Japan PropTech Co.,Ltd.

The end users of the Company's products and services are concentrated in the real estate industry, including real estate transaction businesses and property management businesses, such that changes in the economic trends of this industry and its level of system investment directly affect business performance. Changes in the regulatory environment for the real estate industry and shifts in the responses of companies within the industry could also affect the Company's financial position and results of operations. The structural vulnerability arising from the industry-specific business model, which does not benefit from diversification effects, remains a concern.

The property management support service "Chintai Kakumei" and its ancillary services accounted for a majority of net sales in the current consolidated fiscal year, resulting in a high degree of sales dependence on a specific product. If competitiveness of this product declines due to intensifying competition or technological innovation, the impact on business performance would be significant. The Company aims to optimize the sales mix by promoting growth in the brokerage solutions domain, but the dependent structure continues at present.

In the information services industry, the pace of technological innovation is rapid, and if new technologies and services become widespread faster than anticipated, the Company's products and services could become obsolete and lose competitiveness. Price reductions for products due to intensifying competition with rivals and enhancements to competitors' products could also affect the Company's financial position and results of operations. The development division is continuously working on improving existing products and conducting research and development, but the risk of failing to keep pace with technological change cannot be eliminated.

Through its business activities, the Company obtains highly confidential information, including customer transaction partner information and personal information. If information is leaked, lost, or misused due to unauthorized external access, system defects or failures, human error, or intentional acts by employees, this could result in a loss of trust and liability for damages. The Company has implemented measures such as obtaining ISMS (ISO27001) certification and establishing internal regulations including the "Information Security Management Regulations" and the "Basic Regulations for Personal Information Protection," but complete prevention is difficult. Given the nature of systems for the real estate industry, which handle large volumes of confidential customer information, the severity of this risk is high.

The Company's business activities, cloud services, and other service provisions rely heavily on the internet, and if a system failure occurs due to natural disasters, terrorism, communication infrastructure failures, computer viruses, hackers, or other causes, this could have an extremely significant impact on the business. It may be difficult to fully secure alternative sales and service delivery routes in the event of a system failure, which could lead to decreased sales and damage to customer trust. Dependence on a wide range of infrastructure, including outsourced systems, compounds this risk.

To achieve the medium-term vision of "creating an innovative platform in the real estate domain through technology," the Company is promoting the expansion of its customer base and an upsell/cross-sell strategy for paid services through the inter-broker property distribution services "ReaPro BB" and "ReaPro." However, if the customer base does not expand as expected or if the paid services fail to produce the anticipated effects, the medium-term management plan may not be achieved. Failure to achieve the plan would directly affect the Company's financial position and results of operations, and could also lead to a decline in market valuation.

Regarding software under development for the inter-broker property distribution services, if the release is delayed relative to the development plan, if development costs become substantial, or if the sales plan is significantly revised downward, the asset value of software in progress could be impaired, affecting business performance. If the outlook for recovering development investment deteriorates, impairment accounting would become necessary, entailing the risk of recognizing a temporary loss.

As part of its growth strategy, the Company actively engages in M&A and holds goodwill and shares in subsidiaries. If a subsidiary's business performance deteriorates, impairment of goodwill or devaluation of subsidiary shares may become necessary, affecting business performance. As the balance of goodwill held increases with more active M&A activity, the future risk of impairment also accumulates correspondingly.

Kenichi Yonezu, the Representative Director and Chairman, and NJC Co., Ltd., his asset management company, are major shareholders holding 68.73% of the Company's total issued shares. If, for some reason, Mr. Yonezu were to sell the Company's shares in the future, this could have a material impact on the market price and trading conditions of the Company's shares. In addition, because Mr. Yonezu holds more than a majority of voting rights, this structure gives him substantial influence over resolutions on important matters at general shareholders' meetings.

Securing and developing excellent engineers and sales personnel (customer consultants) is essential for the continuous development of the business and for responding to rapid technological innovation. However, if it becomes difficult to recruit personnel or if existing personnel leave, this could hinder the smooth operation and expansion of the business. Increased costs associated with securing, retaining, and developing excellent personnel could also affect the Company's financial position and results of operations. Amid a market environment of continued tightness in the supply and demand for IT personnel, intensifying competition for recruitment remains an ongoing challenge.