# EDGAR Filing Document

**Accession Number:** 0001962845
**File Stem:** 0000950123-23-002910
**Filing Date:** 2023-3
**Character Count:** 944000
**Document Hash:** ae779c62b53dbe642615cab1f4c9f9f6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950123-23-002910.hdr.sgml**: 20230607

**ACCESSION NUMBER**: 0000950123-23-002910

**CONFORMED SUBMISSION TYPE**: DRS

**PUBLIC DOCUMENT COUNT**: 26

**FILED AS OF DATE**: 20230308

**DATE AS OF CHANGE**: 20230308

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PIXIE DUST TECHNOLOGIES, INC.
- **CENTRAL INDEX KEY:** 0001962845
- **STANDARD INDUSTRIAL CLASSIFICATION:** ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** M0
- **FISCAL YEAR END:** 0430

**FILING VALUES:**
- **FORM TYPE:** DRS
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 377-06629
- **FILM NUMBER:** 23715120

**BUSINESS ADDRESS:**
- **STREET 1:** 2-20-5 KANDA MISAKI-CHO, CHIYODA-KU
- **CITY:** TOKYO
- **STATE:** M0
- **ZIP:** 101-0061
- **BUSINESS PHONE:** 81(0)3-5244-4880

**MAIL ADDRESS:**
- **STREET 1:** 2-20-5 KANDA MISAKI-CHO, CHIYODA-KU
- **CITY:** TOKYO
- **STATE:** M0
- **ZIP:** 101-0061

##### [**Table of Contents**](#toc)
**CONFIDENTIAL TREATMENT REQUESTED** 

**As confidentially submitted to the U.S. Securities and Exchange Commission on March 8, 2023** 

**This Draft Registration Statement has not been filed publicly with the U.S. Securities Exchange Commission and all information contained herein remains strictly confidential.** 

**Registration No. 333-**●

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

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**FORM F-1** 

**REGISTRATION STATEMENT** 

***UNDER***

***THE SECURITIES ACT OF 1933***

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## PIXIE DUST TECHNOLOGIES, INC.
**(Exact name of Registrant as specified in its charter)** 

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| | | |
|:---|:---|:---|
| **Japan** | **8731** | **Not Applicable** |
| **(State or other jurisdiction of<br>incorporation or organization)** | **(Primary Standard Industrial<br>Classification Code Number)** | **(I.R.S. Employer**<br> **Identification No.)** |

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**Pixie Dust Technologies, Inc.** 

**2-20-5 Kanda Misaki-cho, Chiyoda-ku** 

**Tokyo, 101-0061, Japan** 

**Tel: +81(0)3-5244-4880** 

**(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)** 

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● **(Name, address, including zip code, and telephone number, including area code, of agent for service)** 

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***With copies to:***

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| | | |
|:---|:---|:---|
| **Barbara A. Jones**<br> **Greenberg Traurig, LLP**<br> **1840 Century Park East,<br>Suite 1900**<br> **Los Angeles, CA 90067**<br> **Tel: (310) 586-7773** | **Koji Ishikawa**<br> **Greenberg Traurig Tokyo Law Offices**<br> **Meiji Yasuda Seimei Building, 21F**<br> **2-1-1 Marunouchi,**<br> **Chiyoda-ku**<br> **Tokyo 100-0005, Japan**<br> **Tel: +81(0)3-4510-2200** | **Lawrence Venick**<br> **Loeb & Loeb LLP**<br> **2206-19 Jardine House**<br> **1 Connaught Place**<br> **Central**<br> **Hong Kong SAR**<br> **Tel: (852) 3923-1111** |

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**Approximate date of commencement of proposed sale to the public:** As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging Growth Company ☑

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 7(a)(2)(B) of the Securities Act. ☐

† The term "new or revised financial accounting standard" refers to any update issued by the Financial
Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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**The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.** 

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##### [**Table of Contents**](#toc)
**The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling shareholders may sell these securities until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities, nor a solicitation of an offer to buy these securities, in any jurisdiction where the offer, solicitation, or sale is not permitted.** 

**SUBJECT TO COMPLETION, DATED** ●**, 2023** 

**PRELIMINARY PROSPECTUS**![LOGO](g430639g01a03.jpg)

## Pixie Dust Technologies, Inc.
● **American Depositary Shares** 

**Representing** ● **Common Shares** 

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This is the initial public offering of our common shares, no par value, in the form of American Depositary Shares ("ADSs"). Each ADS represents ● common shares. We are offering ● ADSs in the United States and • ADSs are being offered in a concurrent offering in Japan in accordance with local laws. We currently expect the initial public offering price to be between $● and $● per ADS.

Prior to this offering, there has been no public market for our common shares or ADSs. We intend to apply to list the ADSs on the Nasdaq Capital Market ("Nasdaq") under the symbol "PXDT."

We are organized under the laws of Japan. We are a "foreign private issuer" and an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, under applicable U.S. federal securities laws, and are eligible for reduced public company reporting requirements. See "Prospectus Summary — Implications of Being an Emerging Growth Company and a Foreign Private Issuer."

**Investing in the ADSs involves a high degree of risk. Before buying any of the ADSs, you should carefully read the discussion of material risks of investing in the ADSs in "[Risk Factors](#tx430639_6)" beginning on page 14 of this prospectus.** 

**Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.** 

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| | |
|:---|:---|
|  Initial public offering price | $● |
|  Underwriting discounts and commissions<sup>(1)</sup> | $● |
|  Proceeds to us (before expenses) | $● |

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<sup>(1)</sup> See "Underwriting — Commissions and Discounts" for additional information regarding compensation payable to the underwriters.

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We have granted the underwriters an option to purchase up to ● additional ADSs from us at the public offering price, less underwriting discounts and commissions, for 45 days after the date of this prospectus to cover over-allotments, if any.

The underwriters expect to deliver the ADSs to purchasers on or about ●, 2023.

**Boustead Securities, LLC** 

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**The date of this prospectus is** ●**, 2023.**

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##### [**Table of Contents**](#toc)
**TABLE OF CONTENTS** 

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| | |
|:---|:---|
|  | **Page** |
|  [ABOUT THIS PROSPECTUS](#tx430639_1) | iii |
|  [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](#tx430639_2) | iv |
|  [PROSPECTUS SUMMARY](#tx430639_3) | 1 |
|  [THE OFFERING](#tx430639_4) | 8 |
|  [SUMMARY FINANCIAL INFORMATION AND OPERATING DATA](#tx430639_5) | 11 |
|  [RISK FACTORS](#tx430639_6) | 14 |
|  [USE OF PROCEEDS](#tx430639_7) | 52 |
|  [DIVIDEND POLICY](#tx430639_8) | 53 |
|  [CAPITALIZATION](#tx430639_9) | 54 |
|  [DILUTION](#tx430639_10) | 56 |
|  [SELECTED FINANCIAL INFORMATION AND OPERATING DATA](#tx430639_11) | 59 |
|  [MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](#tx430639_12) | 61 |
|  [BUSINESS](#tx430639_13) | 76 |
|  [REGULATION OF OUR INDUSTRY](#tx430639_14) | 92 |
|  [MANAGEMENT](#tx430639_15) | 96 |
|  [PRINCIPAL SHAREHOLDERS](#tx430639_16) | 104 |
|  [CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS](#tx430639_17) | 107 |
|  [DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF INCORPORATION](#tx430639_18) | 109 |
|  [DESCRIPTION OF AMERICAN DEPOSITARY SHARES](#tx430639_19) | 116 |
|  [SECURITIES ELIGIBLE FOR FUTURE SALE](#tx430639_20) | 125 |
|  [CERTAIN TAX CONSIDERATIONS](#tx430639_21) | 127 |
|  [UNDERWRITING](#tx430639_22) | 134 |
|  [EXPENSES RELATED TO THE OFFERING](#tx430639_23) | 147 |
|  [LEGAL MATTERS](#tx430639_24) | 148 |
|  [EXPERTS](#tx430639_25) | 148 |
|  [ENFORCEABILITY OF CIVIL LIABILITIES](#tx430639_26) | 148 |
|  [WHERE YOU CAN FIND ADDITIONAL INFORMATION](#tx430639_27) | 149 |
|  [INDEX TO FINANCIAL STATEMENTS](#tx430639_28) | F-1 |

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**You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us. Neither we nor the underwriters have authorized anyone to provide you with information that is different, and neither we nor the underwriters take any responsibility for, and provide any assurance as to the reliability of, any information, other than the information in this prospectus and any free writing prospectus prepared by us. We are offering to sell the ADSs, and seeking offers to buy the ADSs, only in jurisdictions where such offers and sales are permitted. This prospectus is not an offer to sell, or a solicitation of an offer to buy, the ADSs in any jurisdictions where, or under any circumstances under which, the offer, sale, or solicitation is not permitted. The information in this prospectus and in any free writing prospectus prepared by us is accurate only as of the date on its respective cover, regardless of the time of delivery of this prospectus or any free writing prospectus or the time of any sale of the ADSs. Our business, results of operations, financial condition, or prospects may have changed since those dates.** 

**Before you invest in the ADSs, you should read the registration statement (including the exhibits thereto and the documents incorporated by reference therein) of which this prospectus forms a part.** 

**For investors in Japan:** The ADSs offered and sold in Japan will be registered with the Financial Services Agency of Japan pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act.

**For investors outside of the United States and Japan**: Neither we nor the underwriters have done anything that would permit this offering, or the possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States and Japan. You are required to inform yourselves about, and observe any restrictions relating to, this offering and the distribution of this prospectus.

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##### [**Table of Contents**](#toc)
**ABOUT THIS PROSPECTUS** 

As used in this prospectus, unless the context otherwise requires or otherwise states, references to "Pixie," "our company," the "Company," "we," "us," "our," and similar references refer to Pixie Dust Technologies, Inc., a joint stock corporation with limited liability organized under the laws of Japan. We refer to our common shares as "common shares" or "common stock," unless the context otherwise requires. We sometimes refer to our common shares as "equity interests" when described on an aggregate basis.

Our functional currency and reporting currency is the Japanese yen ("JPY" or "¥"). The terms "dollar," "USD," "US$" or "$" refer to U.S. dollars, the legal currency of the United States. Convenience translations included in this prospectus of Japanese yen into U.S. dollars have been made at the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022 as reported by the U.S. Federal Reserve in is weekly release on November 7, 2022 (www.federalreserve.gov/releases/h10/2022/).

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Our fiscal year ends on April 30 of each year as does our reporting year. Our most recent fiscal year ended on April 30, 2022. See Note 2 to our audited financial statements as of and for the year ended April 30, 2022, included elsewhere in this prospectus, for a discussion of the basis of presentation, functional currency, and translation of financial statements.

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

**Market and Industry Data** 

This prospectus contains references to market data and industry forecasts and projections, which were obtained or derived from publicly available information, reports of governmental agencies, market research reports, and industry publications and surveys. These sources generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. Although we believe such information to be accurate, we have not independently verified the data from these sources. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and additional uncertainties and risks regarding the other forward-looking statements in this prospectus due to a variety of factors, including those described in the section entitled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the forecasts and estimates.

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**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS** 

Various statements contained in this prospectus, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning our possible or assumed future results of operations, financial condition, business strategies and plans, market opportunity, competitive position, industry environment, and potential growth opportunities. In some cases, you can identify forward-looking statements by terms such as "may", "will", "should", "believe", "expect", "could", "intend", "plan", "anticipate", "estimate", "continue", "predict", "project", "potential", "target," "goal," or other words that convey the uncertainty of future events or outcomes. You can also identify forward-looking statements by discussions of strategy, plans or intentions. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, because forward-looking statements relate to matters that have not yet occurred, they are inherently subject to significant business, competitive, economic, regulatory and other risks, contingencies, and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including, among others, those discussed in this prospectus under the headings "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Our Business" may cause our actual results, performance, or achievements to differ materially from any future results, performance, or achievements expressed or implied by the forward-looking statements in this prospectus. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements in this prospectus include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our expectations regarding our revenue, expenses, and other operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our efforts to successfully develop and commercialize our technologies and related products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the implementation of our strategic plans for our business and products and product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the size of the market opportunity for our products and product candidates and our ability to maximize those
opportunities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to obtain and maintain any needed regulatory approval of our product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our expectations regarding success in testing for our product candidates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs and success of our marketing efforts, and our ability to promote our brands;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our expectations regarding our ability, and that of our manufacturers, to manufacture our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our competitive position and the development of and projections relating to our competitors or our industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to obtain adequate financing in the future on terms acceptable to us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to consummate strategic transactions, which may include acquisitions, mergers, dispositions, or
investments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to identify and successfully enter into strategic collaborations in the future, and our assumptions
regarding any potential revenue that we may generate thereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to exploit the intellectual property rights jointly owned with our collaborators in a manner
beneficial to us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to obtain, maintain, protect, and enforce intellectual property protection for our technologies and
related products and services, and the scope of such protection;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to operate our business without infringing, misappropriating, or otherwise violating the intellectual
property or proprietary rights of third parties;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general economic conditions and events and the impact they may have on us and our customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to respond to national disasters, such as earthquakes and tsunamis, and to global pandemics, such as COVID-19;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the regulatory environment in which we operate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our plans with respect to use of proceeds from this offering;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to attract and retain qualified key management and technical personnel; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our expectations regarding the time during which we will be an emerging growth company and a foreign private
issuer.

Given the foregoing risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements in this prospectus. The forward-looking statements contained in this prospectus are not guarantees of future performance and our actual results of operations and financial condition may differ materially from such forward-looking statements. In addition, even if our results of operations and financial condition are consistent with the forward-looking statements in this prospectus, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this prospectus speaks only as of the date of this prospectus. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements in this prospectus, whether as a result of new information, future events, or otherwise, after the date of this prospectus.

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**PROSPECTUS SUMMARY** 

***This summary highlights selected information presented in greater detail elsewhere in this prospectus. This summary does not include all the information you should consider before investing in the ADSs. You should read this summary together with the more detailed information appearing elsewhere in this prospectus, including our audited and unaudited financial statements and related notes and the sections entitled "Risk Factors" on page 14 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" elsewhere in this prospectus. Some of the statements in this summary and elsewhere in this prospectus constitute forward-looking statements. See "Cautionary Note Regarding Forward-looking Statements."***

**Business Overview** 

We create and commercialize innovative consumer personal care products and spatial materials through the utilization of mechanobiology and metamaterials in combination with our core proprietary wave technology that controls ultrasound and other waves. Metamaterials are substances that are artificially-created through structural design and have properties that do not exist in nature, such as certain electromagnetic metamaterials. We seek to exploit and accelerate the coming digital era through the fusion of computer science and wave technology, which we call "Digital Nature." By focusing on this evolving area, we intend to research, develop, and commercialize technologies that, among other things, improve health and human interfaces and that overcome physical limitations through sensory and metamaterial technologies. We expect that, over time, the world of Digital Nature will construct an environment inseparable from both computers and non-computers, building a computational nature that transcends language and phenomenon with information processes unique to living organisms.

Our proprietary wave control technology seeks not only to remove the barriers that limit us physically, but also to expand our physical capabilities. We intend to use our proprietary wave control technology to expand physical capabilities, and thereby to achieve our mission of improving the quality of life for our customers. We believe these technologies can be used to create, for example, acoustic sonar capabilities similar to dolphins or computer systems that optimize spatial information by developing wireless communication. Waves, such as sound and light, differ in the physical behavior of the medium as they travel through it and in the way they interact with objects and living bodies. However, their basic behaviors are wave equations. Our wave control technologies consist of a system of methodologies to manipulate the common behaviors of sound and light in this abstract layer as desired, and to utilize the unique phenomena of sound and light for human benefits. While wave control technology has the potential for a variety of applications, we currently focus our development efforts in two principal fields: Healthcare & Diversity and Workspace & Digital Transformation. In the Healthcare & Diversity field, we seek solutions to various social issues arising from physical and environmental differences by applying our proprietary technologies, such as SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device which we launched in November 2022, VUEVO, a series of directional voice arrival detection devices for individuals with deaf and hard-of-hearing ("DHH"), and kikippa, an acoustic stimulation device intended to provide assistance for individuals with cognitive impairment. In the Workspace & Digital Transformation field, we aim to solve business and social issues by developing technologies for sensing and controlling space, such as iwasemi, a sound-absorbing metamaterial we launched in July 2022, hackke, a location positioning technology, and KOTOWARI, a technology providing spatial analysis data. In the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. We expect to launch kikippa and VUEVO in the second calendar quarter of 2023.

In 2014, Dr. Yoichi Ochiai, our Chief Executive Officer and Dr. Takayuki Hoshi, our Chief Research Officer, developed "Pixie Dust," a three-dimensional acoustic levitation technology, which enables the movement of objects in three dimensions by using ultrasonic control. Until this time, ultrasonic waves had only been used to levitate objects and make them move in two dimensions. Since then, we have continued to work on

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overcoming the challenges in manipulating waves by improving the efficiency and performance of the computer processing required to control waves and making the circuit boards more sophisticated, as well as on applying our wave control technology to product developments and innovation. The intersection of Digital Nature and wave technology is the key focus of our research and development activities. As society becomes more governed by a computer-based environment, we believe that computers will become a complement to human intelligence. One of our desired contributions to society is to accelerate this evolution in order to create a better quality of life.

We are an early-stage company and have not generated significant revenue from any commercialization of our proprietary technologies or products. We have generated revenues primarily from commissioned research and development ("R&D") and solution services we provided for other companies including under our collaboration arrangements. For our fiscal years ended April 30, 2022 and April 30, 2021, we generated revenues of ¥636,265 thousand ($4,281 thousand) and ¥512,772 thousand ($3,450 thousand), respectively, and incurred net losses of ¥1,109,468 thousand ($7,465 thousand) and ¥759,484 thousand ($5,110 thousand), respectively. For the six months period ended October 31, 2022 and October 31, 2021, we have generated revenues of ¥158,639 thousand ($1,067 thousand) and ¥179,213 thousand ($1,206 thousand), respectively, and have incurred net losses of ¥885,000 thousand ($5,954 thousand) and ¥624,957 thousand ($4,205 thousand), respectively.

**Our Strategy** 

Our goal is to continue to develop and commercialize innovative and practical products by applying our control wave technology. In this effort, we plan to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Focus our sales efforts in establishing our brands and implementing customized marketing strategy for each of our main products.*** In the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. We intend to implement customized marketing strategies for each of these products depending on the nature and features
of the product and to tailor initiatives to the product's target audience. With respect to SonoRepro, VUEVO, and kikippa, we plan to position and market them as consumer personal care products for everyday use. We plan to adopt a multi-faceted,
consumer-driven marketing strategy for these products including establishing distributor and retailer networks and leveraging online and print media and social media including our dedicated websites. With respect to iwasemi, we plan to market this
product primarily through growing the awareness of iwasemi among architectural firms, construction companies, and other distributors and consultants of construction materials. In addition, as for all of these products, we plan to leverage our
collaborative relationships with our R&D collaborators, which are established companies in the relevant industries, to jointly market these products.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Maximize the commercial potential of our technology applications with simultaneous revenue models.*** We plan to commercialize our products by simultaneously pursuing four revenue models (sales model, subscription model, lease model, and licensing model), which we believe will provide us the flexibility and long-term sustainability to
monetize our technology applications. We currently expect to generate most of our commercialization revenues from the sales model, which will apply to SonoRepro and iwasemi.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Continue to develop and leverage our collaborative relationships with academia and the industry in R&D and marketing our products.*** We have benefited from our collaborations with academic institutions and industry collaborators, which contributed ideas and funds to our development and research endeavors. We intend to continue to leverage our
established relationships and develop new collaborations in developing and commercializing our products. In particular, we intend to leverage our industry collaborators' reputation, distribution channels, and service and support in raising
market awareness and expanding sales of our products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Drive innovation to increase applications of our wave control technology and upgrade our products*.** We plan to continue to invest in research and development to bring innovative and practical products and solutions to our customers. This may include new data, new features, new applications, and new services for our
existing products and product candidates. As we continue our research, we may use our research results to apply for regulatory approvals for certain of our personal care products to be marketed as medical devices in the future, if necessary.

**Summary Risk Factors** 

There are a number of risks that you should carefully consider before making an investment decision regarding this offering. These risks are discussed more fully in the section entitled "Risk factors" beginning on page 14 of this prospectus. You should read and carefully consider these risks and all of the other information in this prospectus, including the financial statements and the related notes thereto included in this prospectus, before deciding whether to invest in the ADSs. If any of these risks actually occur, our business, financial condition, operating results and cash flows could be materially adversely affected. In such case, the trading price of our ADSs would likely decline, and you may lose all or part of your investment. These risk factors include, but are not limited to:

***Risks Related to Our Company and Our Business***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are an early-stage company and have a limited operating history, which may make it difficult to evaluate our
current business and predict our future performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have a history of operating losses and we do not expect to be profitable for the foreseeable future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We may need to raise additional capital to meet our business requirements in the future, and such capital raising
may be costly or difficult to obtain and could dilute current shareholders' ownership interests.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to increase revenue and achieve profitability will depend on the successful commercialization of our
products and product candidates, including SonoRepro, kikippa, VUEVO, and iwasemi in the next one to three years, and our product and product candidates may not be successfully commercialized, or we may experience delays in achieving market
acceptance, which could negatively impact our business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We operate in a very competitive business environment, and if we are unable to compete successfully against our
existing or potential competitors, our business, financial condition, and results of operations may be adversely affected.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have generated most of our revenues from providing commissioned research and development and solution services
including under our collaboration agreements and have significant customer concentration, and this concentration may continue if we fail to diversify our customer base by successfully commercializing our products and product candidates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are subject to risks related to our reliance on collaboration arrangements to fund development and
commercialization of certain of our products or product candidates, and our financial results may be adversely impacted if such collaborations do not lead to the commercialization of products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our product
manufacturing and distribution, and these third parties may terminate these agreements or not perform satisfactorily.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are highly dependent on our senior management team and key personnel and our business could be harmed if we
are unable to attract and retain personnel necessary for our success.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are exposed to the risk of natural disasters, unusual weather conditions, pandemic outbreaks such as COVID-19,
political events, war, terrorism, and unfavorable macroeconomic conditions such as inflation, which could disrupt business and limit our ability to grow our business and negatively affect our results of operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our long-term success depends, in part, on our ability to market and sell our products to customers located
outside of Japan and our future international operations could expose us to risks that could have a material adverse effect on our business, operating results, and financial condition.

***Risks Related to Government Regulation***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We currently do not, and do not plan in the near future to, market our consumer personal care products, including
SonoRepro, VUEVO, and kikippa, as medical devices. If we fail to comply with the government regulations relating to the promotion of such products, or to obtain any required approvals on a timely basis, we may incur fines, penalties, and consumer
lawsuits and our business and growth prospects may be negatively impacted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in government regulations and trade policies may materially and adversely affect our sales and results of
operations.

***Risks Related to Our Intellectual Property***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The failure to enforce and maintain our patents, trademarks and protect our other intellectual property could
materially adversely affect our business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We rely substantially on our trademarks and trade names. If our trademarks and trade names are not adequately
protected, then we may not be able to build name recognition in our markets of interest and our business may be harmed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our obligations under our existing or future product development and commercialization collaboration agreements
may limit our ability to exploit intellectual property rights that are important to our business. Further, if we fail to comply with our obligations under our existing or future collaboration agreements, or otherwise experience disruptions to our
business relationships with our prior, current, or future collaborators, we could lose intellectual property rights that are important to our business.

***Risks Related to Cybersecurity***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Security breaches, loss of data, and other disruptions could compromise sensitive information related to our
business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cybersecurity breaches and other disruptions or failures in our information technology systems could compromise
our information, result in the unauthorized disclosure of confidential customer, employee, Company and business partners' information, damage our reputation, and expose us to liability, which could negatively impact our business.

***Risks Related to this Offering and Ownership of the ADSs***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are an "emerging growth company" and, as a result of the reduced disclosure and governance
requirements applicable to emerging growth companies, our common shares and ADSs may be less attractive to investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• As a "foreign private issuer" we are permitted, and intend, to follow certain home country corporate
governance and other practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The requirements of being a public company may strain our resources and divert management's attention.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have identified material weaknesses in our internal control over financial reporting. If our remediation of
these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results in a
timely manner, which may adversely affect investor confidence in our Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The market price of our ADSs may be volatile or may decline regardless of our operating performance, and you may
not be able to resell your ADSs at or above the public offering price.

***Risks Related to Japan***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We are incorporated in Japan, and it may be more difficult to enforce judgments against us that are obtained in
courts outside of Japan.

**Share Capital** 

Prior to the effective date of the registration statement of which this prospectus is a part, we intend to effect (i) a 1-to-● share split of all issued common shares (the "Share Split"), and (ii) a conversion on a one-to-one basis of all our issued and outstanding convertible preferred shares including 1,111 Series AA convertible preferred shares, 4,600 Series A convertible preferred shares, 404 Series BB convertible preferred shares, 3,688 Series B convertible preferred shares and 1,923 Series C convertible Preferred Shares, into common shares (the "Conversion" and, together with the Share Split, the "Share Capital Reorganization"). See "Description of Share Capital and Articles of Incorporation."

**Implications of Being an Emerging Growth Company and a Foreign Private Issuer** 

We are an "emerging growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"), as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are eligible to take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to reporting companies that make filings with the U.S. Securities and Exchange Commission (the "SEC"). For so long as we remain an emerging growth company, we will not be required to, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• present more than two years of audited financial statements and two years of related selected financial data and
management's discussion and analysis of financial condition and results of operations disclosure in our registration statement of which this prospectus forms a part;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• disclose certain executive compensation related items; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• seek shareholder non-binding advisory votes on certain executive
compensation matters and golden parachute arrangements, to the extent applicable to our Company as a foreign private issuer.<sup></sup>

The JOBS Act also permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates.

We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (ii) the last day of the fiscal year during which we have total annual gross revenue of at least $1.235 billion, (iii) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which means the market value of our common shares that are held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, upon the consummation of this offering, we will report in accordance with the rules and regulations applicable to a "foreign private issuer." As a foreign private issuer, we will take advantage of certain provisions under the rules that allow us to follow the laws of Japan for certain corporate governance matters. Even when we no longer qualify as an emerging growth company, as long as we continue to qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations with respect
to a security registered under the Exchange Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, and current reports on Form 8-K upon the occurrence of specified significant events; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Regulation Fair Disclosure ("Regulation FD"), which regulates selective disclosures of material
information by issuers.

As a foreign private issuer, we will have four months after the end of each fiscal year to file our annual report on Form 20-F with the SEC. In addition, our executive officers, directors, and principal shareholders will be exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act.

Foreign private issuers, like emerging growth companies, are exempt from certain more stringent executive compensation disclosure rules. As such, even when we no longer qualify as an emerging growth company, as long as we continue to qualify as a foreign private issuer under the Exchange Act, we will continue to be exempt from the more stringent compensation disclosures required of public companies that are not a foreign private issuer.

We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal

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quarter. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the majority of our executive officers or directors are U.S. citizens or residents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) more than 50% of our assets are located in the United States; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) our business is administered principally in the United States.

In this prospectus, we have taken advantage of certain of the reduced reporting requirements as a result of being an emerging growth company and a foreign private issuer. Accordingly, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

**Corporate Information** 

Our Company was originally incorporated in Japan on May 10, 2017.

Our agent for service of process in the United States is •. Our principal executive offices are located at 2-20-5 Kanda Misaki-cho, Chiyoda-ku, Tokyo 101-0061, Japan, and our main telephone number is +81(0)3-5244-4880. Our website is <u>https://pixiedusttech.com/</u>. The information contained in, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this prospectus. You should not consider any information on our website to be a part of this prospectus or use any such information in your decision on whether to purchase the ADSs. We have included our website address in this prospectus solely for informational purposes.

**Trademarks** 

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. As of January 31, 2023, we had 50 registered trademarks and 66 trademark applications. "Pixie Dust Technologies" is registered in Japan, the United States and with the World Intellectual Property Organization. The other registered trademarks are currently only registered in Japan. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties' trademarks, service marks, trade names or food products in this prospectus is not intended to imply a relationship with, or endorsement or sponsorship by, these other parties. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the <sup>®</sup>, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names.

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**THE OFFERING** 

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| **Issuer**  | Pixie Dust Technologies, Inc. |

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| **ADSs Offered by Us**  | ● ADSs (or ● ADSs if the underwriters exercise in full the option to purchase additional ADSs). |

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| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**U.S. offering**  | ● ADSs |

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| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Japanese offering**  | ● ADSs |

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| **Offering Price**  | We currently expect the initial public offering price to be between $● and $● per ADS. |

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| **ADSs to be Outstanding Immediately After this Offering**  | ● ADSs (or ● ADSs if the underwriters exercise in full their option to purchase additional ADSs). |

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|:---|:---|
| **Common Shares to be Outstanding Immediately After this Offering**  | ● common shares (or ● common shares if the underwriters exercise in full their option to purchase additional ADSs). |

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|:---|:---|
| **Common Shares**  | Our share capital consists of common shares. Each common share shall be entitled to one vote on all matters subject to shareholders' vote. |

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|:---|:---|
| **Option to Purchase Additional ADSs**  | We have granted to the underwriters an option to purchase up to ● additional ADSs from us at the initial public offering price less the underwriting discounts and commissions, to cover over-allotments, if any, for a period of 45 days from the date of this prospectus. |

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|:---|:---|
| **Representative's Warrants**  | We will issue to Boustead Securities, LLC (the "Representative"), the representative of the underwriters, or its permitted designees warrants to purchase up to ● ADSs if the underwriters exercise their over-allotment option in full. The Representative's warrants will have an exercise price equal to the lower of: (i) the fair market value price per ADS as of the closing date of this offering; (ii) in the event that convertible securities are sold in this offering, the conversion price of such securities; or (iii) in the event that warrants or other rights are issued in this offering, the exercise price of such warrants or other rights, will be exercisable upon issuance, and will terminate on the fifth anniversary of the effective date of the registration statement of which this prospectus is a part. |

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|:---|:---|
| **The ADSs**  | Each ADS represents ● common shares. The ADSs are evidenced by American depositary receipts ("ADRs") issued by ●, as the depositary. |

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The depositary will be the holder of the common shares underlying the ADSs, and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary, and owners and beneficial owners of ADSs from time to time.

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You may surrender your ADSs to the depositary to withdraw the common shares underlying your ADSs. The depositary will charge you a fee for such an exchange.

We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement, as amended, if you continue to hold your ADSs.

To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled "Description of American Depositary Shares." We also encourage you to read the deposit agreement, a form of which is an exhibit to the registration statement to which this prospectus forms a part.

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|:---|:---|
| **Depositary**  | ● |

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|:---|:---|
| **Use of Proceeds**  | We estimate that the net proceeds to us from this offering will be approximately $● (or $● if the underwriters exercise in full their option to purchase additional ADSs), assuming an initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. |

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We currently intend to use the net proceeds from this offering for working capital and general corporate purposes, which include developing and commercializing our technologies and related products. See "Use of Proceeds."

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|:---|:---|
| **Lock-ups**  | We, our directors, corporate auditors, executive officers, employees and certain of our existing shareholders have agreed with the underwriters not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of, or otherwise dispose of, any of our securities for a period of up to 12 months following the closing of this offering, subject to certain exceptions. See "Underwriting — No Sales of Similar Securities" for more information. |

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|:---|:---|
| **Listing**  | We intend to apply to list the ADSs on the Nasdaq Capital Market ("Nasdaq") under the symbol "PXDT." Such listing will be subject to us fulfilling all of the listing requirements of the Nasdaq, including, without limitation, the distribution of the ADSs to a minimum number of public shareholders. |

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|:---|:---|
| **Risk Factors**  | **Investing in the ADSs is highly speculative and involves a high degree of risk**. You should carefully read and consider the information set forth under the heading "Risk Factors" beginning on page 14, and all other information contained in this prospectus, before deciding to invest in the ADSs. |

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<sup>(1)</sup> The number of common shares that will be outstanding after this offering is based on ● common shares outstanding immediately prior to the completion of this offering and excludes:

(a) up to ● ADSs issuable upon the exercise in full by the underwriters of their option to purchase additional ADSs from us;

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(b) up to an aggregate of ● common shares issuable upon the exercise of stock options outstanding as of ●, 2023, at a weighted-average exercise price of $● per share; and

(c) up to an aggregate of ● common shares issuable upon the exercise of the Representative's warrants as described above.

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Unless otherwise indicated, all information contained in this prospectus assumes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• no exercise of the option granted to the underwriters to purchase up to • additional ADSs in connection with
this offering.

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**SUMMARY FINANCIAL INFORMATION AND OPERATING DATA** 

The following tables set forth our summary financial information as of and for the years ended April 30, 2022 and 2021 and the six months ended October 31, 2022 and 2021. You should read the following summary financial information in conjunction with, and it is qualified in its entirety by reference to, our audited financial statements and the related notes thereto, our unaudited condensed financial statements and the related notes thereto, and the sections entitled "Capitalization", "Selected Financial Information and Operating Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", each of which are included elsewhere in this prospectus.

Our summary statement of operations information for the years ended April 30, 2022 and 2021, and our related summary balance sheet information as of April 30, 2022, and 2021, have been derived from our audited financial statements as of and for the years ended April 30, 2022 and 2021, prepared in accordance with U.S. GAAP, which are included elsewhere in this prospectus.

Our summary statement of operations information for the six months ended October 31, 2022 and 2021, and our related summary balance sheet information as of October 31, 2022, have been derived from our unaudited condensed financial statements as of and for the six months ended October 31, 2022, prepared in accordance with U.S. GAAP, which are included elsewhere in this prospectus.

Our historical results for the periods presented below are not necessarily indicative of the results to be expected for any future periods.

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|:---|:---|:---|:---|:---|:---|:---|
| **(*in thousands,<br>except per share amounts*)** | **Six months ended October 31,** | **Six months ended October 31,** | **Six months ended October 31,** | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
| **(*in thousands,<br>except per share amounts*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** |
|  **<u>Statement of Operations<br>Information:</u>** |  |  |  |  |  |  |
|  Revenue: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | $820 | ¥121866 | ¥179213 | $4281 | ¥636265 | ¥512772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Products | 247 | 36773 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 1067 | 158639 | 179213 | 4281 | 636265 | 512772 |
|  Cost and Expenses: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 155 | 23121 | 71258 | 1391 | 206604 | 136390 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of products | 162 | 24053 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 2283 | 339283 | 364465 | 4670 | 694072 | 601731 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 4332 | 643892 | 360962 | 5604 | 832994 | 525158 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expenses, net |  |  | 311 | 2 | 311 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total costs and expenses | 6932 | 1030349 | 796996 | 11667 | 1733981 | 1263279 |
|  **Loss from operations** | (5865) | (871710) | (617783) | (7386) | (1097716) | (750507) |
|  Interest expense | (90) | (13423) | (11662) | (167) | (24777) | (17672) |
|  Other income | 1 | 133 | 4488 | 88 | 13025 | 8695 |
|  **Loss before income taxes** | (5954) | (885000) | (624957) | (7465) | (1109468) | (759484) |
|  Income tax expense |  |  |  |  |  |  |
|  **Net loss** | $(5954) | ¥(885000) | ¥(624957) | $(7465) | ¥(1109468) | ¥(759484) |
|  Weighted-average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 |
|  Net loss per share attributable to common stockholders, basic and diluted | $(595.44) | ¥(88499.96) | ¥(62495.68) | $(746.46) | ¥(110946.80) | ¥(75948.41) |

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|:---|:---|:---|:---|:---|:---|
| **(*in thousands*)** | **As of October 31,** | **As of October 31,** | **As of April 30,** | **As of April 30,** | **As of April 30,** |
| **(*in thousands*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** |
|  **<u>Balance Sheet Information:</u>**  |  |  |  |  |  |
|  Total assets | $36401 | ¥5410219 | $25497 | ¥3789682 | ¥4541714 |
|  Total liabilities | $16358 | ¥2431301 | $14535 | ¥2160405 | ¥1802969 |
|  Stockholders' Equity: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C convertible preferred stock, no par value; 6,200 shares authorized; 1,923 shares issued and outstanding; aggregate liquidation preference of ¥4,357,518 ($29318) at October 31, 2022; and no shares authorized and no shares issued and outstanding at April 30, 2022 | 7329 | 1089380 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series B convertible preferred stock, no par value; 3,688 shares authorized; 3,688 shares issued and outstanding; aggregate liquidation preference of ¥7,791,269 ($52421) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series BB convertible preferred stock, no par value; 404 shares authorized; 404 shares issued and outstanding; aggregate liquidation preference of ¥199,963 ($1345) at October 31, 2022, and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series A convertible preferred stock, no par value; 298,889 shares authorized; 4,600 shares issued and outstanding; aggregate liquidation preference of ¥862,500 ($5803) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series AA convertible preferred stock, no par value; 1,111 shares authorized; 1,111 shares issued and outstanding; aggregate liquidation preference of ¥37,303 ($251) at October 31, 2022, and April 30, 2022 |  |  |  |  |  |
|  Common stock, no par value; 689,708 shares authorized; 10,000 shares issued and outstanding at October 31, 2022; and 695,908 shares authorized and 10,000 shares issued and outstanding at April 30, 2022 | 673 | 100000 | 673 | 100000 | 100000 |
|  Additional paid-in capital | 34255 | 5091299 | 26549 | 3946038 | 3946038 |
|  Accumulated deficit | (22214) | (3301761) | (16260) | (2416761) | (1307293) |
|  **Total stockholders' equity** | 20043 | 2978918 | 10962 | 1629277 | 2738745 |
|  **Total Liabilities and Stockholders' Equity** | $36401 | ¥5410219 | $25497 | ¥3789682 | ¥4541714 |

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<sup>(1)</sup> For convenience, the Japanese yen amounts are expressed in U.S. dollars at the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022 as reported by the U.S. Federal Reserve in is weekly release on November 7, 2022 (www.federalreserve.gov/releases/h10/2022/). 

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**RISK FACTORS** 

***An investment in the ADSs is highly speculative and involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. You should carefully consider the factors described below, together with all the other information contained in this prospectus, including the audited and unaudited financial statements and the related notes included in this prospectus, before deciding whether to invest in the ADSs. These risk factors are not presented in the order of importance or probability of occurrence. If any of the following risks occurs, our business, financial condition and results of operations could be materially and adversely affected. In that event, the market price of the ADSs could decline, and you could lose part or all your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled "Cautionary note regarding forward-looking statements."***

**Risks Related to Our Company and Our Business** 

***We are an early-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.***

We are an early-stage company and have a limited history in our business. We commenced operations in 2017 and have not commercially launched any product which generated significant revenues. Substantially all of our revenue to date has been generated from commissioned research and development and solution services for third parties including collaboration arrangements aimed at developing, testing and validating new products using our technologies. We are now focusing on developing and commercializing products that we plan to offer to a wide market including iwasemi, a sound-absorbing metamaterial we launched in July 2022, SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device we launched in November 2022, VUEVO, a series of directional voice arrival detection devices for Individuals with DHH, and kikippa, an acoustic stimulation device intended to help individuals with cognitive impairment, which we expect to launch in the second calendar quarter of 2023. Our prospects must be considered in light of the uncertainties, risks, expenses and difficulties frequently encountered by companies in their early stages of operations and following shifts in business models. We have not yet achieved market acceptance for our products, generated significant revenue from product sales, produced our products at scale, scaled our manufacturing capabilities to meet potential demand at a reasonable cost, established a sales model or conducted sales and marketing activities necessary for successful product commercialization. Consequently, predictions about our future success or viability are highly uncertain and may not be as accurate as they could be if we had a longer operating history or a company history of successfully developing, commercializing and generating revenue from products for a mass market.

In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown obstacles. While, to date, we have generated revenue primarily from commissioned research and development and solution services for third parties including collaboration arrangements with third parties, we expect to generate revenue primarily from the sale of our products as we progress our efforts to commercialize our product candidates and expand our marketing and distribution capabilities; however, we may not be successful in our efforts. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in emerging and rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations, and our business, financial condition and results of operations could be adversely affected.

***We have a history of operating losses and we do not expect to be profitable for the foreseeable future.***

We have incurred operating losses to date and may not be profitable in the foreseeable future. Specifically, we recorded a net loss of ¥759,484 thousand ($5,110 thousand) for the year ended April 30, 2021, and

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¥1,109,468 thousand ($7,465 thousand) for the year ended April 30, 2022, and a net loss of ¥885,000 thousand ($5,954 thousand) for the six months ended October 31, 2022. As of October 31, 2022, we had an accumulated deficit of ¥3,301,761 thousand ($22,214 thousand).

To date, we have funded our operations primarily through the issuance of convertible preferred shares, borrowings from banks, commissioned research income, and grant income. As we focus on developing and commercializing our own products, we have devoted substantial resources to R&D, testing, and commercialization of our products. These operating costs have adversely affected, and may continue to adversely affect, our working capital, total assets and shareholders' equity.

We expect our losses to continue for the foreseeable future as we continue to invest significant additional funds toward ongoing R&D as we develop new products through investments in our wave control technologies and product pipeline and toward the timely commercialization of new products and improved versions of existing products. We also expect that our operating expenses will increase because of becoming a public company and will continue to increase as we grow our business and expand our marketing and distribution capabilities. As we ramp the sale of new products, we expect to initially experience negative product gross margins. We expect our cost of product revenue to increase over time in absolute dollars and our gross margins will vary based on the volume and mix of products sold. We may not achieve the product gross margins that we anticipate. If our revenue and gross profit does not increase sufficiently to keep pace with our investments and expenses, our net losses may not decline, and we may not attain profitability in the future. Further, our limited operating history makes it difficult to effectively plan for and model future growth, revenue, and operating expenses. Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control, including the impact of market acceptance of our products, product and technology development, our ability to develop and commercialize new products in a timely manner, our ability to scale our manufacturing capacity, and our market penetration and margins. We may never be able to generate sufficient revenue to achieve or sustain profitability. Our failure to achieve or maintain profitability could negatively impact the value of our ADSs and common shares. ****

***It is difficult to predict the time and cost of development and commercialization of our pipeline products, which are produced by or based on the relatively novel and complex wave control technologies and are subject to many risks, any of which could prevent or delay revenue growth and adversely impact our market acceptance, business and results of operations.***

We have concentrated our R&D efforts to date on a select number of pipeline products for commercialization based on technical feasibility and market opportunity. We launched iwasemi, a sound-absorbing metamaterial in July 2022 and SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device in November 2022. We also expect to launch VUEVO, a series of directional voice arrival detection devices for Individuals with DHH, and kikippa, an acoustic stimulation device intended to help individuals with cognitive impairment, in the second calendar quarter of 2023. We plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi in the next few years. We also have other product candidates such as hackke, a location positioning technology, and KOTOWARI, a technology providing spatial analysis data, which are currently undergoing trial implementation.

The typical development cycle of new pipeline products can be lengthy and may require new scientific discoveries or advancements and the development and engineering of complex technology, including improvements or modifications to our existing wave control technologies. As we ramp the sale of new products, we expect to initially experience negative product gross margins. We expect our cost of product revenue to increase over time in absolute dollars and our gross margins will vary based on the volume and mix of products sold. We may not achieve the product gross margins that we anticipate.

Further, the variety of our products and product candidates, differences in industries as well as pricing pressures and other factors, leads to challenges in scaling production and sales across the portfolio. We also may

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depend on third parties for financing, the supply of key inputs and various components and for manufacturing capacity, making our ability to develop new pipeline products complex and subject to risks and uncertainties regarding commercial feasibility, timing and satisfactory technical performance of pipeline products. Additionally, even after the incurrence of significant costs to develop a product, we may not be able to develop a commercially viable product at all. We may need to obtain regulatory approvals for marketing our products, which may require us to complete a lengthy application process. If we do not achieve the required technical specifications or successfully manage our new product development processes, or if commercialization cannot be conducted according to our expected schedule, then our revenue growth from new pipeline products may be prevented or delayed, and our business and operating results may be harmed.

***Our ability to increase revenue and achieve profitability will depend on the successful commercialization of our products and product candidates, including SonoRepro, kikippa, VUEVO, and iwasemi in the next one to three years, and our product and product candidates may not be successfully commercialized, or we may experience delays in achieving market acceptance, which could negatively impact our business.***

We have yet to generate any significant revenue from sales of our own products. In the near term, we plan to focus on commercializing our products, iwasemi, a sound-absorbing metamaterial we launched in July 2022 and SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device we launched in November 2022, and product candidates, VUEVO, a series of directional voice arrival detection devices for individuals with DHH, and kikippa, an acoustic stimulation device intended to help individuals with cognitive impairment. In the initial phase, we expect to introduce VUEVO mic, which is a tabletop microphone that can connect to a computer or tablet. At the next phase, we expect to introduce our smart-glasses product for individuals with DHH, VUEVO glasses. We expect to launch VUEVO mic and kikippa in the second calendar quarter of 2023. In the medium term, we plan to commercialize our product candidate VUEVO glasses, which is based on the VUEVO technology, as well as new devices with expanded applications based on the SonoRepro technology. Our financial prospects in the near term, including our ability to achieve profitability, as well as our future growth, may depend greatly on the commercialization of SonoRepro, kikippa, VUEVO, and iwasemi, which are intended to be sold to a wide market inside and outside Japan such as other Asian countries. To date, we have only produced and sold an insignificant amount of iwasemi and SonoRepro. We have not launched VUEVO or kikippa. If development or manufacturing challenges arise or errors are discovered during the product development cycle of VUEVO or kikippa, the launch date of these products may be delayed.

The commercial success of our product and product candidates is dependent on a number of factors, some of which are beyond our control, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability of our exclusive manufacturing partners or any other third parties to which we outsource the
manufacture of our products to manufacture and supply our products in sufficient quantities to meet demand, in a timely manner, in accordance with our specifications and in compliance with applicable regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• demand for our products from our targeted customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the availability, perceived superiority, relative cost, relative convenience and relative effectiveness of our
products compared to our competitors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• any positive or negative press coverage of the products or competitive products with respect to their
convenience, cost and effectiveness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effectiveness of our marketing and sales efforts, including our ability to secure a sufficient number of
qualified sales channels or representatives to market our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to raise additional capital, on acceptable terms or at all, if necessary, to support the
commercialization of our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to comply with all regulatory requirements applicable to our products including false advertising and
consumer protection laws;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to introduce and market our products in international markets including the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to acquire, maintain and enforce our intellectual property rights; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the proprietary rights of third parties may prevent us from using our technology or selling our products.

We currently do not, and do not plan in the near future to, market our consumer personal care products including SonoRepro, VUEVO, and kikippa as medical devices. As a result, we are prohibited by the applicable government regulations from marketing or labelling our products as intended for use in the diagnosis, treatment, or prevention of disease in humans or animals, or to affect the structure or functioning of the bodies of humans or animals. For example, we are marketing SonoRepro as a personal scalp care device and do not make any claims relating to hair growth or preventing hair loss. The regulatory limitations we are subject to for our personal care products may affect our ability to effectively promote these products to consumers. We may need to apply for regulatory approvals to market our products as medical devices in the future in certain jurisdictions, in which case there is no assurance that we may receive the requisite regulatory approvals in a timely and cost-efficient manner.

In addition, our future success will depend on our customers having a positive experience with our products and increasing demand for our products because of positive feedback and word of mouth. Customers may become dissatisfied if their expectations of beneficial effect after using our products are not met. Customers may also be dissatisfied if adverse events occur, such as equipment malfunction, inaccurate displays, or significant delays in response. Even if we were able to bring new products to the market, we may not be able to demonstrate the superiority of our products over competing products due to factors such as the emergence of alternative technologies to our proprietary technologies, including our wave control technology. If our products fail to meet our customers' expectations or if our customers experience adverse events, they may be discouraged from repurchasing our products or referring others to purchase our products. In addition, dissatisfied customers may express their negative opinions through social media. Failure to meet our customers' expectations and the resulting negative publicity could adversely affect our reputation and future sales.

Any costs or losses associated with the failure of product development or launch activities could also adversely affect our business and financial condition.

***We operate in a very competitive business environment, and if we are unable to compete successfully against our existing or potential competitors, our business, financial condition, and results of operations may be adversely affected.***

Our existing products are, and any new products we develop and commercialize will be, subject to intense competition. Our ability to compete successfully will depend on our ability to continue to apply our wave control technologies to develop innovative and practical solutions of societal problems in a timely and cost-effective manner. In addition, our ability to increase our customer base and achieve broader market acceptance of our products will depend to a significant extent on our ability to expand our marketing efforts. Given the variety of our pipeline products, the number of companies with which we compete varies significantly depending on the geographic market, business segment and line of business. Some of our current and prospective competitors may enjoy a number of competitive advantages over us, including greater name and brand recognition; greater financial and human resources; larger R&D departments; broader product lines; larger sales forces and more established distributor networks; substantial intellectual property portfolios; larger and more established customer bases and relationships; the leverage to enter contracts on more favorable terms; and better established, larger scale and lower cost manufacturing capabilities. There can be no assurance that we will be able to compete successfully against current and future competitors or that the competitive pressures that we face will not materially adversely affect our business, financial condition, and results of operations.

***Our results of operations will be harmed if we are unable to accurately forecast customer demand for our product and product candidates.***

Our estimates of the market for our products and product candidates are based on a number of internal and third-party estimates. Our ability to accurately forecast demand for our products and product candidates is subject

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to a number of factors, including our inability to accurately manage our growth strategy, the introduction of products by competitors, increases and decreases in customer demand for our products and competitors' products, our inability to accurately predict market acceptance of new products, changes in general market conditions, including as a result of public health emergencies such as the COVID-19 pandemic, seasonal demands, regulatory matters or decreased customer confidence in current and future economic conditions.

While we believe that the data underlying our assumptions and estimates is reasonable, we have not independently verified the accuracy of the third-party data underlying our assumptions and estimates, and these assumptions and estimates may be incorrect. In addition, the conditions upon which the assumptions and estimates are based may change at any time, including due to factors outside of our control, which may reduce the predictive accuracy of these underlying factors. If the actual number of customers who benefit from our products, the price at which we are able to sell our products, or the annual addressable market for our products is smaller than our estimates, sales growth could be impaired and our business, financial condition and results of operations could be adversely affected.

Further, in order to ensure adequate supply, we must forecast our inventory needs and manufacture our products based on projected future demand. If forecasts do not materialize, inventory projections may be inaccurate, resulting in inventory shortages or excesses. Inventory levels that exceed customer demand could lead to inventory write-downs or write-offs, which could adversely affect our gross profit margins and damage our brand strength. Conversely, if we underestimate customer demand for our products, our manufacturing partners may not be able to provide us with supplies that meets our requirements, which could result in damage to our reputation and customer relationships. In addition, if our demand increases significantly, we may not be able to obtain additional supplies of materials or increased manufacturing capacity on terms acceptable to us when we need them, or at all, which could adversely affect our business, financial condition and results of operations.

***If our products and product candidates do not perform as expected, our operating results, reputation and business will suffer.***

Our products and product candidates may have design and manufacturing defects and/or labeling defects that prevent them from functioning as expected or may require repairs, recalls, and design changes. Further, the accuracy and reproducibility that we have demonstrated in tests with respect to our products and product candidates may not continue and is not indicative of our actual future performance. There is a limited frame of reference for assessing the long-term performance of our products and product candidates. If our products do not perform as expected, customers may delay deliveries, terminate additional orders, or demand product recalls, each of which could adversely affect our sales and brand and adversely affect our business, financial condition and results of operations. Our future success depends on our ability to implement our business strategy and to develop and introduce a version of our products that meet the evolving needs of our customers in a timely manner. If we are unable to establish an adequate distribution, customer service or technical support network, we may not be able to effectively market and distribute our products or our customers may decide not to order our products. Any operational, technical, user or other problems could adversely affect performance, damage our reputation, affect the commercial attractiveness of our products, increase costs or divert resources, including management's time and attention from other projects or priorities. Any of the above could have a material adverse effect on our business, financial condition, and results of operations.

***We may face significant challenges in obtaining market acceptance of our product and product candidates, which could adversely affect our potential sales and revenues.***

We have not yet established a market or customer base for our products or product candidates. The market acceptance of our products by potential customers is uncertain, and if we do not achieve sufficient market acceptance, our ability to generate revenue and profits will be significantly limited. Market acceptance will require substantial marketing efforts and the expenditure of significant amounts of money by us to communicate the benefits of using our products. We may encounter significant market resistance to our products and our

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products may not be accepted by the market. Our products and technologies may not achieve the expected reliability, performance and durability. Orders for our products may be cancelled, customers who have begun using our products may stop using them, and customers who are expected to begin using our products may not do so. Factors that may affect our ability to achieve market acceptance of our products include whether the product is effective, correctly priced, and safe.

***If we cannot provide quality customer and user support for our products once they are sold and delivered to our customers, we could lose customers and our business and prospects will suffer.***

Once our products have been delivered to our customers, ongoing customer and user support may be needed and can be complex. For example, we expect many of our potential users for kikippa to be the elderly or people with cognitive impairment. Therefore, we will require additional customer support and user support personnel to cater to such population groups. In order to effectively support potential new customers and eventual users, we may need to significantly increase our customer and user support staff and provide them with the requisite training for the specific targeted customers and users. If we are unable to attract, train and retain the number of qualified customer and user support personnel that our business requires, our business and prospects may be harmed.

***Quality problems with, and product liability claims in connection with, our products could lead to recalls or safety alerts, harm to our reputation, or adverse verdicts or costly settlements, and could have a material adverse effect on our business, financial condition and results of operations.***

Quality is critical to us and our customers because product defects can have serious and costly consequences. Our business is exposed to the potential product liability risks inherent in the design, manufacture, and sale of our products. Component failures, manufacturing defects, design flaws, and labeling defects can result in unsafe conditions and injuries to users of our products. These problems could lead to a recall of our products or a safety alert. They could also lead to unfavorable judicial decisions or settlements arising from product liability claims or lawsuits, including class action lawsuits, which could adversely affect our business, financial condition, and results of operations. In particular, a material adverse event to any of our products could reduce market acceptance and demand for all products offered under our brands, which could adversely affect our reputation and our ability to sell products in the future.

High quality products are critical to the success of our business. If we fail to meet the high standards that we set for ourselves and that our customers expect of us, and if our products become the subject of recalls, safety alerts or other serious adverse events, our reputation could be harmed, we could lose customers and our revenues could decline.

In addition, any product liability claims brought against us, regardless of the basis for such claims, could be costly to defend and settle. Any of the issues, including product liability claims and product recalls, may arise in the future. Regardless of the ultimate outcome, this could damage our reputation and have a material adverse effect on our business, financial condition, and results of operations.

***The illegal distribution and sale by third parties of counterfeit versions of our products or the unauthorized diversion by third parties of our products could have an adverse effect on our net sales and a negative impact on our reputation and business.***

Third parties may illegally distribute and sell counterfeit versions of our products. These counterfeit products may be inferior in terms of quality and other characteristics compared to our authentic products and/or the counterfeit products could pose safety risks that our authentic products would not otherwise present to consumers. Consumers could confuse counterfeit products with our authentic products, which could damage or diminish the image, reputation and/or value of our brand and cause consumers to refrain from purchasing our products in the future, which could adversely affect our reputation, business, financial condition, and results of operations.

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We believe our trademarks, patents, and other intellectual property rights are extremely important to our success and our competitive position. While we devote significant resources to the registration and protection of our intellectual property and the protection of our brand image and plan to aggressively pursue entities involved in the trafficking and sale of counterfeit products and the unauthorized diversion of our products, we may be unable to eliminate all counterfeiting activities and unauthorized product diversion, both of which could have a negative impact on our reputation and adversely affect our business, financial condition and results of operations.

***If we are unable to successfully expand our sales and marketing to match our growth, our business may be adversely affected.***

Our future sales will largely depend on its ability to develop and significantly expand our sales channels and sales force and increase the scope of our marketing activities. We plan to carefully expand and optimize our sales infrastructure and network in order to grow our customer base and business. Our business could be adversely affected if our efforts to expand our sales channels and sales force do not result in a commensurate increase in revenue and a decline in our operating margin. In particular, if we are unable to engage, train and retain qualified sales partners and personnel, or if new sales partners and personnel are unable to achieve desired productivity levels within a reasonable period of time, we may not realize the expected benefits and may not be able to increase our revenues.

We plan to devote significant financial and other resources to our marketing programs, which may result in significant upfront costs. If our marketing activities and expenditures do not result in a commensurate increase in revenue, our business and gross profit may be adversely affected.

We also believe it is important to increase and maintain awareness of our brands in a cost-effective manner in order for our products to be widely accepted and to attract new customers. Even with our brand promotion activities, we may not be able to increase our revenue due to lack of customer awareness. Even if revenues do increase, they may not be able to offset the costs and expenses incurred by us in building our brands. If we are not successful in promoting, maintaining, and protecting our brands, we may not be able to attract or retain the customers we need to realize a sufficient return on our brand-building efforts, and we may not be able to achieve the brand awareness that is essential for our products to be widely accepted by our customers.

***We have significant customer concentration, and this concentration may continue if we fail to diversify our customer base by successfully commercializing our products and product candidates.***

We have generated most of our revenue from commissioned research and development and solution services including under our collaboration agreements. During the fiscal year ended April 30, 2022, three customers accounted for approximately 54.3% of our total revenue. During the fiscal year ended April 30, 2021, two customers accounted for approximately 37.5% of our total revenue. Additionally, as of April 30, 2022, two customers' account receivable accounted for 59.8% and 10.1% of the total outstanding accounts receivable balance. As of April 30, 2021, two customers' account receivable accounted for 70.8% and 19.8% of the total outstanding account receivable balance. This concentration of customers leaves us exposed to the risks associated with the loss or default of one or more of these significant customers, which would materially and adversely affect our revenue and results of operations. If these customers were to default in their payment obligations under our collaboration agreements, significantly reduce their relationship with us, or if we are unable to replace the revenue through the sale of our products and services to additional customers, our financial condition and results from operations could be negatively impacted, and such impact would likely be significant. We expect to be able to diversify our customer base by commercializing our products including our products targeting consumer markets, however, customer concentration may continue if we fail to successfully commercialize our products.

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***Our ability to expand our product offerings and introduce additional products and services may be limited, which could have a material adverse effect on our business, financial condition, and results of operations.***

There can be no assurance that we will be successful in commercializing our products, developing or commercializing our product candidates, and expanding our product offerings, or that demand for our products will increase in the future. Entering new markets may require us to compete with new companies, meet customer expectations, and comply with new and complex regulations with which we are not familiar. Therefore, significant resources must be invested in market research, legal counsel, and organizational infrastructure, and the return on such investments may not be achieved for several years, if ever. In addition, failure to comply with applicable regulations or obtain the necessary licenses may result in fines and penalties. We also may not be able to demonstrate the value of our new products to our customers, which could impair our ability to successfully generate new revenue streams or receive returns greater than our investments. If these risks materialize, they could have a material and adverse effect on our business, financial condition, and results of operations.

***We are subject to risks related to our reliance on collaboration arrangements to fund development and commercialization of certain of our products and product candidates, and our financial results may be adversely impacted if such collaborations do not lead to the commercialization of our products.***

Collaborations with strategic partners such as established companies in their respective markets are necessary to successfully commercialize our existing and future products, and substantially all our revenue to date has been generated from research and development service contracts and collaboration agreements. In the near term, we expect revenue from collaborations to continue to represent a significant portion of our revenue. The terms of certain of our collaboration agreements include one or more of the following: joint ownership of the new intellectual property; assignment of the new intellectual property to either us or the collaborator; or either exclusive or non-exclusive licenses to the new intellectual property to us or the collaborator and other restrictions on our sole use of developments, such as non-competes. Such collaboration agreements also typically include one or more of the following payment terms: payments for the research and development services to be performed, milestone payments to be received upon the achievement of the milestone events defined in the agreements, and revenue-sharing and royalty payments. These exclusivity, revenue-sharing and other similar terms limit our ability to commercialize our products and technology and may impact the size of our business or our profitability, including in ways that we do not currently envision. For example, our collaboration agreements currently, and future agreements could, result in restrictions on our ability to use, transfer, or license intellectual property developed, or technology discovered through the collaborations, which now and may in the future restrict our ability to commercialize certain products. Please see the section entitled "*Business – Intellectual Property*" for more information. Even if certain of our products are commercialized pursuant to such agreements, the commercial returns, including any revenues and expenses derived from or allocable to products incorporating any developed intellectual property, may be shared between the parties, further reducing our potential future revenue or profitability.

Additionally, suitable collaborators might be scarce. Whether or not we pursue a collaboration will depend on a few of factors, including our assessment of the collaborator's resources and expertise, the terms and conditions of the proposed collaboration and their interest in our product or services. The collaborator must also, in turn, evaluate several factors, such as our technical and commercial capabilities as a partner, the potential market for the subject product, the costs and complexities of manufacturing and delivering the product to the market, and the potential for competing products. The collaborator may also consider alternative product or technologies for similar applications that may be available to develop internally or to collaborate on with another partner and whether such alternative approaches could be more attractive than the proposed collaboration with us for our product. The competition for collaborators is intense.

Even if a suitable collaboration partner is identified, the negotiation process is time-consuming and complex, and the collaboration may not be on terms that are optimal for us. Any such collaboration may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant

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integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management's time and attention to manage a collaboration, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers, or customers of any acquired business due to changes in management and ownership, and the inability to retain key employees of any acquired business.

Many factors may impact the success of such collaborations, including our ability to perform our obligations, our collaborators' satisfaction with our products and services, our collaborators' participation, and interest in supporting commercialization of products, and exposure to the risks of our collaborators. Like us, many of our collaborators are exposed to several risks, any of which could impact their ability to fulfill their obligations under our collaboration agreements, which in turn would adversely impact our ability to derive the anticipated benefits from these collaboration agreements. In addition, most of these agreements do not affirmatively obligate the other party to commercialize a product we have developed for them or to purchase specific quantities of any products. Some agreements do not require funding all research and development costs necessary to bring products to market. We may encounter numerous uncertainties and difficulties in developing, manufacturing, and commercializing any new products subject to these collaboration arrangements that may delay or prevent us from realizing their expected benefits or enhancing our business. Further, we may in the future have disputes with our collaborators, which may harm these relationships or require us to settle the disputes on unfavorable terms.

Any failure or difficulties in maintaining existing collaboration arrangements, establishing new collaboration arrangements, or building up or retooling our operations to meet the demands of our collaboration partners could have a significant negative impact on our business, including our ability to commercialize or achieve commercial viability for our products, lead to the inability to meet our contractual obligations, and could cause us to allocate or divert capital, personnel and other resources from our organization which could adversely affect our business, financial condition, results of operations, prospects, and reputation.

***We currently rely, and expect to continue to rely, on third parties to conduct many aspects of our product manufacturing and distribution, and these third parties may terminate these agreements or not perform satisfactorily.***

We do not have our own manufacturing facilities or capabilities for our products. We currently rely, and expect to continue to rely, on third parties to scale-up, manufacture and supply our products and product candidates including for SonoRepro, kikippa, VUEVO, and iwasemi. We also expect to rely on third parties for distribution, including our sales partners and their vendors. Risks arising from our reliance on third-party manufacturers include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduced control and additional burdens of oversight as a result of using third-party manufacturers and
distributors for many aspects of manufacturing activities, including regulatory compliance, quality control and quality assurance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• termination of manufacturing agreements, termination fees associated with such termination, or nonrenewal of
manufacturing agreements with third parties may negatively impact our planned development and commercialization activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the possible misappropriation of our proprietary technology, including our trade secrets and know-how; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• disruptions to the operations of our third-party manufacturers, distributors, or suppliers unrelated to our
product, including the merger, acquisition, or bankruptcy of a manufacturer or supplier or a catastrophic event, including disruption resulting from public heath emergencies such as the COVID-19 pandemic,
affecting our manufacturers, distributors, or suppliers.

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Any of these events could lead to development delays or affect our ability to successfully commercialize our products and product candidates. Some of these events could be the basis for action by a regulatory authority, including injunction, recall, seizure or total or partial suspension of production.

If any third-party manufacturer terminates its engagement with us or fails to perform as agreed, we may be required to find replacement manufacturers. Although we believe that there are several potential alternative manufacturers who could manufacture our products and product candidates, we may incur significant delays and added costs in identifying, qualifying and contracting with any such third party or potential second source manufacturer. These delays could result in a suspension or delay of marketing our products and of developing or marketing our product candidates.

***We are highly dependent on our senior management team and key personnel and our business could be harmed if we are unable to attract and retain personnel necessary for our success.***

We rely heavily on our senior management and key personnel. Our success depends on our ability to retain senior management, retain qualified personnel, including R&D personnel and sales and marketing professionals and other highly skilled personnel, for the foreseeable future, and integrate current and additional talent in all departments. The loss of senior management, sales and marketing professionals, scientists, engineers, and contractors could result in delays in product development and adversely affect our business. If we are not successful in attracting and retaining qualified personnel, our business, financial condition and results of operations could be adversely affected.

There is intense competition for skilled personnel in our markets, and we may not be able to hire and retain talented personnel on acceptable terms or at all. To encourage valuable employees to stay with us, in addition to salary and cash incentives, we have issued and will continue to issue stock options that vest over time. The value to employees of stock options that vest over time may be significantly affected by movements in our stock price over which we have no control and may be insufficient to compete with more favorable offers from other companies. Despite our efforts to retain valuable personnel, members of our management and key employees may terminate their employment with us in a short period of time.

Many of the other companies with which we compete for talented personnel may have greater financial and other resources, and longer histories in the industry than we do. If we hire employees from competitors or other companies, their former employers may attempt to claim that these employees or we have violated our legal obligations, which could result in a waste of our time and resources and could result in claims for damages. Our competitors may also provide opportunities, career growth or other characteristics more attractive than we can offer. If we are unable to attract and retain quality candidates on an ongoing basis, our ability to discover, develop and commercialize our wave control technologies and related products will be limited in percentage and success rate.

In addition, job seekers and existing employees often consider the value of the equity compensation they receive in connection with their employment. If the value of our equity compensation declines because we are a public company or for any other reason, our ability to recruit and retain highly skilled employees may be impaired.

If we are unable to attract new personnel or retain and motivate our current personnel, our business, financial condition and results of operations will be adversely affected.

***We have increased the size of our organization and expect to further increase it in the future, and we may experience difficulties in managing this growth. If we are unable to manage the anticipated growth of our business, our future revenue and operating results may be harmed.***

As of January 31, 2023, we had 70 full-time employees. As our sales and marketing strategy evolves and we become a publicly traded company, we expect to require additional management, operations, sales, marketing

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and other personnel. Future growth will place significant responsibilities on our management team, including responsibilities to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• identify, recruit, integrate, retain, and motivate additional employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• effectively manage internal development efforts while complying with contractual obligations with contractors and
other third parties; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• improve operational, financial, and administrative controls, reporting systems, and procedures.

Since our inception, we have experienced growth and expect to experience further growth in our business operations. This future growth may place a strain on our organizational, administrative, and operational infrastructure, including our quality control, operations, financial, customer service and sales organization management. We anticipate that we will continue to increase our headcount and hire more specialized personnel as our business grows. To properly manage our growth, we will need to hire, train and manage additional qualified scientists, engineers, laboratory personnel, customer service representatives, and sales and marketing personnel. Rapid expansion of human resources means inexperienced people developing, marketing, and selling our products, which can lead to inefficiencies, unanticipated costs, poor quality, and operational disruptions. If the performance of new hires declines, if we fail to hire, train, manage and integrate these new hires, or if we are not successful in retaining our existing employees, our business could suffer. We may not be able to maintain the quality of our products or our expected delivery dates, and we may not be able to meet the demands of our growing customer base. To properly manage our growth, we need to continuously improve our control systems in the areas of operations, finance, and management, as well as improve our reporting systems and procedures. The time and resources required to implement these new systems and procedures are uncertain, and failure to complete them in a timely, efficient, and effective manner could have an adverse effect on our operations. In addition, as a public company, we will be obligated to establish and maintain effective internal controls over financial reporting, and failure to maintain the adequacy of these internal controls could adversely affect investor confidence in us and, as a result, the value of our common shares.

***Matters relating to employment and labor law may adversely affect our business.***

Various labor laws in Japan govern our relationship with our employees and affect our operating expenses. These laws include employment classifications such as employee, independent contractor and contract labor, minimum wage requirements, employer contributions to social security, unemployment insurance and workers' compensation insurance, and other wage and benefit requirements. Substantial additional government regulation or the enactment of new laws, such as increases in minimum wages, changes in employment status or other labor law amendments, could have a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, the formation of a union by our employees could have a material adverse effect on our business, financial condition, results of operations or cash flows.

In addition, in the ordinary course of business, we are subject to claims by employees for compensation based on discrimination, harassment, unfair dismissal, and violations of labor laws. Such claims could result in the ongoing costs of litigation and significant settlements or damages against us that would require us to expend our resources, which could adversely affect our business, brand image, employee recruitment, financial condition, results of operations or cash flows.

***If we or our third-party contractors experience significant technological or other disruptions, our business may be harmed.***

We and our third-party contractors, including manufacturing contractors, rely on information technology systems to function efficiently in our or their businesses, including relating to the manufacture, distribution, and maintenance of our products, and for accounting, data storage, compliance, purchasing and inventory management. Our and our third-party contractors' information technology systems are vulnerable to computer viruses, ransomware or other malware, attacks by computer hackers, failures while upgrading or replacing

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software, databases or their components, power outages, fire or other natural disasters, or damage or loss of data, or other natural disasters, hardware failures, communication failures and user errors, other malfunctions, and other cyberattacks. We and our third-party contractors may encounter unintended events where third parties gain unauthorized access to the systems, which may result in interruption of our or their operations, corruption of data, or leakage of our confidential information. If disruptions or security breaches result in the loss of or damage to our data or systems, or inappropriate or unauthorized access, disclosure, or use of confidential, proprietary or other critical information, we may be liable for compensation and may suffer reputational damage.

Technological interruptions could disrupt our operations, including our ability to conduct R&D, ship and track product orders in a timely manner, forecast inventory requirements, manage our supply chain and provide other appropriate services, or impair our customers' ability to use our products. We will also rely heavily on transportation service providers to ensure that our products are transported reliably and safely point-to-point to our customers and users.

If carriers of our products encounter delivery performance problems such as lost, damaged, or destroyed systems, it can be costly to replace such systems in a timely manner. If this were to occur, our reputation could be harmed, demand for our products could decrease, and the costs and expenses of our business could increase. In addition, a significant increase in shipping costs could adversely affect our operating margins and results of operations. Similarly, strikes, severe weather, natural disasters or other service disruptions affecting the delivery services we use could adversely affect our ability to process product orders in a timely manner.

If we or our third-party contractors experience a material failure of our technological or delivery systems, we may not be able to repair such systems in an efficient and timely manner. Accordingly, such an event could disrupt or reduce the efficiency of our overall business, which could adversely affect our business, financial condition, and results of operations. Our information systems require us to continuously invest significant resources to maintain, protect and enhance our existing systems. If we are unable to effectively maintain and protect the integrity of our information systems and data, our business, financial condition, and results of operations could be adversely affected.

