Annual Report for Fiscal Year Ending June 30, 2024 (Form 20-F)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from to

Commission file number: 001-41814

Kabushiki Kaisha Lead Real Estate

(Exact name of Registrant as specified in its charter)

Lead Real Estate Co., Ltd

(Translation of Registrant's name into English)

Japan

(Jurisdiction of incorporation or organization)

6F, MFPR Shibuya Nanpeidai Building 16-11

Nampeidai-cho, Shibuya-ku

Tokyo, 150-0036, Japan

(Address of principal executive offices)

Eiji Nagahara, President, Chief Executive Officer and Representative Director

Telephone: +81 3-5784-5127

Email: [email protected]

At the address of the Company set forth above

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

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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.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 13,641,900 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒

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INTRODUCTION

In this annual report on Form 20-F, unless the context otherwise requires, references to:

This annual report on Form 20-F includes our audited consolidated financial statements for the fiscal years ended June 30, 2024, 2023, and 2022. Our functional currency and reporting currency is the Japanese yen. Convenience translations included in this annual report of Japanese yen into U.S. dollars have been made at the exchange rate of JPY160.88 = $1.00, which was the foreign exchange rate on June 28, 2024 as reported by the Board of Governors of the Federal Reserve System (the "U.S. Federal Reserve") in its weekly release on July 1, 2024. Historical and current exchange rate information may be found at https://www.federalreserve.gov/releases/h10/20240701/, exchange rate of JPY144.47=$1.00, which was the foreign exchange rate on June 30, 2023 (https://www.federalreserve.gov/releases/h10/20230703/), exchange rate of JPY135.69=$1.00, which was foreign exchange rate on June 30, 2022 (https://www.federalreserve.gov/releases/h10/20220705/).

We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them.

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Part I

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

Item 3. KEY INFORMATION

Not applicable.

Not applicable.

Risks Related to Our Business and Industry

The luxury residential property markets in Tokyo, Kanagawa prefecture, and Sapporo are highly competitive and if we cannot continue to successfully identify and secure an adequate inventory of development sites in these areas at commercially reasonable costs, our operations could be adversely impacted.

The luxury residential property markets in Tokyo, Kanagawa prefecture, and Sapporo are highly competitive with limited greenfield land and development sites available for acquisitions. The results of our property development operations depend in part upon our continuing ability to successfully identify and acquire an adequate number of land and development sites in desirable locations in our markets. To date, we primarily identify land and development sites through local real estate agencies. There can be no assurance that our long-standing relationships with these agencies will continue, that an adequate supply of land and development sites that meet our specifications will continue to be available to us through these agencies on terms similar to those available in the past, or that we will not be required to devote a greater amount of capital to the acquisitions of land and development sites than we have historically. We may not successfully obtain desired land and development sites due to the increasingly intense competition. An insufficient supply of land and development sites in one or more of our markets, or our inability to purchase or finance land and development sites on reasonable terms could have a material adverse effect on our sales, profitability, reputation, ability to service our debt obligations, and future cash flows, which could impact our ability to compete for land. Any land shortages or any decrease in the supply of suitable land at commercially reasonable costs could limit our ability to develop new projects or result in increased site deposit requirements or land costs. Moreover, the supply of potential development sites in Tokyo, Kanagawa prefecture, and Sapporo will diminish over time and we may find it increasingly difficult to identify and acquire attractive land and development sites through real estate agencies at commercially reasonable costs in the future. Our land acquisition costs are a major component of our cost of real estate sales and increases in such costs could diminish our gross margin. We may not be able to pass through to our customers any increased land costs, which could adversely impact our revenue, earnings, and margins.

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Revenue generated from our condominium development and sales is uncertain and volatile.

Historically, the revenue generated from our condominium development and sales has been uncertain and volatile. For the fiscal years ended June 30, 2024, 2023, and 2022, revenue generated from sales of our condominiums was JPY11,811,213 thousand (approximately $73,416 thousand), JPY7,199,741 thousand (approximately $49,836 thousand), and JPY5,162,292 thousand (approximately $38,045 thousand), accounting for approximately 62%, 41%, and 35% of our total revenue, respectively. Because we sell the entire condominiums, we have a relatively small number of condominium projects per year but much higher average sale price per project, which may result in lumpy and uneven revenue during a period of time. If we fail to predict the revenue generated from sales of our condominiums in the future, or if such revenue continues to be uncertain and volatile, it could adversely impact our business, prospects, liquidity, financial condition, and results of operations.

We rely substantially on short-term borrowings to fund our operations, and the failure to renew these short-term borrowings or the failure to continue to obtain financing on favorable terms, if at all, may adversely affect our ability to operate our business.

Real estate development is capital intensive. To date, we have funded our land acquisitions for single-family home development primarily through short-term bank loans, typically with terms ranging from three to six months, and we have funded our land acquisitions for condominium development using long-term loans from local banks. As of June 30, 2024, we had approximately JPY4,923,796 thousand (approximately $30,605 thousand) in short-term borrowings outstanding. During the fiscal year ended June 30, 2024, we repaid JPY12,700,984 thousand (approximately $78,947 thousand) and renewed JPY12,531,641 thousand (approximately $77,894 thousand of our short-term borrowings. As of June 30, 2023, we had approximately JPY5,093,139 thousand (approximately $35,254 thousand) in short-term borrowings outstanding. During the fiscal year ended June 30, 2023, we repaid JPY10,293,315 thousand (approximately $71,249 thousand) and renewed JPY10,660,041 thousand (approximately $73,787 thousand) of our short-term borrowings. As of June 30, 2022, we had approximately JPY4,726,413 thousand (approximately $34,832 thousand) in short-term borrowings outstanding. During the fiscal year ended June 30, 2022, we repaid JPY9,175,148 thousand (approximately $67,618 thousand) and renewed JPY9,506,180 thousand (approximately $70,058 thousand) of our short-term borrowings. We expect that we will be able to renew all of the existing bank loans upon their maturity based on our past experience and outstanding credit history. However, we cannot assure you that we will be able to renew these loans in the future as they mature. If we are unable to renew these bank loans in the future, our liquidity position would be adversely affected, and we may be required to seek more expensive sources of short-term or long-term funding to finance our operations.

Our ability to secure sufficient financing for land acquisitions depends on a number of factors that are beyond our control, including market conditions in the capital markets, lenders' perceptions of our creditworthiness, the Japanese economy, and the Japanese government regulations that affect the availability and cost of financing for real estate companies. Further financing may not be available to us on favorable terms, if at all. If we are unable to obtain short-term financing in an amount sufficient to support our operations, it may be necessary, to suspend or curtail our operations, which would have a material adverse effect on our business and financial condition. In that event, current shareholders would likely experience a loss of most of or all of their investment.

Our substantial indebtedness could materially and adversely affect our business, financial condition, results of operations, and cash flows.

As of June 30, 2024, we had approximately JPY4,923,796 thousand (approximately $30,605 thousand) in short-term borrowings and JPY6,489,536 thousand (approximately $40,338 thousand) in long-term borrowings outstanding.

The amount of our debt could have significant consequences on our operations, including:

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Any of these factors and other consequences that may result from our substantial indebtedness could have a material adverse effect on our business, financial condition, results of operations, and cash flows impacting our ability to meet our payment obligations under our debts. Our ability to meet our payment obligations under our outstanding indebtedness depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control.

We rely on key relationships with service providers and agencies across the real estate development industry, and to the extent they experience pressures in raw materials, labor, or timely construction and delivery of projects, it could in turn have an adverse impact on our business, prospect, liquidity, financial condition, and results of operations.

We primarily rely on service providers, including contractors, to perform the construction of substantially all of our single-family homes and condominiums, including the selection and procurement of raw materials used in the construction as well as the construction and delivery of the projects. If our contractors fail to timely construct and deliver projects, we will be subject to penalties for such delay under our contracts with customers. We also primarily rely on real estate agencies to identify land and development sites for acquisition as well as customers. Therefore, to the extent such service providers and agencies experience pressures in raw materials (especially an increase in the price of lumber), labor (including an increase in labor cost), or timely construction and delivery of projects, such pressures may pass through to us, which could increase our cost and adversely impact our business, prospects, liquidity, financial condition, and results of operations.

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.

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. See "Item 4. Information on The Company-B. Business Overview-Glocaly Platform" for more information. As of the date of this annual report, Glocaly has not generated revenue, though we have seen a growing number of client requests for property referrals through the platform. However, we cannot guarantee that Glocaly's performance will remain stable as we continue to improve and upgrade the platform. Failure to properly maintain the platform could adversely impact our business, prospects, and results of operations.

In addition to functioning as an interactive media platform, our Glocaly platform has the potential to expand into 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. Although we expect to have the first-mover advantage in the area of electronic real estate transactions, there can be no assurance that we can take advantage of the amendments in relation to our business using Glocaly platform.

Our construction of single-family homes and condominiums is dependent on the availability, skill, and performance of contractors.

We engage contractors to perform the construction of substantially all of our single-family homes and condominiums and to select and obtain raw materials used in the construction. Accordingly, the timing and quality of our construction depend on the availability and skill of our contractors. While we anticipate being able to cooperate with reliable contractors and believe that our relationships with contractors are good, we can provide no assurance that skilled contractors will continue to be available at reasonable rates and in our markets. In addition, as we expand into new markets, we typically must develop new relationships with contractors in such markets, and there can be no assurance that we will be able to do so in a cost-effective and timely manner, or at all. The inability to contract with skilled contractors at reasonable rates on a timely basis could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.

