Metros Development (MTRS) F-1Registration statement (foreign)

As filed with the U.S. Securities and Exchange Commission on September 26, 2023

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form F-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

Metros Development Co., Ltd.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Metros Development Co., Ltd.

Ginza Sanno Building 7F

4-10-10, Ginza, Chuo-ku

Tokyo, Japan

Telephone: +81 3-6457-9420

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

Cogency Global Inc.

122 East 42nd Street, 18th Floor

New York, NY 10168

Telephone: (800) 221-0102

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

Copies to:

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

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, please 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.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant files 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 or until the registration statement becomes effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus does not constitute an offer to sell or a solicitation of an offer to purchase securities in any jurisdiction where offer or sale is not authorized.

METROS DEVELOPMENT CO., LTD.

_______ Common Shares

We are offering ________ common shares, no par value. This is our initial public offering. Prior to the offering, there has been no public market for our common shares. We expect the initial public offering price to be between $________ and $________ per share. For purposes of this prospectus, the assumed initial public offering price per share is $________, the low-end of the anticipated price range.

We are also seeking to register the issuance of (i) warrants to purchase ______ common shares (the “Representative’s Warrant”) to the underwriters (assuming the exercise of the over-allotment option by the Underwriters in full) as well as (ii) ______ common shares issuable upon exercise by the underwriters of the Representative’s Warrant at an exercise price of $______ per share (100% of initial public offering price).

We have applied to list our common shares on The Nasdaq Capital Market (“Nasdaq”) under the symbol “______”. We believe that upon the completion of the offering contemplated by this prospectus, we will meet the standards for listing on Nasdaq. We cannot guarantee that we will be successful in listing our common shares on Nasdaq; however, we will not complete this offering unless we are so listed.

Currently, Yoshihiro Koshiba, our Chief Executive Officer and a member of our board of directors, beneficially owns 35,000,000 common shares, which represent approximately 71.43% of the voting power of our outstanding common shares. Following this offering, Mr. Koshiba will control approximately ______% of the voting power of our outstanding common shares if all the common shares are sold. As a result of his voting power, he will be able to control any action requiring the general approval of our shareholders, including the election of our board of directors, the adoption of amendments to our articles of incorporation and the approval of any merger or sale of substantially all of our assets. If we are approved to list our common shares on Nasdaq, we will be a “controlled company” as defined in Rule 5615(c)(1) of the Nasdaq listing standards because more than 50% of our voting power will be held by Mr. Koshiba after the offering. As a “controlled company,” we are exempt by Rule 5615(c)(2) of the Nasdaq listing standards from certain corporate governance requirements. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. See “Prospectus Summary—Implications of Being a Controlled Company.”

We are an “emerging growth company” under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary— Implications of Being an Emerging Growth Company and a Foreign Private Issuer.”

Investing in our common shares involves a high degree of risk. Before purchasing any shares, potential investors should carefully read the discussion of the material risks of investing in our common shares under the heading “Risk Factors” beginning on page 13 of this prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or recognized the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

We have granted a 45-day option to the underwriters to purchase up to ______ additional common shares solely to cover over-allotments, if any. If the underwriters exercise the option in full, the total underwriting cash discounts and commissions payable by us will be $[●], and the total proceeds to us, before expenses, will be $[●].

Delivery of the common shares is expected to be made on or about [●], 2023.

The date of this prospectus is , 2023

TABLE OF CONTENTS

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 our common shares, and seeking offers to buy our common shares, 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, our common shares in any jurisdiction 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 our common shares. Our business, results of operations, financial condition, or prospects may have changed since those dates.

Before you invest in our common shares, 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 outside of the United States: 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. You are required to inform yourselves about, and observe any restrictions relating to, this offering and the distribution of this prospectus.

Notice to prospective investors in Japan: Our common shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of our common shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations, and ministerial guidelines of Japan in effect at the relevant time.

Cautionary Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements that reflect our current expectations and views of future events, all of which are subject to risks and uncertainties. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. These statements are likely to address our growth strategy, financial results, and product and development programs. You must carefully consider any such statements and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed, and actual future results may vary materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

We describe certain material risks, uncertainties, and assumptions that could affect our business, including our financial condition and results of operations, under “Risk Factors.” We base our forward-looking statements on our management’s beliefs and assumptions based on information available to our management at the time the statements are made. We caution you that actual outcomes and results may, and are likely to, differ materially from what is expressed, implied or forecast by our forward-looking statements. Accordingly, potential investors should be careful about relying on any forward-looking statements. Except as required under the federal securities laws, we do not have any intention or obligation to update publicly any forward-looking statements after the distribution of this prospectus, whether as a result of new information, future events, changes in assumptions, or otherwise.

ABOUT THIS PROSPECTUS

As used in this prospectus, unless the context otherwise requires or otherwise states, references to the “Company,” “we,” “us,” “our,” and similar references refer to Metros Development Co., Ltd., a joint stock corporation with limited liability organized under the laws of Japan, and its subsidiaries.

Our functional currency is the Japanese yen (which we refer to as “¥”). Our reporting currency is the U.S. dollar. The terms “$” refer to U.S. dollars, the legal currency of the United States. Consistent with ASC 830, the reporting currency is converted at the following rates:

We make no representation that the Japanese yen or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Japanese yen, as the case may be, at any particular rate or at all.

Our financial statements are prepared in accordance with U.S. generally accepted accounting principles (which we refer to as “US GAAP”). Our fiscal year ends on November 30 of each year as does our reporting year. Therefore, any references to 2022 and 2021 are references to the fiscal and reporting years ended November 30, 2022 and November 30, 2021, respectively. Our most recent fiscal year ended on November 30, 2022. See Note 2 in our audited consolidated financial statements as of and for the years ended November 30, 2022, and November 30, 2021, included elsewhere in this prospectus for a discussion of the basis of presentation 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.

TRADEMARKS AND COPYRIGHTS

The names and marks of Metros and Metros Development mentioned in this prospectus are not registered as trademarks. We intend to register the names and marks of Metros and the potential real estate crowdfunding services as trademarks in Japan. This prospectus may also contain trademarks, service marks, and trade names of other companies that are the property of their respective owners. The use or display of trademarks, service marks, trade names or services of third parties in this prospectus does not imply, and should not be construed to imply, any affiliation, endorsement or sponsorship by the Company. For the convenience of readers only, some copyrights, trade names, and trademarks mentioned in this prospectus may appear without their ©, ® and ™ symbols.

RISK FACTORS

An investment in the common shares 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 of the other information contained in this prospectus, including the audited financial statements and the related notes included in this prospectus, before deciding whether to invest in the common shares. These risk factors are not presented in the order of importance or probability of occurrence. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. In that event, the market price of the common shares could decline, and you could lose part or all of 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 Statement Regarding Forward-Looking Statements.”

General Risks Related to our Business

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds to invest in future growth opportunities. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could seriously harm our business and operating results. If we incur debt, the debt holders would have rights senior to common shareholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common shares. Furthermore, if we issue equity securities, shareholders will experience dilution, and the new equity securities could have rights senior to those of our common shares. Any additional equity or equity-linked financings would be dilutive to our shareholders. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. As a result, our shareholders bear the risk of our future securities offerings reducing the market price of our common shares and diluting their interest.

Public health epidemics or outbreaks (such as the novel strain of coronavirus (COVID-19)) could adversely impact our business.

The Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19) which in March 2020, has been declared a pandemic by the World Health Organization. The ultimate disruption which may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows. Possible areas that may be affected include, but are not limited to, disruption to the Company’s ability to make investments through its subsidiaries, negative impact to revenue related to real estate holdings, negative impact on its workforce, unavailability of professional services and other resources, disruption to credit markets necessary for success of the Company’s business model, and the decline in value of assets held by the Company’s subsidiaries.

The supply of real estate inventory may become further restricted by purchase/sale staff inability to meet with land or building owners to negotiate the sale of their properties for redevelopment. Additionally, a moratorium on real estate transactions may be imposed in reaction to the pandemic. These housing market impacts may limit the Company’s ability to acquire or dispose of real estate assets.

General employment in the region may continue to suffer as the pandemic continues. Some local governments have proposed rent or eviction moratoria, or similar programs of rent abatement, in response to the sudden upturn in unemployment. Any of these factors could cause a future decline in the market rate for residential rentals negatively impacting the Company’s income and cash flow from its real estate holdings.

Employees could be medically or mentally affected by the pandemic and may be required to continue to work remotely, particularly given the potential for complete or partial lockdown. This situation could cause of reduction in productivity or the inability to complete critical tasks for the Company.

There is a risk that we will be a passive foreign investment company (which we refer to as “PFIC”) for the current or any future taxable year, which could result in material adverse U.S. federal income tax consequences if you are a U.S. holder.

A non-U.S. corporation, such as our Company, is classified as a PFIC for any taxable year in which, after applying relevant look-through rules with respect to the income and 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 cash we raise in this offering will generally be considered to be held for the production of passive income and thus will be considered a passive asset.

The determination of whether a corporation is 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 common shares in this offering, a decrease in the market price of the common shares may also cause us to be classified as a PFIC for the current or any future taxable year. Based upon the foregoing, it is uncertain whether we will be a PFIC for our current taxable year or any future taxable year. We believe we were not a PFIC in prior taxable year 2022 because less than 75% of our gross income was passive income and less than 50% of the average value of our assets consisted of assets that would produce passive income in 2022.

If we are a PFIC for any taxable year during which a U.S. holder (as defined below) owns common shares, certain adverse U.S. federal income tax consequences could apply to such U.S. holder. See “Certain Tax Considerations — Certain U.S. Federal Income Tax Considerations for U.S. Holders” for further information. We have not determined, if we were to be classified as a PFIC for a taxable year, whether we will provide information necessary for a U.S. holder to make a “qualified electing fund” election which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs. 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. 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 our common shares.

It may not be possible for investors to effect service of process within the United States upon most our directors, corporate auditors and executive officers, or to enforce against us or those persons judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States.

We are a joint stock corporation organized under Japanese law. Most of our directors, corporate auditors and 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. A Japanese court may refuse to apply provisions of U.S. securities laws in original actions, or to enforce judgments of U.S. courts that are based on such provisions, if it considers such provisions to be contrary to the public policy of Japan. The United States and Japan do not currently have a treaty providing for reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters, and a Japanese court may deem that there is not sufficient basis for the reciprocity on the enforcement of judgments. Therefore, if you obtain a civil judgment by a U.S. court, you may not be able to enforce it in Japan.

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 (which we refer to as 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.

Substantially all of our revenues are generated in Japan, but 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 is Japanese yen and reporting currency is US dollar. Substantially all of our revenues are generated in Japan, but we adopt US dollar as reporting currency. We are exposed to fluctuations in the foreign currency exchange rate. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies which, among other factors, may be influenced by governmental policies and domestic and international economic and political developments. 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 results of operations due to translational and transactional differences in exchange rates.

We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the amount of our revenues that will be generated in other countries, the variability of currency exposures, and the potential volatility of currency exchange rates. We do not take any actions to manage our foreign currency exposure, such as entering into hedging transactions.

