Startline CO.,LTD.

The Company continues to borrow from financial institutions for new store openings, and the balance of interest-bearing debt has increased year by year, with dependence on such debt remaining at a high level. A future rise in market interest rates due to changes in monetary policy or other factors could increase interest expense, thereby affecting the financial condition, business results, and cash flows. In addition, if fundraising does not proceed as planned, it could also impede investment activities such as new store openings and new business development.

The Company has numerous business locations, primarily in urban areas, and if a large-scale disaster occurs, it could affect business performance. Although the Company has partially introduced remote operations in response to the COVID-19 pandemic, a full transition of all operations to remote work is not realistic given the business model, and physical damage to locations and impacts on employees and users cannot be completely avoided.

The Company holds a large volume of personal information, including customer information and sensitive information about persons with disabilities. If an information leak occurs due to unauthorized external intrusion or virus spread, it could have a serious impact on business operations, including loss of social trust, service cancellations, and slower acquisition of new customers. The Company has implemented measures such as establishing personal information protection regulations based on JIS Q 15001:2017, segmenting access privileges, and managing system IDs and passwords.

Some of the Company's borrowings from financial institutions are subject to covenants (financial restriction clauses), and if the conditions are violated, it could have a material impact on the financial condition, including an increase in borrowing interest rates or loss of the benefit of the grace period. The Company has taken measures such as reviewing investment plans and building relationships with supporting financial institutions, but the risk of violation increases during periods of deteriorating business performance.

The Company continues to open new locations to expand services such as BYSN, IBUKI, and INCLU, but if suitable properties cannot be secured, or if there are delays in procuring materials or increases in material costs for interior and exterior construction work, delays in store opening timing or cost increases may occur. A dedicated department has been assigned to select areas and properties, but the impact of external factors cannot be completely eliminated.

The Company holds fixed assets at numerous locations, and if impairment accounting becomes necessary due to a decline in asset value or other factors, it could affect the financial condition, business results, and cash flows. The Company has established a system to regularly monitor profitability by location and take early countermeasures, but the risk of underperforming locations arising continues to exist.

The statutory employment rate stipulated by the Act on Employment Promotion, etc. of Persons with Disabilities has been decided to be raised to 2.7% in July 2026, which is a factor expanding business opportunities for the Company's core services BYSN, IBUKI, and INCLU. On the other hand, if the statutory employment rate system itself is revised, it could lead to cancellations by existing customers and could have a material impact on business performance. The Company continues to liaise and confirm matters with administrative authorities while responding by promoting the establishment of disability employment that does not depend on the statutory employment rate.

In the Disability Employment Support Services Business and the disability welfare business, securing and training support staff who directly assist persons with disabilities is fundamental to business growth. If recruitment and training do not proceed as planned, it could lead to delays in new store openings or a decline in the quality of support. The Company utilizes various recruitment media, staffing agencies, and recruitment events, and has established tiered specialized training programs to address this, but there is a risk that sufficient effect may not be achieved due to intensifying competition in the labor market.

If the development of internal management systems fails to keep pace with the rapid expansion of business and personnel, appropriate business management may become difficult, potentially affecting business performance. The Company recognizes that the effective functioning of corporate governance is essential to the sustained increase in corporate value and is working to strengthen its systems, but there is a risk that the response could lag behind depending on the speed of growth.

The Company's business is based on collaboration with persons with disabilities, employer companies, government agencies, welfare facilities, and others. If a scandal or legal violation by another company in the same industry invites social criticism of the industry as a whole, it could affect the Company's business performance and financial condition. The Company seeks to reduce this risk by establishing and joining an industry association (Japan Association for Promotion of Disability Employment Businesses) and working toward the sound growth of the industry.