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We are exposed to risks that the performance of our contractors may not meet our standards or specifications. 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. Despite our quality control efforts, we may discover from time to time that our contractors have engaged in improper construction practices or have installed defective materials in our residential condominiums or buildings. Negligence or poor work quality by any contractors may result in structural defects or substandard construction quality in our single-family homes or condominiums, which could in turn cause us to suffer project delays, cost overruns, and financial losses, harm our reputation, or expose us to third-party claims. Even if the contractor performing the construction work in such instances is ultimately held responsible for the consequences of any such property defects, any such incidents could have lasting adverse effects on us. We work with multiple contractors on different projects and we cannot guarantee that we can effectively monitor their work at all times. In addition, contractors may make use of third-party subcontractors with which we have no direct relationship, further limiting our ability to manage the foregoing risks. Although our construction contracts with contractors contain provisions designed to protect us, we may be unable to successfully enforce these provisions and, even if we are able to successfully enforce these provisions, the contractor may not have sufficient financial resources to compensate us. Moreover, the contractors may undertake projects from other property developers, engage in risky undertakings, or encounter financial or other difficulties, such as supply shortages, labor disputes, or work accidents, which may cause delays in the completion of our property projects or increases in our costs.

A shortage of building materials or labor, or increases in their costs, could delay home construction or increase its cost, which could materially and adversely affect us.

Our contractors are responsible for procuring almost all of the raw materials used in our project developments. The real estate development industry experiences labor and raw material shortages from time to time, including shortages in lumber in particular. Shortages in lumber in particular could result in an increase in our construction cost paid to the contractors, which in turn could have a material adverse effect on our business, prospects, financial condition, and results of operations. For example, the price of lumber has been increasing since the beginning of 2021, which has in turn increased the payments to our contractors. These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures, or a result of broader economic disruptions. In addition, our success in our existing markets or those we may choose to enter in the future depends substantially on our ability to source labor and local materials through contractors on terms that are favorable to us. Such markets may exhibit a reduced level of skilled labor relative to increased property development demand in these markets. In the event of shortages in labor or raw materials in such markets, local contractors, tradespeople, and suppliers may choose to allocate their resources to developers with an established presence in the market and with whom they have longer-standing relationships with. Labor and raw material shortages and price increases for labor and raw materials could cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, financial condition, and results of operations.

Our business could be materially and adversely disrupted by an epidemic or pandemic, or similar public threat, or fear of such an event, and the measures that the governmental authorities implement to address it.

An epidemic, pandemic, or similar serious public health issue, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, along with any associated economic and social instability or distress, have a material adverse impact on our business, prospects, liquidity, financial condition, and results of operations.

For example, pandemics like COVID-19 may impact our business by disrupting supply chains and inflating raw material and labor costs. During the COVID-19 pandemic, we managed these challenges by passing increased costs to customers through higher average sale prices and managing increases in our construction costs through fixed cost subcontractor arrangements, which helped maintain our margins.

Although COVID-19 has not materially impacted our operations during the fiscal years ended June 30, 2024, 2023, and 2022, there remains a risk that future disruptions, whether from another pandemic, economic downturns, or other external factors, could lead to supply chain issues, increased costs, or broader operational challenges. We cannot guarantee that we will be able to fully mitigate these adverse impacts in the future.

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We may be unable to complete our property development projects on time, or at all.

The progress and costs for our development projects can be adversely affected by many factors, including:

Any construction delays, or failure to complete a project according to our planned specifications or budget, may delay our property sales, which could harm our revenue, cash flows, and reputation.

Our results of operations may fluctuate from period to period.

Our results of operations tend to fluctuate from period to period. The number of properties that we can develop or complete during any particular period is limited due to the substantial capital required for land acquisitions and construction, as well as the lengthy development periods required before positive cash flows may be generated.

Our hotel operations are subject to the business, financial, and operating risks inherent to the hospitality industry, any of which could reduce our revenue and limit opportunities for growth.

Our hotel operations are subject to a number of business, financial, and operating risks inherent to the hospitality industry, including:

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Any of these factors could increase our costs or limit or reduce the prices we are able to charge for hospitality products and services, or otherwise affect our ability to maintain existing properties or develop new properties. As a result, any of these factors can reduce our revenue and limit opportunities for growth.

Contraction in the global economy or low levels of economic growth could adversely affect our revenue and profitability as a hotel operator.

Consumer demand for our hotel services is linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Decreased global or regional demand for hospitality products and services can be especially pronounced during periods of economic contraction or low levels of economic growth, and the recovery period in our industry may lag overall economic improvement. Declines in demand for our products and services due to general economic conditions could negatively affect our business by limiting the amount of fee revenue we are able to generate from our hotel properties and decreasing the revenue and profitability of our hotel properties. In addition, many of the expenses associated with our business, including personnel costs, interest, rent, property taxes, insurance, and utilities, are relatively fixed. During a period of overall economic weakness, if we are unable to meaningfully decrease these costs as demand for our hotel services decreases, our business operations and financial performance and results may be adversely affected.

We are subject to risks inherent in the residential leasing business.

As we lease apartment building units to individual customers in Japan and Dallas, Texas, we are subject to varying degrees of risk inherent to the residential leasing business, including:

Any of these factors could have a material adverse impact on results of our operations or financial condition.

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Rent control laws and other regulations that limit our ability to increase rental rates may negatively impact our rental income and profitability of our residential leasing business.

Various levels of governmental agencies may introduce rent control laws or other regulations that limit our ability to increase rental rates, which may affect our rental income. Especially in times of recession and economic slowdown, rent control initiatives can acquire significant political support. If rent controls unexpectedly become applicable to certain of our properties, our revenue from and the value of such properties can be adversely affected.

If our tenants seek early termination of their leases or fail to meet their obligations under their leases, our business, results of operations, and financial condition may be materially and adversely affected.

Our tenants may seek early termination of their leases or fail to meet their obligations in connection with the leases. If a tenant defaults on his/her payment obligations and fails to cure the default within the applicable grace period, we may terminate the lease and repossess the apartment pursuant to the lease and relevant laws. We also need to return prepaid rents to the relevant tenant, as applicable, which might have negative impact on our cash flow. In the event of lease breach or early termination, we may not be able to find a new tenant to fill the vacancy in a timely manner, under the same terms or at all, and the security deposit or penalty of the defaulting tenant may not be sufficient to cover our losses for the period in between the leases. Our business, results of operations, and financial condition would be adversely affected, if a significant number of our tenants seek early termination or fail to meet their obligations in connection with the lease.

In addition, tenants may use our apartments for illegal purposes or engage in illegal activities in our apartments, damage or make unauthorized structural changes to our apartments, refuse to leave the apartments upon default or termination of the lease, disturb nearby tenants with noise, trash, odors, or eyesores, sublet our apartments in violation of our lease, or permit unauthorized persons to live in our apartments. Although the tenants are responsible for damages caused by their wrongful conduct, we may still suffer from negative impact on our business and reputation. Damage to our apartments may delay re-leasing, necessitate expensive repairs, or impair the rental income of the apartments, resulting in a lower-than-expected rate of return.

If we are unable to attract, train, assimilate, and retain employees that embody our culture, including project managers and senior managers, we may not be able to grow or successfully operate our business.

Our success depends in part upon our ability to attract, train, assimilate, and retain a sufficient number of employees, including project managers. If we are unable to hire and retain project managers capable of effectively coordinating external parties that work on our projects, our ability to develop new projects may be impaired, the construction of our existing projects could be materially adversely affected, and our brand image may be negatively impacted. Our growth strategy will require us to attract, train, and assimilate even more personnel. Any failure to meet our staffing needs or any material increases in team member turnover rates could have a material adverse effect on our business or results of operations.

We place substantial reliance on the industry experience and knowledge of our senior management team as well as their relationships with other industry participants. Mr. Eiji Nagahara, our founder, president, chief executive officer, and representative director, is particularly important to our future success due to his substantial experience and reputation in the real estate development industry. We do not carry, and do not intend to procure, key person insurance on any of our senior management team. The loss of the services of one or more members of our senior management team due to their departure, or otherwise, could hinder our ability to effectively manage our business and implement our growth strategies. Finding suitable replacements for our current senior management could be difficult, and competition for such personnel of similar experience is intense. If we fail to retain our senior management, our business and results of operations could be materially and adversely affected.

Any unauthorized use of our brand or trademark may adversely affect our business.

We currently own 19 trademarks for real estate related services in Japan and have three pending trademark applications in Japan and the U.S. We rely on the Japanese and U.S. intellectual property and anti-unfair competition laws and contractual restrictions to protect our brand name and trademarks. We believe our brand, trademarks, and other intellectual property rights are important to our success. Any unauthorized use of our brand, trademarks, and other intellectual property rights could harm our competitive advantages and business. Monitoring and preventing unauthorized use is difficult. The measures we take to protect our intellectual property rights may not be adequate. If we are unable to adequately protect our brand, trademarks, and other intellectual property rights, our reputation may be harmed and our business may be adversely affected.

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We do not have sufficient insurance to cover potential losses and claims.

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 enough insurance coverage against potential losses or damages with respect to our properties before their delivery to customers. Our contractors may not be sufficiently insured themselves or have the financial ability to absorb any losses that arise with respect to our projects or pay our claims. While we believe that our practice is in line with the general practice in the Japanese property development industry and there have not been instances when we had to incur losses, damages, and liabilities because of the lack of insurance coverage, there may be such instances in the future as we develop more properties, which may in turn adversely affect our financial condition and results of operations.

We are subject to various laws and regulations, including those regarding the leasing, purchasing, and selling of real property, and violations of, or changes to, such laws and regulations may adversely affect our business.

The businesses we engage in are subject to various laws and regulations in Japan.

