CREEMA LTD.

There is a risk that attacks by hackers or other malicious third parties could result in unauthorized acquisition of customer information or data tampering. Although the Group has implemented measures such as network monitoring systems and encryption, the possibility of system outages due to unpredictable factors cannot be ruled out. Should such an event occur, it could affect the Group's business, results of operations, and financial condition through legal liability claims and damage to corporate image.

In operating its online marketplace, the Group holds large volumes of personal information belonging to members and others, giving rise to risks of unauthorized external access or information leakage due to intentional acts or negligence. Although measures such as access control settings, strict management at external data centers, and internal training have been implemented, unforeseen events cannot be completely eliminated. If personal information were to be leaked externally, it could have a material impact on the Group's business, results of operations, financial condition, and corporate credibility.

The stable operation of Creema, the Group's core online marketplace service, is fundamental to business continuity, and there is a risk of system downtime due to overload, software defects, unauthorized external access, natural disasters, power outages, and other causes. Although the Group is focused on system enhancements and security measures, it is difficult to completely eliminate these risks. If a system outage were to occur, it could directly affect the Group's business, results of operations, and financial condition through the interruption of service provision.

In providing its smartphone applications, the Group's business depends significantly on the platforms of Apple Inc. and Google LLC, and changes in the trends or business strategies of these companies would directly affect the Group's business. The Group also depends on external payment service providers for credit card and convenience store payments, as well as delivery companies such as Yamato Transport and Japan Post, and risks may materialize if these parties change their transaction terms or business policies. Should these external dependency relationships change, it could affect the Group's business, results of operations, and financial condition.

The Group is subject to a wide range of laws and regulations, including the Payment Services Act, the Act against Unjustifiable Premiums and Misleading Representations, the Consumer Contract Act, the Act on Specified Commercial Transactions, the Act on the Protection of Personal Information, and the Telecommunications Business Act, and there is a risk that its business could come into conflict with laws due to legal amendments, new legislation, or changes in the interpretations of regulatory authorities. Although the Group is working to build and strengthen its compliance framework through consultations with outside legal counsel and other experts, collection of information on legal amendments, and employee training, it may be difficult to respond to unforeseen regulatory changes. If the Group's business were to conflict with applicable laws, it could have a material impact on the Group's business, results of operations, and financial condition.

There is a risk that the competitive advantage of the Group's existing business model could be undermined by the rapid pace of technological innovation in the internet industry, the emergence of new entrants, and changes in customer needs. The Group's growth depends on its ability to respond quickly and flexibly to such changes in the operating environment and on its technological development capabilities. If the Group is slow to respond to such changes and fails to capture consumer needs, it could affect its business, results of operations, and financial condition.

In pursuing new services and new businesses aimed at further business expansion and non-continuous growth, additional investments in personnel, system development, fixed assets, advertising expenses, and other areas may be required. If the pace of market expansion or the scale of growth falls short of initial expectations, the Group may be forced to suspend or withdraw from a business, resulting in losses from the disposal or impairment of business assets. Should these risks materialize, they could affect the Group's results of operations and financial condition.

While securing and developing talented personnel is recognized as an important challenge for sustained growth, there is a risk that the Group may find it difficult to secure personnel as planned amid intense competition in the IT industry. As the Group's organizational structure is small in scale, a shortage of personnel would directly affect its ability to drive business forward. If the Group is unable to secure the personnel it seeks as planned, it could affect its business and results of operations.

At the end of the current consolidated fiscal year, the number of potential shares arising from stock acquisition rights was 304,000 shares, equivalent to 4.5% of the total number of issued shares of 6,740,100 shares. If the share price exceeds the exercise price and the exercise conditions are met, the exercise of these stock acquisition rights could dilute the value per share. In addition, the sale of 599,200 shares (8.9% of the total number of issued shares) held by venture capital firms and others could temporarily disrupt the supply-demand balance of the Company's shares and affect share price formation.

There is a risk that natural disasters such as major earthquakes or typhoons, as well as accidents or fires, could cause unforeseen events such as the suspension of system development and operation, damage to facilities, and disruption of delivery networks. In addition, a resurgence or prolongation of infectious diseases such as COVID-19 could lead to continued restraint in holding events, stagnation in new sales activities, and a decline in domestic consumption. Should these risks materialize, they could affect the Group's results of operations and future business development.