20-F: RYOJBABA Reports 2025 Net Income Decline Amid IPO & Strategic Shifts

RYOJBABA Co., Ltd. reported a significant 91% decrease in net income for fiscal year 2025 to $119,394, despite completing an initial public offering and outlining strategic growth initiatives.

Summary

• Total revenue for fiscal year 2025 decreased by 19% to $9,335,591 from $11,576,848 in 2024.
• Net income for 2025 was $119,394, a 91% decrease from $1,332,399 in 2024.
• EBITDA for 2025 plummeted by 97% to $64,096 from $2,489,996 in 2024, with the EBITDA margin falling to 0.7% from 21.5%.
• Consulting Services revenue decreased by 50% to $1,556,000 in 2025, while Health Services revenue decreased by 8% to $7,779,000.
• The company completed an Initial Public Offering (IPO) on August 15, 2025, raising approximately $3,894,210 in net proceeds.
• Material weaknesses in internal control over financial reporting were identified, specifically lacking well-established procedures for related party transactions and sufficient financial reporting personnel.
• The company closed one osteopathic beauty salon and opened one osteopathic clinic during 2025, resulting in 29 clinics and 1 beauty salon by year-end.
• A Comprehensive Agreement on International Labor Support and Union Infrastructure Development for the International Labor Union (ILU Agreement) worth JPY 500 million (USD $3.2 million) was entered into on October 1, 2025, with no revenue recognized in 2025.
• Ryoji Baba, CEO, became Interim Chief Financial Officer on September 16, 2025, following the resignation of Satoshi Saito.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with caution. While the successful IPO and strategic growth plans are positive, the significant decline in net income and EBITDA, coupled with identified material weaknesses in internal controls, indicates substantial operational and financial challenges that need to be addressed.

Positives

• Successfully completed an Initial Public Offering (IPO) on Nasdaq Capital Market on August 14, 2025, raising approximately $3.89 million in net proceeds.
• Entered into a significant JPY 500 million (USD $3.2 million) Comprehensive Agreement on International Labor Support and Union Infrastructure Development with the International Labor Union.
• Cash and cash equivalents increased significantly to $6,158,462 in 2025 from $2,605,275 in 2024, improving liquidity.
• The osteopathic clinics maintain a high repeat customer rate of over 80% and an annual average of 22.5 visits per customer in 2025.
• The company's consulting services boast high average compensation of 309,330 JPY per month and customer retention rates of 83.3% without advertising costs.
• Ryoji Baba's expertise as a Labor and Social Security Attorney provides a competitive advantage in consulting services.
• The company's osteopathic clinics offer a unique 'integrative medicine' approach, collaborating with local medical institutions and treating a wide range of patients.
• The company has a strong hiring rate for nationally certified judo therapists in Kyushu, securing 10.1% of those who passed the 2023 exam.

Negatives

• Net income decreased by 91% from $1,332,399 in 2024 to $119,394 in 2025.
• EBITDA decreased by 97% from $2,489,996 in 2024 to $64,096 in 2025.
• Total revenue decreased by 19% in 2025 compared to 2024, driven by declines in both consulting and health services.
• Osteopathic Beauty Salons revenue decreased by 53% in 2025, and the number of salons decreased from 6 in 2023 to 1 in 2025.
• Identified two material weaknesses in internal control over financial reporting: lack of well-established procedures for related party transactions and insufficient financial reporting and accounting personnel.
• Operating expenses increased by 25% in 2025, mainly due to increased outsourcing fees.
• The company's liquidity and capital resources are expected to be sufficient only through early 2026, indicating a need for additional capital in the near future.
• The company is a controlled company, with Ryoji Baba owning 69.47% of voting power, which may limit minority shareholder influence.