***We may acquire other companies or technologies, which could divert our management's attention, result in additional dilution to shareholders and otherwise disrupt our operations and adversely affect our business, financial condition, and results of operations.***

Our success will depend on our ability to grow our business, including through acquisitions. We may identify opportunities to establish and expand our industry leadership internationally through selective joint ventures or acquisitions to further leverage our differentiated technologies. In some situations, the decision may be made to do this through the acquisition of complementary businesses or technologies rather than through internal development. Identifying suitable acquisition candidates can be difficult, time-consuming, and expensive, and we may not be able to successfully complete the acquisitions we identify. The risks we face in connection with acquisitions are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the diversion of management's time and focus from running the business to addressing the integration
challenges of the acquisition, including whether how to integrate the acquired company's employees and accounting, management information, human resources, and other management systems into the Company, and the coordination of technology,
research and development, and sales and marketing functions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the need to implement or improve controls, policies and procedures in businesses that may have lacked effective
controls, policies and procedures prior to the acquisition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the potential for write-downs of intangible and other assets acquired in such transactions, which could adversely
affect our operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• incurring liability for the pre-acquisition activities of the acquired
company, including patent and trademark infringement claims, violations of law, commercial disputes, tax liabilities and other known or unknown liabilities; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• litigation or other claims relating to the acquired company, including claims by terminated employees, consumers,
former shareholders or other third parties.

If we are unable to address these risks and other issues that arise in connection with acquisitions and investments, we may not realize the expected benefits from the acquisition or investment, incur unexpected liabilities or otherwise harm our business. In addition, future acquisitions may result in the issuance of dilutive securities, incurrence of debt, incurrence of contingent liabilities, amortization or goodwill, any of which could adversely affect our financial condition. If any of these risks materialize, it could have a material adverse effect on our business, financial condition and results of operations.

***Insurance policies may be expensive and only protect us from some business risks, which will leave us exposed to significant uninsured liabilities.***

Our business may expose us to product liability and other risks inherent in the development, testing, manufacturing, and marketing of our products. Product liability and other claims or incidents, such as regulatory claims, labor disputes, and cyber incidents and breaches, could delay or prevent the development and commercialization of our products. Even if we succeed in marketing products, such claims could result in regulatory authority investigation of the safety and effectiveness of our products, our manufacturing processes, and facilities or, our marketing materials and programs. We may potentially be subject to the Japanese Pharmaceuticals and Medical Devices Agency or other regulatory authority's investigations which could lead to fines or more serious enforcement action, limitations on which they may be used or suspension. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management's time, and our resources and substantial monetary awards to users of our products. We currently have insurance that we believe is appropriate for our stage of development and may need to obtain higher levels prior to advancing our product candidates or marketing any of our product candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, product liability and other types of insurance (such as cyber insurance) is becoming increasingly expensive and difficult to obtain. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability or other claims or incidents, including data breach and incidents, that could have an adverse effect on our business and financial condition.

***Litigation and other legal proceedings may harm our business.***

We have been and may in the future be involved in legal proceedings relating to patents and other intellectual property rights, product liability claims, false advertising and consumer protection law claims, employee claims, tort or contract claims, regulatory investigations, securities class actions, and other legal proceedings and investigations. Litigation is inherently unpredictable and may result in excessive or unexpected judgments or injunctions that could affect our business operations. We may be subject to judgments or settlements seeking monetary damages, agreements to change the way we operate our business, or both. The scope of these cases may expand, or additional lawsuits, claims, proceedings, or investigations may be brought against us in the future, which could adversely affect our business, financial condition and results of operations. Adverse media coverage of regulatory or legal actions against us, even if the regulatory or legal actions are unfounded or immaterial to our business, could damage our reputation and brand image, undermine customer confidence and reduce long-term demand for our products.

***Our level of indebtedness could materially and adversely affect our business, financial condition and results of operations.***

As of October 31, 2022, our outstanding debt was ¥1,040,000 thousand ($6,997 thousand). Our indebtedness could have a material impact on our business, including the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restricting our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt
repayment, and the implementation of our growth strategy;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring us to devote a substantial portion of our cash flow from operations to the payment of principal and
interest on our debt, resulting in reduced availability of cash flow for working capital, capital expenditures, acquisitions, the implementation of our growth strategies and other general corporate purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• making us more vulnerable to adverse changes in general economic, industry and competitive conditions, government
regulations and our business by limiting our ability to plan for and respond to change; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• placing us at a disadvantage compared to its competitors with less debt.

In addition, we may not be able to generate sufficient cash flow from our operations to repay our debt when it becomes due and to meet our other financing needs. If we are unable to meet our debt obligations, we may need to pursue one or more alternative strategies, such as selling assets, refinancing, or restructuring its debt, or selling additional debt or equity. In addition, if we must sell assets, our ability to generate revenue may be adversely affected.

***Our outstanding debt agreements may limit our flexibility in operating and expanding our business.***

As of October 31, 2022, we had had a total of five loans with two Japanese financial institutions with an aggregate principal amount of ¥1,040,000 thousand ($6,997 thousand).

Covenants included in our existing loan agreements and that may be included in future loan agreements may limit our access to future debt financing on which our business operations and expansion plans are partially dependent. If our revenues were to decrease significantly or our interest expense were to increase significantly, we may not have sufficient cash on hand. In addition, upon the occurrence of an event of default, we may not have sufficient cash to make the necessary prepayments or to raise additional funds on satisfactory terms through equity or debt issuances. In such an event, we may be required to delay, limit, curtail or terminate our business development and expansion efforts. As a result, our business, financial condition, and results of operations may be materially adversely affected.

***We may need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult to obtain and could dilute current shareholders' ownership interests.***

Our future capital requirements will depend on a number of factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• future revenues and profits resulting from the anticipated launch of new products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the level of investment in research and development necessary to develop our technologies and products and to
maintain and improve our technological position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability and willingness to enter into new contracts with strategic partners and the terms of these contracts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the cost of recruiting and retaining qualified personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the time and cost required to obtain regulatory approvals, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs of applying for, prosecuting, defending and enforcing trademarks, patents and other intellectual
property rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the speed of our business growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the progress and results of our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the development requirements of the businesses we pursue; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs of our commercialization activities, including marketing and sales.

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Due to the many risks and uncertainties involved in the development and commercialization of our products, we are unable to reasonably estimate the amount of capital expenditures and incremental operating expenses that our business will require. We may need to raise additional capital through public or private debt or equity financing to achieve a variety of objectives, including, but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• pursue growth opportunities, including overseas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• acquire complementary businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• make capital improvements to our infrastructure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• hire talented management and key employees;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• respond to competitive pressures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• comply with regulatory requirements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• maintain compliance with applicable laws.

If we raise additional capital through the sale of equity or equity-linked securities, existing shareholders' ownership interest in us may be diluted and the market price of our ADSs may decline. The terms of the securities we issue in future capital transactions may be more favorable to new investors and may include the issuance of superior voting rights, warrants or other derivative securities, which could have a further dilutive effect. Convertible debt securities or other equity-linked securities may be subject to conversion rate adjustments or other anti-dilution protections, which may increase the number of shares available for issuance upon conversion due to certain events. If preferred shares are issued, there may be a preference with respect to the liquidation of dividends or a preference with respect to the payment of dividends, which could limit our ability to pay dividends to the holders of our ADSs.

In addition, the debt and equity financing we require may not be available to us on favorable terms, or at all. If we are unable to obtain the additional capital we need, we may be forced to scale back our growth plans or reduce our existing operations, and if we are unable to generate sufficient revenues from our operations to continue our business, we may not be able to continue our operations.

We may incur significant costs in raising future capital, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution costs, and other expenses. In addition, we may be required to record non-cash expenses in connection with certain securities issued by us, such as convertible bonds and warrants, which could adversely affect our financial condition. As such, holders of ADSs are subject to the risk that future issuances by us may result in a decline in the market price of ADSs and dilution of their holdings in us. Please refer to "Description of Share Capital and Articles of Incorporation" in this prospectus.

If we are unable to raise the necessary funds for our operations, we may not be able to develop and commercialize our technologies and products, which could have a material adverse effect on our business, liquidity and results of operations.

***If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our ADSs.***

The preparation of our financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Estimates are based on historical experience and a variety of assumptions

that are believed to be reasonable in the circumstances. The results form the basis for judgments about the

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carrying amounts of assets, liabilities, equity, income, and expenses that are not readily apparent from other sources. For example, in connection with the revenue accounting standard (Accounting Standards Codification (ASC) Topic 606), management has made judgments and assumptions based on its interpretation of the new standard. The revenue standard is principles-based, and interpretations of those principles may vary from entity to entity based on their unique circumstances. In addition, interpretations, industry practices, and guidelines may change in the application of this standard. If the assumptions underlying the estimates and judgments related to critical accounting policies change, or if actual conditions differ from the assumptions, estimates and judgments, our results of operations could be adversely affected and could fall short of our published guidance or the expectations of securities analysts and investors, which could result in a decline in the market price of our ADSs.

***We are exposed to the risk of natural disasters, unusual weather conditions, pandemic outbreaks such as COVID-19, political events, war, terrorism, and unfavorable macroeconomic conditions such as inflation, which could disrupt business and limit our ability to grow our business and negatively affect our results of operations.***

We and some of our suppliers, manufacturers, and customers are located in areas that have been or may be affected by natural disasters such as floods, typhoons, tsunamis, tornadoes, fires, earthquakes, volcanic eruptions, global pandemics such as COVID-19, war, and terrorism. Extreme weather events such as severe weather, resulting electrical or technological failures, or even a leak at a nuclear power plant could disrupt our operations and adversely affect our ability to sell our products and services. Any of these events could adversely affect our ability to sell our products and services, and any of them could affect customer trends and purchasing, which in turn could adversely affect our revenues, assets or business.

In addition, our business may be affected by force majeure events, such as natural disasters. Temporary or prolonged disruptions in the transportation of goods, delays in our goods and supplies, disruptions in our technical support or information systems, fuel or power shortages or sharp increases in fuel or power prices could increase the cost of doing business. These events could also have indirect consequences, such as increased insurance or tax costs, if they result in a material loss of property or other insurable losses. Any one or a combination of these factors could have an adverse effect on our business and financial results.

Negative conditions in the general economy both in Japan and globally, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, recessions, international trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, uncertain geopolitical conditions, natural catastrophes, warfare, and terrorist attacks could cause a decrease in business investments and consumer demand, and negatively affect the growth of our business. For example, global supply chain issues, such as semiconductor shortages, may adversely impact our business as we expand sales of electronic products based on our technologies. Additionally, inflation has accelerated in Japan and globally due in part to global supply chain issues, the Ukraine-Russia war, a rise in energy prices, and strong consumer demand as economies continue to reopen from restrictions related to the COVID-19 pandemic. An inflationary environment can increase our cost of labor, as well as our other operating costs, which may have a material adverse impact on our financial results. In addition, economic conditions could impact and reduce the number of customers who purchase our products or services as credit becomes more expensive or unavailable. Although interest rates have increased and are expected to increase further, inflation may continue. Further, increased interest rates could have a negative effect on the securities markets generally and increase the cost of capital to us, in particular, which may, in turn, have a material adverse effect on the market price of the ADSs.

***Our long-term success depends, in part, on our ability to market and sell our products to customers located outside of Japan and our future international operations could expose us to risks that could have a material adverse effect on our business, operating results, and financial condition.***

We have not sold any products or generated any revenue from customers located outside Japan but expect to do so as part of our growth strategy. Our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular

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challenges of supporting a business in an environment of multiple cultures, customs, legal systems, regulatory systems, and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Our operations in international markets may not develop at a rate that supports our level of investment. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• recruiting and retaining talented and capable employees in foreign countries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• exposure to public health issues, such as the COVID-19 pandemic;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• promoting our products to customers from different cultures, which may require us to adapt to sales and service
practices necessary to effectively serve the local market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with the laws of numerous taxing jurisdictions, both foreign and domestic, in which we conduct
business, potential double taxation of our international earnings, and potentially adverse tax consequences due to changes in applicable Japanese and foreign tax laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with privacy, data protection, encryption, and information security laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• credit risk and higher levels of payment fraud;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• weaker intellectual property protection in some countries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with anti-money laundering, anti-bribery and anti-corruption laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• currency exchange rate fluctuations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• tariffs, export, and import restrictions, restrictions on foreign investments, sanctions, and other trade
barriers or protection measures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• foreign exchange controls that might prevent us from repatriating cash earned outside Japan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• economic or political instability in countries where we may operate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increased costs to establish and maintain effective controls at foreign locations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• overall higher costs of doing business internationally.

Our international operations may be subject to foreign governmental laws and regulations, which vary substantially from country to country. Further, we may be unable to keep up to date with changes in government laws and regulations as they change over time. Failure to comply with these laws and regulations could result in adverse effects to our business. Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations and our internal policies, there can be no assurance that all our employees, contractors, partners, and agents will comply with these laws and regulations or our internal policies. Violations of laws or regulations by our employees, contractors, partners, or agents could result in litigation, regulatory action, costs of investigation, delays in revenue recognition, delays in financial reporting, financial reporting misstatements, fines, or penalties, any of which could have an adverse effect on our business, operating results, and financial condition.

**Risks Related to Government Regulation** 

***We currently do not, and do not plan in the near future to, market our consumer personal care products, including SonoRepro and kikippa, as medical devices. If we fail to comply with the government regulations relating to the promotion of such products, or to obtain any required approvals on a timely basis, we may incur fines, penalties, and consumer lawsuits and our business and growth prospects may be negatively impacted.***

The Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices is a Japanese law that establishes regulations to secure the quality, efficacy, and safety of medical products such as pharmaceuticals, cosmetics, and medical devices. Under this Act, if a company wants to market and manufacture medical devices, it is required to obtain a marketing and manufacturing license from the Minister of Health, Labor and Welfare and then to follow one of the following procedures depending on the type

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of medical device: (1) obtain approval from the Minister of Health, Labor and Welfare; (2) obtain certification from a private certification body who is registered by the Minister of Health, Labor and Welfare; or (3) submit a notification to the Minister of Health, Labor and Welfare. This Act also prohibits (a) false or exaggerated advertisements; (b) advertisements that may lead to the false impression that a physician or other person has certified the efficacy, effects or performance of the product; and (c) obscene advertisements with respect to medical devices. In addition, the Act against Unjustifiable Premiums and Misleading Representations stipulates the restricted methods and means of various advertisements, representations, and sales promotions, in a broad sense. When we advertise our products, we must provide appropriate information under this Act, so as not to mislead our customers.

We currently do not, and do not plan in the near future to, market our consumer personal care products, including SonoRepro and kikippa, as medical devices. As a result, we are prohibited by the applicable government regulations from marketing or labelling our products as intended for use in the diagnosis, treatment, or prevention of disease in humans or animals, or to affect the structure or functioning of the bodies of humans or animals. For example, we are marketing SonoRepro and requires our distributors to market as a personal scalp care device without making any claims relating to hair growth or preventing hair loss. If we or, our distributors, fail to comply with these limitations, we may be subject to fines or other penalties, or may be prevented from selling our products without obtaining the required approvals. In addition, our marketing could be the target of claims of false or deceptive advertising or other criticism. Even if a consumer fraud claim is unsuccessful, has no merit or is not pursued, the negative publicity surrounding assertions against our products could adversely affect our sales, reputation, and growth prospects.

As our business grows, we may need to apply for approvals to market certain products as medical devices in Japan and in other jurisdictions where we operate. Obtaining the approval of Minister of Health, Labor and Welfare for medical devices is typically a lengthy and expensive process, and approval could be uncertain. Foreign governments also regulate medical devices distributed outside Japan, whose approval can also be lengthy, expensive, and highly uncertain. None of our consumer personal care products or product candidates has received regulatory approval to be marketed and sold in Japan or any other country. To the extent that any regulatory approval is needed for our products, we may not be able to obtain, or may experience significant delays or costs in obtaining, regulatory approval for our products and even if approvals are obtained, complying on an on-going basis with numerous regulatory requirements will be time-consuming and costly. The failure to obtain timely regulatory approval of product candidates, any product marketing limitations or a product withdrawal would negatively impact our business, results of operations and financial condition.

In addition, we have commenced selling a medication used for treating hair loss on our e-commerce site in conjunction with selling SonoRepro in January 2023. To sell such medication, we are required under the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices to notify the public health center of the municipality which has jurisdiction over our store, apply for a license for the store-based distribution, and provide a notification to the public health center of the specified distribution before operating the store. We obtained the license in December 2022. In addition, under the Act, a pharmacist or a registered salesclerk of pharmaceuticals must be in charge of the storefront sales business, and the sales of pharmaceuticals must be conducted by a pharmacist or a registered sales representative of pharmaceuticals. These regulations could be costly to comply with and may delay our planned expansion of sales operations given our limited resources. If we fail to comply with these regulations, we may be subject to regulatory penalties such as fines, consumer claims, and negative publicity.

***Changes in government regulations and trade policies may materially and adversely affect our sales and results of operations.***

The markets where we sell and expect to sell our products may be heavily influenced by government regulations and policies. The governments may take administrative, legislative, or regulatory action that could materially interfere with our ability to sell our products in the manner we desire and/or to certain customers. The

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uncertainty regarding future standards and policies may also affect our ability to develop our products or to license our technologies to third parties and to sell products to our end users, which could have a material adverse effect on our business, financial condition and results of operations.

***Our collection, use, storage, disclosure, transfer and other processing of personal information, could give rise to significant costs, liabilities and other risks, including as a result of investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about our privacy and data protection practices, which may harm our business, financial conditions, results of operations and prospects.***

During our business activities, we collect, use, store, disclose, transfer and otherwise process increasingly large amounts of personal information, including that of our employees, customers, and third parties with whom we do business. The collection, use, storage, disclosure, transfer and other processing of personal information is increasingly subject to a wide range of national and international laws and regulations regarding data privacy and security including those relating to the processing, safekeeping, and use of personal data, in respect of each of which the relevant regulators in Japan have a broad discretion to interpret the relevant laws and regulations. As we seek to expand our business, we are subject to, and may continue to be subject to, various data privacy and security laws, regulations, standards and contractual obligations in the jurisdictions in which we operate.

The Act on the Protection of Personal Information (the "APPI") in Japan is to protect rights and interests of individuals, while balancing the usefulness of personal information. The APPI mainly concerns three situations: (i) acquisition and use; (ii) storage; and (iii) transfer of personal information. When personal information is acquired, the purpose of use must be notified to the individual or made public, except in cases where the purpose of use has been made public in advance. The purpose of use must be specified, and the acquired personal information must be used within the scope of such purpose of use. When storing personal information, it is necessary to manage it safely so that it will not be leaked. For the safe management, the APPI requires business operators holding others' personal information to establish information security system. It includes establishment of fundamental rule of personal information management, appointment of personnel responsible for personal information management, provisions of regular training courses on privacy and security breach, physical security control. Additionally, when transferring personal data to a third party, it is necessary, in principle, to obtain the consent of the principal in advance. In the event that an individual violates the above obligations under the APPI and also violates an improvement order issued by the Personal Information Protection Commission regarding this matter, a criminal penalty of "imprisonment for not more than one year or a fine of not more than one million yen" could be imposed on the individual who violated the law. In addition, a criminal penalty of "a fine of up to 100 million yen" could be imposed on the violating entity. A victim may file a claim for damages based on torts against the offending entity for damages caused by the leakage and for compensation. Furthermore, if there is a contractual relationship between the victim and the entity, and the leakage of personal information is judged to be a breach of contract, damages may be claimed for breach of contract.

When conducting tests of our products and product candidates, we face risks associated with the collection of subject data in a manner consistent with applicable laws and regulations, including the requirements and other similar regulatory bodies. We have not needed to, nor have we conducted clinical trials of our products or product candidates, which we currently do not and do not expect to market as medical devices. To the extent we need to conduct clinical trials in the future, we will collect personal health information which may subject us to additional regulatory requirements.

In many cases, these laws and regulations apply not only to our dealings with third parties, but also to the transfer of information between us and our affiliates and other parties with whom we do business. These laws, regulations and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, which could adversely affect our business, financial condition, and results of operations. Regulatory frameworks for data privacy and security around the world are continually evolving and developing, and as a result, interpretation and enforcement standards and methods of enforcement may be uncertain for the foreseeable future.

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***Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, or contractual obligations, which could harm our business, financial condition and results of operations.***

We are exposed to the risk that our employees, independent contractors, consultants, commercial partners, distributors, and vendors may engage in fraudulent, illegal, or unethical activities. Fraud by these parties could include intentional, reckless, or negligent acts, or fraudulent disclosures that violate (1) the laws of the Pharmaceuticals and Medical Devices Agency and other similar regulatory bodies, including laws requiring true, complete and accurate reporting of information to such bodies; (2) manufacturing standards; (3) anti-fraud laws; or (4) laws requiring true, complete and accurate reporting of financial information or data. This may also include intentional, reckless, or negligent acts or fraudulent disclosures to the Company in violation of the above laws and regulations. This may also include breach of any contracts we have entered such as our employees or contractors disclosing our collaborators' trade secrets to others and causing us to breach our confidentiality obligations to our collaborators.

It is not always possible to identify and deter fraudulent, illegal, or unethical activities by our employees or other third parties, and the precautions we take to detect and prevent such activities may not be effective in limiting unknown or uncontrolled risks or losses or in protecting us from government investigations or other actions or lawsuits arising from noncompliance with such laws and regulations or breach of any contracts we have entered into. If such lawsuits are brought against us and we are not successful in defending or asserting our rights, these lawsuits could result in the imposition of significant fines or other sanctions, including civil, criminal or administrative penalties, damages, monetary fines, disgorgement and imprisonment. These sanctions could adversely affect our ability to operate our business and our results of operations. Regardless of whether we are successful in defending against such lawsuits or investigations, we may incur significant costs, including legal fees and reputational damage, and management's attention to defending against such claims and investigations may adversely affect our business, financial condition, and results of operations.

***Changes in tax law and regulations may have a material adverse effect on our business, financial condition, and results of operations.***

The rules and regulations dealing with taxes including corporate, local and enterprise taxes in Japan are constantly under review by governmental agencies. Changes in tax laws may adversely affect us or the holders of our common shares. Future changes in tax laws could have a material adverse effect on our business, financial condition, results of operations and cash flows. Investors are urged to consult with their legal and tax advisors regarding the impact of potential changes in tax law on their investment in our ADSs.

**Risks Related to Our Intellectual Property** 

***The failure to enforce and maintain our patents, trademarks and protect our other intellectual property could materially adversely affect our business.***

We own various patents, trademarks, trade secrets, know-how, and similar intellectual property essential to our success. The success of our business strategy depends on our ability to continue to use our existing intellectual property to leverage our technologies to develop and commercialize our products and product candidates.

To protect or enforce our patents and other intellectual property rights, we may be required to initiate patent or other intellectual property proceedings (such as infringement or interference suits) against third parties. These proceedings may be costly, time-consuming and may divert management's attention from other business concerns. There is also a risk that these lawsuits may invalidate or narrowly interpret our patents or that our patent applications may not be issued. In addition, these lawsuits may induce the defendants to bring claims against us. There can be no assurance that we will prevail in any such litigation or proceeding, or that any damages or other remedies awarded to us will be commercially valuable, if any.

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If our efforts to protect our intellectual property are inadequate, or if third parties misappropriate or infringe on our intellectual property, whether in print, on the Internet or in other media, or if our employees or contractors intentionally or inadvertently leaked our trade secrets, the value of our technologies and brands may be harmed. This could have a material adverse effect on our business, such as weakening the competitive position of our products in the market. There can be no assurance that all measures we have taken to protect our intellectual property in Japan and in any relevant foreign countries outside Japan, will be adequate. In addition, in light of our intention to expand our business internationally, some foreign laws do not protect intellectual property rights to the same extent as Japanese laws. Any infringement of our trademarks, trade secrets or other intellectual property could have a material adverse effect on our business, financial condition, and results of operations.

Even if resolved in our favor, litigation or other legal proceedings related to intellectual property claims could result in significant costs and could divert our management and other personnel from their normal responsibilities. In addition, the results of hearings, motions or other interim proceedings or developments may be made public, and if securities analysts or investors perceive these results negatively, it could have a material adverse effect on the price of our common shares. Such litigation or proceedings could significantly increase our operating losses and reduce the resources available for research and development activities and future sales, marketing, and distribution activities. We may not have sufficient financial or other resources to properly pursue such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation and proceedings more effectively than we can because they have greater financial resources and a more mature and developed portfolio of intellectual property rights. Uncertainties arising from the initiation and continuation of patent litigation and other proceedings may impair our ability to compete in the marketplace. The foregoing could adversely affect our business, financial condition, and results of operations.

***We rely substantially on our trademarks and trade names. If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be harmed.***

We rely heavily on our trademarks to build and maintain the integrity of our brands. Our registered and unregistered trademarks and trade names may be challenged, infringed, circumvented, declared generic or found to be in violation or infringement of other trademarks. Although we use these trademarks and trade names to increase our visibility among potential partners and customers in markets in which we have an interest, we may not be able to protect our rights. The use of trade names or trademarks like ours by competitors or other third parties may interfere with the establishment of our brand identity and may cause market confusion. In addition, other trademark owners may file claims against us for infringement or dilution of their trade names or trademarks. In the long run, if we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights relating to trademarks, trade secrets, domain names and other intellectual property may be ineffective and may result in the diversion of significant costs and resources, which could adversely affect our business, financial condition, and results of operations.

***We may be subject to claims that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property. Such claims could harm our business, financial condition and results of operations.***

Our employees, consultants and advisors may be currently or have been employed or engaged by universities or our competitors and potential competitors. While we strive to ensure that its employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, there may be instances in the future where we or these individuals may be subject to claims that they have inadvertently or otherwise used or disclosed the intellectual property, including trade secrets or other proprietary information, of a current or former employer. We may be subject to claims that we or these people have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information of current or former employers. They may also be subject to claims in the future that they have

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breached non-compete agreements with their former employers. Litigation may be necessary to defend against these claims. If we fail to defend against such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights and human resources, which may adversely affect our business, financial condition, and earnings. In addition, even if we are successful in defending ourselves against such claims, we may incur significant costs for litigation, which may hinder our business operations.

In addition, although it is our policy to require employees and contractors who may be involved in the conception or development of intellectual property to enter into agreements to assign such intellectual property to us, we may not be able to enter into such agreements with each of the parties who conceived or developed the intellectual property that we consider to be our own. In addition, there is a possibility that the transfer of intellectual property rights may not be possible. It is also possible that the assignment of intellectual property rights may not be self-contained or that the assignment agreement may be breached, and that we may be forced to file claims against third parties or defend claims brought by third parties against us to determine ownership of what we consider to be its intellectual property. Such claims could adversely affect our business, financial condition and results of operations.

***Our obligations under our existing or future product development and commercialization collaboration agreements may limit our ability to exploit intellectual property rights that are important to our business. Further, if we fail to comply with our obligations under our existing or future collaboration agreements, or otherwise experience disruptions to our business relationships with our prior, current, or future collaborators, we could lose intellectual property rights that are important to our business.***

We are party to collaboration agreements with other companies, pursuant to which we provide research and development services but have no ownership rights or co-ownership rights, to certain intellectual property generated through the collaborations. We may enter into additional collaboration agreements in the future, pursuant to which we may have no ownership rights, or only co-ownership rights, to certain intellectual property generated through the future collaborations. If we are unable to obtain ownership or license of such intellectual property generated through our prior, current, or future collaborations and overlapping with, or related to, our own proprietary technology or product candidates, then our business, financial condition, results of operations and prospects could be materially harmed. As some of our intellectual properties are jointly developed with and co-owned by third parties, in those cases we may be required by our collaboration agreements to obtain the third parties' consent to use or license the co-owned intellectual properties as desired by us. If we cannot obtain the third parties' consent in a timely manner or at a cost acceptable to us, our ability to commercialize those intellectual properties may be restricted.

Our existing collaboration agreements contain certain obligations that require us to design certain products for our collaborators with respect to certain specific targets over a specified period. Despite our best efforts, our prior, current or future collaborators might conclude that we have materially breached our collaboration agreements. If these collaboration agreements are terminated, or if the underlying intellectual property, to the extent we have ownership or license thereof, fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products and technology identical to ours. This could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects.

Disputes may arise regarding intellectual property subject to a collaboration agreement, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the scope of ownership or license granted under the collaboration agreement and other interpretation related
issues;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the extent to which our technology and product candidates infringe on intellectual property that is or will be
generated through the collaboration, to which we do not have ownership or license under such collaboration agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the assignment or sublicense of intellectual property rights and other rights under the collaboration agreement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our diligence obligations under the collaboration agreement and what activities satisfy those diligence
obligations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the inventorship and ownership of inventions and know-how resulting from
the joint creation or use of intellectual property by us and our current or future collaborators.

In addition, collaboration agreements are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or increase what we believe to be our obligations under the relevant agreements, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have owned, co-owned or in-licensed under the collaboration agreements prevent or impair our ability to maintain our current collaboration arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology or product candidates, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

***Intellectual property rights do not necessarily address all potential threats, and limitations in intellectual property rights could harm our business, financial condition, and results of operations.***

It is uncertain to what extent our intellectual property rights will be protected in the future because they are limited and may not adequately protect our business or enable us to maintain our competitive advantage. For example:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other companies may manufacture products that are like or utilize similar technology to our current and future
products but are not covered by our patent claims, or that incorporate public domain technology contained in our current and future products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we or our current and future licensors or collaborators may not be the first to file patent applications covering
us or our inventions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our current or future pending patent applications may not lead to issued patents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there may be prior disclosures that could invalidate our patents or portions of our patents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there may be unpublished applications or secretly maintained patent applications that subsequently issue claims
covering current and future products of the Company or technology like the Company's technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our patents or patent applications may omit persons who should be listed as inventors or include persons who
should not be listed as inventors, which could result in these patents or patents issuing from these patent applications being invalid or unenforceable. This may result in these patents, or patents issued from these patent applications, becoming
invalid or unenforceable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• issued patents in which we hold rights may become invalid or unenforceable, including as a result of litigation
by competitors or other third parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the claims of our patents or patent applications, if issued, may not cover our current and future products and
technologies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• foreign laws may not protect our proprietary rights or the rights of prospective licensors or collaborators to
the same extent as U.S. laws, and our competitors or other third parties may conduct research and development activities in countries where we do not have patent rights, and use the information obtained therefrom to develop competitive products for
sale in our major commercial markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the inventors of our patents or patent applications may become involved with competitors, develop products,
prototypes, or processes designed to circumvent our patents, or otherwise antagonize us or the patents or patent applications for which they are named as inventors; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we may choose not to apply for patents to maintain certain trade secrets or know-how, and third parties may later apply for patents covering such intellectual property.

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Any of the foregoing could adversely affect our business, financial condition, and results of operations.

***Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed. If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.***

In addition to seeking patent protection for its current and future products, we rely on unpatented trade secrets, know-how and continuous innovation to establish and maintain its competitive position, particularly in cases where patent protection is not appropriate or cannot be obtained. Trade secrets and know-how can be difficult to protect. We strive to protect such proprietary information through confidentiality agreements with our employees, collaborators, contractors, advisors, consultants and other third parties, as well as invention assignment agreements with our employees. Confidentiality agreements are intended to protect our proprietary information and, in the case of agreements or clauses involving invention assignment, to grant us ownership of technology developed through relationships with employees or third parties.

We cannot assure you that we have entered into such agreements with each party that has or may have access to our trade secrets or proprietary information. Further, despite such efforts, it is possible that one of these parties may breach the agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain an adequate remedy for such breach. Enforcing claims that a party has illegally disclosed or misappropriated a trade secret can be difficult, costly, and time-consuming, and the outcome is unpredictable. In addition, if our trade secrets were disclosed to competitors or other third parties, or developed independently by third parties, our competitive position would be materially impaired. Furthermore, these trade secrets, know-how and proprietary information are likely to spread within the industry over time through independent development, publication of journal articles describing the methodology, and the transfer of personnel from academic to industrial scientific positions.

We also strive to maintain the integrity and confidentiality of our data and trade secrets by maintaining the physical security of our premises and the physical and electronic security of our information technology systems. Although we rely on these people, organizations, and systems, our contracts and security measures may be breached, and we may not have adequate remedies in the event of a breach. There is also a possibility that our trade secrets may become known to our competitors or be independently discovered. To the extent that our employees, consultants, contractors or subcontractors use intellectual property owned by others in performing their work for us, disputes may arise with respect to related or resulting know-how or invention rights, which could adversely affect our business, financial condition and results of operations.

***If our third-party manufacturing partners do not respect our intellectual property and trade secrets and produce competitive products using our designs or intellectual property, our business, financial condition and results of operations would be harmed.***

We do not have our own manufacturing facilities or capabilities for our products. We currently rely, and expect to continue to rely, on third parties to scale-up, manufacture and supply our products and product candidates including for SonoRepro, kikippa, VUEVO, and iwasemi. While our manufacturing agreements generally prohibit our manufacturing partners from misappropriating our intellectual property or trade secrets or using our designs to manufacture products for competitors, we may be unsuccessful in monitoring or enforcing our intellectual property rights. It is possible that counterfeit products may be found in the marketplace that are manufactured by our manufacturing partners, and any measures we take to stop counterfeit products may not be successful. In addition, customers who purchase these counterfeit products may experience product defects or malfunctions, which could damage our reputation and brand and cause us to lose future sales. As a result of the above, our business, financial condition and results of operations may be adversely affected.

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**Risks Related to Cybersecurity** 

***Security breaches, loss of data and other disruptions could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.***

We rely on computer systems and network infrastructure throughout our operations. We use the server of a third-party hosting service provider. Our operations depend on our ability to protect our computer equipment and systems from damage from physical theft, fire, power outages, telecommunications failures, and other catastrophic events, as well as from internal and external security breaches, viruses, worms, and other destructive problems. Any disruption to our operations due to damage to or failure of our computer systems, network infrastructure or servers could have a material adverse effect on our business and could subject us to regulatory action or litigation. A significant network breach in the security of these systems because of ineffective operation of these systems, maintenance issues, upgrades, or migrations to new platforms, or cyberattacks or other failures to maintain an ongoing and secure cyber network could result in further damage, delays in customer service, and reduced efficiency in our operations. This could include the theft of our intellectual property and trade secrets, improper use of personal information, and other forms of identity theft. While we utilize our own personnel and various hardware and software to monitor our systems, controls, firewalls, and encryption, and intend to maintain and upgrade our security technology and operating procedures to prevent damage, breaches and other disruptions, there is no guarantee that these security measures will be successful. Any such claims, proceedings or actions by regulatory authorities, or adverse publicity resulting from such claims, could adversely affect our business and results of operations.

We use information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As the use of digital technology increases, cyber incidents, including intentional attacks and unauthorized access attempts to computer systems and networks, are becoming more frequent and sophisticated. These threats pose a risk to the security of our systems and networks, and to the confidentiality, availability and integrity of data that is critical to our business and business strategy. There can be no assurance that we will be successful in preventing cyberattacks or successfully mitigating their effects.

Despite the implementation of security measures, our computer systems and our current and future third-party service providers are susceptible to damage or interruption due to hacking, computer viruses, software bugs, unauthorized access or disclosure, natural disasters, terrorism, war, telecommunications, equipment, and electrical failures. There is no guarantee that we will be able to promptly detect such events. If such an event occurs, we will have a difficult time responding to it. Unauthorized access, loss, or dissemination could disrupt our operations, including our research and development activities, the processing and preparation of our financial information and our ability to manage various general and administrative aspects of our business. To the extent that such disruptions or security breaches result in loss of or damage to our data or applications, or inappropriate disclosure or theft of confidential, proprietary, or personal information, we could be subject to liability, reputational damage, poor performance, or regulatory action by the government authorities where we operate. Any of these could have an adverse effect on our business.

***Cybersecurity breaches and other disruptions or failures in our information technology systems could compromise our information, result in the unauthorized disclosure of confidential customer, employee, Company and business partners' information, damage our reputation, and expose us to liability, which could negatively impact our business.***

In the normal course of our business, we may collect, process, and store sensitive data, including our own business information; information about our customers, suppliers, and business partners; and personally identifiable information about our customers and employees that resides in our data centers and on our networks. The secure processing, maintenance and transmission of this information is essential to our business operations. We also depend on the information technology systems of third parties for the analysis, data storage, and communication. We currently do not have redundant information technology systems.

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We rely on commercially available systems, software, tools, and monitoring to provide security for the processing, transmission, and storage of sensitive information. Despite the security measures and ongoing vigilance, we have in place to protect sensitive information, our systems and those of our third-party service providers may be vulnerable to security breaches, hacker attacks, vandalism, computer viruses, loss or misplacement of data, human error, or other malfunctions and attacks. Such breaches may compromise our network and information stored therein may be accessed, disclosed, lost, or stolen. For example, in the second calendar quarter of 2022, we discovered an unauthorized use of our account with a third-party service provider which resulted in improper billing to us. We promptly initiated an investigation after the incident with the assistance of outside experts. The investigation found no evidence of virus infection or unauthorized access. We also do not believe that there was any breach of personally identifiable information or information of our business partners as such information was not stored on the third-party server. Following the incident, we have taken measures to enhance our system and password security but there is no guarantee that the measures we have taken and will take in the future will be adequate in fending off cyber-attacks or compromises. Advances in computer and software capabilities and encryption technology, new tools, and other developments may increase the risk of a breach or compromise. Technological interruptions would also disrupt our operations, including our ability to timely deliver and track product or service orders, project inventory requirements, manage our supply chain and otherwise adequately service our customers or disrupt our customers' ability to use our products or services. In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner and such events may disrupt or reduce the efficiency of our entire operation for a prolonged period. The occurrence of these incidents could result in diminished internal and external reporting capabilities, impaired ability to process transactions, harm to our control environment, diminished employee productivity, and unanticipated increases in costs, including substantial legal costs in connection with the defending of any lawsuits that may arise from such incidents.

Currently, we carry insurance policies to mitigate certain potential losses, but this insurance is limited in amount, and we cannot be certain that such potential losses will not exceed policy limits. In addition, we cannot be certain that insurance for cybersecurity incidents will continue to be available on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. It could be difficult to predict the ultimate resolution of any such incidents or to estimate the amounts or ranges of potential loss, if any, that could result therefrom. We are increasingly dependent on complex information technology to manage our infrastructure. Our information systems require an ongoing commitment of significant resources to maintain, protect and enhance our existing systems. Failure to maintain or protect our information systems and data integrity effectively could negatively affect our business, financial condition and results of operations.

**Risks Related to this Offering and Ownership of the ADSs** 

***We are an "emerging growth company" and, because of the reduced disclosure and governance requirements applicable to emerging growth companies, our common shares and ADSs may be less attractive to investors.***

We are an "emerging growth company," as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements in the registration statement for the emerging growth company's initial public offering of common equity securities, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), reduced disclosure about executive compensation arrangements pursuant to the rules applicable to emerging growth companies, no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements, and not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding a supplement to the auditor's report providing additional information about the audit and the financial statements. We have elected to adopt these reduced disclosure requirements.

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 registration statement declared effective under the Securities Act or do not have a class of securities registered under the Exchange

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Act are required to comply with the new or revised financial accounting standards. In addition, Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. An emerging growth company can, therefore, delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates.

We would cease to be an "emerging growth company" upon the earliest of (i) the last day of the fiscal year following the fifth anniversary of this offering, (ii) the last day of the fiscal year during which our annual gross revenues are $1.235 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities, or (iv) as of the end of any fiscal year in which the market value of our common shares held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year (and we have been a public company for at least 12 months and have filed at least one annual report on Form 20-F).

We cannot predict if investors will find the ADSs less attractive as a result of our taking advantage of these exemptions. If some investors find the ADSs less attractive as a result of our choices, there may be a less active trading market for the ADSs and our stock price may be more volatile.

***As a "foreign private issuer" we are permitted, and intend, to follow certain home country corporate governance and other practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.***

Our status as a foreign private issuer exempts us from compliance with certain SEC laws and regulations and certain regulations of Nasdaq, including certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. Further, consistent with corporate governance practices in Japan, we do not have a standalone nomination and corporate governance committee under our board. In addition, we will not be required under the Exchange Act to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. Also, we are not required to provide the same executive compensation disclosures regarding the annual compensation of our five most highly compensated senior executives on an individual basis as are required of U.S. domestic issuers. As a foreign private issuer, we are permitted to disclose executive compensation on an aggregate basis and need not supply a Compensation Discussion and Analysis, as is required for domestic companies. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and accommodations will reduce the frequency and scope of information and protections to which you are entitled as an investor.

***Management will continue to have substantial influence over us after this offering, which could limit your ability to affect the outcome of key transactions, including a change of control.***

After this offering, our directors, executive officers, and founders and their respective affiliates will beneficially own shares representing approximately ●% of our outstanding common shares. As a result, these shareholders, if they act together, will be able to influence our management and affairs and all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of the Company and might affect the market price of our common shares represented by ADSs.

***The requirements of being a public company may strain our resources and divert management's attention.***

As a public company following this offering, we will incur legal, accounting, and other expenses that we did not previously incur. We will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley

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Act, the Dodd-Frank Act, and the listing standards of Nasdaq as applicable to a foreign private issuer, which are different in some material respects from those required for a U.S. public company. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources, particularly after we are no longer an "emerging growth company." Further, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain directors' and officers' liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors.

Pursuant to Section 404 of the Sarbanes-Oxley Act, once we are no longer an emerging growth company, we may be required to furnish an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of complying with Section 404 of the Sarbanes-Oxley Act will significantly increase, and management's attention may be diverted from other business concerns, which could adversely affect our business and results of operations. We may need to hire more employees in the future or engage outside consultants to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, which will further increase our cost and expense. In addition, enhanced legal and regulatory regimes and heightened standards relating to corporate governance and disclosure for public companies result in increased legal and financial compliance costs and make some activities more time-consuming.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors, shareholders or third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition and results of operations.

As a public company, we will incur significant legal, accounting and other expenses that we would not have incurred as a private company. We expect to be subject to the reporting requirements of the Securities Exchange Act, other rules and regulations of the SEC, and the rules and regulations of any trading market on which our securities may be listed or traded. The costs of proper reporting as a public company are significant, and compliance with the various reporting and other requirements applicable to public companies requires significant time and attention on the part of management. For example, the Sarbanes-Oxley Act, the SEC and the rules of the national securities exchanges impose various requirements on public companies, including requirements to establish and maintain effective disclosure and internal controls. Our management and other personnel must devote a significant amount of time to these compliance efforts. These rules and regulations continue to increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations may make it more difficult and expensive for us to obtain directors' and officers' liability insurance, and we may have to accept reduced limits of coverage under our insurance policies or incur significant expenses to maintain the same or similar coverage. In addition, the impact of these events may make it difficult to attract and retain qualified personnel to serve on the Board of Directors, Board committees or as executive officers.

***We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our Company.***

During the preparation of our audited financial statements for the fiscal year ended April 30, 2022, we identified material weaknesses in internal control over financial reporting. Specifically, we did not design or maintain effective management review related to (i) the conversion of our financial statements from Japan's generally accepted accounting principles to U.S. GAAP, (ii) the valuation of stock-based awards, and (iii) the SEC financial reporting process. A material weakness is a deficiency, or a combination of deficiencies, in

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internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected on a timely basis.

We are in the process of implementing measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses, including hiring additional accounting personnel and initiating design and implementation of our financial control environment, including the establishment of formal accounting policies and procedures, financial reporting controls and controls to account for and disclose complex transactions. This remediation process will be time consuming and costly and will place significant demands on our financial and operational resources. While we are focused on remediation, at this time we can neither provide an estimate of costs expected to be incurred in connection with the implementation of this remediation plan, nor can we provide an estimate of the time it will take to complete this remediation plan.

Furthermore, we cannot provide assurance that additional material weaknesses or control deficiencies will not occur in the future. If we identify additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our ADSs could be negatively affected.

We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and therefore are not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. We will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until our second annual report required to be filed with the SEC. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls over financial reporting beginning with our annual report to be filed with the SEC following the date on which we are no longer an emerging growth company.

To comply with the requirements of being a public company, we may need to undertake various actions, to develop, implement and test additional processes and other controls. Testing and maintaining internal controls can divert our management's attention from other matters related to the operation of our business.

***If we fail to implement and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.***

Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act. Section 404 of the Sarbanes-Oxley Act ("Section 404"), requires that we include a report from management on the effectiveness of 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 defined in 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 control 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, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial

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resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

We have identified material weaknesses in our internal control over financial reporting as discussed under "— Risks Related to this Offering and Ownership of the ADSs — *We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our Company*," and may discover other significant deficiencies or material weaknesses in our internal control over financial reporting. We may not successfully remediate these significant deficiencies or material weaknesses on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our ADSs could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. However, any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause our operations to suffer and we may be unable to conclude that our internal controls over financial reporting is effective and to obtain an unqualified report on internal controls from our auditors as required under Section 404 of the Sarbanes-Oxley Act. This, in turn, could have an adverse impact on trading prices for our ADSs, and could adversely affect our ability to access the capital markets.

***The determination of the offering price of our ADSs is more arbitrary compared with the pricing of securities for an established operating company.***

There is no public market for any securities of the Company prior to this offering. The public offering price of our ADSs will be negotiated between us and the Representative. We expect the following factors will be taken into account in determining the price and terms of the Company's ADSs (and any additional ADSs to be acquired) in this offering:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the history, prospects, and prior offerings of companies similar to our Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our prospects;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our capital structure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an assessment of our management;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general conditions of the securities markets at the time of the offering; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other factors as were deemed relevant.

However, although these factors are expected to be considered, the determination of the offering price is more arbitrary compared to the pricing of securities of existing operating companies. Consequently, the price of the ADSs of the Company after this offering may fluctuate significantly due to general market conditions, economic conditions, and other factors.

***We cannot assure you that the ADSs will become liquid, or we will maintain a listing on Nasdaq.***

We have sought listing of the ADSs representing our common shares on Nasdaq; however, we cannot assure you that we will be able to maintain any such listing. Furthermore, although we anticipate a mechanism allowing

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common shares to be exchanged at a certain ratio to ADSs in connection with this offering, we may experience procedural or regulatory difficulties, from time to time, in the exchange of common shares for ADSs.

In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling ADSs representing our common shares, which may further affect the liquidity of the ADSs. This would also make it more difficult for us to raise additional capital or attract qualified employees or partners.

Additionally, prior to the completion of this offering, there has been no public market for our common shares or the ADSs. Although we intend to apply to list the ADSs on the Nasdaq under the symbol "PXDT ", an active trading market for the ADSs may never develop or be sustained following this offering. If an active trading market does not develop or is not sustained, you may have difficulty selling your ADSs at an attractive price, or at all. An inactive market may also impair our ability to raise capital by selling our common shares or ADSs, and it may impair our ability to attract and motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using our common shares or ADSs as consideration.

***If our ADSs become subject to the SEC's penny stock rules, broker-dealers may experience difficulty in completing customer transactions, and trading activity in our ADSs may be adversely affected.***

If net tangible assets are less than $5,000,000 and the market price per ADS is less than $5.00, trading in our ADSs may be subject to the "penny stock" rules promulgated under the Exchange Act. Under these rules, a broker-dealer who recommends a security to a person other than an institutional, qualified investor must:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide the purchaser with a special written suitability determination;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• obtain the written consent of the purchaser to the transaction prior to the sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide the purchaser with a risk disclosure document that identifies the specific risks associated with
investing in penny stock and explains the market for these penny stock and the purchaser's legal remedies; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• obtain a written confirmation signed and dated by the purchaser indicating that the purchaser has in fact
received the required risk disclosure document prior to closing the transaction of the penny stock.

If our ADSs become subject to these rules, broker-dealers may have difficulty in effecting transactions with their customers, which could adversely affect trading activity in our ADSs. As a result, the market price of the Company's ADSs may decline, and customers may find it more difficult to sell the Company's ADSs.

***Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.***

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of the ADSs. Our failure to apply these funds effectively could have a material adverse effect on our business, delay the development of our businesses and cause the price of the ADSs to decline.

***If you purchase ADSs in this offering, you will experience immediate dilution.***

If you purchase ADSs in this offering, you will experience immediate dilution of $● per ADS in the net tangible book value of your ADSs after giving effect to this offering at the initial public offering price (which is the midpoint of the price range set forth on the cover page of this prospectus) of $● per ADS (because the price that you pay will be substantially greater than the net tangible book value per ADS that you acquire. As a result of the dilution to investors purchasing ADSs in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. In addition, to the extent that any

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outstanding stock options or warrants are exercised, new options are issued under our share-based compensation plans or we issue additional common shares or common share-linked equity instruments in the future, there will be further dilution to investors participating in this offering. See "Dilution."

***If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of the ADSs and trading volume could decline.***

The trading market for the ADSs depends in part on the research and reports that securities or industry analysts publish about us or our business. If few or no securities or industry analysts cover us, the trading price for the ADSs would be negatively impacted. If one or more of the analysts who covers us downgrades the ADSs, publishes incorrect or unfavorable research about our business, ceases coverage of our Company, or fails to publish reports on us regularly, demand for the ADSs could decrease, which could cause the price of the ADSs or trading volume to decline.

***Our failure to meet Nasdaq's continued listing requirements could result in a delisting of our ADSs.***

If, after listing, we fail to comply with Nasdaq's requirements for continued listing, including corporate governance requirements and minimum closing price requirements, Nasdaq may take action to delist our ADSs. Such a delisting would likely adversely affect the price of our ADSs and impair your ability to sell or purchase our ADSs when you wish to do so. In the event of delisting, there can be no assurance that any action taken by us to restore compliance with the listing requirements will allow our ADSs to be relisted, stabilize the market price of our ADSs or increase liquidity, prevent our ADSs from falling below Nasdaq's minimum bid price requirements or prevent future non-compliance with Nasdaq's listing requirements.

***We do not currently intend to pay dividends on our common shares for the foreseeable future.***

We currently do not intend to pay any dividends to holders of our common shares for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Any determination to pay dividends in the future will require shareholder approval and be subject to limitations under applicable law. Therefore, you are not likely to receive any dividends on your ADSs for the foreseeable future, and the success of an investment in the ADSs will depend upon any future appreciation in its value. Moreover, any ability to pay may be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of us or any of our subsidiaries. Consequently, investors may need to sell all or part of their holdings of our ADSs after price appreciation, which may never occur, as the only way to realize any future gains on their investment. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which our ADS holders have purchased the ADSs.

***Sales of a substantial number of our common shares or ADSs in the public markets by our existing shareholders in the future could cause the price of the ADSs to fall.***

Sales of a substantial number of our common shares or ADSs in the public market in the future or the perception that these sales might occur, could depress the market price of the ADSs and could impair our ability to raise capital through the sale of additional equity securities from time to time. We are unable to predict the effect that any such sales may have on the prevailing market price of the ADSs.

***Our board of directors may determine the number of common shares to be issued as equity compensation from time to time, and the future issuance of additional common shares in connection with such issuances or in other transactions may adversely affect the market of the ADSs.***

We from time to time may grant equity-based compensation in the form of stock options or other equity incentives to our directors, internal corporate auditors, employees, and external consultants. The number of common shares to be issued for such purpose may be determined by our board of directors provided that notice is given to our shareholders, or by approval of our shareholders. ****As of January 31, 2023, 2,128 common shares are

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issuable upon exercise of outstanding stock options at a weighted average exercise price of ¥147,173 per share. If and when these options are exercised for our common shares, the number of common shares outstanding will increase. Such an increase in our outstanding securities, and any sales of such shares, could have a material adverse effect on the market for the ADSs, and the market price of the ADSs.

We currently plan to continue granting stock options and other incentives so that we can continue to secure talented personnel in the future. Any common shares to be issued as equity-based compensation, the exercise of outstanding stock options, or in other transactions, including future financing transactions, would dilute the percentage ownership held by the investors who purchase ADSs in this offering.

***The right of holders of ADSs to participate in any future rights offerings may be limited, which may cause dilution to their holdings and holders of ADSs may not receive cash dividends if it is impractical to make them available to them.***

We may, from time to time, distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make any such rights available to the ADS holders in the United States unless we register such rights and the securities to which such rights relate under the Securities Act or an exemption from the registration requirements is available. In addition, the deposit agreement provides that the depositary bank will not make rights available to ADS holders unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act.

The depositary has agreed to pay ADS holders the cash dividends or other distributions it or the custodian receives on our common shares or other deposited securities after deducting its fees and expenses. However, because of these deductions, ADS holders may receive less, on a per share basis with respect to their ADSs than they would if they owned the number of shares or other deposited securities directly. ADS holders will receive these distributions in proportion to the number of common shares the ADSs represent. In addition, the depositary may, at its discretion, decide that it is not lawful or practical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property and ADS holders will not receive such distribution.

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

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

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

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amendment to the deposit agreement, their choices will be limited to selling the ADSs or withdrawing the underlying common shares. No assurance can be given that a sale of ADSs could be made at a price satisfactory to the holder in such circumstances.

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

The depositary of the ADSs has agreed to pay holders of ADSs the cash dividends or other distributions it or the custodian for the ADSs receives on common shares or other deposited securities after deducting its fees and expenses. Holders of ADSs will receive these distributions in proportion to the number of our common 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 common shares to holders of ADSs. This means that holders of ADSs may not receive the distributions we make on our common shares if it is illegal or impractical to make them available to such holders. These restrictions may materially reduce the value of the ADSs.

***We could be subject to securities class action litigation.***

In the past, securities class action lawsuits have often been filed against companies after the market price of their securities has declined. If the Company were to face such a lawsuit, it could result in significant costs and require diversion of management's attention and resources, which could adversely affect the Company's business.

***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 common shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial for any claim they may have against us or the depositary arising out of or relating to our common shares, the ADSs or the deposit agreement, which may include any claim under the U.S. federal securities laws.

If we or the depositary were to oppose a jury trial based on this waiver, the court would have to determine whether the waiver was enforceable based on the facts and circumstances of the case in accordance with applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including 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, which has non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver, courts will generally consider whether a party knowingly, intelligently, and voluntarily waived the right to a jury trial. We believe that this would be the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging 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

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justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have, including outcomes that could be less favorable to the plaintiff(s) in any such action. Nevertheless, if this jury trial waiver is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or the ADSs serves as a waiver by any holder or beneficial owner of ADSs (including purchasers of the ADSs in the secondary market) or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

***The market price of our ADSs may be volatile or may decline regardless of our operating performance, and you may not be able to resell your ADSs at or above the public offering price.***

Recently, there have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with a number of recent initial public offerings, especially among companies with relatively smaller public floats. The public offering price for our ADSs will be determined through negotiations between the underwriters and us and may vary from the market price of our ADSs following our public offering. If you purchase our ADSs in our public offering, you may not be able to resell those ADSs at or above the public offering price. We cannot assure you that the public offering price of our common shares represented by ADSs, or the market price following our public offering, will equal or exceed prices in privately negotiated transactions of our shares that have occurred from time to time prior to our public offering. The market price of our ADSs may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actual or anticipated fluctuations in our revenue and other operating results;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the financial projections we may provide to the public, any changes in these projections or our failure to meet
these projections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any
securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• announcements by us or our competitors of significant products, services or features, technical innovations,
acquisitions, strategic relationships, joint ventures, or capital commitments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a
whole;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• lawsuits threatened or filed against us;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other events or factors, including those resulting from war or incidents of terrorism, or responses to these
events;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to obtain and maintain regulatory approvals for our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in laws or regulations applicable to our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adverse developments with respect to third party collaborators or suppliers, including our current sole supplier;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to obtain adequate product supply for approved products or to obtain supply at acceptable prices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to obtain adequate product supply for approved products or to obtain supply at acceptable prices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the extent or rate of market adoption of the Company's products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adverse developments regarding the safety, efficacy, accuracy or usefulness of our products, negative publicity
related to issues related to our products, reputational concerns, peer group performance and news releases;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• inability to conduct joint research, if necessary;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• additions or departures of our key management personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• issuances by us of debt or equity securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in the market valuations of similar companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• general economic, regulatory and market conditions, including recessions and slowdowns, due to pandemics
(including the COVID-19 pandemic) or otherwise; and

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, shareholders have filed securities class action litigation following periods of market volatility. In the event that 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.

***We may experience extreme stock price volatility, including any stock-run up, unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our*** ADSs*.***

In addition to the risks addressed above, our ADSs may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. In particular, our ADSs may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices, given that we will have relatively small public floats after this offering. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance, financial condition or prospects.

Holders of our ADSs may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our ADSs. As a result of this volatility, investors may experience losses on their investment in our ADSs. Furthermore, the potential extreme volatility may confuse the public investors of the value of our stock, distort the market perception of our stock price and our company's financial performance and public image, negatively affect the long-term liquidity of our ADSs, regardless of our actual or expected operating performance. If we encounter such volatility, including any rapid stock price increases and declines seemingly unrelated to our actual or expected operating performance and financial condition or prospects, it will likely make it difficult and confusing for prospective investors to assess the rapidly changing value of our ADSs and understand the value thereof.

**Risks Related to Japan** 

***We are incorporated in Japan, and it may be more difficult to enforce judgments against us that are obtained in courts outside of Japan.***

We are incorporated in Japan as a joint stock corporation (*kabushiki kaisha*) with limited liability. All of our directors are non-U.S. residents, and all of our assets and the personal assets of our directors 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 upon us in the United States, or to enforce against us, or our directors or executive officers, judgments obtained in U.S. courts predicated upon civil liability provisions of U.S. federal or state securities laws or similar judgments obtained in other courts outside of 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 U.S. federal and state securities laws.

***An increase of our international presence could expose us to fluctuations in foreign currency exchange rates, or a change in monetary policy may harm our financial results.***

Our functional currency and reporting currency is Japanese yen. An increase in our business activities internationally could expose us to fluctuations in foreign currency exchange rates. If our non-Japanese revenues

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increase substantially in the future, any significant change in the value of the currencies of the countries in which we do business against the Japanese yen could adversely affect our financial condition and operating performance due to conversion of exchange rates and transactional differences.

***We are actively expanding in Japan and are planning to expand overseas markets in the future, and we may be adversely affected if Japanese and global economic conditions and financial markets deteriorate.***

We are actively expanding in Japan and plan to expand our business overseas in the future, especially in the United States and Southeast Asia. As a result, our financial condition and results of operations may be significantly affected by general economic conditions and the economic and financial conditions in Japan and internationally. Factors affecting these conditions include fiscal and monetary policies, laws, regulations and other policies of Japan and any other relevant countries. In addition, we may be affected by labor shortages in Japan and any other relevant countries. As a result, our sales may fall short of our expectations, our liquidity and capital position could deteriorate and our cost of credit could increase, which in turn could adversely affect our results of operations and financial condition and may result in a material adverse effect to our business.

***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 (the "Companies Act") govern our corporate affairs. Legal principles relating to matters such as the validity of corporate procedures, directors' 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 laws 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.

***Holders of ADSs have fewer rights than shareholders under Japanese law, and their voting rights are limited by the terms of the deposit agreement.***

The rights of shareholders under Japanese law to take actions, including with respect to 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. Because the depositary, through its custodian agents, is the record holder of our common shares underlying the ADSs, only the depositary can exercise those rights in connection with the deposited shares. 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. 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 common 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.

***Dividend payments 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 common shares represented by the ADSs will be paid to the depositary in Japanese yen and then converted by the depositary into U.S. dollars, subject to certain conditions. 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.

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***Direct acquisition of our common shares, in lieu of ADSs, is subject to a prior filing requirement under recent amendments to the Japanese Foreign Exchange and Foreign Trade Act and related regulations.***

Under the amendments in 2019 to Japan's Foreign Exchange and Foreign Trade Law and related regulations (which we refer to as the "FEFTA"), direct acquisitions of our common shares in lieu of ADSs, by a Foreign Investor (as defined herein under "Description of Share Capital and Articles of Incorporation — Exchange Control") may be subject to prior filing requirements under the FEFTA regardless of the amount of shares to be acquired. A Foreign Investor wishing to acquire direct ownership of our common 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 common shares directly. In addition, any Foreign Investor who intends to take delivery of common shares of the Company upon delivery of ADSs must obtain prior approval of the Japanese governmental authorities before taking delivery, which may take up to 30 days. Without such clearance, the Foreign Investor will not be permitted to acquire our common shares directly.

A prior filing requirement as set forth above is not triggered for acquiring or trading the ADSs once the depositary receives clearance for the acquisition of our common shares underlying the ADS. The requisite approval relating to this offering was received on •, 2023. In addition, any Foreign Investor expecting to receive delivery of our common 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 our ADSs once the depositary receives clearance for the deposit of the underlying common shares, we cannot assure you that there will not be delays for additional Foreign Investors who wish to acquire our common shares or for holders of the ADSs who are Foreign Investors and who wish to surrender their ADSs and acquire the underlying common 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 common 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 "Description of Share Capital and Articles of Incorporation — Exchange Controls" and "Description of American Depositary Shares — Deposit, Withdrawal and Cancellation" in this Prospectus.

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**USE OF PROCEEDS** 

We estimate that we will receive approximately $● million in net proceeds from the sale of ● ADSs offered by us in this offering (or approximately $● million if the underwriters exercise in full their option to purchase up to ● additional ADSs from us), based on an assumed public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses of approximately $● million payable by us.

We intend to use the net proceeds from this offering for working capital and general corporate purposes, which include developing and commercializing our technologies and related products.

We have no agreements or commitments for particular uses of the net proceeds from this offering, and our management will have discretion in allocating the net proceeds. The amounts and timing of our actual expenditures will depend upon numerous factors, including the progress of our product development and sales efforts, whether or not we enter into strategic transactions, our general operating costs and expenditures, and the changing needs of our businesses.

Each $1.00 increase (decrease) in the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $● million, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions payable by us. We may also increase or decrease the number of ADSs we are selling in this offering. An increase (decrease) of 1,000,000 in the number of ADSs offered by us in this offering, as set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $● million, assuming the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the underwriting discounts and commissions payable by us.

We believe that our funds and the net proceeds from this offering will be sufficient to continue our businesses and operations as currently conducted in the next twelve months; however, changing circumstances may cause us to consume capital significantly faster than we currently anticipate.

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**DIVIDEND POLICY** 

We currently intend to retain any future earnings to finance the development and expansion of our businesses and, therefore, do not intend to pay any cash dividends in the foreseeable future. Since our inception, we have not declared or paid any cash dividends on our common shares. Any decision to pay dividends 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 and will require shareholder approval. ****Accordingly, we cannot give any assurance that any dividends may be declared and paid in the future.

If declared, holders of outstanding common shares on a dividend record date will be entitled to the full dividend declared without regard to the date of issuance of the common shares or any transfer of the common shares subsequent to the dividend payment date. 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. See "Description of Share Capital and Articles of Incorporation — Dividend Rights." Any dividend we declare will be paid by the depositary bank to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders of our common shares, to the extent permitted by applicable law and regulations, less the fees and expenses payable under the deposit agreement. See "Description of American Depositary Shares — Dividends and Other Distributions."

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**CAPITALIZATION** 

The following table sets forth our cash and cash equivalents, debt and capitalization as of October 31, 2022:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on an actual basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on a pro forma basis to give effect to the Share Capital Reorganization and the issuances of an aggregate of
● shares of common stock after October 31, 2022, in connection with the exercise of outstanding stock options; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on a pro forma, as adjusted, basis to give effect to the above and the issuance of ● ADSs in this offering
at an assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses
payable by us, as set forth in this prospectus.

You should read the following table in conjunction with the sections entitled "Use of Proceeds", "Selected Financial Information and Operating Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our financial statements and the related notes thereto included elsewhere in this prospectus.

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| | | | |
|:---|:---|:---|:---|
|  | **As of October 31, 2022** | **As of October 31, 2022** | **As of October 31, 2022** |
| **(*in thousands, except share amounts*)** | **Actual<sup>(1)</sup>** | **Pro Forma<sup>(1)</sup>** | **Pro Forma,<br>as Adjusted<sup>(1)(2)</sup>** |
|  Cash and cash equivalents | $22034 | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● |
|  Debt | $6997 | ● | ● |
| Stockholders' equity: |  | ● | ● |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock, no par value – 689,708 shares authorized; 10,000 shares issued and outstanding, actual; ● shares issued and outstanding, pro forma; and ● shares issued and outstanding, pro forma, as adjusted(3) | 673 | ● | ● |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series AA convertible preferred stock, no par value –1,111 shares authorized; 1,111 shares issued and outstanding; aggregate liquidation preference of $251, actual; no shares issued and outstanding, pro forma; and no shares issued and outstanding, pro forma, as adjusted(3) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series A convertible preferred stock, no par value – 298,889 shares authorized; 4,600 shares issued and outstanding; aggregate liquidation preference of $5,803, actual; no shares issued and outstanding, pro forma; and no shares issued and outstanding, pro forma, as adjusted(3) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series BB convertible preferred stock, no par value – 404 shares authorized; 404 shares issued and outstanding; aggregate liquidation preference of $1,345, actual; no shares issued and outstanding, pro forma; and no shares issued and outstanding, pro forma, as adjusted(3) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series B convertible preferred stock, no par value – 3,688 shares authorized; 3,688 shares issued and outstanding; aggregate liquidation preference of $52,421, actual; no shares issued and outstanding, pro forma; and no shares issued and outstanding, pro forma, as adjusted(3) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C convertible preferred stock, no par value – 6,200 shares authorized; 1,923 shares issued and outstanding; aggregate liquidation preference of $29,318, actual; no shares issued and outstanding, pro forma; and no shares issued and outstanding, pro forma, as adjusted(3) | 7329 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional paid-in capital | 34255 |  |  |

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| | | | |
|:---|:---|:---|:---|
|  | **As of October 31, 2022** | **As of October 31, 2022** | |
| **(*in thousands, except share amounts*)** | **Actual<sup>(1)</sup>** | **Pro Forma<sup>(1)</sup>** | <br>**Pro Forma,**<br>**as Adjusted<sup>(1)(2)</sup>** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated deficit | (22214) | ● | ● |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders' equity | 20043 | ● |  |
|  Total capitalization | $27040 | $● | $● |

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<sup>(1)</sup> Based upon the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022, as reported by the U.S. Federal Reserve in is weekly release on November 7, 2022 (<u>www.federalreserve.gov/releases/h10/2022/</u>), and as used in our unaudited condensed financial statements as of and for the six months ended October 31, 2022 included elsewhere in this prospectus. 

<sup>(2)</sup> The number of common stock to be outstanding immediately after this offering is based on the issuance of ● ADSs in this offering and does not include (i) up to ● ADSs issuable upon the exercise in full by the underwriters of their option to purchase additional ADSs from us, and (ii) up to an aggregate of 2,138 shares of common stock issuable upon the exercise of stock options outstanding as of October 31, 2022. The outstanding stock options have a weighted average exercise price of ¥147,326 per share and expire August 30, 2032. 

<sup>(3)</sup> Prior to the public filing of this registration statement, we intend to retroactively adjust the number of common stock and of convertible preferred stock to give effect to the Share Capital Reorganization.

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**DILUTION** 

Upon completion of this offering, we will have one class of equity interests issued and outstanding: common shares. Purchasers of ADSs in this offering will experience immediate and substantial dilution to the extent of the difference between the initial public offering price per ADS paid by the purchasers of the ADSs in this offering and the pro forma, as adjusted net tangible book value per ADS immediately after, and giving effect to, this offering. Dilution results from the fact that the initial public offering price (which is the midpoint of the price range set forth on the cover page of this prospectus) per ADS in this offering is substantially in excess of the net tangible book value per ADS attributable to our existing shareholders for our presently outstanding common shares.

Our historical net tangible book value per common share is determined by dividing our net tangible book value, which is the book value of our total tangible assets less the book value of our total liabilities, by the number of outstanding equity interests. As of October 31, 2022, the historical net tangible book value of our common shares was $●, or $● per common share. On a pro forma basis, after giving effect to the Share Capital Reorganization and the issuances of common shares after October 31, 2022, in connection with the exercise of outstanding stock options, our historical net tangible book value as of October 31, 2022 would have been $●, or $● per common share.

After giving effect to the (i) sale by us of ● ADSs in this offering at an assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), and (ii) receipt by us of the net proceeds of this offering, after deduction of the underwriting discounts and commissions and the estimated offering expenses payable by us, our pro forma, as adjusted net tangible book value as of October 31, 2022, would have been $●, or $● per common share. The pro forma, as adjusted net tangible book value per common share immediately after the offering is calculated by dividing the pro forma, as adjusted net tangible book value of $● by ● shares of equity interests (which is the pro forma, as adjusted number of equity interests outstanding as of October 31, 2022). The difference between the initial public offering price per ADS and the pro forma, as adjusted net tangible book value per ADS represents an immediate increase in net tangible book value of $● per ADS to our existing shareholders, and an immediate dilution in net tangible book value of $● per ADS to purchasers of ADSs in this offering.

The following table illustrates this dilution to purchasers in this offering on a per ADS basis (*in thousands, except per ADS data*):

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| | | |
|:---|:---|:---|
|  Assumed initial public offering price per ADS |  | $● |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net tangible book value per common share before this offering (as of October 31, 2022) | $● |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase in net tangible book value per common share attributable to existing shareholders due to the issuance of common shares after October 31, 2022, | $● |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma net tangible book value per common share before this offering (as of October 31, 2022) | $● |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Increase in net tangible book value per ADS attributable to purchasers in this offering | $● |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pro forma, as adjusted net tangible book value per ADS immediately after this offering |  | $● |
|  Dilution in pro forma, as adjusted net tangible book value per ADS to purchasers in this offering |  | $● |

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Each $1.00 increase (decrease) in the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the pro forma, as adjusted net tangible book value per ADS immediately after this offering by $●, and the dilution in pro

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forma, as adjusted net tangible book value per ADS to purchasers in this offering by $●, assuming the number of ADSs offered by us and this offering, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions payable by us.

We may also increase or decrease the number of ADSs we are selling in this offering. An increase (decrease) of 1,000,000 in the number of ADSs offered by us in this offering, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma, as adjusted net tangible book value per ADS immediately after this offering by $●, and the dilution in pro forma, as adjusted net tangible book value per ADS to purchasers in this offering by $●, assuming the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the underwriting discounts and commissions payable by us.

The table and information above assume no exercise by the underwriters of their option to purchase additional ADSs in this offering. If the underwriters exercise in full their option to purchase up to ● additional ADSs from us, the pro forma, as adjusted net tangible book value per ADS immediately after this offering would be $● per ADS, and the dilution in pro forma, as adjusted net tangible book value per ADS to purchasers in this offering would be $● per ADS, in each case assuming an assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, as of October 31, 2022, on the pro forma, as adjusted basis described above, the differences between the number of common shares underlying the ADSs purchased from us, the total consideration paid to us in cash, and the weighted average price per common share underlying the ADSs that our existing shareholders and the new purchasers in this offering paid. The calculation below is based on an assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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|:---|:---|:---|:---|:---|:---|
|  | **Shares Purchased** | **Shares Purchased** | **Total Consideration** | **Total Consideration** | **Total Consideration** |
|  | **Number** | **Percent** | **Amount** | **Percent** | **Weighted<br>Average Price<br>Per Share** |
|  Existing shareholders<sup>(1)</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● | ●% | $● | ●% | $● |
|  Purchasers in this offering<sup>(1)(2)</sup> | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● | ●% | $● | ●% | $● |
|  Total | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● | 100% | $● | 100% | $● |

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<sup>(1)</sup> ●

<sup>(2)</sup> ●

Each $1.00 increase (decrease) in the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the total consideration paid by purchasers in this offering and the weighted average price per share paid by all shareholders by $● and $● per share, respectively, and in the case of an increase, would increase the percentage of total consideration paid by purchasers in this offering by ● %, and in the case of a decrease, would decrease the percentage of total consideration paid by purchasers in this offering by ● %s, assuming the number of ADSs offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions payable by us.

