20-F: Perpetuals.com Ltd. Faces Going Concern Doubt

Perpetuals.com Ltd. (formerly Earlyworks Co., Ltd.) filed its Form 20-F, highlighting substantial doubt about its ability to continue as a going concern amidst significant operating losses and a working capital deficit.

Summary

• Perpetuals.com Ltd. (formerly Earlyworks Co., Ltd.) has filed its annual report on Form 20-F for the fiscal year ended April 30, 2026.
• The company reported a net loss of JPY 2,754.5 million (US$17.6 million) for the fiscal year ended April 30, 2026.
• As of April 30, 2026, the company had cash of JPY 132.8 million (US$0.85 million) and a working capital deficit of JPY 1,839.8 million (US$11.7 million).
• Management has concluded there is substantial doubt about the company's ability to continue as a going concern.
• The company completed the acquisition of Perpetual Markets Ltd. (PML) on January 20, 2026, rebranding to Perpetuals.com Ltd. and changing its Nasdaq ticker to PDC.
• The post-acquisition business focuses on AI-powered financial services, including the UpsideOnly platform and Kronos X trading infrastructure.
• The legacy blockchain business contributed the majority of revenue in FY2026, but is not expected to be a significant part of future growth strategy.
• The company is actively seeking additional debt and equity financing to address its liquidity concerns.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to the substantial doubt about the company's ability to continue as a going concern and significant operating losses.

Positives

• The acquisition of Perpetual Markets Ltd. on January 20, 2026, has expanded the company's operational scope into AI-powered financial services.
• The UpsideOnly platform has acquired over 500,000 users across approximately 170 countries with low acquisition costs of approximately $0.65 per user.
• The Kronos X platform has secured a MiFID II MTF license and MiCA approval, enabling it to offer crypto-asset services across the EU.
• Strategic licensing agreements have been executed for the BayesShield AI technology with the German University of Digital Science and the European Institute of Management.
• The company has filed two provisional patent applications related to its BayesShield AI technology.
• Trademarks for key products like Perpetuals.com, UpsideOnly.com, and BayesShield have been registered in various jurisdictions.

Negatives

• The company has a history of operating losses and expects substantial additional expenses and operating losses in the future.
• Management has concluded there is substantial doubt about the company's ability to continue as a going concern.
• As of April 30, 2026, the company had cash of JPY 132.8 million (US$0.85 million) and a working capital deficit of JPY 1,839.8 million (US$11.7 million).
• Net cash used in operating activities for the fiscal year ended April 30, 2026, was JPY 2,650.4 million (US$16.9 million).
• The company is dependent on its ability to obtain new revenue-generating customer contracts and secure equity and/or debt financing, with no assurance of success.
• The company's transformed business has a limited operating history, making future prospects difficult to evaluate.
• The company is involved in two pending employment-related lawsuits in the U.S. and a breach of contract lawsuit filed by Alexander Capital, L.P.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to operating losses, negative cash flow from operations, and a working capital deficit.
• The company has a limited operating history with its transformed business, making it difficult to evaluate future prospects and increasing the risk of not successfully executing its business strategy.
• The transition to a new, U.S.-based management team with limited experience managing a publicly traded company may adversely affect operations and the ability to meet obligations.
• The company may not be successful in operating, commercializing, and scaling its UpsideOnly platform, which depends on the performance of its proprietary technology, user acquisition, and business model.
• The economic model of UpsideOnly substantially depends on the ability of BayesShield AI to identify profitable trading opportunities; if it does not perform as expected, revenue generation and scaling could be materially affected.
• Proprietary trading activities expose the company to significant market and investment losses.
• The markets in which the company operates have relatively low barriers to entry, and it may face increasing competition from existing and new competitors.
• The company will need to obtain additional financing to fund operations and growth, and such financing may not be available on commercially acceptable terms or at all.

Future Outlook

The company's future outlook is heavily dependent on its ability to secure additional financing, successfully execute its new business strategy, and remediate its material weaknesses in internal controls. The company anticipates continued investment in operations and growth, but faces significant going concern risks.

