TO Books, Inc.

Since multiple creators, including authors and manga artists, are involved in the Company's content production, and multiple rights relationships exist for a single piece of content, the occurrence of disputes could lead to litigation risk and reputational damage. At present, no litigation with a material impact on the business has been filed, but even in cases that do not escalate into disputes, the brand value of the Company and its IP could be affected. In response, the Company aims to build good relationships with creators through initiatives to maximize IP value via TV anime adaptations, films, stage plays, etc.

The founders, Representative Director Takeichi Honda and Senior Managing Director Yui Shibata, play central roles in driving the business, from formulating management policies and business strategies to maintaining relationships with business partners and networks, resulting in a high degree of dependence on both individuals. If, for any reason, either of them becomes unable to continue performing their duties, this could affect the Company's financial position and business results. In response, the Company is working to expand and develop its management executives and business promotion personnel, and to build a division-of-labor system through delegation of authority.

Media mix initiatives such as anime and stage adaptations of major titles are subject to changes in work popularity, user preferences, and market conditions, and there is a possibility that revenue may not be generated as initially expected. In addition, if for any reason the release of a major title becomes impossible, this could have a material impact on business development and performance. In response, the Company is also focusing on creating new IP to expand its portfolio and build a stable revenue base.

Rights infringements, such as the production of pirated versions and illegal distribution, have already been confirmed for some of the IP held by the Company, and if intellectual property rights are not adequately protected, sales of legitimate products and services may be hindered. There is also a risk that significant costs may be incurred to protect rights. In response, the Company strives for strict countermeasures through cooperation with industry organizations and for the acquisition and protection of intellectual property such as trademarks and content.

While content is increasing due to media diversification, competition among companies is intensifying amid a challenging market environment, and there is a possibility of new entrants with business models similar to the Company's. Intensifying competition poses a risk of decreasing the Company's market share and profitability. In response, the Company aims to differentiate itself by enhancing IP value using its knowledge and know-how in media mix development, as well as by improving satisfaction among authors and users.

Most of the Company's IP creation depends on the free posting site "Syosetu.com" (Shosetsuka ni Naro), and if this service becomes unavailable due to terms of service violations or changes to the terms, the foundation for new IP creation would be lost, potentially affecting business development and performance. In response, the Company is working to reduce this dependence by utilizing multiple posting sites and expanding authors' original works.

As of the end of April 2025, receivables from MediaDo Co., Ltd. (e-book distribution), Nippon Shuppan Hanbai Co., Ltd., and Tohan Corporation (print book distribution) accounted for 50% of the total, and if problems arise in the business relationships with these major business partners, this could have a material impact on the Company's business development and performance. In response, the Company's policy is to maintain good relationships with major business partners while also diversifying its sales channels.

The Company's Official Online Store and official Web comic site "Corona EX" are operated on the web, and if a system failure occurs due to a sudden surge in access, server shutdown caused by a disaster, computer virus infection, or unauthorized access by a third party, this could affect business development and performance. In response, the Company's policy is to conduct thorough verification when introducing new systems and functions, and to secure personnel for the stable operation of its systems.

The Company has introduced a trust-type stock acquisition rights plan issued at fair value, and as of the filing date of this document, the number of potential shares is 450,000, representing 13.04% of the total of 3,450,000 shares comprising the total number of issued shares plus potential shares. When these rights are exercised, the share value and voting rights ratio of existing shareholders will be diluted, and if the shares flow into the market all at once, this could affect the appropriate formation of the stock price. In response, the Company's policy is to carry out any new issuance through appropriate procedures based on the Companies Act and to disclose the details.

Due to the consignment sales system unique to the publishing industry, publications distributed to distributors and bookstores are sold under conditions that accept returns, and depending on trends in actual returns, this could affect the Company's financial position and business results. The Company calculates the expected refund amount based on the return rate and other factors, deducting it from revenue and recording it as a refund liability, but there is a risk that returns could exceed expectations. In response, the Company continuously monitors expected refund amounts and return rates, and implements measures with distributors and bookstores to reduce return rates.