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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended March 31, 20222023

OR

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

OR

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

Date of event requiring this shell company report

For the transition period from to

Commission file number: 001-41433

Warrantee Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Japan

(Jurisdiction of incorporation or organization)

1103, Kitahama Craft

2-4-1 Doshomachi, Chuo-ku

Osaka City, Osaka 541-0045, Japan

+81(0)6-6227-8775

(Address of principal executive offices)

Yusuke Shono, Chief Executive Officer

Telephone: +81(0)6-6227-8775

Email: y.shouno@warrantee.co.jp

At the address of the Company set forth above

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

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

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

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

None

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 20,004,00022,404,000 common shares

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

Yes ☐ No ☒

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

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

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

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

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

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

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

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

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INTRODUCTION

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

This annual report on Form 20-F includes our audited consolidated financial statements for the fiscal years ended March 31, 2023, 2022, 2021, and 2020.2021. Our functional currency and reporting currency is the Japanese yen. Convenience translations included in this annual report of Japanese yen into U.S. dollars have been made at the exchange rate of JPY144.71JPY132.75 = $1.00, which was the foreign exchange rate on September 30, 2022March 31, 2023 as reported by the Board of Governors of the Federal Reserve System (the “U.S. Federal Reserve”) in its weekly release on September 30, 2022.April 3, 2023. Historical and current exchange rate information may be found at https://www.federalreserve.gov/releases/h10/20221003/20230403/.

On October 12, 2021, we effected a 1,500-for-one forward split of all issued and outstanding shares. All historical share amounts and share price information presented in this annual report have been proportionally adjusted to reflect the impact of the forward split.

On November 29, 2022, we effected a two-for-one forward split of all our issued and outstanding shares. All historical share amounts and share price information presented in this annual report have been proportionally adjusted to reflect the impact of the forward split.

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

Non-GAAP Financial Measures

In addition to U.S. GAAP measures, we use AdjustedNon-GAAP EBITDA and AdjustedNon-GAAP EBITDA Margin as described under “Item 5. Operating and Financial Review and Prospects—Non-GAAP Financial Measures” in various places in this annual report. These financial measures are presented as supplemental disclosure and should not be considered in isolation of, as a substitute for, or superior to, the financial information prepared in accordance with U.S. GAAP, and should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report. AdjustedNon-GAAP EBITDA and AdjustedNon-GAAP EBITDA Margin may differ from similarly titled measures presented by other companies.

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Risks Related to Our Company and Our Business

We have a limited operating history applying our trinity model to conduct campaigns for corporate sponsors upon which investors can evaluate our future prospects.

We started to apply our trinity model to conduct campaigns for corporate sponsors in 2018. We have a limited operating history, in this respect, upon which an evaluation of our business plan or performance and prospects can be made. The business and prospects of our Company must be considered in light of the potential problems, delays, uncertainties, and complications encountered in connection with a newly established business model. The risks include:

To successfully introduce and market our services at a profit, we must establish goodwill and brand name recognition among the public so that potential customers of our corporate sponsors will agree to participate in the campaigns we conduct for our corporate sponsors to gather relevant customer data or market our corporate sponsors’ products and services. There are no assurances that we can successfully address these challenges and, if unsuccessful, we and our business, financial condition, and operating results could be materially and adversely affected.

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We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.

As of March 31, 2022,2023, we had total assets of JPY182,810JPY266,560 thousand (approximately $1,505$2,008 thousand) and a working capital deficit of JPY112,658JPY156,354 thousand (approximately $928$1,178 thousand). As of the date of this annual report, we believe we need a minimum of JPY951,985 thousand (approximately $7,839$7,171 thousand) in order to fund our presently forecasted working capital requirements over the next 12 months. We have undertaken our initial public offering for purposes of acquiring the required capital and believe that the net proceeds of our proposed initial public offering if closed, will be sufficient to fund our presently forecasted business plan and scale-up operations over, at least, the 12 months following the date of this annual report. However, as a result of certain factors presently unforeseen, we may require additional capital over the next 12 months, the receipt of which there can be no assurance. In addition, unless we are able to successfully scale our operations and achieve meaningful cash flow from operations, we will require additional capital in order to fund the continued development of our trinity business model following the 12-month period after the date of this annual report. We will endeavor to acquire any additional required funds through various financing sources, including borrowings under our existing loans from financial institutions, the private and public sale of our equity and debt securities, and other third-party financings. In addition, we will consider alternatives to our current business plan that may enable us to achieve meaningful cash flow from operations with a smaller amount of capital. However, there can be no guaranty that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to further pursue our business plan and we may be unable to continue operations.

We have incurred losses from operations during the fiscal years ended March 31, 2022 2021, and 2020, which rasise substantial dobut about our ability to continue as a going concern.2021. Our ability to continue as a going concern depends on our being able to generate revenue significant enough to result in operating profitability.

We have a history of recurring losses, including a loss from operations of JPY89,842 thousand (approximately $621$677 thousand), and JPY27,754 thousand (approximately $192 thousand), and JPY44,482 thousand (approximately $307$209 thousand) for the fiscal years ended March 31, 2022 2021, and 2020,2021, respectively. This operating loss has resulted in an accumulated deficit of JPY470,605 thousand (approximately $3,545 thousand), JPY511,908 thousand (approximately $3,537$3,856 thousand), and JPY414,828 thousand (approximately $2,867 thousand), and JPY389,030 thousand (approximately $2,688$3,125 thousand) as of March 31, 2023, 2022, and 2021, and 2020, respectively.

The report of our independent registered public accounting firm for the fiscal year ended March 31, 2022 states that, due to our net losses, significant accumulated deficit, and continuing negative cash flows, there is substantial doubt about our ability to continue as a going concern.

If we are unable to generate enough revenue to result in operating profitability in the future, there may remainbe substantial doubt about our ability to continue as a going concern and, therefore, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, or at all. Further, if we are unable to continue as a going concern, we may have to discontinue operations and liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, which could cause our investors to lose all or part of their investment.

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Most of our competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, higher margins on their products and services, and substantially greater financial, technological, and research and development resources and selling and marketing capabilities. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion, and sale of their products and services than we do, or sell their products and services at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations. In addition, for cost-saving or other reasons, our customers, which are often large consumer goods manufacturers, may decide to conduct directed marketing or market data research in-house. Increased competition and cost-saving initiatives on the part of corporate sponsors are likely to result in pricing pressures, which could harm our sales, profitability, or ability to gain market share.

We had a limited number of customers accounting for a substantial portion of our revenue in fiscal years ended March 31, 2023, 2022, 2021, and 2020,2021, respectively. We have not generated revenue from any customer on a recurring basis, and our efforts in expanding our customer base, increasing average contract value, and generating recurring revenue may not be successful, which makes us vulnerable to a near-term severe financial loss.

We have derived a substantial portion of our revenue from a limited number of customers. For the yearsfiscal year ended March 31, 2021, and 2020, more than 80% of the consolidated revenue was derived from two and three customers, respectively.customers. In the fiscal year ended March 31, 2022, we received revenue from one corporate sponsor, Paygene Co., Ltd. (“Paygene”), a sales agency for medical devices. In May 2022, we acquired three new corporate sponsors, Beauken Co., Ltd. ("(“Beauken”), Connect Plus Co., Ltd. ("(“Connect Plus”), and Y’s Inc. We completed the marketing campaigns for Beauken and Connect Plus in May 2023 and are currently conducting acompleted the marketing campaign for Y’s Inc. in November 2023. There are inherent risks whenever a large percentage of total revenue is concentrated with a limited number of customers. We have not yet established a recurring customer base that provides us with an ongoing sustainable source of revenue sufficient to cover our operating expenses, which makes us vulnerable to the risk of a near-term severe financial impact if we are unable to secure new revenue generating customer contracts. We will need to develop new campaigns and engage new customers to maintain or increase our service revenue, and there is no assurance that we can do so at a cost-effective manner. In addition, our customers have been concentrated in certain market sectors, such as durables, non-prescription medical treatments and devices, and supplements. If our customers or prospective customers reduce their marketing their expenditure because they experience declining or delayed revenue due to market, economic, or competitive conditions, or for other reasons, we could be pressured to reduce the prices we charge for our services or we may not be able to efficiently expand our customer base, which could have an adverse effect on our profit margins and financial position, and could negatively affect our revenue and results of operations and/or trading price of the ADSs.