We are subject to the Building Lots and Buildings Transaction Business Act of Japan (Act No. 176 of 1952, as amended), or the Building Lots and Buildings Transaction Business Act, which regulates the lease, sale, and purchase of buildings and building lots or brokerage of sale and purchase or leasing thereof and which requires a license from the Minister of Land, Infrastructure, Transport, and Tourism of Japan or the governor of a prefecture, as the case may be. Violations of the Building Lots and Buildings Transaction Business Act could result in our licenses being revoked or our business being suspended, which could materially impact our ability to continue our operations in these businesses. In addition to the above, our real estate business is subject to several other national and local regulations concerning matters such as zoning, public bidding procedures, environmental restrictions, and health and safety compliance, and we are required to obtain numerous governmental permits and approvals.

Our real estate business is also subject to the Building Standards Act of Japan (Act No. 201 of 1950, as amended), or the Building Standards Act, which subjects our building operations to extensive regulation and supervision regarding the methods of construction, as well as safety matters. Violations of the Building Standards Act and other building construction regulations could result in the suspension of construction, the demolition, or the reconstruction of a building, repairs, or limiting use of a building to only certain conforming parts of the building.

Changes to other laws and regulations with more general applicability to Japanese corporations, such as tax laws and accounting rules, could also have an impact on our financial condition and results of operations. Violations of laws and regulations could result in significant regulatory sanctions against us, including the suspension or revocation of our governmental permits and approvals, which could have a negative impact on our reputation and materially affect our results of operations.

Changes in applicable laws and regulations could also result in reduced flexibility in conducting our business and increased compliance costs or may have other adverse effects on our business, financial condition, and results of operations.

Our business is geographically concentrated, which subjects us to greater risks from changes in local or regional conditions.

As of the date of this annual report, we primarily operate in the real estate development markets in Tokyo, Kanagawa prefecture, and Sapporo and we primarily generate revenue from these markets. Due to this geographic concentration, our results of operations and financial conditions are subject to greater risks from changes in general economic and other conditions in these areas, than the operations of more geographically diversified competitors. These risks include:

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As a result of the geographic concentration of our business, we face a greater risk of a negative impact on our business, financial condition, results of operations, and prospects in the event that any of the areas in which we develop real properties is more severely impacted by any such adverse condition, as compared to other areas or countries.

A downturn in the economy of the markets in which we operate could adversely impact purchases of real properties. Factors that could affect customers' willingness to make real property purchases include general business conditions, levels of employment, interest rates and tax rates, the availability of mortgage, and customer confidence in future economic conditions. In the event of an economic downturn, home purchase habits could be adversely affected and we could experience lower than expected net sales, which could force us to delay or slow our growth strategy and have a material adverse effect on our business, financial condition, profitability, and cash flows.

In recent years, the economic indicators in Japan have shown mixed signs, and future growth of the Japanese economy is subject to many factors beyond our control. The former administration of Prime Minster Fumio Kishida, Prime Minister Yoshihide Suga and Prime Minister Shinzo Abe have introduced policies to combat deflation and promote economic growth. In addition, the Bank of Japan introduced a plan for quantitative and qualitative monetary easing in April 2013 and announced a negative interest rate policy in January 2016. However, the long-term impact of these policy initiatives on Japan's economy remains uncertain. In addition, the occurrence of pandemics, such as the COVID-19 pandemic, the occurrence of large-scale natural disasters, such as earthquakes and typhoons, as well as an increase in the consumption tax rate, which took place in April 2014 with a further increase in October 2019, may also adversely impact the Japanese economy, potentially impacting spending on real properties. Any future deterioration of the Japanese or global economy may result in a decline in consumption that would have a negative impact on demand for our real properties and their prices.

We may be unsuccessful in expanding and operating our business internationally, which could adversely affect our results of operations.

We have established subsidiaries in the U.S. and Hong Kong and plan to expand our operations in these markets and in Southeast Asia, especially the Philippines. The entry and operation of our business in these markets could cause us to be subject to unexpected, uncontrollable, and rapidly changing events and circumstances outside Japan. As we grow our international operations, we may need to recruit and hire new project management, sales, marketing, and support personnel in the countries in which we have or will establish new subsidiaries or otherwise have a significant presence. Entry into new international markets typically requires the establishment of new marketing and sales channels. Our ability to continue to expand into international markets involves various risks, including the possibility that our expectations regarding the level of returns we will achieve on such expansion will not be achieved in the near future, or ever, and that competing in markets with which we are unfamiliar may be more difficult than anticipated. If we are less successful than we expect in a new market, we may not be able to realize an adequate return on our initial investment and our operating results could suffer.

Our international operations may also fail due to other risks inherent in foreign operations, including:

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Our current and any future international expansion plans will require management attention and resources and may be unsuccessful. We may find it impossible or prohibitively expensive to continue expanding internationally or we may be unsuccessful in our attempt to do so, and our results of operations could be adversely impacted.

We may become involved in legal and other proceedings from time to time and may suffer significant liabilities or other losses as a result.

From time to time, we may become involved in disputes with the development and sale of our properties or other aspects of our business and operations, including labor disputes with employees. These disputes may lead to legal or other proceedings and may result in substantial costs and diversion of resources and management's attention. Disputes and legal and other proceedings may require substantial time and expense to resolve, which could divert valuable resources, such as management time and working capital, delay our planned projects, and increase our costs. Third parties that are found liable to us may not have the resources to compensate us for our incurred costs and damages. We could also be required to pay significant costs and damages if we do not prevail in any such disputes or proceedings. In addition, we may have disagreements with regulatory bodies in the course of our operations, which may subject us to administrative proceedings and unfavorable decrees that result in pecuniary liabilities and cause delays to our property developments.

Environmental contamination on properties that we own or have sold could adversely affect our results of operations.

In Japan, under the Soil Contamination Countermeasures Act of Japan (Act No. 53 of 2002, as amended), or the Soil Contamination Countermeasures Act, if a local governor finds that the level of soil pollution in a given area of land due to hazardous or toxic substances exceeds the standards prescribed by the Ministry of the Environment of Japan and that area of land is polluted to such an extent that it has caused or may cause harm to human health, the governor must designate the area of land as a polluted area and the governor may order the current owner of such land to remove or remediate hazardous or toxic substances on or under the land in accordance with a plan for removal and remediation, in principle, whether or not the current owner knew of, or was responsible for, the presence of such hazardous or toxic substances.

The environmental surveys that we generally conduct in connection with our properties, such as to discover hazardous or toxic substances in the soil, groundwater, and buildings, may be inadequate to fully uncover the problems of the types they are intended to identify, which are often hidden or impossible to detect without special expertise and equipment. The presence of hazardous or toxic substances on our properties, or our failure to properly remediate any such contamination, may adversely affect our ability to sell, develop, or lease our properties or borrow using the affected properties as collateral. If hazardous or toxic substances are discovered on any of our properties, the affected properties could fall in value, completion of development may be delayed, and we may be required to incur substantial unforeseen costs to remediate the underlying hazard and discharge the related environmental liabilities. Furthermore, if actual harm to human health results from the presence of hazardous or toxic substances on our properties, we may incur significant damages, regulatory sanctions, or damage to our brand and reputation. The realization of any of such risks related to environmental contamination could have a material adverse effect on our business, financial condition, and results of operations.

Our businesses are subject to risks related to natural or man-made disasters, pandemics, and other catastrophic events.

Our business is subject to the risk of natural disasters, such as earthquakes, typhoons, tsunamis, flooding, and volcanic eruptions, as well as man-made disasters, such as fire, industrial accidents, war, riots, or terrorism. We are also exposed to the risk of pandemics, such as the COVID-19 pandemic, public health issues, and other catastrophic events. Should a disaster or other catastrophic event occur, our personnel could suffer injuries, our operations could be disrupted, and we may experience construction delays, including delays in initiating development or construction of properties, or become unable to complete the construction of properties under development. In addition, we may be unable to sell our properties in inventory and our properties could decrease in value or be directly and severely damaged. We may also be required to incur expenses to restore or replace damaged properties in inventory or other facilities we rely on to operate our business.

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Japan is earthquake-prone and has historically experienced numerous large earthquakes that have resulted in extensive property damage, such as the earthquake on March 11, 2011, or the Great East Japan Earthquake, and the earthquakes that occurred in Kumamoto in April 2016. Developments on reclaimed land are subject to an increased risk of soil liquefaction, which can be triggered by an earthquake. Although we generally avoid developing projects on reclaimed land, it is possible that some of our future developments will be located on reclaimed land. Although we will conduct assessments of the reclaimed land as we deem necessary, the assessments may not be sufficient to detect the extent of any risk of liquefaction in the event of an earthquake. Typhoons also frequently hit various regions of Japan. For instance, major typhoons affected parts of Japan in the fall of 2019. Although we have not experienced material disruptions to our business or physical damage resulting from typhoons in the past, we cannot guarantee that such disruptions or physical damage will not happen in the future. In addition, we focus primarily on developing and selling real estate located in Tokyo, Kanagawa prefecture, and Sapporo, making us particularly vulnerable to any natural or man-made disasters that occur in this area. Even if our facilities do not incur physical damage, any loss or limit to our use of utilities, such as electricity, could disrupt our businesses. Our insurance against damage or liability caused by typhoons and other natural disasters may not be sufficient to cover repair costs or other losses, and we generally maintain no insurance coverage relating to earthquakes or business interruption insurance.

Changes in the policies of the Japanese government that affect demand for housing and investment properties may adversely affect the ability or willingness of prospective buyers to purchase residential real estate.