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 The Nasdaq Capital Market (which we refer to as “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 compensation committee or nomination and corporate governance committee under our board. In addition, we are not required under the Exchange Act to file current reports and financial statements with the U.S. Securities and Exchange Commission (which we refer to as the “SEC”) as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we are generally 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 & 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. For a detailed description of our home country corporate governance practices see “Management - Corporate Governance Practices” on page 62 of this prospectus.

As an “emerging growth company” under the JOBS Act, we are permitted to rely on exemptions from certain disclosure requirements.

We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

In addition, Section 102 of the JOBS Act also 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 accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our consolidated financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.235 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our membership interests that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Until such time, however, we cannot predict if investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities may be more volatile.

If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and have an adverse effect on the value of our securities.

As a public company, we would be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. Further, we will be required to report any changes in internal controls on an annual basis. In addition, we would be required to furnish a report by management on the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We will design, implement, and test the internal controls over financial reporting required to comply with these obligations. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 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 opinion as to the effectiveness of its internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the value of our securities could be negatively affected. We also could become subject to investigations by the Commission or other regulatory authorities, which could require additional financial and management resources.

As an emerging growth company, our auditor will not be required to attest to the effectiveness of our internal controls.

Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting while we are an emerging growth company. This means that the effectiveness of our financial operations may differ from our peer companies in that they may be required to obtain independent registered public accounting firm attestations as to the effectiveness of their internal controls over financial reporting and we are not. While our management will be required to attest to internal control over financial reporting and we will be required to detail changes to our internal controls in our annual reports on Form 20-F (commencing with the filing for the year ended 2024), we cannot provide assurance that the independent registered public accounting firm’s review process in assessing the effectiveness of our internal controls over financial reporting, if obtained, would not find one or more material weaknesses or significant deficiencies. Further, once we cease to be an emerging growth company (as described below), we will be subject to independent registered public accounting firm attestation regarding the effectiveness of our internal controls over financial reporting. Even if management finds such controls to be effective, our independent registered public accounting firm may decline to attest to the effectiveness of such internal controls and issue a qualified report.

Upon becoming a public company, we will incur significantly increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

Upon becoming a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act has imposed various requirements on public companies including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, 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. We cannot predict or estimate the amount of additional costs we will incur as a public company or the timing of such costs.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting the later of our second annual report on Form 20-F or the first annual report on Form 20-F following the date on which we are no longer an emerging growth company. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. 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 value of our securities could decline and we could be subject to sanctions or investigations by 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 our existing, and implement new, operational and financial systems, procedures and controls to manage our business effectively. 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 control 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 the value of our securities, and could adversely affect our ability to access the capital markets.

We depend on certain officers of the Company, the loss of whom could materially harm our business.

We rely upon the accumulated knowledge, skills and experience of the officers and personnel of our Company and its affiliates. If Yoshihiro Koshiba, our Chief Executive Officer, or any of the other officers or personnel were to leave the Company or become incapacitated, we might suffer in our planning and execution of business strategy and operations, impacting our brand and financial results.

Risks Related to Our Real Estate Business

We may be incorrect in our determination of whether a certain property may be redeveloped, which could cause us to be unable to resell such property without incurring a loss.

We are a real estate consulting company that identifies what we believe to be underdeveloped real estate properties which may be redeveloped and purchase and then re-sell such properties to real estate developers for redevelopment. When identifying a property that we believe may be redeveloped we look for certain factors, for example, if a real estate property is located in an upscale residential area, but the property, whether it be a building or land, is being used for low-value single-family homes, low-rise buildings or is at the moment just a plot of land, we do not believe that this is the most effective use of the land. However, we may be incorrect in our determination of whether a certain property may be redeveloped, and if we proceed with purchasing such property, we may be unable to resell it to a developer for redevelopment at a higher price than which we paid for it, which would cause us to incur a loss on such property.

We may not be able to attract and retain a sufficient number of purchase/sales personnel needed to maintain and grow our business.

The business we conduct is greatly dependent on the number of purchasing/sales personnel that we can attract and retain. In our core business, we plan to increase the number of purchase/sales personnel, mainly in Tokyo, Osaka, and Nagoya, in order to increase the number of approaches to landowners, which we believe will lead to an increase in the number of purchase contracts and settlements, thereby further expanding sales and increasing our revenues. In addition, it is imperative to train and secure personnel who have expertise in purchasing operations and who are trusted by landowners, an accordingly we plan to train personnel who we believe can support the medium-to long-term growth of the Company and strengthen young and mid-career personnel. However, if we are unable to attract and retain a sufficient number of purchase/sales personnel needed to maintain and grow our business, it would have an adverse effect on our business operations as well as our ability to grow our business.

The illiquidity of real estate properties could significantly impede our ability to resell properties that we purchase.

Once we identify an underdeveloped property, we negotiate diligently with the landowner to purchase that property. As a result of these negotiations, we purchase and then sell the high-value land collectively to the developer for redevelopment. Real estate properties may be relatively illiquid. As a result, we may not be able to sell a property or facilitate the sale of a property quickly or on favorable terms in response to changing economic, financial and investment conditions when it otherwise may be prudent to do so. Deteriorating conditions in the Japanese economy and credit markets may make it difficult to sell properties or facilitate the sale of properties at attractive prices. We cannot predict whether we will be able to sell or facilitate the sale of any property for the price or on the terms set by us or whether any price or other terms offered by a prospective purchaser would be acceptable to us or an identified seller. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property. We may be required to expend funds to correct defects before a property can be sold, and we cannot provide any assurances that we will have funds available to correct such defects. Our inability to dispose of properties or facilitate the sale of properties at opportune times or on favorable terms could adversely affect our cash flows and results of operations.

We may not make a profit if we sell a property.

The prices that we can obtain when we sell a property will depend on many factors that are presently unknown, including, among other things, the economy, demographic trends in the area, tax treatment of real estate investments, and available financing to purchasers. There is a risk that we will not realize any significant profit on any specific property when we sell it.

A property that we purchase may turn out to be subject to litigation or liens that we failed to identify prior to our purchase or become subject to litigation or liens after our purchase, which would cause us to suffer a loss.

A property that we purchase may turn out to be subject to litigation or liens that we failed to identify prior to our purchase or become subject to litigation or liens after our purchase. If this occurs, we would have to expend our own funds in order to remove such liens or contest or settle such litigation, and we may not have such funds available to us at that time. Additionally, we may not be able to sell that property at a price higher than what we paid for it, or at all, which would cause us to suffer a loss.

A property that we purchase may turn out to have structural or other issues that we failed to identify prior to our purchase or may become subject to damage due to factors outside of our control, which would cause us to suffer a loss.

A property that we purchase may turn out to have structural or other issues that we failed to identify prior to our purchase. If we do not identify such issues until after we have already purchased the property, we would have to expend our own funds in order to correct such structural issues, and we may not have sufficient funds available at that time. Additionally, we may not be able to resell that property to a purchasing developer. Accordingly, we may not be able to sell that property at a price higher than what we paid for it, or at all, which would cause us to suffer a loss. Additionally, if a property that we purchase become subject to damage due to factors outside of our controls, such as fires, flooding, weather related damage such as wind damage, or damage due to vandalism, we may not be able to sell such property at a price higher than which we paid for it, or at all, which would cause us to suffer a loss.

A material amount of our revenues may be concentrated in one or more large purchasers. If we lose or experience a significant reduction in sales to such key purchasers, our revenues may decrease substantially and our results of operations and financial condition may be harmed.

A high concentration of our revenue comes from the sale of real estate to certain large developers purchasing real estate from us. Accordingly, in each year there may be a small number of developers who purchase from us from whom we generate our revenue. These developers may not be repeat purchasers and in each year it may be a different single purchaser or small number of purchasers from which we generate a large percentage of our revenues. We rely on these purchasers and there is a risk that these purchasers may be unable to make payment under their obligations to us, thereby affecting our revenues.

In 2021, we sold various real properties to Louis Corporation, a real estate developer, which accounted for 14.37% of our total revenues in 2021. The contracts were separate sales contracts for each of the properties. The purchase price for each property was paid in a lump sum at the time of delivery of each property.

In 2022, we sold various real properties to Kashiwabara Ground, a real estate developer, which accounted for 11.99% of our total revenues in 2022. The contracts were separate sales contracts for each of the real properties. The purchase price for each property was paid in a lump sum at the time of delivery of each property.

Any payment issues encountered by these large purchasers would likely harm our financial condition and results of operations.

We intend to have significant operations in certain geographic areas, which will subject us to an increased risk of loss of revenue or decreases in the market value of properties we purchase or identify in these regions from factors which may affect any of these regions.

We anticipate that our operations and real properties we purchase will be concentrated in Tokyo, Osaka, and Nagoya. Some or all of these regions could be affected by:

Due to our business and real properties that we purchased being concentrated in these areas, negative factors affecting one or a number of these geographic regions at the same time could result in decreased market value of properties we purchase or identify negatively affecting our results of operations. To the extent that regions in which our business is concentrated are impacted by an adverse event, we could be disproportionately affected compared to companies whose operations are less geographically concentrated.

Lots that we purchase may become subject to damage due to factors outside of our control, which would cause us to suffer a loss.

As part of our business, we purchase small adjacent individual lots in bulk and sell them to developers as large lots that can be developed by them on a large scale. If such lots that we purchase become subject to damage due to factors outside of our controls, such as fires, flooding, weather related damage such as wind damage, or damage due to vandalism, we may not be able to sell such lots at a price higher than which we paid for them, or at all, which would cause us to suffer a loss.

We rely on our ability and the ability of our purchasing developers to obtain needed financing from financial institutions.

When purchasing properties to date, we had only two options: using our own funds or borrowing funds from financial institutions. As a result, the amount of cash on hand and the amount available for borrowing from financial institutions have been limiting factors for the Company’s growth. Additionally, our purchasing developers also rely on either their own funds or borrowing funds from financial institutions in order to make property purchases, and for funds to redevelop such properties. Accordingly, each of the Company and our purchasing developers rely on borrowing funds from financial institutions in order to make property purchases, and for our purchasing developers, for funds to redevelop such properties. Accordingly, a portion of our business is dependent on us, as well as purchasing developers being able to obtain loans from financial institutions. Therefore, in the event that a financial institution is unable to provide financing either to us or a purchasing developer as needed, our business performance would be adversely affected. Additionally, if either the Company or our purchasing developers are unable to obtain needed financing in order to purchase property, it would have a negative effect on the Company’s ability to maintain and grow our business.

If properties are not available at competitive prices, our sales and results of operations could be adversely affected.

Our long-term profitability depends in large part on the price at which we are able to purchase or identify underdeveloped properties for which we facilitate the sale and purchase of the property between the owner and the developer. Increases in the price (or decreases in the availability) of suitable properties could adversely affect our profitability. Moreover, changes in the general availability of desirable underdeveloped properties, competition for available properties, limited availability of financing to acquire such properties, zoning regulations that limit housing density, environmental requirements and other market conditions may hurt our ability to identify and obtain, either for purchase or for the facilitation of a purchase, at prices that will allow us to be profitable. If the supply properties that are appropriate for development become more limited because of these factors, or for any other reason, the cost of such properties could adversely affect our results of operations and financial condition.

A downturn in the real estate market or changes in industry trends would negatively impact our business.

