LaKeel, Inc.

The software industry has high growth expectations, and intensifying competition from new entrants both domestically and internationally is anticipated. If sufficient differentiation is not achieved, this could have a certain impact on business performance. The Company aims to secure technological superiority through the functionality, implementation track record, and know-how of its main products, and to establish its market position by accumulating a lead in implementation experience.

In the course of its operations, the Company has opportunities to receive personal and confidential information from customers, and if leakage, falsification, or unauthorized use occurs, this could significantly impact business performance through customer claims for damages or loss of trust. As countermeasures, the Company has established information security regulations, implemented system measures to prevent unauthorized access and virus intrusion, provides continuous training to employees and partners, and operates a personal information management system certified with the Privacy Mark.

If cloud services are suspended or delayed due to natural disasters such as earthquakes, power outages, communication failures, cracking, computer viruses, human error, etc., this could significantly impact operating results and financial condition through loss of trust and missed business opportunities. The Company has established a system operation management framework and implements monitoring of operational status, backups, and unauthorized access prevention measures to prevent failures and minimize their impact.

In the software industry, technological innovation and changes in customer needs occur extremely rapidly, and a delayed response could lead to reduced competitiveness of services, significantly impacting business performance. The Company continuously analyzes the latest technology and market trends and engages in research and development of new technologies and products to maintain and enhance its competitiveness.

For the Company, which handles everything from the development to the sales and operation of software and cloud services, securing and developing experienced personnel is an important issue, and if this does not proceed as planned, it could have a certain impact on business development and performance. The Company plans to strengthen new graduate and mid-career hiring in addition to working to improve employee job satisfaction through enhanced educational systems, revision of personnel evaluation systems, and improvement of the working environment.

The Company recorded goodwill in connection with the acquisitions of former Legend Applications Co., Ltd. (balance of ¥274,859 thousand at the end of FY2025 (ending December 2025)) and Maverick Co., Ltd. (balance of ¥57,812 thousand for the same period), and if future profitability declines, this could have a certain impact on business performance through the recognition of impairment losses. The Company judges that the relevant goodwill appropriately reflects future earning power, and recognizes that the likelihood of this risk materializing in the near term is low.

In its overseas business, centered on Asia and including the Chinese subsidiary acquired in September 2005, if there are changes in laws and regulations, deterioration of the political situation, occurrence of natural disasters or epidemics, or sharp fluctuations in exchange rates or foreign exchange restrictions, this could have a certain impact on business development and performance. The Company has established a risk management system that enables rapid information gathering and appropriate response, working to mitigate such risks.

The Company's business is premised on providing services offered by cloud vendors to customers via the internet, and if a system failure occurs at a cloud vendor itself due to a natural disaster or accident, this could have a certain impact on operating results and financial condition. The Company has established a system for continuous monitoring of services and built a framework capable of promptly implementing countermeasures and recovery when a failure occurs or signs of a failure are detected.

In fundraising through borrowings from financial institutions, some contracts include financial covenants, and if these covenants are breached, lump-sum repayment would be required, which could have a certain impact on financial condition and business performance. The Company recognizes that the likelihood of this risk materializing in the near term is low, but maintaining stable financial management is a prerequisite.

The number of shares underlying the stock acquisition rights granted to officers and employees for the purpose of enhancing motivation to improve business performance is 210,000 shares, representing a potential dilution ratio of 2.7% relative to the total number of issued shares of 7,672,500 shares. If the exercise of these rights progresses, it could affect share price formation through dilution of share value, and it is recognized that this could materialize over the medium to long term.