Risks

• Need to raise additional capital in the future, which may be costly, difficult to obtain, and could dilute current shareholders' ownership interests.
• Risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, leading to adverse consequences for U.S. holders.
• Difficulty for investors to effect service of process within the United States upon most directors, corporate auditors, and executive officers, or to enforce U.S. judgments in Japan.
• Rights of shareholders under Japanese law may differ from those in other jurisdictions, potentially offering less protection.
• Exposure to fluctuations in foreign currency exchange rates due to potential international expansion, despite substantially all revenues being generated in Japan.
• Risks related to expansion into new geographic markets, including unforeseen developments, supply chain disruptions, and noncompliance with foreign laws.
• As a foreign private issuer, the company follows certain home country corporate governance practices instead of Nasdaq requirements, potentially offering less protection to investors.
• Inability to retain senior management team, particularly Ryoji Baba, could be detrimental to the labor consulting business.
• Inability to hire and retain talented people in the highly competitive labor consultancy industry could negatively affect prospects and results.
• Failure to successfully manage the growth of the labor consulting business may prevent sustained profitability.
• Financial results could suffer from inadequate utilization or unsuitable billing rates for labor consultants.
• Significant portion of revenues derived from a limited number of clients, with non-recurring engagement agreements terminable with little notice, leading to unpredictable operating results.
• Ability to maintain and attract new business depends on reputation and quality of services, which could be harmed by not meeting client expectations or misconduct.
• The consulting services industry is highly competitive, and the company may not be able to compete effectively.
• Additional hiring of labor consultants or acquisitions could disrupt operations, increase costs, or harm the business.
• Profitability of fixed-fee engagements may not meet expectations if costs are underestimated.
• Revenues from performance-based engagements are difficult to predict, and cost recovery is uncertain.
• Conflicts of interest could preclude accepting engagements, causing decreased utilization and revenues.
• Expanding service offerings or number of offices may not be profitable.
• Engagements could result in professional liability, which could be costly and damage reputation.
• Failure to achieve development goals for the osteopathic clinic business could adversely affect operations and financial results.
• Geographic concentration of osteopathic clinics and beauty salons in the Kyusyu area of Japan, especially Fukuoka Prefecture, makes the company vulnerable to regional conditions.
• Success depends substantially on brand value, which can be damaged by negative publicity or incidents.
• Failure to enforce and maintain trademarks and protect other intellectual property could materially adversely affect the business.
• Changes in regulatory requirements or their application to osteopathic clinics and beauty salons may adversely affect business and results.
• Potential losses from liability or other claims if clinic services cause harm to customers.
• Labor shortages or increased labor costs for osteopathic clinics and beauty salons could adversely affect results and growth.
• Contracts with customers under 18 may be terminated if parental consent cannot be obtained.
• Vulnerability to changes in consumer preferences and economic conditions could harm the osteopathic clinic and beauty salon business.
• Inability to compete successfully with other osteopathic clinic businesses could materially and adversely affect results.
• Negative publicity could reduce sales at osteopathic clinics or beauty salons.
• Conducting business in a heavily regulated healthcare industry, with failure to comply leading to penalties, exclusion from government programs, or adverse publicity.
• Potential delays in obtaining required regulatory approvals for proposed businesses.
• Legislative or governmental administrative reforms to reimbursement systems in Japan that significantly reduce reimbursement for services could have a material adverse effect.
• Level of indebtedness could materially and adversely affect business, financial condition, and results of operations.
• Outstanding debt agreements may limit flexibility in operating and expanding the business.
• Litigation involving the company may occur and affect operations.
• Third-party claims with respect to intellectual property assets, if decided against the company, may result in competing uses or require adoption of new IP.
• Cybersecurity breaches and other disruptions could compromise information, result in unauthorized disclosure, damage reputation, and expose to liability.
• Matters relating to employment and labor law may adversely affect the business.
• Impact of healthcare reform legislation and other changes in the healthcare industry is unknown but may harm the business.
• No assurance of continued compliance with Nasdaq's listing standards.
• Price of common shares could be subject to rapid and substantial volatility.
• As an emerging growth company, reduced reporting and disclosure requirements may make common shares less attractive to investors.
• Significant taxation from an investigation by the tax authority in Japan.
• Restrictions on foreign investment related to the Foreign Exchange and Foreign Trade Act (FEFTA) in Japan.

Future Outlook

The company expects its results to be affected by global economy, market conditions, customer preference, and competitive environment. It anticipates continued costs associated with operating as a Nasdaq-listed public company and enhancing internal control and reporting functions. Future performance will depend on revenue growth, cost management, and the ability to fund operations and business initiatives. The company plans to implement and develop a centralized IT platform for labor consulting services, hire additional consultants, and expand osteopathic clinics and beauty salons through M&A and franchising, particularly in the Kyushu region and potentially overseas.

Management Comments

• "Our primary mission is to improve and restore physical and mental health diminished by work related stress through our consulting and health services."
• "We believe that work-induced stress is a serious and growing problem as profits over people dominate all sectors of contemporary business culture."
• "We believe that Mr. Baba's knowledge and experience in labor laws gives us an advantage over other consulting companies."
• "We believe the significant difference between us and our competitors is our ability to provide impartial services that are not tailored specifically to the employer or the employee."
• "We believe the significant difference between us and other competitive companies is that we are able to serve a wide range of patients, from young to old, and from amateur athletes to professional athletes, because of the wealth of knowledge we have developed from integrative medicine."
• "We believe that a company's contribution to the social good is an important factor that should be considered along with the economic performance of a business."
• "We believe that it is important to improve labor unions in order to achieve these objectives and a fair society, regardless of nationality, gender, age, status, or income."
• "We believe that our present exposure to interest rate risk is manageable, as is reflected in the sensitivity analysis below."
• "Management believes it will be able to raise capital in the short-term through consulting services and the sales of osteopathic clinics."
• "Management, including our chief executive officer and chief financial officer, believes the consolidated financial statements included in this annual report on Form 20-F present fairly, in all material respects, our financial condition, results of operations and cash flows in conformity with U.S. GAAP."

