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美國

證券交易委員會

華盛頓特區20549

表格20-F

☐ 根據1934年證券交易所法第12(b)或(g)條的規定，註冊聲明書

或者

☒ 根據證券交易法1934年13或15(d)條款的年度報告

截至2021年9月30日的財政年度報告6月30日, 2024

或者

☐ 根據1934年證券交易法第13或15（d)條的轉型報告

或者

☐ 根據1934年證券交易所法第13條或第15(d)條，報告關於殼公司

事件要求此殼公司報告的日期

第過渡期

委託文件號碼：001-41814

Kabushiki Kaisha Lead房地產業

（根據其章程規定的準確名稱）

領先房地產有限公司

(註冊人名稱的英文翻譯)

日本

（成立或組織的轄區）

日本 150-0036 東京都澀谷區南平台町 16-11 6 樓 MFPR 澀谷南平台大廈

日本 150-0036 東京都澀谷區南平台町 16-11

東京, 150-0036, 日本

，（主要行政辦公地址）

永原 栄治，總裁，首席執行官和代表董事

電話：+81 3-5784-5127

電子郵件: nagahara@lead-real.co.jp

在上述公司地址處

（公司聯繫人的姓名，電話，電子郵件和/或傳真號碼以及地址）

根據法案第12（b）條的規定註冊或擬註冊的證券。

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* Not for trading, but only in connection with the registration of the American depositary shares on The Nasdaq Stock Market LLC. Each American depositary share represents one ordinary share.

根據該法案第12(g)條的規定已註冊或將要註冊的證券。

無

（每個交易所的名稱）

根據該法案第15(d)條的規定存在報告義務的證券。

無

（每個交易所的名稱）

指示每個發行人類別的優先股或普通股在年度報告所涵蓋期間結束時的未償還股份數量： 13,641,900 普通股

請確認註冊人是否屬於《證券法》405條規定的知名老手發行人。

是的 ☐ 不 ☒

如果這份報告是年度報告或過渡報告，請通過勾選的方式表明註冊人不需要根據《1934年證券交易法》第13或15(d)條的規定提交報告。

是的 ☐ 不 ☒

請確認是否按照證券交易法案第13或15（d）節的要求文件了在過去12個月內（或該註冊人需要提交此類文件的更短期間內）的所有報告，並且在過去90天內一直受到這些文件提交的要求。

是 ☒否☐

請勾選表示註冊公司是否在過去12個月（或更短的時間內）根據S-t規則405條的要求電子提交了所有需要提交的互動數據文件。

是 ☒ 沒有☐

用複選標記表示申報人是大型加速報表人，加速報表人，非加速報表人，還是新興成長型公司。請參閱《交易所法》第120億.2規則中「大型加速報表人」，「加速報表人」和「新興成長型公司」的定義。

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如果一家在依照美國通用會計準則編制基本報表的新興成長公司，符合美國證券交易所第13(a)節規定提供的任何新的或修訂後的財務會計準則的過渡期選擇不使用，請用勾號表示。 ☐

請通過選中的方式指示，公司是否根據《薩班斯-奧克斯利法案》（15 U.S.C. 7262(b)）的規定，向其審核報告的註冊公共會計師事務所提交了關於內部控制的有效性的管理評估報告和承諾的陳述。 ☐

如果證券根據該法案第12（b）條進行註冊，請通過複選標記指示註冊人文件中包含的財務報表是否反映了先前發佈的財務報表的更正。 ☐

請在檢查標記中表示這些錯誤更正是否重述需要根據§240.10D-1(b)規定在相關恢復期間接受任何註冊人執行官員獲得獎勵的補救分析。☐

請勾選方框，以表明註冊人用於準備本備案文件中包含的財務報表的會計基礎：

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如果「其他」已在回答上一問題中勾選，請用複選標記表示註冊人選擇遵循的基本報表項目。項目17 ☐ 項目18 ☐

如果這是一份年度報告，請用複選標記表示註冊人是否爲殼公司（根據交易所法規120億.2定義）。是 ☐否☒

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目錄

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簡介

在這份20-F表格的年度報告中，除非上下文另有說明，否則參考：

本年度報告書20-F表格包括截至2024年6月30日、2023年、2022年的審計的合併財務報表。我們的功能貨幣和報告貨幣爲日幣。在本年度報告書中，將日幣方便地折算爲美元，匯率爲1日幣兌換160.88美元，這是2024年6月28日美國聯邦儲備委員會（「聯儲局」）在2024年7月1日週報中公佈的外匯牌價。歷史和當前匯率信息可在https://www.federalreserve.gov/releases/h10/20240701/找到，是2023年6月30日的匯率爲1日幣兌換144.47美元（https://www.federalreserve.gov/releases/h10/20230703/），以及2022年6月30日的匯率爲1日幣兌換135.69美元（https://www.federalreserve.gov/releases/h10/20220705/）。

我們對本年度報告書中的一些數值進行了四捨五入調整。因此，一些表格中顯示爲總數的數字可能不是前面數字的算術彙總。

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第一部分

第1項。董事、高級管理人員及顧問的身份

不適用。

第2項。發行統計數據和預期時間表

不適用。

第3項。關鍵信息

不適用。

不適用。

我們業務和行業相關的風險

東京、神奈川縣和札幌的豪華住宅房地產市場競爭激烈，如果我們不能繼續成功地確定並以商業上合理的成本獲得這些地區的開發用地庫存，我們的運營可能會受到不利影響。

東京、神奈川縣和札幌的豪華住宅房地產市場競爭激烈，綠地稀缺，可供收購的開發用地有限。我們的房地產開發業務的結果在一定程度上取決於我們繼續成功確定並收購足夠數量的土地和開發用地，並且位於我們市場的理想位置。迄今爲止，我們主要通過地方房地產代理商確定土地和開發用地。我們無法保證與這些代理商的長期關係將繼續下去，也無法保證符合我們要求的土地和開發用地將繼續通過這些代理商以類似過去提供的條件提供給我們，或者我們將不需要投入更多的資本用於土地和開發用地的收購，就如我們以往所做的那樣。由於競爭日益激烈，我們可能無法成功獲得所需的土地和開發用地。在我們一個或多個市場中土地和開發用地供應不足，或者我們無法以合理條件購買或融資土地和開發用地可能會對我們的銷售、盈利能力、聲譽、履行債務義務的能力和未來現金流產生重大不利影響，這可能影響我們爭取土地的能力。任何土地短缺或者以商業上合理的成本減少適用土地供應都可能限制我們開發新項目的能力或導致要求增加的土地存款或土地成本。此外，東京、神奈川縣和札幌的潛在開發用地供應將隨着時間的推移而減少，我們可能會越來越難以在未來以商業合理成本通過房地產代理獲取有吸引力的土地和開發用地。我們的土地收購成本是我們房地產銷售成本的重要組成部分，這些成本的增加可能降低我們的毛利率。我們可能無法將增加的土地成本轉嫁給客戶，這可能對我們的營收、利潤和利潤率產生不利影響。

從我們的公寓開發和銷售所產生的營業收入是不確定和波動的。

從歷史上看，我們的公寓開發和銷售所產生的營業收入是不確定和波動的。截至2024年6月30日、2023年和2022年的財政年度，我們的公寓銷售的營業收入分別爲JPY1181121.3萬（約7341.6萬美元）、JPY719974.1000000001萬（約4983.6萬美元）和JPY516229.2萬（約3804.5萬美元），分別佔我們總營業收入的約62%、41%和35%。由於我們銷售整棟公寓，每年的公寓項目相對較少，但每個項目的平均銷售價格更高，可能導致在一段時間內營業收入不穩定和不均勻。如果我們未能準確預測未來公寓銷售所產生的營業收入，或者這種收入繼續不確定和波動，可能會對我們的業務、前景、流動性、財務狀況和經營結果產生不利影響。

我們在很大程度上依賴短期借款來資助我們的業務，如果無法續簽這些短期借款，或者未能繼續獲得有利條件的融資，這可能會對我們經營業務的能力產生不利影響。

房地產開發是資本密集型的。迄今爲止，我們主要通過短期銀行貸款融資用於單戶住宅開發的土地收購，通常貸款期限爲三到六個月，而我們則是通過當地銀行的長期貸款爲公寓開發的土地收購提供資金。截至2024年6月30日，我們尚有約JPY492379.6萬（約3060.5萬美元）的短期借款未償還。在截至2024年6月30日的財政年度內，我們償還了JPY1270098.4000000001萬（約7894.7萬美元），並續簽了JPY1253164.1000000001萬（約7789.4萬美元）的短期借款。截至2023年6月30日，我們尚有約JPY509313.9萬（約3525.4萬美元）的短期借款未償還。在截至2023年6月30日的財政年度內，我們償還了JPY1029331.5萬（約7124.9萬美元），並續簽了JPY1066004.1000000001萬（約7378.7萬美元）的短期借款。截至2022年6月30日，我們尚有約JPY472641.3萬（約3483.2萬美元）的短期借款未償還。在截至2022年6月30日的財政年度內，我們償還了JPY917514.8萬（約6761.8萬美元），並續簽了JPY950618萬（約7005.8萬美元）的短期借款。我們預計根據我們過去的經驗和出色的信用歷史，能夠在到期時續簽所有現有的銀行貸款。然而，我們無法保證未來能夠續簽這些貸款。如果未來不能續簽這些銀行貸款，我們的流動性狀況將受到不利影響，可能需要尋找更昂貴的短期或長期融資來源來資助我們的業務。

我們能夠爲土地收購獲得足夠融資的能力取決於許多我們無法控制的因素，包括資本市場的市場條件、銀行對我們信用價值的認知、日本經濟，以及影響房地產公司融資可用性和成本的日本政府法規。如果我們無法以有利條款或完全獲取短期融資，可能需要暫停或削減我們的業務，這將對我們的業務和財務狀況產生重大不利影響。在這種情況下，目前的股東可能會損失大部分或全部投資。

我們的大額負債可能會對我們的業務、財務狀況、經營業績和現金流產生重大不利影響。

截至2024年6月30日，我們的短期借款約爲JPY492379.6萬（約合3060.5萬美元），長期借款爲JPY648953.6000000001萬（約合4033.8萬美元）。

我們的債務金額可能會對我們的運營產生重大影響，包括：

這些因素和其他可能由我們重大負債引起的後果可能對我們的業務、財務狀況、經營業績和現金流產生重大不利影響，影響我們履行債務下的支付義務的能力。我們履行債務下的支付義務的能力取決於我們將來產生顯著現金流的能力。在一定程度上，這取決於一般經濟、金融、競爭、立法和監管因素以及其他超出我們控制範圍的因素。

我們在房地產開發行業主要依賴於與服務提供商和機構的關鍵關係，如果他們在原材料、勞動力或項目的及時建設和交付方面遇到壓力，可能會進而對我們的業務、前景、流動性、財務狀況和經營業績產生不利影響。

我們主要依賴服務提供商（包括承包商）來進行幾乎所有單戶住宅和公寓的建設，包括選擇和採購用於建築的原材料以及項目的建設和交付。如果我們的承包商未能及時建設和交付項目，我們將受到合同與客戶之間拖延方面的處罰。我們還主要依賴房地產中介機構來尋找土地和開發項目，以及客戶。因此，如果這些服務提供商和機構在原材料（尤其是木材價格上漲）、勞動力（包括勞動力成本上漲）或項目的及時建設和交付方面遇到壓力，這種壓力可能傳遞給我們，從而可能增加我們的成本並對我們的業務、前景、流動性、財務狀況和經營業績產生不利影響。

我們的Glocaly平台處於起步階段，可能會在表現上經歷波動，不能保證我們能利用日本法律的修訂，允許以電子形式交付房地產交易所需的某些文件。

我們於2021年10月推出了互動媒體平台， Glocaly，作爲一個上市和營銷平台，旨在促進買方和賣方公寓的配對。有關更多信息，請參見「項目4.公司業務概況-Glocaly平台」。截至本年度報告日期， Glocaly 尚未產生營業收入，儘管我們看到越來越多的客戶通過該平台請求物業轉介。但是，我們無法保證 Glocaly的表現在我們繼續改進和升級平台的過程中能保持穩定。未能妥善維護平台可能會對我們的業務、前景和運營結果產生不利影響。

除了作爲互動媒體平台的功能，我們的業務平台還有潛力擴展成一個面向國內外買家的多語言和無縫交易平台，用於在日本交易公寓。 Glocaly 雖然過去在日本不允許通過電子方式進行房地產交易的所有程序，但日本法律的修訂允許從2022年5月開始電子交付房地產交易所需的某些文件。雖然我們期望在電子房地產交易領域擁有先發優勢，但無法保證我們能利用修訂法律和Glocaly來開展業務。 Glocaly關於亨廷頓病

我們建造獨棟住宅和公寓的施工依賴於承包商的供應、技能和表現。

我們僱用承包商來進行絕大多數單戶住宅和公寓的施工，並挑選和獲得所用的原材料。因此，我們的施工時間和質量取決於我們承包商的供應和技能。雖然我們預計能夠與可靠的承包商合作，也相信我們與承包商的關係良好，但我們無法保證技術嫺熟的承包商會繼續以合理的價格在我們的市場上提供服務。此外，隨着我們進入新市場，我們通常需要與這些市場的承包商建立新的關係，無法保證我們能夠以成本效益和及時的方式或根本無法建立這樣的關係。未能及時以合理價格與熟練承包商簽約可能會對我們的業務、前景、流動性、財務狀況和運營結果產生重大不利影響。

我們面臨的風險是，承包商的業績可能不符合我們的標準或規格。根據我們與客戶簽訂的合同，並根據日本法律，我們開發的物業享有10年質量保證。儘管我們進行了質量控制工作，但我們可能不時發現，我們的承包商從事不當的施工實踐，或者在我們的住宅公寓或建築物中安裝了有缺陷的材料。任何承包商的疏忽或劣質工作可能導致我們的獨棟住宅或公寓存在結構缺陷或施工質量不達標，進而導致我們遭受項目延誤、超支和財務損失，損害我們的聲譽，或者讓我們面臨第三方索賠。即使在這種情況下進行施工工作的承包商最終被追究責任來承擔任何物業缺陷的後果，任何此類事件仍可能對我們產生長期不利影響。我們與不同項目上的多家承包商合作，無法保證能夠始終有效監控他們的工作。此外，承包商可能利用我們沒有直接關係的第三方分包商，進一步限制我們管理上述風險的能力。儘管我們與承包商的施工合同中包含旨在保護我們的條款，但我們可能無法成功執行這些條款，即使我們成功執行這些條款，承包商也可能沒有足夠的財務資源來補償我們。此外，承包商可能承擔來自其他房地產開發商的項目，從事風險工程，或遇到供應短缺、勞資糾紛或工作事故等財務或其他困難，這可能導致我們物業項目完成時間延誤或成本增加。

