Executive Summary / Key Takeaways

• Earlyworks Co., Ltd. is a Japanese blockchain technology company leveraging its proprietary Grid Ledger System (GLS) to enable enterprise digital transformation, positioning itself as a key technology enabler in a data-centric future.
• The company achieved substantial revenue growth of 145.50% in the fiscal year ended April 30, 2025, primarily driven by a nearly 200% increase in its core software and system development services, reflecting strong project delivery and market recognition following its Nasdaq listing.
• GLS offers significant technological advantages over conventional blockchains, including transaction approval times as fast as 0.02 seconds, real-time data processing with absolute finality, and flexible fee structures, making it a versatile infrastructure for emerging technologies like AI and IoT.
• Earlyworks is strategically expanding GLS deployment into eight high-growth sectors, including stablecoins and carbon offset, supported by increased R&D investments and a focus on attracting top talent and forming strategic alliances.
• Despite its technological promise and growth, Earlyworks faces critical challenges, including substantial doubt about its ability to continue as a going concern, a Nasdaq delisting determination, significant customer concentration, and internal control weaknesses, which necessitate successful capital raising and operational improvements.

Japan's Blockchain Frontier: Earlyworks' Vision and Strategic Foundation

Earlyworks Co., Ltd., established in Japan on May 1, 2018, is a blockchain-based technology company dedicated to optimizing business operations through its innovative Grid Ledger System (GLS). The company envisions a data-centric future where blockchain technology is indispensable due to its inherent efficiency, security, and reliability. This vision positions Earlyworks at the forefront of the Web3 movement, aiming to foster industry growth through diverse applications of its blockchain technology.

The blockchain industry, while nascent, is rapidly evolving and presents significant technical challenges, particularly in balancing speed, security, and transparency. Conventional blockchains often struggle with slow processing speeds and a lack of "absolute finality," limiting their commercial applicability beyond demonstration testing. Earlyworks was co-founded by Satoshi Kobayashi, CEO, and Hiroki Yamamoto, CTO, with a clear mission to overcome these limitations through its proprietary GLS. Early collaborations with NTT Docomo, Inc. (NTT) and advisory from Professor Kazuyuki Shudo underscored the company's commitment to rigorous development and performance enhancement.

Earlyworks operates within a unique competitive landscape in Japan, where it identifies as one of the very few companies capable of commercializing blockchain technology. The difficulty for other Japanese entities to find technically capable blockchain partners has drawn significant attention to Earlyworks' offerings. This strategic positioning allows the company to focus on localized consulting and solution design, providing a distinct value proposition in a market with specific cultural and regulatory nuances. The company's overarching strategy is to establish GLS as an infrastructural technology, underpinning the latest advancements in artificial intelligence, big data, and the Internet of Things.

The Grid Ledger System (GLS): Earlyworks' Technological Moat

Earlyworks' core competitive advantage lies in its proprietary Grid Ledger System (GLS), a hybrid blockchain that intelligently combines the strengths of traditional database technology with the security and immutability of blockchain. This innovative architecture was specifically designed to address the critical trade-offs between security and processing speed that plague conventional blockchain networks.

GLS offers several quantifiable and tangible benefits over its predecessors. It boasts a remarkable transaction approval time, capable of reaching as fast as 0.02 seconds, a stark contrast to the several seconds or even minutes required by conventional blockchains (e.g., EOS at 3 seconds, Ethereum at 15 seconds, and Bitcoin at 10 minutes). This superior speed enables greater real-time data processing, a critical feature for commercial applications, by achieving "absolute finality"—a definite consensus algorithm that ensures transactions are confirmed and irreversible. Furthermore, GLS incorporates parallel processing and auto-scale functions, allowing it to adapt performance dynamically to user expansion and contraction needs, distributing processing loads efficiently across intermediate nodes.

Beyond speed, GLS provides enhanced security and operational stability. Its blockchain integration ensures high tamper-resistance, with any tampering incidents being traceable. The peer-to-peer network design guarantees zero server downtime, maintaining stable services even during system maintenance or cyber-attacks. Uniquely, GLS includes an "emergency stop" or "kill switch," a crucial feature absent in conventional blockchains, enabling rapid system shutdown in critical situations. From a cost perspective, GLS reduces construction, installation, and maintenance expenses by enabling data storage on users' personal computers, eliminating the need for expensive high-performance servers. As a private blockchain, it also offers flexible fee structures for high-speed, high-volume transactions.

Earlyworks' commitment to innovation is evident in its R&D initiatives. The completion of the GLS System Development Kit (SDK) by the fiscal year ended April 30, 2024, was a significant milestone, enabling the company to deliver services that precisely meet customer requirements. The company is also engaged in a joint R&D project to develop "SmokeDB," an ultra-high-speed next-generation hybrid database, specifically aimed at facilitating blockchain integration into non-financial sectors where low processing speeds and technical complexities are prevalent. These technological advancements and R&D efforts are crucial for Earlyworks' long-term growth, contributing to its competitive moat, enhancing its market positioning in data-intensive sectors, and potentially leading to higher average selling prices (ASPs) and improved margins through increased operational efficiency. The company holds three registered patents, including the "Information processing equipment and program (GLS)," which is considered material to its business.