Industry Context

StockSavvy.ai notes that the Japanese osteopathic market is experiencing industry consolidation and increased competition from low-price providers, athletic training services, and body stretching. RYOJBABA's strategy to differentiate through tailor-made treatments and integrative medicine, coupled with its strong repeat customer rates in osteopathic clinics, positions it to potentially benefit from this consolidation by acquiring smaller operators. In the labor consulting sector, the increasing complexity of labor laws and the government's 'Work Style Reform' initiative create a growing demand for specialized services, which RYOJBABA aims to address with its CEO's legal expertise and impartial approach. However, the overall market for labor consulting is smaller than other professional industries, suggesting potential growth limitations despite increasing demand for specialized services.

Comparison to Industry Standards

• RYOJBABA's osteopathic clinics in Kyushu have an average of 3,445 annual insurance claims per clinic in 2021, significantly higher than the Kyushu area average of 1,134 cases per clinic, indicating strong market recognition and patient volume compared to regional competitors.
• The company's osteopathic clinics' repeat customer rate of over 80% in 2025 is a strong indicator of customer satisfaction and loyalty, potentially outperforming many competitors in the highly competitive Japanese medical industry.
• The osteopathic beauty salon's repeat customer rate of 15.9% in December 2025 is relatively low compared to the osteopathic clinics, suggesting a different customer engagement model or market challenge in this segment.
• In the labor consulting market, RYOJBABA's ability to secure high-unit-price contracts (e.g., 300,000 JPY per month) and high customer retention (83.3%) without significant advertising expenses suggests a strong competitive position, possibly due to the specialized legal expertise of its CEO, differentiating it from general Labor and Social Security Attorney offices.
• The company's average monthly insurance claims per clinic (322.4 in March 2025) are higher than the national average of 217.7, further reinforcing its strong operational performance in the osteopathic clinic segment compared to industry benchmarks.

Management Changes

Corporate Governance

Legal Proceedings

• No pending legal proceedings to which the company is a party or in which any director, officer, or affiliate has a material adverse interest.

Related Party Transactions

• During the year ended December 31, 2023, the company recorded commission expenses of $79,336 from Global HR Technology (GHRT), of which the CEO/director was a minority shareholder at the time. GHRT ceased to be a related party on January 1, 2024.
• During the years ended December 31, 2025, 2024, and 2023, the company paid rent of $19,250, $18,986, and $5,118, respectively, to Runbridge Inc., of which the CEO/director is a shareholder. Runbridge Inc. continued to be a related party in 2025 due to the transferee being a director nominee.

Stakeholder Impact

• **Shareholders:** Potential dilution from future capital raises, reduced protections due to foreign private issuer and controlled company status, and volatility in share price due to financial performance and market factors. The significant decline in net income and EBITDA could negatively impact investor confidence.
• **Employees:** Potential for increased labor costs due to competition for talent and changes in labor laws. The company aims to improve work-life balance and compensation for osteopathic therapists.
• **Customers (Consulting Services):** Benefit from impartial, high-quality labor and corporate consulting services, including support for whistleblowing and stress checks, and assistance with government subsidies.
• **Customers (Health Services):** Benefit from a wide range of osteopathic treatments, integrative medicine approach, and insurance coverage. However, potential liability claims from harm caused by services could affect customer trust.
• **Regulatory Authorities:** The company is subject to heavy regulation in the healthcare industry and labor laws, with a risk of penalties for non-compliance. Material weaknesses in internal controls could attract regulatory scrutiny.
• **Creditors:** The company's level of indebtedness ($4.1 million total debt) and potential need for additional financing could affect its creditworthiness, though current interest rate risk is deemed manageable.

Next Steps

• Implement and develop a centralized IT platform for labor consulting services.
• Hire additional consultants and administrative staff, including Labor and Social Security Attorneys.
• Actively pursue business expansion abroad, leveraging the CEO's experience.
• Evaluate acquisition opportunities complementary to existing businesses.
• Expand osteopathic clinics, focusing on the Kyushu region, through acquisitions and franchising.
• Develop manuals and business packaging for franchising osteopathic clinics and beauty salons.
• Optimize management costs through operations improvement and IT platform integration.
• Implement additional measures in fiscal year 2026 to remediate identified material weaknesses in internal control over financial reporting.

Key Dates

Recommendation

RYOJBABA's recent IPO and strategic initiatives, including expansion plans and a significant new international labor agreement, present long-term growth potential. The company also demonstrates strong operational metrics in its core osteopathic clinics, such as high repeat customer rates and insurance claims. However, the substantial decline in net income and EBITDA for 2025, coupled with identified material weaknesses in internal controls, introduces significant short-to-medium term uncertainty and risk. While the IPO has improved liquidity, the company anticipates needing additional capital in the near future. A 'hold' recommendation is appropriate to allow investors to monitor the company's progress in remediating internal control issues, executing its growth strategy, and demonstrating a return to profitability before making further investment decisions.

Keywords

Labor Consulting, Osteopathic Clinics, Health Services, Japan, SEC Filing, 20-F, Nasdaq, IPO, Financial Performance, Corporate Governance, Risk Factors, Healthcare Industry, Work Style Reform, Judo Therapy, Stress Checks, Whistleblower System, Foreign Private Issuer, Controlled Company, Internal Controls