TOKEN CORPORATION

The Group conducts business under licenses and permits obtained under the Construction Business Act, the Building Lots and Buildings Transaction Business Act, the Money Lending Business Act, and other laws. Amendments to these laws or deficiencies in compliance may result in administrative guidance, which could affect operating results, financial condition, and business plans. Although the Group aims to ensure proper business execution, there is an inherent risk of increased costs and business constraints arising from responding to legal amendments.

The construction business is significantly affected by external factors such as employment conditions, land price movements, interest rate trends, and housing tax systems. Deterioration in these conditions could worsen order intake, potentially affecting operating results and financial condition. In particular, in a rising interest rate environment, landowners' willingness to build may decline, creating a risk that securing orders becomes more difficult.

The Company records orders at the time a building construction contract is concluded; however, because a certain period elapses between order receipt and construction commencement, order cancellations may occur during this interval due to changes in financial institutions' lending stance, declines in land collateral valuations, or shifts in interest rate trends. Since order cancellations directly result in the loss of recorded revenue, they may have a direct impact on operating results.

Due to the nature of the business, net sales tend to be weighted more heavily toward the second half of the fiscal year compared to the first half. Profit shows a similar tendency, making it difficult to assess full-year performance based solely on first-half results, which may affect investors' performance forecasts. The structure in which order receipt and construction completion are concentrated in the second half amplifies the risk of downside performance in the event of a sudden change in the external environment.

If raw material, materials, or labor costs rise sharply after conclusion of a construction contract, the cost of completed construction increases; in cases where it is difficult to pass this on to the contract price, gross profit on completed construction decreases. In addition, because the Company employs a sublease (master lease) system, a decline in occupancy rates at managed properties, resulting in reduced rental income, could raise the cost-of-sales ratio in the secondary business, potentially affecting operating results and financial condition.

The Group holds personal information of a large number of customers, including landowners, homeowners, and tenants. Although the Group strives for thorough information management through employee education and training via its personal information protection committee, should a leak occur, it could result in a loss of public trust and affect business performance. Given the breadth of the customer base, the reputational risk in the event of a leak is significant.

In the event of a large-scale earthquake, typhoon, or other natural disaster, substantial costs may arise to restore facilities such as the head office, business offices, and construction sites, as well as costs for supporting affected homeowners and tenants. Depending on the extent of damage, order-taking activities may stagnate, sales may decline, construction material prices may surge, and on-site work may be forced to halt, potentially having a wide-ranging impact on business activities, operating results, and financial condition.