Financial Results Material for FY24/12 Q2ACSL Ltd (TYO: 6232)
August 13, 2024

CONFIDENTIAL
This materials should not be used without prior consent from ACSL Ltd.

Company outline
Company outline
Corporate NameACSL Ltd.

Representative

Satoshi Washiya(CEO and Representative Director)

Established

November 2013

Location

3-6-4 Rinkai-cho, Edogawa-ku, Tokyo
Hulic Kasai Rinkai Bldg. 2F

At a glance1

Ratio of engineers

Approx.

# of Non-Japanese

Approx.

No. of Employee2 59 (as of June 2024)
Description ofBusiness

Manufacture and sale of commercial
drones and provision of solution
services for unmanned and IoTapplications using autonomous
control technology

Client1: Percentage of engineers and number of foreign employees are as of March, 2024. The number of customers is the total number ofcustomers from FY19/03 to FY24/12 Q2. All figures do not include group companies
2:Full time employee. Not including group companies.

68

22

%

％

232

companies
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11. Market / Mission / Growth strategy
2. FY23/12 Q2 results and highlights
3. Appendix

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2MISSIONVISION

Liberate Humanity
Through Technology

Revolutionizing Social
Infrastructure By Pursuing
Cutting-Edge Robotics
Technology

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3

Issues that social infrastructure is facing today

Issue

Social infrastructure is not sustainable
Lack ofworkforce

Aging
population

Rapid increaseof workload

Decreasing workforce
willing to work in tough,dirty, dangerous tasks
driven by low birth rate

Transition of know-howsfrom experts have notprogressed, andaccidents still continue

Aging infrastructure
increasing and EC drives# of packages, resulting
in increasing workload

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4

Solutions that drones can bringFree human from time and physical constraints, andUpdate social infrastructure
Act autonomously
Drone thinks and act on its own using highlevel control and AI. No need for humanintervention

Move space freely
Drone can fly both indoor and outdoor in any
open space

Become “Eye” and “Hand”
Can act as human’s eye and hand using
sensors and mechatronics

Control remotelyDrone can be controlled remotely using
wireless radio, e.g., between Tokyo and
Hokkaido
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5

Drone market environment
Effectiveness of drones are being recognized. Further discussions taking placearound geopolitics, economic security and data sensitivity

01

02

03

Economic Security
Data sensitivity

Unmanned
Optimization, DX

Decarbonization
EV

Initiatives related to economic
security and data sensitivity
taken place at a national scalein the US, India, AU and Japan

Drones and robotics being
implemented as unmanned andefficient operations are in
demand. Japan promoting
Digital Rural City concept

Drones recognized as a tool for
decarbonation and EV. Drones
are considered to work together
with trucks in logistics field

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6

Drone market size
Drone market expected to reach more than 5 tn JPY in 2030
Global drone market1
5.6 tn JPY

Japan drone hardware market
Potential
10 tn JPY

3.1 tn JPY
OtherNorth America
Asia

1.22
0.81
1.19

2022

1.94

2030

2030 4use case2
300 bn JPY
2022 all use case3
84.8 bn JPY

1: Drone Industry Insights (Calculated at 100 JPY/USD)
2: Company estimate based on assumptions to number of assets, total service values, service frequency, drone unit sales on the following information
Ministry of Land, Infrastructure, Transport and Tourism, "Trends Surrounding Logistics"
Ministry of Land, Infrastructure, Transport and Tourism, "Conditions Surrounding Infrastructure Maintenance”
Cabinet Secretariat, "Estimation of the size of the private sector market for national land fortification“
Ministry of Economy, Trade and Industry/Digital Architecture and Design Center (DADC) "Autonomous Mobile Robot Architecture Design Report“
3: Impress Research Institute “Drone Business Report 2023”

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7

ACSL Competitive Environment
In many countries, Chinese drones are being replaced in industrial andgovernment areaJapan

consumers

Mainly hobby drones made in China.

US

Our Expansion

Mainly hobby drones made in China. U.S.-madedrones are also deployed.

Industry
Aerialphotography

Foreign products (mainly made in China) are themainstream. Replacement with domestic products asa security measure is gradual.

Chinese-made drone were used, but “Non-China" isproceeding. U.S. and French manufacturers have not
become mainstream, and ACSL receive high evaluation

Delivery

ACSL has the most experience in Japan; only ACSL
has experience in Lv4; most Lv3 and Lv3.5 flights are
ACSL aircraft

US-made VTOL (fixed-wing) aircraft predominate forlong-distance flights.

government

Foreign-made drones (mainly made in China) are themainstream. ACSL has recently been used by the
Ministry of Defense and other organizations.

