Space Market, Inc.

The medium-term management plan is formulated on the premise of steady growth in the space-sharing market; however, if the market does not expand as forecast, there is a possibility that the plan will not be achieved and that business development and operating results will be adversely affected. In response, the Company continuously monitors market trends and strives to build a system capable of flexible response.

There are already multiple existing competitors in the space-sharing field, and new entrants are also expected as the market expands. If competitors with superior business models or more competitive terms emerge, this could adversely affect the Company's financial position and operating results. The Company is working to maintain its competitive advantage by expanding its listed space lineup and enhancing proactive marketing and customer support.

The Company's services operate in an environment of rapid technological innovation, making continuous acquisition of advanced technology and know-how essential. Any delay in responding could lead to reduced competitiveness and deterioration in service quality. There is also a risk of increased additional expenditure, such as system investment and personnel costs, to accommodate new technologies. The Company works to mitigate this risk through engineer recruitment and training and through the development of its engineering environment.

If fraudulent activities such as violations of public order and morals, infringement of intellectual property rights, or fraud occur on the marketplace, this could lead to a decline in trust in the service and user attrition. Furthermore, if the Company is held responsible as a platform provider, this could damage its corporate image and affect its financial position. The Company is advancing measures such as specifying prohibited activities in the terms of service, expanding the responsible department, and developing a system for promptly addressing issues through system development.

In the event of illegal acts or disputes involving hosts or guests, third parties may bring litigation or damage claims against the Company even though the terms of service contain exemption provisions. A similar risk also exists in the transactional relationships with owners in the shared space operation support business of the subsidiary Space Mall. The Company seeks to reduce this risk through cooperation with retained legal counsel and outside experts.

The Group holds personal information of guests and hosts and is subject to the Act on the Protection of Personal Information. If personal information is leaked to or misused by outside parties for any reason, this could affect the Group's financial position and operating results, and could also damage its social credibility as a company. The Company addresses this through the development of a privacy policy and personal information protection regulations, thorough internal training, and the establishment of a management framework.

Daisuke Shigematsu, the founder and Representative Director and President, plays a critical role in determining and executing management policy and business strategy. If he becomes unable to continue leading operations, this could have a material impact on business development and operating results. The Company is promoting information sharing and delegation of authority through the Board of Directors and other bodies, and is working to establish a management structure that does not depend excessively on a specific individual.

Customer acquisition via external search engines plays an important role in attracting new customers. If changes to search algorithms render the Company's SEO measures ineffective, this could reduce its ability to attract customers and affect its financial position and operating results. The Company continuously monitors search results and user inflow figures, and maintains a system capable of responding promptly to changes in display policy.

The Company's smartphone app offerings depend on the platforms of Apple Inc. and Google Inc., and it has also adopted external providers' services, such as credit cards and deferred payment options, as payment methods. Changes in the circumstances, business strategies, or relationships of these providers with the Company could affect its business and results. The Company monitors developments at each provider and strives to build a system capable of flexible response.

The Group holds goodwill recorded through M&A transactions. If changes in the business environment or other factors make it impossible to achieve the originally anticipated earnings, the Group may need to recognize an impairment loss on goodwill. Recognition of an impairment loss would directly affect the Group's financial position and operating results. When there are indications of impairment, the Company's policy is to calculate the recoverable amount based on estimates of future cash flows.