Similarly, an increase (decrease) of 1,000,000 in the number of ADSs offered by us in this offering, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by purchasers in this offering and the weighted average price per share paid by all shareholders by $● and $● per share, respectively, and in the case of an increase, would increase the percentage of total consideration paid by purchasers in this offering by ● %, and in the case of a decrease, would decrease the percentage of total

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consideration paid by purchasers in this offering by ● %, assuming the assumed initial public offering price of $● per ADS (which is the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the underwriting discounts and commissions payable by us.

The table and information above assume no exercise by the underwriters of their option to purchase additional ADSs in this offering. If the underwriters exercise in full their option to purchase up to ● additional ADSs from us, the number of common shares underlying the ADSs held by purchasers in this offering would be increased to ● common shares, or ● % of the total number of common shares outstanding immediately after this offering, and the percentage of common shares held by our existing shareholders would be reduced to ● % of the total number of common shares outstanding immediately after this offering.

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**SELECTED FINANCIAL INFORMATION AND OPERATING DATA** 

The following tables set forth our selected financial information as of and for the years ended April 30, 2022 and 2021 and the six months ended October 31, 2022 and 2021. You should read the following selected financial information in conjunction with, and it is qualified in its entirety by reference to, our audited financial statements and the related notes thereto, our unaudited condensed financial statements and the related notes thereto, and the sections entitled "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," each of which are included elsewhere in this prospectus.

Our selected statement of operations information for the years ended April 30, 2022 and 2021, and our related selected balance sheet information as of April 30, 2022 and 2021, have been derived from our audited financial statements as of and for the years ended April 30, 2022 and 2021, prepared in accordance with U.S. GAAP, which are included elsewhere in this prospectus.

Our selected statement of operations information for the six months ended October 31, 2022 and 2021, and our related selected balance sheet information as of October 31, 2022, have been derived from our unaudited condensed financial statements as of and for the six months ended October 31, 2022, prepared in accordance with U.S. GAAP, which are included elsewhere in this prospectus.

Our historical results for the periods presented below are not necessarily indicative of the results to be expected for any future periods.

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|:---|:---|:---|:---|:---|:---|:---|
| **(*in thousands,except per share amounts*)** | **Six months ended October 31,** | **Six months ended October 31,** | **Six months ended October 31,** | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
| **(*in thousands,except per share amounts*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** |
|  **<u>Statement of Operations Information:</u>** |  |  |  |  |  |  |
|  Revenue: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | $820 | ¥121866 | ¥179213 | $4281 | ¥636265 | ¥512772 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Products | 247 | 36773 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 1067 | 158639 | 179213 | 4281 | 636265 | 512772 |
|  Cost and Expenses: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 155 | 23121 | 71258 | 1391 | 206604 | 136390 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of products | 162 | 24053 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 2283 | 339283 | 364465 | 4670 | 694072 | 601731 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 4332 | 643892 | 360962 | 5604 | 832994 | 525158 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expenses, net |  |  | 311 | 2 | 311 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total costs and expenses | 6932 | 1030349 | 796996 | 11667 | 1733981 | 1263279 |
|  **Loss from operations** | (5865) | (871710) | (617783) | (7386) | (1097716) | (750507) |
|  Interest expense | (90) | (13423) | (11662) | (167) | (24777) | (17672) |
|  Other income | 1 | 133 | 4488 | 88 | 13025 | 8695 |
|  **Loss before income taxes** | (5954) | (885000) | (624957) | (7465) | (1109468) | (759484) |
|  Income tax expense |  |  |  |  |  |  |
|  **Net loss** | $(5954) | ¥(885000) | ¥(624957) | $(7465) | ¥(1109468) | ¥(759484) |
|  Weighted-average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 | 10000 | 10000 | 10000 |
|  Net loss per share attributable to common stockholders, basic and diluted | $(595.44) | ¥(88499.96) | ¥(62495.68) | $(746.46) | ¥(110946.80) | ¥(75948.41) |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(*in thousands*)** | **As of October 31,** | **As of October 31,** | **As of April 30,** | **As of April 30,** | **As of April 30,** |
| **(*in thousands*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** |
|  **<u>Balance Sheet Information:</u>**  |  |  |  |  |  |
|  Total assets | $36401 | ¥5410219 | $25497 | ¥3789682 | ¥4541714 |
|  Total liabilities | $16358 | ¥2431301 | $14535 | ¥2160405 | ¥1802969 |
|  Stockholders' Equity: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C convertible preferred stock, no par value; 6,200 shares authorized; 1,923 shares issued and outstanding; aggregate liquidation preference of ¥4,357,518 ($29318) at October 31, 2022 and no shares authorized; no shares issued and outstanding at April 30, 2022 | 7329 | 1089380 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series B convertible preferred stock, no par value; 3,688 shares authorized; 3,688 shares issued and outstanding; aggregate liquidation preference of ¥7,791,269 ($52421) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series BB convertible preferred stock, no par value; 404 shares authorized; 404 shares issued and outstanding; aggregate liquidation preference of ¥199,963 ($1345) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series A convertible preferred stock, no par value; 298,889 shares authorized; 4,600 shares issued and outstanding; aggregate liquidation preference of ¥862,500 ($5803) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series AA convertible preferred stock, no par value; 1,111 shares authorized; 1,111 shares issued and outstanding; aggregate liquidation preference of ¥37,303 ($251) at October 31, 2022 and April 30, 2022 |  |  |  |  |  |
|  Common stock, no par value; 689,708 shares authorized; 10,000 shares issued and outstanding at October 31, 2022 and 695,908 shares authorized; 10,000 shares issued and outstanding at April 30, 2022 | 673 | 100000 | 673 | 100000 | 100000 |
|  Additional paid-in capital | 34255 | 5091299 | 26549 | 3946038 | 3946038 |
|  Accumulated deficit | (22214) | (3301761) | (16260) | (2416761) | (1307293) |
|  **Total stockholders' equity** | 20043 | 2978918 | 10962 | 1629277 | 2738745 |
|  **Total Liabilities and Stockholders' Equity** | $36401 | ¥5410219 | $25497 | ¥3789682 | ¥4541714 |

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<sup>(1)</sup> For convenience, the Japanese yen amounts are expressed in U.S. dollars at the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022 as reported by the U.S. Federal Reserve in is weekly release on November 7, 2022 (www.federalreserve.gov/releases/h10/2022/). 

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##### [**Table of Contents**](#toc)
**MANAGEMENT'S DISCUSSION AND ANALYSIS OF** 

**FINANCIAL CONDITION AND RESULTS OF OPERATIONS** 

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections of this prospectus entitled "Selected Financial Information and Operating Data" and "Business", and our financial statements and related notes thereto, included elsewhere in this prospectus. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our current plans, expectations, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements."* 

**Overview** 

We create and commercialize innovative consumer personal care products and spatial materials through the utilization of mechanobiology and metamaterials in combination with our core proprietary wave technology that controls ultrasound and other waves. Metamaterials are substances that are artificially created through structural design and have properties that do not exist in nature, such as certain electromagnetic metamaterials. We seek to exploit and accelerate the coming digital era through the fusion of computer science and wave technology, which we call "Digital Nature." By focusing on this evolving area, we intend to research, develop, and commercialize technologies that, among other things, improve health and human interfaces and that overcome physical limitations through sensory and metamaterial technologies. We expect that, over time, the world of Digital Nature will construct an environment inseparable from both computers and non-computers, building a computational nature that transcends language and phenomenon with information processes unique to living organisms.

Our proprietary wave control technology seeks not only to remove the barriers that limit us physically, but also to expand our physical capabilities. We intend to use our proprietary wave control technology to expand physical capabilities, and thereby to achieve our mission of improving the quality of life for our customers. We believe these technologies can be used to create, for example, acoustic sonar capabilities similar to dolphins or computer systems that optimize spatial information by developing wireless communication. Waves, such as sound and light, differ in the physical behavior of the medium as they travel through it and in the way they interact with objects and living bodies. However, their basic behaviors are wave equations. Our wave control technologies consist of a system of methodologies to manipulate the common behaviors of sound and light in this abstract layer as desired, and to utilize the unique phenomena of sound and light for human benefits. While wave control technology has the potential for a variety of applications, we currently focus our development efforts in two principal fields: Healthcare & Diversity and Workspace & Digital Transformation. In the Healthcare & Diversity field, we seek solutions to various social issues arising from physical and environmental differences by applying our proprietary technologies, such as SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device which we launched in November 2022, VUEVO, a series of directional voice arrival detection devices for individuals with DHH, and kikippa, an acoustic stimulation device intended to aid individuals with cognitive impairment. In the Workspace & Digital Transformation field, we aim to solve business and social issues by developing technologies for sensing and controlling space, such as iwasemi, a sound-absorbing metamaterial we launched in July 2022, hackke, a location positioning technology, and KOTOWARI, a technology providing spatial analysis data. In the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. We expect to launch kikippa and VUEVO in the second calendar quarter of 2023.

In 2014, Dr. Yoichi Ochiai, our Chief Executive Officer and Dr. Takayuki Hoshi, our Chief Research Officer, developed "Pixie Dust," a three-dimensional acoustic levitation technology, which enables the movement of objects in three dimensions by using ultrasonic control. Until this time, ultrasonic waves had only been used to levitate objects and make them move in two dimensions. Since then, we have continued to work on

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overcoming the challenges in manipulating waves by improving the efficiency and performance of the computer processing required to control waves and making the circuit boards more sophisticated, as well as on applying our wave control technology to product developments and innovation. The intersection of Digital Nature and wave technology is the key focus of our research and development activities. As society becomes more governed by a computer-based environment, we believe that computers will become a complement to human intelligence. One of our desired contributions to society is to accelerate this evolution in order to create a better quality of life.

We are an early-stage company and have not generated significant revenue from any commercialization of our proprietary technologies or products. For our fiscal years ended April 30, 2022 and April 30, 2021, we have generated revenues of ¥636,265 thousand ($4,281 thousand) and ¥512,772 thousand ($3,450 thousand), respectively, primarily from commissioned research and development and solution services we provided for other companies and have incurred net losses of ¥1,109,468 thousand ($7,465 thousand) and ¥759,484 thousand ($5,110 thousand), respectively. For the six months ended October 31, 2022 and October 31, 2021, we have generated revenues of ¥158,639 thousand ($1,067 thousand) and ¥179,213 thousand ($1,206 thousand), respectively, primarily from commissioned research and development and solution services we provided for other companies and our products sales and have incurred net losses of ¥885,000 thousand ($5,954 thousand) and ¥624,957 thousand ($4,205 thousand), respectively.

**Key Financial Definitions** 

***Revenue***. Our major sources of revenue include commissioned research and development, solution services, membership services, guest speaker services, and product sales.

Our commissioned research revenue has comprised the bulk of our revenue. As part of our commissioned research activities, we submit to our customers certain deliverables, such as reports, prototypes, and digital source code, which are generated during research and demonstration experiments or the verification and demonstration of the relevant digital technology to the customers. As part of our solution services, we sell or lend dedicated devices and provide system usage, planning, and monitoring services, principally through our *hackke* service and *magickiri* service. As part of our membership services, we operate a membership forum called "Pixie Nest," which hosts meetings and distributes information to facilitate solving social issues based on knowledge gained by Pixie through industry-academia collaboration, and for which service our members pay a fee. As part of our guest speaker services, members of our management team speak for several media or external events such as academic or industry conferences managed by third parties. While the revenue from commissioned research and development will remain as a source of capital for us, we expect to gain more revenue from commercializing and expanding sales of our own products and solution services.

During the six months ended October 31, 2022, we generated revenue from new product sales in addition to commissioned research, solution services, membership services and guest speaker services. New product sales

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are primarily comprised of SonoRepro and iwasemi. Revenue is recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the expected consideration in exchange for such goods or services. We recognize revenue from product sales to customers principally at the point of delivery of the product to the customer. When we generate revenue from e-commerce, it is recognized either at the time of shipment or at the time of delivery of the product to the customer, depending on the customer's order designation.

***Cost of services***. Cost of services consists primarily of outsourcing costs, depreciation and amortization, supply expenses, personnel costs and related costs that are attributable to providing our services.

***Cost of products***. Cost of products consists primarily of material costs, outsourcing costs, depreciation and amortization, supply expenses, personnel costs and related costs that are attributable to production.

***Research and development costs***. Research and development costs consist of salaries, benefits, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on our behalf.

***Selling, general and administrative expenses***. Our selling, general and administrative expenses ("SG&A") are primarily composed of advertising and marketing promotion expenses, personnel costs for sales and marketing staff and general corporate functions, share-based compensation expenses, and rental and depreciation expenses.

***Other operating expenses***. Other operating expenses include a loss on disposal of property and equipment.

***Interest expense***. Interest expense consists primarily of interest expense arising from borrowings to banks.

***Other income (expense)***. From time to time we have non-recurring, non-operating gains and losses which are reflected through other income/expense. These typically include income from interest and subsidies among other sources, and foreign exchange gain or loss.

**Factors Impacting our Operating Results** 

The following trends and uncertainties either affected our financial performance historically or are likely to impact our results of operations in the future:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *The number and quality of partner companies which collaborate with us for joint research and development*.
We have historically generated revenues primarily from commissioned research and development and solution services we provided for other companies including under our collaboration arrangements. We intend to continue to generate revenue from these
sources in the future, though the focus of our business is expected to be on commercializing our products. We face significant competition in seeking appropriate collaborators, which are sometimes also clients of our services. Collaborations are
complex and time-consuming to negotiate and document. Whether we can continue to benefit from our collaborations with other companies will depend on whether we can establish or maintain strategic partnerships or other alternative arrangements for
our product and product candidates on acceptable terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *The commercialization and potential profitability of our wave control technology and related products*. In
the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. To date, we have only produced and sold an insignificant amount of SonoRepro and iwasemi. We have not launched VUEVO or kikippa and expect to do so in
the second calendar quarter of 2023.

Our financial prospects in the near term, including our ability to achieve profitability, as well as our

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future growth, may depend greatly on the commercialization of SonoRepro, kikippa, VUEVO, and iwasemi. As we have a limited history of commercializing our products, it may be difficult to predict our future performance based on our current operation results. The commercial success of our products and product candidates is dependent on a number of factors including market acceptance of our products and solutions, our manufacturing and marketing capabilities, and our competitive and regulatory environments, among others, many of which may be out of our control. We plan to leverage our resources including our collaboration relationships with strategic partners in our efforts to commercialize our products and have seen some encouraging market reaction to SonoRepro and iwasemi so far. Our ability to achieve profitability by focusing on commercializing our products will depend on our ability to create and increase market demand for our products and manage our growth and the related costs effectively. <br>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *The market acceptance of our products and product candidates*. The commercialization of our products is at
an early stage and our business performance will depend on our ability to increase levels of user engagement in current and new markets. If we are unable to achieve the degree of market acceptance necessary for future commercial success of our
product candidates, we may not be able to attract or retain customers and users or otherwise maintain or increase the frequency, duration, or level of their engagement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *The timing and cost to establish a sales, marketing, and distribution infrastructure*. In order for us to
successfully commercialize our products, we must either develop a sales, marketing, and distribution infrastructure or collaborate with third parties that have such commercial infrastructure and relevant sales and marketing experience. We expect to
be able to build our commercial infrastructure over time as we launch and expand sales of our products, and we may rely on licensing and collaboration agreements with strategic partners for the commercialization of our products. If we establish the
commercial infrastructure to support the sales, marketing, and distribution of our products, such commercial infrastructure could be expected to include a targeted sales force supported by sales management, internal sales support, an internal
marketing group, and distribution support. Therefore, our business performance will likely depend on our ability to establish a successful infrastructure to market and sell our products, whether on our own or jointly with current or future
collaborators.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Changes in general market and economic conditions*. Macroeconomic factors affect consumer spending patterns
and thereby our results of operations. These factors include general economic conditions, inflation, consumer confidence, employment rate, business conditions, and the impact on economic conditions from pandemics such as COVID-19 and related
prophylactic measures. Factors that impact consumer discretionary spending, which remains volatile globally, continue to create a complex and challenging environment for us and our strategic partners. We intend to continue to evaluate and adjust our
operating strategies and cost management opportunities to mitigate any impacts on our results of operating operations resulting from broader macroeconomic conditions and policy changes, while remaining focused on the long-term growth of our
business.

We anticipate that our general and administrative expenses will increase in the future as a result of increased costs associated with being a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys, and accountants, among other expenses, and, in the case of public company-related expenses, services associated with strengthening our internal control over financial reporting, maintaining compliance with Nasdaq listing and SEC reporting requirements, director and officer liability insurance costs, and investor and public relations costs, among other expenses.

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**Results of Operations** 

***Comparison of the year ended April 30, 2022 and 2021.***

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(*in thousands*)** | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** | **Change (2022 vs 2021)** | **Change (2022 vs 2021)** |
| **(*in thousands*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** | **$<sup>(1)</sup>** | **%** |
|  **<u>Statement of Operations Information:</u>** |  |  |  |  |  |
|  Revenue: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | $4281 | ¥636265 | ¥512772 | $831 | 24.1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 4281 | 636265 | 512772 | 831 | 24.1 |
|  Cost and Expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 1391 | 206604 | 136390 | 472 | 51.5 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 4670 | 694072 | 601731 | 621 | 15.3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 5604 | 832994 | 525158 | 2072 | 58.6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expenses, net | 2 | 311 |  | 2 | 100.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total cost and expenses | 11667 | 1733981 | 1263279 | 3167 | 37.3 |
|  **Loss from operations** | (7386) | (1097716) | (750507) | (2336) | 46.3 |
|  Interest expense | (167) | (24777) | (17672) | (48) | 40.2 |
|  Other income | 88 | 13025 | 8695 | 29 | 49.8 |
|  **Loss before income taxes** | (7465) | (1109468) | (759484) | (2355) | 46.1 |
|  Income tax expense |  |  |  |  |  |
|  **Net loss** | $(7465) | ¥(1109468) | ¥(759484) | $(2355) | 46.1 |

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<sup>(1)</sup> For convenience, the Japanese yen amounts are expressed in U.S. dollars at the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022 as reported by the U.S. Federal Reserve in its weekly release on November 7, 2022 (<u>www.federalreserve.gov/releases/h10/2022</u>). 

*Revenue.* Our revenue increased by 24.1% from ¥512,772 thousand ($3,450 thousand) in the fiscal year ended April 30, 2021 to ¥636,265 thousand ($4,281 thousand) in the fiscal year ended April 30, 2022, primarily due to an increase in the number of orders from commissioned research and development. During the fiscal year ended April 30, 2022, three customers accounted for approximately 54.3% of our total revenue. During the fiscal year ended April 30, 2021, two customers accounted for approximately 37.5% of our total revenue.

*Cost of Services*. Our cost of services increased by 51.5% from ¥136,390 thousand ($918 thousand) in the fiscal year ended April 30, 2021 to ¥206,604 thousand ($1,391 thousand) in the fiscal year ended April 30, 2022, primarily due to increases in outsourcing and personnel costs based on an increase in the number of orders and decreases in profit margins, which were due to changes in our service portfolio.

*Research and Development.* Our research and development expenses increased by 15.3% from ¥601,731 thousand ($4,049 thousand) in the fiscal year ended April 30, 2021 to ¥694,072 thousand ($4,670 thousand) in the fiscal year ended April 30, 2022, primarily due to increases in employment costs for our research and development function.

*SG&A.* Our SG&A increased by 58.6% from ¥525,158 thousand ($3,533 thousand) in the fiscal year ended April 30, 2021 to ¥832,994 thousand ($5,604 thousand) in the fiscal year ended April 30, 2022, primarily due to increases in professional service costs as we contracted with a law firm, an accounting adviser and our auditor in connection with preparations for this offering.

*Other Operating Expenses.* Our other operating expenses increased from zero in the fiscal year ended April 30, 2021 to ¥311 thousand ($2 thousand) in the fiscal year ended April 30, 2022, due to disposal of property and equipment.

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*Interest Expense*. Our interest expense increased by 40.2% from ¥17,672 thousand ($119 thousand) in the fiscal year ended April 30, 2021 to ¥24,777 thousand ($167 thousand) in the fiscal year ended April 30, 2022, primarily due to an increase in outstanding borrowings.

*Other Income*. Our other income increased by 49.8% from ¥8,695 thousand ($59 thousand) in the fiscal year ended April 30, 2021 to ¥13,025 thousand ($88 thousand) in the fiscal year ended April 30, 2022, primarily due to an increase in subsidy income, partially offset by an increase in foreign exchange loss based on foreign exchange rate changes.

***Comparison of the six months ended October 31, 2022 and 2021.***

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(*in thousands*)** | **Six months ended October 31,** | **Six months ended October 31,** | **Six months ended October 31,** | **Change (2022 vs 2021)** | **Change (2022 vs 2021)** |
| **(*in thousands*)** | **2022($)<sup>(1)</sup>** | **2022(¥)** | **2021(¥)** | **$<sup>(1)</sup>** | **%** |
|  **<u>Statement of Operations Information:</u>** |  |  |  |  |  |
|  Revenue: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | $820 | ¥121866 | ¥179213 | $(385) | (32.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Products | 247 | 36773 |  | 247 | 100.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 1067 | 158639 | 179213 | (138) | (11.5) |
|  Cost and Expenses: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 155 | 23121 | 71258 | (324) | (67.6) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of products | 162 | 24053 |  | 162 | 100.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 2283 | 339283 | 364465 | (169) | (6.9) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 4332 | 643892 | 360962 | 1904 | 78.4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expenses, net |  |  | 311 | (2) | (100.0) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total costs and expenses | 6932 | 1030349 | 796996 | 1571 | 29.3 |
|  **Loss from operations** | (5865) | (871710) | (617783) | (1709) | 41.1 |
|  Interest expense | (90) | (13423) | (11662) | (12) | 15.1 |
|  Other income | 1 | 133 | 4488 | (29) | (97.0) |
|  **Loss before income taxes** | (5954) | (885000) | (624957) | (1750) | 41.6 |
|  Income tax expense |  |  |  |  |  |
|  **Net loss** | $(5954) | ¥(885000) | ¥(624957) | $(1750) | 41.6 |

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<sup>(1)</sup> For convenience, the Japanese yen amounts are expressed in U.S. dollars at the exchange rate of ¥148.63 = US$1.00, which was the foreign exchange rate on October 31, 2022 as reported by the U.S. Federal Reserve in is weekly release on November 7, 2022 (<u>www.federalreserve.gov/releases/h10/2022</u>). 

*Revenue.* Our revenue decreased by 11.5% from ¥179,213 thousand ($1,206 thousand) in the six months ended October 31, 2021 to ¥158,639 thousand ($1,067 thousand) in the six months ended October 31, 2022, primarily due to decreases in commissioned research and development of ¥11,047 thousand ($75 thousand) and solution service of ¥43,305 thousand ($292 thousand), partially offset by an increase in product sales of ¥36,773 thousand ($247 thousand).

*Cost of Services.* Our cost of services decreased by 67.6% from ¥71,258 thousand ($480 thousand) in the six months ended October 31, 2021 to ¥23,121 thousand ($155 thousand) in the six months ended October 31, 2022, primarily due to variation of overhead cost allocation standard and increases in profit margins by changes in service portfolio.

*Cost of Products.* Our cost of products newly incurred ¥24,053 thousand ($162 thousand) in the six months ended October 31, 2022 due to the launch of new products.

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*Research and Development*. Our research and development expenses decreased by 6.9% from ¥364,465 thousand ($2,452 thousand) in the six months ended October 31, 2021 to ¥339,283 thousand ($2,283 thousand) in the six months ended October 31, 2022, primarily due to variation of our overhead cost allocation standard and our selection and concentration of development products.

*SG&A.* Our SG&A increased by 78.4% from ¥360,962 thousand ($2,429 thousand) in the six months ended October 31, 2021 to ¥643,892 thousand ($4,332 thousand) in the six months ended October 31, 2022, primarily due to increases in professional service costs as we contracted with a law firm, an accounting adviser and our auditor in connection with preparations for this offering, as well as advertising expenses related to new products and compensation for consulting service.

*Other Operating Expenses.* Our other operating expenses decreased by 100.0% from ¥311 thousand ($2 thousand) in the six months ended October 31, 2021 to zero in the six months ended October 31, 2022, primarily due to the cessation of non-recurring items such as the disposal of property and equipment.

*Interest Expense*. Our interest expense increased by 15.1% from ¥11,662 thousand ($78 thousand) in the six months ended October 31, 2021 to ¥13,423 thousand ($90 thousand) in the six months ended October 31, 2022, primarily due to an increase in outstanding borrowings.

*Other Income*. Our other income decreased by 97.0% from ¥4,488 thousand ($30 thousand) in the six months ended October 31, 2021 to ¥133 thousand ($1 thousand) in the six months ended October 31, 2022, primarily due to an increase of a foreign exchange loss.

**Liquidity and Capital Resources** 

***Sources of Capital Resources***

Our principal sources of liquidity were cash and cash equivalents totaling ¥1,795,963 thousand ($12,083 thousand) as of April 30, 2022 and ¥3,274,956 thousand ($22,034 thousand) as of October 31, 2022, which were held and used for working capital purposes. Our cash and cash equivalents are comprised of cash on hand, demand deposits, and time deposits maintained at various financial institutions. We believe our working capital is sufficient for the Company's requirements for the next 12 months.

We have funded our operations primarily through equity and debt financings, and revenue from our commissioned research and development pursuant to contractual arrangements with third parties. In June and September 2022, we received ¥2,178,760 thousand ($14,658 thousand) in gross proceeds from our sale of 1,923 shares of Series C convertible preferred stock. Additionally, the Company has outstanding loans from two Japanese financial institutions: (i) The Shoko Chukin Bank, Ltd. and (ii) Resona Bank Limited. See " — Credit Facilities" below for more information on these loans.

Our commissioned research and development pursuant to contractual arrangements with third parties and our collaboration arrangements aimed at developing, testing and validating our products and product candidates with collaboration partners are a substantial source of revenue for our business. While the revenue from commissioned research and development will remain as a source of capital for us, we expect to gain more revenue from commercializing and expanding sales of our own products and solution services.

***Uses of Capital Resources***

We have incurred significant operating losses and negative cash flows since our inception. We incurred net losses of ¥885,000 thousand ($5,954 thousand), ¥624,957 thousand ($4,205 thousand), ¥1,109,468 thousand ($7,465 thousand), and ¥759,484 thousand ($5,110 thousand) for the six months ended October 31, 2022 and 2021 and the years ended April 30, 2022 and 2021, respectively. As of October 31, 2022, we had an accumulated deficit of ¥3,301,761 thousand ($22,214 thousand). Our primary use of capital resources has been to conduct research and development activities, organize and staff our Company, develop our business plan, secure related intellectual property rights, and raise capital.

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***Operating Capital Requirements***

Our ability to achieve profitability depends on the successful development and commercialization of our technology and our products. We expect to incur significant costs for at least the next several years to develop, manufacture, and distribute our products, and we expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development and seek marketing approval for our Healthcare & Diversity products and related products as needed. As a result, we will require significant capital to support our ongoing operations and to drive our business strategy before we can generate significant revenues.

However, we believe that our cash and cash equivalents will enable us to finance our continued operations, growth strategy and additional expenses we expect to incur as a public company for at least the next twelve months. Beyond the next 12 months, until we are able to generate significant revenues from the sale of our products, we expect to finance our operations through the sale of equity, debt financing, or other sources, including revenue from third-party collaborations, strategic partnerships, marketing, distribution, and licensing agreements. We do not expect to generate cash flow from operating activities sufficient to fund our operating expenses and capital expenditure requirements for the next two to three years.

These estimates and assumptions underlying our belief in the sufficiency of our capital resources in the short term and our ability to obtain capital resources in the long term may prove to be wrong, and we could exhaust our capital resources sooner than we expect and may not be able to obtain resources on favorable terms, or at all. Our future funding requirements will depend on many factors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to achieve revenue growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to secure any required regulatory clearance or approval for our technology, products, and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of
our technology, products, and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• commercial manufacturing, shipping, installation and deployment of our products and sufficient inventory to
support commercial launch and expansion;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the cost of expanding our research and development, manufacturing and laboratory operations and products and
services offerings, including the hiring of operational, financial and management personnel;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of competing technological and market developments

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to maintain, expand and protect our intellectual property portfolio;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• market acceptance of our technology, products, and services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the ability to establish and maintain collaborations on favorable terms, if at all;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• costs related to international expansion; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the potential cost of, and delays in, product development as a result of regulatory oversight.

Additionally, a change in any of the above or other factors with respect to the development and commercialization of any of our products could significantly change the costs and timing associated with the development and commercialization of that product. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. If we are unable to raise the capital we need when we need it or enter into such agreements, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our products. See the section titled "Risk Factors — *We may need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult to obtain and could dilute current shareholders' ownership interests*."

We will also incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company.

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***Cash Flows***

***Comparison of the years ended April 30, 2022 and 2021***

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| | | | |
|:---|:---|:---|:---|
|  | Years ended April 30, | Years ended April 30, | Years ended April 30, |
| (in thousands) | 2022 ($) | 2022 (¥) | 2021 (¥) |
|  **Statements of Cash Flows Data:** |  |  |  |
|  Net cash used in operating activities: | $(7235) | ¥(1075326) | ¥(589065) |
|  Net cash (used in) provided by investing activities: | $(503) | ¥(74702) | ¥779350 |
|  Net cash (used in) provided by financing activities: | $(808) | ¥(120110) | ¥289354 |

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*Net Cash used in Operating Activities* 

During the years ended April 30, 2022 and 2021, net cash used in operating activities was ¥1,075,326 thousand ($7,235 thousand) and ¥589,065 thousand ($3,963 thousand), respectively, resulting from our net loss of ¥1,109,468 thousand ($7,465 thousand) and ¥759,484 thousand ($5,110 thousand), respectively, adjusted for non-cash charges and changes in components of working capital of ¥34,142 thousand ($230 thousand) and ¥170,419 thousand ($1,147 thousand), respectively. The increase in cash used in operating activities was primarily due to activities related to our business expansion.

*Net Cash (used in) provided by Investing Activities* 

During the years ended April 30, 2022 and 2021, net cash used in investing activities was ¥74,702 thousand ($503 thousand) and net cash provided by investing activities was ¥779,350 thousand ($5,243 thousand), respectively. The increase in net cash used in investing activities was mainly due to an increase in acquisitions of property and equipment for research and development in the year ended April 30, 2022, and the increase in net cash provided by investing activities was mainly due to the redemption from our short-term investment at maturity in the year ended April 30, 2021.

*Net Cash (used in) provided by Financing Activities* 

During the years ended April 30, 2022 and 2021, net cash used in financing activities was ¥120,110 thousand ($808 thousand) and net cash provided by financing activities was ¥289,354 thousand ($1,947 thousand), respectively. The increase in net cash used in financing activities was primarily due to our repayment of long-term borrowings and our payment of offering costs in the year ended April 30, 2022. The increase in net cash provided by financing activities was primarily due to proceeds from long-term borrowings in the year ended April 30, 2021.

***Comparison of the six months ended October 31, 2022 and 2021***

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| | | | |
|:---|:---|:---|:---|
|  | Six months ended October 31, | Six months ended October 31, | Six months ended October 31, |
| (in thousands) | 2022 ($) | 2022 (¥) | 2021 (¥) |
|  **Statements of Cash Flows Data:** |  |  |  |
|  Net cash used in operating activities: | $(5797) | ¥(861666) | ¥(681806) |
|  Net cash used in investing activities: | $(332) | ¥(49321) | ¥(62626) |
|  Net cash provided by financing activities: | $16080 | ¥2389980 | ¥231485 |

---

*Net Cash used in Operating Activities* 

During the six months ended October 31, 2022 and 2021, net cash used in operating activities was ¥861,666 thousand ($5,797 thousand) and ¥681,806 thousand ($4,587 thousand), respectively, resulting from our net loss of ¥885,000 thousand ($5,954 thousand) and ¥624,957 thousand ($4,205 thousand), respectively, adjusted primarily for stock-based compensation of ¥32,768 thousand ($220 thousand) and changes in

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components of working capital of ¥48,662 thousand ($327 thousand) for the six months ended October 31, 2022 and for non-cash charges and changes in components of working capital of ¥56,849 thousand ($382 thousand) for the six months ended October 31, 2021. The increase in cash used in operating activities was primarily due to activities related to our business expansion.

*Net Cash used in Investing Activities* 

During the six months ended October 31, 2022 and 2021, net cash used in investing activities was ¥49,321 thousand ($332 thousand) and ¥62,626 thousand ($421 thousand), respectively, primarily due to an increase in acquisitions of property and equipment.

*Net Cash provided by Financing Activities* 

During the six months ended October 31, 2022 and 2021, net cash provided by financing activities was ¥2,389,980 thousand ($16,080 thousand) and ¥231,485 thousand ($1,557 thousand), respectively, primarily due to proceeds from issuance of Series C convertible preferred stock in the six months ended October 31, 2022 and proceeds from long-term borrowings in the six months ended October 31, 2021.

***Credit Facilities***

As of October 31, 2022, the Company has outstanding loans (the "Bank Loans") from two Japanese financial institutions: (i) The Shoko Chukin Bank, Ltd. and (ii) Resona Bank Limited. The main purpose of obtaining the Bank Loans has been to fund the Company's operations.

On March 22, 2019, the Company entered into a loan agreement with The Shoko Chukin Bank, Ltd. The agreement provides for four loans to be advanced to the Company in March 2019, July 2020, July 2021 and July 2022, respectively, each in the amount of ¥250,000 thousand ($1,682 thousand), provided that the Company meets certain financial performance targets prior to each of the second, third and fourth loans. The loans under this facility carry an interest rate of 3% per annum and will mature in a lump sum on February 29, 2024. The outstanding balance as of October 31, 2022 was ¥1,000,000 thousand ($6,728 thousand), comprising the outstanding principal in the amount of ¥1,000,000 thousand ($6,728 thousand).

On November 30, 2020, the Company entered into a loan agreement with Resona Bank Limited for a principal amount of ¥40,000 thousand ($269 thousand). The loan agreement was amended on the same date. Pursuant to the loan agreement, as amended, the loan carries an interest of 1.475% per annum, however, the loan is exempt from interest payment for the period from November 30, 2020 to November 29, 2023. In addition, the Company shall make a monthly repayment of ¥1,111 thousand ($7 thousand) and the last payment shall be made on November 30, 2025. This loan is guaranteed by Tokyo Credit Guarantee Corporation, an unaffiliated guarantee service provider. The outstanding balance as of October 31, 2022 was ¥40,000 thousand ($269 thousand), comprising the outstanding principal in the amount of ¥40,000 thousand ($269 thousand).

**Contractual Obligations and Commitments** 

The following table summarizes our contractual obligations as of April 30, 2022 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Payment due by period** | **Payment due by period** | **Payment due by period** | **Payment due by period** | **Payment due by period** |
| | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  | **Total** | **Less than**<br>**1 year** | **1-3 years** | **3-5 years** | **More than**<br>**5 years** |
|  Contractual Obligations |  |  |  |  |  |
|  Long-term debt principal payments | ¥790000 | ¥5555 | ¥776664 | ¥7781 | ¥— |
|  Long-term debt interest payments | 41836 | 22500 | 19307 | 29 |  |
|  Operating Lease Obligations | 1254012 | 92429 | 177876 | 174882 | 808825 |
|  Total | ¥2085848 | ¥120484 | ¥973847 | ¥182692 | ¥808825 |

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We have entered into contracts in the normal course of business with third parties. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice and, as a result, are not included in the table of contractual obligations and commitments above. Payments due upon cancellation consist only of payments for services provided and expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation.

**Off-Balance Sheet Arrangements** 

As of October 31, 2022, we were not party to any material off-balance sheet financial arrangements that are reasonably likely to have a current or future effect on our financial condition or operating results. We do not have any relationship with unconsolidated entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

**Research and Development** 

Commissioned research and development has been a substantial source of our revenue. We discuss with our collaboration partners what areas to perform research and development. Through trials and tests, we and our collaboration partners have found some results which we believe can be commercialized. We have developed and released our products such as SonoRepro and iwasemi under these collaborations. We are also in the stage of validating and testing our candidate products kikippa and VUEVO with our collaboration partners and expect to release kikippa and VUEVO in the second calendar quarter of 2023. We have made a substantial investment in research and development including incurring personnel-related expenses and facility costs. We plan to continue investing in research and development to bring innovative products and solutions to the market.

**Critical Accounting Policies and Estimates** 

Our financial statements are prepared in accordance with U.S. GAAP, which requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the financial statements. These estimates and assumptions 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 revenues and expenses during the reporting period. We base our accounting estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. However, actual results may differ from those estimates.

For a description of our significant accounting policies and recently issued accounting pronouncements, see Note 2 – Summary of Significant Accounting Policies to our financial statements included elsewhere in this prospectus.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our financials are described below.

***Revenue Recognition***

We adopted Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"), on May 1, 2020 using the modified retrospective approach.

Under ASC 606, revenues from contracts with customers are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services, after considering reductions by sales return and consumption tax. Historically, the customer returns were immaterial. Therefore, we did not provide any sales return allowances as of April 30, 2021 and 2022 and October 31, 2022.

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<u>Nature of Goods and Services</u> 

We derive our revenue from the following sources:

*Commissioned research* 

We receive compensation for conducting the research and demonstration experiments, verification, or demonstration of the digital technology. We submit the deliverables such as reports, prototype, and digital source code to the customer. The contracts include the customer acceptance right. Therefore, the revenue is recognized at a point in time, when the goods are delivered, and acceptance is completed.

*Solution services* 

We provide the solution services by utilizing our own technologies and receive compensation from customers. For the years ended April 30, 2021 and 2022 and for the six months ended October 31, 2022, our services are principally hackke and magickiri services.

For hackke services, we sell the dedicated device and provide system usage service to the customer, which we identify as two distinct performance obligations. Since the contract for hackke services with a customer includes multiple performance obligations, the transaction price is allocated to each performance obligation based on their respective standalone selling price ("SSP") which is estimated by management's judgement.

For the sale of the dedicated device, the revenue is recognized at a point in time when products or deliverables are delivered, and acceptance is completed as the performance obligation is deemed to be satisfied at the time of completion of acceptance. For system usage service, revenue is recognized on a monthly basis as access rights are granted on a monthly basis.

For magickiri services, we provide both the planning and monitoring services which submit primarily the results to the customer in the form of reports. The revenue is recognized at a point in time, when the deliverables are delivered, and acceptance is completed

In respect of commissioned research and solution services, for some contracts, we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date. In these cases, we recognize revenue over time using the "as invoiced" practical expedient and thereby recognized the amount to which the entity has a right to invoice.

*Membership services* 

We generally provide membership services in which we hold forums to discuss recommendations and future direction to solve social issues by utilizing our technologies. The consideration is received in advance and the contract terms are generally one year. Since the customer simultaneously receives and consumes the benefits of our performance, we recognize revenue over time i.e., membership period. The contract specifically states that no refund will be made, therefore we did not record any refund liability as of April 30, 2021 and 2022 and October 31, 2022. We record contract liability in respect of the amount of consideration received in advance.

*Guest speaker services* 

The guest speaker services are provided by our management for several media and external events managed by a third party. The revenue from guest speaker services is recognized at a point in time when the services are delivered.

*Product sales* 

We primarily sell two products "iwasemi" and "SonoRepro" which were launched or pre-sold for the six months ended October 31, 2022. We recognize revenue from product sales to customers principally at the point

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of delivery of the product to the customer. When we generate revenue from e-commerce, it is recognized either at the time of shipment or at the time of delivery of the product to the customer, depending on the customer's order designation.

<u>Significant Judgments and Estimates</u> 

Determining the method and amount of revenue to recognize requires management to make judgments and estimates. Judgments include determining whether to present revenue gross, as a principal, or net, as an agent, which is based on an evaluation of whether we control the service prior to it being transferred to the customer, and applying ASC 606 to our collaborative research and development arrangement.

In addition, our contracts with customers may include multiple promises to transfer services to a user. Judgment is required to determine if the promises are separate performance obligations, and if so, the allocation of the transaction price to each performance obligation. For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling price ("SSP") of each obligation. Judgment is required to determine SSP for each distinct performance obligation.

For the hackke services, we estimated SSP for the dedicated device using the adjusted market assessment approach as similar equipment is available in the market. Under the adjusted market assessment approach, we search for the competitors that sell similar equipment and takes into consideration several factors to determine the price it could charge to a similar customer like market share, expected profit margin, customer/geographic segments, and distribution channel. In respect of providing the system usage service to the customer, due to the difference in service design among customers, we do not have SSP for providing the system usage service to the customer. Thus, we estimated the SSP for the system usage service using the residual approach by reference to the total transaction price less the SSP of sale of device.

***Stock-Based Compensation***

Our stock-based awards consist of stock options issued to employees and non-employees. We measure the estimated fair value of the stock-based awards on the date of grant. We recognize compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective awards. We record expense for awards with service-based vesting using the straight-line method. For awards with performance conditions, compensation expense is recognized when the condition is probable of being achieved, or in the case of a liquidity event, when the liquidity event occurs. We account for forfeitures as they occur.

Fair values of stock options are determined using the Black-Scholes option pricing model. In estimating the fair value, management is required to make certain assumptions and estimates such as the expected life of options, volatility of our future stock price, risk-free rate, future dividend yields and estimated forfeitures at the initial grant measurement date. Changes in assumptions used to estimate fair value could result in different outcomes.

*Expected Term*. The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding. The expected term of option was estimated utilizing the simplified method because we did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The simplified method primarily is calculated as the midpoint between the requisite service period and the contractual term of option.

*Expected Volatility*. The expected stock price volatility assumption was determined by examining the historical volatilities of comparable publicly traded companies within our industry.

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*Risk-Free Interest Rate*. The risk-free rate assumption was based on the U.S. treasury rate that was consistent with the expected term of our stock options.

*Expected Dividend*. The expected dividend assumption was based on our history and expectation of dividend payouts. We do not currently pay dividends on the common stock; therefore, a dividend yield of 0% was used in the Black-Scholes option pricing model.

*Fair Value of Common Stock*. The fair value of the common stock underlying the stock options has historically been the responsibility of and determined by our Board of Directors. Because there has been no public market for our common stock, the Board of Directors has used independent third-party valuations of our common stock, operating and financial performance, and general and industry-specific economic outlook, amongst other factors.

***Income Tax***

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

We recognize net deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to our historical operating performance and the recorded cumulative net losses in prior fiscal periods, the net deferred tax assets have been fully offset by a valuation allowance.

Tax benefits for uncertain tax positions are based upon management's evaluation of the information available at the reporting date. We recognize uncertain tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. In identifying our uncertain tax positions, we reviewed the operating results and balance sheets; reviewed tax returns filed for open tax years including relevant supporting documents, preformed analysis on our book to tax differences and their impact and evaluated significant tax elections and position. We have concluded that all tax positions reported on our tax returns are highly certain tax position and we do not have any uncertain tax positions.

**Quantitative and Qualitative Disclosure About Market Risk** 

***Foreign Exchange Risk***

We are exposed to foreign exchange risks in our international transactions such as purchases of services in U.S. dollars, and we expect our foreign exchange risks to increase as we conduct international sales of our products in the future. Our foreign currency exposures give rise to market risk associated with exchange rate movements of the Japanese yen against the applicable foreign currencies, and vice versa. Most of our expenses are denominated in Japanese yen, and our Japanese yen expenses consist principally of compensation, contractor expenses, and rent. We anticipate that a sizable portion of our expenses will continue to be denominated in Japanese yen. However, our results of operations and cash flow are subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. The sensitivity of our income to foreign exchange rate changes is analyzed at year-end. In this sensitivity analysis, if the U.S. dollar were to appreciate against the Japanese Yen by 10%, as of October 31, 2022, the expected adverse impact on our net income would not be significant.

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To date, we have not engaged in hedging our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the adverse effects of such fluctuations.

***Credit Risk***

We are exposed to credit risk from our operating activities, primarily trade receivables. Credit risk is the risk that a counterparty will be unable to meet its obligations under a financial instrument or customer contract. We assess writing off of receivables on a case-by-case basis if the outstanding balance exceeds 90 days.

We do not believe that credit risk had a material effect on our business, financial condition, or results of operations. Our cash and cash equivalents are deposited with reputable financial institutions. We are highly selective in entering into engagements for long-term commissioned research and have not had any such customer default in their payment obligations. We are also diversifying our customer base as we expand our product sales. However, to date, a majority of our revenue has been generated from a small number of customers. If customers representing a significant percentage of our trade receivables are unable to meet their payment obligations to us, we may suffer harm to our business, financial condition or results of operations.

***Interest rate risk***

Fluctuations in market interest rates may negatively affect our financial condition and results of operations. As of October 31, 2022, our borrowings were only at fixed rates. We are exposed to fair value interest rate risk due to our borrowings with fixed interest rates. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure. However, our future results of operation may be affected due to changes in market interest rates.

***Inflation Risk***

We do not believe that inflation had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.

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**BUSINESS** 

**Overview** 

We create and commercialize innovative consumer personal care products and spatial materials through the utilization of mechanobiology and metamaterials in combination with our core proprietary wave technology that controls ultrasound and other waves. Metamaterials are substances that are artificially created through structural design and have properties that do not exist in nature, such as certain electromagnetic metamaterials. We seek to exploit and accelerate the coming digital era through the fusion of computer science and wave technology, which we call "Digital Nature." By focusing on this evolving area, we intend to research, develop, and commercialize technologies that, among other things, improve health and human interfaces and that overcome physical limitations through sensory and metamaterial technologies. We expect that, over time, the world of Digital Nature will construct an environment inseparable from both computers and non-computers, building a computational nature that transcends language and phenomenon with information processes unique to living organisms.

Our proprietary wave control technology seeks not only to remove the barriers that limit us physically, but also to expand our physical capabilities. We intend to use our proprietary wave control technology to expand physical capabilities, and thereby to achieve our mission of improving the quality of life for our customers. We believe these technologies can be used to create, for example, acoustic sonar capabilities similar to dolphins or computer systems that optimize spatial information by developing wireless communication. Waves, such as sound and light, differ in the physical behavior of the medium as they travel through it and in the way they interact with objects and living bodies. However, their basic behaviors are wave equations. Our wave control technologies consist of a system of methodologies to manipulate the common behaviors of sound and light in this abstract layer as desired, and to utilize the unique phenomena of sound and light for human benefits. While wave control technology has the potential for a variety of applications, we currently focus our development efforts in two principal fields: Healthcare & Diversity and Workspace & Digital Transformation. In the Healthcare & Diversity field, we seek solutions to various social issues arising from physical and environmental differences by applying our proprietary technologies, such as SonoRepro, an ultrasonic non-contact vibrotactile stimulation scalp care device which we launched in November 2022, VUEVO, a series of directional voice arrival detection devices for individuals with DHH, and kikippa, an acoustic stimulation device intended to aid individuals with cognitive impairment. In the Workspace & Digital Transformation field, we aim to solve business and social issues by developing technologies for sensing and controlling space, such as iwasemi, a sound-absorbing metamaterial we launched in July 2022, hackke, a location positioning technology, and KOTOWARI, a technology providing spatial analysis data. In the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. We expect to launch kikippa and VUEVO in the second calendar quarter of 2023.

In 2014, Dr. Yoichi Ochiai, our Chief Executive Officer and Dr. Takayuki Hoshi, our Chief Research Officer, developed "Pixie Dust," a three-dimensional acoustic levitation technology, which enables the movement of objects in three dimensions by using ultrasonic control. Until this time, ultrasonic waves had only been used to levitate objects and make them move in two dimensions. Since then, we have continued to work on overcoming the challenges in manipulating waves by improving the efficiency and performance of the computer processing required to control waves and making the circuit boards more sophisticated, as well as on applying our wave control technology to product developments and innovation. The intersection of Digital Nature and wave technology is the key focus of our research and development activities. As society becomes more governed by a computer-based environment, we believe that computers will become a complement to human intelligence. One of our desired contributions to society is to accelerate this evolution in order to create a better quality of life.

Our Company was founded in 2017 by Dr. Ochiai, Dr. Hoshi, and Mr. Taiichiro Murakami, our Chief Operating Officer, to explore better ways to integrate academic and industry resources and develop and commercialize applications of our wave control technology. Since our inception, we have actively pursued

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We are an early-stage company and have not generated significant revenue from any commercialization of our proprietary technologies or products. We have generated revenues primarily from commissioned research and development and solution services we provided for other companies including under our collaboration arrangements. For our fiscal years ended April 30, 2022 and April 30, 2021, we generated revenues of ¥636,265 thousand ($4,281 thousand) and ¥512,772 thousand ($3,450 thousand), respectively, and incurred net losses of ¥1,109,468 thousand ($7,465 thousand) and ¥759,484 thousand ($5,110 thousand), respectively. For the six-month period ended October 31, 2022 and October 31, 2021, we have generated revenues of ¥158,639 thousand ($1,067 thousand) and ¥179,213 thousand ($1,206 thousand), respectively, and have incurred net losses of ¥885,000 thousand ($5,954 thousand) and ¥624,957 thousand ($4,205 thousand), respectively.

**Our Revenue Models** 

As we create and commercialize a variety of products through applying our core proprietary wave control technology, we have adopted four revenue models: (i) the sales model; (ii) the subscription model; (iii) the lease model; and (iv) the licensing model. The table below illustrates the various sources of revenue we expect to obtain from these four models. We may apply one or more of these models to each of our products depending on the nature and features of the product. The revenue models that we plan to apply to each product is further discussed in the sections entitled "Collaboration and Commercialization" under "Our Products and Product Candidates" below.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Revenue model** | **One-time charge**<br> **Upfront fee** | **Subscription fee** | **Lease Fee** | **Royalty** |
|  **Sales Model** | X |  |  |  |
|  **Subscription Model** | X<sup>\*</sup> | X |  |  |
|  **Lease Model** | X<sup>\*</sup> |  | X |  |
|  **Licensing Model** |  |  |  | X |

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\* May be applicable, subject to product requirements.

***The Sales Model.*** Under this model, we sell a product for a one-time charge. We have applied and plan to continue to apply the sales model currently to SonoRepro and iwasemi.

***The Subscription Model.*** Under this model, we expect to continue to receive proceeds from subscription fees for our software upgrades or other services based on the duration or volume of use after a product is sold to a customer. We plan to apply the subscription model initially to kikippa and VUEVO.

***The Lease Model.*** Under this model, we lease a product for certain period of time and receive proceeds for the duration of the lease. We have applied and plan to continue to apply the lease model to SonoRepro.

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***The Licensing Model.*** Under this model, we license our technology to a third party to manufacture and sell the relevant product and receive royalties from the licensing arrangement. We have applied the licensing model to iwasemi HX-a and may apply this model to our other technology applications.

**Our Strategy** 

Our strategy is to continue to develop and commercialize innovative and practical products by applying our wave control technology. In this effort, we plan to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Focus our sales efforts in establishing our brands and implementing customized marketing strategy for each of our main products.*** In the next few years, we plan to focus on commercializing SonoRepro, kikippa, VUEVO, and iwasemi. We intend to implement customized marketing strategies for each of these products depending on the nature and features
of the product and to tailor initiatives to the product's target audience. With respect to SonoRepro, VUEVO, and kikippa, we plan to position and market them as consumer personal care products for everyday use. We plan to adopt a multi-faceted,
consumer-driven marketing strategy for these products including establishing distributor and retailer networks and leveraging online and print media and social media including our dedicated websites. With respect to iwasemi, we plan to market this
product primarily through growing the awareness of iwasemi among architectural firms, construction companies, and other distributors and consultants of construction materials. In addition, as for all of these products, we plan to leverage our
collaborative relationships with our R&D collaborators, which are established companies in the relevant industries, to jointly market these products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Maximize the commercial potential of our technology applications with simultaneous revenue models.*** We plan to commercialize our products by simultaneously pursuing four revenue models (sales model, subscription model, lease model, and licensing model), which we believe will provide us the flexibility and long-term sustainability to
monetize our technology applications. We currently expect to generate most of our commercialization revenues from the sales model, which will apply to SonoRepro and iwasemi.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Continue to develop and leverage our collaborative relationships with academia and the industry in R&D and marketing our products.*** We have benefited from our collaborations with academic institutions and industry collaborators, which contributed ideas and funds to our development and research endeavors. We intend to continue to leverage our
established relationships and develop new collaborations in developing and commercializing our products. In particular, we intend to leverage our industry collaborators' reputation, distribution channels, and service and support in raising
market awareness and expanding sales of our products.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•  ***Drive innovation to increase applications of our wave control technology and upgrade our products*.** We plan to continue to invest in research and development to bring innovative and practical products and solutions to our customers. This may include new data, new features, new applications, and new services for our
existing products and product candidates. As we continue our research, we may use our research results to apply for regulatory approvals for certain of our personal care products to be marketed as medical devices in the future, if necessary.

**Our Products and Product Candidates** 

While our wave control technologies have the potential to open up a variety of applications, we are currently focusing our business development efforts on the fields of Healthcare & Diversity and Workspace & Digital Transformation.

**Healthcare and Diversity** 

In the Healthcare & Diversity field, we apply our wave control technologies to seek solutions to improve general daily care and well-being and assist people with physical impairments or functional limitations to live

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healthy, productive, independent, dignified lives. We have designed our products to be used alone, or as a reasonably priced supplement to an individual's prescribed medication or treatment. Below are our main product and product candidates with respect to this area. We plan to focus in the near team on commercializing SonoRepro, which we launched in November 2022, and kikippa and VUEVO, which we expect to launch in the second calendar quarter of 2023.

**SonoRepro** 

SonoRepro is a personal scalp care device, which we launched for the retail market in November 2022, using non-contact vibrotactile stimulation with ultrasound. No adverse side effects have been observed to date. We believe the device may be particularly useful for individuals suffering from androgenetic alopecia ("AGA"), or male pattern baldness.

In researching the use of ultrasound to promote wound healing, we discovered through experiments on mice that ultrasound stimulation can boost hair growth. From 2019 to 2020, we collaborated with Angfa Co., Ltd., a Japanese hair regrowth pharmaceutical company ("Angfa"), to conduct a clinical study, "Effects of an Ultrasound Focusing Device for Noncontact Force Radiation on Hair (UMIN000038797)," on healthy males between the ages of 20 and 30, which demonstrated that non-contact vibrotactile stimulation increases the percentage of anagen hair and decreases the percentage of telogen hair. The study subjects had their scalp irradiated with non-contact vibrotactile stimulation for 20 minutes once a week for 16 weeks, and the results indicated a significant decrease in the telogen hair and a significant increase in the anagen hair in the irradiated group. No adverse events that could be attributed to the non-contact vibrotactile stimulation was reported by any of the subjects. The results of this clinical study were presented at the World Congress for Hair Research 2022.

SonoRepro was developed based on non-contact vibrotactile stimulation with ultrasound, one of our proprietary wave control technologies. It is a smaller version of the ultrasonic device that was used in the above-described clinical study. A user can hold SonoRepro by one hand and use it for daily scalp care. We have not made, and do not make, any claims that SonoRepro may stimulate hair growth. Although our research to date is encouraging, we expect to continue our studies in this area and may make adjustments to our product in the future, if necessary and appropriate, including launching new models of SonoRepro with additional or improved features.

SonoRepro won "CES 2023 Innovation Award" at the Consumer Electronics Show 2023 where over 3,200 companies participated.

![LOGO](g430639g89b16.jpg)

*SonoRepro* 

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***Market and Competition***

We expect SonoRepro to benefit the AGA population in Japan. According to a 2018 report in the Journal of Clinical and Aesthetic Dermatology, AGA is the most common form of hair loss in Asian men. While SonoRepro can be used in conjunction with hair growth medication, consumers may deem SonoRepro as an alternative, and in that perspective, SonoRepro faces competition from various manufacturers and suppliers of hair growth drugs, treatments, and devices. Many of them are more established companies with greater name and brand recognition and more established sales channels. In addition, as we currently do not, and do not plan in the near future to, market SonoRepro as a medical device, we are subject to regulatory limitations in making claims about SonoRepro's effects, which may affect our ability to successfully compete with other manufacturers and suppliers that have received regulatory approvals.

***Collaboration and Commercialization***

We have collaborated with Angfa to develop and commercialize SonoRepro. Angfa was appointed as a non-exclusive distributor in June 2022 for our SonoRepro product within the territory in Japan. We have retained the right to distribute the product in Japan independently by ourselves or third parties. Angfa may receive incentive fees from us based upon sales volume. In June 2022, we also engaged KAGA FEI Co., Ltd. ("KAGA FEI") as a non-exclusive manufacturer of SonoRepro, reserving the right to manufacture the product by ourselves or other third-party manufacturers.

In Japan, we plan to sell SonoRepro through e-commerce sites, while retail sales will be determined on a case-by-case basis. Initial pre-sales of SonoRepro in July 2022 through Makuake, a Japanese product launch platform, were encouraging, and in turn, we have begun selling this product on our own e-commerce site in November 2022. We also plan to sell SonoRepro to barber shops and beauty salons for sale to their own customers. In conjunction with selling SonoRepro, we have commenced selling a medication for treating hair loss in January 2023, which requires us to meet certain regulatory requirements including obtaining a license for store-based distribution. We obtained the license in December 2022.

At this stage, we do not plan to market SonoRepro as a medical device or claim that it has a medical effect of improving thinning hair. We initiated sales of SonoRepro in Japan in November 2022 as a personal scalp care device without making any claims relating to hair growth or preventing hair loss. We believe by doing so we do not need to apply for a medical device approval under Japanese law and expect to continue to do so. In the long term, we also plan to expand our sales to other countries, initially focusing on other Asian countries. If we determine following further research and trials that our SonoRepro may be effective for hair growth, we will apply for any regulatory approvals that may be required prior to commencing marketing for such purposes. In the future, we may elect to, or may be required to, apply for regulatory approvals to market and sell SonoRepro as a medical device in Japan or in other jurisdictions where we will sell the product. Until we obtain the required regulatory approvals, we will not make any medical device claims relating to SonoRepro.

The revenue model we have applied to SonoRepro is the sales model or the lease model. Under the sales model, we charge a one-time fee for each sale. Under the lease model, we receive lease revenue for the duration of the lease.

***Intellectual Property***

We have filed 10 patent applications in Japan for the ultrasonic control element technology from the development stage. In addition, we have filed a PCT application covering the United States, Europe, and China based on the Japanese patent application for the specifications of the SonoRepro product. We have acquired design patent rights for the SonoRepro enclosure and the design of the ultrasonic vibration arrangement. We have acquired trademark rights for the product name "SonoRepro" in Japan and expect to apply in the future for trademark rights in other major countries where we plan to sell the product.

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**kikippa** 

kikippa is a device we are developing to provide assistance for individuals with cognitive impairments through the use of non-invasive stimuli such as sound. kikippa applies period-equivalent amplitude modulation to daily speech, such as the television or radio, and inserts sounds that are expected to evoke gamma waves. At the same time, kikippa can be used as a normal speaker.

An academic research report published by Massachusetts Institute of Technology ("MIT") in Cell in 2019 suggested that listening to sound pulses for a period corresponding to gamma waves in the brain (approximately 40 hertz) was found to induce gamma waves and possibly improve dementia in mice. When the subject mice were stimulated with 40-Hz sound pulses, neural activity synchronized with the stimulation was observed not only in the auditory cortex but also in the hippocampus. Furthermore, a reduction of amyloid in the auditory cortex and hippocampus and morphological and functional changes of microglial cells were observed. The performance was improved in the evaluation of cognitive function. As published in AmedRxiv in 2021, in MIT's clinical study on cognitively normal individuals, patients with medically intractable epilepsy, and patients with mild Alzheimer's disease dementia, they confirmed that 40-Hz brain waves can be induced by 40-Hz sound pulses and light sensory stimulation. In the same experiment, the results they obtained suggested that cognitive deterioration and brain atrophy were suppressed.

We expect that the pulsed sounds, while acceptable during experiments, would be unbearable for the human ear in daily life. To pursue this research further, we developed a process for the substitution of everyday audio sounds, such as TV sound, by applying amplitude modulation with a period equivalent to gamma waves. Based on our modulation algorithm developed to date, we confirmed that the modulated signals also induce gamma waves in human brains. In this research, we modulated 1-kHz signal using our algorithm. There was no significant difference between the induced gamma waves in human brains by the conventional pulsed sounds and our modulated sounds. We are developing kikippa based on our research. We believe kikippa can change casual TV viewing into an activity that could potentially assist cognitive-impaired individuals in performing everyday tasks through sound stimulation. We have been developing kikippa as a speaker that can be used at home, which we believe has the potential to particularly benefit the aging population and those living alone.

In addition to the amplitude modulation, kikippa contains a function to record the hours of TV watching. According to the 2020 Japanese population census, there were 5,626,000 households in Japan in which a person over 65 years old was the sole resident. The top three causes of fatalities among the elderly in Japan due to "unforeseen accidents" were falls, aspirations and other forms of choking, and drowning while bathing, which in the aggregate accounted for 73.4% of all fatal accidents among the elderly in 2020. In many cases, these types of accidents occur at home, and if the elderly person is living alone, there may be a delay before caretakers discover these accidents. kikippa aims to increase the chances of these accidents being timely detected in homes in which an elderly person is living alone, by tracking TV use and alerting caretakers if the duration of the TV use is abnormal. We believe TV can be an effective indicator of a person's well-being without being unduly intrusive. According to the National Personal Viewership Survey in 2022, people in Japan over the age of 70 watch TV approximately 6 hours a day.

![LOGO](g430639g01a68.jpg)

*Prototype of kikppa* 

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***Market and Competition***

We expect kikippa to benefit the aging population who have or are prone to cognitive impairment including dementia. According to a report by the Ministry of Health, Labor, and Welfare Bureau for the Elderly, dated June 2020, the number of dementia patients in Japan was estimated to be seven million. According to a Fact Sheet published by the World Health Organization ("WHO") in September 2022, more than 55 million people worldwide suffer from dementia, with nearly 10 million new cases being detected each year.

As a personal care device, we believe kikippa can be used in conjunction with dementia medication as part of an individual's overall care strategy. kikippa faces competition from various providers of alternative care and treatments, many of which are more established companies with greater name and brand recognition and more established sales channels. We currently do not, and do not plan in the near future to, market kikippa as a medical device. We are subject to regulatory limitations in our ability to make claims about the potential uses or effectiveness of kikippa. In Japan, we will be required to comply with the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices and the Act against Unjustifiable Premiums and Misleading Representations when we introduce kikippa to the market. Our board of directors has established internal regulations to ensure that our business activities comply with these laws and has established the Quality Management System Promotion Committee to be responsible for designing and monitoring our compliance systems. The Quality Management System Promotion Committee has developed guidelines concerning advertising of our products, which have been incorporated into our ISO 9001 Quality Management System and implemented in our operations. The regulatory limitations we are subject to may affect our ability to successfully compete with other manufacturers and suppliers which have received regulatory approvals to make medical claims about their products or treatments.

***Collaboration and Commercialization***

Since December 2021, we have been collaborating with Shionogi & Co., Ltd., a Japanese pharmaceutical company, and its affiliate, Shionogi Healthcare Co., Ltd. (together, "Shionogi"), to develop and commercialize kikippa. Under the various arrangements with Shiongi, the companies are working jointly on research aimed at developing a new service that focuses on changes in brain rhythm activity caused by sensory stimulation. By leveraging their respective strengths, Pixie and Shionogi plan to develop products and services that support dementia care in everyday life through stimulating senses such as sight and hearing to offer new solutions for caring for individuals with cognitive impairment.

We intend to manufacture and supply the product to Shionogi under mutually agreed terms to be determined in the future. We and Shionogi may separately sell the product in Japan and we may also provide customer support services to end users. We will also use third-party manufacturers, where appropriate from time to time, on a non-exclusive basis, including JENESIS Co., Ltd.

We are currently testing a prototype of kikippa accumulating know-how on how to modulate the input audio, such as TV sound, for optimization without degradation and how to minimize discomfort caused by the modulation. We expect to introduce the product to the market in the second calendar quarter of 2023. We plan to market the product initially in Japan and expect to expand overseas in the future. We may elect to, or may be required to, apply for regulatory approvals to market and sell the product as a medical device in Japan or in other jurisdictions where we sell the product. Until we obtain the required regulatory approvals, we will not make any medical device claims relating to the product.

The main revenue models we expect to apply to kikippa are the sales model and the subscription model. We plan to generate revenue from both sales of the speakers and charging a subscription fee for providing continuous software upgrades or other services to the users for a subscribed period.

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***Intellectual Property***

All intellectual property relating to the product will be jointly owned by us and Shionogi, except where the relevant deliverables and technologies are independently developed by either party. We and Shionogi have jointly filed 9 patent applications in Japan and 2 patent applications on the PCT for this device, which are intended to cover: (1) the signal processing method that converts everyday sounds, such as TV sound, into non-invasive sound stimuli; and (2) functions that improve the usability of the equipment. We also have filed a design patent application for the equipment housing. All these patents are pending and have not yet been registered. We have applied for trademark protection of the product brand in Japan and intend to apply for trademark protection of the product brand in other key markets where we will market and sell the product. Trademarks will be owned by us and licensed to Shionogi.

As most of the patents related to kikippa will be jointly owned between us and Shionogi, if we implement the patents by ourselves, we may do so without consent from Shionogi, but we will be required to pay them a customary license fee. The prior written consent of Shionogi is required for disposal, transfer, or pledge of the co-ownership interest. If we license the patent technology to a third party to generate income, we must obtain the prior written consent of Shionogi, and pay them a portion of the license fee, which will be determined by separate negotiation.

**VUEVO** 

We are applying our sensing technology to develop a series of products under the name VUEVO, which can display the direction and content of a speaker's speech. In the initial phase, we are developing VUEVO mic, which is a tabletop microphone that can connect to a computer or tablet. VUEVO mic uses an intuitive user interface on a computer, tablet, or smartphone to provide the speaker direction and speech content recognized from the microphone, which is a feature of VUEVO. In the second phase, we plan to develop VUEVO glasses. Using the same core VUEVO technology as in the first phase, our goal for the glasses is to superimpose the content of speech onto the speaker in real space from the perspective of the viewer wearing the glasses. As our research and development continues, we expect to launch new models of VUEVO with additional or improved features. In each case, VUEVO will be provided as a set of hardware and a network service.

We expect that VUEVO will help DHH people communicate more smoothly, especially in group situations. We hope to remove barriers to communication and facilitate the ability of DHH people to reach their capacity. VUEVO provides the user with transcribed data that includes the speaker's information, which can then be used to create minutes of meetings. The transcription engine can also be replaced by a translation engine to provide real-time translation capabilities.

Originally, a doctoral student with congenital hearing loss was conducting research on DHH people in Dr. Ochiai's Laboratory at the University of Tsukuba, focusing on the use of smart glasses with a transcription function to enable the contents of the voice to be visually confirmed as subtitles. We acquired the research in 2019 and proceeded to develop the system through interviews with more than 100 DHH people. To address the difficulty of distinguishing between multiple voices and accurately perceiving the direction of the voice, we developed an algorithm based on our proprietary wave control technologies, to realize a function that detects the direction of the voice and displays that direction on the smart glasses. Our algorithm also improves noise immunity for transcription. Once recognized, the position of the speaker is retained, so that subtitles of different colors can be displayed for each speaker, subtitles can be overlaid in the direction of a speaker who is within the visible area, and indications can be displayed when someone outside that area starts speaking so that the user can see the subtitles displayed if they turn to that direction.

VUEVO glasses, which are currently under development, are worn in the same way as eyeglasses. Speech is projected in real time on the inside of the lenses, allowing the user to read what is being said. We expect that VUEVO glasses will incorporate our proprietary algorithm that overcomes certain challenges by extending

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conventional technology. For example, when a wearable device is attached to a flexible joint, such as the neck, errors can accumulate in inertial sensor-based posture correction algorithms, resulting in a shift in the origin and direction of coordinates. This misalignment means that the wearable device will not be able to correctly capture and display the direction of the voice. We have developed a proprietary algorithm that can continue to compensate for shifts in the origin and direction of coordinates caused by neck movements. As a result, the expected use cases may not be limited to the desktop for meetings, schools, and homes; rather, the range of application is expected to be expanded to include conversations during commuting and other forms of transportation, as well as at work.

![LOGO](g430639g01a70.jpg)

 *Prototype of VUEVO mic* *Prototype of VUEVO glasses*

![LOGO](g430639g02b72.jpg)

*Example of visual display on prototype VUEVO glasses*

***Market and Competition***

We expect VUEVO to benefit the DHH population by allowing them to view speech instantly. We believe VUEVO will be particularly useful to severely hearing-impaired people. It is estimated that there are approximately 14.3 million DHH people in Japan, and according to the WHO, the number of hearing-impaired people worldwide is estimated to double from 466 million in 2019 to over 700 million by 2050.

While VUEVO can be used in conjunction with hearing aids, consumers may deem VUEVO as an alternative, and in that perspective, VUEVO faces competition from manufacturers and suppliers of hearing aids. Many of them are more established companies with greater name and brand recognition and more established sales channels.

***Collaboration and Commercialization***

We have collaborated with Sumitomo Pharma Co., Ltd., a Japanese pharmaceutical company ("Sumitomo Pharma"), to jointly develop and commercialize VUEVO products since September 2022.

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The intellectual property relating to VUEVO will be jointly owned by us and Sumitomo Pharma. To date, we have entered into four joint patent application agreements relating to patents and design relating to VUEVO. We intend to utilize third parties, on a non-exclusive basis, to manufacture the VUEVO products and may, from time to time, manufacture certain VUEVO products by ourselves in the future.

We currently expect to introduce our first VUEVO to the market in the second calendar quarter of 2023. We plan to market the product initially in Japan and intend to expand overseas in the future, subject to suitable market conditions. We expect there will be two sales channels, one for businesses and the other for retail/personal use. However, we expect that our initial launch will focus only on sales to businesses.

The main revenue models we expect to apply to VUEVO are the sales model and the subscription model. We plan to generate revenue from both sales of the products and charging a subscription fee for providing transcription and other services to the users for a subscribed period.

***Intellectual Property***

We have filed 9 patent applications in Japan and 4 PCT applications related to VUEVO, which are intended to cover the technology related to display methods that enable natural recognition of speech content and sound sources in real time. On the other hand, we protect our unique algorithms to estimate multiple sound source directions as a trade secret to prevent imitation by other companies. We applied for 2 design patents for the housing design of the microphone and the graphical user interface design. We plan to protect the graphical user interface for displaying a content of speech and the direction of the sound source through a combination of utility patent and design patents. Patents for inventions relating to VUEVO that pre-dated our relationship with Sumitomo Pharma are owned solely by us. Inventions resulting from our collaboration with Sumitomo Pharma are jointly owned by us and Sumitomo Pharma. We have applied for trademark protection of the product brand in Japan, and we also intend to apply for the trademark in other key markets where we will market and sell the product. Our trademarks are owned by us, and licensed to Sumitomo Pharma and, where appropriate, other third parties.

Most of the intellectual property applications related to VUEVO have been filed jointly with Sumitomo Pharma. All of the patents are pending and have not yet been registered. If the patents are registered, they will be jointly owned by us and Sumitomo Pharma. If we implement the patents by ourselves, we may do so free of charge without consent from Sumitomo Pharma. The prior written consent of Sumitomo Pharma is required for disposal, transfer, or pledge of the co-ownership interest. If we license the patent technology to a third party to generate income, we must obtain the prior written consent of Sumitomo Pharma and also pay a portion of the license income to them. In addition, depending on the progress of future joint research and development, payments other than those agreed upon above may be required.