Chinese drones are being eliminated at the regulatorylevel. U.S. and French-made drone have not been
mainstream, and ACSL plans to expand in the future.

Included in the above for government

U.S. and French manufacturers are most focusedMillitary

Other

India
A market is in the process of
being formed. Import offoreign-made drones is
prohibited, and Indian
manufacturers exist but on asmall scale.
TaiwanAs in the U.S., the trend istoward de-China. Local
companies exist, but they aresmall, and Western
manufacturers are lessfocused.

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8

Who we are

A global manufacturer that update social infrastructure
through realization of autonomous control technology
and co-existence of robotics and humans

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9ACSL Business
Leverage core autonomous control system to customize and conduct trial basedon customer demand. Mass produce those that are identified as marketable
Solution development

Sales of application-specific drones

ACSL develops proprietary autonomous
control system, which can be customized
based on customer demand

Develop, manufacture and sell mass
production model of applications identified
as marketable based on PoC

Delivery

Aerial photo

Inspection

Deliverybody

Aerial photo
body

Inspection
body

・・

Autonomous Control Technology

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10

Select and Focus：Target domain with strong competitivenessConduct immediate focus on domains with strong competitiveness andprofitability
Domain 1

Aerialphoto

Domain 2

DeliveryCurrent activity

Competitiveness

Focus

SOTEN (launched)

Drone development that meets
economic security demand

Japan：Defense and Disaster(public agency)

One of the very few mass
manufacturer in Japan for aerial
photo drone

Overseas：Focus on US and Taiwanthat has shown strong China ban.
Start with inspection and expand
to defense and disasterHigh technical capability that
achieved the only Level 4 typecertificate

Japan：Continue developmentwith Japan Post, and establish
operations for social
implementation

Development of next
gen aerial photo drone(SBIR1 ending 25/12)

Partnership with Japan
Post
Development of Postaldelivery drone
Continuous trials forsocial implementation

Abundant record of successful
delivery trials in Japan
In-depth technical and operationalteam setup with Japan Post

1: Small Business Innovation Research program. Anticipated receipt of up to 2.6 bn JPY in subsidies for the period from December 2023 to December 2025 for thedevelopment of new high-performance small aerial photography drones

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111. Market / Mission / Growth strategy
2. FY23/12 Q2 results and highlights
3. Appendix

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12

FY24/12 Q2 results and highlights
Summary

Sales

Sales are strong, and 82% of FY24 target has
been ordered. India large project was booked in
Q2

Sales

Marginal profit margin will remain high.
R&D expenses, excluding SBIR, were reduced
from YoY

Profit rate

Gross profit rate

Marginal profit rate1

YoY +6.7pt

YoY ±0pt

5%58%

Marginal profit margin without India project remained
high. Gross margin improved YoY.

1: Excluding India large project

Sales + Backlog

2.05 bn JPY 2.75 bn JPY
YoY +291%

A large project in India was recorded in 2Q. Total sales andorder backlog are 82% of the annual target.

Operating income-1.02 bn JPY
YoY -145 mn JPY

SBIR R&D expenses were recorded. Cost reduction effectsof business reforms have been partially realized from Q2.
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13

FY24 financial plan and Q2 Results Summary (Consolidated)
FY24 Q2 sales and profit outlook is favorable relative to the annual target[mn JPY]

Net sales(Incl. Backlog)

Aftertransformation

1,500

FY24 Numerical Plan
India
Large
projects

SBIR
(Gov.
Project)1+1,840-FY24/12 Q2 Results

Total

After
transformation

India
Large
projects

SBIR
(Gov.
Project)1

Total

3,340

349

+1,700-2,050(1,054)(2,755)Gross profit

70

+40

-

110

▲16

+117

-

100

Gross profit
ratio

5%

-

-

3

▲5%

-

-

5%

SG&A

1,570

-

+1,600

3,170

863

-

+263

1,126

▲1,500+40▲1,600▲3,060

▲879

+117

▲263

▲1,026+1,200▲1,860

▲963

-

▲963

▲1,935▲1,010(inc. R&D,
US subsidiary)
Operating profit
Ordinary profit▲1,500Net Profit▲1,575(Nonoperating
income)1: Income to be booked for non-operating income as a subsidy at the timing when the expenditure amount is confirmed. The expenditure from FY24/Q1 to
FY24/Q3 is planned to be booked in FY24/12. Expenditures from FY24/Q4 to be booked after 2025. As of Q2 end subsidy is not booked and expected tobook in the future.