Management Comments

• Management has concluded that there is, and the report of our independent registered public accounting firm contains an explanatory paragraph that expresses, substantial doubt about our ability to continue as a going concern.
• We may consider obtaining additional financing in the future through equity or debt financings, or other means. However, we are dependent upon our ability to obtain new revenue generating customer contracts, secure equity and/or debt financing and there are no assurances that we will be successful.
• We have only a limited operating history with respect to our current products, services, business models, and sources of revenue. Accordingly, our historical financial results and operating experience may not be indicative of our future performance, and investors may have limited information on which to evaluate our prospects.

Industry Context

StockSavvy.ai notes that Perpetuals.com Ltd. is operating in the rapidly evolving fintech and AI sectors. The company's pivot from blockchain to AI-powered financial services, including trading platforms and market infrastructure, aligns with broader industry trends. However, the significant capital requirements, intense competition, and evolving regulatory landscape in these sectors present substantial challenges.

Comparison to Industry Standards

• The company's reported user acquisition cost of $0.65 for UpsideOnly is significantly lower than the industry averages of approximately $500 for CFD providers and $200 for brokers, suggesting a potentially efficient customer acquisition strategy.
• The company's net loss of JPY 2,754.5 million (US$17.6 million) on revenue of JPY 256.3 million (US$1.6 million) in FY2026 indicates a substantial operating loss margin, which is concerning compared to profitable fintech companies.
• The company's reliance on external financing and the expressed doubt about its going concern status are critical negative indicators when compared to established, well-capitalized players in the financial technology and AI markets.

Legal Proceedings

• A lawsuit was filed by certain shareholders in the Tokyo District Court against the Company and Mr. Satoshi Kobayashi, alleging intentional delay or misrepresentation in share sale procedures. A judicial settlement was reached on July 17, 2026, with a payment of JPY 20 million.
• Alexander Capital, L.P. filed a lawsuit against the Company in the U.S. District Court for the Southern District of New York, alleging breach of contract related to its engagement as a placement agent. The company is in negotiations to settle.
• The Company's U.S. subsidiary, Kephas Corporation, is involved in two pending employment-related lawsuits: one alleging unpaid wages (filed April 2026) and another alleging wrongful termination (filed May 2026).

Related Party Transactions

• Satoshi Kobayashi, Co-Chief Executive Officer, is a guarantor for an office space lease agreement and a loan from Kiraboshi Bank.
• The Company borrowed JPY 13,000,000 from Mr. Satoshi Kobayashi, which was repaid, and an additional JPY 27,000,000 for working capital, which remains outstanding.
• Co-CEO Patrick Gruhn advanced an aggregate of $560,000 to the subsidiary Kephas Corporation for working capital.
• The Company acquired real property from co-CEO Patrick Gruhn for its subsidiary Kephas Corporation in December 2025, valued at $480,000.

Stakeholder Impact

• Shareholders face significant risk due to the company's going concern issues, substantial operating losses, and potential dilution from future equity financings.
• Employees may be impacted by the company's financial instability and potential restructuring.
• Creditors and lenders face increased risk given the company's liquidity challenges and the doubt about its ability to continue as a going concern.

Next Steps

• Continue to remediate material weaknesses in internal controls by appointing a CFO with relevant experience, hiring additional finance personnel, and implementing enhanced control procedures.
• Seek additional debt and equity financing to meet obligations and sustain operations.
• Continue to develop and improve BayesShield AI models.
• Grow the user base of the UpsideOnly platform.
• Launch Barriers.com in partnership with PM MTF Ltd.
• Explore potential new markets for BayesShield AI technology, such as healthcare.
• Continue to offer full platform services for brokers.

Key Dates

Recommendation

The company's Form 20-F filing reveals significant financial distress, including substantial operating losses, a working capital deficit, and a formal acknowledgement of substantial doubt regarding its ability to continue as a going concern. Despite strategic acquisitions and platform developments, the immediate financial risks and uncertainty surrounding future financing and operational viability outweigh potential positives. A seasoned investor would likely view these factors as strong indicators for a sell recommendation.

Keywords

AI financial services, trading platform, market infrastructure, proprietary trading, BayesShield AI, Kronos X, UpsideOnly, tokenization