734 Sublease revenue 225,044 ― 225,044 Other franchise revenues 112,323 ― 112,323 Other revenues ― 16,918 16,918 Total revenues ¥ 2,110,561 ¥ 16,918 ¥ 2,127,479 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. | For the year ended December 31, 2020, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Digital Preventative Revenue Stream* Relaxation Salon Healthcare Consolidated Year ended December 31, 2020 Revenue from directly-operated salons ¥ 2,026,806 ¥ ― ¥ 2,026,806 Franchise fees 175,445 ― 175,445 Royalty income 179,745 ― 179,745 Staffing service revenue 254,282 ― 254,282 Sublease revenue 492,371 ― 492,371 Other franchise revenues 187,298 ― 187,298 Other revenues ― 25,670 25,670 Total revenues ¥ 3,315,947 ¥ 25,670 ¥ 3,341,617 |
Relaxation Salon Segment | ||
Significant Accounting Policies | ||
Schedule of total number of salons by operation type | Number of Relaxation Salons 2020 2019 Directly-operated 150 107 Franchised 140 176 Total 290 283 |
Business Combination (Tables)
Business Combination (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combination | |
Schedule of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date | Thousands of Yen Fair value of assets/liabilities 2020 2019 Property and equipment - net ¥ 51,005 ¥ 27,567 Goodwill 72,438 22,156 Intangible assets 12,690 6,519 Total assets acquired 136,133 56,242 Asset retirement obligation (49,217) (25,942) Total liabilities assumed (49,217) (25,942) Net assets assumed 86,916 30,300 Fair value of the consideration transferred 86,916 23,813 Gain from bargain purchases ¥ ― ¥ 6,487 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property and Equipment, Net | |
Schedule of property and equipment | Thousands of Yen 2020 2019 Leasehold improvements ¥ 272,756 ¥ 215,524 Vehicles 9,548 7,786 Tools, furniture and fixtures 37,480 19,755 Total 319,784 243,065 Accumulated depreciation and amortization (83,854) (74,110) ¥ 235,930 ¥ 168,955 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Goodwill. | ||
Schedule of components of intangible assets | Thousands of Yen 2020 2019 Intangible assets subject to amortization: Software for internal use ¥ 84,152 ¥ 54,710 Reacquired franchise rights 17,973 9,802 Other 750 10,750 Total 102,875 75,262 Accumulated amortization (44,330) (36,694) Net carrying amount 58,545 38,568 Intangible assets not subject to amortization: Trademark 38,922 38,922 Goodwill 150,720 78,282 Telephone rights 148 148 Total 189,790 117,352 Total intangible assets ¥ 248,335 ¥ 155,920 | |
Schedule of estimated aggregate amortization expense for intangible assets | Thousands of Yen Year ending December 31: 2021 ¥ 24,019 2022 17,857 2023 9,540 2024 6,034 2025 957 Thereafter 138 Total ¥ 58,545 | |
Schedule of changes in carrying amount of goodwill | Thousands of Yen Balance at December 31, 2020 ¥ 150,720 Acquisition of SAWAN's shares 218,138 Acquisitions of relaxation salons 166,388 Balance at June 30, 2021 ¥ 535,246 | Thousands of Yen Balance at December 31, 2018 Goodwill ¥ 63,955 Acquisitions of relaxation salons* 22,156 Sales of directly-operated salons to franchisees, and disposal of relaxation salon (7,829) Balance at December 31, 2019 Goodwill 78,282 Acquisitions of relaxation salons* 72,438 Balance at December 31, 2020 Goodwill ¥ 150,720 * Acquisitions for the years ended December 31, 2020 and 2019 relate to relaxation salon acquisitions in the relaxation salon segment. Refer to Note 2. |
Investments (Tables)
Investments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Investments | |
Schedule of non-marketable securities | Carrying amount Thousands of Yen Ownership 2020 2019 2020 2019 Matrix Industries, Inc. ¥ ― ¥ 5,544 0.09% 14.3% Kabushiki Kaisha ReRaKu WEST ― 3,000 ― 16.6% Other 500 5,500 ― ― Total ¥ 500 ¥ 14,044 |
Short-term Borrowings and Lon_2
Short-term Borrowings and Long-term Borrowings (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Long-term Borrowings | ||
Schedule of long-term borrowings | Thousands of Yen As of June 30, 2021 As of December 31, 2020 Bank loans (Due through 2035 with weighted average interest rates of 1.05% as of June 30, 2021, due through 2035 with weighted average interest rates of ¥ 755,159 ¥ 910,661 Current portion of long-term borrowings (181,884) (242,281) Total long-term borrowings ¥ 573,275 ¥ 668,380 | Thousands of Yen 2020 2019 Unsecured bank loans (Due through 2035 with weighted average interest rates of 1.33% as of December 31, 2020, due through 2025 with weighted average interest rates of ¥ 910,661 ¥ 342,101 Current portion of long-term borrowings (242,281) (191,570) Total long-term borrowings ¥ 668,380 ¥ 150,531 |
Schedule of maturities of long-term borrowings | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 86,779 2022 123,460 2023 62,628 2024 60,252 2025 59,370 2026 and thereafter 362,670 Total ¥ 755,159 | Thousands of Yen Year ending December 31: 2021 ¥ 242,281 2022 123,460 2023 62,628 2024 60,252 2025 59,550 2026 and thereafter 362,490 Total ¥ 910,661 |
Asset Retirement Obligation (Ta
Asset Retirement Obligation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Asset Retirement Obligation | |
Schedule of reconciliation of the beginning and ending amount of asset retirement obligation | Thousands of Yen 2020 2019 Beginning balance ¥ 127,411 ¥ 119,519 Liabilities incurred 80,056 63,623 Liabilities settled (16,870) (55,954) Accretion expense 595 223 Ending balance ¥ 191,192 ¥ 127,411 |
Leases (Tables)
Leases (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Leases | ||
Schedule of components of operating lease costs related to operating leases | Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed lease cost (a) ¥ 386,992 ¥ 372,769 Variable lease cost (b) 13,789 7,476 Short-term cost 18,170 4,458 Total ¥ 418,951 ¥ 384,703 (a) This includes the amount of ¥ 217,083 thousand and ¥ 260,194 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. (b) This includes the amount of ¥ 7,961 thousand and ¥ 5,674 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. | Thousands of Yen 2020 2019 Fixed lease cost (a) ¥ 748,230 ¥ 851,555 Variable lease cost (b) 24,484 30,901 Short-term cost 11,669 10,979 Total ¥ 784,383 ¥ 893,435 (a) This includes the amount of ¥478,225 thousand and ¥580,074 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. (b) This includes the amount of ¥14,146 thousand and ¥27,606 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. |
Schedule of supplementary information on cash flow and other information for leasing activities | Thousands of Yen Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 391,650 ¥ 99,758 Right-of-use assets obtained in exchange for lease liabilities 490,342 189,240 Weighted average remaining lease term (in years) 2.9 3.1 Weighted average discount rate 1.45% 1.45% | Thousands of Yen 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 797,623 ¥ 375,270 Right-of-use assets obtained in exchange for lease liabilities 604,703 749,008 Weighted average remaining lease term (in years) 2.8 3.3 Weighted average discount rate 1.45% 1.45% |
Schedule of maturity analysis of future minimum lease payments under non-cancellable leases | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 430,043 2022 620,210 2023 363,730 2024 183,145 2025 110,723 2026 and thereafter 132,480 Total 1,840,331 Less: Interest component (78,116) Present value of minimum lease payments ¥ 1,762,215 | Thousands of Yen Year ending December 31: 2021 ¥ 667,823 2022 493,800 2023 246,751 2024 122,654 2025 70,448 2026 and thereafter 98,245 Total 1,699,721 Less: Interest component (48,509) Present value of minimum lease payments ¥ 1,651,212 |
Schedule of subleases | Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed sublease income ¥ 217,083 ¥ 260,194 Variable sublease income 7,961 5,674 Total ¥ 225,044 ¥ 265,868 Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 178,798 2022 313,207 2023 198,400 2024 82,997 2025 43,103 2026 and thereafter 28,198 Total ¥ 844,703 | Thousands of Yen 2020 2019 Fixed sublease income ¥ 478,225 ¥ 580,074 Variable sublease income 14,146 27,606 Total ¥ 492,371 ¥ 607,680 Thousands of Yen Year ending December 31: 2021 ¥ 376,993 2022 276,765 2023 152,356 2024 66,450 2025 33,728 2026 and thereafter 20,488 Total ¥ 926,780 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stock-based Compensation | |
Defined Benefit Plan, Assumptions [Table Text Block] | Year ended December 31, 2020 Expected term of option (in years) 2 3 Expected volatility 58.21 – 65.93 % Expected dividend yield ― % Risk-free interest rate 0.17 – 0.19 % |
Activity in stock option plans | Yen Years Thousands of Yen Number of shares Weighted-average exercise price Weighted-average remaining contractual term Aggregate intrinsic value Outstanding at December 31, 2018 549,500 ¥ 1,552 7.6 ¥ ― Forfeited/Expired (30,000) 800 Outstanding at December 31, 2019 519,500 1,595 6.7 ― Exercisable at December 31, 2019 519,500 1,595 6.7 ― Granted 450,000 752 ― Forfeited/Expired (290,000) 1,903 Outstanding at December 31, 2020 679,500 905 4.3 531,518 Exercisable at December 31, 2020 229,500 ¥ 1,205 5.4 ¥ 123,891 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Segment Information | ||
Information about operating results and assets for each segment | Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Six months ended June 30, 2021 (ASC 606) Revenues ¥ 2,110,561 ¥ 16,918 ¥ ― ¥ 2,127,479 Operating income (loss) 93,852 (65,004) (511,036) (482,188) Depreciation and amortization 25,345 4,201 10,085 39,631 Six months ended June 30, 2020 (ASC 605) Revenues ¥ 1,344,503 ¥ 11,774 ¥ ― ¥ 1,356,277 Operating loss (166,200) (21,016) (247,091) (434,307) Depreciation and amortization 14,453 3,771 14,881 33,105 | Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Year ended December 31, 2020 Revenues ¥ 3,315,947 ¥ 25,670 ¥ ― ¥ 3,341,617 Operating income (loss) (140,866) (66,100) (539,122) (746,088) Depreciation and amortization 32,261 8,007 22,022 62,290 Total assets 3,096,094 34,247 2,583,125 5,713,466 Year ended December 31, 2019 Revenues ¥ 3,864,656 ¥ 43,608 ¥ ― ¥ 3,908,264 Operating income (loss) 279,439 (43,056) (202,033) 34,350 Depreciation and amortization 34,025 4,764 7,385 46,174 Total assets 3,346,739 29,565 1,381,161 4,757,465 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Taxes | |
Summary of income taxes | Thousands of Yen Thousands of Yen 2020 2019 Domestic Total Domestic Total (Loss) income before income taxes ¥ (626,689) ¥ (626,689) ¥ 32,737 ¥ 32,737 Income taxes Current 19,745 19,745 10,222 10,222 Deferred (107,264) (107,264) 5,739 5,739 Total ¥ (87,519) ¥ (87,519) ¥ 15,961 ¥ 15,961 |
Reconciliation of the differences between the effective income tax rates | 2020 2019 Statutory tax rate 30.6 % 30.6 % Increases (reductions) in taxes due to: Change in valuation allowance (13.2) (10.2) Nondeductible expenses (0.3) 3.2 Inhabitant tax-per capita* (3.2) 24.5 Other-net 0.1 0.7 Effective income tax rate 14.0 % 48.8 % * Inhabitants tax is imposed on resident corporations in Japan. It consists of the corporation tax calculated as a percentage of national corporation tax and the per capita levy determined based on capital and the number of employees. For the year ended December 31, 2020, the impact of inhabitant tax per capita on the effective tax rate decreased due to fluctuation of (loss) income before income taxes. |
Temporary differences giving rise to the deferred tax assets and liabilities | Thousands of Yen 2020 2019 Deferred tax assets: Accounts receivable-trade ¥ 13,485 ¥ 13,485 Provision for bad debt 41,700 50,271 Goodwill ― 1,135 Other prepaid expenses - currently not deductible ― 54,235 Contract liability 154,950 ― Asset retirement obligation 58,543 39,013 Operating lease liability 505,601 563,660 Operating loss carryforwards 484,040 95,490 Other 60,392 51,485 Gross deferred tax assets 1,318,711 868,774 Valuation allowance (125,376) (42,395) Total deferred tax assets 1,193,335 826,379 Deferred tax liabilities: Property and equipment (32,433) (18,141) Goodwill (4,073) Intangible assets (15,285) (6,485) Right-of-use asset - operating lease (483,437) (560,336) Deferred offering costs ― (17,609) Advances received (1,311) (1,303) Other (1,205) ― Total deferred tax liabilities (537,744) (603,874) Net deferred tax assets ¥ 655,591 ¥ 222,505 |
Operating loss carryforwards | Operating loss carryforwards (Thousands of Yen) Years ending December 31: Between 2021 and 2024 ¥ 75,596 Between 2025 and 2028 132,439 2029 and thereafter 1,372,760 Total ¥ 1,580,795 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Schedule of disaggregation of revenue | Thousands of Yen Revenue Stream* Relaxation Salon Digital Preventative Healthcare Consolidated Six months ended June 30, 2021 Revenue from directly-operated salons ¥ 1,421,413 ¥ ― ¥ 1,421,413 Franchise fees 125,513 ― 125,513 Royalty income 99,534 ― 99,534 Staffing service revenue 126,734 ― 126,734 Sublease revenue 225,044 ― 225,044 Other franchise revenues 112,323 ― 112,323 Other revenues ― 16,918 16,918 Total revenues ¥ 2,110,561 ¥ 16,918 ¥ 2,127,479 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. | For the year ended December 31, 2020, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Digital Preventative Revenue Stream* Relaxation Salon Healthcare Consolidated Year ended December 31, 2020 Revenue from directly-operated salons ¥ 2,026,806 ¥ ― ¥ 2,026,806 Franchise fees 175,445 ― 175,445 Royalty income 179,745 ― 179,745 Staffing service revenue 254,282 ― 254,282 Sublease revenue 492,371 ― 492,371 Other franchise revenues 187,298 ― 187,298 Other revenues ― 25,670 25,670 Total revenues ¥ 3,315,947 ¥ 25,670 ¥ 3,341,617 |
Schedule of changes in contract liability | Thousands of Yen Contract liabilities Balance at December 31, 2020 ¥ 506,041 Revenues recognized during 2021 which were included in the contract liabilities balance at December 31, 2020 (131,269) Remaining amounts at June 30, 2021 which were newly recognized as contract liabilities during 2021 15,739 Balance at June 30, 2021 ¥ 390,511 | Changes in the Company’s contract liabilities for the year ended December 31, 2020 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2019 as adjusted (Note 1) ¥ 666,636 Revenues recognized during 2020 which were included in the contract liabilities balance at December 31, 2019 (203,970) Remaining amounts at December 31, 2020 which were newly recognized as contract liabilities during 2020 43,375 Balance at December 31, 2020 ¥ 506,041 |
Schedule of estimated revenue | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 45,307 2022 92,083 2023 90,272 2024 81,855 2025 53,551 2026 and thereafter 27,443 Total ¥ 390,511 | Estimated revenue, which includes renewal fees not yet paid, expected to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2020 is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 172,063 2022 90,313 2023 88,310 2024 79,168 2025 53,558 2026 and thereafter 34,730 Total ¥ 518,142 |
Other Comprehensive Income (L_2
Other Comprehensive Income (Loss) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Other Comprehensive Income (Loss) | |
Components of other comprehensive income (loss) | Thousands of Yen Tax Before Tax (Expense) Net of Tax Amount Benefit Amount Year ended December 31, 2019 Foreign currency translation adjustments Amount arising during the period ¥ ― ¥ ― ¥ ― Reclassification adjustments for gains and losses realized in net income 400 (122) 278 Other comprehensive income (loss) ¥ 400 ¥ (122) ¥ 278 |
Change in accumulated other comprehensive income (loss) | Thousands of Yen Foreign currency translation adjustments Balance at December 31, 2018 ¥ (278) Other comprehensive income (loss) before reclassifications ― Amounts reclassified from accumulated other comprehensive income (loss) 278 Net change during the year 278 Balance at December 31, 2019 ¥ ― |
Reclassifications out of accumulated other comprehensive income(loss) | Affected line items Thousands of Yen in consolidated 2020 2019 statements of (loss) income Foreign currency translation adjustments ¥ ― ¥ 400 Other – net ― (122) Income tax (benefit) expense ― 278 Net (loss) income Total amount reclassified, net of tax ¥ ― ¥ 278 |
(Loss) Earnings Per Share (Tabl
(Loss) Earnings Per Share (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Loss Per Share | ||
Reclassifications out of accumulated other comprehensive income (loss) | Six Months Ended June 30, 2021 2020 Common Class A Common Class A (Thousands of Yen) (Thousands of Yen) Loss (Numerator) Net loss attributable to shareholders of the Company ¥ (521,770) ― ¥ (442,971) ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,872,224 1 4,022,500 1 Effect of dilutive instruments: Stock options ― ― ― ― Weighted average common shares for diluted computation 4,872,224 1 4,022,500 1 Loss per common share attributable to shareholders of the Company (Yen) (Yen) Basic ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) Diluted ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) | 2020 2019 Common Class A Common Class A (Yen) (Yen) Income (Numerator) Net (loss) income attributable to shareholders of the Company ¥ (539,170) ― ¥ 17,335 ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,024,692 1 3,747,295 1 Effect of dilutive instruments: Stock options ― ― 525,007 ― Weighted average common shares for diluted computation 4,024,692 1 4,272,302 1 (Loss) earnings per common share attributable to shareholders of the Company Basic ¥ (133.97) ¥ (133.97) ¥ 4.63 ¥ 4.63 Diluted ¥ (133.97) ¥ (133.97) ¥ 4.06 ¥ 4.06 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value of Financial Instruments | ||
Estimated fair value of debt | Thousands of Yen As of June 30, 2021 As of December 31, 2020 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (573,275) ¥ (554,257) ¥ (668,380) ¥ (644,499) | Thousands of Yen 2020 2019 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (668,380) ¥ (644,499) ¥ (150,531) ¥ (145,600) |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Measurements | |
Assets and liabilities measured on a nonrecurring basis | Thousands of Yen Impairment Level 1 Level 2 Level 3 loss Year ended December 31, 2020 Assets Leasehold improvements ¥ ― ¥ ― ¥ 213,314 ¥ 36,512 Right-of-use asset - operating lease ― ― 1,578,828 69,989 Total ¥ ― ¥ ― ¥ 1,792,142 ¥ 106,501 Year ended December 31, 2019 Assets Leasehold improvements ¥ ― ¥ ― ¥ 161,330 ¥ 9,825 Right-of-use asset - operating lease ― ― 1,829,968 34,721 Total ¥ ― ¥ ― ¥ 1,991,298 ¥ 44,546 |
Basis of Presentation and Sum_4
Basis of Presentation and Summary of Significant Accounting Policies (Details) ¥ in Thousands | Feb. 01, 2021JPY (¥)shares | Dec. 31, 2020JPY (¥) | Jun. 30, 2021JPY (¥)itemsubsidiarysegment | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)segmentsubsidiaryshares | Dec. 31, 2019JPY (¥)item | Feb. 01, 2021$ / shares | Dec. 31, 2020item$ / shares |
Product Information [Line Items] | ||||||||
Number of subsidiaries | subsidiary | 5 | 4 | ||||||
Number of lines of business | segment | 2 | 2 | ||||||
Number of salons | item | 313 | 283 | 290 | |||||
Number of VIE where the Company is the primary beneficiary | item | 0 | 0 | 0 | |||||
Aggregate net proceeds | ¥ 765,867 | |||||||
Offering costs | ¥ 255,887 | ¥ 41,589 | ¥ 97,857 | ¥ 43,283 | ||||
IPO | American Depository Shares | ||||||||
Product Information [Line Items] | ||||||||
Issuance of common stock upon initial public offering, net of offering costs (in shares) | shares | 800,000 | |||||||
Share price | $ / shares | $ 15 | |||||||
Aggregate net proceeds | ¥ 765,867 | |||||||
Underwriters commission | 69,653 | |||||||
Offering costs | 402,760 | |||||||
Tax effected associated with offering costs | ¥ 123,325 | |||||||
IPO | American Depository Shares | Subsequent Event | ||||||||
Product Information [Line Items] | ||||||||
Issuance of common stock upon initial public offering, net of offering costs (in shares) | shares | 60,000 | |||||||
Share price | $ / shares | $ 15 | |||||||
Aggregate net proceeds | ¥ 87,642 | |||||||
Over-Allotment Option | American Depository Shares | Subsequent Event | ||||||||
Product Information [Line Items] | ||||||||
Issuance of common stock upon initial public offering, net of offering costs (in shares) | shares | 60,000 | |||||||
Share price | $ / shares | $ 15 | |||||||
Aggregate net proceeds | ¥ 87,642 | |||||||
Over-Allotment Option | American Depository Shares | Subsequent Event | Maximum | ||||||||
Product Information [Line Items] | ||||||||
Issuance of common stock upon initial public offering, net of offering costs (in shares) | shares | 120,000 | |||||||
Directly-operated salons | ||||||||
Product Information [Line Items] | ||||||||
Number of salons | item | 188 | 107 | 150 | |||||
Franchise fees | ||||||||
Product Information [Line Items] | ||||||||
Number of salons | item | 125 | 176 | 140 |
Basis of Presentation and Sum_5
Basis of Presentation and Summary of Significant Accounting Policies - Recent Developments and Liquidity (Details) ¥ in Thousands | May 10, 2021item | Mar. 05, 2021item | Feb. 28, 2021item | Feb. 02, 2021item | Jan. 13, 2021item | Dec. 31, 2020JPY (¥) | May 31, 2020 | Dec. 31, 2020JPY (¥) | Nov. 30, 2020JPY (¥) | Jul. 28, 2020JPY (¥) |
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Period of time over which operations were suspended | 2 months | |||||||||
Aggregate net proceeds | ¥ | ¥ 765,867 | |||||||||
Number of salons with shortened operations | 28 | |||||||||
Number of fully closed salons | 36 | |||||||||
Loans from Japan Finance Corporation and Higashi-Nippon Bank | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Loan amount borrowed | ¥ | 230,000 | ¥ 230,000 | ||||||||
Proceeds from government assistance COVID-19 | ¥ | 111,581 | |||||||||
Loans from Higashi-Nippon Bank | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Loan amount borrowed | ¥ | ¥ 175,000 | ¥ 170,000 | ||||||||
Loans from Shoko Chukin Bank | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Loan amount borrowed | ¥ | ¥ 100,000 | ¥ 100,000 | ||||||||
Subsequent Event | Declaration One | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of prefectures | 7 | |||||||||
Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of prefectures | 10 | |||||||||
Number of salons with shortened operations | 76 | |||||||||
Subsequent Event | Declaration Three | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of prefectures | 6 | |||||||||
Subsequent Event | Declaration Four | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of prefectures | 4 | |||||||||
Minimum | Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of fully closed salons | 1 | |||||||||
Maximum | Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||||||
Number of fully closed salons | 2 |
Basis of Presentation and Sum_6
Basis of Presentation and Summary of Significant Accounting Policies - Cash and Cash Equivalents and Concentrations (Details) - JPY (¥) ¥ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | ||
Cash equivalents | ¥ 0 | ¥ 0 |
Maximum cash deposits insured by the government | ¥ 10,000 |
Basis of Presentation and Sum_7
Basis of Presentation and Summary of Significant Accounting Policies - Accounts Receivable (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2021 | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Allowance for doubtful accounts related to accounts receivable-trade | ¥ 4,426 | ¥ 22,920 | ¥ 5,484 |
Accounts receivable-other | 411,278 | 428,278 | 305,851 |
Long-term accounts receivable-other, net | 116,942 | 106,208 | 115,247 |
Allowance for doubtful accounts on long-term accounts receivable | 131,759 | 141,256 | ¥ 125,939 |
Receivable from commercial facilities and credit card companies | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Accounts receivable-other | 302,227 | 318,474 | |
Receivable from sale of investment | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Accounts receivable-other | 50,000 | ||
Loan receivable due from an unrelated business entity | |||
Accounts, Notes, Loans and Financing Receivable [Line Items] | |||
Monthly repayment of loan receivable due from an unrelated business entity | 720 | 1,200 | |
Long-term accounts receivable-other, net | ¥ 235,945 | ¥ 247,450 |
Basis of Presentation and Sum_8
Basis of Presentation and Summary of Significant Accounting Policies - Leases (Details) | Dec. 31, 2020 |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Lease terms, operating lease | 3 years |
Lease terms, finance lease | 3 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Lease terms, operating lease | 10 years |
Lease terms, finance lease | 10 years |
Basis of Presentation and Sum_9
Basis of Presentation and Summary of Significant Accounting Policies - Property and Equipment, Net (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Useful life | 15 years |
Vehicles | |
Property, Plant and Equipment [Line Items] | |
Useful life | 6 years |
Tools, furniture and fixtures | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 2 years |
Tools, furniture and fixtures | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 10 years |
Basis of Presentation and Su_10
Basis of Presentation and Summary of Significant Accounting Policies - Other Intangible Assets, Net (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Minimum | Capitalized software | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 3 years |
Minimum | Reacquired franchise rights | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 1 year |
Maximum | Capitalized software | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 5 years |
Maximum | Reacquired franchise rights | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 5 years |
Basis of Presentation and Su_11
Basis of Presentation and Summary of Significant Accounting Policies - Impairment of Long-lived Assets, Goodwill and Deferred Offering Costs (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||
Impairment of Long-Lived Assets Held-for-use | ¥ 0 | ¥ 106,501 | ¥ 44,546 |
Impairment charges on right-of-use asset-operating leases | 69,989 | 34,721 | |
Impairment losses for goodwill | 0 | 0 | |
Deferred Offering Costs Noncurrent | 0 | 57,509 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Impairment of Long-Lived Assets Held-for-use | ¥ 36,512 | ¥ 9,825 |
Basis of Presentation and Su_12
Basis of Presentation and Summary of Significant Accounting Policies - Revenue Recognition (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 | ¥ 3,341,617 | ¥ 3,908,264 |
Typical initial term of franchise agreement | 5 years | |||
Franchise fees | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | ¥ 689,148 | ¥ 593,236 | ¥ 1,289,141 | ¥ 1,833,501 |
Health monitoring wearable device service | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | ¥ 0 | |||
Minimum | Franchise fees | ||||
Disaggregation of Revenue [Line Items] | ||||
Expected average contract life | 8 years | |||
Maximum | Franchise fees | ||||
Disaggregation of Revenue [Line Items] | ||||
Expected average contract life | 10 years |
Basis of Presentation and Su_13
Basis of Presentation and Summary of Significant Accounting Policies - Advertising Expenses, Accounting Pronouncements (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Jan. 01, 2020 | |
Advertising costs | ¥ 92,460 | ¥ 77,911 | |||
Operating lease right-of-use assets | ¥ 1,709,722 | 1,578,828 | 1,829,968 | ||
Operating lease liabilities | 1,762,215 | 1,651,212 | |||
Assets: | |||||
Accounts receivable-trade, net | 89,416 | 148,540 | 337,048 | ||
Deferred tax assets, net | 613,311 | 655,591 | 222,505 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Accrued expenses | 814,390 | 889,112 | 447,974 | ||
Contract liability (current) | 92,988 | 172,063 | 201,559 | ||
Advances Received | 438,482 | 461,665 | 483,124 | ||
Long-term contract liability - net of current portion | 297,523 | 333,978 | 465,077 | ||
SHAREHOLDERS' EQUITY: | |||||
Accumulated deficit | (2,225,072) | (1,703,302) | (705,309) | ||
Revenues | 2,127,479 | ¥ 1,356,277 | 3,341,617 | 3,908,264 | |
Operating loss | (482,188) | (434,307) | (746,088) | 34,350 | |
Loss before income tax | (626,689) | 32,737 | |||
Income tax (benefit) expense | 55,219 | 19,030 | (87,519) | 15,961 | |
Net loss | (521,770) | (442,971) | (539,170) | 17,335 | |
Cash flows from operating activities: | |||||
Net income | (521,770) | (442,971) | (539,170) | 17,335 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Deferred income tax (benefit) expense | 42,280 | 11,046 | (107,264) | 5,739 | |
Changes in operating assets and liabilities: | |||||
Accounts receivable-trade, net | 72,839 | 192,093 | 189,143 | (66,877) | |
Accrued expenses | 106,131 | (62,280) | 206,706 | 116,856 | |
Contract liability | (115,531) | (160,595) | |||
Advances received | (96,535) | (124,828) | (15,322) | (39,177) | |
Net cash used in operating activities | (348,266) | ¥ (374,861) | (366,420) | 7,870 | |
Cumulative adjustment | |||||
Assets: | |||||
Deferred tax assets, net | (135,345) | 202,496 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Accrued expenses | (600) | 820 | |||
Contract liability (current) | (172,063) | 201,559 | |||
Advances Received | 26 | (6,137) | |||
Long-term contract liability - net of current portion | (333,978) | 465,077 | |||
SHAREHOLDERS' EQUITY: | |||||
Accumulated deficit | 371,270 | (458,823) | |||
Cash flows from operating activities: | |||||
Net income | (87,551) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Deferred income tax (benefit) expense | (67,151) | ||||
Changes in operating assets and liabilities: | |||||
Accrued expenses | 220 | ||||
Contract liability | 160,595 | ||||
Advances received | (6,113) | ||||
Cumulative Adjusted Balance | |||||
Assets: | |||||
Deferred tax assets, net | 520,246 | 425,001 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | |||||
Accrued expenses | 888,512 | 448,794 | |||
Contract liability (current) | 201,559 | ||||
Advances Received | 461,691 | 476,987 | |||
Long-term contract liability - net of current portion | 465,077 | ||||
SHAREHOLDERS' EQUITY: | |||||
Accumulated deficit | (1,332,032) | (1,164,132) | |||
Cash flows from operating activities: | |||||
Net income | (626,721) | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||
Deferred income tax (benefit) expense | (174,415) | ||||
Changes in operating assets and liabilities: | |||||
Accrued expenses | 206,926 | ||||
Advances received | (21,435) | ||||
Net cash used in operating activities | (366,420) | ||||
Difference between Revenue Guidance in Effect before and after Topic 606 | |||||
SHAREHOLDERS' EQUITY: | |||||
Revenues | (154,702) | ||||
Operating loss | (154,702) | ||||
Loss before income tax | (154,702) | ||||
Income tax (benefit) expense | (67,151) | ||||
Net loss | (87,551) | ||||
Calculated under Revenue Guidance in Effect before Topic 606 | |||||
SHAREHOLDERS' EQUITY: | |||||
Revenues | 3,186,915 | ||||
Operating loss | (900,790) | ||||
Loss before income tax | (781,391) | ||||
Income tax (benefit) expense | (154,670) | ||||
Net loss | (626,721) | ||||
Accumulated deficit | |||||
SHAREHOLDERS' EQUITY: | |||||
Net loss | ¥ (521,770) | ¥ (539,170) | ¥ 17,335 | ||