As our sponsored marketing or market research services have been primarily provided on a campaign basis, revenue from our customers has fluctuated based on the number of the campaigns we may be engaged to conduct for corporate sponsors and the average contract value, which represents the average sponsorship amount from campaigns, during a reporting period, which may be affected by our corporate sponsors’ needs, market conditions, or other factors, some of which may be outside of our control. Our bargaining leverage is often limited with our large manufacturer customers, and we may not be able to obtain the pricing and other terms favorable to us when entering into service contracts with them.

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If we fail to retain our Chief Executive Officer or attract and retain additional qualified personnel, we may not be able to pursue our growth strategy.

Our future success will depend upon the continued service of our Chief Executive Officer, Mr. Yusuke Shono. We have leveraged his relationships in our business development activities and in obtaining financing for our operations. See “—As a controlled company, we have relied on our Chief Executive Officer to provide guarantees for our corporate loans from financial institutions and for the lease of our corporate headquarters. We have also historically received short-term loans from our Chief Executive Officer and his wholly owned companies to fund our working capital needs. We may not be able to find alternative financing sources on terms equal to or better than those obtained from our Chief Executive Officer, which could adversely impact our ability to secure necessary financing in the future.” The loss of his services could have a material adverse effect on our business, operations, revenue, or prospects. We do not currently maintain key man life insurance on the life of our Chief Executive Officer. In order to implement our growth plans and continue to grow our business, we also need to recruit additional qualified personnel, such as marketing and sales personnel. If we are not able to recruit such qualified personnel as and when needed, or if the labor costs for such additional personnel exceed the additional revenue we can generate, our growth prospects and profit margins will be harmed.

Our success greatly depends upon our ability to generate and maintain goodwill with the public so that potential customers of our corporate sponsors will be willing to participate in the campaigns we design for our corporate sponsors. If we or our corporate sponsors fail to provide satisfactory products and services to our participant users, our brand image may be tarnished and our financial results and prospects for growth may be adversely affected, and we could also incur liability for recommending our sponsors’ products.

Our ability to provide our marketing campaign services to our corporate sponsors greatly depends on our ability to attract an adequate number of users who are within our corporate sponsors’ target customer base to provide data to us or participate in trials or meetings facilitating the sale of our corporate sponsors’ products or services. We sometimes access these users through third-party partners, such as clinics, for our corporate sponsors in the commercial healthcare vertical arena. While most of the corporate sponsors we work with are large reputable manufacturers in Japan, we cannot guarantee that any products and services they provide to the users who participate in our campaigns are free of defect or error or will meet the participant users’ satisfaction each time. In our past campaign for a supplement supplier, we recommended our sponsor’s preventative care supplements to participant users whose gene test results suggested they may need certain micronutrients. We may also make recommendations of our sponsors’ products in future campaigns we design and conduct for other corporate sponsors. We could incur liability in these campaigns and legal costs in defending litigation if our sponsors’ products cause any negative effect on the participant users.

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We rely on a combination of patent, trademark, trade secret, and other intellectual property rights and measures to protect our intellectual property. Our patents may expire and may not be extended, our patent applications may not be granted, and our patent rights may be contested, circumvented, invalidated, or limited in scope. As a result, our patent rights may not protect us effectively. In particular, we may not be able to prevent others from developing and deploying competing technologies, which could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

To establish and protect our proprietary rights, we rely on a combination of patents, trademarks, confidentiality policies and procedures, non-disclosure agreements with third parties, employee non-disclosure agreements, and other contractual and implicit rights worldwide. As of the date of this annual report, we have three registered patents for the system underlying our business model for us to serve as an intermediary between sponsors, insurance companies, and users and in such role, providing insurance for the users upon terms agreed by the sponsors, and nine registered trademarks and other names and logos used by our Company as trademarks with the Japan Patent Office. Such patents and trademarks are not registered in any other jurisdiction except that Warrantee has been registered in the European Union, the United Kingdom, and Singapore. The success of our business strategy depends on our continued ability to use our existing intellectual property to increase brand awareness and develop our branded services. If our efforts to protect our intellectual property are not adequate or if any third-party misappropriates or infringes on our intellectual property, whether in print, on the Internet, or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded services to achieve and maintain market acceptance. There can be no assurance that all of the steps we have taken to protect our intellectual property in Japan or outside Japan in relevant foreign countries will be adequate. In addition, in light of our intention to expand internationally, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of Japan. If any of our patents, trademarks, trade secrets, or other intellectual property are infringed, our business, financial condition, and results of operations could be materially adversely affected.

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

We rely on information technology, and any material failure, weakness, interruption, or breach of security could prevent us from effectively operating our business.

We rely significantly on information systems, including the collection of participant user data and processing of product insurance claims on our Warrantee app. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of the information systems. Failures of these systems to operate effectively, maintenance problems, or a breach in security of these systems could result in delays in user service and reduce efficiency in our operations.

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Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to or acquisition of our participant users’ data, we may also have obligations to notify participant users about the incident and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted user notification requirements in the event of unauthorized access to or acquisition of certain types of personal data. Such breach notification laws continue to evolve in Japan. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises participant users’ data. Given the limited amount of user data we have collected, we do not currently carry insurance coverage that is designed to address aspects of cyber risks, and we will have to pay for all losses or all types of claims that may arise in the event we experience a security breach. In addition, any such security breaches may result in negative publicity, adversely affect our brand, decrease demand for our services, and adversely affect our operating results and financial condition.

Failure to comply with relevant laws and regulations, including those relating to the processing, safekeeping, and use of personal data and the insurance licensing requirements could harm our business, financial condition, or results of operations, and any change in laws and regulations may adversely affect our ability to grow our business.

We are subject to various laws and government regulations, including those relating to the processing, safekeeping, and use of personal data and the Insurance Business Act of Japan (Act No. 105 of 1995, as amended) (the “Insurance Business Act”), in respect of each of which the relevant regulators in Japan have a broad discretion to interpret the relevant laws and regulations. Although we have implemented policies and procedures and business models designed to comply with these laws, there can be no assurance that our employees, contractors, agents, or other third parties will not take actions in violation of our policies or applicable law. Any such violations or suspected violations could subject us to civil or criminal penalties, including substantial fines and significant investigation costs, and could also materially damage our reputation, brands, international expansion efforts, and growth prospects, business, financial condition, and results of operations. Publicity relating to any noncompliance or alleged noncompliance as well as interpretation of such laws and regulations by the relevant regulators could also harm our reputation and adversely affect our business, financial condition, or results of operations. Any change in the laws and regulations as well as interpretation of such laws and regulations by the relevant regulators applicable to us may also adversely affect our ability to grow our business, including by greatly increasing the costs for ensuring compliance with the new laws and regulations.

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Moreover, we do not take actions to manage our foreign currency exposure, such as entering into hedging transactions.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 revenue that will be generated in other countries, the variability of currency exposures, and the potential volatility of currency exchange rates.

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

We have not provided any service or generated any revenue from customers located outside Japan but expect to do so as part of our growth strategy. We intend to focus our international expansion initially on other Asian countries, particularly Taiwan and Singapore. Our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a business in an environment of multiple cultures, customs, legal systems, regulatory systems, and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Our operations in international markets may not develop at a rate that supports our level of investment. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:

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

As a controlled company, we have relied on our Chief Executive Officer to provide guarantees for our corporate loans from financial institutions and for the lease of our corporate headquarters. We have also historically received short-term loans from our Chief Executive Officer and his wholly owned companies to fund our working capital needs. We may not be able to find alternative financing sources on terms equal to or better than those obtained from our Chief Executive Officer, which could adversely impact our ability to secure necessary financing in the future.