建築材料或勞工短缺，或其成本提高，可能會導致住宅建設延誤或成本增加，進而可能對我們產生重大不利影響。

我們的承包商負責採購幾乎所有我們項目開發中使用的原材料。房地產開發行業偶爾會經歷勞動力和原材料短缺，包括木材短缺。特別是木材短缺可能會導致我們支付給承包商的施工成本增加，進而對我們的業務、前景、財務狀況和經營業績產生實質不利影響。例如，自2021年初以來木材價格一直在上漲，這反過來導致我們支付給承包商的款項增加。這些勞動力和原材料短缺在住房需求旺盛時期、自然災害過後對現有住宅和商業建築產生重大影響時期，或是更廣泛經濟動盪的結果時更嚴重。此外，我們在現有市場或未來可能選擇進入的市場取得成功，很大程度上取決於我們通過對我們有利條件的承包商獲取勞動力和當地材料的能力。在這些市場中，相對於增加的物業開發需求，這些市場可能展示出降低水平的熟練勞動力。如果這些市場出現勞動力或原材料短缺，當地承包商、工匠和供應商可能選擇向市場中與他們有更長期合作關係的已經在市場上建立存在的開發商分配資源。勞動力和原材料短缺以及勞動力和原材料價格上漲可能導致我們的住宅施工延遲並增加成本，進而對我們的業務、前景、財務狀況和經營業績產生實質不利影響。

我們的業務可能會受到流行病、大流行病或類似的公共威脅，或對此類事件的恐慌以及政府當局實施的應對措施造成重大和不利的干擾。

流行病、大流行或類似嚴重的公共衛生問題，以及政府當局爲解決這些問題所採取的措施，可能會嚴重干擾或阻止我們正常開展業務達到預期時間，並且可能會對我們的業務、前景、流動性、財務狀況和經營業績產生重大不利影響，同時伴隨着任何相關的經濟和社會不穩定或困擾。

例如，像COVID-19這樣的大流行可能會通過打亂供應鏈和提高原材料和勞動力成本來影響我們的業務。在COVID-19大流行期間，我們通過將增加的成本通過提高平均銷售價格向客戶傳遞，並通過固定成本分包商安排來應對我們施工成本的增加，這有助於保持我們的利潤。

儘管COVID-19在截至2024年6月30日、2023年和2022年的財政年度並沒有對我們的運營產生重大影響，但未來仍存在因另一次大流行、經濟衰退或其他外部因素而導致供應鏈問題、成本上升或更廣泛的運營挑戰的風險。我們不能保證將來能夠完全化解這些不利影響。

我們可能無法及時完成或完全完成我們的房地產開發項目。

發展項目的進展和成本可能受到許多因素的不利影響，包括：

任何施工延遲或未能按照我們計劃的規格或預算完成項目，都可能會延誤我們的房地產銷售，影響我們的營業收入、現金流和聲譽。

我們的經營業績可能會因時期而異。

我們的經營業績往往會因時期而異。由於土地收購和施工需要大量資金，以及在正現金流量產生之前需要較長時間的開發週期，因此我們在任何特定時期內可以開發或完成的物業數量是有限的。

我們的酒店運營面臨着酒店業固有的商業、財務和運營風險，其中任何風險都可能減少我們的營業收入並限制增長機會。

我們的酒店經營面臨酒店業固有的許多商業、財務和運營風險，包括：

這些因素中的任何一個都可能增加我們的成本或限制或降低我們對酒店產品和服務的定價，或以其他方式影響我們維護現有物業或開發新物業的能力。因此，這些因素中的任何一個都可能降低我們的收入並限制增長機會。

全球經濟衰退或較低水平的經濟增長可能會對我們作爲酒店運營商的收入和盈利能力產生不利影響。

消費者對我們酒店服務的需求與整體經濟表現密切相關，並且對企業和個人自發性支出水平敏感。在經濟衰退或低水平經濟增長期間，全球或區域需求減少酒店產品和服務的情況尤其明顯，而我們行業的復甦期可能滯後於整體經濟改善。由於一般經濟狀況下對我們產品和服務的需求下降可能會通過限制我們能從酒店物業收取的費用收入金額來負面影響我們的業務，降低我們酒店物業的收入和盈利能力。此外，我們業務涉及的許多費用，包括人員成本、利息、租金、房產稅、保險和公用事業，相對穩定。在整體經濟疲軟期間，如果我們無法在酒店服務需求下降時實質性降低這些成本，我們的業務運營和財務表現可能受到不利影響。

我們面臨着固有於住宅租賃業務的風險。

在日本和德克薩斯州達拉斯向個人客戶出租公寓大樓單位時，我們面臨着住宅租賃業務固有的多種風險，包括：

這些因素中的任何一個都可能對我們的運營結果或財務狀況產生重大不利影響。

租賃管制法律和其他限制我們提高租金的規定可能會對我們的租金收入和住宅租賃業務的盈利能力產生負面影響。

各級政府機構可能會出台租金管制法律或其他規定，限制我們提高租金的能力，這可能會影響我們的租金收入。特別是在經濟衰退和經濟放緩時期，租金管制措施可能獲得重要政治支持。如果租金管制突然適用於我們某些物業，我們從這些物業獲得的營業收入以及其價值可能會受到不利影響。

如果我們的租戶尋求提前終止租約或未能履行租約下的義務，可能會嚴重不利地影響我們的業務、運營結果和財務狀況。

我們的租戶可能會尋求提前終止租約或未能履行租約下的義務。如果租戶違約付款義務並未在適用寬限期內補救違約，我們可能會依據租約和相關法律終止租約並收回公寓。我們還需要按照適用的情況向相關租戶返還預付租金，這可能會對我們的現金流產生負面影響。在租約違約或提前終止情況下，我們可能無法及時找到新的租戶填補空缺，並採取相同條款或其他條款，而且違約租戶的按金或違約金可能不足以cover我們在租約期間的損失。如果我們的大量租戶尋求提前終止或未能履行租約下的義務，我們的業務、運營結果和財務狀況將受到不利影響。

此外，租戶可能會將我們的公寓用於非法用途或在我們的公寓內從事非法活動，損壞或對我們的公寓進行未經授權的結構性改變，拒絕在違約或租約終止時離開公寓，打擾附近租戶的噪音、垃圾、異味或礙事物，違反我們的租約將公寓轉租出去，或允許未經授權的人員居住在我們的公寓。儘管租戶應對其不當行爲造成的損害負責，但我們仍可能受到業務和聲譽上的負面影響。公寓的損壞可能會延遲重新出租，需要進行昂貴的修復，或影響公寓的租金收入，導致預期以下的回報率。

如果我們無法吸引、培訓、融入和留住體現我們文化的員工，包括項目經理和高級經理，我們可能無法使業務增長或成功運營。

我們的成功在一定程度上取決於我們吸引、培訓、融入和留住足夠數量員工的能力，包括項目經理。如果我們無法聘用和留住能有效協調參與我們項目工作的外部方的項目經理，我們開發新項目的能力可能會受損，現有項目的建設可能會受到實質性不利影響，我們的品牌形象可能會受到負面影響。我們的增長策略將需要我們吸引、培訓和融入更多人員。任何未能滿足我們人員需求或團隊成員離職率顯著增加可能會對我們的業務或運營結果產生重大不利影響。

我們在房地產開發業重要厚重地依賴於我們的高級管理團隊的行業經驗和知識以及他們與其他行業參與者的關係。我們的創始人、總裁、首席執行官和代表董事長，永原英治先生對我們未來的成功尤爲重要，原因在於他在房地產開發業的豐富經驗和聲譽。我們不購買、也不打算購買任何高級管理團隊成員的關鍵人員保險。由於高級管理團隊中的一個或多個成員離職或其他原因，失去其服務可能會阻礙我們有效管理業務和實施發展策略的能力。尋找適當的替代者來替換我們現有的高級管理團隊可能很困難，而對具有類似經驗的此類人員的競爭激烈。如果我們未能留住我們的高級管理團隊，我們的業務和運營結果可能會受到重大不利影響。

任何未經授權使用我們的品牌或商標可能會對我們的業務產生不利影響。

我們目前在日本擁有19項與房地產相關服務的商標，並在日本和美國各有三項商標申請待批准。我們依賴日本和美國的知識產權和反不正當競爭法以及合同限制來保護我們的品牌名稱和商標。我們相信我們的品牌、商標和其他知識產權對我們的成功至關重要。任何未經授權使用我們的品牌、商標和其他知識產權均可能損害我們的競爭優勢和業務。監控和防止未經授權使用具有一定難度。我們採取的措施可能無法充分保護我們的知識產權。如果我們無法充分保護我們的品牌、商標和其他知識產權，可能會損害我們的聲譽並對我們的業務造成不利影響。

我們沒有足夠的保險來覆蓋潛在的損失和索賠。

我們目前持有火災保險，以及針對項目工地上的侵權行爲或其他人身傷害的責任保險。然而，在將產業交付給客戶之前，我們沒有足夠的保險覆蓋潛在的損失或損害。我們的承包商可能沒有足夠的保險，或者沒有財務能力來承擔由於項目而產生的任何損失或支付我們的索賠。雖然我們認爲我們的做法符合日本房地產開發行業的一般慣例，並且我們在過去沒有因爲缺乏保險覆蓋而產生損失、損害或責任的情況，但隨着我們開發更多產業，未來可能會出現這種情況，可能會對我們的財務狀況和業務結果產生不利影響。

我們受到各種法律法規的約束，包括涉及房地產租賃、購買和銷售的法律，違反這些法律法規或者這些法規的變更可能會對我們的業務造成不利影響。

我們從事的業務受到日本各種法律法規的約束。

我們受到日本《建築用地及建築物經營法》（1952年第176號法律及修正案）的約束，該法律規定了建築物和土地的租賃、銷售和購買，或者銷售和購買的中介，需要從日本國土交通部長、交通大臣或者相應的縣知事處獲得許可。違反《建築用地及建築物經營法》可能導致我們的許可被吊銷或業務暫停，這可能會對我們繼續在這些業務中進行操作的能力產生重大影響。除上述之外，我們的房地產業務還受到其他幾項國家和地方法規的約束，涉及區域規劃、公開招標程序、環境限制以及健康與安全合規，我們需要獲得許多政府許可和批准。

我們的房地產業務也受到日本建築標準法（1950年第201號法律及其修正案）的約束，該法律對我們的建築施工方法和安全事項進行了廣泛的監管和監督。違反建築標準法和其他建築施工法規可能導致施工暫停、拆除、重新建造建築物、維修或限制建築物僅能使用符合規定的部分。

對於日本公司普遍適用的其他法律法規的變化，如稅法和會計準則，也可能對我們的財務狀況和經營結果產生影響。違反法律法規可能導致我們遭受重大監管制裁，包括暫停或撤銷政府許可和批准，這可能會對我們的聲譽產生負面影響，並對我們的業務經營結果產生重大影響。

適用法律法規的變化還可能導致我們在開展業務方面靈活性降低，合規成本增加，或者對我們的業務、財務狀況和經營結果產生其他不利影響。

我們的業務地理集中，因此更容易受到當地或區域條件變化的風險。

截至本年度報告日期，我們主要在東京、神奈川縣和札幌的房地產開發市場開展業務，並主要從這些市場獲取收入。由於地理集中，我們的經營業績和財務狀況更容易受到這些地區一般經濟和其他狀況變化的風險影響，比更具地理多樣性的競爭對手的經營更易受到影響。這些風險包括：

由於我們業務地理集中，如果我們房地產陳偉中開發的任何地區受到不利條件影響，與其他地區或國家相比，我們業務、財務狀況、運營結果和前景面臨更大的負面影響風險。

在我們業務運營市場經濟出現衰退的情況下，可能會對房地產購買產生負面影響。可能影響客戶購買房地產意願的因素包括一般經營環境、就業水平、利率和稅率、抵押貸款的可獲性以及客戶對未來經濟狀況的信懇智能。在經濟衰退時，購房習慣可能受到不利影響，我們可能會經歷低於預期的淨銷售額，這可能迫使我們推遲或減緩增長策略，對我們的業務、財務狀況、盈利能力和現金流量產生重大不利影響。

近年來，日本的經濟因素呈現出複雜跡象，日本經濟的未來增長受到許多我們無法控制的因素的影響。前首相岸田文雄、首相菅義偉和前首相安倍晉三的政策旨在對抗通縮並促進經濟增長。此外，日本銀行於2013年4月推出了定量寬鬆和定性寬鬆貨幣政策，並於2016年1月宣佈了負利率政策。然而，這些政策倡議對日本經濟的長期影響仍不確定。此外，像COVID-19大流行這樣的大流行病、像地震和颱風這樣的大規模自然災害的發生，以及在2014年4月實施並於2019年10月進一步提高消費稅率，這些都可能對日本經濟產生不利影響，進而影響對房地產的支出。日本或全球經濟未來的惡化可能導致消費減少，從而對我們房地產的需求和價格產生負面影響。

我們在國際業務的擴張和運營方面可能會遇到困難，這可能會對我們的運營結果產生不利影響。

我們已在美國和香港設立了子公司，並計劃擴大在這些市場以及東南亞，特別是菲律賓的業務。我們在這些市場啓動和運營業務可能會使我們面臨來自日本之外的意料之外、無法控制和迅速變化的事件和環境。隨着國際業務的擴展，我們可能需要招募和聘用新的項目管理、銷售、市場營銷和支持人員，這些人員將在我們設立新子公司或在其他國家擁有或將擁有顯著存在的國家工作。進入新的國際市場通常需要建立新的營銷和銷售渠道。我們繼續擴展國際市場的能力涉及各種風險，包括我們關於擴張所帶來回報水平的預期在不久的將來或永遠無法實現，以及在我們不熟悉的市場中競爭可能比預期更困難。如果我們在一個新市場上的表現不如預期，我們可能無法實現對初始投資的充分回報，我們的經營業績可能會受到影響。