Accumulated deficit | Cumulative adjustment | |||||
SHAREHOLDERS' EQUITY: | |||||
Accumulated deficit | ¥ (458,823) |
Business Combination - Acquisit
Business Combination - Acquisition of relaxation salons (Details) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021JPY (¥)item | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)item | Dec. 31, 2019JPY (¥)item | |
Business Acquisition [Line Items] | ||||
Cash consideration | ¥ 86,916 | ¥ 23,813 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||
Cash and cash equivalents | ¥ 354,950 | 1,439,733 | 513,621 | |
Right-of-use asset - operating lease, net | 51,005 | 27,567 | ||
Goodwill | 72,438 | 22,156 | ||
Intangible assets | 12,690 | 6,519 | ||
Total assets acquired | 136,133 | 56,242 | ||
Asset retirement obligations | (49,217) | (25,942) | ||
Total liabilities assumed | (49,217) | (25,942) | ||
Net assets assumed | 86,916 | 30,300 | ||
Fair value of the consideration transferred | ¥ 86,916 | 23,813 | ||
Gain from bargain purchase | ¥ 1,014 | ¥ 1,624 | ¥ 6,487 | |
Relaxation Salons | ||||
Business Acquisition [Line Items] | ||||
Number of salons acquired | item | 18 | 16 | 17 | |
Cash consideration | ¥ 167,970 | ¥ 86,916 | ¥ 23,813 | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||
Asset retirement obligations | (35,883) | |||
Fair value of the consideration transferred | 167,970 | 86,916 | 23,813 | |
Gain from bargain purchase | ¥ 1,014 | ¥ 0 | ¥ 6,487 |
Business Combination - Acquis_2
Business Combination - Acquisition of Running Station Business (Run Pit) (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Business Combination | ||||
Cash consideration | ¥ 86,916 | ¥ 23,813 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | ||||
Goodwill | 72,438 | 22,156 | ||
Intangible assets | 12,690 | 6,519 | ||
Right-of-use asset - operating lease, net | 51,005 | 27,567 | ||
Total assets acquired | 136,133 | 56,242 | ||
Asset retirement obligations | (49,217) | (25,942) | ||
Total liabilities assumed | (49,217) | (25,942) | ||
Net assets assumed | 86,916 | 30,300 | ||
Fair value of the consideration transferred | ¥ 86,916 | 23,813 | ||
Gain from bargain purchase | ¥ 1,014 | ¥ 1,624 | ¥ 6,487 |
Business Combination - Addition
Business Combination - Additional Information (Details) - JPY (¥) ¥ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Business Acquisition | |||||
Gain from bargain purchases | ¥ 1,014 | ¥ 1,624 | ¥ 6,487 | ||
Amount of intangibles acquired | ¥ 102,875 | 75,262 | |||
Revenues | 2,127,479 | 1,356,277 | 3,341,617 | 3,908,264 | |
Net loss | (521,770) | ¥ (442,971) | (539,170) | 17,335 | |
Minimum | |||||
Business Acquisition | |||||
Royalty rate of fair value measurements for unobservable inputs (as a percent) | 1.20% | ||||
Discount rate of fair value measurements for unobservable inputs (as a percent) | 11.30% | ||||
Maximum | |||||
Business Acquisition | |||||
Royalty rate of fair value measurements for unobservable inputs (as a percent) | 2.50% | ||||
Discount rate of fair value measurements for unobservable inputs (as a percent) | 14.00% | ||||
Reacquired franchise rights | |||||
Business Acquisition | |||||
Amount of intangibles acquired | ¥ 17,973 | 9,802 | |||
Reacquired franchise rights | Minimum | |||||
Business Acquisition | |||||
Useful life | 1 year | ||||
Reacquired franchise rights | Maximum | |||||
Business Acquisition | |||||
Useful life | 5 years | ||||
Relaxation Salons | |||||
Business Acquisition | |||||
Gain from bargain purchases | 1,014 | ¥ 0 | 6,487 | ||
Revenues | 80,215 | 375,148 | 799,788 | ||
Net loss | ¥ (10,354) | (26,595) | 107,145 | ||
Relaxation Salons | Reacquired franchise rights | |||||
Business Acquisition | |||||
Amount of franchise rights reacquired | ¥ 12,690 | ¥ 6,519 | |||
Useful life of reacquired franchise rights | 3 years |
Property and Equipment, Net - P
Property and Equipment, Net - Property and Equipment (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||
Cost | ¥ 319,784 | ¥ 243,065 | |
Accumulated depreciation and amortization | (83,854) | (74,110) | |
Net carrying amounts | ¥ 330,692 | 235,930 | 168,955 |
Depreciation and amortization expense | 41,691 | 29,557 | |
Impairment loss | ¥ 0 | 106,501 | 44,546 |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Cost | 272,756 | 215,524 | |
Impairment loss | 36,512 | 9,825 | |
Vehicles | |||
Property, Plant and Equipment [Line Items] | |||
Cost | 9,548 | 7,786 | |
Tools, furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Cost | ¥ 37,480 | ¥ 19,755 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net - Components of intangible assets (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2021 | Dec. 31, 2018 | |
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets subject to amortization | ¥ 102,875 | ¥ 75,262 | ||
Accumulated amortization | (44,330) | (36,694) | ||
Net carrying amount, Intangible assets subject to amortization | 58,545 | 38,568 | ||
Goodwill | 150,720 | 78,282 | ¥ 535,246 | ¥ 63,955 |
Indefinite-lived Intangible Assets and Goodwill | 189,790 | 117,352 | ||
Total intangible assets | 248,335 | 155,920 | ||
Amortization expense | 20,599 | 16,617 | ||
Trademark | ||||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets not subject to amortization | 38,922 | 38,922 | ||
Telephone rights | ||||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets not subject to amortization | 148 | 148 | ||
Goodwill | 150,720 | 78,282 | ||
Capitalized software | ||||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets subject to amortization | 84,152 | 54,710 | ||
Reacquired franchise rights | ||||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets subject to amortization | 17,973 | 9,802 | ||
Other | ||||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | ||||
Intangible assets subject to amortization | ¥ 750 | ¥ 10,750 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Estimated aggregate amortization expense (Details) - JPY (¥) ¥ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2021 | ¥ 24,019 | |
2022 | 17,857 | |
2023 | 9,540 | |
2024 | 6,034 | |
2025 | 957 | |
Thereafter | 138 | |
Net carrying amount, Intangible assets subject to amortization | ¥ 58,545 | ¥ 38,568 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets, Net - Changes in carrying amount of goodwill (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2021 | |
Goodwill [Roll Forward] | ||||
Goodwill | ¥ 150,720 | ¥ 78,282 | ¥ 63,955 | ¥ 535,246 |
Acquisitions of relaxation salons | 72,438 | 22,156 | ||
Sales of directly-operated salons to franchisees, and disposal of relaxation salons | ¥ (7,829) | |||
Goodwill impairment losses | ¥ 0 | ¥ 0 |
Investments - Equity Method Inv
Investments - Equity Method Investments (Details) - JPY (¥) ¥ in Thousands | 1 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2020 | |
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 0.00% | 0.00% |
Re.Ra.Ku (Hong Kong) Health Science | ||
Schedule of Equity Method Investments [Line Items] | ||
Cost of investment | ¥ 50,000 | |
Gain from sale of investment | ¥ 559 |
Investments - Investment at Cos
Investments - Investment at Cost (Details) - JPY (¥) ¥ in Thousands | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Equity Securities without Readily Determinable Fair Value [Line Items] | |||
Carrying amount | ¥ 500 | ¥ 14,044 | |
Impairment loss on investments | 10,544 | ||
Proceeds from Sale of Long-term Investments | ¥ 53,000 | ||
Matrix Industries, Inc. | |||
Equity Securities without Readily Determinable Fair Value [Line Items] | |||
Carrying amount | ¥ 5,544 | ||
Ownership percentage | 0.09% | 14.30% | |
Impairment loss on investments | ¥ 5,544 | ||
Kabushiki Kaisha ReRaKu WEST | |||
Equity Securities without Readily Determinable Fair Value [Line Items] | |||
Carrying amount | ¥ 3,000 | ||
Ownership percentage | 16.60% | ||
Proceeds from Sale of Long-term Investments | ¥ 3,000 | ||
Other | |||
Equity Securities without Readily Determinable Fair Value [Line Items] | |||
Carrying amount | 500 | ¥ 5,500 | |
Impairment loss on investments | ¥ 5,000 |
Short-term Borrowings and Lon_3
Short-term Borrowings and Long-term Borrowings (Details) - Japanese financial institution short-term borrowings - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Short-term Debt [Line Items] | ||
Principal balance | ¥ 0 | ¥ 180,000 |
Interest rate | 2.35% | |
Repayments of Short-term Debt | ¥ 180,000 |
Short-term Borrowings and Lon_4
Short-term Borrowings and Long-term Borrowings - Long-term borrowings (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2021JPY (¥) | Jun. 30, 2021USD ($) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Debt Instrument [Line Items] | ||||
Time deposits pledged as collateral | ¥ 72,525 | ¥ 63,524 | ||
Long-term debt | 755,159 | 910,661 | ¥ 342,101 | |
Current portion of long-term borrowings | (181,884) | (242,281) | (191,570) | |
Total long-term borrowings | ¥ 573,275 | $ 573,275 | ¥ 668,380 | ¥ 150,531 |
Debt, Weighted Average Interest Rate | 1.05% | 1.05% | 1.33% | 1.74% |
Time Deposits | ||||
Debt Instrument [Line Items] | ||||
Time deposits pledged as collateral | ¥ 20,024 | |||
Other Noncurrent Assets [Member] | ||||
Debt Instrument [Line Items] | ||||
Time deposits pledged as collateral | ¥ 43,500 | |||
Japanese financial institutions unsecured bank loans | Minimum | ||||
Debt Instrument [Line Items] | ||||
Fixed interest rates | 0.21% | 0.21% | 0.21% | 0.61% |
Japanese financial institutions unsecured bank loans | Maximum | ||||
Debt Instrument [Line Items] | ||||
Fixed interest rates | 3.98% | 3.98% | 3.98% | 3.30% |
Short-term Borrowings and Lon_5
Short-term Borrowings and Long-term Borrowings - Maturities of long-term borrowings (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
2021 | ¥ 86,779 | ¥ 242,281 | |
2022 | 123,460 | 123,460 | |
2023 | 62,628 | 62,628 | |
2024 | 60,252 | 60,252 | |
2025 | 59,370 | 59,550 | |
2026 and thereafter | 362,670 | 362,490 | |
Total | ¥ 755,159 | ¥ 910,661 | ¥ 342,101 |
Short-term Borrowings and Lon_6
Short-term Borrowings and Long-term Borrowings - Borrowings (Details) - Kouji Eguchi ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2021JPY (¥) | Dec. 31, 2020loan | Dec. 31, 2019 | |
Debt Instrument [Line Items] | |||
Number of loan agreements containing financial covenants | 0 | 0 | |
Common | |||
Debt Instrument [Line Items] | |||
Ownership percentage | 39.09% | 48.04% | |
Class A Common | |||
Debt Instrument [Line Items] | |||
Ownership percentage | 39.09% | 48.04% |
Asset Retirement Obligation (De
Asset Retirement Obligation (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Asset Retirement Obligation | ||
Beginning balance | ¥ 127,411 | ¥ 119,519 |
Liabilities incurred | 80,056 | 63,623 |
Liabilities settled | (16,870) | (55,954) |
Accretion expense | 595 | 223 |
Ending balance | ¥ 191,192 | ¥ 127,411 |
Leases - Operating Leases (Deta
Leases - Operating Leases (Details) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021JPY (¥)item | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)item | Dec. 31, 2019JPY (¥)item | |
Leases | ||||
Number of leased salons | 230 | 220 | 213 | 220 |
Number of leased salons subleased | 120 | 141 | 130 | 165 |
Operating lease costs: | ||||
Fixed lease cost | ¥ 386,992,000 | ¥ 372,769,000 | ¥ 748,230,000 | ¥ 851,555,000 |
Variable lease cost | 13,789,000 | 7,476,000 | 24,484,000 | 30,901,000 |
Short-term cost | 18,170,000 | 4,458,000 | 11,669,000 | 10,979,000 |
Total | 418,951,000 | 384,703,000 | 784,383,000 | 893,435,000 |
Sublease income, fixed lease | 217,083,000 | 260,194,000 | 478,225,000 | 580,074,000 |
Sublease income, variable lease | ¥ 7,961,000 | ¥ 5,674,000 | ¥ 14,146,000 | ¥ 27,606,000 |
Leases - Supplementary informat
Leases - Supplementary information on cash flow (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows | ¥ 391,650 | ¥ 99,758 | ¥ 797,623 | ¥ 375,270 |
Right-of-use assets obtained in exchange for lease liabilities | ¥ 490,342 | ¥ 189,240 | ¥ 604,703 | ¥ 749,008 |
Weighted average remaining lease term (in years) | 2 years 10 months 24 days | 3 years 1 month 6 days | 2 years 9 months 18 days | 3 years 3 months 18 days |
Weighted average discount rate | 1.45% | 1.45% | 1.45% | 1.45% |
Year ending December 31: | ||||
2021 | ¥ 430,043 | ¥ 667,823 | ||
2022 | 620,210 | 493,800 | ||
2023 | 363,730 | 246,751 | ||
2024 | 183,145 | 122,654 | ||
2025 | 110,723 | 70,448 | ||
2026 and thereafter | 132,480 | 98,245 | ||
Total | 1,840,331 | 1,699,721 | ||
Less: Interest component | (78,116) | (48,509) | ||
Present value of minimum lease payments | 1,762,215 | 1,651,212 | ||
Short-term lease liability | 702,685 | 658,320 | ¥ 704,024 | |
Long-term lease liability - net of current portion | ¥ 1,059,530 | ¥ 992,892 | ¥ 1,136,799 |
Leases - Subleases (Details)
Leases - Subleases (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Leases | ||||
Fixed sublease income | ¥ 217,083 | ¥ 260,194 | ¥ 478,225 | ¥ 580,074 |
Variable sublease income | 7,961 | 5,674 | 14,146 | 27,606 |
Total | 225,044 | ¥ 265,868 | 492,371 | ¥ 607,680 |
Year ending December 31: | ||||
2021 | 178,798 | 376,993 | ||
2022 | 313,207 | 276,765 | ||
2023 | 198,400 | 152,356 | ||
2024 | 82,997 | 66,450 | ||
2025 | 43,103 | 33,728 | ||
2026 and thereafter | 28,198 | 20,488 | ||
Total | ¥ 844,703 | ¥ 926,780 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) ¥ in Millions | 12 Months Ended |
Dec. 31, 2020JPY (¥) | |
Minimum required net assets after distribution of dividends | ¥ 3 |
Required appropriation to legal reserve, percentage | 10.00% |
Percentage of common stock, percentage which precludes appropriation | 25.00% |
Common stock | |
Portion of proceeds credited to capital stock, minimum under Companies Act | 50.00% |
Stock-based Compensation (Detai
Stock-based Compensation (Details) | Oct. 01, 2021 | Oct. 02, 2020JPY (¥)¥ / sharesshares | Oct. 01, 2020¥ / shares | Dec. 21, 2016¥ / sharesshares | Dec. 21, 2015¥ / sharesshares | Dec. 31, 2020JPY (¥)¥ / sharesshares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 450,000 | |||||
Exercise price, per share | ¥ 752 | |||||
Expected volatility minimum | 58.21% | |||||
Expected volatility maximum | 65.93% | |||||
Risk-free interest rate minimum | 0.17% | |||||
Risk-free interest rate maximum | 0.19% | |||||
Minimum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected term of option (in years) | 2 years | |||||
Maximum | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Expected term of option (in years) | 3 years | |||||
Other Current Liabilities | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Liability on stock options granted | ¥ | ¥ 6,750,000 | |||||
Stock option | Director and corporate auditor | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 300,000 | 1,539,500 | ||||
Exercise term | 3 years | 8 years | ||||
Fair value at grant date, per share | ¥ 22 | ¥ 2.45 | ||||
Exercise price, per share | ¥ 400 | |||||
Stock option | Director and employees | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 174,000 | |||||
Exercise term | 8 years | |||||
Fair value at grant date, per share | ¥ 0.82 | |||||
Exercise price, per share | ¥ 2,000 | |||||
Stock option | Corporate auditor | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 230,000 | |||||
Exercise term | 8 years | |||||
Fair value at grant date, per share | ¥ 0.67 | |||||
Exercise price, per share | ¥ 2,000 | |||||
Stock option | Director | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 150,000 | |||||
Exercise term | 5 years | |||||
Fair value at grant date, per share | ¥ 104.64 | |||||
Paid in for the stock option | ¥ | 1 | |||||
Exercise price, per share | ¥ 2,000 | |||||
Stock option | Employees | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares granted | shares | 285,500 | |||||
Exercise term | 8 years | |||||
Fair value at grant date, per share | 637.02 | ¥ 2.96 | ||||
Exercise price, per share | ¥ 128 | ¥ 400 | ||||
Annual consolidated revenue target to achieve to exercise options | ¥ | ¥ 3,908,264,000 |
Stock-based Compensation - Acti
Stock-based Compensation - Activity (Details) - JPY (¥) ¥ / shares in Units, ¥ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |||
Number of shares outstanding, beginning of period | 519,500 | 549,500 | |
Number of shares granted | 450,000 | ||
Number of shares forfeited/expired | (290,000) | (30,000) | |
Number of shares outstanding, end of period | 679,500 | 519,500 | 549,500 |
Number of shares exercisable | 229,500 | 519,500 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | |||
Weighted average exercise price, beginning of period | ¥ 1,595 | ¥ 1,552 | |
Weighted average exercise price, granted | 752 | ||
Weighted average exercise price, forfeited/expired | 1,903 | 800 | |
Weighted average exercise price, outstanding, end of period | 905 | 1,595 | ¥ 1,552 |
Weighted average exercise price exercisable | ¥ 1,205 | ¥ 1,595 | |
Weighted average remaining contractual term, outstanding | 4 years 3 months 18 days | 6 years 8 months 12 days | 7 years 7 months 6 days |
Weighted average remaining contractual term, exercisable | 5 years 4 months 24 days | 6 years 8 months 12 days | |
Aggregated intrinsic value, outstanding, end of period of period | ¥ 531,518 | ||
Aggregated intrinsic value, exercisable | 123,891 | ||
Stock option | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | |||
Compensation cost recognized | ¥ 0 | ¥ 0 |
Segment Information (Details)
Segment Information (Details) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021JPY (¥)segment | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)segment | Dec. 31, 2019JPY (¥) | |
Segment Reporting Information [Line Items] | ||||
Number of operating segments | segment | 2 | 2 | ||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 | ¥ 3,341,617 | ¥ 3,908,264 |
Operating income (loss) | (482,188) | (434,307) | (746,088) | 34,350 |
Depreciation and amortization | 39,631 | 33,105 | 62,290 | 46,174 |
Total assets | 5,200,016 | 5,713,466 | 4,757,465 | |
Relaxation Salon Segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 2,110,561 | 1,344,503 | 3,315,947 | |
Operating income (loss) | 93,852 | (166,200) | ||
Depreciation and amortization | 25,345 | 14,453 | ||
Digital Preventative Healthcare | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 16,918 | 11,774 | 25,670 | |
Operating income (loss) | (65,004) | (21,016) | ||
Depreciation and amortization | 4,201 | 3,771 | ||
Operating segments | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 2,127,479 | 3,341,617 | ||
Operating segments | Relaxation Salon Segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 3,315,947 | 3,864,656 | ||
Operating income (loss) | (140,866) | 279,439 | ||
Depreciation and amortization | 32,261 | 34,025 | ||
Total assets | 3,096,094 | 3,346,739 | ||
Operating segments | Digital Preventative Healthcare | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 25,670 | 43,608 | ||
Operating income (loss) | (66,100) | (43,056) | ||
Depreciation and amortization | 8,007 | 4,764 | ||
Total assets | 34,247 | 29,565 | ||
Corporate and eliminations | ||||
Segment Reporting Information [Line Items] | ||||
Operating income (loss) | (511,036) | (247,091) | (539,122) | (202,033) |
Depreciation and amortization | ¥ 10,085 | ¥ 14,881 | 22,022 | 7,385 |
Total assets | ¥ 2,583,125 | ¥ 1,381,161 |
Income Taxes (Details)
Income Taxes (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Line Items] | ||||
(Loss) income before income taxes | ¥ (626,689) | ¥ 32,737 | ||
Income taxes | ||||
Current | 19,745 | 10,222 | ||
Deferred income tax (benefit) expense | ¥ 42,280 | ¥ 11,046 | (107,264) | 5,739 |
Total | ¥ 55,219 | ¥ 19,030 | ¥ (87,519) | ¥ 15,961 |
Effective Income Tax Rate Reconciliation, Percent [Abstract] | ||||
Statutory tax rate | 30.60% | 30.60% | ||
Change in valuation allowance | (13.20%) | (10.20%) | ||
Nondeductible expenses | (0.30%) | 3.20% | ||
Inhabitant tax-per capita* | (3.20%) | 24.50% | ||
Other-net | 0.10% | 0.70% | ||
Effective income tax rate | (11.80%) | (4.50%) | 14.00% | 48.80% |
Domestic | ||||
Income Tax Disclosure [Line Items] | ||||
(Loss) income before income taxes | ¥ (626,689) | ¥ 32,737 | ||
Income taxes | ||||
Current | 19,745 | 10,222 | ||
Deferred income tax (benefit) expense | (107,264) | 5,739 | ||
Total | ¥ (87,519) | ¥ 15,961 |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets and liabilities (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Deferred tax assets: | ||
Accounts receivable-trade | ¥ 13,485 | ¥ 13,485 |
Provision for bad debt | 41,700 | 50,271 |
Goodwill | 1,135 | |
Other prepaid expenses-currently not deductible | 54,235 | |
Contract liability | 154,950 | |
Asset retirement obligation | 58,543 | 39,013 |
Operating lease liability | 505,601 | 563,660 |
Operating loss carryforwards | 484,040 | 95,490 |
Other | 60,392 | 51,485 |
Gross deferred tax assets | 1,318,711 | 868,774 |
Valuation allowance | (125,376) | (42,395) |
Total deferred tax assets | 1,193,335 | 826,379 |
Deferred tax liabilities: | ||
Property and equipment | (32,433) | (18,141) |
Goodwill | (4,073) | |
Intangible assets | (15,285) | (6,485) |
Right-of-use asset-operating lease | (483,437) | (560,336) |
Deferred offering costs | (17,609) | |
Advances received | (1,311) | (1,303) |
Other | (1,205) | |
Total deferred tax liabilities | (537,744) | (603,874) |
Net deferred tax assets | 655,591 | 222,505 |
Increase (decrease) in valuation allowance | ¥ 82,981 | ¥ 3,355 |
Income Taxes - Operating loss c
Income Taxes - Operating loss carryforwards (Details) ¥ in Thousands | Dec. 31, 2020JPY (¥) |
Income Taxes | |
Operating loss carryforwards expiring between 2020 and 2023 | ¥ 75,596 |
Operating loss carryforwards expiring between 2024 and 2027 | 132,439 |
Operating loss carryforwards expiring 2028 and thereafter | 1,372,760 |
Total | ¥ 1,580,795 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of revenue (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation of Revenue | ||||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 | ¥ 3,341,617 | ¥ 3,908,264 |
Directly-operated salons | ||||
Disaggregation of Revenue | ||||
Revenues | 1,421,413 | 751,267 | 2,026,806 | 2,031,155 |
Franchise fees | ||||
Disaggregation of Revenue | ||||
Revenues | 689,148 | 593,236 | 1,289,141 | 1,833,501 |
Other | ||||
Disaggregation of Revenue | ||||
Revenues | 16,918 | 11,774 | 25,670 | 43,608 |
Relaxation Salon Segment | ||||
Disaggregation of Revenue | ||||
Revenues | 2,110,561 | 1,344,503 | 3,315,947 | |
Relaxation Salon Segment | Directly-operated salons | ||||
Disaggregation of Revenue | ||||
Revenues | 1,421,413 | 2,026,806 | ||
Relaxation Salon Segment | Franchise fees | ||||
Disaggregation of Revenue | ||||
Revenues | 125,513 | 175,445 | ||
Relaxation Salon Segment | Royalty income | ||||
Disaggregation of Revenue | ||||
Revenues | 99,534 | 179,745 | ||
Relaxation Salon Segment | Staffing service revenue | ||||
Disaggregation of Revenue | ||||
Revenues | 126,734 | 254,282 | ||
Relaxation Salon Segment | Sublease revenue | ||||
Disaggregation of Revenue | ||||
Revenues | 225,044 | 492,371 | ||
Relaxation Salon Segment | Other franchise revenues | ||||
Disaggregation of Revenue | ||||
Revenues | 112,323 | 187,298 | ||
Digital Preventative Healthcare | ||||
Disaggregation of Revenue | ||||
Revenues | 16,918 | ¥ 11,774 | 25,670 | |
Digital Preventative Healthcare | Other | ||||
Disaggregation of Revenue | ||||
Revenues | 16,918 | 25,670 | ||
Operating segments | ||||
Disaggregation of Revenue | ||||
Revenues | 2,127,479 | 3,341,617 | ||
Operating segments | Directly-operated salons | ||||
Disaggregation of Revenue | ||||
Revenues | 1,421,413 | 2,026,806 | ||
Operating segments | Franchise fees | ||||
Disaggregation of Revenue | ||||
Revenues | 125,513 | 175,445 | ||
Operating segments | Royalty income | ||||
Disaggregation of Revenue | ||||
Revenues | 99,534 | 179,745 | ||
Operating segments | Staffing service revenue | ||||
Disaggregation of Revenue | ||||
Revenues | 126,734 | 254,282 | ||
Operating segments | Sublease revenue | ||||
Disaggregation of Revenue | ||||
Revenues | 225,044 | 492,371 | ||
Operating segments | Other franchise revenues | ||||
Disaggregation of Revenue | ||||
Revenues | 112,323 | 187,298 | ||
Operating segments | Other | ||||
Disaggregation of Revenue | ||||
Revenues | ¥ 16,918 | 25,670 | ||
Operating segments | Relaxation Salon Segment | ||||
Disaggregation of Revenue | ||||
Revenues | 3,315,947 | 3,864,656 | ||
Operating segments | Digital Preventative Healthcare | ||||
Disaggregation of Revenue | ||||
Revenues | ¥ 25,670 | ¥ 43,608 |
Revenue Recognition - Contract
Revenue Recognition - Contract Balance (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Revenue Recognition | |||
Accounts receivable-trade, net | ¥ 89,416 | ¥ 148,540 | ¥ 337,048 |
Contract liabilities: | |||
Contract liability (current) | 92,988 | 172,063 | 201,559 |
Long-term contract liability - net of current portion | 297,523 | 333,978 | 465,077 |
Contract with Customer, Liability, Total | ¥ 390,511 | ¥ 506,041 | ¥ 666,636 |
Revenue Recognition - Changes i
Revenue Recognition - Changes in Company's Contract Liabilities (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Balance at December 31, 2020 | ¥ 506,041 | ¥ 666,636 |
Revenues recognized during 2020 which were included in the contract liabilities balance at December 31, 2019 | (131,269) | (203,970) |
Remaining amounts at December 31, 2020 which were newly recognized as contract liabilities during 2020 | 15,739 | 43,375 |
Balance at June 30, 2021 | ¥ 390,511 | ¥ 506,041 |
Revenue Recognition - Estimated
Revenue Recognition - Estimated revenue (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
2021 | ¥ 172,063 | |
2022 | ¥ 92,083 | 90,313 |
2023 | 90,272 | 88,310 |
2024 | 81,855 | 79,168 |
2025 | 53,551 | 53,558 |
2026 and thereafter | 27,443 | 34,730 |
Total remaining revenue performance obligation | ¥ 390,511 | ¥ 518,142 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 6 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-12-31 | ||
Revenue Recognition | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Other Comprehensive Income (L_3
Other Comprehensive Income (Loss) (Details) ¥ in Thousands | 12 Months Ended |
Dec. 31, 2019JPY (¥) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Reclassification adjustments for gains and losses realized in net income, before tax | ¥ 400,000 |
Reclassification adjustments for gains and losses realized in net income, tax | (122,000) |
Reclassification adjustments for gains and losses realized in net income, after tax | 278,000 |
Net change during the year, before tax | 400,000 |
Net change during the year, tax | (122,000) |
Net change during the year, after tax | 278,000 |
Foreign currency translation adjustments | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Reclassification adjustments for gains and losses realized in net income, after tax | 278 |
Net change during the year, after tax | ¥ 278 |
Other Comprehensive Income (L_4
Other Comprehensive Income (Loss) - Change in AOCI (Details) ¥ in Thousands | 12 Months Ended |
Dec. 31, 2019JPY (¥) | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Balance, beginning of period | ¥ (117,555) |
Amounts reclassified from accumulated other comprehensive income (loss) | 278,000 |
Net change during the year | 278,000 |
Balance, end of period | 600,058 |
Foreign currency translation adjustments | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |
Balance, beginning of period | (278) |
Amounts reclassified from accumulated other comprehensive income (loss) | 278 |
Net change during the year | ¥ 278 |
Other Comprehensive Income (L_5
Other Comprehensive Income (Loss) - Reclassification out of AOCI (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Other-net | ¥ 19,733 | ¥ 1,912 | ¥ 19,718 | ¥ 4,153 |
Income tax (benefit) expense | 55,219 | 19,030 | (87,519) | 15,961 |
Net (loss) income | ¥ (521,770) | ¥ (442,971) | ¥ (539,170) | 17,335 |
Total amount reclassified | 278,000 | |||
Amount reclassified | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Total amount reclassified | 278 | |||
Foreign currency translation adjustments | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||||
Other-net | 400 | |||
Income tax (benefit) expense | (122) | |||
Net (loss) income | 278 | |||
Total amount reclassified | ¥ 278 |
(Loss) Earnings Per Share (Deta
(Loss) Earnings Per Share (Details) - JPY (¥) ¥ / shares in Units, ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Earnings Per Share | ||||
Weighted average common shares outstanding | 4,872,224 | 4,022,501 | 4,024,692 | 3,747,296 |
Effect of dilutive instruments: | ||||
Weighted average common shares for diluted computation | 4,872,224 | 4,022,501 | 4,024,692 | 4,272,302 |
Basic | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.63 |
Diluted | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.06 |
Common | ||||
Earnings Per Share | ||||
Net (loss) income attributable to shareholders of the Company | ¥ (539,170) | ¥ 17,335 | ||
Weighted average common shares outstanding | 4,024,692 | 3,747,295 | ||
Effect of dilutive instruments: | ||||
Stock options | 799,500 | 525,007 | ||
Weighted average common shares for diluted computation | 4,024,692 | 4,272,302 | ||
Basic | ¥ (133.97) | ¥ 4.63 | ||
Diluted | ¥ (133.97) | ¥ 4.06 | ||
Class A Common | ||||
Earnings Per Share | ||||
Weighted average common shares outstanding | 1 | 1 | 1 | 1 |
Effect of dilutive instruments: | ||||
Weighted average common shares for diluted computation | 1 | 1 | 1 | 1 |
Basic | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.63 |
Diluted | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.06 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2021JPY (¥) | Jun. 30, 2021USD ($) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Fair Value of Financial Instruments | ||||
Long-term borrowings - net of current portion, carrying amount | ¥ (573,275) | $ (573,275) | ¥ (668,380) | ¥ (150,531) |
Long-term borrowings - net of current portion, estimated fair value | $ (554,257) | ¥ (644,499) | ¥ (145,600) |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - JPY (¥) ¥ in Thousands | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2021 | Jun. 30, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Assets measured at fair value | ¥ 5,713,466 | ¥ 4,757,465 | ¥ 5,200,016 | |
Liabilities measured at fair value | 5,222,209 | ¥ 4,993,947 | ||
Impairment loss, right-of-use asset - operating lease | 69,989 | 34,721 | ||
Impairment loss, assets measured on nonrecurring basis | ¥ 106,501 | 44,546 | ||
Minimum | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Percentage of weighted average cost of capital | 11.30% | 11.30% | ||
Maximum | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Percentage of weighted average cost of capital | 14.00% | 14.00% | ||
Nonrecurring | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Impairment loss, leasehold improvements | ¥ 36,512 | 9,825 | ||
Impairment loss, right-of-use asset - operating lease | 69,989 | 34,721 | ||