(Nonoperating
income)▲1,010CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

14

FY24/12 Q2 Results compared to previous year
Sales and backlogs increased YoY.
Operating income decreased due to SBIR R&D expenses and expenses for U.S.
[mn JPY]

FY24/12Q2 Results

FY23/12Q2

FY23/12AnnualYoY

Net sales

2,050

524

896

+1,525summaryGross profit

100

▲9

▲235

+109

Gross profit
ratio

5%

▲2%

▲26%

＋7pt

SG&A

1,126

871

1,836

255
(incl. SBIR
263)

▲1,026▲880▲2,071▲145▲1,009▲935▲2,544▲74(inc. R&D,
US subsidiary)
Operatingincomenet income











Increased YoY due to India large project. Large projects areweighted toward the second half of the year.

The backlog for the domestic market was 658 mn JPY, up
190% (+431 mn JPY)
Marginal profit margin remained high at 58% in existing
business excluding India project
Gross profit margin increased YoY, partly due to thecontribution of the India project
SG&A increased by 255 mn JPY YoY. Of this amount, 263
mn JPY was R&D for SBIR. Excluding SBIR, R&D decreased
YoY.
Deteriorated YoY due to SBIR R&D expenses and SG&A
expenses of U.S. subsidiary despite increase in Sales
Special severance payments for voluntary retirement program
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15

Quarterly Net Sales
Increased significantly YoY due to India large project
Sales1

Application specificmn JPY

Solution development

Others
1,761

952
495

473
267

1-3

4-6

2021

133

100

7-9

10-12

1-3

78

130

4-6

7-9

10-12

429

1-3

2022

95

132

4-6

7-9

2023

239

288

10-12

1-3

60

(Excl.
India)

4-6

2024

1: The fiscal year ended March 31, 2021, and the following fiscal year ended December 31 2021 is a 9-month irregular accounting period fromCONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

16

FY24/12 2Q End Backlog
Sales and order backlog total (excluding India) is1.05 billion yen against sales
target of 1.5 billion yen
Sales and backlog1
mn JPY

2,755

1,700
46
658
349
2Q
Actual Sales(Excluding India
large project)

Backlog
2Q EndAdditional
Backlog
in 3Q

1,700

1,054
705

705

349

349

Sales andBacklog
as of May 15

India
Large
Project 2

3,380
F24/12 Sales
target1,500
FY24/12 Sales
target(Excluding India
large project)

Total

1: Backlog is the total value of orders received as of August 13, 2024 (the date this report was released)
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17

Status of overseas expansion
In the U.S., sales and marketing activities are in full swing and have generated
significant interest. Booked India large project
India large project

U.S. Marketing activities in full swing









Obtained export license in 2023 and started sales to end-users through the U.S.
distributor



Signed MOUs with a total of 5 companies, and started expansion in the U.S. through 8
distributors

Completed inspection
by local company andbooked in Q2

Taiwan sales
structure established

SOTEN exhibits at XPONENTIAL 2024, the world's largest drone exhibition in the U.S.
Highly evaluated in the U.S., where Non-China is progressing. SOTEN's, NDAA1
compliance and competitive pricing have earned high interest and expectations fromequipment inspection companies in the U.S.



A local infrastructure inspection company, aiming to move away from China, achieved
better results with SOTEN than other drones in a comparison

1: NDAA (National Defense Authorization Act) is a law concerning the defense budget that is introduced annually in the U.S. Congress. It governs U.S. defense policy
and establishes rules that prevent the U.S. from hiring companies that could be immediately converted to a particular country's military or weapons industry.

Continue to collaborate
in product sales and sales
expansion with a local
distributor

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18

De-China Drone Movement in the U.S.
The movement away from Chinese drones in the U.S. is gaining momentum,
increasing demand for NDAA1 compliant drones.
Changes in Regulations on Drones in the U.S.

Customer Trends in the U.S.

2020

DJI added to entity list as product may affect
U.S. national security

 U.S. electric utilities and others have invested

2021

Executive Order 13981 signed, aimed atpreventing the procurement of drones
manufactured by foreign adversaries orcontaining critical electronic components

2023
2024

Ban on certain Chinese semiconductor
products in the supply chain of government
officials as NDAACountering CCP Drones Act introduced andpassed in the U.S. House of Representatives

in drone-based workflows to inspect powerlines, monitor substations, and assess criticalinfrastructure.