我們的國際業務也可能由於外國業務固有的其他風險而失敗，包括：

我們目前和任何未來的國際擴張計劃都需要管理關注和資源，可能會失敗。我們可能發現繼續國際擴張是不可能的或成本過高，或者我們可能在嘗試中失敗，這將對我們的經營業績產生不利影響。

我們可能不時捲入法律和其他訴訟，並因此遭受重大責任或其他損失。

我們可能不時與開發和銷售我們的物業或業務和運營的其他方面發生爭端，包括與僱員發生勞資糾紛。這些爭端可能導致法律或其他訴訟，並可能帶來巨額費用和資源以及管理關注的分散。爭端和法律和其他訴訟可能需要大量時間和費用來解決，這可能會轉移寶貴資源，如管理時間和營運資本，延遲我們的計劃項目，增加我們的成本。如果我們在這類爭端或訴訟中不勝訴，我們可能需要支付巨額費用和賠償金。此外，在我們的運營過程中，我們可能與監管機構產生分歧，這可能使我們面臨行政訴訟和不利判決，導致財務責任，並延誤我們的物業開發。

我們擁有或已出售的物業上的環境污染可能會對我們的經營業績造成不利影響。

在日本，《日本土壤污染對策法》（第2002年第53號法案，已修訂），如果地方長官發現由於有害或有毒物質造成的土地特定區域的土壤污染水平超過日本環境廳規定的標準，並且該土地區域受到的土壤污染已經或可能對人體健康造成危害，地方長官必須將該土地區域指定爲污染區域，並且地方長官可以根據一項有關去除和修復有害或有毒物質的計劃責令該土地的現任所有者進行去除或修復，原則上，不管當前所有者是否知道或對這些有害或有毒物質的存在負責。

通常我們在與我們的屬性相關的環境調查中進行的調查，比如發現土壤、地下水和建築物中的有毒或有毒物質，可能不足以完全發現旨在識別的問題類型，這些問題通常是隱藏的或需要特殊的專業知識和設備才能檢測到。我們的屬性上存在有害或有毒物質，或者我們未能適當清除任何此類污染，可能會對我們銷售、開發或出租我們的屬性或使用受影響的屬性作爲抵押品借款的能力產生不利影響。如果在我們的任何屬性上發現有害或有毒物質，受影響的屬性可能價值下降，開發可能延遲完成，我們可能需要承擔重大的未預見的費用以修復根源的危害並排除相關的環境責任。此外，如果由於我們屬性上存在有害或有毒物質而導致對人體健康產生實際危害，我們可能會遭受重大損失、監管制裁或損害我們的品牌和聲譽。環境污染相關的任何此類風險的實現都可能對我們的業務、財務狀況和運營結果產生重大不利影響。

我們的業務面臨與自然或人爲災害、大流行以及其他災難性事件相關的風險。

我們的業務面臨自然災害風險，如地震、颱風、海嘯、洪水和火山噴發，以及人爲災害風險，如火災、工業事故、戰爭、暴亂或恐怖主義。我們還面臨大流行風險，如新冠肺炎大流行、公共健康問題以及其他災難性事件。如果發生災難或其他災難性事件，我們的人員可能會受傷，我們的運營可能會受到干擾，我們可能會遇到施工延誤，包括推遲啓動或建造屬性的開發，或無法完成開發中的屬性的建造。此外，我們可能無法出售我們庫存中的屬性，我們的屬性可能價值下降或直接嚴重受損。我們可能還需要承擔費用來恢復或更換庫存中的受損屬性或我們依賴於運營業務的其他設施。

日本屬於地震多發地區，歷史上經歷了許多導致大面積財產損壞的大地震，比如2011年3月11日的地震，即東日本大地震，以及2016年4月熊本發生的地震。填海造地的發展面臨更高的土壤液化風險，可能會被地震觸發。雖然我們通常避免在填海造地上開發項目，但未來的一些開發項目可能會位於填海造地上。雖然我們會根據需要進行填海地的評估，但評估可能不足以發現地震時液化風險的程度。颱風也經常襲擊日本各地。例如，2019年秋季的大型颱風影響了日本部分地區。雖然我們過去未在業務或財產受到颱風而導致的實質性中斷，但不能保證將來不會發生這樣的中斷或物理損害。此外，我們主要致力於開發和銷售位於東京、神奈川縣和札幌的房地產，使我們在該地區發生任何自然災害或人爲災害時特別容易受到影響。即使我們的設施不遭受物理損害，電力等公用事業的損失或限制也可能影響我們的業務。我們對臺風和其他自然災害造成的損害或責任的保險可能不足以支付維修費用或其他損失，並且我們一般不購買與地震或業務中斷相關的保險。

日本政府政策的變化可能會對住房需求和投資物業產生不利影響，進而影響潛在買家購買住宅房地產的能力或意願。

日本住宅房地產市場的需求受到日本政府政策的顯著影響，其中目前包括低利率政策導致銀行提供高度折扣抵押貸款利率以及與住房貸款相關的優惠稅收待遇，以及公共贊助的長期抵押貸款產品。這些房屋相關政策之一是日本政府爲幫助抵消2014年消費稅率上調對住房需求的影響而實施的，並且進一步修改以幫助減輕2019年消費稅率上調的影響。這些政策未來可能會變化或終止，或者可能不再像預期的那樣繼續促進對獨棟住宅和公寓的需求增加。住宅物業稅、購買住房時發生的消費稅或其他與住房相關的政策的變化，如果增加擁有、購買或出售房地產的成本，可能會對潛在購房者購買獨棟住宅或公寓的能力或意願產生不利影響，從而可能對我們的業務、財務狀況和經營業績產生重大不利影響。

投資住宅房地產業需求也受政府政策影響。例如，在日本稅法下，個人投資海外二手租賃建築可以獲得有利的稅收減免。當此類二手租賃建築賣出時，計算折舊費用時忽略的租賃損失（使用簡便法確定有用餘壽期的路徑外二手租賃建築）可從累計折舊費用中扣除，這應在計算出售物業基礎時排除，導致更高的基礎，進而降低資本收益。

我們可能因與我們的物業相關的缺陷而產生損失。

我們可能會對我們開發、擁有、出售或出租的物業發生的未預見損失、損害或第三方遭受的傷害承擔責任，這是由於此類物業存在缺陷。在日本，根據日本民法（1896年修訂的第89號法案，即民法），建築物的所有者或附着在土地上的物業對由於這些結構或物業缺陷造成的第三方受損承擔嚴格責任。我們的業務、財務狀況或經營結果可能會受到我們承擔任何此類責任的不利影響。我們也可能會爲保修期內的物業建設缺陷承擔重大成本。在完成房地產開發項目後，我們可能會對我們擁有或出售的物業中發生的未預見損失、損害或第三方受傷承擔責任，這出於建築缺陷產生。

日幣對某些外幣價值波動可能會對我們的運營結果產生重大不利影響。

我們部分外國業務的結算貨幣不是日幣，其財務報表最初使用其結算貨幣編制，然後被轉換爲日幣。由於銷售記入的貨幣可能與發生費用的貨幣不同，匯率波動可能對我們的運營結果產生重大影響。儘管當前我們的營業收入只有很小一部分來自日本以外的市場，但我們預計未來我們的營業收入和支出中將有越來越多的部分以日幣以外的貨幣計價。因此，我們的合併財務結果、資產和負債可能會受到我們開展業務所涉及的外幣匯率變化的重大影響。

未來的收購可能會對我們管理業務以及運營和財務狀況產生重大不利影響。

我們可能收購與我們的核心房地產開發和銷售業務相輔相成的業務、技術、服務或產品。未來的收購可能讓我們面臨潛在風險，包括與整合新業務、服務和人員相關的風險、未預見或隱藏的負債、從我們現有業務和技術中轉移資源和管理注意力、我們潛在無法產生足夠營收以抵消新成本、與此類收購相關的費用和支出、或由於我們整合新業務而可能損失或損害與供應商、員工和客戶的關係。

以上列出的任何潛在風險可能會對我們管理業務的能力或我們的運營和財務狀況產生重大不利影響。此外，我們可能需要通過增加債務或出售額外債務或股票來籌集任何此類收購所需的資金，這將導致增加的債務償還義務，包括額外的經營和融資契約，或對我們資產施加抵押，從而限制我們的運營，或給我們的股東造成攤薄。

與我們的普通股和交易市場相關的風險

股權集中在我們管理層手中，他們能夠對我們直接或間接地施加控制影響。

截至本年度年度報告日期，我們的董事和執行官共同有權擁有約90.1%的已發行和流通的普通股，不包括無表決權的庫藏股。這些股東共同行動對於我們股東需要批准的一切事項具有重要影響，包括董事的選舉和重大公司交易的批准。即使其他股東持反對意見，也可能採取公司行動。這種所有權集中也可能導致拖延或阻止其他股東視爲有利的公司控制權更迭。

ADS大量出售或可供出售可能會對市場價格產生不利影響。

大量ADS在公開市場上的銷售或預期這些銷售可能發生，可能會對ADS的市場價格產生不利影響，並且可能會嚴重影響我們未來通過股權發行籌集資本的能力。截至本年度年度報告日期，已發行和流通的普通股爲13,641,900股，已發行爲庫藏股1,986,100股，以及發行、流通和自由交易的ADS 1,143,000股（相當於1,143,000股普通股）。我們無法預測，如果我們重要股東或其他股東持有的證券在市場上銷售，或者這些證券未來可供出售，將對ADS的市場價格產生何種影響。

如果證券或行業分析師未就我們的業務發佈研究或報告，或者如果他們發佈與ADS有關的負面報告，ADS的價格和交易量可能會下降。

ADS的任何交易市場可能部分地取決於行業或證券分析師關於我們或我們業務的研究和報告。我們無法控制這些分析師。如果覆蓋我們的一個或多個分析師給予我們下調評級，ADS的價格可能會下跌。如果其中一個或多個分析師停止覆蓋我們公司或未能定期發佈關於我們的報告，我們可能會失去在金融市場上的知名度，這可能導致ADS的價格和交易量下降。

The market price of the ADSs may be volatile or may decline regardless of our operating performance.

The market price of the ADSs may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

If we fail to implement and maintain an effective system of internal control, we may fail to meet our reporting obligations or be unable to accurately report our results of operations or prevent fraud, and investor confidence and the market price of the ADSs may be materially and adversely affected.

As a public company in the United States, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. In addition, once we cease to be an “emerging growth company,” as such term is defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented, or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations, and civil or criminal sanctions. We may also be required to restate our financial statements for prior periods. See “Item 15. Controls And Procedures” for more information.

As a foreign private issuer, we have followed home country practice even though we are considered a “controlled company” under Nasdaq corporate governance rules, which could adversely affect our public shareholders.

As of the date of this annual report, Mr. Eiji Nagahara, our president, chief executive officer, and representative director, owns more than a majority of the voting power of our outstanding Ordinary Shares. Under the Nasdaq corporate governance rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance standards, including the requirements that:

As a foreign private issuer, however, Nasdaq corporate governance rules allow us to follow corporate governance practice in our home country, Japan, with respect to appointments to our board of directors and committees. We have followed home country practice as permitted by Nasdaq rather than rely on the “controlled company” exception to the corporate governance rules. See “—Because we are a foreign private issuer and have taken advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, you have less protection than you would have if we were a domestic issuer.” Accordingly, you do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

Rights of shareholders under Japanese law may be different from rights of shareholders in other jurisdictions.

Our articles of incorporation and the Companies Act of Japan (Act No. 86 of 2005, as amended), or the Companies Act, govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors’ and executive officers’ fiduciary duties, and obligations and shareholders’ rights under Japanese law may be different from, or less clearly defined than, those that would apply to a company incorporated in any other jurisdiction. Shareholders’ rights under Japanese law may not be as extensive as shareholders’ rights under the law of other countries. For example, under the Companies Act, only holders of 3% or more of our total voting rights or our outstanding shares are entitled to examine our accounting books and records. Furthermore, there is a degree of uncertainty as to what duties the directors of a Japanese joint-stock corporation may have in response to an unsolicited takeover bid, and such uncertainty may be more pronounced than that in other jurisdictions.

As holders of ADSs, you may have fewer rights than holders of our Ordinary Shares and must act through the depositary to exercise those rights.

The rights of shareholders under Japanese law to take actions, including voting their shares, receiving dividends and distributions, bringing derivative actions, examining our accounting books and records, and exercising appraisal rights, are available only to shareholders of record. ADS holders are not shareholders of record. The depositary, through its custodian agents, is the record holder of our Ordinary Shares underlying the ADSs. ADS holders will not be able to bring a derivative action, examine our accounting books and records, or exercise appraisal rights through the depositary.

Holders of ADSs may exercise their voting rights only in accordance with the provisions of the deposit agreement. If we instruct the depositary to ask for your voting instructions, upon receipt of voting instructions from the ADS holders in the manner set forth in the deposit agreement, the depositary will make efforts to vote the Ordinary Shares underlying the ADSs in accordance with the instructions of the ADS holders. The depositary and its agents may not be able to send voting instructions to ADS holders or carry out their voting instructions in a timely manner. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast, or for the effect of any such vote. As a result, holders of ADSs may not be able to exercise their right to vote.

Direct acquisition of our Ordinary Shares, in lieu of ADSs, is subject to a prior filing requirement under the amendments in 2019 to the Japanese Foreign Exchange and Foreign Trade Act of Japan and related regulations.

Under the amendments in 2019 to the Foreign Exchange and Foreign Trade Act of Japan (Act No. 228 of 1949, as amended) (“FEFTA”) and related regulations, direct acquisition of our Ordinary Shares, in lieu of ADSs, by a Foreign Investor (as defined herein under “Item 10. Additional Information—D. Exchange Controls”) could be subject to the prior filing requirement under FEFTA, regardless of the amount of shares to be acquired. A Foreign Investor wishing to acquire direct ownership of our Ordinary Shares, rather than ADSs, will be required to make a prior filing with the relevant governmental authorities through the Bank of Japan and wait until clearance for the acquisition is granted by the applicable governmental authorities, which approval may take up to 30 days and could be subject to further extension. Without such clearance, the Foreign Investor will not be permitted to acquire our Ordinary Shares directly.