Demand in the Japanese residential real estate market is significantly affected by the policies of the Japanese government, which currently include low interest rate policies that result in the availability of housing loans from banks with highly discounted mortgage rates and preferential tax treatment in connection with housing loans, and the availability of publicly sponsored long-term mortgage products. Some of these housing-related policies were put in place by the Japanese government to help counteract the effect of the consumption tax rate increase in 2014 on housing demand and were further modified to help mitigate the impact of the consumption tax rate increase in 2019. Such policies may change or be discontinued in the future or may not continue to contribute to increased demand for single-family homes and condominiums as intended. Changes in residential property taxes, consumption taxes incurred when purchasing a residence, or other housing-related policies that increase the cost of owning, acquiring, or selling real estate may adversely affect the ability or willingness of prospective home buyers to purchase a single-family home or condominium, which may materially and adversely affect our business, financial condition, and results of operations.

Demand for residential real estate properties for investment purposes is also affected by government policies. For example, under Japanese tax laws, it has been possible for individuals to receive favorable tax deductions relating to investments in used rental buildings located overseas. When such used rental buildings are sold, rental losses that have been disregarded when calculating depreciation expenses for a used rental building located outside of Japan using the simplified method to determine useful life may be deducted from the accumulated depreciation expenses that should be excluded when calculating the property's basis for sale, resulting in a higher basis and thus lower capital gains.

We may incur losses due to defects relating to our properties.

We may be liable for unforeseen losses, damages, or injuries suffered by third parties at properties that we develop, own, sell, or lease as a result of defects in such properties. In Japan, pursuant to the Civil Code of Japan (Act No. 89 of 1896, as amended), or the Civil Code, the owner of a structure or property attached to land is strictly liable to a third party who suffers damages due to defects in such structure or property. Our business, financial condition, or results of operations could be adversely affected as a result of our incurring any such liability. We may also incur significant costs to remedy construction defects in properties that we develop, own, lease, or sell under warranty. Following the completion of our real estate development projects, we may be liable for unforeseen losses, damages, or injuries to third parties at properties we own or sell arising from construction defects.

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Fluctuation of the value of the Japanese yen against certain foreign currencies may have a material adverse effect on the results of our operations.

Some of our foreign operations' functional currencies are not the Japanese yen, and the financial statements of such foreign operations prepared initially using their functional currencies are translated into Japanese yen. Since the currency in which sales are recorded may not be the same as the currency in which expenses are incurred, foreign exchange rate fluctuations may materially affect our results of operations. Although we currently generate an insignificant amount of our revenue from markets outside of Japan, we expect that an increasing portion of our revenue and expenses in the future will be denominated in currencies other than the Japanese yen. Accordingly, our consolidated financial results and assets and liabilities may be materially affected by changes in the exchange rates of foreign currencies in which we conduct our business.

Future acquisitions may have a material adverse effect on our ability to manage our business and our results of operations and financial condition.

We may acquire businesses, technologies, services, or products which are complementary to our core real estate development and sales business. Future acquisitions may expose us to potential risks, including risks associated with the integration of new operations, services, and personnel, unforeseen or hidden liabilities, the diversion of resources and management attention from our existing business and technology, our potential inability to generate sufficient revenue to offset new costs, the costs and expenses incurred in connection with such acquisitions, or the potential loss of or harm to relationships with suppliers, employees, and customers resulting from our integration of new businesses.

Any of the potential risks listed above could have a material adverse effect on our ability to manage our business or our results of operations and financial condition. In addition, we may need to fund any such acquisitions through the incurrence of additional debt or the sale of additional debt or equity securities, which would result in increased debt service obligations, including additional operating and financing covenants, or liens on our assets, that would restrict our operations, or dilution to our shareholders.

Risks Related to Our Ordinary Shares and the Trading Market

Share ownership is concentrated in the hands of our management, who are able to exercise a direct or indirect controlling influence on us.

As of the date of this annual report, our directors and executive officers together beneficially own approximately 90.1% of our Ordinary Shares issued and outstanding, excluding treasury shares with no voting rights. These shareholders, acting together, have significant influence over all matters that require approval by our shareholders, including the election of directors and approval of significant corporate transactions. Corporate action might be taken even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of our Company that other shareholders may view as beneficial.

The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price.

Sales of a substantial amount of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. As of the date of this annual report, 13,641,900 Ordinary Shares are issued and outstanding, 1,986,100 Ordinary Shares are issued as treasury shares, and 1,143,000 ADSs (representing 1,143,000 Ordinary Shares) are issued, outstanding and freely tradeable. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.

If securities or industry analysts do not publish research or reports about our business, or if they publish a negative report regarding the ADSs, the price of the ADSs and trading volume could decline.

Any trading market for the ADSs may depend in part on the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade us, the price of the ADSs would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price of the ADSs and the trading volume to decline.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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:

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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:

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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.

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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.

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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.

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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.

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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:

​

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.

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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.

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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.

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Special Fixed-term Building Lease

The Act on Land and Building Leases provides that the rules regarding renewals of lease agreements do not apply to a type of special fixed-term building lease known as teiki tatemono chintaishaku. Further, the landlord and the lessee may exclude the application of the rules regarding adjustment of rent described above.

Environmental Regulation

Our leasing, development, and reconstruction operations are subject to the Soil Contamination Countermeasures Act. Under this law, if a local governor finds that the level of soil pollution in a given area of land due to hazardous or toxic substances exceeds the standards prescribed by the Ministry of the Environment of Japan and that area of land is polluted to such an extent that it has caused or may cause harm to human health, the governor must designate the area of land as a polluted area and the governor may order the current owner of such land to remove or remediate hazardous or toxic substances on or under the land in accordance with a plan for the removal and remediation, in principle, whether or not the current owner knew of, or was responsible for, the presence of such hazardous or toxic substances.

Liability for Defect of Warranty and Non-Conformity to the Contract

In connection with our property sales businesses, pursuant to the Civil Code or other certain laws, we may be subject to potential liabilities for "defects" in relation to a contract for sale or work entered into on or before March 31, 2020 or "non-conformity to the contract" in relation to a contract for sale or work entered into on and after April 1, 2020. On April 1, 2020, the Act Partially Amending the Civil Code came into force and the provisions of the liability for defect of warranty were wholly amended such that the concept of "defects" was replaced by the concept of "non-conformity to the contract" with clarification of liabilities arising from such non-conformity.

Under the Civil Code, if there is any latent defect or any non-conformity to the contract in the subject matter of a sale or if there is any defect or any non-conformity to the contract in the subject matter of work performed, the seller or the constructor of buildings or building lots is statutorily liable for the defect of warranty or the non-conformity to the contract vis-à-vis the purchaser or the contractee. These statutory liabilities are generally available for one year from (i) the date on which the purchaser becomes aware of the latent defect or the non-conformity to the contract with respect to the kind or quality, (ii) the time of the delivery of the subject matter of work performed with defects, or (iii) the date on which the contractee becomes aware of the non-conformity to the contract with respect to the kind or quality. In case of non-conformity to the contract, after the above-mentioned partial amendment to the Civil Code, these statutory liabilities can be enforced by a cancellation of the underlying sale, by requesting deduction of sale price, by requesting realization of conformity, or by requesting damages, which may include resale profit. The Building Lots and Buildings Transaction Business Act generally prohibits real estate traders, as sellers of buildings or building lots, from modifying these liabilities unfavorably to the purchaser.

The Housing Quality Assurance Act of Japan (Act No. 81 of 1999, as amended), imposes stricter liability against sellers of newly built houses including new condominium units and constructors of new houses, under which a seller and a constructor of a new house is statutorily liable for a defect of the primary parts of the house for 10 years from delivery of it under certain conditions, and any agreement which purports to modify these liabilities unfavorably to the purchaser or the contractee is void.

Labor Laws

There are various labor-related laws in Japan, including the Labor Standards Act (Act No. 49 of April 7, 1947, as amended), the Industrial Safety and Health Act (Act No. 57 of June 8, 1972, as amended), and the Labor Contracts Act (Act No. 128 of December 5, 2007). The Labor Standards Act regulates, among others, minimum standards for working conditions such as working hours, leave period, and leave days. The Industrial Safety and Health Act requires, among others, the implementation of measures to secure employee safety and protect the health of workers in the workplace. The Labor Contracts Act regulates, among others, the change of terms of employment contracts and working rules, and dismissal and disciplinary action. We comply with these regulations.

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Personal Information

The Personal Information Protection Act of Japan (Act No. 57 of 2003, as amended) and related guidelines impose various requirements on businesses, including our group companies, that use databases containing personal information, such as appropriate custody of such information and restrictions on information sharing with third parties. Non-compliance with any order issued by the Personal Information Protection Commission or any other relevant authorities to take necessary measures to comply with the law could subject us to criminal and/or administrative sanctions. As a result of recent amendments, anonymously processed information (tokumei kako joho), pseudonymized information (kamei kako joho), and individual-related information (kojin kanren joho) are subject to the Personal Information Protection Act.

U.S. Regulations

As a residential apartment provider in the U.S., we are subject to various federal, state, and local laws. Our apartment units must comply with Title III of the Americans with Disabilities Act (the "ADA") to the extent that they are "public accommodations" or "commercial facilities" as defined in the ADA. The ADA does not consider apartment buildings to be public accommodations or commercial facilities, except for portions of such properties that are open to the public.

In addition, the Fair Housing Amendments Act of 1988 requires apartment buildings first occupied after March 13, 1990 to be accessible to the handicapped. Other laws also require apartment communities to be handicap accessible. Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants.

Under various federal, state, and local laws, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, under, or in the property. This liability may be imposed without regard to whether the owner or operator knew of, or was responsible for, the presence of the substances. Other law imposes on owners and operators certain requirements regarding conditions and activities that may affect human health or the environment. Failure to comply with applicable requirements could complicate our ability to lease an affected property and could subject us to monetary penalties, costs required to achieve compliance, and potential liability to third parties.