 Potential for tighter regulations and growing

security concerns drive companies to rethinkuse of Chinese drones and transition to
NDAA-compliant drones When evaluating these drones, a key

consideration is whether further
improvements can be made while maintaining
the efficiency of existing drone workflows

1: The NDAA (National Defense Authorization Act) is a law that governs U.S. national defense policy and establishes rules that prevent companies frombeing employed in the U.S. that could be quickly converted to the military or arms industry of a particular country.

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19

US Expansion
Started sales of SOTEN in the US from Dec 2023. Strategic MOU signed ininfrastructure companies. Expanding distributor and dealer network.
MOU signed in the US
Distributor leading the US drone
marketDrone solution provider toinfrastructure companies
Drone service provider to mining
and infrastructure companies
Largest utility company inMissouri. Listed at Fortune 500.
Global agri and infra company
with footprint in 21 countries

Distributor and dealer network in the US
Expanding US with wide coverage
Blue Skies Drones
Washington

Volatus Drones
New York

General PacificOregonUnmanned
VehicleTechnologies
Arkansas

Frontier Precision
North Dakota
Advexure Enterprise
California

Gresco Utility
SupplyGeorgia

DronesMadeEasy
California

Frontier Precision
Florida50 units delivered to GenPac

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20

TENSO, a smart controller compliant with NDAA1 , launched in the U.S.
NDAA compliance increases the credibility and competitiveness of ACSL andproducts in the U.S.
Background in the U.S.
 DJI, a Chinese drone

SOTEN and TENSO in the U.S.
 SOTEN has been in operation throughout the U.S.

manufacturer, will be
and has earned high praise and interest fromdesignated as a "China
facility inspection companies for its NDAA
Military Enterprise" by thecompliance and competitive pricing.
U.S. Department of Defense TENSO responds quickly to the product updatestarting in 2020.
(after noun,
orclient
plain3 verb)
just keeps
needsadjective-stemof our major U.S.
and develops
 In 2022, the NDAA bans
 Advantages of TENSO
government procurement▪ NDAA compliant, secureof Russian and Chinesedrones.2 Movement toward▪ Ease of use, high efficiency and performanceelimination of Chinese▪ IP43, high dustproof and waterproof
made products accelerates.
▪ Specialized for aerial photography drone
1: National Defense Authorization Act
2: https://www.congress.gov/bill/116th-congress/senate-bill/2502 (American Security Drone Act of 2020)
3: ACSL, Inc. has worked with large Fortune 500 utility companies such as Missouri-based Ameren Corporation, a provider of electric and gas services, and New
York Power Authority (NYPA), as well as Texas-based Firmatek, LLC, a nationwide provider of drone services for mining and critical infrastructure inspection.

SOTEN

Smart Controller "TENSO”

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21

Applied for Type 1 Type Certification for delivery drone
Work toward accelerating social implementation of drones in the logistics
field with Japan Post
Japan Post and ACSL Initiatives

 In June 2021, ACSL signed a businessand capital alliance agreement withJapan Post Corporation and Japan Post
Capital Corporation to develop a drone
dedicated to logistics.

 Aiming to resolve the challenges facing

social infrastructure in terms of labor
shortages, aging population, and rapid
increase in workload

 In March 2023, obtained Japan's firstType 1 Type Certification for Level 4(unaided flight in a manned zone).

 In March 2024, trial delivery at "Level

3.51 " in Toyooka City, Hyogo
Prefecture

Overview of new aircraft Emphasis on design for ease oflogistics operations and social
acceptability

 Luggage is easily stowed fromthe top of the fuselage andautomatically detached fromthe bottom of the fuselage
upon arrival Increased payload weight (5.0kg, equivalent to 100 size) andmaximum flight distance (35km) compared to conventionalmodels

1: Level 3.5 flight eliminates the entry control measures (placement of assistants and signs) required for Level 3 ("unassisted visual flight in an unmannedzone") on the condition that digital technology (onboard cameras), unmanned aircraft operator proficiency certification, and insurance coverage are used,
Flight methods that facilitate the crossing of roads, railroads, etc.

