F-1/A: CTW Cayman Files for Nasdaq IPO to Fuel Global Anime Gaming Expansion Amidst Mixed Financials

CTW Cayman, a leading web-based gaming platform specializing in anime IP-based HTML5 games, is seeking to raise up to $18 million in an initial public offering on the Nasdaq Capital Market to fund global expansion and general corporate purposes.

Summary

• CTW Cayman is offering 3,000,000 Class A ordinary shares in its initial public offering, with an anticipated price range of US$5.0 to US$6.0 per share.
• The company operates G123.jp, an HTML5-based free-to-play gaming platform featuring games inspired by popular Japanese animations, and is the largest anime IP-based H5 games platform globally in 2023 by gross billings.
• Revenue for the six months ended January 31, 2025, increased by 23.2% to US$41.2 million, primarily driven by new game launches, including 'So Im a Spider, So What? Ruler of the Labyrinth' which generated approximately US$6.5 million.
• Net income for the six months ended January 31, 2025, decreased significantly by 83.9% to US$0.6 million, compared to US$4.0 million in the same period of the prior fiscal year, due to increased operating expenses.
• Sales and marketing expenses rose by 50.7% to US$25.98 million for the six months ended January 31, 2025, reflecting intensified promotional campaigns for new titles and international market expansion.
• The company's gross in-game purchase amounts were approximately US$49.1 million for the six months ended January 31, 2025, and US$84.5 million for the year ended July 31, 2024.
• Monthly Active Users (MAUs) increased to 3.27 million for the six months ended January 31, 2025, from 2.08 million in the prior comparable period, while Paying Monthly Active Users (PMAUs) grew by 66.2% to 284,062 users.
• The Return on Advertisement Spend (ROAS) was 105.8% for the six months ended January 31, 2025, an improvement from 96.6% in the prior comparable period, but lower than 130.3% in fiscal year 2023.
• The company has identified material weaknesses in internal control over financial reporting, specifically lacking proper system data change control, user access review control of ITGC, and independent directors/audit committee prior to the offering.
• Mr. Ryuichi Sasaki, the founder and CEO, will beneficially own 94.1% of Class A ordinary shares and all Class B ordinary shares, exercising approximately 98.2% of total voting power post-IPO, making the company a 'controlled company' under Nasdaq rules.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company demonstrates strong growth in revenue and user base, and holds a leading position in its niche market, the significant decline in net income for the most recent six-month period due to increased expenses, coupled with identified material weaknesses in internal controls and high concentration of voting power, introduces notable concerns. The IPO itself is a positive step for capital raising and global expansion, but the recent financial performance indicates operational challenges that need to be addressed for sustained profitability.

Positives

• The company is the largest anime IP-based H5 games platform globally in 2023 in terms of gross billings, indicating a strong market position.
• Revenue increased by 23.2% to US$41.2 million for the six months ended January 31, 2025, driven by successful new game launches.
• Monthly Active Users (MAUs) grew by 140.14% from 958,578 in 2021 to 2,301,929 in 2024, and Paying Monthly Active Users (PMAUs) increased by 66.2% for the six months ended January 31, 2025, demonstrating strong user acquisition and monetization.
• The company maintains privileged access to top-tier Japanese animation IPs through partnerships with 33 IP holders, including KADOKAWA Corporation, TMS Entertainment, and Warner Bros Japan LLC.
• The HTML5-based G123.jp platform offers seamless, instant access to games across various devices without downloads or registrations, enhancing user experience and accessibility.
• The company operates on an asset-light model with high profit margins (retaining approximately 80% of gross in-game purchases after royalty costs for IP-based games) and low upfront investment.
• Advanced AI capabilities are integrated for game localization, data analytics, and advertising optimization, contributing to efficient user acquisition and ROAS.
• The company's independent platform bypasses significant fees associated with third-party app stores, allowing for direct reinvestment into platform development.
• The leadership team possesses deep expertise in the gaming industry and technology sectors, with founder and CEO Mr. Ryuichi Sasaki having over 15 years of experience.
• The company has a robust game pipeline with 11 games in pre-registration and agreements to release globally recognized IPs like 'Doraemon' and 'Kakegurui' in late 2025 and early 2026.