C. Organizational Structure

See "-A. History and Development of the Company."

D. Property, Plants and Equipment

See "-B. Business Overview-Facilities" and "-B. Business Overview-Environmental Matters."

Item 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report. This report contains forward-looking statements. In evaluating our business, you should carefully consider the information provided under the caption "Item 3. Key Information-D. Risk Factors" in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

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Comparison of Results of Operations for the Fiscal Years Ended June 30, 2024, 2023, and 2022

​

​

Revenue

Revenue from real estate sales increased by 8.1% to JPY18,487,074 thousand (approximately $114,912 thousand) in the fiscal year ended June 30, 2024 from JPY17,098,308 (approximately $118,352 thousand) in the fiscal year ended June 30, 2023, primarily driven by the following factors:

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Revenue from real estate sales increased by 18.1% to JPY17,098,308 thousand (approximately $118,352 thousand) in the fiscal year ended June 30, 2023 from JPY14,478,498 thousand (approximately $106,703 thousand) in the fiscal year ended June 30, 2022, primarily driven by the following factors:

Other revenue increased by 46.3% to JPY463,609 thousand (approximately $2,882 thousand) in the fiscal year ended June 30, 2024 from JPY316,940 thousand (approximately $2,194 thousand) in the fiscal year ended June 30, 2023. This growth was primarily driven by two hotels, which opened during the fiscal year ended June 30, 2023 and were in full operation for the full year throughout the fiscal year ended June 20, 2024.

Other revenue increased by 52.0% to JPY316,940 (approximately $2,194) in the fiscal year ended June 30, 2023 from JPY208,516 thousand (approximately $1,537 thousand) in the fiscal year ended June 30, 2022, primarily due to an increase in hotel revenue, attributed to the successful launch of two new hotels, ENT TERRACE Asakusa and ENT TERRACE Akihabara, during the fiscal year ended June 30, 2023.

Cost of Revenue and Gross Margin

Cost of revenue primarily includes the lot purchase costs and demolition costs associated with each lot, construction costs of each home, capitalized interest, building permits and other local municipality related costs, internal and external realtor commissions, and warranty costs (both incurred and estimated to be incurred)

Cost of revenue for real estate sales increased by 8.7% to JPY15,721,271 thousand (approximately $97,720 thousand) in the fiscal year ended June 30, 2024, from JPY14,466,459 thousand (approximately $100,135 thousand) in the fiscal year ended June 30, 2023, primarily reflecting increases in construction cost, such as labor costs and material costs since general market price in labor and material costs have been increasing.

Cost of revenue for real estate sales increased by 20.3% to JPY14,466,459 thousand (approximately $100,135 thousand) in the fiscal year ended June 30, 2023, from JPY12,023,652 thousand (approximately $88,611 thousand) in the fiscal year ended June 30, 2022, primarily reflecting increases in construction cost, such as labor costs and material costs since general market price in labor and material costs have been increasing.

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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.

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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.

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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.

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Contractual Obligations

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

​

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.

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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.

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Board Diversity

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

​

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.

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Our board of directors consists of five directors, among whom Hiroyuki Saito and Ryoma Iida satisfy the "independence" requirements of the Nasdaq corporate governance rules and the rules and regulations of the SEC.

Limitation of Liability of Directors and Accounting Auditors (kaikei kansa-nin)

Under the Companies Act and our articles of incorporation we may exempt, by resolution of the board of directors, our directors and accounting auditors (kaikei kansa-nin) from liabilities to us arising in connection with their failure to execute their duties in good faith and without gross negligence, within the limits stipulated by applicable laws and regulations. In addition, our articles of incorporation provide that we may enter into agreements with our directors (excluding executive directors) to limit their respective liabilities to us arising in connection with a failure to execute their duties in good faith and without gross negligence to the higher of either a predetermined amount which shall be no less than JPY1 million or an amount stipulated in laws and regulations. Our articles of incorporation also provide that we may enter into agreements with our accounting auditors (kaikei kansa-nin) to limit their respective liabilities to us arising in connection with a failure to execute their duties in good faith and without gross negligence to the amount stipulated in laws and regulations. We have obtained directors and officers liability insurance, which covers expenses, capped at a certain amount, that our directors and officers may incur in connection with their conduct as our directors or executive officers.

Audit and Supervisory Committee

We currently have an audit and supervisory committee consisting of three members, Akiya Ueki, Hiroyuki Saito, and Ryoma Iida. The audit and supervisory committee, in accordance with our Regulations of the Audit and Supervisory Committee, (i) audits the execution by our directors of their duties and the preparation of audit reports and (ii) determines the details of proposals concerning the election, dismissal, or non-reappointment of the accounting auditor to be submitted to general meetings of shareholders by the board of directors. With respect to financial reporting, the audit and supervisory committee has the statutory duty to examine financial statements and business reports to be submitted to the shareholders by a representative director and is authorized to report its opinion to the ordinary general meeting of shareholders.

In addition to our audit and supervisory committee, we must appoint accounting auditors (kaikei kansa-nin) from independent certified public accountants or an independent audit firm in Japan. The accounting auditors have the statutory duties of examining the financial statements to be submitted to the shareholders by a representative director at the general meetings of shareholders and reporting their opinion thereon to the relevant directors and the audit and supervisory committee. The accounting auditors also audit the financial statements to be included in the securities reports that, if required, will be filed with the relevant local finance bureau of the Ministry of Finance. We have appointed Hideki Otaki as our accounting auditor.

Controlled Company

Mr. Eiji Nagahara, our president, chief executive officer, and representative director, holds approximately 89.7% of the aggregate voting power of our outstanding Ordinary Shares. As a result, we are a "controlled company" within the meaning of the Nasdaq listing rules. As a controlled company, we are permitted to elect to rely on certain exemptions from the obligations to comply with certain corporate governance requirements, 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 "Item 3. Key Information-D. Risk Factors- Risks Related to Our Ordinary Shares and the Trading Market-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.

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See "Item 4. Information on the Company-B. Business Overview-Employees."

The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our Ordinary Shares as of the date of this annual report for:

Beneficial ownership includes voting or investment power with respect to the Ordinary Shares. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all Ordinary Shares shown as beneficially owned by them. Percentage of beneficial ownership of each listed person is based on 13,641,900. Ordinary Shares outstanding as of the date of this annual report, excluding 1,986,100 issued treasury shares with no voting rights.

Information with respect to beneficial ownership has been furnished by each named executive officer, director, or beneficial owner of 5% or more of our Ordinary Shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person have voting or investment power with respect to securities. In computing the number of Ordinary Shares beneficially owned by a person listed below and the percentage ownership of such person, Ordinary Shares underlying options, warrants, or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this annual report are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person.

Note:

To our knowledge, the Company is not directly or indirectly owned or controlled by another corporation(s), by any foreign government, or by any other natural or legal person(s) severally or jointly. As of the date of this annual report, none of our issued and outstanding Ordinary Shares are held in the United States. None of the Company's major shareholders have any different or special voting rights with respect to their Ordinary Shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our Company.

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Not applicable.

Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

See "Item 6. Directors, Senior Management and Employees-E. Share Ownership."

During the fiscal year ended June 30, 2024 and up to the date of this annual report, we have not engaged in any related party transactions.

Not applicable.

Item 8. FINANCIAL INFORMATION

We have appended consolidated financial statements filed as part of this annual report. See "Item 18. Financial Statements."

Legal Proceedings

From time to time, we may become a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect to intellectual property infringement, breach of contract, and labor and employment claims. We are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, may have, or have had in the recent past, any material and adverse effect on our business, financial condition, cash flow, or results of operations.

Dividend Policy

On September 29, 2023, we paid an aggregate of JPY24,997,800 (approximately $173,031) as cash dividends to shareholders as of June 30, 2023. On September 30, 2024, we paid an aggregate of JPY40,925,700 (approximately $254,386) as cash dividends to shareholders of record as of June 30, 2024 (Japan Standard Time), with an American depositary receipt record date of June 28, 2024 (Eastern Time). Since our inception and as of the date of this annual report, we have not declared or paid cash dividends on our Ordinary Shares other than as described herein.

Our board of directors may suggest to the shareholders meeting in the future that it resolves to pay dividends. Any decision to make such a suggestion in the future will be subject to a number of factors, including our financial condition, results of operations, the level of our retained earnings, capital demands, general business conditions, and other factors our board of directors may deem relevant.

If declared, holders of our outstanding shares on a dividend record date will be entitled to the full dividend declared without regard to the date of issuance of the shares or any subsequent transfer of the shares. Payment of declared annual dividends in respect of a particular year, if any, will be made in the following year after approval by our shareholders at the annual general meeting of shareholders, subject to certain provisions of our articles of incorporation and the Companies Act.

Subject to the terms of the deposit agreement for the ADSs, holders of our ADSs will be entitled to receive dividends on our Ordinary Shares represented by ADSs to the same extent as the holders of our Ordinary Shares, less the fees and expenses payable under the deposit agreement in respect of, and any Japanese tax or any other taxes or other governmental charges applicable to, such dividends. The depositary will generally convert the Japanese yen it receives into U.S. dollars and distribute the U.S. dollar amounts to holders of ADSs. Cash dividends on our Ordinary Shares, if any, will be paid in Japanese yen.

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Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

Item 9. THE OFFER AND LISTING

Our ADSs are listed on the Nasdaq Global Market under the symbol "LRE." Holders of our ADSs should obtain current market quotations for their ADSs.

Not applicable.

Our ADSs are listed on the Nasdaq Global Market under the symbol "LRE." Holders of our ADSs should obtain current market quotations for their ADSs.