A prior filing requirement as set forth above is not triggered for acquiring or trading the ADSs since the depositary received clearance for the acquisition of our Ordinary Shares underlying the ADS in May 2023. In addition, any Foreign Investor expecting to receive delivery of our Ordinary Shares upon surrender of ADSs must also obtain pre-clearance from the applicable Japanese governmental authority prior to accepting delivery, which approval may take up to 30 days and could be subject to further extension. Although such prior filing requirement is not triggered for trading the ADSs once the depositary receives clearance for the deposit of the underlying Ordinary Shares, we cannot assure you that there will not be delays for additional Foreign Investors who wish to acquire our Ordinary Shares or for holders of the ADSs who are Foreign Investors and who wish to surrender their ADSs and acquire the underlying Ordinary Shares. In addition, we cannot assure you that the applicable Japanese governmental authorities will grant such clearance in a timely manner or at all.

The discussion above is not exhaustive of all possible foreign exchange controls requirements that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall foreign exchange controls consequences of the acquisition, ownership and disposition of our Ordinary Shares or the ADSs by consulting their own advisors. For a more detailed discussion on the requirements and procedures regarding the prior notifications under the Foreign Exchange Regulations, see “Item 10. Additional Information—D. Exchange Controls.”

ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our Ordinary Shares provides that, to the fullest extent permitted by applicable law, owners and holders of ADSs irrevocably waive the right to a jury trial for any claim that they may have against us or the depositary arising from or relating to our Ordinary Shares, the ADSs, or the deposit agreement, including any claim under the U.S. federal securities laws.

However, ADS owners and holders are not deemed, by agreeing to the terms of the deposit agreement, to have waived our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. In fact, ADS owners and holders cannot waive our or the depositary’s compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder. If we or the depositary opposed a demand for jury trial relying on the jury trial waiver mentioned above, it is up to the court to determine whether such waiver was enforceable considering the facts and circumstances of that case in accordance with the applicable state and federal law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs.

If you or any other owners or holders of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other owner or holder may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action. Nevertheless, if the jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any owner or holder of ADSs or by us or the depositary of compliance with any substantive provision of U.S. federal securities laws and the rules and regulations promulgated thereunder.

Holders of ADSs may not receive distributions on our Ordinary Shares or any value for them if it is illegal or impractical to make them available to such holders.

Subject to the terms of the deposit agreement, the depositary has agreed to pay holders of ADSs the cash dividends or other distributions it or the custodian for the ADSs receives on the Ordinary Shares or other deposited securities after deducting its fees and expenses and any taxes or other government charges. Holders of ADSs will receive these distributions in proportion to the number of our Ordinary Shares that such ADSs represent. However, the depositary is not responsible for making such payments or distributions if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended (the “Securities Act”), but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit distributions on our Ordinary Shares to holders of ADSs. This means that holders of ADSs may not receive the distributions we make on our Ordinary Shares if it is illegal or impractical to make them available to such holders. These restrictions may materially reduce the value of the ADSs.

Holders of ADSs may be subject to limitations on transfer of their ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer, or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

We may amend the deposit agreement without consent from holders of ADSs and, if such holders disagree with our amendments, their choices will be limited to selling the ADSs or cancelling and withdrawing the underlying Ordinary Shares.

We may agree with the depositary to amend the deposit agreement without consent from holders of ADSs. If an amendment increases fees to be charged to ADS holders or prejudices a substantial existing right of ADS holders, it will not become effective until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, ADS holders are considered, by continuing to hold their ADSs, to have agreed to the amendment and to be bound by the amended deposit agreement. If holders of ADSs do not agree with an amendment to the deposit agreement, their choices will be limited to selling the ADSs or cancelling and withdrawing the underlying Ordinary Shares. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.

We are incorporated in Japan, and it may be more difficult to enforce judgments obtained in courts outside Japan.

We are incorporated in Japan as a joint-stock corporation with limited liability. All of our directors are non-U.S. residents, and a substantial portion of our assets and the personal assets of our directors and executive officers are located outside the United States. As a result, when compared to a U.S. company, it may be more difficult for investors to effect service of process in the United States upon us or to enforce against us, our directors or executive officers, judgments obtained in U.S. courts predicated upon civil liability provisions of the federal or state securities laws of the U.S. or similar judgments obtained in other courts outside Japan. There is doubt as to the enforceability in Japanese courts, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the federal and state securities laws of the United States.

Dividend payments and the amount you may realize upon a sale of our Ordinary Shares or the ADSs that you hold will be affected by fluctuations in the exchange rate between the U.S. dollar and the Japanese yen.

Cash dividends, if any, in respect of our Ordinary Shares represented by the ADSs will be paid to the depositary in Japanese yen and then converted by the depositary or its agents into U.S. dollars, subject to certain conditions and the terms of the deposit agreement. Accordingly, fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will affect, among other things, the amounts a holder of ADSs will receive from the depositary in respect of dividends, the U.S. dollar value of the proceeds that a holder of ADSs would receive upon sale in Japan of our Ordinary Shares obtained upon cancellation and surrender of ADSs and the secondary market price of ADSs. Such fluctuations will also affect the U.S. dollar value of dividends and sales proceeds received by holders of our Ordinary Shares.

If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting, and other expenses that we would not incur as a foreign private issuer.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our executive officers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we are not required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. We may cease to qualify as a foreign private issuer in the future, in which case we would incur significant additional expenses that could have a material adverse effect on our results of operations.

Because we are a foreign private issuer and have taken advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, you have less protection than you would have if we were a domestic issuer.

Nasdaq listing rules require listed companies to have, among other things, a majority of its board members be independent. As a foreign private issuer, however, we are permitted to, and we have followed home country practice in lieu of the above requirements. The corporate governance practice in our home country, Japan, does not require a majority of our board to consist of independent directors. Thus, although a director must act in the best interests of the company, it is possible that fewer board members will be exercising independent judgment and the level of board oversight on the management of our company may decrease as a result. In addition, Nasdaq listing rules also require U.S. domestic issuers to have an audit committee and a compensation committee and a nominating/corporate governance committee composed entirely of independent directors, and an audit committee with a minimum of three members. We, as a foreign private issuer, are not subject to these requirements. Consistent with corporate governance practices in Japan, we do not have a standalone compensation committee or nomination and corporate governance committee of our board. As a result of these exemptions, investors would have less protection than they would have if we were a domestic issuer.

We are currently not in compliance with the continued listing requirements of Nasdaq. As a result, the ADSs may be delisted, which could negatively impact the price of the ADSs and your ability to sell them.

In order to maintain our listing on Nasdaq, we are required to comply with the continued listing requirements and other rules of Nasdaq. On August 12, 2024, we received a letter from the Listing Qualifications Department of Nasdaq notifying us that we are not in compliance with the minimum market value of publicly held shares (“MVPHS”) requirement as set forth in Nasdaq Listing Rule 5450(b)(1)(C) for continued listing on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have been provided 180 calendar days, or until February 10, 2025, to regain compliance with Nasdaq Listing Rule 5450(b)(1)(C). To regain compliance, our MVPHS needs to close at $5,000,000 or more for a minimum of 10 consecutive business days at any time during the compliance period. In the event that we do not regain compliance by February 10, 2025, Nasdaq will provide written notification to us that the ADSs are subject to delisting. At that time, we may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the hearings panel, such an appeal would be successful. Alternatively, we may consider applying to transfer our securities to the Nasdaq Capital Market.

If Nasdaq subsequently delists the ADSs from trading, we could face significant consequences, including:

We are an “emerging growth company” within the meaning of the Securities Act, and we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies, which will make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This will make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and the ADSs.

For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we have elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of other public companies. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the ADS price may be more volatile.

If we are classified as a passive foreign investment company, United States taxpayers who own the ADSs or our Ordinary Shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company (“PFIC”) for any taxable year if, for such year, either:

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds the ADSs or our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Based on our operations and the composition of our assets, we do not believe we were a PFIC for our 2023 taxable year. However, it is possible that, for our 2024 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year.

The classification of certain of our income as active or passive, and certain of our assets as producing active or passive income, and hence whether we are or will become a PFIC, depends on the interpretation of certain United States Treasury Regulations as well as certain IRS guidance relating to the classification of assets as producing active or passive income. Such regulations and guidance are potentially subject to different interpretations. If due to different interpretations of such regulations and guidance the percentage of our passive income or the percentage of our assets treated as producing passive income increases, we may be a PFIC in one or more taxable years.

For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were or are determined to be a PFIC, see “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation—Passive Foreign Investment Company (“PFIC”) Consequences.”

U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS ABOUT THE PFIC RULES, THE POTENTIAL APPLICABILITY OF THESE RULES TO THE COMPANY CURRENTLY AND IN THE FUTURE, AND THEIR FILING OBLIGATIONS IF THE COMPANY IS A PFIC.

Item 4. INFORMATION ON THE COMPANY

Corporate History and Structure

We started our business through Lead Real Estate in Tokyo, Japan, in March 2001 as a limited liability company, which was subsequently reorganized in November 2003 into a joint-stock corporation (kabushiki kaisha) with limited liability.

In July 2006, Mr. Eiji Nagahara, our president, chief executive officer, and representative director, established Lead Proset Farm Co., Ltd as a joint-stock corporation with limited liability in Japan, which was changed into Real Vision Co., Ltd. in December 2008 and became a wholly owned subsidiary of Lead Real Estate in March 2021. Real Vision was established for the provision of property management service to the properties we developed.

In February 2014, Mr. Nagahara established LRE HK, a private company limited by shares in Hong Kong, which became a wholly owned subsidiary of Lead Real Estate in May 2015. LRE HK was established for the expansion of our overseas business in Asia.

We further expanded geographically to the United States through the establishment of Lead Real Estate Dallas, LLC, a limited liability company in Texas, the U.S., in September 2017, which was converted into Lead Real Estate Global Co., Ltd., a Texas corporation, in October 2020. LRE Dallas was established for the expansion of our overseas business in the U.S. Lead Real Estate has also been qualified and authorized to transact intrastate business in California since December 2014.

In January 2020, together with Mr. Nagahara, we established Sojiya Japan, as a joint-stock corporation with limited liability in Japan, for the provision of cleaning services for our properties. Lead Real Estate and Mr. Nagahara each hold 50% of the equity interests in Sojiya Japan.

In October 2014, Mr. Nagahara established JP Shuhan, as a joint-stock corporation with limited liability in Japan. Mr. Nagahara currently holds 100% of the equity interests in JP Shuhan.

In August 2019, Mr. Nagahara established LRE Cayman, as a company limited by shares under the laws of the Cayman Islands. Mr. Nagahara currently holds 100% of the equity interests in LRE Cayman.

Based on our analysis, we have concluded that Sojiya Japan and LRE Cayman are our variable interest entities under Accounting Standards Codification 810-10-05-08A in the fiscal years ended June 30,2024, 2023, and 2022. See our consolidated financial statements and related notes included elsewhere in this annual report.

On September 29, 2023, we closed our initial public offering (the “IPO”) of 1,143,000 ADSs at a price to the public of $7.00 per ADS. Each ADS represents one ordinary share of the Company. In connection with the IPO, the ADSs began trading on the Nasdaq Global Market under the symbol “LRE” on September 27, 2023.
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The following chart illustrates our corporate structure as of the date of this annual report.

Notes: all percentages reflect the equity interests held by each of our shareholders.

Corporate Information

Our headquarters are located at 6F, MFPR Shibuya Nanpeidai Building 16-11, Nampeidai-cho, Shibuya-ku, Tokyo, 150-0036, Japan, and our phone number is +81 03-5784-5127. Our website address is http://www.lead-real.co.jp/en/. The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report. Our agent for service of process in the United States is Lead Real Estate Global Co., Ltd., located at 6860 North Dallas Pkwy, Suite 200, Plano, TX 75024.

The SEC maintains a website at www.sec.gov that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC using its EDGAR system.

For information regarding our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”

We are a developer of luxury residential properties, including single-family homes and condominiums, across Tokyo, Kanagawa prefecture, and Sapporo. In addition, we operate hotels in Tokyo and lease apartment building units to individual customers in Japan and Dallas, Texas. Our goal is to accurately understand the characteristics and needs of our customers and to create more comfortable and secure living environments.

We primarily generate revenue from developing and selling single-family homes and condominiums. Since our inception in 2001, we have delivered approximately 1,200 single-family homes and 27 condominiums. The target customers of our single-family homes are wealthy family buyers who are looking for luxury single-family homes as their primary residence, while the target customers of our condominiums are institutional customers who look to purchase entire condominiums for investment purposes. We rely on real estate agencies to help identify land and development sites for acquisition and customers for our luxury residential properties and generally acquire land parcels from private landowners. We outsource the design work and construction for our luxury residential property projects to third-party design firms and construction companies, while coordinating and closely supervising the projects through our internal teams to maximize quality of the projects. In addition, we launched our interactive media platform, Glocaly, in October 2021, as a listing and marketing platform seeking to facilitate matching of sellers and buyers of condominiums.

We utilize a homebuilding model designed to minimize risks, in which we typically identify customers for our single-family homes before acquiring the land and commencing construction and build our condominiums in highly-marketable locations, resulting in an aggregate of only six cancelations during the fiscal years ended June 30, 2024, 2023, and 2022. When developing a single-family home or condominium, we typically deliver the land to the customer before starting the construction of the building and deliver the completed building to the customer six to 12 months after the land delivery, in order to quickly recover our payment for the land. The tables below summarize the units of land and building we delivered during the fiscal years ended June 30, 2024, 2023, and 2022.

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To diversify our revenue streams and supplement our real estate sales, we have expanded into other businesses related to real estate since 2018. During the fiscal years ended June 30, 2024, 2023, and 2022, we operated six, six, and four hotels in Tokyo, respectively. During the fiscal years ended June 30, 2024, 2023, and 2022, we leased apartment units in 16, 19, and 21 apartment buildings to 61, 59, and 77 individual customers, respectively.

For the fiscal years ended June 30, 2024, 2023, and 2022, we had total revenue of JPY18,950,683 thousand (approximately $117,794 thousand), JPY17,415,248 thousand (approximately $128,346 thousand), and JPY14,687,014 thousand (approximately $108,239 thousand), respectively, and profit of JPY626,959 thousand (approximately $3,897 thousand), JPY611,918 thousand (approximately $3,804 thousand), and JPY551,622 thousand (approximately $3,429 thousand), respectively. Revenue generated from real estate sales accounted for approximately 97.6%, 98.2%, and 98.6% of our total revenue for the same fiscal years, respectively. Revenue derived from other sources accounted for approximately 2.4%, 1.8%, and 1.4% of our total revenue for the same fiscal years, respectively.