Impairment loss, assets measured on nonrecurring basis | 106,501 | 44,546 | ||
Nonrecurring | Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Leasehold improvements | 213,314 | 161,330 | ||
Right-of-use asset - operating lease | 1,578,828 | 1,829,968 | ||
Assets measured at fair value | 1,792,142 | |||
Impairment loss, assets measured on nonrecurring basis | 1,991,298 | |||
Recurring | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Assets measured at fair value | 0 | 0 | ¥ 0 | ¥ 0 |
Liabilities measured at fair value | ¥ 0 | ¥ 0 | ¥ 0 | ¥ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Kouji Eguchi | ||||
Related Party Transaction [Line Items] | ||||
Balance due from related party | ¥ 8,266 | |||
Interest income from related party | ¥ 189 | |||
Kouji Eguchi | Common | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 39.09% | 48.04% | ||
Kouji Eguchi | Class A Common | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 39.09% | 48.04% | ||
Kabushiki Kaisha No Track | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | ¥ 55 | ¥ 110 | ¥ 110 | |
Consulting fees paid to related party | 300 | ¥ 300 | ¥ 600 | ¥ 600 |
Tomoya Ogawa | Common | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 0.59% | 0.71% | ||
Kabushiki Kaisha LTW | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | ¥ 110 | ¥ 110 | ||
Consulting fees paid to related party | ¥ 1,200 | 600 | ¥ 1,200 | ¥ 1,200 |
Corporate auditor | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 0.36% | 0.36% | 0.44% | |
Aoyama Consulting Group Co., Ltd. | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | ¥ 110 | ¥ 110 | ||
Consulting fees paid to related party | ¥ 600 | ¥ 600 | ¥ 1,200 | ¥ 1,200 |
Corporate Auditor (Details)
Corporate Auditor (Details) - item | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Corporate Auditor | ||
Required percentage of votes needed to elect corporate auditor | 33.00% | 33.00% |
Percentage of corporate auditors who must satisfy requirements of outside corporate auditor | 50.00% | |
Number of corporate auditors that must be full-time | 1 |
Subsequent Events (Details)
Subsequent Events (Details) ¥ / shares in Units, ¥ in Thousands | Feb. 01, 2021JPY (¥)shares | Dec. 31, 2020JPY (¥)item¥ / sharesshares | Jun. 30, 2021JPY (¥)item¥ / sharesshares | Dec. 31, 2021JPY (¥)item | Dec. 31, 2020JPY (¥)item¥ / sharesshares | Dec. 31, 2019JPY (¥)item¥ / sharesshares | Apr. 28, 2021item | Mar. 29, 2021shares | Feb. 01, 2021$ / shares |
Subsequent event | |||||||||
Cash consideration | ¥ | ¥ 86,916 | ¥ 23,813 | |||||||
Aggregate net proceeds | ¥ | ¥ 765,867 | ||||||||
Ownership percentage | 0.00% | 0.00% | 0.00% | ||||||
Number of salons | 290 | 313 | 290 | 283 | |||||
Common | |||||||||
Subsequent event | |||||||||
Common stock, no par value | ¥ / shares | ¥ 0 | ¥ 0 | ¥ 0 | ||||||
Common stock, shares authorized | shares | 9,999,999 | 9,999,999 | 9,999,999 | ||||||
Class A Common | |||||||||
Subsequent event | |||||||||
Common stock, no par value | ¥ / shares | ¥ 0 | ¥ 0 | ¥ 0 | ¥ 0 | |||||
Common stock, shares authorized | shares | 1 | 1 | 1 | 1 | |||||
Subsequent Event | |||||||||
Subsequent event | |||||||||
Common stock, shares authorized | shares | 19,900,000 | ||||||||
Subsequent Event | Common | |||||||||
Subsequent event | |||||||||
Common stock, shares authorized | shares | 19,899,999 | ||||||||
Subsequent Event | Class A Common | |||||||||
Subsequent event | |||||||||
Common stock, shares authorized | shares | 1 | ||||||||
Subsequent Event | Over-Allotment Option | American Depository Shares | |||||||||
Subsequent event | |||||||||
Issuance of common stock upon initial public offering, net of offering costs (in shares) | shares | 60,000 | ||||||||
Common stock, no par value | $ / shares | $ 0 | ||||||||
Share price | $ / shares | $ 15 | ||||||||
Aggregate net proceeds | ¥ | ¥ 87,642 | ||||||||
Relaxation Salons | |||||||||
Subsequent event | |||||||||
Number of salons acquired | 18 | 16 | 17 | ||||||
Cash consideration | ¥ | ¥ 167,970 | ¥ 86,916 | ¥ 23,813 | ||||||
Relaxation Salons | Subsequent Event | |||||||||
Subsequent event | |||||||||
Number of salons acquired | 18 | ||||||||
Cash consideration | ¥ | ¥ 171,601 | ||||||||
SAWAN CO. LTD. ("SAWAN") | Subsequent Event | |||||||||
Subsequent event | |||||||||
Ownership percentage | 100.00% | ||||||||
Directly-operated salons | |||||||||
Subsequent event | |||||||||
Number of salons | 150 | 188 | 150 | 107 | |||||
Franchise fees | |||||||||
Subsequent event | |||||||||
Number of salons | 140 | 125 | 140 | 176 | |||||
Franchise fees | Relaxation Salons | Subsequent Event | |||||||||
Subsequent event | |||||||||
Number of salons | 5 | ||||||||
Franchise fees | SAWAN CO. LTD. ("SAWAN") | Subsequent Event | |||||||||
Subsequent event | |||||||||
Number of salons | 10 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) ¥ in Thousands, $ in Thousands | Jun. 30, 2021JPY (¥) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Current assets: | |||
Cash and cash equivalents | ¥ 354,950 | ¥ 1,439,733 | ¥ 513,621 |
Time deposits | 32,524 | 38,520 | |
Accounts receivable-trade, net of allowances of 5,484 and 4,426, respectively | 89,416 | 148,540 | 337,048 |
Accounts receivable-other | 305,851 | 411,278 | 428,278 |
Due from shareholder | 8,266 | ||
Inventories | 10,904 | 7,956 | 5,511 |
Prepaid expenses and other current assets | 111,057 | 79,717 | |
Total current assets | 872,178 | 2,087,224 | 1,378,729 |
Property and equipment, net | 330,692 | 235,930 | 168,955 |
Goodwill | 535,246 | 150,720 | 78,282 |
Other intangible assets, net | 91,036 | 97,615 | 77,638 |
Investments | 53,020 | 500 | 14,044 |
Long-term accounts receivable-other, net of allowances of 125,939 and 131,759, respectively | 115,247 | 116,942 | 106,208 |
Right-of-use asset - operating lease, net | 1,709,722 | 1,578,828 | 1,829,968 |
Lease and guarantee deposits | 784,796 | 710,636 | 769,104 |
Deferred tax assets, net | 613,311 | 655,591 | 222,505 |
Deferred offering costs | 0 | 57,509 | |
Other assets | 94,768 | 79,480 | 54,523 |
Total assets | 5,200,016 | 5,713,466 | 4,757,465 |
Current liabilities: | |||
Accounts payable | 62,244 | 67,016 | 122,590 |
Accrued expenses | 814,390 | 889,112 | 447,974 |
Current portion of long-term borrowings | 181,884 | 242,281 | 371,570 |
Accrued income taxes | 13,211 | 43,198 | 17,834 |
Contract liability (current) | 92,988 | 172,063 | 201,559 |
Advances received | 438,482 | 461,665 | 483,124 |
Short-term lease liability | 702,685 | 658,320 | 704,024 |
Other current liabilities | 141,550 | 118,933 | 115,573 |
Total current liabilities | 2,447,434 | 2,652,588 | 2,262,689 |
Long-term borrowings - net of current portion | 573,275 | 668,380 | 150,531 |
Deposit received | 340,525 | 375,463 | 474,388 |
Long-term contract liability - net of current portion | 297,523 | 333,978 | 465,077 |
Long-term lease liability - net of current portion | 1,059,530 | 992,892 | 1,136,799 |
Asset retirement obligation | 256,967 | 191,192 | 127,411 |
Other liabilities | 18,693 | 7,716 | 5,589 |
Total liabilities | 4,993,947 | 5,222,209 | |
COMMITMENTS AND CONTINGENCIES (NOTE 12) | |||
SHAREHOLDERS' EQUITY: | |||
Treasury stock, at cost- 92,500 common shares at June 30, 2021 and December 31, 2020 | (3,000) | (3,000) | (3,000) |
Additional paid-in capital | 1,210,907 | 1,018,146 | 713,267 |
Accumulated deficit | (2,225,072) | (1,703,302) | (705,309) |
Total shareholders' equity | 206,069 | 491,257 | 600,058 |
Total liabilities and shareholders' equity | 5,200,016 | 5,713,466 | 4,757,465 |
Common stock | |||
SHAREHOLDERS' EQUITY: | |||
Common stock | 1,223,134 | 1,179,313 | |
Class A Common | |||
SHAREHOLDERS' EQUITY: | |||
Common stock | ¥ 100 | ¥ 100 | ¥ 100 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Allowance for doubtful accounts related to accounts receivable-trade | ¥ 5,484 | ¥ 4,426 | ¥ 22,920 |
Allowance for doubtful accounts on long-term accounts receivable | ¥ 125,939 | ¥ 131,759 | ¥ 141,256 |
Treasury stock shares | 92,500 | 92,500 | 92,500 |
Common stock | |||
Common stock, no par value | ¥ 0 | ¥ 0 | |
Common stock, shares authorized | 19,899,999 | 9,999,999 | |
Common stock, shares issued | 4,975,000 | 4,915,000 | |
Common stock, shares outstanding | 4,882,500 | 4,822,500 | |
Class A Common | |||
Common stock, no par value | ¥ 0 | ¥ 0 | ¥ 0 |
Common stock, shares authorized | 1 | 1 | 1 |
Common stock, shares issued | 1 | 1 | 1 |
Common stock, shares outstanding | 1 | 1 | 1 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED) - JPY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Revenues: | ||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 |
Cost of revenues and operating expenses: | ||
Selling, general and administrative expenses | 840,760 | 521,364 |
Impairment loss on long-lived assets | 0 | |
Total cost of revenues and operating expenses | 2,609,667 | 1,790,584 |
Operating loss | (482,188) | (434,307) |
Other income: | ||
Dividend income | 2 | 2 |
Interest income | 506 | 674 |
Interest expense | (6,683) | (6,076) |
Gain from bargain purchases | 1,014 | 1,624 |
Government subsidies | 1,065 | 12,230 |
Other, net | 19,733 | 1,912 |
Total other income | 15,637 | 10,366 |
Loss before income tax expense | (466,551) | (423,941) |
Income tax expense | 55,219 | 19,030 |
Net loss | ¥ (521,770) | ¥ (442,971) |
Net loss per share | ||
Basic | ¥ (107.09) | ¥ (110.12) |
Diluted | ¥ (107.09) | ¥ (110.12) |
Weighted average shares outstanding | ||
Basic | 4,872,224 | 4,022,501 |
Diluted | 4,872,224 | 4,022,501 |
Directly-operated salons | ||
Revenues: | ||
Revenues | ¥ 1,421,413 | ¥ 751,267 |
Cost of revenues and operating expenses: | ||
Cost of revenue | 1,415,685 | 866,297 |
Franchise fees | ||
Revenues: | ||
Revenues | 689,148 | 593,236 |
Cost of revenues and operating expenses: | ||
Cost of revenue | 335,458 | 394,906 |
Other | ||
Revenues: | ||
Revenues | 16,918 | 11,774 |
Cost of revenues and operating expenses: | ||
Cost of revenue | ¥ 17,764 | ¥ 8,017 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - JPY (¥) ¥ in Thousands | Common stockClass A Common | Common stock | Treasury stock | Additional paid-in capital | Accumulated deficitCumulative adjustment | Accumulated deficit | Cumulative adjustment | Total |
Balance, beginning of period at Dec. 31, 2018 | ¥ 100 | ¥ 245,000 | ¥ (3,000) | ¥ 363,267 | ¥ (722,644) | ¥ (117,555) | ||
Balance, beginning of period (in shares) at Dec. 31, 2018 | 1 | 3,765,000 | 92,500 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs | ¥ 350,000 | 350,000 | 700,000 | |||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 350,000 | |||||||
Net loss | 17,335 | 17,335 | ||||||
Foreign currency translation adjustments | 278 | |||||||
Balance, end of period at Dec. 31, 2019 | ¥ 100 | ¥ 595,000 | ¥ (3,000) | 713,267 | (705,309) | 600,058 | ||
Balance, end of period (in shares) at Dec. 31, 2019 | 1 | 4,115,000 | 92,500 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs | ¥ 584,313 | 304,879 | 889,192 | |||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 800,000 | |||||||
Net loss | (539,170) | (539,170) | ||||||
Balance, end of period at Dec. 31, 2020 | ¥ 100 | ¥ 1,179,313 | ¥ (3,000) | 1,018,146 | ¥ (458,823) | (1,703,302) | ¥ (458,823) | 491,257 |
Balance, end of period (in shares) at Dec. 31, 2020 | 1 | 4,915,000 | 92,500 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock for exercise of over-allotment, net of issuance costs | ¥ 43,821 | 43,821 | 87,642 | |||||
Issuance of common stock for exercise of over-allotment, net of issuance costs (in shares) | 60,000 | |||||||
Net loss | (521,770) | (521,770) | ||||||
Stock-based compensation | 148,940 | 148,940 | ||||||
Balance, end of period at Jun. 30, 2021 | ¥ 100 | ¥ 1,223,134 | ¥ (3,000) | ¥ 1,210,907 | ¥ (2,225,072) | ¥ 206,069 | ||
Balance, end of period (in shares) at Jun. 30, 2021 | 1 | 4,975,000 | 92,500 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - JPY (¥) ¥ in Thousands | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Cash flows from operating activities: | ||
Net loss | ¥ (521,770) | ¥ (442,971) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 39,631 | 33,105 |
Losses on sales of directly-operated salons to franchisees | 49 | 65 |
Allowance for doubtful accounts | (4,860) | (5,295) |
Stock-based compensation | 148,940 | |
Losses on disposal of property and equipment, net and other intangible assets, net | 1,967 | 26,913 |
Impairment loss on long-lived assets | 0 | |
Gain from bargain purchases | (1,014) | (1,624) |
Deferred income tax expense | 42,280 | 11,046 |
Other non-cash gains - net | 847 | 121 |
Changes in operating assets and liabilities: | ||
Accounts receivable-trade, net | 72,839 | 192,093 |
Accounts receivable-other | 108,981 | 89,518 |
Inventories | (50) | (369) |
Prepaid expenses and other current assets | (35,395) | (37,422) |
Lease and guarantee deposits | (16,902) | 84,323 |
Accounts payable | (8,303) | (52,394) |
Accrued expenses | 106,131 | (62,280) |
Accrued income taxes | (30,267) | 3,105 |
Contract liability | (115,531) | |
Advances received | (96,535) | (124,828) |
Other current liabilities | 597 | (23,476) |
Deposit received | (34,938) | (66,195) |
Other assets and other liabilities - net | (4,963) | 1,704 |
Net cash used in operating activities | (348,266) | (374,861) |
Cash flows from investing activities: | ||
Purchases of time deposits | (13,201) | (13,500) |
Proceeds from maturities of time deposits | 10,000 | |
Proceeds from sale of affiliated company securities | 50,000 | |
Acquisition of investment securities | (52,520) | |
Acquisition of property and equipment | (41,370) | (70,803) |
Proceeds from sale of property and equipment | 3,227 | |
Cost additions to internal use software | (7,631) | (9,492) |
Acquisition of businesses - net of cash acquired | (300,843) | (42,393) |
Proceeds from due from shareholder | 7,966 | |
Payment received on short-term loans receivable | 225 | 225 |
Payment received on long-term accounts receivable-other, net | 5,090 | 7,515 |
Net cash used in investing activities | (410,250) | (57,255) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock for exercise of over-allotment, net of issuance costs | 87,642 | |
Proceeds from long-term borrowings | 330,000 | |
Repayment of long-term borrowings | (155,502) | (114,657) |
Payment of installment payables related to business acquisitions | (2,520) | (30,199) |
Payment of deferred offering costs | (255,887) | (41,589) |
Net cash (used in) provided provided by financing activities | (326,267) | 143,555 |
Net decrease in cash and cash equivalents | (1,084,783) | (288,561) |
Cash and cash equivalents at beginning of period | 1,439,733 | 513,621 |
Cash and cash equivalents at end of period | 354,950 | 225,060 |
Cash paid during the period for: | ||
Interest | 6,733 | 4,896 |
Income taxes | 43,199 | 4,953 |
Non-cash investing and financing activities: | ||
Right-of-use assets obtained in exchange for lease liabilities | 490,342 | 189,240 |
Purchases of property and equipment included in accrued expenses | 2,670 | 9,548 |
Purchases of intangible assets included in accrued expenses | ¥ 2,325 | |
Payables related to acquisition of businesses included in accrued expenses | 60,902 | |
Deferred offering costs included in accrued expenses | ¥ 26,476 |
Description of Business, Basis
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | ||
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies Description of Business MEDIROM Healthcare Technologies Inc. (the "Company") and its five subsidiaries (collectively, the "Group") are one of the leading holistic health services providers in Japan. The Group is a franchiser and operator of healthcare salons across Japan and is a preferred platform partner for large consumer brands, healthcare service providers, and government entities to affect positive health outcomes. The Group primarily engages in two lines of business: Relaxation Salon Segment (retail) and Digital Preventative Healthcare Segment (healthtech). Refer to description below and Note 6 for segment information. Relaxation Salon Segment (See Note 6 for segment information) The Relaxation Salon Segment is the core of our business, whereby we own, develop, operate, or franchise and support relaxation salons. Our salon locations cover major cities throughout Japan, with strong market presence in the Tokyo metropolitan area. The Segment includes several Relaxation Salon brands including Re.Ra.Ku®, and as of June 30, 2021 and December 31, 2020, it has a total of 313 and 290 salons, respectively. The following table presents total number of salons by operation type: Number of Relaxation Salons As of June 30, As of December 31, 2021 2020 Directly-operated 188 150 Franchised 125 140 Total 313 290 See Note 2, “Business Combination” for the number of salons acquired during the period. The results of operations of directly-operated salons converted to franchised salons in sale transactions with franchisees were not material either individually or in the aggregate to the unaudited condensed consolidated financial statements. Digital Preventative Healthcare Segment (See Note 6 for segment information) The Digital Preventative Healthcare Segment mainly consists of the following operations: government-sponsored Specific Health Guidance program, utilizing our internally-developed on-demand health monitoring smartphone application, LAV®; our MOTHER Tracker® under development for fitness applications. Basis of Presentation The accompanying unaudited condensed consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The results of operations for interim period are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period. The accompanying unaudited condensed consolidated financial information should be read in conjunction with the Company’s annual financial statements and notes included in our Annual Report on Form 20-F for the year ended December 31, 2020, which was filed with the SEC on May 17, 2021. Recent Developments and Liquidity In the six months ended June 30, 2021, the Company experienced negative cash flows from operations and also used a significant amount of cash for acquisitions and investments. In addition, it has had losses from operations since 2020, and has had a working capital deficit and an accumulated deficit since inception. Management evaluates the Company’s ability to continue as a going concern for one year after the date of the unaudited condensed consolidated financial statements are available for issuance. During the first half of 2021, the Japanese government issued multiple Declarations of Emergency for COVID-19, which impacted Tokyo and other prefectures where our salons are located. This affected the operation of our salons located in shopping malls and spa facilities. Under Declarations of Emergency, up to 28 salons had shortened operation and 36 salons temporarily closed their operation. As a result, our sales and profitability have not fully recovered. We are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, all Declarations of Emergency had been lifted nationwide. However, the duration and extent of COVID-19’s impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. The Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses, capital expenditure requirements and debt service obligations through early 2022 and that the Company would require additional capital in the future. Management believes it will be able to raise capital in the short-term through the sales of directly-owned salons. We may also consider obtaining additional financing through the issuance of our common stock or through other equity or debt financings, and we may also look into refinancing our existing debt obligations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. In addition, management is actively pursuing restoring profitability of our relaxation salon business. Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation., Medirom Human Resources Inc., and SAWAN CO. LTD. All intercompany transactions have been eliminated in consolidation. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of June 30, 2021 and December 31, 2020. Recently Adopted Accounting Pronouncements Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12 Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform | 1. Basis of Presentation and Summary of Significant Accounting Policies Description of Business MEDIROM Healthcare Technologies Inc. (the "Company") and its four subsidiaries (collectively, the "Group") are one of the leading holistic health services providers in Japan. The Group is a franchiser and operator of healthcare salons across Japan and is a preferred platform partner for large consumer brands, healthcare service providers, and government entities to affect positive health outcomes. The Group primarily engages in two lines of business: Relaxation Salon Segment (retail) and Digital Preventative Healthcare Segment (healthtech). Refer to description below and Note 11 for segment information. Our Company was originally incorporated in Japan on July 13, 2000 under the name "Kabushiki Kaisha Young Leaves." In January 2017, we changed our name to "MEDIROM Inc." In March 2020, our Company's English name was changed to "MEDIROM Healthcare Technologies Inc." Relaxation Salon Segment (See Note 11 for segment information) The Relaxation Salon Segment is the core of our business, whereby we own, develop, operate, or franchise and support relaxation salons. Our salon locations cover major cities throughout Japan, with strong market presence in the Tokyo metropolitan area. The Segment includes several Relaxation Salon brands including Re.Ra.Ku®, and as of December 31, 2020 and 2019, it has a total of 290 and 283 salons, respectively. The following table presents total number of salons by operation type: Number of Relaxation Salons 2020 2019 Directly-operated 150 107 Franchised 140 176 Total 290 283 See Note 2, "Business Combination" for the number of salons acquired during each year. The results of operations of directly-operated salons converted to franchised salons in sale transactions with franchisees were not material either individually or in the aggregate to the consolidated financial statements. Digital Preventative Healthcare Segment (See Note 11 for segment information) The Digital Preventative Healthcare Segment consists of the following operations: preventative healthcare services utilizing our digital application and devices; and government-sponsored Specific Health Guidance program, utilizing our internally-developed on-demand health monitoring smartphone application, or LAV ® ; our MOTHER Tracker ® for fitness applications. Basis of Presentation The accompanying consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America ("U.S. GAAP"). Initial Public Offering The Company completed the initial public offering (IPO) of 800,000 shares of common stock in the form of American Depositary Shares (ADSs) at a price to the public of $15.00 per share on December 31, 2020. Each ADS represents one common share. The Company's ADSs are traded on the Nasdaq Capital Market. The Company recognized aggregate net proceeds of approximately ¥765,867 thousand after deducting underwriting discounts and commissions of ¥69,653 thousand and offering costs of ¥402,760 thousand, which net amount was credited to shareholders' equity. Tax effects associated with costs from the initial public offering of ¥123,325 thousand was credited to equity. As described in Note 21, on February 1, 2021, the Company sold an additional 60,000 ADSs representing 60,000 shares of common at the initial offering price of $15.00 per ADS, pursuant to the partial exercise of the over-allotment option to purchase up to 120,000 ADSs granted to the underwriters in connection with the initial public offering. The Company received aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. Recent Developments and Liquidity Pursuant to Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statement Going Concern On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions. National and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The outbreak and associated restrictions that have been implemented have had a material adverse impact on the Company's business and cash flow from operations, similar to many businesses. In response to this outbreak, the Japanese government issued a Declaration of a State of Emergency (the "Declaration") on April 7, 2020. The Declaration resulted in a significant reduction in guest traffic at our relaxation salons due to changes in consumer behavior as social distancing practices. On April 21, 2020, the Company announced the temporary closure of almost all of its relaxation salons located across the country until May 6, 2020. The Declaration was lifted in Japan on May 25, 2020, however, other restrictions have been continuously encouraged by the Japanese government. In September, 2020, substantially all of the Company's relaxation salons were in operation. Because our operating results substantially depend upon our relaxation salons’ revenue volumes and profitability, the two months of idleness in April and May materially impacted our revenues. The Company implemented cost measures to mitigate topline degradation to the business from this pandemic, including reductions in executive and employee compensation and deferral of nonessential spend in order to limit the impact on our operations and financial results. Additionally, in order to further strengthen its cash position and provide financial flexibility in light of the current uncertainty arising from the COVID-19 pandemic, the Company entered into additional loan agreements with Japan Finance Corporation and Higashi-Nippon Bank, Limited to borrow ¥230,000 thousand collectively as of June 30, 2020. Furthermore, the Company entered into additional loan agreements with Higashi-Nippon Bank, Limited to borrow ¥170,000 thousand as of July 28, 2020 and to borrow additional ¥175,000 thousand from the same bank as of November 30, and entered into loan agreements with The Shoko Chukin Bank, Ltd. to borrow ¥100,000 thousand as of December 31, 2020. The Company also applied for the subsidy program for employment adjustment by the Japanese government with COVID-19 special treatment, which incentivizes companies to retain their employees. During 2020, the Company received ¥111,581 thousand from the subsidy program. The subsidy can help to cover the payroll costs of furloughed employees. The Japanese government subsidies of non-operating nature with no further conditions to be met are recorded as non-operating income in "other income (expense)" in the consolidated statements of (loss) income when received. In December 2020, the Company received aggregate net proceeds of ¥765,867 thousand that it will use for working capital and general corporate purposes. On January 7, 2021, Japanese government issued the second Declaration of Emergency for COVID-19, which applied to Tokyo, Kanagawa, Saitama, and Chiba prefectures and was planned to be effective from January 8 to February 7, 2021. In the declaration, the government requested shopping malls and other large-sized commercial properties, where many of our salons are located, to close stores at 8 p.m. The declaration also requested businesses to introduce remote work from home, which also impacted sales of our salons located in business districts. On January 13, 2021, the government expanded the declaration to seven other prefectures (Osaka, Kyoto, Hyogo, Aichi, Gifu, Fukuoka, and Tochigi). On February 2, 2021, the government decided to extend the declaration till March 7 over ten prefectures excluding Tochigi. On February 28, 2021, the government released six prefectures excluding Tokyo, Kanagawa, Saitama, and Chiba from the declaration. On March 5, 2021, the government decided to extend the declaration over the four prefectures till March 21. On March 21, 2021, the second Declaration of Emergency was fully lifted. Despite it having an adverse impact on our sales activities during the period, compared to the first Declaration of Emergency, in which most of shopping malls voluntarily closed the whole properties, there was much less impact. During the second declaration, 76 salons had shortened operations and 1 - 2 salons fully closed operations. On April 23, 2021, the Japanese government issued the third Declaration of Emergency applicable to Tokyo, Osaka, Hyogo, Kyoto during the period from April 25 to May 11. The declaration requested department stores and other large-sized commercial properties to close operation. This affected the operation of our salons located in shopping malls and spa facilities. As of May 10, 2021, 28 salons had shortened operation and 36 salons fully closed their operation. On May 6, 2021, the government announced it will extend the declaration till May 31 and add Fukuoka and Aichi prefectures to the scope of the declaration. Although the declarations have been adversely affecting our business, we are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, the duration and extent of COVID-19's impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. Whereas management presently expects proceeds from existing loans, subsidies, and the net proceeds received from our IPO, to be sufficient to fund operating needs and existing debt obligations and does not currently expect to require additional capital for the next 12 months, no assurance can be provided as to the ultimate resolution of the foregoing matters and their ultimate impact on the Company's financial position, results of operations and cash flows. Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation, and Medirom Human Resources Inc. All intercompany transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence but not control are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of December 31, 2020 and 2019. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, the allowance for doubtful accounts, fair value of intangible assets acquired through business combination, impairment of long-lived assets and goodwill, asset retirement obligations, valuation of stock-based compensation, and valuation of deferred tax assets. Management bases these estimates on assumptions that it believes to be reasonable under the circumstance, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. Actual results may differ from these estimates in future periods when the COVID-19 pandemic continues to evolve and additional information becomes available. Foreign Currency Translation The assets and liabilities of an equity method investee are translated into Japanese yen at the respective year-end exchange rates. All income and expense accounts are translated at weighted average rates. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income within shareholders' equity. Exchange gains and losses resulting from foreign currency transactions and the conversion of monetary assets and liabilities denominated in foreign currencies are included in other income (expenses) in the consolidated statements of (loss) income. