NOTE 5 – COMPENSATION RECEIVABLE FOR CONSUMPTION TAX, NET

Compensation receivable for consumption tax, net consisted of the following:

The Tokyo Regional Taxation Bureau had conducted a tax examination into the Company’s consumption tax filing for the period from July 2018 to December 2021. As a result of the examination, the Company was required to return consumption tax refund for export transactions that were determined not to meet the tax exemption requirements due to failure in submission of relevant export documents (see Note 13) by certain of the Company’s suppliers and customers. In June 2023, the Company entered into agreements with relevant suppliers and customers to claim compensation for damages from the additional consumption tax payment. These suppliers and customers agreed to compensate the Company and the compensation receivable for consumption tax will be paid over two years from the date of the agreements. However, due to the tax review the Company filed with the National Tax Tribunal on February 22, 2024 as mentioned in Note 6(3), the Company agreed to temporarily suspend the repayment, and these suppliers and customers will resume the payment after the final assessment is determined by the Tokyo Regional Taxation Bureau. As of March 31, 2024, the net total of compensation receivable for consumption tax was approximately $9.9 million (approximately ¥1.5 billion). During the fiscal year ended March 31, 2025, the Company received a total of approximately $0.6 million (approximately ¥0.1 billion), and the net total of compensation receivable for consumption tax was approximately $9.3 million (approximately ¥1.4 billion) as of March 31, 2025.