As a controlled company, we have relied on our Chief Executive Officer’s business relationships and financial support in our operations. Mr. Shono is the guarantor of all our outstanding corporate loans from financial institutions and our lease for our corporate headquarters. We have also historically received short-term loans from our Chief Executive Officer and his wholly owned companies to fund our working capital needs. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Transactions with Our Chief Executive Officer and His Wholly-Owned Companies.” If Mr. Shono’s ownership interest in us declines significantly in the future, we may not be able to receive the same level of financial support from Mr. Shono. See “—Our Chief Executive Officer has entered into an agreement with another shareholder that may obligate our Chief Executive Officer to effect a transaction that may be unfavorable to our shareholders and our Company.” Although we expect Mr. Shono to continue to support our growth and development through his role with our Company, Mr. Shono does not have any contractual obligation to provide any operational, financial, or other support to us other than those under the existing guarantees. Our inability to secure additional financing in the future on equal or better terms could be limited and, in such event, could adversely affect our business and operations.

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Our articles of incorporation exculpate our directors and corporate auditors from certain liability to us or our shareholders.

Our articles of incorporation include limitation of liability provisions, pursuant to which we can exempt, by resolution of our board of directors, our directors and corporate auditors from liabilities arising in connection with any failure to execute their respective duties in good faith or due to simple negligence (excluding gross negligence and willful misconduct), within the limits stipulated by applicable Japanese laws and regulations. We have also entered into a limitation of liability agreement with each of our directors and corporate auditors, except our Chief Executive Officer and Chief Financial Officer. With certain exceptions, these agreements provide for indemnification for related expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these directors and corporate auditors in connection with any action, proceeding, or investigation in those capacities. We have not entered into any limitation of liability agreement with our Chief Executive Officer or Chief Financial Officer, as Article 427 of the Companies Act of Japan (the “Companies Act”) does not allow companies to enter into limitation of liability agreements with executive directors (gyomu-shikko-torishimariyaku).

The limitation on liability provided by our articles of incorporation and the limitation of liability agreements with our non-executive directors and corporate auditors may reduce the likelihood of derivative litigation against directors and corporate auditors and may discourage or deter our shareholders from suing them based upon breaches of their duties to us. Successful claims for indemnification by our non-executive directors and corporate auditors may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. While we plan to procure directors’ and officers’ liability insurance policies if we close our proposed initial public offering, such insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed.

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

From the listing of the ADSs on Nasdaq on July 25, 2023 to the date of this annual report, the closing price of the ADSs has ranged from $0.26 to $4.30 per ADS. The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in Japan that have listed their securities in the United States.

In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following:

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

We used to be a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. Our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. However, in preparing our consolidated financial statements as of and for the fiscal year ended March 31, 2022,2023, we have identified certain deficiencies resulting from multiple audit adjustments that could aggregate to a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected on a timely basis. Our Chief Executive Officer and Chief Financial Officer concluded that our internal controls over financial reporting were deficient primarily due to (i) a lack of manpower in our accounting department, which may reduce the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and (ii) failure to timely file our annual reportreports on Form 20-F for the fiscal yearyears ended March 31, 2023 and 2022. The primary deficiencies related to audit adjustments are due to this shortage of staff within our internal accounting department, in addition to the burdens of reporting under U.S. GAAP. As of March 31, 2022,2023, we did not have an effective internal control in place to monitor the progress of all aspects of our SEC reporting and disclosure requirements to timely identify delays, resulting in us being unable to timely meet our reporting and disclosure requirements with the SEC. We are re-evaluating our internal procedures to reduce delays in our future periodic and current reports and plan to adopt certain remedial measures to this effect, including, but not limited to, adopting formal internal policies and guidance on the monitoring of our SEC reporting and disclosure requirements and holding regular training sessions for our internal accounting staff related to SEC reporting and U.S. GAAP requirements. However, the implementation of these measures may not fully address the material weakness in our internal control over financial reporting. Our failure to correct the material weakness or our failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations, and prospects, as well as the trading price of the ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

In addition, once we cease to be an “emerging growth company,” as such term is defined in the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act,” in April 2029, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, as a public company, our reporting obligations may place a significant strain on our management, operational, and financial resources and systems for the foreseeable future. We may be unable to complete our evaluation testing and any required remediation in a timely manner.

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Being a public company and these new rules and regulations make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and executive officers.

We were not in compliance with our periodic reporting obligation under the Exchange Act by failing to file our annual reportreports on Form 20-F for the fiscal yearyears ended March 31, 2023 and 2022 on a timely basis. In the event that we become delinquent with our SEC reporting obligation again, we may not be able to provide up-to-date disclosure to the public market, the ADSs may be considered highly risky or worthless, and the ADSs may be delisted from NASDAQ.Nasdaq.

We have become subject to periodic reporting obligations under the Exchange Act since June 30, 2022, when our registration statement on Form F-1, as amended (File No. 333-265511), was declared effective by the SEC. As a reporting company and a foreign private issuer, the prescribed deadline for us to file our annual report on Form 20-F for the fiscal year ended March 31, 2023 was July 31, 2023, which annual report we did not file until January 31, 2024; the prescribed deadline for us to file our annual report on Form 20-F for the fiscal year ended March 31, 2022 was July 31, 2022, which annual report we did not file until June 16, 2023.

Such failure to satisfy our periodic reporting obligation represents a deficiency in our internal controls over financial reporting. See also “—We have identified deficiencies that could aggregate to a material weakness in our internal control over financial reporting. If our remediation of these deficiencies is not effective, or if we identify additional material weaknesses or control deficiencies in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our Company.”

Further, any failure by us to comply with our SEC reporting obligation in the future may materially and adversely affect investors’ investment in the ADSs. For instance, in the event that we fail to timely file any periodic reports or current reports, we may not be able to provide up-to-date disclosure to the public market, and the ADSs may be considered highly risky or even worthless as a result. Additionally, under Nasdaq Listing Rule 5250(c)(1), a foreign private issuer listed on NASDAQNasdaq is required to timely file all required periodic financial reports with the SEC. Should an approval be granted to us on ourSee “—We are currently not in compliance with the continued listing application with NASDAQ and we become subsequently listed, any delinquency under Nasdaq Listing Rules asrequirements of Nasdaq. As a result, of failing to comply with SEC reporting obligation may cause the ADSs tomay be delisted, which could negatively impact the price of the ADSs and your ability to sell them.” In the event that the ADSs are delisted from NASDAQ. In such event,Nasdaq, the value and liquidity of investors’ investment in the ADSs maywill be materially and adversely affected. Failure to comply with reporting obligation will also render us ineligible to use Form F-3 for registration of securities offered by us.

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

Our largest shareholder, Mr. Yusuke Shono, owns more than a majority of the voting power of our outstanding Common Shares. Under the Nasdaq corporate governance rules, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance standards, including the requirements that:

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

We do not intend to pay dividends on our Common Shares for the foreseeable future.

We currently intend to retain most, if not all, of our available funds and any future earnings to fund the operation, development, and growth of our business and, as a result, we do not expect to declare or pay any dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

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

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

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

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

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

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

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If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court or by the United States Supreme Court. Nonetheless, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, or by a federal or state court in the City of New York. In determining whether to enforce a jury trial waiver provision, New York courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and the ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one which is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim, none of which we believe are applicable in the case of the deposit agreement or the ADSs. If you or any other owners or holders of ADSs bring a claim against us or the depositary relating to the matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other owner or holder may not have the right to a jury trial regarding such claims, which may limit and discourage lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may have different outcomes compared to that of a jury trial, including results that could be less favorable to the plaintiff(s) in any such action.

Nevertheless, if the jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any owner or holder of ADSs or by us or the depositary of compliance with U.S. federal securities laws and the rules and regulations promulgated thereunder.

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

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

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

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

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

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

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

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

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

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

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

We have applied to list the ADSs representing our Common Shares on the Nasdaq Capital Market. At this time, Nasdaq has not yet approved our application to list the ADSs and there is no guarantee or assurance that the ADSs will be approved for listing on Nasdaq.

