AZOOM CO.,LTD

If the Parking Lot Act, Road Traffic Act, Garage Act, Building Lots and Buildings Transaction Business Act, or other related laws are amended, or if legal amendments leading to restrictions on automobile use in urban areas are implemented, demand for the Monthly Parking Referral and Sublease Services may decline, potentially affecting business performance. In addition, in the Visualization Business, discussions on legal frameworks concerning copyright, portrait rights, and other matters are becoming more active, and legal amendments may affect business operations. As a countermeasure, the Group seeks to reduce this risk by establishing a legal affairs function and receiving timely advice from retained legal counsel.

In the Idle Asset Utilization Business, litigation may arise from damage or accidents involving mechanical parking equipment, while in the Visualization Business, litigation related to intellectual property rights such as copyright and portrait rights may occur. If significant litigation is brought, it could damage the Group's credibility and result in damages payments, potentially affecting business performance and operations. No litigation has occurred to date, but a system for early response involving the legal affairs function and retained legal counsel has been established.

If parking demand declines sharply due to external factors such as a sudden decrease in the number of vehicles owned domestically caused by a rapid rise in gasoline prices, this could directly affect the performance of the Idle Asset Utilization Business. In addition, if managed properties are damaged or closed due to natural disasters or other causes, business operations could also be disrupted. As a countermeasure, the Group geographically diversifies this risk through the establishment of branch offices and staff deployment in major cities.

In the Monthly Parking Referral Service and Sublease Service, new entrants by well-capitalized companies and an increase in competitors may result in price competition over referral fees and rental rates, as well as increased user acquisition costs. This could lower profitability and affect business performance. As a countermeasure, a dedicated web marketing staff member regularly monitors competitor trends to enhance competitiveness.

Under the Monthly Parking Sublease Service, the Group continues to bear the obligation to pay fixed rent to parking lot owners, while if the number of subleased spaces falls short of plan or cancellations of existing contracts increase, losses may arise due to the gap between declining revenue and fixed cost payments. Although not a contractual obligation, the Group's policy of avoiding cancellation of lease agreements wherever possible creates a structure that heightens this risk. As a countermeasure, the Group monitors the number of master lease spaces, the number of sublease spaces, and occupancy rates on a monthly basis as key performance management indicators.

The Group receives deposits equivalent to one to two months' rent from users of subleased parking spaces at the time of contract conclusion; however, since these deposits are not subject to protective measures, a mass occurrence of cancellations at one time could affect cash flow and financial position. As a countermeasure, the Group manages this liquidity risk through the timely preparation and updating of cash flow plans and the maintenance of on-hand liquidity.

Traffic to the portal site "CarParking" is largely driven by search engines such as Google, and if changes in ranking policies by search engine operators cause the Company's site to no longer appear prominently in search results, this could reduce customer acquisition and affect business performance. A decline in the number of users would also directly translate into a decrease in the number of parking referrals and sublease contracts. As a countermeasure, the Group continuously monitors search results and user inflow, enabling timely responses to policy changes.

The Monthly Parking Referral Service relies on internet communication networks, and if communication is disrupted due to natural disasters or accidents, or if server downtime occurs due to a sudden surge in access, service provision could be halted, potentially affecting business performance. Although such an event has not occurred within the Group to date, the risk remains latent. As a countermeasure, the Group reduces this risk by expanding server capacity as needed and performing regular backups of critical data.

Each business handles a large amount of confidential information, including personal information, and if an information leak occurs due to an unforeseen incident, it could damage the Group's credibility and result in damages litigation, affecting business performance and operations. As a countermeasure, the Group has established an information security policy and personal information protection regulations, set up an information security committee, and conducts internal training, in addition to having obtained Privacy Mark certification in January 2017 and ISO/IEC 27001:2022 and JIS Q 27001:2023 certification in December 2023.

Real estate for sale is valued using the write-down method based on declines in profitability, and if the assumptions used to estimate net realizable value are changed due to shifts in economic conditions, interest rate trends, land price trends, or other factors, this could materially affect the carrying amount of real estate for sale in the consolidated financial statements for the following fiscal year. In addition, for unlisted subsidiary shares without a market value, if the substantive value declines significantly due to deterioration in financial position or other factors, an impairment charge may be required, potentially affecting the non-consolidated financial results. As a countermeasure, the Group strives for early risk identification through regular monitoring of business performance and close attention to trends in the real estate sales market.