**Workspace & Digital Transformation** 

In the Workspace & Digital Transformation domain, we apply our wave control technologies to help people to better sense and control the space they are in. Below are our main product and product candidates.

**iwasemi** 

iwasemi is a sound-absorbing material we developed by applying our proprietary engineering technologies to acoustic metamaterial technologies. In general, metamaterials are artificially created substances with properties that do not exist in nature. For example, the first well-known example is electromagnetic wave metamaterials with a negative refractive index. Since this was achieved with a structure smaller than the wavelength of the electromagnetic wave, the term "metamaterial" was coined to mean "a substance whose properties are given by its microstructure." iwasemi is a metamaterial that can be applied in various contexts, such as construction, building materials, fixtures, railways, and automobiles.

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iwasemi has three features. iwasemi can effectively absorb a wide frequency range, including hundreds of hertz, which glass wool cannot absorb, or it can absorb sound specifically in a certain frequency range. We have created design assets that allow us to modify iwasemi's properties to suit the application. iwasemi can be made from various materials, including plastic, metal, and glass, because the sound-absorbing performance is achieved by the internal structure of the material. We are focusing on designing structures to provide a soundproof environment for different purposes, for example by optimizing sound-absorption for online conferences at construction sites and along railway lines.

Common sound-absorbing materials are porous materials, such as glass wool. Therefore, design and strength are limited. In contrast, iwasemi is able to use various materials, such as acrylonitrile butadiene styrene, stainless steel, and acrylic, to realize a high sound-absorption coefficiency based on well-designed resonant structures. Consequently, it is possible to create the sound absorbing material with design features such as color variations including transparent colors and texture expression using surface treatment, and with sufficient stiffness by selecting an adequate raw material. In addition, the sound-absorbing material can be molded integrally with applied products to improve their strength and reduce their weight.

In the initial phase for iwasemi, we launched the hexagonal iwasemi HX-a in July 2022, as shown below. In the second phase, we launched the square-shaped iwasemi SQ-a in December 2022, as shown below. For the third phase, we are planning to launch iwasemi RC-a, with more enhanced design and transparency than iwasemi HX-a, in the second calendar quarter of 2023. All products can be easily installed using tape or magnets. As our research and development continues, we expect to launch new models of iwasemi with additional or improved features.

In 2022, we installed iwasemi HX-a to a meeting room in the office of a large Japan-based multinational corporation and performed an experiment to test the sound-proofing effect of iwasemi HX-a. We observed that the installation of iwasemi HX-a resulted in a reduction in sound reverberation time of approximately 40% for the sounds in the frequency range of 500-1000 Hz, which is the frequency band human voices mostly fall within, while maintaining the design characteristics of the space. Based on this study, we believe the installation of

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iwasemi can reduce the noise and bring clearer voice for conversation made within a room or on audio or video conference calls in the room.

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| | |
|:---|:---|
| ![LOGO](g430639g02a80.jpg) | ![LOGO](g430639g01b80.jpg) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *iwasemi HX-*a |  |
| ![LOGO](g430639g03c80.jpg) | ![LOGO](g430639g04d80.jpg) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *iwasemi SQ-*a |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ![LOGO](g430639g00m02.jpg)  | ![LOGO](g430639g00m01.jpg) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *Prototype of iwasemi RC-*a |  |

---

***Market and Competition***

According to a report by Global Information, dated July 13, 2021, the global market for soundproofing materials is expected to grow from approximately US$14.1 billion in 2021 to US$17.1 billion by 2026. We expect iwasemi will be the first acoustic metamaterial for offices and homes to enter the market. The product is expected to be a sound-absorbing material with a design that combines functionality and creativity, taking advantage of the large number of material options available.

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iwasemi faces competition from existing and upcoming sound proofing materials. Many of the manufacturers and suppliers of competitive sound proofing materials are more established companies with greater name and brand recognition and more established sales channels than us.

***Collaboration and Commercialization***

We have collaborated with Itoki Corporation, a major Japanese office furniture manufacturer ("Itoki"), since September 2021 to develop and commercialize our hexagonal iwasemi HX-a, which was introduced to the market in July 2022. Itoki has exclusive manufacturing rights for this product through June 30, 2023 (subject to certain customary automatic renewal rights) on terms to be agreed in purchase orders.

Intellectual property obtained from the joint research will be solely owned by us, except as follows: (i) patent, patent application rights, utility model rights and application rights for utility model for wall-mounted structures not involving sound-absorbing structures will be solely owned by Itoki; and (ii) industrial design rights of iwasemi will be co-owned by both parties.

In July 2022, we entered into a license agreement with Itoki for sales and distribution of the iwasemi products in Japan. We and Itoki may each sell the product in Japan. The agreement has a one-year term beginning from July 1, 2022, but is subject to automatic one-year renewals on customary terms.

Except as noted above with respect to the hexagonal iwasemi HX-a product, we intend to utilize third parties, on a non-exclusive basis, to manufacture phase two and phase three iwasemi products and may, from time to time, manufacture certain of these products by ourselves in the future.

The revenue model we have applied to iwasemi HX-a is a sales model along with a licensing model. We have applied the sales model to iwasemi SQ-a and we also expect to apply the sales model to iwasemi RC-a.

***Intellectual Property***

We have filed 19 patent applications in Japan for the sound absorption system with acoustic metamaterials from the development stage. In addition, we have filed 4 PCT applications covering the United States, Europe, and China based on the Japanese patent application for the specifications of iwasemi. One of these patents is on sound-absorbing structures used in all HX-a, SQ-a, and RC-a. We also filed 10 design patent applications in Japan and 2 international application for the equipment housing. 7 of the 12 design patents, including international application, are jointly owned with Itoki. We have applied for trademark protection of the product brand in Japan and other key markets where we expect to market and sell the product such as the United States, Europe, and China. Our trademarks are owned by us, and licensed to Itoki and, where appropriate, other third parties.

**hackke** 

We refer to our positioning technology as "hackke." In the VUEVO smart glasses application discussed above, the direction of arrival is calculated by analyzing the waveform of the voice signal received by the microphone, and the direction of the speaker is identified. Similarly, the direction of arrival can be calculated by analyzing the waveform of electromagnetic signals. The microphone and the speaker are called a locator and a tag, respectively, in this case. By installing multiple locators on, for example, the ceiling of a room, it is possible to calculate the three-dimensional location information of the tags. This technology, which has been under development since 2020, can be used to visualize the movement of workers and cargo and provide the information needed to improve efficiency.

We believe we were among the first companies to focus on the Angle of Arrival ("AOA") function of Bluetooth 5.1 and have been developing technology and accumulating know-how to bring it to the stage where it can be used in real-life environments. In addition, we have been striving to develop appropriate technology that

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complies with the technical standards set forth in the Japanese Radio Act, and obtained Bluetooth Special Interest Group certification ("Bluetooth SIG") by meeting the requirements set forth by the Bluetooth SIG. We believe the technology developed as a result of these efforts has opened up a new product area of low cost and high accuracy for location positioning technologies, whereas existing location positioning technologies were either high cost and high accuracy or low cost and low accuracy. We further believe that this technology can not only replace the existing positioning technology in industry, but also open up a wide range of new applications.

hackke is currently in additional research and development with a construction company, which is one of the potential clients for this system and is currently undergoing trial implementation. We do not have any specific timeline for further commercialization of this technology, if any.

**KOTOWARI** 

Wave control technologies can be used for spatial sensing, but to achieve this, a platform is required with a database function to appropriately aggregate data continuously sent from a large number of sensors, locators, and tags, a component to process the data as needed, and a dashboard editing function for visualization. KOTOWARI provides spatial analysis data to its users. As an example, KOTOWARI can generate data on work conditions at construction sites and on human flow information at stores and exhibitions upon user request, which can then be analyzed by the user for management and other purposes.

KOTOWARI is a solution service that converts space into time-series digital data in an optimal way according to the customers' needs. It can offer both real-time human/object digitization and high-definition digitization of industrial machinery. Our spatial time-series data enables advanced analysis which was not possible with image recognition only and make previously unviewable objects visible. Additionally, by linking with machines, we believe we can give the machines "eyes" and "intelligence" to achieve advanced controls. KOTOWARI is not limited to sensors developed by us but can also be used to connect commercially available surveillance cameras for digital transformation in construction, agriculture, and other fields, and to connect commercially available CO<sup>2</sup> sensors to develop pandemic (such as COVID-19) countermeasures based on actual measurements.

We are collaborating with certain third parties in the development of the KOTOWARI technology. We do not have any specific timeline for further commercialization of this technology, if at all.

**Intellectual Property** 

To establish and protect our proprietary rights, we rely on a combination of patents, trademarks, confidentiality policies and procedures, non-disclosure agreements with third parties, employee non-disclosure agreements, and other contractual and implicit rights worldwide. As of January 31, 2023, we had 35 registered patents (including 33 solely owned patents and 2 patents jointly owned with collaborators), 244 inventions filed for patent applications (including 212 solely applied patents and 32 patent applications jointly applied with collaborators), 15 registered design patent (including 8 solely owned patents and 7 patents jointly owned with collaborators) and 26 design patent applications (including 13 solely applied patents and 13 patent applications jointly applied with collaborators). In addition, as of January 31, 2023, we had 50 registered trademarks and 66 trademark applications. "Pixie Dust Technologies" is registered in Japan, the United States and with the World Intellectual Property Organization. The other registered trademarks are currently only registered in Japan. We further have license agreements with collaborators as discussed above under "Our Products and Product Candidates."

To protect our intellectual property and ensure its competitiveness, we have an intellectual property management division. The division has 2 patent attorneys who work on discovering invention and intellectual property protections on a regular basis. When we collaborate with other companies in research and development projects, we have, and intend to continue to, enter into agreements to provide that (i) any intellectual property arising from joint research and development will be shared between the parties and (ii) any intellectual property arising from one party's sole activity will be owned by that party, in order to ensure our sole ownership of any

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intellectual property developed by us on our own, except with pharmaceutical companies with which all intellectual property developed will generally be jointly shared between the parties as discussed above under "Our Products and Product Candidates." As some of our intellectual properties are jointly developed with and co-owned by third parties, in those cases we may be required by our collaboration agreements to obtain the third parties' consent to use or license the co-owned intellectual properties as desired by us. If we cannot obtain the third parties' consent in a timely manner or at a cost acceptable to us, our ability to commercialize those intellectual properties may be restricted. See "Risk Factors — *Our obligations under our existing or future product development and commercialization collaboration agreements may limit our ability to exploit intellectual property rights that are important to our business. Further, if we fail to comply with our obligations under our existing or future collaboration agreements, or otherwise experience disruptions to our business relationships with our prior, current, or future collaborators, we could lose intellectual property rights that are important to our business*."

We are also often engaged in research and development projects with academic institutions and in particular, University of Tsukuba and Tohoku University. Different from collaborating with companies, we have entered into agreements with academic institutions whereby we would retain sole ownership of any intellectual property arising from the collaboration, and in consideration for the academic institution's contributions, we have granted warrants to such academic institution. In the future, we may compensate certain institutions for their contributions in cash or in our securities, where appropriate.

The success of our business strategy depends on our continued ability to use our existing intellectual property in order to develop new solutions, increase brand awareness and develop our branded services. If our efforts to protect our intellectual property are not adequate, or if any third-party misappropriates or infringes on our intellectual property, whether in print, on the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded services to achieve and maintain market acceptance. There can be no assurance that all of the steps we have taken to protect our intellectual property in Japan or outside Japan in relevant foreign countries will be adequate. In addition, in light of our intention to expand internationally, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of Japan. If any of our patents, trademarks, trade secrets or other intellectual property are infringed, our business, financial condition and results of operations could be materially adversely affected.

In addition, third parties may assert infringement or misappropriation claims against us, or assert claims that our rights in our trademarks, patents and other intellectual property assets are invalid or unenforceable. Any such claims could have a material adverse effect on us if such claims were to be decided against us. If our rights in any intellectual property were invalidated or deemed unenforceable, it could permit competing uses of intellectual property which, in turn, could lead to a decline in business, and other revenues. If the intellectual property became subject to third-party infringement, misappropriation or other claims, and such claims were decided against us, we may be forced to pay damages, be required to develop or adopt non-infringing intellectual property or be obligated to acquire a license to the intellectual property that is the subject of the asserted claim. There could be significant expenses associated with the defense of any infringement, misappropriation, or other third-party claims.

**Employees** 

As of January 31, 2023, the Company had 111 employees including 70 permanent employees, 3 fixed-term employees, 10 fixed-term part-time employees, 20 contractors and 8 dispatched workers. The Company has never had a work stoppage and none of its employees are represented by any labor organization.

**Property and Equipment** 

Except for our research facility which we call "Technotope" which we own, we lease all of our facilities. We believe our current facilities are suitable and adequate to meet our current needs. We may add new facilities or expand existing facilities as we expand our operations, and we believe suitable additional or substitute space

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will be available as needed to accommodate any such expansion of our operations. The table below sets forth the sizes and uses of our material facilities:

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| | | |
|:---|:---|:---|
| **Location** | **Primary Function** | **Approximate Size** |
| 3022-1 Numata, Itabashi, Tsukubamirai City, Ibaraki Prefecture (1) | Research & Laboratory | 7,492.5 square meters |
| 2-20-5 Kanda Misaki-cho, Chiyoda-ku, Tokyo (2) | Office | 1,056.9 square meters |
| 1-2, Kasuga, Tsukuba City, Ibaraki Prefecture (3) | Research & Laboratory | 59.1 square meters |

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(1) We own this facility, and our research base "Technotope" is located at this facility. There is an
anechoic room designed to completely absorb reflections of either sound or electromagnetic waves located at Technotope.

(2) Our corporate headquarters is located at this facility. We have leased this facility from Sumitomo
Realty & Development Co., Ltd. for a term from May 1, 2022 to December 31, 2023.

(3) We lease this laboratory room from University of Tsukuba for a term from December 1, 2019 to
November 30, 2025.

**Legal Proceedings** 

We are currently not a party to any material legal or administrative proceedings. We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of our business, including matters involving our franchisees, among others. Any litigation or other legal or administrative proceedings, regardless of the outcome, are likely to result in substantial costs and a diversion of our resources, including our management's time and attention.

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**REGULATION OF OUR INDUSTRY** 

**Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors** 

In Japan, the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (shitauke hou) is the law regulating certain level of large companies subcontracting their jobs to protect subcontractors from exploitation. The applicability is determined based on the three prongs: (I) type of subcontracted job; (II) registered capital of a subcontracting company; and (III) registered capital of a subcontractor.

With regard to (I) type of subcontracted job, the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors provides four major categories: (a) manufacturing of goods; (b) repairing of goods; (c) creation of "information-based products"; or (d) provision of services that a subcontracting company is primarily responsible for. If a company subcontract any of the four types of jobs, then we need to go on to the next prong.

In the second prong, a subcontracting company needs to review whether its registered capital exceeds a threshold established by the law. The important thresholds are JPY 300 million, JPY 50 million, and JPY 10 million, and an applicable threshold differs from what the job is subcontracted. If a company subcontracts (a) manufacturing of goods, (b) repairing of goods, (c) creation of computer programs in the category of information-based products, or (d) provision of transportation service/warehousing/information processing services, then thresholds of JPY 300 million and JPY 10 million will apply. If a company subcontracts any creation of information-based products or provision of services other than the foregoing, then the thresholds of JPY 50 million and JPY 10 million will apply.

Lastly, the third prong will look at whether subcontractor's registered capital is under the threshold applicable in the second prong. For example, in the case where the threshold of JPY 300 million applies and the second prong is satisfied, if the subcontractor's registered paid-in capital does not exceed JPY 300 million, then the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors will apply to the subcontracting company, which will result in a number of duties being imposed.

If the Act against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors applies, a subcontracting company will be obligated to obey various duties. Among others, obligations include: (i) duty to provide a form stating terms and conditions of order, such as the amount of subcontract fees; (ii) duty to prepare and retain a form; (iii) duty to specify a payment due, which must not exceed 60 days from receipt of deliverable; (iv) prohibition of unreasonable refusal of deliverable; (v) prohibition of unreasonable delay in subcontract fees; (vi) prohibition of return of deliverable; and (vii) prohibition of unreasonable request of rework.

**Act on the Protection of Personal Information and Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures** 

We are subject to laws and regulations regarding privacy and protection of user data and personal information, due to our customer data collection operations. The application and interpretation of these and other similar international laws and regulations regarding privacy and protection of user data and personal information is often uncertain, particularly with respect to the new and rapidly evolving industry in which we operate.

The Act on the Protection of Personal Information (the "APPI") is to protect rights and interests of individuals, while balancing the usefulness of personal information. The APPI mainly concerns three situations: (i) acquisition and use; (ii) storage; and (iii) transfer of personal information.

When personal information is acquired, the purpose of use must be notified to the individual or made public, except in cases where the purpose of use has been made public in advance. The purpose of use must be specified, and the acquired personal information must be used within the scope of such purpose of use. Under Pixie's privacy policy, the purpose of use is specified. Pixie also provides a form of purpose of use when acquiring personal information.

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When storing personal information, it is necessary to manage it safely so that it will not be leaked. For the safe management, the APPI requires business operators holding others' personal information to establish information security system. It includes establishment of fundamental rule of personal information management, appointment of personnel responsible for personal information management, provisions of regular training courses on privacy and security breach, physical security control. As fundamental rules, Pixie has three internal regulations, "Rules on Personal Information Protection", "Regulation on Handling of Specific Personal Information", and "Information Security Rule", which govern personal information protection. Under the Rules on Personal Information Protection, Pixie appointed an employee who is responsible for personal information management. As a window from the public, Pixie provides contact information when obtaining personal information. For the high care of specific personal information under the Regulation on Handling of Specific Personal Information, Pixie prepares "Regulation on Handling of Specific Personal Information", stipulates the scope of use in it, establishes a person in charge and maintains such information in a separate room that monitors entry and exit for physical separation so that we comply with the Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures. Under the Information Security Rule, Pixie established an information security committee and holds meetings of the committee biweekly. As a current working task, Pixie is preparing regular training courses for employees with respect to information security.

Additionally, when transferring personal data to a third party, it is necessary, in principle, to obtain the consent of the principal in advance. Pixie has not conducted third-party transfer of retained personal data that requires consent from personal information providers under the APPI.

**Foreign Exchange and Foreign Trade Act** 

The Foreign Exchange and Foreign Trade Act (the "FEFTA") regulates foreigners' investment activities into Japanese companies. Under the FEFTA, among other triggering events, a Foreign Investor who desires to acquire shares in a Japanese company which is not listed on any stock exchange in Japan, is subject to a prior filing requirement, regardless of the acquired number of shares, if such Japanese company engages any business in certain industries related to the national security. Such industries include, among other things, manufacturing in relation to weapons, aircraft, space, and nuclear power, as well as agriculture, fishery, mining, and utility service. Additionally, due to today's growing awareness of technology, the FEFTA expanded, by its amendment, the scope of the prior filing requirement, broadly covering industries related to data processing businesses and information and communication technologies service.

A Foreign Investor wishing to acquire or hold our common shares directly will be required to make a prior filing with the relevant government authorities through the Bank of Japan and wait until clearance for the acquisition is granted by the applicable governmental authorities. Without such clearance, the Foreign Investor will not be permitted to acquire or hold our common shares directly. Once clearance is obtained, the Foreign Investor may acquire shares in the amount indicated in the filing any time within six months of the filing. While the standard waiting period to obtain clearance is 30 days, the waiting period could be expedited to two weeks, at the discretion of the applicable governmental authorities, depending on the level of potential impact on national security.

In addition to the prior filing requirement above, when a Foreign Investor who completed a prior filing and received clearance has acquired shares in accordance with the filed information, such Foreign Investor will be required to make a post-acquisition notice filing to report the completed purchase. Such post-acquisition notice filing must be made no later than 45 days after the acquisition of the shares.

**Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices** 

The Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices is a law that establishes regulations to secure the quality, efficacy, and safety of medical products, such as pharmaceuticals, cosmetics, and medical devices.

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Under the Act, if a company wants to market and manufacture medical devices, it is required to obtain a marketing and manufacturing license from the Minister of Health, Labor and Welfare and then to follow one of the following procedures depending on the type of medical device: (a) obtain approval from the Minister of Health, Labor and Welfare; (b) obtain certification from a private certification body who is registered by the Minister of Health, Labor and Welfare; or (c) submit a notification to the Minister of Health, Labor and Welfare.

In addition, the Act prohibits (a) false or exaggerated advertisements, (b) advertisements that may lead to the false impression that a physician or other person has certified the efficacy, effects or performance of the product, and (c) obscene advertisements with respect to medical devices. Furthermore, advertisement of medical devices is not permitted prior to receipt of approval from the Minister of Health, Labor and Welfare or certification from a private certification body which is registered by the Minister of Health.

If a product falls under the "medical device" definition under the Act, it is subject to various regulations under the Act. In this regard, the term "medical device" as used in the Act means "appliances or instruments, etc. which are intended for use in the diagnosis, treatment, or prevention of disease in humans or animals, or intended to affect the structure or functioning of the bodies of humans or animals (excluding regenerative medicine products), and which are specified by Cabinet Order". Therefore, if the product is neither intended for use in the diagnosis, treatment, or prevention of disease in humans or animals, nor intended to affect the structure or functioning of the bodies of humans or animals, it does not fall under the "medical device" definition.

In light of the above regulations, Pixie intends to market its personal care products as neither intended for use in the diagnosis, treatment, or prevention of disease in humans or animals, nor to affect the structure or functioning of the bodies of humans or animals so that they would not be deemed medical devices and subject to the various regulations under the Act.

**Regulations regarding Product Quality and Customer Protection** 

We are subject to laws and regulations, as well as pending legislative and regulatory proposals, regarding product quality and customer protection, which could affect us in jurisdictions in which we sell our products.

In Japan, the Product Liability Act (Act No. 85 of July 1, 1994, as amended) and Consumer Contract Act (Act No. 61 of May 12, 2000, as amended) mainly regulate product quality and customer protection. The Product Liability Act sets forth the liabilities of a manufacturer, processor, or importer for damages caused by defects in a product. A seller who was not involved in the manufacturing, processing, or import of a product could still be liable under this Act if its name was indicated on the product and consumers are led to believe that the seller was the manufacturer, processor, or importer. Liability under this Act can be imposed even if the manufacturer, processor, or importer (and the said seller) was not negligent. The Consumer Contract Act invalidates certain provisions in contracts with consumers, such as exemption of compensation for damages to consumers and restrictions of termination by consumers due to the seller's breach of contract.

**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 other things, minimum standards for working conditions, such as working hours, leave periods, and leave days. The Industrial Safety and Health Act requires, among other things, 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.

**Regulations on Advertising** 

The Act against Unjustifiable Premiums and Misleading Representations (Act No. 134 of May 15, 1962) stipulates the restricted methods and means of various advertisements, representations, and sales promotions, in a

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broad sense. When we advertise our products, we must provide appropriate information under this Act, so as not to mislead our customers.

**Other Laws and Regulations** 

Pixie's current and planned manufacturing activities are subject to a variety of laws and regulations including the Electrical Appliance and Material Safety Act, the Product Liability Act, the Consumer Product Safety Act the Radio Act, and the Antimonopoly Act. In addition to these laws and regulations, Pixie is in compliance with the JIS standard, ISO standard and IEC standard.

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**MANAGEMENT** 

**Our Executive Officers, Directors, and Corporate Auditors** 

The following table sets forth the names, ages and positions of our executive officers and members of our board of directors and of our board of corporate auditors as of the date of this prospectus. The business address of all of persons identified below is 2-20-5 Kanda Misaki-cho, Chiyoda-ku, Tokyo, 101-0061, Japan.

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Age** | **Position(s) with our Company** | **Term<br>Expires** |
|  Yoichi Ochiai | 35 | Chief Executive Officer and Director | 2023 |
|  Taiichiro Murakami | 37 | Chief Operation Officer and Director | 2023 |
|  Takayuki Hoshi | 42 | Chief Research Officer and Director | 2023 |
|  Yoshiyuki Sekine | 47 | Chief Financial Officer and Director | 2023 |
|  Yusuke Murata(1) | 42 | Outside Director | 2023 |
|  Ryo Oshima(2) | 42 | Outside Director | 2023 |
|  Masayo Takahashi | 61 | Outside Director | 2023 |
|  Kazuyoshi Takeya | 65 | Corporate Auditor | 2026 |
|  Akiko Ito | 43 | Corporate Auditor | 2026 |
|  Seiichi Koike | 66 | Corporate Auditor | 2026 |

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(1) Yusuke Murata is a general partner of Incubate Fund III LPS and serves as the appointee of Incubate Fund III
LPS to our board of directors pursuant to the shareholders' agreement, dated June 17, 2022.

(2) Ryo Oshima is a managing director of INCJ, Ltd. and serves as the appointee of INCJ, Ltd. to our board of
directors pursuant to the shareholders' agreement, dated June 17, 2022.

**Biographical Information** 

The following is a summary of certain biographical information concerning our executive officers, directors, and corporate auditors.

***Yoichi Ochiai.*** Mr. Ochiai is the co-founder of our Company and has served as our Chief Executive Officer and as a representative director since our inception. Mr. Ochiai has been an assistant professor of library, information and media studies at the University of Tsukuba since 2015. His main research interest is human-computer interaction called "Digital Nature", which is an environment that fuses the digital with the analogue, blurring the boundary between nature and artifice. At the University of Tsukuba, he heads up the research lab, Digital Nature Group, which seeks to solve problems around the industry, academia and art. Previously, Mr. Ochiai served as a research fellow for the Japan Society for the Promotion of Science. Mr. Ochiai has received numerous awards and accolades, including the 2015 World Technology Award (IT Hardware) from the World Technology Network, the 2020 Innovators Under 35 Japan by MIT Technology Review and the Future 50 by Project Management Institute. Mr. Ochiai received a master's degree in Applied Computer Science from the University of Tokyo in April 2015 and completed a doctoral course in Applied Computer Science at the University of Tokyo in April 2015.

***Taiichiro Murakami.*** Mr. Murakami has served as our Chief Operating Officer since May 2017 and as a representative director since January 2019. Previously, Mr. Murakami served as a management consultant for Accenture Japan Ltd. from April 2010 to December 2016 where he focused on assisting companies with the development of business strategies, operating models, digital strategies and large-scale business transformation and organizational change. In addition, Mr. Murakami has served as an executive advisor for Mitou Foundation since January 2017 and as a director of Ippan Shadan Houjin xDiversity since November 2018. Mr. Murakami received a Bachelor of Engineering degree from University of Tokyo in March 2008 and a Master of Engineering degree from University of Tokyo in March 2010.

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***Takayuki Hoshi.*** Dr. Hoshi is the co-founder of our Company and has served as our Chief Research Officer and as a director since October 2017. Previously, Dr. Hoshi served as an assistant professor at the University of Tokyo in its Research Center for Advanced Science and Technology from June 2016 to September 2017 and in the department of information physics and computing from April 2016 to May 2016. Prior to his tenure at the University of Tokyo, Dr. Hoshi served as an assistant professor at Nagoya Institute of Technology's Center for Innovative Young Researchers from April 2011 to May 2016 and as an assistant professor in the department of intelligent mechanical systems at the Graduate School of Science and Technology at Kumamoto University from April 2009 to March 2011. Dr. Hoshi is considered a world-renowned expert on wave control technologies. Dr. Hoshi developed the world's first ultrasonic phased array system for non-contact mid-air haptic stimulation in 2008 and demonstrated the world's first three-dimensional acoustic manipulation in 2013. Dr. Hoshi continues his academic contributions, including participating as the editor and author of the first professional book on ultrasonic haptics, "Ultrasound Mid-Air Haptics for Touchless Interfaces." Dr. Hoshi received a Bachelor of Engineering degree in March 2003, a Master of Engineering degree in March 2005 and a Ph.D. in Information Science and Technology in March 2008 from the University of Tokyo.

***Yoshiyuki Sekine.*** Mr. Sekine has served as our Chief Financial Officer and a director since July 2018. Mr. Sekine has served as a director and as the chief of administration department of PeptiDream Inc. (OTC: PPTDF), a drug discovery bio-venture company, from May 2012 to February 2018, where he was responsible for the company's general management as well as investor relations functions. At PeptiDream Inc. (TYO: 4587), Mr. Sekine assisted with the company's initial public offering on the Tokyo Stock Exchange and development of the compliance and disclosure systems for compliance with the various listing requirements of the Tokyo Stock Exchange. From February 2003 to December 2011, Mr. Sekine has served in various roles at Treasure Factory Co., Ltd., including serving as the chief of accounting and finance and the general affairs departments. Mr. Sekine received a Bachelor of Arts degree in Journalism from Sophia University in March 1998.

***Yusuke Murata.*** Mr. Murata is a director and has served on our board of directors since May 2017. Mr. Murata has served as the general partner of Incubate Fund III LPS, a JPY25 billion fund with investments in various early-stage companies that seek to transform and revolutionize existing industries, since October 2010. Prior to Incubate Fund, Mr. Murata served as Group Manager, Investment Department 1 Investment Group 6 at Daiwa Corporate Investment CO., Ltd. (formerly known as N.I.F. Ventures) from April 2003 to March 2010, where he was engaged in investments and development of startups and fund formation management. Mr. Murata received a Bachelor of Arts degree in Economics from Rikkyo University in March 2003.

***Ryo Oshima.*** Mr. Oshima is a director and has served on our board of directors since April 2019. Mr. Oshima has served as the managing director of INCJ, Ltd., a public-private partnership that provides financial, technological and management support for next-generation businesses, since April 2021. Mr. Oshima also currently serves as the external auditor of Dynamic Map Platform Co., Ltd. and as the outside director of GROOVE X, Inc. and Oh My Glasses Inc. Previously, Mr. Oshima served as the outside director of ispace, Inc. from December 2017 to August 2021 and Coiney, Inc. from October 2013 to August 2020. Mr. Oshima received a Bachelor of Commerce degree from Keio University in March 2004.

***Masayo Takahashi***. Dr. Takahashi is a director and has served on our board of directors since July 2022. Dr. Takahashi has served as the president of Vision Care Inc., VC Gene Therapy and VC Cell Therapy, start-ups which she founded in August 2019, August 2020 and March 2021, respectively, and that develop various regenerative and gene therapy technologies and products. As the president, she is responsible for the general management and strategic growth of these companies. Prior to that, Dr. Takahashi was an ophthalmologist at Kyoto University from April 1986 to September 2006. Additionally, Dr. Takahashi currently serves as a board member of Sysmex Corporation (OTC: SSMXY), a company that engages in the development, manufacture and sale of laboratory testing reagents and laboratory equipment; the development and sale of computer systems for medical institutions, as well as the development and sale of software used for clinical examination information systems. Dr. Takahashi is a world-renowned expert in the area of regenerative medicine led the world's first iPS cell application in 2014. Dr. Takahashi received Bachelor of Medicine, Ph.D. and M.D. degrees from Kyoto University.

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***Kazuyoshi Takeya.*** Mr. Takeya has served as a corporate auditor of our Company since October 2020. Previously, Mr. Takeya has served in various leadership roles at Japan Credit Information Reference Center, one of the largest credit information agencies in Japan, including: as the chief of the business affairs department from July 1986 to June 1999; as the director of the corporate planning department from June 1999 to June 2001; as the executive director of the corporate planning, legal & compliance and general risk management departments from June 2001 to June 2016; and most recently, as the auditor and part-time advisor from June 2016 to June 2020. At Japan Credit Information Reference Center, Mr. Takeya was responsible for developing corporate governance and management systems, formulating management plans, and managing legal and compliance affairs relating to personal information protection, comprehensive risk management and information security. Mr. Takeya received a Bachelor of Arts degree in Sociology from Hosei University in March 1979.

***Akiko Ito.*** Ms. Ito has served as a corporate auditor of our Company since April 2019. Ms. Ito is a licensed certified public accountant in Japan and currently serves as the representative certified public accountant at Akiko Ito Certified Public Accountant and Tax Accountant Office, an accounting and tax consulting firm Ms. Ito founded in October 2014. From December 2004 to September 2014, Ms. Ito served as the manager of Ernst & Young ShinNihon LLP where she provided internal audit and internal control consulting services. Ms. Ito currently serves as the external auditor of Petgo Corporation, istyle Inc. and Convano Inc. Ms. Ito has previously served as the external auditor of SuRaLa Net Co., Ltd. from March 2018 to March 2019 where she provided various accounting and tax consulting services. Ms. Ito received a Bachelor of Arts degree in Law from Hosei University in March 2002 and a Master of Arts degree in Law from the Graduate School of Kyoto Sangyo University in March 2004.

***Seiichi Koike.*** Mr. Koike has served as a corporate auditor of our Company since April 2019. Mr. Koike has extensive experience in the automobile industry, particularly in materials development and production technology for automotive parts, as well as in corporate governance as a corporate auditor. Mr. Koike currently serves as an external director of Taiyo Yuden Co., Ltd. and Smart Solar Corporation, and as the auditor for Honda Foundry Co., Ltd. from June 2013 to June 2017. Prior to that, Mr. Koike served in various roles at Honda R&D Co., Ltd., including as the Chief Scientist from March 1982 to April 2008 and also as the Chief of Brazil Automobile Center from April 2004 to April 2006. Mr. Koike received a Bachelor of Engineering degree in March 1978 and a Master of Engineering degree in March 1980 from Tohoku University.

**Agreements with Directors, Corporate Auditors, and Officers** 

Yusuke Murata and Ryo Oshima were appointed by our investors, Incubate Fund III LPS and INCJ, Ltd., respectively, pursuant to our shareholders' agreement, dated June 17, 2022, which will be terminated as of the effective date of the registration statement of which this prospectus is a part. There is no family relationship among any of the directors, corporate auditors and officers.

**Corporate Governance Practices** 

After the consummation of this offering, we will be a "foreign private issuer" under the federal securities laws of the United States and the Nasdaq listing standards. Under the federal securities laws of the United States, foreign private issuers are subject to different disclosure requirements than U.S.-domiciled public companies. We intend to take all actions necessary for us to maintain our status as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the Exchange Act and other applicable rules adopted by the SEC, and the Nasdaq listing standards. Under the SEC rules and the Nasdaq listing standards, a foreign private issuer is subject to less stringent corporate governance requirements. Subject to certain exceptions, the SEC and the Nasdaq permit a foreign private issuer to follow its home country practice in lieu of their respective rules and listing standards. In general, our Articles of Incorporation and the Companies Act of Japan (the "Companies Act") govern our corporate affairs

In particular, as a foreign private issuer, we will follow Japanese law and corporate practice in lieu of the corporate governance provisions set out under Nasdaq Rule 5600, the requirement in Nasdaq Rule 5250(b)(3) to

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disclose third party director and nominee compensation, and the requirement in Nasdaq Rule 5250(d) to distribute annual and interim reports. Of particular note, the following rules under Nasdaq Rule 5600 differ from Japanese law requirements:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nasdaq Rule 5605(b)(1) requires that at least a majority of a listed company's board of directors be
independent directors, and Nasdaq Rule 5605(b)(2) requires that independent directors regularly meet in executive session, where only independent directors are present. Under our current corporate structure, the Companies Act does not require
independent directors. However, our board of directors is currently comprised of seven directors, three of whom are considered "independent", as determined in accordance with the applicable Nasdaq rules. We expect our independent directors
to regularly meet in executive sessions, where only the independent directors are present.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nasdaq Rule 5605(c)(2)(A) requires a listed company to have an audit committee composed entirely of not less than
three directors, each of whom must be independent. Under Japanese law, a company may have a statutory auditor or a board of auditors. We have a three-member Board of Corporate Auditors, each member of which will meet the requirements of Rule 10A-3 under the Exchange Act. See " — Board of Corporate Auditors" below for additional information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nasdaq Rule 5605(d) requires, among other things, that a listed company's compensation committee be
comprised of at least two members, each of whom is an independent director as defined under such rule. Our board of directors will collectively participate in the discussions and determination of compensation for our executive officers and
directors, and other compensation related matters. Although not required under the Companies Act, our board of directors has established a compensation committee composed of a majority of outside directors. In accordance with the Companies Act and
our Articles of Incorporation, the maximum aggregate annual amount of compensation for our directors and for our corporate auditors is determined by our shareholders through a shareholder resolution. Once the maximum aggregate annual amount of
compensation is approved at a general meeting of shareholders, no further approval is required unless a proposal is approved by the board of directors to adjust the maximum aggregate annual amount of compensation. Subject to such shareholder
resolution, the compensation committee of our board of directors, in consultation with the compensation committee, will then determine the specific amount of compensation for each director, and our board of auditors will then determine the specific
amount of compensation for each corporate auditor.<sup></sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nasdaq Rule 5605(e) requires that a listed company's nomination and corporate governance committee be
comprised solely of independent directors. Our board of directors will not have a standalone nomination and corporate governance committee. Our board of directors will collectively participate in the nomination process of potential directors and
oversee our corporate governance practices. Our board of directors will also nominate potential corporate auditors subject to a prior approval of the board of auditors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Nasdaq Rule 5620(c) sets out a quorum requirement of 33-1/3% applicable
to meetings of shareholders. In accordance with Japanese law and generally accepted business practices, our Articles of Incorporation provide that there is no quorum requirement for a general resolution of our shareholders. However, under the
Companies Act and our Articles of Incorporation, a quorum of not less than one-third of the total number of voting rights is required in connection with the election of directors, statutory auditors and
certain other matters.

**Board of Directors** 

Our board of directors has the ultimate responsibility for the administration of our affairs. Our board of directors meets no less than once a month. Under the Companies Act and our Articles of Incorporation, our Company must have at least three, but no more than ten, directors on our board of directors. Our board of directors is currently comprised of seven directors. Directors are typically nominated at the board level and are elected at general meetings of the shareholders. The term of office of any director is two years and expires at the

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close of the ordinary general meeting of shareholders held with respect to the last fiscal year ended within two years after such director's election to office. Our directors may, however, serve any number of consecutive terms.

Our board of directors appoints from among its members one or more representative directors, who serve as head administrator(s) over our Company's affairs and represent our Company in accordance with the resolutions of our board of directors. Mr. Yoichi Ochiai, our Chief Executive Officer and a director, and Mr. Taiichiro Murakami, our Chief Operating Officer and a director, are currently the sole representative directors of our Company. Our board of directors may appoint from among its members a chairman, a Chief Executive Office or one or more executive chairmen (*Torishimariyaku Kaicho*), vice president(s) (*Torishimariyaku Fukushacho*), senior managing director(s) (*Senmu torishimariyaku*) and managing director(s) (*Jomu Torishimariyaku*).

Under our Company's current corporate structure, the Companies Act does not require our board of directors to have any independent directors. However, our board of directors is currently comprised of seven directors, three of whom (Mr. Yusuke Murata, Mr. Ryo Oshima and Ms. Masayo Takahashi) are considered "independent", as determined in accordance with the applicable Nasdaq rules, and also satisfy the requirements for an outside (or independent) director under the Companies Act.

**Board of Corporate Auditors** 

As permitted under the Companies Act, we have elected to structure our corporate governance system as a company with a separate board of corporate auditors instead of an audit committee of our board of directors. Our Articles of Incorporation provide for not more than three corporate auditors. Corporate auditors are typically nominated at the board level and are elected at general meetings of shareholders by a majority of shareholders entitled to vote, where a quorum is established by shareholders holding one-third or more of the voting rights of those who are entitled to vote are present at the shareholders' meeting. The normal term of office of any corporate auditor expires at the close of the annual general meeting of shareholders held with respect to the last fiscal year ended within four years after such corporate auditor's election to office. Our corporate auditors may, however, serve any number of consecutive terms. Corporate auditors may be removed by a special resolution of a general meeting of shareholders.

Our corporate auditors are not required to be certified public accountants. Our corporate auditors may not concurrently serve as directors or employees of our Company or any of our subsidiaries or serve as corporate officers of any of our subsidiaries. Under the Companies Act, at least one-half of the corporate auditors of a company must be persons who satisfy the requirements for an outside corporate auditor under the Companies Act, and at least one of the corporate auditors must be a full-time corporate auditor.

The function of our board of corporate auditors and each corporate auditor is similar to that of independent directors, including those who are members of the audit committee of a U.S. public company. Each corporate auditor has a statutory duty to supervise the administration by the directors of our affairs, to examine our financial statements and business reports to be submitted by a representative director at the general meetings of shareholders, and to prepare an audit report. Our corporate auditors are obligated to participate in meetings of our board of directors and, if necessary, to express their opinion at such meetings, but are not entitled to vote. Our corporate auditors must inspect the proposals, documents and any other materials to be submitted by our board of directors to the shareholders at the shareholders' meeting. If a corporate auditor finds a violation of statutory regulations or our Articles of Incorporation, or another significant improper matter, such auditor must report those findings to the shareholders at the shareholders' meeting.

Furthermore, if a corporate auditor believes that a director has engaged in, or is likely to engage in, misconduct or acts that are significantly improper, or that there has been a violation of statutory regulations or our Articles of Incorporation, the corporate auditor: (i) must report that fact to our board of directors; (ii) can demand that a director convene a meeting of our board of directors; and (iii) if no such meeting is convened in response to the demand, can convene the meeting under the corporate auditor's own authority. If a director engages in, or is likely to engage in, an activity outside the scope of the objectives of our Company or otherwise

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in violation of laws or regulations or our Articles of Incorporation, and such act is likely to cause significant damage to our Company, then a corporate auditor can demand that the director cease such activity.

Our board of corporate auditors has a statutory duty to prepare an audit report based on the audit reports issued by the individual corporate auditors and submit such audit reports to a relevant director and, in the case of audit reports related to financial statements, the independent auditors of our Company each year. A corporate auditor may note an opinion in an audit report issued by our board of corporate auditors, if the opinion expressed in such corporate auditor's individual audit report is different from the opinion expressed in the audit report issued by our board of corporate auditors. Our board of corporate auditors is empowered to establish the audit principles, the method of examination by our corporate auditors of our affairs and financial position, and any other matters relating to the performance of our corporate auditors' duties.

Additionally, our corporate auditors must represent our Company in: (i) any litigation between our Company and a director; (ii) dealing with shareholders' demands seeking a director's liability to our Company; and (iii) dealing with notices of litigation and settlement in a derivative suit seeking a director's liability to our Company. A corporate auditor can file court actions relating to our Company within the authority of our corporate auditors, such as an action to nullify the incorporation of our Company, the issuance of shares, or a merger, or to cancel a resolution at a shareholders' meeting.

**Risk Management** 

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors administers this oversight function primarily through the Internal Control Committee, which is an executive committee comprising the General Manager of Management Head Office, the Manager of Internal Audit Division and a representative of each other division. While the Initial Control Committee is responsible for analyzing and evaluating matters relating to compliance and strategic risk management, our entire board of directors will be regularly informed through committee reports about the risks. Our board of corporate auditors is responsible for overseeing and evaluating our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our board of corporate auditors also reviews legal, regulatory and compliance matters that could have a significant impact on our financial statements.

**Code of Business Conduct** 

Following consummation of this offering, our board of directors will adopt a written code of business conduct that applies to our directors, corporate auditors, officers, and employees (including our principal executive officer, principal financial officer, principal accounting officer, and other persons performing similar functions), and our agents.

**Limitation of Liability of Directors and Corporate Auditors** 

Under the Companies Act and our Articles of Incorporation we may exempt, by resolution of the board of directors, our directors and corporate auditors 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) and corporate auditors 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 entered into a liability limitation agreement with each of our non-executive directors (Yusuke Murata, Ryo Oshima and Masayo Takahashi) and outside corporate auditors (Kazuyoshi Takeya, Akiko Ito and Seiichi Koike) which limits the maximum amount of their liability to the amount stipulated in laws and regulations.

**Compensation of our Directors and Corporate Auditors** 

In accordance with the Companies Act and our Articles of Incorporation, the maximum aggregate annual amount of compensation for our directors and for our corporate auditors is determined by our shareholders

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through a shareholder resolution. Once the maximum aggregate annual amount of compensation is approved at a general meeting of shareholders, no further approval is required unless a proposal is approved by the board of directors to adjust the maximum aggregate annual amount of compensation. Subject to such shareholder resolution, our board of directors, in consultation with the compensation committee, will then determine the specific amount of compensation for each director, and our board of auditors will then determine the specific amount of compensation for each corporate auditor. The following table summarizes the total amount of remuneration paid to each category of our directors and corporate auditors in the fiscal year ended April 30, 2022, including by the type of remuneration and the number of persons in each category.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Total amount**<br>**of remuneration** | **Base<br>compensation** | **Number of<br>persons in<br>category** | |
| **Category of directors and corporate auditor** | **Total amount**<br>**of remuneration** | **Base<br>compensation** | **Number of<br>persons in<br>category** | |
|  Executive director<sup>(1)</sup> | ¥57550800 | ¥57550800 |  | 4 |
|  Outside directors<sup>(2)</sup> | ¥0 | ¥0 |  | 2 |
|  Outside corporate auditors<sup>(3)</sup> | ¥9440000 | ¥9440000 |  | 3 |

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<sup>(1)</sup> Includes Yoichi Ochiai, Taiichiro Murakami, Takayuki Hoshi, and Yoshiyuki Sekine.

<sup>(2)</sup> Includes Yusuke Murata and Ryo Oshima.

<sup>(3)</sup> Includes Kazuyoshi Takeya, Akiko Ito, and Seiichi Koike.

**Stock Options** 

We have granted stock options to purchase our common shares, as authorized by our shareholders in April 2018, July 2018, October 2018, April 2019, March 2020, April 2020 and August 2022. The purpose of these grants is to enable our directors, corporate auditors, employees, and advisors to share in our success and to reinforce a corporate culture that aligns interests with those of our shareholders. Our stock option grants generally prohibit transfers of options. A stock option holder generally forfeits such stock options if they are no longer a director, corporate auditor, employee, or advisor of our Company, except under limited circumstances or as otherwise determined by our board of directors. The following table summarizes the stock options we have issued since the inception of the Company.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name of Issuance** | **Issuance Date** | **Expiration Date** | **Exercise Price**<br>**(per share)** | **Number of<br>Common Shares to<br>be Granted** |  |
|  First Series <sup>(1)</sup> | 04/27/2018 | 04/26/2028 | ¥125000 |  | 12.0 |
|  Second Series <sup>(1)</sup> | 07/24/2018 | 07/23/2028 | ¥16500 |  | 415.0 |
|  Second-2 Series <sup>(1)</sup> | 10/17/2018 | 10/16/2028 | ¥16500 |  | 25.0 |
|  Third Series <sup>(1)</sup> | 04/24/2019 | 04/23/2029 | ¥180000 |  | 647.0 |
|  Fourth Series <sup>(1)</sup> | 04/24/2019 | 04/23/2029 | ¥180000 |  | 357.0 |
|  Fifth Series <sup>(1)</sup> | 03/31/2020 | 03/30/2030 | ¥181000 |  | 80.0 |
|  Sixth Series  | 04/30/2020 | 04/29/2030 | ¥181000 |  | 782.0 |
|  Seventh Series  | 04/30/2020 | 04/29/2030 | ¥181000 |  | 366.0 |
|  Eighth Series  | 08/31/2022 | 08/30/2032 | ¥1 |  | 146.0 |

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<sup>(1)</sup> The options may not be exercised until our common shares is listed on any stock exchange in Japan or elsewhere.

Of the stock options granted pursuant to the above-mentioned grants, stock options to acquire an aggregate of 692 of our common shares have been extinguished, and stock options to acquire an aggregate of 2,138 of our common shares remain outstanding as of October 31, 2022. For additional details, see Note 13 to our audited financial statements as of and for the years ended April 30, 2022 and 2021 appearing elsewhere in this prospectus.

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The following table summarizes the outstanding stock options with respect to our common shares that we have granted to our officers, directors and corporate auditors:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Name** | **Grant Date** | **Beginning of<br>Exercise<br>Period** | **End of<br>Exercise<br>Period** | **Exercise Price**<br>**(per share)** | **Total<br>Number of<br>Stock<br>Options<br>Granted** | **Total Number<br>of Common<br>Shares<br>Underlying<br>Stock<br>Options** |
|  Yoichi Ochiai | 04/30/2020 | 04/30/2020 | 04/29/2030 | ¥181000 | 4 | 4 |
|  Taiichiro Murakami | 04/24/2019 | 04/24/2019 | 04/23/2029 | ¥180000 | 132 | 132 |
|  Taiichiro Murakami | 04/24/2019 | 04/24/2019 | 04/23/2029 | ¥180000 | 218<sup>(1)</sup> | 218<sup>(1)</sup> |
|  Taiichiro Murakami | 04/30/2020 | 04/30/2020 | 04/29/2030 | ¥181000 | 221 | 221 |
|  Takayuki Hoshi | 04/30/2020 | 04/30/2020 | 04/29/2030 | ¥181000 | 2 | 2 |
|  Yoshiyuki Sekine | 07/24/2018 | 07/24/2018 | 07/23/2028 | ¥16500 | 150 | 150 |
|  Yoshiyuki Sekine | 04/24/2019 | 04/24/2019 | 04/23/2029 | ¥180000 | 118 | 118 |
|  Yoshiyuki Sekine | 04/24/2019 | 04/24/2019 | 04/23/2029 | ¥180000 | 132<sup>(1)</sup> | 132<sup>(1)</sup> |
|  Yoshiyuki Sekine | 04/30/2020 | 04/30/2020 | 04/29/2030 | ¥181000 | 132 | 132 |

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<sup>(1)</sup> The options were cancelled with consents by both the Company and the grantee.

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**PRINCIPAL SHAREHOLDERS** 

The following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of our common shares, immediately prior to and immediately after the completion of this offering, by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• each of our executive officers, directors, and corporate auditors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• all of our executive officers, directors, and corporate auditors as a group; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• each person or entity (or group of affiliated persons or entities) known by us to be the beneficial owner of 5%
or more of our common shares.

To our knowledge, each shareholder named in the table has sole voting and investment power with respect to all of our common shares shown as "beneficially owned" (as determined by the rules of the SEC) by such shareholder, except as otherwise set forth in the footnotes to the table. The SEC has defined "beneficial" ownership of a security to mean the possession, directly or indirectly, of voting power and/or investment power.

The percentages reflect beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act) immediately prior to the completion of this offering, and are based on 21,726 common shares outstanding (including 11,726 common shares to be issued pursuant to the Conversion of the convertible preferred shares), and ● common shares subject to options that are exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The percentages reflect beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act) immediately after the completion of this offering, and are based on 21,726 common shares outstanding, including 11,726 common shares to be issued pursuant to the Conversion of the convertible preferred shares, and ● common shares in the form of ADSs. The percentages reflect beneficial ownership (as determined in accordance with Rule 13d-3 under the Exchange Act) immediately after the completion of this offering includes ● common shares subject to options that are exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The percentages assume no exercise by the underwriters of their option to purchase additional ADSs from us in this offering.

Except as noted in the footnotes to the table below, the address for all of the shareholders in the table below is c/o Pixie Dust Technologies, Inc., 2-20-5 Kanda Misaki-cho, Chiyoda-ku, Tokyo, Japan.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Common Shares<br>beneficially owned<br>immediately prior to the<br>consummation of this<br>offering** | **Common Shares<br>beneficially owned<br>immediately prior to the<br>consummation of this<br>offering** | **Common Shares<br>beneficially owned<br>immediately after the<br>consummation of this<br>offering** | **Common Shares<br>beneficially owned<br>immediately after the<br>consummation of this<br>offering** |  |
| **Name of Beneficial Owner** | **Shares<sup>(1)</sup>** | **Percentage** | **Shares<sup>(1)</sup>** | **Percentages** |  |
|  **Executive Officers, Directors, and Corporate Auditors:** |  |  |  |  |  |
|  Yoichi Ochiai<sup>(2)</sup> | 5275 | 24.3% | 5275 |  | ●% |
|  Taiichiro Murakami<sup>(3)</sup> | 2314 | 10.5% | 2314 |  | ●% |
|  Takayuki Hoshi<sup>(4)</sup> | 2299 | 10.6% | 2299 |  | ●% |
|  Yoshiyuki Sekine<sup>(5)</sup> | 561 | 2.5% | 561 |  | ●% |
|  Yusuke Murata<sup>(6)</sup> |  | \* |  |  | \* |
|  Ryo Oshima<sup>(7)</sup> |  | \* |  |  | \* |
|  Masayo Takahashi |  | \* |  |  | \* |
|  Kazuyoshi Takeya |  | \* |  |  | \* |
|  Akiko Ito |  | \* |  |  | \* |
|  Seiichi Koike |  | \* |  |  | \* |
|  **Executive Officers, Directors, and Corporate Auditors:** |  |  |  |  |  |
|  All executive officers, directors, and corporate auditors as a group (ten persons) | 10449 | 46.5% | 10449 |  | ●% |
|  **5% or More Shareholders:** |  |  |  |  |  |
|  Incubate Fund III LPS<sup>(8)</sup> | 3511 | 16.2% | ● |  | ●% |
|  INCJ, Ltd.<sup>(9)</sup> | 1799 | 8.3% | ● |  | ●% |
|  Abies Ventures Fund I, L.P.<sub></sub><sup>(10)</sup> | 1200 | 5.5% | ● |  | ●% |

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\* Represents less than 1% of ownership. 

<sup>(1)</sup> Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. A person is deemed to be the beneficial owner of any common shares if that person has or shares voting power or investment power with respect to those shares or has the right to acquire beneficial ownership at any time within 60 days. 

<sup>(2)</sup> The aggregate number of common shares beneficially owned by Mr. Yoichi Ochiai reflects (i) 5,271 common shares, and (ii) an aggregate of 4 common shares that may be issued upon exercise of stock options, held by Mr. Ochiai. 

<sup>(3)</sup> The aggregate number of common shares beneficially owned by Mr. Taiichiro Murakami reflects (i) 1,961 common shares, and (ii) an aggregate of 353 common shares that may be issued upon exercise of stock options, held by Mr. Murakami. 

<sup>(4)</sup> The aggregate number of common shares beneficially owned by Mr. Takayuki Hoshi reflects (i) 2,297 common shares, and (ii) an aggregate of 2 common shares that may be issued upon exercise of stock options, held by Mr. Hoshi. 

<sup>(5)</sup> The aggregate number of common shares beneficially owned by Mr. Yoshiyuki Sekine reflects (i) 161 common shares, and (ii) an aggregate of 400 common shares that may be issued upon exercise of stock options, held by Mr. Sekine. 

<sup>(6)</sup> Excludes shares that Mr. Oshima may be deemed to beneficially own by virtue of his relationship to INCJ, Ltd., as described in Note 9 below.

<sup>(7)</sup> Excludes shares that Mr. Murata may be deemed to beneficially own by virtue of his relationship to Incubate Fund III LPS, as described in Note 8 below.

<sup>(8)</sup> Incubate Fund III LPS is the record holder of the shares reported herein. Incubate Fund III LPS's business address is at 1-12-32, Akasaka, Minato-ku, Tokyo. Yusuke Murata is a general partner of Incubate Fund III LPS and serves as the appointee of Incubate Fund III LPS. Mr. Murata disclaims beneficial ownership of the shares held by Incubate Fund III LPS. 

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<sup>(9)</sup> INCJ, Ltd. is a wholly owned subsidiary of Japan Investment Corporation, whose shares are owned by the Japanese government and 25 Japanese private corporations. INCJ, Ltd. promotes open innovation and next-generation businesses by providing capital and managerial support. INCJ, Ltd. conducts its businesses and investments under the supervision of the Ministry of Economy, Trade and Industry of Japan, in accordance with the Industrial Competitiveness Enhancement Act. INCJ Ltd.'s business address is at Tokyo Toranomon Global Square, 1-3-1, Toranomon, Minato-ku, Tokyo 105-0001, Japan. Ryo Oshima is a managing director of INCJ, Ltd. and serves as the appointee of INCJ, Ltd. Mr. Oshima disclaims beneficial ownership of the shares held by INCJ, Ltd. 

<sup>(10)</sup> Abies Ventures Fund I, L.P.'s business address is at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KY1-1111, Cayman Islands.

As of October 31, 2022, we have 5 common shareholders, 1 Series AA convertible preferred shareholder, 4 Series A convertible preferred shareholders, 1 Series BB convertible preferred shareholder, 11 Series B convertible preferred shareholders and 7 Series C convertible preferred shareholders, none of which are record holders in the United States. All of the Series AA convertible preferred shares, Series A convertible preferred shares, Series BB convertible preferred shares, Series B convertible preferred shares and Series C convertible preferred shares will convert into common shares on a one-for-one basis immediately prior to the completion of this offering in connection with the Conversion. The ADSs that we issue in this offering will represent our common shares.

We are not aware of any arrangement that may, at a subsequent date, result in change of control of our Company.

For additional information about our principal shareholders, please see "Certain Relationships and Related Party Transactions."

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**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS** 

The following includes summaries of transactions or agreements, since May 1, 2020, to which we have been a party, in which any of our directors, corporate auditors, executive officers or beneficial owners of more than 5% of our voting securities, affiliates of our directors, corporate auditors, executive officers and holders of more than 5% of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other similar arrangements, which are described under "Management" and "Principal Shareholders."

**Transactions with xDiversity** 

xDiversity is a non-profit juridical entity working on social issues and established by five members, including Mr. Ochiai, our Chief Executive Officer, and Mr. Murakami, our Chief Operating Officer, both of whom serve as directors of both xDiversity and Pixie. The Company entered into an agreement for the operation and administration management of xDiversity. The Company has recognized other income of ¥ 2,727 thousand ($18 thousand) and ¥2,727 thousand ($18 thousand) for the fiscal years ended April 30, 2022 and 2021, respectively, related to outsourcing fees.

**Transaction with Sumitomo Mitsui Finance and Leasing Co., Ltd.** 

We lease a laser doppler vibrometer from Sumitomo Mitsui Finance and Leasing Co., Ltd. for a term from January 24, 2022 to January 23, 2026. Mr. Ochiai, our Chief Executive Officer, is a joint surety to this lease agreement. The monthly fee for this lease is ¥1,137 thousand ($7.7 thousand).

**Existing Shareholders' Arrangements** 

***Shareholders' Agreement***

On June 17, 2022, we entered into a shareholders' agreement with certain of our shareholders, including management shareholders and holders of our Series A convertible preferred shares, Series AA convertible preferred shares, Series B convertible preferred shares, Series BB convertible preferred shares, and Series C convertible preferred shares (the "Shareholders' Agreement"). The Shareholders' Agreement sets forth matters subject to pre-approval, restrictions on share transfer, and rules for appointments to the board of directors, among others. The Shareholders' Agreement will be terminated as of the effective date of the registration statement of which this prospectus is a part. In addition, the rights and obligations of each party under this agreement will be suspended from the date we make a listing application with a stock exchange including Nasdaq.

***Agreement on Preference Rights***

On June 17, 2022, we entered into an agreement on preference rights with such shareholders (the "Agreement on Preference Rights"). The Agreement on Preference Rights grants a qualified right to the Series A, Series B, and Series C lead investors to demand a liquidation pursuant to a sale of the Company. The Agreement on Preference Rights will be terminated as of the effective date of the registration statement of which this prospectus is a part. In addition, the rights and obligations of each party under this agreement will be suspended from the date we make a listing application with a stock exchange including Nasdaq.

***Investment Agreement with Series A Convertible Preferred Shareholders***

On July 24, 2017, we entered into an investment agreement with Mr. Ochiai, a management shareholder, and our Series A convertible preferred shareholders (the "Series A Investment Agreement"). The Series A Investment Agreement contains the terms of purchase and sale of the Series A convertible preferred shares, as well as certain rights of first refusal and or pre-approval in favor of the Series A convertible preferred shareholders. The Series A Investment Agreement will be terminated as of the effective date of the registration statement of which this prospectus is a part.

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***Investment Agreement with Series B Convertible Preferred Shareholders***

On April 18, 2019, we entered into an investment agreement with Mr. Ochiai, Mr. Hoshi, and Mr. Murakami, as management shareholders, and our Series B convertible preferred shareholders (the "Series B Investment Agreement"). The Series B Investment Agreement contains the terms of purchase and sale of the Series B convertible preferred shares. The Series B Investment Agreement will be terminated as of the effective date of the registration statement of which this prospectus is a part. In addition, the rights and obligations of each party under this agreement will be suspended from the date we make a listing application with a stock exchange including Nasdaq.

***Investment Agreement with Series C Convertible Preferred Shareholders***

On June 17, 2022, we entered into an investment agreement with Mr. Ochiai, Mr. Hoshi, and Mr. Murakami, as management shareholders, and our Series C convertible preferred shareholders (the "Series C Investment Agreement"). The Series C Investment Agreement contains the terms of purchase and sale of the Series C convertible preferred shares. The Series C Investment Agreement will be terminated as of the effective date of the registration statement of which this prospectus is a part. In addition, the rights and obligations of each party under this agreement will be suspended from the date we make a listing application with a stock exchange including Nasdaq.

**Indemnification Agreements** 

We have entered into a customary liability limitation agreement with each of our outside directors (Yusuke Murata, Ryo Oshima and Masayo Takahashi) and outside corporate auditors (Kazuyoshi Takeya, Akiko Ito, and Seiichi Koike) which limits the maximum amount of their liability to an amount stipulated in laws and regulations.

**Transactions with Trusts for the Benefit of Employees** 

In respect of Series 6 stock options, we apply the scheme called "The Trusted Fair Value Stock Option," under which three directors contributed their own money as the trustors to establish the trust. The trustee (Nozomi Kaikeisya, the tax accountant) subscribed for our stock options and administer them until they are allocated to the final beneficiaries. The trust documents permit employees and directors of the Company, any of its subsidiaries or affiliates to participate, however, the Company currently does not intend for directors or executive officers to participate. Since the payment to establish the trust is made before the rights are vested, the amounts paid by the trust of ¥2,854 thousand ($19 thousand) and ¥2,854 thousand ($19 thousand) were recorded as our other current liabilities, as of April 30, 2022 and 2021, respectively.

**Policies and Procedures for Related Party Transactions** 

Our board of directors has adopted a written related person transaction policy (the "Related Person Transaction Policy"), setting forth the policies and procedures for the review and approval or ratification of related party transactions. The Related Person Transaction Policy covers any related party transaction or loan as defined under Form 20-F, Item 7.B. In reviewing and approving any such transactions, our board of corporate auditors will be tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm's-length transaction and the extent of the related person's interest in the transaction. Under the Related Party Transactions Policy, our board of corporate auditors oversees approval of transactions and arrangements between us and any subsidiaries, on the one hand, and between principal shareholders, directors, and officers.

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**DESCRIPTION OF SHARE CAPITAL AND ARTICLES OF INCORPORATION** 

*The following is a summary of the material terms of our capital stock and our articles of incorporation, including a summary of the relevant provisions of applicable share handling regulations, of the Companies Act* *****relating to joint-stock corporations (kabushiki kaisha), and of certain related laws and legislation, each as currently in effect. Because it is a summary, this discussion should be read together with our articles of incorporation and the applicable share handling regulations.* 

We are a joint-stock corporation incorporated in Japan under the Companies Act. The rights of our shareholders are represented by our common shares as described below, and our shareholders' liability is limited to the amount of their respective holdings in such shares.

**Description of Our Share Capital** 

Based upon the assumed offer and sale of ● common shares in the form of ADSs in this offering at an initial public offering price of $● per ADS (which is the midpoint of the range set forth on the cover page of this prospectus), following this offering, there will be ● common shares outstanding, including 11,726 common shares to be issued pursuant to the Conversion of the convertible preferred shares.

Prior to the effective date of the registration statement of which this prospectus is a part, we intend to effect (i) a 1-to-● share split of all issued common shares, and (ii) a conversion on a one-to-one basis of all our issued and outstanding preferred shares including 1,111 Series AA convertible preferred shares, 4,600 Series A convertible preferred shares, 404 Series BB convertible preferred shares, 3,688 Series B convertible preferred shares and 1,923 Series C convertible preferred shares, into common shares. All currently outstanding common shares are fully paid and non-assessable, and our common shares underlying the ADSs to be issued in this offering will be fully-paid and non-assessable.

**Changes in Capital** 

Under our articles of incorporation, certain changes in capital, such as consolidation of shares, among others, require a majority vote of our common shareholders as set described under " — Voting Rights and Shareholder Meetings" below. ****

**Voting Rights and Shareholder Meetings** 

Our articles of incorporation provide that each annual meeting of our shareholders must be held within three months after the end of each fiscal year. Our fiscal year ends on April 30, and therefore, we must hold our annual shareholders' meeting by the end of July of each year. In addition, shareholders meetings to consider and vote on extraordinary matters may be held as necessary, provided that we satisfy all of the procedural requirements under both our articles of incorporation and the Companies Act.

Our common shares allocate one vote per share at shareholders' meetings. Our articles of incorporation provide for a simple majority approval on most matters submitted for shareholder vote, unless otherwise required by laws or regulations. As required by law, and as referenced in our articles of incorporation, a two-thirds majority approval is required for any votes on matters specified in Article 309, Paragraph (2) of the Companies Act, which cover, in relevant part, stock purchase requests, treasury stock purchases from a specific shareholder, purchases of an entire class of shares, demands for share sales by an heir, and stock consolidations. In such cases, under the Companies Act and our articles of incorporation, the quorum requirement is one-third of the outstanding voting rights. Any amendment to our articles of incorporation must be approved by our shareholders at a shareholders' meeting.

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**Pre-Emptive Rights** 

Holders of common shares have no pre-emptive rights under our articles of incorporation.

**Dividend Rights** 

We may issue annual dividends upon a resolution of our common shareholders and may issue interim dividends upon a resolution of our board of directors. We have not issued dividends or interim dividends to our shareholders since the incorporation of our Company.

**Liquidation Rights** 

In accordance with the Companies Act, liquidations must be approved by common shareholders holding at least a two-thirds majority of the shares present at a meeting where the majority of the issued and outstanding shares with voting rights is present.

**Transfer Agent** 

Under Article 12 of our articles of incorporation, we are required to set up a shareholder registry administrator. The shareholder registry administrator and the shareholder registry administrator's location for handling share-related affairs must be determined pursuant to a resolution of our board of directors. All affairs related to our shareholder and share option registries are delegated to the shareholder registry administrator and are not to be handled by our Company. The current shareholder registry administrator for our Company is Sumitomo Mitsui Trust Bank, Limited.

**Limitation on Liability** 

Our articles of incorporation permit us to exempt, by resolution of our board of directors, corporate auditors from liabilities arising in connection with their failure to execute their duties in good faith (but without gross negligence), to the fullest extent permitted by the Companies Act. In addition, our articles of incorporation permit us to exempt, by resolution of our board of directors, directors from liabilities arising in connection with any failure to execute their duties in good faith (but without gross negligence), to the fullest extent permitted by the Companies Act. Should our board of directors exempt a corporate auditor or director from any such liabilities, our rights and those of our shareholders to file shareholders' derivative suits on behalf of our Company to recover monetary damages from such corporate auditor or director for breach of their duties under the Companies Act will be eliminated or reduced. However, exculpation does not apply to any director or corporate auditor if they have breached their duties under the Companies Act intentionally (*koi*) or by gross negligence (*ju-kashitsu*). Furthermore, we may enter into agreements for the limitation of liabilities with our non-executive directors and corporate auditors. If we do so, we expect that these agreements will eliminate or reduce our rights and those of our shareholders as described above.

**Articles of Incorporation** 

***Objective of our Company under our Articles of incorporation***

We have broad authority under Article 2 of our articles of incorporation to conduct our lines of business.

***Provisions Regarding our Directors***

With respect to the election of directors of our Company, each director must be elected by a majority of our common shareholders entitled to vote at a common shareholder's meeting where shareholders holding one-third or more of the voting rights entitled to vote are present. Additionally, any resolution regarding the election of a director cannot be adopted by cumulative voting.

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***Rights of Shareholders of our Common Shares***

Under the Companies Act and our articles of incorporation, holders of our common shares have, among others, the following rights:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the right to receive dividends when the payment of dividends has been approved at a shareholders' meeting,
with this right lapsing three years after the provision of the payment in accordance with our articles of incorporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the right to vote at a shareholders' meeting (cumulative voting for the election of directors is not allowed
under our articles of incorporation);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the right to receive surplus in the event of a liquidation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the right to require us to purchase shares subject to certain requirements under the Companies Act when a
shareholder opposes certain resolutions, including (i) the transfer of all or material part of our business, (ii) an amendment to our articles of incorporation to establish a restriction on share transfer, (iii) a share exchange or
share transfer to establish a holding company, (iv) a company split, or (v) a merger, all of which must, as a general rule, be approved by a special resolution adopted at a shareholders' meeting.

Under the Companies Act, a company is permitted to make a distribution of surplus to the extent that the aggregate book value of the assets to be distributed to shareholders does not exceed the distributable amount provided for under the Companies Act and the applicable ordinance of the Ministry of Justice as of the effective date of such distribution of surplus. The amount of surplus at any given time shall be the amount of the company's assets and the book value of the company's treasury stock after subtracting and adding the amounts of the items provided for under the Companies Act and the applicable ordinance of the Ministry of Justice.

A shareholder is generally entitled to one vote per share at a shareholders' meeting. In general, under the Companies Act and our articles of incorporation, a shareholders' meeting may adopt an ordinary resolution by a majority of the voting rights presented at the meeting. The Companies Act and our articles of incorporation require a quorum of not less than one-third of the total number of voting rights in connection with the election of directors and statutory corporate auditors. Under the Companies Act, to avoid exercising improper control in a form of mutual shareholding, an institutional shareholder, 25% or more voting rights of which are directly or indirectly held by us, does not have voting rights at our shareholders' meeting. We have no voting rights with respect to our own common shares that we hold. Under the Companies Act and our Articles of Incorporation, shareholders or their attorney-in-fact may exercise their voting rights through proxies, provided that a shareholder or his/her attorney-in-fact may appoint only one other shareholder who has voting rights as its proxy.

With respect to a special resolution, while the Companies Act generally requires a quorum of the majority of the total number of voting rights and approval of two-thirds of the voting rights presented at the meeting in connection with any material corporate actions, it allows a company to reduce the quorum for such special resolutions pursuant to its articles of incorporation to one-third (or greater than one-third) of the total number of voting rights.

