THE WHY HOW DO COMPANY,Inc.

The Group conducts its business operations on the premise of internet use, and if unauthorized external access or network failures occur, service interruptions or suspensions and leakage of customer information may result. Should a security incident such as an information leak occur, this could lead to a decline in social credibility, claims for damages, and other consequences that would have a material impact on business results and financial condition. The Group has implemented measures against unauthorized access, such as system redundancy and the gathering of the latest information, but it is difficult to completely eliminate this risk.

The Group holds personal information of registered members through its operation of internet sites for smartphones, and if such personal information leaks externally due to unauthorized external access or other causes, this could lead to claims for damages, a decline in credibility, and other consequences that may affect business results and financial condition. The Group strives to prevent such incidents by establishing and disseminating internal regulations on the protection and management of personal information, and by thoroughly implementing employee training, security enhancements, and operational management, but unforeseen incidents cannot be completely prevented.

The Group has positioned M&A as a core pillar of its growth strategy, actively pursuing business expansion, including the acquisition of Dream Planet, Inc. and Sunrise Japan Co., Ltd. during the current consolidated fiscal year, and the making of Still Un Co., Ltd. a subsidiary in September 2025. However, if the progress or expansion of new businesses does not proceed as originally planned, or if additional expenditures such as upfront investments arise, profit margins may decline, potentially affecting business results and financial condition. There is also a risk that impairment losses may need to be recognized on fixed assets such as goodwill if their profitability declines.

The Group has recorded operating losses in almost every fiscal year since FY2009 (ending August 2009), and in the previous consolidated fiscal year recorded an operating loss of ¥247 million and a net loss attributable to owners of the parent of ¥961 million, giving rise to material doubt about the going concern assumption. In the current consolidated fiscal year, the Group recorded an operating loss of ¥72 million, but improvements are progressing, including a 134.3% increase in net sales due to M&A and cash and deposits of ¥1,246 million (up 109.3% from the end of the previous fiscal year); the Company has determined that the material uncertainty has been resolved. However, the Company has not yet fully escaped its loss-making structure, and continued monitoring of its financial condition remains necessary.

In June 2024, the Securities and Exchange Surveillance Commission recommended an order to submit a corrected report relating to the Company's 15th-term annual securities report from approximately six years earlier, and on October 1, 2025, the Company received a decision ordering payment of an administrative monetary penalty. The Company has filed a lawsuit seeking revocation of the order, as it does not accept the order, and recorded a provision for the administrative monetary penalty of ¥44 million as an extraordinary loss in the previous consolidated fiscal year. Depending on the outcome of future litigation, additional litigation costs and other factors could affect the Company's business results and financial condition.

As the Group expands its business through M&A, securing and developing personnel knowledgeable in new fields and personnel for group management is essential; if the Group is unable to acquire personnel or develop them internally as planned, this could affect business results and financial condition. In addition, the Solutions Business utilizes outsourcing to supplement internal staffing and reduce development costs, and a similar risk arises if the Group is unable to stably secure excellent outsourcing partners. The Group is addressing this through recruitment activities utilizing industry personnel networks.

The Group records manufacturing costs related to software development in the Solutions Business as software assets, and its policy is to promptly expense such assets when it is determined that sales targets are unlikely to be achieved. The Group conducts periodic internal evaluations of the likelihood of achieving sales targets, but if the asset value is lost due to a sudden change in the market environment or other factors, a one-time expense recognition may occur, which could have a material impact on business results and financial condition.

The 12th Series Stock Acquisition Rights (37,000 units outstanding as of October 31, 2025) and the 15th Series Stock Acquisition Rights (22,600 units outstanding as of the same date) remain outstanding, and if exercised, per-share value would be diluted, potentially adversely affecting the share price. In particular, the 15th Series Stock Acquisition Rights were issued on favorable terms at an exercise price significantly below the share price at the time of issuance, resulting in a larger dilutive impact. Additionally, since the exercise of stock acquisition rights depends on the judgment of the rights holders, this may also make it difficult to raise funds in line with the Company's funding needs.

The Group's Solutions Business primarily offers services and solutions for mobile devices such as smartphones, but changes in the market environment could lead to the entry of new competitors, potentially resulting in a decline in competitive advantage or price competition. Entertainment services for end users are characterized by sales that are significantly influenced by changes in individual preferences and trends. If costs for competitive countermeasures increase or customer attrition occurs, this could affect business results and financial condition.

Interplan Co., Ltd. earns most of its revenue from subsidies under the Ministry of Health, Labour and Welfare's job seeker support program, and revisions to the program or revocation of authorization due to a significant decline in employment rates could affect the continuity of its business. Dream Planet, Inc. operates a consignment-type business selling capsule toy vending machines, and changes in contracts with, or closures of, installation sites, as well as changes in licensing terms, could affect sales and profit margins. Goodman Co., Ltd. conducts import sales based on exclusive distribution rights, and loss of distribution rights or sudden exchange rate fluctuations could affect its earnings.