Nissou Co.,Ltd.

The Group's business is highly dependent on the real estate industry, and the spread of negative reputation within the industry or a decline in move-in/move-out activity at real estate properties due to economic downturn could significantly reduce order intake and completed construction revenue. A deterioration in the real estate market could lead directly to a decline in net sales and materially affect business performance. Currently, the structure is characterized by high concentration on specific demand sources with limited diversification.

If subcontracting costs and material prices surge due to price increase requests from subcontractors or rising demand for materials, this could adversely affect business performance and financial condition through a rise in the cost ratio. The Group strives to contain prices by securing multiple subcontractors and suppliers, but this effect is limited during periods of broad market-wide price increases. There is a risk that profitability will decline if cost increases cannot be passed on to order prices.

The Group holds real estate for sale, and if sales do not progress smoothly due to a deterioration in the domestic real estate market, or if valuation losses occur, this could affect operating results and financial condition. The real estate market is influenced by external factors such as interest rate trends, economic fluctuations, and the supply-demand balance, making it difficult to control. Recognition of valuation losses carries the risk of significantly worsening profit and loss on a temporary basis.

The Group relies on a construction network consisting of specialized subcontracted construction companies for renovation work, and if it is unable to secure subcontractors in a timely manner when expanding its sales area or increasing order volume, this could affect business operations and performance. In addition, a decline in skilled labor due to an aging population and population decline poses a medium- to long-term supply constraint risk. When selecting subcontractors, the Company investigates their management condition, technical capability, and any relationships with anti-social forces, but securing sufficient quantity remains an ongoing management challenge.

Hiroshi Maeda, the founder and Representative Director and President, plays a central role in formulating and executing management policy and sales strategy, and if he becomes unable to be involved in management for any reason, this could affect business operations and performance due to operational stagnation, among other effects. The Company is working to reduce this dependence through delegation of authority and promotion of collective decision-making, but the degree of dependence remains high at present. Developing a succession framework remains an important management issue.

The Company is pursuing active M&A to stabilize and diversify its earnings base, but if investment in new projects is delayed or if an acquired company's performance deteriorates such that the planned profit level cannot be secured, impairment losses on acquired assets or goodwill could occur, materially affecting business performance and financial condition. The recognition of goodwill in connection with M&A carries an inherent risk of future impairment, and this risk materializes if post-acquisition integration and management do not function appropriately. Strengthening the subsidiary management framework is an essential issue.

The Group is subject to regulations such as the Construction Business Act and the Real Estate Brokerage Act, and if licenses or permits are revoked or non-renewed, or if laws are revised, abolished, or new regulations are established, this could affect business operations and performance. Legal risk could also arise if the Group violates payment deadline regulations for subcontractors under the Construction Business Act. It is necessary to maintain and manage multiple licenses and permits across group companies (including Japan Resort Bank, Yana Corporation, Sasaki Co., Ltd., and Heisei Housing), imposing a heavy administrative burden.

If serious defects or deficiencies are found in constructed properties, or if an unexpected serious accident occurs during construction, the Group could face liability claims, and there is a possibility that coverage under construction contractor liability insurance or product liability insurance may not be available. The occurrence of liability claims entails direct cost burdens and could also damage trust with customers and within the industry, potentially leading to a decline in orders received. Thorough quality control and safety management remain important issues for business continuity.

The Group centrally manages customer information, construction management, estimates, billing, and other data through computer systems, and if the systems or databases become unusable due to system failure, a large-scale disaster, computer viruses, or other causes, this could affect business operations and performance. In addition, if customer information or other data is leaked due to an unforeseen event, this is expected to result in reduced public trust and incur response costs. The Group implements data protection through regular backups and has established internal rules and employee awareness programs, but risk continues to exist as cyber threats become more sophisticated.

As of the filing date of this report (October 28, 2025), the Company's tradable share market capitalization is at a level close to the formal listing criteria set by the Tokyo Stock Exchange, and there is a possibility that the requirement may not be met due to stock price fluctuations, among other factors. Even if delisting were to occur, trading would continue to be possible on the Nagoya Stock Exchange, but this would carry risks such as constraints on fundraising methods and a shrinking investor base. The Company's policy is to work to expand its tradable share market capitalization through continued enhancement of corporate value and consideration of capital policy.