The Companies Act provides additional specific rights for shareholders owning a substantial number of voting rights:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a shareholder holding 90% or more of the total number of voting rights of all shareholders has the right to
demand that all other shareholders sell their shares to such shareholder who holds 90% or more of the voting rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders holding 10% or more of the total number of voting rights of all shareholders, or 10% or more of the
total number of our outstanding shares, have the right to apply to a court of competent jurisdiction for our dissolution;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders who have held 3% or more of the total number of voting rights of all shareholders for six months or
more have the right to demand the convening of a shareholders' meeting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders who have held 3% or more of the total number of voting rights of all shareholders, or 3% or more of
the total number of our outstanding shares, for six months or more have certain rights under the Companies Act, which include the right to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• apply to a competent court for removal of a director or a corporate auditor; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• apply to a competent court for removal of a liquidator;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders holding 3% or more of the total number of voting rights of all shareholders have the right to object
to the exculpation of a director or a corporate auditor from certain liabilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders holding 3% or more of the total number of voting rights of all shareholders, or 3% or more of the
total number of our outstanding shares, have certain rights under the Companies Act, which include the right to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• examine our accounting books and documents and make copies of them; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• apply to a competent court for the appointment of an inspector to inspect our operation and/or financial
condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders who have held 1% or more of the total number of voting rights of all shareholders for six months or
more have the right to apply to a competent court for the appointment of an inspector to review the correctness of the convocation and voting procedures of a shareholders' meeting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders who have held 1% or more of the total number of voting rights of all shareholders, or 300 or more
voting rights, for six months or more have the right to demand that certain matters be added to the agenda items at a shareholders' meeting;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders holding 1% or more of the total number of voting rights of all shareholders, or 1% or more of the
total number of our outstanding shares, have the right to institute a derivative action to enforce the liabilities of directors or corporate auditors of our material subsidiaries that satisfy statutory requirements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• shareholders who have held any number of shares for six months or more have the right to demand that we take
certain actions under the Companies Act, which include the rights to demand:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the institution of an action to enforce the liabilities of our directors or corporate auditors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the institution of an action to disgorge from a recipient the benefit of a proprietary nature given in relation
to the exercise of the right of a shareholder; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• on our behalf, that a director ceases an illegal or ultra vires action.

There are no provisions under the Companies Act or our articles of incorporation which forces shareholders to make additional contributions when requested by us.

Under the Companies Act, in order to change the rights of shareholders which are stipulated and defined in our articles of incorporation, we must amend our articles of incorporation. Amendments must, as a general rule, be approved by a special resolution of our shareholders.

Annual meetings and special meetings of shareholders are convened, unless otherwise provided by laws and regulations, by our Chief Executive Officer based on a resolution of our board of directors. Under our articles of incorporation, shareholders of record as of April 30 of each year have the right to attend our annual shareholders' meeting. We may, by prescribing a record date, determine the shareholders who are stated or recorded in the

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shareholder registry on the record date as the shareholders entitled to attend and take action at a special shareholders' meeting, and in this case, we are required to provide a notice in writing or by electromagnetic means of the record date at seven (7) days prior to the meeting date. A convocation notice will be sent to these shareholders at least seven (7) days prior to the date of the shareholders' meeting.

**Our Acquisition of our Common Shares** 

Under applicable laws of Japan, we may acquire our common shares:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) from a specific shareholder (other than any of our subsidiaries), pursuant to a special resolution of a
shareholders' meeting; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) from any of our subsidiaries, pursuant to a resolution of our board of directors.

In general, an acquisition by us of our common shares must satisfy certain requirements, including that the total amount of the acquisition price may not exceed the distributable amount.

We may hold the common shares which we acquired pursuant to (i) and (ii) above, or we may cancel such shares by a resolution of our board of directors. We may also dispose of such shares pursuant to a resolution of our board of directors, subject to other requirements applicable to the issuance of shares under the Companies Act.

**Restrictions on Holders of our Common Shares** 

There are no restrictions with respect to non-residents of Japan or foreign shareholders holding our common shares or on the exercise of voting rights, except for filing requirements with respect to an acquisition of shares by a Non-Resident of Japan under the Foreign Exchange and Foreign Trade Act of Japan and related regulations. However, pursuant to a provision of our share handling regulations, a shareholder who does not have an address or residence in Japan is required to file with our transfer agent its temporary address to receive notices in Japan or that of a standing proxy having any address or residence in Japan.

There are no provisions in our articles of incorporation that would have the effect of delaying, deferring, or preventing a change in control that would operate only with respect to a merger, acquisition, or corporate restructuring involving us.

There are no provisions in our articles of incorporation or other subordinated rules regarding an ownership threshold, above which shareholder ownership must be disclosed.

There are no provisions in our articles of incorporation governing changes in our Company's capital more stringent than is required by law.

For a description of rights of holders of ADSs, please see the "Description of American Depositary Shares."

**Exchange Controls** 

The Foreign Exchange and Foreign Trade Act ("FEFTA") and related regulations regulate certain transactions involving a "Non-Resident of Japan" or a "Foreign Investor", including "inward direct investments" by Foreign Investors, and payments from Japan to foreign countries or by residents of Japan to Non-Residents of Japan.

"Non-Residents of Japan" are defined as individuals who are not residents in Japan and corporations whose principal offices are located outside of Japan. Generally, branches and other offices of Japanese corporations which are located outside of Japan are regarded as Non-Residents of Japan, and branches and other offices of non-resident corporations which are located within Japan are regarded as residents of Japan.

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"Foreign Investors" are defined as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• individuals who are Non-Residents of Japan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• entities which are organized under the laws of foreign countries or whose principal offices are located outside
of Japan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• companies of which 50% or more of their voting rights are held by individuals who are Non- Residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• partnerships engaging in investment activities and investment limited partnerships (including partnerships formed
under the laws of foreign countries) which satisfy one of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 50% or more of contributions to the partnership were made by (i) individuals who are non-Residents of Japan,
(ii) entities which are organized under the laws of foreign countries or whose principal offices are located outside of Japan, (iii) companies of which 50% or more of their voting rights are held by individuals who are Non-Residents of Japan and/or corporations which are organized under the laws of foreign countries or whose principal offices are located outside of Japan, (iv) entities a majority of whose officers, or
officers having the power of representation, are individuals who are Non-Residents of Japan, or (v) partnerships a majority of whose executive partners fall within items (i) through (iv) above; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a majority of the executive partners of the partnership are (A) any persons or entities who fall within
items (i) through (v) above, (B) any partnerships to which 50% or more of contribution were made by persons or entities who fall within items (i) through (v) above, or (C) limited partnerships a majority of whose executive
partners fall within Non-Residents of Japan, persons or entities who fall within (A) or (B), or any officers of entities which fall within (A) or (B); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• entities, a majority of whose officers are individuals who are Non-Residents of Japan.

Under FEFTA and related regulations, dividends paid on, and the proceeds of sales in Japan of, shares held by Non-Residents of Japan may in general be converted into any foreign currency and repatriated abroad.

Under FEFTA, among other triggering events, a Foreign Investor who desires to acquire shares in a Japanese company which is not listed on any stock exchange in Japan, is subject to a prior filing requirement, regardless of the acquired amount of shares, if such Japanese company engages any business in certain industries related to the national security. Such industries include, among other things, manufacturing in relation to weapons, aircraft, space, and nuclear power, as well as agriculture, fishery, mining, and utility service. Additionally, due to today's growing awareness of cybersecurity, the recent amendment to FEFTA expanded the scope of the prior filing requirement, broadly covering industries related to data processing businesses and information and communication technologies service. Direct acquisition of our common shares, rather than ADSs, by a Foreign Investor could be subject to the prior filing requirement under FEFTA.

A Foreign Investor wishing to acquire or hold our common shares directly will be required to make a prior filing with the relevant government authorities through the Bank of Japan and wait until clearance for the acquisition is granted by the applicable governmental authorities. Without such clearance, the Foreign Investor will not be permitted to acquire or hold our common shares directly. Once clearance is obtained, the Foreign Investor may acquire shares in the amount indicated in the filing any time within six months of the filing. While the standard waiting period to obtain clearance is 30 days, the waiting period could be expedited to two weeks, at the discretion of the applicable governmental authorities, depending on the level of potential impact to national security.

In addition to the prior filing requirement above, when a Foreign Investor who completed a prior filing and received clearance has acquired shares in accordance with the filed information, such Foreign Investor will be required to make a post-acquisition notice filing to report the completed acquisition. Such post- acquisition notice filing must be made no later than 45 days after the acquisition of the shares.

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Under FEFTA, in each case where a resident of Japan receives a single payment of more than JPY 30 million from a Non-Resident of Japan for a transfer of shares in a Japanese company, such resident of Japan is required to report each receipt of payment to the Minister of Finance of Japan.

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**DESCRIPTION OF AMERICAN DEPOSITARY SHARES** 

**American Depositary Shares** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●, as depositary, will register and deliver American Depositary Shares, also referred to as ADSs. Each ADS will represent ● common shares (or a right to receive ● common shares) deposited with ●, as custodian for the depositary in Japan. Each ADS will also represent 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 will be administered, and its principal executive office are located at ●.

You may hold ADSs either (A) directly (i) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (ii) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depository Trust Company, also called DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.

As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Japanese law governs shareholder rights. The depositary will be the holder of our common shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR. For directions on how to obtain copies of those documents, see "Where You Can Find Additional Information."

**Dividends and Other Distributions** 

***How will you receive dividends and other distributions on our common shares?***

The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on common shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of common shares your ADSs represent.

***Cash***. The depositary will convert any cash dividend or other cash distribution we pay on the common shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and cannot be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See "Certain Tax Considerations." The depositary will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. *If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some of the value of the distribution.*

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***Shares****.* The depositary may distribute additional ADSs representing any common shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell common shares which would require it to deliver a fraction of an ADS (or ADSs representing those common shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new common shares. The depositary may sell a portion of the distributed common shares (or ADSs representing those common shares) sufficient to pay its fees and expenses in connection with that distribution.

***Rights to purchase additional shares****.* If we offer holders of our common shares any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. *In that case, you will receive no value for them.* The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary exercises rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

***Other Distributions****.* The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. *This means that you may not receive the distributions we make on our common shares or any value for them if it is illegal or impractical for us to make them available to you*.

**Deposit, Withdrawal and Cancellation** 

***How are ADSs issued?***

The depositary will deliver ADSs if you or your broker deposits our common shares or evidence of rights to receive common shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

***What are the pre-clearance requirements for Foreign Investors to acquire or hold the underlying common shares directly rather than through the depositary?***

Under the amendments in 2019 to FEFTA, a proposed transferee of our common shares who is a Foreign Investor (as defined under FEFTA) must submit an application for pre-clearance to the applicable Japanese

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governmental authority prior to the transfer of our common shares, regardless of the amount of shares to be acquired, which approval may take up to 30 days and could be subject to further extension. Prior to accepting common shares for deposit in return for the issuance of ADSs, the depositary, which is considered a Foreign Investor for purposes of FEFTA, must obtain pre-clearance from the Japanese governmental authority. Accordingly, investors wishing to deposit common shares with the depositary for the issuance of ADSs should notify the depositary at least 30 days prior to such deposit to allow time for the depositary to apply for any required pre-clearance, if not already obtained. The depositary will not accept any common shares for deposit until any required pre-clearance has been obtained. In addition, any Foreign Investor expecting to receive delivery of our common 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. Accordingly, ADS holders who are Foreign Investors wishing to surrender ADSs for the purpose of withdrawing the underlying deposited common shares should apply for pre-clearance at least 30 days in advance of such surrender. The depositary will not accept surrender of ADSs for the purpose of withdrawal of common shares until it receives assurances satisfactory to the depositary that any required pre-clearance for the delivery of the common shares to a Foreign Investor has been obtained.

***How can ADS holders withdraw the deposited securities?***

You may surrender your ADSs to the depositary for the purpose of withdrawal. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver our common shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. However, the depositary is not required to accept surrender of ADSs to the extent it would require delivery of a fraction of a deposited share or other security. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.

***How do ADS holders interchange between certificated ADSs and uncertificated ADSs?***

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

**Voting Rights** 

***How do you vote?***

ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders' meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of Japan and the provisions of our Articles of Incorporation or similar documents, to vote or to have its agents vote the common shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.

*Except by instructing the depositary as described above, you won't be able to exercise voting rights unless you surrender your ADSs and withdraw the common shares. However, you may not know about the meeting enough in advance to withdraw the common shares.* In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.

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We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your common shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. *This means that you may not be able to exercise voting rights and there may be nothing you can do if your common shares are not voted as you requested.*

In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to Deposited Securities, if we request the Depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 45 days in advance of the meeting date.

**Fees and Expenses** 

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|:---|:---|
| ***Persons depositing or withdrawing common shares or ADS holders must pay:*** | ***For:*** |
| $5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property<br> Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates |
| $.05 (or less) per ADS | Any cash distribution to ADS holders |
| A fee equivalent to the fee that would be payable if securities distributed to you had been common shares and the common shares had been deposited for issuance of ADSs | Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders |
| $.05 (or less) per ADS per calendar year | Depositary services |
| Registration or transfer fees | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares |
| Expenses of the depositary | Cable (including SWIFT) and facsimile transmissions (when expressly provided in the deposit agreement)<br> Converting foreign currency to U.S. dollars |
| Taxes and other governmental charges the depositary or the custodian have to pay on any ADSs or common shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes | As necessary |
| Any charges incurred by the depositary or its agents for servicing the deposited securities | As necessary |

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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.

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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 will retain 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 the 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 will be 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.

**Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities** 

The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do so by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.

If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.

If there is any change in the deposited securities such as a sub-division, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited

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securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful and practical to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.

If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.

If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender of those ADSs or cancel those ADSs upon notice to the ADS holders.

**Amendment and Termination** 

***How may the deposit agreement be amended?***

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. *At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended*.

***How may the deposit agreement be terminated?***

The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 60 days have passed since the depositary told us it wants to resign but a successor depositary has not been
appointed and accepted its appointment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we delist the ADSs from an exchange in the United States on which they were listed and do not list the ADSs on
another exchange in the United States or make arrangements for trading of ADSs on the U.S. over-the-counter market;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we delist our common shares from an exchange outside the United States on which they were listed and do not list
the common shares on another exchange outside the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the depositary has reason to believe the ADSs have become, or will become, ineligible for registration on Form F-6 under the Securities Act of 1933;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• we appear to be insolvent or enter insolvency proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• all or substantially all the value of the deposited securities has been distributed either in cash or in the form
of securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there are no deposited securities underlying the ADSs or the underlying deposited securities have become
apparently worthless; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• there has been a replacement of deposited securities.

If the deposit agreement terminates, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the <u>pro</u> <u>rata</u> benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.

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After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities or reverse previously accepted surrenders of that kind that have not settled if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, <u>but</u>, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.

**Limitations on Obligations and Liability** 

***Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs***

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad
faith, and the depositary will not be a fiduciary or have any fiduciary duty to holders of ADSs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its
ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are not liable if we or it exercises discretion permitted under the deposit agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities
that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit
agreement on your behalf or on behalf of any other person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• may rely upon any documents we believe, or it believes in good faith to be genuine and to have been signed or
presented by the proper person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are not liable for the acts or omissions of any securities depository, clearing agency or settlement system; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the depositary has no duty to make any determination or provide any information as to our tax status, or any
liability for any tax consequences that may be incurred by ADS holders as a result of owning or holding ADSs or be liable for the inability or failure of an ADS holder to obtain the benefit of a foreign tax credit, reduced rate of withholding or
refund of amounts withheld in respect of tax or any other tax benefit.

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

**Requirements for Depositary Actions** 

Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of common shares, the depositary may require:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged
by third parties for the transfer of any shares or other deposited securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including
presentation of transfer documents.

The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

**Your Right to Receive the Common Shares Underlying your ADSs** 

ADS holders have the right to cancel their ADSs and withdraw the underlying common shares at any time except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• when temporary delays arise because: (i) the depositary has closed its transfer books or we have closed our
transfer books; (ii) the transfer of common shares is blocked to permit voting at a shareholders' meeting; or (iii) we are paying a dividend on our common shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• when you owe money to pay fees, taxes and similar charges; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that
apply to ADSs or to the withdrawal of common shares or other deposited securities.

This right of withdrawal may not be limited by any other provision of the deposit agreement.

**Direct Registration System** 

In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery as described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary's reliance on and compliance with instructions received by the depositary through the DRS/Profile system and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

**Shareholder Communications; Inspection of Register of Holders of ADSs** 

The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

**Jury Trial Waiver** 

The deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our common shares, the

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ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable in the facts and circumstances of that case in accordance with applicable case law. You will not, by agreeing to the terms of the deposit agreement, be deemed to have waived our or the depositary's compliance with U.S. federal securities laws or the rules and regulations promulgated thereunder.

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**SECURITIES ELIGIBLE FOR FUTURE SALE** 

Prior to this offering, no public market existed for our common shares or the ADSs. Sales of substantial amounts of the ADSs following this offering, or the perception that these sales could occur, could adversely affect prevailing market prices of the ADSs and could impair our future ability to obtain capital, especially through an offering of equity securities. Assuming that the underwriters do not exercise their option to purchase additional ADSs from us in this offering and assuming no exercise of outstanding stock options following this offering, we will have an aggregate of ● common shares outstanding upon completion of this offering. Of these shares, the ADSs sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless purchased by "affiliates" (as that term is defined under Rule 144 of the Securities Act), who may sell only the volume of ADSs described below and whose sales would be subject to additional restrictions described below.

The remaining common shares will be held by our existing shareholders. Because substantially all of these shares were sold outside the United States to persons residing outside the United States at the time, they also will be freely tradable without restriction or further registration, except for the restrictions described below and as described under "Description of Share Capital and Articles of Incorporation — Transfer of Shares; Share Ownership Restrictions." None of the outstanding common shares are subject to such lock-up agreements, except as described below.

**Rule 144** 

In general, under Rule 144 under the Securities Act ("Rule 144") as in effect on the date hereof, beginning 90 days after the date of this prospectus, a person who holds restricted shares (assuming there are any restricted shares) and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned such restricted shares for at least six months, would be entitled to sell an unlimited number of our common shares, provided that current public information about us is available. In addition, under Rule 144, a person who holds restricted shares and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned such restricted shares for at least one year, would be entitled to sell an unlimited number of our common shares immediately upon the closing of this offering without regard to whether current public information about us is available. Beginning 90 days after the date of this prospectus, our affiliates who have beneficially owned our common shares for at least six months are entitled to sell within any three-month period a number of shares that does not exceed the greater of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 1% of the aggregate number of common shares then outstanding, in the form of ADSs or otherwise, which will equal
approximately ● common shares immediately after this offering (assuming no exercise by the underwriters of their option to purchase additional ADSs from us); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the average weekly trading volume of the ADSs on the Nasdaq Capital Market during the four calendar weeks
preceding the filing of a notice on Form 144 with respect to the sale; provided that current public information about us is available and such the affiliate complies with the manner of sale requirements imposed by Rule 144.

Upon expiration of the lock-up restrictions described under "Underwriting — Lock Up Agreements", substantially all of our outstanding common shares will either be unrestricted or will be eligible for sale under Rule 144, subject to the Rule 144 volume limitations applicable to our affiliates described above. We cannot estimate the number of our common shares that our existing shareholders will elect to sell.

**Rule 701** 

In general, under Rule 701 of the Securities Act ("Rule 701") as currently in effect, each of our employees, consultants or advisors who purchased, or who purchases, pursuant to an offer made prior to the date hereof, common shares from us in connection with a compensatory share plan or other written agreement, if such

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purchase or offer, as applicable, was made in accordance with Rule 701, is eligible, beginning 90 days from the date hereof, to resell such shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. We make no assurance that any such prior purchase or offer was made in accordance with Rule 701.

**THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL MATTERS RELATING TO SHARE TRANSFER RESTRICTIONS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN LEGAL ADVISOR REGARDING THE PARTICULAR SECURITIES LAWS AND TRANSFER RESTRICTION CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR COMMON SHARES OR THE ADSs, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.** 

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**CERTAIN TAX CONSIDERATIONS** 

The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our common shares, including the ADSs. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any local, state, foreign, including Japan, or other taxing jurisdiction.

**Taxation in Japan** 

Generally, a non-resident of Japan or non-Japanese entity (which we refer to as a "Non-Resident Holder") is subject to Japanese withholding tax on dividends paid by Japanese corporations. Stock splits are not subject to Japanese income tax. A conversion of retained earnings or legal reserve (but not additional paid-in capital, in general) into stated capital (whether made in connection with a stock split or otherwise) is not treated as a deemed dividend payment to shareholders for Japanese tax purposes. Thus, such a conversion does not trigger Japanese withholding taxation (Article 2(16) of the Japanese Corporation Tax Law and Article 8(1)(xiii) of the Japanese Corporation Tax Law Enforcement Order).

Pursuant to the Convention Between the Government of the United States of America and the Government of Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the "Treaty"), dividend payments made by a Japanese corporation to a U.S. resident or entity, unless the recipient of the dividend has a "permanent establishment" in Japan, and the common shares or ADSs with respect to which such dividends are paid are effectively connected with such "permanent establishment", are generally subject to a withholding tax at rate of: (i) 10% for portfolio investors who are qualified U.S. residents eligible for benefits of the Treaty; and (ii) 0% (*i.e.*, no withholding) for pension funds which are qualified U.S. residents eligible for benefits of the Treaty, provided that the dividends are not derived from the carrying on of a business, directly or indirectly, by such pension funds. Japan is a party to a number of income tax treaties, conventions and agreements, (which we refer to collectively as the "Tax Treaties"), whereby the maximum withholding tax rate for dividend payments is set at, in most cases, 15% for portfolio investors who are Non-Resident Holders. Specific countries with which such Tax Treaties have been entered into include Canada, Denmark, Finland, Germany, Ireland, Italy, Luxembourg, New Zealand, Norway, Republic of Singapore, and Spain. Japan's income tax treaties with Australia, Belgium, France, The Netherlands, Sweden, Switzerland and the United Kingdom have been amended to generally reduce the maximum withholding tax rate to 10%.

On the other hand, unless one of the applicable Tax Treaties reducing the maximum rate of withholding tax applies, the standard tax rate applicable to dividends paid with respect to listed shares, such as those paid by our Company on shares or ADSs, to Non-Resident Holders is 15% under the Japanese Income Tax Law, except for dividends paid to any individual shareholder who holds 3% or more of the issued shares, in which case the applicable rate is 20% (Article 182(2) of the Japanese Income Tax Law and Article 9-3(1)(i) of the Japanese Special Tax Measures Law, including its relevant temporary provision for these withholding rates). On December 2, 2011, the "Special measures act to secure the financial resources required to implement policy on restoration of the East Japan Earthquake" (Act No. 117 of 2011) was promulgated and special surtax measures on income tax and withholding tax were introduced thereafter to fund the restoration effort for the earthquake. Income tax and withholding taxpayers need to pay a surtax, calculated by multiplying the standard tax rate by 2.1% for 25 years starting from January 1, 2013 ("Surtax"). As a result, the withholding tax rate applicable to dividends paid with respect to listed shares to Non-Resident Holders increased to 15.315% ("Withholding Tax Rate") which is applicable for the period from January 1, 2014 until December 31, 2037.

Taking this Withholding Tax Rate into account, the treaty rates such as the 15% rate (or 10% for eligible U.S. residents subject to the Treaty and/or eligible residents subject to other similarly renewed treaties mentioned above) apply, in general, except for dividends paid to any individual holder who holds 3% or more of the total issued shares, in which case the applicable rate is 20.42% (standard tax rate of 20% imposed by Surtax). The treaty rate normally overrides the domestic rate, but due to the so-called "preservation doctrine" under Article

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1(2) of the Treaty, and/or due to Article 3-2 of the Special Measures Law for the Income Tax Law, Corporation Tax Law and Local Taxes Law with respect to the Implementation of Tax Treaties, if the tax rate under the domestic tax law is lower than that promulgated under the applicable income tax treaty, then the domestic tax rate is still applicable. Currently, the tax rate under the applicable tax treaty is lower than that under the domestic tax law and thus the treaty override treatment applies. As such, the tax rate under the Treaty applies for most holders of shares or ADSs who are U.S. residents or entities. In the case where the treaty rate is applicable, no Surtax is imposed, but in order to enjoy the lower treaty rate, the taxpayer must file a treaty application in advance with the Japanese National Tax Agency through our Company. Gains derived from the sale outside Japan of a Japanese corporation's shares or ADSs by Non-Resident Holders, or from the sale of a Japanese corporation's shares or ADSs within Japan by a non-resident of Japan as an occasional transaction or by a non-Japanese entity not having a permanent establishment in Japan, are generally not subject to Japanese income or corporation taxes, provided that the seller is a portfolio investor. Japanese inheritance and gift taxes at progressive rates may apply to an individual who has acquired a Japanese corporation's shares or ADSs as a distribute, legatee, or donee.

**Certain U.S. Federal Income Tax Considerations for U.S. Holders** 

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of our common shares or ADSs by a U.S. holder (as defined below) that acquires our common shares or ADSs in this offering. This summary is for general information purposes only and does not purport to be a complete discussion of all potential tax considerations that may be relevant to a particular person's decision to acquire common shares or ADSs.

This summary is based on the U.S. Internal Revenue Code of 1986, as amended (the "Code"), the regulations promulgated under the Code (the "U.S. Treasury Regulations"), the income tax treaty between Japan and the United States (the "Treaty"), published rulings of the U.S. Internal Revenue Service (the "IRS"), published administrative positions of the IRS, and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date hereof. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. We have not requested a ruling from the IRS with respect to any of the U.S. federal income tax considerations described below and, as a result, the IRS could disagree with portions of this discussion.

For purposes of this discussion, a "U.S. holder" is a beneficial owner of the common shares or ADSs that is, for U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an individual who is a citizen or resident of the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or
organized in or under the laws of the United States, any state thereof, or the District of Columbia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• an estate the income of which is includable in gross income for U.S. federal income tax purposes regardless of
its source; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a trust (i) the administration of which is subject to the primary supervision of a court within the United
States and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust, or (ii) that has validly elected to be treated as a U.S. person under the Code.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes holds the common shares or ADSs, the U.S. federal income tax consequences to such partnership and its partners of the ownership and disposition of the common shares or ADSs generally will depend in part on the activities of the partnership and the status of such partners. This summary does not address the tax consequences to any such partner or partnership. Partners of entities or arrangements that are classified as partnerships for U.S. federal

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income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership and disposition of the common shares or ADSs.

This discussion applies only to a U.S. holder that holds common shares or ADSs as "capital assets" under the Code (generally, property held for investment). Unless otherwise provided, this summary does not discuss reporting requirements. In addition, this discussion does not address any tax consequences other than U.S. federal income tax consequences, such as U.S. state and local tax consequences, U.S. estate and gift tax consequences, and non-U.S. tax consequences, and does not describe all of the U.S. federal income tax consequences that may be relevant in light of a U.S. holder's particular circumstances, including alternative minimum tax consequences, the Medicare tax on certain net investment income, and tax consequences to holders that are subject to special provisions under the Code, including, but not limited to, holders that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are tax-exempt organizations, qualified retirement plans, individual
retirement accounts, or other tax deferred accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated
investment companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are brokers or dealers in securities or currencies or holders that are traders in securities that elect to apply
a mark-to-market accounting method;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• have a "functional currency" for U.S. federal income tax purposes that is not the U.S. dollar;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• own common shares or ADSs as part of a straddle, hedging transaction, conversion transaction, constructive sale,
or other arrangement involving more than one position;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• acquire common shares or ADSs in connection with the exercise of employee stock options or otherwise as
compensation for services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are partnerships or other pass-through entities for U.S. federal income tax purposes (or investors in such
partnerships and entities);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are required to accelerate the recognition of any item of gross income with respect to the common shares or ADSs
as a result of such income being recognized on an applicable financial statement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• own or will own (directly, indirectly, or constructively) 10% or more of our total combined voting power or
value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• hold the common shares or ADSs in connection with trade or business conducted outside of the United States or in
connection with a permanent establishment or other fixed place of business outside of the United States; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• are former U.S. citizens or former long-term residents of the United States.

Each U.S. holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular circumstances, and the state, local, non-U.S. and other tax considerations of the ownership and disposition of our common shares or ADSs.

***Treatment of ADSs***

For U.S. federal income tax purposes, a U.S. holder of ADSs generally will be treated as the beneficial owner of the underlying shares represented by the ADSs. The remainder of this discussion assumes that a U.S. holder of our ADSs will be treated in this manner. Accordingly, deposits or withdrawals of common shares for ADSs generally will not be subject to U.S. federal income tax.

***Passive Foreign Investment Company Considerations***

A non-U.S. corporation, such as our company, is classified as a passive foreign investment company ("PFIC") for any taxable year in which, after applying relevant look-through rules with respect to the income and

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assets of its subsidiaries, either: (i) 50% or more of the value of the corporation's assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets; or (ii) at least 75% of the corporation's gross income is passive income. "Passive income" generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. In determining the value and composition of our assets, the net proceeds we raise in this offering generally will be considered to be held for the production of passive income and thus will be considered a passive asset.

Based upon our current and projected income and the valuation of our assets, including goodwill, we do not expect to be classified as a PFIC for our current taxable year. However, the determination of whether any corporation was, or will be, a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules that are subject to differing interpretations. In addition, the determination of whether a corporation will be a PFIC for any taxable year can only be made after the close of such taxable year. Our PFIC status will depend, in part, on the amount of cash that we raise in this offering and how quickly we utilize the cash in our business. Furthermore, because we may value our goodwill based on the market price of the ADSs, a decrease in the market price of our ADSs may also cause us to be classified as a PFIC for the current or any future taxable year. Based upon the foregoing, there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year.

We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. If we are a PFIC for any year during which you hold the common shares or ADSs, we will generally continue to be treated as a PFIC for all succeeding years during which you hold such common shares or ADSs. However, if we cease to be a PFIC, provided that you have not made a mark-to-market election, as described below, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the common shares or ADSs, as applicable.

The discussion below under " — Distributions on the Common Shares or ADSs" and " — Sale or Other Disposition of the Common Shares or ADSs" is written on the basis that we will not be classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that generally would apply if we are treated as a PFIC are discussed below under " — *Passive Foreign Investment Company Rules*."

***Distributions on the Common Shares or ADSs***

The gross amount of any distributions paid on our common shares or ADSs will generally be included in the gross income of a U.S. holder as dividend income on the date actually or constructively received by the U.S. holder, in the case of common shares, or by the depositary, in the case of ADSs, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (computed on the basis of U.S. federal income tax principles). Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, we expect that distributions will generally be reported to U.S. holders as dividends. Dividends received on our common shares or ADSs will not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from U.S. corporations.

Individuals and other non-corporate U.S. holders will be subject to tax on any such dividends at the lower capital gains tax rate applicable to "qualified dividend income," provided that certain conditions are satisfied, including that (i) the common shares or ADSs on which the dividends are paid are readily tradable on an established securities market in the United States or we are eligible for the benefits of the Treaty, (ii) we are not a PFIC nor treated as such with respect to a U.S. holder (as discussed below) for either our taxable year in which the dividend was paid or for the preceding taxable year, and (iii) certain holding period requirements are met. For this purpose, ADSs listed on the Nasdaq will generally be considered to be readily tradable on an established securities market in the United States. You should consult your tax advisor regarding the availability of the lower rate for dividends paid with respect to our common shares or ADSs.

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For U.S. foreign tax credit purposes, dividends paid on our common shares or ADSs generally will be treated as foreign source income and generally will constitute passive category income. The amount of a dividend will include any amounts withheld by us in respect of Japanese income taxes. Subject to applicable limitations, some of which vary depending upon the U.S. holder's particular circumstances, a U.S. holder may be eligible to claim a foreign tax credit in respect of any Japanese income taxes withheld from dividends on the common shares or ADSs, at a rate not exceeding any reduced rate pursuant to the Treaty. However, as a result of recent changes to the U.S. foreign tax credit rules, a Japanese withholding tax generally will need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. holder, except in the case of a U.S. holder that is eligible for, and properly claims, the benefits of the Treaty. We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any Japanese withholding tax will be creditable. In lieu of claiming a foreign tax credit, U.S. holders may, at their election, deduct foreign taxes, including any Japanese income taxes, in computing their taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year. The rules governing foreign tax credits are complex and U.S. holders should consult their tax advisers regarding the creditability or deductibility of foreign taxes in their particular circumstances.

The amount of any dividend paid in Japanese yen will equal the U.S. dollar value of the Japanese yen received, calculated by reference to the exchange rate in effect on the date the dividend is received by you, in the case of common shares, or by the depositary, in the case of ADSs, regardless of whether the Japanese yen are converted into U.S. dollars. If the Japanese yen received as a dividend are converted into U.S. dollars on the date of receipt, a U.S. holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income. If the Japanese yen received as a dividend are not converted into U.S. dollars on the date of receipt, a U.S. holder will have a basis in the Japanese yen equal to their U.S. dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other disposition of the Japanese yen will be treated as U.S. source ordinary income or loss.

***Sale or Other Disposition of the Common Shares or ADSs***

A U.S. holder will recognize gain or loss on the sale or other disposition of a common share or ADS equal to the difference between the amount realized for the common share or ADS and the holder's tax basis in the common share or ADS. Such gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if the U.S. holder's holding period for such common share or ADS was more than one year as of the date of the sale or other disposition. Long-term capital gain recognized by a non-corporate U.S. holder is subject to U.S. federal income tax at rates lower than the rates applicable to ordinary income and short-term capital gains, while short-term capital gains are subject to U.S. federal income tax at the rates applicable to ordinary income. The deductibility of capital losses is subject to various limitations. Any gain or loss recognized will generally be U.S. source gain or loss for foreign tax credit purposes.

***Passive Foreign Investment Company Rules***

If we are a PFIC for any taxable year during which you hold our common shares or ADSs, 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 common shares or ADSs, unless you make a mark-to-market election as discussed below. Distributions you receive from us in a taxable year that are greater than 125% of the average annual distributions you received from us during the shorter of the three preceding taxable years or your holding period for the common shares or ADSs will be treated as an excess distribution. Under these special tax rules:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the excess distribution or gain will be allocated ratably over your holding period for the common shares or ADSs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which
we became a PFIC, will be treated as ordinary income; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the amount allocated to each of the other taxable years will be subject to tax at the highest rate of tax in
effect for you for such year and will be increased by an additional tax calculated as an interest charge on the resulting tax deemed deferred with respect to each such other taxable year at the rates generally applicable to underpayments of tax
payable in those years.

If we are a PFIC for any taxable year during which a U.S. holder holds our common shares or ADSs and any of our subsidiaries or other corporate entities in which we own equity interests is also a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

As an alternative to the foregoing rules, a U.S. holder may make a mark-to-market election with respect to our common shares or ADSs, provided such common shares or ADSs are treated as "marketable stock." The common shares or ADSs generally will be treated as marketable stock if the common shares or ADSs are regularly traded on a "qualified exchange or other market," as defined in applicable U.S. Treasury Regulations. Our ADSs will be marketable stock as long as they remain listed on the Nasdaq, which is a qualified exchange for this purpose, and are regularly traded. We anticipate that our ADSs should qualify as being regularly traded but no assurances can be given in this regard. Only the ADSs and not the common shares will be listed on the Nasdaq. Consequently, a U.S. holder of common shares that are not represented by ADSs generally will not be eligible to make the mark-to-market election.

If a U.S. holder makes a valid mark-to-market election with respect to the ADSs, the holder generally will (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss in each such taxable year the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder's adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. holder makes a mark-to-market election in respect of our ADSs and we cease to be classified as a PFIC, the holder will not be required to consider the gain or loss described above during any period that we are not classified as a PFIC. If a U.S. holder makes a mark-to-market election, any gain such U.S. holder recognizes upon the sale or other disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.

Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. holder may continue to be subject to the general PFIC rules described above with respect to such U.S. holder's indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

We have not determined whether, if we were to be classified as a PFIC for a taxable year, we will provide information necessary for U.S. holders to make "qualified electing fund" elections which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above. Accordingly, U.S. holders should assume that they will not be able to make a qualified electing fund election with respect to the common shares or ADSs.

If a U.S. holder owns common shares or ADSs during any year in which we are a PFIC, the holder generally must file an annual report containing such information as the U.S. Treasury may require on IRS Form 8621 (or any successor form). A failure to file this report generally will suspend the statute of limitations with respect to any tax return, event, or period to which such report relates (potentially including with respect to items that do not relate to a U.S. holder's investment in common shares or ADSs).

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The PFIC rules are complex, and each U.S. holder should consult its own tax advisor regarding the PFIC rules, the elections which may be available to it, and how the PFIC rules may affect the U.S. federal income tax consequences relating to the ownership and disposition of common shares or ADSs.

***Information Reporting and Backup Withholding***

Payments of dividends or sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding, unless (i) the U.S. holder is a corporation or other exempt recipient, or (ii) in the case of backup withholding, the U.S. holder provides a correct U.S. taxpayer identification number and certifies that it is not subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding rules will be allowed as a credit against a U.S. holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. holder furnishes required information to the IRS in a timely manner. Each U.S. holder should consult its own tax advisor regarding the information reporting and backup withholding rules in their particular circumstances and the availability of and procedures for obtaining an exemption from backup withholding.

***Reporting Obligations for Certain Owners of Foreign Financial Assets***

Certain U.S. holders may be required to file information returns with respect to their investment in common shares or ADSs. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of "specified foreign financial assets" includes not only financial accounts maintained in non-U.S. financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person, and any interest in a non-U.S. entity. U.S. holders may be subject to these reporting requirements unless their common shares or ADSs are held in an account at certain financial institutions. In addition, U.S. holders may be required to file an IRS Form 926 to report the payment of the offering price for our ADSs.

The discussion of reporting obligations set forth above is not intended to constitute an exhaustive description of all reporting obligations that may apply to a U.S. holder. A failure to satisfy certain reporting obligations may result in an extension of the period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting obligation. Penalties for failure to comply with these reporting obligations are substantial. U.S. holders should consult with their own tax advisors regarding their reporting obligations under these rules, including the requirement to file an IRS Form 8938 and IRS Form 926.

U.S. holders should consult their tax advisors regarding any reporting obligations that may arise with respect to the acquisition, ownership or disposition of our common shares or the ADSs. Failure to company with applicable reporting requirements could result in substantial penalties.

**The foregoing discussion of certain U.S. federal income tax considerations is for general information only and is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our common shares or the ADSs. U.S. holders should consult their own tax advisors concerning the tax consequences applicable to their particular situations.** 

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**UNDERWRITING** 

Subject to the terms and conditions set forth in the underwriting agreement, dated ●, 2023, among us and the underwriters named below, for whom Boustead Securities, LLC is acting as the representative, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the respective number of ADSs shown opposite its name below:

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| | |
|:---|:---|
| **Underwriter** | **Number of<br>ADSs** |
|  Boustead Securities, LLC | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● |
|  Total | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● |

---

The underwriting agreement provides that the obligations of the underwriters are subject to certain conditions precedent such as the receipt by the underwriters of certain certificates and other documents, as well as confirmation of the receipt of certain legal and regulatory approvals. The underwriting agreement provides that the underwriters will purchase all of the ADSs if any of them are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated. We have agreed to indemnify the underwriters and certain of their controlling and related persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.

The underwriters have advised us that, following the completion of this offering, they currently intend to make a market in the ADSs as permitted by applicable laws and regulations. However, the underwriters are not obligated to do so, and the underwriters may discontinue any market-making activities at any time without notice in their sole discretion. Accordingly, no assurance can be given as to the liquidity of the trading market for the ADSs, that you will be able to sell any of the ADSs held by you at a particular time or that the prices that you receive when you sell will be favorable.

The underwriters are offering the ADSs subject to their acceptance of the ADSs from us and subject to prior sale. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

The underwriters are expected to make offers and sales both inside and outside the United States through their respective selling agents. Any offers or sales in the United States will be conducted by broker-dealers registered with the SEC.

**Option to Purchase Additional ADSs** 

We have granted to the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of ● ADSs from us at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. If the underwriters exercise this option, each underwriter will be severally and not jointly obligated, subject to specified conditions, to purchase a number of additional ADSs proportionate to that underwriter's initial purchase commitment as indicated in the table above. This option may be exercised only if the underwriters sell more ADSs than the total number set forth on the cover page of this prospectus.

**Commission and Expenses** 

The underwriters have advised us that they propose to offer the ADSs to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers, which may include the underwriters, at that price less a concession not in excess of US$● per ADS. After the offering, the initial public

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offering price and concession to dealers may be reduced by the representatives. No such reduction will change the amount of proceeds to be received by us as set forth on the cover page of this prospectus.

We have agreed to pay the underwriter a fee equal to 7% of the gross proceeds of the offering. The following table shows the public offering price, the underwriting discounts and commissions that we are to pay the underwriters and the proceeds, before expenses, to us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional ADSs.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Per ADS** | **Per ADS** | **Total** | **Total** | **Total** | **Total** |
|  | **Per ADS** | **Per ADS** | **No<br>Exercise** | **No<br>Exercise** | **Full<br>Exercise** | **Full<br>Exercise** |
|  Initial public offering price | US$ | ● | US$ | ● | US$ | ● |
|  Underwriting discounts and commissions paid by us | US$ | ● | US$ | ● | US$ | ● |
|  Proceeds to us, before expenses | US$ | ● | US$ | ● | US$ | ● |

---

We have agreed to pay a non-accountable expense allowance to the underwriters equal to 1.0% of the gross proceeds received in this offering.

In addition, we have agreed to reimburse the Representative for (i) fees and expenses of legal counsel to the underwriters in an amount not to exceed $125,000; (ii) fees and expenses related to due diligence and other expenses incurred prior to completion of the offering not to exceed US$75,000; (iii) road show, travel, platform on-boarding fees, and other reasonable out-of-pocket accountable expenses not to exceed US$75,000; and (iv) US$8,000 for background checks on the Company's officers, directors, corporate auditors and major shareholders. Such reimbursements are deemed underwriter compensation by FINRA.

We paid an expense deposit of $75,000 to the Representative, upon the execution of letter of intent between us and the Representative. Upon the closing of this offering, we will pay an additional $208,000 to the Representative. Any expense deposits will be returned to us to the extent the Representative's out-of-pocket accountable expenses are not actually incurred in accordance with FINRA Rule 5110(g)(4)(A).

We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount and non-accountable expense allowance, will be approximately US$●.

**Determination of Offering Price** 

Prior to this offering, there has not been a public market for our ADSs. Consequently, the initial public offering price for our ADSs will be determined by negotiations between us and the Representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.

We offer no assurances that the initial public offering price will correspond to the price at which the ADSs will trade in the public market subsequent to the offering or that an active trading market for the ADSs will develop and continue after the offering.

**Listing** 

We intend to apply to list the ADSs on Nasdaq under the trading symbol "PXDT."

**Stamp Taxes** 

If you purchase ADSs offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

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**Representative's Warrants** 

In addition, we have agreed to issue the Representative's warrants to the Representative of the underwriters to purchase a number of ADSs equal to 7% of the total number of ADSs sold in this offering. The Representative's warrants shall have an initial exercise price equal to the lower of: (i) the fair market value price per ADS as of the closing date of this offering; (ii) in the event that securities convertible are sold in this offering; the conversion price of such securities; or (iii) in the event that warrants or other rights are issued in this offering, the exercise price of such warrants or other rights. The Representative's warrants may be purchased in cash, will be exercisable for five (5) years from the commencement of sales of this offering. The Representative's warrants and the underlying shares will be deemed compensation by FINRA, and therefore will be subject to FINRA Rule 5110(e)(1). In accordance with FINRA Rule 5110(e)(1), and except as otherwise permitted by FINRA rules, neither the Representative's warrants nor any of our shares issued upon exercise of the Representative's warrants may be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities by any person, for a period of one (1) year beginning on the date of commencement of sales of the offering. In addition, although the Representative's warrants and the underlying common shares will be registered in the registration statement of which this prospectus forms a part, we have also agreed that the Representative's warrants will provide for registration rights in certain cases. These registration rights apply to all of the securities directly and indirectly issuable upon exercise of the Representative's warrants. The piggyback registration right provided will not be greater than seven years from the effective date of the offering in compliance with FINRA Rule 5110(g)(8)(D).

We will bear all fees and expenses attendant to registering the common shares issuable upon exercise of the Representative's warrants, other than underwriting discounts and commissions incurred and payable by the holders. The exercise price and number of common shares issuable upon exercise of the Representative's warrants may be adjusted in certain circumstances, including in the event of a share dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. The warrant exercise price and/or underlying shares may also be adjusted for issuances of common shares at a price below the warrant exercise price.

**Lock Up Agreements** 

We, our officers, directors, and corporate auditors have agreed to be locked up for a period of twelve (12) months from the date on which the trading of our ADSs commences. For holders of 5% or greater of our capital stock who are not officers, directors, or corporate auditors, the lock-up period will be six (6) months from the date on which the trading of our ADSs commences for one-half of such holder's securities of our Company and twelve (12) months for the remaining one-half. Our employees and holders holding less than 5% of our capital stock who are not officers, directors, or corporate auditors have agreed to be locked up for a period of six (6) months from the date on which the trading of our ADSs commences. During the lock-up period, without the prior written consent of the Representative, holders subject to a lock-up shall not, directly or indirectly, (i) offer, pledge, assign, encumber, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, any ADSs or common shares or any securities convertible into or exercisable or exchangeable for common shares, owned either of record or beneficially by any signatory of the lock-up agreement on the date of the prospectus or thereafter acquired; (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the ADSs or common shares or any securities convertible into or exercisable or exchangeable for ADSs or common shares, whether any such transaction described in clauses (i) or (ii) above is to be settled by delivery of ADSs or common shares or such other securities, in cash or otherwise, or publicly announce an intention to do any of the foregoing; and (iii) make any demand for or exercise any right with respect to, the registration of any ADSs or common shares or any security convertible into or exercisable or exchangeable for ADSs or common shares.

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The foregoing restrictions do not apply (a) to common shares or ADSs acquired in this offering, or transactions relating to common shares, ADSs or other securities acquired in open market transactions after the date of this prospectus; (b) to transfers of common shares, ADSs or any warrant or other security convertible into or exercisable or exchangeable for common shares or ADSs as a bona fide gift or by operation of law, such as pursuant to a qualified domestic relations order or in connection with a divorce settlement, or through will or intestacy, provided that the donee or donees thereof agree to be bound in by the underlying lock up agreement; (c) to transfers of common shares, ADSs or any warrant or other security convertible into or exercisable or exchangeable for common shares or ADSs to any trust for the direct or indirect benefit of the lock-up parties or any immediate family member of the lock-up parties or to any entity beneficially owned and controlled by the lock-up parties, provided that the trustee of the trust or the transferee, as applicable, agrees to be bound in writing by the underlying lock up agreement, and provided further that any such transfer shall not involve a disposition for value; (d) if the signor to the lock up agreement is a partnership, limited liability company or corporation, to limited partners, shareholders or "affiliates" (as defined under the Exchange Act) of the signor to the lock up agreement, provided that such transferee or transferees thereof agree to be bound in writing by the underlying lock up agreement, and provided further that any such transfer shall not involve a disposition for value.

The underwriters may, in their sole discretion and at any time or from time to time before the termination of the applicable lock-up period release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the underwriters and any of our shareholders who has executed a lock-up agreement, providing consent to the sale of ADSs prior to the expiration of the lock-up period.

**Right of First Refusal** 

For a period of two years from the commencement of sales of the offering or expiration of the Company's engagement of the Representative, the Representative will have a right of first refusal to act as sole investment banker, sole book-runner, sole financial advisor, and/or sole placement agent, in connection with any public or private equity and/or debt offerings, including all equity linked financings, mergers, business combinations, recapitalizations or sale of some or all of the equity or assets of the Company, whether in conjunction with another advisor, or broker-dealer, or on the Company's own volition.

**Stabilization** 

The underwriters have advised us that they, pursuant to Regulation M under the Exchange Act, and certain persons participating in the offering may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition of penalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price of the ADSs at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involve either "covered" short sales or "naked" short sales.

"Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional ADSs in this offering. The underwriters may close out any covered short position by either exercising their option to purchase additional ADSs or purchasing the ADSs in the open market. In determining the source of ADSs to close out the covered short position, the underwriters will consider, among other things, the price of ADSs available for purchase in the open market as compared to the price at which they may purchase ADSs through the option to purchase additional ADSs.

"Naked" short sales are sales in excess of the option to purchase additional ADSs. The underwriters must close out any naked short position by purchasing ADSs in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the ADSs in the open market after pricing that could adversely affect investors who purchase in this offering.

A stabilizing bid is a bid for the purchase of ADSs on behalf of the underwriters for the purpose of fixing or maintaining the price of the ADSs. A syndicate covering transaction is the bid for or the purchase of ADSs on

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behalf of the underwriters to reduce a short position incurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriter's purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our ADSs or preventing or retarding a decline in the market price of our ADSs. As a result, the price of our ADSs may be higher than the price that might otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concession otherwise accruing to a syndicate member in connection with the offering if the ADSs originally sold by such syndicate member are purchased in a syndicate covering transaction and therefore have not been effectively placed by such syndicate member.

None of we, or any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ADSs. The underwriters are not obligated to engage in these activities and, if commenced, any of the activities may be discontinued at any time.

**Electronic Distribution** 

A prospectus in electronic format may be made available by e-mail or on the websites or through online services maintained by one or more of the underwriters or their affiliates. In those cases, prospective investors may view offering terms online and may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of ADSs for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format, the information on the underwriters' websites and any information contained in any other website maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us or the underwriters and should not be relied upon by investors.

**Indemnification** 

We have agreed to indemnify the underwriters against liabilities relating to the offering arising under the Securities Act and the Exchange Act and to contribute to payments that the Underwriter may be required to make for these liabilities.

**Relationships** 

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. If the underwriters or their respective affiliates have a lending relationship with us, they routinely hedge their credit exposure to us consistent with their customary risk management policies. The underwriters and their respective affiliates may hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the ADSs offered hereby. Any such short positions could adversely affect future trading prices of the ADSs offered hereby. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

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**Selling Restrictions** 

No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the ADSs, or the possession, circulation, or distribution of this prospectus or any other material relating to us or the ADSs in any jurisdiction where action for that purpose is required. Accordingly, the ADSs may not be offered or sold, directly or indirectly, and neither this prospectus nor any other material or advertisements in connection with the ADSs may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.

***Australia***

This prospectus does not constitute a product disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the "Corporations Act"), has not been, and will not be, lodged with the Australian Securities and Investments Commission ("ASIC"), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document under Chapter 6D.2 of the Corporations Act. It does not constitute or involve a recommendation to acquire, an offer or invitation for issue or sale, an offer or invitation to arrange the issue or sale, or an issue or sale, of interests to a "retail client" (as defined in section 761G of the Corporations Act and applicable regulations) in Australia and may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, or Exempt Investors, available under section 708 of the Corporations Act as set out below. Accordingly, if you receive this prospectus in Australia:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. You confirm and warrant that you are either:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a "sophisticated investor" under section 708(8)(a) or (b) of the Corporations Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a "sophisticated investor" under section 708(8)(c) or (d) of the Corporations Act and that you
have provided an accountant's certificate to the Company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a person associated with the Company under Section 708(12) of the Corporations Act; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a "professional investor" within the meaning of section 708(11)(a) or (b) of the Corporations Act.

The ADSs may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the ADSs may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any ADSs may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By applying for the ADSs, you represent and warrant to us that you are an Exempt Investor. To the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this prospectus is void and incapable of acceptance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. As any offer of ADSs under this prospectus will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the ADSs, you warrant and agree that you will not offer any of the securities issued to you pursuant to this prospectus for resale in Australia within 12 months of those securities being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

***Bermuda***

ADSs may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons

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(including companies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.

***British Virgin Islands***

The ADSs are not being, and may not be offered to the public or to any person in the British Virgin Islands for purchase or subscription by or on behalf of the Company. The ADSs may be offered to companies incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), ("BVI Companies"), but only where the offer will be made to, and received by, the relevant BVI Company entirely outside of the British Virgin Islands.

***Canada***

The securities may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

***Dubai International Financial Centre***

This document relates to an Exempt Offer, as defined in the Offered Securities Rules module of the DFSA Rulebook, or the OSR, in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to persons, as defined in the OSR, of a type specified in those rules. It must not be delivered to, or relied on by, any other Person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it and has no responsibility for it. The ADSs to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the ADSs offered should conduct their own due diligence on the ADSs. If you do not understand the contents of this document, you should consult an authorized financial adviser.

***Israel***

The ADSs offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), nor has it been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the ADSs being offered. Any resale in Israel, directly or indirectly, to the public of the ADSs offered by this

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prospectus is subject to restrictions on transferability and must be affected only in compliance with the Israeli securities laws and regulations.

***Cayman Islands***

This prospectus does not constitute a public offer of the ADSs, whether by way of sale or subscription, in the Cayman Islands. Each underwriter has represented and agreed that it has not offered or sold, and will not offer or sell, directly or indirectly, any ADSs in the Cayman Islands.

***European Economic Area***

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive, or each referred as a "Relevant Member State," an offer to the public of the ADSs which are the subject of the offering contemplated by this prospectus supplement and the accompanying prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any ADSs may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) to any legal entity which is a "qualified investor" as defined in the Prospectus Directive;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD
Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the underwriters or the underwriters
nominated by us for any such offer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive;

provided that, no such offer of ADSs shall require us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, and each person who initially acquires any ADSs or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a "qualified investor" within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any ADSs being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the ADSs acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any ADSs to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.

For the purposes of this provision, the expression an "offer ADSs to the public" in relation to the ADSs in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the ADSs to be offered so as to enable an investor to decide to purchase or subscribe to the ADSs, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

***Hong Kong***

No securities have been offered or sold, and no securities may be offered or sold, in Hong Kong, by means of any document, other than to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong, or the SFO, and any rules made under that Ordinance; or in other circumstances which do

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not result in the document being a "prospectus" as defined in the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong, or the CEO, or which do not constitute an offer or invitation to the public for the purpose of the CEO and the SFO. No document, invitation or advertisement relating to the securities has been issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the content of which are likely to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the SFO and any rules made under that Ordinance.

This prospectus has not been registered with the Registrar of Companies in Hong Kong. Accordingly, this prospectus may not be issued, circulated or distributed in Hong Kong, and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers of the securities described in this prospectus and the relevant offering documents and that he is not acquiring, and has not been offered any securities in circumstances that contravene any such restrictions.

***Korea***

The ADSs have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder (the "FSCMA"), and the ADSs have been and will be offered in Korea as a private placement under the FSCMA. None of the ADSs may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder (the "FETL"). The ADSs have not been listed on any of securities exchanges in the world including, without limitation, the Korea Exchange in Korea. Furthermore, the purchaser of the ADSs shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the ADSs. By the purchase of the ADSs, the relevant holder thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased the ADSs pursuant to the applicable laws and regulations of Korea.

***Kuwait***

Unless all necessary approvals from the Kuwait Ministry of Commerce and Industry required by Law No. 31/1990 "Regulating the Negotiation of Securities and Establishment of Investment Funds," its Executive Regulations and the various Ministerial Orders issued pursuant thereto or in connection therewith, have been given in relation to the marketing and sale of the ADSs, these may not be marketed, offered for sale, nor sold in the State of Kuwait. Neither this prospectus (including any related document), nor any of the information contained therein is intended to lead to the conclusion of any contract of whatsoever nature within Kuwait.

***Malaysia***

No prospectus or other offering material or document in connection with the offer and sale of the ADSs has been or will be registered with the Securities Commission of Malaysia, or the Commission, for the Commission's approval pursuant to the Capital Markets and Services Act 2007. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ADSs may not be circulated or distributed, nor may the ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Malaysia other than (i) a closed end fund approved by the Commission; (ii) a holder of a Capital Markets Services License; (iii) a person who acquires the ADSs, as principal, if the offer is on terms that the ADSs may only be acquired at a consideration of not less than RM250,000 (or its equivalent in foreign currencies) for each transaction; (iv) an individual whose total net personal assets or total net joint assets with his or her spouse exceeds RM3 million (or its equivalent in foreign currencies), excluding the value of the primary residence of the individual; (v) an individual who has a

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gross annual income exceeding RM300,000 (or its equivalent in foreign currencies) per annum in the preceding twelve months; (vi) an individual who, jointly with his or her spouse, has a gross annual income of RM400,000 (or its equivalent in foreign currencies), per annum in the preceding twelve months; (vii) a corporation with total net assets exceeding RM10 million (or its equivalent in a foreign currencies) based on the last audited accounts; (viii) a partnership with total net assets exceeding RM10 million (or its equivalent in foreign currencies); (ix) a bank licensee or insurance licensee as defined in the Labuan Financial Services and Securities Act 2010; (x) an Islamic bank licensee or takaful licensee as defined in the Labuan Financial Services and Securities Act 2010; and (xi) any other person as may be specified by the Commission; provided that, in the each of the preceding categories (i) to (xi), the distribution of the ADSs is made by a holder of a Capital Markets Services License who carries on the business of dealing in securities. The distribution in Malaysia of this prospectus is subject to Malaysian laws. This prospectus does not constitute and may not be used for the purpose of public offering or an issue, offer for subscription or purchase, invitation to subscribe for or purchase any securities requiring the registration of a prospectus with the Commission under the Capital Markets and Services Act 2007.

***People's Republic of China***

This prospectus may not be circulated or distributed in the PRC and the ADSs may not be offered or sold and will not offer or sell to any person for re-offering or resale directly or indirectly to any resident of the PRC or for the benefit of, legal or natural persons of the PRC except pursuant to applicable laws and regulations of the PRC. Further, no legal or natural persons of the PRC may directly or indirectly purchase any of the ADSs or any beneficial interest therein without obtaining all prior PRC's governmental approvals that are required, whether statutorily or otherwise. Persons who come into possession of this prospectus are required by the issuer and its representatives to observe these restrictions. For the purpose of this paragraph, PRC does not include Taiwan and the special administrative regions of Hong Kong and Macau.

***Qatar***

In the State of Qatar, the offer contained herein is made on an exclusive basis to the specifically intended recipient thereof, upon that person's request and initiative, for personal use only and shall in no way be construed as a general offer for the sale of securities to the public or an attempt to do business as a bank, an investment company or otherwise in the State of Qatar. This prospectus and the underlying securities have not been approved or licensed by the Qatar Central Bank or the Qatar Financial Centre Regulatory Authority or any other regulator in the State of Qatar. The information contained in this prospectus shall only be shared with any third parties in Qatar on a need-to-know basis for the purpose of evaluating the contained offer. Any distribution of this prospectus by the recipient to third parties in Qatar beyond the terms hereof is not permitted and shall be at the liability of such recipient.

***Saudi Arabia***

This prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority pursuant to resolution number 2-11-2004 dated October 4, 2004 as amended by resolution number 1-28-2008, as amended. The Capital Market Authority does not make any representation as to the accuracy or completeness of this prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this prospectus. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this prospectus, you should consult an authorized financial adviser.

***South Africa***

Due to restrictions under the securities laws of South Africa, the ADSs are not offered, and the offer shall not be transferred, sold, renounced or delivered, in South Africa or to a person with an address in South Africa, unless one or other of the following exemptions applies:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the offer, transfer, sale, renunciation or delivery is to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) persons whose ordinary business is to deal in securities, as principal or agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the South African Public Investment Corporation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) persons or entities regulated by the Reserve Bank of South Africa;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) authorized financial service providers under South African law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) financial institutions recognized as such under South African law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) a wholly owned subsidiary of any person or entity contemplated in (c), (d) or (e), acting as agent in the
capacity of an authorized portfolio manager for a pension fund or collective investment scheme (in each case duly registered as such under South African law); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) any combination of the person in (a) to (f); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the total contemplated acquisition cost of the securities, for any single addressee acting as principal is
equal to or greater than ZAR1,000,000.

No "offer to the public" (as such term is defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted) (the "South African Companies Act")) in South Africa is being made in connection with the issue of the ADSs. Accordingly, this prospectus does not, nor is it intended to, constitute a "registered prospectus" (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act and has not been approved by, and/or filed with, the South African Companies and Intellectual Property Commission or any other regulatory authority in South Africa. Any issue or offering of the ADSs in South Africa constitutes an offer of the ADSs in South Africa for subscription or sale in South Africa only to persons who fall within the exemption from "offers to the public" set out in section 96(1)(a) of the South African Companies Act. Accordingly, this prospectus must not be acted on or relied on by persons in South Africa who do not fall within section 96(1)(a) of the South African Companies Act (such persons being referred to as "SA Relevant Persons"). Any investment or investment activity to which this prospectus relates is available in South Africa only to SA Relevant Persons and will be engaged in South Africa only with SA relevant persons.

***Singapore***

This prospectus has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ADSs may not be circulated or distributed, nor may the ADSs be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the ADSs are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole
business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor,

securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the ADSs pursuant to an offer made under Section 275 of the SFA except:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any
person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) where no consideration is or will be given for the transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) where the transfer is by operation of law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) as specified in Section 276(7) of the SFA; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures)
Regulations 2005 of Singapore.

***Switzerland***

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or the CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of securities.

***Taiwan***

The ADSs have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorized to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the ADSs in Taiwan.

***United Arab Emirates***

This prospectus is not intended to constitute an offer, sale or delivery of ADSs or other securities under the laws of the United Arab Emirates, or the UAE. The ADSs have not been and will not be registered under Federal Law No. 4 of 2000 Concerning the Emirates Securities and Commodities Authority and the Emirates Security and Commodity Exchange, or with the UAE Central Bank, the Dubai Financial Market, the Abu Dhabi Securities Market or with any other UAE exchange.

The offering, the ADSs and interests therein have not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities in the UAE, and do not constitute a public offer of securities in the UAE in accordance with the Commercial Companies Law, Federal Law No. 8 of 1984 (as amended) or otherwise.

In relation to its use in the UAE, this prospectus is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. The interests in the ADSs may not be offered or sold directly or indirectly to the public in the UAE.

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***United Kingdom***

This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated (each such person being referred to as a "relevant person").

This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this prospectus or any of its contents.

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**EXPENSES RELATED TO THE OFFERING** 

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions and expenses, payable in connection with this offering. All amounts shown are estimates and subject to future contingencies, except the U.S. Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority filing fee, and the Nasdaq Stock Market entry and listing fee.

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| | |
|:---|:---|
| **Description** | **Amount** |
|  U.S. Securities and Exchange Commission registration fee | $● |
|  Financial Industry Regulatory Authority filing fee | ● |
|  Nasdaq Stock Market entry and listing fee | ● |
|  Accounting fees and expenses | ● |
|  Legal fees and expenses | ● |
|  Blue Sky fees and expenses | ● |
|  Printing expenses | ● |
|  Miscellaneous | ● |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total | $● |

---

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##### [**Table of Contents**](#toc)
**LEGAL MATTERS** 

We are being represented by Greenberg Traurig, LLP, Los Angeles, California, with respect to certain legal matters as to United States federal securities and New York State law. The underwriters are being represented by Loeb & Loeb LLP, with respect to certain legal matters as to United States federal securities and New York State law. The validity of the common shares represented by the ADSs offered in this offering and certain legal matters as to Japanese law will be passed upon for us by Greenberg Traurig Tokyo Law Offices.

**EXPERTS** 

Baker Tilly US, LLP, independent registered public accounting firm, has audited our financial statements as of, and for the years ended, April 30, 2022 and 2021, as set forth in their report thereon. We have included such financial statements in this prospectus in reliance on Baker Tilly US, LLP's report, given on their authority as experts in accounting and auditing. Baker Tilly US, LLP's headquarters are located at Chicago, Illinois.

**ENFORCEABILITY OF CIVIL LIABILITIES** 

We are a corporation organized under Japanese law. All of our directors, our corporate auditor, and our executive officers reside in Japan, and significantly all of our assets and the assets of such persons are located outside of the United States. As a result, it may not be possible for investors to effect service of process within the United States upon these persons or us, or to enforce against them or us judgments obtained in U.S. courts, whether or not predicated upon the civil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. There is doubt as to the enforceability in Japan, either in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely on the federal securities laws of the United States or the securities laws of any state of the United States.

------

##### [**Table of Contents**](#toc)
**WHERE YOU CAN FIND ADDITIONAL INFORMATION** 

We have filed with the U.S. Securities and Exchange Commission (the "SEC") a registration statement on Form F-1 under the Securities Act relating to the underlying common shares represented by the ADSs being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. Some items included in the registration statement have been omitted from this prospectus in accordance with the rules and regulations of the SEC. For further information about our Company, our common shares, and the ADSs being offered by this prospectus, we refer you to the registration statement, including all amendments, supplements, exhibits, and schedules thereto. Statements contained in this prospectus regarding the contents of any contract, or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see a copy of such contract or document that has been filed. Each statement in this prospectus relating to a contract or document that is filed as an exhibit to the registration statement is qualified in all respects by reference to the full text of such contract or document filed as an exhibit to the registration statement.

You may access and read the registration statement and this prospectus, including the related exhibits and schedules, and any document we file with the SEC at the SEC's Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are available to the public without charge through the SEC's website at <u>http://www.sec.gov</u>.

Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act that are applicable to "foreign private issuers", and under those requirements will file reports with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a "foreign private issuer", we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, corporate auditors, and principal shareholders will be exempt from the reporting and "short swing" profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchases and sales of common shares. In addition, as a "foreign private issuer", we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. Furthermore, we will not be required under the Exchange Act to file annual or other reports and financial statements with the SEC as frequently or as promptly as U.S. companies that have securities registered under the Exchange Act. As such, we will file with the SEC, within 120 days after the end of each fiscal year, or such other applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm. We also intend to furnish to the SEC under cover of Form 6-K certain other material information.

Our corporate website is <u>https://pixiedusttech.com/</u>. After the consummation of this offering, you may go to our website to access our periodic reports and other information that we file with the SEC as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this prospectus. We have included our website address in this prospectus solely for informational purposes.

------

##### [**Table of Contents**](#toc)
**INDEX TO FINANCIAL STATEMENTS** 

**ANNUAL FINANCIAL STATEMENTS** 

---

| | |
|:---|:---|
|  | **Page** |
|  [Report of Independent Registered Public Accounting Firm (PCAOB Firm ID# 23)](#fin430639_1) | F-2 |
|  [Balance Sheets as of April 30, 2021 and 2022](#fin430639_2) | F-3 |
|  [Statements of Operations for the Years Ended April 30, 2021 and 2022](#fin430639_3) | F-4 |
|  [Statements of Stockholders' Equity for the Years Ended April 30, 2021 and 2022](#fin430639_4) | F-5 |
|  [Statements of Cash Flows for the Years Ended April 30, 2021 and 2022](#fin430639_5) | F-6 |
|  [Notes to Financial Statements for the Years Ended April 30, 2021 and 2022](#fin430639_6) | F-7 |

---

**UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS** 

---

| | |
|:---|:---|
|  | **Page** |
|  [Condensed Balance Sheets as of April 30, 2022 and October 31, 2022 (Unaudited)](#fin430639_7) | F-33 |
|  [Condensed Statements of Operations for the Six Months Ended October 31, 2021 and 2022 (Unaudited)](#fin430639_8) | F-34 |
|  [Condensed Statements of Stockholders' Equity for the Six Months Ended October 31, 2021 and 2022 (Unaudited)](#fin430639_9) | F-35 |
|  [Condensed Statements of Cash Flows for the Six Months Ended October 31, 2021 and 2022 (Unaudited)](#fin430639_10) | F-36 |
|  [Notes to Condensed Financial Statements for the Six Months Ended October 31, 2021 and 2022 (Unaudited)](#fin430639_11) | F-37 |

---

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##### [**Table of Contents**](#toc)
**Report of Independent Registered Public Accounting Firm** 

To the Stockholders and the Board of Directors of Pixie Dust Technologies, Inc.

**Opinion on the Financial Statements** 

We have audited the accompanying balance sheets of Pixie Dust Technologies, Inc. (the "Company") as of April 30, 2022 and 2021, the related statements of operations, stockholders' equity and cash flows for each of the two years in the period ended April 30, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion** 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Baker Tilly US, LLP

We have served as the Company's auditor since 2021.

Irvine, California

March 7, 2023

------

##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**Balance Sheets** 

---

| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** |
|  **Assets** |  |  |  |
|  Current assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | ¥3066101 | ¥1795963 | $12083 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-trade | 15548 | 82784 | 557 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-other |  | 3539 | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due from related party | 7750 | 250 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | 5631 | 23305 | 157 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred offering costs |  | 75024 | 505 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | 96986 | 121948 | 820 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total current assets** | 3192016 | 2102813 | 14148 |
|  Property and equipment, net | 482201 | 518824 | 3491 |
|  Intangible assets, net | 5948 | 9619 | 65 |
|  Operating lease right-of-use assets, net | 765743 | 1049583 | 7062 |
|  Other assets | 95806 | 108843 | 731 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total assets** | ¥4541714 | ¥3789682 | $25497 |
|  **Liabilities and stockholders' equity** |  |  |  |
|  Current liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | ¥95039 | ¥100240 | $674 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses and other current liabilities | 78083 | 136183 | 916 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current portion of operating lease liabilities | 48740 | 69127 | 465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current portion of long-term borrowings | 300000 | 5555 | 37 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total current liabilities** | 521862 | 311105 | 2092 |
|  Deferred tax liabilities | 831 | 831 | 6 |
|  Long-term borrowings, net of current portion | 540000 | 784445 | 5278 |
|  Asset retirement obligation | 16854 | 22979 | 155 |
|  Operating lease liabilities, net of current portion | 721140 | 1004246 | 6757 |
|  Finance lease liabilities, net of current portion | 2282 | 36799 | 247 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total liabilities** | 1802969 | 2160405 | 14535 |
|  Commitments and contingencies (Note 11) |  |  |  |
|  **Stockholders' equity:** |  |  |  |
|  Series B convertible preferred stock, no par value; 3,688 shares authorized; 3,688 shares issued and outstanding; aggregate liquidation preference of ¥7,791,269 ($52421) at April 30, 2021 and 2022 |  |  |  |
|  Series BB convertible preferred stock, no par value; 404 shares authorized; 404 shares issued and outstanding; aggregate liquidation preference of ¥199,963 ($1345) at April 30, 2021 and 2022 |  |  |  |
|  Series A convertible preferred stock, no par value; 298,889 shares authorized; 4,600 shares issued and outstanding; aggregate liquidation preference of ¥862,500 ($5803) at April 30, 2021 and 2022 |  |  |  |
|  Series AA convertible preferred stock, no par value; 1,111 shares authorized; 1,111 shares issued and outstanding; aggregate liquidation preference of ¥37,303 ($251) at April 30, 2021 and 2022 |  |  |  |
|  Common stock, no par value; 695,908 shares authorized; 10,000 shares issued and outstanding at April 30, 2021 and 2022 | 100000 | 100000 | 673 |
|  Additional paid-in capital | 3946038 | 3946038 | 26549 |
|  Accumulated deficit | (1307293) | (2416761) | (16260) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total stockholders' equity** | 2738745 | 1629277 | 10962 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total liabilities and stockholders' equity** | ¥4541714 | ¥3789682 | $25497 |

---

The accompanying notes are an integral part of these financial statements.

------

##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**Statements of Operations** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended April 30,** | **Year Ended April 30,** | **Year Ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** |
|  Revenue: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | ¥512772 | ¥636265 | $4281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 512772 | 636265 | 4281 |
|  Costs and Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 136390 | 206604 | 1391 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 601731 | 694072 | 4670 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 525158 | 832994 | 5604 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expense, net |  | 311 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total costs and expenses | 1263279 | 1733981 | 11667 |
|  **Loss from operations** | (750507) | (1097716) | (7386) |
|  Interest expense | (17672) | (24777) | (167) |
|  Other income | 8695 | 13025 | 88 |
|  **Loss before income taxes** | (759484) | (1109468) | (7465) |
|  Income tax expense |  |  |  |
|  **Net loss** | ¥ (759484) | ¥(1109468) | $(7465) |
|  Weighted-average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 |
|  Net loss per share attributable to common stockholders, basic and diluted | ¥(75948.41) | ¥(110,946.80) | $(746.46) |

---

The accompanying notes are an integral part of these financial statements.