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and time deposits or other highly liquid investments placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities of less than three months. There are no cash equivalents balances for the periods presented. Time deposits presented in the consolidated balance sheets are short-term investments, these maturities are longer than three months but less than one year. Accounts Receivable—Trade, Net The accounts receivable-trade on the Company's consolidated balance sheets primarily includes accounts receivables from franchisees. The balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from the Company's franchisees. The Company monitors the financial condition of its franchisees and records provisions for estimated losses on receivables when it believes franchisees are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses incurred related to existing accounts and receivables. As of December 31, 2020 and 2019, the allowance for doubtful accounts related to accounts receivable-trade was ¥4,426 thousand and ¥22,920 thousand, respectively. Accounts Receivable—Other and Long-Term Accounts Receivable—Other, Net The accounts receivable—other on the Company's consolidated balance sheets primarily includes accounts receivable from commercial facility landlords and credit card companies related directly-operated salon's revenue and franchisee's revenue collected by these entities on behalf of the Group. As of December 31, 2020 and 2019, accounts receivable from commercial facilities and credit card companies of ¥302,227 thousand and ¥318,474 thousand, respectively, are included in the accounts receivable—other on the consolidated balance sheets. Receivable of ¥50,000 thousand for the sale of the Company's investment in Re.Ra.Ku (Hong Kong) Health Science and Technology Co., Limited is included in the accounts receivable—other as of December 31, 2019. Long-term accounts receivable—other mainly consists of a non-interest bearing receivable due from an unrelated business entity, with a maturity of May 31, 2038, monthly repayment amounts of ¥720 thousand ¥1,200 thousand- and the principal balance due of ¥235,945 thousand and ¥247,450 thousand as of December 31, 2020 and 2019, respectively. The Company monitors the financial condition of its obligor and records provisions for estimated losses on receivables when it believes the obligors are unable to make their required payments. As of December 31, 2020 and 2019, the related discounts and allowance for doubtful accounts on long-term accounts receivable—other was ¥131,759 thousand and ¥141,256 thousand, respectively. Concentrations Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. The Company's cash deposits, of up to ¥10,000 thousand are insured by the Japanese government. From time to time, the Company has deposits in excess of the insured amounts. No single customer accounted for 10% or more of the Company's total revenues for the years ended December 31, 2020 and 2019. Inventories Inventories consist principally of merchandise. A portion of inventories are also used for salon services. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method for merchandise. Investments The Company uses the equity method to account for equity investments over which it has significant influence but does not own a majority equity interest or otherwise control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of (loss) income. Equity method adjustments include the company's proportionate share of investee income or loss and other adjustments required by the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that may have a significant adverse impact on the fair value of the investment. If a loss in value has occurred and is deemed to be other than temporary, an impairment loss is recorded. Several factors are reviewed to determine whether a loss has occurred that is other than temporary, including absence of an ability to recover the carrying amount of the investment, the length and extent of the fair value decline, and the financial condition and future prospects of the investee. Investments in equity securities, in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired or not, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: (1) A significant deterioration in the earnings performance or business prospects of the investee. (2) A significant adverse change in the regulatory, economic, or technological environment of the investee. (3) A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. (4) A recent example of the new issuance of a security, in which the issue price is less than our cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined as a result of considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. Leases The Group considers whether a contract is a lease or if it contains a lease element when a contract is executed. If a contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration, such contract is determined to contain a lease element. When the contract contains a lease element, a lease is either classified as operating lease or finance lease when the Group is a lessee, and a sales-type lease or direct financing lease when the Group is a lessor. The Group, as a lessee, applies the right-of-use model to account for lease transactions. Under the right-of-use model, right-of-use asset and lease liability are recognized at commencement date. The Group measures its lease liability at present value of future lease payments over the remaining term. The Group uses its incremental borrowing rate for the discount rate to calculate the present value of the payments since it is difficult and not practical to determine the interest rate implicit in the lease. The Group's incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Right-of-use asset lease liability 3 For operating leases, the Group recognizes the minimum lease payments where it is the lessee and the minimum lease income where it is the lessor on a straight-line basis over the lease term, and reflects them as rental expenses and rental revenues, respectively, in the consolidated statements of (loss) income. Operating rental expense includes amortization of right-of-use assets and interests on lease liability. Variable lease expenses are primarily linked to sales and are excluded from the measurement of lease liability. Rental expenses are recorded in the consolidated statements of (loss) income based on the nature of the underlying lease. Rental expense related to leases for directly-operated salons and for leased properties that are subsequently subleased to franchisees are recorded to "Cost of revenue from directly-operated salons" and "Cost of franchise revenues," respectively, and rental expense related to leases for corporate offices is recorded to "Selling, general and administrative expenses." Rental income for operating leases on properties subleased to franchisees is recorded to "Franchise revenue". Terms and conditions of the sublease agreements are arranged to pass through lease obligations under head leases to the franchisees. Sublease income is presented on a gross basis on the accompanying consolidated statements of (loss) income, as the Company remains the primary obligor. For newly executed contracts, renewal and revision related to leases, estimates and certain assumptions are used to determine asset value, useful lives, discount rate, lease term, etc. and these have effects on (1) classification of lease, (2) measurement of rental payments and (3) measurement of lease asset. These results may differ if varying estimates and assumptions are used. Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is computed principally using the straight-line method based on the estimated useful life of the assets. The useful lives for depreciation by major asset classes are as follows: Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 Other Intangible Assets, Net Other intangible assets with finite useful lives consist primarily of capitalized software and reacquired franchise rights. The Company capitalizes both eligible internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized until the software is substantially complete and ready for its intended use. Costs related to data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. Capitalized software is amortized over the estimated useful life ( 3 1 Impairment of Long-lived Assets, Excluding Goodwill The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities. The Company reviews the carrying value of long-lived assets or a related group of assets to be held and used for impairment whenever events or circumstances occur that indicate that the carrying value of the assets may not be recoverable. The assets are considered to be impaired when the estimated undiscounted cash flows expected to result from the use of the assets and their eventual disposition are less than their carrying values. The impairment loss is measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. In determining the fair value, the Company uses present value techniques, if appropriate, based on the estimated future cash flows expected to result from the use of the assets and their eventual dispositions. During 2020, long-lived assets impairment charges related to continuing operations of ¥36,512 thousand and ¥69,989 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. During 2019, long-lived assets impairment charges related to continuing operations of ¥9,825 thousand and ¥34,721 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. Goodwill Goodwill represents the excess of cost over fair value of identifiable net assets acquired and assumed in business combinations. The Company generally records goodwill in connection with the acquisition of relaxation salons from franchisees. Upon the sale of relaxation salons to franchisees, goodwill is decremented. Goodwill and intangible assets that are deemed to have indefinite useful lives are subject to impairment testing. Impairment testing is performed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill impairment assessments are performed at the reporting unit level, which is the same as the Company's operating segments. The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair value of a reporting unit to its carrying value. The carrying value of each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit. The Company calculates estimated fair values of the reporting units based on discounted future cash flows utilizing estimates in annual revenue, service and product margins, fixed expense rates, allocated corporate overhead, directly-operated and franchise salon counts, and long-term growth rates for determining terminal value. If the carrying amount of a reporting unit exceeds its fair value, a loss will be recorded for the excess of the carrying value of the reporting unit over the fair value of the reporting unit. The Company did not recognize impairment losses for any goodwill during the years ended December 31, 2020 and 2019. Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal, consulting, accounting and other fees relating to the Company's initial public offering (IPO) completed on December 31, 2020, had been capitalized. These costs were reclassified to additional paid-in capital as a reduction from the IPO proceeds. Other incremental organization costs are expensed as incurred. As of December 31, 2020, there were no capitalized deferred offering costs in the consolidated balance sheets. As of December 31, 2019, there were ¥57,509 thousand of deferred offering costs capitalized in the consolidated balance sheets. Asset Retirement Obligations The Company records asset retirement obligations when the obligation is incurred. The obligation is measured at fair value and included in Non-current liabilities. When the liability is initially recorded, the Company capitalizes the related cost by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value, and the capitalized cost is depreciated over the asset's useful life. Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company determines revenue recognition through the following steps: Step 1: identification of the contract with a customer; Step 2: identification of the performance obligations in the contract; Step 3: determination of the transaction price; Step 4: allocation of the transaction price to the performance obligations in the contract; Step 5: recognition of revenue when, or as, the Company satisfies a performance obligation. Revenue from Directly-Operated Salons Revenues from directly-operated salons are recognized when services are provided at the salons. Franchise Revenue Franchise Revenue is comprised of (i) franchise fees, (ii) royalty income, (iii) staffing service revenue, (iv) sublease revenue, and (v) other franchise revenues. The Company and the franchisee enter into a franchise agreement which sets forth the standard terms and conditions of operating the franchised salon, as well as the fees and royalties over the term of the agreement. In most cases, an outsourcing agreement, is also entered into in conjunction with the franchise agreement that specifies the terms of the sublease arrangement with the franchisee. Upon the franchisee's request, the Company's therapists are dispatched to franchise locations and franchisees must pay dispatch fees in accordance with the dispatched employees' position. (i) Franchise fees The Company receives the entire non-refundable initial franchise fees from the franchisee based on franchise agreement. The franchise agreement typically has an initial term of five years agreement could be renewed prior to expiration by mutual consent and renewal franchise fees are paid by franchisee upon renewal of agreement. Initial franchise fees and expected renewal franchise fees are recognized as revenue ratably using the time-based input method over the expected average contract life ( 8 (ii) Royalty income The Company collects royalties, an amount calculated by multiplying a certain percentage to gross sales, on a monthly basis. The royalties are subject to the sales- and usage-based royalties constraint and are recognized as revenues based on the monthly royalty earned where such amount is determined on the basis of gross sales made from each salon. (iii) Staffing service revenue The Company also generates revenue from providing its therapists to franchisees, which are recognized as revenues based on the total number of working hours of the agency worker during the dispatched period. The Company has elected the 'as-invoiced' practical expedient for its staffing services where the fixed rate per hour is invoiced to the customer. (iv) Sublease revenue The Company leases the premises in which the majority of its franchisees operate, where the Company retains the head lease primary obligation, and has entered into corresponding sublease arrangements with franchisees. Revenues from sublease transactions with franchisees are recognized on a straight-line basis over the respective operating lease terms, or at the time of the underlying sales for variable lease payments, in accordance with Accounting Standards Codification ("ASC") 842 Leases ("ASC 842"). (v) Other franchise revenues Other franchise revenues include other services provided to franchisees separately from the franchise agreements and include advertising, training, studio construction and hiring support. These services are primarily recognized as revenues when services are provided. The Company has elected the 'as-invoiced' practical expedient for its studio construction services where the consideration is invoiced to the customer. Other Revenues Other revenues are primarily from the Digital Preventive Healthcare segment, whic |
Business Combination_2
Business Combination | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Business Combination | ||
Business Combination | 2. Business Combination Acquisition of SAWAN’s share On May 6, 2021, the Company acquired control of SAWAN CO. LTD. (“SAWAN”) by purchasing all outstanding shares for cash consideration of ¥140,697 thousand. As a result, “Ruam Ruam”, which is a luxury relaxation salon brand held by SAWAN, has become part of the Company’s directly-operated salons. The acquisition was accounted for by the acquisition method. Acquisition related costs of ¥12,000 thousand were recognized as expenses when incurred, which is included in “selling, general and administrative expenses” in the condensed consolidated statements of loss. The allocation of the purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The fair value of the identified intangible assets is still open as of June 30, 2021, as the Company is continuing to obtain information and coordinate with the third-party specialist to complete its valuation of identified intangible assets. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows: Thousands of Yen Fair value of assets/liabilities Cash and cash equivalents ¥ 7,824 Accounts receivable, net 18,228 Inventories 2,898 Prepaid expenses and other current assets 14,989 Property and equipment - net 50,673 Goodwill 218,138 Right-of-use asset-operating lease, net 153,269 Other long-term assets 57,323 Total assets acquired 523,342 Accounts payable (3,531) Accrued expenses (97,279) Advances received (73,353) Other current liabilities (21,995) Lease liability (151,197) Asset retirement obligation (25,060) Other liabilities (10,230) Total liabilities assumed (382,645) Net assets assumed 140,697 Fair value of the consideration transferred ¥ 140,697 The goodwill recorded primarily relates to the sales growth potential of the relaxation salons held by SAWAN. Almost all of the goodwill is expected to be nondeductible for income tax purposes. The amount of revenue and earnings from the acquisition included in the Company’s results of operations for the six months ended June 30, 2021 was ¥73,706 thousand and ¥4,483 thousand, respectively. Acquisition of relaxation salons For the six months ended June 30, 2021, the Company acquired 18 relaxation salons from a third-party company and franchise owners for total consideration of ¥167,970 thousand. The acquisitions with purchase agreements were accounted for by the acquisition method. Acquisition related costs were recognized as expenses when incurred, which were immaterial in amount. The results of operations, and assets and liabilities, of these relaxation salons were included in the condensed consolidated financial statements from the date of acquisition. The purchase price was preliminarily allocated to property and equipment of ¥38,479 thousand, asset retirement obligations of ¥35,883 thousand and goodwill of ¥166,388 thousand. The allocation of the purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The fair value of the identified intangible assets is still open as of June 30, 2021, as the Company is continuing to obtain information and coordinate with the third-party specialist to complete the valuation of identified intangible assets. The goodwill recorded primarily relates to the sales growth potential of the relaxation salons acquired and is expected to be deductible for income tax purposes. For some relaxation salons acquired, the Company recognized the excess of the fair value of the net assets assumed over the fair value of the consideration transferred as a gain from bargain purchases of ¥1,014 thousand for the six months ended June 30, 2021, which is separately presented in the condensed consolidated statements of loss. In the case of the bargain purchase gain, the seller of franchisee wanted to cease their franchise business and reached out to the Company to sell the franchise. Most of the time, the franchisee wants to sell because the studio is not generating profit or for other financial reasons. The amount of revenue and (loss) earnings from the acquired relaxation salons included in the Company’s results of operations for the six months ended June 30, 2021 was ¥80,215 thousand and ¥(10,354) thousand, respectively . | 2. Business Combination Acquisition of relaxation salons During 2020 and 2019, the Company acquired 16 relaxation salons and 17 relaxation salons for cash consideration of ¥86,916 thousand and ¥23,813 thousand, respectively. The cash consideration paid in these transactions is included within "Acquisition of businesses - net of cash acquired" in the investing activities, "Payment of installment payables related to business acquisitions" in the financing activities and "Payables related to acquisition of businesses included in accrued expenses" in the non-cash investing and financing activities sections of the consolidated statements of cash flows. The acquisitions were accounted for by the acquisition method. Acquisition related costs were recognized as expenses when incurred, which were immaterial in amount. The results of operations, and assets and liabilities, of these relaxation salons were included in the consolidated financial statements from the date of acquisition. The purchase price allocation was based on the estimated fair values of the assets acquired and liabilities assumed, as of the acquisition date. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date were as follows: Thousands of Yen Fair value of assets/liabilities 2020 2019 Property and equipment - net ¥ 51,005 ¥ 27,567 Goodwill 72,438 22,156 Intangible assets 12,690 6,519 Total assets acquired 136,133 56,242 Asset retirement obligation (49,217) (25,942) Total liabilities assumed (49,217) (25,942) Net assets assumed 86,916 30,300 Fair value of the consideration transferred 86,916 23,813 Gain from bargain purchases ¥ ― ¥ 6,487 The goodwill recorded primarily relates to the sales growth potential of the relaxation salon locations acquired and is expected to be deductible for income tax purposes. Intangible assets in the table above consist of reacquired franchise rights, fair values of which were estimated using the relief from royalty method with Level 3 unobservable inputs. In order to develop these Level 3 fair value measurements, the Company used 1.2% - 2.5% of royalty rate and 11.3% - 14.0% of discount rate as significant unobservable inputs. The amount of reacquired franchise rights was ¥12,690 thousand and ¥6,519 thousand in 2020 and 2019 respectively. Reacquired franchise rights are subject to amortization, amortized over an estimated useful life of approximately three years. For some relaxation salons acquired, the Company recognized the excess of the fair value of the net assets assumed over the fair value of the consideration transferred as a gain from bargain purchases of nil and ¥6,487 thousand in 2020 and 2019 respectively, which is separately presented in the consolidated statements of (loss) income. The amount of revenue from the acquired relaxation salons included in the Company's results of operations for the years ended December 31, 2020 and 2019 was ¥375,148 thousand and ¥799,788 thousand, respectively. The amount of (loss) earnings from the acquired relaxation salons included in the Company's results of operations for the years ended December 31, 2020 and 2019 was ¥(26,595) thousand and ¥107,145 thousand, respectively. Disclosure of pro forma information is omitted as the information is not easily available. |
Goodwill
Goodwill | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Goodwill. | ||
Goodwill and Other Intangible Assets, Net | 4. Goodwill and Other Intangible Assets, Net The components of intangible assets as of December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Intangible assets subject to amortization: Software for internal use ¥ 84,152 ¥ 54,710 Reacquired franchise rights 17,973 9,802 Other 750 10,750 Total 102,875 75,262 Accumulated amortization (44,330) (36,694) Net carrying amount 58,545 38,568 Intangible assets not subject to amortization: Trademark 38,922 38,922 Goodwill 150,720 78,282 Telephone rights 148 148 Total 189,790 117,352 Total intangible assets ¥ 248,335 ¥ 155,920 The aggregate amortization expense was ¥20,599 thousand and ¥16,617 thousand for the years ended December 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for other intangible assets for the next five years and thereafter is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 24,019 2022 17,857 2023 9,540 2024 6,034 2025 957 Thereafter 138 Total ¥ 58,545 The following table shows changes in carrying amount of goodwill for the years ended December 31, 2020 and 2019: Thousands of Yen Balance at December 31, 2018 Goodwill ¥ 63,955 Acquisitions of relaxation salons* 22,156 Sales of directly-operated salons to franchisees, and disposal of relaxation salon (7,829) Balance at December 31, 2019 Goodwill 78,282 Acquisitions of relaxation salons* 72,438 Balance at December 31, 2020 Goodwill ¥ 150,720 * Acquisitions for the years ended December 31, 2020 and 2019 relate to relaxation salon acquisitions in the relaxation salon segment. Refer to Note 2. No impairment losses were recognized for the years ended December 31, 2020 and 2019. The Company performed a qualitative assessment for its annual goodwill impairment test on December 31, 2020. Based on the results of the qualitative assessment, a step one test was not considered necessary. | |
Goodwill | 3. Goodwill The following table shows changes in carrying amount of goodwill for the six months ended June 30, 2021: Thousands of Yen Balance at December 31, 2020 ¥ 150,720 Acquisition of SAWAN's shares 218,138 Acquisitions of relaxation salons 166,388 Balance at June 30, 2021 ¥ 535,246 The Company concluded that there were no triggering events requiring an impairment assessment. The Company continues to evaluate the impact of macroeconomic conditions including, but not limited to, the impact of the COVID-19 pandemic. |
Long-term Borrowings
Long-term Borrowings | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Long-term Borrowings | ||
Long-term Borrowings | 4. Long-term Borrowings The Company has long-term loans with Japanese financial institutions. Some long-term loans are secured. As of June 30, 2021, time deposits with an aggregating book value of ¥72,525 thousand are pledged as collateral (the amounts of ¥20,025 thousand and ¥52,500 are included in “prepaid expenses and other current assets” and “other assets”, respectively, in the condensed consolidated balance sheets). Some long-term loans are guaranteed by Credit Guarantee Association, a Japanese governmental affiliate agency which supplements private companies with credit. The long-term loan accrue interest using fixed interest rates of 0.21% – 3.98% per annum as of June 30, 2021. Debt issuance costs related to these borrowings are immaterial. Long-term borrowings as of June 30, 2021 and December 31, 2020 are as follow: Thousands of Yen As of June 30, 2021 As of December 31, 2020 Bank loans (Due through 2035 with weighted average interest rates of 1.05% as of June 30, 2021, due through 2035 with weighted average interest rates of ¥ 755,159 ¥ 910,661 Current portion of long-term borrowings (181,884) (242,281) Total long-term borrowings ¥ 573,275 ¥ 668,380 The following is a summary of maturities of long-term borrowings subsequent to June 30, 2021: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 86,779 2022 123,460 2023 62,628 2024 60,252 2025 59,370 2026 and thereafter 362,670 Total ¥ 755,159 Long-term borrowings are primarily made under general agreements, which are to provide security and guarantees for present and future indebtedness or to secure a guarantor upon request of the bank, and that the banks shall have the right to offset cash deposits against any debts and obligations that have become due or, in the case of default, against all obligations to the banks. The Company’s CEO is a guarantor with respect to some of these borrowings. None of the loan agreements contain any financial covenants. | 6. Short-term Borrowings and Long-term Borrowings The Company has short-term borrowings from a Japanese financial institution, with a principal balance of nil and ¥180,000 thousand outstanding as of December 31, 2020 and 2019. The unsecured short-term borrowings accrue interest, compounded annually, using a fixed interest rate of 2.35%. The Company repaid the principal balance of ¥180,000 thousand during 2020. The Company has long-term loans with Japanese financial institutions. Some long-term loans are secured. As of December 31, 2020, time deposits with an aggregating book value of ¥63,524 thousand are pledged as collateral (the amounts of ¥20,024 thousand and ¥43,500 are included in “time deposits” and “other assets”, respectively, in the consolidated balance sheets). Some long-term loans are guaranteed by Credit Guarantee Association, a Japanese governmental affiliate agency which supplements private companies with credit. The long-term loan accrue interest using fixed interest rates of 0.21% – 3.98% and 0.61% – 3.30% per annum as of December 31, 2020 and 2019, respectively. Debt issuance costs related to these borrowings are immaterial. Long-term borrowings as of December 31, 2020 and 2019 are as follow: Thousands of Yen 2020 2019 Unsecured bank loans (Due through 2035 with weighted average interest rates of 1.33% as of December 31, 2020, due through 2025 with weighted average interest rates of ¥ 910,661 ¥ 342,101 Current portion of long-term borrowings (242,281) (191,570) Total long-term borrowings ¥ 668,380 ¥ 150,531 The following is a summary of maturities of long-term borrowings subsequent to December 31, 2020: Thousands of Yen Year ending December 31: 2021 ¥ 242,281 2022 123,460 2023 62,628 2024 60,252 2025 59,550 2026 and thereafter 362,490 Total ¥ 910,661 Both short-term borrowings and long-term borrowings are primarily made under general agreements, which are to provide security and guarantees for present and future indebtedness or to secure a guarantor upon request of the bank, and that the banks shall have the right to offset cash deposits against any debts and obligations that have become due or, in the case of default, against all obligations to the banks. Kouji Eguchi, the representative director and the shareholder of the Company (holds 39.09% of common stock and all Class A |
Leases_2
Leases | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Leases | ||