Our Competitive Strengths

We believe the following competitive strengths are essential for our success and differentiate us from our competitors:

Developer of luxury residential properties in prime locations across Tokyo, Kanagawa prefecture, and Sapporo

We are a real estate developer in Japan. Our revenue increased approximately 327.4% in the past 10 years. Since our establishment, we have strategically focused on the development of luxury residential properties, including single-family homes and condominiums, and gradually expanded our product and service offerings into hotel operations and residential leasing. We also launched our Glocaly platform in October 2021. Our business model covers the full cycle of luxury residential property development, from land acquisitions and design to construction and delivery.

The single-family homes and condominiums we develop are mainly located in central and southern Tokyo, which are considered prime locations across Tokyo and Kanagawa prefecture, and in Sapporo. We delivered an aggregate of 397 single-family homes and 64 condominiums in the three fiscal years ended June 30, 2024, and we had 25 single-family home projects and nine condominium projects ongoing as of June 30, 2024. In addition to the prime locations of the properties we develop, we have been recognized for the quality and design of our products. Specifically, we received the Good Design Award for our Excellence Building Futako-Tamagawa issued by the Japan Institute of Design Promotion in 2020.

Easy access to land parcels as a result of our long operating history and strong brand awareness

As a real estate developer, we strategically focus on prime locations in Tokyo, Kanagawa prefecture, and Sapporo. In identifying suitable land parcels, we consider various factors, including the supply and demand dynamics in local areas, preferences of our target individual and institutional customers, land prices, and proximity to downtown and convenient transportation. We generally acquire land parcels from private landowners through the introduction by real estate agencies. These real estate agencies are inclined to refer opportunities to us because of our good reputation and capabilities and the business relationships we have built over the years while working with them, many of which have cooperated with us for over 15 years. As a result, we are generally able to avoid excessive bidding pressures, as the agencies that we work with know the types of land parcels that are best suited to our preferences and they proactively choose to source such land parcels to us, which gives us advantages over competitors.

In addition, our “Lead Real” brand is widely recognized in Tokyo, Kanagawa prefecture, and Sapporo. We have developed approximately 1,200 luxury residential properties since our inception in 2001 and this achievement has helped us attract partners and build trust in our brand. In particular, Mr. Eiji Nagahara, our president, chief executive officer, and representative director, is highly respected in the Tokyo real estate development industry for the quality and design of our products. Leveraging Mr. Nagahara’s decades of goodwill and relationships built over his career, together with the strong brand awareness of our brand, we enjoy easy access to land parcels in our target areas.

Strong project oversight and execution capabilities

We demonstrate our effective decision-making capabilities and efficient execution capabilities in managing our development projects. In addition to basic compliance with zoning, building codes, and safety, we staff personnel at each project to provide us with daily reports on key risks, progress, and issues. We implement a system of checks and balances for risk control purposes and we refrain from transacting in high-risk businesses that we determine to be speculative in nature, with uncertain end demand or in unfavorable locations. In addition, we utilize an outsourcing model with trusted contractors who directly handle labor and supply hurdles.

We have strong execution capabilities as a result of the ways we develop and sell our single-family homes and condominiums. For our single-family homes, individual customers are identified before we acquire the land and commence construction, so we do not experience any pressure on holding inventory as a result of such a lower-risk model. For our condominiums, we typically build in highly-marketable locations, which makes it easy to find buyers.

Experienced management team with industrial expertise

Our executive officers, most of whom have worked with our company for over 10 years, have on average over 20 years of experience in the Japanese real estate development industry and considerable strategic planning and business management expertise. Mr. Eiji Nagahara, our president, chief executive officer, and representative director, has more than 25 years of experience in developing single-family homes and condominiums in Japan.

Our Growth Strategies

We intend to develop our business and strengthen brand loyalty by implementing the following strategies:

Target prime real estate opportunities across the Kanto Region to continue to grow

Our growth will primarily focus on new prime real estate opportunities in Tokyo and Kanagawa prefecture. Currently, our single-family homes and condominium are primarily located in central and southern Tokyo, which are considered to be prime locations. We will continue to leverage our strong brand name and long-standing relationships with other industry participants to further develop properties in these areas. In addition, we plan to expand to prime real estate locations across the Kanto Region, which encompasses seven prefectures of Japan, including Gunma, Tochigi, Ibaraki, Saitama, Tokyo, Chiba, and Kanagawa, in order to further grow our real estate sales.

Further strengthen and leverage our relationships with local real estate agencies

Relationships with local real estate agencies are essential to our business operation. We primarily rely on real estate agencies to identify land and development sites for acquisition as well as customers. We will further strengthen our relationships with local real estate agencies which we have been cooperating with as well as establish relationships with new local real estate agencies in existing and new markets. We intend to further leverage our relationships with local real estate agencies to facilitate our access to development land parcels and customers.

Continue to develop and improve our Glocaly platform

Our interactive media platform, Glocaly, has the potential to expand into a multilingual and seamless transaction platform targeting both domestic and foreign buyers for transacting condominiums in Japan. We will continue to develop and improve the features of our Glocaly platform to make them more helpful and friendly to users of our platform. In addition, as electronic transactions of real estate became permissible under Japanese law starting from May 2022, we expect to have the first-mover advantage by enabling electronic real estate transactions on Glocaly and providing features such as the electronic know your customer (“eKYC”) process, online contracting and digital legal documentations, and artificial intelligence-powered chatbots in more than 100 languages to facilitate the transactions.

Further expand our operations locally and overseas

We plan to continue expanding our hotel business both throughout Japan and overseas.

Our strategy for local growth focuses on expanding our hotel operations across Japan. Beyond Tokyo, Kanagawa prefecture, and Sapporo, we are targeting regions such as Mie and Shimane prefectures for further growth. Specifically, we plan to launch a new hotel, ENT TERRACE GINZA PREMIUM, by the end of December 2024. These expansion plan will solidify our presence in Japan’s hospitality sector, allowing us to meet growing demand and broaden our market reach across the country.

On the international front, we have been leasing apartment building units to individual customers in Dallas, Texas since 2020 and Mr. Eiji Nagahara has built personal relationships with landowners and local builders in Texas over the years. In the long term, we plan to acquire land or residential properties in Dallas as well as other cities and states in the U.S. and further expand our operations in the U.S. through acquisition and joint ventures. Along with our plan to expand our Glocaly platform to Hong Kong, we will further expand our footprints in Hong Kong, including partnering with local agencies. We will also continue to expand our operations in Southeast Asia, especially the Philippines. We chose the Philippines as our focus of expansion in Southeast Asia because it is a location attractive to Japanese investors, and we expect to be able to acquire lands in the Philippines at a relatively low price. Our expansion plans are subject to, among other things, our ability to obtain sufficient capital to execute such plans, of which there can be no assurance. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our substantial indebtedness could materially and adversely affect our business, financial condition, results of operations, and cash flows.”

Expansion into different countries subjects us to risks associated with entry and operations in those countries. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may be unsuccessful in expanding and operating our business internationally, which could adversely affect our results of operations.”

Our Business Model

We currently generate revenue from the following principal sources:

The following tables presents our revenue for the fiscal years ended June 30, 2024, 2023, and 2022.

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Real Estate Sales

Our real estate sales business model is based on our proven track record of identifying and developing prime land and building high-quality residential properties. We have a highly-qualified team, whose skills and knowledge span across all key areas of real estate development and operations, including, among others, land identification and acquisition, government licensing and relations, project management, and commercialization and sales. Our experienced team, together with the standardization of our processes and our sophisticated management tools, enables us to consistently launch new projects, as well as successfully undertake a large number of projects at the same time.

We manage and actively participate in every aspect of our luxury residential property development, from search and acquisition of the land, to product design, marketing, sales, construction management, purchase of supplies, post-sale services, and financial planning, with the assistance of specialized companies at each development stage. While the decisions and control of these functions remain with us, actual execution of certain functions, such as architecture and construction, is entrusted to specialized companies under our close supervision. The specialized companies we work with include real estate agencies, which help us identify land and development sites for acquisition and customers for our luxury residential properties, and design firms and construction companies, to which we outsource the design work and construction for our luxury residential property projects. We do not work with financing companies to obtain financing for our customers. For details about our relationships with real estate agencies, design firms, and construction companies, see “—Our Project Development Process—Opportunity Identification and Land Acquisition,” “—Our Project Development Process—Project Planning and Design,” and “—Our Project Development Process—Project Construction and Management,” respectively. This business model enables us to achieve excellence in production for each location and segment, ensure effective working capital management, and choose the best possible partner for each aspect of the work, all while keeping an organizational structure that can adapt to changes in business volume.

Luxury Residential Properties

Single-family Homes

We develop and sell of single-family homes to individual customers, primarily in Tokyo, Kanagawa prefecture, and Sapporo. Our target individual customers are wealthy family buyers who look for luxury single-family homes as primary residence in Tokyo, Kanagawa prefecture, and Sapporo.

The entire process of a given single-family home project, from land acquisitions to delivery of the completed project, typically takes approximately 10 months.

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The following tables show the key operating results for our development and sales of single-family homes for the fiscal years ended June 30, 2024, 2023, and 2022, respectively:

Note:

Condominiums

We develop and sell entire low-rise and mid-rise condominiums to institutional customers, which include blue chip private equity buyers, foreign real estate investment funds, and local strategic bidders. Current rental rates for condominiums in Tokyo, Kanagawa prefecture, and Sapporo are on a gradual upward trend, and we expect them to continue rising steadily following the anticipated economic reforms. As a consequence, we believe a lack of long-term capital investments and limited focus from international investors have created opportunities for investments in condominiums.

The entire process of a given condominium project, from land acquisitions to delivery of the completed project, typically takes approximately 20 months.

In addition to the construction of new condominiums, our developments of condominiums also include renovation of existing condominiums, which we acquire from third parties, leveraging our design and architect capabilities.

The following table shows the key operating results for our development and sales of condominiums for the fiscal years ended June 30, 2024, 2023, and 2022, respectively:

Note:

Our Project Development Process

We have a systematic and standardized process of project development for our single-family homes and condominiums, which we implement through several well-defined phases as follows:

Opportunity Identification and Land Acquisition

The first stage of our development process involves the identification of new opportunities. We identify land and development sites for acquisition as well as customers through introduction by real estate agencies. We do not have any agreements with these real estate agencies that require them to continue to source land and development sites or customers to us on an advantageous basis or at all. Instead, we rely on the business relationships we have built over the years while working with these real estate agencies, many of which have cooperated with us for over 15 years. Since our inception in 2001, we have developed approximately 1,200 luxury residential properties in Tokyo, Kanagawa prefecture, and Sapporo, making us one of the few developers that have a proven track record of developing luxury residential properties in these areas. The wide recognition of our brand and Mr. Eiji Nagahara’s decades of good will and relationships built over his career also help us become a trusted partner of real estate agencies. See “—Our Competitive Strengths—Easy access to land parcels as a result of our long operating history and strong brand awareness.” As a result, real estate agencies that we work with proactively choose to source land parcels that are best suited to our preferences to us, and we are generally able to avoid excessive bidding pressures. During the fiscal years ended June 30, 2024, 2023, and 2022, 60, 60, and 56 real estate agencies introduced approximately 170, 150, and 130 land parcels and approximately 170, 150, and 130 customers to us, respectively. In identifying suitable land parcels, we consider various factors, including the supply and demand dynamics in local areas, preferences of our target individual and institutional customers, land prices, and proximity to downtown and convenient transportation.

We generally acquire land parcels from private landowners. For our single-family home projects, after both land spots and individual customers are identified through the introduction of real estate agencies, we acquire the land through financing with short-term bank loans (typically with terms ranging from six to 12 months and interest rates ranging from 1.5% to 4.2%). For our condominium projects, as bank loans are generally not available for financing land acquisitions for condominiums due to the larger size and higher risk of such projects, we typically fund such land acquisitions using cash generated from our operations.

Project Planning and Design

We plan internally and outsource our design to our trusted design partners. We have an internal project management team that organizes timelines and coordinates all external parties and activities (including design).

Our project planning and design process includes concept and architectural design, construction and engineering design, budgeting, and financial analysis and projections. We believe careful planning is essential to control costs, quality, and timing of our projects.

We outsource our design work to reputable third-party design firms. Our internal project management team, with eight employees as of June 30, 2024, works closely with project managers as well as external designers and architects to ensure that our designs comply with Japanese laws and regulations, and meet our design and other project objectives. Our senior management is also actively involved in the whole process, especially in the master planning and architectural design of our projects. We use our enterprise resource planning systems to conduct preliminary planning and scheduling for each stage of the development project, including planning our outsourcing requirements for the project construction stage.

We seek to create residential properties with high-quality design by incorporating certain design features, such as landscaped environments. In determining the architectural designs of our projects, we consider the proposed type of products to be developed as well as the surrounding environment and neighborhood.

During the fiscal years ended June 30, 2024, 2023, and 2022, we cooperated with 15, 15, and 15 third-party design firms, respectively. In selecting external design firms, we consider, among other things, their reputation for reliability and quality, their track record with us, the design proposed, and the price quoted. Our internal project management team monitors the progress and quality of the design firms to ensure that they meet our requirements.

Marketing and Sales

We maintain an initial bid list of customers who have high intent of purchasing from us. We also identify customers through introduction by real estate agencies. Such agencies are responsible for our marketing and sales activities under our brand name.

For sales of our single-family homes, we typically enter into a land sales contract and a construction contract with each individual customer.

For sales of our condominiums, we typically enter into a single contract, which covers both land sales and building construction, with each institutional customer. Upon signing the contract, we typically receive less than 10% of the purchase price from the institutional customer, with the remaining to be payable upon the construction completion and the transfer of property ownership being recorded. We use our own operating funds for both the land acquisition and the construction of the condominiums. The construction of the condominiums (including the purchase of raw materials) is outsourced to contractors.

Project Construction and Management

We adopt a general contractor/subcontractor model, and we have an internal operation team that coordinates all projects.

We outsource substantially all of our construction work to independent construction companies and generally hire one contractor for each project. We have established a selection procedure in order to ensure compliance with our quality and workmanship standards. When inviting candidates to bid, we consider the construction companies’ professional qualifications, reputation, track record, past cooperation with us, and financial condition and resources. We also review the qualifications and performance of our construction contractors on an annual basis. We closely supervise and manage the entire project construction process, utilizing our enterprise resource planning systems to monitor and analyze information regarding the process on a real-time basis. We collect information throughout the development cycle on the entire project and from our contractors to avoid unanticipated delays and cost overruns.