Negatives

• Net income significantly decreased by 83.9% to US$0.6 million for the six months ended January 31, 2025, compared to US$4.0 million in the prior comparable period, primarily due to increased operating expenses.
• The company experienced a substantial increase in general and administrative expenses (105.5%) and sales and marketing expenses (50.7%) for the six months ended January 31, 2025.
• The Return on Advertisement Spend (ROAS) declined from 130.3% in fiscal year 2023 to 99.3% in fiscal year 2024, indicating increased advertising costs per user acquisition.
• The company is highly dependent on a few flagship games and related developers, with 'Vivid Army' and 'Queens Blade Limited Break' accounting for a substantial portion of revenue (28.6% and 11.9% respectively for the six months ended January 31, 2025).
• The company may be unable to fully recover advance fees provided to game developers if a game fails to launch or generate sufficient in-game purchases, leading to financial losses (e.g., 3 advances not recovered, 6 games went offline before full repayment, valuation allowances for 6 additional games as of January 31, 2025).
• Valuation provisions for advances to game developers were high at 29.6% as of January 31, 2025, and 36.0% as of July 31, 2024, reflecting risks from engaging with less experienced developers and lesser-known IPs.
• The company has identified material weaknesses in internal control over financial reporting, including a lack of proper system data change control, user access review control of ITGC, and a lack of independent directors and an audit committee.
• The dual-class share structure and concentration of voting control in the founder, Mr. Ryuichi Sasaki (98.2% voting power post-IPO), may limit other shareholders' ability to influence corporate matters.
• The company is subject to intense competition in the gaming industry, including from larger companies with greater resources and broader market reach.
• Operating metrics are subject to inherent challenges in measurement, such as potential overstatement of active users due to cookie-based uniqueness across multiple devices/browsers.

Risks

• Intense competition in the gaming industry, with larger competitors having greater financial, technical, and personnel resources to secure desirable IPs and outpace marketing efforts.
• Exposure to risks of digital sales and the free-to-play business model, including the inability to efficiently attract and retain end-users who make in-game purchases, and potential failure of new games to achieve commercial success.
• Dependence on third parties to develop commercially viable games and appealing content, and the ability to compete for key licenses and engage with game developers on favorable terms.
• Increasing difficulty and expense in acquiring players for games, and the risk of not achieving a positive return on investment on user acquisition efforts.
• Reliance on third-party intellectual property, with risks of losing benefits if key licenses or partnerships are not secured/renewed, and exposure to potential infringement claims.
• Dependence on the success of flagship games and related developers, requiring continuous launch of hit titles or sequels to compete successfully.
• Inability to fully recover advance fees provided to game developers if a game fails to launch or generate sufficient in-game purchases to offset outstanding balances.
• Technology upgrade risks, including delays and additional costs, and the need to continually invest in technological advancement and adapt to changes in web-based technologies, network infrastructure, payment systems, cloud computing, and data storage.
• Reliance on a small percentage of end-users for all in-game purchases, making the business highly sensitive to changes in player spending behavior.
• Inherent challenges in measuring operating metrics, which may lead to real or perceived inaccuracies that could harm reputation and business.
• Dependence on effectively operating the platform with operating systems and network infrastructures not controlled by the company, with changes potentially harming player retention, growth, and engagement.
• Reliance on a limited number of data storage and cloud infrastructure providers, exposing the company to service disruptions or fee increases.
• Dependence on servers and Internet bandwidth, with potential business suffering from loss of capacity or insufficient bandwidth.
• Reliance on third-party payment processors, with risks related to managing relationships, potential service disruptions, and difficulty accessing banking/payment services.
• Content policies or regulations adopted by regulators, consumer opposition, and litigation, particularly concerning age appropriateness, sensitive topics, consumer protection, privacy, and gaming disorder.
• Security breaches or other disruptions compromising information or player data, leading to loss of players, increased costs, significant liability, governmental scrutiny, and reputational harm.
• Fluctuations in periodic and annual operating results due to dependence on the timing and success of hit title releases.
• Challenges in successfully managing current and future growth, which could materially and adversely affect results of operations and financial condition.
• Adverse effects on reported financial results from the application of existing or future accounting standards.
• Negative effects on business, financial condition, and results of operations from changes to U.S. tariff and import/export regulations.
• Adverse effects on financial condition and results of operations from changes and uncertainties in the tax system in operating countries.
• Increased operational costs and potential sanctions/penalties due to data privacy and security laws and regulations in various jurisdictions.
• Lack of a prior public market for Class A ordinary shares, with no assurance of developing or sustaining an active public market.
• Volatility or decline in the market price of Class A ordinary shares regardless of operating performance, and the risk of not being able to resell shares at or above the IPO price.
• Immediate and substantial dilution in the net tangible book value of Class A ordinary shares purchased by new investors.
• Failure to implement and maintain an effective system of internal controls or remediate identified material weaknesses, potentially leading to failure in meeting reporting obligations or accurately reporting results.
• Substantial increased costs as a result of being a public company.
• Adverse effects on market price from the sale or availability for sale of substantial amounts of Class A ordinary shares.
• No intention to pay dividends for the foreseeable future, meaning returns depend solely on share price appreciation.
• Potential decline in share price and trading volume if securities or industry analysts do not publish research or publish negative reports.
• Limited ability for shareholders to influence corporate matters due to the dual-class share structure and concentration of voting control in the founder.
• Broad discretion of management in using IPO funds, potentially in ways that may not enhance results or share price.
• Risk of delisting if the company cannot continue to satisfy Nasdaq Capital Market listing requirements.
• Anti-takeover provisions in articles of association that may discourage, delay, or prevent a change in control.
• Difficulty enforcing judgments against the company due to incorporation in the Cayman Islands and assets/personnel primarily outside the U.S.
• Cayman Islands laws potentially providing fewer benefits to shareholders compared to U.S. corporate laws.
• Adverse U.S. federal income tax consequences for U.S. taxpayers if classified as a passive foreign investment company (PFIC).
• Shareholders potentially being held liable for claims by third parties against the company to the extent of distributions received upon redemption of shares if the company enters insolvency liquidation.
• Adverse impact from reductions in discretionary consumer spending due to economic downturns, global pandemics, or other factors.
• Risks and uncertainties of global operations, including fluctuations in foreign currency exchange rates and international political/regulatory developments.
• Adverse impact from the effects of inflation on overall cost structure.
• Social opposition to online gaming potentially limiting growth and impacting the future of the business.
• Software susceptibility to errors, bugs, flaws, corrupted data, defects, and other vulnerabilities that can harm financial results and reputation.
• Operational and reputational risks from the development and use of artificial intelligence (AI) in the platform, including intellectual property ownership uncertainties.
• Inability to integrate acquired businesses, intellectual properties, or assets, potentially impairing financial performance.
• Risks associated with the use of open-source software, including unknown bugs, security vulnerabilities, and potential license compliance issues.
• Damage to corporate and social responsibility and reputation from failure to act responsibly in areas like diversity, safety, workplace conduct, and human rights.
• Long-term impact on business from catastrophic events and climate change.