Strategic Expansion and Market Penetration

Earlyworks' strategic roadmap centers on establishing itself as a pivotal technology enabler through the widespread, real-world deployment of GLS. The company is actively accelerating the development, proof-of-concept validations, and implementation of its technology across eight key sectors. These include stablecoins, where GLS can provide high-integrity infrastructure for fiat-pegged digital currencies; carbon offset, for transparent tracking and verification of carbon credits; and advertising, to reduce fraud and improve trust through immutable impression tracking. Other target sectors encompass supply chain, entertainment (particularly online gaming), energy, trade logistics, and insurance, each presenting unique opportunities for GLS to enhance efficiency, security, and transparency.

To achieve these ambitious goals, Earlyworks is committed to strengthening its R&D investments, attracting top-tier engineering and business talent, and pursuing strategic alliances both domestically and globally. The company's business model thrives on identifying opportunities where blockchain can digitally transform internal databases. It engages in a meticulous process of project planning, collaborating closely with customers to design tailored solutions and ensure project alignment. Earlyworks prides itself on fostering trusted relationships with a diverse customer base, ranging from venture companies to multi-national businesses across various industries, often leading to repeat engagements for additional consulting and system maintenance services.

Financial Performance: Growth Amidst Challenges

Earlyworks demonstrated significant financial momentum in the fiscal year ended April 30, 2025, with total revenue surging by approximately JPY261.0 million, or 145.50%, to JPY440.36 million (USD 3.09 million), compared to JPY179.36 million in the prior fiscal year. This impressive growth follows a 285.10% increase in total revenue in the fiscal year ended April 30, 2024, compared to JPY46.57 million in 2023.

The primary driver of this expansion was the software and system development services segment, which generated JPY375.35 million (USD 2.63 million) in FY2025, accounting for 85.20% of total revenue. This segment's revenue increased by approximately JPY249.7 million, or 198.80%, from FY2024, fueled by an increase in system development projects, including preliminary research and post-delivery maintenance and support. The completion of the GLS SDK in FY2024 and the company's Nasdaq listing significantly bolstered its industry presence and customer trust, contributing to this growth. Consulting and solution services also saw a remarkable increase, rising by approximately JPY62.2 million, or 2221.30%, to JPY65.01 million (USD 455,807) in FY2025, driven by the completion and delivery of new projects. Notably, the company strategically reallocated resources, resulting in nil revenue from NFT sales in FY2025, a 100% decrease from FY2024.

Despite robust revenue growth, profitability remains a challenge. While gross profit increased by approximately JPY85.3 million, or 60.20%, to JPY227.10 million in FY2025, the TTM Gross Profit Margin stood at 51.57%. Operating expenses saw varied trends: selling and marketing expenses increased by 34.80% due to new hires and advertising, while general and administrative expenses decreased by 9% due to the absence of one-time NASDAQ listing costs from the previous year. Research and development expenses also decreased by 43.20% as projects moved beyond the initial research phase. Consequently, Earlyworks reported a net loss of approximately JPY256.7 million (USD 1.80 million) for FY2025, with a TTM Operating Profit Margin of -55.83% and a TTM Net Profit Margin of -58.29%.

Liquidity and capital resources present a significant concern. The company reported negative cash flow from operating activities of JPY191.73 million (USD 1.34 million) for FY2025. As of April 30, 2025, working capital was JPY60.72 million (USD 425,737), and unrestricted cash stood at JPY104.38 million (USD 731,819). Total contractual obligations amounted to JPY51.85 million, with JPY17.99 million due within one year. Management acknowledges that these conditions "raise substantial doubt about the Company’s ability to continue as a going concern." To address this, Earlyworks secured an interest-free loan of JPY17.00 million (USD 119,190) from CEO Satoshi Kobayashi due September 30, 2025, and entered into a memorandum of understanding for a proposed third-party allotment of new shares valued between USD 2.50 million and USD 4.00 million.

Competitive Landscape: A Niche Player Among Giants

Earlyworks operates in a blockchain industry characterized by high technological barriers to entry and the inherent difficulty in balancing speed, security, and transparency. The company distinguishes itself as one of the few in Japan capable of commercializing blockchain technology, a factor that has drawn significant attention to its offerings given the scarcity of local, technically proficient blockchain partners.

Compared to global technology giants like IBM , Microsoft , and Oracle , Earlyworks occupies a specialized niche. IBM , with its extensive global brand and hybrid cloud/AI focus, offers comprehensive enterprise blockchain solutions. Earlyworks, however, demonstrates greater agility and specialized expertise in tailoring its GLS for specific Japanese market needs, potentially allowing for quicker deployment in niche use cases like advertisement tracking. While IBM (IBM) possesses superior resources, market share, and financial health, Earlyworks' speed in custom applications provides a distinct competitive edge.

