L is B Corp.

Because services are provided via the internet, there is a risk of system failures or network disconnections caused by large-scale program defects, natural disasters, unauthorized access, and other factors. Should a failure occur, it could damage the Company's social credibility and have a significant impact on operating results and financial condition. While the Company is preparing by enhancing server equipment, strengthening security, and building a system management framework, unforeseeable troubles cannot be completely eliminated.

The DX Solutions business primarily serves the construction, distribution/retail, and infrastructure industries, with the construction industry accounting for a particularly high proportion. As a result, performance is strongly affected by software investment trends in that industry. If a downturn in the domestic or overseas economy significantly curtails software investment by the construction industry, this could have a material impact on operating results and financial condition. As a countermeasure, the Company is promoting avoidance of dependence on specific customers and diversification of its customer base beyond the construction industry.

The number of potential shares underlying stock acquisition rights granted as incentives to officers and employees is 395,700 shares, representing 7.72% of the total number of issued shares. If these rights are exercised, the value of shares held by existing shareholders and their voting ratios could be diluted. The likelihood of occurrence is high, and it is recognized that this risk could materialize within a few years.

The Group's business is highly dependent on the business chat service "direct," and changes in the business environment or intensifying competition from competitors and new entrants could directly affect performance. The timing at which this risk could materialize is anticipated to be within the relatively near future, i.e., within a few years. The Company aims to reduce this dependence through continuous updates for differentiation and the development and provision of ancillary services. However, given the current high level of dependence, a decline in the competitiveness of "direct" carries the risk of immediately leading to deterioration in revenue.

In the software-related market, the pace of technological innovation and changes in customer needs is extremely rapid, and failure to respond in a timely manner could lead to a decline in competitiveness. Substantial expenses, such as system investment and personnel costs, incurred in responding to these changes could also affect operating results and financial condition. While the Company addresses this through establishing a framework to track the latest technology trends and securing and training talented personnel, the risk of falling behind in responding to change remains ongoing.

Given the nature of its services, the Company has occasion to receive personal information and confidential information from customers. Should leakage, tampering, or unauthorized use occur, this could lead to claims for damages from customers and loss of credibility. The Company has taken systematic measures, including obtaining ISO/IEC27001 and ISO/IEC27017 certification, providing training for officers and employees, and implementing countermeasures against external unauthorized access and viruses, but the risk cannot be completely eliminated. Information security incidents could affect operating results and financial condition.

In addition to direct sales, the Group provides services to customers through wholesale/resale via sales partners and OEM supply to OEM partners; however, the sales activities of these partners are beyond the Group's control. A slowdown in new customer acquisition, a decline in recurring revenue due to increased cancellations, or deterioration in relationships with partners could affect operating results and financial condition. The Company seeks to strengthen partner relationships through joint proposal and customer success activities as well as the development of new features that reflect partner needs.

Taisuke Yokoi, the founder and Representative Director and CEO, plays a critical role across the Company's overall business activities, including determining management policy and business strategy, and the Company is highly dependent on him. Should he become unable to perform his duties for any reason, this could affect operating results and financial condition. The Company is working to mitigate this risk by developing its management structure and cultivating personnel, but reducing this dependence will take time.

The Company has adopted a policy of actively utilizing M&A as a means of business expansion; however, if issues not identified during pre-acquisition due diligence come to light afterward, or if expected results are not achieved as planned, it may become necessary to record impairment losses on the value of acquired shares or business assets. In addition, the addition of new businesses introduces risk factors specific to those businesses. While the Company carefully examines risks through detailed pre-acquisition due diligence, the inherent uncertainties of M&A cannot be eliminated.

As the Group has expanded in scale in recent years through M&A and new business establishments, there is a risk that the development of management structures may not keep pace. If management structures are inadequate, this could result in legal violations or deficiencies in licensing procedures, which could affect operating results and financial condition. The administrative department is working to strengthen management structures, including internal controls, but there is a risk that the response may lag behind the pace of Group expansion.