Lib Work Co.,Ltd.

The Group limits its business to certain areas within Kumamoto, Fukuoka, Saga, Oita, Chiba, and Kanagawa Prefectures, so changes in the economic conditions, interest rate trends, land prices, housing supply-demand balance, and employment situation in these regions directly affect business performance. Because geographic diversification is limited, an economic downturn or deterioration in the real estate market in a specific region can readily spread to overall earnings.

There is a risk that increased demand for and rising prices of raw materials and building materials, exemplified by the lumber price surge known as the "wood shock," will push up procurement costs. The Company secures multiple suppliers to help contain costs, but if the global tightness in supply and demand continues, it may become difficult to pass on costs, potentially compressing profit margins.

If sales do not proceed as planned due to a sharp economic downturn, rising interest rates, or changes to real estate-related tax systems, completed inventory may build up and reduce capital efficiency. Furthermore, under the application of the "Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9), if the net realizable value falls below the acquisition cost, valuation losses must be recognized on real estate held for sale and real estate under development for sale, directly affecting business performance.

The Company holds bitcoin, and large price fluctuations driven by various factors—including supply-demand trends, regulatory authority announcements, media influence, technological changes, and broader economic trends—may affect financial soundness and business results. Cryptocurrency prices are characterized by extremely high volatility, and this is a distinctive risk in that substantial valuation gains or losses can arise within a short period.

The detached housing business is subject to numerous laws and regulations, including the Building Standards Act, the Construction Business Act, the Real Estate Brokerage Act, the City Planning Act, and the Act for Promotion of Ensuring Quality in Housing, and the tightening of industry regulations or major legal revisions could increase business costs. Furthermore, if a license, registration, or permit (such as the specific construction business license, first-class architect office registration, or real estate brokerage license) is revoked for any reason, business activities would be significantly constrained. No grounds for revocation currently exist, but this is recognized as a future risk.

The Group holds personal information such as lists of visitors to housing showcase events and home purchase customers, and information leakage due to human error or unauthorized access could lead to a decline in creditworthiness and claims for damages. The Group has established internal regulations, built a management structure, implemented measures to prevent external intrusion, and conducted employee training, but complete prevention is difficult, and the impact on business performance and brand in the event of a leak would be significant.

The rapid development of generative AI technology poses a risk that services the Group has uniquely provided (including the My Home Robo business) could be replaced by generative AI, reducing demand and eroding competitive advantage. The Detached Housing Platform business includes new services such as the IP licensing business, but changes in the technological environment may make it difficult to execute the original plan.

The Group outsources home construction work to external contractors, and business performance may deteriorate if the Group cannot secure subcontractors in a timely manner as it expands its operating regions or increases the number of orders received, or if construction is delayed due to adjustments needed to find replacement contractors following a subcontractor's bankruptcy or similar event. Subcontractors are selected based on investigations of their financial condition, technical capability, reputation, and absence of ties to antisocial forces, but the risk is increasing amid a worsening labor shortage across the construction industry as a whole.

Representative Director and President Tsutomu Seguchi plays a central role in management policy, strategic decision-making, and business execution, and if he becomes unable to be involved in management for any reason, it could affect business performance and other aspects of the Group. The Group is strengthening its organization through delegation of authority, establishment of decision-making bodies, and hiring of personnel, but reducing this dependence remains a work in progress.

The Group acquired all shares of Takue Home Co., Ltd. in July 2020 and all shares of Konokuni Mokuzai Kogyo Co., Ltd. in July 2023, and records goodwill associated with these acquisitions on its consolidated balance sheet. If the business development of an acquired company does not proceed as planned, impairment of goodwill may be required under accounting standards, which could result in a temporary substantial loss and materially affect the Group's business performance.