B-Lot Company Limited

As of the end of December 2025, interest-bearing debt accounted for 75% of total assets, reflecting the Company's heavy reliance on financial institution borrowings to fund the Real Estate Investment & Development Business. A rise in interest rate levels would directly increase financial costs and affect business performance. In addition, if the Company is unable to sell properties within the contractual repayment period of its borrowings during a downturn in the real estate market and refinancing becomes difficult, there is a risk that its financial condition could deteriorate. The Company addresses this risk by diversifying its funding methods and maintaining relationships with multiple financial institutions.

The real estate and real estate finance industries are highly susceptible to economic conditions such as business trends, interest rate trends, and land price trends. If the real estate market deteriorates beyond expectations, an unexpected decline in the value of held assets may occur. A market downturn could foster industry-wide anxiety and prolong stagnation in real estate investment, potentially exerting a sustained impact on business performance. The Company seeks to mitigate this risk through its personnel with extensive experience and specialized knowledge, while continuously monitoring market trends.

The Group applies the "Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9), under which, if the net realizable value of inventory assets held at fiscal year-end falls below their acquisition cost, the difference is recorded as a valuation loss within cost of sales. If net realizable value declines due to deteriorating economic conditions or a downturn in the real estate market, or if inventory assets become long-term stock necessitating a reduction in expected selling prices, this could have a material impact on business performance and financial condition.

In Tokyo's 23 wards and surrounding areas, which are the Group's core markets, major domestic and foreign capital has continued to actively invest in these areas as promising investment destinations in recent years, and competition may intensify further. Intensifying competition could lead to higher property acquisition costs, lower selling prices, and reduced demand, creating a risk that makes it difficult for the Company to maintain its competitiveness. The Company seeks to differentiate itself through its specialized expertise combining the three businesses of real estate investment and development, consulting, and management.

Because the Real Estate Investment & Development Business adopts the delivery basis for revenue recognition, the timing of revenue recognition tends to concentrate around property delivery dates, causing significant quarter-to-quarter fluctuations in performance. In fact, in the fiscal year ended December 2024, approximately 79% of net sales were concentrated in the second and third quarters, while quarterly net income before income taxes and other adjustments for the fourth quarter was ¥(489) million, illustrating pronounced intra-year performance volatility. Since this concentration pattern does not necessarily repeat in the same way each fiscal year, it makes performance forecasting difficult for investors.

The Group is subject to a wide range of legal regulations, including the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the Financial Instruments and Exchange Act, and the Act on Specified Joint Real Estate Ventures, and holds key licenses such as its Real Estate Brokerage License (Minister of Land, Infrastructure, Transport and Tourism License (3) No. 8157, valid until June 21, 2026). If relevant laws and regulations are revised or abolished, new regulations are introduced, or licenses are revoked due to a failure to comply with laws and regulations, this could cause material disruption to business continuity. In addition, the real estate industry is highly susceptible to changes in the tax system, and tax reforms may affect business performance and financial condition.

While the Group's owned real estate is distributed across the area surrounding Tokyo's 23 wards, the Hokkaido region, the Chubu region, the Kansai region, and the Kyushu region, the occurrence of an earthquake, other disaster, or unforeseen accident could cause the loss, damage, or deterioration of owned real estate, resulting in a decline in asset value. If such events coincide with a deterioration in the regional economy, this could have a compounded impact on business performance, financial condition, and business development.

If a material defect or non-conformity with contract terms is found in a property sold by the Group, the Company, as the seller, may bear liability even where the direct cause lies with a third party. In addition to increased costs for remedial construction work, a decline in social credibility poses a risk of adversely affecting the Company's ability to attract customers and its business development.

The Group completes a wide range of operations in-house, from information gathering to business planning, development design, property acquisition, sales, and construction supervision, and securing and developing excellent personnel well-versed in the real estate industry is fundamental to its competitive advantage. If the Group is unable to secure and develop sufficient personnel in a timely manner, or if personnel attrition increases, this could disrupt business operations and affect business performance. The Company addresses this through enhanced recruiting activities and improved training programs.

The Group maintains a policy of actively entering new businesses for the purpose of diversifying revenue, but this may result in additional expenditures or a decline in profit margins. If a new business does not proceed as planned, recovery of invested capital may become difficult, creating a risk that could affect business performance and the overall business.