Even if the ADSs are listed on Nasdaq, we cannot assure you that the ADSs will continue to be listed on Nasdaq. In order to maintain our listing on Nasdaq, we will beare required to comply with certain rules of Nasdaq, including those regarding minimum stockholders’ equity, minimum share price, minimum market value of publicly held shares, and various additional requirements. We mayOn August 18, 2023, we received a notice of non-compliance from the Listing Qualifications Department of Nasdaq stating that, as a result of not be able to continue to satisfy these requirements and applicable rules. Ifhaving timely filed our annual report on Form 20-F for the fiscal year ended March 31, 2023, we were not in compliance with Nasdaq Listing Rule 5250(c)(1). On October 13, 2023, we received a letter from the Listing Qualifications Department of Nasdaq notifying us that we are unablenot in compliance with the minimum bid price requirement as set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided 180 calendar days, or until April 10, 2024, to satisfyregain compliance with Nasdaq criteria for maintaining our listing,Listing Rule 5550(a)(2). To regain compliance, the ADSs couldmust have a closing bid price of at least US$1.00 for a minimum of 10 consecutive business days. In the event we do not regain compliance by April 10, 2024, we may be subjecteligible for additional time to regain compliance or may face delisting. On October 27, 2023, we received a staff determination letter (the “Letter”) from the Listing Qualifications Department of Nasdaq notifying us of the determination from the Nasdaq staff to delist our securities from The Nasdaq Stock Market because we had not filed our Form 20-F for the fiscal year ended March 31, 2023 and we are not in compliance with Nasdaq’s filing requirements for continued inclusion set forth in Nasdaq Listing Rule 5250(c)(1). The delisting action referenced in the Letter has been stayed pending the issuance of a formal decision by the Nasdaq Hearings Panel following a hearing to be held on February 8, 2024.

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

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

For as long as we remain an “emerging growth company,” as defined in the JOBS Act, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of shareholder approval of any golden parachute payments not previously approved. Because of these lessened regulatory requirements, our shareholders would be left without information or rights available to shareholders of other public companies. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the ADS price may be more volatile.

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

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either:

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

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

Based on our operations and the composition of our assets, we do not believe we were a PFIC for our 20222023 taxable year. However, it is possible that, for our 20232024 taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income, in which case we would be deemed a PFIC, which could have adverse U.S. federal income tax consequences for U.S. taxpayers who are shareholders. We will make this determination following the end of any particular tax year.

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

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

A prior filing requirement as set forth above is not triggered for acquiring or trading the ADSs since the depositary received clearance for the acquisition of our Common Shares underlying the ADS in June 2022. In addition, any Foreign Investor expecting to receive delivery of our Common Shares upon surrender of ADSs must also obtain pre-clearance from the applicable Japanese governmental authority prior to accepting delivery, which approval may take up to 30 days and could be subject to further extension. Although such prior filing requirement is not triggered for trading the ADSs once the depositary receives clearance for the deposit of the underlying Common Shares, we cannot assure you that there will not be delays for additional Foreign Investors who wish to acquire our Common Shares or for holders of the ADSs who are Foreign Investors and who wish to surrender their ADSs and acquire the underlying Common Shares. In addition, we cannot assure you that the applicable Japanese governmental authorities will grant such clearance in a timely manner or at all.

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

Item 4. INFORMATION ON THE COMPANY

Corporate History and Structure

We began our operations through Warrantee, a joint-stock corporation organized under the laws of Japan on October 21, 2013. On July 12, 2019, Warrantee incorporated a wholly owned subsidiary, Warrantee Pte. Ltd., in Singapore as a private company limited by shares.

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In 2020, we expanded our marketing campaign services to corporate sponsors in the commercial healthcare vertical. Based on our trinity model, we have designed and conducted campaigns for corporate sponsors in the commercial healthcare vertical, which use sponsorship fees to provide certain types of medical insurance or other healthcare benefits in exchange for user data. Such model has the potential of increasing sales of such corporate sponsors’ products by means of such marketing. In June 2022, we further expanded our marketing campaign services by initiating a sponsor campaign for an employment agency, pursuant to which we will provide to the sponsor’s labor pool members a limited amount of unemployment insurance in exchange for their personal data.

For the fiscal years ended March 31, 2023, 2022, 2021, and 2020,2021, we generated total revenue of JPY243,218 thousand (approximately $1,832 thousand), JPY224,727 thousand (approximately $1,553$1,693 thousand), and JPY212,000 thousand (approximately $1,465$1,597 thousand), respectively, and JPY57,674generated net income of JPY41,303 thousand (approximately $399$311 thousand), respectively, and incurred net losses of JPY97,080 thousand (approximately $799$731 thousand), and JPY25,798 thousand (approximately $212 thousand), and JPY48,334 thousand (approximately $433$194 thousand), respectively. We have had only 11 customers and associated marketing campaigns to date, including one currently ongoing sponsor contract with Paygene, which will expire on December 31, 2023, one sponsor contract with Y’s Inc. that expired on May 26, 2023, which we are in the process of extending to JulyDecember 2023, and two customers, Beauken and Connect Plus for which we completed marketing campaigns in May 2023. We have not yet established a recurring customer base that provides an ongoing sustainable source of revenue sufficient to cover our operating expenses. If we are unable to develop new sponsor contracts or other revenue sources, we may not be able to sustain our operations.

We believe our trinity model creates value for both our corporate sponsors and participant users. We expect to design and conduct more campaigns based on our trinity model in our two existing verticals, as well as in other market verticals as part of our growth strategy.

Sponsored Marketing and Market Research Services

We are focused on offering marketing campaign services, which may help drive revenue growth for our corporate sponsors through demand and behavior analysis and direct incremental sales. We believe that our marketing campaign services provide manufacturers and suppliers greater clarity on aspects of product purchases, such as stock-keeping unit, price, quantity, and timing by their customers or potential customers. We collect relevant granular sales data points and provide to our corporate sponsors organized user data that may be used for retargeting or marketing activities.

To facilitate our data collection and to provide convenience to participant users, we have developed and provided a mobile app for our campaigns for certain of our campaigns in the durables vertical, which allows participant users to input data and make claims for repair services or replacements through the app. Our app is available through the iTunes Store and Google Play in Japan. For cost efficiency or to accommodate less tech savvy participant users, we also utilize a manual process of data collection. All user data collected are owned by Warrantee, and we impose contractual limitations on use periods and purposes to our sponsors or obtain a confirmation letter stating that our sponsors have discarded all user data provided by Warrantee.

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In a typical campaign, in partnership with our corporate sponsor or an advertising agency, we access and recruit participant users via flyers, email, social media, phone calls, or through person-to-person outreach. After signing our consent form to participate in the campaign, a participant user is requested to provide personal or other identification data, such as a name and contact information, answer questions designed to gather targeted and relevant information for our sponsor, and register all appliances the user owns that are of the same type as sold by our sponsor. For participant users who use our mobile app, and if we have a campaign launched on the app, participant users can provide requested information and register their products on the app.

In exchange for the requested data, we provide to each participant user one year of product insurance coverage of up to JPY100,000 (approximately $823)$753) for the user’s registered appliances. The coverage can be used to pay for repair services or replacements if a registered appliance breaks down, regardless of whether such appliance is still within the warranty period provided by the manufacturer. If the user chooses a replacement, our coverage can only be used to purchase the replacement product from our sponsor.

After we collect the user data, we organize the data and provide it to our sponsor. In return for the information, the sponsor pays a sponsorship fee to us, which we use to cover our operating costs, including purchasing product insurance from licensed insurers to provide coverage to the participant users.

We believe our sponsored product insurance model benefits both our corporate sponsors and participant users. This model enables participant users to receive product insurance coverage without paying any cash premium and enables our corporate sponsors to receive targeted and relevant user data in a cost-efficient manner to inform their business and marketing decisions. As we effectively subsidize our participant users’ purchase costs if their registered products break down and if they elect to use our coverage to purchase replacements from our sponsors, we expect our participant users to be incentivized to purchase replacements from our sponsors instead of repairing broken products. We believe this can potentially generate new sales for our sponsors.