Microsoft , through Azure Blockchain, provides scalable cloud-based solutions integrated with AI. Earlyworks' GLS, with its 0.02-second transaction approval time, offers notably faster processing for specific blockchain tasks, potentially leading to lower implementation costs for enterprises in its target segments. Microsoft's (MSFT) vast ecosystem and R&D scale give it a significant advantage in technological breadth and market capture, but Earlyworks' localized approach and customizability allow it to build stronger customer relationships in sectors like real estate.

Oracle , a leader in database and cloud technology, offers robust blockchain platforms emphasizing data security. Earlyworks' proprietary GLS provides potentially more efficient and flexible blockchain solutions tailored to user-specific needs, such as in supply chain or entertainment, where real-time applications are critical. Oracle (ORCL) benefits from its established infrastructure and scale, which often translate to superior operational efficiency and profitability. Earlyworks' innovation speed in blockchain-specific developments, however, allows it to perform better in dynamic markets.

Earlyworks' competitive advantages, or "moats," are primarily rooted in its proprietary Grid Ledger System's quantifiable performance benefits, its deep focus on the Japanese market, and its ability to provide customized consulting and solution services. These strengths enable it to counter the bureaucratic weaknesses of larger competitors and offer more adaptable, potentially lower-cost solutions in its chosen niches. However, Earlyworks' smaller scale, limited global presence, and potential dependencies on Japanese regulations represent significant vulnerabilities. These factors can increase customer acquisition costs and reduce profitability, making it challenging to compete with the broader market reach and financial might of its larger rivals. Indirect competitors, such as traditional cloud databases and emerging AI-driven platforms, also pose a threat by offering simpler or cheaper alternatives for non-blockchain needs.

Risks and Forward Outlook

Earlyworks' promising technological advancements and strategic growth initiatives are tempered by several critical risks and uncertainties. The most immediate concern is the Nasdaq delisting determination received on May 2, 2025, due to failing the minimum market value requirement. While the company was granted an extension until September 19, 2025, to regain compliance with the minimum stockholders' equity rule, there is no assurance it will succeed. This situation, coupled with significant accumulated losses and negative operating cash flow, raises "substantial doubt about the Company’s ability to continue as a going concern."

Customer concentration also poses a material risk, as two customers accounted for approximately 86.4% of Earlyworks' total sales revenue in FY2025. The loss of either of these major clients or their inability to meet contractual obligations could severely impact the company's financial condition. Furthermore, Earlyworks is actively addressing a material weakness in its internal control over financial reporting, stemming from insufficient financial reporting and accounting personnel. While remediation efforts are underway, timely resolution is not guaranteed.

The company is also involved in a lawsuit filed by certain shareholders, alleging misconduct by CEO Satoshi Kobayashi and seeking USD 2.93 million in damages, which has resulted in the temporary seizure of JPY 31.49 million in bank accounts. Although Earlyworks believes the complaint is without merit and intends to vigorously defend the case, litigation outcomes are inherently uncertain. Broader industry risks include the nascent and rapidly changing nature of blockchain technology, its market acceptance, and evolving regulatory frameworks, which could all impact the development and adoption of GLS.

Despite these challenges, Earlyworks' outlook is anchored in its strategic commitment to R&D, talent acquisition, and global strategic alliances to expand GLS deployment across high-growth sectors. The ongoing capital raising efforts, including the proposed third-party allotment of new shares, are crucial for addressing its liquidity needs and regaining Nasdaq compliance. The company intends to retain all future earnings to fund its operations and growth, indicating no dividend payments in the foreseeable future.

Conclusion

Earlyworks Co., Ltd. stands as a compelling, albeit high-risk, investment proposition at the intersection of innovative blockchain technology and a rapidly digitizing enterprise landscape in Japan. Its proprietary Grid Ledger System (GLS) represents a significant technological differentiator, offering quantifiable advantages in speed, real-time processing, and cost-efficiency over conventional blockchain solutions. This technological edge, coupled with a strategic focus on expanding into diverse, high-potential sectors like stablecoins and supply chain, underpins the company's long-term vision for driving digital transformation.

However, the investment narrative is currently dominated by critical financial and operational hurdles. The "substantial doubt" regarding its going concern status, the looming Nasdaq delisting threat, and significant customer concentration demand immediate and decisive action. While Earlyworks has demonstrated impressive revenue growth in its core software and system development services, the successful execution of its capital raising initiatives and the remediation of internal control weaknesses will be paramount. For discerning investors, Earlyworks presents an opportunity to back a specialized blockchain innovator with a strong technological foundation, but one that requires close monitoring of its ability to overcome present financial and operational challenges to fully realize its enterprise blockchain future.