Our construction contracts typically provide for fixed payments, subject to adjustments for some types of excess, such as design changes during construction or changes in government-suggested steel prices. Contractors are typically responsible for procuring the necessary raw materials, as well as providing engineering and construction services.

During the fiscal years ended June 30, 2024, 2023, and 2022, we outsourced projects to 12, 13, and 13 construction companies, respectively. For the same fiscal years, payments to our single largest construction contractor accounted for 15%, 15%, and 15%, respectively, of our total payments under our construction contracts. For the same fiscal years, payments to our five largest construction contractors accounted for 80%, 80%, and 75%, respectively, of our total payments under our construction contracts.

After-sale Services and Delivery

The delivery cycles generally range from six to nine months and are set out in the construction contracts entered into with our customers, and we are subject to penalty payments to the purchasers for any delay in delivery caused by us. We closely monitor the progress of construction of our residential property projects and conduct pre-delivery property inspections to ensure timely delivery. Once a property development has been completed, has passed the requisite government inspections, and is ready for delivery, we will notify our customer and hand over keys and possession of the property. After the completion and delivery of the property, we receive the remaining 90% of purchase price of the construction contract. We assist our customers in various title registration procedures relating to their properties.

Quality Control

Under our contracts with customers in relation to our single-family homes and condominiums and in accordance with Japanese law, the properties we develop are subject to a 10-year quality warranty. We emphasize quality control to ensure that our buildings and residential units meet our standards and provide high-quality service. We select only experienced design and construction companies. We provide customers with warranties covering the building structure and certain fittings and facilities of our properties in accordance with the relevant regulations. To ensure construction quality, our construction contracts contain quality warranties and penalty provisions for poor work quality. In the event of delay or poor work quality, the contractor may be required to pay pre-agreed damages under our construction contracts.

Our contractors are also subject to our quality control procedures, including examination of materials and supplies, on-site inspection, and production of progress reports. We require our contractors to comply with relevant Japanese laws and regulations, as well as our own standards and specifications.

Other Sources of Revenue

In addition to developing and selling single-family homes and condominiums, we also generate revenue from hotel operations and residential leasing.

Hotel Operations

We operate hotels under our brand, ENT TERRACE, in Tokyo. During the fiscal years ended June 30, 2024, 2023, and 2022, we operated six, six, and four hotels, respectively. Our hotels are generally located near train stations and popular tourist attractions. We set the room rates of our hotels based on a number of factors, including local market conditions with reference to room rates set by our competitors, recent occupancy levels, and seasonal occupancy fluctuations. Our ENT TERRACE Akihabara hotel has a 9.5 points or higher rating on Bookings.com as of the date of this annual report.

The table below summarizes information about our hotels as of the date of this annual report.

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Residential Leasing

We lease apartment building units to individual customers both in Japan and in Dallas, Texas. During the fiscal years ended June 30, 2024, 2023, and 2022, we leased apartment units in 16, 15, and 8 apartment buildings to 61, 52, and 13 individual customers, respectively. The rent is typically between JPY50,000 (approximately $311) and JPY500,000 (approximately $3,108) and the lease terms usually range from 24 to 36 months. We also provide other services such as property brokerage, property management, and utilities services.

Glocaly Platform

We launched our interactive media platform, Glocaly, in October 2021, as a listing and marketing platform seeking to facilitate matching of sellers and buyers of condominiums. Our Glocaly platform is designed to engage customers of our condominiums globally with our condominiums as well as partnered condominiums for sales across Tokyo, Kanagawa prefecture, and Sapporo, with potentially localized portfolio in other countries/regions, such as the U.S. and Hong Kong. Glocaly leverages interactive media to attract sellers and customers and facilitate matching of them. Our proprietary database and algorithm are expected to respond to customers with tailored condominium suggestions based on demographics and preference. Glocaly also connects to financing providers and other affiliated service providers, such as renovation, to make it more convenient for our customers. The features of Glocaly include customized selections of condominiums, the eKYC process, an interactive media portal, including videos and 360-degree views of condominiums, and artificial intelligence-powered translation in more than 100 languages, making Glocaly a platform that can be accessed by investors around the world.

We currently expect our Glocaly platform to generate revenue by December 2025, from the following aspects: (i) transactional spread (commission) paid by the sellers who utilize our platform; (ii) membership fees paid by sellers who subscribe and list properties on our platform; (iii) advertising fees from selling advertisement space and banners on our platform; and (iv) charges for other value-added services, including transaction services and interactive media services.

Our Glocaly platform, by enabling electronic real estate transactions, has the potential to expand to a multilingual and seamless transaction platform targeting both domestic and foreign buyers for transacting condominiums in Japan. Although all procedures in real estate transactions were previously not allowed to be conducted electronically in Japan, amendments to Japanese law allow electronic delivery of certain documents required for real estate transactions starting from May 2022. We expect to have the first-mover advantage in the area of electronic real estate transactions and expect the Glocaly transaction platform to modernize the high friction, inefficient nature of traditional real estate transactions in Japan. If electronic real estate transactions are enabled on Glocaly, we expect the platform to have certain additional features, including online contracting and digital legal documentations and artificial intelligence-powered chatbots in more than 100 languages to facilitate the transactions. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our Glocaly platform is in its nascent stage and may experience volatility in performance, and there can be no assurance that we can take advantage of the amendments to the Japanese law that allow electronic delivery of certain documents required for real estate transactions.”

Competition

We primarily face competition in the luxury residential property industry in Tokyo, Kanagawa prefecture, and Sapporo. The luxury residential property industry in Tokyo, Kanagawa prefecture, and Sapporo is competitive. We compete primarily with local residential property developers as well as large national and overseas residential property developers that have also started to enter these markets. As a boutique real estate developer, we compete on the basis of, among other things, customers, desirable lots, the types of products offered, brand recognition, price, design and quality, financing, raw materials, and skilled labor. Increased competition may prevent us from acquiring attractive lots on which we can build condominiums or make such acquisitions more expensive, hinder our market share expansion or lead to pricing pressures on our condominiums that may adversely impact our margins and revenue. Our competitors may independently develop land and construct condominium units that are superior or substantially similar to our products and, because they are or may be significantly larger, have a longer operating history, and/or have greater resources or lower cost of capital than us, may be able to compete more effectively in one or more of the markets in which we operate or may operate in the future. We also compete with other residential property developers that have longstanding relationships with agencies, subcontractors, and suppliers in the markets in which we operate or may operate in the future. We believe that, through our long operating history and strong brand awareness as well as our in-depth understanding of the residential property market in Tokyo, Kanagawa Prefecture, and Sapporo, we will be able to react more quickly than these competitors to market opportunities and changes in market trends.

Intellectual Property

We rely on a combination of trademarks, service marks, domain name registrations, and contractual restrictions to establish and protect our brand name and logos, marketing designs, and internet domain names.

As of the date of this annual report, we have registered:

Insurance

We currently maintain fire insurance and insurance coverage against liability from tortious acts or other personal injuries on our project sites. However, we do not have insurance coverage against potential losses or damages with respect to our properties before their delivery to customers. In addition, our contractors typically do not maintain insurance coverage on our properties under construction. We believe that our contractors should bear liabilities from tortuous acts or other personal injuries on our project sites, and we do not maintain insurance coverage against such liabilities. There are certain types of losses, such as losses from natural disasters, terrorist attacks, construction delays, and business interruptions, for which insurance is either not available or not available at a reasonable cost. We believe our practice is consistent with the customary industry practice in Japan.

Environmental Matters

As a real estate developer in Japan, we are subject to various environmental laws and regulations in Japan. These include regulations on air pollution, noise emissions, as well as water and waste discharge. We in the past have never paid any penalties associated with the breach of any such laws and regulations. Compliance with existing environmental laws and regulations has not had a material adverse effect on our financial condition and results of operations, and we do not believe it will have such an impact in the future.

In addition, we have adopted an environmentally friendly approach for our property development. We primarily use lumber as raw material for the construction, such that our properties typically have long life span and our constructions involve less energy and less carbon emissions.

Employees

We had 70, 62, and 46 full-time employees as of June 30, 2024, 2023, and 2022, respectively. The following table sets forth the number of our full-time employees categorized by areas of operations as of June 30, 2024:

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We enter into employment agreements with our full-time employees. The employment agreements have an indefinite term and may be terminated by the employee with a 14-day advance notice. Dismissal of the employee by us is required to meet the following requirements: (i) the dismissal is objectively reasonable and socially acceptable; (ii) the dismissal is based on the grounds set forth in the labor regulations; (iii) the dismissal does not fall under any of the prohibited grounds stipulated by law; and (iv) a 30-day advance notice is given, or a dismissal allowance is paid in lieu of such notice. In addition, we enter into confidentiality agreements with our employees to protect our intellectual property rights.

In addition to our full-time employees, we had two, two, and one independent contractors as of June 30, 2024, 2023, and 2022, respectively. These independent contractors are primarily responsible for planning and development of our projects.

We believe that we maintain a good working relationship with our employees and independent contractors, and we have not experienced material labor disputes in the past. None of our employees are represented by labor unions.

Facilities

Our principal executive offices are located in Tokyo, Japan, where we lease offices from an independent third party with an area of approximately 4,243 square feet, with a lease term from December 2022 to November 2024 and a monthly rent of JPY2,623,720 (approximately $14,826). The lease agreement automatically renews for successive three-year terms, unless either party notifies the other party of its intention to the contrary in writing no later than six months before the expiration of the then current term. The lease will be automatically renewed in December 2024.

As of the date of this annual report, we own an aggregate of 25,652 square feet of buildings and land in Tokyo (other than inventories for our real estate development and sales).

We lease offices in Yokohama, Japan, from an independent third party with an area of approximately 1,293.5 square feet, with a lease term from September 1, 2021 to August 31, 2024 and a monthly rent of JPY518,519 (approximately $3,821).

We also leased offices in Sapporo, Japan, in April 2018 from an independent third party with an area of approximately 766 square feet and a monthly rent of JPY193,770 (approximately $1,428). The lease agreement is for a term of three years, and it automatically renews for successive one-year terms, unless we notify the landlord of our intention to the contrary in writing no later than three months before the expiration of the then current term or the landlord notifies us of its intention to the contrary in writing no later than six months before the expiration of the then current term.

We believe that our existing facilities are sufficient for our near-term needs.

Seasonality

Our business is not subject to seasonal fluctuations.

Japanese Regulations

Construction, Repair, and Remodeling of Buildings

Our business involving the construction, repair, and remodeling of buildings is generally subject to the Building Standards Act. Under this law, any entity that constructs, substantially repairs, or remodels, whether by itself or through a third-party contractor, any building that is larger than a certain size or that is located in certain designated areas must obtain a certificate of prior confirmation for the planned construction, repair, or remodeling as well as a certificate of completion thereof from an inspector appointed by the local authorities. Such certificates confirm that the building, repair, or remodeling conforms to the standards prescribed by the Building Standards Act and relevant regulations. In addition, the local authorities may order the suspension of construction or the demolition, reconstruction, remodeling, or repair of any building, or may prohibit or limit the use of any building, if the building does not conform to the relevant building standards. Such standards include those relating to the use, height, and structure of buildings, including the seismic design, the building-to-land area ratio, and fire prevention, security, and sanitation requirements.

The relevant site may be subject to general restrictions under the City Planning Act of Japan (Act No. 100 of 1968, as amended), which designates areas where certain usage is not allowed. If and when we intend to perform development activities in specified designated areas, we must firstly obtain permission from the relevant governor.

Sales and Brokerage of Real Estate

Our business involving property sales and brokerage of real estate transactions is subject to the Building Lots and Buildings Transaction Business Act. Under this law, any person who intends to engage in the business of the sale and purchase of buildings and building lots or the brokerage of sale and purchase or leasing thereof, referred to by this law as a real estate trader, must firstly obtain a license from the Minister of Land, Infrastructure, Transport, and Tourism or the relevant governor of the municipal government in Japan. The minister or the relevant governor may revoke such license or order the suspension of business for a period of up to one year if the real estate trader enters into a transaction that violates the Building Lots and Buildings Transaction Business Act or otherwise engages in substantially inappropriate conduct. This law also requires real estate traders to employ, or otherwise enlist the services of, a certain number of qualified and registered real estate transaction managers.

The Building Lots and Buildings Transaction Business Act imposes various obligations on real estate traders in connection with their business. For instance, real estate traders must ensure that their real estate transaction managers deliver to property purchasers, lessees and/or certain relevant parties documents setting forth important matters relating to the property and provide sufficient explanations to these parties before entering into real estate contracts. In addition, the Building Lots and Buildings Transaction Business Act places limits on the size of deposits that may be collected from a purchaser and on liquidated damages payable to real estate traders and also provides restrictions on advertisements relating to the business of real estate traders.

In May 2022, the amendments to the Building Lots and Buildings Transaction Business Act and related regulations came into effect, allowing documents that were previously required to be delivered in writing, such as the documents setting forth important matters relating to the property, to be delivered by electronic means, subject to the consent of the property purchasers, lessees, and/or certain relevant parties. The amendments, in effect, allow real estate transactions to be completed entirely online.

Lease of Buildings

Leases of buildings in Japan are governed principally by the Civil Code and the Act on Land and Building Leases. In relation to building lease transactions, the Act on Land and Building Leases generally takes priority over the Civil Code principally in terms of protection of rights of lessees. Except where the Act on Land and Building Leases provides otherwise, its provisions are compulsorily applicable to building leases, regardless of the terms of the relevant lease agreement, especially where the terms are less favorable to a lessee than the provisions of the Act on Land and Building Leases.

Lease Term

A building lease agreement may have either a fixed or an indefinite term. Under the Act on Land and Building Leases, however, a building lease having a term of less than one year is deemed to have an indefinite term. Even if the building lease is for a fixed term of one year or more, unless the landlord gives notice of its intention not to renew the lease generally six months prior to the expiration of the term, the lease is automatically deemed to be renewed without a fixed term.

The Act on Land and Building Leases provides that a building lease may be terminated by the landlord on six months’ notice, although a longer notice period may be required if such longer period is provided for in the relevant lease agreement. However, in the case of building leases having a fixed term of one year or more, the lease generally cannot be terminated prior to the end of that term unless the lease agreement specifically provides otherwise.