PF4-CAT3

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22

Gross Profit and Gross Margin
Gross margin improved from Q4 of the previous fiscal year, and gross profit
became positive. Gross profit and gross margin improved YoY
Gross Profit and Gross Margin1
450

 Gross profit margin

mn JPYGross profit

Gross margin

150%

350

100%

250
150
50
-50

133

94

19%

17

5

7%

4%

-150
-250

1-3

4-6

7-9

2021

62
-22
-23%

10-12

14%

-30
-39%

1-3

4-6

-23
-18%

7-9

2022

-204

-43%

10-12

1-3

15%

-76%
4-6

-37%

7-9

2023

64

36

-48

-71

improved from Q4 ofthe previous fiscal year,and gross profit posted
a positive result

13%

4%

1-3

4-6

2024

1: Fiscal year ending in March until FY21/3. FY21/12 is irregular with 9 months between 21/04~21/12. FY22 onward is fiscal year ending December

 YoY, gross profit

increased and grossmargin improved topositiveIncluding onetime decrease factor in

0%
-50%

-74%
-177
10-12

50%

 FY23/12 Q4 due to-100%

inventory write-down(140 mn JPY)CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

23

Marginal profit ratio by segments1
Marginal profit ratio SOTEN maintained about 40% and Solution Development
kept 60% or more

SOTEN

(Aerial photography)

Solution
Development

FY22/12 Full Year

FY23/12 Full Year

FY24/12 Q2 Results

Sales (100 mn JPY)

9.3

2.0

0.6

# of drones (units)

645

101

39

Marginal profit ratio (%)

20

46

40

Sales (100 mn JPY)

5.0

3.3

2.3

54

61

65

(Proof-of-concepts trials, Marginal profit ratio (%)
sales of prototype drone)

1: Marginal profit by product is defined as net sales minus variable costs; for SOTEN and aircraft sales, it is defined as net sales minus material costs; and fordemonstration projects, it is defined as profit minus direct subcontracting costs. Gross profit is defined as marginal profit less labor and manufacturing costs.

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24

R&D expense
Overall increase due to R&D expenses related to SBIR2.
R&D for current business decreased YoY
R&D expense¹
mn JPY

450

424

400
350
300

315

285

158

292

250

228

200

153

150

371

261
224

197

165

182

203

176

212

104
156

100
50
0

1-3

4-6

R&D for SBIR2

7-9

2021

10-12

1-3

4-6

7-9

2022

10-12

1-3

4-6

7-9

10-12

2023

1: Fiscal year ending in March until FY21/3. FY21/12 is irregular with 9 months between 21/04~21/12. FY22 onward is fiscal year ending December
2: Small Business Innovation Research program. Anticipated receipt of up to 2.6 bn JPY in subsidies for the period from December 2023 to December 2025 forthe development of new high-performance small aerial photography drones

1-3

R&D for current
business

4-6

2024
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25

Awarded 3 national projects for technical development
Award SBIR to develop next generation of aerial photo drone with budget of
2.6bn JPY. Additional 1bn JPY and 100 mn JPY by taking part in K program.
Project Summary

SBIR(Small Business
Innovation Research
program)

K Program(Economic security
important technology
development program)

A large-scale technology
demonstration project topromote research anddevelopment by small andmedium-sized enterprises

Developing cutting-edge andimportant technologies thatare essential for Japan tomaintain a firm position in
the international community

ACSL Role











K ProgramSame as above

1: Multiple drones flying simultaneously and in collaboration
2: Value will be determined based on discussion with funding partiesPeriod / Value

Development of a new high-performance compact aerial
photography drone that takes economic security and security
into consideration
Utilizing the knowledge gained through the development of
SOTEN, we will respond to the demand for small aerial
photography drones in Japan and overseas.
Research and development of control technology and systemconstruction that can realize autonomous group flight in harshenvironments
Development of technology for multiple drones to estimate
and understand their own spatial position and share

Study for hardware development of small drone withautonomous and distributed control functions

Analysis of existing small drone products and research anddevelopment trends as a survey of advanced technologies inJapan and overseas to define the direction of competitive
drone development













Period：Dec 2023~Dec 2025
Subsidy：Max 2.6 bn JPY
Period：Apr 2024~Mar 2028
R&D subsidy：
Max 1 bn JPY2
Period：Apr 2024~Mar 2028
project scale：Max 100 mn JPY

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26

1. Market / Mission / Growth strategy
2. FY23/12 Q2 results and highlights
3. Appendix

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27

FAQs 1/3
Item

Question

AnswerMacroWill the global expansion of
military demand have an
impact on the Company?

It is our policy not to develop or provide technology for drones used for offensive purposes. On the other hand, it is expectedthat drones used for defense purposes such as reconnaissance and patrol will either be produced domestically or procured fromallied countries.

Macro

Will semiconductor shortage
continue to have impact thisyear?

In 2022, the shortage of semiconductors and price hikes will continue to have a negative impact of about 600 mn JPY on grossprofit. The marginal profit margin recovered in 2023 as a result of measures such as design changes.