Commercial Healthcare Vertical

We entered the commercial healthcare vertical in 2020 by adapting our trinity model for the design and conduct of customized campaigns for corporate sponsors in this vertical, which include manufacturers, suppliers, and agencies marketing or selling health care related goods or services. Our campaigns in this vertical allow participant users who are generally consumers to receive complimentary examinations or treatments for ailments and procedures that are usually not covered by Japan’s “universal” coverage program. In our campaigns, we use sponsorship fees to pay the costs to enable these complimentary examinations or treatments to be available for participant users in exchange for their health and other data needed by our sponsors. As of the date of this annual report, we have served a total of three sponsors in this vertical, including one medical device manufacturer in the fiscal year ended March 31, 2020, one supplement supplier in the fiscal year ended March 31, 2021 and a manufacturer of health food products, Beauken, for which we completed a marketing campaign in May 2023.

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Our other type of customer is a manufacturer and/or supplier of supplement and health food products. In the campaign we conducted for a supplement manufacturer in the fiscal year ended March 31, 2021 and our recently completed campaign for Beauken, we used sponsorship fees to purchase and provided gene testing kits that help test potential metabolic and genetic traits of disease to participant users in exchange for their health data. In providing the test results for participant users, we also made recommendations of our sponsor’s preventative care supplements and health food products to participant users whose test results suggested they may need certain micronutrients. For participant users who decided to purchase our sponsor’s products, they were directed to make orders with our sponsor. We believe by promoting users’ awareness of our sponsor’s supplements through our campaign, we could increase sales of our sponsor’s supplements.

Additional Verticals

Our strategy includes, among other things, the development of and entry into other industry verticals. For example, in May 2022, we were engaged by Y’s, Inc., a Kyoto, Japan based employment agency, to design and launch a campaign directed at persons placed by Y’s placement services, pursuant to which users receive a limited amount of unemployment insurance, up to JPY100,000 (approximately $823)$753), in exchange for their personal data. We believe that campaigns on behalf of corporate sponsors that offer users limited unemployment insurance will be attractive in times of macroeconomic uncertainty, such as those experienced by our addressable markets as of the date of this annual report.

Customers

Our primary source of revenue is derived from corporate sponsorship contracts for our campaigns. We have also generated revenue from miscellaneous services, including advertising, licensing fees, and system development services from time to time, though we do not expect to engage in any significant activity or incur significant revenue or expenses with regard to miscellaneous services going forward. Our customers include both established companies, such as Daikin Industries, Ltd., and growth companies. Our customers for our campaign services have been concentrated in the durables and commercial healthcare verticals, and we plan to expand our services to potential customers in other market verticals.

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Market

We operate in the competitive marketing and market research technology industry in Japan. Our sponsors generally view our services as a substitute to other means of advertising and marketing, including social media marketing, direct response marketing, TV or radio ads, and other advertising. In contrast to traditional advertising media, we believe our services provide sponsors an effective, differentiated targeted marketing program that generates actionable customer insights, including specific consumer information and purchase data and potential increase of revenue through new sales.

Our Growth Strategy

Domestically, we strive to continue our growth through demonstrated track records on return on investment for sponsors and increased branding with their potential customers. By demonstrating tangible return on investment for sponsors and growing usage by their potential customers, we believe we will continue to be able to increase adoption from both stakeholders as we scale the business across more corporate sponsors. Additionally, we plan to leverage outbound marketing—including through an expansion of agency network referrals, recruitment of internal sales staff, and general advertising and promotion—to attract new corporate sponsors.

Our focus domestically will be to expand the number of corporate sponsors for whom we provide marketing and market research services, increase the frequency of campaigns for sponsors, increase the average rate charged per participant user in our campaigns, and enter into other industry verticals. Our strategy is to monetize the higher per user pricing often associated with the commercial healthcare vertical and other verticals we identify and pursue, which we expect will help improve our contract value and core business growth and profitability. We believe our trinity model is widely applicable across many traditional industries and new growth industries, given the benefits we provide to our sponsors’ potential customers with no cash payment required.

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Intellectual Property

To establish and protect our proprietary rights, we rely on a combination of patents, trademarks, confidentiality policies and procedures, non-disclosure agreements with third parties, employee non-disclosure agreements, and other contractual and implicit rights worldwide. As of the date of this annual report, we have three registered patents protecting the intellectual property of the system underlying our sponsored product insurance model, which enables us to serve as an intermediary—helping facilitate data in exchange for insurance benefits—among sponsors, insurance companies, and users. We also have nine registered trademarks, including our names and marks, Warrantee, Warrantee Now, Free Insurance, our logo, and the Warrantee Now logo, with the Japan Patent Office. Our patents have a term of 20 years and will expire on March 20, 2039.years. Our patents and trademarks are not currently registered in any other jurisdiction, except that Warrantee has been registered in Australia, Brazil, China, the European Union, India, the United Kingdom, and Singapore. The success of our business strategy depends on our continued ability to use our existing intellectual property in order to increase brand awareness and develop our branded services. If our efforts to protect our intellectual property are not adequate, or if any third-party misappropriates or infringes on our intellectual property, whether in print, on the Internet or through other media, the value of our brands may be harmed, which could have a material adverse effect on our business, including the failure of our brands and branded services to achieve and maintain market acceptance. There can be no assurance that all of the steps we have taken to protect our intellectual property in Japan or outside Japan in relevant foreign countries, such as Taiwan and Singapore, will be adequate. In addition, in light of our intention to expand internationally, the laws of some foreign countries do not protect intellectual property rights to the same extent as do the laws of Japan. If any of our patents, trademarks, trade secrets, or other intellectual property are infringed, our business, financial condition, and results of operations could be materially adversely affected.

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

Seasonality

Our business is not subject to seasonal fluctuations.

Regulations

Personal Information Protection

In Japan, the Act on the Protection of Personal Information (the “APPI”) and its related guidelines impose various requirements on businesses, including us, that use databases containing personal information. Under the APPI, we are required to lawfully use personal information we have obtained within the purpose of use we have specified and taken appropriate measures to maintain the security of such personal information. We are also restricted from providing the personal information of a person (the “principal”) to third parties without the consent of the principal. The APPI also includes regulations relating to the handling of sensitive personal data and anonymous personal data and the transfer of personal information to foreign countries. A Personal Information Handling Business Operator (as defined below) shall not transfer a person’s personal data to third parties, including its affiliated entities without the prior consent of the principal unless an exception applies (Article 27, Paragraph 1 of the APPI).

A “Personal Information Handling Business Operator” is defined as a person (including a judicial person and excluding any administrative organizations) providing a personal information database for use in business (Article 16, Paragraph 2). Our business utilizes the personal information obtained from participant users, thereby subjecting our Company to the provisions applicable to the Personal Information Handling Business Operator. Under the APPI, the prior consent of the principal to a transfer of such person’s personal data (including Sensitive Information (as defined below)) is not required if the transfer:

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Furthermore, the Personal Information Handling Business Operator shall, unless an exception listed above applies, not acquire Sensitive Information (such as personal information relating to physical or mental disabilities, medical records, and medical and pharmacological treatment) without obtaining prior consent from the principal (Article 2, Paragraph 3 and Article 20, Paragraph 2 of the APPI).

We gather personal information from participant users and transfer them to our corporate sponsors in conducting our campaigns for our corporate sponsors. Therefore, we are required to obtain consents from the participant users prior to the transfer of their information to our corporate sponsors. Some of the information we collect could fall under the category of sensitive personal data under the APPI. In addition, we gather personal information including diagnosis records, which is understood to typically fall under the Sensitive Information,  from participant users in our campaigns for corporate sponsors in the healthcare industry. Therefore, we are required to obtain prior consent from the participant users to obtain the Sensitive Information.

When storing personal information, it is necessary to manage it safely so that it will not be leaked and the database storing the information is not breached. For the safe management, the APPI requires the Personal Information Handling Business Operator to establish an information security system. It includes establishment of the fundamental rule of personal information management, appointment of personnel responsible for personal information management, provisions of regular training courses on privacy and security breach, and physical security control. As for the fundamental rules, we have two internal rules, “Rules on Personal Information Protection” and “Basic Policy on Handling of Personal Information,” which govern personal information protection. Under the Rules on Personal Information Protection, we appointed our Chief Executive Officer, as the person who is responsible for personal information management. We provide a copy of our privacy policy and relevant contact information on our website.