Not applicable.

Not applicable.

Not applicable.

Item 10. ADDITIONAL INFORMATION

Not applicable.

We incorporate by reference into this annual report the description of our articles of association, Exhibit 3.1, and the description of differences in corporate laws contained in our registration statement on Form F-1 (File No. 333-266762), as amended, initially filed with the SEC on August 11, 2022.

For the two years immediately preceding the date of this annual report, we have not entered into any material contracts other than in the ordinary course of business and other than those described in "Item 4. Information on the Company" or elsewhere in this annual report.

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Foreign Exchange Regulations

The FEFTA and related cabinet orders and ministerial ordinances, which we refer to collectively as the Foreign Exchange Regulations, govern certain aspects relating to the acquisition and holding of shares by "exchange non-residents" and by "foreign investors" (as these terms are defined below). It also applies in some cases to the acquisition and holding of ADSs representing our Ordinary Shares acquired and held by non-residents of Japan and by foreign investors. In general, the Foreign Exchange Regulations currently in effect do not affect transactions between exchange non-residents to purchase or sell Ordinary Shares or ADSs outside Japan using currencies other than Japanese yen.

Exchange residents are defined in the Foreign Exchange Regulations as:

Exchange non-residents are defined in the Foreign Exchange Regulations as:

Generally, branches and other offices of non-resident corporations located within Japan are regarded as exchange residents. Conversely, branches and other offices of Japanese corporations located outside Japan are regarded as exchange non-residents.

Foreign investors are defined in the Foreign Exchange Regulations as:

Acquisition of Shares

Acquisition by a foreign investor of shares of a Japanese corporation from a non-foreign investor requires pre or post facto reporting by the foreign investor through an exchange resident to the Minister of Finance of Japan through the Bank of Japan. No such reporting requirement is imposed, however, if:

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Dividends and Proceeds of Sale

Under the Foreign Exchange Regulations, dividends paid on, and the proceeds from sales in Japan of, shares held by exchange non-residents of Japan may generally be converted into any foreign currency and repatriated abroad.

Japanese Taxation

The following is a general summary of the principal Japanese tax consequences (limited to national tax) to owners of our Ordinary Shares, in the form of Ordinary Shares or ADSs, who are non-resident individuals of Japan or who are non-Japanese corporations without a permanent establishment in Japan, collectively referred to in this section as non-resident holders. The statements below regarding Japanese tax laws are based on the laws and treaties in force and as interpreted by the Japanese tax authorities as of the date of this annual report, and are subject to changes in applicable Japanese laws, tax treaties, conventions, or agreements, or in the interpretation of them, occurring after that date. This summary is not exhaustive of all possible tax considerations that may apply to a particular investor, and potential investors are advised to satisfy themselves as to the overall tax consequences of the acquisition, ownership, and disposition of our Ordinary Shares, including, specifically, the tax consequences under Japanese law, under the laws of the jurisdiction of which they are resident and under any tax treaty, convention, or agreement between Japan and their country of residence, by consulting their own tax advisors.

For the purpose of Japanese tax law and the tax treaty between the United States and Japan, a U.S. holder of ADSs will generally be treated as the owner of the Ordinary Shares underlying the ADSs evidenced by the ADRs.

Generally, a non-resident holder of Ordinary Shares or ADSs will be subject to Japanese income tax collected by way of withholding on dividends (meaning in this section distributions made from our retained earnings for the Companies Act purposes) we pay with respect to our Ordinary Shares and such tax will be withheld prior to payment of dividends. Share splits generally are not subject to Japanese income or corporation taxes.

In the absence of any applicable tax treaty, convention, or agreement reducing the maximum rate of Japanese withholding tax or allowing exemption from Japanese withholding tax, the rate of the Japanese withholding tax applicable to dividends paid by Japanese corporations on their Ordinary Shares to non-resident holders is generally 20.42% (or 20% for dividends due and payable on or after January 1, 2038) under Japanese tax law. However, with respect to dividends paid on listed shares issued by a Japanese corporation (such as Ordinary Shares or ADSs) to non-resident holders, other than any individual shareholder who holds 3% or more of the total number of shares issued by the relevant Japanese corporation (to whom the aforementioned withholding tax rate will still apply), the aforementioned withholding tax rate is reduced to (i) 15.315% for dividends due and payable up to and including December 31, 2037 and (ii) 15% for dividends due and payable on or after January 1, 2038. The withholding tax rates described above include the special reconstruction surtax (2.1% multiplied by the original applicable withholding tax rate, i.e., 15% or 20%, as the case may be), which is imposed during the period from and including January 1, 2013 to and including December 31, 2037, to fund the reconstruction from the Great East Japan Earthquake.

If distributions were made from our capital surplus, rather than retained earnings, for the Companies Act purposes, the portion of such distributions in excess of the amount corresponding to a pro rata portion of return of capital as determined under Japanese tax laws would be deemed dividends for Japanese tax purposes, while the rest would be treated as return of capital for Japanese tax purposes. The deemed dividend portion, if any, would generally be subject to the same tax treatment as dividends as described above, and the return of capital portion would generally be treated as proceeds derived from the sale of Ordinary Shares and subject to the same tax treatment as sale of our Ordinary Shares as described below. Distributions made in consideration of repurchase by us of our own shares or in connection with certain reorganization transactions will be treated substantially in the same manner.

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Japan has income tax treaties whereby the withholding tax rate (including the special reconstruction surtax) may be reduced, generally to 15%, for portfolio investors, with, among others, Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, and Singapore, while the income tax treaties with, among others, Australia, Belgium, France, Hong Kong, the Netherlands, Portugal, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States generally reduce the withholding tax rate to 10% for portfolio investors and the income tax treaties with, among others, Spain, generally reduce the withholding tax rate to 5% for portfolio investors. In addition, under the income tax treaty between Japan and the United States, dividends paid to pension funds which are qualified U.S. residents eligible to enjoy treaty benefits are exempt from Japanese income taxation by way of withholding or otherwise unless the dividends are derived from the carrying on of a business, directly or indirectly, by the pension funds. Similar treatment is applicable to dividends paid to pension funds under the income tax treaties between Japan and, among others, Belgium, Denmark, Spain, the United Kingdom, the Netherlands, and Switzerland. Under Japanese tax law, any reduced maximum rate applicable under a tax treaty shall be available when such maximum rate is below the rate otherwise applicable under the Japanese tax law referred to in the second preceding paragraph with respect to the dividends to be paid by us on our Ordinary Shares or the ADSs.

Non-resident holders of our Ordinary Shares or the ADSs who are entitled under an applicable tax treaty to a reduced rate of, or exemption from, Japanese withholding tax on any dividends on our Ordinary Shares or the ADSs, in general, are required to submit, through the withholding agent to the relevant tax authority prior to the payment of dividends, an Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends together with any required forms and documents. A standing proxy for a non-resident holder of our Ordinary Shares or the ADSs may be used in order to submit the application on a non-resident holder's behalf. In this regard, a certain simplified special filing procedure may also be available for non-resident holders to claim treaty benefits of reduction of or exemption from Japanese withholding tax, by submitting a Special Application Form for Income Tax Convention regarding Relief from Japanese Income Tax and Special Income Tax for Reconstruction on Dividends of Listed Stock, together with any required forms or documents. If the depositary needs investigation to identify whether any non-resident holders of ADSs are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax the depositary or its agent submits an application form before payment of dividends so that the withholding cannot be made in connection with such holders for eight months after the record date concerning such payment of dividends. If it is proved that such holders are entitled to claim treaty benefits of exemption from or reduction of Japanese withholding tax within the foregoing eight-month period, the depositary or its agent submits another application form together with certain other documents so that such holder can be subject to exemption from or reduction of Japanese withholding tax. To claim this reduced rate or exemption, such non-resident holder of ADSs will be required to file a proof of taxpayer status, residence, and beneficial ownership, as applicable, and to provide other information or documents as may be required by the depositary. Non-resident holders who are entitled, under any applicable tax treaty, to a reduced rate of Japanese withholding tax below the rate otherwise applicable under Japanese tax law, or exemption therefrom, as the case may be, but fail to submit the required application in advance may nevertheless be entitled to claim a refund from the relevant Japanese tax authority of withholding taxes withheld in excess of the rate under an applicable tax treaty (if such non-resident holders are entitled to a reduced treaty rate under the applicable tax treaty) or the full amount of tax withheld (if such non-resident holders are entitled to an exemption under the applicable tax treaty), as the case may be, by complying with a certain subsequent filing procedure. We do not assume any responsibility to ensure withholding at the reduced treaty rate, or exemption therefrom, for shareholders who would be eligible under an applicable tax treaty but who do not follow the required procedures as stated above.

Gains derived from the sale of our Ordinary Shares or the ADSs outside Japan by a non-resident holder that is a portfolio investor will generally not be subject to Japanese income or corporation taxes. Japanese inheritance and gift taxes, at progressive rates, may be payable by an individual who has acquired from another individual our Ordinary Shares or the ADSs as a legatee, heir, or donee, even if none of the acquiring individual, the decedent, or the donor is a Japanese resident.

United States Federal Income Taxation

WE URGE POTENTIAL PURCHASERS OF THE ADSS OR OUR ORDINARY SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING, AND DISPOSING OF THE ADSS OR OUR ORDINARY SHARES.

The following does not address the tax consequences to any particular investor or to persons in special tax situations such as:

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The discussion set forth below is addressed only to U.S. Holders that purchase Ordinary Shares or ADSs. Prospective purchasers are urged to consult their own tax advisors about the application of the U.S. federal income tax rules to their particular circumstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our Ordinary Shares or the ADSs.