Domestic
marketFuture Prospects for Working
with the Ministry of Defense

In addition to the 370 million yen order for SOTEN from the Defense Acquisition Agency, we have also been selected as a drone
for aerial photography by the Air Self-Defense Force of the Ministry of Defense. In addition, ACSL became the first drone
manufacturer to be approved as a regular member of the Japan Defense Equipment Industries Association (JDAA). The Ministryof Defense is highly interested in economic security and security measures in Japan, and we recognize that this is an area where
we can take advantage of our strengths, and we will continue to focus on this area in the future.

Overseas

The progress in US and thespecific timing of sales, future
prospect

We have already signed MOUs with 5 companies including distributors and end users. We plan to expand sales through 8 sales
agents. We obtained export permission in November 2023 and sold 50 units to distributors in December 2023. Sales from
distributors have already been completed, and discussions are underway regarding sales in 2024. Sales are expected in thesecond half of 2024 based on tighter regulations on Chinese-made drones and the exhibition to be held in September.

Overseas

The progress in Taiwan andthe specific timing of sales,
future prospect

We have signed a dealership contract with a local sales agent. We have already conducted demos and other activities locally andhave received evaluations. We are currently applying for export permission for product sales and discussing sales plan with the
distributor

Overseas

The content of the large
project in India

We sold ground running robots for 1.7 billion yen from an Indian partner company. We completed inspection in Q2 and booked
revenue of backlog. Profitability was higher than planned.

1 USD = 135 JPY

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28

FAQs 2/3
Item

Question

AnswerOutlook

Progress against this year's
plan is as follows

Excluding the large project in India, sales are expected to be 1.5 billion yen, while the backlog is over 1 billion yen at the time ofthis announcement. As for costs, we expect to realize the effects of the structural reforms from Q2.

OutlookWhat is the composition ofsales, and the overseas ratio
for FY24?

SOTEN sales are the main source of 1.5 billion yen in sales, excluding the large project in India, in addition to domestic
demonstration tests in the logistics field, etc. and sales of existing aircraft. The Defense Equipment Agency delivery announced in
March 2012 has already been factored into the plan. Although domestic sales are the main source of overseas sales, sales in the
U.S. are expected to increase.

OutlookIs there a possibility that sales
and development cannot bedone due to cost reduction

We aim to optimize resources by focusing on two areas (small aerial photography, logistics). Even after implementing
redundancy plan, we expect to secure the personnel to achieve the current sales plan. We design incentives and career paths sothat core personnel do not leave.

Chinese drone manufacturers
have a high market share, but
how to compete againstthem?

We recognize that although Chinese manufacturers have a large share of the consumer market, there is no clear dominant player
in the industrial drone market. In addition, we have three competitive advantages over Chinese manufacturers: (1) technologicalstandards for industrial drones (autonomous control technology, application-specific drones tailored to each use case, and drone
certification), (2) understanding customer operations and building a support system to meet local customer requirements, and(3) providing secure and reliable drone to exclude security concerns.
Recently, due to growing security concerns, some overseas countries have explicitly banned the import or use of Chinese drones,a situation that we recognize is favorable to us.

The possibility of emergenceof competitors as drone
manufacturers?

Companies that possess autonomous control system technology at the source code level, especially those that havecommercialized the advanced model-based control technology that we employ, are rare worldwide.
The development of autonomous control systems for industrial drones requires verification in the field. We have a strong
customer base, and we can enhance our competitiveness by promoting development in response to actual demand for eachapplication through dialogue with customers and verification in actual environments.

Competitiveenvironment

Competitiveenvironment

1 USD = 135 JPY

CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

29

FAQs 3/3
Item

Question

Sales structure

What is the sales structure
in overseas market?

Depending on the situation in each country, in the U.S., a subsidiary was established with a sales function. In India, we haveestablished a JV with a local partner company. In each of these regions, we believe that local sales and support functions areimportant, and we will work to deepen cooperation with local companies.

Risk

What are the biggest
perceived risks?

We recognize that major accidents involving drones, including those involving drone manufacturers other than our company, area major risk. Stricter laws and regulations on drones due to serious accidents, deterioration of public trust in drones, and otherfactors are expected to delay the commercialization of drones and delay the introduction of drones by customers, slowing the
speed of the ACSL’s business development.

Manufacturing
SystemIs there a potential shortageof manufacturing capacity?

As a fabless manufacturer, we outsource production to an external partner in Japan and can handle increased manufacturing
capacity.

How seasonality in sales
occurs?

