Living Technologies Inc.

The Group provides internet services specialized in the real estate and housing industry as its DX Platform Business, and there is a risk that if real estate transactions stagnate due to an economic downturn, a significant rise in interest rates, or changes in housing tax systems, advertising placements across the industry as a whole could decrease significantly. Because the business domain is concentrated in the real estate and housing industry, a deterioration in market conditions in that industry could directly affect the Group's financial position and operating results. No particular diversification measures have been disclosed at this time.

In the service areas where the housing vertical media 'Living Match' operates, other companies also conduct business, and there is a possibility that a decline in profitability or an increase in advertising expenses due to intensifying competition could affect the Group's financial position and operating results. The Group bases its competitive advantage on differentiation through new service development and branding, as well as entry barriers created by substantial advertising expenditure; however, there is a risk that this advantage could be undermined by the entry of competitors backed by major capital.

Advertising expenses related to 'Living Match' account for a very high proportion of consolidated operating revenue and are positioned as important investments for customer acquisition and revenue expansion. If advertising expenses fluctuate significantly due to changes in listing criteria of various advertising media, fluctuations in search engine display results, changes in advertising methods, etc., and cost-effectiveness deteriorates, this could result in a decrease in the number of customers acquired or in operating revenue, or in additional advertising expenditure, potentially affecting the Group's financial position and operating results. Although the Group strives to analyze and optimize cost-effectiveness, the risk of fluctuation due to external factors cannot be eliminated.

The Group's services are based on internet-related technologies, and in the internet industry where the pace of technological innovation is extremely rapid, if the Group becomes unable to respond to the latest technologies, its services could become obsolete, potentially affecting its financial position and operating results. Although the Group focuses on rapidly responding to the latest technologies and on accumulating and analyzing information, there is a risk that it may fail to keep pace due to the rapid evolution of AI, generative technologies, and the like.

The Group handles large amounts of personal information relating to end users of its sites, and in the event of an information leak, this could result in a loss of social trust and the incurrence of substantial expenses, potentially affecting the Group's financial position and operating results. The Group strives to maintain its protection framework through obtaining and renewing Privacy Mark certification, developing internal rules and operational manuals, and thoroughly educating employees, but it is difficult to completely eliminate risks such as cyberattacks or internal misconduct.

The Group's business is conducted over the internet environment, and if a system failure exceeding expected limits occurs due to a sudden surge in access volume, human error, computer viruses, cyberattacks by third parties, natural disasters, or other causes, business activities could be disrupted, potentially affecting the Group's financial position and operating results. Although appropriate security measures have been implemented, complete protection against increasingly sophisticated and diversified threats cannot be guaranteed.

The Group's internet services are subject to legal regulations such as the Act on the Prohibition of Unauthorized Computer Access, the Act on Regulation of Transmission of Specified Electronic Mail, and the Telecommunications Business Act, among others. If new laws are enacted or the interpretation of existing laws changes, the Group's business could be restricted or new compliance costs could arise. Although the Group addresses this through establishing and strengthening compliance frameworks, employee training, and regular exchanges of information with retained legal counsel, it is difficult to completely predict or control changes in the regulatory environment.

The Group outsources advertisement placement to numerous advertising media and ad networks, and if an advertising medium continues to run advertisements that violate public order and morals against the Group's intentions, there is a risk that the Group's services or accounts could be removed by major advertising media such as Google LLC or LINE Yahoo Corporation. The Group conducts screening at the start of transactions, sets internal advertisement listing standards, performs regular monitoring patrols, and manages violations through warnings or contract termination, but it is difficult to completely control the actions of outsourced partners.

President and Representative Director Daimu Kawai, as the founder, plays an extremely important role in determining and executing management policy and business strategy, and if he becomes unable to carry out his duties, this could affect the Group's financial position and operating results. The Group is working to reduce this dependence through information sharing via the Board of Directors and regular management meetings and through strengthening its management organization, but a high degree of dependence on him continues at present.

The Group is a small-scale organization, and if the development of internal control systems fails to keep pace with rapid business expansion, or if the Group is unable to secure and retain excellent personnel as planned, appropriate business operations could become difficult, potentially affecting the Group's financial position and operating results. The Group is working to secure, develop, and improve retention rates of personnel through active recruitment activities, in-house training, improvements to personnel systems, and expansion of employee benefits, but securing personnel as planned is not guaranteed amid intensifying competition in the labor market.