Leases | 5. Leases The Group mainly leases commercial space for its relaxation salon from external third parties, which are either operated by the Company or a franchisee and also enters into contracts with franchisees subleasing partial spaces of leased properties under the terms and conditions that are substantially the same as the head lease contracts. As of June 30, 2021 and 2020, the Group had 230 and 220 leased salons, respectively, of which 120 and 141 salons, respectively were subleased. Operating Leases Lessee There are no lease transactions classified as finance leases for the six months ended June 30, 2021 and 2020. The table below summarizes the components of operating lease costs related to operating leases: Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed lease cost (a) ¥ 386,992 ¥ 372,769 Variable lease cost (b) 13,789 7,476 Short-term cost 18,170 4,458 Total ¥ 418,951 ¥ 384,703 (a) This includes the amount of ¥ 217,083 thousand and ¥ 260,194 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. (b) This includes the amount of ¥ 7,961 thousand and ¥ 5,674 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. There are no sale-and leaseback transactions conducted in the six months ended June 30, 2021 and 2020. Supplementary information on cash flow and other information for leasing activities for the six months ended June 30, 2021 and 2020 are as follows: Thousands of Yen Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 391,650 ¥ 99,758 Right-of-use assets obtained in exchange for lease liabilities 490,342 189,240 Weighted average remaining lease term (in years) 2.9 3.1 Weighted average discount rate 1.45% 1.45% Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to June 30, 2021 are as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 430,043 2022 620,210 2023 363,730 2024 183,145 2025 110,723 2026 and thereafter 132,480 Total 1,840,331 Less: Interest component (78,116) Present value of minimum lease payments ¥ 1,762,215 The amount of ¥702,685 thousand and ¥1,059,530 thousand of the discounted present value of minimum lease payment are included in "Short-term lease liability" and "Long-term lease liability — net of current portion", respectively, in the condensed consolidated balance sheets. Subleases The Group leases space from commercial facility landlords which in turn it subleases to certain franchisees of its relaxation salons. Sublease revenues are as follows for the six months ended June 30, 2021 and 2020, and included in franchise revenues: Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed sublease income ¥ 217,083 ¥ 260,194 Variable sublease income 7,961 5,674 Total ¥ 225,044 ¥ 265,868 Expected future minimum lease collections to be received under non-cancellable subleases subsequent to June 30, 2021 are as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 178,798 2022 313,207 2023 198,400 2024 82,997 2025 43,103 2026 and thereafter 28,198 Total ¥ 844,703 There are no lease transactions classified as sale-type leases and direct financing leases for the six months ended June 30, 2021 and 2020. | 8. Leases The Group mainly leases commercial space for its relaxation salon from external third parties, which are either operated by the Company or a franchisee and also enters into contracts with franchisees subleasing partial spaces of leased properties under the terms and conditions that are substantially the same as the head lease contracts. As of December 31, 2020 and 2019, the Group had 213 and 220 leased salons, respectively, of which 130 and 165 salons, respectively were subleased. Operating Leases Lessee There are no lease transactions classified as finance leases for the years ended December 31, 2020 and 2019. The table below summarizes the components of operating lease costs related to operating leases for the year ended December 31, 2020 and 2019: Thousands of Yen 2020 2019 Fixed lease cost (a) ¥ 748,230 ¥ 851,555 Variable lease cost (b) 24,484 30,901 Short-term cost 11,669 10,979 Total ¥ 784,383 ¥ 893,435 (a) This includes the amount of ¥478,225 thousand and ¥580,074 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. (b) This includes the amount of ¥14,146 thousand and ¥27,606 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. There are no sale-and leaseback transactions conducted in the years ended December 31, 2020 and 2019. Supplementary information on cash flow and other information for leasing activities for the year ended December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 797,623 ¥ 375,270 Right-of-use assets obtained in exchange for lease liabilities 604,703 749,008 Weighted average remaining lease term (in years) 2.8 3.3 Weighted average discount rate 1.45% 1.45% Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to December 31, 2020 are as follows: Thousands of Yen Year ending December 31: 2021 ¥ 667,823 2022 493,800 2023 246,751 2024 122,654 2025 70,448 2026 and thereafter 98,245 Total 1,699,721 Less: Interest component (48,509) Present value of minimum lease payments ¥ 1,651,212 The amount of ¥658,320 thousand and ¥992,892 thousand of the discounted present value of minimum lease payment are included in "Short-term lease liability" and "Long-term lease liability — net of current portion", respectively, in the consolidated balance sheets. Subleases The Group leases space from commercial facility landlords which in turn it subleases to certain franchisees of its relaxation salons. Sublease revenues are as follows for the years ended December 31, 2020 and 2019, and included in franchise revenues: Thousands of Yen 2020 2019 Fixed sublease income ¥ 478,225 ¥ 580,074 Variable sublease income 14,146 27,606 Total ¥ 492,371 ¥ 607,680 Expected future minimum lease collections to be received under non-cancellable subleases subsequent to December 31, 2020 are as follows: Thousands of Yen Year ending December 31: 2021 ¥ 376,993 2022 276,765 2023 152,356 2024 66,450 2025 33,728 2026 and thereafter 20,488 Total ¥ 926,780 There are no lease transactions classified as sale-type leases and direct financing leases for the years ended December 31, 2020 and 2019. |
Segment Information_2
Segment Information | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Segment Information | ||
Segment Information | 6. Segment Information The Company operates its business in two segments: Relaxation Salon and Digital Preventative Healthcare, which are based on the organizational structure and information reviewed by the Company’s Chief Operating Decision Maker, who is the President, to evaluate its operating results and allocation of resources. Information about operating results for each segment for the six months ended June 30, 2021 and 2020 is as follows: Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Six months ended June 30, 2021 (ASC 606) Revenues ¥ 2,110,561 ¥ 16,918 ¥ ― ¥ 2,127,479 Operating income (loss) 93,852 (65,004) (511,036) (482,188) Depreciation and amortization 25,345 4,201 10,085 39,631 Six months ended June 30, 2020 (ASC 605) Revenues ¥ 1,344,503 ¥ 11,774 ¥ ― ¥ 1,356,277 Operating loss (166,200) (21,016) (247,091) (434,307) Depreciation and amortization 14,453 3,771 14,881 33,105 Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate general and administrative expenses and back office expenses. Substantially all revenues are from customers in Japan. Geographic information is omitted due to immateriality of revenue and operating income attributable to other international locations for the six months ended June 30, 2021 and 2020. | 11. Segment Information The Company operates its business in two segments: Relaxation Salon and Digital Preventative Healthcare, which are based on the organizational structure and information reviewed by the Company's Chief Operating Decision Maker, who is the President, to evaluate its operating results and allocation of resources. The accounting policies of the segments are substantially the same as those described in the significant accounting policies in Note 1. Information about operating results and assets for each segment as of and for the years ended December 31, 2020 and 2019 is as follows: Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Year ended December 31, 2020 Revenues ¥ 3,315,947 ¥ 25,670 ¥ ― ¥ 3,341,617 Operating income (loss) (140,866) (66,100) (539,122) (746,088) Depreciation and amortization 32,261 8,007 22,022 62,290 Total assets 3,096,094 34,247 2,583,125 5,713,466 Year ended December 31, 2019 Revenues ¥ 3,864,656 ¥ 43,608 ¥ ― ¥ 3,908,264 Operating income (loss) 279,439 (43,056) (202,033) 34,350 Depreciation and amortization 34,025 4,764 7,385 46,174 Total assets 3,346,739 29,565 1,381,161 4,757,465 Expenses not directly associated with specific segments are allocated based on the most reasonable measures applicable. Corporate expenses include certain corporate general and administrative expenses and back office expenses. Assets attributed to each segment are accounts receivable-trade, net, accounts receivable-other, inventories, prepaid expenses, right-of-use asset - operating lease, property and equipment, goodwill, intangible assets, and lease and guarantee deposits. Corporate assets primarily consist of cash and cash equivalents, time deposits, long-term accounts receivable-other, net, deferred tax assets, and corporate properties. Substantially all revenues are from customers operating in Japan. Geographic information is omitted due to immateriality of revenue and operating income attributable to international operations for the years ended December 31, 2020 and 2019. |
Income Taxes_2
Income Taxes | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Income Taxes | ||
Income Taxes | 7. Income Taxes Our effective income tax rate for the six months ended June 30, 2021 and 2020 was (11.8)% and At June 30, 2021 and December 31, 2020, current unrecognized tax benefit is not material in amount. Even in the next twelve months after the end of June 2021, it is unlikely that the total amount would change dramatically. | 12. Income Taxes The following table shows a summary of income taxes for the years ended December 31, 2020 and 2019: Thousands of Yen Thousands of Yen 2020 2019 Domestic Total Domestic Total (Loss) income before income taxes ¥ (626,689) ¥ (626,689) ¥ 32,737 ¥ 32,737 Income taxes Current 19,745 19,745 10,222 10,222 Deferred (107,264) (107,264) 5,739 5,739 Total ¥ (87,519) ¥ (87,519) ¥ 15,961 ¥ 15,961 The Company and its domestic subsidiaries are subject to a number of taxes based on income, in the aggregate resulted in an effective statutory rate of approximately 30.6% and 30.6% for the years ended December 31, 2020 and 2019, respectively. A reconciliation of the differences between the effective income tax rates reflected in the accompanying consolidated statements of (loss) income and Japanese statutory tax rates for the years ended December 31, 2020 and 2019 is as follows: 2020 2019 Statutory tax rate 30.6 % 30.6 % Increases (reductions) in taxes due to: Change in valuation allowance (13.2) (10.2) Nondeductible expenses (0.3) 3.2 Inhabitant tax-per capita* (3.2) 24.5 Other-net 0.1 0.7 Effective income tax rate 14.0 % 48.8 % * Inhabitants tax is imposed on resident corporations in Japan. It consists of the corporation tax calculated as a percentage of national corporation tax and the per capita levy determined based on capital and the number of employees. For the year ended December 31, 2020, the impact of inhabitant tax per capita on the effective tax rate decreased due to fluctuation of (loss) income before income taxes. The tax effects of the major items of temporary differences giving rise to the deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows: Thousands of Yen 2020 2019 Deferred tax assets: Accounts receivable-trade ¥ 13,485 ¥ 13,485 Provision for bad debt 41,700 50,271 Goodwill ― 1,135 Other prepaid expenses - currently not deductible ― 54,235 Contract liability 154,950 ― Asset retirement obligation 58,543 39,013 Operating lease liability 505,601 563,660 Operating loss carryforwards 484,040 95,490 Other 60,392 51,485 Gross deferred tax assets 1,318,711 868,774 Valuation allowance (125,376) (42,395) Total deferred tax assets 1,193,335 826,379 Deferred tax liabilities: Property and equipment (32,433) (18,141) Goodwill (4,073) Intangible assets (15,285) (6,485) Right-of-use asset - operating lease (483,437) (560,336) Deferred offering costs ― (17,609) Advances received (1,311) (1,303) Other (1,205) ― Total deferred tax liabilities (537,744) (603,874) Net deferred tax assets ¥ 655,591 ¥ 222,505 Valuation allowance for deferred tax assets have decreased by ¥82,981 thousand and decreased by ¥3,355 thousand for the years ended December 31, 2020 and 2019, respectively. Based on the level of historical taxable income and projections for future taxable income over the periods which the net deductible temporary differences are expected to reverse, the Company believes it is more likely than not that the Company will realize the benefits of these tax assets, net of valuation allowance, at December 31, 2020. At December 31, 2020, the Group had operating loss carryforwards of ¥1,580,795 thousand, which are available to offset future taxable income. These carryforwards are scheduled to expire as follows: Operating loss carryforwards (Thousands of Yen) Years ending December 31: Between 2021 and 2024 ¥ 75,596 Between 2025 and 2028 132,439 2029 and thereafter 1,372,760 Total ¥ 1,580,795 The Company does not recognize any deferred tax liabilities for undistributed earnings of domestic subsidiaries since dividends from these subsidiaries are not subject to taxation under Japanese tax law. At December 31, 2020 and 2019, current unrecognized tax benefit is not material in amount. Even in the next twelve months after the end of 2020, it is unlikely that the total amount would change dramatically. The penalties and interest expenses related to income taxes are recognized in the consolidated statements of (loss) income as of December 31, 2020 and 2019, however, the amounts are immaterial. The Company and its subsidiaries are subject to taxation in Japan. As of December 31, 2020, all years remain open to examination by the tax authority. |
Revenue Recognition_2
Revenue Recognition | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Revenue Recognition | 8. Revenue Recognition For the six months ended June 30, 2020, the Company recognized revenue under Financial Accounting Standards Board (“FASB”) Topic 605 (“ASC 605”)—“Revenue Recognition” as Topic 606—“Revenue from Contracts with Customers” (“ASC 606”) was not required to be implemented for interim periods in 2020. Disaggregation of revenue For the six months ended June 30, 2021, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Revenue Stream* Relaxation Salon Digital Preventative Healthcare Consolidated Six months ended June 30, 2021 Revenue from directly-operated salons ¥ 1,421,413 ¥ ― ¥ 1,421,413 Franchise fees 125,513 ― 125,513 Royalty income 99,534 ― 99,534 Staffing service revenue 126,734 ― 126,734 Sublease revenue 225,044 ― 225,044 Other franchise revenues 112,323 ― 112,323 Other revenues ― 16,918 16,918 Total revenues ¥ 2,110,561 ¥ 16,918 ¥ 2,127,479 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. Contract balance Information about receivables and contract liabilities from contracts with customers is as follows: Thousands of Yen As of As of June 30, December 31, 2021 2020 Balance sheet classification Receivables ¥ 89,416 ¥ 148,540 Accounts receivable-trade, net Contract liabilities: Current 92,988 172,063 Contract liability (current) Long-term 297,523 333,978 Long-term contract liability – net of current portion Total ¥ 390,511 ¥ 506,041 Receivables relate primarily to payments due for royalty income, staffing service revenue and sublease revenue. With respect to the payment term, payment for these revenues are generally collected monthly. As such, no significant finance component has been identified. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), and are primarily related to receivables from the Company’s franchisees. Contract liabilities primarily represents the Company’s remaining performance obligations under its franchise agreement at the end of the period, for which consideration has been received and revenue had not been recognized, and is generally recognized as revenues ratably over the remaining expected customer life. As of June 30, 2021, contract assets under contracts with customers were immaterial in amount. Changes in the Company’s contract liabilities for the six months ended June 30, 2021 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2020 ¥ 506,041 Revenues recognized during 2021 which were included in the contract liabilities balance at December 31, 2020 (131,269) Remaining amounts at June 30, 2021 which were newly recognized as contract liabilities during 2021 15,739 Balance at June 30, 2021 ¥ 390,511 For the six months ended June 30, 2021, there were no revenues recognized under performance obligations which were satisfied for past fiscal years by change of transaction price, etc. Changes in receivables and contract liabilities are primarily due to the timing of revenue recognition, billings and cash collections. Transaction price allocated to remaining performance obligations Estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of June 30, 2021 is as follows: Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 45,307 2022 92,083 2023 90,272 2024 81,855 2025 53,551 2026 and thereafter 27,443 Total ¥ 390,511 | 13. Revenue Recognition Disaggregation of revenue For the year ended December 31, 2020, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Digital Preventative Revenue Stream* Relaxation Salon Healthcare Consolidated Year ended December 31, 2020 Revenue from directly-operated salons ¥ 2,026,806 ¥ ― ¥ 2,026,806 Franchise fees 175,445 ― 175,445 Royalty income 179,745 ― 179,745 Staffing service revenue 254,282 ― 254,282 Sublease revenue 492,371 ― 492,371 Other franchise revenues 187,298 ― 187,298 Other revenues ― 25,670 25,670 Total revenues ¥ 3,315,947 ¥ 25,670 ¥ 3,341,617 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. Contract balance Information about receivables and contract liabilities from contracts with customers is as follows: Thousands of Yen As of As of December 31, December 31, 2020 2019 (as adjusted- Note 1) Balance sheet classification Receivables ¥ 148,540 ¥ 337,048 Accounts receivable-trade, net Contract liabilities: Current 172,063 201,559 Contract liability (current) Long-term 333,978 465,077 Long-term contract liability - net of current portion Total ¥ 506,041 ¥ 666,636 Receivables relate primarily to payments due for royalty income, staffing service revenue and sublease revenue. With respect to the payment term, payment for these revenues are generally collected monthly. As such, no significant finance component has been identified. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), and are primarily related to receivables from the Company’s franchisees. Refer to “Accounts Receivables – Trade, Net” on Note 1 for details on the components of the receivables balance and the allowance. Contract liabilities primarily represents the Company’s remaining performance obligations under its franchise agreement at the end of the year, for which consideration has been received and revenue had not been recognized, and is generally recognized as revenues ratably over the remaining expected customer life. As of December 31, 2020, contract assets under contracts with customers were immaterial in amount. Changes in the Company’s contract liabilities for the year ended December 31, 2020 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2019 as adjusted (Note 1) ¥ 666,636 Revenues recognized during 2020 which were included in the contract liabilities balance at December 31, 2019 (203,970) Remaining amounts at December 31, 2020 which were newly recognized as contract liabilities during 2020 43,375 Balance at December 31, 2020 ¥ 506,041 For the year ended December 31, 2020, there were no revenues recognized under performance obligations which were satisfied for past fiscal years by change of transaction price, etc. Changes in receivables and contract liabilities are primarily due to the timing of revenue recognition, billings and cash collections. Transaction price allocated to remaining performance obligations Estimated revenue, which includes renewal fees not yet paid, expected to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2020 is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 172,063 2022 90,313 2023 88,310 2024 79,168 2025 53,558 2026 and thereafter 34,730 Total ¥ 518,142 |
Loss Per Share
Loss Per Share | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Loss Per Share | ||
Loss Per Share | 9. Loss Per Share Loss per common share is allocated based on each right of common stock and Class A common stock, on the assumption that loss from current year has been distributed. Common stock and Class A common stock have equal rights with respect to surplus dividend and residual assets distribution as net loss attributable to shareholders of the Company is allocated proportionally. Reconciliations of net loss and weighted average number of common shares outstanding used for the computation of basic loss per common share for the six months ended June 30, 2021 and 2020 are as follows: Six Months Ended June 30, 2021 2020 Common Class A Common Class A (Thousands of Yen) (Thousands of Yen) Loss (Numerator) Net loss attributable to shareholders of the Company ¥ (521,770) ― ¥ (442,971) ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,872,224 1 4,022,500 1 Effect of dilutive instruments: Stock options ― ― ― ― Weighted average common shares for diluted computation 4,872,224 1 4,022,500 1 Loss per common share attributable to shareholders of the Company (Yen) (Yen) Basic ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) Diluted ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) For periods in which the Company reports net loss, diluted net loss per common share attributable to common shareholders is the same as basic net loss per common share attributable to common shareholders. Options to purchase 608,500 shares and 234,000 shares have been excluded from the diluted net loss per common share attributable to common shareholders calculation for the six months ended June 30, 2021 and 2020, respectively, because the effect of inclusion would have been anti-dilutive. | 15. (Loss) Earnings Per Share (Loss) Earnings per common share is allocated based on each right of common stock and Class A common stock, on the assumption that (loss) income from current year has been distributed. Common stock and Class A common stock have equal rights with respect to surplus dividend and residual assets distribution as net (loss) income attributable to shareholders of the Company is allocated proportionally. Reconciliations of net (loss) income and weighted average number of common shares outstanding used for the computation of basic (loss) earnings per common share for the years ended December 31, 2020 and 2019 are as follows: 2020 2019 Common Class A Common Class A (Yen) (Yen) Income (Numerator) Net (loss) income attributable to shareholders of the Company ¥ (539,170) ― ¥ 17,335 ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,024,692 1 3,747,295 1 Effect of dilutive instruments: Stock options ― ― 525,007 ― Weighted average common shares for diluted computation 4,024,692 1 4,272,302 1 (Loss) earnings per common share attributable to shareholders of the Company Basic ¥ (133.97) ¥ (133.97) ¥ 4.63 ¥ 4.63 Diluted ¥ (133.97) ¥ (133.97) ¥ 4.06 ¥ 4.06 For periods in which the Company reports net loss, diluted net loss per common share attributable to common shareholders is the same as basic net loss per common share attributable to common shareholders. Options to purchase 799,500 shares have been excluded from the diluted net loss per common share attributable to common shareholders calculation for the year ended December 31, 2020 because the effect of inclusion would have been anti-dilutive. |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value of Financial Instruments | ||
Fair Value of Financial Instruments | 10. Fair Value of Financial Instruments Fair value of financial instruments The estimated fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020 are set forth below: The following summary excludes cash and cash equivalents, accounts receivable-trade, accounts receivable-other, long-term accounts receivable-other, lease and guarantee deposits, current portion of long-term borrowings, accounts payable-trade, accrued expenses, deposit received and operating lease liability for which fair values approximate their carrying amounts. The summary also excludes investments. Thousands of Yen As of June 30, 2021 As of December 31, 2020 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (573,275) ¥ (554,257) ¥ (668,380) ¥ (644,499) The following methods and assumptions are used to estimate the fair value in the above table. Long-term borrowings The Company’s long-term borrowings instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar borrowings instruments of comparable maturity. The classification of levels is fully described in Note 11. Assumptions used in fair value estimates Fair value estimates are made at a specific point in time, based on relevant market information available and details of the financial instruments. These estimates are practically conducted by the Company which involve uncertainties and matters of significant judgment, therefore, these cannot be determined with precision. Changes in assumptions could significantly affect the estimates. | 16. Fair Value of Financial Instruments Fair value of financial instruments The estimated fair values of the Company's financial instruments at December 31, 2020 and 2019 are set forth below: The following summary excludes cash and cash equivalents, time deposits, accounts receivable-trade, accounts receivable-other, due from shareholder, long-term accounts receivable-other, lease and guarantee deposits, short-term borrowings and current portion of long-term borrowings, accounts payable-trade, accrued expenses, deposit received and operating lease liability for which fair values approximate their carrying amounts. The summary also excludes investments which are disclosed in Note 5. Thousands of Yen 2020 2019 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (668,380) ¥ (644,499) ¥ (150,531) ¥ (145,600) The following methods and assumptions are used to estimate the fair value in the above table. Long-term borrowings The Company's long-term borrowings instruments are classified as Level 2 instruments and valued based on the present value of future cash flows associated with each instrument discounted using current market borrowing rates for similar borrowings instruments of comparable maturity. The classification of levels is fully described in Note 17. Assumptions used in fair value estimates Fair value estimates are made at a specific point in time, based on relevant market information available and details of the financial instruments. These estimates are practically conducted by the Company which involve uncertainties and matters of significant judgment, therefore, these cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
Fair Value Measurements_2
Fair Value Measurements | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value Measurements | ||
Fair Value Measurements | 11. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity’s own assumptions about the assumptions that market participants would use in establishing a price. There were no assets or liabilities to be measured at fair value on "recurring" basis for the six months ended June 30, 2021 and 2020. Impairment of long-lived assets Significant judgments and unobservable inputs categorized as Level 3 in the fair value hierarchy are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. The Company believes that the assumptions used in its annual and any interim date impairment tests are reasonable, but variations in any of the assumptions may result in different calculations of fair values and impairment charges. The Company’s primary business is the operations of Relaxation Salons. It regularly conducts reviews of past performances and future profitability forecast for individual Salons. Based on the evaluation, if the Company determines that the Salon assets are impaired and not fully recoverable, it reduces the carrying amounts of the Salon’s long-lived assets to the estimated fair value. Fair value is determined based on income approach using Level 3 inputs under ASC 820 Fair Value Measurement For the six months ended June 30, 2021, as a result of the continued impact of the COVID-19 pandemic, the Company evaluated whether the carrying values of the long-lived assets in certain relaxation salons were recoverable as of June 30, 2021. Based on the business recovery to-date, the Company did not identify any triggering event during the period. No impairments of long-lived assets were recorded for the six months ended June 30, 2021. | 17. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is as follows: Level 1 Inputs are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable, which reflect the reporting entity's own assumptions about the assumptions that market participants would use in establishing a price. There were no assets or liabilities to be measured at fair value on "recurring" basis during 2020 and 2019. Long-lived assets and liabilities measured at fair value on "nonrecurring" basis include leasehold improvements and right-of-use assets — operating lease. Assets and liabilities measured at fair value on "nonrecurring" basis as of December 31, 2020 and 2019 are as follows: Thousands of Yen Impairment Level 1 Level 2 Level 3 loss Year ended December 31, 2020 Assets Leasehold improvements ¥ ― ¥ ― ¥ 213,314 ¥ 36,512 Right-of-use asset - operating lease ― ― 1,578,828 69,989 Total ¥ ― ¥ ― ¥ 1,792,142 ¥ 106,501 Year ended December 31, 2019 Assets Leasehold improvements ¥ ― ¥ ― ¥ 161,330 ¥ 9,825 Right-of-use asset - operating lease ― ― 1,829,968 34,721 Total ¥ ― ¥ ― ¥ 1,991,298 ¥ 44,546 Impairment of long-lived assets Significant judgments and unobservable inputs categorized as Level 3 in the fair value hierarchy are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. The Company believes that the assumptions used in its annual and any interim date impairment tests are reasonable, but variations in any of the assumptions may result in different calculations of fair values and impairment charges. The Company's primary business is the operations of Relaxation Salons. It regularly conducts reviews of past performances and future profitability forecast for individual Salons. Based on the evaluation, if the Company determines that the Salon assets are impaired and not fully recoverable, it reduces the carrying amounts of the Salon's long-lived assets to the estimated fair value. Fair value is determined based on income approach using Level 3 inputs under ASC 820 Fair Value Measurement For the year ended December 31, 2020, the Company recognized impairment loss of ¥106,501 thousand on leasehold improvements and right-of-use asset — operating lease used in certain relaxation salons. The Company conducted strategic reviews of its future profitability forecast for the salons. Following these reviews, the Company reduced the corresponding estimated future cash flows of these assets and the estimated ability to recover the carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in the impairment charges. For the year ended December 31, 2019, the Company recognized impairment loss of ¥44,546 thousand on leasehold improvements and right-of-use assets — operating lease used in certain relaxation salons. The Company conducted strategic reviews of its future profitability forecast for the salons. Following these reviews, the Company reduced the corresponding estimated future cash flows of these assets and the estimated ability to recover the carrying amount of the long-lived assets within the period applicable to the impairment determination, resulting in the impairment charges. |