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##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**Statements of Stockholders' Equity** 

---

| | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | **Series B<br>convertible preferred stock** | **Series B<br>convertible preferred stock** | **Series BB<br>convertible preferred stock** | **Series BB<br>convertible preferred stock** | **Series A<br>convertible preferred stock** | **Series A<br>convertible preferred stock** | **Series AA<br>convertible preferred stock** | **Series AA<br>convertible preferred stock** | **Common stock** | **Common stock** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | | **JPY** | | **JPY** | | **JPY** | | **JPY** | | **JPY** | **JPY** | **JPY** | **JPY** |
|  | | | | | | | | | | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** |
|  **Balance, May 1, 2020** | 3688 | ¥— | 404 | ¥— | 4600 | ¥— | 1111 | ¥— | 10000 | ¥100000 | ¥3946038 | ¥(547809) | ¥3498229 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss |  |  |  |  |  |  |  |  |  |  |  | (759484) | (759484) |
|  **Balance at April 30, 2021** | 3688 |  | 404 |  | 4600 |  | 1111 |  | 10000 | 100000 | 3946038 | (1307293) | 2738745 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss |  |  |  |  |  |  |  |  |  |  |  | (1109468) | (1109468) |
|  **Balance at April 30, 2022** | 3688 | ¥— | 404 | ¥— | 4600 | ¥— | 1111 | ¥— | 10000 | ¥100000 | ¥3946038 | ¥(2416761) | ¥1629277 |
|  **Balance at April 30, 2022- Convenience translation into US dollars (Note 2) - Thousand USD** | 3688 | $— | 404 | $— | 4600 | $— | 1111 | $— | 10000 | $673 | $26549 | $(16260) | $10962 |

---

The accompanying notes are an integral part of these financial statements.

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##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**Statements of Cash Flows** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended April 30,** | **Year Ended April 30,** | **Year Ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  **Cash flows from operating activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss | ¥(759484) | ¥(1109468) | $(7465) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization | 51732 | 75182 | 506 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss on disposal |  | 311 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Asset retirement obligation accretion | 491 | 599 | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-trade | 8755 | (67236) | (452) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-other | 10656 | (3539) | (24) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due from related party | 33000 | 7500 | 50 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | 1292 | (17674) | (119) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | 25693 | (20249) | (136) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease right-of-use assets, net | 45508 | (283840) | (1910) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets | (23511) | (13037) | (88) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | 38634 | 9969 | 67 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses and other current liabilities | 23952 | 42663 | 288 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease liabilities | (45783) | 303493 | 2042 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net cash used in operating activities** | (589065) | (1075326) | (7235) |
|  **Cash flows from investing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of property and equipment | (18577) | (70484) | (474) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of intangible assets | (2073) | (4218) | (29) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Redemption from short term investment | 800000 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net cash provided by (used in) investing activities** | 779350 | (74702) | (503) |
|  **Cash flows from financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from borrowings | 290000 | 250000 | 1682 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayment of borrowings |  | (300000) | (2018) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayments of finance lease liabilities | (646) | (4766) | (32) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payments of offering costs |  | (65344) | (440) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net cash provided by (used in) financing activities** | 289354 | (120110) | (808) |
|  Net increase (decrease) in cash and cash equivalents | 479639 | (1270138) | (8546) |
|  Cash and cash equivalents at beginning of year | 2586462 | 3066101 | 20629 |
|  Cash and cash equivalents at end of year | ¥3066101 | ¥1795963 | $12083 |
|  **Supplemental disclosures of cash flow information:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash paid during the year for: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest | ¥17672 | ¥24777 | $167 |
|  **Non-cash investing and financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease right-of-use assets obtained in exchange for lease liabilities | ¥4805 | ¥347445 | $2338 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Property and equipment acquired under finance leases |  | 47147 | 317 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of property and equipment included in accounts payable | 15447 | 2258 | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of intangible assets included in accounts payable | 369 | 1970 | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Offering costs included in accounts payable and, accrued expenses and other current liabilities |  | 9680 | 65 |

---

The accompanying notes are an integral part of these financial statements.

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##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**NOTES TO FINANCIAL STATEMENTS** 

**1.** **Description of Business** 

Pixie Dust Technologies, Inc. (the "Company") was incorporated in Japan in May 2017. Since its inception, the Company has conducted research, technology development, and business development based on research (basic technology) created through industry-academic collaborations. Additionally, the Company builds mechanisms for continuous social implementation in response to the issues and needs that exist in society.

The core technology of the Company is "wave control technology". While wave control technology has the potential for a variety of applications, the Company currently focuses development efforts in two principal fields: Healthcare & Diversity and Workspace & Digital Transformation. The Company continuously performs research and development activities with its partners, and then manufactures and/or sells the products resulting from that research and development in cooperation with its partners.

Currently, the Company is working in the Diversity and Healthcare fields by developing scalp care products, devices for the deaf or hard-of-hearing persons, and devices for the elderly utilizing wave control technology, however, the Company has not launched these products as of April 30, 2022 and generated no revenue from these products during the year ended April 30, 2022. In the Workspace & Digital Transformation (DX) field, the Company has been working on providing a digital spatial transformation (DX) platform service for enterprises and developing acoustic metamaterials.

The Company generated revenue from commissioned research and development fees from its partners which contributed to 76% and 80% of the Company's total revenue for the years ended April 30, 2021, and 2022 respectively. In addition, the Company generated revenue from "magickiri" and "hackke" services in the DX field, which utilizes the Company's sensing technologies. All of the Company's customers are located in Japan.

magickiri is a solution service that combines the latest sensing technologies, simulation, and infection data. By providing magickiri services, the Company aims to achieve both infection prevention and economic recovery in the COVID-19 era.

hackke is a location-based solution service to ensure business continuity and improve business productivity for customers by providing human location management, concentrated contact detection, enrollment management, and seat booking functions.

The Company's fiscal year-end is April 30. The Company is headquartered in Japan. For the years ended April 30, 2021 and 2022, there are no subsidiaries to be consolidated for the Company.

**2.** **Summary of Significant Accounting Policies** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Basis of Presentation and Preparation*** 

The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Liquidity*** 

The Company has incurred recurring operating losses and negative cash flow from operating activities since inception. As of April 30, 2022, the Company had an accumulated deficit of ¥2,416,761 thousand ($16,260 thousand) and cash and cash equivalents of ¥1,795,963 thousand ($12,083 thousand). Additionally, in order to further strengthen its cash position, the Company issued Series C convertible preferred stock during June 2022 and September 2022 and collected cash proceeds of ¥2,171,103 thousand ($14,607 thousand). Refer

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Note 18 – Subsequent Events for details. Based on the Company's current operating plans and projections, the Company expects that its existing cash and cash equivalents will be sufficient to meet normal operating requirements and to fund planned capital expenditures during the next 12 months from the date the financial statements were available to be issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Convenience Translation*** 

The functional and reporting currency of the Company is the Japanese yen (JPY), the currency of the country in which the Company is incorporated and principally operates. Translations of the Balance Sheets, the Statements of Operations, the Statements of Stockholders' Equity and the Statements of Cash Flows from JPY into US$ as of and for the year ended April 30, 2022 are solely for the convenience of the readers and were calculated at the rate of US$1.00=JPY148.63, representing the index rates stipulated by the federal reserve board/ the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on October 31, 2022. No representation is made that the JPY amounts could have been, or could be, converted, realized or settled into US$ at that rate on October 31, 2022, or at any other rate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Comprehensive Income*** 

The Company did not have any items that required classification as other comprehensive income.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Use of Estimates*** 

The preparation of the financial statements in conformity with U.S. GAAP requires management to make certain 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 revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the financial statements include, but are not limited to, impairment of long-lived assets, asset retirement obligations, revenue recognition, stock-based compensation, and valuation of deferred tax assets. On March 11, 2020, the World Health Organization designated the outbreak of the novel strain of coronavirus ("COVID-19") as a global pandemic. The Company considered the potential impact of the COVID-19 pandemic on its estimates and assumptions. There was no material impact to the Company's financial statements as of and for the years ended April 30, 2021 and 2022. Actual results could materially differ from the Company's estimates, and there may be changes to the estimates in future periods. Management bases these estimates on assumptions that it believes reasonable under the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Risks and Uncertainties*** 

The Company is subject to number of risks similar to other companies in the development stage, including, but are not limited to, its limited operating history, competition from other companies, limited access to additional funds, dependence on key personnel, and management of potential rapid growth. To address these risks, the Company must, among other things, develop its customer base, implement and successfully execute its business and marketing strategy, develop follow-on products, provide superior customer service, and attract, retain, and motivate qualified personnel. There can be no guarantee that the Company will be successful in addressing these or other such risks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Concentrations of Credit Risk*** 

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and receivables. The Company's cash and cash equivalents are held by five financial institutions in Japan, which management believes to be of high credit quality. The Company's cash deposits of up to ¥10,000 thousand are insured by the Japanese government. From time to time, the Company has deposits in excess of the insured amounts. The Company has not experienced any losses on its

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cash and cash equivalents deposits. To reduce credit risk, the Company performs ongoing credit evaluations of its customers and limits the amount of credit extended when deemed necessary. Generally, the Company requires no collateral from its customers. The Company maintains an allowance for potential credit losses, but historically has not experienced any significant losses related to individual customers or groups of customers in any particular industry or geographic area.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Concentrations of Customers*** 

There were two customers from whom revenues individually represent greater than 10% of the total revenues of the Company for the year ended April 30, 2021, and three customers from whom revenues individually represent greater than 10% of the total revenues of the Company for the year ended April 30, 2022, as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** |
|  Customer A | \* | 23.3% |
|  Customer B | 25.8% | 20.5% |
|  Customer C | 11.7% | 10.5% |
|  Total | 37.5% | 54.3% |

---

There were two customers from whom accounts receivable individually represent greater than 10% of the total accounts receivable-trade as of April 30, 2021 and 2022 respectively as follows:

---

| | | |
|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** |
|  Customer C | 70.8% | 10.1% |
|  Customer D | \* | 59.8% |
|  Customer E | 19.8% | \* |
|  Total | 90.6% | 69.9% |

---

\* The percentage was below 10% for the period. 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Foreign Currency Transactions*** 

Gains and losses resulting from foreign currency transactions are recognized in the Statements of Operations. Foreign currency-denominated assets and liabilities are remeasured to the functional currency using the exchange rate at the balance sheet date and gains or losses are recorded in the Statements of Operations. The amount recorded for the year ended April 30, 2021 and 2022 were not material.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Segment Information*** 

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company's Chief Operating Decision Maker to make decisions with respect to resource allocation and assessment of performance. The Company's Chief Operating Decision Maker is its Chief Executive Officer.

To date, the Company has reviewed its operations and manages its business as one operating segment; all required segment financial information is found in the financial statements. All of the Company's long-lived assets are located in Japan, and all revenue generated during the year ended April 30, 2021 and 2022 were to customers located in Japan.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Cash and Cash Equivalents*** 

The Company considers highly liquid investments purchased with a remaining maturity date upon acquisition of three months or less to be cash equivalents and are stated at cost, which approximates fair value. As of April 30, 2021 and 2022, the Company's cash and cash equivalents include cash on hand, demand deposits, and time deposits maintained at various financial institutions. The cash equivalents consist of the time deposit of ¥50,000 thousand and ¥50,001 thousand ($336 thousand) as of April 30, 2021 and 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Accounts Receivable-trade and Due from Related Party*** 

Accounts receivable consists of receivables from customers and the related party for services invoiced by the Company for which payment is outstanding. Accounts receivables are recorded at the invoiced amount, net of allowances for doubtful accounts. The allowance for doubtful accounts reduces the accounts receivable balance to the net realizable value of the outstanding accounts receivables.

The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses incurred related to existing accounts receivable and determined based on historical collection experience, age of the receivable, current economic conditions, and the Company's expectation for future economic conditions. The Company did not have any allowance for doubtful accounts as of April 30, 2021 and 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Accounts Receivable-other*** 

Accounts receivable-other includes reimbursement by a university which entered into a joint research agreement with the Company for research expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Inventories*** 

Inventories are comprised of finished goods, work in process and raw materials which are stated at the lower of cost or estimated net realizable value using either the weighted-average method or the specific identification method (i.e., project costing).

The Company periodically reviews its inventory for potential impairment and adjusts inventory, if necessary, to net realizable value based on customer orders on hand, and internal demand forecasts using management's best estimates given the information currently available. There is no reserve as of April 30, 2021 and 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Property and Equipment, Net*** 

Property and equipment are stated at cost less accumulated depreciation and amortization. Except for assets which are not subject to depreciation, such as land, depreciation is computed on a straight-line basis or declining-balance method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the shorter of the asset's estimated useful lives or the remaining lease term. Maintenance and repairs are charged to operations as incurred.

Useful lives of property and equipment are as follows:

---

| | |
|:---|:---|
|  | **Estimated useful life** |
| Land | Infinite |
| Buildings and improvements | 5-19 years |
| Leasehold improvements | Lesser of estimated useful life or the remaining lease term |
| Vehicles | 2-6 years |
| Tools and fixtures | 2-15 years |

---

Land has an infinite useful life and is therefore not subjected to amortization.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Intangible Assets, Net*** 

<u>Patents</u>

The Company expenses patent costs, including legal related costs, as incurred. Patents are capitalized when the Company determines there will be a future benefit derived from such assets and are stated at cost. For the years ended April 30, 2021 and 2022, no such patent has been capitalized and costs to write, maintain, in-license, and defend patents are recorded as selling, general and administrative expenses in the statements of operations.

<u>Other intangible assets</u>

Intangible assets consist of internal-use software purchased from external parties. Amortization is computed using the straight-line method over the estimated useful lives of up to 5 years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. Maintenance and training costs are charged to expense as incurred. Upgrades or enhancements to existing internal-use software which result in additional functionality are capitalized.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Leases*** 

The Company adopted Accounting Standards Codification ("ASC") 842, *Leases* ("ASC 842") effective on May 1, 2020, using a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which allowed the Company to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard, apply hindsight in determining the lease term, assessing the impairment of right of use assets and not reassess whether any contracts entered into prior to the adoption are leases.

As of May 1, 2020, the Company recognized operating lease right-of-use assets of ¥811,250 thousand, which represents the operating lease liabilities of ¥815,663 thousand, adjusted for prepaid and accrued rent of ¥4,413 thousand. The adoption of this ASC 842 did not have any impact on the statements of operations and statements of cash flows. And there was no cumulative effect on accumulated deficit.

The Company determines if an arrangement is, or contains, a lease at inception and then classifies the lease as operating or financing based on the underlying terms and conditions of the contract. Leases with terms greater than one year are initially recognized on the balance sheet as right-of-use assets and lease liabilities based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the incremental borrowing rate ("IBR"). IBR based on the information available on the commencement date in determining the present value of lease payments. The Company's IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.

Operating leases are included in operating lease right-of-use assets, net, current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Balance Sheets. Operating leases right-of-use represents the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Operating lease right-of-use also includes any lease payments made and is reduced by any lease incentives. Options to extend or terminate the lease are considered in determining the lease term when it is reasonably certain that the option will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. It is reflected as rent expense (included in cost of services, research and development and selling, general and administrative expenses) in the Statements of Operations. The Company's operating leases are primarily for office space. The Company's finance lease is included in property and equipment, net, accrued expenses and other current liabilities, and finance lease liabilities, net of current portion in the Balance

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Sheets. Finance leases with a term greater than one year are included as an asset within property and equipment, net and a lease liability equal to the present value of the minimum lease payments is included in accrued expenses and other current liabilities and finance lease liabilities, net of current portion in its Balance Sheets. The present value of the finance lease payments is calculated using IBR in the lease. Finance lease right-of-use assets are amortized on a straight-line basis over the earlier of the end of the useful life of the right-of-use asset or the end of the lease term and the carrying amount of the lease liability is adjusted to reflect interest, which is recorded as interest expense.

The Company has lease agreements with both lease and non-lease components. The Company elected to separate lease and non-lease components for its building leases. The Company also made an accounting policy election to recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and not recognize right-of-use assets or lease liabilities for such leases.

For newly executed contracts, renewals and revisions related to leases, and estimates, certain assumptions are used to determine asset value, useful life, discount rate, lease term, etc. and these have effects on (1) the classification of the lease, (2) the measurement of rental payments, and (3) the measurement of the lease asset. These results may differ if varying estimates and assumptions are used.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Impairment or Disposal of Long-Lived Assets*** 

The Company's long-lived assets are comprised of property and equipment, including leasehold improvements, right-of-use assets and definite-lived intangible assets. Long-lived assets are reviewed for indications of possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability is measured by comparing the carrying amounts of the asset group to the future undiscounted cash flows attributable to these assets. An impairment loss is recognized to the extent an asset group is not recoverable and the carrying amount exceeds the projected discounted future cash flows arising from these assets. There were no impairments of long-lived assets for the years ended April 30, 2021 and 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Deferred Offering Costs*** 

The Company capitalizes certain legal, accounting, and other third-party fees that are directly associated with in-process equity financings, including the initial public offering ("IPO"), as deferred offering costs until such financings are consummated. After the consummation of the equity financing, these costs are recorded in stockholders' equity as a reduction of additional paid-in capital generated as a result of financing. In the event a proposed IPO is deemed not likely to be completed, the deferred offering costs will be expensed immediately as a charge to operating expenses in the Statements of Operations in the period of such determination. As of April 30, 2021 and 2022, zero and ¥75,024 thousand ($505 thousand) of deferred offering costs, respectively, were capitalized in current assets on the Balance Sheets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Other Assets*** 

Other Assets primarily include advance payments paid to third-party vendors or deposit to the landlord.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Asset Retirement Obligations*** 

The Company records asset retirement obligations when the obligation is incurred. The obligation is measured at fair value and recorded as a non-current liability. When the liability is initially recorded, the Company capitalizes the related cost by increasing the carrying amount of the related long-lived asset. The liability is accreted to its present value, and the capitalized cost is depreciated over the asset's useful life.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Stock -Based Compensation*** 

The Company's stock-based awards consist of stock options issued to employees and non-employees. The Company measures the estimated fair value of the stock-based awards on the date of grant. It recognizes compensation expense for those awards over the requisite service period, which is generally the vesting

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period of the respective awards. The Company records expenses for awards with service-based vesting using the straight-line method. For awards with performance conditions, compensation expense is recognized when the condition is probable of being achieved, or in the case of a liquidity event, when the liquidity event occurs. The Company accounts for forfeitures as they occur.

Fair values of stock options are determined using the Black-Scholes option pricing model ("BSM"). In estimating the fair value, Management is required to make certain assumptions and estimates such as the expected life of options, volatility of the Company's future share price, risk-free rate, future dividend yields, and estimated forfeitures at the initial grant measurement date. Changes in assumptions used to estimate fair value could result in different outcomes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Revenue Recognition*** 

The Company adopted ASC 606, *Revenue from Contracts with Customers* ("ASC 606"), on May 1, 2020, using the modified retrospective approach to all contracts not completed at the date of initial application.

According to ASC 606, revenue is recognized when control of the promised good or service is transferred to the Company's customer in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Consistent with the criteria of ASC 606, the Company follows five steps for its revenue recognition: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of ASC 606 and therefore, there were no material changes to the Company's financial statements upon adoption of ASC 606.

The Company is the principal for all of its transactions and recognizes revenue on a gross basis. Revenue is recognized net of consumption tax collected from customers and subsequently remitted to governmental authorities.

<u>Nature of Goods and Services</u>

The Company currently generates its revenues through commissioned research, solution services, membership services and guest speaker services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *<u>Commissioned research</u>* 

The Company submits the deliverables generated during the research and demonstration experiments or the verification and demonstration of the digital technology to the customer. The contracts include the customer acceptance right, which is considered a requirement to conclude the customer has obtained control of the submitted deliverables such as reports, prototypes and digital source code. Since the acceptance of the asset by the customer indicates that the customer has acquired the ability to direct the use of the asset and derive benefits from the asset, the performance obligation is deemed to be satisfied at that time. Therefore, the revenue is recognized at a point in time, when the goods are delivered, and acceptance is completed.

For some contracts, the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date. In these cases, the Company recognizes revenue over time using the "as invoiced" practical expedient and thereby recognized the amount to which the entity has a right to invoice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *<u>Solution services</u>* 

The Company receives compensation from customers through providing its solution services by utilizing its own technologies. For the years ended April 30, 2021 and 2022, the Company's services are principally hackke and magickiri services, which utilize the Company's sensing technologies.

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For hackke services, the Company identifies two performance obligations that sales of dedicated devices and providing the system usage service to the customer, for which the Company receives compensation. For contracts with more than one performance obligation, the transaction price is allocated among the performance obligations in an amount that depicts the relative standalone selling price ("SSP") of each obligation. Judgment is required to determine the SSP for each distinct performance obligation. The transaction price is allocated to each performance obligation based on the SSP determined by the adjusted market assessment approach utilized similar equipment for the dedicated device and the residual approach for the system usage service due to no direct observable SSP for similar services in the market that is reasonably available. For the sales of dedicated devices, the Company provides the dedicated devices and the contract includes the customer acceptance right, which is considered as a requirement to conclude that the customer has obtained the control of the provided devices. Since the acceptance of the product by the customer indicates that the customer has acquired the ability to direct the use of the product and derive benefits from it, the performance obligation is deemed to be satisfied at that time. Therefore, the revenue is recognized at a point in time when the products are delivered and acceptance is completed. For system use services, revenue is recognized on a monthly basis as access rights are granted on a monthly basis.

For the magickiri service, the Company provides primarily, planning services and in some of the instances and designs, proposes the appropriate countermeasures against infectious diseases, or the monitoring service, which monitors human behavior and analyzes the customer's own environment on the customer's behalf. For both the planning and monitoring services, the Company submits the results to the customer in the form of reports, and the contract includes the customer acceptance right which is considered as a requirement to conclude the customer has obtained the control of the submitted deliverables (i.e. product and report). Since the acceptance of the deliverables by the customer indicates that the customer has acquired the ability to direct the use of the deliverables and derive benefits from it, the performance obligation is deemed to be satisfied at that time. Therefore, the revenue is recognized at a point in time, when the deliverables are delivered, and acceptance is completed.

In magickiri planning services, for some contracts, the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date. In these cases, the Company recognizes revenue over time using the "as invoiced" practical expedient and thereby recognized the amount to which the entity has a right to invoice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *<u>Membership services</u>* 

The Company operates a membership forum, "Pixie Nest." Membership contracts are generally for a one-year term. The Company holds forums to discuss future direction and recommendations on social issues it aims to solve by utilizing its technologies. The customer pays the fee in advance before the membership service begins. In exchange for providing the Company's membership services, the customer gains knowledge which may be used over the lifetime of the membership and the customer simultaneously receives and consumes the benefits of the Company's performance. Therefore, the Company recognizes revenue over membership period. The Company does not recognize a refund liability because the contract specifies that no refunds will be made. The Company records deferred revenue (contract liability) that is included in accrued expenses and other current liabilities on the Balance Sheet when cash payments are received in advance of the Company's performance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *<u>Guest speaker services</u>* 

The guest speaker services are provided by the Company's management for several media and external events managed by a third party. This service helps the Company promote its business. The revenue from guest speaker services is recognized at a point in time when the service is delivered.

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<u>Disaggregation of Revenue</u>

The table reflects revenue by major source for the following periods:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Commissioned research | ¥390260 | ¥508906 | $3424 |
|  Solution services | 55987 | 82657 | 556 |
|  Membership services | 41000 | 15250 | 103 |
|  Guest speaker services | 25525 | 29452 | 198 |
|  Total revenue | ¥512772 | ¥636265 | $4281 |

---

<u>Contract Balance</u>

Contract balances typically arise when there is a timing difference between the transfer of control to the customer and the receipt of consideration. The Company did not have contract assets as of April 30, 2021 and 2022. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment. With respect to payment terms, payments of revenues are generally collected in the following month from the invoice date. If the Company receives payments before the performance obligation is satisfied, contract liabilities are recorded. Contract liabilities are included in accrued expenses and other current liabilities on the Balance Sheet are expected to be recognized as revenue within one year. There are no significant financing components because the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service is short-term. The Company applied the practical expedient available under ASC 606 that permits the Company not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

The following table summarizes the change in contract liabilities for the years ended April 30, 2021 and April 30, 2022.

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| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Beginning balance | ¥13700 | ¥10038 | $68 |
|  Revenue earned | (68013) | (97206) | (654) |
|  Deferral of revenue | 64351 | 99740 | 671 |
|  Ending balance | ¥10038 | ¥12572 | $85 |

---

<u>Contract Costs</u>

The Company does not have any commission plans and the Company's process in obtaining a customer starts when the customer approaches the Company due to interest in the Company's technology. These initial interactions are, for example, an inquiry in response to a press release, an introduction from another party or customer, or a direct inquiry. Therefore, the Company does not incur incremental costs from activities such as requesting a third party to act as an intermediary in obtaining contracts or having to pay sales representatives commissions to find potential customers.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Collaborative Arrangements*** 

When the Company enters into a collaborative research and development arrangement, it evaluates whether the arrangement falls within the scope of ASC Topic 808, *Collaborative Arrangements* ("ASC 808"), based on whether it involves joint operating activities and whether both parties actively participate in the arrangement and are exposed to significant risks and rewards.

If the payments from the counterparty of contracts to the Company are from customers, the Company accounts for them within the scope of ASC 606. However, if the Company determines that the payment is not from a customer, certain collaborative research, development, manufacturing and commercial activities and related payments should be presented as a reduction to research and development or general and administrative expenses, depending on where the underlying costs are presented.

Although the Company has formally entered into several joint research and development agreements, the Company is only commissioned by the customers to perform research and development work.

There is no evidence that both parties are actively participating in the arrangement or are exposed to significant risks and rewards, and therefore, no contracts fall within collaborative agreements as defined in ASC 808.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Cost of Services*** 

Cost of services consists primarily of outsourcing costs, depreciation and amortization, supply expenses, personnel costs, and related costs that are attributable to providing our services.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Selling, General and Administrative Expenses*** 

Selling expenses primarily consist of (i) advertising and marketing expenses, (ii) personnel costs for sales and marketing staff, and (iii) rental and depreciation expenses. For the years ended April 30, 2021 and 2022, advertising expenses totaled ¥958 thousand and ¥9,465 thousand ($64 thousand) respectively.

General and administrative expenses consist of (1) personnel costs and other expenses which are related to the general corporate functions, including accounting, finance, tax, legal and human relations, and (2) costs associated with use by these functions of facilities and equipment, such as depreciation expenses, rental, and other general corporate-related expenses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Research and Development Costs*** 

Research and development costs are expensed as incurred and consist of salaries, benefits, laboratory supplies and facility costs, as well as fees paid to other entities who conduct research and development activities on the Company's behalf.

Advance payments for goods or services which will be used or rendered for future research and development activities are capitalized as prepaid expenses and recognized as an expense as the related services are performed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Income Taxes*** 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences,

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projected future taxable income, tax-planning strategies, and results of recent operations. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company's historical operating performance and the recorded cumulative net losses in prior fiscal periods, the net deferred tax assets have been fully offset by a valuation allowance.

Tax benefits for uncertain tax positions are based upon management's evaluation of the information available at the reporting date. The Company recognizes uncertain tax positions at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Net Loss per Share*** 

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common stock equivalents of potentially diluted securities outstanding for the period determined using the treasury-stock methods. Basic and diluted net loss per share attributable to common stockholders are presented in conformity with the two-class method required for participating securities. The Company's shares of convertible preferred stock are participating securities as defined by ASC 260. The Company's basic and diluted net loss per share were the same because the Company generated a net loss for all periods and potentially dilutive securities are excluded from diluted net loss per share as a result of their anti-dilutive impact. Net loss is attributable entirely to common stockholders. It is not allocated to the convertible preferred stock as the holders do not have a contractual obligation to share in the Company's losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Recently Issued Accounting Pronouncements Not Yet Adopted*** 

In June 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments ("ASU 2016-13"). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which required entities to make a one-time determination of whether an entity is eligible to be a smaller reporting company as of November 15, 2019 for the purpose of determining the effective date of ASU 2016-13. As an emerging growth company, the Company will adopt this standard effective May 1, 2023 and the adoption of this ASU is currently not expected to have a material effect on the financial statements.

In November 2021, the FASB issued ASU 2021-10, *"Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance"*. The ASU requires additional disclosures for transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including: (i) information about the nature of the transactions and related accounting policy used to account for the transactions; (ii) the line items on the balance sheet and income statement affected by these transactions including amounts applicable to each line; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The new guidance is effective for the Company for annual periods beginning after December 15, 2021. The Company is planning to adopt this ASU on May 1, 2022 and the adoption of this ASU is currently not expected to have a material effect on the financial statements.

**3.** **Fair Value Measurements** 

The Company applies the provisions of ASC Topic 820, *Fair Value Measurement*, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements.

Assets and liabilities are categorized based upon the level of judgment associated with the inputs used to measure their fair values.

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Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active;

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

There were no assets or liabilities to be measured at fair value on "recurring" basis as of April 30, 2021 and 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Fair Value of Financial Instruments*** 

The Company's financial instruments include cash equivalents, accounts receivable-trade, due from related party, accounts receivable-other, lease deposits, accounts payable, accrued expenses, operating and finance lease liabilities, and long-term borrowings. The carrying values of the Company's financial instruments approximate their fair value due to the short-term nature of those instruments and market interest rates.

**4.** **Inventories** 

Inventories are comprised as follows as of April 30, 2021 and 2022: Finished goods are the dedicated location measurement devices required to provide hackke services, which are included in the solution services; and Work-in-process and Raw materials mainly consist of items related to the manufacturing of the devices.

---

| | | | |
|:---|:---|:---|:---|
|  | **As of April, 30** | **As of April, 30** | **As of April, 30** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Finished goods | ¥— | ¥12153 | $82 |
|  Work-in-process | 5631 | 5432 | 37 |
|  Raw materials |  | 5720 | 38 |
|  Total | ¥5631 | ¥23305 | $157 |

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**5.** **Property and Equipment, Net** 

As of April 30, 2021 and 2022, property and equipment consist of the following:

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| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Land | ¥218980 | ¥218980 | $1473 |
|  Buildings and improvements | 159154 | 161503 | 1087 |
|  Leasehold improvements | 69358 | 86744 | 584 |
|  Vehicles | 7954 | 7954 | 54 |
|  Tools and fixtures | 188726 | 261796 | 1761 |
|  Total property and equipment | 644172 | 736977 | 4959 |
|  Less: Accumulated depreciation and amortization | (161971) | (218153) | (1468) |
|  Property and equipment, net | ¥482201 | ¥518824 | $3491 |

---

Depreciation and amortization expense was ¥50,476 thousand and ¥73,034 thousand ($492 thousand) for the years ended April 30, 2021 and 2022, respectively.

**6.** **Intangible Assets, Net** 

Intangible assets consist of the following as of April 30, 2021 and 2022:

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| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Software |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gross carrying amount | ¥8031 | ¥13850 | $93 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accumulated amortization | (2083) | (4231) | (28) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net book value | ¥5948 | ¥9619 | $65 |

---

The amortization expense was ¥1,256 thousand and ¥2,148 thousand ($14 thousand) for the years ended April 30, 2021 and 2022, respectively. No impairment losses were recognized for the years ended April 30, 2021 and 2022.

The expected aggregate amortization expense for the years following April 30, 2022 are as follows:

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| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
| Year ending April 30, | **(in thousands)** | **(in thousands)** |
| 2023 | ¥2760 | $19 |
| 2024 | 2760 | 19 |
| 2025 | 1982 | 13 |
| 2026 | 1504 | 10 |
| 2027 | 613 | 4 |
|  Total | ¥9619 | $65 |

---

**7.** **Leases** 

The Company's operating leases consist of offices and other facilities, and the Company's finance lease consists of vehicles and tools and fixtures.

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<u>Finance Leases</u>

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company's finance right-of-use assets and lease liabilities are as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Finance lease right-of-use assets, net<sup>(1)</sup> | ¥2668 | ¥45303 | $305 |
|  Current portion of finance lease liabilities<sup>(2)</sup> | 642 | 13221 | 89 |
|  Finance lease liabilities, net of current portion | 2282 | 36799 | 247 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Included in "Property and equipment, net" in the Balance Sheet.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Included in "Accrued expenses and other current liabilities" in the Balance Sheet.

The components of lease costs are as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
| Finance lease cost | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of right-of-use assets | ¥582 | ¥4511 | $30 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest on lease liabilities | 118 | 548 | 4 |
|  Total | ¥700 | ¥5059 | $34 |

---

Supplemental information related to finance leases is as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
| Cash flow information | **(in thousands)** | **(in thousands)** | **(in thousands)** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash paid for amounts included in the measurement of lease liabilities | ¥646 | ¥4766 | $32 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Finance lease right-of-use assets obtained in exchange for lease liabilities |  | 47147 | 317 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted average remaining lease term (in years) | 4.6 | 3.7 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted average discount rate (IBR) | 3.00% | 2.56% |  |

---

Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to April 30, 2022 are as follows:

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| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
| Year ending April 30, | **(in thousands)** | **(in thousands)** |
| 2023 | ¥14413 | $97 |
| 2024 | 14413 | 97 |
| 2025 | 14413 | 97 |
| 2026 | 9546 | 64 |
|  Total | 52785 | 355 |
|  Less: Interest component | (2765) | (18) |
|  Present value of minimum lease payments | ¥50020 | 337 |

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<u>Operating Leases</u>

Payments under the Company's lease arrangements are primarily fixed; however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. Variable lease costs include property taxes and utilities. The Company has elected not to recognize a right-of-use asset or lease liability for short-term leases with a lease term of 12 months or less. Short-term leases are recognized in the statement of operations on a straight-line basis over the lease term. When the Company determines a lease term, if a lease contract contains an option to extend its lease term and it is reasonably expected that the Company will exercise the option, the Company includes the extending period in its lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of the operating lease expenses reflected in the statement of operations for the year ended April 30, 2021 and 2022 were as follows:

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| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Fixed lease cost | ¥65968 | ¥88273 | $594 |
|  Variable lease cost | 3205 | 4010 | 27 |
|  Short-term cost | 115 | 304 | 2 |
|  Total | ¥69288 | ¥92587 | $623 |

---

Supplemental information related to operating leases is as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Cash paid for amounts included in the measurement of lease liabilities | ¥65968 | ¥88273 | $594 |
|  Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | 4805 | 347445 | 2338 |
|  Weighted average remaining lease term (in years) | 15.1 | 14.2 |  |
|  Weighted average discount rate-operating lease (IBR) | 2.17% | 2.24% |  |

---

Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to April 30, 2022 are as follows:

---

| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
| Year ending April 30, | **(in thousands)** | **(in thousands)** |
| 2023 | ¥92429 | $622 |
| 2024 | 89562 | 603 |
| 2025 | 88314 | 594 |
| 2026 | 87441 | 588 |
| 2027 | 87441 | 588 |
|  Thereafter | 808825 | 5442 |
|  Total | 1254012 | 8437 |
|  Less: Interest component | (180639) | (1215) |
|  Present value of minimum lease payments | ¥1073373 | $7222 |

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**8.** **Accrued Expenses and Other Current Liabilities** 

Accrued expenses and other current liabilities consist of the following:

---

| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Accrued legal expense | ¥— | ¥44424 | $299 |
|  Wages and paid leave | 32674 | 42196 | 284 |
|  Other | 45409 | 49563 | 333 |
|  Total | ¥78083 | ¥136183 | $916 |

---

**9.** **Borrowings** 

Long-term borrowings consist of the following as of April 30, 2021 and 2022:

---

| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Long-term borrowings, unsecured, maturing serially through 2022-2026, (weighted average: 2021—2.40%, 2022—2.93%) | ¥840000 | ¥790000 | $5315 |
|  Less: current portion | (300000) | (5555) | (37) |
|  Long-term borrowings, net of current portion | ¥540000 | ¥784445 | $5278 |

---

The long-term borrowings accrue interest using fixed interest rates of 1.48%-3.00% and 1.70%-3.00% per annum as of April 30, 2021 and 2022. However, certain borrowing is exempt from interest payments until November 29, 2023, due to the Tokyo Metropolitan Government's interest subsidy policy for COVID-19.

In addition, there is another unsecured borrowing which allows the Company to borrow up to ¥1,000,000 thousand ($6,728 thousand). This borrowing is to be disbursed in four installments of ¥250,000 thousand ($1,682 thousand) each, provided, that the Company meets certain financial performance targets prior to each of the second, third and fourth installment. The Company borrowed ¥750,000 thousand ($5,046 thousand) in total as of April 30, 2022.

Debt issuance costs related to these borrowings are immaterial.

Annual maturities for the years subsequent to April 30, 2022 are as follows:

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| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
| Year ending April 30, | **(in thousands)** | **(in thousands)** |
| 2023 | ¥5555 | $37 |
| 2024 | 763332 | 5136 |
| 2025 | 13332 | 90 |
| 2026 | 7781 | 52 |
|  Total | ¥790000 | $5315 |

---

**10.** **Asset Retirement Obligation** 

These obligations include estimated costs arising from a contractual obligation to a landlord to remove leasehold improvements from the leased property for the Company's headquarters at the end of the lease

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term. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depleted over the lease term, which has been determined to be 15 to 17 years. The following is a description of the changes to its beginning and ending amount of asset retirement obligation for the years ended April 30, 2021 and 2022:

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| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Beginning balance | ¥16363 | ¥16854 | $114 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liabilities incurred during the period |  | 5526 | 37 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accretion expense | 491 | 599 | 4 |
|  Ending balance | ¥16854 | ¥22979 | $155 |

---

**11.** **Commitments and Contingencies** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Litigation*** 

From time to time, the Company may be involved in litigation related to claims that arise in the ordinary course of its business activities. The Company accrues for these matters when it is probable that losses will be incurred and these losses can be reasonably estimated. Management does not expect any liabilities from claims to have a material adverse effect on its financial position or the results of operations.

**12.** **Stockholders' Equity** 

On May 10, 2017, the Company was incorporated as a private company with 1,000,000 authorized shares, pursuant to the Companies Act of Japan (the "Companies Act").

At incorporation, the Company issued 10,000 shares of common stock for ¥10 thousand. The Company recorded ¥5 thousand each in Common stock and additional paid-in capital.

In July 2017, 1,111 shares of Series AA convertible preferred stock were issued for ¥37,303 thousand in total. The Company recorded ¥18,657 thousand and ¥18,477 thousand in Series AA convertible preferred stock and additional paid-in capital, respectively.

In July, August, and October 2017, total 4,600 shares of Series A convertible preferred stock were issued for ¥575,000 thousand in total. The Company recorded ¥287,500 thousand each in Series A convertible preferred stock and additional paid-in capital.

In April 2019, 404 shares of Series BB convertible preferred stock were issued for ¥100,000 thousand in total. The Company recorded ¥50,000 thousand each in Series BB convertible preferred stock and additional paid-in capital.

In April and May 2019, total 3,688 shares of Series B convertible preferred stock were issued for ¥3,895,634 thousand in total. The Company recorded ¥1,947,817 thousand each in Series B convertible preferred stock and additional paid-in capital.

During April 2020, upon the resolution of the stockholders, a capital reduction was properly carried out in accordance with the Companies Act to simplify the capital structure and be more efficient. The Company reduced its total amount of common stock and series A, AA, B and BB convertible preferred stock of ¥2,303,979 thousand to ¥100,000 thousand. The capital reduction was treated appropriately pursuant to the Companies Act "Increase/Decreases and Transfer of Common Stock and Convertible Preferred Stock, Reserve, and Surplus" as given below, and the remaining amount after the capital reduction are presented as common stock on the balance sheet.

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Japanese companies are subject to the Companies Act. The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

***Common Stock and Convertible Preferred Stock***

Under the Companies Act, the Company is only allowed to issue no par value stock, and issuances of stock are required to be credited to the stock account for at least 50% of the proceeds and to additional paid-in capital account for the remaining amounts.

***Increases/Decreases and Transfer of Common Stock and Convertible Preferred Stock, Reserve, and Surplus***

Under the Companies Act, the total amount of legal capital surplus and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, convertible preferred stock, legal reserve, legal capital surplus, and other capital surplus (a component of additional paid-in capital) and retained earnings (a component of accumulated deficit) can be transferred among the accounts under certain conditions upon resolution of the stockholders.

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as legal reserve (a component of accumulated deficit) or as legal capital surplus (a component of additional paid-in capital) depending on the equity account charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and legal capital surplus equals 25% of common stock and convertible preferred stock combined.

***Dividends***

Under the Companies Act, companies can pay dividends at any time during the year in addition to the year-end dividend upon resolution at the stockholders' meeting. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to stockholders subject to certain limitations and additional requirements. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the stockholders, but the amount of net assets after dividends must be maintained at no less than ¥3,000 thousand.

***The Amount Available for Dividends***

The amount available for dividends under the Companies Act is calculated based on the amount recorded in the Company's financial statements prepared in accordance with accounting principles generally accepted in Japan. As a result, there is no amount available for dividends due to the accumulated deficit as of April 30, 2022.

Upon closing of the issuance of common stock and Series A, AA, B, and BB convertible preferred stock, the Company adopted a dual voting structure on its shares.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Preferred stock*** 

The following table summarizes the issuances of convertible preferred stock as of April 30, 2022:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Issue Date** | **Issuance<br>Price<br>(amount<br>paid in)**<br>**(per share)** | **Holder's<br>Conversion<br>Right** | **Conversion<br>Ratio\*** | **Settlement<br>methods** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series A | July 24, 2017<br> July 28, 2017<br> August 2, 2017<br> October 13, 2017 | ¥125000 | Any time | 1 | Shares |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series AA | July 20, 2017 | ¥33576 | Any time | 1 | Shares |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series B | April 18, 2019<br> April 25, 2019<br> May 27, 2019 | ¥1056300 | Any time | 1 | Shares |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series BB | April 1, 2019 | ¥247525 | Any time | 1 | Shares |

---

\* All series of convertible preferred stock will convert into common shares on a one-for-one basis.

The key terms of the convertible preferred stock are as follows:

***Conversion Right***

All shares of convertible preferred stock may, at the option of the holders, be converted at any time into shares of common stock. The conversion ratio for each convertible preferred stock shall be determined by dividing the issue price by the conversion price in effect at the time of the conversion. The initial conversion price of each class of convertible preferred stock shall be its respective subscription price (i.e., conversion ratio =1), and shall be subject to adjustment in the event of the issuance of additional common stock at a per share price less than the conversion price.

All shares of convertible preferred stock are automatically converted into shares of common stock either immediately prior to the completion of IPO or when the convertible preferred stockholders holding the largest number of outstanding shares of convertible preferred stock agree to convert the convertible preferred stock in writing. Each share of convertible preferred stock shall automatically be converted into common stock of the Company at the effective conversion price upon the closing of an IPO.

***Dividend Rights***

All series of convertible preferred stock do not have right to receive preferred dividend. Therefore, all shares of convertible preferred stock and common stock have equal rights with respect to the surplus dividend on an as-converted basis, when, as and if declared by the Board. However, no dividends on shares of convertible preferred and common stock have been declared since the issuance date until April 30, 2022, as there is no amount available for dividends due to the accumulated deficit as of April 30, 2022. The convertible preferred stock is considered a participating security because it participates in dividends with common stock.

***Liquidation Rights***

In the event the Company voluntary or involuntary liquidates, holders of the convertible preferred stock will be entitled to receive a distribution of the Company's residual assets and funds upon the liquidation in preference over shares of common stock. Holders of convertible preferred stock of later series have a right to the distribution of assets or funds over holders of convertible preferred stock of earlier series in the following sequence: Series B convertible preferred stock and Series BB convertible preferred stock, Series A convertible preferred stock, and Series AA convertible preferred stock and common stock.

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After distribution to the holders of convertible preferred stock the amount of preference, all remaining assets and funds of the Company available for distribution to the stockholders shall be distributed ratably among all the stockholders on a fully diluted basis.

***Redemption Rights***

The shares of convertible preferred stock are not mandatorily redeemable. Shares of convertible preferred stock are contingently redeemable upon the occurrence of certain liquidation events. However, the redemption of the convertible preferred stock are solely within the control of the Company and then the convertible preferred stock are classified as permanent equity.

***Voting Rights***

Each share of convertible preferred stock confers the right to receive notice of, attend, and vote at any general meeting of members on an as-converted basis. The holders of the convertible preferred stock vote together with the common stockholders, and not as a separate class or series, on all matters put before the stockholders.

**13.** **Stock-Based Compensation** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Equity Incentive Plans*** 

In 2018, the Company's Board of Directors adopted, and stockholders approved an equity incentive plan (the "Plan"). The Plan is a broad-based retention program and is intended to attract and retain talented employees and directors. The Plan provides for the granting of stock options to employees, and directors through a series of stock option awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Method that Estimates the Fair Value of Stock Options*** 

Stock options granted are exercisable for the full ten-year contractual term. The fair value of stock options as part of employees and nonemployees incentive plans is estimated at the date of grant using the BSM. BSM requires the input of significant assumptions such as the expected stock price, volatility, risk-free interest rate, and expected dividend.

The Company did not grant any stock options during the years ended April 30, 2021 and 2022.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Summary of Terms Included in the Stock Options Agreement*** 

<u>Series 1</u>

According to the resolutions at the general meeting of stockholders held on April 27, 2018, the Company issued and granted 12 stock options to the University of Tsukuba at an exercise price of ¥125,000. The exercise term of these stock options is 10 years commencing April 27, 2018. The general terms require performance conditions to be satisfied prior to vesting. The performance condition will be satisfied upon a liquidity event defined as an IPO on any of the financial exchanges. The stock option's fair value as of the grant date was ¥1,054.87 per share. Each option can be exercised for one common stock (the same applies hereafter).

<u>Series 2</u>

According to the resolutions at the general meetings of stockholders and the Board of Directors held on July 24, 2018 (Tranche 1), and in October 17, 2018 (Tranche 2), the Company issued stock options to employees and the Company's director and granted 440 stock options at an exercise price of ¥16,500. The exercise term of stock options for Tranche 1 and Tranche 2 is 10 years commencing from July 24 and

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October 17, 2018, respectively. The general terms require both service and performance conditions to be satisfied prior to vesting. The performance condition will be satisfied upon a liquidity event defined as an IPO on any of the financial exchanges. The holder shall be required to be a director, corporate auditor, or employee of the Company or subsidiary/affiliate of the Company at the time of the exercise of their rights. The stock option's fair value as of the grant dates for Tranche 1 and Tranche 2 is ¥10,117.70 and ¥7,370.97 per share, respectively.

<u>Series 3</u>

According to the resolutions at the general meetings of stockholders and the Board of Directors held on April 24, 2019, the Company issued stock options to employees and the Company's director and granted 647 stock options at the exercise price of ¥180,000. The exercise term of stock options is 10 years commencing April 24, 2019. The general terms require both service and performance conditions to be satisfied prior to vesting. The performance condition will be satisfied upon a liquidity event defined as an IPO on any of the financial exchanges. The holder shall be required to be a director, corporate auditor, or employee of the Company or subsidiary/affiliate of the Company at the time of the exercise of their rights. The stock option's fair value as of the grant date is ¥2,579.33 per share.

<u>Series 5</u>

According to the resolutions at the general meetings of stockholders and the Board of Directors held on March 11, 2020, the Company issued stock options to the University of Tsukuba and Tohoku University and granted 80 stock options at an exercise price of ¥181,000. The exercise term of stock options is 10 years commencing March 31, 2020. The joint research agreement can be terminated when the agreement cannot be maintained due to the transfer or retirement of the holder. The Company may acquire unexercised rights without compensation in the event that the joint research agreement is terminated due to the rights holder, such as when the joint research based on the joint research agreement cannot be maintained due to the transfer or retirement of the rights holder's staff. The general terms require performance conditions to be satisfied prior to vesting. The performance condition will be satisfied upon a liquidity event defined as an IPO on any of the financial exchanges. The stock option's fair value as of the grant date is ¥104.40 per share.

<u>Series 6</u>

The Company applied the scheme called "The Trusted Fair Value Stock Option" in which funds will be deposited by a trustor (not an issuing company, but a third party such as its owner or its CEO) to a trustee (usually, tax accountants are appointed as trustees due to the need of tax payment). The trustee purchases the Fair Value Stock Option by using the funds and the trustee distributes it to the beneficiaries identified by the issuing company based on their trust agreement and delivery guideline in the future based on an objective evaluation of the performance of those beneficiaries. In the case of the Company, three directors contributed their own money as the trustor to establish the trust. According to the resolutions at the General Meetings of Stockholders and the Board of Directors held on April 21, 2020, the Company issued stock options to Nozomi Tax Corporation (Trustee) and granted 782 stock options at an exercise price of ¥181,000. The exercise term of the stock options is 10 years commencing April 30, 2020. The holder of the rights shall be required to be a director or employee of the Company or subsidiary/affiliate of the Company at the time of the exercise of their rights. Although the IPO condition is not mentioned in the agreement specifically, it is exercisable only at the time of IPO as the shares will be allocated to the employees (ultimate beneficiary) at the time of IPO, therefore there is an implicit performance conditions to be satisfied prior to vesting. The stock option's fair value as of the grant date is ¥11.38 per share.

<u>Series 7</u>

According to the resolutions at the General Meetings of Stockholders and the Board of Directors held on April 21, 2020, the Company issued stock options to the Company's director and granted 366 stock options

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at the exercise price of ¥181,000. The exercise term of the stock options is 10 years commencing April 30, 2020, and the holder of the rights shall be required to be a director, corporate auditor, or employee of the Company or subsidiary/affiliate of the Company at the time of the exercise of their rights. There is no performance conditions to be satisfied prior to vesting. The stock option's fair value as of the grant date is ¥3.17 per share.

The Company currently plans to use authorized and unissued shares to satisfy share award exercises.

Cash received from stock options is included within "accrued expenses and other current liabilities" and "additional paid-in capital" in the Balance Sheets. It is recognized as a liability until the options vest. As the stock options vest, the liability will be reclassified to additional paid-in capital.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***A Summary of the Activity of the Company's Stock Option Plans*** 

The Company did not grant any stock options during the year ended April 30, 2021 and April 30, 2022. The following table summarizes the stock options activity under the Plan for the years ended April 30, 2021 and April 30, 2022.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Number<br>of<br>shares** | **Weighted-average**<br>**Exercise price** | **Weighted-average**<br>**Exercise price** | **Weighted-<br>average**<br>**Remaining<br>contract<br>term<br>(years)** |
|  | | **JPY** | **US$** | |
|  Outstanding at April 30, 2020 | 2317 | ¥149196 | $1004 | 9.4 |
|  Forfeited | (80) | 57375 | 386 |  |
|  Outstanding at April 30, 2021 | 2237 | 152480 | 1026 | 8.4 |
|  Forfeited | (165) | 71000 | 478 |  |
|  Outstanding at April 30, 2022 | 2072 | 158969 | 1070 | 7.5 |
|  Vested and exercisable at April 30, 2022 | 366 | ¥181000 | $1218 | 8.0 |

---

As of April 30, 2021, the aggregate intrinsic value of all outstanding options was ¥126,063 thousand. As of April 30, 2022, the aggregate intrinsic value of all outstanding options was ¥500,463 thousand ($3,367 thousand). As of the same date, the aggregate intrinsic value of all exercisable options was ¥80,339 thousand ($541 thousand). The aggregate intrinsic value was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of April 30, 2021 and 2022.

As the liquidity event is not determined to be probable, no stock-based compensation expense is recognized.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The total compensation cost related to non-vested awards not yet recognized are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30,** | **Year ended April 30,** | **Year ended April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  The total compensation cost | ¥5376 | ¥4135 | $28 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The weighted-average period over which the total compensation cost related to non-vested awards not yet recognized is expected to be recognized is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2021** | **2022** | **2022** |
|  The weighted-average period (in years) |  | 2.48 |  | 1.50 |

---

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**14.** **Other Income** 

Other income consists of the following for the years ended April 30, 2021 and 2022:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended April, 30** | **Year ended April, 30** | **Year ended April, 30** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Dividend income | ¥79 | ¥— | $— |
|  Interest income | 32 | 28 | 0 |
|  Subsidy income | 1948 | 8898 | 60 |
|  Other, net | 6636 | 4099 | 28 |
|  Total | ¥8695 | ¥13025 | $88 |

---

**15.** **Income Taxes** 

The Company has incurred net pre-tax losses in Japan for all periods presented. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax basis using tax rates expected to be in effect during the years in which the basis differences reverse.

The benefit from income taxes differs from the amount expected by applying the statutory tax rate in Japan to the loss before taxes as follows:

---

| | | |
|:---|:---|:---|
|  | **Year ended<br>April 30,** | **Year ended<br>April 30,** |
|  | **2021** | **2022** |
|  Statutory tax rate (benefit) | (34.6%) | (34.6%) |
|  Change in valuation allowance | 34.4% | 36.8% |
|  Permanent items | 0.0% | (2.3%) |
|  Other | 0.2% | 0.1% |
|  Effective income tax rate | 0.0% | 0.0% |

---

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The tax effects of temporary differences and loss carryforwards that give rise to significant portions of the deferred tax assets and liabilities are presented below:

---

| | | | |
|:---|:---|:---|:---|
|  | **As of April 30,** | **As of April 30,** | **As of April 30,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Deferred tax assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net operating loss carryforwards | ¥628329 | ¥1020469 | $6866 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Asset retirement obligation | 5830 | 7948 | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease liability | 266095 | 371091 | 2497 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses | 7289 | 19341 | 130 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other | 1496 | 69 | 0 |
|  Gross deferred tax assets | 909039 | 1418918 | 9546 |
|  Less: valuation allowance | (639291) | (1047918) | (7050) |
|  Total deferred tax assets | 269748 | 371000 | 2496 |
|  Deferred tax liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease right-of-use assets, net | (266095) | (363253) | (2444) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Property and equipment | (4072) | (8578) | (58) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-other | (412) |  |  |
|  Gross deferred tax liabilities | (270579) | (371831) | (2502) |
|  Net deferred tax assets (liabilities) | ¥(831) | ¥(831) | $(6) |

---

Due to the Company's lack of earnings history, the deferred tax assets have been fully offset by a valuation allowance as of April 30, 2021 and 2022. The net change in the valuation allowance for the years ended April 30, 2021 and 2022 has increased by ¥258,403 thousand and ¥408,627 thousand ($2,750 thousand), respectively.

As of April 30, 2022, the Company had operating loss carryforwards of ¥2,950,186 thousand ($19,849 thousand), which are available as an offset against future taxable income. These carryforwards are scheduled to expire as follows:

---

| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** |
|  Years ending April 30: |  |  |
|  Between 2027 and 2030 | ¥1033913 | $6956 |
|  2031 and thereafter | 1916273 | 12893 |
|  Total | ¥2950186 | $19849 |

---

The Company has determined a greater than 50% likelihood that a tax benefit will be sustained; therefore, no uncertain tax benefit has been recognized. It is not expected that there will be a significant change in uncertain tax positions in the next 12 months. Penalties and interest incurred related to income tax matters are classified as income tax expense in the Statements of Operations in the period incurred, respectively, if applicable. The Company did not have any penalties or interest associated with any uncertain tax benefits that have been accrued or recognized as of and for the years ended April 30, 2021 and 2022.

Income tax returns are filed in Japan. In the ordinary course of business, the Company is subject to examination by tax authorities. The years ended April 30, 2018, through 2022 remain open to examination by tax jurisdictions in Japan. As of the date of the financial statements, there are no tax examinations in progress.

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**16.** **Net Loss Per Share** 

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year ended April 30** | **Year ended April 30** | **Year ended April 30** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** |
|  Common Stock |  |  |  |
|  Numerator: |  |  |  |
|  Net loss | ¥(759484) | ¥(1109468) | $(7465) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss attributable to stockholders | (759484) | (1109468) | (7465) |
|  Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic and diluted | ¥(75948.41) | ¥(110946.80) | $(746.46) |

---

The Company's potentially dilutive securities, which include all outstanding stock options and convertible preferred stock, have been excluded from the calculation of diluted net loss per share for the years ended April 30, 2021 and 2022 due to their anti-dilutive effect.

**17.** **Related-Party Transactions** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with xDiversity*** 

The Company entered into an agreement for the operation and administration management of xDiversity. xDiversity has no capital relationship with the Company, but the Company's two directors are board members of xDiversity.

The Company recognized other income ¥2,727 thousand and ¥2,727 thousand ($18 thousand) for the years ended April 30, 2021 and 2022 related to outsourcing fees. The accounts receivable balance related to the outsourcing fee was ¥250 thousand and ¥250 thousand ($2 thousand) as of April 30, 2021 and 2022, respectively. The accounts receivable balance related to a sales agreement for the commissioned research was ¥7,500 thousand and zero as of April 30, 2021 and 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with Trusts for the Benefit of Employees*** 

In respect of Series 6 stock options, the Company applies the scheme called "The Trusted Fair Value Stock Option" and three directors contributed funds as trustors to establish the trust. The trustee (Nozomi Kaikeisya, the tax accountant) purchased the Company's stock options and holds them until they are allocated to the final beneficiaries (employees, etc.). Since the payment is made before the rights are vested, the amount paid by the trust of ¥2,854 thousand and ¥2,854 thousand ($19 thousand) is recorded as other current liabilities, as of April 30, 2021 and 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with CEO*** 

Yoichi Ochiai, the CEO of the Company, has guaranteed the Company's lease liability during the contract period. The lease balance was ¥47,738 thousand ($321 thousand) as of April 30, 2022.

**18.** **Subsequent Events** 

The subsequent events were evaluated through March 7, 2023, the date the financial statements were issued.

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***Issuance of a Series C Convertible Preferred Stock***

During June 2022 and September 2022, the Company entered into multiple Preferred Stock Investment Agreements with various investors for the sale of 1,413 shares and 510 shares of Series C convertible preferred stock, respectively, at an issuance price of ¥1,133 thousand ($8 thousand) per share which were allotted to different investors and received cash proceeds of ¥2,171,103 thousand ($14,607 thousand).

***Issuance of Stock Options to Consulting Firm***

On August 31, 2022, the Company issued to a consulting firm, as compensation in part for services rendered, options to purchase 146 shares of common stock with an exercise price of ¥1 ($0). The term of the options is 10 years and may be exercised at any time prior to the expiration of the option term.

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**Pixie Dust Technologies, Inc.** 

**Condensed Balance Sheets (Unaudited)** 

---

| | | | |
|:---|:---|:---|:---|
|  | **April 30,<br>2022** | **October 31, 2022<br>(Unaudited)** | **October 31, 2022<br>(Unaudited)** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** |
|  **Assets** |  |  |  |
|  Current assets: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | ¥1795963 | ¥3274956 | $22034 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-trade | 82784 | 122615 | 825 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-other | 3539 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Due from related party | 250 | 250 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | 23305 | 53816 | 362 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred offering costs | 75024 | 110913 | 746 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid compensation asset |  | 32768 | 220 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | 121948 | 138737 | 934 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total current assets** | 2102813 | 3734055 | 25123 |
|  Property and equipment, net | 518824 | 538730 | 3625 |
|  Operating lease right-of-use assets, net | 1049583 | 1018674 | 6854 |
|  Intangible assets, net and other assets | 118462 | 118760 | 799 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total assets** | ¥3789682 | ¥5410219 | $36401 |
|  **Liabilities and stockholders' equity** |  |  |  |
|  Current liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | ¥100240 | ¥141944 | $955 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses and other current liabilities | 136183 | 151403 | 1019 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current portion of operating lease liabilities | 69127 | 69128 | 465 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current portion of long-term borrowings | 5555 | 12221 | 82 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total current liabilities** | 311105 | 374696 | 2521 |
|  Long-term borrowings, net of current portion | 784445 | 1027779 | 6915 |
|  Operating lease liabilities, net of current portion | 1004246 | 972277 | 6542 |
|  Other liabilities | 60609 | 56549 | 380 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total liabilities** | 2160405 | 2431301 | 16358 |
|  Commitments and contingencies |  |  |  |
|  **Stockholders' equity:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C convertible preferred stock, no par value; no shares authorized; no shares issued and outstanding at April 30, 2022 and 6,200 shares authorized; 1,923 shares issued and outstanding; aggregate liquidation preference of ¥4,357,518 ($29318) at October 31, 2022 |  | 1089380 | 7329 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series B convertible preferred stock, no par value; 3,688 shares authorized; 3,688 shares issued and outstanding; aggregate liquidation preference of ¥7,791,269 ($52421) at April 30, 2022 and October 31, 2022 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series BB convertible preferred stock, no par value; 404 shares authorized; 404 shares issued and outstanding; aggregate liquidation preference of ¥199,963 ($1345) at April 30, 2022 and October 31, 2022 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series A convertible preferred stock, no par value; 298,889 shares authorized; 4,600 shares issued and outstanding; aggregate liquidation preference of ¥862,500 ($5803) at April 30, 2022 and October 31, 2022 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series AA convertible preferred stock, no par value; 1,111 shares authorized; 1,111 shares issued and outstanding; aggregate liquidation preference of ¥37,303 ($251) at April 30, 2022 and October 31, 2022 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock, no par value; 695,908 shares authorized; 10,000 shares issued and outstanding at April 30, 2022, and 689,708 shares authorized; 10,000 shares issued and outstanding at October 31, 2022 | 100000 | 100000 | 673 |
|  Additional paid-in capital | 3946038 | 5091299 | 34255 |
|  Accumulated deficit | (2416761) | (3301761) | (22214) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total stockholders' equity** | 1629277 | 2978918 | 20043 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total liabilities and stockholders' equity** | ¥3789682 | ¥5410219 | $36401 |

---

The accompanying notes are an integral part of these unaudited condensed financial statements.

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**Pixie Dust Technologies, Inc.** 

**Condensed Statements of Operations (Unaudited)** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months Ended October 31,** | **Six Months Ended October 31,** | **Six Months Ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands, except share and per share<br>data)** | **(in thousands, except share and per share<br>data)** | **(in thousands, except share and per share<br>data)** |
|  Revenue: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Services | ¥179213 | ¥121866 | $820 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Products |  | 36773 | 247 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 179213 | 158639 | 1067 |
|  Costs and Expenses: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of services | 71258 | 23121 | 155 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cost of products |  | 24053 | 162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Research and development | 364465 | 339283 | 2283 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Selling, general and administrative expenses | 360962 | 643892 | 4332 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other operating expense, net | 311 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total costs and expenses | 796996 | 1030349 | 6932 |
|  **Loss from operations** | (617783) | (871710) | (5865) |
|  Interest expense | (11662) | (13423) | (90) |
|  Other income | 4488 | 133 | 1 |
|  **Loss before income taxes** | (624957) | (885000) | (5954) |
|  Income tax expense |  |  |  |
|  **Net loss** | ¥(624957) | ¥(885000) | $(5954) |
|  Weighted-average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 |
|  Net loss per share attributable to common stockholders, basic and diluted | ¥(62495.68) | ¥(88499.96) | $(595.44) |

---

The accompanying notes are an integral part of these unaudited condensed financial statements.

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**Pixie Dust Technologies, Inc.** 

**Condensed Statements of Stockholders' Equity (Unaudited)** 

---

| | | | | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Stock Class** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | **Series C<br>convertible<br>preferred stock** | **Series C<br>convertible<br>preferred stock** | **Series B<br>convertible<br>preferred stock** | **Series B<br>convertible<br>preferred stock** | **Series BB<br>convertible<br>preferred stock** | **Series BB<br>convertible<br>preferred stock** | **Series A<br>convertible<br>preferred stock** | **Series A<br>convertible<br>preferred stock** | **Series AA<br>convertible<br>preferred stock** | **Series AA<br>convertible<br>preferred stock** | **Common stock** | **Common stock** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Shares** | **Amount** | **Additional<br>Paid-In<br>Capital** | **Accumulated<br>Deficit** | **Total<br>Stockholders'<br>Equity** |
|  | | **JPY** | | **JPY** | | **JPY** | | **JPY** | | **JPY** | | **JPY** | **JPY** | **JPY** | **JPY** |
|  | | | | | | | | | | | | | **(in thousands, except share data)** | **(in thousands, except share data)** | **(in thousands, except share data)** |
|  **Balance, April 30, 2022** |  | ¥— | 3688 | ¥— | 404 | ¥— | 4600 | ¥— | 1111 | ¥— | 10000 | ¥100000 | ¥3946038 | ¥(2416761) | ¥1629277 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuance of convertible preferred stock, net | 1923 | 1089380 |  |  |  |  |  |  |  |  |  |  | 1079724 |  | 2169104 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation |  |  |  |  |  |  |  |  |  |  |  |  | 65537 |  | 65537 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss |  |  |  |  |  |  |  |  |  |  |  |  |  | (885000) | (885000) |
|  **Balance, October 31, 2022** | 1923 | ¥1089380 | 3688 | ¥— | 404 | ¥— | 4600 | ¥— | 1111 | ¥— | 10000 | ¥100000 | ¥5091299 | ¥(3301761) | ¥2978918 |
|  **Balance at October 31, 2022- Convenience translation into US dollars (Note 2) - Thousand USD** | 1923 | $7329 | 3688 | $— | 404 | $— | 4600 | $— | 1111 | $— | 10000 | $673 | $34255 | $(22214) | $20043 |

---

The accompanying notes are an integral part of these unaudited condensed financial statements.

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**Pixie Dust Technologies, Inc.** 

**Condensed Statements of Cash Flows (Unaudited)** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Six months Ended October 31,** | **Six months Ended October 31,** | **Six months Ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$(Note 2)** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  **Cash flows from operating activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss | ¥(624957) | ¥(885000) | $(5954) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization | 33104 | 38896 | 262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-based compensation |  | 32768 | 220 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Loss on disposal | 311 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Asset retirement obligation accretion | 274 | 332 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Changes in operating assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-trade | (55256) | (39831) | (268) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts receivable-other | (716) | 3539 | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Inventories | (14469) | (30511) | (205) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses and other current assets | (5192) | (16789) | (113) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease right-of-use assets, net | (314461) | 30909 | 208 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other assets | (16705) | (1678) | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | (27630) | 28166 | 190 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses and other current liabilities | 29247 | 9501 | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease liabilities | 314644 | (31968) | (215) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net cash used in operating activities** | (681806) | (861666) | (5797) |
|  **Cash flows from investing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of property and equipment | (59071) | (47351) | (319) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of intangible assets | (3555) | (1970) | (13) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Net cash used in investing activities** | (62626) | (49321) | (332) |
|  **Cash flows from financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from borrowings | 250000 | 250000 | 1682 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Repayments of finance lease liabilities | (322) | (6972) | (47) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Payments of offering costs | (18193) | (24151) | (162) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Proceeds from issuance of convertible preferred stock |  | 2171103 | 14607 |
|  **Net cash provided by financing activities** | 231485 | 2389980 | 16080 |
|  Net (decrease) increase in cash and cash equivalents | (512947) | 1478993 | 9951 |
|  Cash and cash equivalents at beginning of year | 3066101 | 1795963 | 12083 |
|  Cash and cash equivalents at end of year | ¥2553154 | ¥3274956 | $22034 |
|  **Supplemental disclosures of cash flow information:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash paid during the year for: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest | ¥11662 | ¥13423 | $90 |
|  **Non-cash investing and financing activities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Operating lease right-of-use assets obtained in exchange for lease liabilities | ¥344603 | ¥2716 | $18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Property and equipment acquired under finance leases |  | 3996 | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of property and equipment included in accounts payable | 322 | 8332 | 56 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Offering costs included in accounts payable and, accrued expenses and other current liabilities | 1840 | 23417 | 158 |

---

The accompanying notes are an integral part of these unaudited condensed financial statements.

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##### [**Table of Contents**](#toc)
**Pixie Dust Technologies, Inc.** 

**NOTES TO CONDENSED FINANCIAL STATEMENTS** 

**1.** **Description of Business** 

Pixie Dust Technologies, Inc. (the "Company") was incorporated in Japan in May 2017. Since its inception, the Company has conducted research, technology development, and business development based on research (basic technology) acquired through industry-academic collaboration and builds mechanisms for continuous social implementation in response to the issues and needs that exist in society.

The core technology of the company is "wave control technology". While wave control technology has the potential for a variety of applications, the Company currently focuses development efforts in two principal fields: Healthcare & Diversity and Workspace & Digital Transformation. The Company continuously performs research and development activities with its partners and then manufactures and/or sells the products resulting from that research and development in cooperation with its partners.

Currently, the Company is working in the Diversity and Healthcare fields by developing scalp care products, devices for the deaf or hard-of-hearing persons, and devices for the elderly utilizing wave control technology. For the six months ended October 31, 2022, initial pre-sales of "SonoRepro" were conducted through a third-party Japanese product launch platform. SonoRepro is a scalp care device using non-contact vibrotactile stimulation with ultrasound. The Company launched this product in November 2022.

In the Workspace & Digital Transformation (DX) field, the Company has been working on providing a digital spatial transformation (DX) platform service for enterprises and developing acoustic metamaterials. In July 2022, the Company launched a product "iwasemi HX-α" which is a sound absorption design technology to acoustic metamaterial technology. The Company generated revenues through sales to other corporations and through third-party online retailers.

For the six months ended October 31, 2021 and 2022, all of the Company's customers are located in Japan. The Company's fiscal year-end is April 30. The Company is headquartered in Japan. For the six months ended October 31, 2021 and 2022, there are no subsidiaries to be consolidated for the Company and the Company has one operating segment.

**2.** **Summary of Significant Accounting Policies** 

The Company's significant accounting policies are described in Note 2 – Summary of Significant Accounting Policies, to the financial statements for the year ended April 30, 2022 included elsewhere in this prospectus. There have been no material changes to the significant accounting policies during the six months ended October 31, 2022

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Basis of Presentation*** 

The accompanying unaudited condensed financial statements for the six-month periods ended October 31, 2021 and 2022 have been prepared in accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP") .

The results of operations for interim period are not necessarily indicative of the results to be expected for the fiscal year ending April 30, 2023 or for any other future annual or interim period. Translations of the condensed balance sheets, the condensed statements of operations, the condensed statements of stockholders' equity and the condensed statements of cash flows from JPY into US$ as of and for the year ended October 31, 2022 are solely for the convenience of the readers and were calculated at the rate of US$1.00=JPY148.63, representing the index rates stipulated by the federal reserve board/ the noon buying rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on October 31, 2022. No representation is made that the JPY amounts could have been, or could be, converted, realized or settled into US$ at that rate on October 31, 2022, or at any other rate.

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##### [**Table of Contents**](#toc)
The condensed balance sheet as of April 30, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited interim condensed financial statements should be read in conjunction with the financial statements and related notes for the year ended April 30, 2022 included elsewhere in this prospectus.