Notwithstanding the foregoing, the landlord may not give notice of intention not to renew, or of termination of, a lease unless it has a justifiable reason for not renewing or terminating the lease in light of a number of factors, including: each of the landlord’s and the lessee’s need for the building for its own use; the history of the building lease; the present use of the building; the current condition of the building; and the amount of money the landlord is offering to pay the lessee in consideration of vacating the building.

Adjustment of Rent

The Act on Land and Building Leases provides that either party to a building lease agreement may demand that the rent be increased or decreased, regardless of the provisions of the lease agreement, if the rent has become unreasonable (i) as a result of any increase or decrease in taxes or other charges imposed on the leased building or the underlying land, (ii) as a result of any increase or decrease in the price of such building or land or any other change in economic condition, or (iii) in light of the rents of comparable buildings in the immediate area. This provision of the Act on Land and Building Leases, however, will not permit a landlord to demand an increase in rent if the relevant lease agreement provides that the rent shall not increase for a specific period.

If no agreement is reached between the parties with respect to an increase or decrease in the amount of the rent, either party may seek a court order. In such case, the court will determine whether and to what extent the amount of the rent shall be adjusted taking into consideration various factors, including those described in (i) through (iii) above. If the court determines that the rent should be decreased, the landlord will be ordered to return any excess rent collected after the lessee’s initial demand and to pay interest on such excess amount, if any, at a rate of 10% per annum.

特殊的固定期建築租賃

《土地及建築物租賃法》規定，關於租賃協議續訂的規定不適用於一種稱爲特殊固定期建築租賃的類型 特定建築租賃此外，房東和承租人可以排除上述調整租金規則的適用

環保監管

我們的租賃、發展和重建業務受土壤污染對策法的約束。根據該法律，如果地方政府發現由於有害或有毒物質導致土地某一區域的土壤污染水平超出日本環境省規定的標準，並且該土地區域受到的污染達到或可能會對人類健康造成危害，地方政府必須將該土地區域指定爲受污染區域，地方政府可以命令該土地的現任所有者根據去除和修復計劃移除或修復土地上或下的有害或有毒物質，原則上無論當前所有者是否知曉或負責存在此類有害或有毒物質

瑕疵擔保責任和合同不符責任

關於我們的房地產銷售業務，根據《民法》或其他某些法律，我們可能會因與2020年3月31日或之前簽訂的銷售或工作合同涉及的「瑕疵」或與2020年4月1日後簽訂的銷售或工作合同涉及的「與合同不符」而可能承擔潛在責任。2020年4月1日，《部分修正民法的法律》生效，保證責任瑕疵的規定被全面修訂，將「瑕疵」概念替換爲「與合同不符」概念，並明確了由此類不符導致的責任。

根據《民法》，如果銷售標的物存在任何潛在瑕疵或與合同不符，或者工作標的物存在任何瑕疵或與合同不符，銷售人或建築物或房地產的建造者在法律上對瑕疵保證或與合同不符對購買人或合同方承擔責任。這些法定責任一般自購買人發現有關潛在瑕疵或合同不符的日期起一年內有效，或自有瑕疵的工作標的物交付時，或自合同方注意到有關種類或質量的合同不符的日期起。在合同不符的情況下，在上述民法部分修正之後，可以通過取消基礎銷售、要求扣除銷售價格、要求實現一致性，或要求賠償（可能包括轉售利潤）來實施這些法定責任。《建築地塊及建築物交易業法》通常禁止房地產交易者作爲建築物或房地產的銷售人修改這些與購買人不利的責任。

日本的《住宅質量保證法》（1999年第81號法案，經修正），對新建住宅包括新建共管單位的銷售者和新房建築商施加更嚴格的責任，根據某些條件，新房的銷售者和建築商在交付後的10年內對房屋主要部分的瑕疵負有法定責任，並且任何試圖對購買者或承包方不利地修改這些責任的協議均無效。

勞動法

日本有各種勞工相關的法律，包括《勞動標準法》（1947年4月7日第49號法案，經修正），《勞動安全衛生法》（1972年6月8日第57號法案，經修正）和《勞動合同法》（2007年12月5日第128號法案）。《勞動標準法》規定了工作條件的最低標準，如工作時間、休假期和休息日等。《勞動安全衛生法》要求採取措施確保員工安全並保護職場工人的健康等。《勞動合同法》規定了修改僱傭合同和工作規定條款、解僱和紀律行爲等。我們遵守這些法規。

個人信息

根據日本個人信息保護法（2003年法案第57號修訂）及相關指南，對包括我們集團公司在內的使用含有個人信息數據庫的企業施加各種要求，如對這些信息的妥善保管以及限制與第三方的信息共享。不遵守個人信息保護委員會或其他相關機構發佈的任何命令採取必要措施以遵守法律的行爲可能使我們面臨刑事和/或行政制裁。根據最近的修訂，匿名處理的信息（特定化處理信息），化名處理的信息（化名化處理信息）和與個人相關的信息（個人相關信息）受個人信息保護法約束。

美國法規

作爲在美國的住宅公寓供應商，我們受到各種聯邦、州和地方法律的約束。我們的公寓單位必須遵守《美國殘疾人法》第三章（ADA），只要它們符合ADA中定義的「公共場所」或「商業設施」。ADA不認爲公寓大樓屬於公共設施或商業設施，除非這些財產的部分對公衆開放。

此外，1988年《公平住房修正法案》要求在1990年3月13日之後首次被佔用的公寓大樓必須對殘障人士無障礙。其他法律也要求公寓社區無障礙。不遵守這些法律可能導致處以罰款或對私人起訴者賠償金。

根據各種聯邦、州和地方法律，房地產的所有者或運營商可能需要承擔在財產上、下或內的某些有害或有毒物質的清除或修復成本。無論所有者或運營商是否知曉或對這些物質的存在負責，均可能被徵收此項責任。其他法律對業主和運營商施加了關於可能影響人類健康或環境的條件和活動的要求。未能遵守適用要求可能使我們難以出租受影響的財產，並可能使我們面臨金錢處罰、達到合規所需的成本以及對第三方的潛在責任。

C. 組織構架

請查看「—A. 公司歷史和發展。」

D. 資產，設施與設備

請查看「—b. 業務概況—設施」和「—b. 業務概況—環境事項。」

項目4A. 未解決的員工意見

不適用。

項目5. 運營和財務回顧與展望

我們的財務狀況和經營業績的討論基於並應結合本年度報告中包含的我們的合併財務報表及其附註進行閱讀。本報告包含前瞻性陳述。在評估我們的業務時，您應仔細考慮本年度報告中「項目3. 關鍵信息—D. 風險因素」標題下提供的信息。我們提醒您，我們的業務和財務表現受到重大風險和不確定性的影響。

2024年、2023年和2022年截至6月30日的營運結果比較

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營業收入

房地產銷售收入在截至2024年6月30日的財政年度中增加了8.1%，從截至2023年6月30日的1,709.83萬日元（約合11,491.2萬美元）增至1,848.707.4萬日元，主要受以下因素推動：

截至2023年6月30日的財政年度，房地產銷售收入增長18.1％，達到JPY1709830.8萬（約11835.2萬美元），而2022年6月30日的財政年度爲JPY1447849.8萬（約10670.3萬美元），主要受以下因素推動：

其他營業收入從2023年6月30日結束的財政年度的JPY31694萬（約219.4萬美元）增長了46.3％至JPY46360.9萬（約288.2萬美元），這一增長主要是由於兩家酒店的開業，這兩家酒店在2023年6月30日結束的財政年度全年運營，並在截至2024年6月30日的財政年度內全年運營。

其他營業收入從2022年6月30日結束的財政年度的JPY20851.6萬（約153.7萬美元）增長了52.0％至2023年6月30日結束的財政年度的JPY316,940（約2,194美元），主要是由於酒店收入增加，歸因於2023年6月30日結束的財政年度成功推出的兩家新酒店ENt TERRACE Asakusa和ENt TERRACE Akihabara。

營業成本和毛利率

營業成本主要包括每一塊土地的購買成本和拆除成本，每棟房屋的建築成本，資本化利息，建築許可證和其他地方政府相關成本，內部和外部房地產經紀佣金，以及保修成本（已發生和估計將發生的）

房地產銷售的營業收入在截至2024年6月30日的財政年度中增加了8.7%，達到JPY1572127.1000000001萬（約9772萬美元），而在截至2023年6月30日的財政年度中爲JPY1446645.9000000001萬（約10013.5萬美元），主要反映了施工成本的增加，例如勞動力成本和材料成本，因爲勞動力和材料成本的一般市場價格一直在上漲

房地產銷售的營業收入在截至2023年6月30日的財政年度中增加了20.3%，達到JPY1446645.9000000001萬（約10013.5萬美元），而在截至2022年6月30日的財政年度中爲JPY1202365.2萬（約8861.1萬美元），主要反映了施工成本的增加，例如勞動力成本和材料成本，因爲勞動力和材料成本的一般市場價格一直在上漲

Gross margin slightly decreased to 15.6% in the fiscal year ended June 30, 2024, compared to 15.8% in the fiscal year ended June 30, 2023, primarily driven by the increase in construction costs, such as labor costs and material costs.

Gross margin decreased to 15.8% in the fiscal year ended June 30, 2023, compared to 17.6% in the fiscal year ended June 30, 2022, primarily driven by the increase in construction costs, such as labor costs and material costs.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses primarily consist of payroll expenses, sales commissions, consulting expenses, and taxes and public dues.

Selling, general, and administrative expenses were JPY2,051,040 thousand (approximately $12,749 thousand) in the fiscal year ended June 30, 2024, compared to JPY1,817,970 thousand (approximately $12,584 thousand) for the fiscal year ended June 30, 2023. As a percentage of revenue, these expenses increased to 10.8% in the fiscal year ended June 30, 2024, from 10.4% in the fiscal year ended June 30, 2023, due to IPO related expenses.

Selling, general, and administrative expenses were JPY1,817,970 thousand (approximately $12,584 thousand) in the fiscal year ended June 30, 2023, compared to JPY1,704,042 thousand (approximately $12,558 thousand) in the fiscal year ended June 30, 2022. The reason of the increase is due to variable cost such as sales commission, which increase as sales increase.

Operating Margin

As a result of the foregoing, operating income decreased by 4.3 % year-over-year to JPY898,566 thousand (approximately $5,585 thousand) in the fiscal year ended June 30, 2024 from JPY939,275 thousand (approximately $6,502 thousand ) in the prior fiscal year, and operating profit margin decreased to 5.0%, from 5.3% in the prior fiscal year.

Operating income increased by 5.9% year-over-year to JPY939,275 (approximately $6,502) in the fiscal year ended June 30, 2023 from JPY887,100 thousand (approximately $6,537 thousand) in the fiscal year ended June 30, 2022. Operating profit margin decreased from 6.0% in the fiscal year ended June 30, 2022 to 5.4% in the fiscal year ended June 30, 2023.

Interest Expenses

Interest expenses increased to JPY18,286 thousand (approximately $114 thousand) in the fiscal year ended June 30, 2024 from JPY16,731thousand (approximately $116thousand) in the fiscal year ended June 30, 2023, reflecting gradual increase in interest rates.

Interest expenses decreased to JPY16,731 thousand (approximately $116 thousand) in the fiscal year ended June 30, 2023 from JPY23,333 thousand (approximately $172 thousand) in the fiscal year ended June 30, 2022, reflecting higher amounts of capitalized interest associated with an increase in the number of our development projects, which offset increases in net borrowings and interest expense.

Other Income, net

Other income was JPY73,759 thousand (approximately $458 thousand) in the fiscal year ended June 30, 2024 compared to other income of JPY6,268 thousand (approximately $43 thousand) in the fiscal year ended June 30, 2023, primarily due to the cancellation penalties.

Other income was JPY6,268 thousand (approximately $43 thousand) in the fiscal year ended June 30, 2023 compared to other expenses of JPY25,596 thousand (approximately $189 thousand) in the fiscal year ended June 30, 2022, primarily due to the absence of proceeds from the sale of fixed assets.

Provision for Income Taxes

For the fiscal years ended June 30, 2024, 2023, and 2022, we had a tax provision of JPY327,869 thousand ($2,037 thousand), JPY317,418 thousand (approximately $2,197 thousand), and JPY286,919 thousand (approximately $2,115 thousand), respectively, which resulted in an overall effective income tax rate of 34.4%, 34.1%, and 34.2%, respectively. The overall effective income tax rate was higher in fiscal year 2024 compared to fiscal year 2023, primarily reflecting the impact of deductions and other adjustments. The effective tax rate in FY2023 is slightly lower than in FY2022, primarily reflecting lower deductions and other adjustments.

Profit (Loss)

As a result of the foregoing, our net income attributable to ordinary shareholders increased by 2.5% to JPY626,959 thousand (approximately $3,897 thousand) in the fiscal year ended June 30, 2024 from JPY611,918 thousand (approximately $3,804 thousand) in the fiscal year ended June 30, 2023, and our net income attributable to ordinary shareholders increased by 10.9% to JPY611,918 thousand (approximately $3,804 thousand) in the fiscal year ended June 30, 2023 from JPY551,622 thousand (approximately $3,429 thousand) in the fiscal year ended June 30, 2022.

We believe we have a prudent strategy for company-wide cash management, including controls related to cash outflows for lot purchases and general contractor and subcontractor management as well as access to short-term borrowings and shortened cash conversion cycles related to our land delivery strategy.

As of June 30, 2024, we had JPY1,300,684 thousand (approximately $8,085 thousand) in cash and deposits.

We intend to generate cash from the sale of our inventory net of loan release payments on our short-term land bank financing and we intend to re-deploy the net cash generated from the sale of inventory to acquire land and further grow our operations over the next three years.

Our principal uses of capital are land acquisitions, building construction, operating expenses, and payment for routine liabilities. We primarily use funds generated by operations and available borrowings to meet our short-term working capital requirements, and utilize shareholder funding for select growth opportunities when appropriate. We are focused on generating high margins in our development operations and acquiring desirable land positions while maintaining our asset-light land financing strategy that conserves liquidity while allowing us to remain opportunistic in achieving growth in the prime locations across Tokyo, Kanagawa prefecture, and Sapporo.