Commitments and Contingencies_2
Commitments and Contingencies | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Commitments and Contingencies. | ||
Commitments and Contingencies | 12. Commitments and Contingencies Operating leases The Group mainly in addition to its headquarters facility, leases salon spaces from external third parties, which are either directly-operated salons or franchised salons. Refer to Note 5 "Leases" for details on the components of operating lease costs and future minimum lease payments under non-cancellable leases. Borrowings The Company has long-term borrowings that are primarily made under general agreements. Refer to Note 4 "Long-term Borrowing" for future debt payments. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. The Company reviews these provisions at least on a yearly basis and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, the Company believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of the Company’s potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, or cash flows. | 18. Commitments and Contingencies Operating leases The Group mainly in addition to its headquarters facility, leases salon spaces from external third parties, which are either directly-operated salons or franchised salons. Refer to Note 8 "Leases" and Note 7 "Asset Retirement Obligation" for details on the components of operating lease costs and future minimum lease payments under non-cancellable leases and asset retirement obligation, respectively. Borrowings The Company has both short-term borrowings and long-term borrowings that are primarily made under general agreements. Refer to Note 6 "Short term and Long-term Borrowing" for future debt payments. Litigation The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company has recorded provisions for liabilities when it is probable that liabilities have been incurred and the amount of loss can be reasonably estimated. The Company reviews these provisions at least on a yearly basis and adjusts these provisions to reflect the impact of the negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Based on its experience, although litigation is inherently unpredictable, the Company believes that any damage amounts claimed in outstanding matters are not a meaningful indicator of the Company's potential liability. In the opinion of management, any reasonably possible range of losses from outstanding matters would not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows. |
Related Party Transactions_2
Related Party Transactions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Related Party Transactions | ||
Related Party Transactions | 13. Related Party Transactions Transactions with the Company’s director Akira Nojima, the Company’s independent director, is the sole owner of Kabushiki Kaisha No Track. As of June 30, 2021 and December 31, 2020, the outstanding accrued expenses to Kabushiki Kaisha No Track are ¥55 thousand and ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥300 thousand and ¥300 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha No Track, respectively. Tomoya Ogawa, the Company’s independent director and the shareholder of the Company (holds 0.58% and 0.59% of common stock as of June 30, 2021 and December 31, 2020, respectively), is the sole owner of Kabushiki Kaisha LTW. As of December 31, 2020, the outstanding accrued expenses to Kabushiki Kaisha LTW are ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥ Transactions with the Company’s corporate auditor As permitted under the Companies Act, we have elected to structure our corporate governance system as a company with a separate board of corporate auditors instead of an audit committee of our board of directors. Corporate auditors are typically nominated at the board level and are elected at general meetings of shareholders by a majority of shareholders entitled to vote, where a quorum is established by shareholders holding one Osamu Sato, the Company’s corporate auditor and the shareholder of the Company (holds 0.36% and 0.36% of common stock as of June 30, 2021 and December 31, 2020 respectively), is a part-time employee of Ebis 20 Co., Ltd., a Japanese company. As of December 31, 2020, the outstanding accrued expenses to Ebis 20 Co., Ltd. are ¥110 thousand (included in accrued expenses). For the six months ended June 30, 2021 and 2020, the Company paid consulting fees of ¥600 thousand and ¥600 thousand (included in selling, general and administrative expenses) to Ebis 20 Co., Ltd. respectively. | 19. Related Party Transactions Transactions with the Company's representative director As of December 31, 2019, the outstanding balance due from Kouji Eguchi, the representative director and the shareholder of the Company (holds 48.04% of common stock and all Class A Transactions with the Company's director Akira Nojima, the Company's independent director, is the sole owner of Kabushiki Kaisha No Track. As of December 31, 2020 and 2019, the outstanding accrued expenses to Kabushiki Kaisha No Track are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥600 thousand and ¥600 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha No Track, in each year respectively. Tomoya Ogawa, the Company's independent director and the shareholder of the Company (holds 0.59% and 0.71% of common stock as of December 31, 2020 and 2019 respectively), is the sole owner of Kabushiki Kaisha LTW. As of December 31, 2020 and 2019, the outstanding accrued expenses to Kabushiki Kaisha LTW are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥1,200 thousand and ¥1,200 thousand (included in selling, general and administrative expenses) to Kabushiki Kaisha LTW, in each year respectively. Transactions with the Company's corporate auditor (See Note 20) Osamu Sato, the Company's corporate auditor and the shareholder of the Company (holds 0.36% and 0.44% of common stock as of December 31, 2020 and 2019 respectively), is a part-time employee of Ebis 20 Co., Ltd. As of December 31, 2020 and 2019, the outstanding accrued expenses to Aoyama Consulting Group Co., Ltd are ¥110 thousand and ¥110 thousand (included in accrued expenses). The Company paid consulting fees of ¥1,200 thousand and ¥1,200 thousand (included in selling, general and administrative expenses) to Aoyama Consulting Group Co., Ltd in each year, respectively. |
Subsequent Events_2
Subsequent Events | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Subsequent Events | ||
Subsequent Events | 14. Subsequent Events Reorganization of the salon operation business Effective July 1, 2021, Bell Epoc Wellness Inc., a subsidiary of the Company, was merged with Decollte Wellness Corporation, another subsidiary of the Company pursaunt to an absorption-type company split agreement, with Bell Epoc Wellness Inc. being the successor entity. The purpose of this reorganization is to achieve more efficiency in training therapists and operating the relaxation salons, and to integrate the brands. As these subsidiaries were under common control, there was no impact to the consolidated financial statements. Bell Epoc Wellness Inc. changed its name to Wing Inc. effective November 1, 2021. Acquisition of ZACC’s share On August 31, 2021, the Company entered into a share transfer agreement with all of the existing shareholders of ZACC Kabusiki kaisha (“ZACC”), a Japanese hair salon operator of ”ZACC” brand, pursuant to which it will acquire 100% of the outstanding shares of ZACC through a two-stage acquisition for total consideration of ¥370,000 thousand. ZACC owns and operates 3 luxury hair salon brands (ZACC vie, ZACC raffine, and ZACC ginza), all of which have been recognized by customers for over 30 years for their high level of techniques and hospitality. The purchase price will be paid by cash on hand, and an initial payment of ¥69,014 thousand was made on August 31, 2021. The first stage of the acquisition closed on October 1, 2021, when the shareholders of ZACC transferred 60% of the common shares of ZACC to the Company for ¥152,986 thousand. The second stage, at which point the remaining shares of ZACC will be transferred to the Company, is scheduled to close on January 1, 2022 for ¥148,000 thousand. Conversion of Underlying Shares into ADSs The ADSs representing our common shares are listed on The Nasdaq Capital Market under the symbol “MRM”. As of July 31, 2021, more than 40% of our common shares were converted to ADSs which are tradable on DTC (Depository Trust Company) in the United States. Upon IPO and following over-allotment, we had only 17% of common shares converted and traded as ADSs on DTC. | 21. Subsequent Events Acquisition of relaxation salons In 2021, the Company acquired 18 relaxation salons from our franchisee located in Japan for cash consideration of ¥171,601 thousand. The results of operations, assets and liabilities of these acquired relaxation salons are expected to be included in the consolidated financial statements from the date of each acquisition during 2021. Exercise of Over-Allotment Option by the Underwriter On February 1, 2021, the Company completed the sale of an additional 60,000 ADSs, each representing one common share, no par value, of the Company, at the initial public offering price of $15.00 per ADS, pursuant to the exercise by the underwriter of the over-allotment option granted to it in connection with the Company’s initial public offering. The Company received additional aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. Acquisition of SAWAN’s share On April 28, 2021, the Company acquired 100% ownership of SAWAN CO. LTD. (“SAWAN”), a relaxation salon operator of “Ruam Ruam” from BOX GROUP Co., Ltd., a Japanese holding company specializing in beauty and spa products and services. Ruam Ruam is a luxury relaxation salon brand, which is characterized with Oriental relaxation techniques to fit the needs and preferences of the Japanese consumer. SAWAN directly operates 8 salons across the Tokyo metropolitan area. In addition, SAWAN entered into an agreement with Nine Roots Co., LTD., the sole franchisee of Ruam Ruam, to acquire its The acquisition was closed on May 6, 2021. The purchase price was paid by cash on hand and non-interest-bearing short-term liabilities. No shares were issued to the seller or its affiliates. The 21 st Ordinary General Meeting of Shareholders On March 29, 2021, the Company held its 21st Ordinary General Meeting of Shareholders, whereby the proposal to amend the Articles of Incorporation to increase the total number of authorized shares was approved. The total number of authorized shares increased to 19,900,000 shares, and the total number of authorized class shares increased to ommon shares and one (1) Class A common share. |
Description of Business, Basi_2
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies | ||
Description of Business | Description of Business MEDIROM Healthcare Technologies Inc. (the "Company") and its five subsidiaries (collectively, the "Group") are one of the leading holistic health services providers in Japan. The Group is a franchiser and operator of healthcare salons across Japan and is a preferred platform partner for large consumer brands, healthcare service providers, and government entities to affect positive health outcomes. The Group primarily engages in two lines of business: Relaxation Salon Segment (retail) and Digital Preventative Healthcare Segment (healthtech). Refer to description below and Note 6 for segment information. Relaxation Salon Segment (See Note 6 for segment information) The Relaxation Salon Segment is the core of our business, whereby we own, develop, operate, or franchise and support relaxation salons. Our salon locations cover major cities throughout Japan, with strong market presence in the Tokyo metropolitan area. The Segment includes several Relaxation Salon brands including Re.Ra.Ku®, and as of June 30, 2021 and December 31, 2020, it has a total of 313 and 290 salons, respectively. The following table presents total number of salons by operation type: Number of Relaxation Salons As of June 30, As of December 31, 2021 2020 Directly-operated 188 150 Franchised 125 140 Total 313 290 See Note 2, “Business Combination” for the number of salons acquired during the period. The results of operations of directly-operated salons converted to franchised salons in sale transactions with franchisees were not material either individually or in the aggregate to the unaudited condensed consolidated financial statements. Digital Preventative Healthcare Segment (See Note 6 for segment information) The Digital Preventative Healthcare Segment mainly consists of the following operations: government-sponsored Specific Health Guidance program, utilizing our internally-developed on-demand health monitoring smartphone application, LAV®; our MOTHER Tracker® under development for fitness applications. | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements are presented in Japanese yen, the currency of the country in which the Group is incorporated and principally operates. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The results of operations for interim period are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2021 or for any other future annual or interim period. The accompanying unaudited condensed consolidated financial information should be read in conjunction with the Company’s annual financial statements and notes included in our Annual Report on Form 20-F for the year ended December 31, 2020, which was filed with the SEC on May 17, 2021. | |
Initial Public Offering | Initial Public Offering The Company completed the initial public offering (IPO) of 800,000 shares of common stock in the form of American Depositary Shares (ADSs) at a price to the public of $15.00 per share on December 31, 2020. Each ADS represents one common share. The Company's ADSs are traded on the Nasdaq Capital Market. The Company recognized aggregate net proceeds of approximately ¥765,867 thousand after deducting underwriting discounts and commissions of ¥69,653 thousand and offering costs of ¥402,760 thousand, which net amount was credited to shareholders' equity. Tax effects associated with costs from the initial public offering of ¥123,325 thousand was credited to equity. As described in Note 21, on February 1, 2021, the Company sold an additional 60,000 ADSs representing 60,000 shares of common at the initial offering price of $15.00 per ADS, pursuant to the partial exercise of the over-allotment option to purchase up to 120,000 ADSs granted to the underwriters in connection with the initial public offering. The Company received aggregate net proceeds of approximately ¥87,642 thousand after deducting underwriting discounts and commissions. The remaining over-allotment option expired on February 12, 2021. | |
Recent Developments and Liquidity | Recent Developments and Liquidity In the six months ended June 30, 2021, the Company experienced negative cash flows from operations and also used a significant amount of cash for acquisitions and investments. In addition, it has had losses from operations since 2020, and has had a working capital deficit and an accumulated deficit since inception. Management evaluates the Company’s ability to continue as a going concern for one year after the date of the unaudited condensed consolidated financial statements are available for issuance. During the first half of 2021, the Japanese government issued multiple Declarations of Emergency for COVID-19, which impacted Tokyo and other prefectures where our salons are located. This affected the operation of our salons located in shopping malls and spa facilities. Under Declarations of Emergency, up to 28 salons had shortened operation and 36 salons temporarily closed their operation. As a result, our sales and profitability have not fully recovered. We are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, all Declarations of Emergency had been lifted nationwide. However, the duration and extent of COVID-19’s impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. The Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses, capital expenditure requirements and debt service obligations through early 2022 and that the Company would require additional capital in the future. Management believes it will be able to raise capital in the short-term through the sales of directly-owned salons. We may also consider obtaining additional financing through the issuance of our common stock or through other equity or debt financings, and we may also look into refinancing our existing debt obligations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful. In addition, management is actively pursuing restoring profitability of our relaxation salon business. | Recent Developments and Liquidity Pursuant to Accounting Standards Update ("ASU") No. 2014-15, Presentation of Financial Statement Going Concern On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic. The outbreak is having an impact on the global economy, resulting in rapidly changing market and economic conditions. National and local governments around the world instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The outbreak and associated restrictions that have been implemented have had a material adverse impact on the Company's business and cash flow from operations, similar to many businesses. In response to this outbreak, the Japanese government issued a Declaration of a State of Emergency (the "Declaration") on April 7, 2020. The Declaration resulted in a significant reduction in guest traffic at our relaxation salons due to changes in consumer behavior as social distancing practices. On April 21, 2020, the Company announced the temporary closure of almost all of its relaxation salons located across the country until May 6, 2020. The Declaration was lifted in Japan on May 25, 2020, however, other restrictions have been continuously encouraged by the Japanese government. In September, 2020, substantially all of the Company's relaxation salons were in operation. Because our operating results substantially depend upon our relaxation salons’ revenue volumes and profitability, the two months of idleness in April and May materially impacted our revenues. The Company implemented cost measures to mitigate topline degradation to the business from this pandemic, including reductions in executive and employee compensation and deferral of nonessential spend in order to limit the impact on our operations and financial results. Additionally, in order to further strengthen its cash position and provide financial flexibility in light of the current uncertainty arising from the COVID-19 pandemic, the Company entered into additional loan agreements with Japan Finance Corporation and Higashi-Nippon Bank, Limited to borrow ¥230,000 thousand collectively as of June 30, 2020. Furthermore, the Company entered into additional loan agreements with Higashi-Nippon Bank, Limited to borrow ¥170,000 thousand as of July 28, 2020 and to borrow additional ¥175,000 thousand from the same bank as of November 30, and entered into loan agreements with The Shoko Chukin Bank, Ltd. to borrow ¥100,000 thousand as of December 31, 2020. The Company also applied for the subsidy program for employment adjustment by the Japanese government with COVID-19 special treatment, which incentivizes companies to retain their employees. During 2020, the Company received ¥111,581 thousand from the subsidy program. The subsidy can help to cover the payroll costs of furloughed employees. The Japanese government subsidies of non-operating nature with no further conditions to be met are recorded as non-operating income in "other income (expense)" in the consolidated statements of (loss) income when received. In December 2020, the Company received aggregate net proceeds of ¥765,867 thousand that it will use for working capital and general corporate purposes. On January 7, 2021, Japanese government issued the second Declaration of Emergency for COVID-19, which applied to Tokyo, Kanagawa, Saitama, and Chiba prefectures and was planned to be effective from January 8 to February 7, 2021. In the declaration, the government requested shopping malls and other large-sized commercial properties, where many of our salons are located, to close stores at 8 p.m. The declaration also requested businesses to introduce remote work from home, which also impacted sales of our salons located in business districts. On January 13, 2021, the government expanded the declaration to seven other prefectures (Osaka, Kyoto, Hyogo, Aichi, Gifu, Fukuoka, and Tochigi). On February 2, 2021, the government decided to extend the declaration till March 7 over ten prefectures excluding Tochigi. On February 28, 2021, the government released six prefectures excluding Tokyo, Kanagawa, Saitama, and Chiba from the declaration. On March 5, 2021, the government decided to extend the declaration over the four prefectures till March 21. On March 21, 2021, the second Declaration of Emergency was fully lifted. Despite it having an adverse impact on our sales activities during the period, compared to the first Declaration of Emergency, in which most of shopping malls voluntarily closed the whole properties, there was much less impact. During the second declaration, 76 salons had shortened operations and 1 - 2 salons fully closed operations. On April 23, 2021, the Japanese government issued the third Declaration of Emergency applicable to Tokyo, Osaka, Hyogo, Kyoto during the period from April 25 to May 11. The declaration requested department stores and other large-sized commercial properties to close operation. This affected the operation of our salons located in shopping malls and spa facilities. As of May 10, 2021, 28 salons had shortened operation and 36 salons fully closed their operation. On May 6, 2021, the government announced it will extend the declaration till May 31 and add Fukuoka and Aichi prefectures to the scope of the declaration. Although the declarations have been adversely affecting our business, we are managing our operations by relocating therapists from closed or shortened salons to those lacking enough therapists, or issuing furlough to those who cannot be relocated to other open salons and applying for governmental subsidies. As of this report, the duration and extent of COVID-19's impact is not reasonably possible to estimate due to the uncertainty about the spread of the virus. This could lead to lower sales, further relaxation salon closures, delays in development of our business, which could continue to materially affect our financial condition and results of operations. Whereas management presently expects proceeds from existing loans, subsidies, and the net proceeds received from our IPO, to be sufficient to fund operating needs and existing debt obligations and does not currently expect to require additional capital for the next 12 months, no assurance can be provided as to the ultimate resolution of the foregoing matters and their ultimate impact on the Company's financial position, results of operations and cash flows. |
Consolidation and Variable Interest Entities | Consolidation and Variable Interest Entities The condensed consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation., Medirom Human Resources Inc., and SAWAN CO. LTD. All intercompany transactions have been eliminated in consolidation. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of June 30, 2021 and December 31, 2020. | Consolidation and Variable Interest Entities The consolidated financial statements include the accounts of the Company and the following wholly owned subsidiaries: JOYHANDS WELLNESS Inc., Bell Epoc Wellness Inc., Decollte Wellness Corporation, and Medirom Human Resources Inc. All intercompany transactions have been eliminated in consolidation. Investments in companies over which the Company has significant influence but not control are accounted for by the equity method. The Company evaluates its investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If the Company concludes that an investee is a VIE, the Company evaluates its power to direct the activities of the investee, its obligation to absorb the expected losses of the investee and its right to receive the expected residual returns of the investee to determine whether the Company is the primary beneficiary of the investee. If the Company is the primary beneficiary of a VIE, the Company consolidates such entity and reflects the non-controlling interest of other beneficiaries of that entity. There is no VIE where the Company is the primary beneficiary as of December 31, 2020 and 2019. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, the allowance for doubtful accounts, fair value of intangible assets acquired through business combination, impairment of long-lived assets and goodwill, asset retirement obligations, valuation of stock-based compensation, and valuation of deferred tax assets. Management bases these estimates on assumptions that it believes to be reasonable under the circumstance, including considerations for the impact from the outbreak of the COVID-19 pandemic on the Company's business. Actual results may differ from these estimates in future periods when the COVID-19 pandemic continues to evolve and additional information becomes available. | |
Foreign Currency Translation | Foreign Currency Translation The assets and liabilities of an equity method investee are translated into Japanese yen at the respective year-end exchange rates. All income and expense accounts are translated at weighted average rates. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income within shareholders' equity. Exchange gains and losses resulting from foreign currency transactions and the conversion of monetary assets and liabilities denominated in foreign currencies are included in other income (expenses) in the consolidated statements of (loss) income. | |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and time deposits or other highly liquid investments placed with banks or other financial institutions which are unrestricted as to withdrawal or use and have original maturities of less than three months. There are no cash equivalents balances for the periods presented. Time deposits presented in the consolidated balance sheets are short-term investments, these maturities are longer than three months but less than one year. | |
Accounts Receivable-Trade, Net | Accounts Receivable—Trade, Net The accounts receivable-trade on the Company's consolidated balance sheets primarily includes accounts receivables from franchisees. The balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from the Company's franchisees. The Company monitors the financial condition of its franchisees and records provisions for estimated losses on receivables when it believes franchisees are unable to make their required payments based on factors such as delinquencies and aging trends. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses incurred related to existing accounts and receivables. As of December 31, 2020 and 2019, the allowance for doubtful accounts related to accounts receivable-trade was ¥4,426 thousand and ¥22,920 thousand, respectively. | |
Accounts Receivable-Other and Long-Term Accounts Receivable-Other, Net | Accounts Receivable—Other and Long-Term Accounts Receivable—Other, Net The accounts receivable—other on the Company's consolidated balance sheets primarily includes accounts receivable from commercial facility landlords and credit card companies related directly-operated salon's revenue and franchisee's revenue collected by these entities on behalf of the Group. As of December 31, 2020 and 2019, accounts receivable from commercial facilities and credit card companies of ¥302,227 thousand and ¥318,474 thousand, respectively, are included in the accounts receivable—other on the consolidated balance sheets. Receivable of ¥50,000 thousand for the sale of the Company's investment in Re.Ra.Ku (Hong Kong) Health Science and Technology Co., Limited is included in the accounts receivable—other as of December 31, 2019. Long-term accounts receivable—other mainly consists of a non-interest bearing receivable due from an unrelated business entity, with a maturity of May 31, 2038, monthly repayment amounts of ¥720 thousand ¥1,200 thousand- and the principal balance due of ¥235,945 thousand and ¥247,450 thousand as of December 31, 2020 and 2019, respectively. The Company monitors the financial condition of its obligor and records provisions for estimated losses on receivables when it believes the obligors are unable to make their required payments. As of December 31, 2020 and 2019, the related discounts and allowance for doubtful accounts on long-term accounts receivable—other was ¥131,759 thousand and ¥141,256 thousand, respectively. | |
Concentrations | Concentrations Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash. The Company primarily places its cash with high-credit quality financial institutions. The Company's cash deposits, of up to ¥10,000 thousand are insured by the Japanese government. From time to time, the Company has deposits in excess of the insured amounts. No single customer accounted for 10% or more of the Company's total revenues for the years ended December 31, 2020 and 2019. | |
Inventories | Inventories Inventories consist principally of merchandise. A portion of inventories are also used for salon services. Inventories are stated at the lower of cost or net realizable value, cost being determined by the first-in, first-out method for merchandise. | |