The Company has evaluated subsequent events through the date that the condensed financial statements were issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Liquidity*** 

The Company has incurred recurring operating losses and negative cash flow from operating activities since inception. As of October 31, 2022, the Company had an accumulated deficit of ¥3,301,761 thousand ($22,214 thousand) and cash and cash equivalents of ¥3,274,956 thousand ($22,034 thousand). Based on the Company's current operating plans and projections, the Company expects that its existing cash and cash equivalents will be sufficient to meet normal operating requirements and to fund planned capital expenditures during the next 12 months from the date these condensed financial statements were available to be issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Use of Estimates*** 

The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in the condensed financial statements include, but are not limited to, impairment of long-lived assets, asset retirement obligations, revenue recognition, stock-based compensation, and valuation of deferred tax assets. Actual results could materially differ from the Company's estimates, and there may be changes to the estimates in future periods. Management bases these estimates on assumptions that it believes are reasonable under the circumstances. Actual results could differ from those estimates

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Risks and Uncertainties*** 

The Company is subject to number of risks similar to other companies in the development stage, including, but are not limited to, its limited operating history, competition from other companies, limited access to additional funds, dependence on key personnel, and management of potential rapid growth. To address these risks, the Company must, among other things, develop its customer base, implement and successfully execute its business and marketing strategy, develop follow-on products, provide superior customer service, and attract, retain, and motivate qualified personnel. There can be no guarantee that the Company will be successful in addressing these or other such risks.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Recently Adopted Accounting Pronouncements*** 

In November 2021, the financial accounting standards board ("FASB") issued an Accounting Standards Update ("ASU") 2021-10, *"Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance"*. The ASU requires additional disclosures for transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including: (i) information about the nature of the transactions and related accounting policy used to account for the transactions; (ii) the line items on the balance sheet and income statement affected by these transactions including amounts applicable to each line; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The new guidance is effective for the Company for annual periods beginning after December 15, 2021. The Company has adopted this standard effective May 1, 2022. The adoption of this standard did not have a material effect on the Company's condensed financial statements.

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##### [**Table of Contents**](#toc)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Recently Issued Accounting Pronouncements Not Yet Adopted*** 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments ("ASU 2016-13"). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which required entities to make a one-time determination of whether an entity is eligible to be a smaller reporting company as of November 15, 2019 for the purpose of determining the effective date of ASU 2016-13. As an emerging growth company, the Company will adopt this standard effective May 1, 2023 and the adoption of this ASU is currently not expected to have a material effect on the financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020- 06") to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. As an emerging growth company, the Company will adopt this standard effective May 1, 2024. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

**3.** **Inventories** 

Inventories are comprised as follows as of April 30, 2022 and October 31, 2022: Finished goods include iwasemi products, the dedicated location measurement devices required to provide hackke services and SonoRepro devices. Work in process includes the costs for commissioned research. Raw materials include items related to hackke and SonoRepro. There is no reserve as of October 31, 2022.

---

| | | | |
|:---|:---|:---|:---|
|  | **As of** | **As of** | **As of** |
|  | **April 30, 2022** | **October 31, 2022** | **October 31, 2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Finished goods | ¥12153 | ¥19487 | $131 |
|  Work-in-process | 5432 | 6092 | 41 |
|  Raw materials | 5720 | 28237 | 190 |
|  Total | ¥23305 | ¥53816 | $362 |

---

**4.** **Leases** 

<u>Finance Leases</u>

The Company's finance right-of-use assets and lease liabilities are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **As of** | **As of** | **As of** |
|  | **April 30, 2022** | **October 31, 2022** | **October 31, 2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Finance lease right-of-use assets, net<sup>(1)</sup> | ¥45303 | ¥42763 | $288 |
|  Current portion of finance lease liabilities <sup>(2)</sup> | 13221 | 14636 | 98 |
|  Finance lease liabilities, net of current portion<sup>(3)</sup> | 36799 | 32408 | 218 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Included in "Property and equipment, net" in the Condensed Balance Sheet.

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##### [**Table of Contents**](#toc)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Included in "Accrued expenses and other current liabilities" in Condensed Balance Sheet.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Included in "Other liabilities" in the Condensed Balance Sheet.

The components of lease costs are as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended<br>October 31,** | **Six Months ended<br>October 31,** | **Six Months ended<br>October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Finance lease cost |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Amortization of right-of-use assets | ¥291 | ¥6537 | $44 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest on lease liabilities | 61 | 663 | 4 |
|  Total | ¥352 | ¥7200 | $48 |

---

Supplemental information related to finance leases is as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended<br>October 31,** | **Six Months ended<br>October 31,** | **Six Months ended<br>October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Cash flow information |  |  |  |
|  Cash paid for amounts included in the measurement of lease liabilities | ¥322 | ¥6972 | $47 |
|  Finance lease right-of-use assets obtained in exchange for lease liabilities |  | 3996 | 27 |
|  Weighted average remaining lease term (in years) | 4.1 | 2.9 |  |
|  Weighted average discount rate | 3.00% | 2.59% |  |

---

Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to October 31, 2022 are as follows:

---

| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** |
|  Year ending April 30, |  |  |
|  2023 (remainder) | ¥7879 | $53 |
| 2024 | 15757 | 106 |
| 2025 | 15091 | 102 |
| 2026 | 10001 | 67 |
| 2027 | 456 | 3 |
|  Thereafter | 190 | 1 |
|  Total | 49374 | 332 |
|  Less: Interest component | (2330) | (16) |
|  Present value of minimum lease payments | ¥47044 | 316 |

---

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<u>Operating Leases</u>

The components of the operating lease expenses reflected in the statement of operations for the six months ended October 31, 2021 and 2022 were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended October 31,** | **Six Months ended October 31,** | **Six Months ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Fixed lease cost | ¥42122 | ¥46193 | $311 |
|  Variable lease cost | 1550 | 2231 | 15 |
|  Short-term cost | 120 | 32 | 0 |
|  Total | ¥43792 | ¥48456 | $326 |

---

Supplemental information related to operating leases is as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended October 31,** | **Six Months ended October 31,** | **Six Months ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Cash paid for amounts included in the measurement of lease liabilities | ¥42122 | ¥46193 | $311 |
|  Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | 344603 | 2716 | 18 |
|  Weighted average remaining lease term (in years) | 14.5 | 13.6 |  |
|  Weighted average discount rate-operating lease | 2.24% | 2.25% |  |

---

Maturity analysis of future minimum lease payments under non-cancellable leases subsequent to October 31, 2022 are as follows:

---

| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** |
|  Year ending April 30, |  |  |
|  2023 (remainder) | ¥46254 | $311 |
| 2024 | 90771 | 611 |
| 2025 | 89215 | 600 |
| 2026 | 87777 | 591 |
| 2027 | 87441 | 588 |
|  Thereafter | 808826 | 5442 |
|  Total | 1210284 | 8143 |
|  Less: Interest component | (168879) | (1136) |
|  Present value of minimum lease payments | ¥1041405 | $7007 |

---

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**5.** **Borrowings** 

Long-term borrowings consisted of the following as of April 30, 2022 and October 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
|  | **As of** | **As of** | **As of** |
|  | **April 30, 2022** | **October 31, 2022** | **October 31, 2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Long term borrowings from Banks, unsecured, maturing serially through 2022-2026, (weighted average: April 2022 — 2.93%, October 2022 — 2.95%) | ¥790000 | ¥1040000 | $6997 |
|  Less: current portion | (5555) | (12221) | (82) |
|  Long-term borrowings, net of current portion | ¥784445 | ¥1027779 | $6915 |

---

The long-term borrowings accrue interest using fixed interest rates of 1.70% - 3.00% per annum as of April 30, 2022 and October 31, 2022. However, one borrowing is exempt from interest payments until November 29, 2023 due to the Tokyo Metropolitan Government's interest subsidy policy for COVID-19.

There is an unsecured borrowing which allows the Company to borrow up to ¥1,000,000 thousand ($6,728 thousand). This borrowing is to be disbursed in four installments of ¥250,000 thousand ($1,682 thousand) each, provided, that the Company meets certain financial performance targets prior to each of the second, third and fourth installment. The Company executed its last borrowing of ¥250,000 thousand in July 2022 and completed the entire borrowing ¥1,000,000 thousand ($6,728 thousand).

All debt issuance costs related to these borrowings are immaterial.

Annual maturities for the years subsequent to October 31, 2022 are as follows:

---

| | | |
|:---|:---|:---|
|  | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** |
|  Year ending April 30, |  |  |
|  2023 (remainder) | ¥5555 | $37 |
| 2024 | 1013332 | 6818 |
| 2025 | 13332 | 90 |
| 2026 | 7781 | 52 |
|  Total | ¥1040000 | $6997 |

---

**6.** **Stockholders' Equity** 

There were no changes to the Company's Series A, AA, B, and BB convertible preferred stock or common stock during the six months ended October 31, 2022. A total of 1,923 shares of Series C convertible preferred stock were issued for ¥2,178,760 thousand in total during the interim financial statement period as given below in the table with the same rights as previous issuances. See Note 12 to our audited financial statements as of and for the years ended April 30, 2022 included elsewhere in this prospectus for a discussion of the Company's convertible preferred stock rights. The Company recorded ¥1,089,380 thousand ($7,329 thousand) and ¥1,089,380 thousand ($7,329 thousand) in Series C convertible preferred stock and additional paid-in capital, respectively, and issuance costs of ¥9,656 thousand ($65 thousand) as a reduction of the additional paid-in capital:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Issue Date** | **Issuance Price<br>(amount paid in)**<br>**(per share)** | **Holder's<br>Conversion<br>Right** | **Conversion<br>Ratio** | **Settlement<br>methods** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C | June 17, 2022 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C | September 8, 2022 | ¥1,133 thousand |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C | September 14, 2022 | ($8 thousand) | Any time | 1 | Shares |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Series C | September 26, 2022 |  |  |  |  |

---

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##### [**Table of Contents**](#toc)
**7.** **Revenue Recognition** 

<u>Disaggregation of Revenue</u>

The table reflects revenue by major source for the following periods:

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended October 31,** | **Six Months ended October 31,** | **Six Months ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Commissioned research | ¥98027 | ¥86980 | $585 |
|  Product sales<sup>(1)</sup> |  | 36773 | 247 |
|  Solution services | 57491 | 14186 | 95 |
|  Membership services | 9125 | 4097 | 28 |
|  Guest speaker services | 14570 | 16603 | 112 |
|  Total revenue | ¥179213 | ¥158639 | $1067 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) During the six months ended October 31, 2022, the Company generated revenue from new product sales in
addition to commissioned research, solution services, membership services and guest speaker services. New product sales are primarily comprised of SonoRepro and iwasemi. Revenue is recognized when control of the promised goods is transferred to the
customer in an amount that reflects the expected consideration in exchange for such goods. The Company recognizes revenue from product sales to customers principally at the point of delivery of the product to the customer. When the Company generates
revenue from e-commerce, it is recognized either at the time of shipment or at the time of delivery of the product to the customer, depending on the customer's order designation.

<u>Contract Balance</u>

The Company did not have contract assets as of April 30, 2022 and October 31, 2022. Contract liabilities are included in accrued expenses and other current liabilities on the Condensed Balance Sheet are expected to be recognized as revenue within one year.

The following table summarizes the change in contract liabilities for the six months ended October 31, 2021 and 2022.

---

| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended October 31,** | **Six Months ended October 31,** | **Six Months ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands)** | **(in thousands)** | **(in thousands)** |
|  Beginning balance | ¥10038 | ¥12572 | $85 |
|  Revenue earned | (10579) | (7673) | (52) |
|  Deferral of revenue | 7347 | 22982 | 155 |
|  Ending balance | ¥6806 | ¥27881 | $188 |

---

**8.** **Stock-Based Compensation** 

On August 31, 2022, the Board of Directors and stockholders approved the issuance of the 8th Series stock options, the Company granted options to purchase 146 shares of common stock at an exercise price of ¥1 per share to a consulting firm.

The exercise term of 8th Series stock options is 10 years commencing from August 31, 2022. The options are fully vested, nonforfeitable at the grant date and have no performance conditions that impact vesting, however, there are specific implied performance obligations within the consulting agreement throughout the expected project term which supports the recognition of an asset and not expense on the day of grant. The

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Company is essentially paying them for their time. Therefore, the Company recognizes a prepaid compensation asset on the grant date for the fully vested and nonforfeitable stock options and recognize the costs straight line over the expected service (project) period to mirror the services being received. The stock option's fair value as of the grant date is ¥448,882.86 ($3,020.14) per share.

Total stock-based compensation expense for 8th Series stock options included in selling, general and administrative expenses in the Condensed Statements of Operations was ¥32,768 thousand ($220 thousand) for the six months ended October 31, 2022. As of October 31, 2022, there was ¥32,768 thousand ($220 thousand) of unrecognized expense included in prepaid compensation asset related to 8th Series stock options in the Condensed Balance Sheets.

The fair value of the 8th Series is estimated using a Black -Scholes option -pricing model ("BSM"). BSM requires the input of significant assumptions such as the expected stock price volatility, risk free interest rate and expected dividend.

Expected Term — The expected term of stock options represents the weighted-average period the stock options are expected to be outstanding. The expected term of option was estimated utilizing the simplified method because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The simplified method primarily is calculated as the midpoint between the requisite service period and the contractual term of option.

Expected Volatility — The expected stock price volatility assumption was determined by examining the historical volatilities of comparable publicly traded companies within the Company's industry.

Risk-Free Interest Rate — The risk-free rate assumption was based on the U.S. treasury rate that was consistent with the expected term of the Company's stock options.

Expected Dividend — The expected dividend assumption was based on the Company's history and expectation of dividend payouts. The Company does not currently pay dividends on the common stock; therefore, a dividend yield of 0% was used in the BSM model.

Fair Value of Common Stock — The fair value of the common stock underlying the stock options has historically been the responsibility of and determined by the Company's Board of Directors. Because there has been no public market for the Company's common stock, the Board of Directors has used independent third-party valuations of the Company's common stock, operating and financial performance, and general and industry-specific economic outlook, amongst other factors.

The following assumptions were used in the BSM calculation for the Series 8 stock options:

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| | |
|:---|:---|
|  | **Six Months ended<br>October 31, 2022** |
|  Expected term | 5 years |
|  Expected volatility | 39.54% |
|  Risk-free interest rate | 3.25% |
|  Expected dividend yield |  |

---

**9.** **Income Taxes** 

The Company calculates the tax expense (benefit) for interim financial statement periods using an estimated annual effective tax rate. The Company recorded no income tax expense for the six months ended October 31, 2021 and 2022 because the estimated annual effective tax rate was zero. As of October 31, 2022, the Company continues to maintain a valuation allowance against its net deferred tax assets. The Company intends to maintain this valuation allowance until sufficient evidence exists to support the reversal of the valuation allowance. The Company has recognized no uncertain tax benefit.

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**10.** **Net Loss Per Share** 

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:

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| | | | |
|:---|:---|:---|:---|
|  | **Six Months ended October 31,** | **Six Months ended October 31,** | **Six Months ended October 31,** |
|  | **2021** | **2022** | **2022** |
|  | **JPY** | **JPY** | **US$** |
|  | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** | **(in thousands, except share and per share data)** |
|  Common Stock |  |  |  |
|  Numerator: |  |  |  |
|  Net loss | ¥(624957) | ¥(885000) | $(5954) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net loss attributable to stockholders | (624957) | (885000) | (5954) |
|  Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Weighted average shares outstanding used to compute net loss per share, basic and diluted | 10000 | 10000 | 10000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basic and diluted | ¥(62495.68) | ¥(88499.96) | $(595.44) |

---

The Company's potentially dilutive securities, which include all outstanding stock options and convertible preferred stock, have been excluded from the calculation of diluted net loss per share for the six months ended October 31, 2021 and 2022 due to their anti-dilutive effect.

**11.** **Related-Party Transactions** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with xDiversity*** 

The Company entered into an agreement for the operation and administration management of xDiversity. xDiversity has no capital relationship with the Company, but the Company's two directors are board members of xDiversity.

The Company recognized other income ¥1,364 thousand and ¥1,364 thousand ($9 thousand) for the six months ended October 31, 2021 and 2022 related to outsourcing fees. The accounts receivable balance related to the outsourcing fee was ¥250 thousand and ¥250 thousand ($2 thousand) as of April 30, 2022 and October 31, 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with Trusts for the Benefit of Employees*** 

In respect of Series 6 stock options, the Company applies the scheme called "The Trusted Fair Value Stock Option" and three directors contributed funds as trustors to establish the trust. The trustee (Nozomi Kaikeisya, the tax accountant) purchased the Company's stock options and holds them until they are allocated to the final beneficiaries (employees, etc.). Since the payment is made before the rights are vested, the amount paid by the trust of ¥2,854 thousand and ¥2,854 thousand ($19 thousand) is recorded as other current liabilities, as of April 30, 2022 and October 31, 2022, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***•***  ***Transactions with CEO*** 

Yoichi Ochiai, the CEO of the Company, has guaranteed the Company's lease liability during the contract period. The lease balance was ¥47,738 thousand and ¥41,487 thousand ($279 thousand) as of April 30, 2022 and October 31, 2022.

**12.** **Subsequent Events** 

The subsequent events were evaluated through March 7, 2023, the date the condensed financial statements were issued, during which time, nothing has occurred outside the normal course of business operations that would require disclosure.

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**• American Depositary Shares** 

**Representing • Common Shares**![LOGO](g430639g10c39.jpg)

**PIXIE DUST TECHNOLOGIES, INC.** 

**Common Shares** 

**in the form of American Depositary Shares** 

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**PROSPECTUS** 

------

**Boustead Securities, LLC** 

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● **, 2023** 

Until and including ●, 2023 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

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##### [**Table of Contents**](#toc)
**PART II** 

**INFORMATION NOT REQUIRED IN PROSPECTUS** 

**Item 6. Indemnification of Directors and Officers.** 

Article 330 of the Companies Act of Japan (the "Companies Act") makes the provisions of Part III, Chapter 2, Section 10 of the Civil Code of Japan applicable to the relationship between us and our directors and corporate auditors. Section 10 of the Civil Code, among other things, provides in effect that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Any director or corporate auditor of a company may demand advance payment of expenses considered necessary for
the management of the affairs of such company entrusted to the director or corporate auditor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If a director or a corporate auditor of a company has defrayed any expenses considered necessary for the
management of the affairs of such company entrusted to the director or corporate auditor, the director or corporate auditor may demand reimbursement therefor and interest thereon after the date of payment from such company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. If a director or a corporate auditor has assumed an obligation necessary for the management of the affairs of
such company, the director or corporate auditor may require such company to perform it in the director or corporate auditor's place or, if it is not due, to furnish adequate security; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. If a director or a corporate auditor, without any fault on the director or corporate auditor's part,
sustains damage through the management of the affairs of such company, the director or corporate auditor may demand compensation therefor from such company.

In accordance with our Articles of Incorporation, and pursuant to the provisions of Article 427 of the Companies Act, we are authorized to enter into agreements with non-executive directors and corporate auditors, respectively, to limit his or her liability to our Company for loss or damage arising from the conduct specified under Article 423 of the Companies Act; provided that, the amount of such limited liability is either: (i) an amount set out in the agreement which shall be not less than one million (1,000,000) yen, or (ii) the amount stipulated in applicable laws and regulations, whichever is higher.

In addition, our Articles of Incorporation include limitation of liability provisions, pursuant to which we can exempt, by resolution of our board of directors, our independent directors and corporate auditors from liabilities arising in connection with any failure to execute their respective duties in good faith or due to simple negligence (excluding gross negligence and willful misconduct), within the limits stipulated by applicable laws and regulations including Article 426, Paragraph 1 of the Companies Act.

We maintain, at our expense, a directors' and officers' liability insurance policy for each of our directors and corporate auditors. The policy insures each of our directors and corporate auditors against certain liabilities that they may incur in their capacity as a director or corporate auditor.

We have entered into a customary liability limitation agreement with each of our outside directors (Yusuke Murata, Ryo Oshima and Masayo Takahashi) and outside corporate auditors (Kazuyoshi Takeya, Akiko Ito and Seiichi Koike) which limits the maximum amount of their liability to an amount stipulated in laws and regulations.

**Item 7. Recent Sales of Unregistered Securities.** 

During the three-year period preceding the date of filing this registration statement, we have issued securities in the transactions described below without registration under the Securities Act. All share amounts below are presented as of the date of the relevant transaction, without accounting for the Share Split. We believe

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that each of the following issuances was exempt from registration under the Securities Act in reliance on Regulation S under the Securities Act regarding sales by an issuer in offshore transactions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In April 2020, we granted the Sixth Series stock options to purchase a total of 782 common shares to certain
employees, directors, and advisors, at an exercise price of ¥181,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In April 2020, we granted the Seventh Series stock options to purchase a total of 366 common shares to certain
employees, directors, and advisors, at an exercise price of ¥181,000.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In August 2022, we granted the Eighth Series stock options to purchase a total of 146 common shares to an
advisor, at an exercise price of ¥1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In June and September 2022, we issued and sold 1,923 Series C convertible preferred shares to various
institutional investors and other persons inside and outside of Japan, at a purchase price of JPY 1,133,000 per share.

**Item 8. Exhibits and Financial Statement Schedules.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The following exhibits are filed as part of this Registration Statement and are numbered in accordance with
Item 601 of Regulation S-K:

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| | |
|:---|:---|
| **Exhibit<br>Number** | **Description** |
| &nbsp;&nbsp;&nbsp;&nbsp;1.1\* | Form of Underwriting Agreement. |
| &nbsp;&nbsp;&nbsp;&nbsp;3.1 | Form of Articles of Incorporation of the Registrant (English translation) to be in effect prior to the consummation of this offering. |
| &nbsp;&nbsp;&nbsp;&nbsp;4.1\* | Form of Deposit Agreement among the Registrant, the depositary, and holders of the American Depositary Receipts. |
| &nbsp;&nbsp;&nbsp;&nbsp;4.2\* | Specimen American Depositary Receipt of the Registrant (included as Exhibit A in Exhibit 4.1). |
| &nbsp;&nbsp;&nbsp;&nbsp;4.3\* | Form of Underwriter's Warrant (included as Exhibit A in Exhibit 1.1). |
| &nbsp;&nbsp;&nbsp;&nbsp;5.1\* | Opinion of Greenberg Traurig Tokyo Law Offices, Japanese counsel for the Registrant. |
| 10.1 | Loan Agreement, dated as of March 22, 2019, by and between The Shoko Chukin Bank and the Registrant (English translation). |
| 10.2 | Loan Agreement, dated as of November 30, 2020, by and between Resona Bank Limited and the Registrant (English translation). |
| 10.3 | Addendum to the Loan Agreement, dated as of November 30, 2020, by and between Resona Bank Limited and the Registrant (English translation). |
| 10.4 | Lease Agreement, dated as of June 28, 2021, by and between Sumitomo Realty & Development Co., Ltd. and the Registrant (English translation). |
| 10.5# | Form of Limitation of Liability Agreement by and between the Registrant and its outside director or outside corporate auditor (English translation). |
| 10.6# | Form of Stock Acquisition Rights Allotment Agreement by and between the Registrant and its director or officer (English translation). |
| 23.1\* | Consent of Baker Tilly US, LLP, independent registered public accounting firm. |
| 23.2\* | Consent of Greenberg Traurig Tokyo Law Offices (included in Exhibit 5.1). |
| 24.1 | Power of Attorney (included on the signature page to this Registration Statement). |
| 99.1 | Request for Waiver and Representation under Item 8.A.4 of Form 20-F. |
| 107\* | Filing Fee Table. |

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\* To be provided by amendment.

# Indicates management contract or compensatory plan or arrangement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Financial Statements Schedules

See our Financial Statements starting on page F-1. All other schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the financial statements and related notes thereto.

**Item 9. Undertakings** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The undersigned registrant (the "Registrant") hereby undertakes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To file, during any period in which offers, or sales are being made, a post-effective amendment to this
registration statement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To include any prospectus required by section 10(a)(3) of the Securities Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To include any material information with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To remove from registration by means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) To file a post-effective amendment to the registration statement to include any financial statements required
by Item 8.A of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Securities Act need
not be furnished, provided that the Registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph and other information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) That, for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in
the initial distribution of the securities:

The Registrant undertakes that in a primary offering of securities of the Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following

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communications, the Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Any preliminary prospectus or prospectus of the Registrant relating to the offering required to be filed
pursuant to Rule 424 under the Securities Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the Registrant or used or
referred to by the Registrant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The portion of any other free writing prospectus relating to the offering containing material information about
the Registrant or its securities provided by or on behalf of the Registrant; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Any other communication that is an offer in the offering made by the Registrant to the purchaser.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Registrant hereby undertakes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) That, for purposes of determining any liability under the Securities Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon Rule 430A under the Securities Act and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was declared effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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**SIGNATURES** 

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Tokyo, Japan on ●, 2023.

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| | |
|:---|:---|
| PIXIE DUST TECHNOLOGIES, INC. | PIXIE DUST TECHNOLOGIES, INC. |
| By: |  |
|  | Name: Yoichi Ochiai |
|  | Title: Chief Executive Officer |

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**POWER OF ATTORNEY** 

KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned officers, directors and corporate auditors of the Registrant, a Japanese corporation, which is filing this registration statement on Form F-1 with the U.S. Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, and the Registrant's Authorized Representative in the United States, hereby constitutes and appoints Messrs. Yoichi Ochiai and Yoshiyuki Sekine, and each of them, as such individual's true and lawful attorneys-in-fact and agents, with full power to act separately and full power of substitution and re-substitution, for such individual and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, including a prospectus or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all other documents in connection therewith to be filed with the U.S. Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or his or her or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

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**Signature of Authorized U.S. Representative of Registrant** 

Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Pixie Dust Technologies, Inc. has signed this registration statement on ●, 2023.

 Name: ●

 Title: ●

## Exhibit 3.1

**Exhibit 3.1** 

Pixie Dust Technologies, Inc.

Articles of Incorporation

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Chapter I General Provisions

Article 1 (Company Name)

The company name of this company is "Pixie Dust Technologies Kabushiki Kaisha", which is expressed in English as "Pixie Dust Technologies, Inc" (hereinafter referred to as the "**Company**").

Article 2 (Purposes)

The purposes of the Company are to engage in the following businesses:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to control of wave motion, including sound, light, and electromagnetic wave;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) research and development, design, manufacturing, sale, import, export and provision of service contributing to
overcoming physical difficulty or promoting diversity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to medical, nursing, welfare and health care;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to energy conservation contributing to sustainable development and greenhouse gas mitigation, etc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to spatial perception and spatial control;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to technology of digital fabrication;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to in relation to technology of artificial intelligence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to in relation to plants and animals, agriculture and livestock industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to any type of technology contributing to resolve social issue or arising out of academic research;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10) research and development, design, manufacturing, sale, import, export and provision of service of software and
hardware in relation to any other type of technology;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(11) research and development, design, manufacturing, sale, import, export and provision of service of textile
products, paper products, woodworking products, daily use products, food, and toys;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12) provision, consulting, and consortium operation of primary information and others on technological information,
technological knowledge, and social issue;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(13) acquisition, development of methods of use, license for performance/use, management, and transfer of
copyrights, related rights, patent rights, utility model rights, design patent rights, trademark rights, know-hows, and other intellectual property rights, and intermediation thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14) planning, production, sale, and provision of service of publication, including book, magazine, and sheet music,
and art work;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(15) planning, production, and sale on the Internet, and any service incidental to the Internet;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(16) service of information processing and service of information provision;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(17) purchase and sale, lease, intermediation, and management of real property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(18) business of lease and business of rental;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19) research and development, design, manufacturing, sale, import, export and provision of service of medical
device;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(20) research and development, design, manufacturing, sale, import, export of pharmaceutical, quasi-pharmaceutical
product, pharmaceutical for animal, medical device for animal, industrial chemical product and measuring instrument, and management of pharmacy and clinic;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(21) sale, import, export and provision of service of dietary supplement to provide vitamins, minerals, proteins or
amino acids, fats, and carbohydrates, etc.;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(22) research and development, design, manufacturing, sale, import, export and provision of service of social
welfare equipment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(23) investment to persons working on any of the foregoing businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(24) management support to any of the foregoing businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(25) any and all business incidental and related to the above; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(26) Any and all other business.

Article 3 (Location of Head Office)

The Company shall have its head office in Chuo-ku, Tokyo.

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Article 4 (Organizational Bodies)

The Company shall have the following organizational bodies in addition to meetings of the shareholders and directors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Board of directors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Corporate auditors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Board of corporate auditors; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Financial auditor.

Article 5 (Method for Public Notice)

Public notices by the Company shall be published in a form of electronic public notice, provided, however, that in the event that the Company is unable to publish public notices in an electronic form due to accidents or any other unavoidable events, the public notices shall be published in the Japanese Official Gazette (*Kampo*).

Chapter II Shares

Article 6 (Total Numbers of Shares Issuable)

The total number of shares issuable by the Company shall be eighty-six thousand nine hundred four (86,904) shares.

Article 7 (No Issuance of Share Certificate)

No share certificate shall be issued for shares of the Company.

Article 8 (Shareholder Registry Administrator)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Company shall have a shareholder registry administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The shareholder registry administrator and the administrator's office shall be determined by a resolution
of the board of directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Preparation and maintenance of the Company's shareholder registry and share option rights registry and
other affairs related to the Company's shareholder registry and share option rights registry shall be entrusted to the shareholder registry administrator and shall not be handled by the Company.

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Article 9 (Rules on Handling of Shares)

The method and fees for handling shares of the Company shall be governed by the internal rules on the handling of the shares established by the board of directors, in addition to laws and regulations and these Articles of Incorporation.

Chapter III Meeting of Shareholders

Article 10 (Convocation)

The Company shall convene an annual meeting of the shareholders within three (3) months of the last day of each fiscal year, and an extraordinary meeting of the shareholders, as and when required.

Article 11 (Record Date for Annual Shareholders Meetings)

The record date for voting rights at an annual meeting of the shareholders shall be April 30 of each year.

Article 12 (Convener and Chairperson)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A CEO shall convene a meeting of the shareholders and shall act as the chairman therein, unless otherwise
specifically stipulated in laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If the CEO is unable to so convene or act due to accidents, other directors shall act in place of the CEO, in
accordance with the order decided upon in advance by a resolution of the board of directors.

Article 13 (Resolution Method)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Unless otherwise specifically provided by laws and regulations or these Articles of Incorporation, resolutions
at a meeting of the shareholders shall be passed by a majority of the votes of shareholders present at the meeting, who are entitled to exercise the votes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Resolutions set forth in Article 309, Paragraph 2 of the Companies Act shall be passed at a meeting of the
shareholders by two-thirds or more of the votes of shareholders present at the meeting, with a quorum of one-third or more of the votes of the shareholders who are
entitled to exercise their votes.

Article 14 (Exercise of Voting Rights by Proxy)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A shareholder may exercise voting rights by authorizing another shareholder who has voting rights in the
Company as proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The shareholder or proxy shall present to the Company a document evidencing the authority for each meeting of
the shareholders.

------

**Chapter IV Directors and Board of Directors** 

Article 15 (Numbers of Directors)

The number of directors of the Company shall be ten (10) or fewer.

Article 16 (Election of Directors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A director of the Company shall be elected at a meeting of the shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The election of directors shall be made by a resolution passed by a majority of the votes of shareholders
present at a meeting of the shareholders, with a quorum of one-third or more of the votes of the shareholders who are entitled to exercise their voting rights at the meeting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. No cumulative voting shall be used for a resolution for the election of directors.

Article 17 (Term of Office of Directors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The term of office of a director shall be until the conclusion of the annual meeting of the shareholders for
the last fiscal year ending in two (2) years of the election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The term of office of a director who is elected as an additional director or elected to fill a vacancy shall be
the same as the remining term of the other incumbent directors or the remaining term of his or her predecessor.

Article 18 (Representative Directors and Executive Directors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The board of directors shall elect a representative director(s) by a resolution of the board of directors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The board of directors may elect one (1) CEO (*torishimariyaku shacho*), and may elect a small number
of each executive chairman(s) (*torishimariyaku kaicho*), vice-president(s) (*torishimariyaku fukushacho*), senior managing director(s) (*senmu torishimariyaku*), and managing director(s) (*jomu torishimariyaku*).

Article 19 (Convener and Chairperson of Meetings of Board of Directors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A CEO shall convene a meeting of the board of directors and shall act as the chairperson of the meetings,
unless otherwise specifically stipulated in laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If the CEO is unable to so convene or act due to accidents, other directors shall act in place of the CEO, in
accordance with the order decided upon in advance by a resolution of the board of directors.

------

Article 20 (Convocation Notice of Meetings of Board of Directors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A notice to convene a meeting of the board of directors shall be given to each director and corporate auditor
at least three (3) days before the date set for the meeting, provided, however, in case of emergency, such period may be shortened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A meeting of the board of directors may be held without the convocation procedures if all directors and
corporate auditors give consent.

<u>Article 21 (Resolution Method of Board of Directors)</u> 

The resolutions at a meeting of the board of directors shall be passed by a majority of the votes of directors present at the meeting, who are entitled to participate in resolutions.

Article 22 (Waiver of Resolution of Board of Directors)

The Company may deem that a resolution was passed where the requirements under Article 370 of the Companies Act are satisfied.

Article 23 (Rules Concerning Board of Directors)

Any matter related to the board of directors shall be governed by the internal rules concerning the board of directors established by the board of directors.

Article 24 (Directors' Remuneration, etc.)

Any remuneration, bonus and other financial benefit (hereinafter referred to as the "**Remuneration, etc.**") to be received by directors as consideration for performance of their duties from the Company shall be determined by a resolution at a meeting of the shareholders.

------

Article 25 (Directors Liability Exemption)

1. Pursuant to the provisions of Article 426, Paragraph 1 of the Companies Act, the Company may exempt directors
(including former directors) from their liabilities for loss or damage arising from their misconducts to the extent permitted by laws and regulations.

2. Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company may enter into an
agreement with directors (excluding executive directors, etc.) to limit their liabilities for damage arising from their misconducts, provided, however, that the maximum amount that the Company may limit under such agreement shall be the minimum
liability amount stipulated in the laws and regulations.

**Chapter V Corporate Auditors and Board of Corporate Auditors** 

Article 26 (Number of Corporate Auditors)

The number of corporate auditors of the Company shall be three (3) or fewer.

Article 27 (Election of Corporate Auditors)

The election of corporate auditors shall be made by a resolution passed by a majority of the votes by shareholders present at a meeting of the shareholders, with a quorum of one-third or more of the votes of the shareholders who are entitled to exercise their votes at the meeting.

Article 28 (Term of Office of Corporate Auditors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The term of office of a corporate auditor shall be until the conclusion of the annual meeting of the
shareholders for the last fiscal year ending within four (4) years of the election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The term of office of a corporate auditor who is elected to fill a vacancy shall be the same as the remaining
term of his or her predecessor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. A resolution for election of an alternate auditor shall be effective until commencement of the annual meeting
of the shareholders for the last fiscal year ending within four (4) years of the election.

Article 29 (Full-Time Corporate Auditor)

The board of corporate auditors shall elect full-time corporate auditor(s) by its resolution.

------

Article 30 (Convocation Notice of Meetings of Board of Corporate Auditors)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A notice to convene a meeting of the board of corporate auditors shall be given to each corporate auditor at
least three (3) days before the date set for the meeting, provided, however, that in case of emergency, such period may be shortened.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A meeting of the board of corporate auditors may be held without the convocation procedures if all corporate
auditors give consent.

<u>Article 31 (Resolution Method of Board of Corporate auditors)</u> 

Unless otherwise specifically provided by laws and regulations, the resolutions at a meeting of the board of corporate auditors shall be passed by a majority of the votes of corporate auditors.

Article 32 (Rules Concerning the Board of Corporate Auditors)

Any matter related to the board of corporate auditors shall be governed by internal rules concerning the board of corporate auditors established by the board of corporate auditors as well as laws, regulations, and these Articles of Incorporation.

Article 33 (Remuneration, etc.)

The Remuneration, etc. of corporate auditors shall be determined by a resolution at a meeting of the shareholders.

Article 34 (Corporate Auditors Liability Exemption)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Only if corporate auditors are both in good faith and without gross negligence with respect to liabilities of
the corporate auditors (including former corporate auditors) under Article 423, Paragraph 1 of the Companies Act, the Company may exempt such corporate auditors from their liabilities by a resolution of the board of directors to the extent permitted
by laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act, the Company may enter into an
agreement with corporate auditors to limit their liabilities for damage arising from their misconducts, provided, however, that the maximum amount that the Company may limit under such agreement shall be the amount stipulated in laws and
regulations.

------

**Chapter VI Financial Auditor** 

Article 35 (Election of Financial Auditor)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Financial auditor shall be elected by a resolution at a meeting of the shareholders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The election of the financial auditor of the Company shall be made by a resolution passed by a majority of the
votes of the shareholders present at a meeting of the shareholders, with a quorum of one-third or more of the votes of the shareholders who are entitled to exercise their votes at the meeting.

Article 36 (Term of Office)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The term of office of the financial auditor shall be until the conclusion of the annual meeting of the
shareholders for the last fiscal year ending within one (1) year of the election.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Unless otherwise specifically resolved at the foregoing annual meeting of the shareholders, the financial
auditor shall be deemed reelected at such annual meeting of the shareholders.

Article 37 (Remuneration, etc.)

The Remuneration, etc. of the financial auditor shall be determined by the CEO with consent from the board of corporate auditors.

Article 38 (Financial Auditor Liability Exemption)

Pursuant to the provisions of Article 426, Paragraph 1 of the Companies Act, the Company may exempt financial auditors (including former financial auditors) from their liabilities for loss or damage arising from their misconducts to the extent permitted by laws and regulations.

**Chapter VII Accounts** 

Article 39 (Fiscal Year)

The Company's fiscal year shall be a period of one year from May 1 of each year to April 30 of the following year.

Article 40 (Record Date for Dividends from Surplus)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The record date for year-end dividends of the Company shall be
April 30 of each year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. In addition to the preceding paragraph, the Company may distribute surplus by setting a record date.

------

<u>Article 41 (Interim Dividends)</u> 

The Company may distribute interim dividends to shareholders or registered pledgee of shares by a resolution of the board of directors with October 30 every year as the record date.

Article 42 (Statute of Limitations on Dividends)

If amounts concerning the dividend are not received after three (3) full years have passed since the date on which the payment of such dividend was attempted, the Company shall be released from its obligation to pay such dividend.

(Supplementary Provision)

Article 1

The deletions of Article 7 (Restriction of Share Transfer), Article 8 (Claim to heirs, etc. for sale) and Article 10 (Grant of Rights to Receive an Allotment of Shares) as provided for in this Articles of Incorporation before amendment shall be effective upon the date of the public filing of the Company's registration statement for listing submitted with the U.S. Securities and Exchange Commission (hereinafter referred to as the "SEC") as determined by the board of directors (hereinafter referred to as the "Public Filing Date") after the confidential filing of such registration statement with the SEC. The deletions shall become effective at midnight Japan time on the Public Filing Date determined by the board of directors, regardless of the time when the Company actually files the public filing in the U.S. on the New York City time basis. This article shall be deleted after the effective date of this provision.

Article 2

The change to Article 3 (Location of Head Office) shall be effective on the date of relocation of head office as determined by the board of directors to be held by the end of October 2023. This article shall be deleted after the effective date of this provision.

- END -

## Exhibit 10.1

**Exhibit 10.1** 

**Loan Agreement** 

**(Installment-Type Term Loan Subject to Achievement of Plan)** 

Pixie Dust Technologies, Inc. ("**Borrower**") and The Shoko Chukin Bank, Ltd. ("**Lender**") agree as follows on March 22, 2019 (this "**Agreement**").

**Article 1. Definitions of Terms** 

Unless the context clearly requires otherwise, the terms used in this Agreement have the meanings set forth in Exhibit 1.

**Article 2. Loan-related Terms** 

**2.1 Loan** 

Lender shall lend money to Borrower in installments according to the terms of this Agreement:

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Total loan amount | JPY 1,000,000,000 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Expected Borrowing Date From the execution date of this Agreement until July 31, 2022; provided, however, that if the Loan Obligation terminates before then pursuant to the provisions of this Agreement, until the time of such termination.

**2.2 Individual Loan** 

In accordance with the provisions of this Agreement, Borrower shall apply for an Individual Loan upon the key terms below, and Lender shall make an Individual Loan to Borrower.

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Use of funds | Working capital |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Loan application deadline and method | Borrower will apply by sending a loan application form (Exhibit 2) to Lender by fax at least 5 Business Days before the requested borrowing date. (Borrower will confirm by phone that Lender has received the loan application form and will have no obligation to submit the original loan application form.) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Expected borrowing period and amount to be borrowed | First installment (March 2019): JPY 250,000,000<br> Second installment (July 2020): JPY 250,000,000<br> Third installment (July 2021): JPY 250,000,000<br> Fourth installment (July 2022): JPY 250,000,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Consolidation of Individual Loans | Each Individual Loan will be consolidated into a single Individual Loan on August 31, 2022 and will subsequently be treated as a single Individual Loan in all respects. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Term of Individual Loan | From the Borrowing Date until the maturity date of each Individual Loan |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Maturity date | February 29, 2024 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Principal repayment method | Pay as a lump sum on the maturity date |

---

------

---

| | |
|:---|:---|
| (7) Interest calculation period | For the first interest calculation period, means the period from each Borrowing Date (inclusive) until the next interest payment date (inclusive), and for subsequent interest calculation periods, means the period from the day after the last day (inclusive) of the immediately-preceding interest calculation period until the next interest payment date (inclusive). |
| (8) Applicable interest rate | 3.00% per annum |
| (9) Interest payment date | March 31, 2019 will be the first interest payment date, and thereafter, the last day of each month until the maturity date will be the interest payment date. |
| (10) Interest payment method | The sum of the remaining principal amount of an Individual Loan in each interest calculation period and the interest calculated by multiplying the applicable interest rate by the actual number of days in the interest calculation period (prorated, inclusive of both the start date and end date, and based on a 365-day year) (division will be performed at the end, and any fractional amount will be rounded off) will be paid on the interest payment date for such interest calculation period. |
| (11) Treatment of holidays | If the principal repayment date or interest payment date falls on a day other than a Business Day, it will be the next Business Day; provided, however, that if the next Business Day is in the next month, it will be the immediately-preceding Business Day rather than the next Business Day. |
| (12) Late payment charge | If a debt under this Agreement is not paid when due, for the period from the date on which such debt (the "**Overdue Debt**") became due (inclusive of such date) until the date on which the Overdue Debt is paid in full (inclusive of such date) (prorated, inclusive of both the start date and end date, and based on a 365-day year), Borrower shall pay a late payment charge calculated by multiplying the amount of the Overdue Debt by a rate of 14.5% per annum (division will be performed at the end, and any fractional amount will be rounded off). |

---

**2.3 Conditions Precedent to Loans; Modification of Loan Application Amount** 

(1) Lender shall make each Individual Loan subject to the satisfaction of all of the conditions set forth below as
of Each Individual Loan Borrowing Date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) This Agreement has validly come into effect

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Each matter set forth in Article 3.1 is true and correct

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Borrower is not in breach of any provision of this Agreement and such breach is not at risk of occurring on or
after Each Individual Loan Borrowing Date

(2) In addition to the conditions set forth in the preceding paragraph, Lender shall make an Individual Loan
subject to the satisfaction of all conditions set forth in each of the items below as of Each Individual Loan Borrowing Date for the second and subsequent loans:

Second Individual Loan The figure for each item stated in the Business Plan Achievement Status Report for the fiscal year ending April 2020 submitted to Lender exceeds all of the following:

---

| | |
|:---|:---|
| Sales | JPY 351,000,000 |
| Royalty / solution income | JPY 8,000,000 |
| Operating profit and loss | (JPY 700,000,000) |
| EBITDA | (JPY 478,000,000) |
| Cash and deposits | JPY 1,053,000,000 |

---

------

Third Individual Loan The figure for each item stated in the Business Plan Achievement Status Report for the fiscal year ending April 2021 submitted to Lender exceeds all of the following:

---

| | |
|:---|:---|
| Sales | JPY 842,000,000 |
| Royalty / solution income | JPY 235,000,000 |
| Operating profit and loss | (JPY 758,000,000) |
| EBITDA | (JPY 361,000,000) |
| Cash and deposits | JPY 273,000,000 |

---

Fourth Individual Loan The figure for each item stated in the Business Plan Achievement Status Report for the fiscal year ending April 2022 submitted to Lender exceeds all of the following:

---

| | |
|:---|:---|
| Sales | JPY 1,578,000,000 |
| Royalty / solution income | JPY 826,000,000 |
| Operating profit and loss | (JPY 229,000,000) |
| EBITDA | JPY 161,000,000 |
| Cash and deposits | JPY 264,000,000 |

---

(3) If the conditions set forth in the preceding paragraph are not satisfied as of Each Individual Loan Borrowing
Date, Lender may choose not to make an Individual Loan. In such cases, the amount of Individual Loan that is not made will be added to the next amount to be borrowed, and if the conditions set forth in the preceding paragraph are also not satisfied
as of the next Individual Loan Borrowing Date and an Individual Loan is not made, such amount will be further added to the amount of the next Individual Loan.

**2.4 Making a Loan** 

If all conditions set forth in Article 2.3(1) and 2.3(2) are satisfied as of the making of Each Individual Loan, Lender shall deposit the Individual Loan Amount to the Loan Bank Account on Each Individual Loan Borrowing Date in accordance with Article 2.2.

**2.5 Not Making a Loan** 

If Lender decides not to make an Individual Loan due to the failure to satisfy all or some of the conditions precedent to the making of the loan, unless there is a compelling reason, Lender shall notify Borrower by 1:00 p.m. on the date that is 2 Business Days before Each Individual Loan Borrowing Date. (In such cases, Lender shall deliver a notice letter (Exhibit 4) to Borrower by fax and promptly mail the original. If a fax is not received or the original is not received due to a reason attributable to the fault of Borrower, Borrower shall not raise any objection whatsoever.)

**2.6 Exclusion of Liability of Lender** 

(1) If a Loan Impossibility Event occurs with respect to Lender, Lender shall immediately notify Borrower.

(2) During the period of occurrence of a Loan Impossibility Event, Lender shall be exempt from the Loan Obligation.

------

**Article 3. Borrower's Representations, Warranties, and Covenants** 

**3.1 Borrower's Representations and Warranties** 

Borrower represents and warrants to Lender that, as of the execution date of this Agreement and the making of each Individual Loan, each matter stated below is true:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Borrower is a corporation (*kabushiki kaisha*) duly organized and validly existing under the laws of
Japan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The execution and performance of this Agreement and the transactions hereunder by Borrower are acts that fall
within the scope of Borrower's corporate purpose, and Borrower has completed all procedures required for such acts under laws, regulations, articles of incorporation, and other internal rules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The execution and performance of this Agreement and the transactions hereunder by Borrower: (a) do not
violate any laws or regulations binding on Borrower; (b) do not violate Borrower's articles of incorporation or other internal rules; and (c) do not breach any contract to which Borrower is a party or any contract with a third party
that is binding on Borrower or its property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The person who will sign or place his or her name and seal on this Agreement has been granted valid authority
to sign or to place his or her name and seal on this Agreement on behalf of Borrower in accordance with the procedures required under laws, regulations, articles of incorporation, and other internal rules.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) This Agreement is lawful, validly binding, and enforceable against Borrower in accordance with each of the
terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) The Reports, Etc. prepared by Borrower have been prepared accurately and lawfully in accordance with generally
accepted accounting standards in Japan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) On and after the completion of the settlement of accounts for the fiscal year ended in April 2018, no material
change has occurred that may deteriorate Borrower's business, property, or financial position stated in the audited accounting documents for said fiscal year and have a material effect on the performance of Borrower's obligations under
this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) No lawsuit, arbitration, administrative proceeding, or any other dispute that has or may have a material
adverse effect on the performance of obligations under this Agreement has been commenced or may be commenced with respect to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) None of the events set forth in Article 4 has occurred or may occur with respect to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) Borrower does not fall under any of items (a) through (n) below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Organized crime group (a group that may encourage its members (including members of the group's
constituent groups) to collectively or habitually commit violent torts or the like; same applies below)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Organized crime group member (a member of an organized crime group; same applies below)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Quasi-member of an organized crime group (a person, other than an organized crime group member, who has a
relationship with an organized crime group and who may commit violent torts or the like by showing the force of an organized crime group or who cooperates with or is involved in the maintenance or operation of an organized crime group, such as
supplying funds, weapons, or the like to an organized crime group or organized crime group member; same applies below)

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Entity affiliated with an organized crime group (an entity in which an organized crime group member is
substantially involved in the entity's management, an entity that is managed by a quasi-member of an organized crime group or a former organized crime group member and that proactively cooperates with or is involved in the maintenance or
operation of an organized crime group such as providing funds to an organized crime group, or an entity that proactively uses an organized crime group for the execution of work and cooperates with the maintenance or operation of an organized crime
group)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Corporate racketeer, etc. (a person who may commit violent torts or the like by seeking illicit profits from
companies or the like and thereby threaten the safety of civilian life, such as corporate racketeers and corporate extortionists)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Person engaging in criminal activities under the pretext of social activism, etc. (a person who may commit
violent torts of the like by seeking illicit profits under the pretext of social activism or political activities and thereby threaten the safety of civilian life, such as corporate racketeers and corporate extortionists)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) Person who was an organized crime group member at any time in the past 5 years

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Special intellectual crime group, etc. (a group or individual, other than those listed in items
(a) through (g) above, who uses the force of an organized crime group based on its relationship therewith or has a financial connection with an organized crime group and is at the center of structural misconduct)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Other persons equivalent to those in items (a) through (h) above

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) Person who has a relationship where its management is considered to be controlled by a person who falls under
items (a) through (i) above (for purposes of this item, "**Organized Crime Group Member, Etc.** ")

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) Person who has a relationship where an Organized Crime Group Member, Etc. is considered to be substantially
involved in its management

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) Person who has a relationship where it is considered to be wrongfully using an Organized Crime Group Member,
Etc. for the purpose of seeking illicit profits for itself, its company, or a third party or inflicting harm on a third party

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) Person who has a relationship where it is considered to be involved with an Organized Crime Group Member, Etc.,
such as providing funds or the like or providing favors

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) Officer or a person who is substantially involved in management and has a relationship that should be socially
condemned with an Organized Crime Group Member, Etc.

**3.2 Borrower's Covenants** 

(1) From the execution date of this Agreement until the termination hereof and the completion of the payment of all
debts to Lender hereunder, Borrower shall comply with each of the following items:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Continue its business by maintaining the licenses and the like necessary to run its principal business and
complying with all laws and regulations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Do not change the nature of its principal business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Except when required by law or regulation, handle the payment of all debts under this Agreement as at least the
same rank without subordination to the payment of other unsecured debts (including secured loans that constitute debt that cannot be fully recovered even after converting the collateral into cash).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) In the absence of Lender's consent, do not perform any merger, divestiture, share exchange, or share
transfer, transfer of its business or assets to a third party (including a transfer for a sale-and-leaseback), or receipt of a third party's business or assets that
will have, or may have, a material effect on the performance of Borrower's obligations under this Agreement, except when Borrower performs a transfer to the extent reasonably necessary when raising funds through asset securitization.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Borrower shall not fall under any of items (a) through (n) of Article 3.1(x).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Borrower, either directly or through a third party, shall not engage in any conduct that falls under any of
items (a) through (e) below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Making a violent demand

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Making an unreasonable demand that exceeds one's legal responsibility

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Engaging in threatening behavior or using violence in connection with a transaction

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Spreading rumors, harm Lender's reputation through deception or force, or interfering with Lender's
business

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Any other conduct equivalent to items (a) through (d) above

(2) From the execution date of this Agreement until the termination hereof and the completion of the payment of all
debts to Lender hereunder, Borrower shall comply with each of the following items at its own expense:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) If an event set forth in Article 4 occurs or may occur with respect to Borrower, Borrower shall immediately
report to Lender accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Reports, Etc. are prepared, Borrower shall submit to Lender a copy of the Reports, Etc. by the 10<sup>th</sup> day of the third month after the end of Borrower's fiscal year. In addition, Borrower shall accurately and duly prepare the Reports, Etc. in accordance with generally accepted accounting
standards in Japan, and in cases where the Reports, Etc. are required to be audited by law or regulation, they must undergo the necessary audits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) When submitting a copy of the Reports, Etc. under the preceding item, Borrower shall attach the following
documents and submit them to Lender:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Set of corporation income tax return and local corporation income tax return schedules for each fiscal year

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Business Plan Achievement Status Report (Exhibit 3; provided, however, that this will be after the submission
of the Reports, Etc. for the fiscal year ending April 2020)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Pipeline status report for each fiscal year

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Cash flow performance table for the next fiscal year as of the preparation of the Reports, Etc. to be submitted
to Lender

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Borrower shall submit to Lender the following documents as of the last day of July, October, and January by the
10<sup>th</sup> day of the third month after each such month:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Trial balance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Pipeline status report

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Cash flow performance table

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) If Lender determines that it is necessary, Borrower shall immediately report to Lender the property,
management, or business conditions of Borrower and its subsidiaries and affiliates and provide the necessary facilities for the investigation thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) If a material change with respect to the property, management, or business conditions of Borrower and its
subsidiaries and affiliates has occurred or may occur, or if a lawsuit, arbitration, administrative proceeding, or any other dispute that has or may have a material effect on the performance of Borrower's obligations under this Agreement has
been commenced or may be commenced, Borrower shall immediately report to Lender accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) On or after the execution date of this Agreement, if there is a change of 5% or more in the voting rights ratio
or it is determined that such change is expected, Borrower shall immediately notify Lender in writing.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) If it is determined that any of the items in the preceding Article is untrue, Borrower shall immediately report
to Lender accordingly in writing.

(3) If Borrower receives service of order for provisional attachment, preservative attachment, or attachment of
loan claims, Borrower shall immediately give written notice to Lender accordingly, along with a copy of such order.

**Article 4. Acceleration** 

(1) If any of the events set forth below occurs with respect to Borrower, all of its debts owed to Lender under
this Agreement will immediately become due and payable without any notice or demand from Lender, and Borrower shall immediately pay the principal and interest on an Individual Loan, the Settlement Fee, and all other amounts that must be paid by
Borrower under this Agreement in accordance with the terms hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) There is a petition (including similar petitions outside of Japan) for the suspension of payment, commencement
of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation, or commencement of any other legal insolvency proceedings similar thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Borrower passes a resolution for dissolution or receives a dissolution order (excluding cases where it
dissolves in connection with a merger).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Borrower discontinues its business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Borrower receives a suspension of transaction from a clearinghouse or a suspension of transaction from
densai.net Co., Ltd., or measures equivalent thereto from another electronic monetary claims recording institution.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) A provisional attachment, preservative attachment, or attachment order or notice (including similar procedures
outside of Japan) is sent, or a judgment ordering the execution of a preservative attachment or attachment is issued, with respect to Borrower's deposit claims or other claims against Lender. In such cases, Lender shall immediately notify
Borrower of the occurrence of such event.

(2) If any of the events set forth below occurs with respect to Borrower, upon Lender's notice of request, all
of Borrower's debts to Lender under this Agreement will immediately become due and payable and Borrower shall, in accordance with the terms of this Agreement, immediately pay the principal and interest on the loan, the Settlement Fee, and all
other amounts that must be paid by Borrower under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Whether or not it is a debt under this Agreement, Borrower does not pay all or a portion of its debts to Lender
when due.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) It is determined that any item in Article 3.1 of this Agreement is untrue.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Except for the preceding two items, Borrower breaches an obligation under this Agreement and such breach is not
cured within 10 Business Days.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) An order or notice of attachment, provisional attachment, preservative attachment, or provisional disposition
is sent, or a public auction procedure is commenced, with respect to collateral pledged to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) There is a petition for special conciliation (*tokutei choutei*).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) A bond issued by Borrower is accelerated.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) A debt other than the debts under this Agreement is accelerated, or a guaranty obligation of a third
party's debt cannot be performed despite the fact that the obligation to perform has arisen.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) Borrower suspends its business, decides to suspend or discontinue its business, or receives a business
suspension from a competent government body or the like.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) Besides the items above, the condition of Borrower's business or property has deteriorated or may
deteriorate, and acceleration is determined to be necessary for the preservation of claims.

(3) If a notice under the preceding paragraph is delayed or did not arrive due to the fault of Borrower, all of
Borrower's debts under this Agreement will immediately become due and payable when it normally would have arrived and Borrower shall, in accordance with the terms of this Agreement, immediately pay the principal and interest on the loan, the
Settlement Fee, and all other amounts that must be paid by Borrower under this Agreement, and Lender's Loan Obligation will be extinguished.

(4) Even if any of the events set forth in each item of paragraph (1) or each item of paragraph (2) (including
but not limited to cases where it is determined that Article 3.1(x) is untrue and cases where there is a breach of obligation under either Article 3.2(1)(v) or 3.2(1)(vi)) occurs and all of the debts under this Agreement are accelerated, and
Borrower thereby suffers damages or incurs losses or costs, Borrower shall not claim indemnification from Lender for such damages, losses, or costs, and Borrower shall be liable for any damages, losses, costs, and the like suffered or incurred by
Lender.

**Article 5. Repayment of Debt** 

(1) For the purpose of repaying the debt under this Agreement, Borrower shall make a deposit to the Loan Bank
Account by the Repayment Due Date.

(2) Borrower grants to Lender the authority regarding automatic fund transfer from the Loan Bank Account. In such
cases, Borrower will be deemed to have paid the debt to Lender upon debit from the Loan Bank Account by Lender.

(3) Payments by Borrower under this Article will be applied in the following order:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Late payment charges and the Settlement Fee

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Interest on loan

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Principal of loan

(4) Except when required by law or regulation, Borrower shall not deduct taxes, governmental charges, and the like
from the payment of the debt under this Agreement.

**Article 6. Prepayment** 

(1) Borrower shall not repay the principal of a loan, in whole or in part, before the Repayment Due Date
(" **Prepayment** ").

(2) If a Prepayment is requested for a compelling reason, Borrower shall make a Prepayment after obtaining
Lender's consent.

(3) When making a Prepayment pursuant to the preceding paragraph, on the requested Prepayment date, Borrower shall
pay the sum of the principal of the loan that is the subject of Prepayment and the accrued interest and the Settlement Fee calculated according to the formula set forth below in accordance with the terms of this Agreement. In such cases, the
Settlement Fee will be calculated by prorating based on a 365-day year, the division will be performed at the end, and any fractional amount will be rounded off.

------

[Calculation of the Settlement Fee]

---

| | | |
|:---|:---|:---|
| (Prepayment amount)  | ![LOGO](g430639g37p21.jpg) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[(Applicable interest rate) – (Long-term prime rate as of the Prepayment date)] |
| ![LOGO](g430639g37p21.jpg) | <br> (Number of days from the day after the Prepayment date, inclusive, until the maturity date, inclusive) | <br> (Number of days from the day after the Prepayment date, inclusive, until the maturity date, inclusive) |

---

**Article 7. Other Provisions** 

**7.1 General Provisions** 

(1) Risk of Loss; Exclusion of Liability; Compensation and Indemnification

If a document that Borrower provides to Lender is lost, destroyed, or damaged due to a disturbance, disaster, or other compelling circumstances, Borrower shall consult with Lender and then promptly prepare and submit a replacement document to Lender.

(2) Severability

If any provision of this Agreement becomes invalid, illegal, or unenforceable, the validity, legality, and enforceability of the other provisions will not be impaired or affected in any way.

(3) Application of General Terms and Conditions

With respect to the transaction under this Agreement, the provisions of this Agreement will prevail over the general terms and conditions; provided, however, that with respect to any matters not provided for in this Agreement, the general terms and conditions will apply to the transaction under this Agreement.

(4) Calculation

In the absence of an express provision to the contrary, the calculations under this Agreement will be performed by prorating, inclusive of both the start date and end date, and based on a 365-day year, the division will be performed at the end, and any fractional amount will be rounded off.

(5) Preparation of Notarized Deed

Upon the request of Lender, Borrower shall immediately take the necessary procedures to prepare a notarized deed containing an acknowledgment of the debt under this Agreement and an acknowledgment of compulsory execution.

(6) Governing Law; Jurisdiction

This Agreement is governed by the laws of Japan, and disputes that arise regarding this Agreement will be subject to the jurisdiction of the district court that has jurisdiction over the location of Lender's head office or handling branch.

------

(7) Matters for Consultation

If any question arises between the parties regarding a matter not provided for in this Agreement or the interpretation of this Agreement, Borrower and Lender shall consult with each other and decide on how to handle the situation.

**7.2 Modification of Agreement** 

This Agreement may not be modified without a written agreement between Borrower and Lender.

**7.3 Expenses; Taxes and Governmental Charges, Etc.** 

Except when it would violate a law or regulation, all costs for the preparation of this Agreement and otherwise required for this Agreement will be borne by Borrower.

------

IN WITNESS WHEREOF, a single original of this Agreement has been prepared, Borrower has placed its name and seal hereon, and Lender shall retain this original. Borrower will receive a copy hereof from Lender.

March 22, 2019

![LOGO](g430639g37g04.jpg)

---

| |
|:---|
|  Borrower |
| Yoichi Ochiai<br> Representative Director<br> Pixie Dust Technologies, Inc.<br> Kanda Yamazaki Sudacho Building F4<br> 2-20-5 Kanda-misakicho<br> Chiyoda-ku, Tokyo |
|  [Stamped Seal] |

---

------

Exhibit 1

Definitions of Terms

---

| | | |
|:---|:---|:---|
| **Term** | **Definition** | **Definition** |
| **1. Business Day** | means a day other than the days treated as holidays by Lender. | means a day other than the days treated as holidays by Lender. |
| **2. Loan Obligation** | means Lender's obligation to make an Individual Loan to Borrower upon Borrower's application for loan subject to the satisfaction of the conditions precedent to the loan set forth in this Agreement. | means Lender's obligation to make an Individual Loan to Borrower upon Borrower's application for loan subject to the satisfaction of the conditions precedent to the loan set forth in this Agreement. |
| **3. Loan Impossibility Event** | means a situation where the making of a loan has become impossible due to: (i) a natural disaster, war, or terrorist attack, or disconnection or interference of electrical, communications, and various payment systems; (ii) yen fund loan transactions cannot be performed on the Tokyo Interbank market; or (iii) any other situation where it has become impossible to make a loan due to a reason that is not attributable to the fault of Lender. | means a situation where the making of a loan has become impossible due to: (i) a natural disaster, war, or terrorist attack, or disconnection or interference of electrical, communications, and various payment systems; (ii) yen fund loan transactions cannot be performed on the Tokyo Interbank market; or (iii) any other situation where it has become impossible to make a loan due to a reason that is not attributable to the fault of Lender. |
| **4. Loan Bank Account** | means Borrower's ordinary savings account at The Shoko Chukin Bank, Ltd., Ueno Branch (Account No.: 1112783, Account Holder: Pixie Dust Technologies, Inc.). | means Borrower's ordinary savings account at The Shoko Chukin Bank, Ltd., Ueno Branch (Account No.: 1112783, Account Holder: Pixie Dust Technologies, Inc.). |
| **5. Business Plan Achievement Status Report** | means a document stating the amount of sales, royalty / solution income, operating profit and loss, EBITDA [operating profit and loss + depreciation (including those recorded as research and development costs)], and cash and deposits for the fiscal year corresponding to the reports submitted by Borrower. By stating the amount below, the figure for each item will match the figure in Borrower's reports or the figure in the internal materials prepared by Borrower, and its accuracy and legality will be the same level as the reports. | means a document stating the amount of sales, royalty / solution income, operating profit and loss, EBITDA [operating profit and loss + depreciation (including those recorded as research and development costs)], and cash and deposits for the fiscal year corresponding to the reports submitted by Borrower. By stating the amount below, the figure for each item will match the figure in Borrower's reports or the figure in the internal materials prepared by Borrower, and its accuracy and legality will be the same level as the reports. |
|  | Sales | Amount stated in the profit and loss statement that is part of the report |
|  | Royalty /solution income | Amount stated in the pipeline status report |
|  | Operating profit and loss | Amount stated in the profit and loss statement that is part of the report |
|  | Depreciation | Amount recorded as depreciation in Appendix 16 of the corporation income tax return and local corporation income tax return |
|  | EBITDA | Amount of the operating profit and loss set forth above plus the depreciation set forth above |
|  | Cash and deposits | Amount stated in the balance sheet that is part of the report |
| **6. Individual Loan** | means the individual loan transaction that will be made in installments by Lender. | means the individual loan transaction that will be made in installments by Lender. |
| **7. Individual Loan Proceeds** | means the money that Lender lends to Borrower through Individual Loans, and "**Individual Loan Amount**" means the amount of such money. "**Each Individual Loan Amount**" means each Individual Loan Amount in the first through fourth installments. | means the money that Lender lends to Borrower through Individual Loans, and "**Individual Loan Amount**" means the amount of such money. "**Each Individual Loan Amount**" means each Individual Loan Amount in the first through fourth installments. |
| **8. Borrowing Date** | means the date on which a loan is made. "**Individual Loan Borrowing Dates**" means the dates on which a loan is made in the first through fourth installments, and "**Each Individual Loan Borrowing Date**" means each Individual Loan Borrowing Date in the first through fourth installments. | means the date on which a loan is made. "**Individual Loan Borrowing Dates**" means the dates on which a loan is made in the first through fourth installments, and "**Each Individual Loan Borrowing Date**" means each Individual Loan Borrowing Date in the first through fourth installments. |
| **9. Settlement Fee** | means the fee for Prepayment that Borrower will pay to Lender. | means the fee for Prepayment that Borrower will pay to Lender. |
| **11. Repayment Due Date** | means the principal repayment date and interest payment date of an Individual Loan. | means the principal repayment date and interest payment date of an Individual Loan. |
| **12. Reports, Etc.** | means financial statements. | means financial statements. |

---

------

Exhibit 2

**<u>Loan Application Form</u>** 

[*Date*]

To: The Shoko Chukin Bank, Ltd.

Pursuant to the Loan Agreement (Installment-Type Term Loan Subject to Achievement of Plan) dated March 22, 2019 entered into with The Shoko Chukin Bank (the "**Agreement**"), we apply for an Individual Loan pursuant to the terms below.

---

| | |
|:---|:---|
| Requested Individual Loan amount\* | JPY [ ] |
| Requested Borrowing Date | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[*Date*] |
| Repayment Due Date | February 29, 2024 |

---

\* The requested Individual Loan amount is the amount set forth in Article 2.2(2), and if it is modified pursuant to Article 2.3(3), it will be the modified amount. 

We hereby confirm that, as of today, all conditions precedent to assumption of the Loan Obligation set forth in the Agreement have been satisfied, we are in compliance with all of our obligations under the Agreement, all representations and warranties made by us in the Agreement are true and correct, and no event of acceleration has occurred or is at risk of occurring, and we also confirm that no such event will occur as a result of the loan.

---

| |
|:---|
| (Borrower) |
|  [seal] |

---

------

Exhibit 3

**<u>Business Plan Achievement Status Report</u>** 

[*Date*]

To: The Shoko Chukin Bank, Ltd.

Regarding the transaction under the Loan Agreement (Installment-Type Term Loan Subject to Achievement of Plan), dated March 22, 2019, between our company and The Shoko Chukin Bank (the "**Agreement**"), we hereby submit this Business Plan Achievement Status Report pursuant to the provisions of Article 3.2(2)(iii) of the Agreement.

We also affirm that the figures in this Report match the figures in the Reports, Etc. as defined in the original agreement or the internal materials prepared by our company and are accurate and lawful figures.

Fiscal year ending [*Month & Year*]

---

| | | | |
|:---|:---|:---|:---|
| Item | Conditions precedent to<br>the [*installment no.*]<br>Individual Loan | Actual results | Determination<br> (Circle one) |
| Sales |  |  | Achieved / Not achieved |
| Royalty / solution income |  |  | Achieved / Not achieved |
| Operating profit and loss |  |  | Achieved / Not achieved |
| EBITDA |  |  | Achieved / Not achieved |
| Cash and deposits |  |  | Achieved / Not achieved |

---

---

| |
|:---|
| (Borrower) |
|  [seal] |

---

------

Exhibit 4

**<u>Notice Letter</u>** 

[*Date*]

To: Pixie Dust Technologies, Inc.

Regarding the transaction under the Loan Agreement (Installment-Type Term Loan Subject to Achievement of Plan), dated March 22, 2019, between your company and The Shoko Chukin Bank (the "**Agreement**"), Article 2.3 (Conditions Precedent to Assumption of the Loan Obligation), item [<u> </u>] of the Agreement is not satisfied, so we hereby give notice that we will not make the loan requested in the Loan Application Form dated [*Date*].

---

| |
|:---|
| (Lender) |
|  [seal] |

---

## Exhibit 10.2

**Exhibit 10.2** 

**Loan Agreement**<br> (For both Automatic Change and Fixed Rate)<br>

---

| | | | |
|:---|:---|:---|:---|
| | | | Borrowing date |
|  |  |  | *November 30, 2020* |
| To: **Resona Bank, Limited** | To: **Resona Bank, Limited** |  | Registered seal for<br> bank account for <br> repayment  |
| Address: |  |  |  |
|  |  | stamped seal | &nbsp;&nbsp;&nbsp;&nbsp;Please affix seal if it<br> differs from the seal for<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;this Agreement |
| Borrower: | Yoichi Ochiai<br> Representative Director<br> Pixie Dust Technologies, Inc.<br> Sumitomo Fudosan Suidobashi Nishiguchi Bldg. F3<br> 2-20-5 Kanda-misakicho<br> Chiyoda-ku, Tokyo |  |  |
| Address: |  |  |  |
|  |  | ![LOGO](g430639g96n97.jpg) |  |
| Cosigner: |  |  |  |
| Address: |  |  |  |
|  |  | ![LOGO](g430639g96n97.jpg) |  |
| Cosigner: |  |  |  |

---

After agreeing to this Agreement and each provision of the separately-executed banking transaction agreement, Borrower has borrowed and received money from Resona on the borrowing date pursuant to the key terms set forth below. (Check one of the boxes for each item.)