Material Tax Consequences Applicable to U.S. Holders of the ADSs or Ordinary Shares

The following sets forth the material U.S. federal income tax consequences related to the ownership and disposition of the ADSs or our Ordinary Shares. This description does not deal with all possible tax consequences relating to ownership and disposition of the ADSs or our Ordinary Shares or U.S. tax laws, other than the U.S. federal income tax laws, such as the tax consequences under non-U.S. tax laws, state, local, and other tax laws.

The following brief description applies only to U.S. Holders (defined below) that hold ADSs or Ordinary Shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the federal income tax laws of the United States in effect as of the date of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date, and the income tax treaty between the United States and Japan (the "Tax Convention"). All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

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The brief description below of the U.S. federal income tax consequences to "U.S. Holders" will apply to you if you are a beneficial owner of ADSs or Ordinary Shares and you are, for U.S. federal income tax purposes,

If a partnership (or other entities treated as a partnership for United States federal income tax purposes) is a beneficial owner of the ADSs or our Ordinary Shares, the tax treatment of a partner in the partnership will depend upon the status of the partner and the activities of the partnership. Partnerships and partners of a partnership holding the ADSs or our Ordinary Shares are urged to consult their tax advisors regarding an investment in the ADSs or our Ordinary Shares.

An individual is considered a resident of the U.S. for federal income tax purposes if he or she meets either the "Green Card Test" or the "Substantial Presence Test" described as follows:

The Green Card Test: You are a lawful permanent resident of the United States, at any time, if you have been given the privilege, according to the immigration laws of the United States, of residing permanently in the United States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services issued you an alien registration card, Form I-551, also known as a "green card."

The Substantial Presence Test: If an alien is present in the United States on at least 31 days of the current calendar year, he or she will (absent an applicable exception) be classified as a resident alien if the sum of the following equals 183 days or more (See §7701(b)(3)(A) of the Internal Revenue Code and related Treasury Regulations):

The following summary is based, in part, upon the representations made by the depositary to us and assumes that the deposit agreement for the ADSs, and all other related agreements, will be performed in accordance with their terms.

Treatment of the ADSs

U.S. Holders of ADSs generally will be treated for U.S. federal income tax purposes as holding our Ordinary Shares represented by the ADSs. No gain or loss will be recognized on an exchange of our Ordinary Shares for ADSs or an exchange of ADSs for our Ordinary Shares if the depositary has not taken any action inconsistent with the material terms of the deposit agreement for the ADSs or the U.S. Holder's ownership of the underlying Ordinary Shares. A U.S. Holder's tax basis in the Ordinary Shares received in exchange for ADSs will be the same as its tax basis in the ADSs, and the holding period in the shares will include the holding period in the ADSs.

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Taxation of Dividends and Other Distributions on the ADSs or Our Ordinary Shares

Subject to the application of the PFIC rules discussed below, a U.S. Holder generally will recognize ordinary dividend income in an amount equal to the amount of any cash and the value of any property we distribute as a distribution with respect to the U.S. Holder's Ordinary Shares (or ADSs), to the extent that the distribution is paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, when the distribution is received (or when received by the depositary in the case of ADSs). We do not intend to maintain calculations of earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that distributions paid with respect to our Ordinary Shares or the ADSs generally will be treated as dividends. Dividends will not be eligible for the dividends received deduction generally allowable to U.S. corporations. Dividends paid on our Ordinary Shares or the ADSs will be treated as "qualified dividends" taxable at preferential rates, if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the IRS has approved for the purposes of the qualified dividend rules, (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC, and (iii) the U.S. Holder satisfies certain holding period and other requirements. The Tax Convention has been approved for the purposes of the qualified dividend rules and we believe we will be eligible for the benefits of the Tax Convention.

Dividend income will include any amounts withheld in respect of Japanese taxes, and will be treated as foreign-source income for foreign tax credit purposes. Subject to applicable limitations, some of which vary depending upon the U.S. Holder's circumstances, Japanese taxes withheld from dividends on our Ordinary Shares or the ADSs generally will be creditable against the U.S. Holder's U.S. federal income tax liability to the extent such taxes do not exceed any reduced withholding rate available under the Tax Convention. The rules governing foreign tax credits are complex, and U.S. Holders should consult their tax advisors regarding the creditability of foreign taxes in their particular circumstances. In lieu of claiming a foreign tax credit, a U.S. Holder may, at its election, deduct creditable foreign taxes, including Japanese taxes, in computing its taxable income, subject to applicable limitations. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued by the U.S. Holder in the taxable year.

Dividends paid in a currency other than U.S. dollars will be includable in income in a U.S. dollar amount based on the exchange rate in effect on the date of receipt (or the date of the depositary's receipt in the case of ADSs), whether or not the payment is converted into U.S. dollars at that time. A U.S. Holder should not recognize any foreign currency gain or loss in respect of the distribution if the foreign currency is converted into U.S. dollars on the date the distribution is received. If the foreign currency is not converted into U.S. dollars on the date of receipt, however, gain or loss may be recognized upon a subsequent sale or other disposition of the foreign currency. The foreign currency gain or loss (if any) generally will be treated as ordinary income or loss to the U.S. Holder and generally will be treated as U.S.-source income or loss, which may be relevant in calculating the U.S. Holder's foreign tax credit limitation.

To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), it will be treated first as a tax-free return of your tax basis in your Ordinary Shares or ADSs, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will be treated as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

Taxation of Dispositions of ADSs or Ordinary Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a share equal to the difference between the amount realized (in U.S. dollars) for the share and your tax basis (in U.S. dollars) in the ADSs or Ordinary Shares. The gain or loss will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, who has held the ADSs or Ordinary Shares for more than one year, you will generally be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally be treated as United States source income or loss for foreign tax credit limitation purposes which will generally limit the availability of foreign tax credits.

Passive Foreign Investment Company ("PFIC") Consequences

A non-U.S. corporation is considered a PFIC, as defined in Section 1297(a) of the US Internal Revenue Code, for any taxable year if either:

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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. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In determining the value and composition of our assets for purposes of the PFIC asset test, (1) the cash we raised in our recent initial public offering will generally be considered to be held for the production of passive income and (2) the value of our assets must be determined based on the market value of the ADSs or our Ordinary Shares from time to time, which could cause the value of our non-passive assets to be less than 50% of the value of all of our assets on any particular quarterly testing date for purposes of the asset test.

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. If we are a PFIC for your taxable year(s) during which you hold ADSs or Ordinary Shares, you will be subject to special tax rules with respect to any "excess distribution" that you receive and any gain you realize from a sale or other disposition (including a pledge) of the ADSs or Ordinary Shares, unless you make a "mark-to-market" election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or Ordinary Shares will be treated as an excess distribution. Under these special tax rules:

The tax liability for amounts allocated to years prior to the year of disposition or "excess distribution" cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or Ordinary Shares cannot be treated as capital, even if you hold the ADSs or Ordinary Shares as capital assets.

A U.S. Holder of "marketable stock" (as defined below) in a PFIC may make a mark-to-market election under Section 1296 of the US Internal Revenue Code for such stock to elect out of the tax treatment discussed above. If you make a mark-to-market election for first taxable year which you hold (or are deemed to hold) ADSs or Ordinary Shares and for which we are determined to be a PFIC, you will include in your income each year an amount equal to the excess, if any, of the fair market value of the ADSs or Ordinary Shares as of the close of such taxable year over your adjusted basis in such ADSs or Ordinary Shares, which excess will be treated as ordinary income and not capital gain. You are allowed an ordinary loss for the excess, if any, of the adjusted basis of the ADSs or Ordinary Shares over their fair market value as of the close of the taxable year. Such ordinary loss, however, is allowable only to the extent of any net mark-to-market gains on the ADSs or Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to any loss realized on the actual sale or disposition of the ADSs or Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or Ordinary Shares. Your basis in the ADSs or Ordinary Shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark-to-market election, the tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower applicable capital gains rate for qualified dividend income discussed above under "-Taxation of Dividends and Other Distributions on the ADSs or our Ordinary Shares" generally would not apply.

The mark-to-market election is available only for "marketable stock," which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter ("regularly traded") on a qualified exchange or other market (as defined in applicable U.S. Treasury regulations), including the Nasdaq Global Market. If the ADSs or Ordinary Shares are regularly traded on the Nasdaq Global Market and if you are a holder of ADSs or Ordinary Shares, the mark-to-market election would be available to you were we to be or become a PFIC. Our ADSs began trading on the Nasdaq Global Market on September 27, 2023 under the symbol "LRE."

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Alternatively, a U.S. Holder of stock in a PFIC may make a "qualified electing fund" election under Section 1295(b) of the US Internal Revenue Code with respect to such PFIC to elect out of the tax treatment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder's pro rata share of the corporation's earnings and profits for the taxable year. The qualified electing fund election, however, is available only if such PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury regulations. We do not currently intend to prepare or provide the information that would enable you to make a qualified electing fund election. If you hold ADSs or Ordinary Shares in any taxable year in which we are a PFIC, you will be required to file U.S. Internal Revenue Service Form 8621 in each such year and provide certain annual information regarding such ADSs or Ordinary Shares, including regarding distributions received on the ADSs or Ordinary Shares and any gain realized on the disposition of the ADSs or Ordinary Shares.

If you do not make a timely "mark-to-market" election (as described above), and if we were a PFIC at any time during the period you hold the ADSs or our Ordinary Shares, then such ADSs or Ordinary Shares will continue to be treated as stock of a PFIC with respect to you even if we cease to be a PFIC in a future year, unless you make a "purging election" for the year we cease to be a PFIC. A "purging election" creates a deemed sale of such ADSs or Ordinary Shares at their fair market value on the last day of the last year in which we are treated as a PFIC. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, you will have a new basis (equal to the fair market value of the ADSs or Ordinary Shares on the last day of the last year in which we are treated as a PFIC) and holding period (which new holding period will begin the day after such last day) in your ADSs or Ordinary Shares for tax purposes.

