SuRaLa Net Co.,Ltd.

As of the date of submission of this document, the market capitalization of the Company's shares is below ¥4.0 billion, the listing maintenance criterion for the Tokyo Stock Exchange Growth Market. If the criterion is not met as of the end of December 2027, the criteria determination date, the Company will move into an improvement period, and if it fails to meet the criterion within that period, delisting may result. If delisting occurs, it could have a material impact on investors due to reduced liquidity of the shares, among other effects.

The rapid advancement of generative AI technologies, including ChatGPT, may significantly change the competitive environment in the EdTech market. If new regulations are introduced or unexpected technological innovations occur, the Group's competitive advantage may be undermined, potentially affecting its business and results of operations. The Company has established a system to respond flexibly through rapid adaptation to changes in market conditions and needs, as well as strategic technology investment.

The Group's business performance depends on the expansion of the number of schools adopting its services and the number of active IDs. If the acquisition of new schools falls short of plans, or if cancellations by existing customers increase, there will be a direct impact on business performance. Cancellations by large corporate customers switching to competitors are particularly damaging to performance. Amid the declining school-age population due to the falling birthrate, intensifying competition among industry peers to secure students is also a factor increasing cancellation risk.

The long-term decline in the birthrate is reducing the school-age population, intensifying competition to secure students across the education industry as a whole. If the birthrate continues to decline rapidly and the overall education market shrinks significantly, it could affect the Group's business and results of operations. The Company seeks to differentiate itself by providing "genuine academic ability that remains useful into adulthood" and by supporting the management of cram schools, but it is difficult to completely avoid the impact of a shrinking market.

The Group continues to develop new services and expand functionality for medium- to long-term growth, and expenditures such as development costs and personnel costs tend to precede revenue. If market changes or other factors necessitate additional development significantly exceeding initial expectations, or if it is determined that returns commensurate with the investment cannot be obtained, an increase in depreciation expenses or recognition of impairment losses may occur, potentially affecting business performance. This risk will continue to exist going forward as software assets increase.

The Group holds personal information of students, business partners, employees, shareholders, and others. If an information leak occurs, it could severely damage social credibility and materially affect the Group's business and results of operations. As countermeasures, in addition to establishing internal regulations and providing employee training, the Company obtained ISMS (JIS Q 27001) certification in February 2021 to strengthen its management system. However, the risk of leakage due to unauthorized access, computer viruses, or other causes cannot be completely eliminated.

Takahiko Yunokawa, the founder and Representative Director, possesses extensive experience and knowledge related to launching new EdTech businesses and supporting customer management, and plays an extremely important role in determining management policy and business strategy. If, for any reason, he becomes unable to continue his duties, it could affect the Group's business and results of operations. The Company is working to reduce this dependence through information sharing at board meetings and strengthening its management organization, but dependence on him remains high at this time.

In the EdTech industry, new technologies and new services are being introduced one after another, and a delayed response could reduce competitiveness. Responding to technological innovation entails additional system investment and increased personnel costs, among other expenditures, which could put pressure on business performance. The Company is focused on recruiting and training development staff and acquiring cutting-edge technology, knowledge, and know-how, but there is also a risk of difficulty in acquiring such knowledge.

The Group's services are provided through information systems and communication networks. If a system failure occurs due to power supply shortages, disasters, unauthorized access, software defects, or other causes, services may be suspended, potentially affecting business performance. As countermeasures, the Company has established thorough prior testing, daily backups, maintenance outsourcing to external specialist companies, and a failure notification system. However, the risk of failure due to external factors cannot be completely eliminated.

The Group regards M&A as an effective means of business expansion and intends to continue implementing it as necessary in the future. While due diligence is conducted to reduce risk, if unforeseen events occur after the execution of an M&A transaction that were not anticipated during the investigation stage, or if business development does not proceed as planned and impairment of goodwill or other assets occurs, this could affect the Group's financial position and results of operations. As of the date of submission of this document, there are no specific transactions currently planned.