For delivery of drones, sales are recorded when all the drones have been delivered and inspected by the client; for trial projects,
sales are recorded when the entire project is completed. For large projects, sales are often recorded from January to March,depending on the budget cycle of the client company. On the other hand, sales are usually small from April to June. However,
the recent supply side has had an impact on drone sales, and the concentration of sales in the January-March period tends to beless than in the past.

Performance

AnswerCONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

30

Balance Sheet
FY24/12 Q2

Mn JPYFY23/12 Q2

FY23/12ActualYoY change to same
period previous year

ActualActual

5,183

＋51%

3,430

4,203

Cash

1,770

＋45%

1,218

1,499

Fixed assets

997

▲33%

1,483

891

Current liabilities

2,228

＋120%

1,013

1,603

Fixed liabilities

2,412

＋67%

1,447

1,227

Total liabilities

4,641

＋89%

2,461

2,830

Net assets

1,539

▲37%

2,452

2,264

Total assets

6,180

＋26%

4,913

5,094

Current assets

CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

31

Major financial items by year
mn JPY

Accounting Period1

FY19/03

FY20/03

FY21/03

FY21/12

FY22/12

FY23/12

FY24/12 2Q YTD

807

1,278

620

501

1,635

896

2,050

-

-

-

-

939

206

66

645

101

39

-

-

-

-

73

132

13

18

26

1

Amount

293

866

370

124

397

337

215

# of
project

81

112

82

41

71

52

22

Sales ofPlatform/Evaluation
drone

Amount

384

304

145

67

103

67

23

Units

106

101

46

18

27

15

4

Other

Amount

129

107

105

308

120

152

1,731

Gross profit

403

808

68

0

▲124

▲235

100

Gross margin

50%

63%

11%

0%

▲8%

▲26%

5%

SG&A expense

733

792

1,207

1,189

2,079

1,836

1,126

R&D expense (Out of SG&A)

366

275

583

604

1,168

759

632

Operating profit

▲330

15

▲1,139▲1,188▲2,203▲2,071▲1,026

Sales
Small aerial
photography drone(SOTEN)
Other applicationspecific drone
PoC andDevelopment

AmountUnits
AmountUnits

1: Fiscal year ending in March until FY21/3. FY21/12 is irregular with 9 months between 21/04~21/12. FY22 onward is fiscal year ending December
CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

32

Major financial items by quarter
Accounting
Period1

mn JPYFY21/03

FY21/12

FY22/12

FY23/12

FY24/12

Quarterly results

1Q

2Q

3Q

4Q

1Q

2Q

3Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

Sales

36

42

46

495

267

133

100

952

78

130

473

429

94

132

239

288

1,761

590

21

25

301

33

49

37

86

46

19

475

6

7

157

13

16

13

59

31

8

3

2

60

7

34

0

46

50

12

0

1

2

15

-

6

-

10

10

1

0

Small aerial
photography drone(SOTEN)
Other applicationspecific drone

AmountUnits
Amount
Units

-

-

-

-

Amount

1

22

22

323

14

42

67

252

16

25

103

262

5

28

40

192

22

# of
project

2

11

15

54

6

14

21

34

2

12

23

28

4

10

10

18

4

Sales ofPlatform/Evaluation
drone

Amount

4

10

13

116

15

34

17

42

17

7

37

39

9

3

15

23

-

Units

1

3

5

37

6

6

6

8

4

2

13

7

3

1

4

4

-

Other

Amount

30

8

10

55

237

55

15

64

20

11

24

59

30

16

46

13

1,717

Gross profit

▲6

▲6

▲13

94

17

5

▲22

133

▲30

▲23

▲204

62

▲71

▲48

▲177

36

64

Gross margin

▲19%

▲16%

▲28%

19%

7%

4%

▲23%

14%

▲39%

▲18%

▲43%

15%

▲76%

▲37％

▲74%

13%

4%

SG&A expense

230

173

315

488

325

348

515

535

442

431

670

419

451

469

495

631

495

R&D expense (Out of SG&A)

60

77

129

315

153

165

285

292

228

224

424

197

182

176

203

371

261

Operating profit

▲237

▲180

▲328

▲393

▲308

▲342

▲538

▲401

▲473

▲454

▲874

▲356

▲523

▲517

▲672

▲594

▲431

PoC andDevelopment

1: Fiscal year ending in March until FY21/3. FY21/12 is irregular with 9 months between 21/04~21/12. FY22 onward is fiscal year ending December
CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

33

Raised funds to strengthen financial base to accelerate overseas
expansion, etc.
Summary
third-party
allotmentInternational
offering