The Insurance Business Act

The Insurance Business Act prohibits any person from conducting insurance business without obtaining an insurance business license. Under Article 2, Paragraph 1 of the Insurance Business Act, the term “insurance business” is defined to generally include (i) the business of underwriting insurance for which premiums are received in exchange for an agreement to pay a fixed amount of insurance proceeds in connection with the life or death of an individual, (ii) insurance for which premiums are received in exchange for an agreement to compensate for damage caused by specific and accidental events, and (iii) other insurances known as so-called life insurance or non-life insurance, with certain exceptions. We do not hold an insurance business license under the Insurance Business Act though we use the term “Free Insurance” as a trademark in conducting our business in Japan.

The Financial Services Agency of Japan (“JFSA”) publishes the Guideline related to Insurance Companies (for insurance companies that provide small size/short-term insurances) (the “Guideline”) in connection with interpretations of the Insurance Business Act. Among others, the Guideline provides the JFSA’s interpretation of Article 2, Paragraph 1 of the Insurance Business Act as follows:

Other factors that regulators are required to consider in determining whether an insurance business license is required include: the contents of the agreement to provide for the subject service, the person who provides the service, the manner in which the service is provided (such as whether the service is relevant to the primary business of the service provider), whether the service has traditionally been perceived as different from an insurance transaction, and the purpose of the regulations under the Insurance Business Act.

We have and will continue to conduct our business in a manner that does not require us to comply with such licensing requirement for an insurance business under the Insurance Business Act. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Company and Our Business—Failure to comply with relevant laws and regulations including those relating to the processing, safekeeping, and use of personal data and the insurance licensing requirements could harm our business, financial condition, or results of operations, and any change in laws and regulations may adversely affect our ability to grow our business.”

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C. Organizational Structure

See “—A. History and Development of the Company.”

D. Property, Plants and Equipment

See “—B. Business Overview—Property and Equipment.”

Item 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

Key Financial Definitions

Revenue. Our primary source of revenue comes from customer billings in sponsor contracts. We have also generated revenue from miscellaneous services, including advertising, licensing fees, and system development services from time to time, though we do not expect to engage in any significant activity or incur significant revenue or expenses with regard to miscellaneous services going forward.

Cost of revenue. Cost of revenue includes the direct cost to develop software products, depreciation, personnel-related expenses, insurance costs, repair and replacement costs, genetic testing costs, and participant user recruiting costs for our sponsored marketing and market research services.

Selling, general, and administrative expenses. Our selling, general, and administrative expenses (“SG&A”) are primarily composed of operating expenses related to sales and marketing, technology development, miscellaneous insurance expenses for our Company, and other general and administrative expenses, such as expenses related to our proposed initial public offering.

Other income (expense). From time to time we have non-recurring, non-operating gains and losses, which are reflected through other income/expense.

Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we also provide AdjustedNon-GAAP EBITDA and its ratio to revenue, AdjustedNon-GAAP EBITDA %, each of which are financial measures that are not based on any standardized methodology prescribed by U.S. GAAP. Management considers AdjustedNon-GAAP EBITDA and AdjustedNon-GAAP EBITDA Margin to be measures of performance which provide useful information to both management and investors as an additional tool to use in evaluating our ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. We also believe that AdjustedNon-GAAP EBITDA and AdjustedNon-GAAP EBITDA Margin are used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures, and meet working capital requirements. However, you should be aware that non-GAAP financial measures are not a substitute for U.S. GAAP measures; they should be read and used in conjunction with our U.S. GAAP financial information. Our non-GAAP measures may not be comparable to similar non-GAAP information which may be presented by other companies. In all cases, it should be understood that non-GAAP operating measures do not depict amounts that accrue directly to the benefit of shareholders.

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AdjustedNon-GAAP EBITDA. We define AdjustedNon-GAAP EBITDA as net income plus other income, other loss, interest expenses, share-based compensation, and depreciation and amortization expenses. AdjustedNon-GAAP EBITDA should not be considered an alternative to net income or other measures under GAAP. AdjustedNon-GAAP EBITDA is not calculated identically by all companies and, therefore, our measures of AdjustedNon-GAAP EBITDA may not be comparable to similarly titled measures reported by other companies.

AdjustedNon-GAAP EBITDA Margin. We define adjustedNon-GAAP EBITDA Margin as the percentage derived from dividing AdjustedNon-GAAP EBITDA for a period by total revenue for the same period.

Comparison of Results of Operations for the Fiscal Years Ended March 31, 2023 and 2022

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Revenue

Revenue increased by 8% year-over-year in the fiscal year ended March 31, 2023 to JPY243,218 thousand ($1,832 thousand) because we mainly focused on one significant market campaign service in the durables vertical during the fiscal year ended March 31, 2023 which comprises 88% of the revenue of the fiscal year ended March 31, 2023. We transitioned to focusing on our marketing campaign services and reduced the offering of miscellaneous services compared to previous years.

Cost of Revenue

Cost of revenue decreased by 17% year-over-year to JPY2,097 thousand ($16 thousand) in the fiscal year ended March 31, 2023, mainly due to the decrease in variable costs, which are primarily comprised of insurance premiums paid for participant users in campaigns and system development costs in the fiscal year ended March 31, 2022. As we focused on a few significant projects during the fiscal year ended March 31, 2023, insurance costs and labor costs were lower in the fiscal year ended March 31, 2023.

Gross profit grew by 9% year-over-year to JPY18,910 thousand ($142 thousand) and gross profit margin was 99.1% in the fiscal year ended March 31, 2023.

SG&A

SG&A decreased by 40% year-over-year to JPY188,528 thousand ($1,420 thousand) in the fiscal year ended March 31, 2023, primarily due to a decrease in stock compensation expenses and professional fees.

Other (Expenses) Income

We recorded other expenses of JPY7,692 thousand ($58 thousand) in the fiscal year ended March 31, 2023, primarily due to increases in foreign currency losses due to the depreciation of the Japanese yen against the U.S. dollars and the increase in foreign currency remittances compared to the prior fiscal years. This was partially offset by interest income.

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Net Income (Loss) and Non-GAAP EBITDA

Net income increased to JPY41,303 thousand ($311 thousand) in the fiscal year ended March 31, 2023 from a net loss of JPY97,080 thousand ($731 thousand) in the prior fiscal year, primarily due to the increase in revenue and significant decrease in SG&A.

Non-GAAP EBITDA increased to JPY71,806 thousand ($541 thousand) in the fiscal year ended March 31, 2023 from a loss of JPY5,004 thousand ($38 thousand) in the prior fiscal year due to the increase in revenue, significant decreased in SG&A and increase in depreciation and amortization expense which was added back to net income to calculate Non-GAAP EBITDA.

Comparison of Results of Operations for the Fiscal Years Ended March 31, 2022 and 2021

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Revenue

Revenue increased by 6% year-over-year in the fiscal year ended March 31, 2022 to JPY224,727 thousand ($1,553 thousand) because we focused on one significant market campaign service in the durables vertical during the current year, which contributed more than all the prior year’s market campaign services. We transitioned to focusing on our marketing campaign services and reduced prior miscellaneous services.

Cost of Revenue

Cost of revenue decreased by 90% year-over-year to JPY2,516 thousand ($17 thousand) in the fiscal year ended March 31, 2022, due to the decrease in variable costs, which was primarily comprised of insurance premiums paid for participant users in campaigns and system development costs in the prior year, which were not incurred in the current year because we focused on one significant project during the current year, which resulted in a decrease in system development costs, insurance costs, and labor costs. As a result, gross profit grew 19% year-over-year to JPY222,211 thousand ($1,536 thousand) and gross profit margin increased year-over-year to 98.9% in the fiscal year ended March 31, 2022.