The real estate industry is susceptible to economic trends, policy interest rate trends, land price trends, real estate sales price trends, real estate taxation, etc. Therefore, a downturn in the real estate market, a significant increase in interest rates, or other changes in the situation could affect the Company’s performance. In addition, since our Company adopts a style of purchase/sales in which we visit landowners one by one and negotiate with them, our purchase/sales may be restricted by the effects of the continued coronavirus pandemic or other similar pandemics.

Competition for properties may result in fewer opportunities for us to either purchase properties or increase prices for properties, which may impede our growth and materially and adversely affect us.

Our growth depends in part on our ability to identify underdeveloped properties that may be redeveloped, and we may not be successful in identifying such properties or purchasing such properties on favorable terms, if at all. In addition, we can provide no assurances regarding the availability of, or our ability to source and close real estate deals. Failure to identify or purchase properties on favorable terms, or at all, would impede our growth and materially and adversely affect us.

The consideration paid for properties that we purchase may exceed fair market value, which may harm our financial condition and operating results.

The consideration that we pay for a property will be based upon numerous factors, and the target property may be purchased in a negotiated transaction rather than through a competitive bidding process. We cannot assure anyone that the purchase price that we pay for a property or its appraised value will be a fair price. As a result, a property we purchase may not be able to be sold at a profit, which may substantially harm our operating results and financial condition.

Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.

Inflation can adversely affect us by increasing the costs of property such that we will not be able to afford to purchase properties. In addition, significant inflation is often accompanied by higher interest rates, which have a negative impact on demand for properties that we attempt to purchase and sell.

We may incur significant costs in seeking purchasers for the properties that we purchase.

In order to identify potential purchasers for our properties, we will have to use funds to conduct the necessary research, make connections in the industry and market our properties to potential purchasers. The cost of these activities may be significant and in turn may reduce the profit we are able to realize upon the sale of any of our properties.

We will compete with numerous other persons and entities for properties that we seek to purchase.

We will be subject to significant competition when we are attempting to purchase properties. We will compete with many third parties engaged in similar business activities. Many of our competitors may have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital. There is no assurance that we will be able to acquire or facilitate the purchase of properties on favorable terms, if at all. These factors could adversely affect our results of operations and financial condition.

We face risks associated with property purchases.

We intend to purchase properties and our business activities and their success are subject to the following risks:

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

In Japan, under the Soil Contamination Countermeasures Act of Japan (Act No. 53 of 2002, as amended), or the Soil Contamination Countermeasures Act, if a local governor finds that the level of soil pollution in a given area of land due to hazardous or toxic substances exceeds the standards prescribed by the Ministry of the Environment of Japan and that area of land is polluted to such an extent that it has caused or may cause harm to human health, the governor must designate the area of land as a polluted area and the governor may order the current owner of such land to remove or remediate hazardous or toxic substances on or under the land in accordance with a plan for removal and remediation, in principle, whether or not the current owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The environmental surveys that we generally conduct in connection with our properties to discover hazardous or toxic substances in the soil, groundwater, and buildings, may be inadequate to fully uncover the types of problems they are intended to identify, which are often difficult or impossible to detect without special expertise and equipment. The presence of hazardous or toxic substances on our properties, or our failure to properly remediate any such contamination, may adversely affect our ability to sell our properties or borrow using the affected properties as collateral. If hazardous or toxic substances are discovered on any of our properties, the affected properties could fall in value and we may be required to incur substantial unforeseen costs to remediate the underlying hazard and discharge the related environmental liabilities. Furthermore, if actual harm to human health results from the presence of hazardous or toxic substances on our properties, we may incur significant damages, regulatory sanctions, or damage to our brand and reputation. The realization of any of such risks related to environmental contamination could have a material adverse effect on our business, financial condition, and results of operations.

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

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

Risks Related to the Prospective Crowdfunding Platform

The prospective crowdfunding platform may not operate as we anticipate.

When we purchase properties, we only have two options: using our own funds or borrowing from financial institutions. As a result, the amount of cash on hand and the amount available for borrowing from financial institutions have been limiting factors for the Company’s growth. In order to reduce or eliminate the impact of the above limiting factors and achieve further growth, we anticipate using a portion of the net proceeds of this offering to fund the development of a real estate crowdfunding platform in order to raise funds to purchase properties, thereby creating an additional source of funds. We believe that diversifying our funding sources through real estate crowdfunding will contribute to further growth as we can leverage the funds to maximum sales.

In addition, we anticipate potential sponsors of real estate opportunities will come directly to the prospective crowdfunding platform to seek financing for their projects. We anticipate that sponsors of real estate opportunities will continue to seek financing for their projects through the prospective crowdfunding platform. If the asset management platforms experience technical challenges resulting in sponsors not continuing to seek financing through the prospective crowdfunding platform, we may need to implement more manpower-intensive strategies to source investments, which could lead to an increase in expenses and a corresponding decrease in the value of our common shares.

If the security of our investors’ confidential information stored on the prospective crowdfunding platform is breached or otherwise subjected to unauthorized access, their secure information may be stolen.

The prospective crowdfunding platform may store investors’ bank information and other personally-identifiable sensitive data. The prospective crowdfunding platform will be hosted in data centers that are compliant with payment card industry security standards and the website will use daily security monitoring services. However, any accidental or willful security breach or other unauthorized access could cause investors’ secure information to be stolen and used for criminal purposes, and investors would be subject to increased risk of fraud or identity theft. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the prospective crowdfunding platform and its third party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many prefectures have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our prospective investors and real estate companies to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, could result in a loss of investors, and the value of your investment in us could be adversely affected.

Any significant disruption in service on the prospective crowdfunding platform or in its computer or communications systems could reduce their attractiveness and result in a loss of users.

If a catastrophic event resulted in the prospective crowdfunding platform outage and physical data loss, the prospective crowdfunding platform’s ability to perform its obligations would be materially and adversely affected. The satisfactory performance, reliability, and availability of our prospective technology and our underlying hosting services infrastructure will be critical to our operations, level of customer service, reputation and ability to attract new users and retain existing users. Our hosting services infrastructure will be provided by a third party hosting provider (the “Hosting Provider”). We also anticipate maintaining a backup system at a separate location that is owned and operated by a third party. There is no guarantee that access to the prospective crowdfunding platform will be uninterrupted, error-free or secure. Our prospective crowdfunding platform operations will depend on the Hosting Provider’s ability to protect its and our systems in its facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. If our arrangement with the Hosting Provider is terminated, or there is a lapse of service or damage to its facilities, the prospective crowdfunding platform could experience interruptions in their service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in our service, whether as a result of an error by the Hosting Provider or other third party error, our own error, natural disasters or security breaches, whether accidental or willful, could harm our ability to perform any services for corresponding project investments or maintain accurate accounts, and could harm our relationships with our prospective users and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and it may not have sufficient capacity to recover all data and services in the event of an outage at a facility operated by the Hosting Provider. Any of these factors could prevent us from processing or posting payments on the corresponding investments, damage us and our brand and reputation, divert our employees’ attention, and cause users to abandon the prospective crowdfunding platform.

Inappropriate business behavior of entrepreneurs raising funds via our prospective crowdfunding platform could result in reputational or financial damage to our business.

By providing a real estate crowdfunding platform in the future for matching investors and entrepreneurs, there is a possibility that inappropriate business behavior exhibited by any of the entrepreneurs who are raising capital through our real estate crowdfunding platform could result in reputational or financial damages to us. We anticipate enforcing a thorough due diligence process for all companies raising funds via our prospective platform and we anticipate requiring participating entrepreneurs to sign legally binding terms of use releasing us from any responsibility for entrepreneur impropriety or misdeed. Nevertheless, the prospective clients of the crowdfunding platform might regard us as being responsible for any inappropriate behavior of the entrepreneur and this could result in reputation damage to us that could impact our future revenues.

Our prospective crowdfunding platform will operate on an online distribution model and will, therefore, be subject to internet cyber risk.

Our prospective online crowdfunding distribution model could be subject to cyber-attacks aiming to breach our security protocols. We anticipate taking reasonable and commercial precautions to make our online crowdfunding system as secure as possible, including but not limited to daily back-ups, banking grade hosting solutions, divisions between systems to ensure, for example, that our banking backend cannot be reached via our online distribution network, and continuous monitoring of the systems as well as sequential system checks. However, we cannot fully exclude the possibility of cyber-attacks, third party breaches, software bugs or other forms of internet malfeasance. If any of these events occur, our reputation could be negatively impacted and our future revenues could suffer as a result.

Increasing competition within the emerging real estate crowd funding industry could have an impact on our business prospects.

The crowdfunding market is an emerging industry where new competitors are entering the market frequently. These competing companies may have significantly greater financial and other resources than we will have and may have been developing their products and services longer than we have been developing ours. Increasing competition may have a negative impact on our profit margins.

Risks Related to Our Indebtedness

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

The total debt outstanding as of May 31, 2023 was approximately $83,614,531 on a consolidated basis. Our indebtedness could have significant effects on our business, such as:

In addition, we may not be able to generate sufficient cash flow from our operations to repay our indebtedness when it becomes due and to meet our other cash needs. If we are not able to pay our debts as they become due, we will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities. We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if we must sell our assets, it may negatively affect our ability to generate revenues.

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

As of May 31, 2023, we had a total of 49 loans and one bond with 17 Japanese financial institutions and a related party for an aggregate principal amount of $83,614,531 on a consolidated basis. None of the loan agreements contain any material financial covenants, although certain of the government-sponsored loans set a limit on the total loan amount we may borrow from other government-sponsored lenders. However, 28 of the loan agreements have our Chief Executive Officer as a personal guarantor of such debt obligations of our Company. If we release our Chief Executive Officer from such a guarantor burden, the lenders may request us to provide them with alternative collateral and/or seek additional negative covenants on the existing loan agreements. This could limit our discretion to invest, utilize, and/or dispose of our assets for business.

Furthermore, the potential restrictive covenants to be contained in our existing and future loan agreements may restrict our access to future debt financing, on which our business operations and expansion plans, in part, depend. If our revenues decrease materially or we experience a significant increase in our interest expenses, we may not have enough available cash or be able to raise additional funds on satisfactory terms, if at all, through equity or debt financings to make any required prepayment or repay such indebtedness at the time any such event of default occurs. In such an event, we may be required to delay, limit, reduce or terminate our business development or expansion efforts. Our business, financial condition and results of operations could be materially adversely affected as a result.

Risks Related to Financing

We might obtain lines of credit and other borrowings, which increases our risk of loss due to potential foreclosure.

We may obtain lines of credit and long-term financing that may be secured by our assets. As with any liability, there is a risk that we may be unable to repay our obligations from the cash flow of our assets. Therefore, when borrowing and securing such borrowings with our assets, we risk losing such assets in the event we are unable to repay such obligations or meet such demands.

We have broad authority to incur debt.

Our policies do not limit us or our subsidiary entities from incurring debt. We intend to borrow as much as possible. High debt levels would cause us to incur higher interest charges and higher debt service payments and may also be accompanied by restrictive covenants.

Risks Related to our Corporate Structure

Investors will not receive the benefit of the regulations provided to real estate investment trusts or investment companies.

