PORTERS CORPORATION

If the Company infringes upon third parties' trademark rights, patent rights, or other intellectual property rights, it may be required to pay substantial damages or experience a decline in revenue due to reputational damage. The Corporate Unit conducts centralized management of intellectual property rights and addresses potential infringement to the extent that investigation is feasible, but this risk cannot be completely eliminated.

Because the Company provides cloud services utilizing internet environments, system failures may occur due to human error, network equipment malfunction, computer viruses, software defects, and other causes. Should a failure occur, the resulting suspension of service provision could have a material impact on the Company's financial position and business results. The Company addresses this risk by formulating countermeasures based on analysis of past failures, establishing a rapid recovery framework, and building an appropriate security system.

If unforeseen disputes arise with client companies, business partners, or third parties resulting in litigation, the Company may be required to pay substantial damages or experience a decline in revenue due to reputational damage. While there are currently no claims for damages or lawsuits filed against the Company, this is recognized as a potential risk. The Company strives to ensure thorough legal compliance through the establishment of an internal control system and compliance training for officers and employees.

In the event of system trouble caused by natural disasters or accidents exceeding expectations, or a global outbreak of infectious disease, the computer and network systems essential to providing cloud services may malfunction, impeding normal business activities. The Company has implemented enhanced security, data backup systems, and infectious disease countermeasures, but risks remain that unforeseen events cannot be fully addressed.

Regarding stock acquisition rights granted as incentives to officers and employees, the ratio of potential shares to the total number of issued shares as of the filing date is 4.2%, and if exercised, this could dilute the share value and voting rights ratio of existing shareholders. This is identified as a risk with a high probability of occurrence, potentially occurring within one year.

In the CRM market for the recruitment matching business to which the HR-Tech Business belongs, services utilizing IT and the internet are constantly evolving, and products or services that substitute for the Company's products may emerge. While the Company judges the threat of new entrants to be low, as deep knowledge and experience in the human resources services field serves as a barrier to entry, the emergence of substitute services could affect the Company's financial position and business results.

The pace of technological innovation in the HR-Tech market is extremely rapid, and if the Company falls behind in catching up with technology that meets customer needs, this could reduce its competitiveness and affect its financial position and business results. The Company aims to respond to new technologies by securing appropriate IT talent and enhancing its in-house development framework, but keeping pace with rapid technological change remains a challenge.

The Company conducts business in overseas markets centered on Asia, where political, cultural, legal, and regulatory environments differ from Japan, creating uncertainty in business execution. The Company seeks to reduce this risk by utilizing experts to investigate local business environments, accounting, and tax matters, but unforeseen circumstances could hinder overseas expansion and affect the Company's financial position and business results.

As of the end of December 2025, the tradable share ratio stood at only 29.1%, approaching the 25% or higher listing maintenance criterion set by the Tokyo Stock Exchange, presenting a risk of falling short of the standard. The Company plans to improve liquidity through measures such as public offerings, requests to major shareholders to sell shares, and increases in tradable shares through the exercise of stock options, but if these measures are not successful, this could affect the maintenance of the Company's listing.

The Representative Director and President and the Director and Executive Vice President have played important roles in management strategy formulation, business promotion, and overseas expansion since the Company's founding, and both are also major shareholders. Should either of them step down, or should a significant discrepancy arise between them regarding management policy, this could affect business development and business results. While the Company is working to build a management structure that does not depend on these two individuals as its business expands, the current level of dependence on them remains high.