Future Outlook

The company is committed to investing in high-quality IP content and collaborating with top-tier developers to deliver games appealing to a wider global audience, furthering its presence in global markets beyond Japan and increasing market share in the mobile game segment. It also plans to explore new opportunities presented by advanced technologies, including artificial intelligence and data analytics, to drive future growth. The company expects its overall profitability to increase in the long run, driven by content acquisition, strategic partnerships, and global market expansion.

Management Comments

• Our mission is to unlock the potential of Japanese animation-based games, offering game developers the digital floor with commercial opportunities and essential supports to turn their craft into financial success, while creating an unforgettable, ad-free, immersive gaming experience featuring beloved Japanese animations for end-users.
• We believe that our overall profitability will increase in the long run, primarily driven by our continuous focus on acquiring high-quality content and strategic partnerships as well as our growth momentum attributed by the expansion into the global market.
• We are committed to investing in high-quality IP content and collaborating with top-tier developers to deliver games with appeals to a wider audience globally, furthering our presence in global markets beyond Japan and increasing our market share in the mobile game segment of the gaming industry.
• We are also dedicated to exploring new opportunities presented by advanced technologies, including artificial intelligence and data analytics, to drive future growth.
• Our management classifies IPs from publishers with more than 2 million copies sold as valuable IP resources, whereas IPs from those with between 20 million and 30 million copies sold are considered top-tier.
• We consider game developers who have generated cumulative revenue exceeding RMB20 million (approximately US$2.77 million) as strong performers, whereas those with cumulative revenue surpassing RMB100 million (approximately US$13.85 million), or those whose games have ranked in the top 100 on the Apple App Store or Google Play Store at least once, are recognized as top-tier developers.
• We expect that our top titles to rotate as more games gain success on our platform.