We are not a real estate investment trust and enjoy a broader range of permissible activities. Under the Investment Company Act of 1940, an “investment company” is defined as an issuer which is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities; is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding; or is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percent of the value of such issuer’s total assets (exclusive of Government securities and cash items) on an unconsolidated basis.

We intend to operate in such manner as not to be classified as an “investment company” within the meaning of the Investment Company Act of 1940 as we intend on only buying and selling real estate. The investment practices and policies of ours are not supervised or regulated by any federal or state authority. As a result, investors will be exposed to certain risks that would not be present if we were subjected to a more restrictive regulatory situation.

If we are deemed to be an investment company, we may be required to institute burdensome compliance requirements and our activities may be restricted.

If we are ever deemed to be an investment company under the Investment Company Act of 1940, we may be subject to certain restrictions including:

The exemption from the Investment Company Act of 1940 may restrict our operating flexibility. Failure to maintain this exemption may adversely affect our profitability.

We do not believe that at any time we will be deemed an “investment company” under the Investment Company Act of 1940 as we do not intend on trading or selling securities. Rather, we intend to only buy and sell real estate. However, if at any time we may be deemed an “investment company,” we believe we will be afforded an exemption under Section 3(c)(5)(C) of the Investment Company Act of 1940, as amended (referred to in this Offering as the “1940 Act”). Section 3(c)(5)(C) of the 1940 Act excludes from regulation as an “investment company” any entity that is primarily engaged in the business of purchasing or otherwise acquiring “mortgages and other liens on and interests in real estate”. To qualify for this exemption, we must ensure our asset composition meets certain criteria. Generally, 55% of our assets must consist of qualifying mortgages and other liens on and interests in real estate and the remaining 45% must consist of other qualifying real estate-type interests. Maintaining this exemption may adversely impact our ability to acquire or hold investments, to engage in future business activities that we believe could be profitable, or could require us to dispose of investments that we might prefer to retain. If we are required to register as an “investment company” under the 1940 Act, then the additional expenses and operational requirements associated with such registration may materially and adversely impact our financial condition and results of operations in future periods.

Risks Related to Insurance

We may suffer losses that are not covered by insurance.

Certain weather and environmental events, such as fire, lightning, bursts and explosions, wind, hail, snow, and water damage, can cause damage to real estate. Fire insurance policies can be acquired to prepare for such events. In addition, earthquake insurance can be purchased along with fire insurance. Even in the event of an unprecedented disaster such as the Great East Japan Earthquake, earthquake insurance is a highly public insurance policy operated under the Earthquake Insurance Law, which by law as of 31 December 2022 guarantees insurance payments of up to ¥12 trillion ($91 billion) per earthquake. However, not all perils are covered by insurance, as some are subject to insurance exclusions. For example, earthquake insurance does not pay out if there is no damage to the building itself, but only to gates, fences, or hedges, nor does it pay out for damage caused by war, civil war, or other similar events or riots. Damage caused by land subsidence, uplift, movement, or vibration. will also not be paid.

In the event of a significant loss, insurance coverage may be insufficient to pay the full market value or general reacquisition cost of the underlying property. Factors such as inflation, changes in building codes and ordinances, and environmental considerations may make it impossible to replace the underlying property with insurance proceeds if the underlying property is damaged or destroyed. Under these circumstances, the insurance proceeds received may be insufficient to restore the property.

Risks Related to this Offering and Ownership of the Common Shares

Even if the common shares are listed on Nasdaq, there can be no assurance that we will be able to comply with Nasdaq’s continued listing standards.

Prior to this offering, there has been no public market for our common shares. As a condition to consummating this offering, our common shares offered in this prospectus must be listed on Nasdaq. Accordingly, in connection with the filing of the registration statement of which this prospectus forms a part, we have applied to list our common shares on Nasdaq under the symbol “MTRS.” Assuming that our common shares are listed, after the consummation of this offering there can be no assurance any broker will be interested in trading our common shares. Therefore, it may be difficult to sell your common shares if you desire or need to sell them. Our underwriters are not obligated to make a market in our common shares, and even if it makes a market, it can discontinue market making at any time without notice. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our common shares will develop or, if developed, that such market will continue.

Once our common shares are approved for listing on Nasdaq, there is no guarantee that we will be able to maintain such listing for any period of time by perpetually satisfying Nasdaq’s continued listing requirements. Our failure to continue to meet these requirements may result in our common shares being delisted from Nasdaq.

The price of our common shares could be subject to rapid and substantial volatility.

There have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with recent initial public offerings, especially among those with relatively smaller public floats. As a relatively small-capitalization company with relatively small public float, we may experience greater stock price volatility, extreme price run-ups, lower trading volume and less liquidity than large-capitalization companies. In particular, our common shares may be subject to rapid and substantial price volatility, low volumes of trades and large spreads in bid and ask prices. Such volatility, including any stock-run up, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of the common shares.

In addition, if the trading volumes of the common shares are low, persons buying or selling in relatively small quantities may easily influence prices of the common shares. This low volume of trades could also cause the price of the common shares to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of the common shares 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 the common shares. As a result of this volatility, investors may experience losses on their investment in the common shares. A decline in the market price of the common shares also could adversely affect our ability to sell additional common shares or other securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in the common shares will develop or be sustained. If an active market does not develop, holders of the common shares may be unable to readily sell the common shares they hold or may not be able to sell their common shares at all.

Even if the common shares are approved for listing on Nasdaq, there is no guarantee that we will be able to maintain such listing for any period of time by perpetually satisfying Nasdaq’s continued listing requirements. Our failure to continue to meet these requirements may result in the common shares being delisted from Nasdaq.

The price of the common shares may fluctuate substantially.

The price for the common shares in this offering will be determined by us and representatives of the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. You may not be able to sell your common shares at or above the offering price or at any other price or at the time that you would like to sell. You should consider an investment in the common shares to be risky, and you should invest in the common shares only if you can withstand a total loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of the common shares to fluctuate, in addition to the other risks mentioned in this section of the prospectus, are:

These and other market and industry factors may cause the market price and demand for the common shares to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their common shares and may otherwise negatively affect the liquidity of the common shares. Future market fluctuations may also materially adversely affect the market price of the common shares.

In the past, following periods of volatility in the market price of a company’s securities, shareholders have often instituted securities class action litigation against that company. Any such class action suit or other securities litigation would divert the attention of our senior management, require us to incur significant expense and, whether or not adversely determined, could materially adversely affect our business, financial condition, results of operations and prospects.

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

The trading market for the common shares 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 common shares would be negatively impacted. If one or more of the analysts who covers us downgrades the common shares, publishes incorrect or unfavorable research about our business, ceases coverage of our Company, or fails to publish reports on us regularly, demand for the common shares could decrease, which could cause the price of the common shares or trading volume to decline.

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 common shares. 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 common shares to decline.

As a controlled company, we are not subject to all of the corporate governance rules of Nasdaq.

The “controlled company” exception to Nasdaq rules provides that a company of which more than 50% of the voting power is held by an individual, group or another company, a “controlled company,” need not comply with certain requirements of Nasdaq corporate governance rules. As of the date of this prospectus, Mr. Yoshihiro Koshiba, our Chief Executive Officer and a director, beneficially owned an aggregate of 35,000,000 common shares, which represents 71.43% of the voting power of our outstanding common shares. Following this offering, Mr. Koshiba will control approximately ____% of the voting power of our outstanding common shares if all the common shares being offered are sold. If we obtain listing on Nasdaq, we will be a “controlled company” within the meaning of the corporate governance rules of Nasdaq. Controlled companies are exempt from Nasdaq’s corporate governance rules requiring that listed companies have (i) a majority of the board of directors consist of “independent” directors under the listing standards of Nasdaq, (ii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting the requirements of Nasdaq, and (iii) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of Nasdaq. We currently utilize and presently intend to continue to utilize these exemptions. As a result, we may not have a majority of independent directors and we may not have a nomination and corporate governance committee and compensation committees. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. See “Management—Foreign Private Issuer Status and Controlled Company Exemption”.

If the voting power of our capital stock continues to be highly concentrated, it may prevent you and other minority shareholders from influencing significant corporate decisions and may result in conflicts of interest.

Following the completion of this Offering, management will control approximately ______% of the voting power of our outstanding common shares if all the common shares being offered are sold. As a result, management will have majority voting power over all matters requiring shareholder votes, including: the election of directors; mergers, consolidations and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; amendments to our certificate of incorporation or our bylaws; and our winding up and dissolution.

This concentration of voting power may delay, deter or prevent acts that would be favored by our other shareholders. The interests of management may not always coincide with our interests or the interests of our other shareholders. This concentration of voting power may also have the effect of delaying, preventing or deterring a change in control of us. Also, management may seek to cause us to take courses of action that, in their judgment, could enhance their investment in us, but which might involve risks to our other shareholders or adversely affect us or our other shareholders, including investors in this offering. As a result, the market price of our common shares could decline or shareholders might not receive a premium over then-current market price of our common shares upon a change in control. In addition, this concentration of voting power may adversely affect the trading price of our common shares because investors may perceive disadvantages in owning shares in a company with significant shareholders. See “Executive Compensation” and “Description of Share Capital.”

Our common shares may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”

Our common shares may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common shares will not be considered “penny stock” following this offering since they will be listed on Nasdaq, if we are unable to maintain that listing and our common shares is no longer listed on Nasdaq, unless we maintain a per-share price above $5.00, our common shares will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.

Legal remedies available to an investor in “penny stocks” may include the following:

● If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.

● If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.

These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common shares and may affect your ability to resell our common shares.

Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.

For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common shares will not be classified as a “penny stock” in the future.

If you purchase common shares in this offering, you will experience immediate dilution.

If you purchase common shares in this offering, you will experience immediate dilution of $_______ per common share in the net tangible book value of your common shares after giving effect to this offering at an assumed public offering price of $_______ per common share because the price that you pay will be substantially greater than the net tangible book value per common share that you acquire. For a further description of the dilution that you will experience immediately after this offering, see the section of this prospectus titled “Dilution.”

If the benefits of any proposed acquisition do not meet the expectations of investors, shareholders or financial analysts, the market price of our common shares may decline.

If the benefits of any proposed acquisition do not meet the expectations of investors or securities analysts, the market price of our common shares prior to the closing of the proposed acquisition may decline. The market values of our common shares at the time of the proposed acquisition may vary significantly from their prices on the date the acquisition target was identified.

In addition, broad market and industry factors may materially harm the market price of our common shares irrespective of our operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

The payment of future dividends on our common shares, if any, must be approved by our common shareholders at the annual meeting of the shareholders, or our board of directors only once during a business year, and will depend on many factors on which the common shareholders may determine not to do so.

The payment of future dividends on our common shares, if any, must be approved by our common shareholders at the annual meeting of the shareholders, or our board of directors only once during a business year, and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our common shareholders may deem relevant, including retaining future earnings, if any, for reinvestment in the development and expansion of our business. Therefore, you may not receive any dividends on your common shares for the foreseeable future, and the success of an investment in the common shares 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 our subsidiaries. Consequently, investors may need to sell all or part of their holdings of our common shares 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 common shares will appreciate in value or even maintain the price at which our shareholders have purchased the common shares.