**Article 1 (Summary of Loan)** 

---

| | | | | |
|:---|:---|:---|:---|:---|
| Amount | JPY 40,000,000 | JPY 40,000,000 | JPY 40,000,000 | JPY 40,000,000 |
| Use of funds | Long-term working capital | Long-term working capital | Long-term working capital | Long-term working capital |
| Final repayment deadline | November 30, 2025 | November 30, 2025 | November 30, 2025 | November 30, 2025 |
| Interest rate | 1.700% per annum (prorated based on a 365-day year) | 1.700% per annum (prorated based on a 365-day year) | 1.700% per annum (prorated based on a 365-day year) | 1.700% per annum (prorated based on a 365-day year) |
| Repayment method | ☐ Lump-sum repayment on the due date<br> ☑ Repayment in installments | ☐ Lump-sum repayment on the due date<br> ☑ Repayment in installments | ☐ Lump-sum repayment on the due date<br> ☑ Repayment in installments | ☐ Lump-sum repayment on the due date<br> ☑ Repayment in installments |
|  | Repayment term or repayment date | Repayment<br>day | Repayment<br> interval | Repayment amount<br>(JPY) |
|  | December 31, 2022 to October 31, 2025 | 31<sup>st</sup> day | 1 month | JPY 1,111,000 |
|  | November 30, 2025 |  |  | JPY 1,115,000 |

---

(Section for Acceptance of Explanation and Receipt of Copy)

---

| | | |
|:---|:---|:---|
| • We have received an explanation regarding the contents of this Agreement and received a copy.<br>[Cosigner]<br>• We have received an explanation regarding the "Banking Transaction Agreement" and the details of the joint and several guaranty, and also received the "Information regarding the Banking Transaction Agreement" and "Information regarding Joint and Several Guaranty." | stamped seal | ![LOGO](g430639g40a70.jpg) |

---

------

---

| | | | |
|:---|:---|:---|:---|
| Interest payment<br> method | ☐ On the borrowing date, we will prepay the interest for the period from the borrowing date until the final repayment deadline.<br>☑ **On the borrowing date, we will pay the interest for the period from the borrowing date to December 31, 2020, and thereafter, we will prepay the monthly interest on the 31<sup>st</sup> day of each month; provided, however, that on the final interest payment date, we will prepay the interest up to the final repayment deadline.** | ☐ On the borrowing date, we will prepay the interest for the period from the borrowing date until the final repayment deadline.<br>☑ **On the borrowing date, we will pay the interest for the period from the borrowing date to December 31, 2020, and thereafter, we will prepay the monthly interest on the 31<sup>st</sup> day of each month; provided, however, that on the final interest payment date, we will prepay the interest up to the final repayment deadline.** | ☐ On the borrowing date, we will prepay the interest for the period from the borrowing date until the final repayment deadline.<br>☑ **On the borrowing date, we will pay the interest for the period from the borrowing date to December 31, 2020, and thereafter, we will prepay the monthly interest on the 31<sup>st</sup> day of each month; provided, however, that on the final interest payment date, we will prepay the interest up to the final repayment deadline.** |
| Treatment of<br> holidays | ☐ If the principal and interest repayment date falls on a holiday, the previous business day will be the repayment date.<br>☐ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date.<br>☑ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date; provided, however, that if the next business day falls in the next month, the immediately-preceding business day will be the principal and interest repayment date. | ☐ If the principal and interest repayment date falls on a holiday, the previous business day will be the repayment date.<br>☐ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date.<br>☑ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date; provided, however, that if the next business day falls in the next month, the immediately-preceding business day will be the principal and interest repayment date. | ☐ If the principal and interest repayment date falls on a holiday, the previous business day will be the repayment date.<br>☐ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date.<br>☑ If the principal and interest repayment date falls on a holiday, the next business day will be the repayment date; provided, however, that if the next business day falls in the next month, the immediately-preceding business day will be the principal and interest repayment date. |
| Bank account for repayment | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Resona Bank, Limited<br> **Tokyo Sales Dept.** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Type<br> **Ordinary Savings** | Account No. |
| Special Provisions | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1. Subject to the guaranty by the **Tokyo** Credit Guarantee Corporation dated October 9, 2020.<br>2. ☑ The interest rate will not change during the borrowing period.<br>☐ We agree that the interest rate will change during the borrowing period according to the criteria below:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The interest rate is based on the rate set forth below (the "**Base Rate**") and, when there is a change in the Base Rate in the future, the rate will be increased or decreased by the same amount as the change in the Base Rate. We confirm that the Base Rate as of today is as follows: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1. Subject to the guaranty by the **Tokyo** Credit Guarantee Corporation dated October 9, 2020.<br>2. ☑ The interest rate will not change during the borrowing period.<br>☐ We agree that the interest rate will change during the borrowing period according to the criteria below:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The interest rate is based on the rate set forth below (the "**Base Rate**") and, when there is a change in the Base Rate in the future, the rate will be increased or decreased by the same amount as the change in the Base Rate. We confirm that the Base Rate as of today is as follows: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1. Subject to the guaranty by the **Tokyo** Credit Guarantee Corporation dated October 9, 2020.<br>2. ☑ The interest rate will not change during the borrowing period.<br>☐ We agree that the interest rate will change during the borrowing period according to the criteria below:<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The interest rate is based on the rate set forth below (the "**Base Rate**") and, when there is a change in the Base Rate in the future, the rate will be increased or decreased by the same amount as the change in the Base Rate. We confirm that the Base Rate as of today is as follows: |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Base Rate | ☐ Short-term prime rate ☐ Long-term prime rate | <u> </u>% |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If there is a change in the financial situation or any other reasonable cause similar thereto, Borrower or Resona may request a consultation regarding the changing of the Base Rate or interest rate and the agreement on the timing and method of interest payment to a level that is considered generally reasonable.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in the interest rate will apply from the day after the first interest payment date on or after the date of change in the Base Rate.<br>3. This Agreement will be formed when Resona actually delivers the money to Borrower, and Resona will have no obligation to lend to Borrower under this Agreement. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If there is a change in the financial situation or any other reasonable cause similar thereto, Borrower or Resona may request a consultation regarding the changing of the Base Rate or interest rate and the agreement on the timing and method of interest payment to a level that is considered generally reasonable.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in the interest rate will apply from the day after the first interest payment date on or after the date of change in the Base Rate.<br>3. This Agreement will be formed when Resona actually delivers the money to Borrower, and Resona will have no obligation to lend to Borrower under this Agreement. | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If there is a change in the financial situation or any other reasonable cause similar thereto, Borrower or Resona may request a consultation regarding the changing of the Base Rate or interest rate and the agreement on the timing and method of interest payment to a level that is considered generally reasonable.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A change in the interest rate will apply from the day after the first interest payment date on or after the date of change in the Base Rate.<br>3. This Agreement will be formed when Resona actually delivers the money to Borrower, and Resona will have no obligation to lend to Borrower under this Agreement. |

---

------

**Article 2 (Prepayment)** 

If Borrower will be repaying the amount borrowed, in whole or in part, before the final repayment deadline, it shall pay the administrative fee specified by Resona for the prepayment; provided, however, that if there is a change in the administrative fee, Borrower shall subsequently pay the modified administrative fee. The foregoing will also apply when there is a change in the consumption tax or the like due to an amendment of law or regulation.

**Article 3 (Concurrent Use of Note)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. To secure the repayment of the amount borrowed under Article 1, Borrower shall issue a promissory note for the
amount and payment due date specified by Resona, submit it to Resona, and continue renewing in the same manner until the final repayment deadline.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Borrower may omit the delivery of the promissory note referred to in the preceding paragraph after obtaining
Resona's consent; provided, however, that even in such cases, if requested by Resona at a later date, Borrower shall immediately deliver a promissory note according to the provisions of the preceding paragraph.

**Article 4 (Automatic Payment of Principal and Interest Repayment Amount, Etc.)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Regarding the payment of principal, interest, late payment charges, and the like under this Agreement, we will
deposit at least the prescribed payment amount to the bank account for repayment designated in Article 1 by each payment date, so on the payment due date, regardless of the terms and conditions for checking accounts or the terms and conditions for
ordinary savings accounts, Resona shall make a withdrawal from the bank account for repayment, without the need for a check, ordinary savings account or multipurpose account passbook, or withdrawal slip, and apply to the payment in each instance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If the balance of the bank account under the preceding paragraph is less than the payment amount in each
instance, we will not object even if Resona does not accept partial payment and takes the prescribed measures for late payment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. If the balance of the bank account under the preceding paragraph reaches the amount to be paid on a later date,
Resona may take the same steps as those set forth in paragraph 1 at any time, including for late payment charges.

**Article 5 (Withdrawal of Ancillary Expenses)** 

Regarding the credit guarantee corporation guarantee fee and other guarantee fees, certified date fee, and registration fees required to preserve Resona's claims under this Agreement, and all other expenses regarding this Agreement, please withdraw from Borrower's bank account and apply in accordance with Article 4.

**Article 6 (Late Payment Charge)** 

If Borrower fails to perform its obligations to Resona under this Agreement, Borrower shall pay to Resona a late payment charge on the amount payable at a rate of 14% per annum (prorated based on a 365-day year).

------

**Article 7 (Preparation of Notarized Deed)** 

Upon Resona's request, Borrower and the cosigner shall immediately carry out the necessary procedures for preparing a notarized deed for the debt under this Agreement which contains an acknowledgment of compulsory execution that expressly includes an acceleration clause. The costs required for such procedures will be borne by Borrower and the cosigner.

**Article 8 (Review of Transaction Terms)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If any of the events set forth below applies to Borrower, Resona may request Borrower for a consultation
regarding the review of the interest rate and margin for the amount borrowed under this Agreement. Borrower shall comply with such request for consultation by Resona.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Current net loss for 2 consecutive fiscal years

Current net loss for 2 consecutive fiscal years means a situation where the current income in the profit and loss statement (or anything equivalent thereto) is negative for the final fiscal year-end and its immediately-preceding fiscal year-end, and this provision will also apply in cases where the current income is negative for 3 or more consecutive fiscal years.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Liabilities in excess of assets

Liabilities in excess of assets means a situation where liabilities exceed assets on the balance sheet for the final fiscal year-end.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The occurrence of any other objective reason for Resona to determine that a review of the transaction terms is
necessary.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Even if any of the events set forth in the preceding paragraph applies to Borrower, this will not preclude the
application of an event of acceleration under the banking transaction agreement between Borrower and Resona.

**Article 9 (Assignment of Claims)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Resona may assign (for purposes of this Article, including entrustment) all or a portion of the loan claims
under this Agreement to another financial institution or the like in the future. Borrower acknowledges that each provision of the banking transaction agreement between Borrower and Resona and each provision of this Agreement will continue to apply
even after the assignment of claims.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Borrower agrees that, during the period for which Resona is entrusted by the assignee (for purposes of this
Article, including trust beneficiaries) with respect to a claim that Resona has assigned under the preceding paragraph, Resona will perform debt management and collection under this Agreement as an agent for the assignee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. In cases where a claim under this Agreement is guaranteed by a credit guarantee corporation, when Resona
assigns a claim pursuant to paragraph 1, Resona shall obtain the approval of the credit guarantee corporation in advance.

------

**Article 10 (Guaranty)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Based on the entrustment by Borrower, the cosigner shall be jointly and severally liable with Borrower for the
guaranty obligations with respect to all of Borrower's debts owed to Resona as a result of the transaction under this Agreement, and the performance of such obligations will be subject to this Agreement as well as each provision of the banking
transaction agreement that was separately executed by Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The cosigner shall not set off Borrower's deposits with and other claims against Resona against
cosigner's guaranty obligations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Even if Resona modifies or releases the collateral or other security at its convenience, the cosigner shall not
claim an exemption of liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. If the cosigner performs the guarantee obligation, it shall not exercise the rights acquired from Resona by
subrogation without Resona's consent during the transaction between Borrower and Resona. Upon Resona's request, such rights or rank will be assigned to Resona at no charge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. If the cosigner has provided any other guaranty with respect to transactions between Borrower and Resona, such
guaranty will not be modified by this guaranty agreement, and if it has provided any other guaranty with a maximum limit, the amount of such guaranty will be added to such maximum limit. The foregoing will also apply in cases where the cosigner
provides other guarantees in the future with respect to transactions between Borrower and Resona.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. If Resona demands performance by the cosigner, a person who has assumed its debt, or general successor thereto,
such demand for performance will also become effective against Borrower and other cosigners.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Borrower agrees that, upon request by a guarantor (including guarantors who are not entrusted by Borrower) to
Resona, Resona will provide to the guarantor the information specified in Article 458-2 of the Civil Code (whether or not there is any non-payment of the principal of
the principal debt and the interest, penalty, damages, and all other obligations subordinate to the principal debt, as well as the balance thereof and the amount of such balance that has become due and payable).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. If there is a change in the cosigner's seal, name, trade name, representative, address, or any other
matter that has been notified to Resona, the cosigner shall immediately notify Resona in writing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. If a notice given or a document or the like sent by Resona arrives late or does not arrive due to a reason
attributable to the fault of the cosigner such as failing to provide the notification under the preceding paragraph or not accepting the notice from Resona, such notice, document, or the like will be deemed to have arrived when it normally would
have arrived.

[Special Provision Rules when Performing Guaranty Obligations]

If the cosigner files for insolvency proceedings regarding the guaranty obligations under this Agreement in accordance with the Guidelines for Business Owner Guarantee published by the Study Group on the Guidelines for Business Owner Guarantee (Japanese Bankers Association and The Japan Chamber of Commerce and Industry serving as the secretariat) on December 5, 2013 (including amendments made after publication, the "**Guidelines**"), the Bank shall make an effort to handle such insolvency proceedings in good faith pursuant to the Guidelines.

------

**Article 11 (Confirmation of Information Provision)** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Borrower has provided to the guarantor the same information as those provided to the creditor regarding the
following matters:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Status of Borrower's property, income, and expenditures

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Whether or not Borrower has any debt other than this debt, as well as the amount and payment status thereof

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If there is anything else that Borrower has provided or will be providing as collateral for this debt, state
accordingly and the details of such collateral

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The guarantor has received from Borrower information regarding the following matters:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Status of Borrower's property, income, and expenditures

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Whether or not Borrower has any debt other than this debt, as well as the amount and payment status thereof

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If there is anything else that Borrower has provided or will be providing as collateral for this debt, state
accordingly and the details of such collateral

**Article 12 (Jurisdiction)** 

If a lawsuit regarding a transaction under this Agreement becomes necessary, the parties agree to submit to the jurisdiction of the district court in Osaka or Tokyo or the court having jurisdiction over the location of the handling branch.

## Exhibit 10.3

**Exhibit 10.3** 

November 30, 2020

**Addendum to Loan Agreement**

---

| | |
|:---|:---|
| To: | **Resona Bank, Limited**  |

---

---

| | | |
|:---|:---|:---|
|  Address: |  |  |
|  |  | stamped seal |
|  Borrower: | Yoichi Ochiai<br> Representative Director<br> Pixie Dust Technologies, Inc.<br> Sumitomo Fudosan Suidobashi Nishiguchi Bldg. F3<br> 2-20-5 Kanda-misakicho<br> Chiyoda-ku, Tokyo |  |
|  Address: |  |  |
|  |  | ![LOGO](g430639g96n97.jpg) |
|  Cosigner: |  |  |
|  Address: |  |  |
|  |  | ![LOGO](g430639g96n97.jpg) |
|  Cosigner: |  |  |

---

In connection with the transactions under the Loan Agreement (hereinafter referred to as the "**Original Agreement**") executed between Resona, Borrower and Consigner as of November 30, 2020, Borrower and Consigner hereby agree to adhere, in addition to the terms under the Original Agreement and banking transaction agreement, to the terms set forth below.

**Article 1 (Applicable Interest Rate During Supply Period of Interest Subsidy)** 

Notwithstanding the provisions of the Original Agreement, interest rate under the said agreement during supply period of interest subsidy provided by Tokyo shall be as follows. Provided, however, that in the case where the provision of the interest subsidy is suspended, the interest rate under the Original Agreement shall apply even during the supply period of interest subsidy.

---

| | |
|:---|:---|
| Supply period of interest subsidy | Interest rate |
|  From November 30, 2020 to November 29, 2023 | 0.000% |

---

**Article 2 (Applicable Interest Rate After Supply Period of Interest Subsidy)** 

The interest rate to be applied from the day following the last day of the supply period of interest subsidy shall be either of the followings.

---

| | | |
|:---|:---|:---|
|  | to either box below. | Interest rate |
| ![LOGO](g430639g12g14.jpg) |  | Interest rate as set forth in the Original Agreement |
| ![LOGO](g430639g12g14.jpg) |  | 1.475% per annum (prorated based on a 365-day year) |

---

------

**Article 3 (Other)** 

Any matter not stipulated herein shall be determined in accordance with the provision of banking transaction agreement, the Original Agreement and directed credit by Tokyo (Support Credit for Covid-19 (Nationwide Support)).

End

## Exhibit 10.4

**Exhibit 10.4** 

Fixed-Term Building Lease Agreement

(Table of Key Contract Terms)

---

| | |
|:---|:---|
| Landlord | Sumitomo Realty & Development Co., Ltd. ("**Sumitomo**") |
| Tenant | Pixie Dust Technologies, Inc. ("**Pixie Dust**") |

---

---

| | | |
|:---|:---|:---|
| 1. Building | Name | Sumitomo Fudosan Suidobashi Nishiguchi Bldg. |
| 1. Building | Address | 2-20-5 Kanda-misakicho, Chiyoda-ku, Tokyo |
| 2. Premises (indicated in the<br> attached drawing) | Floors | 3F, 4F, 7F |
| 2. Premises (indicated in the<br> attached drawing) | Floor area | 1,056.90 m<sup>2</sup> (319.72 *tsubo*) |
| 2. Premises (indicated in the<br> attached drawing) | Floor area for each floor | 7F 352.30 m<sup>2</sup> 4F 352.30 m<sup>2</sup> 3F 352.30 m<sup>2</sup> |
| 3. Lease Terms | (i) Intended use | Office |
| 3. Lease Terms | (ii) Lease term | May 1, 2022 to December 31, 2023 |
| 3. Lease Terms | (iii) Rent | JPY 7,193,710 per month<br> (JPY 22,500 per 3.3057 m<sup>2</sup>, and fractional amount is rounded off) |
| 3. Lease Terms | (iv) Payment method | By bank transfer to Sumitomo's designated account<br> (bank transfer fee will be borne by Pixie Dust) |
| 3. Lease Terms | (v) Payment due date | Pay next month's rent by the 20<sup>th</sup> day of each month |
| 3. Lease Terms | (vi) Common area charges | JPY 1,598,601 per month<br> (JPY 5,000 per 3.3057 m<sup>2</sup>, and fractional amount is rounded off) |
| 3. Lease Terms | (vii) Security deposit | JPY 105,507,000<br> (JPY 330,000 per 3.3057 m<sup>2</sup>, and amount less than JPY 1,000 is rounded off)<br> Regarding the security deposit set forth above, JPY 70,338,000, which is the amount of the security deposit specified in Article 8 of the Sumitomo Fudosan Suidobashi Nishiguchi Bldg. Fixed-Term Building Lease Agreement dated December 21, 2020 and that has already been deposited, will be applied on May 1, 2022, and Pixie Dust shall deposit the difference (JPY 35,169,000) to Sumitomo by the time of execution of this Agreement. |
| 3. Lease Terms | (viii) Notice of<br> expiration of term | Between 1 year to 6 months before the expiration of the contract term. |
| 3. Lease Terms | (ix) Early termination | No |

---

Sumitomo and Pixie Dust have entered into a fixed-term building lease agreement (this "**Agreement**") provided for in Article 38 of the Act on Land and Building Leases (the "**Act**") for the Premises inside the Building according to the terms set forth below.

IN WITNESS WHEREOF, Sumitomo and Pixie Dust have executed this Agreement in duplicate by placing their names and seals hereon, and each party shall retain one copy.

June 28, 2021

---

| | |
|:---|:---|
| SUMITOMO: | Kojun Nishima [Stamped Seal]<br> President & Director<br> Sumitomo Realty and Development Co., Ltd.<br> 2-4-1 Nishi-shinjuku<br> Shinjuku-ku, Tokyo |
| PIXIE DUST: | Yoichi Ochiai [Stamped Seal]<br> Representative Director<br> Pixie Dust Technologies, Inc.<br> 2-20-5 Kanda-misakicho<br> Chiyoda-ku, Tokyo |

---

------

Special Provisions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Effective April 30, 2022, Sumitomo and Pixie Dust agree to terminate the Sumitomo Fudosan Suidobashi
Nishiguchi Bldg. Fixed-Term Building Lease Agreement, dated December 21, 2020, between Sumitomo and Pixie Dust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Even before the commencement of the lease term set forth in Article 3 of this Agreement, Pixie Dust may use the
7<sup>th</sup> floor portion on and after July 1, 2021 by obtaining Sumitomo's consent and paying to Sumitomo the costs set forth in Article 7 of this Agreement. The use of the 7<sup>th</sup> floor portion will also include the commencement of move-in construction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Pixie Dust shall take the necessary and sufficient measures against conceivable noise, vibration, and odor with
respect to a lab or the like set up by Pixie Dust inside the Premises (any portion other than those used for normal work), but if there is any complaint from Sumitomo or other tenants, Pixie Dust shall immediately discontinue its use and refrain
from using until Sumitomo has investigated the situation and given its approval. In cases where costs will be incurred for the investigation and measures will be taken, such costs shall be borne by Pixie Dust.

------

Article 1 (Premises)

Sumitomo leases to Pixie Dust, and Pixie Dust leases from Sumitomo, the Premises set forth in Item 2 of the Table of Key Contract Terms (the "**Table of Terms**").

Article 2 (Intended Use)

Pixie Dust shall use the Premises for only the purpose set forth in Item 3(i) of the Table of Terms and shall not use the Premises for any other purpose.

Article 3 (Lease Term)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The lease term will be as set forth in Item 3(ii) of the Table of Terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. This Agreement will terminate by expiration of the lease term under the preceding paragraph and will not renew.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. During the period set forth in Item 3(viii) of the Table of Terms, Sumitomo shall give written notice to Pixie
Dust that this Agreement will terminate by expiration of the lease term.

Article 4 (No Termination)

From the execution of this Agreement until the expiration date of the lease term, Sumitomo and Pixie Dust shall not terminate this Agreement; provided, however, that if Pixie Dust wishes to terminate this Agreement and Sumitomo agrees to such termination, Pixie Dust may terminate this Agreement by paying to Sumitomo the rent and the amount equal to the common area charges for the remaining term of this Agreement.

Article 5 (Rent)

The rent will be as set forth in Item 3(iii) of the Table of Terms and will be paid, along with the amount equal to the consumption tax, according to the method set forth in Items 3(iv) and (v) of the Table of Terms. The bank transfer fee will be borne by Pixie Dust, and the rent for a period of less than one month will be the amount prorated based on the actual number of days in such month.

Article 6 (Common Area Charges)

In addition to the rent set forth in the preceding Article, Pixie Dust shall pay the common area charges in Item 3(vi) of the Table of Terms as the maintenance costs for the common areas (the "**Common Area Charges**"), plus the amount equal to the consumption tax, in the same manner as the rent. The Common Area Charges for a period of less than 1 month will be the amount prorated based on the actual number of days in such month.

Article 7 (Costs to Be Borne by Pixie Dust)

Pixie Dust shall bear the following costs in connection with the use of the Premises, and upon Sumitomo's request, shall pay such costs by bank transfer to the bank account designated by Sumitomo by the date specified by Sumitomo. The bank transfer fee will be borne by Pixie Dust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Electricity charges for lighting, air conditioning, and other equipment inside the Premises

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Water charges for inside the Premises

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Cleaning and sanitation fees for inside the Premises

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Other fees and payments that should be borne by Pixie Dust

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Amount equal to the consumption tax on items (1) through (4) above

Article 8 (Security Deposit)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The security deposit will be as set forth in Item 3(vii) of the Table of Terms, and Pixie Dust shall deposit
this amount to Sumitomo interest-free by bank transfer to the bank account designated by Sumitomo by the due date set forth in Item 3(vii) of the Table of Terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Pixie Dust shall not assign to a third party, or furnish as collateral, the right to claim the return of the
security deposit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Pixie Dust shall not claim a setoff of the rent or any other debt to Sumitomo against the security deposit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Upon the termination of this Agreement for any reason, if there is rent or any other debt (including the costs
of the move-in construction for the Premises, construction for alteration of original condition, and construction for restoration of original condition, etc.) that has not been paid by Pixie Dust, Sumitomo
will apply the security deposit to the repayment of such debt, and if there is any remaining amount, Sumitomo shall return such amount to Pixie Dust after Pixie Dust has fully surrendered the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. If Pixie Dust has multiple outstanding debt to Sumitomo under the preceding paragraph and the total amount of
the outstanding debt exceeds the amount of the security deposit, Sumitomo may designate the order in which the security deposit will be applied to Pixie Dust's outstanding debt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Even during the lease term, if there is rent or any other debt (including the costs of the move-in construction for the Premises, construction for alteration of original condition, etc.) that has not been paid by Pixie Dust, Sumitomo may apply the security deposit to such debt after giving notice to Pixie
Dust. In such cases, promptly after the application, Pixie Dust shall additionally deposit the same amount of security deposit as the amount applied.

Article 9 (Duty of Care of a Prudent Manager)

Pixie Dust shall use the Premises and the common areas with the care of a prudent manager.

Article 10 (Prohibited Conduct, Etc.)

Pixie Dust shall not engage in the following conduct:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Assign to a third party, or furnish as collateral, its rights under this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Sublease to a third party or allow a third party to use all or a portion of the Premises.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Allow a third party to co-occupy the Premises or display the name of an
occupant other than Pixie Dust except when Sumitomo's prior written consent is obtained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Conduct that will cause an inconvenience to other tenants and users of the Building and all other conduct that
will damage the Building including the Premises.

------

Article 11 (Alteration of Original Condition)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If Pixie Dust wishes to take the actions listed below at its own convenience, Pixie Dust shall not commence
such action without Sumitomo's prior written consent, and even when Sumitomo's consent is obtained, all costs required for such action will be borne by Pixie Dust:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Create, add, or modify partitions, interior, or other fixtures inside the Premises

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Create, add, or modify electrical, water, air conditioning, or other equipment

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Install or expand a vault, computer, or other heavy objects or equipment with high capacitance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Post a sign, display the company name, or advertise

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Construction for the preceding paragraph will be performed by Sumitomo or the designer and builder designated
by Sumitomo, and Pixie Dust shall place an order with Sumitomo for such construction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The real estate acquisition tax, fixed property tax, and other taxes and governmental charges on the fixtures
and equipment referred to in paragraph 1 will be borne by Pixie Dust regardless of the person to whom it is assessed.

Article 12 (Work)

Pixie Dust shall, in principle, contract out the cleaning work and other work for the Premises to a vendor designated by Sumitomo.

Article 13 (Management Rules)

Pixie Dust shall faithfully comply with the Building management rules established by Sumitomo.

Article 14 (Damages)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If bodily harm or property damage is caused to the Building, Sumitomo, or third parties such as other tenants
due to the willful misconduct or negligence of Pixie Dust or its agent, employee, contractor, visitor, or any other person related to Pixie Dust, Pixie Dust shall compensate for all damages suffered as a result.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Pixie Dust shall not make any claim against Sumitomo for damages suffered by Pixie Dust due to the willful
misconduct or negligence of another tenant or other third party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. If Pixie Dust fails to pay rent or any other monetary obligation, Pixie Dust shall pay to Sumitomo a late
payment charge on the amount payable in full at a daily interest rate of 0.05% for the period from the day after the payment due date until the date of payment in full.

Article 15 (Exclusion of Liability of Sumitomo)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Sumitomo will not be liable for any damages suffered by Pixie Dust due to an earthquake, fire, wind and flood
damage, act of terrorism, or any other disaster caused by a force majeure event or a failure of equipment, theft, loss, power outage, water leakage, or district heating and cooling outage that is not caused by Sumitomo's willful misconduct or
gross negligence.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Even if Pixie Dust has no choice but to suspend the use of the common areas or a portion of the Premises or is
subject to usage restrictions during the period of repair, renovation, or other construction of the Building to be performed by Sumitomo due to a compelling or reasonable cause, Pixie Dust shall not make any claims against Sumitomo; provided,
however, that when performing construction, Sumitomo shall inform Pixie Dust in advance and in writing of the scale of the construction, period of construction, and the reason why the construction is necessary, and if the degree or period of the
suspension or restrictions on use by Pixie Dust is extreme, Sumitomo shall consult with Pixie Dust and decide on the handling of the situation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Sumitomo makes no warranty with respect to the normal running or operation of equipment installed in the
Building by Pixie Dust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Sumitomo's liability for damages under this Agreement will be limited to the compensation of direct and
ordinary damages actually suffered by Pixie Dust, and Sumitomo shall not be liable for loss of opportunities and other lost profits.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Sumitomo's liability for damages will be limited to the coverage of the property and casualty insurance
obtained by Sumitomo.

Article 16 (Access)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If Sumitomo or its designee determines that it is necessary for the management of the Building, it may enter
and inspect the Premises after notifying Pixie Dust accordingly and take the appropriate measures, and Pixie Dust shall cooperate with the measures to be taken by Sumitomo.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If a person who desires to newly rent the Premises will be viewing the Premises during the term of this
Agreement, Sumitomo and the person viewing the Premises may enter the Premises after obtaining Pixie Dust's consent in advance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. If there is a need to prevent the spread of fire or in the case of any other emergency, Sumitomo may enter the
Premises and take the appropriate measures without notifying Pixie Dust in advance. In such cases, Sumitomo shall subsequently notify Pixie Dust accordingly.

Article 17 (Repairs)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If there are parts that require repair due to damage or failure of fixtures and equipment on the Premises and
in the Building, Pixie Dust shall promptly notify Sumitomo.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Repairs that Sumitomo determines to be necessary for maintenance of the Building upon the notice under the
preceding paragraph will be performed by Sumitomo at its own expense, and the foregoing will also apply to repairs that Sumitomo determines to be necessary and performs, even without any notice from Pixie Dust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Notwithstanding the provisions of the preceding paragraph, the costs of the following repairs will be borne by
Pixie Dust:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Repairs of doors, windows, blinds, glass, lighting equipment, switches, electrical outlets, and accessories
inside the Premises

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Minor repairs of the walls, ceiling, floor, or the like inside the Premises (including painting and
reupholstering)

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Repairs of damage and the like that occur due to a reason attributable to the fault of Pixie Dust

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Repairs of fixtures and equipment owned by Pixie Dust

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Even in cases where Pixie Dust, at its own responsibility and expense, will be performing a repair of fixtures
and equipment installed inside the Premises pursuant to Article 11, it shall do so after obtaining Sumitomo's prior written approval regarding the method of such repair; provided, however, that in the case of an urgent or emergency situation,
Pixie Dust shall obtain Sumitomo's approval promptly afterwards.

Article 18 (Notice of Change in Registered Matters, Etc.)

If there is a change in Pixie Dust's head office, trade name, or representative, Pixie Dust shall give written notice to Sumitomo of such change without delay.

Article 19 (Termination of Agreement)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If there is any conduct or fact that falls under any of the items below, Sumitomo may immediately terminate
this Agreement without a demand to cure or any other procedure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Pixie Dust fails to pay the rent, Common Area Charges, etc. when due.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Pixie Dust commits an act that breaches this Agreement or an agreement incidental thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Pixie Dust does not use the Premises for 2 or more consecutive months without good cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Pixie Dust receives or files a petition for the commencement of bankruptcy proceedings, commencement of civil
rehabilitation proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation, or any other insolvency proceedings similar thereto (including those enacted on or after the execution date of this Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Pixie Dust receives a suspension of transactions from a clearinghouse.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Pixie Dust receives a petition for compulsory execution or public auction, temporary restraining order,
procedure for the collection of delinquent taxes, or the like.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Pixie Dust significantly interferes with another tenant's possession or use.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) There is a material change in Pixie Dust's assets, reputation, or business, and Sumitomo determines that
it would be difficult to continue this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If Sumitomo terminates this Agreement pursuant to the preceding paragraph, Pixie Dust shall pay to Sumitomo the
amount equal to the rent and Common Area Charges for the remaining term of this Agreement as a penalty; provided, however, that the foregoing will not preclude Sumitomo from claiming damages.

Article 20 (Exclusion of Antisocial Forces)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. From the execution of this Agreement until the termination hereof, each of Sumitomo and Pixie Dust promises to
the other party that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) it is not an organized crime group, entity affiliated with an organized crime group, corporate racketeer
(*sokaiya*), or a person equivalent thereto or a member thereof (collectively, "**Antisocial Force** ");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) none of its officers (executive members, directors, executive officers, or other persons equivalent thereto) is
an Antisocial Force; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) it is not entering into this Agreement by allowing an Antisocial Force to use the party's name.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Pixie Dust shall not engage in any of the following conduct when using the Building:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Use, or cause a third party to use, the Building as an office or other base of operations of an Antisocial
Force.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Cause Sumitomo, other tenants, nearby residents, or passersby to feel uneasy by engaging in an exceedingly rude
or violent behavior or displaying power in or around the Building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Allow an Antisocial Force to use the Building or allow an Antisocial Force to enter and leave the Building.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Pixie Dust shall cause a co-occupant provided for in Section 10(3)
of this Agreement who has been approved in writing by Sumitomo to comply with this Article.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. If either Sumitomo or Pixie Dust breaches any of paragraph 1 through the preceding paragraph, the other party
may terminate this Agreement without any demand to cure or other procedure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. If Sumitomo or Pixie Dust terminates this Agreement pursuant to the preceding paragraph, the breaching party
shall immediately pay to the other party the penalty set forth in Section 19.2; provided, however, that this will not preclude the other party from claiming damages.

Article 21 (Surrender)

Upon the termination of this Agreement for any reason, except in the case of Article 23, Pixie Dust shall surrender the Premises to Sumitomo by the termination date of this Agreement in accordance with each of the following items:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) By the termination of this Agreement, Pixie Dust shall, through Sumitomo or its designated vendor at Pixie
Dust's expense, restore the Premises and the Building to their original condition by promptly removing the fixtures, equipment, and other property owned by Pixie Dust that were created or added to the Premises and the Building, refinishing of
the floor of the Premises, replacing the lighting fixture, and repainting the walls and ceiling. "Original condition" as used in this Agreement means the state of completion of construction A (standard construction) stated in the standard
specifications of the office of the Building; provided, however, that the Premises may be surrendered as-is if Sumitomo's consent is obtained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) If Pixie Dust fails to restore the original condition by the time of the termination of this Agreement,
Sumitomo may restore the original condition at Pixie Dust's expense; provided, however, that property left behind by Pixie Dust, Pixie Dust will be deemed to have transferred the title to such abandoned property to Sumitomo at no charge or
relinquished such title, and Sumitomo may dispose such property at its discretion. The costs required for the disposal of such abandoned property will be borne by Pixie Dust.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) When surrendering the Premises, regardless of the reason or pretext, Pixie Dust shall not request a purchase of
the fixtures and equipment created or added to the Premises and the Building by Pixie Dust or demand a reimbursement of incurred expenses, relocation compensation, eviction compensation, or other compensation, or other similar fees.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) If Pixie Dust fails to surrender the Premises upon the termination of this Agreement, Pixie Dust shall pay to
Sumitomo damages of double the amount equal to the prorated rent and the amount equal to the Common Area Charges, electricity charges, water charges, and other costs for the period from the day after the termination of this Agreement until the date
on which the surrender is completed, and if Sumitomo suffers damages due to such delay, Pixie Dust shall compensate for such damages.

Article 22 (Statutory Termination)

The provisions of Article 4 and the preceding Article will automatically apply in cases where this Agreement is terminated by Pixie Dust (including Pixie Dust's receiver, etc.) pursuant to the provisions of the Bankruptcy Act, Civil Rehabilitation Act, Corporate Reorganization Act, or similar insolvency proceedings (including those enacted on or after the execution date of this Agreement).

Article 23 (Automatic Termination of Agreement)

If all or a portion of the Building is destroyed or damaged due to a natural disaster or any other force majeure and it becomes impossible to use the Premises or the repair of such damage would require significant costs, this Agreement will automatically terminate.

Article 24 (Execution of Renewal Agreement)

If Sumitomo and Pixie Dust agree, at least 6 months before the expiration date of the term, on a new fixed-term building lease agreement which will commence on the day after the expiration date of the lease term ("**Renewal Agreement**"), they may enter into a Renewal Agreement.

Article 25 (Entire Agreement)

This Agreement sets forth the entire agreement of the parties as of the execution date, and unless expressly provided herein, discussions and agreements between the parties or documents, offers, and the like that a party has provided to the other party prior to the execution of this Agreement will not constitute agreements between the parties.

Article 26 (Modification of this Agreement)

This Agreement may only be modified by written agreement between the parties.

Article 27 (Jurisdiction)

Lawsuits regarding this Agreement will be subject to the jurisdiction of the Tokyo District Court.

Article 28 (Governing Law)

This Agreement is governed by and subject exclusively to the laws of Japan.

Article 29 (Compliance with Confidentiality Obligations)

Sumitomo and Pixie Dust shall comply with the confidentiality obligations regarding the contents of this Agreement and shall not leak such contents to related persons and third parties for any reason whatsoever.

------

Article 30 (Principle of Good Faith and Fair Dealing)

If a question arises with respect to a matter not provided for in this Agreement, Sumitomo and Pixie Dust shall consult with each other and resolve such question in accordance with the principle of good faith and fair dealing.

## Exhibit 10.5

**Exhibit 10.5** 

**Limitation of Liability Agreement** 

This Limitation of Liability Agreement (this "**Agreement**") is entered into as of the date written below by and between Pixie Dust Technologies, Inc. (the "**Company**") and [ ] (the "**Officer**") under the terms set forth below.

Article 1 (Limitation of Liability)

If the Officer performs her duties in good faith and without gross negligence, the Officer's liability under Article 423(1) of the Companies Act will be limited to the minimum liability amount provided for in Article 425(1) of the Companies Act.

Article 2 (Effect)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. This Agreement will be effective for the period during which the Officer retains her status as a non-executive director, etc. (as defined in Article 427(1) of the Companies Act; same applies below) of the Company. Even if the Officer loses her status as a non-executive director, etc. due to the expiration of her term of office or some other reason, if the Officer is reelected as a non-executive director, etc. of the Company, this Agreement will apply even after the
reelection except in cases where another contract limiting the Officer's liability has been executed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. If the Officer becomes an executive director, etc. (as defined in Article 2(xv)(a) of the Companies Act) of the
Company, it will cease to be effective with prospective effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Notwithstanding the provisions of the preceding two paragraphs, the Officer's duties during her tenure as
a non-executive director, etc. will be subject to this Agreement.

Article 3 (Treatment of Retirement Benefits, Etc.)

In a case where the Officer is found not to be liable for damages for the portion exceeding the limit set forth in Article 1, if the approval of the Company's general meeting of shareholders has not yet been obtained, the Officer shall not seek from the Company any retirement benefits or other property benefits provided for in a Ministry of Justice ordinance.

Article 4 (Treatment of Stock Acquisition Rights)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. In a case where the Officer is found not to be liable for damages for the portion exceeding the limit set forth
in Article 1, if the Officer wishes to subsequently exercise or transfer its stock acquisition rights, the Officer shall notify the Company in advance and carry out the necessary procedures under the Companies Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. In a case where the Officer is found not to be liable for damages for the portion exceeding the limit set forth
in Article 1, if the Officer holds warrants indicating stock acquisition rights, the Officer shall deposit such warrants with the Company without delay.

------

Article 5 (Taxes)

Tax issues that occur with respect to the Officer under this Agreement shall be handled by the Officer at her own expense and responsibility.

Article 6 (Application)

Matters not provided for in this Agreement shall be subject to the provisions of the Companies Act and other laws and regulations.

Article 7 (Governing Law; Jurisdiction)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The interpretation and application of this Agreement shall be governed by the laws of Japan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Any disputes regarding this Agreement shall be subject to the exclusive jurisdiction of the Tokyo District
Court as the court of first instance.

IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate by placing their respective name and seal or electronic signature hereon, and if they placed their names and seals, each party shall retain one copy.

[DATE]

COMPANY:

Yoichi Ochiai

Representative Director

Pixie Dust Technologies, Inc.

2-20-5 Kanda-misakicho

Chiyoda-ku, Tokyo

OFFICER:

[ ]

## Exhibit 10.6

**Exhibit 10.6** 

**Series [ ] Stock Acquisition Rights Allotment Agreement** 

---

| | | | |
|:---|:---|:---|:---|
| Company | Trade name | Pixie Dust Technologies, Inc. | (seal) |
| Company | Address | 2-25 Kanda-sudacho, Chiyoda-ku, Tokyo | (seal) |
| Company | Name of representative | Yoichi Ochiai, Representative Director | (seal) |
| Right Holder | Name | [______] | (seal) |
| Right Holder | Address | XXXXXXX | (seal) |
| Decision on subscription requirements | Decision of directors dated [____]<br> (Decision based on delegation by resolution of an extraordinary general meeting of shareholders, general meeting of joint class shareholders, and general meeting of ordinary class shareholders dated [____]) | Decision of directors dated [____]<br> (Decision based on delegation by resolution of an extraordinary general meeting of shareholders, general meeting of joint class shareholders, and general meeting of ordinary class shareholders dated [____]) | Decision of directors dated [____]<br> (Decision based on delegation by resolution of an extraordinary general meeting of shareholders, general meeting of joint class shareholders, and general meeting of ordinary class shareholders dated [____]) |
| Allotment date of stock acquisition rights | [____] | [____] | [____] |
| Number of allotted stock acquisition rights | [____] stock acquisition rights (Underlying shares: One share of common stock per stock acquisition right) | [____] stock acquisition rights (Underlying shares: One share of common stock per stock acquisition right) | [____] stock acquisition rights (Underlying shares: One share of common stock per stock acquisition right) |
| Institution that will handle the payment upon exercise of stock acquisition rights | XXXXXXX | XXXXXXX | XXXXXXX |
| Contract execution date | [____] | [____] | [____] |

---

This Stock Acquisition Rights Allotment Agreement (this "**Agreement**") is entered into as of the contract execution date set forth in the table above by and between the Company and the Right Holder set forth in the table above regarding the Company's allotment of the Series [____] stock acquisition rights to the Right Holder.

**Article 1 <u>Allotment of the Stock Acquisition Rights, Etc.</u>** 

In accordance with the terms of this Agreement, the Company shall allot to the Right Holder, and the Right Holder agrees to subscribe to, the "Number of allotted stock acquisition rights" set forth in the table above (the "**Allotted Stock Acquisition Rights**") out of the stock acquisition rights described in the attached "Terms and Conditions of the Series [____] Stock Acquisition Rights" (the "**Terms and Conditions**") that have been decided to be issued based on the decision of the institution set forth in the "Decision on subscription requirements" set forth in the table above on the allotment date of stock acquisition rights set forth in the table above, and the Right Holder, along with the other subscribers, shall subscribe to the total number of the stock acquisition rights that will be issued.

**Article 2 <u>Exercise Period, Etc.</u>** 

The period during which the Allotted Stock Acquisition Rights can be exercised will be the exercise period set forth in the Terms and Conditions, subject to the provisions of Article 6 Paragraph 1 of this Agreement and the conditions for exercise set forth in the Terms and Conditions.

------

**Article 3 <u>Property to Be Contributed When Exercising the Stock Acquisition Rights</u>** 

The property to be contributed by the Right Holder when exercising the Allotted Stock Acquisition Rights will be the amount set forth in the Terms and Conditions.

**Article 4 <u>Method for Exercise of Rights</u>** 

1. When exercising the Allotted Stock Acquisition Rights, the Right Holder shall fill out the required information
in the "request and pledge for the exercise of stock acquisition rights" in the form specified by the Company, place his/her name and seal thereon, and submit it to the Company. In addition, if the shares underlying the Allotted Stock
Acquisition Rights are book-entry shares as defined in the Act on Book-Entry Transfer of Corporate Bonds and Stocks, Etc., before exercising the Allotted Stock Acquisition Rights, the Right Holder shall open a bank transfer account in the name of
the Right Holder at the account management institution designated by the Company and notify the Company.

2. The Right Holder shall submit the request and pledge for exercise of stock acquisition rights under the
preceding paragraph and transfer the full amount to be contributed for the exercised Allotted Stock Acquisition Rights set forth in the preceding article in cash to the account designated by the Company at the institution that will handle the
payment upon exercise of stock acquisition rights set forth in the table above by the date and time designated by the Company.

3. In a case where the exercise of the Allotted Stock Acquisition Rights is not subject to the exception to
taxation under Article 29-2 of the Act on Special Measures Concerning Taxation, if a withholding tax on income will be imposed on the economic benefits to be received by the Right Holder, the Right Holder
shall transfer the amount equal to the withholding tax on income to the account designated by the Company by the date and time designated by the Company.

4. Upon the Company's request, a person who has succeeded to the Allotted Stock Acquisition Rights by
inheritance shall, in accordance with the Company's instructions, sell the shares in the Company that are acquired through the exercise of the Allotted Stock Acquisition Rights.

**Article 5 <u>Waiver</u>** 

If a reason for acquisition at no cost set forth in the Terms and Conditions applies to the unexercised Allotted Stock Acquisition Rights, upon the Company's request, the Right Holder will be deemed to have waived such unexercised Allotted Stock Acquisition Rights to the extent possible under laws and regulations.

**Article 6 <u>Tax Qualification Provision</u>** 

1. Notwithstanding the provisions of Article 2, during the exercise period under Article 2, the Allotted Stock
Acquisition Rights shall be exercised within the period from the 2<sup>nd</sup> anniversary of the grant resolution date to the 10<sup>th</sup> anniversary of the
grant resolution date. For purposes of this Agreement, grant resolution means the resolution under Article 238(2) of the Companies Act for the Allotted Stock Acquisition Rights (including the decision on the subscription requirements provided for in
Article 239(1) of the Companies Act pursuant to the delegation by resolution under said provision and the resolution of the board of directors pursuant to the provisions of Article 240(1) of the Companies Act).

2. The total amount of the exercise price for the Allotted Stock Acquisition Rights to be exercised in a 1-year period (January 1 to December 31 of each year) shall not exceed JPY 12,000,000, and the Right Holder may exercise the Allotted Stock Acquisition Rights to such extent only. Even if the total amount of
the exercise price for the Allotted Stock Acquisition Rights exercised in a 1-year period

------

does not exceed JPY 12,000,000, if the stock acquisition rights under the Companies Act, the stock acquisition rights under Article 280-21 of the Commercial Code prior to the enforcement of the Companies Act, the subscription warrants under Article 280-19 of the Commercial Code prior to the April 1, 2002 amendment, and the right to demand the transfer of shares under Article 210-2 of the Commercial Code prior to the October 1, 2001 amendment that are granted by the Company separately from the Allotted Stock Acquisition Rights (these 4 rights, collectively, the "**Stock Acquisition Rights, Etc.**") and the exercise price for the Stock Acquisition Rights, Etc. granted by other companies collectively exceed JPY 12,000,000, the Right Holder shall bear in mind that such exercise of the Stock Acquisition Rights, Etc. which will exceed JPY 12,000,000 will not be subject to the exception to taxation under Article 29-2 of the Act on Special Measures Concerning Taxation.

3. The Company and the Right Holder hereby acknowledge that the exercise price per share for the exercise of the
Allotted Stock Acquisition Rights set forth in Article 3 is the same or greater than the amount equal to the per-share price at the time of the execution of this Agreement.

4. The Right Holder shall not assign to third parties, create a security interest in, or otherwise dispose of the
Allotted Stock Acquisition Rights.

5. The issuance of shares through the exercise of the Allotted Stock Acquisition Rights shall be carried out
without violating the matters provided for in Article 238(1) of the Companies Act for which a grant resolution has been adopted for such issuance.

6. In accordance with an agreement regarding a trust for the entry or recording in the book-entry account,
entrustment of storage, or management and disposition of the shares in the Company issued through the exercise of the Stock Acquisition Rights, Etc. ()"**Management, Etc. Trust**") that will be executed in advance between the Company and
a financial instruments business operator or a financial institution ()"**Financial Instruments Business Operator, Etc.**") for the exercise of the shares to be acquired upon the Allotted Stock Acquisition Rights, the Right Holder shall,
immediately following such acquisition, receive entry or recording in the book-entry account of such Financial Instruments Business Operator, Etc. or entrust the storage of or grant a Management, Etc. Trust to the sales office or business office of
such Financial Instruments Business Operator, Etc. through the Company. The Company shall subsequently notify the Right Holder regarding such Financial Instruments Business Operator, Etc.

7. The provisions of each of the preceding paragraphs shall prevail over the other provisions of this Agreement
and any provision of the Terms and Conditions.

8. Unless otherwise provided in this Agreement, the provisions of this Article shall apply even if the Right
Holder is a person who is not subject to the exception to taxation under Article 29-2 of the Act on Special Measures Concerning Taxation.

**Article 7 <u>Execution of Pledge Letter</u>** 

If requested by the Company before the public offering of the Company's stock (which means the listing of the Company's stock on any financial instruments exchange), the Right Holder shall execute with the Company a "pledge letter" for the continued ownership, etc. of new shares, etc. in the form specified by the financial instruments exchange or the Japan Securities Dealers Association with respect to the Allotted Stock Acquisition Rights and the shares to be issued through the exercise of the Allotted Stock Acquisition Rights, and if such pledge letter is not executed, the Right Holder cannot exercise the Allotted Stock Acquisition Rights. If there is a change in the rules, etc. of the financial instruments exchange or the Japan Securities Dealers Association regarding stock acquisition rights, the Right Holder shall carry out the necessary procedures in accordance with the Company's instructions.

------

**Article 8 <u>Compliance with Applicable Laws and Regulations and Internal Rules</u>** 

The Allotted Stock Acquisition Rights will be subject to the Companies Act, the Financial Instruments and Exchange Act, tax laws, and other laws and regulations. The Right Holder shall comply with the Companies Act, the Financial Instruments and Exchange Act, tax laws, and other laws and regulations as well as the Company's insider trading management rules and other internal rules in connection with the exercise of the Allotted Stock Acquisition Rights, the sale of the shares acquired based on the exercise of the Allotted Stock Acquisition Rights, and the purchase of shares around the time of the sale, etc.

**Article 9 <u>Tax Treatment</u>** 

The Right Holder shall, at its own expense and responsibility, pay the income tax and all other taxes and governmental charges imposed on the acquisition and exercise of the Allotted Stock Acquisition Rights and the disposition of the shares in the Company acquired through the exercise of the Allotted Stock Acquisition Rights.

**Article 10 <u>Method of Notice</u>** 

The Company shall give notices under this Agreement in writing to the address of the Right Holder that has been notified to the Company, and such notice will be deemed to have arrived at the time when it would have normally arrived.

**Article 11 <u>Limitation of Liability</u>** 

The Right Holder shall not, for any reason, make any claim for compensation of loss, claim for damages, or pursue any other liability against the Company and the Company's directors in connection with this Agreement.

**Article 12 <u>Modifications of this Agreement</u>** 

1. If it is determined that a provision of this Agreement does not conform to the provisions of the Income Tax
Act, the Corporation Tax Act, or any other tax law or no longer conforms due to an amendment after the execution of this Agreement, the Company may amend or delete the required provision by giving notice to the Right Holder. The foregoing shall also
apply in cases where it is determined that a provision does not conform to, or no longer conforms to, the Companies Act, the Financial Instruments and Exchange Act, or any other relevant laws or regulations.

2. Other than in the case of the preceding paragraph, if the Company determines that it is necessary, it may
propose an amendment of this Agreement to the Right Holder.

3. If the Right Holder does not file with the Company a written objection which states a proper reason within 3
weeks after receiving the proposal under the preceding paragraph, this Agreement will be deemed to be automatically modified according to the Company's proposal.

**Article 13 <u>Term of This Agreement</u>** 

This Agreement will become effective on the contract execution date set forth in the table above and will continue in effect so long as the Allotted Stock Acquisition Rights remain in effect. Even after all of the Allotted Stock Acquisition Rights have lapsed, the provisions of this Agreement that apply to the shares issued based on the exercise of the Allotted Stock Acquisition Rights will remain in effect.

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**Article 14 <u>Severability</u>** 

If any provision of this Agreement or a part thereof is held to be invalid or unenforceable, the remaining provisions of this Agreement and the remaining parts of the provisions that are partly held to be invalid or unenforceable will remain in full force and effect, and the Company and the Right Holder shall use their best efforts to amend the provision or part held to be invalid or unenforceable so that it becomes valid and enforceable while preserving the intentions of the parties.

**Article 15 <u>Governing Law; Jurisdiction</u>** 

This Agreement shall be governed by the laws of Japan, and if there is a need for a lawsuit regarding this Agreement, the parties shall submit to the exclusive jurisdiction of the Tokyo District Court as the court of first instance.

**Article 16 <u>Handling of Matters Not Provided For</u>** 

The Company and the Right Holder shall engage in good-faith consultation regarding the handling of a matter not provided for in this Agreement and the detailed rules, and if the Right Holder refuses to participate in such consultation or no agreement is reached despite such consultation, the handling of such matter will be decided by the Company's board of directors (if the Company does not have a board of directors, the decision of the director).

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Exhibit (Terms and Conditions of the Series [<u> </u>] Stock Acquisition Rights)

**Terms and Conditions of the Series [ ] Stock Acquisition Rights** 

I. Reason for favorable issuance

Stock acquisition rights will be issued for the purpose of stock options with the aim of increasing the incentive for directors and employees of Pixie Dust Technologies, Inc. (the "**Company**") to improve their performance and also recruiting talented individuals. Since they are being issued for the purpose of stock options, the stock acquisition rights will be issued at no cost as set forth in Section III below, and the amount to be paid upon the exercise of the stock acquisition rights will be an amount based on the market price of the shares. The stock acquisition rights that will be issued based on this draft resolution will be referred to as the "**Stock Acquisition Rights**".

II. Allottees

The allottees of the Stock Acquisition Rights will be directors and employees of the Company.

III. Terms and conditions of Stock Acquisition Rights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Class and number of (or calculation method for) shares underlying the Stock Acquisition Rights

The maximum will be [<u> </u>] shares of common stock of the Company; provided, however, that if the number of shares underlying each Stock Acquisition Right will be adjusted pursuant to the provisions of Paragraph 2, it will be adjusted to the number of underlying shares after such adjustment multiplied by the number of the Stock Acquisition Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Number of the Stock Acquisition Rights

The maximum number of stock acquisition rights to be issued is [<u> </u>]. The number of shares underlying each Stock Acquisition Right will be 1 share; provided, however, that the number of shares underlying each Stock Acquisition Right may be adjusted as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) If the Company will be performing a stock split or reverse stock split of common stock, the number of shares
underlying each unexercised Stock Acquisition Right will be adjusted according to the formula set forth below, a fractional share of less than 1/100 of a share that arises due to such adjustment will be rounded off, and no monetary adjustment will
be made. The "split ratio" means the total number of outstanding common shares after the stock split divided by the total number of outstanding common shares before the stock split, the "reverse split ratio" means the total
number of outstanding common shares after the reverse stock split divided by the total number of outstanding common shares before the reverse stock split, and the same will apply below. The adjusted number of shares will apply, in the case of a
stock split, on and after the day after the allotment record date of the stock split pursuant to Article 183(2)(i) of the Companies Act and, in the case of a reverse stock split, on and after the day after the effective date of the reverse stock
split.

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| | | |
|:---|:---|:---|
| Adjusted number of shares = Pre-Adjusted number of shares | ![LOGO](g430639g37p21.jpg) | Split or reverse split ratio |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) If the Company will be issuing or disposing of shares for subscription through a rights offering or will be
performing an allotment of shares without contribution, a merger, share exchange, or divestiture, or it is otherwise determined to be necessary, the Company shall adjust the number of shares underlying each Stock Acquisition Right as determined to
be appropriate.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) If the number of shares underlying each Stock Acquisition Right will be adjusted pursuant to the provisions of
this paragraph, the Company shall, without delay after determination of the relevant matters, notify the persons holding the Stock Acquisition Rights ()"**Right Holders**") accordingly and of the reason for the adjustment, the adjusted
number of shares, the effective date, and other necessary matters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Amount to be paid in for the Stock Acquisition Rights

The Stock Acquisition Rights will be issued at no cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Value of property to be contributed upon the exercise of the Stock Acquisition Rights, or the method for
calculating such value

JPY [<u> </u>] per share (the "**Exercise Price**"), and the value of property to be contributed when exercising each Stock Acquisition Right will be the Exercise Price multiplied by the number of shares underlying each Stock Acquisition Right; provided, however, that the Exercise Price may be adjusted as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) If the Company will be performing a stock split or reverse stock split of common stock, or will be issuing
common shares by allotment without contribution, the Exercise Price for the unexercised Stock Acquisition Rights will be adjusted according to the formula set forth below, and a fractional amount of less than JPY 1 that arises due to such adjustment
will be rounded up. The "ratio of allotment without contribution" means the total number of outstanding common shares (excluding treasury shares) after the allotment without contribution divided by the total number of outstanding common
shares (excluding treasury shares) before the allotment without contribution. The adjusted Exercise Price will start to apply, in the case of stock split and reverse stock split, when the adjusted number of shares under Paragraph 2 Item 1 starts to
apply, and in the case of an allotment without contribution, on the day after the effective date (if there is a record date for the allotment, such record date).

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| | | |
|:---|:---|:---|
|  |  | 1 |
| Adjusted Exercise Price = Pre-Adjusted Exercise Price | ![LOGO](g430639g37p21.jpg) |  |
|  |  | Ratio of stock split, reverse stock split, or allotment without contribution |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) If the Company will be performing a merger, share exchange, or divestiture, or it is otherwise determined to be
necessary, the Company shall adjust the Exercise Price as determined to be appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) If the Exercise Price will be adjusted pursuant to the provisions of this paragraph, the Company shall, without
delay after determination of the relevant matters, notify the Right Holders accordingly and of the reason for the adjustment, the adjusted Exercise Price, the effective date, and other necessary matters.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Period during which the Stock Acquisition Rights can be exercised

The 10-year period from the allotment date of the Stock Acquisition Rights; provided, however, that if the last day of the exercise period falls on a holiday of the Company, the previous business day will be the last day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Conditions for exercise of the Stock Acquisition Rights, Etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Conditions for exercise

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The exercise of the Stock Acquisition Rights will be subject to the non-occurrence of the reasons for acquisition set forth in each item of Paragraph 7 with respect to the Stock Acquisition Rights to be exercised or the Right Holders, and the exercise of the Stock Acquisition
Rights for which a reason for acquisition has occurred will not be permitted except where such exercise is specifically permitted by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Right Holders shall not exercise the Stock Acquisition Rights until the Company's stock is listed on
any financial instruments exchange except where such exercise is specifically permitted by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Stock Acquisition Rights must be exercised in increments of one Stock Acquisition Right, and the partial
exercise of a Stock Acquisition Right will not be permitted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Inheritance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) If a Right Holder dies, the heirs to the Right Holder will inherit the unexercised Stock Acquisition Rights in
accordance with the provisions of this Section III; provided, however, that inheritance will be limited to one time, and if the heirs to the Right Holder who will succeed to the Stock Acquisition Rights (the "**Successors of Rights** ")
die or the Successors of Rights do not exercise the Stock Acquisition Rights within 3 months after the death of the Right Holder, such Stock Acquisition Rights can no longer be exercised and will lapse. In addition, if the Successors of Rights will
be exercising the Stock Acquisition Rights, they cannot be exercised in multiple stages and only a one-time exercise of all unexercised Stock Acquisition Rights will be permitted. Inheritance will be subject
to the provisions below and the conditions set forth in a contract that the Right Holder has entered into with the Company regarding the Stock Acquisition Rights.

1) All heirs to the Right Holder who have inherited the Stock Acquisition Rights shall jointly notify each of the matters listed below to the Company in writing within 3 months after the commencement of inheritance:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Inheritance commencement date

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Details of the conference for division of estate regarding the Stock Acquisition Rights and the date on which
agreement is reached

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Name and address of the Successors of Rights

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Name and address of the representative of the Successors of Rights (the "**Successor Representative** ")

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Matters specified by the Company other than Items (a) through (d) above

2) When providing the notification under Item 1), a certified copy of removal from family register, certified copy of family register, agreement on division of estate, and other documents specified by the Company must be attached.

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3) All of the Successors of Rights will jointly exercise the Stock Acquisition Rights through the Successor Representative. The Successor Representative will have the authority to act on behalf of all of the Successors of Rights with respect to the exercise and waiver of the Stock Acquisition Rights and all other matters regarding the Stock Acquisition Rights. 

4) The Successors of Rights shall be jointly and severally liable for the performance of the obligation to pay the Exercise Price due to the exercise of the Stock Acquisition Rights and all other liabilities owed to the Company regarding the Stock Acquisition Rights.

5) In the event of any change to a matter set forth in Item 1) (a) through (e) above during the exercise period, the Successors of Rights shall promptly notify the Company of the details of such change in writing.

6) Upon the Company's request, the Successors of Rights shall, in accordance with the Company's instructions, sell the shares in the Company that were acquired through the exercise of the Stock Acquisition Rights. 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Successors of Rights will be deemed to be the Right Holders for the application of the provisions of this
Section III excluding this Item (2); provided, however, that the provisions of Paragraph 7(4) will not apply to the Successors of Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Reasons for which the Company can acquire the Stock Acquisition Rights

The Company may acquire the Stock Acquisition Rights based on each of items below. If the Company will be acquiring the Stock Acquisition Rights for which a reason for acquisition set forth in any of the items below has occurred, it shall acquire such Stock Acquisition Rights on the date that is determined by a resolution of the board of directors (if the Company does not have a board of directors, a resolution of the general meeting of shareholders). In addition, if the Company can acquire all or some of the Stock Acquisition Rights for which a reason for acquisition set forth in any of the items below has occurred and will be acquiring some of such Stock Acquisition Rights, the Stock Acquisition Rights that will be acquired will be decided by a resolution of the board of directors (if the Company does not have a board of directors, a resolution of the general meeting of shareholders).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) If an approval resolution of the Company's general meeting of shareholders (if the consent of all
shareholders is required in place of a resolution of the general meeting of shareholders, obtain the consent of all shareholders, and if neither is required, a resolution of the board of directors (if the Company does not have a board of directors,
the decision of the director)) required by law or regulation or under the Company's articles of incorporation is adopted with respect to an absorption-type merger or consolidation-type merger where the Company will be the merged company, an
absorption-type divestiture or incorporation-type divestiture where the Company will be the divested company, or a share exchange or share transfer where the Company will become a wholly owned subsidiary (collectively, "**Organizational Restructuring** "), the Company may acquire the Stock Acquisition Rights at no cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) If a written agreement stating that a majority of the total number of the Company's outstanding shares
will simultaneously or virtually simultaneously transfer to a certain third party (including shareholders of the Company) is entered into between each holder of such shares and such third party, the Company may acquire the Stock Acquisition Rights
at no cost.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) If the Company has approved a demand for the sale of shares, etc. (as defined in Article 179-3(1) of the Companies Act) by a shareholder of the Company, the Company may acquire the Stock Acquisition Rights at no cost.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) If a Right Holder is no longer any of the following, the Company may acquire the unexercised Stock Acquisition
Rights at no cost:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Director (including a director who is a member of the audit and supervisory committee) or statutory auditor of
the Company or the Company's subsidiary (which means a subsidiary of the Company as defined in Article 2(iii) of the Companies Act, "**Subsidiary** ")

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Employee of the Company or a Subsidiary

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A person who is in an ongoing contractual relationship, such as an engagement or service contract, with the
Company or a Subsidiary, whether as a counselor, advisor, consultant, or under any other title

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Upon the occurrence of an event that falls under any of the items below, the Company may acquire the
unexercised Stock Acquisition Rights at no cost:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A Right Holder is sentenced to imprisonment or a more-severe punishment

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A Right Holder competes with the Company or a Subsidiary in any way, such as directly or indirectly
establishing a legal entity that runs a business that competes with the Company or a Subsidiary or assuming a position as its officer or employee except where the Company's prior written approval is obtained

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A Right Holder harms the reputation of the Company or a Subsidiary due to a legal violation or any other
misconduct

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) A Right Holder receives a petition for attachment, provisional attachment, provisional disposition, compulsory
execution, or public auction, or receives a procedure for the collection of delinquent taxes and governmental charges

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) A Right Holder suspends its payment or becomes insolvent, or a note or check issued or accepted by the Right
Holder is dishonored

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) There is a petition for commencement of bankruptcy proceedings, commencement of civil rehabilitation
proceedings, commencement of corporate reorganization proceedings, commencement of special liquidation proceedings, or commencement of any other similar proceedings with respect to a Right Holder

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) A resolution for dissolution of a Right Holder is adopted

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) It is determined that a Right Holder is an antisocial force (which means an organized crime group, member of an
organized crime group, quasi-member of an organized crime group, entity affiliated with an organized crime group, corporate racketeer, or any other group or individual that pursues economic benefits using violence, force, or deception; same applies
below) or is engaged in any interaction or involved with an antisocial force by providing funding, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) A Right Holder breaches a provision of this Section III or a contract entered into with the Company regarding
the Stock Acquisition Rights

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) In a case where a Right Holder is a director (including a director who is a member of the audit and supervisory
committee), statutory auditor, or employee of the Company or a Subsidiary (including cases where the Right Holder becomes any of the foregoing after the issuance of the Stock Acquisition Rights), the Company may acquire the unexercised Stock
Acquisition Rights at no cost upon the occurrence of an event that falls under either of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) A Right Holder falls under any of the grounds for disciplinary action provided for in the work rules of the
Company or a Subsidiary that apply to the Right Holder

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) A Right Holder breaches a duty owed to the Company or a Subsidiary, such as the duty of loyalty as a director

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) The Company may acquire, at no cost, the Stock Acquisition Rights that were not the subject of inheritance. In
such case, the notice to the holder of stock acquisition rights pursuant to Article 273(2) or Article 274(3) of the Companies Act will be sufficient if it is given to a Right Holder's legal heir who is determined to be appropriate by the
Company; provided, however, that if such notice is not required by interpretation of law or regulation, the Stock Acquisition Rights may be acquired at no cost without giving any notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Exercise procedure

The person exercising the Stock Acquisition Rights shall submit to the Company a written request as specified by the Company and pay the full amount of the Exercise Price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. Restrictions on transfer of the Stock Acquisition Rights

The approval of the board of directors (if the Company does not have a board of directors, the general meeting of shareholders) must be obtained to transfer the Stock Acquisition Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. Warrants

No warrants will be issued for the Stock Acquisition Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. Matters regarding the increase in stated capital and capital reserves when shares are issued through the
exercise of the Stock Acquisition Rights

The amount of the increase in stated capital when shares are issued upon the exercise of the Stock Acquisition Rights will be the maximum amount of increase in the stated capital, etc. calculated in accordance with Article 17 of the Corporate Accounting Rules multiplied by 0.5, and if a fractional amount of less than 1 yen arises as a result of the calculation, such fractional amount will be rounded up. The amount of the increase in the capital reserves will be the maximum amount of increase in the stated capital, etc. deducted by the amount of the increase in the stated capital.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. Treatment upon Organizational Restructuring

If the Company performs an Organizational Restructuring, it shall grant, in accordance with the policy set forth below, stock acquisition rights in a surviving company or newly established company in the case of a merger, a successor company or newly established company in the case of a divestiture, or the sole parent company in the case of a share exchange or share transfer (in each case, limited to joint stock companies (*kabushiki kaisha*), collectively, the "**Restructured Company**") to each Right Holder of the Stock Acquisition Rights who is remaining immediately preceding the effective date of the Organizational Restructuring, but only in cases where it is provided in a contract or plan for the Organizational Restructuring that stock acquisition rights in the Restructured Company will be granted in accordance with the policy set forth below:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Number of stock acquisition rights of the Restructured Company that will be granted

The same number as the number of the Stock Acquisition Rights held by a Right Holder will be granted to each Right Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Class of shares of the Restructured Company underlying the stock acquisition rights

Common shares of the Restructured Company

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Number of shares of the Restructured Company underlying the stock acquisition rights

Will be decided in accordance with Paragraph 1 by taking into account factors such as the conditions for the Organizational Restructuring.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Value of property to be contributed when exercising the stock acquisition rights, or the method for calculating
such value

The post-restructuring Exercise Price calculated by adjusting the Exercise Price set forth in Paragraph 4 by taking into account factors such as the conditions for the Organizational Restructuring, multiplied by the number of shares of the Restructured Company underlying such stock acquisition rights decided in accordance with Item (3).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Period during which the stock acquisition rights can be exercised

Starts on the first day of the period during which the stock acquisition rights can be exercised set forth in Paragraph 5 or the effective date of the Organizational Restructuring, whichever occurs later, and ends on the last day of the period during which the stock acquisition rights can be exercised set forth in Paragraph 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Conditions for exercise of rights, reasons for acquisition, and other terms of the stock acquisition rights

Will be specified in a contract or plan for the Organizational Restructuring in accordance with the terms and conditions of the Stock Acquisition Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Restrictions on transfer of stock acquisition rights

A transfer of stock acquisition rights will require approval of the Restructured Company's board of directors (if the company does not have a board of directors, the general meeting of shareholders).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) Treatment upon Organizational Restructuring

Will be decided in accordance with this paragraph.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. Agreement on fractional share of less than 1 share that arises when exercising stock acquisition rights

If there is a fractional share of less than 1 share in the number of shares that will be issued to the Right Holder through the exercise of the Stock Acquisition Rights, such fractional share will be rounded off.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. Applicability to the Right Holder, Etc.

If the Right Holder is an individual, the provisions of this Section III that, by their nature, should only apply to legal entities will not apply. If the Right Holder is a legal entity, the provisions of these terms and conditions that, by their nature, should only apply to individuals will not apply.

## Exhibit 99.1

**Exhibit 99.1** 

**PIXIE DUST TECHNOLOGIES, INC.** 

2-20-5 Kanda Misaki-cho, Chiyoda-ku

Tokyo, 101-0061, Japan

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March 8, 2023

<u>Via EDGAR</u> 

U.S. Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

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| | |
|:---|:---|
| **Re:** | **Pixie Dust Technologies, Inc.** |
|  | **Draft Registration Statement on Form F-1**<br> **CIK No. 0001962845** |
|  | **Request for Waiver and Representation under Item 8.A.4 of Form 20-F** |

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Ladies and Gentlemen:

The undersigned, Pixie Dust Technologies, Inc., a corporation with limited liability organized under the laws of Japan (the "Company"), is submitting this letter to the U.S. Securities and Exchange Commission (the "Commission") in connection with the Company's draft registration statement on Form F-1, initially submitted on March 8, 2023 (the "Registration Statement"), relating to a proposed initial public offering and listing in the United States of American Depositary Shares representing the Company's common shares.

The Company has included in the Registration Statement its audited financial statements, prepared in accordance with accounting principles generally accepted in the United States, as of April 30, 2021 and 2022, and for each of the fiscal years ended April 30, 2021 and 2022, and unaudited interim financial statements as of October 31, 2022, and for each of the six-months period ended October 31, 2021 and 2022.

The Company respectfully requests that the Commission waive the requirement of Item 8.A.4 of Form 20-F (the "Waiver Request"), which states that in the case of a company's initial public offering, the registration statement on Form F-1 must contain audited financial statements of a date not older than 12 months from the date of the filing (the "12-Month Requirement").

The Company is submitting this Waiver Request pursuant to Instruction 2 to Item 8.A.4 of Form 20-F, which provides that the Commission will waive the 12-Month Requirement "in cases where the company is able to represent adequately to us that it is not required to comply with this requirement in any other jurisdiction outside the United States and that complying with this requirement is impracticable or involves undue hardship." In addition, in International Reporting and Disclosure Issues in the Division of Corporation Finance, dated November 1, 2004 (available on the Commission's website at http://www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm at Section III.B.c), staff of the Commission notes that:

"the instruction indicates that the staff will waive the 12-month requirement where it is not applicable in the registrant's other filing jurisdictions and is impracticable or involves undue hardship. As a result, we expect that the vast majority of IPOs will be subject only to the 15-month rule. The only times that we anticipate audited financial statements will be filed under the 12-month rule are when the registrant must comply with the rule in another jurisdiction, or when those audited financial statements are otherwise readily available."

In connection with the Waiver Request, the Company represents to the Commission that:

1. The Company is not currently a public reporting company in any jurisdiction.

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2. The Company is not required by any jurisdiction outside the United States to prepare financial statements
audited under any generally accepted auditing standards for any interim period.

3. Full compliance with Item 8.A.4 of Form 20-F at present is
impracticable and involves undue hardship for the Company.

4. The Company does not anticipate that its audited financial statements for the year ended April 30, 2023
will be available until August 2023.

5. In no event will the Company seek effectiveness of its registration statement on Form F-1 if its audited financial statements are older than 15 months at the time of the Company's initial public offering.

The Company has submitted this letter as Exhibit 99.1 to the Registration Statement pursuant to Instruction 2 to Item 8.A.4 of Form 20-F.

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| | |
|:---|:---|
| Sincerely, | Sincerely, |
| **PIXIE DUST TECHNOLOGIES, INC.** | **PIXIE DUST TECHNOLOGIES, INC.** |
| By: | /s/ Yoichi Ochiai |
| Name: | Yoichi Ochiai |
| Title: | Chief Executive Officer |

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