IRC Section 1014(a) provides for a step-up in basis to the fair market value for the ADSs or our Ordinary Shares when inherited from a decedent that was previously a holder of the ADSs or our Ordinary Shares. However, if we are determined to be a PFIC and a decedent that was a U.S. Holder did not make either a timely qualified electing fund election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) the ADSs or our Ordinary Shares, or a mark-to-market election and ownership of those ADSs or Ordinary Shares are inherited, a special provision in IRC Section 1291(e) provides that the new U.S. Holder's basis should be reduced by an amount equal to the Section 1014 basis minus the decedent's adjusted basis just before death. As such if we are determined to be a PFIC at any time prior to a decedent's passing, the PFIC rules will cause any new U.S. Holder that inherits the ADSs or our Ordinary Shares from a U.S. Holder to not get a step-up in basis under Section 1014 and instead will receive a carryover basis in those ADSs or Ordinary Shares.

You are urged to consult your tax advisors regarding the application of the PFIC rules to your investment in the ADSs or our Ordinary Shares and the elections discussed above.

Information Reporting and Backup Withholding

Dividend payments with respect to the ADSs or our Ordinary Shares and proceeds from the sale, exchange or redemption of the ADSs or our Ordinary Shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding under Section 3406 of the US Internal Revenue Code with at a current flat rate of 24%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification on U.S. Internal Revenue Service Form W-9 or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders are urged to consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information. We do not intend to withhold taxes for individual shareholders. Transactions effected through certain brokers or other intermediaries, however, may be subject to withholding taxes (including backup withholding), and such brokers or intermediaries may be required by law to withhold such taxes.

Under the Hiring Incentives to Restore Employment Act of 2010, certain U.S. Holders are required to report information relating to the ADSs or our Ordinary Shares, subject to certain exceptions (including an exception for ADSs or Ordinary Shares held in accounts maintained by certain financial institutions), by attaching a complete Internal Revenue Service Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year in which they hold ADSs or Ordinary Shares. Failure to report such information could result in substantial penalties. You should consult your own tax advisor regarding your obligation to file a Form 8938.

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Not applicable.

Not applicable.

We have previously filed with the SEC our registration statement on Form F-1 (File No. 333-266762), as amended. We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F within four months after the end of each fiscal year. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing, among other things, the furnishing and content of proxy statements to shareholders, 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.

For information about our subsidiaries, see "Item 4. Information on the Company-A. History and Development of the Company."

Not applicable.

Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily related to interest rates changes.

Interest Rate Risk

Our operations are interest rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates could adversely affect our revenue, gross margin, and net income. We do not enter into, nor do we intend to enter into in the future, derivative financial instruments for trading or speculative purposes to hedge against interest rate fluctuations. Given that we operate primarily in Japan where interest rates have remained low for many decades and the current consensus macro view is for rates to remain low in the foreseeable future, we do not anticipate steeply increasing interest rates as a probable event that would adversely impact our operations.

Foreign Currency Exchange Risk

Our functional currency is the Japanese yen, whereas our foreign wholly-owned subsidiaries are denominated in other currencies. Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. A hypothetical 10% change in foreign currency exchange rates may result in a material impact on our consolidated financial statements. To date, we have not had a formal hedging program with respect to foreign currencies, but we may do so in the future if our exposure to foreign currencies should become more significant.

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Credit Risk

We hold cash in bank deposits financial institutions in Japan which are insured by the Deposit Insurance Corporation of Japan subject to certain limitations. We have not experienced any losses on such accounts and believe they are not exposed to any significant credit risk on cash and cash equivalents.

Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

Not applicable.

Not applicable.

The Bank of New York Mellon, as depositary, registers and delivers ADSs. Each ADS represents one Ordinary Share (or a right to receive one Ordinary Share) deposited with MUFG Bank Ltd., as custodian for the depositary in Japan. Each ADS also represents any other securities, cash, or other property that may be held by the depositary. The deposited shares together with any other securities, cash, or other property held by the depositary are referred to as the deposited securities. The depositary's office at which the ADSs are administered and its principal executive office are located at 240 Greenwich Street, New York, New York 10286.

The form of deposit agreement for the ADSs and the form of ADRs that represents an ADS have been incorporated by reference as exhibits to this annual report.

Fees and Expenses

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The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary, or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency dealers, or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads, or commissions.

The depositary may convert currency itself or through any of its affiliates, or the custodian or we may convert currency and pay U.S. dollars to the depositary. Where the depositary converts currency itself or through any of its affiliates, the depositary acts as principal for its own account and not as agent, advisor, broker, or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it retains for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained by it or its affiliate in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary's obligation to act without negligence or bad faith. The methodology used to determine exchange rates used in currency conversions made by the depositary is available upon request. Where the custodian converts currency, the custodian has no obligation to obtain the most favorable rate that could be obtained at the time or to ensure that the method by which that rate will be determined will be the most favorable to ADS holders, and the depositary makes no representation that the rate is the most favorable rate and will not be liable for any direct or indirect losses associated with the rate. In certain instances, the depositary may receive dividends or other distributions from us in U.S. dollars that represent the proceeds of a conversion of foreign currency or translation from foreign currency at a rate that was obtained or determined by us and, in such cases, the depositary will not engage in, or be responsible for, any foreign currency transactions and neither it nor we make any representation that the rate obtained or determined by us is the most favorable rate and neither it nor we will be liable for any direct or indirect losses associated with the rate.

Payment of Taxes

You are responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

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Part II

Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

See "Item 10. Additional Information" for a description of the rights of securities holders, which remain unchanged.

Use of Proceeds

This "Use of Proceeds" information relates to the registration statement on Form F-1, as amended (File Number 333-266762), which was declared effective by the SEC on September 26, 2023 (the "Registration Statement"). The Registration Statement related to the public offering by the Company of 1,143,000 ADSs at a price to the public of $7.00 per ADS. On September 27, 2023, the ADSs began trading on the Nasdaq Global Market under the ticker symbol "LRE." EF Hutton, division of Benchmark Investments, LLC, and Boustead Securities, LLC acted as the joint book-running managers for the Company's offering. On September 29, 2023, the Company announced the closing of its offering. The Company received aggregate gross proceeds of $8,001,000 from its offering, before deducting underwriting discounts and other related expenses. The Company received aggregate net proceeds of US$7,156,420 from its offering, after deducting underwriting discounts and other related expenses. As of June 30, 2024, the Company used $7.1 million of the proceeds as follows: approximately 60% for domestic business expansion, including expanding our condominium development and sales in Japan; approximately 10% for the development of our Glocaly platform, including sales and marketing, feature development, and server maintenance costs; and approximately 30% for general corporate purposes.

We still intend to use the proceeds from that offering as disclosed in the Registration Statement.

Item 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.

As of June 30, 2024, we identified material weaknesses in our internal control over financial reporting, which related to the fact that our internal audit function was not set up properly. The material weaknesses identified are mainly as follows:

Notwithstanding the identified material weaknesses, management, including our chief executive officer and chief financial officer, believes the consolidated financial statements included in this annual report on Form 20-F present fairly, in all material respects, our financial condition, results of operations, and cash flows in conformity with U.S. GAAP.

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Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company's assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of our internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Rule 15d-15(c) of the Exchange Act, our management conducted an evaluation of our company's internal control over financial reporting, as such term is defined in Rule 13a-15(f), as of June 30, 2024 based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was ineffective as of June 30, 2024.

In accordance with reporting requirements set forth by the SEC, a "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company's annual consolidated financial statements will not be prevented or detected on a timely basis.

We concluded material weaknesses in internal control over financial reporting based on the facts as follows:

Due to the foregoing material weaknesses, management concluded that as of June 30, 2024, our internal control over financial reporting was ineffective.

To remedy our identified material weakness identified to date, we plan to undertake steps to strengthen our internal control over financial reporting, including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework, and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.

We have been undertaking measures to improve our internal control over financial reporting to address the material weakness identified, including:

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However, we cannot assure you that we will remediate our material weaknesses in a timely manner. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation. See "Item 3. Key Information-D. Risk Factors-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."

Attestation Report of the Registered Public Accounting Firm

This annual report on Form 20-F does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC where domestic and foreign registrants that are non-accelerated filers, which we are, and "emerging growth companies," which we also are, are not required to provide the auditor attestation report.

Changes in Internal Control over Financial Reporting

We are currently in the process of remediating the material weaknesses described above. In 2025, we will continue to implement additional measures to remediate them. Other than as described above, there were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [RESERVED]

Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Under the Companies Act, we have elected to structure our corporate governance system as a company with a separate audit and supervisory committee. The function of our audit and supervisory committee and each committee member is similar to that of independent directors, including those who are members of the audit committee of a U.S. public company. Our audit and supervisory committee is comprised of three members, each of which satisfies the requirements of Rule 10A-3 under the Exchange Act.

Item 16B. CODE OF ETHICS

Our board of directors have adopted a code of business conduct and ethics, which is applicable to all of our directors and employees.

Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered and billed by Marcum Asia CPAs LLP, our independent registered public accounting firm for the periods indicated.

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The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered and billed by BF Borgers CPA PC, our former independent registered public accounting firm for the periods indicated.

Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Please refer to "Item 3. Key Information-D. Risk Factors-Risks Relating to Our Ordinary Shares and the Trading Market-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."

Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.