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

Sales of a substantial number of our common shares in the public market in the future or the perception that these sales might occur, could depress the market price of the common shares 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 common shares.

The future issuance of additional common shares in connection with our stock acquisition rights or other incentives, convertible bonds, acquisitions or otherwise may adversely affect the market of the common shares.

At the time of this filing, we had 735,000 common shares issuable upon exercise of outstanding stock acquisition rights at a weighted average exercise price of ¥1($0.01) per share. In addition, we had an aggregate of 8,280,000 common shares issuable upon exercise of outstanding stock acquisition rights at a weighted average exercise price of ¥241($1.73) per share. If and when these stock acquisition rights 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 common shares, and the market price of the common shares.

We currently plan to continue granting stock acquisition rights and other incentives so that we can continue to secure talented personnel in the future. Any common shares issued in connection with the exercise of outstanding stock acquisition rights would dilute your ownership interest.

The right of holders of common shares to participate in any future rights offerings may be limited, which may cause dilution to their holdings.

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 holders of common shares 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. 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.

Risks Related to Tax

We may incur significant taxation from an investigation by the tax authority in Japan.

We have never been investigated by the tax authority in Japan since we were established in March 2013. In Japan, every 2 to 5 years, the tax authority investigates Japanese companies to check the tax filing and determine whether their tax treatment is appropriate. If the tax authority investigates our tax treatment and determines our tax treatment is not appropriate, or if we and the tax authority have different views on tax treatments, we may have to pay a burden taxation. This may materially and adversely impact our financial condition and results of operations in future periods.

Risks Related to Restrictions on Foreign Investment

We may face restrictions on foreign investment related to Foreign Exchange and Foreign Trade Act in Japan.

If we develop a new business or plan a merger or acquisition, we have to consider the impact from restrictions of foreign investment under the Foreign Exchange and Foreign Trade Act, as amended (the “FEFTA”), in Japan. We have applied to list our common shares, not American Depository Receipt, on The Nasdaq Capital Market. In this case, an investment in our Company may be deemed as an inward direct investment as set forth in the FEFTA. When it is applicable, certain acquisitions of shares in Japan from foreign investors may be subject to prior notification or a post-investment report. Under the FEFTA, when foreign investors acquire our common shares in a transaction that is considered as an inward direct investment or a specified acquisition, they are required to file a notification or report with the Japanese government via the Bank of Japan, subject to limited exemptions. Therefore, if we develop a new business or plan a merger or acquisition in the future, we have to consider the impact from restriction of foreign investment in Japan, and if there is any impact due to the application of this regulation, we may have to forego such new business or plans, which may materially and adversely impact our financial condition and results of operations in future periods.

USE OF PROCEEDS

We estimate that we will receive approximately $___ million in net proceeds from the assumed sale of ___ common shares offered by us in this offering (or approximately $___ million if the underwriters exercise in full their option to purchase up to ___ additional common shares from us), based on an assumed public offering price of $___ per common share (which is the low-end of the price range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and offering expenses of approximately $___ million payable by us if the underwriters do not exercise their over-allotment option (approximately $___ million payable by if the underwriters exercise in full their over-allotment option).

We intend to use the net proceeds from this offering for working capital and general corporate purposes, which may include developing a real estate crowdfunding platform, marketing the new real estate crowdfunding platform, as well as the development and marketing of new services.

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 expansion and development efforts, whether or not we enter into strategic transactions, our general operating costs and expenditures, and the changing needs of our businesses.

The estimated percentages of the net amount of proceeds that we intend to use for the following purposes are as follows:

Each $1.00 increase (decrease) in the assumed initial public offering price of $____ per share (which is the low-end 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 shares 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 shares we are selling in this offering. An increase (decrease) of 100,000 in the number of shares 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 shares (which is the low-end 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. Any increase or decrease in the estimated proceeds from the offering is not expected to have a material effect on our operations given the discretion we will have in the application and use thereof.

We believe that our funds and the net proceeds from this offering will be sufficient to continue our businesses and operations as currently conducted through 2024; however, changing circumstances may cause us to consume capital significantly faster than we currently anticipate.

To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest our net proceeds in short-term, interest-bearing bank deposits or debt instruments.

The intended use of proceeds in this section takes into account the potential impacts of COVID-19.

DIVIDEND POLICY

Although we have paid annual dividends to shareholders since 2022 as reflected in the table below, the payment of future dividends on our common shares, if any, will be approved by our common shareholders at the annual meeting of the shareholders, or our board of directors only once during a business year, and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our common shareholders or our directors may deem relevant, including retaining future earnings, if any, for reinvestment in the development and expansion of our business. The agreements into which we may enter in the future, including indebtedness, may impose limitations on our ability to pay dividends or make other distributions on our capital stock. Currently, there are no restrictions on payment of dividends under our existing debt agreements. However, Articles 446 and 461 of Companies Act in Japan set forth the regulations for restricting dividend payments and companies are required to calculate distributable amount of dividend accordingly. See “Description of Share Capital—Dividend Rights” for calculating distributable amount of dividends. The Companies Act in Japan specifically prohibits dividend payment exceeding the distributable amount. Currently, we believe that we have a sufficient distributable amount based on the calculation in accordance with the provision of the Companies Act in order to pay future dividends on our common shares. See “Risk Factors—Risks Related to this Offering and Ownership of the Common Shares—The payment of future dividends on our common shares, if any, will be approved by our common shareholders at the annual meeting of the shareholders, or our board of directors only once during a business year, and will depend on many factors on which the common shareholders may determine not to do so.”

We may issue dividends upon a resolution of our common shareholders or our board of directors. Although we have paid dividends to shareholders in the past, the payment of future dividends on our common shares, if any, will be approved by our common shareholders at the annual meeting of the shareholders, or our board of directors only once during a business year, and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our common shareholders may deem relevant, including retaining future earnings, if any, for reinvestment in the development and expansion of our business.

CAPITALIZATION

The following table sets forth our cash and cash equivalents, debt and capitalization as of May 31, 2023:

You should read the following table in conjunction with the sections entitled “Use of Proceeds”, “Selected Consolidated Financial Information and Operating Data”, “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.

DILUTION

Purchasers of common shares in this offering will experience immediate and substantial dilution to the extent of the difference between the initial public offering price per common share paid by the purchasers of the common shares in this offering and the pro forma, as adjusted net tangible book value per common share immediately after, and giving effect to, this offering. Dilution results from the fact that the initial public offering price per common share in this offering is substantially in excess of the net tangible book value per common share attributable to the issued and outstanding common shares held by our existing shareholders.

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 assets less the book value of our goodwill, intangible assets, deferred initial public offering costs and total liabilities, by the number of outstanding common shares. As of May 31, 2023, the historical net tangible book value of our common shares was $114,553,062, or $2.34 per common share.

After giving effect to the (i) assumed sale by us of ___________ common shares in this offering at an assumed initial public offering price of $_____ per common share (which is the low-end 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 net tangible book value as of May 31, 2023 would have been $______ thousand, or $_____ per common share. The pro forma net tangible book value per common share immediately after the offering is calculated by dividing the pro forma net tangible book value of $______ thousand by ________ common shares (which is the pro forma common shares outstanding as of May 31, 2023). The difference between the initial public offering price per common share and the pro forma net tangible book value per common share represents an immediate increase in net tangible book value of $____ per common share to our existing shareholders, and an immediate dilution in net tangible book value of $______ per common share to purchasers of common shares in this offering.

The following table illustrates this dilution to purchasers in this offering on a per common share basis (in $):

The following table summarizes, as of May 31, 2023, on the pro forma basis described above, the differences between the number of common shares purchased from us, the total consideration paid to us in cash, and the weighted average price per common share that our existing shareholders and the new purchasers in this offering paid. The total consideration below is based on an assumed initial public offering price of $_____ per common share (which is the low-end 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.

The table and information above assume no exercise by the underwriters of their option to purchase additional common shares in this offering. If the underwriters exercise in full their option to purchase up to ______ additional shares from us based upon an assumed offer and sale of ____ common shares at an offering price of $____ per shares, the pro forma net tangible book value per share immediately after this offering would be $_____ per share, and the dilution in pro forma net tangible book value per share to purchasers in this offering would be $___ per share, in each case assuming an assumed initial public offering price of $____ per share (which is the low-end 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.

Based upon an assumed offer and sale of ________ common shares at an offering price of $_____ per common share (which is the low-end of the price range set forth on the cover page of this prospectus), if the underwriters exercise in full their option to purchase up to ________ additional common shares from us, the number of common shares underlying the common shares 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.

Each $1.00 increase (decrease) in the assumed initial public offering price of $____ per common share (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 common shares 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 common shares we are selling in this offering. An increase (decrease) of 100,000 in the number of common shares 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 common share (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. Any increase or decrease in the estimated proceeds from the offering is not expected to have a material effect on our operations given the discretion we will have in the application and use thereof.

The foregoing tables and calculations are based on the number of common shares that will be outstanding immediately following the offering, and exclude (i) up to ______ common shares issuable upon the exercise in full by the underwriters of their option to purchase additional common shares from us based upon an assumed public offering price of $____ per share (which is the low-end of the price range set forth on the cover page of this prospectus), (ii) ______ common shares issuable upon exercise of outstanding options at a weighted average exercise price of $____ per share, (iii) the number of common shares underlying 735,000 stock acquisition rights (with an exercise price of ¥1($0.01) per common share) equal to 1.5% of the issued and outstanding common shares on a fully diluted basis as of the day prior to the successful listing on the Nasdaq Capital Market or NYSE American, subject to adjustment as provided in the stock acquisition rights agreement, (iv) excludes the number of common shares underlying 8,280,000 stock acquisition rights (with an exercise price of ¥241($1.73) per common share), and (iv) up to an aggregate of ________ common shares underlying the Representative’s Warrant to be issued to the underwriter in connection with this offering (assuming the exercise of the over-allotment option by the Underwriters in full).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. The forward-looking statements contained herein are based on management’s judgment, assumptions made by management and information currently available to it. Actual results could differ materially from those discussed or implied in the forward-looking statements as a result of various factors, including those described below and elsewhere in this prospectus, particularly in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”.

Business Overview

We are a real estate consulting company that identifies and purchases what we believe to be underdeveloped real estate properties (land and/or buildings) and re-sell such properties to real estate developers so that they can redevelop those properties. We do not develop, redevelop or participate in the building or construction of any real properties. We also do not engage in realtor-services nor do we provide services such as title services.

Our mission is to maximize the values of the land and building of real estate owners by first identifying their real estate holdings as underdeveloped and proposing the most effective use of the identified real estate. For example, if a real estate property is located in an upscale residential area, but the property, whether it be a building or land, is being used for low-value single-family homes, low-rise buildings or is at the moment just a plot of land, we do not believe that this is the most effective use of the land and we bring that to the attention of the property owner.

Once we identify an underdeveloped property, we negotiate diligently with the landowner to purchase that property. We often purchase separate small parcels of land and sell them to a developer as a single large lot. Selling the land as a single large lot often increases the value of the property and allows us to sell it at a higher price to developers that will develop the property for high-end condominiums or commercial buildings.