Investments | Investments The Company uses the equity method to account for equity investments over which it has significant influence but does not own a majority equity interest or otherwise control, generally accompanying a shareholding of between 20% and 50% of the voting rights. The share of earnings or losses of the investee are recognized in the consolidated statements of (loss) income. Equity method adjustments include the company's proportionate share of investee income or loss and other adjustments required by the equity method. The Company evaluates its equity method investments for impairment whenever an event or change in circumstances occurs that may have a significant adverse impact on the fair value of the investment. If a loss in value has occurred and is deemed to be other than temporary, an impairment loss is recorded. Several factors are reviewed to determine whether a loss has occurred that is other than temporary, including absence of an ability to recover the carrying amount of the investment, the length and extent of the fair value decline, and the financial condition and future prospects of the investee. Investments in equity securities, in which the Company does not have significant influence, and for which there is not a readily determinable fair value, are recorded at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments in the same issuer. When the Company evaluates whether these non-marketable equity securities are impaired or not, the Company evaluates first whether an event or change in circumstances has occurred in the period that may have significant adverse effect on the fair value of the securities (an impairment indicator). The Company uses such impairment indicators as follows: (1) A significant deterioration in the earnings performance or business prospects of the investee. (2) A significant adverse change in the regulatory, economic, or technological environment of the investee. (3) A significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates. (4) A recent example of the new issuance of a security, in which the issue price is less than our cost. The Company estimates the fair value of the non-marketable equity securities when an impairment indicator is present. The fair value is determined as a result of considering various unobservable inputs which are available to the Company, including expectation of future income of the investees, net asset value of the investees, and material unrealized losses to be considered in assets and liabilities held by the investees. The Company recognizes impairment of non-marketable equity securities when the fair value is below the carrying amount and the decline in fair value is considered to be other-than-temporary. | |
Leases | Leases The Group considers whether a contract is a lease or if it contains a lease element when a contract is executed. If a contract conveys the right to control the use of the identified asset for a period of time in exchange for consideration, such contract is determined to contain a lease element. When the contract contains a lease element, a lease is either classified as operating lease or finance lease when the Group is a lessee, and a sales-type lease or direct financing lease when the Group is a lessor. The Group, as a lessee, applies the right-of-use model to account for lease transactions. Under the right-of-use model, right-of-use asset and lease liability are recognized at commencement date. The Group measures its lease liability at present value of future lease payments over the remaining term. The Group uses its incremental borrowing rate for the discount rate to calculate the present value of the payments since it is difficult and not practical to determine the interest rate implicit in the lease. The Group's incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Right-of-use asset lease liability 3 For operating leases, the Group recognizes the minimum lease payments where it is the lessee and the minimum lease income where it is the lessor on a straight-line basis over the lease term, and reflects them as rental expenses and rental revenues, respectively, in the consolidated statements of (loss) income. Operating rental expense includes amortization of right-of-use assets and interests on lease liability. Variable lease expenses are primarily linked to sales and are excluded from the measurement of lease liability. Rental expenses are recorded in the consolidated statements of (loss) income based on the nature of the underlying lease. Rental expense related to leases for directly-operated salons and for leased properties that are subsequently subleased to franchisees are recorded to "Cost of revenue from directly-operated salons" and "Cost of franchise revenues," respectively, and rental expense related to leases for corporate offices is recorded to "Selling, general and administrative expenses." Rental income for operating leases on properties subleased to franchisees is recorded to "Franchise revenue". Terms and conditions of the sublease agreements are arranged to pass through lease obligations under head leases to the franchisees. Sublease income is presented on a gross basis on the accompanying consolidated statements of (loss) income, as the Company remains the primary obligor. For newly executed contracts, renewal and revision related to leases, estimates and certain assumptions are used to determine asset value, useful lives, discount rate, lease term, etc. and these have effects on (1) classification of lease, (2) measurement of rental payments and (3) measurement of lease asset. These results may differ if varying estimates and assumptions are used. | |
Property and Equipment, Net | Property and Equipment, Net Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is computed principally using the straight-line method based on the estimated useful life of the assets. The useful lives for depreciation by major asset classes are as follows: Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 | |
Other Intangible Assets, Net | Other Intangible Assets, Net Other intangible assets with finite useful lives consist primarily of capitalized software and reacquired franchise rights. The Company capitalizes both eligible internal and external costs of developing or obtaining computer software for internal use. Costs incurred to develop internal-use software during the application development stage are capitalized until the software is substantially complete and ready for its intended use. Costs related to data conversion, training and maintenance costs associated with internal-use software are expensed as incurred. Capitalized software is amortized over the estimated useful life ( 3 1 | |
Impairment of Long-lived Assets, Excluding Goodwill | Impairment of Long-lived Assets, Excluding Goodwill The Company assesses impairment of long-lived assets at the individual salon level, as this is the lowest level for which identifiable cash flows are largely independent of other groups of assets and liabilities. The Company reviews the carrying value of long-lived assets or a related group of assets to be held and used for impairment whenever events or circumstances occur that indicate that the carrying value of the assets may not be recoverable. The assets are considered to be impaired when the estimated undiscounted cash flows expected to result from the use of the assets and their eventual disposition are less than their carrying values. The impairment loss is measured as the amount by which the carrying value of the asset or asset group exceeds its fair value. In determining the fair value, the Company uses present value techniques, if appropriate, based on the estimated future cash flows expected to result from the use of the assets and their eventual dispositions. During 2020, long-lived assets impairment charges related to continuing operations of ¥36,512 thousand and ¥69,989 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. During 2019, long-lived assets impairment charges related to continuing operations of ¥9,825 thousand and ¥34,721 thousand were recorded on property and equipment and right-of-use asset—operating leases, respectively. | |
Goodwill | Goodwill Goodwill represents the excess of cost over fair value of identifiable net assets acquired and assumed in business combinations. The Company generally records goodwill in connection with the acquisition of relaxation salons from franchisees. Upon the sale of relaxation salons to franchisees, goodwill is decremented. Goodwill and intangible assets that are deemed to have indefinite useful lives are subject to impairment testing. Impairment testing is performed annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill impairment assessments are performed at the reporting unit level, which is the same as the Company's operating segments. The Company utilizes a qualitative assessment for determining whether step one of the goodwill impairment analysis is necessary. If a step one test is considered necessary based on the qualitative factors, the Company compares the estimated fair value of a reporting unit to its carrying value. The carrying value of each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit. The Company calculates estimated fair values of the reporting units based on discounted future cash flows utilizing estimates in annual revenue, service and product margins, fixed expense rates, allocated corporate overhead, directly-operated and franchise salon counts, and long-term growth rates for determining terminal value. If the carrying amount of a reporting unit exceeds its fair value, a loss will be recorded for the excess of the carrying value of the reporting unit over the fair value of the reporting unit. The Company did not recognize impairment losses for any goodwill during the years ended December 31, 2020 and 2019. | |
Deferred Offering Costs | Deferred Offering Costs Deferred offering costs, which consist of direct incremental legal, consulting, accounting and other fees relating to the Company's initial public offering (IPO) completed on December 31, 2020, had been capitalized. These costs were reclassified to additional paid-in capital as a reduction from the IPO proceeds. Other incremental organization costs are expensed as incurred. As of December 31, 2020, there were no capitalized deferred offering costs in the consolidated balance sheets. As of December 31, 2019, there were ¥57,509 thousand of deferred offering costs capitalized in the consolidated balance sheets. | |
Asset Retirement Obligations | Asset Retirement Obligations The Company records asset retirement obligations when the obligation is incurred. The obligation is measured at fair value and included in Non-current liabilities. When the liability is initially recorded, the Company capitalizes the related cost by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value, and the capitalized cost is depreciated over the asset's useful life. | |
Revenue Recognition | Revenue Recognition Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company determines revenue recognition through the following steps: Step 1: identification of the contract with a customer; Step 2: identification of the performance obligations in the contract; Step 3: determination of the transaction price; Step 4: allocation of the transaction price to the performance obligations in the contract; Step 5: recognition of revenue when, or as, the Company satisfies a performance obligation. Revenue from Directly-Operated Salons Revenues from directly-operated salons are recognized when services are provided at the salons. Franchise Revenue Franchise Revenue is comprised of (i) franchise fees, (ii) royalty income, (iii) staffing service revenue, (iv) sublease revenue, and (v) other franchise revenues. The Company and the franchisee enter into a franchise agreement which sets forth the standard terms and conditions of operating the franchised salon, as well as the fees and royalties over the term of the agreement. In most cases, an outsourcing agreement, is also entered into in conjunction with the franchise agreement that specifies the terms of the sublease arrangement with the franchisee. Upon the franchisee's request, the Company's therapists are dispatched to franchise locations and franchisees must pay dispatch fees in accordance with the dispatched employees' position. (i) Franchise fees The Company receives the entire non-refundable initial franchise fees from the franchisee based on franchise agreement. The franchise agreement typically has an initial term of five years agreement could be renewed prior to expiration by mutual consent and renewal franchise fees are paid by franchisee upon renewal of agreement. Initial franchise fees and expected renewal franchise fees are recognized as revenue ratably using the time-based input method over the expected average contract life ( 8 (ii) Royalty income The Company collects royalties, an amount calculated by multiplying a certain percentage to gross sales, on a monthly basis. The royalties are subject to the sales- and usage-based royalties constraint and are recognized as revenues based on the monthly royalty earned where such amount is determined on the basis of gross sales made from each salon. (iii) Staffing service revenue The Company also generates revenue from providing its therapists to franchisees, which are recognized as revenues based on the total number of working hours of the agency worker during the dispatched period. The Company has elected the 'as-invoiced' practical expedient for its staffing services where the fixed rate per hour is invoiced to the customer. (iv) Sublease revenue The Company leases the premises in which the majority of its franchisees operate, where the Company retains the head lease primary obligation, and has entered into corresponding sublease arrangements with franchisees. Revenues from sublease transactions with franchisees are recognized on a straight-line basis over the respective operating lease terms, or at the time of the underlying sales for variable lease payments, in accordance with Accounting Standards Codification ("ASC") 842 Leases ("ASC 842"). (v) Other franchise revenues Other franchise revenues include other services provided to franchisees separately from the franchise agreements and include advertising, training, studio construction and hiring support. These services are primarily recognized as revenues when services are provided. The Company has elected the 'as-invoiced' practical expedient for its studio construction services where the consideration is invoiced to the customer. Other Revenues Other revenues are primarily from the Digital Preventive Healthcare segment, which include revenues from serving implementation of health and wellness programs (Specific Health Guidance Program), and are recognized when services are provided. Health monitoring wearable device service (MOTHER Tracker ® ) is still at the development stage and as such generates no revenue. See Note 13 for further disclosures required under ASC 606 and Recently Adopted Accounting Pronouncements below for impacts of the ASC 606 adoption. Revenue is recognized net of consumption tax collected from customers and subsequently remitted to governmental authorities. | |
Advertising Expenses | Advertising Expenses Advertising costs are expensed as incurred and are recorded in "selling, general and administration expenses". Advertising expenses for the years ended December 31, 2020 and 2019 were ¥92,460 thousand and ¥77,911 thousand, respectively. | |
Stock-Based Compensation | Stock-Based Compensation The Company measures the cost of employee services received in exchange for an award of equity instruments at the fair value of the award on the grant date and recognizes the cost over the requisite service period which the employee is required to provide services in exchange for the award. Compensation expenses are recognized on a straight-line basis over the requisite service period of the awards which are expected to be vested. The Company accounts for forfeitures as they occur. The Company uses option pricing methods that require the input of subjective assumptions, including the expected term, expected volatility, dividend yield and risk-free interest rate. The Company estimates the likelihood and the rate of achievement for performance sensitive stock-based awards at the end of each reporting period. Changes in the estimated rate of achievement can have a significant effect on the recorded stock-based compensation expense as the effect of a change in the estimated achievement level is recognized in the period the change occurs. | |
Income Taxes | Income Taxes Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes and tax loss carryforwards. These deferred taxes are measured using the currently enacted tax rates in effect for the year in which the temporary differences or tax loss carryforwards and tax credits are expected to reverse. Valuation allowances are provided against deferred tax assets when it is more likely than not that a tax benefit will not be realized. The Company recognizes the financial statement effect of uncertain tax positions when it is more likely than not, based on the technical merits, that the tax positions will be sustained upon examination by the tax authorities. Benefits from tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Accrued interest and penalties related to the unrecognized tax benefits are included in income tax (benefit) expense in the consolidated statements of (loss) income. | |
(Loss) Earnings Per Share | (Loss) Earnings Per Share Basic and diluted (loss) earnings per common share are presented in conformity with the two-class method required for participating securities. Basic net (loss) income attributable to the Company per common share is computed by dividing net (loss) income attributable to the Company by the weighted-average number of shares of common stock outstanding during the year. Diluted net income attributable to the Company per common share reflects the potential dilutive effect of stock options. (See Note 15) | |
Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Adopted Accounting Pronouncements Income Taxes In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12 Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740) Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform | Recently Adopted Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers Revenue from Contracts with Customers (ASC 606) and Leases (ASC 842) -Effective Dates for Certain Entities The Company adopted ASC 606 as of January 1, 2020 using the modified retrospective method of adoption for contracts that were not completed as of the adoption and recognized a cumulative-effect adjustment to accumulated deficit of ¥(458,823) thousand. Revenues are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. As a result, the Company has changed its accounting policy for revenue recognition of franchise fees as detailed below. The adoption of this new guidance did not have a material impact for revenue recognition of other than franchise fees. The comparative periods have not been adjusted and continue to be reported under the previous revenue recognition guidance. The details of the significant changes and quantitative impact of the changes are discussed below. Franchise fees The adoption of the new revenue recognition guidance changed the timing of recognition of initial franchise fees and renewal franchise fees . Prior to the adoption of ASC 606, the Company recognized revenue under FASB Topic 605 Revenue Recognition ("ASC 605") 8 Impacts on consolidated financial statements Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC 606, are as follows: Thousands of Yen As reported on Effect of As adjusted on December 31, adoption of December 31, 2019 ASC 606 2019 Assets: Deferred tax assets, net 222,505 202,496 425,001 Liabilities: Accrued expenses 447,974 820 448,794 Contract liability (current) ― 201,559 201,559 Advances received 483,124 (6,137) 476,987 Long-term contract liability - net of current portion ― 465,077 465,077 Shareholders’ equity: Accumulated deficit ¥ (705,309) ¥ (458,823) ¥ (1,164,132) Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without As of December 31, 2020 As reported amount adoption Assets: Deferred tax assets, net ¥ 655,591 ¥ (135,345) ¥ 520,246 Liabilities: Accrued expenses 889,112 (600) 888,512 Contract liability (current) 172,063 (172,063) ― Advances received 461,665 26 461,691 Long-term contract liability - net of current portion 333,978 (333,978) ― Shareholders’ equity (deficit): Accumulated deficit ¥ (1,703,302) ¥ 371,270 ¥ (1,332,032) Selected condensed consolidated statement of (loss) income line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Revenues ¥ 3,341,617 ¥ (154,702) ¥ 3,186,915 Operating loss (746,088) (154,702) (900,790) Loss before income tax (626,689) (154,702) (781,391) Income tax benefit (87,519) (67,151) (154,670) Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Selected condensed consolidated statement of cash flows line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Cash flows from operating activities: Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Adjustments to reconcile net loss to net cash used in operating activities: Deferred income tax expense (107,264) (67,151) (174,415) Changes in operating assets and liabilities: Accrued expenses 206,706 220 206,926 Contract liability (160,595) 160,595 ― Advances received (15,322) (6,113) (21,435) Net cash used in operating activities ¥ (366,420) ¥ ― ¥ (366,420) Fair Value Measurement Disclosures In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement Recently Issued Accounting Pronouncements Not Yet Adopted Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). Income Taxes In December 2019, the FASB issued ASU 2019-12 Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740) Investments In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321) Clarifying the Interactions between Topics 321, 323 and 815 Reference Rate Reform On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope Reference Rate Reform |
Description of Business, Basi_3
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Significant Accounting Policies | ||
Schedule of total number of salons by operation type | Number of Relaxation Salons As of June 30, As of December 31, 2021 2020 Directly-operated 188 150 Franchised 125 140 Total 313 290 | |
Schedule of useful lives for depreciation by major asset classes | Leasehold improvements Lesser of 15 years or the remaining lease term Vehicles 6 years Tools, furniture and fixtures 2 | |
Accounting Standards Update and Change in Accounting Principle [Table Text Block] | Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC 606, are as follows: Thousands of Yen As reported on Effect of As adjusted on December 31, adoption of December 31, 2019 ASC 606 2019 Assets: Deferred tax assets, net 222,505 202,496 425,001 Liabilities: Accrued expenses 447,974 820 448,794 Contract liability (current) ― 201,559 201,559 Advances received 483,124 (6,137) 476,987 Long-term contract liability - net of current portion ― 465,077 465,077 Shareholders’ equity: Accumulated deficit ¥ (705,309) ¥ (458,823) ¥ (1,164,132) Selected condensed consolidated balance sheets line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without As of December 31, 2020 As reported amount adoption Assets: Deferred tax assets, net ¥ 655,591 ¥ (135,345) ¥ 520,246 Liabilities: Accrued expenses 889,112 (600) 888,512 Contract liability (current) 172,063 (172,063) ― Advances received 461,665 26 461,691 Long-term contract liability - net of current portion 333,978 (333,978) ― Shareholders’ equity (deficit): Accumulated deficit ¥ (1,703,302) ¥ 371,270 ¥ (1,332,032) Selected condensed consolidated statement of (loss) income line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Revenues ¥ 3,341,617 ¥ (154,702) ¥ 3,186,915 Operating loss (746,088) (154,702) (900,790) Loss before income tax (626,689) (154,702) (781,391) Income tax benefit (87,519) (67,151) (154,670) Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Selected condensed consolidated statement of cash flows line items, which reflect the adoption of ASC606, are as follows: Thousands of Yen Balances Adjusted without Year ended December 31, 2020 As reported amount adoption Cash flows from operating activities: Net loss ¥ (539,170) ¥ (87,551) ¥ (626,721) Adjustments to reconcile net loss to net cash used in operating activities: Deferred income tax expense (107,264) (67,151) (174,415) Changes in operating assets and liabilities: Accrued expenses 206,706 220 206,926 Contract liability (160,595) 160,595 ― Advances received (15,322) (6,113) (21,435) Net cash used in operating activities ¥ (366,420) ¥ ― ¥ (366,420) | |
Relaxation Salon Segment | ||
Significant Accounting Policies | ||
Schedule of total number of salons by operation type | Number of Relaxation Salons 2020 2019 Directly-operated 150 107 Franchised 140 176 Total 290 283 |
Business Combination (Tables)_2
Business Combination (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Business Acquisition [Line Items] | ||
Schedule of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date | Thousands of Yen Fair value of assets/liabilities 2020 2019 Property and equipment - net ¥ 51,005 ¥ 27,567 Goodwill 72,438 22,156 Intangible assets 12,690 6,519 Total assets acquired 136,133 56,242 Asset retirement obligation (49,217) (25,942) Total liabilities assumed (49,217) (25,942) Net assets assumed 86,916 30,300 Fair value of the consideration transferred 86,916 23,813 Gain from bargain purchases ¥ ― ¥ 6,487 | |
SAWAN CO. LTD. ("SAWAN") | ||
Business Acquisition [Line Items] | ||
Schedule of the estimated fair values of the assets acquired and liabilities assumed at the acquisition date | Thousands of Yen Fair value of assets/liabilities Cash and cash equivalents ¥ 7,824 Accounts receivable, net 18,228 Inventories 2,898 Prepaid expenses and other current assets 14,989 Property and equipment - net 50,673 Goodwill 218,138 Right-of-use asset-operating lease, net 153,269 Other long-term assets 57,323 Total assets acquired 523,342 Accounts payable (3,531) Accrued expenses (97,279) Advances received (73,353) Other current liabilities (21,995) Lease liability (151,197) Asset retirement obligation (25,060) Other liabilities (10,230) Total liabilities assumed (382,645) Net assets assumed 140,697 Fair value of the consideration transferred ¥ 140,697 |
Goodwill (Tables)
Goodwill (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Goodwill. | ||
Schedule of components of intangible assets | Thousands of Yen 2020 2019 Intangible assets subject to amortization: Software for internal use ¥ 84,152 ¥ 54,710 Reacquired franchise rights 17,973 9,802 Other 750 10,750 Total 102,875 75,262 Accumulated amortization (44,330) (36,694) Net carrying amount 58,545 38,568 Intangible assets not subject to amortization: Trademark 38,922 38,922 Goodwill 150,720 78,282 Telephone rights 148 148 Total 189,790 117,352 Total intangible assets ¥ 248,335 ¥ 155,920 | |
Schedule of estimated aggregate amortization expense for intangible assets | Thousands of Yen Year ending December 31: 2021 ¥ 24,019 2022 17,857 2023 9,540 2024 6,034 2025 957 Thereafter 138 Total ¥ 58,545 | |
Schedule of changes in carrying amount of goodwill | Thousands of Yen Balance at December 31, 2020 ¥ 150,720 Acquisition of SAWAN's shares 218,138 Acquisitions of relaxation salons 166,388 Balance at June 30, 2021 ¥ 535,246 | Thousands of Yen Balance at December 31, 2018 Goodwill ¥ 63,955 Acquisitions of relaxation salons* 22,156 Sales of directly-operated salons to franchisees, and disposal of relaxation salon (7,829) Balance at December 31, 2019 Goodwill 78,282 Acquisitions of relaxation salons* 72,438 Balance at December 31, 2020 Goodwill ¥ 150,720 * Acquisitions for the years ended December 31, 2020 and 2019 relate to relaxation salon acquisitions in the relaxation salon segment. Refer to Note 2. |
Long-term Borrowings (Tables)
Long-term Borrowings (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Long-term Borrowings | ||
Schedule of long-term borrowings | Thousands of Yen As of June 30, 2021 As of December 31, 2020 Bank loans (Due through 2035 with weighted average interest rates of 1.05% as of June 30, 2021, due through 2035 with weighted average interest rates of ¥ 755,159 ¥ 910,661 Current portion of long-term borrowings (181,884) (242,281) Total long-term borrowings ¥ 573,275 ¥ 668,380 | Thousands of Yen 2020 2019 Unsecured bank loans (Due through 2035 with weighted average interest rates of 1.33% as of December 31, 2020, due through 2025 with weighted average interest rates of ¥ 910,661 ¥ 342,101 Current portion of long-term borrowings (242,281) (191,570) Total long-term borrowings ¥ 668,380 ¥ 150,531 |
Schedule of maturities of long-term borrowings | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 86,779 2022 123,460 2023 62,628 2024 60,252 2025 59,370 2026 and thereafter 362,670 Total ¥ 755,159 | Thousands of Yen Year ending December 31: 2021 ¥ 242,281 2022 123,460 2023 62,628 2024 60,252 2025 59,550 2026 and thereafter 362,490 Total ¥ 910,661 |
Leases (Tables)_2
Leases (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Leases | ||
Schedule of components of operating lease costs related to operating leases | Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed lease cost (a) ¥ 386,992 ¥ 372,769 Variable lease cost (b) 13,789 7,476 Short-term cost 18,170 4,458 Total ¥ 418,951 ¥ 384,703 (a) This includes the amount of ¥ 217,083 thousand and ¥ 260,194 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. (b) This includes the amount of ¥ 7,961 thousand and ¥ 5,674 thousand recoverable from sublessees for the six months ended June 30, 2021 and 2020, respectively. | Thousands of Yen 2020 2019 Fixed lease cost (a) ¥ 748,230 ¥ 851,555 Variable lease cost (b) 24,484 30,901 Short-term cost 11,669 10,979 Total ¥ 784,383 ¥ 893,435 (a) This includes the amount of ¥478,225 thousand and ¥580,074 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. (b) This includes the amount of ¥14,146 thousand and ¥27,606 thousand recoverable from sublessees for the years ended December 31, 2020 and 2019, respectively. |
Schedule of supplementary information on cash flow and other information for leasing activities | Thousands of Yen Six Months Ended June 30, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 391,650 ¥ 99,758 Right-of-use assets obtained in exchange for lease liabilities 490,342 189,240 Weighted average remaining lease term (in years) 2.9 3.1 Weighted average discount rate 1.45% 1.45% | Thousands of Yen 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows ¥ 797,623 ¥ 375,270 Right-of-use assets obtained in exchange for lease liabilities 604,703 749,008 Weighted average remaining lease term (in years) 2.8 3.3 Weighted average discount rate 1.45% 1.45% |
Schedule of maturity analysis of future minimum lease payments under non-cancellable leases | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 430,043 2022 620,210 2023 363,730 2024 183,145 2025 110,723 2026 and thereafter 132,480 Total 1,840,331 Less: Interest component (78,116) Present value of minimum lease payments ¥ 1,762,215 | Thousands of Yen Year ending December 31: 2021 ¥ 667,823 2022 493,800 2023 246,751 2024 122,654 2025 70,448 2026 and thereafter 98,245 Total 1,699,721 Less: Interest component (48,509) Present value of minimum lease payments ¥ 1,651,212 |
Schedule of subleases | Thousands of Yen Six Months Ended June 30, 2021 2020 Fixed sublease income ¥ 217,083 ¥ 260,194 Variable sublease income 7,961 5,674 Total ¥ 225,044 ¥ 265,868 Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 178,798 2022 313,207 2023 198,400 2024 82,997 2025 43,103 2026 and thereafter 28,198 Total ¥ 844,703 | Thousands of Yen 2020 2019 Fixed sublease income ¥ 478,225 ¥ 580,074 Variable sublease income 14,146 27,606 Total ¥ 492,371 ¥ 607,680 Thousands of Yen Year ending December 31: 2021 ¥ 376,993 2022 276,765 2023 152,356 2024 66,450 2025 33,728 2026 and thereafter 20,488 Total ¥ 926,780 |