SG&A

SG&A increased by 45% year-over-year to JPY312,053 thousand ($2,157 thousand) in the fiscal year ended March 31, 2022, primarily due to increased stock compensation expenses associated with our fourth series stock option grant.

Other (Expenses) Income

We recorded other expenses of JPY4,254 thousand ($28 thousand) in the fiscal year ended March 31, 2022, primarily due to increases in foreign currency losses due to the depreciation of the Japanese yen against the U.S. dollars and the increase in foreign currency remittances compared to the prior fiscal year. This was partially offset by interest income and a Singapore government grant.

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Net Loss and AdjustedNon-GAAP EBITDA

Net loss increased to JPY97,080 thousand ($670 thousand) in the fiscal year ended March 31, 2022 from a net loss of JPY25,798 thousand ($212 thousand) in the prior fiscal year, primarily due to the increase in SG&A and the increase in other expenses.

AdjustedNon-GAAP EBITDA decreased to a loss of JPY5,004 thousand ($35 thousand) in the fiscal year ended March 31, 2022 from a profit of JPY84,045 thousand ($692 thousand) in the prior fiscal year due to the increased SG&A, increase in other expenses.

Comparison of Results of Operations for the Fiscal Years Ended March 31, 2021 and 2020

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Revenue

Revenue increased by 268% year-over-year in the fiscal year ended March 31, 2021 to JPY212,000 thousand ($1,901 thousand) due to (i) an increase in revenue from our market campaign services in the durables vertical from JPY13,000 thousand ($117 thousand) to JPY85,000 ($762 thousand) and (ii) an increase in revenue from our market campaign services in the commercial healthcare vertical from JPY210 thousand ($2 thousand) to JPY107,000 thousand ($960 thousand), partially offset by a decrease in revenue from our miscellaneous services, including advertising, licensing, and system development services from JPY43,894 thousand ($394 thousand) to JPY 20,000 ($178 thousand). Our revenue from marketing campaign services increased primarily due to a higher average sponsor contract value either associated with a larger average participant user count or a higher average per user fee rate for the campaigns in the fiscal year ended March 31, 2021. Our revenue from miscellaneous services constituted approximately 75% of our total revenue in the fiscal year ended March 31, 2020, but such revenue decreased to less than 10% of our total revenue in the fiscal year ended March 31, 2021, as we transitioned to focusing on our marketing campaign services and reduced those miscellaneous services.

Cost of Revenue

Cost of revenue increased by 303% year-over-year to JPY25,146 thousand ($226 thousand) in the fiscal year ended March 31, 2021 due to the increase in variable costs, which primarily comprised insurance premiums paid for participant users in campaigns and system development costs. As a result, gross profit grew 263% year-over-year to JPY186,854 thousand ($1,676 thousand) and gross profit margin decreased 100 basis points year-over-year to 88.1% in the fiscal year ended March 31, 2021.

SG&A

SG&A increased by 124% year-over-year to JPY214,608 thousand ($1,925 thousand) in the fiscal year ended March 31, 2021, primarily due to increased stock compensation expenses associated with our fourth series stock option grant.

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Cash Flows for the Fiscal Years Ended March 31, 2022 and 2021

The following table sets forth a summary of our cash flows for the fiscal years indicated.

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Operating Activities. Cash flow from operations was a source of JPY79,565 thousand ($655 thousand) in the fiscal year ended March 31, 2022, compared to a source of JPY2,043 thousand ($17 thousand) in the prior fiscal year, mainly due to a decrease in net income, partially increased due to an increase in trade receivables and deferred revenue.

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On September 3, 2014, the Company obtained a loan from Japan Finance Corporation in the principal amount of JPY15,000 thousand ($124113 thousand), which matured on September 30, 2021 (the “Prior Term Loan”). On September 30, 2021, the Company refinanced the Prior Term Loan with Japan Finance Corporation to extend the maturity date to August 31, 2026. The Company also used JPY15,000 thousand ($124113 thousand) out of JPY15,500 thousand ($117 thousand) of the proceeds from the new loan to repay all outstanding principal balance under the Prior Term Loan. The interest rate per annum on the new term loan is 0.36% per annum from September 30, 2021 to September 30, 2024, and 1.26% per annum from October 1, 2024 to the maturity date. Under the new loan, the Company is required to make monthly repayments of principal beginning September 30, 2022 and monthly repayments of interest beginning October 30, 2021. This loan is guaranteed by Mr. Shono, our Chief Executive Officer. The outstanding balance as of September 30, 2022 and March 31, 2023 and 2022 was JPY15,275JPY13,975 thousand ($105 thousand) and JPY15,500 thousand ($128117 thousand), respectively.

Contractual Obligations

Payments of contractual obligations and commitments will require considerable resources. In our ordinary course of business, we routinely enter into commercial commitments and financial obligations for various aspects of our operations.

The following table sets forth the amount of our contractual obligations as of March 31, 2022.2023.

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Off-Balance Sheet Arrangements

As of March 31, 2023, 2022, 2021, and 2020,2021, we were not party to any material off-balance sheet financial arrangements that are reasonably likely to have a current or future effect on our financial condition or operating results. We do not have any relationship with unconsolidated entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

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

Other than as disclosed below and elsewhere in this annual report on Form 20-F, we are not aware of any trends, uncertainties, demands, commitments, or events for the period from April 1, 20212022 to March 31, 20222023 that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity, or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

Factors and Trends Affecting Our Results of Operations

We believe that the growth and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we plan to successfully address in order to sustain our growth and improve our results of operations.

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Acquiring New Sponsors and Campaign Opportunities. Our revenue and costs are primarily affected by the volume of campaign services, as well as the mix of sponsors of these services, which vary from period to period. Although we hope to develop repeated service opportunities with existing sponsors, we have not been successful in doing so to date under our business model and we intend to focus on incremental revenue opportunities through development of new sponsors. If our proposed initial public offering closes, weWe plan to use theour initial public offering proceeds to invest in sales and marketing, including hiring more staff to drive sponsor acquisition and to conduct more campaigns. We believe our investments in these areas will allow us to market our services to the needs of enterprises in the durables vertical and the commercial healthcare vertical which comprise our existing sponsor base, while unlocking opportunities to expand our sponsor base and to conduct campaigns in other verticals and markets. If our investments in sponsor acquisition are not successful, our operating results would be adversely impacted.

Ability to Manage Costs Associated with Implementing Our Growth Strategy. Managing our costs to maintain or increase our profit margin associated with performing our campaign services has been our long-time strategic objective. We have been thinly staffed and have leveraged third-party services to support the operations of our business. In order to acquire more sponsors and campaign opportunities, we intend to invest in sales and marketing and increase hiring. In addition, management expects to adopt automation software where appropriate to maintain or increase efficiency, including increasing the use of our app in conducting campaigns. If we fail to manage the costs and expenses associated with our growth strategy effectively, our profit margin would be harmed.

Business Environment. Product manufacturers and suppliers have always had the need for their potential customers’ information to optimize their sales and marketing funnels. We believe our services address their needs for targeted user data and our trinity model, which is designed to provide a tangible benefit to participant users in exchange for their data, can facilitate obtaining such data efficiently. We believe our patents in Japan also provide certain protection to us in hindering others from serving in a similar intermediary role and adopting the same sponsored product insurance model in Japan. As a relatively new business model, we rely on our patents and the current regulatory framework to allow for this model to be applied for campaigns for sponsors in various verticals. We intend to continue to tap the needs of our sponsors and potential sponsors for user data and new sales channels while any challenge to our patents or change to the current regulatory framework applicable to our business model may adversely affect our business and increase our costs.

Impact of COVID-19

On March 11, 2020, the World Health Organization designated the outbreak of COVID-19 as a pandemic. Given that our marketing campaigns did not depend on face-to-face interactions with sponsors or participant users, we did not observe significant impacts on our business or results of operations for the fiscal years ended March 31, 2023, 2022, 2021, and 2020 from the pandemic.2021. We applied for the COVID-19 subsidy program for sustaining businesses provided by the Japanese government. For the fiscal year ended March 31, 2021, we received a one-time grant of JPY2,000 thousand ($1615 thousand) from the subsidy program. While the extent to which COVID-19 may impact our future results cannot be known at this time, there is no guarantee that the pandemic and associated economic impacts will not result in a negative impact to our future financial condition, results of operations, and cash flows.