We believe our current liquidity will be sufficient to meet our capital expenditure needs, primarily working capital needs for our real estate development business, both in the next 12 months and the long term. We employ short-term land loans in the purchases of lots earmarked for buyer homes, which are usually repaid with the cash flows from the land sales to the end buyer within a three-to-five-month period. This short payback period for the land portion of our real estate development business releases liquidity that allows us to complete the subsequent building development without requiring major external financing. We believe the local credit markets in Japan will continue to be accessible and that our financing partners will continue to provide loans in support of our operations as has been the case throughout our history. We believe our current liquidity is well-positioned to meet our capital expenditure needs in the future.

Cash Flows

The following table summarizes our cash flows for the fiscal years indicated:

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Operating Activities

Net cash provided by operating activities was JPY1,571,895 thousand (approximately $9,771 thousand) for the fiscal year ended June 30, 2024, compared to JPY919,637 thousand (approximately $6,366 thousand) of net cash used during the fiscal year ended June 30, 2023. The increase in net cash provided by operating activities was primarily attributable to the declined inventory purchase compared to the prior year..

Net cash used in operating activities was JPY919,637 thousand (approximately $6,366 thousand) for the fiscal year ended June 30, 2023, compared to JPY2,598,278 thousand (approximately $19,141 thousand) for the fiscal year ended June 30, 2022. The decrease in net cash used in operating activities was primarily attributable to the declined inventory purchase compared to the prior year.

Investing Activities

Net cash used in investing activities was JPY2,243,061 thousand (approximately $13,942 thousand) for the fiscal year ended June 30, 2024, compared to JPY1,256,039 thousand (approximately $8,694 thousand) for the fiscal year ended June 30, 2023. The increase in net cash used in investing activities was primarily attributable to the reason that we acquired additional tools and equipment to support increased construction projects and inventory growth compared to the prior year.

Net cash used in investing activities was JPY1,256,039 thousand (approximately $8,694 thousand) for the fiscal year ended June 30, 2023, compared to JPY216,133 thousand (approximately $1,593 thousand) for the fiscal year ended June 30, 2022. The increase in net cash used in investing activities was primarily attributable to the increase in our investments in tools and equipment. We acquired additional tools and equipment to support increased construction projects and inventory growth compared to the prior year.

Financing Activities

Net cash provided by financing activities was JPY1,176,573 thousand (approximately $7,313) for the fiscal year ended June 30, 2024, compared to JPY2,554,531 thousand (approximately $17,682 thousand) for the fiscal year ended June 30, 2023. The decrease in net cash provided by financing activities was primarily attributable to the reduced need in inventory compared to the prior year, resulting in fewer loans required to finance inventory purchase.

Net cash provided by financing activities was JPY2,554,531 thousand (approximately $17,682 thousand for the fiscal year ended June 30, 2023, compared to JPY2,720,752 thousand (approximately $20,051 thousand) for the fiscal year ended June 30, 2022. The decrease in net cash provided by financing activities was primarily attributable to the decrease in inventory compared to the prior year, as we use loans to finance our inventory purchase.

Credit Facilities

As of June 30, 2024 and 2023,  we had total short-term land loans of JPY3,787,800 thousand (approximately $23,544 thousand) and JPY4,678,641 thousand (approximately $32,385 thousand) respectively with various lenders. These borrowings are collateralized by the land parcels we buy and in turn sell to the ultimate customers. The maturities on these short-term land loans were up to 12 months with a cost of capital ranging from 1.8% to 4.2% annually.

Our long-term borrowings, excluding the current portion, for the fiscal years ended June 30, 2024 and 2023, consisted of aggregate principal balances of JPY4,598,151 thousand (approximately $28,581 thousand) and JPY5,437,668 thousand (approximately $37,639 thousand) respectively, at a cost of capital ranging from 1.0% to 5.5% annually.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2024, 2023, and 2022.

Contractual Obligations

Scheduled contractual obligations required for the five years following June 30, 2024 and thereafter are as follows:

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See “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”

Other than as disclosed below and elsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments, or events for the period from July 1, 2023 to June 30, 2024 that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity, or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

Factors and Trends Affecting Our Results of Operations

Our Business Environment and Current Outlook

During the fiscal years ended June 30, 2024, 2023, and 2022, we continued to experience strong demand for our real properties. We believe the strong demand for new real properties was due to a number of factors, including a supply-demand imbalance resulting from over a decade of underproduction of new real properties, low mortgage rates, a tight supply of resale real properties, favorable demographics, and a renewed appreciation for the importance of homes. Additionally, the weak yen and the stable Tokyo real estate market attracted increased interest from foreign investors. We believe many of these factors will continue to support demand in the foreseeable future.

In response to the strong demand and in an effort to drive profitability and manage growth, we continued to raise prices for our single-family home and condominium projects.

Competitive Landscape

We primarily face competition in the luxury residential property industry in Tokyo, Kanagawa prefecture, and Sapporo. We compete primarily with local residential property developers as well as large national and overseas residential property developers that have also started to enter these markets. As a boutique real estate developer, we compete on the basis of, among other things, customers, desirable lots, the types of products offered, brand recognition, price, design and quality, financing, raw materials, and skilled labor.

Land Acquisition and Development

Our business is subject to many risks because of the extended length of time that it takes to obtain the necessary approval on a property, complete the land improvements on it, and build and deliver a single-family home or condominium after a buyer signs an agreement of sale. We attempt to reduce some of these risks and improve our capital efficiency by utilizing one or more of the following methods: selling land lots financed via short-term land loans first to the end buyer in order to recoup costs and improve the liquidity profile of our sales cycle; generally commencing construction of a single-family home only after both land and development contracts are signed simultaneously; beginning building construction only after receiving a substantial down payment from the buyer; and using subcontractors to perform home construction and land development work on a fixed-price basis.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements. The significant accounting estimates include revenue recognition and cost of sales.

Revenue recognition and cost of sales

Our primary source of revenue is the development and sale of luxury single-family homes and condominiums, including land, in its principal market, Japan. Revenue from sales of real estate is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration we expect to receive in exchange for those goods or services. If the land and building are transferred to the customer in a lump-sum transaction, construction is performed on our real estate and revenue is recognized when title and possession are transferred to the customer. If the land is transferred first, building takes place on the customer's property and revenue is recognized over time using milestone method.

With the land title transferred to the buyer upon the closing of the Land Sales Contract, the construction of the building on the land both creates and enhances a customer-controlled asset and leads to the buyer receiving and benefiting from our performance of obligation as the work under the Construction Contract is conducted.

Based on the fact, we recognize revenue and cost of sales for the Construction Contract over time using the milestone method. In applying the milestone method, the percentage of the revenue and cost of sales to be recognized when meeting each milestone is based on the percentage of estimated days required to complete the milestone out of estimated days to complete the total project. The estimated days required to complete each milestone and the total project are significant assumptions used in the milestone method that directly and significantly affect the amounts of revenue and cost of sales to be recognized.

We developed estimated days required to complete each milestone and the total project based on the standardized process for constructions under regulation the government has on the main milestone of the whole construction process as well as the historical experience. We believe that the number of days expected to achieve each milestone closely correlates to the actual construction costs based on the past experience. We closely monitor the accuracy and reasonableness of the estimated days required to complete each milestone and the total project as well as the actual costs incurred for each milestone and adjust them if necessary. There have been no significant changes in the process or assumptions used during the fiscal years ended June 30, 2024, 2023 and 2022. Due to the low number of uncompleted projects at each year end, any potential changes in number of estimated days for meeting each milestone or for completing the total project will not result in significant changes in revenue recorded.

Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The following sets forth information regarding members of our board of directors and our executive officers as of the date of this annual report.

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Mr. Eiji Nagahara is our founder and has served as our president since November 2003 and our chief executive officer and representative director since March 2001. Prior to founding our Company, Mr. Nagahara worked at multiple real estate companies, including FEC Co., Ltd. from June 1999 to February 2001, Mibu Co., Ltd. from July 1997 to May 1999, and Uptown Co., Ltd. from October 1995 to June 1997. In September 2019, Mr. Nagahara received his certificate as a Certified International Property Specialist.

Mr. Daisuke Takahashi has served as our chief financial officer since January 2021. Prior to joining our Company, Mr. Takahashi served as the managing director and chief financial officer of Japan Card Products Co., Ltd., a Belgium and Japan joint company engaging in manufacturing business, from August 2019 to August 2020, as the financial planning and analysis manager of Starbucks Coffee Japan Ltd from November 2017 to July 2019, as the chief accountant of Fujita Corporation Co., Ltd, a construction company, in Doha, Qatar, from January 2015 to October 2017, as the chief consultant of Chuo Sogo Business Consulting Co., Ltd, a financial advisory company, from June 2014 to December 2014, and as the accounting manager of A.I Global Sun Partners Co., Ltd., an accounting firm, in Ho Chi Minh City, Vietnam, from November 2011 to August 2013. Mr. Takahashi passed all four sections of the Uniform CPA Examination in February 2015. Mr. Takahashi received his bachelor’s degree of Marine Science from Hokkaido University in March 2001.

Mr. Hidekazu Hamagishi has served as our director since July 2021 and as our general manager of accounting department since July 2012. Prior to joining our Company, Mr. Hamagishi worked at Aisei Drug Co., Ltd., a pharmaceutical company, from December 2011 to March 2012. Engaging in the financial service business, he worked at Ibis Consulting Co., Ltd. from July 2011 to November 2011, First Management Service Co., Ltd. from March 2011 to June 2011, and SME Guarantee Organization Co., Ltd. from April 2010 to March 2011. Mr. Hamagishi served as the manager of Kasuga Publishing Co., Ltd., a publishing company, from April 2009 to August 2009 and as the chief accountant of S-net Co., Ltd., a real estate company, from July 2008 to January 2009. From January 2006 to May 2008, Mr. Hamagishi worked at Human Design Limited Company, an administrative outsourcing company. From April 2002 to December 2005, Mr. Hamagishi worked at Nissan Satio Saitama Co., Ltd., an automobile company. Mr. Hamagishi received his Bachelor of Law degree from Daito Bunka University in March 2002.

Mr. Kenichi Homma has served as our director since September 2024. Mr. Homma joined the Company in October 2020 and has served as the General Manager of the Yokohama Supervisory Branch. In July 2022, Mr. Homma was also appointed as the Executive Officer of the Company. Since joining the Company, Mr. Homma has been responsible for the development of the Company’s business mainly in Kanagawa Prefecture, and has continued to lead and promote the business by playing a central role in strategic planning and execution. His experience prior to joining the Company includes roles at Nikos Life Insurance Co., Tell Corporation, Inc., Yokohama Housing Sales Co., Tokyu Livable Inc., and Bader Home Co.

Mr. Akiya Ueki, has served as our director and audit and supervisory committee member since September 2023. Prior to that, he served as an administrator at our Company from May 2023 to September 2023. He served as a general manager of internal audit at Renewable Japan Co. from May 2021 to April 2023, and as a general manager of audit office at Tokyo Tatemono Real Estate Sales Co. Ltd. from July 2013 to April 2021. Mr. Akiya Ueki obtained his Bachelor’s degree in Law from Tokyo University in 1979.

Mr. Hiroyuki Saito has served as our independent director and audit and supervisory committee member since July 2021. Mr. Saito established Saito Certified Public Accountant Office in March 2006, which mainly provides merger and acquisition consulting services to companies in Japan, and established Mitsuba Audit Corporation in March 2021, which conducts accounting audits. Prior to establishing Saito CPA Office, Mr. Saito worked for Ernst & Young ShinNihon LLC and its affiliated companies for 16 years until he retired in 2006, where he was engaged in various business activities, including accounting audits, IPO consulting, and merger and acquisition consulting. Mr. Saito worked for Ginga Audit Corporation as a senior partner from December 2008 to November 2019. He worked for Minamiaoyama Audit Corporation as a senior partner from December 2019 to March 2020. Mr. Saito received his Bachelor of Business Administration degree from Aoyama Gakuin University in March 1990. In August 1993, he received his certificate as a Certified Public Accountant in Japan.

Mr. Ryoma Iida has served as our independent director and audit and supervisory committee member since July 2021. Mr. Iida established Allegro Law Office in 2020, and has worked as an attorney at law mainly in transaction disputes, corporate governance, labor disputes, bankruptcy, and business revitalization. Mr. Iida worked as a school legal affairs specialist of Kobe City Board of Education from April 2020 to March 2021. He worked for Umegae Chuo Legal Profession Corporation as a lawyer from January 2014 to December 2019, where he was engaged in resolution for various disputes between companies as well as individuals. He passed Japanese bar examination on 2012 and was registered with the Osaka Bar Association on December 2013. Mr. Iida holds a Juris Doctor degree from Osaka University Law School.

None of our directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.

Board Diversity

The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.

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In accordance with the Companies Act, compensation for our directors, including bonuses, retirement allowances, and incentive stock options, must be approved at our general meeting of shareholders, unless otherwise specified in our articles of incorporation in the future. The shareholders’ approval may specify the upper limit of the aggregate amount of compensation or calculation methods, but if compensation includes benefits in kind, the shareholders’ approval must include the description of such benefits. Compensation for a director is fixed by our board of directors in accordance with our internal regulations and practice and, in the case of retirement allowances, generally reflects the position of the director or executive officer at the time of retirement, length of service as a director and contribution to our performance.

For the fiscal year ended June 30, 2024, we paid an aggregate of JPY92,083,346 (approximately $572,373) as compensation to our executive officers and directors and we set aside or accrued JPY128,895,000 (approximately $801,187) to provide pension, retirement, or other similar benefits to our directors and executive officers.

Compensation Recovery Policy

We have adopted a compensation recovery policy to provide for the recovery of erroneously-awarded incentive compensation, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, final SEC rules, and applicable listing standards.

Board of Directors

Our board of directors has the ultimate responsibility for the administration of our affairs. Under the Companies Act and our articles of incorporation, we are required to have no fewer than three but not more than 10 directors (excluding those who are member of the audit and supervisory committee) and no more than five directors who are member of the audit and supervisory committee. Directors are elected at general meetings of shareholders. The normal term of office of any director expires at the close of the ordinary general meeting of shareholders held with respect to the last fiscal year ended within one year after such director’s election to office or, in the case of a director who is a member of the audit and supervisory committee, two years after the same. Our directors may, however, serve any number of consecutive terms.

The board of directors (excluding those directors who are members of the audit and supervisory committee) appoints from among its members one or more representative directors, who have the authority individually to represent us in the conduct of our affairs. The board of directors may appoint from among its members (excluding those who are members of the audit and supervisory committee) a chairperson and a president, or one or more vice-presidents, senior managers, and executive managers of the board.