LANDNET Inc.

The interest-bearing debt dependency ratio reached 51.1% at the end of the consolidated fiscal year, as funds for purchasing used real estate are procured mainly through borrowings from financial institutions. If interest rates rise or borrowing becomes difficult due to changes in financial conditions, this will directly affect business performance and financial position. The Company addresses this through avoiding dependence on specific financial institutions and analyzing sales plans for individual projects, but vulnerability to changes in the external environment remains.

Loan agreements with certain financial institutions include financial covenants, and violation of these covenants could result in higher borrowing interest rates or loss of the benefit of the term, significantly impacting cash flow. Compliance status is currently appropriately managed and the risk of violation is recognized as minimal, but there is a risk that meeting the covenants could become difficult if business performance deteriorates.

Real estate held for sale is subject to inventory valuation standards, and a valuation loss is recorded at fiscal year-end if the net realizable value falls below the acquisition cost. If economic conditions deteriorate, real estate prices fluctuate sharply, or the holding period becomes prolonged, recording valuation losses will affect business performance and financial position. The Company addresses this through continuous monitoring of market trends and appropriate purchasing management, but there are limits to responding to sudden changes in the external environment.

The real estate industry is highly susceptible to economic trends, economic conditions, interest rate trends, and land price trends, and if these deteriorate and reduce buyer demand, business performance and financial position will be affected. In particular, rising interest rates increase the borrowing repayment burden on purchasers of investment condominiums, leading to reduced purchase intent and a decline in the number of units sold. The Company seeks to minimize the impact through regular market research and analysis and adjustment of the type and amount of properties purchased.

The real estate industry has numerous competitors ranging from major housing manufacturers to individual proprietors, and an increase in new entrants with similar business models could lead to price competition and a decline in the number of transactions handled. The Company group has a price advantage through direct purchasing utilizing extensive real estate owner information, but if this differentiation cannot be maintained, there is a risk that profitability will decline.

In the sale of investment real estate, if customers purchase properties without fully understanding the investment risks due to insufficient explanation by sales staff, lawsuits and other issues may arise, damaging trust in the Company group. In addition, if a customer's real estate investment income and expenses deteriorate due to worsening occupancy rates, falling rent levels, rising interest rates, or other factors, this will reduce purchase intent. The Company addresses this by providing consistent services from leasing management to building management and thoroughly educating sales staff.

The Company group is subject to numerous legal regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, and the Act on Advancement of Proper Condominium Management, and business activities may be constrained by legal violations or the revision, abolition, or introduction of new regulations. The Company holds licenses and registrations including a real estate transaction business license, condominium management business registration, and rental housing management business registration, and receiving a business suspension or license revocation would significantly hinder business activities. At present, no grounds for license revocation have occurred.

In the real estate sales and leasing management business, the Company group holds large amounts of confidential and personal information of customers and business partners, and information leakage due to cyberattacks, unauthorized access, computer virus intrusion, or other causes could result in damage claims and loss of trust. The Company addresses this through obtaining ISMS certification, awareness-raising activities via internal training, and continuous improvement of database access environments and security systems, but risk continues due to the increasing sophistication of cyber threats.

Founder and Representative Director and President Akihiro Sakae plays an important role in determining management policy, management strategy, fund procurement, and real estate transaction policy, and business performance and financial position could be affected if he becomes unable to perform his duties. In addition, he is a major shareholder who effectively holds 71.1% of issued shares, and a decrease in his shareholding could affect the market price of shares and the exercise of voting rights. The Company is promoting information sharing and delegation of authority to officers and senior staff, but resolving this dependence will take time.

If all stock acquisition rights granted as incentives to officers, employees, and others are exercised, 212,000 new shares will be issued in addition to the 11,968,400 shares currently outstanding, potentially diluting the share value and voting rights ratio of existing shareholders. The dilution rate corresponds to approximately 1.77%, which could exert downward pressure on the share price.