We believe that we also contribute to the creation of safe and comfortable urban environments by purchasing old buildings that lack fire resistance and earthquake resistance and selling them as land for development. By encouraging construction of fire resistance and earthquake resistance buildings, we aim to be beneficial to society as a whole. We are operating under the slogan of “Make the first step for safer and more secure cities.” In Japan, which is prone to earthquakes, typhoons, and other natural disasters, building “safer and more secure cities” is a constant objective, one that requires perseverance over many years and a steady, step-by-step buildup of efforts. We believe that the real estate redevelopment projects that we facilitate are the first steps toward creating “safer and more secure cities.”

In making the first step for safer and more secure cities, we value and conform to a philosophy called “Sampo-yoshi,” which is a traditional Japanese business philosophy. “Sampo” is the Japanese word for three parties: the seller, the buyer, and society. “Yoshi” means “good” or “beneficial” in Japanese. Therefore, it refers to the philosophy of doing good business, which is intended to be a win-win situation for the seller, the buyer, and society. It is essential for the seller and buyer to be satisfied, and that a good business can only be said to be good if it contributes to society as well. In our business, for landowners, the value of their property is expected to increase by the proposed redevelopment. For us, we can profit from the increased value of property. For society, it generally becomes safer and more secure by the redevelopment. “Good for the people, good for the city, and good for society.” This philosophy of “Sampo-yoshi” is our most valued corporate spirit and the very company we are striving to become.

For the years ended November 30, 2022 and 2021, we reported revenues of $472,858,985 and $309,378,119, respectively, net income of $36,365,067 and $14,775,265, respectively, and net cash used in operating activities to be $45,665,390 and $29,758,668, respectively. For the six months ended May 31, 2023, we reported revenues of $291,655,644, net income of $27,429,614, and net cash provided by operating activities of $49,900,607. As stated in the unaudited consolidated financial statements, as of May 31, 2023, we had retained earnings of $136,082,801.

Organizational Structure

The following diagram reflects our current organizational structure as of the date of this prospectus:

Metros Development Co., Ltd., a Japanese corporation (“Metros”), was formed in Japan on March 29, 2013. In February 2020, Metros completed an acquisition of 100% equity interest of Yuryo Shoji Co., a Japanese corporation. Metros was merged with and into Yuryo Shoji Co. on June 1, 2020 with Metros being the surviving entity in such merger. The acquisition of Yuryo Shoji Co. was accounted for as an asset acquisition.

Metros has two wholly owned subsidiaries, Royal House Co., Ltd., a Japanese corporation which was established on October 1, 2015 and Metros Resort LLC, a Japanese limited liability company, which was established on February 14, 2020 as an SPC named Metros 1 LLC, on December 28 2022, it was renamed to Metros Resort LLC.

The Metros operates our business directly as well as through Royal House Co., Ltd., where we also identify what we believe to be underdeveloped real estate properties and purchase and then re-sell such properties to real estate developers.

Metros Resort LLC is a non-operating entity at this time and we are exploring various business opportunities for this entity at this time, but have not yet identified any specific business opportunity.

Our Strategy

We identify and purchase underutilized land and buildings, such as low-rise buildings, from landowners and sell them to developers so that the developers can redevelop the properties in a more useful way, such as a high-rise building. We also purchase small adjacent individual lots in bulk and sell them to developers as large lots that can be developed by them on a large scale. By selling the land in such a way that it can be effectively utilized by the developers, we are able to add value and sell the property at a higher price than the price at which we purchased it.

The real estate industry is susceptible to economic trends, policy interest rate trends, land price trends, real estate sales price trends, real estate taxation, etc. Therefore, a downturn in the real estate market, a significant increase in interest rates, or other similar changes could negatively affect the Company’s performance. In addition, since our Company adopts a style of purchase/sales in which we primarily visit landowners one by one and negotiate with them, our purchase/sales may be restricted by the effects of the continued coronavirus pandemic. Specifically, the revenue and net income in 2020 decreased by 12.6% and 32.2%, respectively, from 2019. In 2021, the revenue recovered to the 2019 level but net income was still 39.0% lower than 2019. Therefore, it is our policy to properly identify and evaluate the possibility of occurrence of risks and to take appropriate measures aiming to deal with them.

Results of Operations

Comparison of results of operations for the six months ended May 31, 2023 and 2022

The following table summarizes our operating income as reflected in our unaudited consolidated statements of operations and comprehensive income for the six months ended May 31, 2023 and 2022, and presents information regarding amounts and percentage changes during those periods.

Our revenues generated from different revenue streams consist of the following:

Revenues

Our revenue stream consists of real estate sales, rental revenue, and real estate brokage revenue. Real estate sales account for more than 99% of total revenue, almost all of our revenue comes from real estate sales. Therefore, the increase in revenue is mainly attributed to an increase in real estate sales. The increase in real estate sales was mainly due to the overall development and expansion of our business. The increase was attributable to an increase of $16 million in real estate sales due to the number of sales contracts increased to 67 for the six months ended May 31, 2023, compared to 55 for the six months ended May 31, 2022. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their land and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in sales. Regarding rental revenue, we completed construction of rental apartment in July 2022 and revenue increased as the number of tenants increased.

Cost of Revenues

Cost of revenue, for the six months ended May 31, 2023, was $210.5 million compared to $205.7 million for the same period in 2022. The increase in cost of revenues by $4.8 million or 2% was in line with the increase of real estate sales due to the number of sales contracts increased to 67 for the six months ended May 31, 2023, compared to 55 for the six months ended May 31, 2022. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their lands and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in cost of revenues.

Gross Profit

Gross profit, for the six months ended May 31, 2023, was $81.1 million compared to $69.7 million for the same period in 2022. The increase in gross profit by $11.4 million or 16% was in line with an increase of real estate sales due to the number of sales contracts increased to 67 for the six months ended May 31, 2023, compared to 55 for the six months ended May 31, 2022. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their lands and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in gross profit.

Selling, General and Administrative Expenses

Operating expenses for the six months ended May 31, 2023 and 2022 were as follows:

The increase in selling, general and administrative expenses was due to an increase in consulting fees, salaries and welfare expenses, taxes and dues, and commission fee as a result of business expansion. The increase of selling, general and administrative expenses was also due to an increase of professional service fees relating to this offering.

The consulting fees increased by $2,604,192 from $17,669,957 for the six months ended May 31, 2022 to $20,274,149 for the six months ended May 31, 2023. This increase is attributed to the increase of consulting fees from a related party. We have entered into a partnership agreement with a related party in order to cooperate and promote our business. In accordance with the partnership agreement, the consulting fee from the related party is calculated based on our revenue. Therefore, due to the revenue increase, consulting fees from the related party increased accordingly. The increase in professional service fees was due to an increase in professional service fees paid to professional parties in connection with going public. The increase in salaries and welfare expenses was due to an increase in sales commission paid to employees according to the increase in revenue. The increase in commission fee was due to an increase in loan fees from financial institutions associated with new borrowings for the purchase of land and buildings due to an increase in transaction volume.

Other Income (Expenses)

Other income (expenses) for the six months ended May 31, 2023 and 2022, were as follows:

The change in other expenses to other income for the six months ended May 31, 2023 was due to a gain from equity method investments offset by an increase in interest expenses. The change in loss from equity method investments to gain from equity method investments for the six months ended May 31, 2023 was due to the impact on net income rather than net loss on the investee in that period. There was no unusual or infrequent event attributed to equity method investments.

Income Tax Expense

Income tax expense, for the six months ended May 31, 2023, was $15.8 million compared to $13.8 million for the same period in 2022. The increase in income tax expense by $2.0 million or 15% was due to the increase in revenue and an increase in earnings due to an improvement in the gross profit margin.

Net Income

As a result of the foregoing, we reported a net income of $27.4 million for the six months ended May 31, 2023, representing a $5.2 million or 23% increase from $22.2 million for the six months ended May 31, 2022.

Comparison of results of operations for the years ended November 30, 2022 and 2021

The following table summarizes our operating income as reflected in our audited consolidated statements of operations and comprehensive income for the years ended November 30, 2022 and 2021, and presents information regarding amounts and percentage changes during those periods.

Our revenues generated from different revenue streams consist of the following:

Revenues

Our revenue stream consists of real estate sales, rental revenue, and real estate brokage revenue., Real estate sales account for more than 99% of total revenue, almost all of our revenue comes from real estate sales. Therefore, the increase in revenue is mainly attributed to an increase of real estate sales. The increase in the real estate sales revenues was mainly due to the overall development and expansion of our business. The increase was attributable to an increase of $164 million in real estate sales due to the number of sales contracts increasing to 96 for the fiscal year ended November 30, 2022, compared to 65 for the fiscal year ended November 30, 2021. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their lands and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in sales.

Cost of Revenues

Cost of revenue, for the year ended November 30, 2022, was $349.5 million compared to $240.4 million for the same period in 2021. The increase in cost of revenues by $109 million or 45% was in line with the increase of real estate sales due to the number of sales contracts increased to 96 for the fiscal year ended November 30, 2022, compared to 65 for the fiscal year ended November 30, 2021. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their lands and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in cost of revenues.

Gross Profit

Gross profit, for the year ended November 30, 2022, was $123.3 million compared to $69.0 million for the same period in 2021. The increase in gross profit by $54 million or 79% was in line with an increase of real estate sales due to the number of sales contracts increased to 96 for the fiscal year ended November 30, 2022, compared to 65 for the fiscal year ended November 30, 2021. The increase in the sales contracts is because we actively conducted sales operations with an increased number of employees and an increased number of approaches to landowners in order to buy their lands and sell them collectively to developers. There was no unusual or infrequent event attributed to the increase in gross profit.

Selling, General and Administrative Expenses

Operating expenses for the years ended November 30, 2022 and 2021 were as follows:

The increase in selling, general and administrative expenses was due to an increase in consulting fees, salaries and welfare expenses, taxes and dues, commission fee, depreciation expenses and others as a result of business expansion.

The consulting fees increased by $11,509,391 from $18,215,467 for the fiscal year ended November 30, 2021 to $29,724,858 for the fiscal year ended November 30, 2022. This increase is attributed to the increase of consulting fees from a related party. We have entered into a partnership agreement with a related party in order to cooperate and promote our business. In accordance with the partnership agreement, the consulting fees from the related party are calculated based on our revenue. Therefore, due to the revenue increase, consulting fees from the related party increased accordingly. The increase in salaries and welfare expenses was due to an increase in sales commission paid to employees according to the increase in revenue. The increase in taxes and dues was mainly due to the increase in non-deductible consumption tax and the increase in the number of sales contracts.

Other Income (Expenses)

Other income (expenses) for the years ended November 30, 2022 and 2021, were as follows:

The decrease in other expenses was due to a decrease in losses from equity method investments offset by an increase in interest expenses.

The increase in interest expenses was due to the significant increase in borrowings attributable to active purchases of real estate. In addition, the decrease in loss from equity method investments was due to the impact of a decrease in net loss of investee. There was no unusual or infrequent event attributed to interest expenses and equity method investments.

Income Tax Expense

Income tax expense, for the year ended November 30, 2022, was $23.1 million compared to $9.0 million for the same period in 2021. The increase in income tax expense by $14 million or 156% was due to the increase in revenue and an increase in earnings due to an improvement in the gross profit margin.

