HATCH WORK CO.,LTD.

AtParking Cloud is a relatively new business that provides monthly parking lot management operations online, and new entrants ranging from major companies in other industries to emerging companies may enter this field. If competitors surpass the Company in financial strength, technological development capability, sales capability, and brand recognition, the Company's competitive advantage could be lost, potentially affecting its business development, operating results, and financial position. As countermeasures, the Company is working to expand its sales personnel, strengthen advertising, develop high-value-added services, and improve efficiency and expand its business domain through the introduction of generative AI.

If external factors such as sharp increases in gasoline prices, young people's declining interest in car ownership, and reduced private vehicle ownership due to the development of MaaS cause a rapid decline in the number of vehicles owned domestically and a sudden easing of parking supply-demand balance, this would affect the foundation of the Monthly Parking Innovation Business. The Company is addressing this by continuously developing and providing services that effectively utilize idle parking spaces, such as parking lots equipped with EV charging facilities and short-term rentals, leveraging its accumulated parking data, vacancy information, and user data.

In the Monthly Parking Innovation Business, the Company obtains personal information such as the names of client company representatives and individual user information. If important personal information were to leak, this could result in the loss of social credibility and the occurrence of damage compensation costs, potentially having a material impact on business development, operating results, and financial position. The Company strives to strengthen information security through the acquisition of the Privacy Mark and certification under the international ISMS standard "ISO/IEC27001:2013" and the domestic standard "JIS Q27001:2014," while also establishing a management system for disclosure, prevention of damage spread, cause investigation, and recurrence prevention in the event of a leak.

Natural disasters, accidents, system defects, computer virus intrusions, unauthorized external access, and similar events could impede the provision of services to customers. Since the Company's business is centered on online services, system failures pose a risk of directly affecting business development, operating results, and financial position. As countermeasures, the Company has implemented enhanced security for its portal site and various management systems, operational status monitoring, and internal system development.

In AtParking Cloud (AP Cloud Service), the Company provides delinquency guarantees to management companies. If a significant deterioration in the economic or employment environment reduces users' ability to pay, there is a risk that the collection of indemnification receivables could become prolonged or that uncollectible receivables could increase. Although the Company records allowances for doubtful accounts and guarantee performance provisions based on past delinquency records, if the actual number of uncollected cases exceeds expectations, the provisions may prove insufficient, potentially affecting the Company's financial position and operating results.

The rental meeting room industry does not have high entry barriers, and numerous competitors exist nationwide, ranging from large corporations to various organizations and public facilities. Increased costs of responding to competition and declines in the number of users and unit prices due to new entrants could narrow profit margins, potentially affecting business development, operating results, and financial position. The Company strives to secure competitive advantage through differentiation, leveraging its advantages in store location and pricing, and offering a wide range of services to a broad customer base, including early morning to late night and holiday availability and hourly usage options.

The Company's Building Innovation Business's strength lies in an "asset-light management" approach that does not involve acquiring ownership of properties. However, if securing new properties or extending existing contracts does not proceed as planned, or if rent increases are announced under fixed-term lease agreements, this could impede business expansion plans. As countermeasures, the Company strives to reduce risk by understanding the needs of real estate owners, monitoring the progress of redevelopment plans, and negotiating extensions.

Due to rapid changes in the employment environment resulting from factors such as the declining birthrate, aging population, and shrinking labor force, competition for acquiring the talent essential to the business is intensifying. If talent acquisition and development do not proceed as planned, this could affect business development, operating results, and financial position over the long term. As countermeasures, the Company actively conducts year-round recruitment of both new graduates and experienced personnel, builds a fair evaluation and treatment system based on a management-by-objectives framework, expands educational programs to develop self-directed talent, and works to pass on operational know-how for rental meeting room management.

Chairman of the Board Hiroshi Otake has played a key role in driving the Building Innovation Business, and President and Representative Director Chihei Masuda has played a key role in driving the Monthly Parking Innovation Business, both since the Company's founding period. If either of them becomes unable to perform their duties for any reason, this could affect business development, operating results, and financial position. As countermeasures, the Company is actively promoting delegation of authority, has established a voluntary Nomination and Compensation Committee, and is working to develop successors through the formulation of a succession plan.

The Company grants stock acquisition rights as incentives to directors and employees and is considering further utilization of stock-based compensation systems going forward. As of the filing date of this document, the number of potential shares from stock acquisition rights is 110,300 shares (equivalent to 5.7% of the total number of issued shares). If the rights under stock acquisition rights to be granted in the future are exercised, the value of shares held by existing shareholders and their voting rights ratio may be diluted.