Industry Context

The global online gaming market is experiencing robust growth, projected to reach USD 219.7 billion by 2028, with mobile games being a significant driver. While the broader H5 games market has seen a slight decline, the Anime IP-based H5 games market is growing, projected to reach USD 870.8 million by 2028, driven by IP licensing, content innovation, globalization, and technological advancements. The company operates in a highly competitive landscape, competing with major players like Tencent Games and NetEase Games, as well as other H5 game platforms. The value of anime IPs in cross-media content and cultural influence is a key driver for this niche market.

Comparison to Industry Standards

• In the global H5 games platforms market in 2023, the company ranked third with gross billings of US$87.3 million, behind Tencent Games (US$222.4 million) and NetEase Games (US$98.8 million).
• In the more specific Anime IP-based H5 Games platform market in 2023, the company held the top position with gross billings of US$87.3 million, surpassing Tencent Games (US$77.8 million) and Poki (US$59.1 million).
• The company's ROAS of 105.8% for the six months ended January 31, 2025, and 99.3% for FY2024, indicates efficient marketing, though it is lower than its own FY2023 ROAS of 130.3% and FY2022 ROAS of 121.9%, suggesting increasing advertising costs across major digital platforms (average cost to acquire a new user increased by approximately 24.0% in FY2024).
• The company's paying user retention rates (Day 1: 60.74%, Day 7: 38.47%, Day 30: 18.47% for the six months ended January 31, 2025) are notable for the free-to-play model, indicating a solid ability to retain paying users within specific games, though these rates have slightly decreased compared to prior periods (e.g., Day 30 was 27.9% in FY2023).

Management Changes

Corporate Governance

Legal Proceedings

• The company is not currently subject to any significant legal proceedings.
• The company may, from time to time, encounter actual or threatened legal actions, claims, investigations, and government inquiries in the ordinary course of business, including matters related to anti-money laundering, gambling, intellectual property, data privacy, consumer protection, and advertising.

Related Party Transactions

• No material transactions with related parties occurred during the six months ended January 31, 2025, and fiscal years ended July 31, 2024 and 2023, as identified in accordance with Form 20-F rules.

Stakeholder Impact

• **Shareholders:** Potential for dilution from the IPO, limited influence on corporate matters due to dual-class share structure and founder's control, and reliance on share price appreciation for returns as no dividends are expected in the foreseeable future. Potential for increased value if global expansion and new game launches are successful.
• **Employees:** Benefits from 2025 Equity Incentive Plan and 2025 Employee Share Purchase Plan, free meals and snacks, and a flat management structure fostering inclusivity. Increased scrutiny and workload due to public company reporting requirements.
• **Game Developers:** Continued access to high-value Japanese animation IPs, upfront advances for game development, comprehensive distribution and marketing support, and a revenue-sharing model that incentivizes high-quality content. Risk of unrecovered advances if games underperform.
• **Customers (End-users/Gamers):** Access to a diverse selection of free-to-play, ad-free HTML5 games based on popular Japanese animations, seamless instant play across devices, and AI-based customer support. Potential for enhanced gaming experiences through new IP content and technological advancements.
• **IP Holders:** Continued partnerships and monetization opportunities through licensing their intellectual property for game development on the platform.

Next Steps

• Launch of new game titles based on globally recognized animation IPs, including 'Doraemon Comic Traveler' and 'Kakegurui All In', expected in the rest of 2025 and early 2026.
• Continued investment in high-quality IP content and collaboration with top-tier developers.
• Further broadening global reach into major markets across America, Europe, and Asia.
• Fully exploring AI-driven opportunities, including offering AI-based packaged solutions to external clients.
• Expanding in-house capabilities, including exploring a proprietary virtual currency for in-game transactions powered by blockchain technology.
• Remediating identified material weaknesses in internal control over financial reporting, including strengthening system data change controls, user access review processes, and appointing independent directors/establishing an audit committee.
• Listing Class A ordinary shares on the Nasdaq Capital Market under the symbol CTW, pending final approval.

Key Dates

Recommendation

Keywords

Gaming Platform, Anime IP, HTML5 Games, Free-to-Play, In-Game Purchases, Game Distribution, Intellectual Property Licensing, User Acquisition, Monetization, AI in Gaming, Global Expansion, Nasdaq IPO, SEC Filing, Financial Performance, Risk Factors, Corporate Governance, Japan Gaming Market, Mobile Gaming, Online Gaming