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. As events continue to evolve, our estimates may change materially in future periods.

In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application, while in other cases, management’s judgment is required in selecting among available alternative accounting standards that allow different accounting treatment for similar transactions. We believe that the accounting policies discussed below are the most critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

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Revenue Recognition

We apply ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented in the consolidated financial statements. To determine the appropriate amount of revenue to be recognized in accordance with ASC 606, we follow a five-step model as follows:

1 — Identification of the contract with a customer;

2 — Identification of the performance obligation in the contract;

3 — Determination of the transaction price;

4 — Allocation of the transaction price to the performance obligation in the contract; and

5 — Recognition of revenue when, or as, a performance obligation is satisfied.

Our revenue is primarily derived from the durables vertical and the commercial healthcare vertical. Our services are marketed and sold directly to the customers. We assess the contract term as the period in which the parties to the contract have enforceable rights and obligations. The actual contract term may differ from the stated term in contracts with certain termination or renewal rights, depending on whether there are substantive penalties associated with those rights. Customer contracts are generally standardized and noncancellable for the duration of the stated contract term. Consumption taxes collected and remitted to tax authorities are excluded from revenue. We may use third-party vendors to provide certain goods or services to our customers. We evaluate those relationships to determine whether revenue should be reported gross or net. We recognize revenue on a gross basis where we act as principal and control the goods and services used to fulfill the performance obligations to the customer and on a net basis where we act as an agent. We have not acted as an agent during the fiscal years ended March 31,31,2023, 2022, and 2021.

Durables Vertical:

Performance Obligations

Revenue from the durables vertical is primarily comprised of sponsorship fees from corporate sponsors in exchange for participant users’ personal or other identification information. During the sponsorship campaigns, we aggregate personal information, organize that data, and then provide it to corporate sponsors. We have identified one performance obligation, the delivery of participant users’ personal information. All other immaterial deliverables occur prior to this but revenue is not recognized until the delivery of the participant users’ personal information, which is the performance obligation. Accordingly, we recognize revenue at a point in time when the personal information is provided to corporate sponsors upon satisfying our single distinct performance obligation.

When we conduct the market research or marketing planning proposal services for the customers in the preliminary stages of the durables vertical contract, the single performance obligation is satisfied and revenue is recognized when the services are completed and accepted by the customers and we have no further obligations.

Contractual Consideration

The transaction price is generally fixed at contract inception. However, our contracts with corporate sponsors within the durables vertical may include a specified quantity, which entitles the customer to refunds, when defined quantity levels are not met at the end of the provision period. These arrangements represent a form of variable consideration, which is estimated using the most likely amount method to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty is subsequently resolved. During the fiscal years ended March 31, 2023, 2022, and 2021, no revenue was recognized from estimates that had not been resolved as of the applicable periods.

Commercial Healthcare Vertical:

Performance Obligations

Revenue from the commercial healthcare vertical is primarily comprised of sponsorship fees from corporate sponsors in exchange for healthcare-related promotional campaigns. During healthcare-related promotional campaigns targeted to participant users based on results of their free genetic test kits, we have the stand-ready obligation to provide promotional services for the duration of the campaign promotion period. Accordingly, revenue is recognized ratably based on the time-elapsed method over the contractual term with the corporate sponsors.

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When we conduct a campaign sponsored by the corporate sponsors and provide them the personal information we have collected from the participant users in exchange for complimentary examinations, we have identified one performance obligation, which is the delivery of participant users’ personal information, with other promises being immaterial in the context of the contract. Therefore, we recognize revenue at a point in time when the personal information is provided to the corporate sponsors.

Contractual Consideration

The transaction price may be fixed at contract inception within the commercial healthcare vertical in a form of non-refundable minimum guarantee but may also have a component of variable consideration, such as sales incentives, which are calculated by multiplying the amount of work accomplished by a fixed unit price of remuneration. Due to the variable consideration being entirely constrained, the sales incentive is excluded from the transaction price until the uncertainty is subsequently resolved. During the fiscal years ended March 31, 2023, 2022, and 2021, no revenue was recognized from estimates that had not been resolved as of the applicable period.

Miscellaneous revenue, such as revenue from advertising, licensing, and system development, is recognized ratably over time or at the point of time depending on the type of deliverables and duration of the sponsor contract.

Transaction Price

The transaction price is the amount of consideration to which we expect to be entitled for transferring goods and services to the customer.

Payments from the customers are often made in advance before satisfaction of the performance obligations. When payments are not due in advance, they are due within 30 days of delivery of the goods or service. In instances where the timing of revenue recognition differs from the timing of the right to invoice, we have determined that a significant financing component generally does not exist. Additionally, we have elected the practical expedient that permits an entity not to recognize a significant financing component if the time between the transfer of a good or service and payment is one year or less.

Share-Based Compensation

We apply the provisions of ASC Topic 718, Compensation—Stock Compensation. We measure the cost of employee and non-employee services received in exchange for awards of equity instruments at the fair value of the award on the grant date and recognize the cost over the requisite service period which the employee and non-employee are required to provide services in exchange for the award. Compensation costs are recognized on a straight-line basis over the requisite service period of the awards which are expected to vest. Recognition of compensation cost will be deferred until the liquidity event occurs. For awards with performance conditions, compensation cost is recognized when the condition is probable of being achieved, or in the case of a liquidity event, when the liquidity event occurs. We use option pricing methods that require the input of subjective assumptions, including the expected term, expected volatility, dividend yield, and risk-free interest rate. For awards with market conditions, we use a hybrid method between a discounted cash flow method and Monte Carlo simulation models to value the awards. We have elected to recognize forfeitures as they occur.

Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable primarily consist of amounts billed and currently due from customers, net of an allowance for doubtful accounts, if recorded. When we have an unconditional right to payment, subject only to the passage of time, the right is treated as a receivable. Fees billed in advance of the related contractual term represent contract liabilities and are presented as deferred revenue. Typical payment terms provide for customer payment within 30 days of the contract date.

Trade accounts receivable are subject to collection risk. We perform evaluations of our customers’ financial positions and generally extend credit on account, without collateral. We determine the need for an allowance for doubtful accounts based upon various factors, including credit quality of the customer, age of the receivable balance, and current economic conditions.

There were no bad debt expenses or allowance for doubtful accounts recorded as of and for the fiscal years ended March 31, 2023, 2022, and 2021.

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Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the differences between the financial statement and tax bases of assets, liabilities, and net operating loss by using enacted tax rate in effect for the year in which the differences are expected to reverse. The effect of a change in tax rate on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that these assets are believed to be more likely than not to be realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. In making such a determination, all available positive and negative evidence is considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

Warrantee and its subsidiary file tax returns in the tax jurisdictions of Japan and Singapore. Tax benefits for uncertain tax positions are based upon management’s evaluation of the information available at the reporting date. To be recognized in the consolidated financial statements, a tax benefit must be at least more likely than not of being sustained based on technical merits. The benefit for positions meeting the recognition threshold is measured as the largest benefit more likely than not of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.

Recently Issued Accounting Pronouncements

As an emerging growth company, the JOBS Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to delay adoption of certain new or revised accounting standards. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021 for non-public entities, with early adoption permitted.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842), Leases — Targeted Improvements (“ASU 2018-11”), which offers a practical expedient for transitioning at the adoption date.

In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which defers the effective date of ASU 2016-02 for non-public entities to fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. We adopted this standard effective April 1, 2022 and the adoption did not have a material effect on our consolidated financial statements.

Financial Instruments — Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which is intended to provide more decision-useful information about expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including, but not limited to accounts receivable. This standard is effective for annual reporting periods beginning after December 15, 2022 for non-public entities, including interim periods within that reporting period. Early adoption is permitted. We adopted this standard effective April 1, 2023 and the adoption did not have a material effect on our consolidated financial statements.

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