User Local. Inc.

If personal information or clients' confidential business strategy information collected through big data analysis were to leak, this could undermine the fundamental trust in the Company's business and materially affect its financial position and operating results. The Company strives to avoid information leakage risk by implementing technical measures such as encryption and access restrictions.

As the Company's business infrastructure depends on internet communication networks, if a large-scale system failure occurs due to computer virus infection, unauthorized intrusion, cyber attack, natural disaster, or other causes, and restoration is delayed, this could materially affect the Company's financial position and operating results. The Company implements preventive measures such as establishing server management and monitoring systems through external vendors, backups, and system redundancy.

Changes in policy by operators of internet services such as SNS, or tightening of legal regulations related to data acquisition, may restrict automated collection of big data or make it subject to fees. If data currently obtainable becomes unavailable, this could lead to a decline in service quality and the incurrence of additional costs, potentially affecting the Company's financial position and operating results. The Company strives to secure multiple data acquisition channels through diverse resources and methods.

Because services are provided in a SaaS format, cancellation is easy, and if the Company's services fail to continuously meet customer needs or if competitors offer superior services, customer attrition may occur, potentially affecting the Company's financial position and operating results. The big data analysis business is a relatively new field, and as the use of such services becomes more widespread, demand for enhanced added value is expected to increase. The Company is continuously working to pursue usability and to examine and develop new technologies.

In technologies related to big data analysis, including the use of machine learning and AI, if the Company is delayed for any reason in responding to new technologies or new services, its competitiveness relative to competitors could decline, potentially affecting operating results. The Company is proactively working on the examination and development of new technologies, aiming to maintain its position as a pioneer in the industry.

The Company's business is premised on the accumulation of big data and continuous learning through AI. If customer attrition occurs, sufficient and up-to-date data accumulation may cease, leading to a decline in the added value of services and potentially affecting the Company's financial position and operating results. Since increasing the volume of data analysis through customer expansion is the source of business growth, maintaining and expanding the customer base is an important premise for business continuity.

It is difficult to fully grasp the intellectual property rights held by third parties, and if the Company unknowingly infringes on another company's patent, it could be subject to damages claims or injunctions. Additionally, because the Company's policy is not to file patent applications for its core service technologies in order to maintain confidentiality, technology leakage through means such as poaching of personnel may occur without the Company's awareness, creating a risk that competitors could develop similar services. The Company addresses this by having all officers and employees sign confidentiality agreements and by periodically monitoring competitors' services.

Due to the high mobility of personnel in internet-related businesses, it may become difficult to flexibly secure the engineers, sales staff, and management personnel necessary for business expansion, or to retain existing personnel. If personnel development and recruitment do not proceed as planned, this could become a constraint on business expansion, potentially affecting the Company's growth strategy and, in turn, its financial position and operating results. The Company addresses this by establishing personnel development programs and setting sufficient incentive plans.

The Company's policy is to continuously develop new services in existing and new fields utilizing big data analysis and AI technology; however, each new business is currently at the conceptual stage, and there is a possibility that it will not materialize or that the Company will withdraw due to failure to generate sufficient revenue. If a new business fails, only costs would be recorded, potentially affecting the Company's financial position and operating results. The Company's policy is to begin development only after conducting sufficient prior verification.

Since the Company's services are utilized by customers as marketing analysis tools or operational support tools, in periods of economic downturn, cost reductions resulting from deterioration in customers' business performance could lead to a decrease in the number of users. Such a situation could materially affect the Company's financial position and operating results, and the Company strives to mitigate this impact while closely monitoring trends in the business environment.