Long-term debt







Setting
Commitment
Lines



Third-party allotment to
CVI Investment, Inc.
Issued new shares,
convertible bonds (CBs)and fixed exercise pricewarrants 1
Offering of common stockin overseas markets,primarily in Europe andAsia (excluding North
America)Long-term loan from JFC at
fixed interest rate

Time






New shares and CBs
paid in February
2023
Redemption date of
the CBs is February
27, 2015.
Paid in November
2023

Amount raised
Total 3.56 Bn JPY
Common stock:
340 MM JPY, CBs:
1.39 Bn JPY, stockacquisition rights:
1.83 Bn JPY
Paid-in amount:1.31 Bn JPY

Usage of funds







Development and evaluation ofdrone
Working capital for overseas
business expansion
Development of TAKEOFF software 2
R&D expenses for drones andbusiness investments related tomass production

Working capital for overseas
business expansion
 Working capital for overseas
business expansion

10 years fromJanuary 2024

Loan amount: 1.44
Bn JPY

7 months fromMarch 2024

Borrowing limit:
1 Bn JPY

Equal principal repayment
starting in 5 years (2029)
Commitment Line Contract
with Resona Bank, Ltd.

1: May not be able to raise funds if subscription rights are not exercised
2: Proprietary ground station software for autonomous drone flightWorking capital for the
implementation of the SBIRCONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

34

Potential Risks and Responses
Item

Major Risks▪

Shortage of materials procurement against
production plan due to semiconductor shortage
and price hikes, material cost to sales ratio, andincreased development costs▪

Increase in prices of products procured fromoverseas due to the weak yen and strong U.S.
dollarMacroOverseas
deployment (e.g.
military forces)

Regulation

Performance▪

Risk of being outperformed by overseas
competitors in terms of competitiveness▪

Potential impact of laws and regulations and local
business practices▪

Necessity of upfront investment for overseas
expansion▪

Impact of the Civil Aeronautics Act, etc. on ourbusiness▪

Uncertainty and seasonality of revenue
recognition and cost execution▪

Need for aggressive investment in R&D

Our Perceptions and Risk Response Measures▪

Semiconductors used for high-power output shortages and price hikes continue to be a constant. As
a result of design changes made in consideration of procurement stability, we expect a certain levelof cost reduction effect from 2023▪

Overseas parts procured from domestic suppliers were partially affected by foreign exchange rate
fluctuations which increased costs▪

In overseas markets, economic security and unmanned needs may be stronger than in Japan, anddemand for secure drones is expected to be significant.. SOTEN's demonstration in the U.S. market
and subsequent inquiries have shown that SOTEN has sufficient competitiveness▪

A certain amount of man-hours may be required to comply with local laws, regulations, and businesspractices. In addition, depending on the location, it is necessary to consider local partnercooperation and collaboration parts▪

Possibility of aggressive upfront investment to acquire sales in overseas markets, including
development of functions for local markets, export support, and initial customer acquisition▪

ACSL has managed to get Tier-1 type certification for Level 4 flight. No impact foreseen by Civil
Aeronautics Act in the coming years▪

Japan sales are expected to be at least the same as the previous year, while overseas sales will beannounced once a reasonable estimate is made. Seasonality will continue to be affected bycustomers' budget cycles, but sales of SOTEN and other products may fluctuate depending on
supply▪

Flexible investment policy in R&D and other areas for product development, overseas expansion,and other high-potential initiatives
CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

35

Disclaimer
Copyright © 2024 ACSL Ltd.
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means,including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the
publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses
permitted by copyright law.
Information in this material is subject to change without notice, its accuracy is not guaranteed and it may not contain allmaterial information concerning ACSL Ltd. (the “Company”). The Company makes no representation regarding, andassumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information
contained herein.
In addition, the information contains projections and forward-looking statements that may reflect the Company’s current
views with respect to future events and financial performance. These views are based on current assumptions which are
subject to various risks and which may change over time. No assurance can be given that future events will occur, thatprojections will be achieved, or that the Company’s assumptions are correct. It is not the intention to provide, and you may
not rely on this presentation as providing, a complete or comprehensive analysis of the Company's financial or trading
position or prospects.
This presentation does not constitute an offer or invitation to purchase or subscribe for any securities or financial
instruments or to provide any investment service or investment advice, and no part of it shall form the basis of or be relied
upon in connection with any contract, commitment or investment decision in relation thereto.
CONFIDENTIAL / Copyright© ACSL Ltd. ALL RIGHTS RESERVED.

36