Segment Information (Tables)_2
Segment Information (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Segment Information | ||
Information about operating results and assets for each segment | Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Six months ended June 30, 2021 (ASC 606) Revenues ¥ 2,110,561 ¥ 16,918 ¥ ― ¥ 2,127,479 Operating income (loss) 93,852 (65,004) (511,036) (482,188) Depreciation and amortization 25,345 4,201 10,085 39,631 Six months ended June 30, 2020 (ASC 605) Revenues ¥ 1,344,503 ¥ 11,774 ¥ ― ¥ 1,356,277 Operating loss (166,200) (21,016) (247,091) (434,307) Depreciation and amortization 14,453 3,771 14,881 33,105 | Thousands of Yen Digital Corporate Relaxation Preventative and Salon Healthcare elimination Consolidated Year ended December 31, 2020 Revenues ¥ 3,315,947 ¥ 25,670 ¥ ― ¥ 3,341,617 Operating income (loss) (140,866) (66,100) (539,122) (746,088) Depreciation and amortization 32,261 8,007 22,022 62,290 Total assets 3,096,094 34,247 2,583,125 5,713,466 Year ended December 31, 2019 Revenues ¥ 3,864,656 ¥ 43,608 ¥ ― ¥ 3,908,264 Operating income (loss) 279,439 (43,056) (202,033) 34,350 Depreciation and amortization 34,025 4,764 7,385 46,174 Total assets 3,346,739 29,565 1,381,161 4,757,465 |
Revenue Recognition (Tables)_2
Revenue Recognition (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Schedule of disaggregation of revenue | Thousands of Yen Revenue Stream* Relaxation Salon Digital Preventative Healthcare Consolidated Six months ended June 30, 2021 Revenue from directly-operated salons ¥ 1,421,413 ¥ ― ¥ 1,421,413 Franchise fees 125,513 ― 125,513 Royalty income 99,534 ― 99,534 Staffing service revenue 126,734 ― 126,734 Sublease revenue 225,044 ― 225,044 Other franchise revenues 112,323 ― 112,323 Other revenues ― 16,918 16,918 Total revenues ¥ 2,110,561 ¥ 16,918 ¥ 2,127,479 * All revenue streams are recognized over time, with the exception of hiring support within “Other franchise revenues,” which are recognized at a point in time. Revenue related to hiring support was not material in the periods presented. | For the year ended December 31, 2020, revenues are disaggregated by revenue stream and reconciled to reportable segment revenues as follows. Thousands of Yen Digital Preventative Revenue Stream* Relaxation Salon Healthcare Consolidated Year ended December 31, 2020 Revenue from directly-operated salons ¥ 2,026,806 ¥ ― ¥ 2,026,806 Franchise fees 175,445 ― 175,445 Royalty income 179,745 ― 179,745 Staffing service revenue 254,282 ― 254,282 Sublease revenue 492,371 ― 492,371 Other franchise revenues 187,298 ― 187,298 Other revenues ― 25,670 25,670 Total revenues ¥ 3,315,947 ¥ 25,670 ¥ 3,341,617 |
Schedule of contract balance | Thousands of Yen As of As of June 30, December 31, 2021 2020 Balance sheet classification Receivables ¥ 89,416 ¥ 148,540 Accounts receivable-trade, net Contract liabilities: Current 92,988 172,063 Contract liability (current) Long-term 297,523 333,978 Long-term contract liability – net of current portion Total ¥ 390,511 ¥ 506,041 | |
Schedule of changes in contract liability | Thousands of Yen Contract liabilities Balance at December 31, 2020 ¥ 506,041 Revenues recognized during 2021 which were included in the contract liabilities balance at December 31, 2020 (131,269) Remaining amounts at June 30, 2021 which were newly recognized as contract liabilities during 2021 15,739 Balance at June 30, 2021 ¥ 390,511 | Changes in the Company’s contract liabilities for the year ended December 31, 2020 are as follows: Thousands of Yen Contract liabilities Balance at December 31, 2019 as adjusted (Note 1) ¥ 666,636 Revenues recognized during 2020 which were included in the contract liabilities balance at December 31, 2019 (203,970) Remaining amounts at December 31, 2020 which were newly recognized as contract liabilities during 2020 43,375 Balance at December 31, 2020 ¥ 506,041 |
Schedule of estimated revenue | Thousands of Yen Year ending December 31: 2021 (remainder) ¥ 45,307 2022 92,083 2023 90,272 2024 81,855 2025 53,551 2026 and thereafter 27,443 Total ¥ 390,511 | Estimated revenue, which includes renewal fees not yet paid, expected to be recognized in the future related to performance obligations that are unsatisfied as of December 31, 2020 is as follows: Thousands of Yen Year ending December 31: 2021 ¥ 172,063 2022 90,313 2023 88,310 2024 79,168 2025 53,558 2026 and thereafter 34,730 Total ¥ 518,142 |
Loss Per Share (Tables)
Loss Per Share (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Loss Per Share | ||
Reconciliations of net (loss) income and weighted average number of common shares outstanding used for the computation of basic (loss) earnings per common share | Six Months Ended June 30, 2021 2020 Common Class A Common Class A (Thousands of Yen) (Thousands of Yen) Loss (Numerator) Net loss attributable to shareholders of the Company ¥ (521,770) ― ¥ (442,971) ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,872,224 1 4,022,500 1 Effect of dilutive instruments: Stock options ― ― ― ― Weighted average common shares for diluted computation 4,872,224 1 4,022,500 1 Loss per common share attributable to shareholders of the Company (Yen) (Yen) Basic ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) Diluted ¥ (107.09) ¥ (107.09) ¥ (110.12) ¥ (110.12) | 2020 2019 Common Class A Common Class A (Yen) (Yen) Income (Numerator) Net (loss) income attributable to shareholders of the Company ¥ (539,170) ― ¥ 17,335 ― Shares (Denominator) (Number of shares) (Number of shares) Weighted average common shares outstanding 4,024,692 1 3,747,295 1 Effect of dilutive instruments: Stock options ― ― 525,007 ― Weighted average common shares for diluted computation 4,024,692 1 4,272,302 1 (Loss) earnings per common share attributable to shareholders of the Company Basic ¥ (133.97) ¥ (133.97) ¥ 4.63 ¥ 4.63 Diluted ¥ (133.97) ¥ (133.97) ¥ 4.06 ¥ 4.06 |
Fair Value of Financial Instr_5
Fair Value of Financial Instruments (Tables) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Fair Value of Financial Instruments | ||
Estimated fair value of debt | Thousands of Yen As of June 30, 2021 As of December 31, 2020 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (573,275) ¥ (554,257) ¥ (668,380) ¥ (644,499) | Thousands of Yen 2020 2019 Carrying amount Estimated fair value Carrying amount Estimated fair value Long-term borrowings - net of current portion ¥ (668,380) ¥ (644,499) ¥ (150,531) ¥ (145,600) |
Description of Business, Basi_4
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies (Details) ¥ in Thousands | 1 Months Ended | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2020JPY (¥) | Jun. 30, 2021itemsubsidiarysegment | Dec. 31, 2020JPY (¥)segmentsubsidiary | Dec. 31, 2020item$ / shares | Dec. 31, 2019item | |
Product Information | |||||
Number of subsidiaries | subsidiary | 5 | 4 | |||
Number of lines of business | segment | 2 | 2 | |||
Number of salons | 313 | 290 | 283 | ||
Number of salons temporarily closed | 36 | ||||
Number of VIE where the Company is the primary beneficiary | 0 | 0 | 0 | ||
Aggregate net proceeds | ¥ | ¥ 765,867 | ||||
Maximum | |||||
Product Information | |||||
Number of salons with shortened duration | 28 | ||||
IPO | American Depository Shares | |||||
Product Information | |||||
Share price | $ / shares | $ 15 | ||||
Aggregate net proceeds | ¥ | ¥ 765,867 | ||||
Underwriters commission | ¥ | 69,653 | ||||
Tax effected associated with offering costs | ¥ | ¥ 123,325 | ||||
Directly-operated salons | |||||
Product Information | |||||
Number of salons | 188 | 150 | 107 | ||
Franchise fees | |||||
Product Information | |||||
Number of salons | 125 | 140 | 176 |
Description of Business, Basi_5
Description of Business, Basis of Presentation and Summary of Significant Accounting Policies - Recent Developments and Liquidity (Details) ¥ in Thousands | May 10, 2021item | Mar. 05, 2021item | Feb. 28, 2021item | Feb. 02, 2021item | Jan. 13, 2021item | Dec. 31, 2020JPY (¥) | May 31, 2020 | Dec. 31, 2020JPY (¥) | Nov. 30, 2020JPY (¥) | Jul. 28, 2020JPY (¥) |
Unusual or Infrequent Item, or Both | ||||||||||
Period of time over which operations were suspended | 2 months | |||||||||
Aggregate net proceeds | ¥ | ¥ 765,867 | |||||||||
Number of salons with shortened operations | 28 | |||||||||
Number of fully closed salons | 36 | |||||||||
Loans from Japan Finance Corporation and Higashi-Nippon Bank | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Loan amount borrowed | ¥ | 230,000 | ¥ 230,000 | ||||||||
Proceeds from government assistance COVID-19 | ¥ | 111,581 | |||||||||
Loans from Higashi-Nippon Bank | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Loan amount borrowed | ¥ | ¥ 175,000 | ¥ 170,000 | ||||||||
Loans from Shoko Chukin Bank | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Loan amount borrowed | ¥ | ¥ 100,000 | ¥ 100,000 | ||||||||
Subsequent Event | Declaration One | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of prefectures | 7 | |||||||||
Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of prefectures | 10 | |||||||||
Number of salons with shortened operations | 76 | |||||||||
Subsequent Event | Declaration Three | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of prefectures | 6 | |||||||||
Subsequent Event | Declaration Four | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of prefectures | 4 | |||||||||
Minimum | Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of fully closed salons | 1 | |||||||||
Maximum | Subsequent Event | Declaration Two | ||||||||||
Unusual or Infrequent Item, or Both | ||||||||||
Number of fully closed salons | 2 |
Business Combination - Acquis_3
Business Combination - Acquisition of relaxation salons (Details) ¥ in Thousands | May 06, 2021JPY (¥) | Jun. 30, 2021JPY (¥)item | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)item | Dec. 31, 2019JPY (¥)item | Dec. 31, 2018JPY (¥) |
Business Acquisition | ||||||
Cash consideration | ¥ 86,916 | ¥ 23,813 | ||||
Business Combination Assets Acquired and Liabilities Assumed, Net | ||||||
Goodwill | ¥ 535,246 | 150,720 | 78,282 | ¥ 63,955 | ||
Other intangible assets, net | 12,690 | 6,519 | ||||
Right-of-use asset - operating lease, net | 51,005 | 27,567 | ||||
Total assets acquired | 136,133 | 56,242 | ||||
Asset retirement obligations | (49,217) | (25,942) | ||||
Other liabilities | (18,693) | (7,716) | (5,589) | |||
Total liabilities assumed | (49,217) | (25,942) | ||||
Net assets assumed | 86,916 | 30,300 | ||||
Fair value of the consideration transferred | ¥ 86,916 | 23,813 | ||||
Gain from bargain purchase | 1,014 | ¥ 1,624 | ¥ 6,487 | |||
SAWAN CO. LTD. ("SAWAN") | ||||||
Business Acquisition | ||||||
Cash consideration | ¥ 140,697 | 140,697 | ||||
Business Combination Assets Acquired and Liabilities Assumed, Net | ||||||
Cash and cash equivalents | 7,824 | |||||
Accounts receivable, net | 18,228 | |||||
Inventories | 2,898 | |||||
Prepaid expenses and other current assets | 14,989 | |||||
Property and equipment - net | 50,673 | |||||
Goodwill | 218,138 | |||||
Right-of-use asset - operating lease, net | 153,269 | |||||
Other long-term assets | 57,323 | |||||
Total assets acquired | 523,342 | |||||
Accounts payable | (3,531) | |||||
Accrued expenses | (97,279) | |||||
Advances received | (73,353) | |||||
Other current liabilities | (21,995) | |||||
Lease liability | (151,197) | |||||
Asset retirement obligations | (25,060) | |||||
Other liabilities | (10,230) | |||||
Total liabilities assumed | (382,645) | |||||
Net assets assumed | 140,697 | |||||
Fair value of the consideration transferred | ¥ 140,697 | ¥ 140,697 | ||||
Relaxation Salons | ||||||
Business Acquisition | ||||||
Number of salons acquired | item | 18 | 16 | 17 | |||
Cash consideration | ¥ 167,970 | ¥ 86,916 | ¥ 23,813 | |||
Business Combination Assets Acquired and Liabilities Assumed, Net | ||||||
Property and equipment - net | 38,479 | |||||
Goodwill | 166,388 | |||||
Asset retirement obligations | (35,883) | |||||
Fair value of the consideration transferred | 167,970 | 86,916 | 23,813 | |||
Gain from bargain purchase | ¥ 1,014 | ¥ 0 | ¥ 6,487 |
Business Combination - Additi_2
Business Combination - Additional Information (Details) - JPY (¥) ¥ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 31, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Business Acquisition | |||||
Gain from bargain purchases | ¥ 1,014 | ¥ 1,624 | ¥ 6,487 | ||
Revenues | 2,127,479 | 1,356,277 | ¥ 3,341,617 | 3,908,264 | |
Net loss | (521,770) | ¥ (442,971) | (539,170) | 17,335 | |
Amount of intangibles acquired | 102,875 | 75,262 | |||
Minimum | |||||
Business Acquisition | |||||
Royalty rate of fair value measurements for unobservable inputs (as a percent) | 1.20% | ||||
Discount rate of fair value measurements for unobservable inputs (as a percent) | 11.30% | ||||
Maximum | |||||
Business Acquisition | |||||
Royalty rate of fair value measurements for unobservable inputs (as a percent) | 2.50% | ||||
Discount rate of fair value measurements for unobservable inputs (as a percent) | 14.00% | ||||
Reacquired franchise rights | |||||
Business Acquisition | |||||
Amount of intangibles acquired | ¥ 17,973 | 9,802 | |||
Reacquired franchise rights | Minimum | |||||
Business Acquisition | |||||
Useful life | 1 year | ||||
Reacquired franchise rights | Maximum | |||||
Business Acquisition | |||||
Useful life | 5 years | ||||
SAWAN CO. LTD. ("SAWAN") | |||||
Business Acquisition | |||||
Acquisition related costs | 12,000 | ||||
Revenues | 73,706 | ||||
Net loss | 4,483 | ||||
Relaxation Salons | |||||
Business Acquisition | |||||
Gain from bargain purchases | 1,014 | ¥ 0 | 6,487 | ||
Revenues | 80,215 | 375,148 | 799,788 | ||
Net loss | ¥ (10,354) | (26,595) | 107,145 | ||
Relaxation Salons | Reacquired franchise rights | |||||
Business Acquisition | |||||
Amount of franchise rights reacquired | ¥ 12,690 | ¥ 6,519 | |||
Useful life of reacquired franchise rights | 3 years |
Goodwill - Changes in carrying
Goodwill - Changes in carrying amount of goodwill (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill Roll Forward | ||||
Goodwill beginning balance | ¥ 150,720 | ¥ 78,282 | ¥ 63,955 | |
Acquisitions | 72,438 | ¥ 22,156 | ||
Sales of directly-operated salons to franchisees, and disposal of relaxation salons | (7,829) | |||
Goodwill impairment losses | 0 | 0 | ||
Goodwill ending balance | 535,246 | ¥ 150,720 | ¥ 78,282 | ¥ 63,955 |
SAWAN CO. LTD. ("SAWAN") | ||||
Goodwill Roll Forward | ||||
Acquisitions | 218,138 | |||
Goodwill ending balance | 218,138 | |||
Relaxation Salons | ||||
Goodwill Roll Forward | ||||
Acquisitions | 166,388 | |||
Goodwill ending balance | ¥ 166,388 |
Long-term Borrowings - Long-ter
Long-term Borrowings - Long-term borrowings (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2021JPY (¥) | Jun. 30, 2021USD ($) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Debt Instrument | ||||
Time deposits pledged as collateral | ¥ 72,525 | ¥ 63,524 | ||
Bank loans | 755,159 | 910,661 | ¥ 342,101 | |
Current portion of long-term borrowings | (181,884) | (242,281) | (191,570) | |
Total long-term borrowings | ¥ 573,275 | $ 573,275 | ¥ 668,380 | ¥ 150,531 |
Debt, Weighted Average Interest Rate | 1.05% | 1.05% | 1.33% | 1.74% |
Prepaid Expenses and Other Current Assets | ||||
Debt Instrument | ||||
Time deposits pledged as collateral | ¥ 20,025 | |||
Other Assets | ||||
Debt Instrument | ||||
Time deposits pledged as collateral | ¥ 52,500 | |||
Japanese financial institutions unsecured bank loans | Minimum | ||||
Debt Instrument | ||||
Fixed interest rates | 0.21% | 0.21% | 0.21% | 0.61% |
Japanese financial institutions unsecured bank loans | Maximum | ||||
Debt Instrument | ||||
Fixed interest rates | 3.98% | 3.98% | 3.98% | 3.30% |
Long-term Borrowings - Maturiti
Long-term Borrowings - Maturities of long-term borrowings (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
2021 (remainder) | ¥ 86,779 | ¥ 242,281 | |
2022 | 123,460 | 123,460 | |
2023 | 62,628 | 62,628 | |
2024 | 60,252 | 60,252 | |
2025 | 59,370 | 59,550 | |
2026 and thereafter | 362,670 | 362,490 | |
Total | ¥ 755,159 | ¥ 910,661 | ¥ 342,101 |
Long-term Borrowings - Borrowin
Long-term Borrowings - Borrowings (Details) - Kouji Eguchi ¥ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2021JPY (¥) | Dec. 31, 2020loan | Dec. 31, 2019 | |
Debt Instrument [Line Items] | |||
Number of loan agreements containing financial covenants | 0 | 0 | |
Class A Common | |||
Debt Instrument [Line Items] | |||
Ownership percentage | 39.09% | 48.04% |
Leases - Operating Leases (De_2
Leases - Operating Leases (Details) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021JPY (¥)item | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)item | Dec. 31, 2019JPY (¥)item | |
Leases | ||||
Number of leased salons | 230 | 220 | 213 | 220 |
Number of leased salons subleased | 120 | 141 | 130 | 165 |
Operating lease costs: | ||||
Fixed lease cost | ¥ 386,992,000 | ¥ 372,769,000 | ¥ 748,230,000 | ¥ 851,555,000 |
Variable lease cost | 13,789,000 | 7,476,000 | 24,484,000 | 30,901,000 |
Short-term cost | 18,170,000 | 4,458,000 | 11,669,000 | 10,979,000 |
Total | 418,951,000 | 384,703,000 | 784,383,000 | 893,435,000 |
Sublease income, fixed lease | 217,083,000 | 260,194,000 | 478,225,000 | 580,074,000 |
Sublease income, variable lease | ¥ 7,961,000 | ¥ 5,674,000 | ¥ 14,146,000 | ¥ 27,606,000 |
Leases - Supplementary inform_2
Leases - Supplementary information on cash flow (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows | ¥ 391,650 | ¥ 99,758 | ¥ 797,623 | ¥ 375,270 |
Right-of-use assets obtained in exchange for lease liabilities | ¥ 490,342 | ¥ 189,240 | ¥ 604,703 | ¥ 749,008 |
Weighted average remaining lease term (in years) | 2 years 10 months 24 days | 3 years 1 month 6 days | 2 years 9 months 18 days | 3 years 3 months 18 days |
Weighted average discount rate | 1.45% | 1.45% | 1.45% | 1.45% |
Year ending December 31: | ||||
2021 (remainder) | ¥ 430,043 | ¥ 667,823 | ||
2022 | 620,210 | 493,800 | ||
2023 | 363,730 | 246,751 | ||
2024 | 183,145 | 122,654 | ||
2025 | 110,723 | 70,448 | ||
2026 and thereafter | 132,480 | 98,245 | ||
Total | 1,840,331 | 1,699,721 | ||
Less: Interest component | (78,116) | (48,509) | ||
Present value of minimum lease payments | 1,762,215 | 1,651,212 | ||
Short-term lease liability | 702,685 | 658,320 | ¥ 704,024 | |
Long-term lease liability - net of current portion | ¥ 1,059,530 | ¥ 992,892 | ¥ 1,136,799 |
Leases - Subleases (Details)_2
Leases - Subleases (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Leases | ||||
Fixed sublease income | ¥ 217,083 | ¥ 260,194 | ¥ 478,225 | ¥ 580,074 |
Variable sublease income | 7,961 | 5,674 | 14,146 | 27,606 |
Total | 225,044 | ¥ 265,868 | 492,371 | ¥ 607,680 |
Year ending December 31: | ||||
2021 (remainder) | 178,798 | 376,993 | ||
2022 | 313,207 | 276,765 | ||
2023 | 198,400 | 152,356 | ||
2024 | 82,997 | 66,450 | ||
2025 | 43,103 | 33,728 | ||
2026 and thereafter | 28,198 | 20,488 | ||
Total | ¥ 844,703 | ¥ 926,780 |
Segment Information (Details)_2
Segment Information (Details) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021JPY (¥)segment | Jun. 30, 2020JPY (¥) | Dec. 31, 2020JPY (¥)segment | Dec. 31, 2019JPY (¥) | |
Segment Reporting Information | ||||
Number of operating segments | segment | 2 | 2 | ||
Revenues | ¥ 2,127,479 | ¥ 1,356,277 | ¥ 3,341,617 | ¥ 3,908,264 |
Operating income (loss) | (482,188) | (434,307) | (746,088) | 34,350 |
Depreciation and amortization | 39,631 | 33,105 | 62,290 | 46,174 |
Total assets | 5,200,016 | 5,713,466 | 4,757,465 | |
Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 2,110,561 | 1,344,503 | 3,315,947 | |
Operating income (loss) | 93,852 | (166,200) | ||
Depreciation and amortization | 25,345 | 14,453 | ||
Digital Preventative Healthcare | ||||
Segment Reporting Information | ||||
Revenues | 16,918 | 11,774 | 25,670 | |
Operating income (loss) | (65,004) | (21,016) | ||
Depreciation and amortization | 4,201 | 3,771 | ||
Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 2,127,479 | 3,341,617 | ||
Operating segments | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 3,315,947 | 3,864,656 | ||
Operating income (loss) | (140,866) | 279,439 | ||
Depreciation and amortization | 32,261 | 34,025 | ||
Total assets | 3,096,094 | 3,346,739 | ||
Operating segments | Digital Preventative Healthcare | ||||
Segment Reporting Information | ||||
Revenues | 25,670 | 43,608 | ||
Operating income (loss) | (66,100) | (43,056) | ||
Depreciation and amortization | 8,007 | 4,764 | ||
Total assets | 34,247 | 29,565 | ||
Corporate and eliminations | ||||
Segment Reporting Information | ||||
Operating income (loss) | (511,036) | (247,091) | (539,122) | (202,033) |
Depreciation and amortization | 10,085 | 14,881 | 22,022 | 7,385 |
Total assets | 2,583,125 | 1,381,161 | ||
Directly-operated salons | ||||
Segment Reporting Information | ||||
Revenues | 1,421,413 | 751,267 | 2,026,806 | 2,031,155 |
Directly-operated salons | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 1,421,413 | 2,026,806 | ||
Directly-operated salons | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 1,421,413 | 2,026,806 | ||
Franchise fees | ||||
Segment Reporting Information | ||||
Revenues | 689,148 | 593,236 | 1,289,141 | 1,833,501 |
Franchise fees | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 125,513 | 175,445 | ||
Franchise fees | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 125,513 | 175,445 | ||
Royalty income | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 99,534 | 179,745 | ||
Royalty income | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 99,534 | 179,745 | ||
Staffing service revenue | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 126,734 | 254,282 | ||
Staffing service revenue | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 126,734 | 254,282 | ||
Sublease revenue | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 225,044 | 492,371 | ||
Sublease revenue | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 225,044 | 492,371 | ||
Other franchise revenues | Relaxation Salon Segment | ||||
Segment Reporting Information | ||||
Revenues | 112,323 | 187,298 | ||
Other franchise revenues | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | 112,323 | 187,298 | ||
Other | ||||
Segment Reporting Information | ||||
Revenues | 16,918 | ¥ 11,774 | 25,670 | ¥ 43,608 |
Other | Digital Preventative Healthcare | ||||
Segment Reporting Information | ||||
Revenues | 16,918 | 25,670 | ||
Other | Operating segments | ||||
Segment Reporting Information | ||||
Revenues | ¥ 16,918 | ¥ 25,670 |
Income Taxes - Effective Income
Income Taxes - Effective Income Tax Rate (Details) | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Effective Income Tax Rate Reconciliation, Percent | ||||
Effective income tax rate | (11.80%) | (4.50%) | 14.00% | 48.80% |
Revenue Recognition - Contrac_2
Revenue Recognition - Contract Balance (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Revenue Recognition | |||
Accounts receivable-trade, net | ¥ 89,416 | ¥ 148,540 | ¥ 337,048 |
Contract liabilities: | |||
Contract liability (current) | 92,988 | 172,063 | 201,559 |
Long-term contract liability - net of current portion | 297,523 | 333,978 | 465,077 |
Contract with Customer, Liability, Total | ¥ 390,511 | ¥ 506,041 | ¥ 666,636 |
Revenue Recognition - Changes_2
Revenue Recognition - Changes in Company's Contract Liabilities (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Revenue Recognition | ||
Balance at December 31, 2020 | ¥ 506,041 | ¥ 666,636 |
Revenues recognized during 2021 which were included in the contract liabilities balance at December 31, 2020 | (131,269) | (203,970) |
Remaining amounts at June 30, 2021 which were newly recognized as contract liabilities during 2021 | 15,739 | 43,375 |
Balance at June 30, 2021 | ¥ 390,511 | ¥ 506,041 |
Revenue Recognition - Estimat_2
Revenue Recognition - Estimated revenue (Details) - JPY (¥) ¥ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
2021 (remainder) | ¥ 45,307 | |
2022 | ¥ 172,063 | |
2022 | 92,083 | 90,313 |
2023 | 90,272 | 88,310 |
2024 | 81,855 | 79,168 |
2025 | 53,551 | 53,558 |
2026 and thereafter | 27,443 | 34,730 |
Total remaining revenue performance obligation | ¥ 390,511 | ¥ 518,142 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 6 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-12-31 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Loss Per Share (Details)
Loss Per Share (Details) - JPY (¥) ¥ / shares in Units, ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Earnings Per Share | ||||
Weighted average common shares outstanding | 4,872,224 | 4,022,501 | 4,024,692 | 3,747,296 |
Effect of dilutive instruments: | ||||
Weighted average common shares for diluted computation | 4,872,224 | 4,022,501 | 4,024,692 | 4,272,302 |
Basic | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.63 |
Diluted | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.06 |
Class A Common | ||||
Earnings Per Share | ||||
Weighted average common shares outstanding | 1 | 1 | 1 | 1 |
Effect of dilutive instruments: | ||||
Weighted average common shares for diluted computation | 1 | 1 | 1 | 1 |
Basic | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.63 |
Diluted | ¥ (107.09) | ¥ (110.12) | ¥ (133.97) | ¥ 4.06 |
Common stock | ||||
Earnings Per Share | ||||
Net (loss) income attributable to shareholders of the Company | ¥ (521,770) | ¥ (442,971) | ||
Weighted average common shares outstanding | 4,872,224 | 4,022,500 | ||
Effect of dilutive instruments: | ||||
Stock options | 608,500 | 234,000 | ||
Weighted average common shares for diluted computation | 4,872,224 | 4,022,500 | ||
Basic | ¥ (107.09) | ¥ (110.12) | ||
Diluted | ¥ (107.09) | ¥ (110.12) |
Fair Value of Financial Instr_6
Fair Value of Financial Instruments (Details) ¥ in Thousands, $ in Thousands | Jun. 30, 2021JPY (¥) | Jun. 30, 2021USD ($) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) |
Fair Value of Financial Instruments | ||||
Long-term borrowings - net of current portion, carrying amount | ¥ (573,275) | $ (573,275) | ¥ (668,380) | ¥ (150,531) |
Long-term borrowings - net of current portion, estimated fair value | $ (554,257) | ¥ (644,499) | ¥ (145,600) |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Assets measured at fair value | ¥ 5,200,016 | ¥ 5,713,466 | ¥ 4,757,465 | |
Liabilities measured at fair value | 4,993,947 | 5,222,209 | ||
Impairment loss, right-of-use asset - operating lease | 69,989 | 34,721 | ||
Impairment loss, assets measured on nonrecurring basis | 106,501 | 44,546 | ||
Impairment loss on long-lived assets | ¥ 0 | ¥ 106,501 | 44,546 | |
Minimum | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Percentage of weighted average cost of capital | 11.30% | 11.30% | ||
Maximum | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Percentage of weighted average cost of capital | 14.00% | 14.00% | ||
Nonrecurring | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Impairment loss, leasehold improvements | ¥ 36,512 | 9,825 | ||
Impairment loss, right-of-use asset - operating lease | 69,989 | 34,721 | ||
Impairment loss, assets measured on nonrecurring basis | 106,501 | 44,546 | ||
Nonrecurring | Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Leasehold improvements | 213,314 | 161,330 | ||
Right-of-use asset - operating lease | 1,578,828 | 1,829,968 | ||
Assets measured at fair value | 1,792,142 | |||
Impairment loss, assets measured on nonrecurring basis | 1,991,298 | |||
Recurring | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Assets measured at fair value | ¥ 0 | 0 | 0 | ¥ 0 |
Liabilities measured at fair value | ¥ 0 | ¥ 0 | ¥ 0 | ¥ 0 |
Related Party Transactions (D_2
Related Party Transactions (Details) - JPY (¥) ¥ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Related Party Transaction [Line Items] | ||||
Required percentage of votes needed to elect corporate auditor | 33.00% | 33.00% | ||
Kouji Eguchi | ||||
Related Party Transaction [Line Items] | ||||
Balance due from related party | ¥ 8,266 | |||
Interest income from related party | ¥ 189 | |||
Kouji Eguchi | Class A Common | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 39.09% | 48.04% | ||
Kabushiki Kaisha No Track | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | ¥ 55 | ¥ 110 | ¥ 110 | |
Consulting fees paid to related party | 300 | ¥ 300 | 600 | 600 |
Kabushiki Kaisha LTW | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | 110 | 110 | ||
Consulting fees paid to related party | ¥ 1,200 | 600 | ¥ 1,200 | ¥ 1,200 |
Corporate auditor | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 0.36% | 0.36% | 0.44% | |
Aoyama Consulting Group Co., Ltd. | ||||
Related Party Transaction [Line Items] | ||||
Accrued expenses due to related party | ¥ 110 | ¥ 110 | ||
Consulting fees paid to related party | ¥ 600 | ¥ 600 | ¥ 1,200 | ¥ 1,200 |
Common stock | Tomoya Ogawa | ||||
Related Party Transaction [Line Items] | ||||
Ownership percentage | 0.58% | 0.59% |
Subsequent Events (Details)_2
Subsequent Events (Details) | Jan. 01, 2022JPY (¥) | Oct. 01, 2021JPY (¥) | Aug. 31, 2021JPY (¥) | Jul. 31, 2021 | Feb. 01, 2021JPY (¥) | Dec. 31, 2020JPY (¥) | Dec. 31, 2020JPY (¥) | Dec. 31, 2019JPY (¥) | Apr. 28, 2021 | Feb. 01, 2021$ / shares |
Subsequent event | ||||||||||
Cash consideration | ¥ 86,916,000 | ¥ 23,813,000 | ||||||||
Aggregate net proceeds | ¥ 765,867,000 | |||||||||
Ownership percentage | 0.00% | 0.00% | 0.00% | |||||||
American Depository Shares | ||||||||||
Subsequent event | ||||||||||
Common shares converted to ADSs tradable on DTC (Depository Trust Company) (as a percent) | 17.00% | |||||||||
Subsequent Event | American Depository Shares | ||||||||||
Subsequent event | ||||||||||
Common shares converted to ADSs tradable on DTC (Depository Trust Company) (as a percent) | 40.00% | |||||||||
Subsequent Event | Over-Allotment Option | American Depository Shares | ||||||||||
Subsequent event | ||||||||||
Share price | $ / shares | $ 15 | |||||||||
Aggregate net proceeds | ¥ 87,642,000 | |||||||||
SAWAN CO. LTD. ("SAWAN") | Subsequent Event | ||||||||||
Subsequent event | ||||||||||
Ownership percentage | 100.00% | |||||||||
Acquisition of ZACC's Share | Subsequent Event | ||||||||||
Subsequent event | ||||||||||
Cash consideration | ¥ 69,014,000 | |||||||||
Business combination, step acquisition, equity interest in acquiree, including subsequent acquisition percentage | 60.00% | 100.00% | ||||||||
Business consideration | ¥ 370,000,000 | |||||||||
Number of luxury hair salon brands operated | 3 | |||||||||
Luxury brands recognition term | 30 years | |||||||||
Business combination, step acquisition, equity interest in acquiree fair value | ¥ 148,000,000 | ¥ 152,986,000 |