Showcase Inc.

Operating cash flow was negative for four consecutive fiscal years from FY2022 (ended December 2022) through the current consolidated fiscal year, giving rise to material events casting significant doubt on the going concern assumption. In the current consolidated fiscal year, operating income improved significantly to ¥126,570 thousand (versus an operating loss of ¥165,842 thousand in the previous fiscal year) and operating cash flow improved to negative ¥13,560 thousand (from negative ¥672,970 thousand in the previous fiscal year). The Company secured liquidity through a third-party allotment capital increase of ¥677,418 thousand and partial transfer of ReYuu shares of ¥1,267,000 thousand, and as a result has determined that the material uncertainty has been resolved. However, operating cash flow remains negative, and continued improvement of the financial base is required.

The Group's business growth premise is based on the expansion of the internet-related market; however, new regulations, technological innovation, intensifying competition from new entrants, and intellectual property infringement, among other factors, could make market expansion difficult. If these risks materialize, they could lead to a decline in profitability and adversely affect operating results and financial condition. The Company strives to mitigate these risks by accumulating in-house know-how and strengthening its service technology development capabilities.

Technological innovation is progressing at an extremely rapid pace in the IT and internet-related industries, and industry standards and user needs are changing rapidly. A delayed response could result in a decline in technological superiority and service competitiveness, potentially affecting business performance. The Company addresses this by accumulating knowledge and know-how in cutting-edge technologies, hiring excellent engineers, making continuous system investments, and improving the capabilities of its engineers.

In addition to existing laws such as the Telecommunications Business Act and the Personal Information Protection Act, the enactment of new laws targeting internet-related businesses or changes in the interpretation of existing laws could restrict business operations. In the event of violations or non-compliance, dispositions or guidance from regulatory authorities, loss of social credibility, or claims for damages could occur, potentially affecting operating results and financial condition. The Company strives to mitigate these risks through the acquisition and renewal of Privacy Mark, ISO27001, and ISO27017 certifications, as well as the establishment and operation of a compliance system.

In providing its services, the Company handles personal information and confidential information of client companies. If information were to leak outside the Company due to unauthorized external access, human error, or unforeseen circumstances, it could result in loss of social credibility or claims for damages, potentially affecting operating results and financial condition. The Company has implemented measures such as obtaining ISO27001, ISO27017, and SOC2 Type2 reports, thorough access rights management, training and obtaining pledges from officers and employees, and management and supervision of outsourcing partners.

If a communications network outage occurs due to a natural disaster or accident, or if servers go down due to a sudden surge in access, service provision could become impossible, potentially leading to a decline in sales, increased system costs, and reduced reliability. The Company strives to prevent system troubles in advance by placing servers on cloud services, performing regular backups, continuously monitoring operational status, and conducting vulnerability assessments.

Management, including Representative Director and President Koichi Matsumoto, possesses the skills necessary for business operations. If, for any reason, management becomes unable to operate the business, it could affect operating results and financial condition. The Company has a policy of promoting personnel appropriate to the business environment and growth strategy, but specific details of successor development measures have not been disclosed.

Securing and developing excellent personnel in the sales, development, and administrative departments is a premise for business expansion. If recruitment, training, or the establishment of management systems does not proceed as planned, it could result in delays in business expansion and increased recruitment costs. The Company strives to mitigate these risks by focusing on active recruitment activities and building an internal education system.

The occurrence of natural disasters such as major earthquakes, fires, or unknown infectious diseases could cause facility damage, power supply restrictions, and changes in economic activity behavior, potentially affecting business continuity, operating results, and financial condition. The Company has established a disaster response flow based on its BCP, implemented a non-face-to-face sales system, and taken productivity improvement measures utilizing digital marketing.

As part of surplus fund management, the Company has extended a loan of ¥1,000,000 thousand to its parent company, AI Fusion Capital Group Co., Ltd. If recovery becomes difficult due to deterioration in the parent company's financial condition or other reasons, it could affect the Group's liquidity and financial condition. Cash and deposits at the end of the current consolidated fiscal year stood at ¥727,674 thousand, a level below the loan amount, making continuous verification of the transparency of intra-group transactions and the recoverability of the loan important.