Net Income

As a result of the foregoing, we reported a net income of $36 million for the fiscal year ended November 30, 2022, representing a $22 million or 146% increase from $15 million for the fiscal year ended November 30, 2021.

Liquidity and Capital Resources

Our cash requirements include operating expenses for real estate sales and finance costs from loans for purchases of real estate inventories. The sources of liquidity to fund these cash requirements include real estate sales and borrowings from banks and other financial institutions, which are our primary source of cash flow.

As of May 31, 2023, the Company had $34.0 million in cash and cash equivalents compared to $6.6 million as of November 30, 2022. In addition, the Company had $190.4 million in real estate inventories as of May 31, 2023 compared to $197.0 million as of November 30, 2022. The Company had $83.6 million in bank and other borrowings as of May 31, 2023 compared to $101.1million as of November 30, 2022.

The Company formulates funding policies that are designed to maintain and improve procurement stability and reduce liquidity risk. As a concrete measure to maintain and improve procurement stability, we engage in various activities such as developing connection with new financial institutions, maintaining good relationship with financial institutions with which we do business, regularly exchanging information with financial institutions on our financial situation and real estate market. We utilize borrowings from Japanese financial institutions to mainly purchase real estate from landowners. To reduce liquidity risk, we use project financing tied to individual real estate properties as much as possible. We take into account the time it takes for those real estate properties to become available for sale, after securing sufficient working capital. In addition, we diversify funding sources in order not only to reduce funding costs but also to improve funding stability and reduce liquidity risk. Furthermore, we monitor central bank monetary policy developments and consider the need for interest rate swaps.

Uncertainties caused by the real estate market remain. To be precise, real estate developers may be materially affected by the inflation of development cost as well as the economic situation around the world which can be largely impacted by central monetary policy. Depending on future developments, we expect an increase in liquidity risk, including higher procurement costs. Specifically, we may be unable to borrow new funds or roll-over existing funds; and we expect there will be an increase in the amount of interest we need to pay if we are able to borrow such funding. Notwithstanding the current environment, we are working to maintain stable procurement and reduce liquidity risk in accordance with the above policy. In addition, with respect to rising interest costs, we are working to maintain good communications with financial institutions so that we can raise funds at favorable interest rates.

Source of Liquidity

The Company borrows from a variety of sources, including regional banks, shinkin (Japanese deposit institution) banks, credit unions, government financial institutions in Japan. We have adopted regular face-to-face communications and established positive working relationships with financial institutions in Japan.

We use project financing tied to individual real estate properties as much as possible. We take into account the time it takes for those real estate properties to become available for sale, after securing sufficient working capital. All of the project financing comes from financial institutions, and the timing and amount of real estate to be acquired and sold have a significant impact on financing activities.

In assessing liquidity, management monitors and analyzes the Company’s cash and cash equivalents, ability to generate sufficient future earnings, and operating and capital investment commitments. The Company believes that its current cash and cash equivalents from operations and borrowings from banks will be sufficient to meet its working capital needs for the next 12 months from the date of issuance of the unaudited financial statements.

Over the next few years, the Company intends to consider other sources of financing to meet its cash needs, including raising additional capital through equity issuances. While we face uncertainties regarding the size and timing of our fundraising, we are confident that we will be able to continue to meet our business needs solely through the use of cash flows generated from operations and shareholder working capital, as needed.

Cash Flows for the Six Months Ended May 31, 2023 and 2022

The following table provides a summary of our cash flows for the periods indicated.

Operating Activities

Net cash provided by operating activities increased $60.3 million to $49.9 million for the six months ended May 31, 2023, mainly due to an increase in net income and an increase in changes in real estate inventories, prepaid expenses, and accounts and other payables, offset by gain from equity method investments and a decrease in change in income tax payables.

Investing Activities

During the six months ended May 31, 2023, net cash provided by investing activities of $0.3 million was mainly the result of distribution from silent partnerships of $1.6 million offset by purchase of term deposits of $1.5 million. During the six months ended May 31, 2022, net cash used in investing activities of $2.9 million was the result of purchase of property and equipment of $2.0 million, purchase of term deposits of $0.4 million and purchase of investments of $0.5 million.

Financing Activities

During the six months ended May 31, 2023, net cash used in financing activities of $20.2 million was the result of repayments for bank loans and other borrowings of $74.3 million offset by proceeds from bank loans and other borrowings of $56.4 million. During the six months ended May 31, 2022, net cash provided by financing activities of $23.6 million was the result of proceeds from bank loans and other borrowings of $70.9 million offset by repayments for bank loans and other borrowings of $45.6 million.

Cash Flows for the Years Ended November 30, 2022 and 2021

The following table provides a summary of our cash flows for the periods indicated.

Operating Activities

Net cash used in operating activities increased $15.9 million to $45.7 million for the year ended November 30, 2022, mainly due to an increase in changes in real estate inventories and prepaid expenses, offset by an increase in net income and changes in accounts and other payables and income tax payables.

Investing Activities

During the year ended November 30, 2022, net cash used in investing activities of $6.6 million was mainly the result of purchase of property and equipment of $5.9 million. During the year ended November 30, 2021, net cash used in investing activities of $1.7 million was mainly the result of purchase of term deposits of $1.1 million and purchase of investments of $1.9 million offset by proceeds from sales of investments of $1.0 million.

Financing Activities

During the year ended November 30, 2022, net cash provided by financing activities of $43.0 million was the result of proceeds from bank loans and other borrowings of $125.6 million offset by repayments for bank loans and other borrowings of $80.8 million. During the year ended November 30, 2021, net cash provided by financing activities of $26.8 million was the result of proceeds from bank loans and other borrowings of $91.6 million offset by repayments for bank loans and other borrowings of $64.8 million.

Contractual Obligations

Lease Agreements

The Company has thirteen leases classified as operating leases for offices and sublease purposes.

As of May 31, 2023, the future maturity of lease liabilities is as follows:

Bank and Other Borrowings

The Company borrowed loans from various financial institutions and issued a bond for the purpose of purchasing real estate properties, and for working capital purpose.

As of May 31, 2023, future minimum borrowing payments are as follows:

Off-Balance Sheet Arrangements (Off-Balance Sheet Transactions)

There are no off-balance sheet arrangements as of May 31, 2023 and 2022.

Trend Information

In addition to the new coronavirus, the recent war in Ukraine and the imposition of broad economic sanctions against Russia could lead to higher energy prices and disruptions in global markets. It is unclear how the continued development and complexity of this situation will affect the Japanese economy and our business in the future. In particular, there is a risk that changes related to the acquisition of new customers and additional purchases by existing customers could adversely affect the Company’s results of operations; that deteriorating global economic conditions could have an adverse effect on the Company’s industry, business and results of operations; and that many of the other risks listed under “Risk Factors” could have an incremental effect.

Other than as disclosed in the consolidated financial statements, we are not aware of any other trends, uncertainties, demands, commitments or events for the six months ended May 31, 2023 and 2022 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with US GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. We believe that critical accounting policies as disclosed in this prospectus reflect the more significant judgements and estimates used in preparation of our consolidated financial statements.

The following descriptions of critical accounting policies and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. When reviewing our consolidated financial statements, you should consider our selection of critical accounting policies, the judgments and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions.

Valuation of Inventories

Real estate inventories represent mainly small adjacent individual lots, which consist of lands and/or lands with buildings attached, that will be grouped into larger lots for the purpose of selling to developers. Substantially all of our real estate inventories are in the process of combining into larger lots. Real estate inventories are recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows, management estimates or market comparisons, is less than its carrying amount, an allowance is recorded against the asset.

The cost basis of the real estate inventories includes all direct acquisition costs including but not limited to the property purchase price, acquisition costs, dismantlement costs, capitalized interest, capitalized real estate taxes and other costs. Interests and real estate taxes are not capitalized unless active redevelopment is underway. When acquiring real estate with existing buildings, we allocate the purchase price between land, building and intangibles related to in-place leases, if any, based on their relative fair values. Management’s judgment is necessary in purchase price allocation to arrive at the proper valuation of real estate inventories.

Revenue Recognition

The Company recognizes revenue from sales of real estate, providing real estate brokerage service under ASC Topic 606, “Revenue from Contracts with Customers”.

To determine revenue recognition for contracts with customers, the Company performs the following five steps : (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. Revenue amount represents the invoiced value, net of consumption tax and applicable local government levies, if any. The consumption tax on sales is calculated at 10% of gross sales.

The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction. The determination of whether the Company acts as a principal or an agent in a transaction is based on the evaluation of whether (i) the Company is primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) the Company has inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer and (iii) the Company has discretion in establishing the price for the specified good or service. If the terms of a transaction do not indicate the Company is acting as a principal in the transaction, then the Company is acting as an agent in the transaction and the associated revenues are recognized on a net basis.

The Company has utilized the practical expedient in ASC Topic 606 and elected not to capitalize contract costs for contracts with customers with durations less than one year. The Company does not have significant remaining unfulfilled performance obligations or contract balances.

The Company recognizes revenue from rental services under ASC Topic 842, “Leases”.

The Company currently generates its revenue from the following main sources:

Real estate sales

Revenues from real estate sales are recognized when the parties are bound by the terms of a contract, consideration has been exchanged, title and other attributes of ownership have been conveyed to the buyer by means of a closing and the Company is not obligated to perform further significant development of the specific property sold, which is generally upon the delivery of the real estate, which generally coincides with the receipt of cash consideration from the customer. Our contracts with customers contain a single performance obligation and we do not provide warranties for sold real estate.

Rental revenue

We commence recognition of income from rentals related to the operating leases at the date the property is ready for its intended use by the tenant and the tenant takes possession of or controls the physical use of the leased asset. Income from rentals related to fixed rental payments under operating leases is recognized on a straight-line basis over the respective operating lease terms.

Real estate brokerage revenue

We recognize commission-based brokerage revenue upon closing of a brokerage transaction. The transaction price is either fixed or calculated by taking the agreed upon commission rate and applying that to the real estate’s selling price. Brokerage revenue primarily contains a single performance obligation that is satisfied upon the closing of a real estate services transaction, at which point the entire transaction price is earned. We are not entitled to any commission until the performance obligation is satisfied and are not owed any commission for unsuccessful transactions, even if services have been provided.

DESCRIPTION OF BUSINESS

Unless the context otherwise requires, “Metros,” the “Company,” “we,” “us,” and “our,” refer to Metros Development Co., Ltd., a Japanese corporation (“Metros Development”), and its direct subsidiaries, including Royal House Co., Ltd. (“Royal House”) and Metros Resort LLC (“Metros Resort”), each a Japanese corporation.

Business Overview

We are a real estate consulting company that identifies and purchases what we believe to be underdeveloped real estate properties (land and/or buildings) and re-sell such properties to real estate developers so that they can redevelop those properties. We do not develop, redevelop or participate in the building or construction of any real properties. We also do not engage in realtor-services nor do we provide services such as title services.

Our mission is to maximize the values of the land and building of real estate owners by first identifying their real estate holdings as underdeveloped and proposing the most effective use of the identified real estate. For example, if a real estate property is located in an upscale residential area, but the property, whether it be a building or land, is being used for low-value single-family homes, low-rise buildings or is at the moment just a plot of land, we do not believe that this is the most effective use of the land and we bring that to the attention of the property owner.

