F-1/A: Leifras Co. Ltd. Eyes Nasdaq Listing with $5 Million IPO

Leifras Co. Ltd., a Japanese sports and social business company, is seeking to raise capital through an initial public offering of American Depositary Shares (ADS) on the Nasdaq Capital Market.

Summary

• Leifras Co. Ltd., a Japanese company focused on youth sports and community engagement, has filed an amendment to its Form F-1 registration statement for an IPO.
• The company plans to offer 1,250,000 ADSs, with each ADS representing one Ordinary Share.
• The expected initial public offering price is between $4.00 and $5.00 per ADS, with an assumed price of $5.00 for prospectus purposes.
• The company has applied to list the ADSs on the Nasdaq Capital Market under the symbol LFS.
• Mr. Kiyotaka Ito, the beneficial owner of 52.89% of the company's Ordinary Shares, is expected to hold approximately 50.37% of the voting power after the offering.
• Leifras reported revenue of JPY10,329.7 million ($65.64 million) for the fiscal year ended December 31, 2024, and net cash flows from operating activities of JPY207.11 million ($1.32 million).
• The company intends to use the net proceeds from the offering for expanding its sports school and social businesses, investing in human resources, and for working capital.
• Kingswood Capital Partners, LLC is acting as the representative of the underwriters for the offering.
• The representative has an option to purchase up to an additional 15% of the ADSs to cover over-allotments.
• The company is an emerging growth company and a foreign private issuer, which allows it to take advantage of reduced reporting requirements.

Sentiment

Score: 6

Explanation: The document presents a balanced view with both positive growth strategies and potential risks. The company is pursuing an IPO to raise capital for expansion, but faces challenges such as economic conditions in Japan and competition.

Positives

• The company has a strong market position and a respected brand known for high-quality youth sports education.
• The company has a visionary and experienced management team with industrial expertise.
• The company has a unique sports education philosophy that fosters non-cognitive abilities.
• The company has a distinctive team of full-time long-term sports school coaches.
• The company has expertise in identifying, training, and managing coaches.

Negatives

• The company does not own any sports facilities but pays for the usage of public facilities for its sports schools, while the legality of this usage remains unsettled.
• The company has had customer concentration, with a limited number of customers accounting for a significant portion of its total revenue.
• The company owns a team of long-term and full-time coaches, and this makes its employment policy less flexible, which may materially and adversely impact the business and operations of our Company.
• The company's business depends significantly on the market recognition of its Leifras brand and any incident that erodes consumer trust in our brand could significantly reduce our brand value and hence affect our business, results of operations, and prospects.

Risks

• A downturn in the Japanese economy may affect consumers' willingness to spend on extracurricular sports activities.
• The legality of using public facilities for sports schools remains unsettled.
• The company faces customer concentration risks.
• The company may face difficulties in recruiting, training, and retaining qualified coaches.
• The company's employment policy is less flexible due to its team of long-term and full-time coaches.
• The company's brand recognition is crucial, and any incident that erodes consumer trust could significantly affect its business.
• The company relies on consumer discretionary spending and public funding, which may be adversely affected by economic downturns and other macroeconomic conditions or trends.

Future Outlook

The company intends to grow its business by expanding sports schools and student enrollment, pursuing mergers and acquisitions, enhancing class offerings and customer services, and further enhancing productivity.

Industry Context

The youth sports education market in Japan is fragmented and highly competitive, with increasing competition due to the falling birthrate and population decline. The company faces competition from other sports schools, extracurricular activities in schools, and online education providers.

Comparison to Industry Standards

• Leifras is recognized as one of Japan's largest operators of children's sports schools in terms of both membership and facilities.
• As of December 31, 2024, Leifras holds its sports classes at more than 4,500 facility locations in Japan nationwide, serving over 62,400 members.
• According to Tokyo Shoko Research, as of the end of 2023, Leifras led all surveyed companies in both the number of facility locations and active members.
• In the Sports School business sector, including franchisees, Tokyo Shoko Research reported that Leifras operated 4,481 schools with a total of 67,281 members as of December 31, 2023.
• By June 30, 2024, according to the Tokyo Shoko Research, this leading position was reflected in our extensive operations, which included 13 sports schools for approximately 65,337 active members and operating at over 4,500 facility locations.

Legal Proceedings

• The company was involved in a lawsuit against a former representative director and vice president, which was settled in December 2023.
• The company received guidance from a government agency indicating its after-school daycare service facilities over-claimed fees by overstating the number of qualified workers in the fiscal years ended December 31, 2023 and 2024, along with noncompliance with required staffing standards.

Related Party Transactions

• Mr. Kiyotaka Ito, the company's founder and CEO, is a related party.
• The company had transactions with K2MY Co., Ltd., an asset management company controlled by Mr. Ito.
• The company had transactions with Rubicon Ltd., a real estate and consulting company controlled by Mr. Mitsunobu Kawaharada.
• The company had transactions with Big Field Management Ltd., a Japanese company wholly owned by Mr. Hisashi Ono.
• The company had transactions with Himikana Ltd., a Fukuoka-based company focusing on real estate management and food and beverage business, controlled by Mr. Hisashi Ono.

Stakeholder Impact

• Shareholders will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares underlying the ADSs purchased.
• Share ownership will remain concentrated in the hands of directors and major shareholders, who will continue to be able to exercise a direct or indirect controlling influence on the company.
• The market price of the ADSs may be volatile or may decline regardless of the company's operating performance, and investors may not be able to resell their ADSs at or above the initial public offering price.
• If the company fails to implement and maintain an effective system of internal control, it may fail to meet its reporting obligations or be unable to accurately report its results of operations or prevent fraud, and investor confidence and the market price of the ADSs may be materially and adversely affected.
• Because the company is a foreign private issuer and intends to take advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, shareholders will have less protection than they would have if the company were a domestic issuer.

Next Steps

• The company needs to secure approval for listing on Nasdaq.
• The underwriters expect to deliver the ADSs against payment in U.S. dollars in New York, New York on or about [ ], 2025.

Key Dates

Keywords

IPO, American Depositary Shares, youth sports, sports education, social business, community engagement, Nasdaq, Leifras, ADSs, Japan