Once we identify an underdeveloped property, we negotiate diligently with the landowner to purchase that property. We often purchase separate small parcels of land and sell them to a developer as a single large lot. Selling the land as a single large lot often increases the value of the property and allows us to sell it at a higher price to developers that will develop the property for high-end condominiums or commercial buildings.

We believe that we also contribute to the creation of safe and comfortable urban environments by purchasing old buildings that lack fire resistance and earthquake resistance and selling them as land for development. By encouraging construction of fire resistance and earthquake resistance buildings, we aim to be beneficial to society as a whole. We are operating under the slogan of “Make the first step for safer and more secure cities.” In Japan, which is prone to earthquakes, typhoons, and other natural disasters, building “safer and more secure cities” is a constant objective, one that requires perseverance over many years and a steady, step-by-step buildup of efforts. We believe that the real estate redevelopment projects that we facilitate are the first steps toward creating “safer and more secure cities.”

In making the first step for safer and more secure cities, we value and conform to a philosophy called “Sampo-yoshi,” which is a traditional Japanese business philosophy. “Sampo” is the Japanese word for three parties: the seller, the buyer, and society. “Yoshi” means “good” or “beneficial” in Japanese. Therefore, it refers to the philosophy of doing good business, which is intended to be a win-win situation for the seller, the buyer, and society. It is essential for the seller and buyer to be satisfied, and that a good business can only be said to be good if it contributes to society as well. In our business, for landowners, the value of their property is expected to increase by the proposed redevelopment. For us, we can profit from the increased value of property. For society, it generally becomes safer and more secure by the redevelopment. “Good for the people, good for the city, and good for society.” This philosophy of “Sampo-yoshi” is our most valued corporate spirit and the very company we are striving to become.

Organizational Structure

The following diagram reflects our current organizational structure as of the date of this prospectus:

Metros Development Co., Ltd., a Japanese corporation (“Metros”), was formed in Japan on March 29, 2013. In February 2020, Metros completed an acquisition of 100% equity interest of Yuryo Shoji Co., a Japanese corporation. Metros was merged with and into Yuryo Shoji Co. on June 1, 2020 with Metros being the surviving entity in such merger. The acquisition of Yuryo Shoji Co. was accounted for as an asset acquisition.

Metros has two wholly owned subsidiaries, Royal House Co., Ltd., a Japanese corporation which was established on October 1, 2015 and Metros Resort LLC, a Japanese limited liability company, which was established on February 14, 2020 as an SPC named Metros 1 LLC, on December 28, 2022, it was renamed to Metros Resort LLC.

The Metros operates our business directly as well as through Royal House Co., Ltd., where we also identify what we believe to be underdeveloped real estate properties and purchase and then re-sell such properties to real estate developers.

Metros Resort LLC is a non-operating entity at this time and we are exploring various business opportunities for this entity at this time, but have not yet identified any specific business opportunity.

Our Strategy

We identify and purchase underutilized land and buildings, such as low-rise buildings, from landowners and sell them to developers so that the developers can redevelop the properties in a more useful way, such as a high-rise building. We also purchase small adjacent individual lots in bulk and sell them to developers as large lots that can be developed by them on a large scale. By selling the land in such a way that it can be effectively utilized by the developers, we are able to add value and sell the property at a higher price than the price at which we purchased it.

The real estate industry is susceptible to economic trends, policy interest rate trends, land price trends, real estate sales price trends, real estate taxation, etc. Therefore, a downturn in the real estate market, a significant increase in interest rates, or other similar changes could negatively affect the Company’s performance. In addition, since our Company adopts a style of purchase/sales in which we primarily visit landowners one by one and negotiate with them, our purchase/sales may be restricted by the effects of the continued coronavirus pandemic. Specifically, the revenue and net income in 2020 decreased by 12.6% and 32.2% respectively from 2019. In 2021, the revenue recovered to the 2019 level but net income was still 39.0% lower than 2019. Therefore, it is our policy to properly identify and evaluate the possibility of occurrence of risks and to take appropriate measures aiming to deal with them.

We are considering the following strategies seeking to steadily expand our business and increase our corporate value even in the environment described above.

Further development of our core business

We will strive for steady growth of our core business by increasing the number of purchase/sales personnel, mainly in Tokyo, Osaka, and Nagoya, in order to increase the number of approaches to landowners, which we believe will lead to an increase in the number of purchase contracts and settlements, thereby further expanding sales. We are considering the use of real estate crowd funding in order to provide alternate funding to purchase additional properties.

We plan to use a portion of the proceeds of this Offering for the development and marketing of the crowdfunding platform. For additional information on this, please see “Use of Proceeds” on page 31. We intend to hire engineers and developers to build out the crowdfunding platform and to market the real estate crowdfunding. We will strive for further growth by earning revenue from both our steady sales style and eventually real estate tech, if possible. As stated above, we intend to primarily use the crowdfunding platform in order to grow our core business. Secondarily, we anticipate that others will be able to utilize our crowd funding platform to raise funds to acquire real estate.

Diversification of funding methods and securing a sound financial base

When purchasing properties to date, we had only two options: using our own funds or borrowing funds from financial institutions. As a result, the amount of cash on hand and the amount available for borrowing from financial institutions have been limiting factors for the Company’s growth. In order to reduce or eliminate the impact of the above limiting factors and to maximize the outcome of effort we put on our core business, we are considering the use of real estate crowdfunding. We believe that diversifying our funding sources through real estate crowdfunding will contribute to further growth as we can aim to leverage the funds in an effort to maximize sales. Our services on the real estate crowdfunding platform are only intended for investors in Japan in accordance with the Act on Specified Joint Real Estate Ventures in Japan. We do not plan to allow U.S. persons or persons located in the United States to obtain access to posted offering materials on the crowdfunding platform. We anticipate restricting access to the posted offering materials (from the crowdfunding site) to those viewers who first provide their residence information and, in doing so, do not provide information such as a U.S. area code or address that indicates that they are a U.S. person.

Proactive recruitment of human resources and building an organization that supports further growth in corporate value.

The business we conduct is greatly affected by the number of purchasing/sales personnel. By increasing the number of purchase/sales personnel, mainly in Tokyo, Osaka, and Nagoya, we aim to increase the number of approaches to landowners, which we believe will lead to an increase in the number of purchase contracts and settlements and further sales growth. In addition, it is imperative to train and secure personnel who have expertise in purchasing operations and who are trusted by landowners, and accordingly we plan to train personnel who we believe can support the medium-to-long-term growth of the Company and strengthen young and mid-career personnel.

Strengthening Internal Controls and Compliance

As part of our corporate social responsibility, we plan to work to strengthen internal control and compliance. To this end, we believe it is important to establish a management control system and strengthen corporate governance. In order to develop and operate a system that can appropriately respond to these management issues, we will strengthen recruitment and establish various regulations and internal systems.

Risk Management

In order to appropriately respond to changes in the business environment, we will identify, assess, and respond to risks, and take risks under an appropriate risk management system in an effort to achieve sustainable growth and enhance our corporate value. In addition, in the event of an emergency such as a new type of coronavirus pandemic, we plan to properly assess the impact on our Company and take appropriate actions.

Description of Our Business

We are a real estate consulting company that identifies and purchases what we believe to be underdeveloped real estate properties (land and/or buildings) and re-sells such properties to real estate developers for redevelopment. We do not develop, redevelop or participate in the building or construction of any real properties. We also do not engage in realtor-services nor do we provide services such as title services.

We believe that we also contribute to the creation of safe and comfortable urban environments by purchasing old buildings that lack fire resistance and earthquake resistance and selling them as land for development. By encouraging construction of fire resistance and earthquake resistance buildings, we aim to be beneficial to society as a whole. We are engaged in our business under the slogan of “Make the first step for safer and more secure cities.” To comply with and live up to this slogan, we strive to maximize the value of landowner’s property.

For land in commercial or residential areas where high-rise buildings have been constructed in the surrounding area, but only one corner of the area is underutilized, such as detached houses or low-rise buildings, we identify applicable properties and prepare redevelopment proposals to encourage the most efficient use of the land in the area, such as condominiums or commercial buildings, which we believe are the most appropriate uses of land in that area. We closely negotiate with each landowner to propose a redevelopment plan that will allow for the construction of condominiums, commercial buildings, and other buildings that will make the most appropriate use of the land in the area. As a result of the negotiations, the separate small parcels of land are sold to the developer as a single large lot. Selling the land as a single large lot increases the value of the property and allows us to sell it at a higher price.

During the period from December 1, 2021 through November 30, 2022, the Company entered into 426 agreements for the purchase of real estate properties. The aggregate purchase price of these real estate properties in such period was ¥59,541 million (approximately $459 million). During the period from December 1, 2021 through November 30, 2022, the Company entered into 96 agreements for the sale of real estate properties. The aggregate sales price of these real estate properties was ¥61,212 million (approximately $472 million).

During the period from December 1, 2020 through November 30, 2021, the Company entered into 225 agreements for the purchase of real estate properties. The aggregate purchase price of these real estate properties in such period was ¥32,969 million (approximately $302 million). During the period from December 1, 2020 through November 30, 2021, the Company entered into 65 agreements for the sale of real estate properties. The aggregate sales price of these real estate properties was ¥33,589 million (approximately $308 million).

We had real estate inventories of $190,421,240 as of May 31, 2023. Real estate inventories represent mainly small adjacent individual lots, which consist of lands and/or lands with buildings attached, that will be grouped into larger lots for the purpose of selling to developers. Set forth in the chart below are material real estate inventories in excess of $1,000,000 as of May 31, 2023. We own each of these properties. None of these properties are currently available for sale to developers as they require the eviction of the existing lessees prior to the sale of the respective properties. Usually, we purchase occupied real estate properties, and we take over all lease agreements accompanying the real estate property from the seller. Thereafter, we negotiate eviction with the lessees on an individual basis, taking into consideration the contents of the lease agreement and the lessee’s actual use of the real estate property. Then, the specific timing of the eviction and the eviction fee will be decided between us and the lessee. Because there are no specific provisions in Japanese law stipulating the timing of an eviction, it is determined through negotiations between the Company and the lessee and is decided on a case-by-case basis, which usually takes from three months to one year from the date of purchase of the property.

The following are the steps taken in our purchase/sale of real estate business for redevelopment:

Distinctive Contractual Arrangements

We believe there are two main obstacles associated with the real estate business. The first obstacle is inventory risk – we may not be able to find a developer to sell a property we purchase from a landowner. In this case, we bear the risk of holding expensive inventory. Regarding the inventory risk, as of November 30, 2022, we had real estate inventories of $196,951,361 and as of May 31, 2023, we had real estate inventories of $190,421,240. If we cannot find developers which offer to buy those real estate inventories through the normal sales process, we may have to discount the sales price significantly even if the sales are at a loss in order to reduce inventory risk. The second obstacle is the large amounts of funds required in operation. Because the product we handle is expensive, we need to secure large amounts of funds to leverage business. In order to eliminate these obstacles, we have the following distinctive contractual arrangements that allow us to leverage our business without using our own capital or borrowing funds.

Indivisible Unit Transaction Agreement